<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 22, 1998.
REGISTRATION NO. 333-51451
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
SUNBELT AUTOMOTIVE GROUP, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
GEORGIA 5511 58-2378292
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Classification Code Number) Identification No.)
Organization)
</TABLE>
5901 PEACHTREE-DUNWOODY RD., SUITE 250-B
ATLANTA, GEORGIA 30328
(678) 443-8100
(Address and Telephone Number of Principal Executive Offices)
STEPHEN C. WHICKER, ESQ.
GENERAL COUNSEL
5901 PEACHTREE-DUNWOODY RD., SUITE 250-B
ATLANTA, GEORGIA 30328
(678) 443-8100
(Name, Address and Telephone Number of Agent for Service)
---------------------
COPIES TO:
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<S> <C>
DAVID S. COOPER, ESQ.
ROBERT B. MURPHY, ESQ.
THOMAS L. HANLEY, ESQ. JAMES L. SMITH, III, ESQ.
SCHNADER HARRISON SEGAL & LEWIS LLP TROUTMAN SANDERS LLP
SUITE 2800 / 303 PEACHTREE ST., N.E. 600 PEACHTREE STREET, N.E. / SUITE 5200
ATLANTA, GEORGIA 30308 ATLANTA, GEORGIA 30308-2216
(404) 215-8100 (404) 885-3000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the Registration Statement becomes effective.
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, check the following box and
list the Securities Act registration 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 number of the earlier effective registration statement for the same
offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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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, DATED , 1998.]
PROSPECTUS
5,500,000 SHARES
(SUNBELT AUTOMOTIVE GROUP LOGO)
COMMON STOCK
(PAR VALUE $0.001 PER SHARE)
------------------------
All of the shares of common stock offered hereby are being sold by Sunbelt
Automotive Group, Inc. ("Sunbelt" or the "Company"). Prior to this offering (the
"Offering"), there has been no public market for the common stock of the
Company. It is currently estimated that the initial public offering price will
be between $9.00 and $11.00 per share. See "Underwriting" for a discussion of
the factors to be considered in determining the initial public offering price of
the common stock.
Application has been made to have the shares of common stock approved for
quotation on the Nasdaq National Market under the symbol "SBLT."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
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.
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<CAPTION>
=============================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
- -------------------------------------------------------------------------------------------------------------
Total(3).......................... $ $ $
=============================================================================================================
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses estimated at $ , which are payable by the
Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
additional shares of common stock on the same terms and conditions as
the common stock offered hereby solely to cover over-allotments, if any. If
the option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
------------------------
The shares of common stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by them, and subject to
other conditions, including the right of the Underwriters to withdraw, cancel,
modify or reject any order in whole or in part. It is expected that delivery of
the shares will be made on or about , 1998 at the offices of Raymond
James & Associates, Inc., 880 Carillon Parkway, St. Petersburg, Florida.
RAYMOND JAMES & ASSOCIATES, INC.
The date of this Prospectus is , 1998.
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[DESCRIPTION OF GRAPHICS -- INSIDE FRONT COVER: COMPANY PROFILE; MAP OF
SOUTHEASTERN UNITED STATES SHOWING COMPANY'S LOCATIONS AND
INVESTMENT HIGHLIGHTS]
[DESCRIPTION OF GRAPHICS -- INSIDE BACK COVER:
EMBLEMS OF VARIOUS DEALERSHIP BRANDS OF COMPANY]
[DESCRIPTION OF GRAPHICS -- OUTSIDE BACK COVER: COMPANY LOGO]
------------------------
The Company intends to furnish its shareholders with annual reports
containing financial statements audited by its independent public accountants
and will make available copies of its quarterly reports for the first three
quarters of each fiscal year.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN THE
COMMON STOCK AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
------------------------
This Prospectus includes statistical data regarding the automotive
retailing 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 NADA Data 1997
publication and/or the Automotive News Market Data Book 1998. The publishers
have consented to the Company's use of the information contained in said
publications in this Prospectus. Sunbelt Automotive Group and Collision Centers
USA are service marks of the Company. This Prospectus includes other trademarks
and service marks of Sunbelt and of companies other than Sunbelt, which
trademarks are the property of their respective holders.
No automobile manufacturer has been involved, directly or indirectly, in
the preparation of this Prospectus or in the Offering being made hereby. No
automobile manufacturer has made any statements or representations in connection
with this Offering or provided any information or materials that were used in
connection with this Offering, and no automobile manufacturer has any
responsibility for the accuracy or completeness of this Prospectus.
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PROSPECTUS SUMMARY
Sunbelt Automotive Group, Inc. was formed in December 1997 to acquire
automobile dealerships and related operations and has conducted limited
operations to date. Sunbelt's current operations are limited to activities
involved in identifying potential target companies, negotiating the related
acquisition agreements and preparing for the proposed Merger and Acquisitions.
Although certain members of Sunbelt's management have significant automotive
retailing industry experience, Sunbelt has not managed the combined businesses,
and the proposed Merger and certain of the Acquisitions will not occur until the
consummation date of this Offering. Accordingly, any references herein to
"Sunbelt" or the "Company" and the activities and characteristics of the
combined entities should be read as pro forma descriptions of those activities
and characteristics following the consummation of the proposed Merger and all of
the Acquisition transactions.
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information, including risk factors and
financial statements (including the notes thereto) appearing elsewhere in this
Prospectus. Unless otherwise indicated, the information in this Prospectus
assumes that (i) the Underwriters' over-allotment option has not been exercised,
and (ii) the Merger (as such term is defined herein; see "The Merger") and the
Acquisitions (as such term is defined herein; see "The Acquisitions") have
occurred. References in this Prospectus to "common stock" are to the common
stock of the Company, unless otherwise indicated or unless the context otherwise
requires. References in this Prospectus to "Sunbelt" or the "Company" (i) are to
Sunbelt Automotive Group, Inc. and, unless the context indicates otherwise, its
consolidated subsidiaries and their respective predecessors, (ii) give effect to
the Merger, and (iii) assume that the Company has consummated the Acquisitions.
See "The Merger" and "The Acquisitions." The Acquisitions will be consummated on
or before the closing of the Offering. Investors should carefully consider the
information set forth in "Risk Factors."
THE COMPANY
Upon the consummation of the Merger and all of the Acquisitions, Sunbelt
expects to be one of the leading retailers of new and used vehicles in the
southeastern United States. The Company will operate a total of 31 dealership
franchises in Georgia, North Carolina and Tennessee, as well as four collision
repair centers in metropolitan Atlanta, Georgia. Sunbelt will sell 20 domestic
and foreign brands of automobiles, which consist of Buick, Cadillac, Chevrolet,
Chrysler, Dodge, Ford, GMC, Honda, Hummer, Isuzu, Jeep, Kia, Mazda, Mercury,
Mitsubishi, Nissan, Oldsmobile, Plymouth, Pontiac and Toyota. In 1997, based on
pro forma retail new vehicle unit sales, the Company would have ranked 13th on
the Automotive News' listing of the 1997 top 100 dealer groups in the United
States. The Company intends to further diversify its product and service
offerings by adding more brands of vehicles, and by offering related finance and
insurance, replacement parts, collision repair, and other products and services
that are complementary to its core automotive retailing operations. The
Company's strategy is: (i) to become the leading operator of automotive
dealerships in small and medium-sized markets in the southeastern United States
through acquisitions of additional dealerships in these markets, and (ii) to
expand its collision centers and other complementary business operations.
The Company's executive management team has extensive experience in the
automotive retailing industry and the operation of automotive dealerships in the
southeastern United States. On average, the Company's executive officers have
over 15 years of direct industry experience. Between 1992 and 1997, the
Company's dealerships won many awards from various manufacturers measuring
quality and customer satisfaction. These awards include: the Five Star Award
from Chrysler, which is given to the top 25% of Chrysler dealers in the nation;
the NACE (North American Customer Excellence) Award, Ford Motor Company's
highest overall award for customer service; the Top 100 Club, which is awarded
to Ford's top 100 retailers or 2% of Ford dealers in the nation based on retail
volume and consumer satisfaction; the Cadillac Master Dealer award, a status
achieved by 1% of Cadillac dealers nationwide; the Oldsmobile Elite Award, which
is given by Oldsmobile Motor Division to the top 10% of Oldsmobile dealers in
the nation; and the President's Circle Award for performance, which is given by
Nissan Motor Corporation to the top 10% of Nissan dealers in the nation.
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THE AUTOMOTIVE RETAILING INDUSTRY
The automotive retailing industry, with aggregate revenues of approximately
$491.1 billion in 1996 for franchised dealers alone, is the largest retail
market in the United States. Aggregate revenues for the southeastern United
States, which is the Company's primary area of operations and is comprised of
the states of Alabama, Florida, Georgia, North Carolina, South Carolina and
Tennessee, amounted to approximately $89.8 billion through franchised dealers in
1996 and accounted for approximately 18% of total franchised dealer revenues in
the United States. Since 1990, the industry has experienced growth in total
revenues, total gross profits and income before taxes. From 1990 to 1996, for
franchised dealers alone, total revenues increased 53.5% from $320.0 billion in
1990 to $491.1 billion in 1996, total gross profits increased 33.3% from $46.9
billion in 1990 to $62.5 billion in 1996, and income before taxes increased
131.3% from $3.2 billion in 1990 to $7.4 billion in 1996. The industry has been
experiencing a consolidation trend which has seen the number of franchised
dealerships in the United States decline from approximately 36,000 in 1960 to
22,750 in 1996. Despite this consolidation, fragmentation is still a defining
characteristic of the industry, with the largest 100 franchised dealership
groups generating less than 10% of 1996 total franchised dealer revenue and
controlling less than 5% of all franchised automotive dealerships. However, as a
result of the increasing capital requirements necessary to operate an automotive
dealership, the management succession planning concerns of many current dealers,
the desire of manufacturers to strengthen their dealer networks through
consolidation and other economic and industry factors, the Company expects a
further consolidation of the automotive retailing industry.
BUSINESS STRATEGY
Sunbelt intends to establish itself as the leading operator of automotive
dealerships in small and medium-sized markets in the southeastern United States
through acquisitions of additional dealerships in these markets. The Company
believes that its diverse portfolio of brands and dealerships in several of
these markets and its experienced management team will give it a competitive
advantage in achieving this goal.
OPERATING STRATEGY
The Company intends to pursue an operating strategy based on the following
key elements:
- Offer a Diverse Range of Automotive Products and Services. The
Company will offer a diverse range of automotive products and
services, including a wide selection of new and used vehicles, vehicle
financing and insurance programs, replacement parts, maintenance and
repair programs. The Company believes that its brand and product
diversity will enable the Company to satisfy a variety of customers,
reduce dependence on any one manufacturer and reduce exposure to
supply problems and product cycles. The Company believes that its
variety of complementary products and services will allow the Company
to generate incremental revenue that will result in higher
profitability and less cyclicality for the Company than if it was
solely dependent on automobile sales.
- Institute Divisional Organization by Manufacturer. The Company
intends to institute a corporate organizational form which the Company
believes will differentiate it from most other automotive retailing
companies. The Company intends to organize its dealerships and
dealership groups by manufacturer, so that all dealerships which carry
a particular manufacturer's brands would be grouped together in a
single division. Each division, in turn, would be headed by a member
of corporate management who has extensive working experience with the
applicable manufacturer. The Company initially intends to implement
this organizational structure only for its Ford and Mercury
dealerships. Once the Company owns an appropriate number of
dealerships affiliated with a single manufacturer and the Company has
achieved an appropriate sales volume with respect to such
manufacturer's vehicles, the Company intends to implement said
organizational structure for such dealerships. The Company believes
that such a corporate structure does not require any manufacturer's
approval and will not impact any other dealership requirements imposed
by manufacturers. The Company believes that organizing its dealerships
by manufacturer
4
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and having each division headed by a senior manager who is experienced with that
particular manufacturer -- and has established and maintained long-standing
business relationships with the regional and corporate managers of that
manufacturer -- will yield numerous benefits to the Company. For
example, the Company believes that its relationships with each
manufacturer will be enhanced; management training within each division
will be more efficient and consistent; and managers within each
division will benefit from a shared experience base. The Company
believes that these benefits will provide a competitive advantage to
the Company.
- Decentralize Marketing Strategies; Achieve High Levels of Customer
Satisfaction; Utilize Incentive-Based Compensation Programs. The
Company believes that many customers purchase automotive vehicles
based on an established long-term business relationship with a
particular dealership. Therefore the Company intends to empower its
experienced local management -- who have a better in-depth knowledge
of local customer needs and preferences -- to establish marketing,
advertising and other policies that foster these long-term
relationships and provide superior customer service. The Company's
strategy emphasizes the retention of local management, which the
Company believes will help make it an attractive acquiror of other
dealerships. The Company also intends to create incentives for
entrepreneurial management teams at the dealer level through the use
of stock options and other programs in order to align local
management's interests with those of the Company's shareholders. In
order to keep local management focused on customer satisfaction, the
Company also intends to include certain customer satisfaction index
("CSI") results as a component of its incentive compensation program.
The Company believes that this is important because some manufacturers
offer specific performance incentives, on a per vehicle basis, if
certain CSI levels (which vary by manufacturer) are achieved by a
dealer.
- Centralize Administrative Functions. The Company believes that the
consolidation of certain dealership functions and requirements will
result in significant cost savings. The Company intends to consolidate
the floorplan financing of all of its dealerships, which the Company
anticipates will result in a reduced interest rate on such financing.
Specifically, the Company estimates that this rate will be
approximately 50 to 75 basis points below the Company's current annual
floorplan rates, and expects that this lower rate will result in
annual cost savings of $750,000 to $1 million. The Company is also
negotiating a consolidated revolving credit facility that it
anticipates will result in a reduced interest rate on such facility.
Furthermore, the Company expects that significant cost savings will be
achieved through the consolidation of administrative functions such as
risk management, employee benefits and employee training.
GROWTH STRATEGY
The Company plans to continue to grow its business using a strategy
comprised of the following principal elements:
- Acquire Dealerships. The Company's goal is to become the leading
operator of automotive dealerships in small and medium-sized markets
in the southeastern United States through acquisitions of additional
dealerships in these markets. The Company plans to pursue acquisitions
in markets where it does not currently own dealerships, as well as in
areas which are contiguous to its existing dealership markets. The
Company intends to focus on acquiring both dealer groups with multiple
franchises in a given market area and dealers with a single franchise
which possess significant market shares. Generally, the Company will
seek to retain the acquired dealerships' operational and financial
management, and thereby benefit from their market knowledge, name
recognition and local reputation.
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- Expand Complementary Products and Services. The Company expects to
generate additional revenue and achieve higher profitability through
the sale of products and services which complement its dealership
operations. Examples of such opportunities include the following:
Collision Repair Centers. The Company owns four collision
repair facilities operated under the name Collision Centers
USA, which serve the Jonesboro, Duluth, Stockbridge and
Marietta, Georgia markets. The Company expects to expand this
business by increasing volumes at these four centers,
developing new centers and acquiring other existing centers.
The Company's collision repair business provides higher margins
than its core retailing operations and is generally not
significantly affected by economic cycles or consumer spending
habits.
Finance and Insurance. The Company offers its customers a wide
range of financing and leasing alternatives for the purchase of
vehicles, as well as credit life, accident and health and
disability insurance and extended service contracts. The
Company has recently entered into an agreement with a leading
insurance carrier to share in certain revenues generated by the
sale of extended warranty contracts. In addition, in January
1998, the Company acquired South Financial Corporation ("South
Financial"), which has been primarily engaged in the sub-prime
automotive lending business for the past eight years. The
Company expects its dealer network to provide additional loan
business opportunities to South Financial.
6
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THE ACQUISITIONS AND THE MERGER
THE ACQUISITIONS
Since November 1997, the Company and/or Boomershine Automotive Group, Inc.
(the accounting acquirer), which will be merged into Sunbelt in the Merger, have
consummated or signed definitive agreements to acquire six dealership groups,
three collision repair centers and one sub-prime automotive lending business for
aggregate consideration of approximately $67 million. Specifically, the
acquisitions consist of the following:
- The acquisition of Southlake Collision Center, Inc., Southlake Collision
Henry County, Inc. and Southlake Collision Cobb Parkway, Inc., each of
which is involved in the automotive collision repair business. This
acquisition was consummated on December 18, 1997 for consideration of
approximately $1.7 million;
- The acquisition of South Financial Corporation, which is involved in the
sub-prime automotive finance business. This acquisition was consummated on
January 6, 1998 for consideration of approximately $4.65 million;
- The acquisition of Hones, Inc. d/b/a Bill Holt Ford Mercury, which is
involved in the automotive retailing business. This acquisition was
consummated on June 15, 1998 for consideration of approximately $750,000;
- The acquisition of Jay Automotive Group, Inc., which is involved in the
automotive retailing business. The Company anticipates consummating this
acquisition upon the consummation of this Offering for consideration of
approximately $16.0 million;
- The acquisition of Wade Ford, Inc. and Wade Ford Buford, Inc., both of
which are involved in the automotive retailing business. The Company
anticipates consummating these acquisitions upon the consummation of this
Offering for consideration of approximately $15.5 million;
- The acquisition of Day's Chevrolet, which is involved in the automotive
retailing business. The Company anticipates consummating this acquisition
upon the consummation of this Offering for consideration of approximately
$10.8 million;
- The acquisition of Grindstaff, Inc., which is involved in the automotive
retailing business. The Company anticipates consummating this acquisition
upon the consummation of this Offering for consideration of approximately
$9.1 million; and
- The acquisition of Robertson Oldsmobile-Cadillac, Inc., which is involved
in the automotive retailing business. The Company anticipates consummating
this acquisition upon the consummation of this Offering for consideration
of approximately $8.1 million.
Each acquisition is hereinafter individually referred to as an
"Acquisition" and collectively referred to as the "Acquisitions." See "The
Acquisitions."
PRICE PROTECTION PROVISIONS
The Company may also be required to pay additional consideration not to
exceed approximately $9.8 million -- in the form of cash and/or the Company's
common stock -- to certain shareholders of the dealerships being acquired in the
Day's Chevrolet and Wade Ford Acquisitions pursuant to certain stock price
protection provisions and/or agreements entered into in connection with said
transactions. See "Risk Factors -- Price Protection Provisions" and "Description
of Capital Stock -- Registration Rights and Stock Price Protection."
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THE MERGER
In addition to the Acquisitions, the Company has signed a definitive
agreement to acquire by merger Boomershine Automotive Group, Inc. simultaneously
with the consummation of this Offering in exchange for 3,800,160 shares of
common stock of Sunbelt. See "The Merger."
The automotive dealerships and related businesses that will comprise the
Company upon the consummation of this Offering would have had pro forma combined
total revenues of approximately $682 million for the year ended June 30, 1997
and $507 million for the nine months ended March 31, 1998. See "Pro Forma
Combined and Condensed Financial Data."
CONSIDERATION RECEIVED BY RELATED PARTIES
In connection with the Merger and the Acquisitions, the following
directors, officers and shareholders owning more than five percent of the
Company's common stock, together with their spouses and affiliates, will receive
shares of the Company's common stock as follows: Walter M. Boomershine,
Jr. -- 570,024 shares (excluding 2,000 shares of common stock that Mr.
Boomershine currently owns); Walter M. Boomershine, III -- 696,696 shares; Renee
B. Jochum -- 633,360 shares; Jacquelyn B. Thompson -- 633,360 shares; Patrice B.
Mitchell -- 633,360 shares; Lindsey B. Robertson -- 673,360 shares; and Alan K.
Arnold -- 400,000 shares. In addition, Mr. Arnold will receive $11.9 million in
cash in connection with the Wade Ford Acquisition.
PRINCIPAL OFFICE
The Company's principal executive office is located at 5901
Peachtree-Dunwoody Road, Suite 250-B, Atlanta, Georgia 30328, and its telephone
number at that location is (678) 443-8100.
THE OFFERING
Common stock offered by the Company..... 5,500,000 shares
Common stock to be outstanding after the
Offering.............................. 10,575,362 shares(1)(2)
Use of proceeds......................... The net proceeds of the Offering
will be used to fund the
Acquisitions, including repaying
certain indebtedness incurred by
the Company in connection therewith
and to provide working capital for
the Company. See "The Acquisitions"
and "Use of Proceeds."
Proposed Nasdaq National Market
Symbol.................................. SBLT
- ---------------
(1) Excludes 2,250,000 shares of common stock reserved for future issuance to
Company employees under the Company's Incentive Stock Plan (as defined
herein) (including up to 1,597,000 shares of common stock reserved for
issuance upon exercise of options granted on or before the consummation of
the Offering pursuant to the Incentive Stock Plan, with the following shares
reserved in connection with grants to executive officers and directors:
25,000 shares underlying options granted to Walter M. Boomershine, Jr.
(executive officer); an aggregate of 350,000 shares underlying options
granted to Robert W. Gundeck (executive officer); an aggregate of 540,000
shares underlying options granted to Charles K. Yancey (executive officer);
an aggregate of 540,000 shares underlying options granted to Stephen C.
Whicker (executive officer); an aggregate of 120,000 shares underlying
options granted to Ricky L. Brown (executive officer); and 5,000 shares
underlying options granted to each of George D. Busbee, Lee M. Sessions, Jr.
and Jack R. Altherr (each, a director)). See "Management -- Incentive Stock
Plan." Also excludes 50,000 shares of common stock reserved for issuance
upon exercise of
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warrants granted to a consulting firm for services rendered in connection
with this Offering. See "Description of Capital Stock -- Warrants."
(2) Includes 249,202 shares of common stock issued to executive officers of the
Company. See "Description of Capital Stock -- Common Stock."
RISK FACTORS
The Company's acquisition program may be limited by the automotive
manufacturers with which the Company has a Franchise Agreement (as hereinafter
defined). Pursuant to the manufacturers' policies in effect as of the date of
this Offering or said manufacturers' approvals of the Acquisitions and the
Merger, the Company may acquire the following:
- A maximum of 10 Chrysler dealerships; seven Toyota dealerships; three
Lexus dealerships; seven Honda dealerships; three Acura dealerships; five
GM dealerships in a two-year period (where Pontiac-Buick-GMC dealerships
count as a single dealership); and the lesser of 15 Ford and 15 Lincoln
dealerships or that number of Ford and Lincoln Mercury dealerships
accounting for two percent of the preceding year's retail sales of those
brands in the United States. The Company is not aware of any limitations
on the number of dealerships it may own under the following manufacturers'
restrictions: Hummer, Isuzu, Kia, Mazda, Mitsubishi, Nissan and Saturn.
- A maximum of the following dealerships in the Company's existing market
areas: (a) in the metropolitan Atlanta market, 25% of the Ford dealerships
in said market area; 50% of the GM dealerships in said market area; six
Chrysler dealerships in the same sales zone and two dealerships in said
market area; one Toyota dealership or 20% of Toyota dealerships in said
market area and the lesser of five Toyota dealerships or five percent of
Toyota dealerships in any Toyota region; two Lexus dealerships; two Honda
dealerships; one Acura dealership; and (b) in the non-Atlanta market, one
Ford dealership in market areas with less than three Ford dealerships; 50%
of the GM dealerships in the market area; six Chrysler dealerships in the
same sales zone and two in the same market; six Toyota dealerships in the
same sales zone and two in the same market; six Lexus dealerships in the
same sales zone and two in the same market; one Honda dealership in a
market area represented by two to 10 Honda points; and one Acura
dealership in a metropolitan market area which has two or more Acura
points and two Acura points in any one of six Acura geographic points.
- A maximum additional number of the following dealerships in the Company's
existing markets: 26 additional Ford/Mercury dealerships; no additional GM
dealerships in a two-year period, subject to GM's allowance of more than
the five GM dealership groups that the Company will own upon the
consummation of the Merger and the Acquisitions under certain
circumstances within GM's discretion; with respect to Chrysler
dealerships, nine additional dealerships in the Southeast or six
additional dealerships in the same sales zone or two additional
dealerships in the same market (less the number of Chrysler dealerships
the Company already has in such sales zone or market); six additional
Toyota dealerships; three additional Lexus dealerships; six additional
Honda dealerships; three additional Acura dealerships and an unknown
number of additional dealerships of the following manufacturers: Hummer,
Isuzu, Kia, Mazda, Mitsubishi, Nissan and Saturn.
The restrictions and maximum number of dealerships of each manufacturer set
forth above are based on the Company's knowledge of each applicable
manufacturer's policies existing on the date of this Prospectus. There can be no
assurance that said manufacturers will not modify or remove such restrictions in
the future, either generally or on a case-by-case basis. See
"Business -- Relationships with Manufacturers" and "Risk
Factors -- Manufacturers' Restrictions on the Merger, the Acquisitions and
Future Acquisitions."
See "Risk Factors" beginning on page 12 for certain additional information
that should be considered by prospective investors.
9
<PAGE> 11
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The Company will acquire Boomershine Automotive Group, Inc. ("Boomershine
Automotive") via the Merger contemporaneously with the consummation of the
Offering. For financial statement purposes, Boomershine Automotive has been
identified as the accounting acquiror. The following summary financial data
presents (i) summary historical consolidated financial data of Boomershine
Automotive as of the dates and for the periods indicated and (ii) summary pro
forma financial data as of the dates and for the periods indicated giving effect
to the events described in the "Pro Forma Combined and Condensed Financial Data"
included elsewhere herein as though they had occurred on the dates indicated
therein. The following Summary Historical and Pro Forma Financial Data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Consolidated Financial Statements of
Boomershine Automotive and the related notes and "Pro Forma Combined and
Condensed Financial Data" included elsewhere in this Prospectus. In connection
with the FIFO Conversion (as hereinafter defined), and in accordance with
generally accepted accounting principles, the Summary Historical and Pro Forma
Financial Data has been retroactively restated to reflect the FIFO Conversion by
Boomershine Automotive. The Summary Historical and Pro Forma Combined Financial
Data below are not necessarily indicative of the results of operations or
financial position that would have resulted had the Merger, the Acquisitions and
the Offering occurred during the periods presented or that may be expected for
the full year or any other interim period.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, NINE MONTHS ENDED MARCH 31,
---------------------------------------------------------------- -------------------------------
HISTORICAL(1) HISTORICAL(1)
---------------------------------------------------- PRO FORMA ------------------- PRO FORMA
1993 1994 1995 1996 1997 1997(2) 1997 1998 1998(2)
-------- -------- -------- -------- -------- --------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND OTHER OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Vehicle sales:
New...................... $ 73,912 $110,674 $156,955 $166,199 $152,625 $420,019 $113,239 $113,340 $315,697
Used..................... 35,747 46,207 57,047 64,652 61,811 177,925 47,318 39,517 127,126
Parts and service.......... 15,085 17,679 19,223 23,764 24,637 66,602 17,689 19,108 50,159
Finance, commissions and
other revenues, net...... 1,418 2,795 3,856 4,219 5,339 17,437 4,355 5,399 13,528
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total revenues....... 126,162 177,355 237,081 258,834 244,412 681,983 182,601 177,364 506,510
Cost of sales................ 112,240 158,754 214,407 231,769 219,319 605,044 163,546 157,026 448,892
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit................. 13,922 18,601 22,674 27,065 25,093 76,939 19,055 20,338 57,618
Selling, general and
administrative expenses.... 12,751 16,685 19,927 24,170 22,262 62,809 16,698 16,544 47,933
Depreciation and
amortization............... 428 410 406 600 890 2,550 659 764 1,984
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income from operations....... 743 1,506 2,341 2,295 1,941 11,580 1,698 3,030 7,701
Interest expense, net........ 587 598 1,436 1,774 2,230 3,126 1,408 1,544 1,496
Interest income.............. 144 119 218 181 120 516 184 247 699
Other income (expense),
net........................ 98 (110) 60 13 44 (240) (80) (68) 100
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before income
taxes...................... 398 917 1,183 715 (125) 8,730 394 1,665 7,004
Income tax (expense)
benefit.................... (151) (450) (448) (213) 40 (3,730) (119) (398) (2,975)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)............ $ 247 $ 467 $ 735 $ 502 $ (85) $ 5,000 $ 275 $ 1,267 $ 4,029
======== ======== ======== ======== ======== ======== ======== ======== ========
Basic:
Net income per share(3).... $ 0.48 $ 0.39
======== ========
Weighted average shares
outstanding(3)........... 10,326 10,326
======== ========
Fully diluted:
Net income per share(3).... $ 0.47 $ 0.38
======== ========
Weighted average shares
outstanding(3)........... 10,666 10,666
======== ========
OTHER OPERATING DATA:
Gross margin................. 11.0% 10.5% 9.6% 10.5% 10.3% 11.3% 10.5% 11.4% 11.4%
Operating margin............. 0.6% 0.8% 0.9% 0.9% 0.8% 1.7% 0.9% 1.7% 1.5%
Pre-tax margin............... 0.3% 0.5% 0.5% (0.3)% (0.0)% 1.3% 0.2% 0.9% 1.4%
New vehicles sold............ 4,583 6,677 9,187 9,206 7,834 20,499 5,803 5,485 14,583
Used vehicles sold........... 4,770 6,378 6,753 7,453 6,908 19,355 5,291 4,552 12,776
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
-------------------------------
AS OF PRO FORMA
JUNE 30, 1997(1) HISTORICAL(1) AS ADJUSTED(2)
---------------- ------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 5,885 $ 760 $ 18,352
Inventories................................................. 39,553 47,733 115,923
Total assets................................................ 55,672 88,949 204,065
Total debt, including current portion....................... 40,618 70,925 121,484
Total shareholders' equity.................................. 7,973 9,240 65,939
</TABLE>
- ---------------
(1) In connection with the Merger and the Offering, Boomershine Automotive will
convert from the last-in, first-out method (the "LIFO Method") of inventory
accounting to the specific identification method of inventory accounting
(the "FIFO Conversion"), conditioned upon the closing of the Offering. In
connection with the FIFO Conversion, and in accordance with generally
accepted accounting principles, the accompanying financial information of
Boomershine Automotive has been retroactively restated to reflect the FIFO
Conversion.
(2) Adjusted to give pro forma effect to (i) the Merger, (ii) the Acquisitions,
and (iii) the sale of the shares of common stock offered hereby and the
application of the net proceeds therefrom. To conform with Boomershine
Automotive's fiscal year end of June 30, the unaudited pro forma statements
of operations include financial data for each Acquisition for the same
periods presented for Boomershine Automotive. See "Pro Forma Combined and
Condensed Financial Data" and "Use of Proceeds."
(3) Historical net income per share is not presented, as the historical capital
structure of Boomershine Automotive prior to the Merger, the Acquisitions
and the Offering is not comparable with the capital structure that will
exist subsequent to these events. The weighted average shares outstanding
was calculated taking into account these events as if they had occurred at
the beginning of each period. See "Pro Forma Combined and Condensed
Financial Data."
11
<PAGE> 13
RISK FACTORS
Prospective investors should carefully consider and evaluate all of the
information set forth in this Prospectus, including the risk factors set forth
below, prior to making an investment in the common stock offered hereby.
DEPENDENCE ON AUTOMOBILE MANUFACTURERS
Each of the Company's dealerships operates pursuant to a dealer sales and
service agreement, or a similar named agreement, between the applicable
automobile manufacturer (or authorized distributor thereof) and the subsidiary
of the Company that operates the automotive dealership ("Franchise Agreement").
The Company is dependent to a significant extent on its relationship with such
manufacturers and the terms and conditions of these Franchise Agreements.
After giving effect to the Merger and the Acquisitions, vehicles
manufactured or distributed by Ford Motor Company ("Ford"), General Motors
Corporation ("GM"), and Nissan Motor Co., Ltd. ("Nissan") accounted for
approximately $202 million, or 48.0%, approximately $98 million, or 23.3%, and
approximately $44 million, or 10.5%, respectively, of the Company's pro forma
sales of new vehicles for the year ended June 30, 1997, and accounted for
approximately $160 million, or 50.6%, approximately $78 million, or 24.7%, and
approximately $21 million, or 6.7%, respectively, of the Company's pro forma
sales of new vehicles for the nine months ended March 31, 1998. No other
manufacturer accounted for more than 10% of the new vehicle sales of the Company
during such periods. See "Business -- New Vehicle Sales," and "Business --
Relationships with Manufacturers." Accordingly, a significant decline in the
sale of Ford, GM, or Nissan new cars could have a material adverse effect on the
Company's business, financial condition and results of operations.
Manufacturers exercise a great degree of control over the operations of the
Company's dealerships. Each of the Franchise Agreements generally provides for
termination or non-renewal for a variety of causes, including any unapproved
change in ownership or management and other material breaches of the Franchise
Agreements. The Company is currently seeking the approval of all manufacturers
of the Company's franchised dealers to the Acquisitions, the Merger and this
Offering. However, as of the date hereof, the Company has not obtained the final
approval of any such manufacturers, and there can be no assurance that the
Company will be able to obtain such approval prior to the closing date of this
Offering.
The Company has no reason to believe that it will not be able to renew all
of its Franchise Agreements upon expiration, but there can be no assurance that
any of such agreements will be renewed or that the terms and conditions of such
renewals will be favorable to the Company. If a manufacturer terminates or
declines to renew one or more of the Company's significant Franchise Agreements,
or if the terms and conditions for the renewal of the Company's significant
Franchise Agreements are less favorable than the Company's current agreements,
such actions or events could have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business -- Relationships with Manufacturers."
The Company also depends on the manufacturers to provide it with a
desirable mix of the most popular new vehicles that produce the highest profit
margins and which may be the most difficult to obtain from the manufacturers.
For a discussion on how the manufacturers allocate the mix of vehicle models,
see "Business -- New Vehicle Sales." If the Company is unable to obtain a
sufficient allocation of the most popular vehicles, such event could have a
material adverse effect on the Company's business, financial condition and
results of operations. In some instances, in order to obtain additional
allocations of these vehicles, the Company may be required to purchase a larger
number of less desirable models than it would otherwise purchase, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company's dealerships depend on the manufacturers
for certain sales incentives and other programs that are intended to promote
dealership sales or support dealership profitability. Manufacturers have
historically made many changes to their incentive programs during each year. A
reduction or discontinuation of, or other material change in, a manufacturer's
incentive programs may have a material adverse effect on the Company's business,
financial condition and results of operations.
12
<PAGE> 14
The success of each of the Company's dealerships depends to a great extent
on 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, could have a material adverse effect
on the Company's business, financial condition and results of operations. For a
discussion of labor actions existing as of the date of this Prospectus, see
"Business -- Cyclicality." Similarly, the delivery of vehicles from
manufacturers later than scheduled, which may occur particularly during periods
when new products are being introduced, can lead to reduced sales. Although 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, adverse conditions affecting Ford, GM or
Nissan, in particular, could have a material adverse affect on the Company's
business, financial condition and results of operations. See "Business -- New
Vehicle Sales" and "Business -- Relationships with Manufacturers."
MANUFACTURERS' RESTRICTIONS ON THE MERGER, THE ACQUISITIONS AND FUTURE
ACQUISITIONS
The Company is required to obtain the consent of the applicable
manufacturer prior to any transfer or change in ownership of the dealership
franchises. Consequently, the Merger, the Acquisitions, the Offering and all
future acquisitions will require approval by the applicable manufacturers. There
can be no assurance that manufacturers will grant such approvals. Obtaining the
consent of the manufacturers for acquisitions of dealerships could also take a
significant amount of time. Obtaining the approvals of the manufacturers for the
Merger, the Acquisitions and the Offering is an ongoing process and will
continue through the date of the Offering. The Company is currently seeking the
approval of all manufacturers of the Company's franchised dealers to the
Acquisitions, the Merger and this Offering. However, as of the date hereof, the
Company has not obtained the final approval of any such manufacturers, and no
manufacturer will give its final approval prior to the consummation date of this
Offering. If the Company fails to obtain any manufacturer's approval, the
Company may be required to discontinue its Franchise Agreement with such
manufacturer and sell the franchise back to the manufacturer or to some other
third party. To date, Saturn Corporation ("Saturn") has not generally approved
the public ownership of its dealership franchises. For this reason, the
financial results of the Company's Saturn dealership in Columbus, Georgia have
not been included in this Prospectus. The Company will use its best efforts to
obtain Saturn approval; however, if Saturn does not approve the Company's
ownership of the Saturn dealership in Columbus, Georgia, the Company will sell
the Saturn dealership.
The Company's growth strategy is predicated in part on the ability of the
Company to acquire additional automotive dealerships. If the Company experiences
delays in obtaining, or fails to obtain, approvals of the manufacturers for
acquisitions of dealerships, the Company's growth strategy could be materially
adversely affected. In determining whether to approve the Merger and the
Acquisitions and any future mergers or acquisitions, the manufacturers may
consider many factors, including the moral character, business experience,
financial condition and ownership structure of the Company and its management,
along with the consumer satisfaction experiences of the Company's customers.
Moreover, under an applicable Franchise Agreement or under state law, a
manufacturer may have a right of first refusal to acquire a dealership in the
event the Company seeks to acquire that dealership franchise.
Several automotive manufacturers presently limit the number of such
manufacturers' dealerships that may be owned by a single public company or the
number that may be owned in a particular geographic area. For example, Ford's
current national policy limits a public company to the lesser of (i) 15 Ford and
15 Lincoln Mercury dealerships or (ii) that number of Ford and Lincoln Mercury
dealerships accounting for 2% of the preceding year's retail sales of those
brands in the United States. It also limits a public company to owning only one
Ford dealership in any market area, as defined by Ford, having three or fewer
Ford dealerships in it and no more than 25% of the Ford dealerships in a market
area having four or more Ford dealerships. In recent discussions with Ford, the
Company has been informed that Ford, Lincoln and Mercury will prohibit the
Company from making additional acquisitions of Ford, Lincoln or Mercury
dealerships for 12 months after the close of the Offering. GM's current national
policy on public companies limits the number of GM dealerships that a public
company may acquire during a two-year period to five GM dealership locations,
13
<PAGE> 15
which number may be increased on a case-by-case basis. In addition, GM limits
the maximum number of GM dealerships that a public company may acquire to 50% of
the GM dealerships, by franchise line, in a GM-defined geographic market area
having multiple GM dealers. GM may also limit further acquisitions of GM
franchises by a single public company until all existing GM franchises of that
public company meet certain GM criteria for sales, market penetration, CSI and
other GM standards. Chrysler may ask the Company to limit its acquisitions, or
to defer any further acquisitions, of Chrysler or Chrysler division dealerships
until it has established a proven performance record with the Chrysler
dealerships it owns or is acquiring in the Acquisitions. Moreover, Chrysler has
recently announced its general policy of limiting ownership by public companies
to 10 Chrysler dealerships in the United States, six Chrysler dealerships in the
same sales zone, as determined by Chrysler, and two dealerships in the same
market (but no more than one like vehicle line brand in the same market). It is
the Company's understanding that Toyota currently limits the number of
dealerships which may be owned by any one group to seven Toyota and three Lexus
dealerships nationally and restricts the number of dealerships that may be owned
to (i) the greater of one dealership, or 20% of the Toyota dealer count in a
"Metro" market (as defined by Toyota), (ii) the lesser of five dealerships or 5%
of the Toyota dealerships in any Toyota region (currently 12 geographic
regions), and (iii) two Lexus dealerships in any one of the four Lexus
geographic areas. In addition, the Company understands that Toyota has required
that at least nine months elapse between acquisitions. Similarly, it is the
current policy of American Honda Co., Inc. ("Honda") to restrict any company
from holding more than seven Honda or more than three Acura franchises
nationally and to restrict the number of franchises to (i) one Honda dealership
in a "Metro" market (a metropolitan market represented by two or more Honda
dealers) with two to 10 Honda dealership points, (ii) two Honda dealerships in a
Metro market with 11 to 20 Honda dealership points, (iii) three Honda
dealerships in a Metro market with 21 or more Honda dealership points, (iv) no
more than 4% of the Honda dealerships in any one of the 10 Honda geographic
zones, (v) one Acura dealership in a Metro market (a metropolitan market with
two or more Acura dealership points), and (vi) two Acura dealerships in any one
of the six Acura geographic zones. Toyota and Honda also prohibit ownership of
contiguous dealerships and the coupling of a franchise with any other brand
without their consent.
Other automobile manufacturers, including Nissan, which accounted for 10.5%
of the Company's pro forma sales of new vehicles for the year ended June 30,
1997, are still developing 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.
As a condition to granting their consent to the Acquisitions, the Merger
and this Offering, a number of manufacturers may also impose certain other
restrictions on the Company. In addition to the restrictions described under
"-- Stock Ownership/Issuance Limits; Limitation on Ability to Issue Additional
Equity," these restrictions principally consist of restrictions on (i) certain
material changes in the Company or extraordinary corporate transactions such as
a merger, sale of a material amount of assets or change in the Board of
Directors or management of the Company which could have a material adverse
effect on the manufacturer's image or reputation or could be materially
incompatible with the manufacturer's interests; (ii) the removal of a dealership
general manager without the consent of the manufacturer; and (iii) the use of
dealership facilities to sell or service new vehicles of other manufacturers. If
the Company is unable to comply with these restrictions, the Company generally
must (i) sell the assets of the dealerships to the manufacturer or to a third
party acceptable to the manufacturer, or (ii) terminate the dealership
agreements with the manufacturer. Manufacturers may impose other and more
stringent restrictions in connection with future acquisitions.
The Company will own, upon the consummation of the Merger and the
Acquisitions, six Ford/Mercury dealerships (including four Ford dealerships and
two Mercury dealerships), ten GM dealerships (including two each of Pontiac,
Buick, GMC and Chevrolet dealerships, one Cadillac dealership and one Oldsmobile
dealership), two dealerships each of Isuzu, Mazda and Mitsubishi, and one
dealership each of Chrysler, Dodge, Honda, Hummer, Jeep, Kia, Nissan, Plymouth
and Toyota. For purposes of the manufacturers'
14
<PAGE> 16
restrictions on the number of dealerships that can be owned by the Company, the
Company will own, upon the consummation of the Merger and the Acquisitions, four
Ford dealerships, five GM franchise groups, two franchise dealerships each of
Isuzu, Mazda, Mitsubishi and Mercury and one franchise dealership each of
Chrysler, Toyota, Honda, Hummer, Kia and Nissan. See "Prospectus Summary -- Risk
Factors." Based on the manufacturers' restrictions known to the Company as of
the date of this Offering, the Company believes that it has significant
opportunities to acquire additional dealerships without exceeding the
manufacturers' policies and restrictions on acquisitions outlined above.
RISKS ASSOCIATED WITH ACQUISITIONS
The automotive retailing industry is considered a mature industry in which
minimal growth is expected in unit sales of new vehicles. Accordingly, the
Company's future growth will depend in large part on its ability to acquire
additional dealerships, profitably expand its complementary businesses, manage
its expansion, control costs in its operations and consolidate acquisitions,
including the Acquisitions, into existing operations. For each acquisition, the
Company will have to review the acquired entity's operations, management
infrastructure and systems and financial controls, and make appropriate
adjustments or complete reorganizations as appropriate. Unforeseen capital and
operating expenses, or other difficulties, complications and delays frequently
encountered in connection with the expansion and integration of acquired
operations could inhibit the Company's growth. The full benefits of a
significant acquisition, including the Acquisitions, will require the
integration of operational, administrative, finance, sales and marketing
organizations, as well as the implementation of appropriate operational,
financial and management systems and controls. There can be no assurance that
the management group will be able to effectively and profitably integrate in a
timely manner each of the businesses included in the Acquisitions or any future
acquisitions, or to manage the combined entity without substantial costs, delays
or other operational or financial problems. The inability of the Company to do
so could have a material adverse effect on the Company's business, financial
condition and results of operations. Additionally, any acquisition, including
the Acquisitions, and the integration of such acquisitions will require
substantial attention from the Company's senior management team. The diversion
of management attention required by the acquisition and integration of multiple
companies, including the Acquisitions, as well as other difficulties that may be
encountered in the transition and integration process, could have an adverse
effect on the revenue and operating results of the Company. There can be no
assurance that the Company will identify suitable acquisition candidates, that
acquisitions will be consummated on acceptable terms or that the Company will be
able to successfully integrate the operations of any acquisitions, including the
Acquisitions.
Acquisitions may also result in significant goodwill and other intangible
assets that are amortized in future years and reduce future stated earnings.
With respect to the Acquisitions and any future acquisitions, if future facts
and circumstances suggest that some or all of the goodwill has been impaired, a
write-off of the applicable goodwill and corresponding charge to earnings would
be recognized in the quarter in which the impairment is identified. Upon
consummation of the Acquisitions and the Merger, an aggregate of $43 million of
goodwill will be recorded, consisting of $37.1 million from the six dealerships
or dealership groups being acquired in the Acquisitions, $1.9 million from the
Collision Centers USA Acquisition and $4.0 million from the South Financial
Acquisition. See "The Acquisitions," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Growth
Strategy."
In addition, the Company's future growth as a result of its acquisition of
automobile dealerships will depend on its ability to obtain the requisite
manufacturer approvals. There can be no assurance that it will be able to obtain
such consents in the future. See "-- Manufacturers' Restrictions on the Merger,
the Acquisitions and Future Acquisitions" and "Business -- Relationships with
Manufacturers."
In certain cases, the Company may be required to file applications and
obtain clearances 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.
STOCK OWNERSHIP/ISSUANCE LIMITS; LIMITATION ON ABILITY TO ISSUE ADDITIONAL
EQUITY
Standard automobile Franchise Agreements limit transfers of any ownership
interests of a dealership and its parent, and therefore often do not by their
terms accommodate public trading of the common stock of a
15
<PAGE> 17
dealership or its parent. Even if all of the manufacturers of which Company
subsidiaries are franchisees agree to permit the Offering and trading in the
common stock, a number of manufacturers may continue to impose restrictions upon
the transferability of the common stock. For example, Ford may cause the Company
to sell or resign from one or more of its Ford franchises if any person or
entity acquires 50% or more of the Company's voting securities without Ford's
approval. Likewise, GM and Toyota may force the sale of their respective
franchises if 20% or more of the Company's voting securities are so acquired by
any one person or entity without their approval. Honda may force the sale of the
Company's Honda franchise if any person or entity acquires 5% or more of the
common stock (10% if such entity is an institutional investor), and Honda deems
such person or entity to be unsatisfactory. See "Business -- Relationships with
Manufacturers."
Any transfer of shares of the common stock, including a transfer by any of
the shareholders of the target companies of the Acquisitions who received the
common stock pursuant to the Acquisitions and shareholders of Boomershine
Automotive who received the Company's common stock pursuant to the Merger, will
be outside the control of the Company. If one or more of such transfers cause a
change in control of the Company, the manufacturers may have the right to
terminate or not renew one or more of the Franchise Agreements. Moreover, these
issuance limitations are likely to impede the Company's ability to raise capital
through additional equity offerings or to issue common stock as consideration
for, and therefore, to consummate, future acquisitions. Such restrictions also
may prevent or deter prospective acquirors from gaining control of the Company
and, therefore, may adversely impact the Company's equity value.
COMPETITION
The automotive retailing industry is highly competitive with respect to
price, service, location and selection. The Company's competition includes
franchised automotive dealerships selling the same or similar makes of new and
used vehicles offered by the Company in the same markets as the Company and
sometimes at lower prices than those of the Company. These dealer competitors
may be larger and have greater financial and marketing resources than the
Company. The Company does not have any cost advantage in purchasing new vehicles
from manufacturers. Additional competitors include other franchised dealers,
private market buyers and sellers of used vehicles, used vehicle dealers
(including regional and national rental car companies which sell their used
rental cars), service center chains and independent service and repair shops.
The used car market faces increasing competition from non-traditional outlets
such as the Internet and used car "superstores," which use sales techniques such
as one-price shopping. Several groups have begun to establish nationwide
networks of used vehicle superstores, and car superstores operate in several of
the Company's existing markets. "No negotiation" sales methods are also being
tried for new cars by at least one of these superstores and by Saturn and other
dealerships. Some of the Company's competitors may have greater financial,
marketing and personnel resources than the Company. In addition, certain
manufacturers, such as Ford, have publicly announced that they may directly
enter the retail market in the future, and certain other manufacturers, such as
GM, have publicly announced that they may consolidate many of their dealerships
in a given market area into a single large dealership to serve that particular
market. Such actions by the manufacturers could have a material adverse effect
on the Company. The increased popularity of vehicle leasing also has resulted,
as these leases expire, in a large increase in the number of late model vehicles
available in the market, which puts added pressure on new vehicle prices. As the
Company seeks to acquire dealerships in new markets, it may face increasingly
significant competition (including from other large dealer groups and dealer
groups that have publicly-traded equity) as it strives to gain market share
through acquisitions or otherwise.
The Company's Franchise Agreements do not give the Company the exclusive
right to sell a manufacturer's product within a given geographic area. The
Company could be materially adversely affected if any of its manufacturers award
franchises to others in the same markets where the Company is operating. A
similar adverse effect could occur if existing competing franchised dealers
increase their market share in the Company's markets. The Company's gross
margins may decline over time if it expands into markets where it does not have
a leading position. These and other competitive pressures could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Competition."
16
<PAGE> 18
REGIONAL CONCENTRATION
Local economic, competitive and other conditions may affect the performance
of automotive dealerships. As such, the Company's results of operations may be
substantially dependent upon general economic conditions and consumer spending
habits and preferences in the southeastern United States, as well as various
factors specific to that area, such as tax rates and state and local regulation.
Additionally, since the Company's growth strategy contemplates acquisitions in
small and medium-sized markets, any adverse business developments experienced by
businesses which have a disproportionately large presence in, and influence on,
such small and medium-sized markets could have a material adverse effect on the
Company's business, financial condition and results of operations.
ACQUISITION FINANCING; FUTURE CAPITAL REQUIREMENTS; POSSIBLE DILUTION THROUGH
ISSUANCE OF STOCK
The Company currently intends to finance future acquisitions in part by
issuing shares of its common stock as full or partial consideration for acquired
dealerships. The extent to which the Company will be able or willing to issue
common stock for acquisitions will depend on the market value of the common
stock from time to time, the willingness of potential acquisition candidates to
accept common stock as part of the consideration for the sale of their
businesses, and the ability of the Company to obtain any necessary
manufacturers' consents. It is possible that the Company will issue, in the
aggregate, a significant number of additional shares of common stock in
connection with such acquisitions in the future, and the number of shares of
common stock could be as much as, or more than, the number of outstanding shares
of common stock following the Offering. Using stock to consummate acquisitions
may result in significant dilution of shareholders' percentage interest in the
Company. To the extent the Company is unable or unwilling to issue common stock
as consideration for future acquisitions, the Company may be required to use
available cash or other sources of debt or equity financings to finance future
acquisitions. The Company is negotiating a credit facility with various lenders
and anticipates that such a credit facility will provide the Company with a line
of credit of up to $50 million which may be used for future acquisitions.
However, there can be no assurance that other sources of debt or equity
financing, including this credit facility, would be available to the Company on
acceptable terms, or at all, or that the Company's available cash or other
sources of financing will be sufficient to finance such acquisitions. If the
Company is unable or unwilling to issue shares of common stock as consideration
for future acquisitions, or is unable to obtain additional financing in a timely
manner on satisfactory terms, it may be required to postpone or reduce its
acquisition plans, which may have a material adverse effect on the Company's
business, financial condition and results of operation.
FLOORPLAN FINANCING
The Company depends to a significant extent on its ability to finance the
purchase of inventory, which in the automotive retailing industry involves
significant sums of money in the form of floorplan financing. The Company
intends to replace the existing floorplan financing of its dealerships with
floorplan financing from a single source. As such, the Company is negotiating an
arrangement letter for a bank credit floorplan facility with various lenders.
The floorplan facility is anticipated to provide the Company with a secured
revolving line of credit up to $120 million which may be used for floorplan
financing. No assurance can be given that the Company's working capital, the
floorplan facility, and other resources will be sufficient to fund the Company's
floorplan financing needs, or that the Company will be able to obtain adequate
additional capital from other sources. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Company's Credit and
Financing Arrangements" and "Business -- Growth Strategy." The Company
anticipates that such a consolidation of its floorplan financing, and the
Company's size and market presence, will provide it with an opportunity to
negotiate more favorable terms for its floorplan financing. However, there can
be no assurance that the Company will be able to obtain more favorable floorplan
financing, or that such financing will be implemented in a timely manner. Even
if such more favorable floorplan financing is obtained, there can be no
assurance that such financing will not subsequently be adversely modified, or
that other sources of floorplan financing will be available to the Company in
the future. Additionally, substantially all the assets of the Company's
dealerships are pledged to secure floorplan indebtedness, which may impede the
Company's ability to borrow from other sources, and the Company must obtain new
floorplan financing or
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obtain consents to assume existing financing in connection with its acquisition
of dealerships. See "-- Dependence on Automobile Manufacturers."
SUB-PRIME AUTOMOBILE FINANCE SUBSIDIARY
The sub-prime consumer automobile finance market is comprised of customers
who are deemed to be relatively high credit risks due to various factors,
including, among other things, the manner in which they have handled previous
credit, the absence or limited extent of their prior credit history and/or their
limited financial resources. Consequently, the loans made by South Financial
have a higher probability of delinquency and default and have greater servicing
costs than loans made to consumers who pose lesser credit risks. South
Financial's profitability depends in part upon its ability to properly evaluate
the creditworthiness of sub-prime consumers and efficiently service its loans.
There can be no assurance that satisfactory credit performance of a sub-prime
consumer will be maintained or that the rate of future defaults and/or losses
will be consistent with prior experience or at levels that will allow South
Financial to maintain profitability. The ability of most borrowers to remit
payments in accordance with the terms of the loans is dependent on their
continued employment. An economic downturn resulting in increased unemployment
could cause a significant rise in delinquencies and defaults, which could
materially adversely affect South Financial's business, financial condition and
results of operations. Moreover, increases in the delinquency and/or loss rates
in South Financial's loan portfolio could adversely affect South Financial's
ability to obtain or maintain its financing resources.
South Financial requires substantial borrowings to fund the purchase of
retail installment contracts from automobile dealerships. Consequently, South
Financial's profitability is affected by the difference, or "spread," between
the rate of interest paid on the funds it borrows and the rate of interest
charged on the installment contracts it purchases, which rate in most states is
limited by law. The difference between South Financial's cost of borrowing
versus the average annual percentage rate on loans it makes was 16.9% for 1995,
18.4% for 1996 and 17.4% for 1997. Commencing in February 1997, loans were
purchased from dealers at a discount and on a non-recourse basis to increase the
overall effective yield of the portfolio. Such discount averaged approximately
45% for the year ended December 31, 1997. In addition, because the interest rate
at which South Financial borrows is variable and the interest rate at which
South Financial purchases the retail installment contracts is fixed, South
Financial assumes the risk of interest rate increases prior to the time
contracts either mature or are sold. There can be no assurance that South
Financial will be able to extend its present revolving credit facility or enter
into new credit facilities on reasonable terms in the future or that interest
rate increases will not adversely affect its ability to maintain profitability
with respect to the retail installment contracts it holds.
South Financial is subject to regulation under various federal, state and
local laws and in some jurisdictions is required to be licensed by the state
banking and insurance authorities. States in which South Financial operates
limit the interest rate, fees and other charges that may be imposed by, or
prescribe certain other terms of, the contracts that South Financial purchases
and restrict its right to repossess and sell collateral. An adverse change in
those laws or regulations could have a material adverse effect on South
Financial's business, financial condition and results of operations by, among
other things, limiting the states in which South Financial may operate or the
interest rate that may be charged on retail installment contracts or restricting
South Financial's ability to realize the value of the collateral securing the
contracts.
COLLISION REPAIR CENTERS
The Company anticipates that much of the growth of its collision repair
business will be achieved through the development of new locations for its
collision repair business; however, the Company to date has not established any
start-up locations of the type anticipated, and there can be no assurance that
the Company will successfully establish any such locations in the near term or
at all. The Company expects that start-up locations may initially have a
negative impact on its results of operations and margins due to several factors,
including: (i) start-up collision repair centers typically require a significant
investment of capital to acquire the necessary equipment and materials and to
establish each start-up location; and (ii) it will generally take some time
following commencement of operations at a start-up location before profitability
can be achieved. There
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can be no assurance that any start-up location will become profitable within the
first several years of operations, if at all.
The collision repair industry is highly fragmented and is comprised
primarily of independent operators of collision repair centers, against which
the Company expects to compete and among which the Company anticipates
identifying acquisition candidates. The Company also expects its competitors in
the collision repair industry to include franchised operators of collision
repair centers and other companies which operate multiple company-owned
collision repair centers. Some of these competitors may be significantly larger
and have greater financial resources than the Company.
OPERATING CONDITION OF ACQUIRED BUSINESSES
Although the Company has conducted what it believes to be a prudent level
of investigation regarding the operating condition of the assets to be purchased
in the Acquisitions in light of the circumstances of each transaction, certain
unavoidable levels of risk remain regarding the actual operating condition of
these assets. The same risk regarding the actual operating condition of
businesses to be acquired will also apply to future acquisitions by the Company.
In addition, in connection with the Acquisitions, the Company has executed
certain acquisition agreements which contain limited or qualified
representations and warranties by the target companies and/or the selling
shareholders, monetary and duration limitations on any indemnifications made by
the target companies and/or selling shareholders, or, in some instances, no
indemnifications at all. Moreover, some of the former owners of the businesses
acquired pursuant to the Acquisitions have or will become executive officers
and/or members of the Board of Directors of the Company. See "Management --
Executive Officers and Directors; Key Personnel." Consequently, the Company may
have little or no recourse against the prior owners of the companies acquired in
the Acquisitions in the event of breach of a representation, warranty or
covenant in such acquisition agreements. Any material misrepresentations,
omissions or breaches of covenants could have a material adverse effect on the
Company's business, financial condition or results of operations.
DEPENDENCE ON KEY PERSONNEL AND LIMITED MANAGEMENT AND PERSONNEL RESOURCES
The Company's success depends to a significant degree upon the continued
contributions of its its senior management, particularly Walter M. Boomershine,
Jr., the Company's Chairman, Robert W. Gundeck, the Company's Chief Executive
Officer, Charles K. Yancey, the Company's Chief Operating Officer and President,
Stephen C. Whicker, the Company's Executive Vice President of Corporate
Development, Ricky L. Brown, the Company's Chief Financial Officer, Alan K.
Arnold, the Company's Vice President of Ford Division, and R. Glynn Wimberly,
the Chief Executive Officer of South Financial Corporation. The Company has
employment agreements with each of said employees, but the Company does not
maintain key-man life insurance on such individuals. The loss of any of said key
employees could have a material adverse effect on the Company's business,
financial condition and results of operation. Additionally, the Franchise
Agreements require the prior approval of the applicable manufacturer before any
change is made in franchise general managers. Consequently, the loss of the
services of one or more of these key employees could have a material adverse
effect on the Company. Although the Company has employment agreements with some
of its key employees, the Company will not have employment agreements in place
for all of its key personnel. The Company does not currently maintain any
key-man life insurance on any member of its management team. In addition, as the
Company expands it may need to hire additional managers and will likely be
dependent on the senior management of any businesses acquired. The market for
qualified employees in the industry and in the regions in which the Company
operates, particularly for general managers and sales and service personnel, is
highly competitive and may subject the Company to increased labor costs in
periods of low unemployment. The loss of the services of key employees or the
inability to attract additional qualified managers could have a material adverse
effect on the Company. In addition, the lack of qualified management or
employees of potential acquisition candidates may limit the Company's ability to
consummate future acquisitions. See "Business -- Growth Strategy,"
"Business -- Competition" and "Management."
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FAILURE TO MEET MANUFACTURER CSI SCORES
Many manufacturers attempt to measure customer satisfaction with dealership
sales, warranty and repair service through a customer satisfaction index which
varies by manufacturer. These manufacturers may use a dealership's CSI scores as
a factor in evaluating applications for additional dealership acquisitions and
other matters such as vehicle inventory allocations. The components of CSI have
been modified from time to time in the past, and there is no assurance that such
components will not be further modified or replaced by different systems in the
future. None of the Company's dealerships has, as of the date of this
Prospectus, received any written notices from any manufacturer indicating that
such dealership is in non-compliance with said manufacturer's CSI requirements.
However, certain of the Company's dealerships may have been in non-compliance
with manufacturers' CSI requirements in the past, although the Company has not
been adversely affected by such non-compliance. There can be no assurance that
the Company will be able to comply with such standards in the future. Failure of
the Company's dealerships to comply with the standards imposed by manufacturers
at any given time may have a material adverse effect on the growth and operating
strategies of the Company.
HOLDING COMPANY STRUCTURE; RELIANCE ON DIVIDENDS AND OTHER PAYMENTS FROM
OPERATING SUBSIDIARIES
The Company is a holding company, the principal assets of which are the
shares of the capital stock of its subsidiaries. As a holding company without
independent means of generating operating revenue, the Company depends on
dividends and other payments, including payments of management fees and pursuant
to tax sharing arrangements, from its subsidiaries to fund its obligations and
meet its cash needs.
YEAR 2000 COMPLIANCE
The Company has taken steps to evaluate the extent of its potential year
2000 problems. Some older, or "legacy" computer programs still in use today use
two-digit fields to represent the year in computer records. Such programs may
not properly recognize date-sensitive information when the year changes to 2000
and the systems' two-digit year code changes to "00." Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail. The Company uses financial reporting software that is standard
to the automotive retailing industry and the Company is not certain of the total
exposure it may have as a result of the year 2000 problem. The Company's
software vendors have indicated to the Company that their software is year 2000
compliant. Accordingly, the Company currently does not expect that it will incur
significant operating expenses or be required to invest heavily in computer
system improvements to be year 2000 compliant. However, there can be no
assurance that such software will operate properly once the year 2000 arrives,
and significant uncertainty exists concerning the potential costs and effects
associated with any year 2000 compliance. Any year 2000 compliance problem of
either the Company or its outside vendors, third-party payors or customers could
have a material adverse effect on the Company's business, financial condition
and results of operations.
CYCLICALITY
Sales of automotive vehicles, particularly new vehicles, historically have
been subject to substantial cyclical variation. The Company believes that the
industry is affected by many factors, including general economic conditions,
consumer confidence, the level of personal discretionary spending, prevailing
interest rates and credit availability. There can be no assurance that the
industry will not experience sustained periods of decline in vehicle sales,
particularly new vehicle sales, in the future. Any such decline could have a
material adverse effect on the Company's growth strategy and financial
condition.
IMPORTED PRODUCT RESTRICTIONS AND FOREIGN TRADE RISKS
Certain motor vehicles sold by the Company, as well as certain major
components of vehicles retailed by the Company, are of foreign origin.
Accordingly, the Company is subject to the import and export restrictions of
various jurisdictions and is dependent to some extent upon general economic
conditions in and political relations with a number of foreign countries,
particularly Japan. Additionally, fluctuations in currency exchange rates may
adversely affect the Company's sales of vehicles produced by foreign
manufacturers.
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Imports into the United States may also be adversely affected by increased
transportation costs and tariffs, quotas or duties.
ADVERSE EFFECT OF GOVERNMENTAL REGULATION; ENVIRONMENTAL REGULATION COMPLIANCE
COSTS
The Company is subject to a wide range of federal, state and local laws and
regulations, such as local licensing requirements and consumer protection laws.
See "-- Sub-Prime Automobile Finance Subsidiary" for a discussion of some of the
laws and regulations which impact the operations of South Financial. The
violation of these laws and regulations can result in civil and criminal
penalties being levied against the Company or in a cease and desist order
against Company operations that are not in compliance. Future acquisitions by
the Company may also be subject to regulation, including antitrust reviews. The
Company believes that it complies in all material respects with all laws and
regulations applicable to its business, but future regulations may be more
stringent and require the Company to incur significant additional costs to
achieve compliance.
The Company's facilities and operations are also subject to federal, state
and local laws and regulations relating to environmental protection and human
health and safety, including those governing wastewater discharges, air
emissions, the operation and removal of underground storage tanks, the use,
storage, treatment, transportation and disposal of solid and hazardous materials
and the remediation of contamination associated with such disposal. Certain of
these laws and regulations may impose joint and several liability on certain
statutory classes of persons for the costs of investigation or remediation of
contaminated properties, regardless of fault or the legality of the original
disposal. These persons include the present or former owner or operator of a
contaminated property and companies that generated, disposed of or arranged for
the disposal of hazardous substances found at the property. Past and present
business operations of the Company subject to such laws and regulations include
the use, storage, handling and contracting for recycling or disposal of
hazardous or toxic substances or wastes, including environmentally sensitive
materials such as motor oil, waste motor oil and filters, transmission fluid,
antifreeze, Freon, waste paint and lacquer thinner, batteries, solvents,
lubricants, degreasing agents, gasoline and diesel fuels. The Company is subject
to other laws and regulations as a result of the past or present existence of
underground storage tanks at many of the Company's properties. The Company, like
many of its competitors, has incurred, and will continue to incur, capital and
operating expenditures and other costs in complying with such laws and
regulations.
Certain laws and regulations, including those governing air emissions and
underground storage tanks, have been amended so as to require compliance with
new or more stringent standards as of future dates. The Company cannot predict
what other environmental legislation or regulations will be enacted in the
future, how existing or future laws or regulations will be administered or
interpreted or what environmental conditions may be found to exist in the
future. Compliance with new or more stringent laws or regulations, stricter
interpretation of existing laws or the future discovery of environmental
conditions may require additional expenditures by the Company, some of which may
be material. See "Business -- Governmental Regulations and Environmental
Matters."
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Articles of Incorporation ("Articles")
and Bylaws may make it more difficult for shareholders of the Company to effect
certain corporate actions. For example, the Company's Articles and Bylaws
provide that special meetings of the shareholders may only be called by the
Chairman or Chief Executive Officer of the Company, or by a majority vote of the
Board of Directors, and the Company's Bylaws provide that shareholders seeking
to bring business before an annual meeting of shareholders, or to nominate
candidates for election as directors at annual or special meetings of
shareholders, must provide timely notice thereof in writing. Additionally, the
Company's Bylaws incorporate the fair-price protections promulgated by Sections
14-2-1110 through 14-2-1113 and 14-2-1131 through 14-2-1133 of the Georgia
Business Corporation Code (the "GBCC"), which provide certain protections to
minority shareholders by imposing certain requirements on business combinations
of the Company with any interested shareholders of the Company beneficially
holding more than 10% of the Company's voting shares. See "Description of
Capital Stock -- Georgia Law, Certain Articles and Bylaw Provisions and Certain
Franchise
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Agreement Provisions." The agreements, corporate documents and laws described
above, as well as provisions of the Franchise Agreements described in
"-- Dependence on Automobile Manufacturers" and "-- Stock Ownership/Issuance
Limits; Limitation on Ability to Issue Additional Equity" above (permitting
manufacturers to terminate such agreements upon a change of control) and
provisions of the Company's lending arrangements described in "-- Stock
Ownership/Issuance Limits; Limitation on Ability to Issue Additional Equity"
above (creating an event of default thereunder upon a change in control), may
have the effect of delaying or preventing a change in control of the Company or
preventing shareholders from realizing a premium on the sale of their shares of
common stock upon an acquisition of the Company.
The Articles authorize the Board of Directors of the Company to issue,
without shareholder approval, up to 50 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. The issuance of such preferred stock
could adversely affect the voting power or other rights of the holders of the
common stock. Under certain circumstances, the Company could also issue such
preferred stock as a method of discouraging, delaying or preventing a change in
control of the Company. The issuance of preferred stock could also prevent
shareholders from realizing a premium upon the sale of their shares of common
stock upon an acquisition 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. See "Description of Capital
Stock -- Preferred Stock." Additionally, the Company's Articles and Bylaws
provide that the Board of Directors is divided into three classes serving
staggered terms. These and other provisions may impair the shareholders' ability
to influence or control the Company or to effect a change in control of the
Company, and may prevent shareholders from realizing a premium on the sale of
their shares of common stock upon an acquisition of the Company. See
"Description of Capital Stock."
POTENTIAL CONFLICTS OF INTEREST
The Company has in the past and will likely in the future enter into
transactions with entities controlled by affiliates of the Company. The Company
believes that the Acquisitions were entered into on terms that, taken as a
whole, reflect arm's-length negotiations and are on terms that are no less
favorable than those that could be obtained from non-affiliated parties. None of
the officers, directors and principal shareholders of the targets were
affiliates of the Company at the time such Acquisitions were negotiated and all
such individuals were represented by independent legal and financial advisors
throughout such negotiations. However, the consideration paid by the Company to
the Boomershine Automotive shareholders in connection with the Merger may have
exceeded the fair market value of the acquired business. At the time of the
Merger, Walter M. Boomershine, Jr. was a director, officer and shareholder of
both Sunbelt and Boomershine Automotive and Charles K. Yancey was a director and
officer of both Sunbelt and Boomershine Automotive. Since no independent
appraisals evaluating the Merger were obtained, there can be no assurance that
the Merger is on terms that could have been obtained from unaffiliated third
parties. Potential conflicts of interest could also arise in the future between
the Company and these affiliated parties in connection with the enforcement,
amendment or termination of these arrangements. The Company anticipates
renegotiating its leases with all related parties at lease expiration at fair
market rentals, which may be higher than current rents. See "Certain
Transactions."
Under Title 14 of the GBCC generally, a transaction effected or proposed to
be effected by a corporation (or a subsidiary of the corporation or any other
entity in which the corporation has a controlling interest) respecting which a
director of the corporation has a conflicting interest is deemed a conflicting
interest transaction. Accordingly, the GBCC provides certain disclosures and
procedures for appropriate directors' actions and shareholders' actions when
dealing with a conflicting interest transaction. Further, under general Georgia
corporate law, a corporate insider is precluded from acting on a business
opportunity in his individual capacity if that opportunity is one which the
corporation is financially able to undertake, is in the line of the
corporation's business, is of practical advantage to the corporation and is one
in which the corporation has an interest or reasonable expectancy.
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NO PRIOR PUBLIC MARKET FOR COMMON STOCK AND POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the common
stock. The initial public offering price of the common stock will be determined
by negotiations among the Company and representatives of the Underwriters. See
"Underwriting" for a discussion of factors considered in determining the initial
public offering price. There can be no assurance that the market price of the
common stock prevailing at any time after this Offering will equal or exceed the
initial public offering price or that an active trading market will be developed
after the Offering or, if developed, that it will be sustained. Quarterly and
annual operating results of the Company, variations between such results and the
results expected by investors and analysts, and changes in local or general
economic conditions or developments affecting the automotive retailing industry,
the Company or its competitors, as well as other factors common to initial
public offerings, could cause the market price of the common stock to fluctuate
substantially. In addition, the stock market has, from time to time, experienced
extreme price and volume fluctuations, which could adversely affect the market
price for the common stock without regard to the financial performance of the
Company.
DILUTION
Purchasers of common stock in the Offering will experience immediate and
substantial dilution in the amount of $7.88 per share in net tangible book value
per share from the initial offering price. See "Dilution."
DIVIDENDS
The Company has no present intention to declare or pay cash dividends after
the Offering. The Company intends to retain any earnings that it may realize in
the future to finance its acquisitions and operations. The payment of any future
dividends will be subject to the discretion of the Board of Directors of the
Company and will depend upon the Company's results of operations, financial
position and capital requirements, general business conditions, restrictions
imposed by financing arrangements, if any, legal restrictions on the payment of
dividends, and other factors the Board of Directors deems relevant. The
Company's Franchise Agreements with vehicle manufacturers generally require the
Company, or its subsidiary operating a particular dealership, to maintain
adequate levels of capitalization, which also could restrict the Company's
ability to pay dividends. See "Dividend Policy."
POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK
Sales of substantial amounts of common stock into the public market
subsequent to the Offering could have a material adverse effect on the market
price of the common stock. Upon consummation of the Merger, the Acquisitions and
the Offering, the Company will have 10,575,362 shares of common stock
outstanding (11,400,362 shares if the Underwriters' over-allotment option is
exercised in full). Of these shares, the 5,500,000 shares offered hereby will be
freely tradable without restriction or further registration under the Securities
Act of 1933, as amended (the "Securities Act"), except for shares held by
persons deemed to be "affiliates" of the Company or acting as "underwriters," as
those terms are defined in the Securities Act. Of the remaining shares of common
stock outstanding, the 3,800,160 shares to be issued to the Boomershine
Automotive shareholders upon consummation of the Merger, the 249,202 shares
issued to executive officers of the Company and the 6,000 shares issued to the
founders of the Company will be "restricted securities" within the meaning of
Rule 144 under the Securities Act and will be eligible for resale subject to
volume, manner of sale, holding period and other limitations of Rule 144. The
1,020,000 shares of common stock to be issued upon consummation of the
Acquisitions will likewise be subject to Rule 144, but the holders of some of
the shares have been granted piggyback registration rights under the terms of
the applicable Acquisition agreements.
The Company has also made certain commitments to issue additional shares of
common stock. The Company may be required to issue shares to the former
shareholders of Wade Ford and Day's Chevrolet under price protection provisions
set forth in the applicable Acquisition agreements. See "Description of Capital
Stock -- Registration Rights and Stock Price Protection." Upon issuance, all of
said shares will be subject to Rule 144. The Company has also reserved 1,592,000
shares of common stock for issuance under stock options
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granted under the Incentive Stock Plan prior to or contemporaneously with the
completion of the Offering, 653,000 shares of common stock for issuance under
stock options which may be granted under the Incentive Stock Plan subsequent to
this Offering and 50,000 shares of common stock for issuance upon exercise of
warrants granted to a consulting firm for services rendered in connection with
this Offering. In addition, the Company has reserved 5,000 shares of common
stock for issuance under stock options granted in connection with the Collision
Centers USA acquisition. See "Management -- Incentive Stock Plan," "Shares
Eligible for Future Sale" and "Description of Capital Stock -- Warrants." The
Company intends to file a registration statement on Form S-8 with the Securities
and Exchange Commission (the "Commission") following completion of the Offering
to register the shares of common stock issuable under the Incentive Stock Plan.
No prediction can be made as to the effect that resale of shares of common
stock, or the availability of shares of common stock for resale, will have on
the market price of the common stock prevailing from time to time. The resale of
substantial amounts of common stock, or the perception that such resales may
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. The Company has agreed, subject to certain exceptions, not to issue, and
all executive officers of the Company and all current holders of common stock
have agreed not to resell, any shares of common stock or other equity securities
of the Company for 180 days after the date of this Prospectus without the prior
written consent of the representatives of the Underwriters. The Company and the
Underwriters do not expect to provide notice to the public of any early
termination of such 180-day lock-up agreements. See "Management -- Incentive
Stock Plan," "Shares Eligible for Future Sale" and "Underwriting."
PRICE PROTECTION PROVISIONS
Pursuant to certain stock price protection provisions and/or agreements
entered into in connection with the Wade Ford Acquisition and the Day's
Chevrolet Acquisition, the Company may be required to pay additional
consideration up to an approximate aggregate amount of $9.8 million -- in the
form of cash and/or the Company's common stock -- to the shareholders of said
acquisition target companies. See "Description of Capital Stock -- Registration
Rights and Stock Price Protection."
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements relating to,
among other things, future results of operations, growth plans, sales, capital
requirements and general industry and business conditions applicable to the
Company. These forward-looking statements are based largely on the Company's
current expectations and are subject to a number of risks and uncertainties
which include, but are not limited to, those set forth above. Actual results
could differ materially from those implied by these forward-looking statements.
Important factors to consider in evaluating such forward-looking statements
include, but are not limited to, changes in external competitive market factors,
changes in the Company's business strategy or an inability to execute its
strategy due to unanticipated changes in the Company's industry or the economy
in general and various competitive factors that may prevent the Company from
competing successfully in existing or new markets.
THE MERGER
Sunbelt Automotive Group, Inc. was incorporated under the GBCC on December
17, 1997. Contemporaneously with the closing date of the Offering, Boomershine
Automotive will merge into the Company via a tax-free reorganization under
Section 368(a)(1)(A) of the Internal Revenue Code and the GBCC (the "Merger").
Upon consummation of the Merger: (i) Boomershine Automotive will be merged with
and into the Company; and (ii) the Boomershine Automotive shareholders will
receive an aggregate of 3,800,160 shares of unregistered common stock of the
Company in exchange for the issued and outstanding capital stock of Boomershine
Automotive.
Boomershine Automotive was formed in 1992 as a holding company to own and
operate the various Boomershine Automotive dealerships throughout the
metropolitan Atlanta area. Prior to the Merger,
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Boomershine Automotive owned and operated nine franchised automobile dealerships
in the metropolitan Atlanta area, including Pontiac, Buick, GMC and Hummer
franchises located in Smyrna, Georgia; Nissan, Ford and Isuzu dealerships in the
Gwinnett Mall area of Duluth, Georgia; a Honda dealership in Cartersville,
Georgia; and a Mitsubishi dealership in Kennesaw, Georgia (North Atlanta).
Boomershine Automotive also owned a collision repair center which served the
Gwinnett County area and the Boomershine Ford and Isuzu dealerships and which is
now one of the four collision repair centers of the Company's Collision Centers
USA subsidiary.
THE ACQUISITIONS
Since November 1997, the Company or Boomershine Automotive, as the
Company's predecessor in interest, has consummated or signed definitive
agreements to purchase six additional dealerships or dealership groups, three
collision repair centers and one automotive sub-prime finance company for an
aggregate purchase price of approximately $67 million. These Acquisitions
consist of the Collision Centers USA Acquisition (consummated December 18,
1997), the South Financial Acquisition (consummated January 6, 1998), the Bill
Holt Acquisition (consummated June 15, 1998), the Grindstaff Acquisition, the
Robertson Acquisition, the Wade Ford Acquisition, the Jay Automotive Group
Acquisition, and the Day's Chevrolet Acquisition (the "Acquisitions"). The
closing of the Offering is contingent upon the Company consummating the
Grindstaff, Robertson, Wade Ford, Jay Automotive and Day's Chevrolet
Acquisitions, and the Company intends to use a portion of the proceeds from the
Offering to pay the cash purchase prices of these remaining Acquisitions. See
"Use of Proceeds."
The Jay Automotive Group Acquisition. On January 5, 1998, the Company
entered into a definitive agreement to acquire from James G. Stelzenmuller, III,
all of the outstanding stock of Jay Automotive Group, Inc., which owns and
operates Toyota, Mazda, Pontiac, Buick, GMC and Mitsubishi dealerships in
Columbus, Georgia. The Jay Automotive Group Acquisition is expected to be
consummated simultaneously with the closing of this Offering. The Company will
pay approximately $16.0 million in consideration for the Jay Automotive Group
Acquisition. At the closing, the Company will pay approximately $12.0 million in
cash and approximately $4.0 million in the form of a ninety-day promissory note
(the "Jay Note") with an interest rate equal to 8% per annum. Jay Automotive
Group, Inc. will continue to lease the real properties on which its facilities
are located from the respective landlords of each property. See
"Business -- Facilities."
The Wade Ford Acquisition. On November 21, 1997, the Company entered into
a definitive agreement to acquire from Alan K. Arnold, Gary R. Billings and
certain other shareholders all of the outstanding common stock of Wade Ford,
Inc. and Wade Ford Buford, Inc. (the "Wade Ford Dealerships"), located in Smyrna
and Buford, Georgia, respectively. The Wade Ford Acquisition is expected to be
consummated simultaneously with the closing of this Offering. The Company will
pay approximately $15.5 million in consideration for the Wade Ford Acquisition.
At the closing, the Company will pay to the selling shareholders approximately
$11.5 million in cash and approximately $3.5 million in the form of unregistered
common stock of the Company. In addition, approximately $367,000 of cash and
approximately $133,000 of common stock will be held in escrow until the
expiration of certain indemnification provisions made by the selling
shareholders of the Wade Ford Dealerships. The Company will also provide certain
piggyback registration rights to the selling shareholders of the Wade Ford
Dealerships, along with certain stock price protection pursuant to which the
Company will compensate the shareholders for any deficiencies in the price of
the stock consideration on the first anniversary of the Offering. See
"Description of Capital Stock -- Registration Rights and Stock Price
Protection." In connection with the Wade Ford Acquisition, Mr. Arnold and Mr.
Billings will each execute non-competition and confidentiality agreements. Mr.
Arnold, who has over 20 years of experience in the automotive retailing
industry, will continue to serve as the Executive Manager of Wade Ford pursuant
to an employment agreement and will join the Company as a director and as the
Vice President in charge of the Ford Division. Mr. Billings, who has over 35
years of experience in the automotive retailing industry, will continue to serve
as the Executive Manager of Wade Ford Buford. The Wade Ford Dealerships will
continue to lease the real properties on which their facilities are located from
the respective landlords of each property. See "Business -- Facilities" and
"Certain Transactions -- Certain Dealership Leases."
25
<PAGE> 27
Day's Chevrolet Acquisition. On March 3, 1998, the Company entered into a
definitive agreement to acquire from Calvin Diemer and Alvin Diemer all of the
outstanding common stock of Day's Chevrolet, Inc., located in Acworth, Georgia.
The Day's Chevrolet Acquisition is expected to be consummated simultaneously
with the closing of this Offering. The Company will pay approximately $10.8
million in consideration for the Day's Chevrolet Acquisition. At the closing,
the Company will pay to the selling shareholders approximately $5.6 million in
cash and approximately $5.2 million in the form of unregistered common stock of
the Company. The Company will also provide certain stock price protection to the
selling shareholders of Day's Chevrolet pursuant to which the Company will
compensate the selling shareholders for any deficiencies in the price of the
stock consideration on the second anniversary of the Offering. See "Description
of Capital Stock -- Registration Rights and Stock Price Protection." In
connection with the Day's Chevrolet Acquisition, Mr. Calvin Diemer, who has over
20 years of experience in the automotive retailing industry, will execute a
non-competition and confidentiality agreement and will continue to serve as the
Executive Manager of Day's Chevrolet pursuant to an employment agreement. Day's
Chevrolet will continue to lease the real property on which its facilities are
located from the landlord of said property. See "Business -- Facilities."
The Grindstaff Acquisition. On December 27, 1997, the Company entered into
a definitive agreement to acquire from Steve E. Grindstaff, Wes Hambrick and
trusts for the benefit of Amie Pearson and Renee Mullins all of the outstanding
common stock of Grindstaff, Inc., a Tennessee corporation, which operates
Chevrolet, Chrysler, Plymouth, Dodge, Jeep and Kia dealerships in Elizabethton,
Tennessee. The Grindstaff Acquisition is expected to be consummated
simultaneously with the closing of this Offering. The Company will pay
approximately $9.1 million in consideration for the Grindstaff Acquisition,
which amount is subject to adjustment if the consolidated net worth of
Grindstaff, Inc. at the time of closing is less than or greater than $1.5
million. The Company expects to receive $1.2 million in repayment of a note
receivable from the selling shareholders at the closing. At the closing, the
Company will pay to the selling shareholders approximately $8.6 million in cash
and approximately $500,000 will be held in escrow until the expiration of
certain indemnification provisions made by the selling shareholders of the
Grindstaff dealerships. In connection with the Grindstaff Acquisition, Mr.
Grindstaff will execute a non-competition and confidentiality agreement. Mr. Wes
Hambrick, who has over 15 years of experience in the automotive retailing
industry, will continue to serve as the Executive Manager of Grindstaff, Inc.
pursuant to an employment agreement. Grindstaff, Inc. will continue to lease the
real property on which its facilities are located from the landlord of said
property. See "Business -- Facilities."
The Robertson Acquisition. On March 1, 1998, the Company entered into a
definitive agreement to acquire from E. Moss Robertson, Jr. all of the
outstanding common stock of Robertson Oldsmobile-Cadillac, Inc. ("ROC"), which
operates Oldsmobile, Cadillac, Isuzu and Mazda dealerships in Gainesville,
Georgia. The Robertson Acquisition is expected to be consummated simultaneously
with the closing of this Offering. The Company will pay approximately $4.7
million in consideration for the Robertson Acquisition plus the closing-date
FIFO net worth of ROC (estimated to be $3.4 million), as defined by the
definitive agreement. At the closing, the Company will pay to Mr. Robertson
approximately $360,000 in the form of unregistered common stock of the Company,
and the balance of the purchase price will be paid by the Company to Mr.
Robertson in cash. Mr. Robertson is the son-in-law of Mr. Walter M. Boomershine,
Jr. (the Senior Vice President and Chairman of the Company) and the spouse of
Lindsey B. Robertson, a shareholder of Boomershine Automotive, which is the
target entity of the Merger. See "The Merger." The Company will also provide
certain piggyback registration rights to the selling shareholder with respect to
the unregistered common stock. See "Description of Capital Stock -- Registration
Rights and Stock Price Protection." In connection with the Robertson
Acquisition, Mr. Robertson, who has over 20 years of experience in the
automotive retailing industry, will execute a non-competition and
confidentiality agreement and will continue to serve as the Executive Manager of
ROC pursuant to an employment agreement. ROC will continue to lease the real
property on which its facilities are located from the landlord of said property,
and the Company will guaranty said lease. See "Business -- Facilities" and
"Certain Transactions -- Certain Dealership Leases."
The Bill Holt Acquisition. On June 15, 1998, the Company acquired
substantially all of the operating assets, and assumed certain liabilities, of
Hones, Inc. d/b/a Bill Holt Ford Mercury, a North Carolina corporation which
operates Ford and Mercury dealerships in Franklin, North Carolina. The Company
paid for
26
<PAGE> 28
the Bill Holt Acquisition consideration in an amount equal to approximately
$750,000 in cash and assumed the outstanding balance of the floorplan liability
for new vehicles of Hones, Inc. actually acquired by the Company, as determined
in accordance with the terms of the definitive agreement. In connection with the
Bill Holt Acquisition, Mr. Bill Holt, who was the sole shareholder of Hones,
Inc. prior to this Offering, executed a non-competition and confidentiality
agreement. An unrelated third party acquired the real property on which its
facilities are located, and the Company will continue to lease said real
property from such landlord. See "Business -- Facilities."
The South Financial Acquisition. On January 6, 1998, the Company acquired
from Thomas F. Murphy, Jr. all of the outstanding capital stock of South
Financial Corporation, a Florida corporation that owns and operates five
standalone sub-prime automotive finance offices located in Florida, Tennessee
and North Carolina. The purchase price of South Financial Corporation was
approximately $4.65 million, which was paid in cash at the time of closing. In
connection with the South Financial Acquisition, Mr. Murphy executed a
non-competition and confidentiality agreement. Upon the consummation of this
transaction, R. Glynn Wimberly became chief executive officer of South Financial
Corporation pursuant to an employment agreement between Mr. Wimberly and South
Financial Corporation. Mr. Wimberly has 24 years of experience in the consumer
finance industry and has served as the president and general manager of an
automotive sub-prime finance company for the past five years. The Company
anticipates that future sites for South Financial Corporation's outlets will be
located in or near existing and future Company-owned dealerships. The South
Financial Acquisition further implements the Company's growth strategy by adding
a higher-margin complementary business to its core automotive retailing
operations.
The Collision Centers USA Acquisition. On December 18, 1997, the Company
acquired from James L. Peters all of the outstanding capital stock of Southlake
Collision Center, Inc., Southlake Collision Henry County, Inc. and Southlake
Collision Cobb Parkway, Inc. (collectively, the "Collision Centers"), which own
and operate stand-alone automobile collision repair centers located in Clayton
County, Henry County and Cobb County, Georgia, respectively. The purchase price
for the Collision Centers, in the aggregate, was approximately $1.7 million,
one-half of which was paid in cash, and the balance of which was paid in the
form of promissory notes (each, the "Collision Note," and collectively, the
"Collision Notes") with an interest rate equal to 18% per annum. One of the
Collision Notes has been paid and satisfied and the other will mature on June
30, 1998, at which time the Company intends to satisfy the remaining Collision
Note with funds from its working capital. In connection with the Collision
Centers USA Acquisition, Mr. Peters executed a non-competition and
confidentiality agreement, and Mr. Peters and Collision Centers USA entered into
an employment agreement pursuant to which Mr. Peters became Vice President of
Collision Centers USA. In connection with his employment by Southlake Collision
Centers, USA, Mr. Peters has also received options to purchase 5,000 shares of
common stock of the Company at an exercise price of $8.00 per share. See
"Management -- Incentive Stock Plan." Collision Centers USA will continue to
lease the real properties on which its facilities are located from the
respective landlords of each property. See "Business -- Facilities." All
collision centers owned by the Company are operated by the Company's subsidiary,
Collision Centers USA, Inc. under the name "Collision Centers USA." The
acquisition of these three companies, along with the Company's acquisition of an
additional collision repair center by virtue of the Merger, further implements
the Company's growth strategy by adding a higher-margin complementary business
with geographic proximity to the Company's existing automobile dealerships.
Additionally, the Collision Centers USA Acquisition will enhance the Company's
cross-selling capabilities by ensuring a continued demand for, and increased
sales of, parts and supplies from nearby Company-owned dealerships.
USE OF PROCEEDS
The net proceeds to the Company from the sale of 5,500,000 shares of common
stock offered hereby are estimated to be approximately $48.2 million
(approximately $55.8 million if the Underwriters' over-allotment option is
exercised in full), assuming an initial public offering price of $10.00 per
share and after deducting the underwriting discount and estimated expenses of
the Offering. The net proceeds of this Offering, along with cash in the
businesses to be merged into or acquired by the Company (amounting to an
aggregate of approximately $19.7 million at March 31, 1998), will be used to pay
the cash portion of the purchase price for
27
<PAGE> 29
the Acquisitions in the aggregate amount of approximately $47 million, and the
balance of the proceeds, if any, will be used to reduce the balance outstanding
on the Company's floorplan facility and as working capital. The Company
regularly reviews opportunities to further its business strategy through
acquisitions of automotive dealerships and other businesses that it believes are
complementary to the Company's current and planned operations. The Company,
however, has no present commitments, agreements or understandings with respect
to any acquisitions other than the Acquisitions.
DIVIDEND POLICY
The Company intends to retain all of its earnings to finance the growth and
development of its business, including future acquisitions, and does not
anticipate paying any cash dividends on its common stock for the foreseeable
future. Any future change in the Company's dividend policy will be made at the
discretion of the Board of Directors of the Company and will depend upon the
Company's operating results, financial condition, capital requirements, general
business conditions and such other factors as the Board of Directors deems
relevant. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and "Description of
Capital Stock."
28
<PAGE> 30
CAPITALIZATION
The following table sets forth, as of March 31, 1998, the capitalization of
the Company (i) on an actual basis, reflecting only the capitalization of
Boomershine Automotive, the accounting acquirer, as of March 31, 1998, (ii) on a
pro forma basis, as adjusted to reflect the Merger and the Acquisitions, and
(iii) on a pro forma as adjusted basis to reflect the Offering and the
application of the net proceeds therefrom to be received by the Company. See
"The Acquisitions" and "Use of Proceeds." This table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Pro Forma Combined and Condensed Financial Data"
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
------------------------------------------
PRO FORMA AS
ACTUAL(1) PRO FORMA(2) ADJUSTED(3)
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt:
Floorplan notes payable................................ $49,918 $114,013 $ 94,898
Notes payable and other................................ 18,726 23,590 23,590
Current maturities of long-term debt................... 1,921 2,159 2,159
------- -------- --------
Total short-term debt.................................... 70,565 139,762 120,647
Long-term debt, less current maturities.................. 360 837 837
Shareholders' equity:
Class A voting common stock, no par value; 500,000
shares authorized; 72,000 shares issued and
outstanding actual; no shares issued and outstanding
pro forma and pro forma as adjusted................. 3,974 -- --
Common stock, $0.001 par value, 450,000,000 shares
authorized, no shares issued and outstanding actual;
5,075,362 shares issued and outstanding pro forma;
and 10,575,362 shares issued and outstanding pro
forma as adjusted(4)................................ -- 5 11
Preferred stock, $0.001 par value, 50,000,000 shares
authorized, no shares issued or outstanding......... -- -- --
Additional paid-in capital............................. -- 15,122 63,266
Note receivable........................................ -- (1,994) (1,994)
Retained earnings...................................... 5,266 4,656 4,656
------- -------- --------
Total shareholders' equity..................... 9,240 17,789 65,939
------- -------- --------
Total capitalization........................... $80,165 $158,388 $187,423
======= ======== ========
</TABLE>
- ---------------
(1) Includes the Collision Centers USA Acquisition and South Financial
Acquisition which were completed by Boomershine Automotive prior to March
31, 1998.
(2) Adjusted to give effect to 255,202 shares of common stock issued to founders
of the Company and certain executive officers prior to the effective date of
the Offering. Also, adjusted to give effect to 3,800,160 shares of common
stock issued in connection with the Merger. Consideration for the common
stock issued to executive officers was in the form of notes payable to the
Company. Adjusted to give effect to the items in (1) above, and the issuance
of 1,020,000 shares of common stock in connection with the Acquisitions. See
"Pro Forma Combined and Condensed Financial Data."
(3) Adjusted to give effect to the items in (2) above and the Offering. See "Pro
Forma Combined and Condensed Financial Data."
(4) Does not reflect the possible exercise of options to purchase 2,250,000
shares of common stock reserved for issuance under the Company's Incentive
Stock Plan, including options to purchase 1,597,000 shares of common stock.
See "Management -- Incentive Stock Plan." Also does not reflect the possible
issuance of 50,000 shares of common stock reserved for issuance upon the
exercise of warrants granted to a consulting firm for services rendered in
connection with this Offering.
29
<PAGE> 31
DILUTION
The pro forma net tangible book value of the Company (after giving effect
to the Merger, the Collision Centers USA Acquisition, and the South Financial
Acquisition) as of March 31, 1998 was $0.55 per share of common stock. Pro forma
net tangible book value per share is determined by dividing the pro forma
tangible net worth of the Company (pro forma total assets less goodwill less pro
forma total liabilities) by the total number of then outstanding shares of
common stock. After giving effect to the Acquisitions and the sale of the
5,500,000 shares of common stock offered hereby and the receipt of an assumed
$48.2 million of net proceeds from the Offering (based on an assumed Offering
price of $10.00 per share and net of the underwriting discounts and estimated
offering expenses), pro forma net tangible book value of the Company at March
31, 1998 would have been $21.9 million, or $2.12 per share. This represents an
immediate increase in pro forma net tangible book value of $1.57 per share to
existing shareholders and an immediate dilution of $7.88 per share to the new
investors purchasing shares of common stock in the Offering. The following table
illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share..................... $10.00
Pro forma net tangible book value per share before
giving effect to the dealership Acquisitions and the
Offering.............................................. 0.55
Increase in pro forma tangible book value per share
attributable to the dealership Acquisitions and the
Offering.............................................. 1.57
----
Pro forma as adjusted net tangible book value per share
after the Offering........................................ 2.12
------
Dilution per share to new investors......................... $ 7.88
======
</TABLE>
The following table sets forth, on a pro forma basis as of March 31, 1998,
the number of shares of common stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid to the
Company by existing shareholders and new investors purchasing shares from the
Company in the Offering (before deducting underwriting discounts and commissions
and estimated offering expenses):
<TABLE>
<CAPTION>
TOTAL AVERAGE
SHARES PURCHASED CONSIDERATION PRICE
---------------------- --------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1)............ 3,806,160 36.8% $ 3,982,704 5.8% $ 1.05
Acquisition shareholders(2)......... 1,020,000 9.9 10,200,000 14.7 10.00
New investors(3).................... 5,500,000 53.3 55,000,000 79.5 10.00
---------- ----- ----------- -----
10,326,160 100.0% $69,182,704 100.0% $ 6.70
========== ===== =========== =====
</TABLE>
- ---------------
(1) Includes 3,800,160 shares issued in connection with the Merger and 6,000
shares of common stock issued to the founders of the Company. Does not
reflect the 249,202 shares of common stock issued to executive officers of
the Company subsequent to March 31, 1998 or possible exercise of options to
purchase 2,250,000 shares of common stock reserved for issuance under the
Company's Incentive Stock Plan, including options to purchase 1,280,000
shares of common stock that were granted subsequent to December 31, 1997 and
options to purchase 317,000 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 -- Incentive
Stock Plan" and "The Merger." Also excludes 50,000 shares of common stock
reserved for issuance upon exercise of warrants granted to a consulting firm
for services rendered in connection with this Offering. See "Description of
Capital Stock -- Warrants."
(2) Includes shares issued in connection with the Acquisitions. See "The
Acquisitions."
(3) Assumes that the Underwriters' over-allotment option is not exercised. Sales
pursuant to the full exercise by the Underwriters of the over-allotment
option will cause the total number of shares purchased by new investors,
total consideration paid by new investors and percent of total consideration
paid by new investors to increase to 6,325,000, $63,250,000 and 81.7%,
respectively.
30
<PAGE> 32
SELECTED FINANCIAL DATA
The Company will acquire six automotive dealerships or dealership groups
prior to or simultaneously with the consummation of the Offering. See "The
Acquisitions." For financial statement presentation purposes, Boomershine
Automotive has been identified as the accounting acquiror. The following
selected historical consolidated financial data of Boomershine Automotive as of
June 30, 1996 and 1997 and for each of the three years in the period ended June
30, 1997, have been derived from the audited financial statements of Boomershine
Automotive included elsewhere in this Prospectus. The following selected
historical financial data for Boomershine Automotive as of June 30, 1993, 1994
and 1995 and for each of the two years in the period ended June 30, 1994 and as
of March 31, 1998 and for the nine months ended March 31, 1997 and March 31,
1998, have been derived from the unaudited financial statements of Boomershine
Automotive, which have been prepared on the same basis as the audited financial
statements and, in the opinion of Boomershine Automotive, reflect all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of such data. The results of operations for interim periods
are not necessarily indicative of results that may be expected for a full year
or any other interim periods. In connection with the FIFO Conversion, and in
accordance with generally accepted accounting principles, the Summary Historical
and Pro Forma Financial Data has been retroactively restated to reflect the FIFO
Conversion by Boomershine Automotive. The pro forma data for the year ended June
30, 1997, as of March 31, 1998 and the nine months ended March 31, 1998 give
effect to the Merger, the Acquisitions and the Offering. See "Pro Forma Combined
and Condensed Financial Data." The following selected financial data should be
read in conjunction with the Consolidated Financial Statements of Boomershine
Automotive, including the notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," appearing elsewhere
herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
---------------------------------------------------------------- -------------------------------
HISTORICAL(1) HISTORICAL(1)
---------------------------------------------------- PRO FORMA ------------------- PRO FORMA
1993 1994 1995 1996 1997 1997(2) 1997 1998 1998(2)
-------- -------- -------- -------- -------- --------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Vehicle sales:
New..................... $ 73,912 $110,674 $156,955 $166,199 $152,625 $420,019 $113,239 $113,340 $315,697
Used.................... 35,747 46,207 57,047 64,652 61,811 177,925 47,318 39,517 127,126
Parts and service......... 15,085 17,679 19,223 23,764 24,637 66,602 17,689 19,108 50,159
Finance, commission and
other revenues, net..... 1,418 2,795 3,856 4,219 5,339 17,437 4,355 5,399 13,528
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total revenues...... 126,162 177,355 237,081 258,834 244,412 681,983 182,601 177,364 506,510
Cost of sales............... 112,240 158,754 214,407 231,769 219,319 605,044 163,546 157,026 448,892
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit................ 13,922 18,601 22,674 27,065 25,093 76,939 19,055 20,338 57,618
Selling, general and
administrative expenses... 12,751 16,685 19,927 24,170 22,262 62,809 16,698 16,544 47,933
Depreciation and
amortization.............. 428 410 406 600 890 2,550 659 764 1,984
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income from operations...... 743 1,506 2,341 2,295 1,941 11,580 1,698 3,030 7,701
Interest expense, net....... 587 598 1,436 1,774 2,230 3,126 1,408 1,544 1,496
Interest income............. 144 119 218 181 120 516 184 247 699
Other income (expense),
net....................... 98 (110) 60 13 44 (240) (80) (68) 100
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before income
taxes..................... 398 917 1,183 715 (125) 8,730 394 1,665 7,004
Income tax (expense)
benefit................... (151) (450) (448) (213) 40 (3,730) (119) (398) (2,975)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)........... $ 247 $ 467 $ 735 $ 502 $ (85) $ 5,000 $ 275 $ 1,267 $ 4,029
======== ======== ======== ======== ======== ======== ======== ======== ========
Basic:
Net income per share(3)... $ 0.48 $ 0.39
======== ========
Weighted average shares
outstanding(3).......... 10,326 10,326
======== ========
Fully diluted:
Net income per share(3)... $ 0.47 $ 0.38
======== ========
Weighted average shares
outstanding(3).......... 10,666 10,666
======== ========
</TABLE>
31
<PAGE> 33
<TABLE>
<CAPTION>
AS OF JUNE 30,(1) AS OF MARCH 31, 1998
----------------------------------------------- ----------------------------
1993 1994 1995 1996 1997 HISTORICAL(1) PRO FORMA(2)
------- ------- ------- ------- ------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................ $ 5,829 $ 6,509 $ 5,872 $ 5,588 $ 5,885 $ 760 $ 18,352
Inventories.................................... 22,307 25,551 46,407 50,231 39,553 47,733 115,923
Total assets................................... 30,777 35,983 65,263 69,649 55,672 88,949 204,065
Total debt, including current portion.......... 20,204 24,152 50,106 53,520 40,618 70,925 121,484
Total shareholders' equity..................... 6,263 6,730 7,465 8,059 7,973 9,240 65,939
</TABLE>
- ---------------
(1) In connection with the Merger and the Offering, Boomershine Automotive will
convert from the LIFO Method of inventory accounting to the specific
identification method of inventory accounting, conditioned upon the closing
of the Offering. In connection with the FIFO Conversion, and in accordance
with generally accepted accounting principles, the accompanying financial
information of Boomershine Automotive has been retroactively restated to
reflect the FIFO Conversion.
(2) Adjusted to give pro forma effect to (i) the Merger and (ii) the
Acquisitions. See "Pro Forma Combined and Condensed Financial Data." Also
gives effect to the sale of the shares offered hereby and the application of
the net proceeds therefrom. See "Use of Proceeds."
(3) Historical net income per share is not presented, as the historical capital
structure of Boomershine Automotive prior to the Merger, the Acquisitions
and the Offering is not comparable with the capital structure that will
exist subsequent to these events. The weighted average shares outstanding
was calculated taking into account these events as if they had occurred at
the beginning of each period. See "Pro Forma Combined and Condensed
Financial Data."
32
<PAGE> 34
PRO FORMA COMBINED AND CONDENSED FINANCIAL DATA
The following unaudited pro forma combined and condensed statements of
operations for the year ended June 30, 1997 and for the nine months ended March
31, 1998 reflect the historical accounts of the Company and Boomershine
Automotive for those periods, adjusted to give pro forma effect to the Merger,
the Acquisitions and the Offering, as if these events had occurred at July 1,
1996. The following unaudited pro forma consolidated balance sheet as of March
31, 1998 reflects the historical accounts of the Company and Boomershine
Automotive as of that date adjusted to give pro forma effect to the Merger, the
Acquisitions and the Offering as if these events had occurred on March 31, 1998.
The pro forma combined and condensed financial data give effect to the Merger
whereby the Company will acquire Boomershine Automotive contemporaneously with
the consummation of this Offering. For financial statement purposes, Boomershine
Automotive has been identified as the accounting acquiror, as it will hold the
single largest voting interest subsequent to the Acquisitions in accordance with
SAB No. 97. The Acquisitions will be consummated on or before the closing of the
Offering and are precedent to the closing of the Offering. Each of the
Acquisitions will be accounted for using the purchase method of accounting. The
pro forma financial data also give effect to the initial public offering of
5,500,000 common shares of the Company. See also "The Merger", "The
Acquisitions", and "Use of Proceeds" included elsewhere in the Prospectus.
Boomershine Automotive will convert to the specific identification method of
inventory accounting for new and used vehicles conditioned and effective upon
the closing of the Offering. In connection with the FIFO Conversion, and in
accordance with generally accepted accounting principles, the accompanying
financial information of Boomershine Automotive has been retroactively restated
to reflect the FIFO Conversion.
The pro forma combined and condensed financial data and accompanying notes
should be read in conjunction with the financial statements and related
footnotes of Sunbelt Automotive Group, Inc.; Boomershine Automotive Group, Inc.;
Jay Automotive Group, Inc.; Grindstaff, Inc.; Wade Ford, Inc. and Wade Ford
Buford, Inc.; Robertson Oldsmobile-Cadillac, Inc.; Day's Chevrolet, Inc.; and
South Financial Corporation, all of which are included elsewhere in the
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 are 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.
PRO FORMA COMBINED AND CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
THE MERGER THE ACQUISITIONS(9)
------------------------- ---------------------------------------------
WADE FORD,
SUNBELT BOOMERSHINE JAY INC. AND
AUTOMOTIVE AUTOMOTIVE AUTOMOTIVE WADE FORD
GROUP, INC. GROUP, INC. GROUP, INC. GRINDSTAFF, INC. BUFORD, INC.
----------- ----------- ----------- ---------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Vehicle sales:
New..................................... $-- $152,625 $56,365 $33,525 $118,324
Used.................................... -- 61,811 28,425 19,500 25,634
Parts and service......................... -- 24,637 11,667 3,681 8,988
Finance, commission and other revenues,
net..................................... -- 5,339 2,092 1,544 1,238
--- -------- ------- ------- --------
Total revenues....................... -- 244,412 98,549 58,250 154,184
Cost of sales.............................. -- 219,319 86,959 51,118 141,842
--- -------- ------- ------- --------
Gross profit............................... -- 25,093 11,590 7,132 12,342
Selling, general and administrative
expenses.................................. -- 22,262 9,289 6,329 10,433
Depreciation and amortization.............. -- 890 245 86 154
--- -------- ------- ------- --------
Income from operations..................... -- 1,941 2,056 717 1,755
Interest expense, net...................... -- 2,230 434 516 260
Interest income............................ -- 120 97 103 23
Other income (expense), net................ -- 44 -- (532) 242
--- -------- ------- ------- --------
Income (loss) before income taxes.......... -- (125) 1,719 (228) 1,760
Income tax (expense) benefit............... -- 40 (653) 14 --
--- -------- ------- ------- --------
Net income (loss).......................... $-- $ (85) $ 1,066 $ (214) $ 1,760
=== ======== ======= ======= ========
Basic:
Net income per share(8)...................
Weighted average shares outstanding(8)....
Fully diluted:
Net income per share(8)...................
Weighted average shares outstanding(8)....
<CAPTION>
THE ACQUISITIONS(9)
----------------------------------------------------------------------
PRO FORMA
ROBERTSON DAY'S SOUTH ADJUSTMENTS
OLDSMOBILE- CHEVROLET, FINANCIAL BILL HOLT COLLISION FOR THE
CADILLAC, INC. INC. CORPORATION FORD MERCURY CENTERS USA ACQUISITIONS
-------------- ---------- ----------- ------------ ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Vehicle sales:
New..................................... $11,157 $27,415 $ -- $20,608 $ -- $ --
Used.................................... 6,914 23,308 -- 12,333 -- --
Parts and service......................... 2,581 10,034 -- 1,652 3,362 --
Finance, commission and other revenues,
net..................................... 195 920 5,437 672 -- --
------- ------- ------ ------- ------ -------
Total revenues....................... 20,847 61,677 5,437 35,265 3,362 --
Cost of sales.............................. 17,969 55,286 -- 31,666 2,256 (1,371)(1)
------- ------- ------ ------- ------ -------
Gross profit............................... 2,878 6,391 5,437 3,599 1,106 1,371
Selling, general and administrative
expenses.................................. 2,034 4,947 3,407 2,958 1,122 28(2)
Depreciation and amortization.............. 59 140 63 139 -- 999(3)
(225)(4)
------- ------- ------ ------- ------ -------
Income from operations..................... 785 1,304 1,967 502 (16) 569
Interest expense, net...................... 61 133 1,521 296 10 (121)(5)
Interest income............................ 171 2 -- -- -- --
Other income (expense), net................ (2) 8 -- -- -- --
------- ------- ------ ------- ------ -------
Income (loss) before income taxes.......... 893 1,181 446 206 (26) 690
Income tax (expense) benefit............... -- -- (376) -- -- (2,755)(7)
------- ------- ------ ------- ------ -------
Net income (loss).......................... $ 893 $ 1,181 $ 70 $ 206 $ (26) $(2,065)
======= ======= ====== ======= ====== =======
Basic:
Net income per share(8)...................
Weighted average shares outstanding(8)....
Fully diluted:
Net income per share(8)...................
Weighted average shares outstanding(8)....
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR THE
OFFERING PRO FORMA
----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Revenues:
Vehicle sales:
New..................................... $ -- $420,019
Used.................................... -- 177,925
Parts and service......................... -- 66,602
Finance, commission and other revenues,
net..................................... -- 17,437
------- --------
Total revenues....................... -- 681,983
Cost of sales.............................. -- 605,044
------- --------
Gross profit............................... -- 76,939
Selling, general and administrative
expenses.................................. -- 62,809
Depreciation and amortization.............. -- 2,550
------- --------
Income from operations..................... -- 11,580
Interest expense, net...................... (2,214)(6) 3,126
Interest income............................ -- 516
Other income (expense), net................ -- (240)
------- --------
Income (loss) before income taxes.......... 2,214 8,730
Income tax (expense) benefit............... -- (3,730)
------- --------
Net income (loss).......................... $ 2,214 $ 5,000
======= ========
Basic:
Net income per share(8)................... $ 0.48
========
Weighted average shares outstanding(8).... 10,326
========
Fully diluted:
Net income per share(8)................... $ 0.47
========
Weighted average shares outstanding(8).... 10,666
========
</TABLE>
33
<PAGE> 35
PRO FORMA COMBINED AND CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
THE MERGER THE ACQUISITIONS(9)
----------------------------- --------------------------------------------------------------
WADE FORD,
SUNBELT BOOMERSHINE JAY INC. AND ROBERTSON
AUTOMOTIVE AUTOMOTIVE AUTOMOTIVE WADE FORD OLDSMOBILE-
GROUP, INC. GROUP, INC.(10) GROUP, INC. GRINDSTAFF, INC. BUFORD, INC. CADILLAC, INC.
----------- --------------- ----------- ---------------- ------------ --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Vehicle sales:
New.................. $ -- $113,340 $39,947 $24,024 $92,848 $ 9,508
Used................. -- 39,517 23,456 12,187 18,939 6,549
Parts and service...... -- 19,108 8,956 3,050 7,143 2,140
Finance, commission and
other revenues,
net.................. -- 5,399 1,704 1,190 1,416 323
----- -------- ------- ------- ------- -------
Total revenues..... -- 177,364 74,063 40,451 120,346 18,520
Cost of sales........... -- 157,026 65,243 34,824 111,127 16,210
----- -------- ------- ------- ------- -------
Gross profit............ -- 20,338 8,820 5,627 9,219 2,310
Selling, general
and administrative
expenses............... 611 16,544 7,067 5,307 7,487 1,417
Depreciation and
amortization........... -- 764 158 184 103 43
----- -------- ------- ------- ------- -------
Income (loss) from
operations............. (611) 3,030 1,595 136 1,629 850
Interest expense, net... -- 1,544 174 300 131 56
Interest income......... -- 247 78 3 246 123
Other income (expense),
net.................... -- (68) 1 102 34 (9)
----- -------- ------- ------- ------- -------
Income (loss) before
income taxes........... (611) 1,665 1,500 (59) 1,778 908
Income tax (expense)
benefit................ -- (398) (570) 3 -- --
----- -------- ------- ------- ------- -------
Net income (loss)....... $(611) $ 1,267 $ 930 $ (56) $ 1,778 $ 908
===== ======== ======= ======= ======= =======
Basic:
Net income per
share(8).............
Weighted average shares
outstanding(8).......
Fully diluted:
Net income per
share(8).............
Weighted average shares
outstanding(8).......
<CAPTION>
THE ACQUISITIONS(9)
------------------------------------------------------------
PRO FORMA PRO FORMA
DAY'S SOUTH BILL HOLT COLLISION ADJUSTMENTS ADJUSTMENTS
CHEVROLET, FINANCIAL FORD CENTERS FOR THE FOR THE
INC. CORPORATION(11) MERCURY(11) USA(11) ACQUISITIONS OFFERING PRO FORMA
---------- --------------- --------------- ----------- ------------ ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Vehicle sales:
New.................. $21,914 $ -- $14,116 $ -- $ -- $ -- $315,697
Used................. 15,076 -- 11,402 -- -- -- 127,126
Parts and service...... 6,880 -- 1,343 1,539 -- -- 50,159
Finance, commission and
other revenues,
net.................. 704 2,321 471 -- -- -- 13,528
------- ------ ------ ------- ------- ------- --------
Total revenues..... 44,574 2,321 27,332 1,539 -- -- 506,510
Cost of sales........... 39,831 -- 24,428 1,139 (936)(1) -- 448,892
------- ------ ------ ------- ------- ------- --------
Gross profit............ 4,743 2,321 2,904 400 936 -- 57,618
Selling, general
and administrative
expenses............... 3,804 2,304 2,655 620 117(2) -- 47,933
Depreciation and
amortization........... 103 33 60 24 706(3) -- 1,984
(194)(4)
------- ------ ------ ------- ------- ------- --------
Income (loss) from
operations............. 836 (16) 189 (244) 307 -- 7,701
Interest expense, net... 58 749 233 5 (94)(5) (1,660)(6) 1,496
Interest income......... 2 -- -- -- -- -- 699
Other income (expense),
net.................... 14 -- 26 -- -- -- 100
------- ------ ------ ------- ------- ------- --------
Income (loss) before
income taxes........... 794 (765) (18) (249) 401 1,660 7,004
Income tax (expense)
benefit................ -- 279 -- -- (2,289)(7) -- (2,975)
------- ------ ------ ------- ------- ------- --------
Net income (loss)....... $ 794 $ (486) (18) (249) $(1,888) $ 1,660 $ 4,029
======= ====== ====== ======= ======= ======= ========
Basic:
Net income per
share(8)............. $ 0.39
========
Weighted average shares
outstanding(8)....... 10,326
========
Fully diluted:
Net income per
share(8)............. $ 0.38
========
Weighted average shares
outstanding(8)....... 10,666
========
</TABLE>
34
<PAGE> 36
- ---------------
(1) Reflects the conversion of Jay Automotive, Grindstaff, Wade Ford,
Robertson, Day's Chevrolet and Bill Holt from the LIFO Method of inventory
accounting to the FIFO Method. Under the FIFO Method, cost of sales would
have been lower by $1,371,000, and $936,000 for the year ended June 30,
1997, and the nine months ended March 31, 1998, respectively. The Company
intends to convert all acquisitions to the FIFO Method conditioned and
effective upon the closing of the Offering.
(2) Reflects the Company's estimate of the net deductions from selling, general
and administrative expenses which would have occurred if the Acquisitions
and the Offering had been effected as of the beginning of each period and
consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
JUNE 30, 1997 MARCH 31, 1998
------------- ------------------
(IN THOUSANDS)
<S> <C> <C> <C>
(i) Reduction and/or elimination of salaries to owners and
other officers whose positions and salaries will be
eliminated or contractually reduced in conjunction
with the Offering..................................... $(919) $(498)
(ii) Increase in salaries of existing and new officers who
have entered into employment agreements with the
Company, effective prior to or upon consummation of
the Offering.......................................... 673 556
(iii) Additional costs related to the long-term lease rental
of real estate, on which certain of the dealerships
are located........................................... 373 206
(iv) Elimination of certain incremental expenses of the
previous owners of certain dealerships, and expenses
of certain dealerships, not relating to the entity
being acquired that are supported by invoices and
contracts, which were reflected in the historical
financial statements.................................. (99) (147)
----- -----
$ 28 $ 117
===== =====
</TABLE>
(3) Reflects amortization as if Jay Automotive, Grindstaff, Wade Ford,
Robertson, Day's Chevrolet, Bill Holt, Collision Centers and South
Financial had been acquired as of July 1, 1996. The pro forma amortization
for the year ended June 30, 1997 and the nine months ended March 31, 1998
reflects additional amortization of approximately $999,000 and $706,000,
respectively, associated with intangible assets resulting from the
Acquisitions. Such costs are being amortized over a 40-year period.
(4) Reflects the reduction of depreciation related to the elimination of
certain property and equipment of Bill Holt in the amount of $1,034,000,
with useful lives ranging from 3 to 20 years, that was not acquired in
connection with the Bill Holt Acquisition. The pro forma depreciation
expense for the year ended June 30, 1997 and the nine months ended March
31, 1998 reflects a reduction $225,000 and $194,000, respectively.
(5) The net reduction in interest expense was calculated based on the
elimination of $2,209,000 in long-term debt of Bill Holt, bearing an
interest rate of 7%, that was not acquired in connection with the Bill Holt
Acquisition, and a $273,000 mortgage of Day's Chevrolet, bearing an
interest rate of 7.5%, relating to land and buildings that were dividended
to the owners in contemplation of the Day's Chevrolet Acquisition. The pro
forma interest expense for the year ended June 30, 1997 and the nine months
ended March 31, 1998 reflects a reduction $121,000 and $94,000,
respectively.
(6) Reflects the reduction in interest expense associated with: (i) the paydown
of $19 million of floorplan notes payable bearing an interest rate of 7.7%
resulting from the use of a portion of the proceeds from the Offering and
the receipt of an assumed $48.2 million of net proceeds from the Offering
(based on an assumed offering price of $10.00 per share and net of
underwriting discounts and estimated offering expenses) and (ii) the
reduction of interest rate on floorplan notes payable assumed from several
of the Acquisitions from their contractual rates, which generally range
from 7.25% to 9.75%, to the contractual rate of Boomershine Automotive of
7.19%, which will become effective in conjunction with the Offering.
(7) Certain of the Acquisitions are S-Corporations and accordingly not subject
to federal and certain state income taxes during the periods indicated.
This adjustment reflects the federal and state income taxes as if all
entities were C-Corporations based on a 43% effective rate assumed during
the period. The assumed effective tax rate reflects, as additional pro
forma permanent differences, non-taxable goodwill amortization.
(8) Pro forma basic net income per share is based upon the assumption that
10,326,160 shares of common stock are outstanding for each period. This
amount represents the 5,500,000 shares to be issued in the Offering, the
3,806,160 shares of common stock owned by the Company's shareholders
immediately following the Merger, and the 1,020,000 shares of common stock
to be issued in connection with the
35
<PAGE> 37
Acquisitions. Fully diluted net income per share includes all basic shares
plus 339,524 shares of common stock equivalents for options granted or to
be granted as of March 31, 1998.
(9) The historical accounts and related footnotes of the Acquisitions included
elsewhere in the Prospectus were prepared based on a fiscal year end of
December 31. To conform with Boomershine Automotive's fiscal year end of
June 30, the unaudited pro forma statements of operations include financial
data for each acquisition for the same periods presented for Boomershine
Automotive.
(10) Reflects the Collision Centers USA Acquisition on December 18, 1997 and the
South Financial Acquisition on January 6, 1998 from the date of acquisition
by Boomershine Automotive. Includes revenues of $2.4 million and net income
before tax of $62,000 related to Collision Centers USA and South Financial
from the date of acquisition to March 31, 1998.
(11) Includes the results of Bill Holt for the nine months ended March 31, 1998,
Collision Centers USA for the period from July 1, 1997 to acquisition by
Boomershine Automotive on December 18, 1997, and South Financial for the
period from July 1, 1997 to acquisition by Boomershine Automotive on
January 6, 1998.
36
<PAGE> 38
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
THE ACQUISITIONS
THE MERGER ------------------------------
---------------------------------------------
SUNBELT BOOMERSHINE PRO FORMA JAY
AUTOMOTIVE AUTOMOTIVE ADJUSTMENTS AUTOMOTIVE
GROUP, INC. GROUP, INC.(6) FOR THE MERGER GROUP, INC. GRINDSTAFF, INC.
----------- -------------- -------------- ----------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents......................... $ 3 $ 4,717 $ -- $ 4,073 $ 722
Accounts receivable, net.......................... 7,883 (611)(7) 1,701 972
Finance receivables, net.......................... 13,495
Notes receivable shareholder......................
Inventories....................................... 47,733 17,317 8,331
Deferred income taxes............................. 1,459 12
Prepaid expenses and other current assets......... 2,256 73 38
----- ------- ------- ------- -------
Total Current Assets........................ 3 77,543 (611) 23,164 10,075
Property and equipment, net........................ 4,413 809 1,146
Other Assets:
Intangible assets, net............................ 6,537 313
Notes receivable shareholder...................... 754
Deferred income taxes............................. 17
Other assets...................................... 439 66 84
----- ------- ------- ------- -------
Total Assets................................ $ 3 $88,949 $ (611) $24,352 $12,059
===== ======= ======= ======= =======
Current Liabilities:
Floor plan notes payable.......................... $ -- $49,918 $ -- $13,707 $ 9,543
Senior debt....................................... 11,471
Current maturities of long-term debt.............. 1,921 60 178
Dealer finance reserves........................... 307
Notes payable -- other............................ 7,255
Income taxes payable..............................
Deferred income taxes............................. 959
Accrued liabilities............................... 2,593 1,120 582
Accounts payable.................................. 611 2,359 (611)(7) 1,206 471
----- ------- ------- ------- -------
Total Current Liabilities................... 611 76,783 (611) 16,093 10,774
Long-term debt, less current maturities............ 360 119 308
Income taxes payable............................... 2,209
Other liabilities.................................. 357
Shareholders' Equity:
Common stock...................................... 3,974 (3,970)(7) 100
Additional paid-in capital........................ 3 3,970(7) 948
Owner's equity.................................... 8,140
Note receivable...................................
Retained earnings................................. (611) 5,266 (71)
----- ------- ------- ------- -------
Total Shareholders' Equity.................. (608) 9,240 -- 8,140 977
----- ------- ------- ------- -------
Total Liabilities and Shareholders'
Equity..................................... $ 3 $88,949 $ (611) $24,352 $12,059
===== ======= ======= ======= =======
<CAPTION>
THE ACQUISITIONS
----------------------------------------------------
WADE FORD BILL PRO FORMA
INC. AND ROBERTSON DAY'S HOLT ADJUSTMENTS
WADE FORD OLDSMOBILE- CHEVROLET, FORD FOR THE
BUFORD, INC. CADILLAC, INC. INC. MERCURY ACQUISITIONS
------------ -------------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents......................... $ 6,001 $2,100 $ 1,448 $ 451 $(45,063)(1)
(1,201)(2)
Accounts receivable, net.......................... 4,434 377 836 604 (604)(2)
Finance receivables, net..........................
Notes receivable shareholder...................... 515 (515)(1)
Inventories....................................... 17,472 2,997 7,787 5,303 33(2)
8,950(3)
Deferred income taxes.............................
Prepaid expenses and other current assets......... 326 45 5 152 (152)(2)
------- ------ ------- ------ --------
Total Current Assets........................ 28,748 5,519 10,076 6,510 (38,552)
Property and equipment, net........................ 514 46 272 1,309 (1,034)(2)
Other Assets:
Intangible assets, net............................ 25 106 43,689(1)
275(2)
(8,950)(3)
2,087(4)
Notes receivable shareholder...................... (754)(1)
Deferred income taxes.............................
Other assets...................................... 70 322 40 (40)(2)
------- ------ ------- ------ --------
Total Assets................................ $29,357 $5,671 $10,670 $7,859 $ (3,279)
======= ====== ======= ====== ========
Current Liabilities:
Floor plan notes payable.......................... $24,121 $2,613 $ 8,975 $5,136 $ --
Senior debt.......................................
Current maturities of long-term debt..............
Dealer finance reserves...........................
Notes payable -- other............................ 864 4,000(1)
Income taxes payable.............................. 522(4)
Deferred income taxes.............................
Accrued liabilities............................... 1,270 104 265 96 (96)(2)
Accounts payable.................................. 220 303 230 40 (40)(2)
------- ------ ------- ------ --------
Total Current Liabilities................... 26,475 3,020 9,470 5,272 4,386
Long-term debt, less current maturities............ 50 2,209 (2,209)(2)
Income taxes payable............................... 1,565(4)
Other liabilities..................................
Shareholders' Equity:
Common stock...................................... 179 5 110 320 (393)(1)
(320)(2)
Additional paid-in capital........................ 100 145 32 7,930(1)
Owner's equity.................................... (8,140)(1)
Note receivable...................................
Retained earnings................................. 2,553 2,501 1,058 58 (6,040)(1)
(58)(2)
------- ------ ------- ------ --------
Total Shareholders' Equity.................. 2,832 2,651 1,200 378 (7,021)
------- ------ ------- ------ --------
Total Liabilities and Shareholders'
Equity..................................... $29,357 $5,671 $10,670 $7,859 $ (3,279)
======= ====== ======= ====== ========
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR THE
OFFERING PRO FORMA
----------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents......................... $ 29,035(5) $ 2,286
Accounts receivable, net.......................... 15,592
Finance receivables, net.......................... 13,495
Notes receivable shareholder......................
Inventories....................................... 115,923
Deferred income taxes............................. 1,471
Prepaid expenses and other current assets......... 2,743
-------- --------
Total Current Assets........................ 29,035 151,510
Property and equipment, net........................ 7,475
Other Assets:
Intangible assets, net............................ 44,082
Notes receivable shareholder......................
Deferred income taxes............................. 17
Other assets...................................... 981
-------- --------
Total Assets................................ $ 29,035 $204,065
======== ========
Current Liabilities:
Floor plan notes payable.......................... $(19,115)(5) $ 94,898
Senior debt....................................... 11,471
Current maturities of long-term debt.............. 2,159
Dealer finance reserves........................... 307
Notes payable -- other............................ 12,119
Income taxes payable.............................. 522
Deferred income taxes............................. 959
Accrued liabilities............................... 5,934
Accounts payable.................................. 4,789
-------- --------
Total Current Liabilities................... (19,115) 133,158
Long-term debt, less current maturities............ 837
Income taxes payable............................... 3,774
Other liabilities.................................. 357
Shareholders' Equity:
Common stock...................................... 6(5) 11
Additional paid-in capital........................ 48,144(5) 61,272
Owner's equity....................................
Note receivable...................................
Retained earnings................................. 4,656
-------- --------
Total Shareholders' Equity.................. 48,150 65,939
-------- --------
Total Liabilities and Shareholders'
Equity..................................... $ 29,035 $204,065
======== ========
</TABLE>
37
<PAGE> 39
- ---------------
(1) Reflects the preliminary allocation of the aggregate purchase price of the
Acquisitions, other than the Bill Holt acquisition, based on the estimated
fair value of the net assets acquired. Because the carrying amount of the
net assets acquired, which primarily consist of accounts receivable,
inventory, property, plant and equipment and floorplan indebtedness,
approximates their fair value, management believes the application of
purchase price accounting will not result in an adjustment to the carrying
amount of those net assets. Under the acquisition agreements, the negotiated
purchase prices for the Acquisitions will be adjusted to the extent that the
fair value of the tangible net assets as of the closing is different than an
agreed upon amount. The owners of Wade Ford, the Robertson dealerships and
Day's Chevrolet will receive 400,000, 40,000 and 580,000 shares of
restricted common stock, respectively, based on an assumed initial public
offering price of $10.00. The holders of restricted stock issued in payment
of the Acquisitions have agreed not to offer, sell or otherwise dispose of
any of those shares for a period of one year after the Offering. The fair
value based on discounted present value of these shares reflects this
restriction. The amount of goodwill and the corresponding amortization
actually recorded may ultimately be different from the amounts estimated
here, depending upon the actual fair value of tangible net assets acquired
at closing of the Acquisitions. The estimated purchase price allocation
consists of the following (in thousands):
<TABLE>
<CAPTION>
JAY WADE FORD, INC. ROBERTSON
AUTOMOTIVE GRINDSTAFF, AND WADE OLDSMOBILE- DAY'S
GROUP, INC. INC. FORD BUFORD, INC. CADILLAC, INC. CHEVROLET TOTAL
----------- ----------- ----------------- -------------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Estimated total consideration:
Cash.................................. $12,000 $ 9,128 $11,904 $ 7,711 $ 5,589 $ 46,332
Promissory note issued................ 4,000 -- -- -- -- 4,000
Restricted stock issued............... -- -- 3,600 360 5,198 9,158
------- ------- ------- ------- ------- --------
Total........................... 16,000 9,128 15,504 8,071 10,787 59,490
Less book value of tangible assets
acquired.............................. (7,827) (977) (2,808) (2,545) (1,200) (15,357)
Less the elimination of pre-existing
goodwill.............................. (313) -- (25) (106) -- (444)
------- ------- ------- ------- ------- --------
Excess of purchase price over fair
value of tangible net assets
acquired.............................. $ 7,860 $ 8,151 $12,671 $ 5,420 $ 9,587 $ 43,689
======= ======= ======= ======= ======= ========
</TABLE>
The difference between the purchase price and the fair market value of the
net assets acquired will be allocated to goodwill and amortized over 40
years. In connection with Wade Ford and the Day's Chevrolet acquisitions,
the Company may be required to issue shares to the former shareholders of
Wade Ford and Day's Chevrolet under price protection provisions, which
compensate for any decrease in the value of shares issued below the issue
price for one year, as set forth in the applicable acquisition agreements.
Any additional shares issued in connection with these price protection
provisions will be accounted for as additional purchase price at the time of
issuance.
(2) Reflects the preliminary allocation of the aggregate purchase price of Holt
Ford Mercury based on estimated fair value of the net assets acquired. Also
reflects the elimination of certain assets and liabilities of the Bill Holt
Acquisition.
(3) Reflects the conversion from the LIFO Method of accounting to the FIFO
Method of inventory accounting at acquired entities including: Day's
Chevrolet, Inc., Grindstaff, Inc., the Jay dealerships, the Robertson
dealerships, and the Wade dealerships in the amounts of $1,838,000,
$1,909,000, $438,000, $1,163,000, and $3,602,000, respectively. The Company
intends to convert to the FIFO Method effective July 1, 1998 conditioned and
effective upon the closing of the Offering. See "Management's Discussion and
Analysis of the Financial Condition and Results of Operations -- Overview."
(4) In connection with the Acquisitions and the Offering, the Company will
convert from the LIFO Method of inventory accounting to the FIFO Method of
inventory accounting. The accompanying pro forma combined and condensed
balance sheet includes $2,087,000 representing an additional tax liability
based on an assumed tax rate of 40%, which will result from this conversion.
The tax liability will be paid over a four year period. Pro forma deferred
tax balances approximate the Boomershine Automotive historical balances, as
the book values for assets and liabilities of the Acquisitions approximate
their tax values.
(5) Reflects the net proceeds from the sale of 5,500,000 shares of common stock
offered hereby estimated to be approximately $48.2 million, assuming an
initial public offering price of $10.00 per share and after deducting the
underwriting discount and estimated expenses of the Offering, along with
cash in the
38
<PAGE> 40
businesses to be merged into or acquired by the Company (amounting to an
aggregate of approximately $19.7 million at March 31, 1998), and their
application to the cash portion of the purchase price for the Acquisitions
in the aggregate amount of approximately $47 million, and the balance of the
proceeds, if any, used to reduce the balance outstanding on the Company's
floorplan facility. See "Use of Proceeds."
(6) Reflects the Collision Centers USA Acquisition on December 18, 1997. The
purchase price for the Collision Centers USA Acquisition was approximately
$1.7 million, one-half of which was paid in cash, and the balance of which
was paid in the form of promissory notes. The Collision Centers have been
consolidated with Boomershine Automotive as of the date of the acquisition.
The excess of purchase price over fair value of tangible net assets acquired
of approximately $1.9 million was allocated to goodwill to be amortized over
40 years.
Also reflects the South Financial Acquisition on January 6, 1998. The
purchase price for South Financial Corporation was approximately $4.65
million, which was paid in cash at the time of closing. To fund the cash
consideration the Company borrowed the sum of $4.5 million from an
affiliated company. See "Certain Transactions -- Certain Business
Relationships." South Financial Corporation has been consolidated with
Boomershine Automotive as of the date of the acquisition. The excess
purchase price over fair value of tangible net assets acquired of
approximately $4.0 million was allocated to goodwill to be amortized over
40 years.
(7) Reflects the Merger of Boomershine Automotive and Sunbelt and the
elimination of intercompany balances. Contemporaneously with the closing
date of the Offering, Boomershine Automotive will merge into the Company.
Upon consummation of the Merger: (i) Boomershine Automotive will be merged
with and into the Company; and (ii) the Boomershine Automotive shareholders
will receive an aggregate of 3,800,160 shares of common stock of the Company
in exchange for the issued and outstanding capital stock of Boomershine
Automotive. Boomershine Automotive has been identified as the acquiror for
financial statement presentation purposes in accordance with SAB No. 97 as
it will hold the largest voting interest subsequent to the Merger.
39
<PAGE> 41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of the results of operations and financial
condition should be read in conjunction with (i) the financial statements of
certain of the entities acquired in the Acquisitions and involved in the Merger,
and the related notes thereto, (ii) the "Pro Forma Combined and Condensed
Financial Data" and the related notes thereto, and (iii) "Selected Financial
Data," all included elsewhere in this Prospectus. Certain statements contained
herein are not based on historical facts, but are forward-looking statements
that are based upon numerous assumptions about future conditions that could
prove not to be accurate. Such forward-looking statements include, without
limitation, the statements regarding the trends in the industry set forth in the
Prospectus Summary and under this caption regarding the Company's anticipated
future financial results and position. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from the
Company's expectations are disclosed in this Prospectus, including but not
limited to the matters described in "Risk Factors."
In addition, Sunbelt has no current operations other than the activities
involved in identifying potential target companies, negotiating the related
acquisition agreements and preparing for the proposed Merger and Acquisitions.
Although certain members of Sunbelt's management have significant automotive
retailing industry experience, Sunbelt has not managed the combined businesses,
and the proposed Merger and certain of the Acquisitions will not occur until the
consummation date of this Offering. Accordingly, any references herein to
"Sunbelt" or the "Company" and the activities and characteristics of the
combined entities should be read as pro forma descriptions of those activities
and characteristics following the consummation of the proposed Merger and all of
the Acquisition transactions.
OVERVIEW
Upon the consummation of the Merger and all of the Acquisitions, Sunbelt
expects to be one of the leading retailers of new and used vehicles in the
southeastern United States. The Company will operate a total of 31 dealership
franchises in Georgia, North Carolina and Tennessee. The Company will also
operate four collision repair centers in metropolitan Atlanta, Georgia, and a
sub-prime automotive finance company with operations in Florida, North Carolina
and Tennessee. Sunbelt will sell 20 domestic and foreign brands of automobiles,
which consist of Buick, Cadillac, Chevrolet, Chrysler, Dodge, Ford, GMC, Honda,
Hummer, Isuzu, Jeep, Kia, Mazda, Mercury, Mitsubishi, Nissan, Oldsmobile,
Plymouth, Pontiac and Toyota. The Company intends to further diversify its
product and service offerings by including more brands of vehicles and by
offering related finance and insurance, replacement parts, collision repair, and
other products and services that are complementary to its core automotive
retailing operations. In several of its markets, the Company has significant
market share for the manufacturer type sold. Pro forma for the Merger and the
Acquisitions, the Company had total revenues of approximately $682 million and
retail unit sales of 20,499 new and 9,913 used vehicles for the year ended June
30, 1997, and revenues of $507 million and retail unit sales of 14,583 new and
7,134 used vehicles for the nine months ended March 31, 1998. The Company
believes that in 1997, based on pro forma retail new vehicle unit sales, it
would have been one of the 15 largest automotive dealer groups out of a total of
more than 15,000 automotive dealer groups in the United States. The Company's
strategy is: (i) to become the leading operator of automotive dealerships in
small and medium-sized markets in the southeastern United States through
acquisitions of additional dealerships in these markets; and (ii) to expand its
collision centers and other complementary business operations.
The Company has diverse sources of revenues, including: new car sales, new
truck sales, used car sales, used truck sales, manufacturer remarketed vehicles
sales, parts sales, service sales, collision repair services, finance fees,
insurance commissions, extended service contract sales, and documentary fees.
Sales revenues include sales to retail customers, other dealers and wholesalers.
Other dealership revenue includes revenue from the sale of financing, insurance
and extended service contracts, net of a provision for anticipated chargebacks
and documentary fees charged to customers.
40
<PAGE> 42
The Company's leasing expenses, salary expense, employee benefits costs and
advertising expenses comprise the majority of its selling, general and
administrative expenses. The Company's interest expense primarily results from
the Company's floorplan financing of its new and used vehicle inventory.
The Company has historically accounted for all of its dealership
acquisitions 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 financial
statements of the Company discussed below reflect the combined and consolidated
results of operations, financial position and cash flows of the Company's
dealerships. As a result of the effects of the Merger, the Acquisitions and the
Offering, the historical financial information described herein 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 Merger and the
Acquisitions and the Offering occurred at the beginning of the periods presented
in the historical financial statements.
Contemporaneously with the effective date hereof, the Company will effect
the Merger pursuant to which (i) Boomershine Automotive will be merged with and
into the Company and (ii) the Boomershine Automotive shareholders will receive
unregistered common stock of the Company in exchange for the capital stock in
Boomershine Automotive. From November 1997 through March 1998, the Company
consummated or signed definitive agreements to purchase six additional
dealerships or dealership groups, three collision repair businesses, and a
sub-prime automotive finance company for an aggregate consideration of
approximately $67 million. See "The Acquisitions." In connection with the
Acquisitions, the Company will book approximately $43 million of goodwill,
consisting of $37.1 million from the six additional dealerships or dealership
groups, $1.9 million from the Collision Centers USA Acquisition, and $4.0
million from the South Financial Acquisition, each of which will be amortized
over 40 years.
COMPANY'S CREDIT AND FINANCING ARRANGEMENTS
The Company is negotiating a $120 million floorplan financing line of
credit and a $50 million acquisition and general corporate and working capital
line of credit for operations subsequent to the closing of this Offering
(collectively the "Credit Facility"). As of March 31, 1998, the Company, before
giving effect to the Offering, had approximately $116 million of floorplan debt
outstanding. Currently, the Combined Companies' (as defined below) floorplan
financing is provided by six different sources. The Company anticipates that all
of the floorplan debt will be refinanced at more favorable terms by the Credit
Facility, but there can be no assurance that the Company will be able to obtain
such more favorable financing. See "Risk Factors -- Floorplan Financing."
Specifically, the Company estimates that, upon the refinancing of the floorplan
debt, the interest rate on such financing will be approximately 50 to 75 basis
points below the Company's current annual floorplan financing rates, and expects
that this lower rate will result in annual cost savings of $750,000 to $1
million. South Financial has a revolving credit agreement with General Electric
Capital Corporation with a maximum borrowing capacity of $15 million with
advances permitted under formulas based on percentages of eligible collateral.
Management of the Company does not currently anticipate replacing this facility
after this Offering.
The Company believes its cash resources, including the Credit Facility and
the net proceeds of this Offering, will be adequate to fund its anticipated
operations and growth for the foreseeable future.
PRO FORMA COMPANY'S DATA
The unaudited pro forma combined financial data of the Company for 1995,
1996 and 1997 and the nine months ended March 31, 1997 and March 31, 1998, do
not purport to present any or all of the combined companies involved in the
Acquisitions and the Merger (the "Combined Companies") in accordance with
generally accepted accounting principles, but represent a summation of certain
data of the individual Combined Companies on a historical basis. The financial
statements of Hones, Inc. d/b/a Bill Holt Ford-Mercury and Collision Centers USA
have not been separately included within this Prospectus because said entities
do not qualify as significant subsidiaries under the Commission's Staff
Accounting Bulletin (SAB) No. 80 and, accordingly, are not required to be
presented. The data presented in this section may not be
41
<PAGE> 43
comparable to and may not be indicative of the Company's post-combination
results of operations because (i) the Combined Companies were not under common
control of management and had different tax structures (S-Corporations and
C-Corporations) during the periods presented, and (ii) the Company will use the
purchase method to establish a new basis of accounting to record the
Acquisitions.
The selected historical financial information presented in the tables below
is derived from the respective audited financial statements of the individual
Combined Companies included elsewhere herein. The following discussion should be
read in conjunction with the financial statements of all of the Combined
Companies and the notes thereto appearing elsewhere in the Prospectus.
For financial statement presentation purposes, as required by the rules and
regulations of the Commission, Boomershine Automotive has been identified as the
accounting acquiror.
The following table sets forth unaudited pro forma revenues and cost of
sales for the Combined Companies for the periods indicated. Revenue items are
shown as a percent of total revenues while cost of sales items are shown as a
percent of the corresponding revenue item.
Operations Data
<TABLE>
<CAPTION>
PRO FORMA COMBINED COMPANIES OPERATIONS DATA
--------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, NINE MONTHS ENDED MARCH 31,
------------------------------------------------------ -----------------------------------
1995 1996 1997 1997 1998
---------------- ---------------- ---------------- ---------------- ----------------
AMT. PCT. AMT. PCT. AMT. PCT. AMT. PCT. AMT. PCT.
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
New vehicle sales........... $357,221 63.2% $403,877 62.2% $420,019 61.6% $306,737 61.1% $315,697 62.3%
Used vehicle sales.......... 142,801 25.3 166,976 25.7 177,925 26.1 132,098 26.3 127,126 25.1
Parts and service........... 53,625 9.5 61,682 9.5 66,602 9.8 48,884 9.7 50,159 9.9
Finance, commission and
other revenues, net....... 11,254 2.0 16,713 2.6 17,437 2.5 14,293 2.9 13,528 2.7
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total revenues........ 564,901 100.0% 649,248 100.0% 681,983 100.0% 502,012 100.0% 506,510 100.0%
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
COST OF SALES:
New vehicle sales........... 338,458 94.7% 383,997 95.1% 399,003 95.0% 291,114 94.9% 300,039 95.0%
Used vehicle sales.......... 132,305 92.6 154,638 92.6 164,736 92.6 123,162 93.2 118,475 93.2
Parts and service........... 32,315 60.3 34,896 56.6 41,305 62.0 29,671 60.7 30,378 60.6
Finance, commission and
other revenues, net....... -- -- -- -- -- -- -- -- -- --
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total cost of sales... 503,078 89.1% 573,531 88.3% 605,044 88.7% 443,947 88.4% 448,892 88.6%
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
GROSS PROFIT.................. $ 61,823 10.9% $ 75,717 11.7% $ 76,939 11.3% $ 58,065 11.6% $ 57,618 11.4%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
The following tables set forth certain unaudited pro forma information with
regard to the Combined Companies' vehicle and parts and services sales for the
periods indicated.
New Vehicle Data
<TABLE>
<CAPTION>
PRO FORMA COMBINED COMPANIES NEW VEHICLE DATA
--------------------------------------------------------
NINE MONTHS
YEAR ENDED JUNE 30, ENDED MARCH 31,
-------------------------------- --------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Retail unit sales................... 19,493 21,694 20,499 14,851 14,583
Retail sales........................ $357,221 $403,877 $420,019 $306,737 $315,697
Gross profit........................ $ 18,763 $ 19,880 $ 21,017 $ 15,623 $ 15,658
Gross margin........................ 5.3% 4.9% 5.0% 5.1% 5.0%
Average gross profit per retail unit
sold.............................. $ 963 $ 916 $ 1,025 $ 1,052 $ 1,074
</TABLE>
42
<PAGE> 44
Used Vehicle Data
<TABLE>
<CAPTION>
PRO FORMA COMBINED COMPANIES USED VEHICLE DATA
------------------------------------------------------
NINE MONTHS
YEAR ENDED JUNE 30, ENDED MARCH 31,
-------------------------------- ------------------
1995 1996 1997 1997 1998
-------- -------- -------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Retail unit sales..................... 9,073 10,205 9,913 7,392 7,134
Retail sales.......................... $102,499 $123,338 $121,657 $89,591 $92,856
Gross profit.......................... $ 10,794 $ 12,155 $ 12,758 $ 8,620 $ 8,769
Gross margin.......................... 10.5% 9.9% 10.5% 9.6% 9.4%
Average gross profit per retail unit
sold................................ $ 1,190 $ 1,191 $ 1,287 $ 1,166 $ 1,229
Wholesale unit sales.................. 8,033 8,665 9,442 7,117 5,642
Wholesale sales....................... $ 40,302 $ 43,638 $ 56,268 $42,507 $34,270
Gross profit.......................... $ (298) $ 183 $ 431 $ 316 $ (118)
Gross margin.......................... (0.7)% 0.4% 0.8% 0.7% (0.3)%
</TABLE>
Parts and Service Data
<TABLE>
<CAPTION>
PRO FORMA COMBINED COMPANIES PARTS AND SERVICE DATA
---------------------------------------------------
NINE MONTHS
YEAR ENDED JUNE 30, ENDED MARCH 31,
----------------------------- ------------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales.................................... $53,625 $61,682 $66,602 $48,884 $50,159
Gross profit............................. $21,310 $26,786 $25,297 $19,213 $19,781
Gross margin............................. 39.7% 43.4% 38.0% 39.3% 39.4%
</TABLE>
Nine Months Ended March 31, 1998 Compared to Nine Months Ended March 31, 1997
Revenues. Total revenues increased by $4.5 million, or 0.9%, from $502.0
million for the nine months ended March 31, 1997 to $506.5 million for the nine
months ended March 31, 1998. New vehicle sales increased $9.0 million, or 2.9%,
from $306.7 million for the nine months ended March 31, 1997 to $315.7 million
for the nine months ended March 31, 1998. This increase was primarily due to
increased sales at Wade Ford, principally at the Buford location, and Day's
Chevrolet. These increases were offset in part by decreased new vehicle sales at
Jay Automotive Group, principally at the Pontiac dealership, and the Bill Holt
Ford-Mercury dealerships. Used vehicle sales decreased $5.0 million, or 3.8%,
from $132.1 million for the nine months ended March 31, 1997 to $127.1 million
for the nine months ended March 31, 1998. This decrease was due primarily to
reduced wholesale used vehicle sales at Boomershine Automotive and at the
Grindstaff dealerships. These decreases were partially offset by increases in
used vehicle sales at the Jay Automotive Group and Bill Holt Ford-Mercury
dealerships. Parts and service sales increased $1.3 million, or 2.6%, from $48.9
million for the nine months ended March 31, 1997 to $50.2 million for the nine
months ended March 31, 1998. This increase was due primarily to increased sales
at Collision Centers USA offset in part by lower parts and service sales at
Day's Chevrolet. Other dealership revenues decreased $765,000, or 5.4%, from
$14.3 million for the nine months ended March 31, 1997 to $13.5 million for the
nine months ended March 31, 1998. This decrease was due to lower finance and
commissions income at South Financial offset partially by higher commissions and
documentation fees at Wade Ford.
Gross Profit. Gross profit decreased by $447,000, or 0.8%, from $58.1
million for the nine months ended March 31, 1997 to $57.6 million for the nine
months ended March 31, 1998. This decrease was primarily due to lower gross
margins realized on new vehicle sales, particularly due to increased competition
affecting the Robertson Oldsmobile-Cadillac dealership, and on sales at
Collision Centers USA. These decreases were partially offset by higher margins
realized at the Grindstaff dealerships due to a higher proportion of trucks
among new vehicle sales.
43
<PAGE> 45
Year Ended June 30, 1997 Compared to Year Ended June 30, 1996
Revenues. Total revenues increased by $32.7 million, or 5.0%, from $649.2
million for the year ended June 30, 1996 to $682.0 million for the year ended
June 30, 1997. New vehicle sales increased $16.1 million, or 4.0%, from $403.9
million for the year ended June 30, 1996 to $420.0 million for the year ended
June 30, 1997. This increase was primarily attributable to higher sales of Ford
products at the Wade Ford and Bill Holt Ford-Mercury dealerships coupled with
the addition of the Buick dealership by the Jay Automotive Group in December
1996. These improvements were partially offset by lower sales at the Boomershine
Nissan and Pontiac locations and the Robertson Oldsmobile-Cadillac dealership.
Used vehicle revenues increased $10.9 million, or 6.6%, from $167.0 million for
the year ended June 30, 1996 to $177.9 million for the year ended June 30, 1997.
This increase resulted from higher wholesale sales at Day's Chevrolet and higher
retail sales at the various Jay Automotive Group locations. These increases were
offset by reductions in retail used vehicle sales at the Boomershine Pontiac and
Nissan dealerships. Parts and service sales increased $4.9 million, or 8.0%,
from $61.7 million for the year ended June 30, 1996 to $66.6 million for the
year ended June 30, 1997. This increase resulted from the growing customer base
at Boomershine Automotive Group and Jay Automotive Group. Other dealership
revenues increased $724,000, or 4.3%, from $16.7 million for the year ended June
30, 1996 to $17.4 million for the year ended June 30, 1997. This increase was
due primarily to higher finance and insurance income at the Boomershine
Automotive dealerships coupled with the higher revenues of South Financial.
Gross Profit. Gross profit increased by $1.2 million, or 1.6%, from $75.7
million for the year ended June 30, 1996 to $76.9 million for the year ended
June 30, 1997. This increase was attributable to higher new and used vehicle
sales levels at the Jay Automotive Group dealerships coupled with higher revenue
from the South Financial business. These factors were offset by lower gross
profit contributions by the Boomershine Automotive dealerships resulting from
lower new vehicle sales and a higher proportion of wholesale units among used
vehicle sales.
Year Ended June 30, 1996 Compared to Year Ended June 30, 1995
Revenues. Total revenues increased by $84.3 million, or 14.9%, from $564.9
million for the year ended June 30, 1995 to $649.2 million for the year ended
June 30, 1996. New vehicle sales increased $46.7 million, or 13.1%, from $357.2
million for the year ended June 30, 1995 to $403.9 million for the year ended
June 30, 1996. This increase was primarily attributable to dealership additions
and higher sales at Bill Holt Ford-Mercury and both Wade Ford locations. The
dealership additions included the Buick, Honda and Mitsubishi dealerships by
Boomershine Automotive and the Mazda dealership by Jay Automotive Group. Used
vehicle revenues increased $24.2 million, or 16.9%, from $142.8 million for the
year ended June 30, 1995 to $167.0 million for the year ended June 30, 1996.
This increase resulted from dealership additions and the expansion of the used
vehicle facility at Robertson Oldsmobile-Cadillac. Parts and service sales
increased $8.1 million, or 15.0%, from $53.6 million for the year ended June 30,
1995 to $61.7 million for the year ended June 30, 1996. This increase resulted
from the dealership additions coupled with expanded customer base and parts
sales at Day's Chevrolet. Other dealership revenues increased $5.5 million, or
48.5%, from $11.2 million for the year ended June 30, 1995 to $16.7 million for
the year ended June 30, 1996. This increase was due primarily to the dealership
additions at Boomershine Automotive coupled with higher finance revenue from
South Financial.
Gross Profit. Gross profit increased by $13.9 million, or 22.5%, from
$61.8 million for the year ended June 30, 1995 to $75.7 million for the year
ended June 30, 1996. This increase was attributable to dealership additions at
the Boomershine Automotive and Jay Automotive along with higher revenue from
South Financial.
INDIVIDUAL MERGER AND ACQUISITION COMPANIES
BOOMERSHINE AUTOMOTIVE GROUP, INC.
Results of Operations
Prior to the Offering, Boomershine Automotive Group, Inc. was one of the
largest automotive dealership groups in Georgia and consisted of nine automotive
dealerships serving the greater Atlanta metropolitan
44
<PAGE> 46
market. The dealerships included Pontiac, Buick, GMC, Hummer, Nissan, Ford,
Isuzu, Honda and Mitsubishi. Executive management of this group includes Mr.
Walter M. Boomershine, Jr., who has over 40 years of experience in the
automotive retailing industry, and Mr. Charles K. Yancey who joined the company
in 1974. Six of the group's nine dealerships have been added under this
executive leadership since 1992.
The following table sets forth selected financial data and such data as a
percentage of total revenues for the Boomershine Automotive dealerships for the
periods indicated on a consolidated basis:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, NINE MONTHS ENDED MARCH 31,
-------------------------------------------------------- ------------------------------------
1995 1996 1997 1997 1998
---------------- ---------------- ---------------- ---------------- ----------------
AMOUNT PCT. AMOUNT PCT. AMOUNT PCT. AMOUNT PCT. AMOUNT PCT.
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
New vehicle sales..... $156,955 66.2% $166,199 64.2% $152,625 62.4% $113,239 62.0% $113,340 63.9%
Used vehicle sales.... 57,047 24.1 64,652 25.0 61,811 25.3 47,318 25.9 39,517 22.3
Parts and service
sales............... 19,223 8.1 23,764 9.2 24,637 10.1 17,689 9.7 19,108 10.8
Other revenues, net... 3,856 1.6 4,219 1.6 5,339 2.2 4,355 2.4 5,399 3.0
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total
revenues...... 237,081 100.0 258,834 100.0 244,412 100.0 182,601 100.0 177,364 100.0
Cost of sales........... 214,407 90.4 231,769 89.5 219,319 89.7 163,546 89.6 157,026 88.5
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Gross profit............ 22,674 9.6 27,065 10.5 25,093 10.3 19,055 10.4 20,338 11.5
Selling, general and
administrative
expenses.............. 20,333 8.6 24,770 9.6 23,152 9.5 17,357 9.5 17,308 9.8
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Income from
operations............ 2,341 1.0 2,295 0.9 1,941 0.8 1,698 0.9 3,030 1.7
Other income and
expense:
Interest expense,
net................. 1,218 0.5 1,593 0.6 2,110 0.9 1,224 0.7 1,297 0.7
Other income
(expense)........... 60 0.0 13 0.0 44 0.0 (80) (0.0) (68) (0.0)
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Income (loss) before in-
come taxes............ 1,183 0.5 715 0.3 (125) (0.1) 394 0.2 1,665 1.0
Income tax (expense)
benefit............... (448) (0.2) (213) (0.1) 40 0.1 (119) (0.0) (398) (0.3)
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Net income (loss)....... $ 735 0.3% $ 502 0.2% $ (85) (0.0)% $ 275 0.2% $ 1,267 0.7%
======== ======== ======== ======== ========
</TABLE>
Nine Months Ended March 31, 1998 Compared to Nine Months Ended March 31, 1997
Revenues. Total revenues decreased $5.2 million, or 2.9%, from $182.6
million for the nine months ended March 31, 1997 to $177.4 million for the nine
months ended March 31, 1998. New vehicle sales increased $101,000, or 0.1%, from
$113.2 million for the nine months ended March 31, 1997 to $113.3 million for
the nine months ended March 31, 1998. This increase was primarily due to higher
sales of trucks and fleet units at Boomershine Ford, resulting in a 30.1%
increase in sales volume, and increased sales of utility vehicles at Boomershine
Mitsubishi. These increases were partially offset by a 31.9% decrease in the
sales of new vehicles at Boomershine Nissan. Used vehicle sales decreased $7.8
million, or 16.5%, from $47.3 million for the nine months ended March 31, 1997
to $39.5 million for the nine months ended March 31, 1998. This decrease was due
primarily to reduced wholesale activity at Boomershine Ford and Boomershine
Nissan, due to fewer trade-ins available for sale. These decreases were offset
in part by a sales increase at Boomershine Mitsubishi due to additional
investments in space and personnel. Parts and service sales increased $1.4
million, or 8.0%, from $17.7 million for the nine months ended March 31, 1997 to
$19.1 million for the nine months ended March 31, 1998. This increase was due
primarily to the acquisition of Collision Centers USA in December 1997 offset
partially by reduced sales of parts and service at Boomershine Nissan. The sales
of parts and service at Collision Centers USA for the three months ended March
31, 1998 amounted to $1.7 million. Other dealership revenues increased $1.0
million, or 24.0%, from $4.4 million for the nine months ended March 31, 1997 to
$5.4 million for the nine months ended March 31, 1998. This increase was due to
the South Financial Acquisition in January 1998 offset by lower finance and
insurance commissions at Boomershine Nissan.
45
<PAGE> 47
Gross Profit. Gross profit increased $1.3 million, or 6.7%, from $19.1
million for the nine months ended March 31, 1997 to $20.3 million for the nine
months ended March 31, 1998. Of this amount, $1.8 million was attributable to
the Collision Centers USA and South Financial acquisitions. Increased new
vehicle sales at Boomershine Ford and Mitsubishi also attributed to the
increased gross profits. These increases were partially offset by the effects of
lower new and used vehicle sales at Boomershine Nissan.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $49,000, or 0.3%, from $17.4 million for the
nine months ended March 31, 1997 to $17.3 million for the nine months ended
March 31, 1998. This decrease was primarily due to reductions at Boomershine
Pontiac and Boomershine Nissan for personnel realignments and lower marketing
expense and sales commissions. These decreases were partially offset by the
Collision Centers USA and South Financial acquisitions, together amounting to
$1.4 million in the three months ended March 31, 1998, and higher sales
commissions at Boomershine Ford.
Interest Expense, net. Interest expense, net increased $73,000 or 6.0%,
from $1.2 million for the nine months ended March 31, 1997 to $1.3 million for
the nine months ended March 31, 1998. This increase was attributable to the
Collision Centers USA and South Financial acquisitions, together amounting to
$364,000 in the three months ended March 31, 1998, offset in part by lower
interest charges at Boomershine Pontiac and greater manufacturer support at
Boomershine Ford.
Year Ended June 30, 1997 Compared to Year Ended June 30, 1996
Revenues. Total revenues decreased by $14.4 million, or 5.6%, from $258.8
million for the year ended June 30, 1996 to $244.4 million for the year ended
June 30, 1997. New vehicle sales revenues decreased $13.6 million, or 8.2% from
$166.2 million for the year ended June 30, 1996 to $152.6 million for the year
ended June 30, 1997. This decrease was primarily attributable to reduced unit
sales of fleet vehicles at both the Boomershine Pontiac and Ford dealerships and
a 14% reduction in retail unit sales at the Boomershine Nissan dealership. Used
vehicle revenues decreased $2.8 million, or 4.4%, from $64.7 million for the
year ended June 30, 1996 to $61.8 million for the year ended June 30, 1997. This
decrease resulted from reduced used vehicle trade-in availability at the
Boomershine Nissan and Pontiac dealerships and reduced wholesale activity at the
Boomershine Ford dealership. These were partially offset by the increase in used
vehicle sales at the Boomershine Mitsubishi dealership that was owned for a
partial year in the year ended June 30, 1996. Parts and service sales increased
$873,000, or 3.7%, from $23.8 million for the year ended June 30, 1996 to $24.6
million for the year ended June 30, 1997. This increase resulted from higher
revenues from service and bodywork at the Boomershine Pontiac, Mitsubishi and
Ford locations and the overall economic strength of the markets served. Other
Boomershine Automotive dealership revenues increased $1.1 million, or 26.5%,
from $4.2 million for the year ended June 30, 1996 to $5.3 million for the year
ended June 30, 1997. This increase was due primarily to increased finance and
insurance income and a generally competitive lending environment.
Gross Profit. Gross profit decreased by $2.0 million, or 7.3%, from $27.1
million for the year ended June 30, 1996 to $25.1 million for the year ended
June 30, 1997. This decrease was attributable to lower overall revenue levels
and profit contribution at the Boomershine Nissan location and was offset in
part by higher average new and used margins at the Boomershine Ford dealership.
The margins were also increased by the effect of having the Boomershine
Mitsubishi dealership for an entire year in the year ended June 30, 1997.
Overall, the percentage gross margin improved from 10.5% for the year ended June
30, 1996 to 10.3% for the year ended June 30, 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $1.6 million, or 6.5%, from $24.8 for the year
ended June 30, 1996 to $23.2 million for the year ended June 30, 1997. This
decrease was primarily due to expense rationalization and lower incentive
compensation charges at the Boomershine Nissan dealership. These were partially
offset by increases in personnel costs at the Boomershine Pontiac, Ford and
Mitsubishi dealerships.
Interest Expense, net. Interest expense, net increased $517,000, or 32.5%,
from $1.6 million for the year ended June 30, 1996 to $2.1 million for the year
ended June 30, 1997. This increase was attributable primarily to slower
inventory turns at Boomershine Pontiac and Nissan locations.
46
<PAGE> 48
Year Ended June 30, 1996 Compared to Year Ended June 30, 1995
Revenues. Total revenues increased by $21.8 million, or 9.2%, from $237.1
million for the year ended June 30, 1995 to $258.8 million for the year ended
June 30, 1996. New vehicle sales revenues increased $9.2 million, or 5.9% from
$157.0 million for the year ended June 30, 1995 to $166.2 million for the year
ended June 30, 1996. This increase was primarily attributable to Boomershine
Automotive's addition of the Honda and Mitsubishi dealerships in the Cobb
County, Georgia market area and higher average per unit sales at the Boomershine
Ford and Nissan dealerships. Used vehicle revenues increased $7.6 million, or
13.3%, from $57.0 million for the year ended June 30, 1995 to $64.6 million for
the year ended June 30, 1996. This increase resulted from the addition of the
Boomershine Honda and Mitsubishi dealerships and higher wholesale revenues at
the Boomershine Ford dealership. These factors were partially offset by lower
used vehicle sales at the Boomershine Pontiac/GMC location. Parts and service
sales increased $4.5 million, or 23.6%, from $19.2 million for the year ended
June 30, 1995 to $23.7 million for the year ended June 30, 1996. This increase
resulted from the Boomershine Honda and Mitsubishi dealership additions and
higher service revenues at the Boomershine Pontiac dealership. Other Boomershine
Automotive dealership revenues increased $363,000, or 9.4%, from $3.9 million
for the year ended June 30, 1995 to $4.2 million for the year ended June 30,
1996. This increase was due primarily to the Boomershine Buick and Mitsubishi
dealership additions and increased unit sales.
Gross Profit. Gross profit increased by $4.4 million, or 19.4%, from $22.7
million for the year ended June 30, 1995 to $27.1 million for the year ended
June 30, 1996. This increase was attributable to the addition of the Boomershine
Buick and Mitsubishi dealerships and the impact of higher revenues and average
sales per unit, particularly at the Boomershine Ford dealership.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $4.4 million, or 21.8%, from $20.3 million for
the year ended June 30, 1995 to $24.7 million for the year ended June 30, 1996.
This increase was primarily due to the addition of the Boomershine Honda and
Mitsubishi dealerships as well as added personnel charges for the Boomershine
Ford and Pontiac locations.
Interest Expense, net. Interest expense, net increased $375,000 from $1.2
million for the year ended June 30, 1995 to $1.6 million for the year ended June
30, 1996. This increase was attributable to increased inventory levels at the
Boomershine Ford location and slow-moving conversion van inventory at the
Boomershine Pontiac dealership.
Liquidity and Capital Resources
The Company considers liquidity to be its ability to meet its long- and
short-term cash requirements. Boomershine Automotive's principal sources of
liquidity are cash on hand, cash from operations and floorplan financing.
The following table sets forth historical selected information from
Boomershine Automotive's statements of cash flows for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
------------------------- ------------------
1995 1996 1997 1997 1998
------- ------- ----- ------- --------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities.................................... $ 4,197 $ 3,513 $ 429 $1,085 $ 2,061
Net cash provided by (used in) investing
activities.................................... (2,740) (4,238) (612) (828) (6,058)
Net cash provided by (used in) financing
activities.................................... 799 9 (259) (168) 4,158
------- ------- ----- ------ -------
Net increase (decrease) in cash and cash
equivalents................................... $ 2,256 $ (716) $(442) $ 89 $ 161
======= ======= ===== ====== =======
</TABLE>
Cash Flows
Total cash and cash equivalents at March 31, 1998 were $4.7 million.
47
<PAGE> 49
For the three years ended June 30, 1997, Boomershine Automotive generated
$3.0 million in cash flow from net income (loss) plus depreciation and
amortization. Net cash flow from operating activities is significantly impacted
by changes in inventory levels reflecting strategic and marketing decisions.
Inventory levels increased by $19.9 million and $1.7 million for the fiscal
years ended June 30, 1995 and 1996, respectively. During the year ended June 30,
1997, the aggregate inventory level decreased by $10.7 million.
Changes in the outstanding balance under the floorplan arrangements also
serve to influence the net cash flow from operations. During the years ended
June 30, 1995 and 1996 the notes payable balance owed to floorplan lenders
increased $25.2 million and $2.8 million, respectively. For the year ended June
30, 1997, such notes payable balances decreased as a result of a repayment of
$12.6 million.
For the nine months ended March 31, 1998, the Boomershine Automotive
dealerships generated net cash flow of $2.0 million from net income plus
depreciation and amortization compared to $935,000 in the nine months ended
March 31, 1997. This resulted from the improvement in net earnings.
The change in net cash used in investing activities for the three years
ended June 30, 1997 amounted to $7.6 million. This was primarily attributable to
capital expenditures for the acquisition of the Boomershine Honda, Mitsubishi
and Buick dealerships, expansion of the rental car program, renovation of
showroom facilities and construction of a collision repair center.
The change in net cash used in investing activities for the nine months
ended March 31, 1998 resulted from the payment of the cash component of the
Collision Centers USA Acquisition and routine capital expenditures.
The change in net cash related to financing activities was primarily
attributable to borrowings and repayments under long-term debt. For the years
ended June 30, 1995 and 1996, the increase in these notes payable amounted to
$799,000 and $9,000, respectively. For the year ended June 30, 1997, the amount
owed under these notes decreased by $259,000.
The change in net cash related to financing activities for the nine months
ended March 31, 1998 resulted from a loan from a related party amounting to $4.5
million to facilitate the South Financial Acquisition in January 1998.
Floorplan Financing
Boomershine Automotive currently obtains floorplan financing for its
dealerships' vehicle inventories primarily through Ford Motor Credit and
NationsBank Credit. As of March 31, 1998, the Boomershine Automotive dealerships
had approximately $49.9 million of outstanding floorplan financing. The debt
bears interest at LIBOR plus 200 to 225 basis points. Interest expense on
floorplan notes payable, before manufacturers' interest assistance, totaled
approximately $3.6 million, $4.5 million and $3.8 million for the years ended
June 30, 1995, 1996 and 1997, respectively. Manufacturers' interest assistance,
which is recorded as a reduction to interest expense, amounted to $2.7 million,
$2.9 million and $2.0 million for the years ended June 30, 1995, 1996 and 1997,
respectively.
Leases
The Boomershine Automotive dealerships lease their primary operating
facilities under operating leases, including leases with related parties, which
expire at various dates through 2017. Certain of the leases contain automatic
renewal provisions that require the lessee to affirmatively state its intention
to vacate. Management believes that the terms and provisions of the related
party leases approximate those available from third parties.
JAY AUTOMOTIVE GROUP
Results of Operations
Prior to the Offering, Jay Automotive Group, Inc. consisted of six retail
automotive dealerships and four used car facilities serving the Columbus,
Georgia market. The dealerships included Toyota, Mazda, Pontiac,
48
<PAGE> 50
Buick, GMC and Mitsubishi. Mr. James G. Stelzenmuller, III, who has over 15
years of experience in the automotive retailing industry and has managed this
business since 1983, owned Jay Automotive immediately prior to the Offering.
Certain related businesses (e.g. leasing and insurance subsidiaries) that
were subsidiaries of Jay Automotive were divested prior to the Offering.
Accordingly, the financial results of those related businesses are not included
in the accompanying financial statements and are excluded from the discussion
below.
The following table sets forth selected financial data and such data as a
percentage of total revenues for the combined Jay Automotive Group dealerships
for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
---------------------------------------------------------- -------------------------------------
1995 1996 1997 1997 1998
----------------- ----------------- ------------------ ----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- -------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
New vehicle sales........ $46,763 58.8% $56,329 59.0% $ 54,899 54.6% $13,748 54.6% $12,756 52.1%
Used vehicle sales....... 21,990 27.7 26,358 27.6 31,562 31.4 7,462 29.6 7,899 32.2
Parts and service
sales.................. 9,009 11.3 10,636 11.2 11,869 11.8 3,218 12.8 3,207 13.1
Other revenues, net...... 1,721 2.2 2,066 2.2 2,184 2.2 752 3.0 645 2.6
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Total revenues..... 79,483 100.0 95,389 100.0 100,514 100.0 25,180 100.0 24,507 100.0
Cost of sales.............. 70,135 88.2 84,106 88.2 88,543 88.1 21,891 86.9 21,412 87.4
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Gross profit............... 9,348 11.8 11,283 11.8 11,971 11.9 3,289 13.1 3,095 12.6
Selling, general and
administrative
expenses................. 7,134 9.0 8,952 9.4 9,588 9.5 2,411 9.6 2,537 10.4
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Income from operations..... 2,214 2.8 2,331 2.4 2,383 2.4 878 3.5 558 2.2
Other income and expense:
Interest expense, net.... 360 0.5 301 0.3 261 0.3 79 0.3 8 0.0
Other income (expense)... -- -- -- -- -- -- -- -- -- --
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Income before income
taxes.................... 1,854 2.3 2,030 2.1 2,122 2.1 799 3.2 550 2.2
Income tax expense......... (703) (0.9) (775) (0.8) (806) (0.8) (304) (1.2) (209) (0.9)
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Net income................. $1,151 1.4% $1,255 1.3% $ 1,316 1.3% $ 495 2.0% $ 341 1.3%
======= ======= ======== ======= =======
</TABLE>
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997
Revenues. Total revenues decreased $673,000, or 2.7%, from $25.2 million
for the three months ended March 31, 1997 to $24.5 million for the three months
ended March 31, 1998. New vehicle sales decreased $1.0 million, or 7.2%, from
$13.7 million for the three months ended March 31, 1997 to $12.7 million for the
three months ended March 31, 1998. This decrease was primarily due to lower
Mitsubishi and Pontiac sales, which was offset partially by higher GMC truck
sales. Used vehicle sales increased $437,000, or 5.9%, from $7.5 million for the
three months ended March 31, 1997 to $7.9 million for the three months ended
March 31, 1998. This increase was due primarily to higher retail used vehicle
sales at the newly opened used vehicle facility offset in part by reduced
wholesale activity. Parts and service sales decreased $11,000, or 0.3%, from
$3.2 million for the three months ended March 31, 1997 to $3.2 million for the
three months ended March 31, 1998. This decrease was due primarily to reduced
selling days available at the Pontiac and Buick dealerships. Other dealership
revenues decreased $107,000, or 14.2%, from $752,000 for the three months ended
March 31, 1997 to $645,000 for the three months ended March 31, 1998. This
decrease was due to lower finance and insurance commissions. Decrease of
revenues was partially attributable to the disruption of the business caused by
the relocation of certain dealerships to a newly-opened auto mall location.
Gross Profit. Gross profit decreased $194,000, or 5.9%, from $3.3 million
for the three months ended March 31, 1997 to $3.1 million for the three months
ended March 31, 1998. This decrease was primarily due to reduced operating days
resulting from the relocation described above and reductions in the gross margin
percentage achieved at the Toyota and Pontiac locations.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $126,000, or 5.2%, from $2.4 million for the
three months ended March 31, 1997 to $2.5 million for the three
49
<PAGE> 51
months ended March 31, 1998. This increase was primarily due to higher
compensation charges and expenses associated with opening the new sales location
offset in part by higher marketing co-op reimbursements.
Interest Expense, net. Interest expense, net decreased $71,000, or 89.9%,
from $79,000 for the three months ended March 31, 1997 to $8,000 for the three
months ended March 31, 1998. This decrease was primarily attributable to
increased manufacturer support.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenues. Total revenues increased by $5.1 million, or 5.4%, from $95.4
million for the year ended December 31, 1996 to $100.5 million for the year
ended December 31, 1997. New vehicle sales decreased $1.4 million, or 2.5% from
$56.3 million for the year ended December 31, 1996 to $54.9 million for the year
ended December 31, 1997. This decrease was primarily attributable to reductions
in the availability of Toyota vehicles from the distributor and a decline in
demand for Pontiac vehicles. These factors were partially offset by the impact
of the addition of the Buick dealership to Jay Automotive in December 1996. Used
vehicle sales increased $5.2 million, or 19.7%, from $26.4 million for the year
ended December 31, 1996 to $31.6 million for the year ended December 31, 1997.
This increase resulted from the implementation of a market segmentation strategy
and more management focus in this area. Parts and service sales increased $1.2
million, or 11.6%, from $10.6 million for the year ended December 31, 1996 to
$11.8 million for the year ended December 31, 1997. This increase resulted from
the addition of the Buick dealership. Other dealership revenues increased
$118,000, or 5.7%, from $2.1 million for the year ended December 31, 1996 to
$2.2 million for the year ended December 31, 1997. This minor increase was due
primarily to higher finance and documentation income.
Gross Profit. Gross profit increased by $688,000, or 6.1%, from $11.3
million for the year ended December 31, 1996 to $12.0 million for the year ended
December 31, 1997. This increase was attributable to higher overall unit sales
and the addition of the Buick dealership to Jay Automotive in December 1996 and
its related service and parts income.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $636,000, or 7.1%, from $8.9 million for the
year ended December 31, 1996 to $9.6 million for the year ended December 31,
1997. This increase was primarily due to the addition of personnel to the Jay
Automotive Toyota body shop operations and the Jay Automotive Buick dealership.
These additions were partially offset by a reduction in sales incentive
compensation related to the reduction in new unit sales.
Interest Expense, net. Interest expense, net decreased $40,000, or 13.3%,
from $301,000 for the year ended December 31, 1996 to $261,000 for the year
ended December 31, 1997.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenues. Total revenues increased by $15.9 million, or 20.0%, from $79.5
million for the year ended December 31, 1995 to $95.4 million for the year ended
December 31, 1996. New vehicle sales increased $9.6 million, or 20.5% from $46.7
million for the year ended December 31, 1995 to $56.3 million for the year ended
December 31, 1996. This increase was primarily attributable to the addition of
the Mazda dealership to Jay Automotive in November 1995. Used vehicle sales
increased $4.4 million, or 19.9%, from $22.0 million for the year ended December
31, 1995 to $26.4 million for the year ended December 31, 1996. This increase
resulted from the addition of the Mazda dealership to Jay Automotive and the
dealership's favorable location for used car sales. This increase was partially
offset by reductions in used vehicle sales from the Jay Automotive Toyota and
Pontiac dealership locations. Parts and service sales increased $1.6 million, or
18.1%, from $9.0 million for the year ended December 31, 1995 to $10.6 million
for the year ended December 31, 1996. This increase resulted from the Mazda
dealership addition. Other dealership revenues increased $345,000, or 20.0%,
from $1.7 million for the year ended December 31, 1995 to $2.1 million for the
year ended December 31, 1996. This minor increase was due primarily to
documentation and insurance commission income.
Gross Profit. Gross profit increased by $1.9 million, or 20.7%, from $9.3
million for the year ended December 31, 1995 to $11.3 million for the year ended
December 31, 1996. This increase was attributable to overall increased unit
sales led by the addition of the Mazda dealership to Jay Automotive in November
1995.
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<PAGE> 52
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.8 million, or 25.5%, from $7.1 million for
the year ended December 31, 1995 to $8.9 million for the year ended December 31,
1996. This increase was primarily due to the increase in personnel that resulted
from the addition of the Mazda dealership and increased employee benefit costs
and increased support staff compensation at the Toyota dealership.
Interest Expense, net. Interest expense, net decreased $59,000, or 16.4%,
from $360,000 for the year ended December 31, 1995 to $301,000 for the year
ended December 31, 1996. This decrease was attributable to additional
manufacturer support under floorplan financing arrangements.
Liquidity and Capital Resources
The Company considers liquidity to be its ability to meet its long- and
short-term cash requirements. Jay Automotive Group's principal sources of
liquidity are cash on hand, cash from operations and floorplan financing.
The following table sets forth historical selected information from the
combined Jay Automotive Group dealership's statements of cash flows for the
periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------- ---------------
1995 1996 1997 1997 1998
------- ---- ------ ------ -----
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities.............................. $ 1,895 $669 $1,424 $1,124 $ 443
Net cash provided by (used in) investing
activities.............................. (1,819) (90) (74) (214) 21
Net cash provided by (used in) financing
activities.............................. 73 37 2 (123) (150)
------- ---- ------ ------ -----
Net increase (decrease) in cash and cash
equivalents............................. $ 149 $616 $1,352 $ 787 $ 314
======= ==== ====== ====== =====
</TABLE>
Cash Flows
Total cash and cash equivalents at March 31, 1998 were $4.1 million.
For the three years ended December 31, 1997, the Jay Automotive Group
dealerships generated $4.4 million in cash flow from net income plus
depreciation and amortization. Net cash flow from operating activities ranged
during this period from a high of $1.9 million in 1995 to a low of $669,000 in
1996. The primary factors influencing these results are net income, change in
investment in inventories and the net borrowing or net repayment on the
floorplan arrangements.
The change in net cash provided by operations for the three months ended
March 31, 1998 compared to the quarter ended March 31, 1997 resulted from
increases in inventories and accounts receivable offset partially by an increase
in floorplan borrowings.
The change in net cash used in investing activities for the three years
ended December 31, 1997 was primarily attributable to capital expenditures, the
purchase of the Mazda dealership in 1995 and the purchase of the Buick franchise
in 1996.
The change in net cash related to financing activities was primarily
attributable to reductions in amounts owed to unconsolidated subsidiaries which
were partially offset by repayments on long-term debt.
Floorplan Financing
Jay Automotive Group currently obtains floorplan financing for its vehicle
inventory primarily through General Motors Acceptance Corporation ("GMAC"),
World Omni Finance and a commercial bank. As of
51
<PAGE> 53
March 31, 1998, Jay Automotive Group had approximately $13.7 million of
outstanding floorplan financing. The debt bears interest at various rates which
generally fluctuate with the prime rate or LIBOR and which ranged from 7.2% to
10.25% at December 31, 1997. The floorplan lenders generally provide for rebate
reductions in interest expense based on volume and other factors as well as
manufacturers' assistance based on an agreed-upon amounts which vary by model.
Interest expense on floorplan notes payable, before manufacturers' interest
assistance, totaled approximately $1.0 million, $1.4 million and $864,000 for
the years ended December 31, 1995, 1996 and 1997, respectively. Manufacturers'
interest assistance, which is recorded as a reduction to interest expense,
amounted to approximately $608,000, $1.1 million and $530,000 for the years
ended December 31, 1995, 1996 and 1997, respectively.
Leases
The real estate and buildings housing the Jay Automotive Pontiac, GMC,
Buick, Mitsubishi and Mazda dealerships and a major used car facility are leased
from a company owned and controlled by James G. Stelzenmuller, the former sole
shareholder of Jay Automotive Group, Inc. This facility is pledged as collateral
to an Industrial Revenue Bond used to finance its construction. Certain other
facilities used in the business operations of Jay Automotive are leased on a
month to month basis and the lease understandings are not in writing. Management
believes these leases and informal arrangements contain terms and rates that are
comparable to those which are available on the open market.
WADE FORD, INC. AND WADE FORD BUFORD, INC. -- COMBINED
Results of Operations
Wade Ford, Inc. and Wade Ford Buford, Inc. operate Ford dealerships located
in Smyrna and Buford, Georgia, respectively both suburban locations which are
part of the greater metropolitan Atlanta market. Prior to the Offering, both
dealerships were owned by Mr. Alan K. Arnold and several other minority
shareholders. Mr. Arnold has over 20 years of automotive retailing experience in
the greater Atlanta area. The Smyrna-based dealership was originally founded in
the early 1950's and the Buford-based dealership was added in 1990.
The following table sets forth selected financial data and such data as a
percentage of total revenues for the combined Wade Ford dealerships for the
periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------------------------------ ---------------------------------------
1995 1996 1997 1997 1998
------------------ ------------------ ------------------ ------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- ------- -------- ------- -------- ------- -------- ------- -------- -------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
New vehicle sales...... $ 83,408 71.6% $105,581 73.5% $129,833 78.5% $ 33,048 79.3% $ 30,607 76.6%
Used vehicle sales..... 22,812 19.6 28,236 19.7 24,482 14.8 6,006 14.4 6,562 16.4
Parts and service
sales................ 9,297 8.0 8,426 5.9 9,603 5.8 2,326 5.6 2,481 6.2
Other revenues, net.... 1,023 0.8 1,351 0.9 1,424 0.9 316 0.7 327 0.8
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total revenues... 116,540 100.0 143,594 100.0 165,342 100.0 41,696 100.0 39,977 100.0
Cost of sales............ 106,587 91.5 131,462 91.6 152,680 92.3 38,512 92.4 37,057 92.7
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Gross profit............. 9,953 8.5 12,132 8.4 12,662 7.7 3,184 7.6 2,920 7.3
Selling, general and
administrative
expenses............... 9,504 8.1 11,261 7.8 10,467 6.3 2,637 6.3 2,581 6.5
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Income from operations... 449 0.4 871 0.6 2,195 1.4 547 1.3 339 0.8
Other income and expense:
Interest expense,
(income) net........... 120 0.1 209 0.2 (5) (0.0) 22 0.1 (34) (0.1)
Other income (expense),
net.................. 230 0.2 252 0.2 95 0.0 12 0.0 7 0.0
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Income before income
taxes.................. 559 0.5 914 0.6 2,295 1.4 537 1.2 380 0.9
Income tax expense....... -- -- -- -- -- -- -- -- -- --
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Net income............... $ 559 0.5% $ 914 0.6% $ 2,295 1.4% $ 537 1.2% $ 380 0.9%
======== ======== ======== ======== ========
</TABLE>
52
<PAGE> 54
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997
Revenues. Total revenues decreased $1.7 million, or 4.1%, from $41.7
million for the three months ended March 31, 1997 to $40.0 million for the three
months ended March 31, 1998. New vehicle sales decreased $2.4 million, or 7.4%,
from $33.0 million for the three months ended March 31, 1997 to $30.6 million
for the three months ended March 31, 1998. This decrease was primarily due to
lower sales of fleet units at the Smyrna location offset in part by increased
truck sales at the Buford location. Used vehicle sales increased $556,000, or
9.3%, from $6.0 million for the three months ended March 31, 1997 to $6.6
million for the three months ended March 31, 1998. This increase was due
primarily to higher sales of remarketed Ford vehicles at the Buford location and
a strategy of dealing in later models. Parts and service sales increased
$155,000, or 6.7%, from $2.3 million for the three months ended March 31, 1997
to $2.5 million for the three months ended March 31, 1998. This increase was due
primarily to population growth and a larger customer base in the Buford
dealership area. Other dealership revenues increased $11,000, or 3.5%, from
$316,000 for the three months ended March 31, 1997 to $327,000 for the three
months ended March 31, 1998. This increase was due to higher warranty sales
offset in part by lower finance and insurance commissions.
Gross Profit. Gross profit decreased $264,000, or 8.3%, from $3.2 million
for the three months ended March 31, 1997 to $2.9 million for the three months
ended March 31, 1998. This decrease was primarily due to lower fleet sales
activity and lower margins on used vehicle sales offset in part by higher sales
of parts and services.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $56,000, or 2.1%, from $2.6 million for the
three months ended March 31, 1997 to $2.6 million for the three months ended
March 31, 1998. This decrease was primarily due to reduced sales commissions and
lower workers compensation insurance premiums offset in part by higher
compensation for support personnel at the Buford location.
Interest Expense, net. Interest expense, net decreased $56,000, from
$22,000 for the three months ended March 31, 1997 to $(34,000) for the three
months ended March 31, 1998. This decrease was attributable to lower inventory
levels.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenues. Total revenues increased by $21.7 million, or 15.1%, from $143.6
million for the year ended December 31, 1996 to $165.3 million for the year
ended December 31, 1997. New vehicle sales increased $24.3 million, or 23.0%
from $105.6 million for the year ended December 31, 1996 to $129.8 million for
the year ended December 31, 1997. This increase was primarily attributable to
strong regional growth near the Wade Ford Buford location and increased emphasis
on fleet sales at the Wade Ford Smyrna location. Used vehicle sales decreased
$3.8 million, or 13.3%, from $28.2 million for the year ended December 31, 1996
to $24.5 million for the year ended December 31, 1997. This decrease resulted
from increased competition near the Wade Ford Smyrna location. Parts and service
sales increased $1.2 million, or 14.0%, from $8.4 million for the year ended
December 31, 1996 to $9.6 million for the year ended December 31, 1997. This
increase resulted from the higher retail demand at the Wade Ford Buford location
resulting in higher new vehicle unit sales. Other dealership revenues increased
$73,000, or 5.4%, from $1.4 million for the year ended December 31, 1996 to $1.4
million for the year ended December 31, 1997. This increase was due primarily to
higher documentation fee income.
Gross Profit. Gross profit increased by $530,000, or 4.4%, from $12.1
million for the year ended December 31, 1996 to $12.6 million for the year ended
December 31, 1997. This increase was attributable to higher overall revenues at
both Wade Ford locations. The gross profit as a percent of sales decreased from
8.4% in 1996 compared to 7.7% in 1997 due to the generally lower returns on
fleet sales.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $794,000, or 7.1%, from $11.3 million for the
year ended December 31, 1996 to $10.5 million for the year ended December 31,
1997. This decrease was primarily due to lower charges for advertising, rents,
bad debts and professional fees.
53
<PAGE> 55
Interest Expense, net. Interest expense, net decreased $214,000, or
102.4%, from $209,000 (expense) for the year ended December 31, 1996 to $5,000
(income) for the year ended December 31, 1997. This decrease was attributable
primarily to greater manufacturer credits which were partially offset by higher
charges incurred for larger average inventory levels.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenues. Total revenues increased by $27.1 million, or 23.2%, from $116.5
million for the year ended December 31, 1995 to $143.6 million for the year
ended December 31, 1996. New vehicle sales increased $22.2 million, or 26.6%
from $83.4 million for the year ended December 31, 1995 to $105.6 million for
the year ended December 31, 1996. This increase was primarily attributable to
expanded fleet sales and overall economic growth in the Buford area. Used
vehicle sales increased $5.4 million, or 23.8%, from $22.8 million for the year
ended December 31, 1995 to $28.2 million for the year ended December 31, 1996.
This increase resulted from the strategic decision by the Wade Ford Buford
management team to carry larger used car inventories. Parts and service sales
decreased $871,000, or 9.4%, from $9.3 million for the year ended December 31,
1995 to $8.4 million for the year ended December 31, 1996. This decrease
resulted from lower parts and service sales at the Smyrna-based dealership.
Other dealership revenues increased $328,000 or 32.1%, from $1.0 million for the
year ended December 31, 1995 to $1.4 million for the year ended December 31,
1996. This increase was due primarily to higher documentation fee income.
Gross Profit. Gross profit increased by $2.2 million, or 21.9%, from $9.9
million for the year ended December 31, 1995 to $12.1 million for the year ended
December 31, 1996. This increase was attributable to higher overall revenues.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.8 million, or 18.5%, from $9.5 million for
the year ended December 31, 1995 to $11.3 million for the year ended December
31, 1996. This increase was primarily due to higher variable incentive pay
stemming from increased retail sales and higher charges for rents, bad debts and
professional fees.
Interest Expense, net. Interest expense, net increased $89,000, or 74.2%,
from $120,000 for the year ended December 31, 1995 to $209,000 for the year
ended December 31, 1996. This increase was attributable to the increased
inventory of vehicles, principally used, at the Wade Ford Buford location.
Liquidity and Capital Resources
The Company considers liquidity to be its ability to meet its long- and
short-term cash requirements. The Wade Ford dealerships' principal sources of
liquidity are cash on hand, cash from operations and floorplan financing.
The following table sets forth historical selected information from the
Wade Ford dealerships' statements of cash flows for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------- -------------------
1995 1996 1997 1997 1998
------- ------- ------- -------- --------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities............................. $ 1,078 $ 3,036 $ 2,472 $ 1,417 $ 1,476
Net cash provided by (used in) investing
activities............................. (727) (295) (185) (21) (6)
Net cash provided by (used in) financing
activities............................. (46) (60) (2,260) (1,297) (130)
------- ------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents............................ $ 305 $ 2,681 $ 27 $ 99 $ 1,340
======= ======= ======= ======= =======
</TABLE>
54
<PAGE> 56
Cash Flows
Total cash and cash equivalents at March 31, 1998 were $6.0 million.
For the three years ended December 31, 1997, the dealership generated $4.3
million in cash flow from net income plus depreciation and amortization. Net
cash flow from operating activities averaged $2.2 million during the three year
period. The increase in net cash provided by operating activities is due
primarily to positive net earnings and increased floorplan balances offset by
the effect of additions to inventory needed to support expanding
sales -- principally in new vehicles at both the Wade Ford Buford and Wade Ford
Smyrna locations.
Net cash provided by operations increased from $1.4 million in the three
months ended March 31, 1997 to $1.5 million in the three months ended March 31,
1998. This was attributable to reductions in inventory balances offset in part
by lower floorplan borrowings.
The change in net cash used in investing activities for the three years
ended December 31, 1997 was primarily attributable to capital expenditures for
renovations to the Wade Ford Smyrna showroom and service facility as well as
purchases of servicing equipment for both Wade Ford dealership sites.
The change in net cash related to financing activities was primarily
attributable to increases in and repayments of long-term debt. In addition,
distributions to former shareholders (consistent with S-Corporation ownership)
aggregated $2.2 million for the three years ended December 31, 1997.
Floorplan Financing
The Wade Ford dealerships currently obtain floorplan financing for their
vehicle inventory primarily through Ford Motor Credit Corporation. As of March
31, 1998, these dealerships had approximately $24.1 million of outstanding
floorplan financing. The debt bears interest at the prime rate plus 100 basis
points. This interest can be reduced if the dealerships meet certain goals for
overall sales volume and retail contracts with Ford Motor Credit. Ford Motor
Company provides interest assistance to the dealerships including a specified
allowance for a vehicle's in-transit period and an amount that varies by vehicle
model.
Interest expense on floorplan notes payable, before manufacturers' interest
assistance, totaled approximately $1.1 million, $2.4 million and $2.7 million
for the years ended December 31, 1995, 1996 and 1997, respectively.
Manufacturers' interest assistance, which is recorded as a reduction to interest
expense, amounted to $749,000, $2.1 million and $2.5 million for the years ended
December 31, 1995, 1996 and 1997, respectively.
Leases
The Wade Ford dealerships lease certain office equipment and the facilities
comprising their retail and service locations, including leases with related
parties, under long-term operating leases and on a month to month basis.
Management believes the lease terms approximate those that would be available
from third parties. Certain of the leases permit the lessee to cancel the lease
by giving notice for periods ranging from 60 to 180 days.
DAY'S CHEVROLET, INC.
Results of Operations
Day's Chevrolet consists of a Chevrolet dealership in Acworth, Georgia, a
city located in the suburbs of Atlanta. The dealership has served Acworth and
northeast Georgia since 1959. Mr. Calvin Diemer and Mr. Alvin Diemer, who owned
Day's Chevrolet prior to the Offering, have worked in the automotive retailing
industry for over 20 years and succeeded to the ownership of Day's Chevrolet in
a series of transactions ending in 1993. Mr. Calvin Diemer will continue to
serve as the Executive Manager of Day's Chevrolet following the Offering.
55
<PAGE> 57
The following table sets forth selected financial data and such data as a
percentage of total revenues for the Day's Chevrolet dealership for the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------------- -------------------------------------
1996 1997 1997 1998
----------------- ------------------ ----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- -------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
New vehicle sales......... $27,924 46.9% $ 28,806 47.4% $ 6,458 43.5% $ 6,559 45.4%
Used vehicle sales........ 21,073 35.4 21,781 35.8 5,965 40.2 5,297 36.6
Parts and service sales... 9,525 16.0 9,340 15.4 2,218 14.9 2,348 16.2
Other revenues, net....... 998 1.7 856 1.4 209 1.4 255 1.8
------- ----- -------- ----- ------- ----- ------- -----
Total revenues.... 59,520 100.0 60,783 100.0 14,850 100.0 14,459 100.0
Cost of sales............... 52,746 88.6 54,545 89.7 13,342 89.8 12,853 88.9
------- ----- -------- ----- ------- ----- ------- -----
Gross profit................ 6,774 11.4 6,238 10.3 1,508 10.2 1,606 11.1
Selling, general and
administrative expenses... 5,076 8.5 5,178 8.5 1,235 8.3 1,258 8.7
------- ----- -------- ----- ------- ----- ------- -----
Income from operations...... 1,698 2.9 1,060 1.8 273 1.9 348 2.4
Other income and expense:
Interest expense, net..... 123 0.2 100 0.2 36 0.2 19 0.1
Other income (expense),
net.................... 7 0.0 6 0.0 1 0.0 7 0.0
------- ----- -------- ----- ------- ----- ------- -----
Income before income
taxes..................... 1,582 2.7 966 1.6 238 1.7 336 2.3
Income tax expense.......... -- -- -- -- -- -- -- --
------- ----- -------- ----- ------- ----- ------- -----
Net income.................. $ 1,582 2.7% $ 966 1.6% $ 238 1.7% $ 336 2.3%
======= ======== ======= =======
</TABLE>
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997
Revenues. Total revenues decreased $391,000, or 2.6%, from $14.8 million
for the three months ended March 31, 1997 to $14.4 million for the three months
ended March 31, 1998. New vehicle sales increased $101,000, or 1.6%, from $6.5
million for the three months ended March 31, 1997 to $6.6 million for the three
months ended March 31, 1998. This increase was primarily due to increased unit
sales of new trucks offset partially by lower unit sales of cars. New truck
sales increased due to higher product availability during the three months ended
March 31, 1998. Used vehicle sales decreased $668,000, or 11.2%, from $6.0
million for the three months ended March 31, 1997 to $5.3 million for the three
months ended March 31, 1998. This decrease was due primarily to decreased
wholesale unit sales stemming from increased competition in this segment. Parts
and service sales increased $130,000, or 5.9%, from $2.2 million for the three
months ended March 31, 1997 to $2.3 million for the three months ended March 31,
1998. This increase was due primarily to increased parts sales to rental car
companies and increased service revenues. Other dealership revenues increased
$46,000, or 22.0%, from $209,000 for the three months ended March 31, 1997 to
$255,000 for the three months ended March 31, 1998. This increase was due
primarily to higher warranty sales.
Gross Profit. Gross profit increased $98,000 or 6.5%, from $1.5 million
for the three months ended March 31, 1997 to $1.6 million for the three months
ended March 31, 1998. This increase was primarily due to higher new truck sales,
a higher proportion of revenues from parts and service sales and increased
incentive rebates from the manufacturer.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $23,000, or 1.9%, from $1.2 million for the
three months ended March 31, 1997 to $1.3 million for the three months ended
March 31, 1998. This increase was primarily due to higher occupancy charges
offset partially by reduced compensation for sales supervision.
Interest Expense, net. Interest expense, net decreased $17,000, or 47.2%,
from $36,000 for the three months ended March 31, 1997 to $19,000 for the three
months ended March 31, 1998. This decrease was attributable to higher
manufacturer credits.
56
<PAGE> 58
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenues. Total revenues increased by $1.3 million, or 2.1%, from $59.5
million for the year ended December 31, 1996 to $60.8 million for the year ended
December 31, 1997. New vehicle sales increased $882,000, or 3.2% from $27.9
million for the year ended December 31, 1996 to $28.8 million for the year ended
December 31, 1997. This increase was primarily attributable to increased sales
of truck, sport utility and sports car vehicles. Used vehicle sales increased
$708,000, or 3.4%, from $21.1 million for the year ended December 31, 1996 to
$21.8 million for the year ended December 31, 1997. This increase resulted from
an increase in personnel and a continuing emphasis on the wholesale component of
used car sales. Parts and service sales decreased $185,000, or 1.9%, from $9.5
million for the year ended December 31, 1996 to $9.3 million for the year ended
December 31, 1997. This minor decrease resulted from a decrease in parts sales.
Other dealership revenues decreased $142,000, or 14.2%, from $1.0 million for
the year ended December 31, 1996 to $856,000 for the year ended December 31,
1997. This decrease was due primarily to a reduction in finance and insurance
related income.
Gross Profit. Gross profit decreased by $536,000, or 7.9%, from $6.8
million for the year ended December 31, 1996 to $6.2 million for the year ended
December 31, 1997. This decrease was attributable to increases in costs greater
than the dealership's ability to raise its new car prices and a small decrease
in the margin realized in the parts and service area.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $102,000, or 2.0%, from $5.1 million for the
year ended December 31, 1996 to $5.2 million for the year ended December 31,
1997. This increase was primarily due to increased compensation charges for
incentive pay and expanded participation by employees in the dealership's 401(k)
plan.
Interest Expense, net. Interest expense, net decreased $23,000, or 18.7%,
from $123,000 for the year ended December 31, 1996 to $100,000 for the year
ended December 31, 1997. This decrease was attributable to faster inventory
turnover.
Liquidity and Capital Resources
The Day's Chevrolet dealership's principal sources of liquidity are cash on
hand, cash from operations and floorplan financing.
The following table sets forth historical selected information from the Day
dealership's statements of cash flows for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
----------------- ------------
1996 1997 1997 1998
------- ------- ----- ----
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C>
Net cash provided by (used in) operating activities... $ 1,493 $ 2,216 $(680) $212
Net cash provided by (used in) investing activities... (144) (21) 8 (52)
Net cash provided by (used in) financing activities... (1,241) (1,825) 337 --
------- ------- ----- ----
Net increase (decrease) in cash and cash
equivalents......................................... $ 108 $ 370 $(335) $160
======= ======= ===== ====
</TABLE>
Cash Flows
Total cash and cash equivalents at March 31, 1998 amounted to $1.4 million.
For the two years ended December 31, 1997, the Day's Chevrolet dealership
generated $3.0 million in cash flow from net income plus depreciation and
amortization. Net cash flow from operating activities increased from $1.5
million in 1996 to $2.2 million in 1997 due principally to the increase in the
outstanding balance under the floorplan arrangement offset by a smaller increase
in inventory balances.
57
<PAGE> 59
Net cash flow from operating activities increased from ($680,000) for the
three months ended March 31, 1997 to $212,000 for the quarter ended March 31,
1998 due primarily to higher earnings and fluctuations in inventory balances and
floorplan borrowings.
The change in net cash used in investing activities for the two years ended
December 31, 1997 amounted to an aggregate of $165,000 and was primarily
attributable to capital expenditures for a sales and administration facility and
certain items of service equipment.
The change in net cash used in financing activities increased from $1.2
million in 1996 to $1.8 million in 1997 due to an increase in dividend
distributions to former shareholders.
Floorplan Financing
The Day's Chevrolet dealership currently obtains floorplan financing for
its vehicle inventory primarily through GMAC. As of March 31, 1998, the
dealership had approximately $9.0 million of outstanding floorplan financing.
The debt bears interest at prime plus 100 basis points and can be reduced
through a rebate program based on retail financing activity. In addition, the
floorplan interest charge is reduced by a manufacturer's support program based
on the cost and model of each vehicle purchased from the franchiser. Interest
expense on floorplan notes payable, before manufacturer's interest assistance,
totaled approximately $640,000 and $643,000 for the years ended December 31,
1996 and 1997, respectively. Manufacturer's interest assistance, which is
recorded as a reduction to interest expense, amounted to $551,000 and $587,000
for the years ended December 31, 1996 and 1997, respectively.
Leases
In September 1997, the dealership declared a dividend of its land and
buildings to its shareholders and executed a lease of such land and buildings
from partnerships owned by Messrs. Diemer and Diemer. The lease is for an
initial term expiring in February 2008. The lease terms provide for cancellation
of the lease by either the lessee or lessor upon 60 days notice.
GRINDSTAFF, INC.
Results of Operations
Grindstaff, Inc. consists of Chrysler-Dodge-Plymouth-Jeep, Chevrolet and
Kia dealerships located in Elizabethton, Tennessee serving the northeast portion
of that state, including the Tri-Cities area, which consists of Bristol, Johnson
City, and Kingsport, Tennessee. Prior to the Offering, Grindstaff, Inc. was
majority-owned and managed by Mr. Steve Grindstaff and Mr. Wes Hambrick since
1987 and the business and its predecessors have served the east Tennessee market
area since the late 1950's. Mr. Hambrick has over 15 years of experience in the
automotive retailing industry and will continue to serve as the Executive
Manager of Grindstaff, Inc. following the Offering.
58
<PAGE> 60
The following table sets forth selected financial data and such data as a
percentage of total revenues for the Grindstaff, Inc. dealerships for the
periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------------------- -------------------------------------
1995 1996 1997 1997 1998
----------------- ----------------- ----------------- ----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
New vehicle sales........ $29,499 57.7% $31,714 57.3% $34,098 59.2% $7,083 54.0% $7,684 60.2%
Used vehicle sales....... 16,974 33.2 18,671 33.7 18,277 31.7 4,668 35.6 3,663 28.7
Parts and service
sales.................. 2,868 5.6 3,388 6.2 3,898 6.8 903 6.9 1,045 8.2
Other revenues, net...... 1,778 3.5 1,552 2.8 1,357 2.3 468 3.5 370 2.9
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total revenues..... 51,119 100.0 55,325 100.0 57,630 100.0 13,122 100.0 12,762 100.0
Cost of sales.............. 44,859 87.8 49,008 88.6 50,055 86.9 11,265 85.8 10,885 85.3
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Gross profit............... 6,260 12.2 6,317 11.4 7,575 13.1 1,857 14.2 1,877 14.7
Selling, general and
administrative
expenses................. 5,391 10.5 5,864 10.6 6,972 12.1 1,592 12.1 1,652 12.9
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Income from operations..... 869 1.7 453 0.8 603 1.0 265 2.1 224 1.8
Other income and expense:
Interest expense, net.... 168 0.3 421 0.6 432 0.6 137 1.0 119 0.9
Other income (expense)... (18) (0.0) (509) (0.9) 55 (0.0) (8) (0.1) (8) (0.1)
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Income (loss) before income
taxes.................... 683 1.4 (477) (0.8) 226 0.4 120 1.0 97 0.8
Income tax (expense)
benefit.................. (40) (0.1) 32 0.1 (13) (0.0) (12) (0.1) (5) (0.0)
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net income (loss).......... $ 643 1.3% $ (445) (0.8)% $ 213 0.4% $ 108 0.9% $ 92 0.8%
======= ======= ======= ======= =======
</TABLE>
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997
Revenues. Total revenues decreased $360,000, or 2.7%, from $13.1 million
for the three months ended March 31, 1997 to $12.8 million for the three months
ended March 31, 1998. New vehicle sales increased $601,000, or 8.5%, from $7.1
million for the three months ended March 31, 1997 to $7.7 million for the three
months ended March 31, 1998. This increase was primarily due to higher sales of
Dodge products (principally trucks) stemming from increased availability from
the manufacturer. Used vehicle sales decreased $1.0 million, or 21.5%, from $4.7
million for the three months ended March 31, 1997 to $3.7 million for the three
months ended March 31, 1998. This decrease was due primarily to the closing of
the Johnson City location in November 1997. Parts and service sales increased
$142,000, or 15.7%, from $903,000 for the three months ended March 31, 1997 to
$1.0 million for the three months ended March 31, 1998. This increase was due
primarily to higher service revenues stemming from additional advertising and an
emphasis on cross-selling opportunities. Other dealership revenues decreased
$98,000, or 20.9%, from $468,000 for the three months ended March 31, 1997 to
$370,000 for the three months ended March 31, 1998. This decrease was due to
reduced income from finance and insurance commissions.
Gross Profit. Gross profit increased $20,000, or 1.1%, from $1.9 million
for the three months ended March 31, 1997 to $1.9 million for the three months
ended March 31, 1998. This increase was primarily due to lower finance and
insurance commission income and lower margins on used wholesale activity offset
in part by higher revenues from Dodge truck sales.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $60,000, or 3.8%, from $1.6 million for the
three months ended March 31, 1997 to $1.7 million for the three months ended
March 31, 1998. This increase was primarily due to higher charges for occupancy
expense, higher sales commission expense and higher advertising expense.
Interest Expense, net. Interest expense, net decreased $18,000, or 13.1%,
from $137,000 for the three months ended March 31, 1997 to $119,000 for the
three months ended March 31, 1998. This decrease was primarily attributable to
higher inventory turns.
59
<PAGE> 61
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenues. Total revenues increased by $2.3 million, or 4.2%, from $55.3
million for the year ended December 31, 1996 to $57.6 million for the year ended
December 31, 1997. New vehicle sales increased $2.4 million, or 7.5% from $31.7
million for the year ended December 31, 1996 to $34.1 million for the year ended
December 31, 1997. This increase was primarily attributable to higher sales at
the Grindstaff Chevrolet dealership and the impact of having the Kia dealership
for an entire year, and was offset partially by reduced sales of Plymouth and
Chrysler products. Used vehicle sales decreased $394,000, or 2.1%, from $18.7
million for the year ended December 31, 1996 to $18.3 million for the year ended
December 31, 1997. This decrease resulted from lower wholesale sales of used
automobiles. Parts and service sales increased $510,000, or 15.1%, from $3.4
million for the year ended December 31, 1996 to $3.9 million for the year ended
December 31, 1997. This increase continued a long-range trend and resulted from
increased wholesale sales to local body shops and mechanics as well as strong
customer acceptance of the dealership's service capabilities. Other Grindstaff
dealership revenues decreased $195,000, or 12.6%, from $1.6 million for the year
ended December 31, 1996 to $1.4 million for the year ended December 31, 1997.
This decrease resulted from lower finance and insurance income.
Gross Profit. Gross profit increased by $1.3 million, or 19.9%, from $6.3
million for the year ended December 31, 1996 to $7.6 million for the year ended
December 31, 1997. This increase was attributable to higher parts and service
sales, which generally has a higher margin and less reliance on wholesale sales
of used cars.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.1 million, or 18.9%, from $5.9 million for
the year ended December 31, 1996 to $7.0 million for the year ended December 31,
1997. This increase was primarily due to renovations to the used car facility
and increased incentive compensation based on gross profit performance.
Interest Expense, net. Interest expense, net increased $11,000, or 2.6%,
from $421,000 for the year ended December 31, 1996 to $432,000 for the year
ended December 31, 1997. This increase was attributable to lower average
inventory balances and reduced interest income from investments.
Other Income (expense). Other income (expense) decreased $564,000, or
110%, from $509,000 (expense) for the year ended December 31, 1996 to income of
$55,000 for the year ended December 31, 1997. This decrease was due to a 1996
lease termination fee amounting to $600,000 paid to a related party lessor. No
such fee was paid in 1997.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenues. Total revenues increased by $4.2 million, or 8.2%, from $51.1
million for the year ended December 31, 1995 to $55.3 million for the year ended
December 31, 1996. New vehicle sales increased $2.2 million, or 7.5% from $29.5
million for the year ended December 31, 1995 to $31.7 million for the year ended
December 31, 1996. This increase was primarily attributable to increased sales
of Chevrolet truck and sport utility van products and the addition of the Kia
dealership to Grindstaff, Inc. in October 1996. This increase was partially
offset by a reduction in unit sales of Chrysler and Plymouth products. Used
vehicle sales increased $1.7 million, or 10.0%, from $16.9 million for the year
ended December 31, 1995 to $18.7 million for the year ended December 31, 1996.
This increase resulted from the opening of a used car facility in Johnson City
and added wholesale sales. Parts and service sales increased $520,000, or 18.1%,
from $2.9 million for the year ended December 31, 1995 to $3.4 million for the
year ended December 31, 1996. This increase resulted from an expanded base of
customers and aggressive marketing by Grindstaff, Inc. in this area. Other
Grindstaff, Inc. dealership revenues decreased $226,000, or 12.7%, from $1.8
million for the year ended December 31, 1995 to $1.6 million for the year ended
December 31, 1996. This decrease was due primarily to reduced finance and
insurance commission revenue.
Gross Profit. Gross profit increased by $57,000, or 0.9%, from $6.3
million for the year ended December 31, 1995 to $6.3 million for the year ended
December 31, 1996. Gross profit as a percent of sales
60
<PAGE> 62
decreased from 12.2% in 1995 to 11.4% in 1996. This was attributable to
increased wholesale sales of used vehicles, reduction in finance and insurance
revenues and soft demand for Chrysler new vehicle sales.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $473,000, or 8.8%, from $5.4 million for the
year ended December 31, 1995 to $5.9 million for the year ended December 31,
1996. This increase was primarily due to higher facility rent charges and
increased personnel costs associated with personnel additions.
Interest Expense, net. Interest expense, net increased $253,000, or 150%,
from $168,000 for the year ended December 31, 1995 to $421,000 for the year
ended December 31, 1996. This increase was attributable to lower inventory
turnover and the addition of the Kia dealership, which did not offer a
manufacturers' support program.
Other Income (expense). Other income (expense) increased $491,000, or
2700%, from $18,000 (expense) for the year ended December 31, 1995 to $509,000
(expense) for the year ended December 31, 1996. This increase was due to a lease
termination fee amounting to $600,000 paid to a related party lessor in 1996.
Liquidity and Capital Resources
The Company considers liquidity to be its ability to meet its long- and
short-term cash requirements. Grindstaff Inc.'s principal sources of liquidity
are cash on hand, cash from operations and floorplan financing.
The following table sets forth historical selected information from the
Grindstaff dealerships' statements of cash flows for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- -------------------
1995 1996 1997 1997 1998
------- ----- ------- -------- --------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities............................... $ 2,021 $(142) $ (944) $ (966) $ 389
Net cash provided by (used in) investing
activities............................... (390) (116) (158) (36) 44
Net cash provided by (used in) financing
activities............................... (124) (297) (38) 113 (4)
------- ----- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents.............................. $ 1,507 $(555) $(1,140) $ (889) $ 429
======= ===== ======= ======= =======
</TABLE>
Cash Flows
Total cash and cash equivalents at March 31, 1998 amounted to $722,000.
For the three years ended December 31, 1997, the Grindstaff dealerships
generated $1.1 million in cash flow from net income plus depreciation and
amortization. Net cash flow from operating activities declined from $2.0 million
in 1995 to $(944,000) in 1997. This decline is due primarily to the reduction in
net income during that period and smaller balances outstanding under the
floorplan, offset partially by reduced inventory levels.
The change in net cash used in investing activities for the three years
ended December 31, 1997 was primarily attributable to capital additions to the
management information system and certain items of service equipment.
The change in net cash related to financing activities was primarily
attributable to principal payments on long-term debt obligations and
transactions in the dealership's capital stock.
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<PAGE> 63
Floorplan Financing
Grindstaff Inc. currently obtains floorplan financing for its dealerships'
vehicle inventories primarily through GMAC and Chrysler Financial Corporation.
As of March 31, 1998, the dealership had approximately $9.5 million of
outstanding floorplan financing. The debt bears interest at rates ranging from
9.0% to 9.5% that are subject to reduction if the dealership meets certain
incentive benchmarks for retail financing contracts. In addition, the
dealerships receive manufacturers' interest support which varies by vehicle
model.
Interest expense on floorplan notes payable, before manufacturers' interest
assistance, totaled approximately $892,000, $1.0 million and $937,000 for the
years ended December 31, 1995, 1996 and 1997, respectively. Manufacturers'
interest assistance, which is recorded as a reduction to interest expense,
amounted to $592,000, $483,000 and $486,000 for the years ended December 31,
1995, 1996 and 1997, respectively.
Leases
The dealership leases its primary operating facilities under operating
leases which require the dealership to pay for maintenance, ad valorem taxes and
insurance. The leases do not contain cancellation or renewal options. Management
believes the rates and terms of all such leases are comparable to those that
would be available on an arm's-length basis. Certain items of equipment used in
the operations of Grindstaff, Inc.'s dealerships are leased under a master
operating lease arrangement and contain renewal and fair value purchase options.
ROBERTSON OLDSMOBILE-CADILLAC, INC.
Results of Operations
Robertson Oldsmobile-Cadillac, Inc. consists of four automotive dealerships
located in Gainesville, Georgia, a suburban city north of Atlanta. The
dealerships include Cadillac, Oldsmobile, Isuzu and Mazda, and the dealership
and its predecessors have served the Gainesville and north Georgia markets
continuously for more than five decades. Prior to the Offering, Mr. Moss
Robertson, who has over 20 years of experience in the automotive retailing
industry, had owned and managed this dealership group since 1982. Mr. Robertson
will remain as the Executive Manager of ROC subsequent to the Offering.
The following table sets forth selected financial data and such data as a
percentage of total revenues for ROC dealership for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------------- --------------------------------------
1996 1997 1997 1998
----------------- ----------------- ----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
New vehicle sales.................... $11,339 52.8% $12,145 51.8% $2,288 47.7% $2,583 45.9%
Used vehicle sales................... 7,443 34.6 8,114 34.6 1,774 37.0 2,328 41.3
Parts and service sales.............. 2,500 11.6 2,778 11.9 655 13.6 652 11.6
Other revenues, net.................. 216 1.0 387 1.7 84 1.7 68 1.2
------- ----- ------- ----- ------- ----- ------- -----
Total revenues................. 21,498 100.0 23,424 100.0 4,801 100.0 5,631 100.0
Cost of sales.......................... 18,447 85.8 20,449 87.3 4,144 86.3 4,871 86.6
------- ----- ------- ----- ------- ----- ------- -----
Gross profit........................... 3,051 14.2 2,975 12.7 657 13.7 760 13.4
Selling, general and administrative
expenses............................. 2,196 10.2 1,957 8.4 472 9.9 500 8.9
------- ----- ------- ----- ------- ----- ------- -----
Income from operations................. 855 4.0 1,018 4.3 185 3.8 260 4.5
Other income and expense:
Interest income, net................. 107 0.5 108 0.5 25 0.5 13 0.2
Other income (expense), net.......... 3 0.0 (4) (0.0) (3) (0.0) (6) (0.0)
------- ----- ------- ----- ------- ----- ------- -----
Income before income taxes............. 965 4.5 1,122 4.8 207 4.3 267 4.7
Income tax expense..................... -- -- -- -- -- -- -- --
------- ----- ------- ----- ------- ----- ------- -----
Net income............................. $ 965 4.5% $1,122 4.8% $ 207 4.3% $ 267 4.7%
======= ======= ======= =======
</TABLE>
62
<PAGE> 64
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997
Revenues. Total revenues increased $830,000, or 17.3%, from $4.8 million
for the three months ended March 31, 1997 to $5.6 million for the three months
ended March 31, 1998. New vehicle sales increased $295,000, or 12.9%, from $2.3
million for the three months ended March 31, 1997 to $2.6 million for the three
months ended March 31, 1998. This increase was primarily due to higher sales of
Oldsmobile products (unit increase of 43%) and higher average per unit sales for
Cadillac products. Used vehicle sales increased $554,000, or 31.2%, from $1.8
million for the three months ended March 31, 1997 to $2.3 million for the three
months ended March 31, 1998. This increase was due primarily to increased
promotions of used vehicles and increased use of selected remarketed vehicles.
Parts and service sales decreased $3,000, or 0.5%, from $655,000 for the three
months ended March 31, 1997 to $652,000 for the three months ended March 31,
1998. This decrease was due primarily to lower warranty and parts sales for both
Mazda and Isuzu resulting from increased competition. Other dealership revenues
decreased $16,000, or 19.0%, from $84,000 for the three months ended March 31,
1997 to $68,000 for the three months ended March 31, 1998. This decrease was due
to lower finance and insurance commissions stemming from a higher proportion of
leases among new vehicle sales.
Gross Profit. Gross profit increased $103,000, or 15.7%, from $657,000 for
the three months ended March 31, 1997 to $760,000 for the three months ended
March 31, 1998. This increase was primarily due to increased sales levels in
both new and used vehicles. The percentage gross margin decreased from 13.7% for
the three months ended March 31, 1997 to 13.4% for the three months ended March
31, 1998 due primarily to increased competition among new car dealers in the
market area.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $28,000, or 5.9%, from $472,000 for the three
months ended March 31, 1997 to $500,000 for the three months ended March 31,
1998. This increase was primarily due to higher sales commissions and higher
marketing expenses.
Interest Expense, net. Interest expense, net decreased $12,000, or 48.0%,
from $25,000 for the three months ended March 31, 1997 to $13,000 for the three
months ended March 31, 1998. This decrease was attributable to higher inventory
turns.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenues. Total revenues increased by $1.9 million, or 9.0%, from $21.5
million for the year ended December 31, 1996 to $23.4 million for the year ended
December 31, 1997. New vehicle sales increased $806,000, or 7.1% from $11.3
million for the year ended December 31, 1996 to $12.1 million for the year ended
December 31, 1997. This increase was primarily attributable to higher sales of
Cadillac products, whose unit sales increased by over 35%. This increase was
partially offset by lower sales of Mazda and Isuzu products. Used vehicle sales
increased $671,000, or 9.0%, from $7.4 million for the year ended December 31,
1996 to $8.1 million for the year ended December 31, 1997. This increase
resulted from additional investments in space and personnel. Parts and service
sales increased $278,000, or 11.1%, from $2.5 million for the year ended
December 31, 1996 to $2.8 million for the year ended December 31, 1997. This
increase resulted from the overall increase in unit sales coupled with a
marketing emphasis on Cadillac service in the north Georgia area. Other
dealership revenues increased $171,000, or 79.2%, from $216,000 for the year
ended December 31, 1996 to $387,000 for the year ended December 31, 1997. This
increase was due primarily to higher finance and insurance related income.
Gross Profit. Gross profit decreased by $76,000, or 2.5%, from $3.1
million for the year ended December 31, 1996 to $3.0 million for the year ended
December 31, 1997. This minor decrease was attributable to the changing mix
among new retail sales and a strategic decision to expand the array of used
vehicles held for sale.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $239,000, or 10.9%, from $2.2 million for the
year ended December 31, 1996 to $2.0 million for the year ended December 31,
1997. This decrease was primarily due to a realignment of incentive pay plans
and the availability of a more attractive co-op advertising program with General
Motors.
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<PAGE> 65
Interest Income, net. Interest income, net increased $1,000, or 0.9%, from
$107,000 for the year ended December 31, 1996 to $108,000 for the year ended
December 31, 1997. This increase was attributable to higher returns on invested
cash and cash equivalents.
Liquidity and Capital Resources
The Company considers liquidity to be its ability to meet its long- and
short-term cash requirements. ROC's principal sources of liquidity are cash on
hand, cash from operations and floorplan financing.
The following table sets forth historical selected information from ROC's
statements of cash flows for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
---------------- -------------
1996 1997 1997 1998
------ ------- ----- -----
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C>
Net cash provided by (used in) operating activities... $1,232 $ 1,060 $ 37 $ 206
Net cash provided by (used in) investing activities... (48) (30) (4) (4)
Net cash provided by (used in) financing activities... (430) (1,416) (305) (270)
------ ------- ----- -----
Net increase (decrease) in cash and cash
equivalents......................................... $ 754 $ (386) $(272) $ (68)
====== ======= ===== =====
</TABLE>
Cash Flows
Total cash and cash equivalents at March 31, 1998 were $2.1 million.
For the two years ended December 31, 1997, the ROC dealerships generated
$2.2 million in cash flow from net income plus depreciation and amortization.
Net cash flow from operating activities decreased from 1996 to 1997 by $173,000.
This decrease is due primarily to higher inventory levels offset in part by
higher earnings and higher borrowings under the floorplan arrangement.
Net cash flow from operating activities for the three months ended March
31, 1998 exceeded that of three months ended March 31, 1997 by $169,000 due to
higher earnings and higher floorplan borrowings.
The change in net cash used in investing activities for the two years ended
December 31, 1997 was primarily attributable to capital expenditures for service
equipment, expanded used vehicle facilities and renovations to the principal
showroom facility.
The change in net cash related to financing activities was primarily
attributable to fluctuations in the amounts paid out as dividends consistent
with S-Corporation ownership.
Floorplan Financing
The ROC dealership currently obtains floorplan financing for vehicle
inventory primarily through GMAC. As of March 31, 1998, ROC had approximately
$2.6 million of outstanding floorplan financing. The debt bears interest at a
rate calculated using a formula based on the prime rate (ranging from 8.25% to
8.5% at December 31, 1997) and is subject to a rebate based on annual amounts of
principal outstanding. Interest expense on floorplan notes payable, before
manufacturer interest assistance, totaled approximately $199,000 and $261,000
for the years ended December 31, 1996 and 1997, respectively. Manufacturers'
interest assistance, which is recorded as a reduction to interest expense,
amounted to $155,000 and $194,000 for the years ended December 31, 1996 and
1997, respectively.
Leases
The ROC dealership leases its land and real estate facilities under a
long-term operating lease from Mr. Robertson at rates and terms which were
negotiated at arm's-length and management believes approximate those that would
result from negotiations with an unrelated third party. The lease expires in
March 2005, contains renewal options and is non-cancelable.
64
<PAGE> 66
SOUTH FINANCIAL CORPORATION
Results of Operations
South Financial is engaged in the purchase and servicing of installment
contract receivables from selected automotive dealers in three southeastern
states. The receivables are collateralized by security interests in the financed
automobiles and are due from individuals who are generally considered sub-prime
credit risks. South Financial's loan portfolio contains loans which were made
both with recourse to the originating dealership (30%) and without recourse
(70%) and have terms not exceeding 48 months. The business was founded in 1989
and was sold to the Company in January 1998. Mr. Glynn Wimberly, who has 24
years of relevant experience in this industry, serves as the chief executive
officer of South Financial.
Revenues are realized for interest income, fees, loan discount income and
credit life insurance commissions. Operating funds are obtained under a
revolving credit agreement with a commercial lender.
The following table sets forth selected financial data and such data as a
percentage of total revenues for South Financial for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1995 1996 1997
---------------- ---------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
New vehicle sales............................ $ -- --% $ -- --% $ -- --%
Used vehicle sales........................... -- -- -- -- -- --
Parts and service sales...................... -- -- -- -- -- --
Other revenues, net.......................... 3,187 100.0 5,723 100.0 4,743 100.0
------ ----- ------ ----- ------- -----
Total revenues....................... $3,187 100.0% $5,723 100.0% $ 4,743 100.0%
Cost of sales.................................. $ -- --% $ -- --% $ -- --%
------ ----- ------ ----- ------- -----
Gross profit................................... 3,187 100.0 5,723 100.0 4,743 100.0
Selling, general and administrative expenses... 1,780 55.9 3,566 62.3 3,704 78.1
------ ----- ------ ----- ------- -----
Income from operations......................... 1,407 44.1 2,157 37.7 1,039 21.9
Other income and expense:
Interest expense............................. 978 30.7 1,416 24.7 1,420 29.9
Other income (expense)....................... -- -- -- -- -- --
------ ----- ------ ----- ------- -----
Income (loss) before income taxes.............. 429 13.5 741 12.9 (381) (8.0)
Income tax (expense) benefit................... (150) (4.7) (307) (5.4) 139 2.9
------ ----- ------ ----- ------- -----
Net income (loss).............................. $ 279 8.8% $ 434 7.6% $ (242) (5.1)%
====== ====== =======
</TABLE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenues. Total revenues decreased by $1.0 million, or 17.1%, from $5.7
million for the year ended December 31, 1996 to $4.7 million for the year ended
December 31, 1997. This decrease was primarily attributable to the introduction
of a dealer program in February 1997 involving smaller advance rates and the
elimination of recourse obligation by the dealers. This program resulted in a
22% decline in the outstanding loan balance and a smaller average loan balance
(from $5,606 at December 31, 1996 to $5,230 at December 31, 1997) and an
approximate 4% drop in the number of contracts being serviced (from 4,100 at
December 31, 1996 to 3,940 at December 31, 1997).
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $138,000, or 3.9%, from $3.6 million for the
year ended December 31, 1996 to $3.7 million for the year ended December 31,
1997. This increase was primarily due to a provision for credit losses in 1997
stemming from the elimination of recourse liability from dealers from whom the
contracts were purchased offset in part by savings generated by office and
personnel realignments.
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<PAGE> 67
Interest Expense. Interest expense increased by a nominal amount, or 0.3%,
from $1.4 million for the year ended December 31, 1996 to $1.4 million for the
year ended December 31, 1997. This minor increase reflects the consistent level
of borrowing outstanding under the revolving credit agreement.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenues. Total revenues increased by $2.5 million, or 79.6%, from $3.2
million for the year ended December 31, 1995 to $5.7 million for the year ended
December 31, 1996. This increase was primarily attributable to the expansion of
the business into new markets (North Carolina and Tennessee) made possible by
obtaining the revolving credit facility in June 1994, and the increase in
borrowings available under the facility in August 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.8 million, or 100.3%, from $1.8 million or
the year ended December 31, 1995 to $3.6 million for the year ended December 31,
1996. This increase was primarily due to added field offices, establishing a
centralized underwriting function and additional rent charges associated with an
expanded data and accounting system.
Interest Expense. Interest expense increased $438,000, or 44.8%, from $1.0
million for the year ended December 31, 1995 to $1.4 million for the year ended
December 31, 1996. This increase was attributable to an increase in the
principal amount outstanding under the revolving credit agreement from $8.2
million at December 31, 1995 to $11.6 million at December 31, 1996.
Liquidity and Capital Resources
The Company considers liquidity to be its ability to meet its long- and
short-term cash requirements. South Financial's principal sources of liquidity
are cash on hand, cash from operations and a revolving credit facility with
General Electric Credit Corporation. The revolving credit facility has a maximum
borrowing capacity of $15 million with advances permitted under formulas based
on percentages of eligible collateral.
The following table sets forth historical selected information from South
Financial's statements of cash flows for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by (used in) operating activities....... $ 1,909 $ 1,155 $(1,785)
Net cash provided by (used in) investing activities....... (7,819) (4,858) 2,353
Net cash provided by (used in) financing activities....... 5,955 3,643 (508)
------- ------- -------
Net increase (decrease) in cash and cash equivalents...... $ 45 $ (60) $ 60
======= ======= =======
</TABLE>
Cash Flows
Total cash and cash equivalents at December 31, 1997 amounted to $64,000.
Unused availability at that date under the revolving credit facility amounted to
$780,000.
For the three years ended December 31, 1997, the South Financial generated
$1.9 million in cash flow from net income plus depreciation and provision for
credit losses. Net cash flow from operating activities declined during this
three-year period from $1.9 million in 1995 to ($1.8 million) in 1997. The
decline is due primarily to the decrease in net earnings and the reduction in
the amount owed to dealers for contractual obligations. The amount owed dealers
for contractual obligations decreased due to the introduction of dealer programs
that do not have a recourse obligation.
The change in net cash used in investing activities for the three years
ended December 31, 1997 aggregated $10.3 million and ranged from a use of cash
of $7.8 million in 1995 to a source of cash amounting to $2.4 million in 1997.
The primary factors affecting this area are disbursements to vehicle dealerships
for originating contracts and principal payments received from borrowers. The
1997 dealer programs have resulted in a smaller average disbursement per loan
generated. Disbursements for capital expenditures have been minor.
66
<PAGE> 68
The change in net cash related to financing activities was primarily
attributable to activity under the revolving credit facility. The aggregate
amount advanced under the facility for the three years ended December 31, 1997
amounted to $8.6 million and ranged from a net borrowing of $5.3 million in 1995
to a net repayment of $185,000 in 1997.
Credit Losses
South Financial maintains a reserve for potential credit losses ($2.0
million at December 31, 1997, or 20.7% of the outstanding principal balance as
of that date) based on pertinent factors including past experience, underlying
collateral, recourse provisions and economic conditions. South Financial staff
members and agents follow up on delinquent accounts with appropriate actions
including correspondence and repossession of the applicable collateral. South
Financial charges potential credit losses back to the originating used auto
dealership if the contracts were purchased on a recourse basis and sells
repossessed collateral at auction. Proceeds from the sale of collateral are
credited to the loss reserve.
Leases
South Financial leases its operating facilities and equipment under various
operating leases, including leases with related parties. Certain of the leases
may be renewed at the option of the lessee. All of South Financial's leases were
negotiated at arm's-length, and the Company's management believes that the terms
and conditions of all of South Financial's leases are comparable to those that
result from negotiations with unrelated third parties.
CYCLICALITY
The Company's operations, like the automotive retailing industry in
general, can be affected by a number of factors relating to general economic
conditions, including consumer business cycles, consumer confidence, economic
conditions, availability of consumer credit and interest rates. Although the
above factors, among others, can impact the Company's business, the Company
believes the impact of cyclicality on its operations will be mitigated as the
Company continues to expand its product offerings, its geographic diversity and
the number of its vehicle brands.
As of the date of this Prospectus, the United Auto Workers union has
commenced a labor action against GM which may have a materially adverse effect
on the production of GM vehicles. As a result, this strike may have a materially
adverse effect on the Company's business, financial condition and results of
operations.
EFFECTS OF INFLATION
Due to the relatively low levels of inflation in 1995, 1996 and 1997 and
the first three months of 1998, inflation did not have a significant effect on
the Company's results of operations for those periods.
NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share." This Statement
specifies the computation, presentation and disclosure requirements for earnings
per share. The Company believes that the adoption of such Statement would not
result in earnings per share materially different from pro forma earnings per
share presented in the accompanying statements of income.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
standard establishes standards of reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements. This
Statement will be effective for the Company's fiscal year ending June 30, 1998,
and the Company does not intend to adopt this statement prior to said effective
date.
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<PAGE> 69
BUSINESS
Sunbelt has no current operations other than the activities involved in
identifying potential target companies, negotiating the related acquisition
agreements and preparing for the proposed Merger and Acquisitions. Although
certain members of Sunbelt's management have significant automotive retailing
industry experience, Sunbelt has not managed the combined businesses, and the
proposed Merger and certain of the Acquisitions will not occur until the
consummation date of this Offering. Accordingly, any references herein to
"Sunbelt" or the "Company" and the activities and characteristics of the
combined entities should be read as pro forma descriptions of those activities
and characteristics following the consummation of the proposed Merger and all of
the Acquisition transactions.
OVERVIEW
Upon the consummation of the Merger and all of the Acquisitions, Sunbelt
expects to be one of the leading retailers of new and used vehicles in the
southeastern United States. The Company will operate a total of 31 dealership
franchises in Georgia, North Carolina and Tennessee and four collision repair
centers in metropolitan Atlanta, Georgia. Sunbelt will sell 20 domestic and
foreign brands of automobiles, which consist of Buick, Cadillac, Chevrolet,
Chrysler, Dodge, Ford, GMC, Honda, Hummer, Isuzu, Jeep, Kia, Mazda, Mercury,
Mitsubishi, Nissan, Oldsmobile, Plymouth, Pontiac and Toyota. In 1997, based on
pro forma retail new vehicle unit sales, the Company would have ranked 13th on
the Automotive News' listing of the 1997 top 100 dealer groups in the United
States. The Company intends to further diversify its product and service
offerings by including more brands of vehicles and by offering related finance
and insurance, replacement parts, collision repair, and other products and
services that are complementary to its core automotive retailing operations. The
Company's strategy is: (i) to become the leading operator of automotive
dealerships in small and medium-sized markets in the southeastern United States
through acquisitions of additional dealerships in these markets; and (ii) to
expand its collision center and other complementary business operations.
The Company's executive management team has extensive experience in the
automotive retailing industry and the operation of automotive dealerships in the
southeastern United States. On average, the Company's executive officers have
over 15 years of direct industry experience. Between 1992 and 1997, the
Company's dealerships won many awards from various manufacturers measuring
quality and customer satisfaction. These awards include: the Five Star Award
from Chrysler, which is given to the top 25% of Chrysler dealers in the nation;
the NACE (North American Customer Excellence) Award, Ford Motor Company's
highest overall award for customer service; the Top 100 Club, which is awarded
to Ford's top 100 retailers or 2% of Ford dealers in the nation based on retail
volume and consumer satisfaction; the Cadillac Master Dealer award, a status
achieved by 1% of Cadillac dealers nationwide; the Oldsmobile Elite Award, which
is given by Oldsmobile Motor Division to the top 10% of Oldsmobile dealers in
the nation; and the President's Circle Award for performance, which is given by
Nissan Motor Corporation to the top 10% of Nissan dealers in the nation.
INDUSTRY OVERVIEW
The automotive retailing industry, with aggregate revenues of approximately
$491.1 billion in 1996 for franchised dealers alone, is the largest retail
market in the United States. Aggregate revenues for the southeastern United
States, which is the Company's primary area of operations and is comprised of
the states of Alabama, Florida, Georgia, North Carolina, South Carolina and
Tennessee amounted to approximately $89.8 billion through franchised dealers in
1996 and accounted for approximately 18% of total franchised dealer revenues in
the United States. Nationally, between 1990 and 1996, the industry has
experienced growth in total revenues, total gross profits and income before
taxes. From 1990 to 1996, for franchised dealers alone, total revenues increased
53.5% from $320.0 billion in 1990 to $491.1 billion in 1996, total gross profits
increased 33.3% from $46.9 billion in 1990 to $62.5 billion in 1996, and income
before taxes increased 131.3% from $3.2 billion in 1990 to $7.4 billion in 1996.
The industry has been experiencing a consolidation trend which has seen the
number of franchised dealerships in the United States decline from approximately
36,000 in 1960 to 22,750 in 1996. Despite the
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trend toward consolidation in the industry, fragmentation is still a defining
characteristic of the industry, with the largest 100 franchised dealership
groups generating less than 10% of 1996 total franchised dealership revenue and
controlling less than 5% of all franchised automotive dealerships in 1996.
However, as a result of the increasing capital requirements necessary to operate
an automotive dealership, the management succession planning concerns of many
current dealers, the desire of manufacturers to strengthen their dealer networks
through consolidation and other economic and industry factors, the Company
expects a further consolidation of the automotive retailing industry.
In 1997, based on pro forma retail new vehicle unit sales, the Company
would have ranked 13th on the Automotive News' listing of the 1997 top 100
dealer groups in the United States.
BUSINESS STRATEGY
Sunbelt intends to establish itself as the leading operator of automotive
dealerships in small and medium-sized markets in the southeastern United States
through acquisitions of additional dealerships in these markets. The Company
believes that its diverse portfolio of brands and dealerships in several of
these markets and its experienced management teams will give it a competitive
advantage in achieving this goal.
Operating Strategy
The Company intends to pursue an operating strategy based on the following
key elements:
- Offer a Diverse Range of Automotive Products and Services. The Company
will offer a diverse 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
programs. The Company believes that its brand and product diversity will
enable the Company to satisfy a variety of customers, reduce dependence
on any one manufacturer and reduce exposure to supply problems and
product cycles. The Company believes that its variety of complementary
products and services will allow the Company to generate incremental
revenue that will result in higher profitability and less cyclicality for
the Company than if it was solely dependent on automobile sales.
- Institute Divisional Organization by Manufacturer. The Company intends
to institute a corporate organizational form which the Company believes
will differentiate it from most other automotive retailing companies. The
Company intends to organize its dealerships and dealership groups by
manufacturer, so that all dealerships which carry a particular
manufacturer's brands would be grouped together in a single division.
Each division, in turn, would be headed by a member of corporate
management who has extensive working experience with the applicable
manufacturer. The Company initially intends to implement this
organizational structure only for its Ford and Mercury dealerships. Once
the Company owns an appropriate number of dealerships affiliated with a
single manufacturer and the Company has achieved an appropriate sales
volume with respect to such manufacturer's vehicles, the Company intends
to implement said organizational structure for such dealerships. The
Company believes that such a corporate structure does not require any
manufacturer's approval and will not impact any other dealership
requirements imposed by manufacturers. The Company believes that
organizing its dealerships by manufacturer and having each division
headed by a senior manager who is experienced with that particular
manufacturer -- and has established and maintained long-standing business
relationships with the regional and corporate managers of that
manufacturer -- will yield numerous benefits to the Company. For example,
the Company's relationships with each manufacturer will be enhanced;
management training within each division will be more efficient and
consistent; and managers within each division will benefit from a shared
experience base. The Company believes that these benefits will provide a
competitive advantage to the Company.
- Decentralize Marketing Strategies; Achieve High Levels of Customer
Satisfaction; Utilize Incentive-Based Compensation Programs. The Company
believes that many customers purchase automotive vehicles based on an
established long-term business relationship with a particular dealership.
Therefore, the Company intends to empower its experienced local
management -- who have a better in-depth knowledge of local customer
needs and preferences -- to establish marketing, advertising and
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other policies that foster these long-term relationships and result in superior
customer service. The Company's strategy emphasizes the retention of the local
management of acquired dealerships, which the Company believes will help make it
an attractive acquiror of other dealerships. The Company also intends to
create incentives for entrepreneurial management teams at the dealer level
through the use of stock options and other programs in order to align
local management's interests with those of the Company's shareholders. In
order to keep local management focused on customer satisfaction, the
Company also intends to include certain CSI results as a component of its
incentive compensation program. The Company believes that this is
important because some manufacturers offer specific performance
incentives, on a per vehicle basis, if certain CSI levels (which vary by
manufacturer) are achieved by a dealer.
- Centralize Administrative Functions. The Company believes that
consolidation of certain dealership functions and requirements will
result in significant cost savings. The Company intends to consolidate
the floorplan financing of all of its dealerships, which the Company
anticipates will result in a reduced interest rate on such financing.
Specifically, the Company estimates that this rate will be approximately
50 to 75 basis points below the Company's current annual floorplan rates,
and expects that this lower rate will result in annual cost savings of
$750,000 to $1 million. The Company is also negotiating a consolidated
revolving credit facility that it anticipates will result in a reduced
interest rate on such facility. Furthermore, the Company expects that
significant cost savings will be achieved through the consolidation of
administrative functions such as risk management, employee benefits and
employee training.
Growth Strategy
The Company plans to continue to grow its business using a strategy
comprised of the following principal elements:
- Acquire Dealerships. The Company's goal is to become the leading
operator of automotive dealerships in small and medium-sized markets in
the southeastern United States through acquisitions of additional
dealerships in these markets. The Company plans to pursue acquisitions in
markets where it does not currently own dealerships, as well as in areas
which are contiguous to its existing dealership markets. The Company
intends to focus on acquiring both dealer groups with multiple franchises
in a given market area and dealers with a single franchise which possess
significant market shares. Generally, the Company will seek to retain the
acquired dealerships' operational and financial management, and thereby
benefit from their market knowledge, name recognition and local
reputation.
- Expand Complementary Products and Services. The Company intends to
pursue opportunities that it expects will result in additional revenue
and higher profitability through the sale of products and services which
complement its dealership operations. Examples of such opportunities
include the following:
Collision Repair Centers. The Company owns four collision repair
facilities operated under the name Collision Centers USA, which serve
the Jonesboro, Duluth, Stockbridge and Marietta, Georgia markets. The
Company expects to expand this business by increasing volumes at
these four centers, developing new centers and acquiring new existing
centers. The Company's collision repair business provides higher
margins than its core automotive retailing operations and is
generally not significantly affected by economic cycles or consumer
spending habits.
Finance and Insurance. The Company offers its customers a wide range
of financing and leasing alternatives for the purchase of vehicles,
as well as credit life, accident and health and disability insurance
and extended service contracts. The Company has entered into an
agreement with a leading insurance carrier to share in certain
revenues generated by the sale of extended warranty contracts. In
addition, in January 1998, the Company acquired South Financial,
which has been primarily engaged in the sub-prime automotive lending
business for
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the past eight years. The Company expects its dealer network to
provide additional loan business opportunities to South Financial.
DEALERSHIP OPERATIONS
The Company has established a management structure that promotes and
rewards entrepreneurial spirit, individual pride and responsibility and the
achievement of team goals. Each dealership's general manager is ultimately
responsible for the operation, personnel and financial performance of the
dealership. The general manager ("Executive Manager") is typically complemented
with a management team consisting of a new vehicle sales manager, used vehicle
sales manager, service and parts manager and finance manager. Each dealership is
operated as a distinct profit center in which the Executive Manager is given a
high degree of operating autonomy. A controller who is dedicated to each
dealership provides financial oversight and control. The Company believes that
the Executive Manager and the other members of the dealership management team,
who in many cases are long-time members of their local communities, are best
able to judge how to conduct day-to-day operations based on the team's
experience in and familiarity with its local market.
The Vice Presidents of each manufacturer Division of the Company (the
"Division VP"), who report to the Company's Chief Operating Officer, support and
oversee the Executive Managers. All Executive Managers will report to the
Company's Division VP on a regular basis and prepare a comprehensive monthly
financial and operating statement of their dealership. In addition, the Division
VPs will meet on a monthly basis with their Executive Managers to address
changing customer preferences and operational concerns and to share best
practices. The Company initially intends to implement this organizational
structure only for its Ford and Mercury dealerships. Once the Company owns an
appropriate number of dealerships affiliated with a single manufacturer and the
Company has achieved an appropriate sales volume with respect to such
manufacturer's vehicles, the Company intends to implement said organizational
structure for such dealerships.
NEW VEHICLE SALES
The Company sells 20 domestic and foreign brands of economy, family, sports
and luxury cars and light trucks and sport utility vehicles. The Company intends
to pursue an acquisition strategy that will continue to enhance its brand
diversity. The following table sets forth for the year ended June 30, 1997 and
the nine months ended March 31, 1998, certain pro forma combined information
relating to the brands of new vehicles sold by the Company:
<TABLE>
<CAPTION>
NEW VEHICLE SALES BY MANUFACTURER
- ---------------------------------------------------------------------------------------------
YEAR ENDED NINE MONTHS ENDED
JUNE 30, 1997 MARCH 31, 1998
--------------------- ---------------------
MANUFACTURER SALES % OF SALES SALES % OF SALES
- ------------ -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Ford(1)....................................... $201,508 48.0% $159,741 50.6%
General Motors(2)............................. 97,973 23.3 77,834 24.7
Nissan........................................ 44,261 10.5 21,043 6.7
Toyota........................................ 17,473 4.2 12,384 3.9
Mitsubishi.................................... 11,013 2.6 8,386 2.6
Mazda......................................... 10,469 2.5 7,628 2.4
Isuzu......................................... 9,434 2.2 7,362 2.3
Chrysler/Dodge/Plymouth....................... 8,717 2.1 6,246 2.0
Kia........................................... 7,040 1.7 5,045 1.6
Honda......................................... 6,105 1.5 4,728 1.5
Jeep/Eagle.................................... 3,353 0.8 2,402 0.8
Hummer........................................ 2,673 0.6 2,898 0.9
-------- ----- -------- -----
$420,019 100.0% $315,697 100.0%
======== ===== ======== =====
</TABLE>
- ---------------
(1) Ford includes both the Ford division and the Mercury division.
(2) General Motors includes the divisions of Buick, Cadillac, Chevrolet, GMC,
Oldsmobile and Pontiac.
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The Company's new vehicle sales include traditional new vehicle retail
sales and retail lease transactions which are arranged by the Company. New
vehicle leases generally have short terms, which bring the consumers back to the
market sooner than if the vehicles were purchased. In addition, leases can
provide the Company with a steady source of late-model, off-lease vehicles for
its used vehicle inventory. Generally, leased vehicles remain under factory
warranty for the term of the lease, which allows the Company to provide repair
service to the lessee throughout the lease term.
The Company seeks to provide customer-oriented service designed to
establish lasting relationships that will result in repeat and referral
business. For example, the Company's dealerships strive to: (i) employ more
efficient selling approaches; (ii) utilize computer technology that decreases
the time necessary to purchase a vehicle; (iii) engage in extensive follow-up
after a sale in order to develop long-term relationships with customers; and
(iv) train their sales staffs to be able to meet the needs of the customers. The
Company continually evaluates ways to improve the buying experience for its
customers and believes that its ability to share best practices among its
dealerships gives it an advantage over smaller dealership group.
The Company acquires substantially all its new vehicle inventory from
manufacturers. Manufacturers' allocations of new vehicle units are based upon
"turn and earn" calculations by the manufacturers. Although the bases for such
calculations are not disclosed to the Company, the Company believes that factors
considered by the manufacturers for such calculations include the applicable
dealership's unit sales volumes in prior months. The Company finances its
inventory purchases through revolving credit arrangements known in the industry
as floorplan facilities.
The following table presents combined pro forma information with respect to
the Company's new vehicle sales for the years ended June 30, 1995, 1996 and
1997, and the nine months ended March 31, 1997 and 1998, respectively.
<TABLE>
<CAPTION>
PRO FORMA COMPANY'S USED VEHICLE DATA
--------------------------------------------------------
NINE MONTHS
YEAR ENDED JUNE 30, ENDED MARCH 31,
New Vehicle Data -------------------------------- --------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Retail unit sales................... 19,493 21,694 20,499 14,851 14,583
Retail sales........................ $357,221 $403,877 $420,019 $306,737 $315,697
Gross profit........................ $ 18,763 $ 19,880 $ 21,017 $ 15,623 $ 15,658
Gross margin........................ 5.3% 4.9% 5.0% 5.1% 5.0%
Average gross profit per retail unit
sold.............................. $ 963 $ 916 $ 1,025 $ 1,052 $ 1,074
</TABLE>
USED VEHICLE SALES
The Company sells used vehicles at each of its dealerships. Consumer demand
for used vehicles has increased as prices of new vehicles have risen and as more
high quality used vehicles have become available. Furthermore, used vehicles
typically generate higher gross margins than new vehicles because of their
limited comparability and the somewhat subjective nature of their valuation. The
Company intends to continue growing its used vehicle sales operations by
maintaining a high quality inventory, providing competitive prices and extended
service contracts for its used vehicles and continuing to promote used vehicle
sales.
Profits from sales of used vehicles are dependent primarily on the ability
of the Company's dealerships to obtain a high quality supply of used vehicles
and effectively manage that inventory. The Company's new vehicle operations
provide the Company's used vehicle operations with a large supply of high
quality trade-ins and off-lease vehicles, which are the best sources of high
quality used vehicles. The Company supplements its used vehicle inventory with
used vehicles purchased at auctions.
The Company generally maintains a 60- to 90-day supply of used vehicles and
disposes of used vehicles that the Company does not retail to customers by
selling them at auctions or offering them to wholesalers. Trade-ins may be
transferred among dealerships to provide balanced inventories of used vehicles
at each of the Company's dealerships. The Company does not need manufacturers'
approvals to transfer its used vehicles
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among its dealerships. The Company believes that acquisitions of additional
dealerships will expand its internal market for transfers of used vehicles among
its dealerships and increase the ability of each of the Company's dealerships to
offer the same brand of used vehicles as it sells new and to maintain a balanced
inventory of used vehicles. The Company intends to develop integrated computer
inventory systems that will allow it to coordinate vehicle transfers among its
dealerships.
The Company believes that strengths of its franchised dealerships -- as
compared with non-franchised used-car sales outlets -- in offering used vehicles
include: (i) access to trade-ins on new vehicle purchases, which are typically
lower mileage and higher quality relative to trade-ins on used car purchases,
(ii) access to late-model, low mileage off-lease vehicles, and (iii) the
availability of manufacturer certification and extended manufacturer warranties
for the Company's higher quality used vehicles. This supply of high quality
trade-ins and off-lease vehicles reduces the Company's dependence on auction
vehicles, which are typically a higher cost source of used vehicles.
The following table represents pro forma information with respect to the
Company's used vehicle sales for the years ended June 30, 1995, 1996 and 1997,
and the nine months ended March 31, 1997 and 1998, respectively:
<TABLE>
<CAPTION>
PRO FORMA COMPANY'S USED VEHICLE DATA
------------------------------------------------------
NINE MONTHS
YEAR ENDED JUNE 30, ENDED MARCH 31,
Used Vehicle Data -------------------------------- ------------------
1995 1996 1997 1997 1998
-------- -------- -------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Retail unit sales..................... 9,073 10,205 9,913 7,392 7,134
Retail sales.......................... $100,563 $122,464 $120,534 $89,217 $92,148
Gross profit.......................... $ 8,858 $ 11,281 $ 11,635 $ 8,246 $ 8,061
Gross margin.......................... 8.8% 9.2% 9.7% 9.2% 8.7%
Average gross profit per retail unit
sold................................ $ 976 $ 1,105 $ 1,174 $ 1,115 $ 1,130
Wholesale unit sales.................. 8,033 8,665 9,442 7,117 5,642
Wholesale sales....................... $ 42,238 $ 44,512 $ 57,391 $42,881 $34,978
Gross profit.......................... $ 1,638 $ 1,057 $ 1,554 $ 690 $ 590
Gross margin.......................... 3.9% 2.4% 2.7% 1.6% 1.7%
</TABLE>
PARTS AND SERVICE SALES
The Company provides parts and service at each of its dealerships primarily
for the vehicle makes sold by its dealerships. The Company provides maintenance
and repair services at each of its dealerships and collision repair centers. The
Company performs both warranty and customer-paid service work.
Historically, the automotive repair industry has been highly fragmented.
However, the Company believes that the increased use of advanced technology in
vehicles has made it more difficult for independent repair shops to retain the
expertise to perform major or technical repairs. Additionally, manufacturers
permit warranty work to be performed only at dealerships. Hence, unlike
independent service stations, or independent and superstore used car dealerships
with service operations, the Company's dealerships are qualified to perform work
covered by manufacturer warranties. Given the increasing technological
complexity of motor vehicles and the trend toward extended manufacturer and
dealer warranty periods for new vehicles, the Company believes that an
increasing percentage of repair work will be performed at dealerships.
The Company seeks to retain each purchaser of a vehicle as a customer of
the Company's service and parts departments. The Company's dealerships have
systems in place that track their customers' maintenance records and notify
owners of vehicles purchased at the dealerships when their vehicles are due for
periodic services. The Company regards its service and repair activities as an
integral part of its overall approach to customer service, providing an
opportunity to foster ongoing relationships with the Company's customers and
deepen customer loyalty.
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The dealerships' parts departments support their respective sales and
service divisions. Each of the Company's dealerships sells factory-approved
parts for vehicle makes and models sold by that dealership. These parts are
either used in repairs made by the dealerships or sold at retail to its
customers or at wholesale to independent repair shops and/or other franchised
dealerships. Currently, each of the Company's dealerships employs its own parts
manager and independently controls its parts inventory and sales.
The following table sets forth information regarding the Company's parts
and service sales for the years ended June 30, 1995, 1996 and 1997, and the nine
months ended March 31, 1997 and 1998, respectively:
<TABLE>
<CAPTION>
PRO FORMA COMPANY'S PARTS AND SERVICE DATA
---------------------------------------------------
NINE MONTHS
YEAR ENDED JUNE 30, ENDED MARCH 31,
Parts and Service Data ----------------------------- ------------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales.................................... $53,625 $61,682 $66,602 $48,884 $50,159
Gross profit............................. $21,310 $26,786 $25,297 $19,213 $19,781
Gross margin............................. 39.7% 43.4% 38.0% 39.3% 39.4%
</TABLE>
COLLISION REPAIR
The Company operates four standalone collision repair centers under the
service mark "Collision Centers USA." The Company began operating the first of
these centers in September 1996 and acquired three additional centers in
November 1997 as part of the Collision Centers USA Acquisition. The Company
believes that the primary source of Collision Centers USA's customers will be
the automobile insurance companies which have entered into direct repair
programs with Collision Centers USA. As of March 31, 1998, Collision Centers USA
had entered into arrangements with seven insurance companies to participate in
their various direct repair programs. In general, these arrangements provide
procedures and guidelines for handling claims, providing estimates and
completing certain paperwork for the individual insurance company, as well as
hourly labor rates for mechanical, body repair, refinishing and painting, and
markups and discounts for used and new parts. The Company believes that these
insurance companies -- by virtue of the customers they refer to Collision
Centers USA -- will be the primary source of the Company's collision repair
center business, and that its ongoing relationship with these insurance
companies will help ensure a continuous and increasing source of customers for
Collision Centers USA. The Company believes that its collision repair business
will provide favorable margins and will not be significantly affected by
business cycles or consumer preferences. The Company also believes that its
development and operation of collision repair centers will provide incremental
parts business to its dealerships. For the three-year period ended June 30,
1997, and the nine months ended March 31, 1998, Collision Centers USA's revenues
have accounted for less than one percent of the total combined pro forma
revenues of the Company.
FINANCE AND INSURANCE
The Company will offer 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 credit life, accident and health and disability
insurance to cover the financing cost of their vehicles, as well as warranty or
extended service contracts. The Company's pro forma revenue from financing,
insurance and extended warranty transactions was $17.4 million for the year
ended June 30, 1997 and $13.5 million for the nine months ended March 31, 1998.
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. Each dealership will then
be able to provide a
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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.
In January 1998, the Company acquired a sub-prime automotive finance
company, South Financial, a Florida corporation with offices in Florida,
Tennessee and North Carolina. The Company expects that its dealership network
will provide South Financial with a steady source of loan business opportunities
and that South Financial will provide each of the Company's dealerships an
ongoing sub-prime financing source.
The following tables set forth information regarding South Financial's
operations:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------- AS OF MARCH 31,
1996 1997 1998
--------- --------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Principal balance of outstanding loans............. $17,141 $14,883 $15,821
Number of outstanding loans........................ 4,100 3,940 3,854
Periods of delinquency:
31 to 60 days.................................... 5.5% 5.6% 3.7%
61 days or more.................................. 4.3% 3.1% 2.0%
------- ------- -------
Total delinquencies as a percentage of the current
principal balance of outstanding loans(1)........ 9.8% 8.7% 5.7%
======= ======= =======
</TABLE>
- ---------------
(1) The portfolio balance in 1996 was on a full recourse basis. Starting in
February 1997 all loans were purchased on a non-recourse basis.
<TABLE>
<CAPTION>
FOR THE THREE
FOR THE YEAR ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------- ---------------
1996 1997 1997 1998
-------- -------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Number of loans purchased................................ 3,982 4,122 636 761
Principal balance of loans purchased..................... $19,910 $22,671 $3,218 $5,212
Average principal balance of loans purchased............. $ 5.0 $ 5.5 $ 5.1 $ 5.5
Average portfolio yield.................................. 29.9% 28.1% 27.5% 27.9%
Average cost of funds.................................... 11.5% 10.7% 10.6% 11.0%
</TABLE>
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 manufacturers, and on used vehicles, such contracts supplement any
remaining manufacturer warranty or serve as the primary service contract on the
vehicle. The Company has recently entered into an agreement with a leading
insurance carrier to share in certain revenues generated by the sale of extended
warranty contracts. The extended service contracts sold by the Company, in the
aggregate, accounted for less than one percent of the Company's total pro forma
combined revenues for the three-year period ended June 30, 1997 and for the nine
months ended March 31, 1998. 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.
SALES AND MARKETING
The Company's marketing and advertising activities vary among its
dealerships and among its markets. The Company advertises primarily through
newspapers, radio, television and direct mail and regularly conducts special
promotions designed to focus vehicle buyers on its product offerings. The
Company intends to continue tailoring its marketing efforts to the relevant
marketplace in order to reach the Company's targeted customer base. The Company
also employs computer technology to aid salespeople in identifying potential new
customers. Under arrangements with each of the manufacturers, the Company
receives a subsidy for a portion of its advertising expenses incurred in
connection with a manufacturer's vehicles. Because of the Company's leading
market presence in certain markets, the Company believes it has been able to
realize cost
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savings on its advertising expenses due to volume discounts and other
concessions from media, and the Company expects such cost savings to continue in
the future.
RELATIONSHIPS WITH MANUFACTURERS
Each of the Company's dealerships operates under a separate Franchise
Agreement which governs the relationship between the dealership and the
manufacturer. In general, each Franchise 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 Franchise Agreement typically 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 Franchise 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 Franchise 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 Franchise Agreement. In connection with the
Offering, the Company is amending its Franchise Agreements which would have
prohibited the Company from selling its common stock to the public. See
"Description of Capital Stock -- Georgia Law, Certain Articles and Bylaw
Provisions and Certain Franchise Agreement Provisions."
Most automobile manufacturers are still developing their policies regarding
public ownership of dealerships. Based upon the Company's own dealings with
various automobile manufacturers during the 18-month period preceding this
Offering, and in light of the actions of several automobile manufacturers during
the two-year period preceding this Offering with respect to public ownership
issues, 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 further 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 -- Dependence on Automobile Manufacturers," "Risk Factors --
Manufacturers' Restrictions on the Merger, the Acquisitions and Future
Acquisitions," "Risk Factors -- Stock Ownership/Issuance Limits; Limitation on
Ability to Issue Additional Equity" and "Risk Factors -- Anti-Takeover
Provisions."
Ford's present public company policy requires public companies to deliver
to Ford all Commission filings made by the public company or third-parties with
respect to the public company, including Schedules 13D and 13G. If any such
filing shows that (a) any person or entity would acquire 50% or more of the
public company's voting securities, (b) any person or entity that owns or
controls 50% or more of the Company's voting securities (or other securities
convertible into such voting securities) intends or may intend to acquire
additional voting securities of the public company, (c) an extraordinary
corporate transaction, such as a merger or liquidation, involving the public
company or any of its subsidiaries is anticipated, (d) a material asset sale
involving the public company or any of its subsidiaries is anticipated, (e) a
change in the public company's Board of Directors or management is planned or
has occurred, or (f) any other material change in the public company's business
or corporate structure is planned or has occurred, then the public company must
give Ford notice of such event. If Ford reasonably determines that such an event
would have a material adverse effect on its reputation in the marketplace or is
otherwise not in its interest, Ford's policy may require the public company to
sell or resign from one or more of its Ford franchises. Should the public
company or any of its Ford franchisee subsidiaries enter into an agreement to
transfer the assets of a Ford franchisee subsidiary to a third party, the right
of first refusal described in the Ford Franchise Agreement may apply.
The following sets forth some additional provisions of Ford's present
announced public company policy: (a) each dealership must be owned by a separate
company that meets Ford's capitalization guidelines; (b) the
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day-to-day management control is to be delegated to the General Manager of each
dealership, whose appointment is subject to Ford's prior written approval; (c)
certain compensation plans must be implemented at each dealership; (d) each
dealership must meet reasonable performance criteria; (e) should a dealership
fail to maintain for a twelve month period substantially the same level of CSI
as the CSI reported for that dealership as of the date of its acquisition, the
parent company shall not apply for another Ford authorized dealership until such
time as the CSI level is restored to Ford's reasonable satisfaction; (f) the
parent company may not acquire more than two Ford and two Lincoln Mercury
dealerships within any single twelve month period; (g) unless otherwise agreed
by Ford, the parent company shall not apply for a Ford authorized dealership if,
once owning such dealership, the parent company would own or control the lesser
of (i) 15 Ford and 15 Lincoln Mercury Dealerships or (ii) that number of Ford
authorized dealerships with total retail sales in the preceding calendar year of
more than 2% of the total Ford and Lincoln Mercury branded vehicles sold at
retail in the United States; (h) in no event, however, shall the parent company
apply for a Ford authorized dealership in any market area that would result in
the parent company owning or controlling more than one Ford authorized
dealership in those market areas having three or less such dealerships or with
the parent company owning or controlling more than 25% of the Ford authorized
dealerships in market areas have four or more such dealerships; (i) the
preceding limitations shall apply separately to Ford and Lincoln Mercury
dealerships; (j) should the preceding limits be reached, Ford will consider
extending the limitations; and (k) each dealership shall operate as an exclusive
fully-dedicated Ford and/or Mercury and/or Lincoln dealership.
In addition to these general policies, Ford has specifically indicated to
the Company that as a condition to Ford's approval of the Offering, the Merger
and the Acquisitions, Ford will require the Company to relocate its existing
Duluth, Georgia Ford dealership and potentially construct a new Ford dealership
facility at the new Duluth location. Ford has also indicated that said Duluth
dealership will operate pursuant to a "Term Agreement" for a period of no less
than 24 months. Such a "Term Agreement" allows Ford to terminate the Company's
Duluth Ford Franchise Agreement at the end of said 24-month term if the
Company's Duluth Ford dealership does not meet certain sales quotas, market
penetration and CSI performance goals.
Under the general terms of GM's public company agreement, the public
company must deliver to GM copies of all Schedules 13D and 13G, and all
amendments thereto and terminations thereof, received by the public company,
within five days of receipt of such Schedules. If the public company is aware of
any ownership of its stock that should have been reported to it on Schedule 13D
but that is not reported in a timely manner, it will promptly give GM written
notice of such ownership, with any relevant information about the owner that the
public company possesses.
The general terms of GM's public company agreement further provide that if
the public company, through its Board of Directors or through shareholder
action, proposes or if any person, entity or group sends the public company a
Schedule 13D, or any amendments thereto, disclosing (a) an agreement to acquire
or the acquisition of aggregate ownership of more than 20% of the voting stock
of the public company and (b) the public company, through its Board of Directors
or through shareholder action, proposes or if any plans or proposals which
relate to or would result in the following: (i) the acquisition by any person of
more than 20% of the voting stock of the public company other than for the
purposes of ordinary passive investment; (ii) an extraordinary corporate
transaction, such as a material merger, reorganization or liquidation, involving
the public company or a sale or transfer of a material amount of assets of the
public company and its subsidiaries; (iii) any change which, together with any
changes made to the Board of Directors within the preceding year, would result
in a change in control of the then current Board of the public company; or (iv)
in the case of an entity that produces motor vehicles or controls or is
controlled by or is under common control with an entity that either produces
motor vehicles or is a motor vehicle franchisor, the acquisition by any person,
entity or group of more than 20% of the voting stock of the public company and
any proposal by any such person, entity or group, through the public company
Board of Directors or shareholders action, to change the Board of Directors of
the public company, then, if such actions in GM's business judgment could have a
material or adverse effect on its image or reputation in the GM dealerships
operated by the public company or be materially incompatible with GM's interests
(and upon notice of GM's reasons for such judgment), the
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<PAGE> 79
public company may be required to take one of the remedial actions set forth in
the next paragraph within a specified time period of receiving such Schedule 13D
or such amendment.
If the public company is obligated under GM's public company policy to take
remedial action, it may be required to transfer the dealership to GM or its
designee. Alternatively, GM or its designee may acquire the assets, properties
or business associated with any GM dealership operated by the public company at
fair market value as determined in accordance with GM's Dealership Agreement
with the public company, or provide evidence to GM that such person, entity or
group no longer has such threshold level of ownership interest in the public
company.
Should the public company or its GM franchisee subsidiary enter into an
agreement to transfer the assets of the GM franchisee subsidiary to a third
party, the right of first refusal described in the GM Dealer Agreement may apply
to any such transfer.
The following sets forth some additional provisions of GM's proposed policy
on public company ownership: (a) under the agreement each GM dealership will be
owned by a separate public company that meets GM net working capital standards;
(b) each public company will comply with GM's brand strategy and will
participate in the dealer marketing groups for its GM lines and non-GM
automotive operations will not be jointly advertised with GM operations; (c)
each public company will have complete dealership operations (sales, service,
parts, used car), and will comply with the channel strategy including divisional
alignment, locations and image requirements; (d) the dealerships will be
exclusive so that no GM sales, service or parts operations will be combined with
non-GM representation and each dealer company will relocate any non-GM lines
within one year of acquiring the dealership; (e) if a public company acquires a
dealership which is not on channel, it will bring it into compliance within 12
months, or GM may require that off-channel GM representation be discontinued in
exchange for compensation based upon an agreed upon formula; (f) GM generally
limits the number of acqusitions a single public company may consummate, and
each acquisition must be submitted to GM for prior approval; (g) there will be
an Executive Manager for each GM dealership who meets the GM requirements for a
dealer operator, except the 15% ownership requirement, and any change in the
Executive Manager must be approved by GM; (h) the public company will comply
with GM's multiple dealer investor/multiple dealer operator policies and will
not acquire more than 50% of the GM dealerships for any division (Chevrolet,
Pontiac-GMC, Oldsmobile, Buick, Cadillac) within a multiple dealer area, and in
the event a multiple dealer area has one dealer in an area that has multiple
dealers for other divisions, the public company may acquire that one dealership
as long as the total does not exceed 50% of the GM dealerships; (i)
semi-annually, GM, the public company and each dealer company will review the
dealer company's performance for sales performance, CSI and branding, and if for
two consecutive evaluation periods the dealer company is not meeting its
requirements, GM can request a change in management within six months; (j) GM
has a right of first refusal if the assets of a dealer company are to be
transferred to a third party; (k) if a dealer agreement is terminated, if
dealership operations are discontinued, if the public company discontinues GM
representation in a multiple dealer area, or if dealership assets are
transferred to GM under the remedial provisions, then GM has the right to
purchase the dealership facilities or assume the leases for the facilities, and
GM will also receive the right of quiet possession for the facilities for 10
years if this right is exercised within 10 years of the Dealer Agreement; and
(l) the public company must agree to use the GM dispute resolution process as
the exclusive source of resolution of any dispute regarding the Dealer
Agreement, the Public Ownership Agreement or acquisition of additional GM
dealerships.
Toyota's general public ownership policy provides that Toyota has the right
to approve any ownership or voting rights of the Company of 20% or greater by
any individual or entity. In addition, no single entity shall hold an ownership
interest, directly or through an affiliate, in more than: (a) the greater of one
dealership or 20% of the Toyota dealer count in a "Metro" market; (b) the lesser
of five dealerships or 5% of the Toyota dealerships in any "Toyota Region;" and
(c) seven Toyota dealerships nationally. Additional provisions of Toyota's
general public ownership policy provide: an entity may not acquire any
additional Toyota dealership within nine months of its prior acquisition of a
Toyota dealership; the public company shall not own contiguous dealerships with
common boundaries; the public company shall create a separate legal entity for
each Toyota dealership which it owns; and the public company shall provide
Toyota with copies of all information and materials filed with the Commission.
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It is the current policy of Honda to restrict any company from holding more
than seven Honda or more than three Acura franchises nationally and to restrict
the number of franchises to: (a) one Honda dealership in a "Metro" market (a
metropolitan market represented by two or more Honda dealers) with two to 10
Honda dealership points; (b) two Honda dealerships in a Metro market with 11 to
20 Honda dealership points; (c) three Honda dealerships in a Metro market with
21 or more Honda dealership points; (d) no more than 4% of the Honda dealerships
in any one of the 10 Honda geographic zones; (e) one Acura dealership in a Metro
market (a metropolitan market with two or more Acura dealership points); and (f)
two Acura dealerships in any one of the six Acura geographic zones.
While Chrysler evaluates each acquisition or appointment on an individual
basis, it has a published policy regarding multiple dealer ownership which
provides that no person or entity may hold an ownership interest in more than 10
Chrysler Motors dealerships in the United States, six dealerships in the same
Sales Zone, and two dealerships in the same market, but in no event two like
vehicle line makes in the same market. Any exception to this policy requires
Chrysler approval. Chrysler has not finalized its agreement with the Company as
of this date.
To date, Saturn has not approved any public ownership of its dealership
franchises. For this reason, the financial results of the Company's Saturn
dealership in Columbus, Georgia have not been included in this Prospectus. The
Company will use its best efforts to obtain Saturn approval; however, if Saturn
does not approve the Company's ownership of the Saturn dealership in Columbus,
Georgia, the Company will sell the Saturn dealership.
The Company's acquisition program may be limited by the automobile
manufacturers with which the Company has a Franchise Agreement. Pursuant to the
manufacturers' policies in effect as of the date of this Offering or said
manufacturers' approvals of the Acquisitions and the Merger, the Company may
acquire the following:
- A maximum of 10 Chrysler dealerships; seven Toyota dealerships; three
Lexus dealerships; seven Honda dealerships; three Acura dealerships; six
GM dealerships within the next two years (where Pontiac-Buick-GMC
dealerships count as a single dealership); and the lesser of 15 Ford and
15 Lincoln dealerships or that number of Ford and Lincoln Mercury
dealerships accounting for two percent of the preceding year's retail
sales of those brands in the United States. The Company is not aware of
any limitations on the number of dealerships it may own under the
following manufacturers' restrictions: Hummer, Isuzu, Kia, Mazda,
Mitsubishi, Nissan and Saturn.
- A maximum of the following dealerships in the Company's existing market
areas: (a) in the metropolitan Atlanta market, 25% of the Ford dealerships
in said market area; 50% of the GM dealerships in said market area; six
Chrysler dealerships in the same sales zone and two dealerships in said
market area; one Toyota dealership or 20% of Toyota dealerships in said
market area and the lesser of five Toyota dealerships or five percent of
Toyota dealerships in any Toyota region; two Lexus dealerships; two Honda
dealerships; one Acura dealership; and (b) in the non-Atlanta market, one
Ford dealership in market areas with less than three Ford dealerships; 50%
of the GM dealerships in the market area; six Chrysler dealerships in the
same sales zone and two in the same market; six Toyota dealerships in the
same sales zone and two in the same market; six Lexus dealerships in the
same sales zone and two in the same market; one Honda dealership in a
market area represented by two to 10 Honda points; and one Acura
dealership in a metropolitan market area which has two or more Acura
points and two Acura points in any one of six Acura geographic points.
- A maximum additional number of the following dealerships in the Company's
existing markets: 26 additional Ford/Mercury dealerships; no additional GM
dealerships in a two-year period, subject to GM's allowance of more than
the five GM dealership groups that the Company will own upon the
consummation of the Merger and the Acquisitions under certain
circumstances within GM's discretion; with respect to Chrysler
dealerships, nine additional dealerships in the Southeast or six
additional dealerships in the same sales zone or two additional
dealerships in the same market (less the number of Chrysler dealerships
the Company already has in such sales zone or market); six additional
Toyota dealerships; three additional Lexus dealerships; six additional
Honda dealerships; three additional
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Acura dealerships and an unknown number of additional dealerships of the
following manufacturers: Hummer, Isuzu, Kia, Mazda, Mitsubishi, Nissan and
Saturn.
The restrictions and maximum number of dealerships of each manufacturer set
forth above are based on the Company's knowledge of each applicable
manufacturer's policies existing on the date of this Prospectus. There can be no
assurance that said manufacturers will not modify or remove such restrictions in
the future, either generally or on a case-by-case basis.
Certain state statutes, including Georgia's, limit manufacturers' control
over dealerships. Georgia law provides that no manufacturer may arbitrarily
reject a proposed change of control or sale of an automobile dealership, and any
manufacturer challenging such a transfer of a dealership must provide written
reasons for its rejection to the dealer. Manufacturers bear the burden of proof
to show that any disapproval of a proposed transfer of a dealership is not
arbitrary. If a manufacturer terminates a franchise agreement due to a proposed
transfer of the dealership or for any other reason not considered to constitute
good cause under Georgia law, such termination will be ineffective. As an
alternative to rejecting or accepting a proposed transfer of a dealership or
terminating the franchise agreement, Georgia law provides that a manufacturer
may offer to purchase the dealership on the same terms and conditions offered to
the prospective transferee.
Under Tennessee law, a manufacturer may not modify, terminate or refuse to
renew a franchise agreement with a dealer except for good cause, as defined in
the governing Tennessee statutes. Further, a manufacturer may be denied a
Tennessee license, or have an existing license revoked or suspended if the
manufacturer modifies, terminates, or suspends a franchise agreement due to an
event not constituting good cause. Good cause includes material shortcomings in
the character, financial condition or business experience of the dealer. A
manufacturer's Tennessee license may also be revoked if the manufacturer
prevents or attempts to prevent the sale or transfer of the dealership by
unreasonably withholding consent to the transfer.
Under North Carolina law, notwithstanding the terms of any franchise
agreement between the manufacturer and the dealer, the manufacturer may not
prevent or refuse to approve: (i) the sale or transfer of the ownership of the
dealer by the sale of the business, stock transfer, or otherwise; (ii) the
transfer, sale or assignment of a dealer franchise; (iii) a change in the
executive management or principal operator of the dealership; or (iv) the
relocation of the dealership to another site within the dealer's relevant market
area, unless the manufacturer can show that the proposed transfer, sale,
assignment, relocation or change is unreasonable. In addition, under North
Carolina law, dealerships may challenge manufacturer's attempts to establish new
dealerships in or to relocate dealerships into the dealer's relevant market
area, and state regulators can prevent the proposed establishment or relocation
upon a finding that there is good cause for not permitting such addition or
relocation. North Carolina law limits the ability of a manufacturer to
terminate, cancel or fail to renew a franchise unless there is good cause for
such termination, cancellation or renewal and the manufacturer acted in good
faith.
COMPETITION
The automotive retailing industry in which the Company operates is highly
competitive. The industry is fragmented and characterized by a large number of
independent operators, many of whom are individuals, families and small groups.
In the sale of new vehicles, the Company principally competes with other new
automotive dealers in the same general vicinity of the Company's dealership
locations. Such competing dealerships may offer the same or different models and
makes of vehicles that the Company sells. In the sale of used vehicles, the
Company principally competes with other used automobile dealers and with new
automobile dealers that operate used automobile lots in the same general
vicinity of the Company's dealership locations. In each of its markets, the
Company competes with numerous other new automobile dealers selling other brands
and a large number of other used automobile stores. In addition, certain
regional and national car rental companies operate retail used car lots to
dispose of their used rental cars. See "Risk Factors -- Competition."
The Company also may face increased competition from certain used
automobile "superstores," such as CarMax, AutoNation USA and Driver's Mart
Worldwide Inc. Such used automobile superstores have emerged recently in various
areas of the United States and are beginning to expand nationally. Such
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"superstores" have recently opened in certain markets in which the Company
competes. In addition, the Company competes with independent leasing companies,
and, to a lesser extent, with an increasing number of automobile dealers that
sell vehicles through nontraditional methods, such as through direct mail, the
Internet or warehouse clubs.
The Company believes that the principal competitive factors in vehicle
sales are 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. In the Company's "main
street" markets, competition tends to be interbrand rather than intrabrand. This
has the effect of eliminating brand saturation within a given market. Other
competitive factors include customer preference for particular brands 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. However, as it enters other markets, the Company may face
competitors that are more established or have access to greater financial
resources. The Company, however, does not have any cost advantage in purchasing
new vehicles from manufacturers and typically relies on advertising and
merchandising, sales expertise, service reputation and location of its
dealerships to sell new vehicles.
The Company competes against other franchised dealers to perform warranty
repairs and against other automobile dealers, franchised and independent service
center chains and independent garages for customer-paid repair and routine
maintenance business. The Company competes with other automobile dealers,
service stores and auto parts retailers in its parts operations. The Company
believes that the principal competitive factors in parts and service sales are
price, the use of factory-approved replacement parts, the familiarity with a
manufacturer's brands and models and the quality of customer service. A number
of regional or national chains offer selected parts and services at prices that
may be lower than the Company's prices.
GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL MATTERS
A number of regulations affect the Company's business of marketing,
selling, financing and servicing automobiles. The Company also is subject to
laws and regulations relating to business corporations generally. Under North
Carolina, Tennessee, and Georgia law, as well as the laws of other states into
which the Company may expand, the Company must obtain a license in order to
establish, operate or relocate a dealership or operate an automotive repair
service. Under Florida law, the Company must also obtain applicable insurance
and financing-related licenses in order to operate its sub-prime finance
business. These laws also regulate the Company's conduct of business, including
its advertising and sales practices. Other states may have similar requirements.
The Company's operations are also subject to laws governing consumer
protection. Automobile dealers and manufacturers are subject to so-called "Lemon
Laws" that require a manufacturer or the dealer to replace a new vehicle or
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.
The Company's financing activities with its customers are subject to
federal truth-in-lending, consumer leasing and equal credit opportunity
regulations as well as state and local motor vehicle finance laws, installment
finance laws, usury laws and other installment sales laws. Some states regulate
finance fees that may be paid as a result of vehicle sales. State and federal
environmental regulations, including regulations governing air and water quality
and the storage and disposal of gasoline, oil and other materials, also apply to
the Company.
The Company believes that it complies in all material respects with the
laws affecting its business. Possible penalties for violation of any of these
laws include revocation of the Company's licenses and fines. In addition, many
laws may give customers a private cause of action.
As with automotive dealerships generally, and service, parts and body shop
operations in particular, the Company's business involves the use, storage,
handling and contracting for recycling or disposal of hazardous or toxic
substances or wastes, including environmentally sensitive materials such as
motor oil, waste motor oil and filters, transmission fluid, antifreeze, Freon,
waste paint and lacquer thinner, batteries, solvents, lubricants,
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degreasing agents, gasoline and diesel fuels. The Company's business also
involves the past and current operation and/or removal of aboveground and
underground storage tanks containing such substances or wastes. Accordingly, the
Company is subject to regulation by federal, state and local authorities
establishing health and environmental quality standards, and liability related
thereto, and providing penalties for violations of those standards. The Company
is also subject to laws, ordinances and regulations governing remediation of
contamination at facilities it operates or to which it sends hazardous or toxic
substances or wastes for treatment, recycling or disposal. The Company believes
that it does not have any material environmental liabilities and that compliance
with environmental laws and regulations will not, individually or in the
aggregate, have a material adverse effect on the Company's results of operations
or financial condition. Furthermore, environmental laws and regulations are
complex and subject to frequent change. There can be no assurance that
compliance with amended, new or more stringent laws or regulations, stricter
interpretations of existing laws or the future discovery of environmental
conditions will not require additional expenditures by the Company, or that such
expenditures will not be material. See "Risk Factors -- Adverse Effect of
Governmental Regulation; Environmental Regulation Compliance Costs."
FACILITIES
The Company's principal executive offices are located at 5901
Peachtree-Dunwoody Rd., Suite 250-B, Atlanta, Georgia 30328, and its telephone
number is (678) 443-8100. These executive offices are located on the premises
owned by Laing Properties, Inc. The following table identifies, for each of the
properties to be utilized by the Company's operations, the location, use and
expiration date of the Company's lease for such property:
<TABLE>
<CAPTION>
LEASE/ EXPIRATION
BUSINESS UNIT OWN LOCATION USE DATE
- ------------- ------ -------- --- ----------
<S> <C> <C> <C> <C>
Robertson Oldsmobile-Cadillac, Lease 2355 Browns Bridge Road New and used vehicle 2005
Inc......................... Gainesville, GA sales; service; F&I
Grindstaff, Inc............... Lease 2224 West Elk Avenue New vehicle sales; 2001
Elizabethton, TN service; F&I
Hones, Inc. d/b/a/ Bill Holt Lease 4910 Sylva Highway New and used vehicle 2016
Ford Mercury................ Franklin, NC sales; service; F&I
Day's Chevrolet, Inc.......... Lease 4461 S. Main St. New and used vehicle 2008
Acworth, GA sales; service; F&I
Wade Ford, Inc................ Lease 3860 South Cobb Drive New and used vehicle 2008
Smyrna, GA sale; service; F&I
Lease 3860 South Cobb Drive Fleet sales; vehicle 2005
Smyrna, GA storage
Wade Ford Buford, Inc......... Lease 4525 Highway 20 New and used vehicle Month-to-Month
Buford, GA sales; service; F&I
South Financial Corporation... Lease 3500 Blanding Blvd. Consumer Lending 2003
Jacksonville, FL Administration
Jay Automotive Group, Inc..... Lease 1661 Whittlesey Road New and used vehicle 2017
Columbus, GA sales; service; F&I
Lease Veterans Parkway New and used vehicle Month-to-Month
Columbus, GA sales; service; F&I
Lease Victory Drive Used vehicle sales; Month-to-Month
Columbus, GA F&I
Lease 1801 Box Road Used vehicle sales; 1999
Columbus, GA F&I
Boomershine Automotive Group, Lease 2150 Cobb Parkway New and used vehicle 1999
Inc......................... Smyrna, GA sales; service; F&I
Lease 3280 Commerce Ave. New and used vehicle 2003
Duluth, GA sales; service; F&I
Lease 3230 Satellite Blvd. New and used vehicle 2017
Duluth, GA sales; service; F&I
Lease 595 East Main St. New and used vehicle 2006
Cartersville, GA sales; service; F&I
Lease 964 Barrett Parkway New and used vehicle 2000
Kennesaw, GA sales; service; F&I
Lease 2970 Old Norcross Rd. Collision Center 2016
Duluth, GA
</TABLE>
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<TABLE>
<CAPTION>
LEASE/ EXPIRATION
BUSINESS UNIT OWN LOCATION USE DATE
- ------------- ------ -------- --- ----------
<S> <C> <C> <C> <C>
Collision Centers USA......... Lease 5548 Old Dixie Highway Collision Center 2009
Forest Park, GA
Lease 1715 Cobb Parkway Collision Center Month-to-Month
Marietta, GA
Lease 1110 Highway 155 South Collision Center 2012
McDonough, GA
Lease 205 Corporate Center Dr. Collision Center 2002
Sunbelt Automotive Group, Stockbridge, GA Administration
Inc......................... Lease 5901 Peachtree-Dunwoody Rd. Corporate 1999
Atlanta, GA Administration
</TABLE>
All of the properties utilized by the Company's operations are leased as
set forth in the foregoing table. The Company believes that its facilities are
adequate for its current needs. In connection with its acquisition strategy, the
Company intends to lease the real estate associated with a particular business
unit whenever practicable. Under the terms of its Franchise Agreements, the
Company must maintain an appropriate appearance and design of its facilities and
is restricted in its ability to relocate its dealerships. See "-- Relationships
with Manufacturers."
EMPLOYEES
As of March 31, 1998, pro forma for the Merger and the Acquisitions, the
Company employed 1,148 people, of whom approximately 177 were employed in
managerial positions, 347 were employed in non-managerial sales positions, 386
were employed in non-managerial parts and service positions and 238 were
employed in administrative support positions.
The following table sets forth information regarding the number of
employees employed by Sunbelt and its subsidiaries, pro forma for the Merger and
the Acquisition, as of March 31, 1998:
<TABLE>
<CAPTION>
PERCENT
BUSINESS UNIT EMPLOYEES OF SUNBELT
- ------------- --------- ----------
<S> <C> <C>
Boomershine Automotive Group, Inc........................... 478 41.6%
Day's Chevrolet, Inc........................................ 89 7.8
Grindstaff, Inc............................................. 135 11.8
Hones, Inc.................................................. 36 3.1
Jay Automotive Group, Inc................................... 178 15.5
Robertson Oldsmobile-Cadillac, Inc.......................... 35 3.0
Sunbelt Automotive Group, Inc. (Corporate).................. 11 1.0
Wade Ford, Inc. and Wade Ford Buford, Inc................... 186 16.2
----- ------
1,148 100.0%
===== ======
</TABLE>
The Company believes that many dealerships in the automotive retailing
industry have had difficulty in attracting and retaining qualified personnel for
a number of reasons, including the historical inability of dealerships to
provide employees with a liquid equity interest in the profitability of the
dealerships. The Company intends, upon completion of the Offering, to provide
certain executive officers, managers and other employees with stock options and
all employees with a stock purchase plan and believes those types of equity
incentives will be attractive to existing and prospective employees of the
Company. See "Management -- Incentive Stock Plan" and "Risk
Factors -- Dependence on Key Personnel and Limited Management and Personnel
Resources."
The Company believes that its relationship with its employees is good. None
of the Company's employees is represented by a labor union. Because of its
dependence on the manufacturers, however, the Company may be affected by labor
strikes, work slowdowns and walkouts at the manufacturers' manufacturing
facilities. See "Business -- Cyclicality" and "Risk Factors -- Dependence on
Automobile Manufacturers."
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<PAGE> 85
LEGAL PROCEEDINGS AND INSURANCE
From time to time, the Company is named in claims involving the
manufacture, servicing and/or repair of automobiles, contractual disputes and
other matters arising in the ordinary course of the Company's business.
Currently, no legal proceedings are pending against or involve the Company that,
in the opinion of management, could reasonably be expected to have a material
adverse effect on the business, financial condition or results of operations of
the Company. Because of their vehicle inventory and nature of business,
automotive dealerships generally require significant levels of insurance
covering a broad variety of risks. The Company's insurance includes an umbrella
policy as well as insurance on its buildings, comprehensive coverage for its
vehicle inventory, general liability insurance, employee dishonesty coverage and
errors and omissions insurance in connection with its vehicle sales and
financing activities.
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<PAGE> 86
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS; KEY PERSONNEL
The executive officers and Directors of the Company and certain key
employees of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
- ---- --- ----------------------------
<S> <C> <C>
Walter M. Boomershine, Jr.*.... 69 Chairman of the Board and Senior Vice President
Robert W. Gundeck*............. 55 Chief Executive Officer and Director
Charles K. Yancey*............. 59 President, Chief Operating Officer and Director
Stephen C. Whicker*............ 49 Executive Vice President of Corporate Development; General
Counsel, Secretary and Director
Ricky L. Brown*................ 45 Chief Financial Officer, Vice President of Finance and
Treasurer
Alan K. Arnold................. 42 Vice President of Ford Division and Director
George D. Busbee............... 70 Director
Lee M. Sessions, Jr. .......... 51 Director
Jack R. Altherr................ 72 Director
R. Glynn Wimberly.............. 47 Chief Executive Officer, South Financial Corporation
</TABLE>
- ---------------
* Executive Officer
WALTER M. BOOMERSHINE, JR. has been Chairman of the Board and President of
the Company since December 1997, and will continue to serve as Chairman of the
Board and Senior Vice President following the Offering. Prior to the Merger, Mr.
Boomershine was the Chairman of the Board, President and the controlling
shareholder of Boomershine Automotive. Mr. Boomershine became associated with
Boomershine Automotive in 1953 and has served in various capacities as an
employee and officer since that date. Mr. Boomershine received a Bachelor of
Science degree in industrial management from the Georgia Institute of Technology
in 1951 and received a certificate for completing the program for Management
Development at Harvard University's Graduate School of Business Administration
in 1973. Mr. Boomershine's initial term as a director of the Company will expire
at the annual meeting of the shareholders of the Company to be held in 2000.
ROBERT W. GUNDECK has been the Chief Executive Officer of the Company since
April 1998 and will continue to serve in that capacity following the Offering.
Upon the consummation of the Offering, Mr. Gundeck will also become a director
of the Company. During the five year period preceding the Offering, Mr. Gundeck
was employed by American Business Products, Inc., a publicly traded corporation,
as Chief Executive Officer and President from 1995 to 1998, Chief Operating
Officer and President from 1992 to 1995 and Vice President of Corporate
Development from 1988 to 1992. Mr. Gundeck received a Bachelor of Science degree
from Rollins College in 1965 and a Masters of Business Administration degree in
Marketing and Finance from American University in 1968. Mr. Gundeck's initial
term as a director of the Company will expire at the annual meeting of the
shareholders of the Company to be held in 2000.
CHARLES K. YANCEY served as interim Chief Executive Officer and director of
the Company from December 1997 through March 1998, and will serve as the
President, Chief Operating Officer and director of the Company following the
Offering. During the five year period preceding the Merger, Mr. Yancey served as
Chief Executive Officer, Secretary and a director of Boomershine Automotive. Mr.
Yancey received a Masters in Business Administration degree in Finance and
Accounting and a Bachelor of Arts degree in Accounting from Georgia State
University in 1970 and 1968, respectively. Mr. Yancey also has been licensed as
a certified public accountant by the State of Georgia. Mr. Yancey's initial term
as a director of the Company will expire at the annual meeting of the
shareholders of the Company to be held in 2001.
STEPHEN C. WHICKER has been Executive Vice President of Corporate
Development, General Counsel, Secretary and director of the Company since
December 1997. During the five-year period prior to
85
<PAGE> 87
the Offering, Mr. Whicker was a principal of The Whicker Law Firm, a private law
practice in Atlanta, Georgia. Mr. Whicker received a Bachelor of Science degree
in Business Administration from the University of North Carolina in 1971 and a
Juris Doctor degree from Samford University in 1974. Mr. Whicker's initial term
as a director of the Company will expire at the annual meeting of the
shareholders of the Company to be held in 2001.
RICKY L. BROWN has been Chief Financial Officer, Vice President of Finance
and Treasurer of the Company since December 1997. Prior to the Merger, Mr. Brown
served as Controller and Chief Financial Officer of Boomershine Automotive from
1996 to 1998, as Chief Financial Officer of Peachtree Nissan, Inc. (f/k/a
Hickman Nissan, Inc.) from 1990 to 1996 and as Chief Financial Officer and
part-owner of Peachtree Acceptance Corporation from 1990 to 1996. Mr. Brown
received an Associate of Applied Science degree from Gadsden State College in
1973, and a Bachelor of Science degree in Accounting from Jacksonville State
University in 1975. Mr. Brown also has been licensed as a certified public
accountant by the State of Alabama.
ALAN K. ARNOLD, who is a key employee of the Company, will serve as Vice
President of Ford Division, President of Wade Ford, Inc., Wade Ford Buford,
Inc., Boomershine Ford, Inc. and Franklin Ford/Mercury, Inc., and director of
the Company upon the consummation of the Offering. During the five year period
preceding the Offering, Mr. Arnold was the President and controlling shareholder
of Wade Ford, Inc. and Wade Ford Buford, Inc. Mr. Arnold's initial term as a
director of the Company will expire at the annual meeting of the shareholders of
the Company to be held in 1999.
GEORGE D. BUSBEE will serve as a director of the Company upon the
consummation of the Offering. Mr. Busbee has been of counsel to the law firm of
King & Spalding since January 1993 and was a partner of King & Spalding from
January 1983 to December 1993. Mr. Busbee was Governor of the State of Georgia
from 1975 until 1983. He is currently a director of Union Camp Corporation and
Weeks Corporation and served as a director of Delta Air Lines, Inc. from January
1983 to November 1997. Mr. Busbee received a Bachelor of Arts degree in Business
and a Juris Doctor degree from the University of Georgia in 1949 and 1952,
respectively. Mr. Busbee's initial term as a director of the Company will expire
at the annual meeting of the shareholders of the Company to be held in 2000.
LEE M. SESSIONS, JR. will serve as a director of the Company upon the
consummation of the Offering. Mr. Sessions was the Principal Operating Officer
of Bank South Corporation from August 1991 to March 1996. Currently, Mr.
Sessions is working as a private investor and consultant to various business and
non-profit organizations. Mr. Sessions received a Bachelor of Arts degree in
English/History from Vanderbilt University in 1968 and received a certificate
for completing the program for Management Development at Harvard University's
Graduate School of Business Administration in 1980. Mr. Session's initial term
as a director of the Company will expire at the annual meeting of the
shareholders of the Company to be held in 1999.
JACK R. ALTHERR will serve as a director of the Company upon the
consummation of the Offering. Mr. Altherr served QMS, Inc. (formerly Quality
Micro Systems, Inc.) in various graduating capacities from April 1984 to October
1995, including Chief Operating Officer/Chief Financial Officer, Executive Vice
President of Sales and Marketing and director. Mr. Altherr received a Bachelor
of Science degree in Accounting from Indiana University in 1951. Mr. Altherr
also has been licensed as a certified public accountant by the State of Indiana.
Mr. Altherr's initial term as a director of the Company will expire at the
annual meeting of the shareholders of the Company to be held in 2001.
R. GLYNN WIMBERLY, who is a key employee of the Company, became the Chief
Executive Officer of South Financial Corporation upon the consummation of the
South Financial Acquisition in January of 1998. From August 1992 until January
1998, Mr. Wimberly served as the President and Chief Operating Officer of U.S.
Auto Credit Corp., a sub-prime automotive finance company. Mr. Wimberly has been
employed in various positions in the consumer finance industry for 24 years at
such companies as General Motors Acceptance Corporation, where he worked in
various capacities, including Credit Manager for Hollywood, Florida operations
and World Omni Financial Corporation, where he worked in various capacities,
including Manager of Branch Operations. Mr. Wimberly received a Bachelor of Arts
degree in Business Administration from Valdosta State College in 1973.
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<PAGE> 88
CLASSIFIED BOARD OF DIRECTORS
The Board of Directors of the Company is divided into three classes, each
of which, after a transitional period, will serve for a term of three years,
with one class being elected each year. The executive officers are elected
annually by, and serve at the discretion of, the Company's Board of Directors.
Classification of the Board of Directors increases the time required to change
the composition of a majority of directors and may tend to discourage a takeover
bid for the Company. See "Description of Capital Stock -- Georgia Law, Certain
Articles and Bylaw Provisions and Certain Franchise Payment Provisions."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Since the Company's organization in 1997, all matters concerning executive
officer compensation have been addressed by the entire Board of Directors,
including directors who serve as executive officers of the Company. Upon
consummation of the Offering, Mr. Busbee, Mr. Sessions and Mr. Altherr will
serve on the Company's Compensation Committee.
COMMITTEES OF THE BOARD
The Board of Directors will establish a Finance Committee, a Compensation
Committee and an Audit Committee consisting of independent directors as soon as
practicable after the completion of the Offering. The Finance Committee will
oversee the Company's budgetary process and the Company's relations with its
lenders. The Compensation Committee, all of whose members will be independent
directors, will review and approve compensation for the executive officers, and
administer, and determine awards under, the Incentive Stock Plan and any other
incentive compensation plans for employees of the Company. See "Management --
Incentive Stock Plan." The Audit Committee, the majority of whose members will
consist of independent directors, 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. The Company has not
previously had any of these committees.
DIRECTOR COMPENSATION
Members of the Board of Directors who are not employees of the Company will
receive options to purchase 5,000 shares of common stock upon initially joining
the Board of Directors, will be compensated for their services at a rate of
$12,000 per annum plus $1,000 per meeting attended and will be eligible to
participate in the Company's Incentive Stock Plan. The Company will also
reimburse all directors for their expenses incurred in connection with their
activities as directors of the Company. Directors who are also employees of the
Company receive no additional compensation for serving on the Board of
Directors.
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<PAGE> 89
EXECUTIVE COMPENSATION
The Company was incorporated on December 17, 1997 and did not conduct any
operations prior to that time. Neither the Chief Executive Officer, nor any
other executive officer of the Company, received any compensation in 1997 from
the Company.
Set forth below is information for the years ended June 30, 1997, 1996 and
1995 with respect to the executive officers of Boomershine Automotive, as the
predecessor of the Company.
SUMMARY ANNUAL COMPENSATION
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS
- ---------------------------- ---- -------- --------
<S> <C> <C> <C>
Walter M. Boomershine, Jr.,................................. 1997 $ 49,200 $ --
Chairman and Senior Vice 1996 49,200 680,400
President 1995 49,200 766,931
Charles K. Yancey,.......................................... 1997 $102,033 $ --
President, Chief Operating 1996 102,033 403,297
Officer and Director 1995 102,033 398,466
Ricky L. Brown,............................................. 1997 $ 62,000 $ --
Chief Financial Officer and Controller 1996 -- --
1995 -- --
</TABLE>
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company has entered or will enter into employment agreements with
Messrs. Walter M. Boomershine, Jr., Robert W. Gundeck, Charles K. Yancey,
Stephen C. Whicker and Ricky L. Brown (the "Employment Agreements"), each of
which will be effective upon the effective date of this Offering. The Employment
Agreements provide for an annual base salary, potential fiscal year end bonuses
and certain other benefits. Each Employment Agreement generally provides for a
level annual increase of the base salary throughout the term of the agreement
and provides that any annual bonuses will be based upon certain
performance-related objectives of the Company that will be ultimately
established by the Compensation Committee. Certain terms of the Employment
Agreements are summarized in the table below:
<TABLE>
<CAPTION>
FIRST YEAR
TERM BASE STOCK
EMPLOYEE POSITION/TITLE (YEARS) COMPENSATION OPTIONS(1)
- -------- -------------- ------- ------------ ----------
<S> <C> <C> <C> <C>
Walter M. Boomershine,
Jr........................ Chairman and Senior Vice President 3 $200,000 25,000
Robert W. Gundeck........... Chief Executive Officer 5 300,000 350,000
Charles K. Yancey........... Chief Operating Officer and President 5 250,000 540,000
Stephen C. Whicker.......... Executive V.P. of Corporate Development, 5 200,000 540,000
General Counsel and Secretary
Ricky L. Brown.............. Chief Financial Officer, Vice President 5 135,000 120,000
of Finance and Treasurer
</TABLE>
- ---------------
(1) As of the effective date of this Offering, pursuant to employee's
participation in the Company's Incentive Stock Plan. See
"Management -- Incentive Stock Plan."
Each of the Employment Agreements of Messrs. Gundeck, Whicker and Brown are
for a term of generally five years and may be renewed for terms of one to three
years thereafter. Mr. Boomershine's Employment Agreement provides that he will
serve as Senior Vice President for a term ending December 31, 2000 and as a
consultant to the Company for a term of 10 years thereafter. Mr. Boomershine's
base salary during the consultation period will be $200,000 for the first two
years and $100,000 each year thereafter. Mr. Yancey's Employment Agreement
provides that he will serve as Chief Operating Officer and President of the
Company for a term of five years and as a consultant to the Company for a term
of generally five years thereafter. Mr. Yancey's base salary during said
consultation period will be $50,000 per year.
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<PAGE> 90
All of the Employment Agreements provide that the Company may terminate the
executive officer with or without cause. The Employment Agreements provide that
if the Company terminates an executive officer without cause or forces the
executive officer to resign for what is not considered a "Good Reason" pursuant
to the applicable Employment Agreement, the Company must continue to pay the
executive officer's base salary and his annual average bonus for a period of no
less than the remaining term of the applicable Employment Agreement.
Each of the Employment Agreements contains similar confidentiality and
non-competition provisions. These provisions provide that during the term of the
Employment Agreement, during a period of three years after the termination
thereof with respect to confidentiality provisions and during a period of one
year after the termination thereof with respect to non-competition provisions,
the executive officer shall not (i) use or disclose any confidential information
of the Company, (ii) become employed by or obtain any ownership interest in any
competitor of the Company that is located within a territory that is specified
in the applicable Employment Agreement, or (iii) interfere with the Company's
relationships with any of its customers, vendors or employees. Said geographic
restrictions generally apply to territories that are within a 100-mile radius of
the city of Atlanta, Georgia or within a 100-mile radius of any automobile or
truck dealership or ancillary business in which the Company has a controlling
interest.
In addition, each Employment Agreement provides that if there is a "Change
of Control," the executive will receive the following benefits: (1) base salary
for a period of time generally no less than the term of the applicable
Employment Agreement plus consulting compensation for a certain period to the
extent the executive officer's Employment Agreement provides for any
consultation periods; (2) a pro-rata portion of the bonus applicable to the
fiscal year in which the termination occurs plus a bonus payment for the
three-year period thereafter; (3) participation in all employee retirement plans
maintained by the Company as of the date of termination for the three-year
period following the termination, or, if no such plans exist, the Company will
pay to the executive officer the then present value of the excess of (i) the
benefit the executive would have been paid under such plan had the executive
continued to be covered for said three-year period (less required contribution
amount) with assumed earnings of eight percent over (ii) the benefit actually
payable under said plan; and (4) medical, dental and hospitalization insurance
coverage for the executive and the executive's dependents until the date on
which the executive is employed by, and becomes eligible for medical, dental and
hospitalization coverage through the plan of, another employer.
Each Employment Agreement provides that a "Change in Control" shall be
deemed to have occurred if (A) prior to the Offering, the shareholders of the
Company or its affiliates sell or otherwise transfer to persons or entities who
are not affiliates of the Company 75% or more of the voting stock of the Company
or its affiliates; (B) any person becomes a beneficial owner or 50% or more of
the voting stock of the Company or its Affiliates prior to the Offering or 40%
or more of the voting stock of the Company or its Affiliates after the Offering;
(C) the majority of the Board of Directors of the Company consists of
individuals other than directors who are incumbent as of the date of the
applicable Employment Agreement or directors that become directors by a majority
vote of the directors who are incumbent as of said date; (D) all or
substantially all of the assets or business of the Company or its affiliates is
disposed of pursuant to a merger, consolidation or other transaction other than
to an affiliate of the Company (unless the Company's shareholders, immediately
prior to such merger, consolidation or other transaction, beneficially own 50%
or more of the voting stock or other ownership interest of any entity or
entities that succeed to the business of the Company; (E) the consummation of a
merger, consolidation or other business combination of the Company with any
other person or affiliate thereof, other than a merger, consolidation or
business combination which would result in the outstanding common stock of the
Company immediately prior thereto continuing to represent at least 50% of the
outstanding common stock of the Company or such surviving entity or parent or
affiliate thereof immediately after such merger, consolidation or business
combination, or the consummation of a plan of complete liquidation of the
Company; or (F) the occurrence of any other event or circumstance which the
Board of Directors of the Company determines, by resolution, affects the control
of the Company and therefore constitutes a "Change of Control."
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<PAGE> 91
INCENTIVE STOCK PLAN
The Board of Directors of the Company adopted the Company's 1997 & 1998
Incentive Stock Plan (the "Incentive Stock Plan") on December 18, 1997, and said
Incentive Stock Plan was approved by the shareholders of the Company on January
8, 1998, in order to attract and retain key personnel. The following discussion
of the material features of the Incentive Stock Plan is qualified by reference
to the text of such Incentive Stock Plan filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
Under the Incentive Stock Plan, options to purchase up to an aggregate of
2,250,000 shares of common stock of the Company may be granted by the
Compensation Committee to directors, officers, consultants and employees of the
Company and/or any of its subsidiaries and other individuals providing services
to the Company. Members of the Board of Directors who serve on the Compensation
Committee must qualify as "non-employee directors," as that term is defined in
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended. In
addition, the Company may issue incentive stock options ("ISOs") to officers and
directors who are employees of the Company.
The Compensation Committee of the Board of Directors of the Company, which
is comprised of independent directors, will administer the Incentive Stock Plan
and will determine, among other things, the persons who are to receive options,
the number of shares to be subject to each option and the vesting schedule of
options. Options granted under the Incentive Stock Plan that are not ISOs must
be granted no later than January 1, 2008 and must be exercised within 10 years
of the grant, but in no event later than December 31, 2017. ISOs must be granted
no later than ten years after the adoption of the Incentive Stock Plan and must
be exercised no later than ten years after the particular ISO is granted.
Options generally may not be transferred other than by will or the laws of
descent and distribution and, during the lifetime of an optionee, options may be
exercised only by the optionee. The exercise price of options that are not ISOs
will be determined at the discretion of the Compensation Committee. The exercise
price of the ISOs may not be less than the market value of the common stock on
the date of grant of the option. In the case of ISOs granted to any holder who
on the date of grant of the ISOs holds more than ten percent of the total
combined voting power of all classes of stock of the Company and its
subsidiaries, the exercise price may not be less than 110% of the market value
per share of the common stock on the date of grant. Unless designated as
"incentive stock options" intended to qualify under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), options granted under the
Incentive Stock Plan are intended to be "nonstatutory stock options" ("NSOs").
The exercise price may be paid in cash, in shares of common stock owned by the
optionee, in other property deemed acceptable by the Compensation Committee, or
in any combination of cash, shares or other such acceptable property.
The Incentive Stock Plan provides that, in the event of changes in the
corporate structure of the Company or certain events affecting the shares of the
Company, adjustments will automatically be made in the number and kind of shares
available for issuance and in the number and kind of shares covered by
outstanding options. It further provides that, in connection with any merger or
consolidation or other business combination in which the Company is not the
surviving corporation, the Compensation Committee shall cause to be paid, in
cash, the excess of the fair market value of all options over the exercise price
of such options on the date of such business combination or, alternatively,
shall grant substitute options on such terms and conditions which substantially
preserve the value, rights and benefits of options being substituted.
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<PAGE> 92
The Board of Directors of the Company has granted or will grant
contemporaneously with the closing of this Offering options to purchase an
aggregate of 1,592,000 shares of common stock under the Incentive Stock Plan to
executive officers, other employees and directors of the Company. All of these
options will vest and become exercisable from time to time over the ten-year
period following the date each option is granted in accordance with the terms of
the individual option grants. The following table sets forth the date on which
such grants were made, the names of the recipients, the number of shares
underlying the grants, the type of options granted and the price at which such
grants may be exercised:
<TABLE>
<CAPTION>
SHARES
NAME OF RECIPIENT UNDERLYING GRANT TYPE DATE OF GRANT(1) EXERCISE PRICE(2)
- ----------------- ---------------- ---- ---------------- -----------------
<S> <C> <C> <C> <C>
Walter M. Boomershine, Jr.*.............. 25,000 ISO IPO Date IPO Price
Robert W. Gundeck*....................... 300,000 ISO 4/22/98 $ 8.00
50,000 ISO IPO Date IPO Price
Charles K. Yancey*....................... 200,000 ISO 1/8/98 $ 6.27
240,000 ISO 4/22/98 $ 8.00
100,000 ISO IPO Date IPO Price
Stephen C. Whicker*...................... 200,000 ISO 1/8/98 $ 6.27
240,000 ISO 4/22/98 $ 8.00
100,000 ISO IPO Date IPO Price
Ricky L. Brown*.......................... 25,000 ISO 1/8/98 $ 6.27
70,000 ISO 4/22/98 $ 8.00
25,000 ISO IPO Date IPO Price
George D. Busbee**....................... 5,000 NSO IPO Date IPO Price
Lee M. Sessions, Jr.**................... 5,000 NSO IPO Date IPO Price
Jack R. Altherr**........................ 5,000 NSO IPO Date IPO Price
Michael F. O'Neill....................... 2,000 ISO IPO Date IPO Price
----------------
Total.......................... 1,592,000
</TABLE>
- ---------------
* Executive officer of the Company.
** Director of the Company.
(1) "IPO Date" means the completion date of this Offering.
(2) "IPO Price" means the price of the common stock listed on the cover page of
this Prospectus.
In addition to such grants, the Company has granted to James E. L. Peters,
Jr., in connection with the Collision Centers USA Acquisition, NSOs to purchase
5,000 shares of common stock, each of which are exercisable at $8.00 per share
and vest six months following the completion of this Offering.
The issuance and exercise of ISOs have no federal income tax consequences
to the Company. While the issuance and exercise of ISOs generally have no
ordinary income tax consequences to the holder, upon the exercise of an ISO, the
holder will treat the excess of the fair market value on the date of exercise
over the exercise price as an item of tax adjustment for alternative minimum tax
purposes. If the holder of common stock acquired upon the exercise of an ISO
disposes of such stock before the later of (i) two years following the grant of
the ISO and (ii) one year following the exercise of the ISO (a "Disqualifying
Disposition"), the holder will recognize ordinary income for federal income tax
purposes in an amount equal to the lesser of (i) the excess of the common
stock's fair market value on the date of exercise over the option exercise
price, and (ii) the excess of the amount realized on disposition of the common
stock over the option exercise price. Any additional gain upon the disposition
will be taxed as capital gains. The disposition of common stock acquired from
the exercise of an ISO other than in a Disqualifying Disposition will ordinarily
result in capital gains or loss to the holder for federal income tax purposes
equal to the difference between the amount realized on disposition of the common
stock and the option exercise price. Any capital gain will be subject to reduced
rates of tax if such shares were held more than twelve months, and will be
subject to further reduced rates if such shares were held more than eighteen
months. The Company will be entitled to a compensation expense
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<PAGE> 93
deduction for the Company's taxable year in which the disposition occurs equal
to the amount of ordinary income recognized by the holder.
The issuance of NSOs has no federal income tax consequences to the Company
or the holder. Upon the exercise of an NSO, the Company generally will be
allowed a federal income tax deduction equal to the amount by which the fair
market value of the underlying shares on the date of exercise exceeds the
exercise price. NSO holders will recognize ordinary income for federal income
tax purposes at the time of option exercise in the same amount. In the event of
a sale of shares acquired by exercise of a NSO, any appreciation or depreciation
after the exercise date generally will be taxed as capital gain or loss;
provided that any gain will be subject to reduced rates of tax if such shares
were held for more than twelve months and will be subject to further reduced
rates if such shares were held for more than eighteen months. The disposition of
shares acquired by exercise of a NSO will result in capital gains or losses to
the holder.
The Company intends to register the shares underlying the Incentive Stock
Plan as soon as practicable on Form S-8. If such registration is not required,
such shares may be issued upon option exercise in reliance upon the private
offering exemption codified in Section 4(2) of the Securities Act and/or Rule
701 promulgated thereunder.
LIMITATIONS OF DIRECTORS LIABILITY
The Articles of the Company include a provision that effectively eliminates
the liability of directors to the Company or to the Company's shareholders for
monetary damages for breach of the fiduciary duties of a director, except for
any appropriation, in violation of the director's duties, of any business
opportunity of the Company, acts or omissions which involve intentional
misconduct or a knowing violation of law, certain actions with respect to
unlawful distributions and any transaction from which the director derived an
improper personal benefit. This provision does not prevent shareholders from
seeking nonmonetary remedies covering any such action, nor does it affect
liabilities under the federal securities laws. The Articles of Incorporation
further provide that the Company shall indemnify each of its directors and
officers against any liability (including counsel fees) which is allowed to be
paid or reimbursed by the Company under the laws of the State of Georgia and
which is actually and reasonably incurred in connection with any proceeding in
which such director or officer may be involved by reason of his or her having
been a director or officer of the Company. Georgia Law currently authorizes a
corporation to indemnify its directors and officers against the obligation to
pay a judgment, settlement, penalty, fine (including an excise tax assessed with
respect to an employee benefit plan), or reasonable expenses (including
counsels' fees) reasonably incurred by them in connection with any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative and whether formal or informal, if
such officers or directors conducted themselves in good faith and they
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal proceeding, had no reasonable
cause to believe their conduct was unlawful. Indemnification is permitted in
more limited circumstances with respect to derivative actions. The Company
believes that these provisions of the Articles of Incorporation and the Bylaws
are necessary to attract and retain qualified persons to serve as directors and
officers. In addition, the Company anticipates carrying directors and officers
liability insurance as soon as practicable following the closing of the
Offering.
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<PAGE> 94
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of April 30, 1998, after giving
effect to the Merger and the Acquisitions, by (i) each shareholder who is known
by the Company to own beneficially more than 5% of the outstanding common stock,
(ii) each director of the Company, (iii) each of the executive officers of the
Company, and (iv) all directors and executive officers of the Company as a
group, and as adjusted to reflect the sale by the Company of the shares of
common stock in this Offering. Holders of Common Stock are entitled to one vote
per share on all matters submitted to a vote of the shareholders of the Company.
See "Description of Capital Stock."
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
AMOUNT AND COMMON STOCK OWNED
NATURE OF ----------------------
BENEFICIAL BEFORE AFTER
NAME OF BENEFICIAL OWNER(1) OWNERSHIP(2)(3) OFFERING OFFERING
- --------------------------- --------------- -------- --------
<S> <C> <C> <C>
Walter M. Boomershine, Jr.(4).......................... 572,024 11.3% 5.4%
Charles K. Yancey...................................... 113,081 2.2 1.1
Robert M. Gundeck...................................... 63,640 1.3 *
Stephen C. Whicker..................................... 66,465 1.3 *
Ricky L. Brown......................................... 10,016 * *
Alan K. Arnold......................................... 400,000 7.9 3.8
George D. Busbee(5).................................... 5,000 * *
Lee M. Sessions, Jr.(5)................................ 5,000 * *
Jack R. Altherr(5)..................................... 5,000 * *
Walter M. Boomershine, III(4)(6)....................... 696,696 13.7 6.6
Renee B. Jochum(4)(7).................................. 633,360 12.5 6.0
Jacquelyn B. Thompson(4)(8)............................ 633,360 12.5 6.0
Patrice B. Mitchell(4)(9).............................. 633,360 12.5 6.0
Lindsey B. Robertson(4)(10)............................ 673,360 13.3 6.4
All directors and executive officers as a group (9
persons)............................................. 1,238,226 24.4% 11.7%
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1% of the total outstanding
shares of the Company.
(1) Unless otherwise noted, the address of all persons listed is c/o Sunbelt
Automotive Group, Inc., 5901 Peachtree-Dunwoody Rd., Suite 250-B, Atlanta,
GA 30328.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission. Shares of common stock subject to options, warrants or other
rights to purchase which are currently exercisable or are exercisable
within 60 days after the completion of the Offering are deemed outstanding
for computing the percentage ownership of the persons holding such options,
warrants or rights, but are not deemed outstanding for computing the
percentage ownership of any other person. Unless otherwise indicated, each
person possesses sole voting and investment power with respect to the
shares identified as beneficially owned.
(3) The numbers with respect to Alan K. Arnold and Lindsey B. Robertson (with
respect to the shares to be issued to E. Moss Robertson, Jr.) assume that
the Offering price is $10.00 per share.
(4) Walter M. Boomershine, III, Renee B. Jochum, Jacquelyn B. Thompson, Patrice
B. Mitchell and Lindsey B. Robertson are all adult children of Walter M.
Boomershine, Jr. Each of said persons disclaims beneficial ownership
pursuant to the rules under the Exchange Act of the common stock attributed
to the others.
(5) Consists of 5,000 shares of common stock issuable upon the exercise of
options granted to each of Mr. Busbee, Mr. Sessions and Mr. Altherr as a
non-employee director, pursuant to the Company's Incentive Stock Plan. See
"Director Compensation."
(6) Includes 126,672 shares to be issued to The WMB, III Family Trust, for
which Mr. Boomershine, III serves as the sole Trustee.
(7) Includes 536,245 shares to be issued to The RBJ Family Trust, for which Ms.
Jochum serves as the sole Trustee. The address of Ms. Jochum is 6 Starlight
Ct., Potomac, MD 20854.
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<PAGE> 95
(8) Includes 536,245 shares to be issued to The JBT Family Trust, for which Ms.
Thompson serves as the sole Trustee. The address of Ms. Thompson is 219
Bates Rd., Cartersville, GA 30120.
(9) Includes 536,245 shares to be issued to The PBM Family Trust, for which Ms.
Mitchell serves as the sole Trustee. The address of Ms. Mitchell is 2074
Shillingwood Dr., Kennesaw, GA 30144.
(10) Includes 536,245 shares to be issued to The LBR Family Trust, for which Ms.
Robertson serves as the sole Trustee, and 40,000 pro forma shares to be
issued to E. Moss Robertson, Jr., who is Ms. Robertson's husband, upon
consummation of the ROC Acquisition. Ms. Robertson disclaims beneficial
ownership under the rules of the Exchange Act of the shares owned by Mr.
Robertson. The address of Ms. Robertson is c/o Robertson
Oldsmobile-Cadillac, Inc., 2355 Browns Bridge Rd., Gainesville, GA 30504.
CERTAIN TRANSACTIONS
CERTAIN DEALERSHIP LEASES
Certain of the properties leased by the Company's dealership subsidiaries
are owned by officers, directors or holders of 5% or more of the common stock of
the Company or their affiliates (the "Related Party Leases"). The Company
believes that the terms and conditions of each of these leases are no less
favorable than those that could be obtained from non-affiliated parties. Each of
the Related Party Leases and the rent payable thereunder are described below.
For a more complete description of the location, use and expiration date of each
lease, see "Business -- Facilities."
During 1995, 1996 and 1997, and continuing after the Offering, the entities
listed below have leased and will continue to lease the real properties on which
their dealerships or operations are located from limited partnerships (WINCO I,
L.P., WINCO II, L.P. and WINCO III, L.P.) controlled by Walter M. Boomershine,
Jr., who is the Chairman of the Board and Senior Vice President of the Company,
and owned by Walter M. Boomershine, Jr. and his family:
<TABLE>
<CAPTION>
ANNUAL
FRANCHISE/SUBSIDIARY RENTAL PAYMENT
- -------------------- --------------
<S> <C>
Boomershine Ford and Boomershine Isuzu...................... $480,000
Collision Centers USA (Duluth center)....................... 240,000
Boomershine Pontiac-Buick-GMC, Inc.......................... 281,388
Boomershine Hummer.......................................... 130,800
Boomershine Nissan.......................................... 210,000
Boomershine Mitsubishi...................................... 180,000
</TABLE>
Each of these leases requires the respective lessees to pay the taxes,
insurance and maintenance expenses related to the applicable leased property.
Wade Ford, Inc. leases one of the two parcels of real property on which its
dealership is located (the "Wade Lease"), and Wade Ford Buford, Inc. leases the
parcel on which its dealership is located (the "Wade Buford Lease"), from Mr.
Alan K. Arnold, who is a director of the Company. The other parcel on which Wade
Ford, Inc.'s dealership is located is owned by an unaffiliated third party. The
Wade Lease annual rental payments during Wade Ford, Inc.'s last fiscal year were
$420,000, and the Wade Buford Lease annual rental payments during Wade Ford
Buford, Inc.'s last fiscal year were $240,000. Both leases require the
respective subsidiaries to pay the taxes, insurance and maintenance expenses
related to the leased property.
Robertson Oldsmobile-Cadillac, Inc. leases the real property on which its
dealerships are located from Mr. E. Moss Robertson, Jr., who is the son-in-law
of Mr. Walter M. Boomershine, Jr., the Chairman of the Board and Senior Vice
President of the Company. Prior to the Offering, the annual rental payments
under the lease were $180,000 for 1997 and $149,600 for 1996. As part of the
Acquisition, Mr. Robertson and the Company have agreed to replace the existing
lease with a new lease agreement, pursuant to which the annual rental payment of
said lease will be $204,000 for the first and second lease years, $216,000 for
the third through fifth lease years, and $240,000 beginning with the sixth lease
year and thereafter until the end of the
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<PAGE> 96
initial term of the lease. The lease also requires Robertson
Oldsmobile-Cadillac, Inc. to pay the taxes, insurance and maintenance expenses
related to the leased property.
CERTAIN BUSINESS RELATIONSHIPS
In connection with the South Financial Acquisition, the Company borrowed
the sum of $4.5 million from WINCO I, L.P., a limited partnership controlled by
Walter M. Boomershine, Jr. and owned by Walter M. Boomershine, Jr. and his
family. This loan was made pursuant to a promissory note which matures on July
7, 1998 and carries an interest rate equal to the prime rate of interest
announced by NationsBank, N.A. from time to time. The Company has the option to
refinance the loan for an additional term of five years subsequent to said
maturity date, at an interest rate to 8% per annum, using a 20-year
amortization. The Company believes that this transaction was made on terms that
are no less favorable than those that could be obtained from non-affiliated
parties.
PROMISSORY NOTES
On April 22, 1998, the Company's Board of Directors granted to Messrs.
Gundeck, Yancey, Whicker and Brown, each of whom is an executive officer of the
Company, the right to purchase shares of common stock of the Company at a price
of $8.00 per share. Messrs. Gundeck, Yancey, Whicker and Brown elected to
purchase 63,640, 111,081, 64,465 and 10,016 shares of common stock of the
Company, respectively (collectively, the "Executive Shares"), and each executed
a five-year promissory note in favor of the Company (collectively, the
"Executive Notes") in the principal amounts of $509,120, $888,648, $515,720 and
$80,128, respectively. The Executive Notes, which bear interest at a rate of 8%
per annum, require annual payments of interest and a single payment of the
entire principal balance at the end of the five-year term. The Company believes
that these Executive Notes were made on terms that are no less favorable than
those that could be obtained from non-affiliated parties.
In connection with an employee savings plan, Boomershine Automotive Group,
Inc. granted to WINCO I, L.P., WINCO II, L.P., WINCO III, L.P. (collectively,
the "WINCO Partnerships") and to certain shareholders and an executive officer
of Boomershine Automotive promissory notes which, as of March 31, 1998, had an
outstanding aggregate principal balance of $2,416,544. Specifically, as of March
31, 1998, the promissory note due to the WINCO Partnerships, which are owned and
controlled by Walter M. Boomershine, Jr., who is the chairman of the Company,
and his family, had an outstanding principal balance of $832,306, and the
promissory notes due to certain individuals (Walter M. Boomershine, Jr., who is
the chairman and an executive officer of the Company, and Patrice B. Mitchell, a
shareholder of Boomershine Automotive, Winfred Boomershine and Randy Thompson,
who are all relatives of Walter M. Boomershine, Jr.) and the executive officer
of Boomershine Automotive (Charles K. Yancey, who is an executive officer of the
Company) had an outstanding aggregate principal balance of $1,584,238. Each of
these promissory notes is unsecured, is due on demand, pays interest on a
monthly basis at a rate equal to the prime rate of interest and requires
repayments of principal on a semi-annual basis. The Company believes that these
promissory notes were made on terms that are no less favorable than those that
could be obtained from non-affiliated parties.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of (i) 450,000,000 shares
of common stock, $0.001 par value, and (ii) 50,000,000 shares of preferred
stock, $0.001 par value. Upon completion of this Offering, the Company will have
10,575,362 outstanding shares of common stock (assuming the Underwriters' over-
allotment option is not exercised) and no outstanding shares of preferred stock.
The following summary description of the Company's capital stock does not
purport to be complete and is qualified in its entirety by reference to the
Company's Articles of Incorporation, which are filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and Georgia law.
Reference is made to such exhibit and Georgia law for a detailed description of
the provisions thereof summarized below.
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<PAGE> 97
COMMON STOCK
As of May 14, 1998, there were 255,202 shares of common stock outstanding
held of record by four shareholders, and options to purchase an aggregate of
1,280,000 shares of common stock were outstanding, none of which was exercisable
as of May 14, 1998. After giving effect to the sale of 5,500,000 shares of
common stock by the Company in this Offering, there will be 10,575,362 shares
outstanding (11,400,362 if the Underwriter's over-allotment option is exercised
in full). Holders of common stock have one vote per share on all matters
submitted to a vote of the shareholders of the Company, including with respect
to the election of directors.
Subject to the prior rights of holders of preferred stock, if any, holders
of the common stock are entitled to receive ratably such dividends, if any, as
are declared by the Company's Board of Directors out of funds legally available
for that purpose. However, as discussed under "Dividend Policy," the Company
currently does not intend to pay any cash dividends. Shareholders of the Company
have no preemptive or other rights to subscribe for additional shares. In the
event of the liquidation, dissolution or winding up of the Company, holders of
common stock are entitled to share ratably in all assets available for
distribution to holders of common stock after payment in full of creditors and
any rights of preferred shareholders. No shares of any class of common stock are
subject to a redemption or a sinking fund. All outstanding shares of common
stock are, and all shares offered by this Prospectus will be, when sold, validly
issued, fully paid and nonassessable.
PREFERRED STOCK
The Company's Articles authorize the Board of Directors to issue up to
50,000,000 shares of preferred stock in one or more series and to establish such
designations and relative voting, dividend, liquidation, conversion, redemption,
liquidation and other rights, preferences and limitations as the Board of
Directors may determine without any further approval of the shareholders of the
Company. The issuance of preferred stock by the Board of Directors, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes could, among other things, adversely affect the voting
power of the holders of common stock and, under certain circumstances, make it
more difficult for a person or group to gain control of the Company. See "Risk
Factors -- Anti-Takeover Provisions." The issuance of any series of preferred
stock, and the relative designations, rights, preferences and limitations of
such series, if and when established, will depend upon, among other things, the
future capital needs of the Company, the then-existing market conditions and
other factors that, in the judgment of the Board of Directors, might warrant the
issuance of preferred stock. At the date of this Prospectus, no shares of
preferred stock are outstanding and there are no plans, agreements or
understandings for the issuance of any shares of preferred stock.
WARRANTS
On March 13, 1998, the Company granted warrants to purchase 50,000 shares
of common stock to Tatum CFO Partners, L.P. in consideration for certain
financial and accounting consulting services rendered in connection with this
Offering. These warrants vest equally on a quarterly basis at 8,333 shares per
quarter, and have an exercise price of $8.00 per share. As of the date of this
Prospectus, 16,666 shares of common stock underlying these warrants are
immediately exercisable and the remaining warrants will vest ratably on a
quarterly basis over the next year. These warrants will expire, if not
exercised, 10 years after the date on which they are granted.
REGISTRATION RIGHTS AND STOCK PRICE PROTECTION
As part of the Acquisitions, the Company entered into a registration rights
agreement with the selling shareholders of Wade Ford, Inc. and Wade Ford Buford,
Inc. (collectively, "Wade Ford") and the sole shareholder of Robertson
Oldsmobile-Cadillac, Inc. (each, a "Registration Rights Agreement" and
collectively, the "Registration Rights Agreements"). Subject to certain
limitations, the Registration Rights Agreements provide said shareholders with
certain piggyback registration rights that permit them to have their shares of
unregistered common stock, as selling security holders, included in any
registration statement pertaining to the registration of the Company's common
stock for issuance by the Company or for resale by other selling security
holders, with the exception of initial public offerings of the common stock,
registrations
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<PAGE> 98
relating solely to employee benefits plans and registrations relating solely to
a transaction pursuant to Rule 145 under the Securities Act. These registration
rights will be limited or restricted to the extent an underwriter of an
offering, if an underwritten offering, or the Company's Board of Directors, if
not an underwritten offering, determines that the amount of the common stock to
be registered pursuant to any Registration Rights Agreement would not permit the
sale of the registered common stock in the quantity and at the price originally
sought by the Company or the original selling security holders, as the case may
be. Additionally, the Company has contractually agreed to provide certain price
protection with respect to the unregistered common stock of the Company (the
"Price Protection Stock") that will be provided by the Company to the selling
shareholders of Wade Ford and Day's Chevrolet. With respect to the Price
Protection Stock, in the event the price of the Price Protection Stock on the
first anniversary (in the case of the Wade Ford Price Protection Stock) or the
second anniversary (in the case of the Day's Chevrolet, Inc. Price Protection
Stock) after the consummation of the Offering is less than the price of said
stock on the date of the Offering, the Company will compensate the applicable
shareholders for such deficiency in cash or by issuing additional shares of
unregistered (in the case of Wade Ford Price Protection Stock) or registered (in
the case of the Day's Chevrolet, Inc. Price Protection Stock) common stock.
GEORGIA LAW, CERTAIN ARTICLES AND BYLAW PROVISIONS AND CERTAIN FRANCHISE
AGREEMENT PROVISIONS
Certain provisions of Georgia law and of the Company's Articles and Bylaws,
summarized in the following paragraphs, may be considered to have an
anti-takeover effect and may delay, deter or prevent a tender offer, proxy
contest or other takeover attempt that a shareholder might consider to be in
such shareholder's best interest, including such an attempt as might result in
payment of a premium over the market price for shares held by shareholders
unless the takeover or change of control is approved by the Company's Board of
Directors. Such provisions may also make the removal of directors and management
more difficult.
Georgia Anti-takeover Law. The GBCC restricts certain business
combinations with "interested shareholders" (as defined below) (the "Business
Combination Statute"), and contains fair price requirements applicable to
certain mergers with certain interested shareholders (the "Fair Price Statute").
In accordance with the provisions of these statutes, the Company must elect in
its Bylaws to be covered by the restrictions imposed by these statutes. The
Company has elected to be covered by such restrictions in its Bylaws, and such
bylaw provisions may only be repealed upon a vote of at least two-thirds of
continuing directors and a majority of the voting shares of the Company.
Furthermore, shareholders may amend or repeal the Company's Bylaws or adopt new
Bylaws (even though these Bylaws may also be amended or repealed by the Board of
Directors).
The Business Combination Statute regulates business combinations such as
mergers, consolidations, share exchanges and asset purchases where the acquired
business has at least 100 shareholders residing in Georgia and has its principal
office in Georgia, as the Company does, and where the acquiror became an
interested shareholder of the corporation, unless either: (i) the transaction
resulting in such acquiror becoming an interested shareholder or the business
combination received the approval of the corporation's board of directors prior
to the date on which the acquiror became an interested shareholder; or (ii) the
acquiror became the owner of at least 90% of the outstanding voting shares of
the corporation (excluding any shares held by certain other persons) in the same
transaction in which the acquiror became an interested shareholder. For purposes
of the Business Combination Statute and the Fair Price Statute, an "interested
shareholder" generally is any person who directly or indirectly, alone or in
concert with others, beneficially owns or controls 10% or more of the voting
power of the outstanding voting shares of the corporation. The Business
Combination Statute prohibits business combinations with an unapproved
interested shareholder for a period of five years after the date on which such
person became an interested shareholder.
The Fair Price Statute prohibits certain business combinations between a
Georgia business corporation and an interested shareholder. The Fair Price
Statute would permit the business combination to be effected if: (i) certain
"fair price" criteria are satisfied; (ii) the business combination is
unanimously approved by the continuing directors; (iii) the business combination
is recommended by at least two-thirds of the continuing directors and approved
by a majority of the votes entitled to be cast by holders of voting shares,
other than voting shares beneficially owned by the interested shareholder; or
(iv) the interested shareholder has been
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<PAGE> 99
such for at least three years and has not increased his ownership position in
such three-year period by more than one percent in any 12-month period. The Fair
Price Statute is designed to inhibit unfriendly acquisitions that do not satisfy
the specified "fair price" requirements.
Classified Board of Directors. The Company's Articles and Bylaws provide
for the Board of Directors to be divided into three classes of directors serving
staggered three-year terms. As a result, approximately one-third of the Board of
Directors will be elected each year, and it will take at least two meetings of
the Company's shareholders in order to change the majority of the directors.
Classification of the Board of Directors increases the time required to change
the composition of a majority of directors and may tend to discourage a takeover
bid for the Company. Moreover, in order to remove a director without cause, the
Articles of Incorporation require the vote of at least eighty percent of the
eligible shares; removal for cause requires the vote of a majority of eligible
shares. Director's positions that become vacant as a result of a removal by the
shareholders may be filled by the shareholders, or, if authorized by the
shareholders, by a majority vote of the Board of Directors. Director's positions
that become vacant due to the death, resignation or retirement of a director may
be filled by a majority vote of the remaining directors. This above-referenced
provision may preclude or hinder shareholders of the Company from removing
incumbent directors without cause, simultaneously gaining control of the Board
of Directors by filing the vacancies with their own nominees. See
"Management -- Executive Officers and Directors; Key Personnel."
Special Meetings of Shareholders. The Company's Articles and Bylaws
provide that special meetings of shareholders may be called only by the Chairman
or Chief Executive Officer of the Company, or by a majority vote of the Board of
Directors of the Company. These provisions may make it more difficult for
shareholders to take action opposed by the Board of Directors.
Advance Notice Requirements for Shareholder Proposals and Director
Nominations. The Company's Bylaws provide that shareholders seeking to bring
business before an annual meeting of shareholders, or to nominate candidates for
election as directors at an annual or a special meeting of shareholders, must
provide timely notice thereof in writing. To be timely, a shareholder's notice
must be delivered to, or mailed and received at, the principal executive office
of the Company at least sixty (60) days prior to the date of such annual or
special meeting. The Bylaws also specify certain requirements for a
shareholder's notice to be in proper written form. These provisions may preclude
some shareholders from bringing matters before the shareholders at an annual or
special meeting or from making nominations for directors at an annual or special
meeting.
Restrictions under Franchise Agreements. The manufacturers' agreements
relating to public companies impose various restrictions on the transfer of the
common stock. A number of manufacturers prohibit transactions which affect
changes in management control of the Company. For instance, Ford may cause the
Company to sell or resign from its Ford franchises if any person or entity
acquires 15% or more of the Company's voting securities. Likewise, GM, Toyota
and Nissan may force the sale of their respective franchises if 20% or more of
the Company's voting securities are so acquired. Chrysler also generally
approves of the public sale of only 50% of the common stock of a public company
and requires prior approval of any future sales that would result in a change in
voting or managerial control of such a public company. All or some of the
restrictions may apply to the Company once the Company reaches an agreement with
each respective manufacturer. Such restrictions may prevent or deter prospective
acquirors from obtaining control of the Company. See "Risk Factors -- Stock
Ownership/Issuance Limits; Limitation on Ability to Issue Additional Equity" and
"Business -- Relationships with Manufacturers."
LISTING
The Company has applied for quotation of the common stock on the Nasdaq
National Market under the symbol "SBLT."
TRANSFER AGENT AND REGISTRAR
The Company has appointed SunTrust Bank, Atlanta as the transfer agent and
registrar for the common stock.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have outstanding
10,575,362 shares of common stock (assuming no exercise of the Underwriters'
over-allotment option). All of such shares will be freely transferable and may
be resold without further registration under the Securities Act; except for any
shares held by an "affiliate" of the Company (as that term is defined in Rule
144), any shares received by any shareholders in connection with any of the
Acquisitions or the Merger and any shares issued to officers of the Company
pursuant to certain employment contracts, which shares will be subject to the
resale limitations of Rule 144. In general, under Rule 144 as currently in
effect, a person (or persons whose shares are aggregated) who has beneficially
owned "restricted securities" for at least one year may, under certain
circumstances, resell within any three-month period, such number of shares as
does not exceed the greater of one percent of the then-outstanding shares of
common stock or the average weekly trading volume of common stock during the
four calendar weeks prior to such resale. Rule 144 also permits, under certain
circumstances, the resale of shares without any quantity limitation by a person
who has satisfied a two-year holding period and who is not, and has not been for
the preceding three months, an affiliate of the Company. In addition, holding
periods of successive non-affiliate owners are aggregated for purposes of
determining compliance with these one- and two-year holding period requirements.
Sales under Rule 144 are also subject to certain provisions relating to the
manner of sale, notice of sale, and availability of current public information
about the Company. The Company has reserved for issuance 1,597,000 shares of
common stock, which underlie options granted under the Company's Incentive Stock
Plan, and 50,000 shares of common stock, which underlie warrants issued to a
consulting firm, and the Company intends to file a registration statement on
Form S-8 with the Commission following completion of this Offering to register
the shares of the common stock issuable under the Incentive Stock Plan and the
consultant warrants.
The availability of shares for sale or actual sales under Rule 144 and the
Form S-8 registration statement and the perception that such shares may be sold
may have a material adverse effect on the market price of the common stock.
Sales under Rule 144 and the Form S-8 registration statement also could impair
the Company's ability to market additional equity securities. Additionally, the
Company has entered into the Registration Rights Agreement with the shareholders
of Wade Ford, Inc., Wade Ford Buford, Inc. and Robertson Oldsmobile-Cadillac,
Inc., which provides piggyback registration rights with respect to all of the
shares of common stock that the selling shareholders in said acquisitions will
receive. For further information regarding the Registration Rights Agreement,
see "Description of Capital Stock -- Registration Rights and Stock Price
Protection."
The Company, its executive officers and directors and holders of more that
two percent (2%) of the common stock have agreed, subject to certain exceptions,
not, directly or indirectly, to: (i) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option to purchase, right or warrant 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,
directly or indirectly, the economic consequences of ownership of the common
stock, whether any such swap or transaction described above is to be settled by
delivery of common stock or such other securities, in cash or otherwise, for 180
days from the date of this Prospectus without the prior written consent of the
Underwriter; provided that the Company may sell shares of common stock to a
third party as consideration for the Company's acquisition from such third party
of an automobile dealership, so long as such third party executes a lock up
agreement on substantially the same terms described above for a period expiring
180 days after the date of this Prospectus.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), through their representative
Raymond James & Associates, Inc. (the "Representative"), have severally agreed
to purchase from the Company the following respective number of shares of common
stock at the public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ---------
<S> <C>
Raymond James & Associates, Inc.............................
-------
Total.............................................
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of common stock
offered hereby are subject to approval of certain legal matters by their counsel
and to certain other conditions. The Underwriters are obligated to take and pay
for all shares of common stock offered hereby (other than those covered by the
over-allotment option described below) if any such shares are purchased.
The Underwriters, through the Representative, propose to offer the shares
of common stock directly to the public at the public offering price set forth on
the cover page of this Prospectus and part of the shares to certain dealers at a
price that represents a concession not in excess of $ per share under
the public offering price. The Underwriters may allow, and such dealers may
re-allow, a concession not in excess of $ per share to certain other
dealers. The Representative has advised the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
The Company has granted the Underwriters an option exercisable not later
than 30 days after the date of this Prospectus, to purchase up to an aggregate
of 825,000 additional shares of common stock, at the public offering price, less
the underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof as the number of shares of common stock to be purchased by
them shown in the above table bears to the total shown, and the Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise their option only to cover over-allotments made in
connection with the sale of the shares of common stock offered hereby. If
purchased, the Underwriters will sell such additional shares on the same terms
as those on which the shares are being offered.
The Company has agreed to indemnify the Underwriters against, or to
contribute to, losses arising out of certain liabilities in connection with this
Offering, including liabilities under the Securities Act. The Company has paid
$75,000 to the Underwriters as an advance against actual out-of-pocket expenses
incurred by the Underwriters in connection with this Offering. The Underwriters
have agreed to reimburse any portion of the advance not applied to such
expenses.
At the request of the Company, the Underwriters have reserved for sale, at
the initial public offering price, up to shares of common stock to be
sold and offered hereby by the Company to certain employees and customers of the
Company and other persons. The number of shares of common stock
100
<PAGE> 102
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 orally
confirmed for purchase within one day of the pricing of the Offering will be
offered by the Underwriters to the general public on the same terms 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, its executive officers and directors, and holders of more than
two percent (2%) of the common stock prior to the consummation of the Offering,
have agreed not to sell, offer to sell, contract to sell, pledge or otherwise
dispose of or transfer any shares of common stock, or any securities convertible
into or exchangeable or exercisable for, or any rights to purchase or acquire,
common stock for a period of 180 days following the date of this Prospectus
without the prior written consent of Raymond James & Associates, Inc., other
than, in the case of the Company, the issuance of options to purchase common
stock or shares of common stock issuable upon the exercise thereof, issuance of
common stock in connection with the Wade Acquisition, the Day's Chevrolet
Acquisition, the Jay Acquisition or the Robertson Acquisition and other
issuances of capital stock of the Company in connection with other acquisitions,
provided such shares of common stock issued upon the exercise of options and
such shares of capital stock issued in connection with any such other
acquisitions shall not be transferable prior to the end of the aforesaid 180-day
period. Raymond James & Associates, Inc. may, in its sole discretion and at any
time without notice, release all or any portion of the shares subject to such
lock-up agreements.
Prior to this Offering, there has been no public market for the common
stock of the Company. The initial public offering price the common stock will be
determined by negotiation between the Company and the Representative. Among the
factors to be considered in such negotiations are prevailing market conditions,
the value of publicly traded companies believed to be comparable to the Company,
the results of operations of the Company in recent periods, estimates of the
business potential of the Company, the present state of the Company's
development and other factors deemed relevant.
The Representative, acting on behalf of the Underwriters, may over-allot
the shares offered hereby and, during the course of this Offering, may engage in
stabilizing and syndicate short covering and may impose a penalty bid on members
of the Offering syndicate. Over-allotment involves sales of shares in excess of
the total number being offered, thereby creating a syndicate short position.
Stabilizing involves a bid by the syndicate to purchase shares in the open
market at a specified price, which may not exceed the public offering price and
may be decreased but not increased. Syndicate short covering involves open
market purchases of shares to cover all or a portion of the syndicate short
position created by over-allotments. A penalty bid permits the Representative to
reclaim selling concessions from a syndicate member when shares sold by that
member in the Offering are purchased by the Representative in the open market to
cover a syndicate short position or pursuant to a stabilizing bid. All of these
activities may cause the market price of the common stock to be higher than
otherwise might be the case in the absence of these activities. These
transactions may be effected on the Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time.
The foregoing includes a summary of certain principal terms of the
Underwriting Agreement and does not purport to be complete. Reference is made to
the copy of the Underwriting Agreement that is on file as an exhibit to the
Registration Statement on Form S-1 (the "Registration Statement") under the
Securities Act and filed by the Company with the Commission with respect to the
shares of common stock offered hereby, of which this Prospectus is a part.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for the Company by Schnader Harrison Segal & Lewis LLP, Atlanta, Georgia.
Troutman Sanders LLP, Atlanta, Georgia, has served as counsel to the
Underwriters in connection with this Offering.
101
<PAGE> 103
EXPERTS
The financial statements of Sunbelt Automotive Group, Inc. at March 31,
1998 and for the period from December 17, 1997 (inception) to March 31, 1998,
the consolidated financial statements of Boomershine Automotive Group, Inc. and
Subsidiaries at June 30, 1996 and 1997 and the three years in the period ended
June 30, 1997, the financial statements of Jay Automotive Group, Inc. at
December 31, 1996 and 1997 and the three years in the period ended December 31,
1997, the financial statements of Grindstaff, Inc. at December 31, 1996 and 1997
and the three years in the period ended December 31, 1997, the financial
statements of Day's Chevrolet, Inc. at December 31, 1996 and 1997 and the years
then ended, and the financial statements of Robertson Oldsmobile-Cadillac, Inc.
at December 31, 1996 and 1997 and the years then ended, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing. The combined financial
statements of Wade Ford, Inc. and Wade Ford Buford, Inc., at December 31, 1996
and 1997 and the three years in the period ended December 31, 1997 appearing in
this Prospectus and Registration Statement have been audited by Pyke & Pierce,
Certified Public Accountants, LLP, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing. The
financial statements of South Financial Corporation at December 31, 1996 and
1997 and the three years in the period ended December 31, 1997 appearing in this
Prospectus and Registration Statement have been audited by Davis Monk & Company,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the shares of common stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the shares of common stock offered
hereby, reference is made to the Registration Statement, including the exhibits
and schedules filed as part thereof. Statements contained in this Prospectus as
to the contents of any contract or any other documents are not necessarily
complete, and, in each such instance, reference is made to the copy of the
contract or document filed as an exhibit to the Registration Statement, each
such statement being qualified in all respects by such reference thereto. The
Registration Statement, together with its exhibits and schedules, may be
inspected at the Public Reference Section of the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at 7 World Trade Center, Suite 1300, New York, NY 10048, and
at the Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
IL 60661. Copies of all or any part of such materials may be obtained from any
such office upon payment of the fees prescribed by the Commission. 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.
The Company is not currently subject to the periodic reporting and
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). As a result of the Offering, the Company will be required
to file reports and other information with the Commission pursuant to the
requirements of the Exchange Act. Such reports and other information may be
obtained from the Commission's Public Reference Section and copied at the public
reference facilities and regional offices referred to above.
102
<PAGE> 104
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUNBELT AUTOMOTIVE GROUP, INC.
Report of Independent Auditors.............................. F-3
Financial Statements:
Balance Sheet............................................. F-4
Statement of Operations................................... F-5
Statement of Shareholders' Equity (Deficit)............... F-6
Statement of Cash Flows................................... F-7
Notes to Financial Statements............................. F-8
BOOMERSHINE AUTOMOTIVE GROUP, INC.
Report of Independent Auditors.............................. F-12
Consolidated Financial Statements:
Consolidated Balance Sheets............................... F-13
Consolidated Statements of Operations and Changes in
Retained Earnings...................................... F-14
Consolidated Statements of Cash Flows..................... F-15
Notes to Consolidated Financial Statements................ F-16
JAY AUTOMOTIVE GROUP, INC.
Report of Independent Auditors.............................. F-26
Financial Statements:
Balance Sheets............................................ F-27
Statements of Income...................................... F-28
Statements of Cash Flows.................................. F-29
Notes to Financial Statements............................. F-30
GRINDSTAFF, INC.
Report of Independent Auditors.............................. F-37
Financial Statements:
Balance Sheets............................................ F-38
Statements of Operations.................................. F-39
Statements of Stockholders' Equity........................ F-40
Statements of Cash Flows.................................. F-41
Notes to Financial Statements............................. F-42
WADE FORD, INC. AND WADE FORD BUFORD, INC.
Independent Auditor's Report................................ F-48
Combined Financial Statements:
Combined Balance Sheets................................... F-49
Combined Statements of Income and Retained Earnings....... F-50
Combined Statements of Cash Flows......................... F-51
Notes to Combined Financial Statements.................... F-52
ROBERTSON OLDSMOBILE-CADILLAC, INC.
Report of Independent Auditors.............................. F-58
Financial Statements:
Balance Sheets............................................ F-59
Statements of Income and Changes in Retained Earnings..... F-60
Statements of Cash Flows.................................. F-61
Notes to Financial Statements............................. F-62
</TABLE>
F-1
<PAGE> 105
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DAY'S CHEVROLET, INC.
Report of Independent Auditors.............................. F-68
Financial Statements:
Balance Sheets............................................ F-69
Statements of Income and Changes in Retained Earnings..... F-70
Statements of Cash Flows.................................. F-71
Notes to Financial Statements............................. F-72
SOUTH FINANCIAL CORPORATION
Independent Auditors' Report................................ F-77
Financial Statements:
Balance Sheets............................................ F-78
Statements of Operations and Retained Earnings............ F-79
Statements of Cash Flows.................................. F-80
Notes to Financial Statements............................. F-81
</TABLE>
F-2
<PAGE> 106
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Sunbelt Automotive Group, Inc.
We have audited the accompanying balance sheet of Sunbelt Automotive Group,
Inc. as of March 31, 1998, and the related statements of operations,
shareholders' equity (deficit) and cash flows for the period from December 17,
1997 (date of inception) through March 31, 1998. 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Sunbelt Automotive Group,
Inc. at March 31, 1998, and the results of its operations and its cash flows for
the period from December 17, 1997 (date of inception) through March 31, 1998 in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
May 11, 1998
F-3
<PAGE> 107
SUNBELT AUTOMOTIVE GROUP, INC.
BALANCE SHEET
MARCH 31, 1998
<TABLE>
<S> <C>
ASSETS
Cash........................................................ $ 3,000
---------
$ 3,000
=========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable -- affiliates.............................. $ 611,236
---------
Total current liabilities......................... 611,236
Shareholders' equity (deficit):
Common stock, $0.001 par value, 450,000,000 shares
authorized, 6,000 shares issued and outstanding........... 6
Preferred stock, $0.001 par value, 50,000,000 shares
authorized, none issued and outstanding................... --
Additional paid in capital.................................. 2,994
Accumulated deficit......................................... (611,236)
---------
Total shareholders' equity (deficit).............. (608,236)
---------
$ 3,000
=========
</TABLE>
See accompanying notes.
F-4
<PAGE> 108
SUNBELT AUTOMOTIVE GROUP, INC.
STATEMENT OF OPERATIONS
PERIOD FROM DECEMBER 17, 1997 (DATE OF INCEPTION) THROUGH MARCH 31, 1998
<TABLE>
<S> <C>
Revenues:
Vehicle sales............................................. $ --
Parts and service......................................... --
Finance, commission and other revenues, net............... --
---------
Cost of sales:
Vehicle sales............................................. --
Parts and service......................................... --
---------
Gross profit................................................ --
Selling, general and administrative......................... 611,236
---------
Loss from operations........................................ (611,236)
Interest expense............................................ --
Interest income............................................. --
Other income, net........................................... --
---------
Loss before income taxes.................................... (611,236)
Income taxes................................................ --
---------
Net loss.................................................... $(611,236)
=========
</TABLE>
See accompanying notes.
F-5
<PAGE> 109
SUNBELT AUTOMOTIVE GROUP, INC.
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
PERIOD FROM DECEMBER 17, 1997 (DATE OF INCEPTION) THROUGH MARCH 31, 1998
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK PREFERRED STOCK SHAREHOLDERS'
--------------- --------------- ADDITIONAL PAID ACCUMULATED EQUITY
SHARES AMOUNT SHARES AMOUNT IN CAPITAL DEFICIT (DEFICIT)
------ ------ ------ ------ --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
December 17, 1997 (date of
inception).............. -- $ -- -- $ -- $ -- $ -- $ --
Issuance of common
stock................... 6,000 6 -- -- 2,994 -- 3,000
Net loss.................. -- -- -- -- -- (611,236) (611,236)
----- ------ ------ ------ ------ --------- ---------
March 31, 1998............ 6,000 $ 6 -- $ -- $2,994 $(611,236) $(608,236)
===== ====== ====== ====== ====== ========= =========
</TABLE>
See accompanying notes.
F-6
<PAGE> 110
SUNBELT AUTOMOTIVE GROUP, INC.
STATEMENT OF CASH FLOWS
PERIOD FROM DECEMBER 17, 1997 (DATE OF INCEPTION) THROUGH MARCH 31, 1998
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss.................................................... $(611,236)
Change in accounts payable -- affiliates.................... 611,236
---------
Net cash provided by operating activities................... --
FINANCING ACTIVITIES
Proceeds from issuance of common stock...................... 3,000
---------
Net cash provided by financing activities................... 3,000
---------
Increase in cash............................................ 3,000
Cash at beginning of the period............................. --
---------
Cash at end of the period................................... $ 3,000
=========
</TABLE>
See accompanying notes.
F-7
<PAGE> 111
SUNBELT AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
Sunbelt Automotive Group, Inc. (a Georgia corporation) ("SAG" or the
"Company"), was founded on December 17, 1997 to become a leading operator and
consolidator in the automotive retailing industry. The Company intends to
acquire twenty-one automobile dealerships and related businesses which are
currently owned by eight dealership and other business groups located in
Georgia, North Carolina and Tennessee (the "Founding Groups") (the
"Acquisitions"), complete an initial public offering (the "Offering") of its
common stock and, subsequent to the Offering, continue to acquire, through
merger or purchase, similar companies to geographically expand its operations.
The Company has not conducted any operations, and all activities to date
relate to the Acquisitions. There is no assurance that the Acquisitions
discussed below will be completed and that SAG will be able to generate future
operating revenues. Funding for the Company, to date, has been provided
primarily by Boomershine Automotive Group, Inc. ("BAG"), a member of the
Founding Groups. SAG is dependent upon the Offering to fund the amounts due to
BAG and future operations. In the event that the Offering is not completed, SAG
will pursue alternative sources of funding in order to meet its current
obligations.
Major Suppliers and Franchise Agreements
The Founding Groups purchase substantially all of their new vehicles and
parts inventory from various automobile manufacturers/distributors at the
prevailing prices charged by the manufacturers/distributors to all franchise
dealers. SAG's sales volume subsequent to the Acquisitions could be adversely
impacted by the manufacturers' inability to supply the dealerships with an
adequate supply of popular models or as a result of an unfavorable allocation of
vehicles by the manufacturers.
The dealer franchise agreements contain provisions, which may limit changes
in dealership management and ownership, place certain restrictions on the
dealerships (such as minimum net worth requirements) and which also provide for
termination of the franchise agreement by the manufacturers in certain
instances. Subsequent to the Acquisitions, SAG's ability to acquire additional
franchises from a particular manufacturer may be limited due to certain
restrictions imposed by manufacturers and the acquisition of the Company's stock
by third parties may be limited by the terms of the franchise agreement.
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 in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Income Taxes
The Company follows the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards No. 109. Under this
method, deferred income taxes are recorded based upon differences between the
financial reporting and tax basis of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the underlying
assets are received or liabilities are settled.
F-8
<PAGE> 112
SUNBELT AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. PROPOSED ACQUISITIONS BY SAG
SAG has signed definitive agreements to acquire seven dealership groups and
related businesses consisting of twenty-one automobile dealerships and related
businesses. The Founding Groups are as follows:
Boomershine Group.......... Consisting of -- Boomershine Pontiac-GMC-Buick,
Inc., Boomershine Automobile Company, Boomershine
Ford, Inc., Boomershine Isuzu, Inc., Boomershine
Services, Inc., Boomershine North Cobb, Inc., d/b/a
Boomershine Mitsubishi and Commerce Credit
Corporation, Thompson Automotive Group, Inc., d/b/a
Boomershine Honda, Boomershine Collision Centers,
Inc., South Financial Corporation
Day Group.................. Consisting of -- Day's Chevrolet, Inc.
Grindstaff Group........... Consisting of -- Grindstaff Chevrolet, Chrysler,
Plymouth, Dodge
Holt Group................. Consisting of -- Hones, Inc. d/b/a Bill Holt Ford
Mercury
Jay Group.................. Consisting of -- Jay Pontiac-Buick-GMC, Inc., Jay
Automotive Group II, Inc. d/b/a Jay Toyota, Jay
Automotive Group V, Inc. d/b/a Jay Mazda
Roberston Group............ Consisting of -- Robertson Oldsmobile-Cadillac,
Inc. d/b/a Moss Robertson Mazda and Moss Robertson
Isuzu
Wade Group................. Consisting of -- Wade Ford, Inc. and Wade Ford
Buford, Inc.
The aggregate consideration that will be paid by SAG to acquire the
Founding Group is approximately $57 million in cash or promissory notes and
4,820,160 shares of SAG common stock (based on an assumed initial public
offering price of $10 per share, the midpoint of the estimated initial public
offering price range). For accounting purposes, Boomershine Group is considered
the accounting acquirer.
The following sets forth the consideration to be paid to each of the
Founding Groups:
<TABLE>
<CAPTION>
RESTRICTED COMMON STOCK
------------------------ PROMISSORY TOTAL
SHARES VALUE NOTES CASH CONSIDERATION
---------- ----- ---------- ---- -------------
<S> <C> <C> <C> <C> <C>
Boomershine Group........... 3,800,160 $ -- $ 932,000 $ 5,425,000 $ 6,357,000
Day Group................... 580,000 5,220,000 -- 5,589,000 10,809,000
Grindstaff Group............ -- -- -- 9,128,000 9,128,000
Holt Group.................. -- -- -- 750,000 750,000
Jay Group................... -- -- 4,000,000 12,000,000 16,000,000
Roberston Group............. 40,000 360,000 -- 7,711,000 8,071,000
Wade Group.................. 400,000 3,600,000 -- 11,904,000 15,504,000
--------- ---------- ---------- ----------- -----------
4,820,160 $9,180,000 $4,932,000 $52,507,000 $66,619,000
========= ========== ========== =========== ===========
</TABLE>
The Boomershine Group acquisition will be accounted for as the equivalent
of a pooling of interest as the Company and the Boomershine Group, the
accounting acquirer, have common ownership. The remaining acquisitions will be
accounted for as purchases with excess of purchase price over fair value of
assets acquired of approximately $43 million.
The promissory note issued in connection with the Boomershine Group
acquisition is due on demand and bears an interest rate of 18%. The note to be
issued in connection with the Jay Group acquisition will have a 90 day maturity
and bear an interest rate of 8%. The restricted shares have been valued using
the discounted present value method based on the time the shares are restricted
from public sale. In connection with the Wade Group and the Day Group
acquisition, the Company may be required to issue shares to the former
F-9
<PAGE> 113
SUNBELT AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
shareholders of Wade Ford and Day's Chevrolet under price protection provisions,
which compensate for any decrease in the value of shares issued below the issue
price for a year, as set forth in the applicable acquisition agreements. Any
additional shares issued in connection with these price protection provisions
will be accounted for as additional purchase price at the time of issuance.
3. GOVERNMENTAL REGULATION
Substantially all of the Founding Group's facilities are subject to
federal, state and local provisions regulating the discharge of materials into
the environment. Compliance with these provisions has not had, nor does the
Company expect such compliance to have any material effect upon the capital
expenditures, net income, financial condition or competitive position of the
Company. Management believes that its current practices and procedures of the
control and disposition of such wastes comply with applicable federal and state
requirements.
4. STOCK-BASED COMPENSATION PLANS
Stock Option Plan
Effective January 2, 1998, the Company adopted the Sunbelt Automotive
Group, Inc. 1997 & 1998 Incentive Stock Plan (the "Plan"). The Plan provides for
a committee (the "Committee") of non-employee members of the Board of Directors
to grant incentive stock options to any director, officer, employee or
consultant of the Company or any of its subsidiaries. The exercise price of the
options granted under the Plan shall be established by the Committee on or prior
to the date of issuance of the options. Options granted under the Plan vest in
accordance with vesting schedules established by the Committee at the time of
the grant. The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
On January 8, 1998, the Committee granted 425,000 options to certain of the
Company's officers. These options vest over three years and expire after ten
years. At such time, the Committee granted the forgoing options with a $6.27 per
share exercise price, based on a third-party valuation performed on the market
value of the Company's Common Stock on the date of grant. At March 31, 1998, no
options were exercisable and 1,825,000 options were available for future grant
under the Plan.
Pro forma information regarding net earnings is required by FASB Statement
No. 123 "Accounting for Stock-Based Compensation," ("SFAS 123"). SFAS 123 also
requires that the information be determined as if the Company has accounted for
its employee stock options granted under the fair value method of SFAS 123. The
fair value for these options was estimated at the date of grant using a minimum
value option pricing model with the following assumptions: risk-free interest
rate of 6.0%; no anticipated dividends; and a weighted-average expected life of
the option of three years. The weighted average grant date fair value of options
granted during the period using the minimum value option pricing model was
$1.03.
For purposes of SFAS 123 pro forma disclosures, the estimated fair value of
the options is amortized to expense over the options' vesting period. The
Company's pro forma net loss would have been $647,716 for the period from
December 17, 1997 (inception) through March 31, 1998.
Warrants
On March 13, 1998, the Company granted warrants to purchase 50,000 shares
of common stock to an outside consultant in consideration for certain financial
and accounting consulting services rendered in connection with the Offering.
These warrants vest over eighteen months and become exercisable upon the
F-10
<PAGE> 114
SUNBELT AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
completion of the Offering at an exercise price of $8.00 per share. The warrants
expire, if not exercised within a specified period from the date of grant. The
fair value of the grant using the minimum value method of option pricing was
$31,500 and will be recorded as a cost of the Offering.
5. INCOME TAXES
The following table sets forth the components of the Company's deferred tax
assets as of March 31, 1998 along with a reconciliation of income tax for the
period ended March 31, 1998. The Company has recorded a valuation allowance
against its deferred tax assets as in management's opinion, it is more likely
than not that such amounts may not be realized in future periods.
<TABLE>
<S> <C>
Benefit at the statutory rate............................... $(207,820)
Increase (decrease) resulting from:
State income tax, net of benefit for federal.............. (24,205)
Valuation allowance....................................... 232,025
---------
$ --
=========
Net operating loss carryforward............................. $ 232,025
Valuation allowance......................................... (232,025)
---------
Net deferred tax assets................................... $ --
=========
</TABLE>
6. RELATED PARTY TRANSACTIONS
In conjunction with the formation of the Company, the acquisitions
described in Note 2 and the Offering, Boomershine Group has paid certain
operating expenses including rent, salaries, utilities and organization expenses
on behalf of the Company. The balance at March 31, 1998 of $611,236 is payable
on demand and does not bear interest.
7. SUBSEQUENT EVENTS
In April 1998, the Committee granted 855,000 options to certain of the
Company's officers. At such time, the Committee granted the forgoing options
with an $8.00 per share exercise price, based on a third-party valuation
performed on the market value of the Company's Common Stock on the date of
grant. Additionally, in April 1998, the Committee granted 317,000 options to
certain of the Company's officers and management. The option grant is
conditioned upon the effectiveness of the Offering. The exercise price will be
the initial public offering price for the Company's Common Stock.
Common Stock Issuance
In April 1998, the Board of Directors of the Company approved the issuance
of 249,202 shares of Common Stock to certain of the Company's officers. The
shares were issued at $8.00 per share, the fair value at the date of issuance.
The consideration for the Common Stock issuance were notes payable to the
Company by the officers. The notes payable are due in five years and bear
interest of 8% per year. The notes will be reflected as a reduction of
shareholder's equity until repaid in full.
F-11
<PAGE> 115
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Boomershine Automotive Group, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Boomershine
Automotive Group, Inc. and Subsidiaries as of June 30, 1996 and 1997, and the
related consolidated statements of operations and changes in retained earnings
and cash flows for each of the three years in the period ended June 30, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Boomershine
Automotive Group, Inc. and Subsidiaries at June 30, 1996 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1997 in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
January 30, 1998
F-12
<PAGE> 116
BOOMERSHINE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 4,998,408 $ 4,556,291 $ 4,717,153
Accounts receivable, net.............................. 7,701,302 5,267,834 7,882,840
Finance receivables, net.............................. -- -- 13,495,149
Inventories........................................... 50,231,288 39,553,471 47,732,587
Prepaid expenses and other current assets............. 341,774 259,289 2,256,415
Refundable income taxes............................... 270,920 454,459 --
Deferred income taxes................................. 766,591 512,945 1,459,134
----------- ----------- -----------
Total current assets.......................... 64,310,283 50,604,289 77,543,278
Property and equipment, net............................. 4,187,891 3,962,564 4,412,546
Deferred income taxes................................... 101,461 54,303 16,887
Intangible assets, net.................................. 784,643 718,738 6,537,311
Other assets............................................ 264,376 332,171 438,946
----------- ----------- -----------
$69,648,654 $55,672,065 $88,948,968
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Floor plan notes payable.............................. $49,439,711 $36,798,078 $49,917,664
Senior debt........................................... -- -- 11,470,680
Notes payable -- affiliates........................... 3,457,215 3,299,926 7,254,948
Accrued liabilities................................... 4,406,168 2,905,053 2,593,850
Accounts payable...................................... 1,320,431 1,677,447 2,359,021
Current maturities of long-term debt.................. 98,333 38,333 1,921,073
Deferred income taxes................................. -- -- 959,374
Dealer finance reserves............................... -- -- 306,420
----------- ----------- -----------
Total current liabilities..................... 58,721,858 44,718,837 76,783,030
Long-term debt, less current maturities................. 523,889 482,362 360,050
Income taxes payable.................................... 2,060,440 2,187,910 2,208,701
Other liabilities....................................... 283,803 309,719 356,850
Stockholders' equity:
Class A voting common stock, no par value, 500,000
shares authorized, 3,600, 3,600 and 72,000 shares
issued and outstanding, respectively............... 198,686 198,686 3,973,704
Class B non-voting common stock, no par value, 500,000
shares authorized, 68,400, 68,400 and 0 shares
issued and outstanding, respectively............... 3,775,018 3,775,018 --
Retained earnings..................................... 4,084,960 3,999,533 5,266,633
----------- ----------- -----------
Total stockholders' equity.................... 8,058,664 7,973,237 9,240,337
----------- ----------- -----------
$69,648,654 $55,672,065 $88,948,968
=========== =========== ===========
</TABLE>
See accompanying notes.
F-13
<PAGE> 117
BOOMERSHINE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND CHANGES IN RETAINED EARNINGS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
------------------------------------------ ---------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Vehicle sales...................... $214,001,989 $230,851,161 $214,435,923 $160,556,742 $152,856,735
Parts and service.................. 19,223,080 23,763,491 24,636,720 17,688,698 19,108,036
Finance, commission and other
revenues, net.................... 3,855,623 4,219,077 5,339,652 4,355,392 5,398,910
------------ ------------ ------------ ------------ ------------
237,080,692 258,833,729 244,412,295 182,600,832 177,363,681
Cost of sales:
Vehicle sales...................... 203,591,143 220,215,226 204,301,660 153,377,193 145,801,173
Parts and service.................. 10,816,132 11,553,747 15,018,056 10,168,079 11,225,178
------------ ------------ ------------ ------------ ------------
214,407,275 231,768,973 219,319,716 163,545,272 157,026,351
------------ ------------ ------------ ------------ ------------
Gross profit......................... 22,673,417 27,064,756 25,092,579 19,055,560 20,337,330
Selling, general and
administrative..................... 20,332,772 24,769,911 23,151,867 17,356,773 17,307,749
------------ ------------ ------------ ------------ ------------
Income from operations............... 2,340,645 2,294,845 1,940,712 1,698,787 3,029,581
Interest expense..................... 1,436,394 1,774,285 2,230,144 1,408,795 1,543,663
Interest income...................... 218,607 181,318 119,706 184,142 247,428
Other income (expense), net.......... 60,606 12,585 44,303 (80,156) (68,215)
------------ ------------ ------------ ------------ ------------
Income (loss) before taxes........... 1,183,464 714,463 (125,423) 393,978 1,665,131
Income tax (expense) benefit......... (448,842) (212,269) 39,996 (118,993) (398,031)
------------ ------------ ------------ ------------ ------------
Net income (loss)........... 734,622 502,194 (85,427) 274,985 1,267,100
Retained earnings at beginning of
period............................. 2,848,144 3,582,766 4,084,960 4,084,960 3,999,533
------------ ------------ ------------ ------------ ------------
Retained earnings at end of period... $ 3,582,766 $ 4,084,960 $ 3,999,533 $ 4,359,945 $ 5,266,633
============ ============ ============ ============ ============
</TABLE>
See accompanying notes.
F-14
<PAGE> 118
BOOMERSHINE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
----------------------------------------- -------------------------
1995 1996 1997 1997 1998
------------ ----------- ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)....................... $ 734,622 $ 502,194 $ (85,427) $ 274,985 $ 1,267,100
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization......... 382,828 556,034 823,575 608,758 644,809
Amortization of intangible assets..... 22,788 44,223 65,905 50,679 119,275
Deferred income taxes................. (386,533) (82,510) 300,804 225,606 (215,885)
Loss on sale of property and
equipment........................... 187 2,747 14,268 -- --
Changes in assets and liabilities:
Accounts receivable, net............ (4,747,808) 2,140,834 2,433,468 2,295,454 (2,173,947)
Finance receivables................. -- -- -- -- (648,377)
Inventories......................... (19,874,742) (1,741,471) 10,677,817 8,215,777 (8,105,375)
Prepaid expenses and other assets... 123,684 2,520 82,485 56,623 (1,969,474)
Floor plan notes payable............ 25,160,314 2,823,261 (12,641,633) (8,096,269) 13,119,586
Accounts payable and accrued
liabilities....................... 2,257,945 (283,535) (1,144,099) (2,315,385) 28,230
Dealer finance reserves............. -- -- -- -- (420,258)
Income taxes........................ 410,312 74,894 (56,069) (106,613) 475,250
Other assets and liabilities........ 113,541 (525,822) (41,879) (124,800) (59,644)
------------ ----------- ------------ ----------- -----------
Net cash provided by operating
activities................... 4,197,138 3,513,369 429,215 1,084,815 2,061,290
INVESTING ACTIVITIES
Purchases of property and equipment..... (1,715,385) (2,450,747) (808,516) (1,208,023) (697,070)
Cost of acquisitions, net of cash
acquired.............................. (1,281,376) (2,107,458) -- -- (5,360,924)
Proceeds on disposal of property and
equipment............................. 256,413 319,913 196,000 380,494 --
------------ ----------- ------------ ----------- -----------
Net cash used in investing
activities................... (2,740,348) (4,238,292) (612,516) (827,529) (6,057,994)
FINANCING ACTIVITIES
Principal payments on notes payable --
affiliates, net....................... 259,064 691,953 (157,289) (76,269) 3,963,814
Borrowings of long-term debt............ 600,000 -- -- -- 219,308
Principal payments on long-term debt.... (60,000) (682,778) (101,527) (92,492) (25,556)
------------ ----------- ------------ ----------- -----------
Net cash provided by (used in)
financing activities......... 799,064 9,175 (258,816) (168,761) 4,157,566
------------ ----------- ------------ ----------- -----------
Change in cash and cash equivalents..... 2,255,854 (715,748) (442,117) 88,525 160,862
Cash and cash equivalents at beginning
of the period......................... 3,458,302 5,714,156 4,998,408 4,998,408 4,556,291
------------ ----------- ------------ ----------- -----------
Cash and cash equivalents at end of the
period................................ $ 5,714,156 $ 4,998,408 $ 4,556,291 $ 5,086,933 $ 4,717,153
============ =========== ============ =========== ===========
</TABLE>
See accompanying notes.
F-15
<PAGE> 119
BOOMERSHINE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1997
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF BUSINESS
Boomershine Automotive Group, Inc. and Subsidiaries (the Company) is
principally engaged in the business of selling and servicing new and used
vehicles. The Company operates eight dealerships in Metropolitan Atlanta
consisting of Ford, Pontiac-GMC, Nissan, Buick, Honda, Mitsubishi, Isuzu, and
Hummer.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Boomershine
Automotive Group, Inc., (the Company), and its wholly-owned subsidiaries:
Boomershine Pontiac-GMC Truck, Inc., Boomershine Automobile Company (a Georgia
Corporation), Boomershine Ford, Inc., Boomershine Isuzu, Inc., Boomershine
Services, Inc., Boomershine North Cobb, Inc., d/b/a Boomershine Mitsubishi and
Commerce Credit Corporation, and its 86% owned subsidiary, Thompson Automotive
Group, Inc., d/b/a Boomershine Honda. The minority stockholders' interest in the
net assets of the 86% owned subsidiary is included in the consolidated balance
sheet, and the minority stockholders' interest in the subsidiary's net loss has
been considered in computing the consolidated net loss. All significant
intercompany accounts and transactions have been eliminated in consolidation.
DEALERSHIP ACQUISITIONS
During 1995, the Company acquired a Honda dealership in Cartersville,
Georgia that included new vehicle inventories, parts and accessories and certain
other assets for $1,281,376. During 1996, the Company acquired a Buick
dealership in Atlanta, Georgia that included vehicle inventories and certain
other assets for $2,107,458 and the issuance of a note payable of $575,000 due
in 1999. The acquisitions have been accounted for using the purchase method of
accounting. The accompanying consolidated financial statements include the
results of the acquired dealerships' operations from the dates of acquisition.
Pro forma information is not provided because the impact of the acquisitions
does not have a material effect on the Company's results of operations, cash
flows or financial position.
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 in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, contracts in transit
pertaining to the sale of vehicles, and all highly liquid investments with an
original maturity of three months or less at the date of purchase.
INVENTORIES
In connection with the Offering, the Company intends to convert from the
last-in, first-out method (the "LIFO Method") of inventory accounting to the
specific identification method, for its inventories of new and used vehicles. In
accordance with Accounting Principles Board Opinion No. 20, "Accounting
Changes", the accompanying financial statements and related notes have been
retroactively restated to reflect that change in accounting principle.
Accordingly, inventories of new and used vehicles are stated at the lower of
specific cost
F-16
<PAGE> 120
BOOMERSHINE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
or market. Inventories of parts and accessories are stated at the lower of
first-in, first-out ("FIFO") cost or market.
The new method of accounting for inventories of new and used vehicles was
adopted to provide a better matching of revenues and expenses and to conform
with the predominant industry practice for automobile dealerships that are
publicly-held. The effect of the accounting change on net income (loss) as
previously reported is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------
1995 1996 1997
-------- --------- ---------
<S> <C> <C> <C>
Net income (loss) on the LIFO Method................. $478,281 $(316,618) $(357,690)
Adjustment for effect of a change in accounting
principle that is applied retroactively............ 256,341 818,812 272,263
-------- --------- ---------
Net income (loss) as adjusted.............. $734,622 $ 502,194 $ (85,427)
======== ========= =========
</TABLE>
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. The Company generates ancillary revenues from its vehicle sales
operation. Such revenues include finance fees, insurance fees, and warranty
contract 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 and warranty commissions are
recognized in income upon customer acceptance of the contract terms as evidenced
by contract execution. Gross revenues related to finance fees and insurance and
warranty commissions amounted to $5,094,956, $8,278,826, and $8,372,554 for the
years ended June 30, 1995, 1996 and 1997, respectively. These revenues are
presented net of associated costs of $1,239,333, $4,059,749 and $3,032,902 for
the years ended June 30, 1995, 1996 and 1997, respectively in other revenues.
The Company is charged back a portion of fees and commissions earned on
finance or insurance contracts if the customer terminates a contract prior to
its scheduled maturity. The estimated allowance for these chargebacks is based
upon the Company's historical experience for prepayments or defaults on the
finance and insurance contracts.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost less accumulated depreciation.
Depreciation is provided predominately on the straight-line method over the
estimated useful lives of the assets. The ranges of estimated useful lives are
as follows:
<TABLE>
<S> <C>
Buildings.................................................. 15 - 20 years
Furniture and fixtures..................................... 5 - 7 years
Leasehold improvements..................................... 5 - 18 years
Machinery and shop equipment............................... 5 - 12 years
Rental cars and company vehicles........................... 3 years
</TABLE>
F-17
<PAGE> 121
BOOMERSHINE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLES
Intangibles consist principally of goodwill, which represents the excess of
cost over assigned fair market value of dealerships acquired and franchise
rights and are being amortized on a straight-line basis over their estimated
useful lives, not exceeding 40 years. Accumulated amortization was $317,712 and
$383,617 at June 30, 1996 and 1997, respectively. The carrying amount of
intangibles and other long lived assets are reviewed if facts and circumstances
suggest that it may be impaired. If this review indicates that these assets will
not be recoverable, as determined based on the estimated undiscounted cash flows
of the entity acquired over the remaining amortization period, the carrying
amount of the asset is reduced by the estimated shortfall of the discounted cash
flows.
MAJOR SUPPLIER
The Company purchases substantially all of its new vehicles and parts
inventory from automobile manufacturers/distributors at the prevailing prices
charged by the manufacturers/distributors to all franchise 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.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of contracts in transit and
accounts receivable. Also, at times, cash deposits in banks exceed the Federal
Deposit Insurance Corporation insurance limit. Contracts in transit are for
funds received shortly after balance sheet date from contracts financed with
financial institutions. Trade receivables principally result from extending
short-term credit to a large number of customers and other automotive dealers
located in the North Georgia area. Finance companies receivables are commissions
on credit contracts of customers. Receivables also result from transactions with
automotive manufacturers. Although the Company is directly affected by the
economic conditions in the automotive industry, financial institutions, banks,
its customers and the general economy of the Atlanta and North Georgia area,
management does not believe significant credit risk exists.
ADVERTISING
The Company expenses the cost of advertising as incurred. Advertising
expense was approximately $1,900,000, $2,700,000 and $2,538,000 for the years
ended June 30, 1995, 1996 and 1997, respectively.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company considers the carrying amounts of significant classes of
financial instruments on the consolidated balance sheet, including cash and
contracts in transit, notes payable and long-term debt to be reasonable
estimates of fair value. Fair value of the Company's debt was estimated using
discounted cash flow analysis, based on the Company's current incremental
borrowing rates for similar types of arrangements.
INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements as of March 31, 1998 and
for the nine months ended March 31, 1997 and 1998 have been prepared on
substantially the same basis as the audited financial statements and include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial information set forth therein.
F-18
<PAGE> 122
BOOMERSHINE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following at June 30, 1996 and 1997:
<TABLE>
<CAPTION>
JUNE 30,
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Parts, service and wholesale................................ $4,929,130 $3,435,110
Factory..................................................... 2,079,487 1,756,567
Finance companies........................................... 696,471 233,532
Employees................................................... 122,553 19,404
Other....................................................... 6,882 53,862
---------- ----------
7,834,523 5,498,475
Less allowance for doubtful accounts........................ 133,221 230,641
---------- ----------
$7,701,302 $5,267,834
========== ==========
</TABLE>
3. INVENTORIES
Inventories consist of the following at June 30, 1996 and 1997:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------
1996 1997
----------- -----------
<S> <C> <C>
New vehicles................................................ $41,240,836 $32,942,563
Used vehicles............................................... 7,204,193 4,994,574
Parts, accessories and other................................ 1,786,259 1,616,334
----------- -----------
$50,231,288 $39,553,471
=========== ===========
</TABLE>
4. PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows as of June 30, 1996 and
1997:
<TABLE>
<CAPTION>
JUNE 30,
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Buildings................................................... $ 904,954 $1,005,885
Leasehold improvements...................................... 1,116,411 1,169,026
Machinery and shop equipment................................ 2,257,615 2,620,613
Furniture and fixtures...................................... 1,302,609 1,481,849
Rental cars and company vehicles............................ 1,383,665 1,010,845
---------- ----------
6,965,254 7,288,218
Less accumulated depreciation and amortization.............. 2,777,363 3,325,654
---------- ----------
$4,187,891 $3,962,564
========== ==========
</TABLE>
F-19
<PAGE> 123
BOOMERSHINE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. FLOOR PLAN NOTES PAYABLE, SENIOR DEBT, AND NOTES PAYABLE -- AFFILIATES
A summary of notes payable is as follows:
<TABLE>
<CAPTION>
JUNE 30,
------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Floor plan notes payable........................ $49,439,711 $36,798,078 $49,917,664
Senior debt, secured, bearing interest at LIBOR
plus 5.6% matures September 1998.............. -- -- 11,470,680
Notes payable -- stockholders; bearing interest
at prime rate; due on demand; unsecured....... 2,242,825 2,161,103 1,584,238
Notes payable -- employees; bearing interest at
prime rate; due on demand; unsecured.......... 630,336 458,384 338,404
Notes payable -- WINCO Partnerships; bearing
interest at prime rate; due on demand;
unsecured..................................... 584,054 680,439 832,306
Notes payable -- WINCO Partnerships; bearing
interest at prime; due on July 1998;
unsecured..................................... -- -- 4,500,000
----------- ----------- -----------
3,457,215 3,299,926 7,254,948
----------- ----------- -----------
$52,896,926 $40,098,004 $68,643,292
=========== =========== ===========
</TABLE>
Floor plan notes payable consists of notes with financial institutions. The
floor plan notes are secured by certain new and used vehicles. The floor plan
arrangements permit the Company to borrow up to approximately $49,500,000 and
$43,250,000 in 1996 and 1997, respectively, restricted by new and used vehicle
levels. The notes are generally due within ten days of the vehicle being sold or
after the vehicle has been in inventory for one year for new vehicles and after
three months for used vehicles. The notes bear interest based on contractual
rates, which ranged from approximately 7.5% to 8.3% and 7.1% to 8.0% at June 30,
1996 and 1997, respectively.
Senior debt at March 31, 1998, is comprised of a secured revolving note
payable to General Electric Capital Corporation (G.E. Capital) assumed in
connection with the purchase of South Financial Corporation (SFC). The G.E.
Capital revolving note is secured by finance contracts assigned to G.E. Capital
as well as all other assets. All contract collections are remitted directly to
G.E. Capital and applied towards the outstanding balance. Under the loan and
security agreement, SFC may borrow up to $15,000,000 by obtaining advances of
90% on SFC's net investment in all eligible contracts. The loan matures
September 1998, with provisions for automatic annual renewals unless terminated
by either party. The loan bears interest at LIBOR plus 5.6%. As of March 31,
1998, SFC was not in compliance with its credit agreement with G.E. Capital
Corporation, however; certain financial ratio covenants have been waived by G.E.
Capital for the period December 31, 1997 through September 30, 1998, which
allows SFC to be in compliance with its credit agreement.
WINCO I, L.P., WINCO II, L.P. and WINCO III, L.P. (collectively, the "WINCO
Partnerships") are partnerships controlled by Walter M. Boomershine, Jr. and
owned by Walter M. Boomershine, Jr. and his family. Walter M. Boomershine, Jr.
and his family own 100% of the Company. This note payable, which matures on July
1998, was made in connection with the acquisition of South Financial Corporation
and carries an interest at prime as announced by NationsBank, N.A. from time to
time. The Company has the option to refinance the loan for an additional term of
five years subsequent to said maturity date, at an interest rate of 8% per
annum, using a 20-year amortization.
F-20
<PAGE> 124
BOOMERSHINE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. ACCRUED LIABILITIES
Accrued liabilities consist of the following at June 30, 1996 and 1997:
<TABLE>
<CAPTION>
JUNE 30,
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Salaries, wages, bonus and vacation......................... $1,188,070 $ 608,286
Finance reserve............................................. 434,627 538,800
Accrued taxes............................................... 586,035 397,284
Accrued interest............................................ 572,103 284,107
Other accrued liabilities................................... 1,625,333 1,076,576
---------- ----------
$4,406,168 $2,905,053
========== ==========
</TABLE>
7. LONG-TERM DEBT
A summary of long-term debt as of June 30, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
JUNE 30,
------------------- MARCH 31,
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Note payable -- Jim Peters; bearing interest at 18%,
due on demand, unsecured............................ $ -- $ -- $1,013,442
Note payable -- Mobile Loan Co.; bearing interest at
LIBOR plus 2%, payable monthly, balance due February
1999, unsecured..................................... 557,222 520,695 492,336
Note payable -- CIT Group; bearing interest at 11%,
payable monthly, balance due November 2001,
secured............................................. -- -- 483,476
Note payable -- Investors Equity Corporation; bearing
interest at 18%, payable monthly, balance due
December 2000, unsecured............................ -- -- 291,869
Other................................................. 65,000 -- --
-------- -------- ----------
622,222 520,695 2,281,123
Less current maturities of long-term debt............. 98,333 38,333 1,921,073
-------- -------- ----------
$523,889 $482,362 $ 360,050
======== ======== ==========
</TABLE>
The note payable to Jim Peters was made in connection with the purchase of
the Collision Centers, Inc. See further discussion of the Collision Center
acquisition in Note 14. The note payable to Mobile Loan Company was made in
connection with the purchase of the Buick dealership in 1996. In December 1997,
the Company signed a promissory note to fund the lease of certain equipment. The
note to Investors Equity Corporation was assumed in connection with the purchase
of South Financial Corporation in January 1998.
During 1995, 1996 and 1997, total cash paid for interest on notes payable
and long-term debt was approximately $1,770,000, $1,400,000 and $2,230,000
respectively.
8. INCOME TAXES
The Company files consolidated Federal and State income tax returns with
its subsidiaries. The current income tax provision represents the amount of
income taxes paid or payable for the year. The deferred income
F-21
<PAGE> 125
BOOMERSHINE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES (CONTINUED)
tax provision represents the change in deferred tax liabilities and assets.
Significant components of the provisions for income taxes are as follows for the
year ended June 30, 1995, 1996 and 1997, respectively:
<TABLE>
<CAPTION>
JUNE 30,
---------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Current income tax (expense) benefit:
Federal........................................... $(703,031) $(244,764) $ 287,179
State............................................. (132,344) (50,015) 53,621
Deferred income tax benefit (expense)............... 386,533 82,510 (300,804)
--------- --------- ---------
Total provision for income tax (expense)
benefit................................. $(448,842) $(212,269) $ 39,996
========= ========= =========
</TABLE>
The Company utilized net operating loss carrybacks for Federal and State
income tax purposes of approximately $1,234,000 during the year ended June 30,
1997. The Company paid income taxes of $450,000 and $253,667 for the years ended
June 30, 1995 and 1996, respectively. The Company received refunds of income
taxes of approximately $443,000 in 1997.
A reconciliation of the expected income tax benefit (expense) at the
statutory federal rate to the Company's actual income tax provision for the year
ended June 30, 1995, 1996 and 1997, respectively follows:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------------
1995 1996 1997
--------- --------- -------
<S> <C> <C> <C>
Federal statutory (expense) benefit................... $(402,378) $(242,917) $42,644
State (expense) benefit, net of federal (expense)
benefit............................................. (47,327) (28,571) 5,017
Other................................................. 863 59,219 (7,665)
--------- --------- -------
$(448,842) $(212,269) $39,996
========= ========= =======
</TABLE>
Deferred income taxes are recognized for tax consequences of temporary
differences between the financial and tax bases of existing assets and
liabilities by applying enacted statutory tax rates to such differences.
Significant components of the Company's deferred tax liabilities and assets as
of June 30, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
JUNE 30,
---------------------
1996 1997
---------- --------
<S> <C> <C>
Deferred tax assets:
Deferred compensation..................................... $ 69,675 $ 82,918
Intangibles............................................... 75,499 70,431
Accrued liabilities....................................... 620,379 211,185
Bad debt reserve.......................................... 50,624 87,643
Finance reserves.......................................... 155,345 204,744
Inventories............................................... 41,236 87,197
Other..................................................... 31,996 36,639
---------- --------
Total deferred tax assets......................... 1,044,754 780,757
Deferred tax liabilities:
Property and equipment.................................... 43,713 99,048
Other..................................................... 132,989 114,461
---------- --------
Total deferred tax liabilities.................... 176,702 213,509
---------- --------
Total net deferred tax assets..................... $ 868,052 $567,248
========== ========
</TABLE>
F-22
<PAGE> 126
BOOMERSHINE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES (CONTINUED)
Deferred tax assets are recognized for the tax benefit of deducting timing
differences. Valuation allowances are recognized on these assets if it is
believed that some or all of the deferred tax assets will not be realized.
Management believes the majority of deferred tax assets will be realized because
of the available taxable income in carryback years and anticipated future
taxable income resulting from operations; therefore, no valuation allowance was
considered necessary.
A change to the specific identification cost method from the LIFO Method
for new and used vehicle inventories resulted in an additional income tax
liability. This liability was recorded as $2,060,440 and $2,187,910 at June 30,
1996 and 1997, respectively and is payable over a four year period beginning in
September 1998.
9. MINORITY STOCKHOLDERS' INTEREST IN CONSOLIDATED SUBSIDIARY
A related party to the Company's principal owner owns 100,000 shares (14%)
non-voting common stock of the Company's subsidiary, Thompson Automotive Group,
Inc., d/b/a Boomershine Honda. The capital stock of the subsidiary has no par
value. The book value of this stock was $95,447 and $91,514 and at June 30, 1996
and 1997, respectively. The minority stockholder's interest in the subsidiary's
net income (loss) was not significant in the years ended June 30, 1995, 1996 and
1997.
10. CONTINGENCIES
At June 30, 1997, there were certain lawsuits and claims pending against
the Company. In the opinion of management, the ultimate liabilities, if any,
resulting from such lawsuits and claims, will not materially affect the
operating results liquidity or the financial position of the Company.
11. COMMITMENTS AND TRANSACTIONS WITH RELATED PARTIES
The Company is obligated to WINCO I, L.P., a related party, under certain
non-cancelable leases. These leases, which cover the lease of certain buildings,
land and equipment provide for the following payments:
<TABLE>
<S> <C>
1998........................................................ $ 1,642,188
1999........................................................ 1,642,188
2000........................................................ 1,642,188
2001........................................................ 1,664,188
2002........................................................ 1,694,188
Later years................................................. 15,897,302
-----------
Total minimum payments............................ $24,182,242
===========
</TABLE>
Total rent expense for the years ended June 30, 1995, 1996 and 1997 was
$1,188,538, $1,288,465 and $1,588,045, respectively. Rent expense includes
$1,095,000, $1,288,465 and $1,578,245 for leases with related parties for the
years ended June 30, 1995, 1996 and 1997, respectively.
12. GOVERNMENTAL REGULATION
Substantially all of the Company's facilities are subject to federal, state
and local provisions regulating the discharge of materials into the environment.
Compliance with these provisions has not had, nor does the Company expect such
compliance to have any material effect upon the capital expenditures, net
income, financial condition or competitive position of the Company. Management
believes that its current practices and procedures of the control and
disposition of such wastes comply with applicable federal and state
requirements.
F-23
<PAGE> 127
BOOMERSHINE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. EMPLOYEE BENEFIT PLAN
The Company has an employee savings plan under Section 401(k) of the
Internal Revenue Code. This plan covers substantially all full time employees.
The Company matches the employees' contributions of up to four percent of
compensation at the rate of $0.50 per $1.00 on the first 2% of compensation
contributed and $0.25 per $1.00 on the next 2% of compensation contributed. The
Company's contributions generally vest over 5 years. The amount charged against
income for the Company's contributions to the plan for the years ended June 30,
1995, 1996 and 1997 was $102,752, $132,612 and $144,737, respectively.
14. SUBSEQUENT EVENTS
Subsequent to June 30, 1997, the Company canceled and retired all of its
Class B non-voting common stock and reissued the same number of shares of Class
A voting common stock. As a result of the cancellation and reissuance, as of
March 31, 1998, there were 72,000 shares of Class A voting common stock, no par
value, issued and outstanding and no Class B common stock issued and
outstanding.
In December 1997, the Company entered into a lease agreement related to
certain equipment. The lease, which was accounted for as a capital lease,
resulted in the recording of a note payable of approximately $535,000, of which
approximately $123,000 is due in fiscal 1998.
In December 1997, the Company purchased an automobile repair business that
consisted of three repair centers in the Metropolitan Atlanta area. The
acquisition included the purchase of certain assets and assumption of
liabilities, the payment of $775,000 and the issuance of notes payable of
approximately $932,000 due in 1998. The acquisition was accounted for as a
purchase. The excess purchase price over fair value of assets acquired of
approximately $1.9 million was allocated to goodwill to be amortized over 40
years.
In January 1998, the Company purchased South Financial Corporation, a
finance company with operations in Florida, North Carolina and Tennessee. The
primary business of South Financial Corporation is to purchase from retail
automobile dealers sales contracts of substandard credit arising from the sale
of used automobiles. The acquisition included the purchase of certain assets and
assumption of liabilities and the payment of $4,650,000. The acquisition was
accounted for as a purchase. The excess purchase price over fair value of assets
acquired of approximately $4.0 million was allocated to goodwill to be amortized
over 40 years. In order to finance the South Financial Corporation acquisition
the Company borrowed $4.5 million from WINCO I, L.P. The promissory note is due
July 1998 and bears interest at the prime rate as announced by NationsBank. The
Company has the option to refinance the note for five years at an interest rate
of 8%.
The results of operations for these acquisitions have been included from
the date of acquisition through March 31, 1998 in the accompanying Unaudited
Consolidated Statement of Operations. The following pro forma financial data is
presented as if the acquisitions had been acquired on July 1, 1996 and July 1,
1997, respectively:
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31,
----------------------------
1997 1998
------------ ------------
<S> <C> <C>
Revenues.............................................. $189,455,266 $181,223,681
Net income(loss)...................................... $ (417,336) $ 229,296
</TABLE>
The pro forma information presented above is not necessarily indicative of
the operating results that would have occurred had the acquisitions been
acquired on July 1, 1996 and July 1, 1997. These results are also not
necessarily indicative of future operations.
In January 1998, the Board of Directors approved the Company to exchange
shares of its common stock with Sunbelt Automotive Group, Inc. ("Sunbelt
Automotive"), a related company through common ownership, in connection with the
filing of a registration statement with the Securities and Exchange
F-24
<PAGE> 128
BOOMERSHINE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. SUBSEQUENT EVENTS (CONTINUED)
Commission. Contemporaneously with the offering by Sunbelt Automotive, the
Company will merge with and into Sunbelt Automotive, which will result in each
of the Company's dealerships and operating divisions becoming direct or indirect
wholly-owned subsidiaries of Sunbelt Automotive. The Company's shareholders will
receive approximately 3,800,000 shares of Sunbelt Automotive common stock in
exchange for the issued and outstanding common stock of the Company. This
transaction will be accounted for similar to a pooling of interests as the
Company and Sunbelt Automotive have common ownership.
F-25
<PAGE> 129
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Jay Automotive Group, Inc.
We have audited the accompanying balance sheets of Jay Automotive Group,
Inc. (as defined in Note 1, Basis of Presentation) as of December 31, 1996 and
1997, and the related statements of income and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the management of Jay Automotive Group, Inc. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Jay Automotive Group, Inc.
at December 31, 1996 and 1997, and results of their operations and their cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
March 23, 1998
F-26
<PAGE> 130
JAY AUTOMOTIVE GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 2,406,058 $ 3,758,389 $ 4,072,647
Accounts receivable................................... 1,049,224 1,053,218 1,318,431
Notes receivable...................................... 227,359 297,968 382,447
Inventories -- Notes 5 and 7.......................... 15,290,708 12,022,640 17,317,178
Other current assets.................................. 138,060 381,181 73,353
----------- ----------- -----------
Total current assets.......................... 19,111,409 17,513,396 23,164,056
Property and equipment, net -- Note 6................... 1,013,309 889,254 808,561
Intangible assets, net -- Note 3........................ 338,333 318,333 313,333
Other assets............................................ 81,437 16,554 65,873
----------- ----------- -----------
$20,544,488 $18,737,537 $24,351,823
=========== =========== ===========
LIABILITIES AND OWNER'S EQUITY
Current liabilities:
Floor plan notes payable -- Note 7.................... $12,375,365 $ 9,019,181 $13,707,401
Accrued liabilities................................... 453,029 693,976 1,119,483
Accounts payable...................................... 905,766 896,598 1,205,917
Current maturities of long-term debt.................. 60,000 60,000 60,000
----------- ----------- -----------
Total current liabilities..................... 13,794,160 10,669,755 16,092,801
Long-term debt, less current maturities -- Note 7....... 185,900 131,076 118,585
Commitments and contingencies -- Notes 3, 7, 10 and 11
Total owner's equity -- Notes 4 and 9......... 6,564,428 7,936,706 8,140,437
----------- ----------- -----------
$20,544,488 $18,737,537 $24,351,823
=========== =========== ===========
</TABLE>
See accompanying notes.
F-27
<PAGE> 131
JAY AUTOMOTIVE GROUP, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Vehicle sales................ $68,752,615 $82,686,950 $ 86,461,125 $21,209,882 $20,655,917
Parts and service............ 9,008,736 10,635,601 11,869,480 3,218,434 3,206,583
Finance, commission and other
revenues, net............. 1,720,997 2,066,160 2,183,817 752,360 644,713
----------- ----------- ------------ ----------- -----------
79,482,348 95,388,711 100,514,422 25,180,676 24,507,213
Cost of sales:
Vehicle sales................ 64,383,162 77,264,532 80,887,066 19,954,073 19,419,134
Parts and service............ 5,751,659 6,841,136 7,656,492 1,936,977 1,992,921
----------- ----------- ------------ ----------- -----------
70,134,821 84,105,668 88,543,558 21,891,050 21,412,055
----------- ----------- ------------ ----------- -----------
Gross profit................... 9,347,527 11,283,043 11,970,864 3,289,626 3,095,158
Selling, general and
administrative............... 7,134,069 8,952,606 9,588,307 2,411,293 2,537,573
----------- ----------- ------------ ----------- -----------
Income from operations......... 2,213,458 2,330,437 2,382,557 878,333 557,585
Interest expense............. 447,932 397,007 361,555 102,282 32,433
Interest income.............. 88,687 96,291 101,104 23,078 25,319
----------- ----------- ------------ ----------- -----------
Income before income taxes..... 1,854,213 2,029,721 2,122,106 799,129 550,471
Income taxes................... 702,792 774,742 806,000 303,700 209,000
----------- ----------- ------------ ----------- -----------
Net income........... $ 1,151,421 $ 1,254,979 $ 1,316,106 $ 495,429 $ 341,471
=========== =========== ============ =========== ===========
</TABLE>
See accompanying notes.
F-28
<PAGE> 132
JAY AUTOMOTIVE GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- ------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income....................... $ 1,151,421 $ 1,254,979 $ 1,316,106 $ 495,429 $ 341,471
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization................ 164,968 251,965 218,554 60,373 64,941
Changes in current assets and
liabilities:
Accounts receivable......... (209,094) (109,842) (3,994) 252,394 (265,213)
Notes receivable............ (1,812) (61,263) (70,609) (9,554) (84,479)
Inventories................. (2,227,883) (1,891,222) 3,268,068 288,558 (5,294,538)
Floor plan notes payable,
net....................... 2,887,279 1,231,619 (3,356,184) (423,525) 4,688,220
Accounts payable............ 170,963 104,845 (9,168) (59,564) 309,319
Accrued liabilities......... 8,905 (133,019) 240,947 436,416 425,506
Other....................... (48,944) 21,158 (179,461) 84,028 258,509
----------- ----------- ----------- ---------- -----------
Net cash provided by
operating
activities........... 1,895,803 669,220 1,424,259 1,124,555 443,736
INVESTING ACTIVITIES
Purchases of property and
equipment...................... (322,999) (78,902) (163,179) (213,929) (35,828)
Purchase of business............. (1,496,372) (275,187) -- -- --
Proceeds from sale of assets..... -- 263,703 89,903 -- 56,580
----------- ----------- ----------- ---------- -----------
Net cash (used in)
provided by investing
activities........... (1,819,371) (90,386) (73,276) (213,929) 20,752
FINANCING ACTIVITIES
Payments on long term debt....... (3,978) (50,122) (54,824) (13,249) (12,491)
Payments and changes in due
to/from subsidiaries not being
acquired by SAG, net........... 76,565 87,324 56,172 (110,145) (137,739)
----------- ----------- ----------- ---------- -----------
Net cash provided by
(used in) financing
activities........... 72,587 37,202 1,348 (123,394) (150,230)
----------- ----------- ----------- ---------- -----------
Increase in cash and cash
equivalents.................... 149,019 616,036 1,352,331 787,232 314,258
Cash and cash equivalents at
beginning of the year.......... 1,641,003 1,790,022 2,406,058 2,406,058 3,758,389
----------- ----------- ----------- ---------- -----------
Cash and cash equivalents at end
of the year.................... $ 1,790,022 $ 2,406,058 $ 3,758,389 $3,193,290 $ 4,072,647
=========== =========== =========== ========== ===========
</TABLE>
See accompanying notes.
F-29
<PAGE> 133
JAY AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
1. BASIS OF PRESENTATION
Pursuant to a stock purchase agreement dated January 5, 1998, (the
"Purchase Agreement") Sunbelt Automotive Group, Inc. ("SAG") has agreed to
purchase all of the issued and outstanding shares of the common stock of Jay
Automotive Group, Inc. ("JAG") subject to certain terms and closing conditions
as set forth in the Purchase Agreement. JAG has various wholly-owned
subsidiaries through which it operates the Toyota, Saturn, Mazda, Pontiac,
Buick, GMC, Suzuki, and Mitsubishi automobile dealerships located in Columbus,
Georgia.
JAG also owns and operates, through other of its wholly-owned subsidiaries,
other businesses which are not being acquired by SAG. Under the terms of the
Purchase Agreement, such businesses will be liquidated or spun off prior to the
closing date. The closing date is anticipated to occur prior to June 30, 1998.
Jay Leasing, Inc. ("Jay Leasing"), a subsidiary not being acquired by SAG, owns
or leases certain land, buildings and equipment used by Jay Automotive Group,
Inc. (see Note 11).
The accompanying financial statements are intended to present the
operations of Jay Automotive Group, Inc. which are to be acquired and operated
by SAG pursuant to the Purchase Agreement and do not include the other
operations of JAG which will be sold, liquidated or spun off. Accordingly, the
operations of the Saturn dealership are not included in the accompanying
financial statements. The accompanying financial statements include the accounts
of JAG and certain of its wholly-owned subsidiaries: Jay Pontiac-Buick-GMC,
Inc., Jay Automotive Group II, Inc. d/b/a Jay Toyota and Jay Automotive Group V,
Inc. d/b/a Jay Mazda, collectively ("Jay Automotive" or the "Company").
The accompanying financial statements are derived from the historical books
and records of Jay Automotive and do not give effect to any purchase accounting
adjustments that SAG may record as a result of its acquisition.
2. SIGNIFICANT ACCOUNTING POLICIES
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 in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, contracts in transit
pertaining to the sale of vehicles, and all highly liquid investments with an
original maturity of three months or less at the date of purchase.
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. The Company generates ancillary revenues from its vehicle sales
operations. Such revenues include finance fees, insurance fees and service
contract commissions. Finance fees represent revenue earned by the Company for
notes placed with financial institutions in connection with customer vehicle
financing. Finance fees are generally 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 and service
contract commissions are recognized at contract execution. Gross revenues
related to finance fees, insurance and warranty commissions amounted to
$2,189,639, $2,723,542, and $2,913,304 for the years ended December 31, 1995,
1996 and 1997, respectively. These revenues are presented
F-30
<PAGE> 134
JAY AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
net of associated costs of $468,642, $657,382, and $729,487 for the years ended
December 31, 1995, 1996, and 1997, respectively in other revenues.
A portion of fees and commissions for finance, insurance or certain service
contracts can be charged back to the Company if the customer terminates a
contract prior to its scheduled maturity. An estimated allowance for these
chargebacks is recorded based upon the Company's historical experience for
prepayments or defaults on the finance and insurance contracts.
INVENTORIES
All inventory is valued at the lower of cost, as determined under the LIFO
method, or market. Cost of new and used vehicles is determined using the
last-in, first-out "LIFO" method. Cost of parts, accessories and other are
determined primarily by using factory list price using the first-in, first-out
"FIFO" method except for those parts and accessories related to the Toyota
dealership which are costed on the LIFO method. Cost of sales during the year
ended December 31, 1997 decreased approximately $89,000 due to a decrement in
the LIFO layer.
OTHER CURRENT ASSETS
Included in other current assets are notes receivable from JAG's
stockholder of $76,644 and $313,000 at December 31, 1996 and 1997, respectively.
Amounts outstanding at December 31, 1996 and 1997 under these notes carried
effective interest rates of 9% and LIBOR plus 1.5%, respectively. The
outstanding balance at December 31, 1997 was repaid in January 1998.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation expense is provided on accelerated methods over the estimated
useful lives of the assets. The ranges of estimated useful lives are as follows:
<TABLE>
<S> <C>
Furniture and fixtures...................................... 3 - 5 years
Leasehold improvements...................................... 5 - 19 years
Machinery and shop equipment................................ 5 years
</TABLE>
INCOME TAXES
The Company files a consolidated federal income tax return with its
subsidiaries. The accompanying financial statements exclude the income tax
expense and/or benefit associated with income or losses of the JAG operations
that will be sold, liquidated or spun off (see Note 1).
The Company accounts for income taxes in accordance with FASB Statement No.
109, Accounting for Income Taxes. Under this method, deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax rate
and laws that will be in effect when the differences are expected to reverse.
The temporary differences are primarily the result of valuation reserves and
warranty reserves. Temporary differences are not material.
INTANGIBLE ASSETS
Intangibles consist of goodwill that represents the excess of cost over
assigned fair market value of dealerships acquired and are being amortized on a
straightline basis over 15 years. Accumulated amortization was approximately
$2,000 and $22,000 at December 31, 1996 and 1997, respectively. The carrying
amount of intangibles and other long lived assets are reviewed if facts and
circumstances suggest that it may be impaired.
F-31
<PAGE> 135
JAY AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
If this review indicates that the carrying value of these assets will not be
recoverable, as determined based on the estimated undiscounted cash flows of the
entity acquired over the remaining amortization period, the carrying amount of
the asset is reduced by the estimated shortfall of cash flows.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of contracts in transit and
accounts receivable. Also, at times, cash deposits in banks exceed the Federal
Deposit Insurance Corporation insurance limit. Contracts in transit are for
funds received shortly after the balance sheet date from contracts financed with
financial institutions. Significant trade receivables result from the extension
of credit for short-term periods to customers located within the Columbus,
Georgia area. Accounts receivable for motor vehicles, parts and services are
mostly from customers and other automotive dealers in Georgia. Finance companies
receivables are commissions on credit contracts of customers. Receivables also
result from transactions with automotive manufacturers.
Although the Company is directly affected by the economic effects in the
automotive industry, financial institutions, banks, its customers and the
general economy of the Columbus, Georgia and the surrounding geographical area,
management does not believe significant credit risk exists.
MAJOR SUPPLIERS
The Company purchases substantially all of its new vehicles and parts
inventory from automobile manufacturers/distributors at the prevailing prices
charged by the manufacturers/distributors to all franchise dealers. The Company
enters into agreements ("Dealer Agreements") with each manufacturer. The Dealer
Agreements, among other things, 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 the Dealer Agreement terms.
ADVERTISING
The Company expenses the cost of advertising as incurred. Advertising
expense was approximately $654,000, $705,000 and $789,000 for the years ended
December 31, 1995, 1996 and 1997, respectively. Substantially all advertising is
contracted through an affiliate of the stockholder.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company considers the carrying amounts of significant classes of
financial instruments on the accompanying balance sheets, including cash and
contracts in transit, notes payable and long-term debt to be reasonable
estimates of fair value due. Fair value of the Company's debt was estimated
using discounted cash flow analysis, based on the Company's current estimated
incremental borrowing rates for similar instruments.
INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements as of March 31, 1998 and
the three months ended March 31, 1997 and 1998 have been prepared on
substantially the same basis as the audited financial statements and include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial information set forth therein.
F-32
<PAGE> 136
JAY AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. BUSINESS COMBINATIONS
On November 20, 1995, Jay Mazda purchased substantially all the assets and
assumed certain liabilities of Charles Levy Mazda for approximately $1.5 million
in cash and notes payable of $300,000. The excess of the purchase price over the
net tangible assets acquired was not material.
On December 16, 1996, Jay Pontiac-Buick-GMC, Inc. acquired the Buick Sales
and Service Agreement. At the date of acquisition, the Company purchased
vehicles and other items for a cash payment of approximately $275,000 and the
assumption of approximately $1,824,000 of floor plan liabilities. The excess of
the purchase price over the net tangible assets acquired was approximately
$300,000. As part of the terms of an exclusive use agreement, JAG could be
required to pay $225,000 to General Motors if there is a breach of certain
covenants as set forth in the agreement. Pro forma results are not presented for
this acquisition as they are not significant during the years presented.
4. JAG CAPITALIZATION
JAG has 500,000 shares of $10 par value common stock authorized of which
21,955 shares were issued and outstanding at both December 31, 1996 and 1997.
The JAG capitalization also includes additional paid-in-capital of $573,348 at
both December 31, 1996 and 1997. See Note 9 for a discussion of JAG corporate
allocations and changes in owner's equity.
5. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1997
----------- -----------
<S> <C> <C>
New vehicles................................................ $10,730,881 $ 8,433,366
Used vehicles............................................... 4,299,635 3,512,675
Parts, accessories and other................................ 1,321,698 1,240,092
----------- -----------
16,352,214 13,186,133
Less LIFO reserve........................................... (1,061,506) (1,163,493)
----------- -----------
$15,290,708 $12,022,640
=========== ===========
</TABLE>
6. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1997
---------- -----------
<S> <C> <C>
Leasehold improvements...................................... $ 171,881 $ 171,881
Machinery and shop equipment................................ 914,969 996,511
Furniture and fixtures...................................... 326,424 364,407
Rental cars and company vehicles............................ 579,796 509,752
---------- -----------
1,993,070 2,042,551
Less accumulated depreciation............................... (979,761) (1,153,297)
---------- -----------
$1,013,309 $ 889,254
========== ===========
</TABLE>
F-33
<PAGE> 137
JAY AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. FLOOR PLANS AND LONG-TERM DEBT
A summary of floor plans and long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1996 1997 1998
----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
World Omni Financial Corporation floor plan;
availability of $4.7 million; secured by
vehicle inventories; due upon sale of vehicles;
interest payable monthly at prime, plus .25%
reduced by various factory incentives.......... $ 2,100,396 $ 819,309 $ 2,257,627
GMAC floor plan; availability of $9 million at
December 31, 1997 subsequently raised to $13
million during March 1998; secured by vehicle
inventories; due upon sale of vehicles;
interest payable monthly at 1% above prime,
reduced by various GMAC and factory
incentives..................................... 8,405,449 6,766,165 9,808,281
First Union floor plan; availability of
$3,850,000; secured by vehicle inventories; due
upon sale of vehicles; interest payable monthly
at 2% over LIBOR, reduced by various factory
incentives..................................... 1,869,520 1,433,707 1,641,493
----------- ---------- -----------
$12,375,365 $9,019,181 $13,707,401
=========== ========== ===========
Note payable; bearing interest at 9% due in
monthly installments of principal and interest
of $6,228 through November 2000................ $ 245,900 $ 191,076 $ 178,585
Less current installments of long-term debt...... (60,000) (60,000) (60,000)
----------- ---------- -----------
$ 185,900 $ 131,076 $ 118,585
=========== ========== ===========
</TABLE>
During 1995, 1996 and 1997, total cash paid for interest on floor plans and
long-term debt was $444,000, $382,000 and $368,000, respectively.
8. INCOME TAXES
The Company files consolidated federal and state income tax returns with
its subsidiaries. The current income tax provision represents the amount of
income taxes paid or payable, by Jay Automotive for each year. The deferred
income tax provision is not material. Significant components of the provisions
for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Current income taxes:
Federal.............................................. $598,000 $659,000 $685,000
State................................................ 104,792 115,742 121,000
-------- -------- --------
Total provision for income taxes............. $702,792 $774,742 $806,000
======== ======== ========
</TABLE>
F-34
<PAGE> 138
JAY AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES (CONTINUED)
A reconciliation of the expected income tax expense at the statutory
federal rate to Jay Automotive's actual income tax provision is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Federal statutory benefit.............................. $630,000 $690,000 $721,000
State benefit, net of federal benefit.................. 70,000 77,000 80,000
Other.................................................. 2,792 7,742 5,000
-------- -------- --------
$702,792 $774,742 $806,000
======== ======== ========
</TABLE>
Jay Automotive made income tax payments of approximately $830,000,
$1,019,000 and $555,000 during the years ended December 31, 1995, 1996 and 1997,
respectively.
9. JAG CORPORATE ALLOCATIONS AND OWNERS' EQUITY
The corporate employees and operations of JAG provide management and
related services to the various JAG subsidiaries. An allocation of corporate
costs has not been made to the operations of the subsidiaries not included in
the accompanying financial statements because such amounts would not be
material.
JAG provides centralized cash management for all subsidiaries. There are no
terms of settlement nor interest charges on intercompany accounts. All
intercompany balances due to/from the subsidiaries not being acquired by SAG are
included as a part of owner's equity.
JAG allocates certain employee benefits to the various operations,
including those operations not being acquired by SAG, based on directly
identifiable incurred costs.
JAG did not pay any dividends to its stockholder during the three year
period ended December 31, 1997. An analysis of the net transactions in the
owner's equity accounts for each of the three years in the period ended December
31 is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Balance of the beginning of year................... $3,994,109 $5,222,095 $6,564,428
Payments to JAG and change in due to/from
subsidiaries not being acquired by SAG, net... 76,565 87,354 56,172
Net earnings..................................... 1,151,421 1,254,979 1,316,106
---------- ---------- ----------
Balance at the end of year......................... $5,222,095 $6,564,428 $7,936,706
========== ========== ==========
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries are involved in various legal proceedings
which are normal to its business. In the opinion of management, the ultimate
liabilities, if any, resulting from such lawsuits and claims, will not have a
material adverse effect on the operating results, liquidity or the financial
position of the Company.
Substantially all of the Company's facilities are subject to federal, state
and local provisions regulating the discharge of materials into the environment.
Compliance with these provisions has not had, nor does the Company expect such
compliance to have, any material effect upon the capital expenditures, net
income, financial condition or competitive position of the Company. Management
believes that its current practices and procedures for the control and
disposition of material and wastes comply with applicable federal and state
requirements.
F-35
<PAGE> 139
JAY AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
11. LEASES
The Company is obligated under certain written or verbal leases for certain
buildings, land and equipment. The leases generally provide for the payment of
fixed monthly rentals and the payment of property taxes, insurance and repairs.
These operating leases provide for the following payments:
<TABLE>
<S> <C>
1998........................................................ $250,645
1999........................................................ 181,188
2000........................................................ 25,820
--------
$457,653
========
</TABLE>
Total rent expense for the years ended December 31, 1995, 1996 and 1997 was
approximately $441,000, $543,000 and $526,000, respectively. Rent expense
includes approximately $157,000, $277,000 and $279,000 for verbal leases with
Jay Leasing for the years ended December 31, 1995, 1996 and 1997, respectively.
By March 1998, all of the Company's operations except for the Toyota
dealership, the Mazda dealership and three used car stores, relocated to a new
auto mall. The Toyota dealership and Mazda dealership will relocate to the auto
mall by June 1998. The cost of the acquisition, construction and equipping of
the auto mall was financed through the issuance of industrial revenue bonds (the
"Revenue Bonds") by the Development Authority of Columbus, Georgia (the
"Development Authority") in the aggregate principal amount of $10 million. The
Revenue Bonds bear interest at a variable rate (as defined in the Bond
Indenture), but may be converted to a term rate at the election of the lessee,
subject to certain terms and restrictions described in the Bond Indenture.
Interest on the Revenue Bonds may be payable quarterly, semiannually or on the
day following a variable rate or term rate period depending on the rate chosen
by the lessee. JAG, Jay Leasing and JAG's shareholder have guaranteed the
Revenue Bonds.
The auto mall is leased by the Development Authority to Jay Leasing
pursuant to a lease agreement dated as of July 1, 1997 and expiring on July 1,
2017. Rental payments due under the lease agreement mirror the debt service
requirements set forth in the Bond Indenture. After having met certain terms and
conditions (as described in the lease agreement), Jay Leasing has the right to
purchase the auto mall from the Authority for $10. Aggregate annual principal
payments due on the Revenue Bonds are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 255,000
1999........................................................ 280,000
2000........................................................ 305,000
2001........................................................ 325,000
2002........................................................ 355,000
Thereafter.................................................. 8,480,000
-----------
$10,000,000
===========
</TABLE>
A formal lease for the auto mall between Jay Leasing and the other JAG
affiliates, including the Saturn dealership, has not yet been finalized.
Management anticipates that rental expense to be paid to Jay Leasing for the
auto mall, including the Saturn dealership, will approximate $1.1 million
annually for twenty years.
12. EMPLOYEE BENEFIT PLAN
The Company has an employee savings plan under Section 401(k) of the
Internal Revenue Code. This plan covers substantially all eligible, full time
employees. The Company may elect to make contributions to match a portion of the
employees' contributions. The Company's contributions vest ratably over five
years. The amounts charged against income in the accompanying financial
statements for the Company's contributions to the plan for the years ended
December 31, 1995, 1996 and 1997 was approximately $22,000, $60,000 and $43,000,
respectively.
F-36
<PAGE> 140
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Grindstaff, Inc.
We have audited the accompanying balance sheets of Grindstaff, Inc. as of
December 31, 1996 and 1997, and the related statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Grindstaff, Inc. at December
31, 1996 and 1997, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
February 13, 1998
F-37
<PAGE> 141
GRINDSTAFF, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 1,433,537 $ 293,036 $ 721,736
Accounts receivable, net.............................. 789,155 748,928 971,608
Inventories........................................... 8,024,643 7,849,280 8,331,248
Prepaid expenses and other current assets............. 16,537 38,664 38,406
Deferred income taxes................................. 19,458 6,734 11,651
----------- ----------- -----------
Total current assets.......................... 10,283,330 8,936,642 10,074,649
Machinery and equipment, net............................ 1,065,223 1,225,749 1,145,897
Receivable from stockholders............................ 429,319 1,259,202 754,056
Other assets............................................ 161,359 107,432 84,092
----------- ----------- -----------
$11,939,231 $11,529,025 $12,058,694
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Floor plan notes payable.............................. $ 8,995,573 $ 8,953,198 $ 9,542,524
Accrued liabilities and other......................... 554,904 663,092 582,271
Accounts payable...................................... 727,534 537,607 470,564
Accounts payable -- related party..................... 720,000 -- --
Current maturities of long-term debt and capital
lease.............................................. 145,962 163,880 177,835
----------- ----------- -----------
Total current liabilities..................... 11,143,973 10,317,777 10,773,194
Long-term debt and capital lease, less current
portion............................................... 272,806 325,768 308,174
Stockholders' equity:
Common stock, $1,000 par value, 100 shares authorized,
100 shares issued and outstanding.................. 100,000 100,000 100,000
Treasury stock, 10 shares in 1996..................... (150,000) -- --
Additional paid-in capital............................ 948,212 948,212 948,212
Accumulated deficit................................... (375,760) (162,732) (70,886)
----------- ----------- -----------
Total stockholders' equity.................... 522,452 885,480 977,326
----------- ----------- -----------
$11,939,231 $11,529,025 $12,058,694
=========== =========== ===========
</TABLE>
See accompanying notes.
F-38
<PAGE> 142
GRINDSTAFF, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Vehicle sales................. $46,472,309 $50,384,680 $52,375,232 $11,751,278 $11,347,411
Parts and service............. 2,868,328 3,387,955 3,897,284 903,312 1,044,766
Finance, commission and other
revenues, net.............. 1,778,275 1,552,020 1,357,153 467,763 369,787
----------- ----------- ----------- ----------- -----------
51,118,912 55,324,655 57,629,669 13,122,353 12,761,964
Cost of sales:
Vehicle sales................. 43,156,061 46,969,662 47,657,291 10,719,036 10,242,242
Parts and service............. 1,703,042 2,038,175 2,397,025 546,504 643,201
----------- ----------- ----------- ----------- -----------
44,859,103 49,007,837 50,054,316 11,265,540 10,885,443
----------- ----------- ----------- ----------- -----------
Gross profit.................... 6,259,809 6,316,818 7,575,353 1,856,813 1,876,521
Selling, general and
administrative expenses....... 5,390,428 5,864,166 6,972,127 1,591,783 1,652,125
----------- ----------- ----------- ----------- -----------
Income from operations.......... 869,381 452,652 603,226 265,030 224,396
Interest expense................ 306,138 588,510 458,534 137,175 119,028
Interest income................. 137,828 167,456 26,516 -- --
Other income (expense), net..... (18,403) (509,191) 54,544 (8,290) (8,048)
----------- ----------- ----------- ----------- -----------
Income (loss) before income tax
benefit....................... 682,668 (477,593) 225,752 119,565 97,320
Income tax (expense) benefit.... (39,844) 32,347 (12,724) (12,010) (5,474)
----------- ----------- ----------- ----------- -----------
Net income (loss)..... $ 642,824 $ (445,246) $ 213,028 $ 107,555 $ 91,846
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-39
<PAGE> 143
GRINDSTAFF, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON TREASURY PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK STOCK CAPITAL DEFICIT EQUITY
-------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995.............. $100,000 $ -- $948,212 $(573,338) $ 474,874
Net income............................ -- -- -- 642,824 642,824
-------- --------- -------- --------- ---------
Balance at December 31, 1995............ 100,000 -- 948,212 69,486 1,117,698
Repurchase of 10 shares of common
stock.............................. -- (150,000) -- -- (150,000)
Net loss.............................. -- -- -- (445,246) (445,246)
-------- --------- -------- --------- ---------
Balance at December 31, 1996............ 100,000 (150,000) 948,212 (375,760) 522,452
Issuance of 10 shares of common
stock.............................. -- 150,000 -- -- 150,000
Net income............................ -- -- -- 213,028 213,028
-------- --------- -------- --------- ---------
Balance at December 31, 1997............ $100,000 $ -- $948,212 $(162,732) $ 885,480
Net income (unaudited)................ -- -- -- 91,846 91,846
-------- --------- -------- --------- ---------
Balance at March 31, 1998 (unaudited)... $100,000 $ -- $948,212 $ (70,886) $ 977,326
======== ========= ======== ========= =========
</TABLE>
See accompanying notes.
F-40
<PAGE> 144
GRINDSTAFF, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -----------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................ $ 642,824 $ (445,246) $ 213,028 $ 107,555 $ 91,846
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation................... 197,428 197,214 228,018 15,367 28,948
Amortization................... 32,654 34,906 33,101 6,560 7,397
Loss (gain) on sale of
machinery and equipment..... 2,236 (5,974) (3,902) -- --
Changes in operating assets and
liabilities:
Accounts receivable, net.... (286,121) 132,181 40,227 (141,756) (222,680)
Inventories................. (4,360,138) 2,159,881 175,363 343,585 (481,968)
Prepaid expenses and other
current assets............ 24,169 (6,002) (22,127) (48,247) 258
Deferred income taxes....... -- (19,458) 12,724 12,010 (4,917)
Receivable from
stockholders.............. -- (140,356) (829,883) (690,623) 505,146
Other assets................ 37,239 (65,229) 53,927 65,559 23,340
Floor plan notes payable.... 5,390,849 (2,783,027) (42,375) (279,548) 589,326
Accounts payable and accrued
liabilities............... 340,123 798,815 (801,739) (356,406) (147,864)
----------- ----------- ----------- --------- -----------
Net cash provided by
(used in) operating
activities........... 2,021,263 (142,295) (943,638) (965,944) 388,832
INVESTING ACTIVITIES
Proceeds on sale of investment... 46,759 -- -- -- --
Purchases of machinery and
equipment...................... (473,252) (144,993) (312,679) (74,077) (15,423)
Proceeds on disposal of machinery
and equipment.................. 36,792 29,297 154,650 37,512 58,930
----------- ----------- ----------- --------- -----------
Net cash used in
investing
activities........... (389,701) (115,696) (158,029) (36,565) 43,507
FINANCING ACTIVITIES
(Purchase) sale of treasury
stock.......................... -- (150,000) 150,000 150,000 --
Principal payments on long-term
debt........................... (124,529) (147,314) (188,834) (37,319) (3,639)
----------- ----------- ----------- --------- -----------
Net cash used in financing
activities..................... (124,529) (297,314) (38,834) 112,681 (3,639)
----------- ----------- ----------- --------- -----------
Change in cash and cash
equivalents.................... 1,507,033 (555,305) (1,140,501) (889,828) 428,700
Cash and cash equivalents at
beginning of the year.......... 481,809 1,988,842 1,433,537 1,433,537 293,036
----------- ----------- ----------- --------- -----------
Cash and cash equivalents at end
of the year.................... $ 1,988,842 $ 1,433,537 $ 293,036 $ 543,709 $ 721,736
=========== =========== =========== ========= ===========
SUPPLEMENTAL CASH FLOW
INFORMATION
Assets acquired under capital
leases......................... $ -- $ 48,961 $ 259,714 $ -- $ --
=========== =========== =========== ========= ===========
Cash paid for interest........... $ 267,698 $ 611,176 $ 465,353 $ 148,619 $ 127,755
=========== =========== =========== ========= ===========
</TABLE>
See accompanying notes.
F-41
<PAGE> 145
GRINDSTAFF, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF BUSINESS
Grindstaff, Inc. (the Company) is principally engaged in the business of
selling and servicing new and used vehicles. The Company operates three
dealerships in Northeast Tennessee: Grindstaff Chevrolet, Grindstaff Kia, and
Grindstaff Chrysler/Plymouth/Dodge/Jeep/Eagle.
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 in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, deposits in banks,
contracts in transit pertaining to the sale of vehicles, and all highly liquid
investments with an original maturity of three months or less at the date of
purchase. The Company's cash equivalents include $1,814,646 at December 31, 1996
and $66,624 at December 31, 1997, which it invested with GMAC as collateral
security for the Company's floor plan notes payable under its security agreement
with GMAC. In consideration, the Company receives a reduction in the interest
charged under the security agreement. So long as the Company is not in default
under its security agreement, it may, upon written request, require GMAC to
return all or a portion of the invested balance to it on the next business day
following receipt by GMAC of the request. The Company's management believes that
there is little, if any, credit risk because its investment may not exceed 75%
of the Company's floor plan notes payable to GMAC.
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 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 and warranty commissions are
recognized in income upon customer acceptance of the contract terms as evidenced
by contract execution. Gross revenues related to finance fees, insurance and
warranty commissions amounted to $2,780,852, $2,533,780, and $2,516,837 for the
years ended December 31, 1995, 1996 and 1997, respectively. These revenues are
presented net of associated costs of $1,002,577, $981,760, and $1,159,684 for
the years ended December 31, 1995, 1996 and 1997, respectively in other
revenues.
The Company is charged back a portion of fees and commissions earned on
finance or insurance contracts if the customer terminates a contract prior to
its scheduled maturity. The estimated allowance for these chargebacks is based
upon the Company's historical experience for prepayments or defaults on the
finance and insurance contracts.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts is based on historical bad debt
experience and management's periodic evaluation of individual accounts.
F-42
<PAGE> 146
GRINDSTAFF, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
All inventory is stated at the lower of cost or market. Cost of new and
used vehicles is determined using the last in, first-out (LIFO) method.
MACHINERY AND EQUIPMENT
Machinery and equipment is stated at cost less accumulated depreciation.
Depreciation is provided predominately on the straight-line method over the
estimated useful lives of the assets. The ranges of estimated useful lives are
as follows:
<TABLE>
<S> <C>
Furniture and fixtures...................................... 5 - 10 years
Leasehold improvements...................................... 5 - 40 years
Machinery and shop equipment................................ 5 - 20 years
Rental cars and company vehicles............................ 7 years
</TABLE>
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of contracts in transit and
accounts receivable. Also, at times, cash deposits in banks exceed the Federal
Deposit Insurance Corporation insurance limit. Contracts in transit are for
funds received shortly after the balance sheet date from contracts financed with
financial institutions. Trade receivables principally result from extending
short-term credit to a large number of customers and other automotive dealers
located in Northeast Tennessee. Finance companies receivables are commissions on
credit contracts of customers. Receivables also result from transactions with
automotive manufacturers. Although the Company is directly affected by the
economic conditions in the automotive industry, financial institutions, banks,
its customers and the general economy of Northeast Tennessee, management does
not believe significant credit risk exists.
INCOME TAXES
The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Under these provisions, the Company does not pay
federal corporate income taxes on its taxable income. Instead, the stockholders
are liable for individual income taxes on their respective share of the
Company's taxable income.
The Company accounts for state income taxes under the liability method.
Under the liability method, deferred income taxes are recorded to reflect the
net effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting and the amounts used for state income tax
purposes.
MAJOR SUPPLIER
The Company purchases substantially all of its new vehicles and parts
inventory from automobile manufacturers/distributors at the prevailing prices
charged by the manufacturers/distributors to all franchise 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.
ADVERTISING
The Company expenses the cost of advertising as incurred. Advertising
expense was $727,523, $912,853 and $1,139,148 for the years ended December 31,
1995, 1996 and 1997, respectively.
F-43
<PAGE> 147
GRINDSTAFF, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company considers the carrying amounts of significant classes of
financial instruments on the balance sheet, including cash and contracts in
transit, notes payable and long-term debt to be reasonable estimates of fair
value. Fair value of the Company's debt was estimated using discounted cash flow
analysis, based on the Company's current incremental borrowing rates for similar
types of arrangements.
STOCK DIVIDEND
On March 3, 1997, the Company effected a 1-for-2 common stock dividend. The
share amounts in the financial statements have been retroactively adjusted for
the stock dividend.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company considers the carrying amounts of significant classes of
financial instruments on the consolidated balance sheet, including cash and
contracts in transit, notes payable and long-term debt to be reasonable
estimates of fair value. Fair value of the Company's debt was estimated using
discounted cash flow analysis, based on the Company's current incremental
borrowing rates for similar types of arrangements.
INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements as of March 31, 1998 and
the three months ended March 31, 1997 and 1998 have been prepared on
substantially the same basis as the audited financial statements and include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial information set forth therein.
2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Parts, service and wholesale................................ $314,785 $183,938
Factory..................................................... 376,643 473,186
Finance companies........................................... 56,403 46,638
Employees................................................... 44,389 52,967
-------- --------
792,220 756,729
Less allowance for doubtful accounts........................ (3,065) (7,801)
-------- --------
$789,155 $748,928
======== ========
</TABLE>
F-44
<PAGE> 148
GRINDSTAFF, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. INVENTORIES
Inventories consist of the following at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
New vehicles................................................ $7,263,231 $7,494,649
Used vehicles............................................... 2,343,152 1,876,461
Parts, accessories and other................................ 275,064 387,370
---------- ----------
9,881,447 9,758,480
Less LIFO reserve........................................... 1,856,804 1,909,200
---------- ----------
$8,024,643 $7,849,280
========== ==========
</TABLE>
4. MACHINERY AND EQUIPMENT
A summary of machinery and equipment is as follows as of December 31, 1996
and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Leasehold improvements...................................... $ 866,414 $ 870,320
Machinery and shop equipment................................ 524,368 579,699
Furniture and fixtures...................................... 587,496 759,976
Rental cars and company vehicles............................ 317,674 345,411
---------- ----------
2,295,952 2,555,406
Less accumulated depreciation............................... 1,230,729 1,329,657
---------- ----------
$1,065,223 $1,225,749
========== ==========
</TABLE>
5. FLOOR PLAN NOTES PAYABLE
Floor plan notes payable consists of notes with financial institutions. The
floor plan notes are secured by certain new and used vehicles. The floor plan
arrangements permit the Company to borrow up to $9,000,000 in 1996 and
$9,505,000 in 1997, restricted by new and used vehicles levels. The notes are
generally due within ten days of the vehicle being sold or after the vehicle has
been in inventory for one year for new vehicles and after three months for used
vehicles. The notes bear interest based on contractual rates, which ranged from
9.00% to 9.75% at December 31, 1997.
6. ACCRUED LIABILITIES AND OTHER
Accrued liabilities and other consist of the following at December 31, 1996
and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Salaries, wages, bonus and vacation......................... $109,393 $258,666
Finance reserve............................................. 40,000 40,000
Accrued taxes............................................... 256,971 208,320
Accrued interest............................................ 66,371 79,563
Other accrued liabilities................................... 82,169 76,543
-------- --------
$554,904 $663,092
======== ========
</TABLE>
F-45
<PAGE> 149
GRINDSTAFF, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT
At December 31, 1996 and 1997 the Company had a note outstanding in the
amount of $285,633 and $187,328, respectively. The note payable to General
Motors Acceptance Corporation is collateralized by all fixed assets, parts and
accessories, and a personal guarantee of a stockholder of the Company. The note
is dated May 25, 1994 with a term of five years payable in monthly installments
of principal and interest. Interest is calculated at prime plus one percent,
9.5% and 10.0% at December 31, 1996 and 1997, respectively. At December 31, 1996
and 1997, $100,000 of the note is classified as current and the remainder is due
during 1999.
At March 31, 1998 the $177,835 (unaudited) note with an interest rate at
prime plus one percent, 10.0%, is classified as current.
8. INCOME TAXES
The current income tax provision represents the amount of state income
taxes paid or payable for the year. The deferred income tax provision represents
the change in deferred tax liabilities and assets. Significant components of the
provisions for income taxes are as follows for the years ended December 31,
1995, 1996 and 1997, respectively:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996 1997
------- -------- -------
<S> <C> <C> <C>
Current state income tax expense (benefit)............... $ 9,126 $(12,889) $ --
Deferred state income tax expense (benefit).............. 30,718 (19,458) 12,724
------- -------- -------
Total provision for income tax expense
(benefit).................................... $39,844 $(32,347) $12,724
======= ======== =======
</TABLE>
The Company recorded deferred tax assets of $19,458 and $6,734 at December
31, 1996 and 1997, respectively, relating to unutilized net operating loss
carryforwards, which expire through 2011. The Company paid state income taxes of
$25,000, $53,203 and $51,598 for the years ended December 31, 1995, 1996 and
1997, respectively.
The pro forma provision for federal and state income taxes for the years
ended December 31, 1995, 1996 and 1997 would be $255,876, $(184,637) and
$80,503, respectively. The pro forma provision reflects amounts recorded related
to the state tax provision and that would have been recorded had the Company's
income been taxed for federal purposes as if it were a C Corporation.
9. COMMITMENTS AND TRANSACTIONS WITH RELATED PARTIES
The Company is obligated to related parties under certain non-cancelable
leases. These leases, which cover the lease of certain buildings, land and
equipment provide for the following payments:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES TOTAL
-------- ---------- ----------
<S> <C> <C> <C>
1998................................................ $ 63,880 $ 630,000 $ 693,880
1999................................................ 65,741 630,000 695,741
2000................................................ 69,713 630,000 699,713
2001................................................ 74,008 390,000 464,008
2002................................................ 28,978 -- 28,978
-------- ---------- ----------
Total minimum payments.................... $302,320 $2,280,000 $2,582,320
======== ========== ==========
</TABLE>
F-46
<PAGE> 150
GRINDSTAFF, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. COMMITMENTS AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
Interest relating to capital leases is generally prepaid in the first year
of the lease. Total rent expense, all of which was paid to related parties, for
the years ended December 31, 1995, 1996 and 1997 was $541,000, $632,200 and
$687,000, respectively.
The Company is obligated under a non-cancelable operating lease on
buildings and automobile lots, which expires on June 30, 2001. A stockholder of
the Company is the leasor of the property.
During 1996, the Company made a $600,000 payment to terminate a property
lease with a stockholder of the Company. This termination payment was recorded
as other expense during 1996.
For all years presented, the Company paid certain personal expenses of a
stockholder and reflected these payments as a receivable from stockholder. This
receivable is due upon demand, non-interest bearing and unsecured.
10. GOVERNMENTAL REGULATION
Substantially all of the Company's facilities are subject to federal, state
and local provisions regulating the discharge of materials into the environment.
Compliance with these provisions has not had, nor does the Company expect such
compliance to have any material effect upon the capital expenditures, net
income, financial condition or competitive position of the Company. Management
believes that its current practices and procedures for the control and
disposition of such wastes comply with applicable federal and state
requirements.
11. SUBSEQUENT EVENT
Subsequent to December 31, 1997, the stockholders of the Company signed an
agreement to sell the stock of the Company. The agreement is subject to several
conditions, including the manufacturers' approval of change in dealership
management and ownership.
F-47
<PAGE> 151
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Wade Ford, Inc.
3860 South Cobb Drive
Smyrna, GA 30080
We have audited the accompanying combined balance sheets of Wade Ford, Inc.
(an S corporation) and affiliate as of December 31, 1997, 1996 and 1995, and the
related combined statements of income, retained earnings, and cash flows for the
years then ended. These combined financial statements are the responsibility of
the Companies' management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
The combined financial statements include the financial statements of Wade
Ford, Inc. (an S corporation) and Wade Ford Buford, Inc. (an S corporation),
which are related through common ownership and management.
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 combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Wade Ford, Inc. and
affiliate as of December 31, 1997, 1996 and 1995, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
Respectfully submitted,
/s/ PYKE & PIERCE, CPA'S
Certified Public Accountants
Atlanta, Georgia
February 9, 1998
F-48
<PAGE> 152
WADE FORD, INC. AND WADE FORD BUFORD, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------- MARCH 31,
1997 1996 1995 1998
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash........................................................ $ 4,661,059 $ 4,634,350 $ 1,953,192 $ 6,001,381
Accounts Receivable -- Trade (Net of Allowance for Doubtful
Accounts of $25,000 in 1997, $25,000 in 1996 and $91,519
in 1995).................................................. 4,088,793 3,656,387 3,518,142 4,420,784
Accounts Receivable -- Employees............................ 24,811 20,969 22,076 13,100
Inventories:
New Vehicles.............................................. 22,582,440 18,198,332 14,651,525 15,274,050
Used Vehicles............................................. 2,725,909 1,971,999 1,433,234 1,554,930
Parts, Accessories and Other.............................. 642,771 670,869 630,097 642,654
Prepaid Expenses............................................ 13,164 19,837 10,381 326,755
Note Receivable -- Stockholders............................. 502,531 484,045 431,592 514,516
----------- ----------- ----------- -----------
Total Current Assets................................ 35,241,478 29,656,788 22,650,239 28,748,170
----------- ----------- ----------- -----------
PROPERTY AND EQUIPMENT:
Buildings and Improvements.................................. 32,375 32,375 32,375 38,667
Parts and Service Equipment................................. 809,275 712,462 606,532 814,541
Rental Vehicles............................................. -- -- 704,243 --
Office Equipment............................................ 680,640 644,698 551,229 692,008
Leasehold Improvements...................................... 387,591 339,959 244,963 388,328
----------- ----------- ----------- -----------
1,909,881 1,729,494 2,139,342 1,933,544
Accumulated Depreciation.................................... (1,379,236) (1,249,139) (1,228,343) (1,419,406)
----------- ----------- ----------- -----------
Total Property and Equipment........................ 530,645 480,355 910,999 514,138
----------- ----------- ----------- -----------
INTANGIBLES AND OTHER ASSETS:
Deposits.................................................... 2,727 2,727 4,727 2,727
Cash Surrender Value of Life Insurance (Net of Policy
Loans).................................................... 68,426 68,790 68,371 68,527
Goodwill and Organization Expense (Net of Accumulated
Amortization of $65,266 in 1997, $63,154 in 1996 and
$57,154 in 1995).......................................... 24,688 27,160 32,800 24,070
----------- ----------- ----------- -----------
Total Intangibles and Other Assets.................. 95,841 98,677 105,898 95,324
----------- ----------- ----------- -----------
Total Assets........................................ $35,867,964 $30,235,820 $23,667,136 $29,357,632
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Floor Plan Notes............................................ $30,714,435 $25,523,346 $20,017,316 $24,121,302
Notes Payable -- Officers and Stockholders.................. 980,000 1,189,999 658,004 855,000
Notes Payable -- Other...................................... 12,610 131,878 24,646 8,988
Accounts Payable............................................ 426,478 310,453 303,029 219,481
Accrued Payroll Taxes and Sales Taxes....................... 111,685 101,370 115,089 363,960
Accrued Wages............................................... 264,715 142,441 94,841 267,437
Accrued Interest............................................ 281,859 207,772 193,472 221,937
Accrued Taxes, Other than Income Tax........................ 105,361 50,743 55,927 22,907
Other Accrued Expenses...................................... 466,971 444,300 285,337 394,085
----------- ----------- ----------- -----------
Total Current Liabilities........................... 33,364,114 28,102,302 21,747,661 26,475,097
LONG-TERM LIABILITIES:
Notes Payable -- Officers and Stockholders.................. -- -- 690,000 --
Notes Payable -- Other...................................... 52,814 61,027 69,327 51,014
----------- ----------- ----------- -----------
Total Long-Term Liabilities......................... 52,814 61,027 759,327 51,014
----------- ----------- ----------- -----------
Total Liabilities................................... 33,416,928 28,163,329 22,506,988 26,526,111
----------- ----------- ----------- -----------
STOCKHOLDERS' EQUITY:
Common Stock................................................ 178,788 178,788 178,788 178,788
Additional Paid-In Capital.................................. 99,500 99,500 99,500 99,500
Retained Earnings........................................... 2,172,748 1,794,203 881,860 2,553,233
----------- ----------- ----------- -----------
Total Stockholders' Equity.......................... 2,451,036 2,072,491 1,160,148 2,831,521
----------- ----------- ----------- -----------
Total Liabilities and Stockholders' Equity.......... $35,867,964 $30,235,820 $23,667,136 $29,357,632
=========== =========== =========== ===========
</TABLE>
See accompanying notes and Independent Auditor's Report.
F-49
<PAGE> 153
WADE FORD, INC. AND WADE FORD BUFORD, INC.
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------ -------------------------
1997 1996 1995 1997 1998
------------ ------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales
Vehicle sales.............. $154,372,002 $133,329,152 $106,391,291 $39,053,811 $37,169,016
Parts, service and
collision repair........ 9,243,897 8,809,835 9,117,897 2,325,766 2,481,010
Finance, commission and
other revenues, net..... 1,725,868 1,454,734 1,030,566 316,732 326,598
------------ ------------ ------------ ----------- -----------
165,341,767 143,593,721 116,539,754 41,696,309 39,976,624
Cost of sales
Vehicle sales.............. 147,941,339 126,915,778 101,654,664 37,259,476 35,758,589
Parts, service and
collision repair........ 4,738,843 4,546,274 4,932,221 1,252,732 1,298,382
------------ ------------ ------------ ----------- -----------
152,680,182 131,462,052 106,586,885 38,512,208 37,056,971
------------ ------------ ------------ ----------- -----------
Gross profit................. 12,661,585 12,131,669 9,952,869 3,184,101 2,919,653
Selling, general and
administrative expense..... 10,467,214 11,261,008 9,503,822 2,636,869 2,580,529
------------ ------------ ------------ ----------- -----------
Income from operations....... 2,194,371 870,661 449,047 547,232 339,124
Floor plan interest.......... 157,354 290,813 155,948 64,211 93,692
Interest income.............. 162,322 81,802 35,970 42,385 127,816
Other income................. 95,405 252,046 229,703 11,984 7,237
------------ ------------ ------------ ----------- -----------
Net income......... 2,294,744 913,696 558,772 537,390 380,485
Retained
earnings -- Beginning...... 1,794,203 881,860 562,443 1,794,203 2,172,748
Less: Current Year
Distributions........... (1,916,199) (1,353) (239,355) -- --
------------ ------------ ------------ ----------- -----------
Retained earnings --Ending... $ 2,172,748 $ 1,794,203 $ 881,860 $ 2,331,593 $ 2,553,233
============ ============ ============ =========== ===========
</TABLE>
See accompanying notes and Independent Auditor's Report.
F-50
<PAGE> 154
WADE FORD, INC. AND WADE FORD BUFORD, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -------------------------
1997 1996 1995 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................ $ 2,294,744 $ 913,696 $ 558,772 $ 537,390 $ 380,485
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization........... 143,419 141,847 229,400 17,591 21,150
Change in LIFO Reserve.................. 72,080 328,080 744,610 -- --
Cash Value of Officer's Life
Insurance............................. 364 (419) 865 -- (101)
(Increase) Decrease In:
Accounts Receivable................... (424,263) (161,123) (381,180) (452,647) (320,280)
Inventories........................... (5,182,000) (3,865,593) (68,333) 4,888,935 8,481,668
Prepaid Expenses...................... 6,673 (9,456) (10,381) (120,920) (313,591)
Notes Receivable...................... (30,471) (28,468) (290,257) 11,985 (11,985)
Deposits.............................. -- 2,000 (2,000) -- --
Increase (Decrease) In:
Floor Plan Notes...................... 5,191,089 5,506,030 189,576 (3,471,541) (6,593,133)
Accounts Payable and Accrued
Expenses............................ 399,990 209,384 107,535 6,596 (167,262)
----------- ----------- ----------- ----------- -----------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES........... 2,471,625 3,035,978 1,078,607 1,417,389 1,476,951
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment........ (184,767) (294,395) (727,368) (20,715) (6,207)
----------- ----------- ----------- ----------- -----------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES........... (184,767) (294,395) (727,368) (20,715) (6,207)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans from Stockholder.................... 530,000 -- -- -- --
Repayment of Loans from Stockholders...... (1,050,000) -- (50,000) (1,314,302) (128,152)
Proceeds from Long-Term Borrowings........ 705,000 336,524 1,036,080 16,638 --
Repayment on Long-Term Borrowings......... (528,950) (395,596) (792,583) -- (2,270)
Distribution to Owners.................... (1,916,199) (1,353) (239,355) -- --
----------- ----------- ----------- ----------- -----------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES........... (2,260,149) (60,425) (45,858) (1,297,664) (130,422)
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN
CASH........................... 26,709 2,681,158 305,381 99,010 1,340,322
CASH AT BEGINNING OF YEAR................. 4,634,350 1,953,192 1,647,811 4,634,350 4,661,059
----------- ----------- ----------- ----------- -----------
CASH AT END OF YEAR....................... $ 4,661,059 $ 4,634,350 $ 1,953,192 $ 4,733,360 $ 6,001,381
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES:
INTEREST PAID............................. $ 2,580,002 $ 2,326,346 $ 2,016,521 $ 597,674 $ 761,101
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes and Independent Auditor's Report.
F-51
<PAGE> 155
WADE FORD, INC. AND WADE FORD BUFORD, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Wade Ford, Inc., located in Smyrna, Georgia, (Smyrna) is an authorized Ford
dealership. Wade Ford Buford, Inc., (Buford) located in Buford, Georgia, is an
authorized Ford-Mercury dealership. The dealerships provide retail and fleet
sales of new and used vehicles, parts and service. The Companies' principal
market areas are the Metropolitan Atlanta area and Northeast Georgia. A major
component of the Buford business is dealer financing of used car sales, also
known as "Tote-Note" sales. Dealer finance receivables are secured by
automobiles sold. Most contracts have payment terms in the 12 to 24 month range.
Because the loans are made principally in the Northeast Georgia and Metropolitan
Atlanta area, the ultimate ability to collect amounts due may be affected by
local economic fluctuations.
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. The Company generates ancillary revenues from its vehicle sales
operation. Such revenues include finance fees, insurance fees, and warranty
contract 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 and warranty commissions are
recognized in income upon customer acceptance of the contract terms as evidenced
by contract execution. Gross revenues related to finance fees, insurance and
warranty commissions amounted to $1,470,432, $1,974,405 and $2,424,016 for the
years ended December 31, 1995, 1996, and 1997, respectively. These revenues are
presented net of associated costs of $439,866, $519,671 and $698,148 for the
years ended December 31, 1995, 1996, and 1997, respectively in other revenues.
The Company is charged back a portion of fees and commissions earned on
finance or insurance contracts if the customer terminates a contract prior to
its scheduled maturity. The estimated allowance for these chargebacks is based
upon the Company's historical experience for prepayments or defaults on the
finance and insurance contracts.
EXCESS OF COST OVER NET ASSETS OF BUSINESSES ACQUIRED AND ORGANIZATIONAL
EXPENSES
The excess of cost over the net assets of businesses acquired at original
purchase in 1982 (Smyrna) is being amortized on a straight-line basis over a
25-year period. Organizational expenses of Buford are being amortized on the
straight-line method over a five year period. The Organizational expenses
(Buford) became fully amortized in 1996. Amortization expense charged to
operations for 1997, 1996 and 1995 was $2,470, $2,470 and $5,638, respectively.
INVENTORIES
All inventories are valued at the lower of cost or market. The cost of new
and used vehicles and parts is determined using the last-in, first-out method
(LIFO). If the first-in, first-out (FIFO) method had been used to determine the
cost of new and used vehicles and parts, the inventories would have been
increased by approximately $3,601,316 at December 31, 1997, $3,407,171 at
December 31, 1996 and $2,807,787 at December 31, 1995. Also, the Companies would
have reported net income of approximately $1,590,323 for 1997, $1,885,162 for
1996 and $1,727,511 for 1995.
F-52
<PAGE> 156
WADE FORD, INC. AND WADE FORD BUFORD, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Companies have elected to be treated as S Corporations for Federal and
State income tax purposes. Under this election, items of profit and loss are
passed through to the shareholders. Accordingly, the financial statements do not
reflect any provision for income tax expense.
The pro forma provision for income taxes for the years ended December 31,
1997, 1996 and 1995 would be $863,941, $336,872 and $191,771, respectively. The
pro forma provision reflects amounts that would have been recorded had the
Companies' income been taxed for federal and state purposes as if they were C
Corporations.
PROPERTY AND EQUIPMENT
Property and Equipment are recorded at cost. Maintenance and repairs are
charged to expense as incurred, and renewals and betterments are capitalized.
Gains or losses on disposals are credited or charged to operations. Depreciation
is provided using the straight-line method over the estimated useful lives of
the assets acquired prior to January 1, 1981 and straight-line and accelerated
methods, for assets acquired subsequent to December 31, 1980. Depreciation and
amortization expense for 1997, 1996 and 1995 was $143,419, $141,847 and $229,400
respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from these estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, contracts in transit
pertaining to the sale of vehicles, all highly liquid investments with an
original maturity of three months or less at the date of purchase, and the Cash
Management Account (See Note 9).
PRINCIPLES OF COMBINATION
The accompanying combined financial statements present the combination of
the financial statements of Wade Ford, Inc. and the financial statements of Wade
Ford Buford, Inc., both of which are under common control.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company considers the carrying amounts of significant classes of
financial instruments on the consolidated balance sheet, including cash and
contracts in transit, notes payable and long-term debt to be reasonable
estimates of fair value. Fair value of the Company's debt was estimated using
discounted cash flow analysis, based on the Company's current incremental
borrowing rates for similar types of arrangements.
INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements as of March 31, 1998 and
the three months ended March 31, 1997 and 1998 have been prepared on
substantially the same basis as the audited financial statements and include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial information set forth therein.
F-53
<PAGE> 157
WADE FORD, INC. AND WADE FORD BUFORD, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
2. CASH SURRENDER VALUE
The Smyrna dealership is the beneficiary of insurance policies on the life
of a former stockholder and previous owner of Wade Ford, Inc. At December 31,
1997, 1996 and 1995, notes payable to the insurance companies in the amounts of
$42,940, respectively, were collateralized by the cash value of the policies
which is $68,426 for 1997, $68,790 for 1996 and $68,371 for 1995.
3. FLOOR PLAN NOTES -- FORD MOTOR CREDIT CORPORATION
The Companies' floor plan notes payable to Ford Motor Credit Co. are floor
plan loans bearing interest at 1% over the floating prime commercial lending
rate. Principal payments are made as each unit of the new and used vehicle
inventory is sold. Interest is payable monthly. The notes are collateralized by
the new and used vehicle inventory.
Notes payable to Ford Motor Credit Co. -- Rental vehicles are floor plan
loans bearing interest at 2 3/4% over the commercial paper rate based on the
date the vehicle is put into rental service. Principal payments are made monthly
at a rate of 1.75% of the capitalized cost of the rental truck and 2 1/4% for
rental car. When a vehicle is taken out of rental service, any remaining
principal balance is then due.
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
1997 1996 1995 1998
-------- --------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Note payable to irrevocable trust of a
former stockholder. Interest is 1% above
floating prime and payable monthly. Note
is unsecured................................ $ -- $ -- $580,000 $ --
Note Payable to estate of a former
stockholder. Interest is 1% above
floating prime and payable monthly.
Principal due November 15, 1997............. -- 110,000 110,000 --
Notes Payable for cash value of life
insurance. Interest is payable at 5
percent..................................... 42,940 42,940 42,940 42,940
Installment notes payable, payable in variable
monthly installments of principal plus interest,
interest from 7.5% to 9%, due between 1994
and 1998, secured by Rotunda equipment...... 22,484 39,965 51,033 17,062
-------- --------- -------- --------
65,424 192,905 783,973 60,002
Less Current Maturities....................... (12,610) (131,878) 24,646 (8,988)
-------- --------- -------- --------
TOTAL LONG-TERM DEBT................ $ 52,814 $ 61,027 $759,327 $ 51,014
======== ========= ======== ========
</TABLE>
As of December 31, 1997, long-term debt matures approximately as follows:
<TABLE>
<S> <C>
1998........................................................ $12,610
1999........................................................ 47,730
2000........................................................ 3,813
2001........................................................ 1,271
2002........................................................ --
-------
$65,424
=======
</TABLE>
F-54
<PAGE> 158
WADE FORD, INC. AND WADE FORD BUFORD, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
5. LEASE COMMITMENTS
The Companies rent their facilities under operating leases. Smyrna rents a
portion of its facility from an officer/shareholder. Buford leases its
facilities from an officer/shareholder. While the agreements provide for minimum
lease payments, the leases also provide that the Company pay the taxes,
insurance, and maintenance expenses related to the leased property. Buford's
lease as of December 31, 1997, is being continued on a month-to-month basis.
Smyrna's lease is noncancellable through the end of its term.
The following is a schedule by years of future minimum lease payments
required under the Companies' operating leases:
<TABLE>
<S> <C>
1998........................................................ $ 420,000
1999........................................................ 423,000
2000........................................................ 432,000
2001........................................................ 435,000
2002........................................................ 444,000
2003 and thereafter......................................... 2,166,000
</TABLE>
Total rent expense for 1997, 1996 and 1995 was $659,471, $658,543 and
$651,828, respectively.
The Companies also lease their computer system and have other equipment
leases. These leases are treated as operating leases. Future minimum lease
payments required under the above written lease agreements are:
<TABLE>
<S> <C>
1998........................................................ $84,775
1999........................................................ 83,777
2000........................................................ 83,777
2001........................................................ 15,795
2002........................................................ --
</TABLE>
6. ARRANGEMENTS FOR RENTAL TO OTHERS
The Smyrna location rents cars and trucks to others under agreements with
varying terms, primarily daily, weekly or monthly, with renewal options. The
agreements are cancelable by either party. The Company holds title to the cars
and finances the arrangements by blanket-type rent payments consisting of
principal, interest and insurance. Interest is payable at 3/4 percent over
floating prime at date of rental. Ford Motor Company is the lien holder on the
vehicles. The dealership discontinued this program during 1996 and had no
vehicles at December 31, 1997 or 1996.
The following is an analysis of the book value of the rental cars at
December 31, 1995:
<TABLE>
<S> <C>
Cost........................................................ $704,243
Less Accumulated Depreciation............................... 115,412
--------
$588,831
========
</TABLE>
During the years ended December 31, 1995 and 1996, rental cars with a book
value of $3,349,764 and $588,831 were transferred from property and equipment to
inventory, for re-sale.
7. PROFIT SHARING PLAN
The Companies have profit-sharing plans that cover any employee with 12
months of service. Enrollment, when eligible, is January 1 or July 1 of each
year. Contributions to the plans are based on a formula and are contingent upon
the attainment of certain level of earnings as defined in the agreements. During
1997, 1996 and 1995, contributions to the plans charged to operations were
$55,841, $51,662 and $39,958, respectively.
F-55
<PAGE> 159
WADE FORD, INC. AND WADE FORD BUFORD, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
8. RELATED PARTY TRANSACTIONS
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Accounts Receivable Stockholders............................ $ 38,015 $ 50,000 $ 26,015
Notes Receivable from Stockholders $85,000 demand note with
interest at 8.5%; $50,000 demand note with interest at 7%;
$204,741 demand note with interest at 8%; $22,749 demand
note with interest at 8%; (includes accrued interest of
$98,670, $68,849 and $39,396 in 1997, 1996, and 1995,
respectively)............................................. 464,516 434,045 405,577
-------- -------- --------
$502,531 $484,045 $431,592
======== ======== ========
</TABLE>
The Companies borrow from stockholders and their related entities varying
amounts at 1% above floating prime. These notes are generally unsecured and
payable on demand or in periods of two years or less.
Interest paid on the aforementioned notes payable during 1997, 1996 and
1995 was $50,129, $122,590 and $63,188, respectively.
9. CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Companies to
concentrations of credit risk consist principally of customer accounts
receivables. Concentrations of credit risk with respect to customer receivables
are limited due to the large number of customers comprising the Companies'
customer base and their dispersion across the Metropolitan Atlanta area and
Northeast Georgia. As of December 31, 1997, 1996 and 1995, the companies had no
significant concentrations of credit risk arising from these customer accounts
receivable.
The Companies maintain their cash balances with two financial institutions
located in Atlanta, Georgia. The balances are insured by the Federal Deposit
Insurance Corporation up to $100,000 per dealership at each financial
institution location. At December 31, 1997, 1996 and 1995, the Companies'
uninsured cash balances totaled $747,899, $1,055,457 and $961,156, respectively.
The Companies have on deposit with Ford Motor Credit -- $2,480,000 in Cash
Management Accounts (CMA), as of December 31, 1997. These monies are used to
reduce Ford Motor Credit's balance of the Companies' floor plan notes. These
monies are uninsured.
Balance of CMA at December 31, 1996 -- $2,950,000.
Balance of CMA at December 31, 1995 -- $1,730,000.
10. INTERNAL REVENUE SERVICE EXAMINATION
In 1995, the Internal Revenue Service began an examination of the
Companies' tax returns for the year ended December 31, 1993. In their report,
dated August 30, 1995, the Internal Revenue Service terminated the Companies'
use of the Last-In, First-Out (LIFO) inventory method. This LIFO termination has
been rescinded by the Service and the Companies have agreed to come under the
provisions of Revenue Procedure 97-44. Under this procedure the Companies can
continue to use LIFO but the stockholders were required to pay a penalty to the
Internal Revenue Service.
11. POTENTIAL SALE
Subsequent to December 31, 1997, the stockholders of the Companies signed
an agreement to sell the stock of the Companies. The agreement is subject to
several conditions, including the manufacturers' approval of change in the
dealerships' management and ownership.
F-56
<PAGE> 160
WADE FORD, INC. AND WADE FORD BUFORD, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
12. MAJOR SUPPLIER
The Companies purchase substantially all of its new vehicles and parts
inventory from Ford Motor Co. at the prevailing prices charged by Ford to all
franchise dealers. The Companies enter into agreements ("Dealer Agreements")
with Ford. The Dealer Agreements generally limit the location of the dealership
and include Ford's approval rights over changes in dealership management and
ownership. Ford is also entitled to terminate the Dealer Agreements if the
dealerships are in material breach of their terms.
13. ADVERTISING
The Companies expense the cost of advertising as incurred. Advertising
expense was $595,629, $832,622 and $695,695 for the years ended December 31,
1997, 1996 and 1995, respectively.
14. GOVERNMENTAL REGULATION
Substantially all of the Companies facilities are subject to federal, state
and local provisions regulating the discharge of materials into the environment.
Compliance with these provisions has not had, nor does the Companies expect such
compliance to have any material effect upon the capital expenditures, net
income, financial condition or competitive position of the Companies. Management
believes that its current practices and procedures of the control and
disposition of such wastes comply with applicable federal and state
requirements.
15. LAWSUIT
Wade Ford, Inc. is a defendant in a lawsuit filed by a customer for alleged
fraudulent misrepresentation. The suit asks for damages totaling $128,000.
Outside counsel from the Company has advised that at this stage in the
proceedings, they cannot offer an opinion as to the probable outcome. Management
intends to vigorously defend this lawsuit. In the opinion of management, the
ultimate liability, if any, resulting from such lawsuit, will not have a
material adverse effect on the operating results, liquidity, or the financial
position of the Company.
16. COMMON STOCK
A summary of common stock follows:
<TABLE>
<CAPTION>
WADE
WADE FORD
FORD, INC. BUFORD COMBINED
---------- -------- --------
<S> <C> <C> <C>
Total Value............................................. $ 1,000 $177,788 $178,788
======= ======== ========
Stated value per share.................................. $ 1.00 No par
value
Authorized shares....................................... 10,000 500,000
Shares issued and outstanding........................... 1,000 12,800
</TABLE>
F-57
<PAGE> 161
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Robertson Oldsmobile-Cadillac, Inc. d/b/a
Moss Robertson Mazda and
Moss Robertson Isuzu
We have audited the accompanying balance sheets of Robertson
Oldsmobile-Cadillac, Inc. d/b/a Moss Robertson Mazda and Moss Robertson Isuzu as
of December 31, 1996 and 1997, and the related statements of income and changes
in retained earnings 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.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Robertson
Oldsmobile-Cadillac, Inc. d/b/a Moss Robertson Mazda and Moss Robertson Isuzu at
December 31, 1996 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
January 26, 1998
F-58
<PAGE> 162
ROBERTSON OLDSMOBILE-CADILLAC, INC. D/B/A
MOSS ROBERTSON MAZDA AND
MOSS ROBERTSON ISUZU
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $2,554,818 $2,168,413 $2,100,295
Accounts receivable...................................... 355,968 258,276 377,162
Inventories.............................................. 2,341,805 2,766,897 2,996,592
Prepaid expenses and other current assets................ 23,114 41,879 44,922
---------- ---------- ----------
Total current assets............................. 5,275,705 5,235,465 5,518,971
Machinery and equipment, net............................... 60,770 46,228 46,252
Intangible assets, net..................................... 117,592 108,122 105,755
---------- ---------- ----------
$5,454,067 $5,389,815 $5,670,978
========== ========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Floor plan notes payable................................. $1,921,823 $2,391,254 $2,612,872
Accounts payable......................................... 537,806 290,511 303,046
Accrued liabilities...................................... 45,402 54,072 104,842
Current maturities of long-term debt..................... 7,663 -- --
---------- ---------- ----------
Total current liabilities........................ 2,512,694 2,735,837 3,020,760
Stockholder's equity:
Common stock, $5 par value:
2,000 shares authorized, 1,000 shares issued and
outstanding......................................... 5,000 5,000 5,000
Additional paid in capital............................... 144,500 144,500 144,500
Retained earnings........................................ 2,791,873 2,504,478 2,500,718
---------- ---------- ----------
Total stockholder's equity....................... 2,941,373 2,653,978 2,650,218
---------- ---------- ----------
$5,454,067 $5,389,815 $5,670,978
========== ========== ==========
</TABLE>
See accompanying notes.
F-59
<PAGE> 163
ROBERTSON OLDSMOBILE-CADILLAC, INC. D/B/A
MOSS ROBERTSON MAZDA AND
MOSS ROBERTSON ISUZU
STATEMENTS OF INCOME AND CHANGES IN RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- -----------------------
1996 1997 1997 1998
----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Vehicle sales............................... $18,781,757 $20,258,720 $4,061,881 $4,910,948
Parts and service........................... 2,499,903 2,778,577 654,458 651,971
Finance, commission and other revenues,
net...................................... 216,387 387,204 84,195 67,993
----------- ----------- ---------- ----------
21,498,047 23,424,501 4,800,534 5,630,912
Cost of sales:
Vehicle Sales............................... 17,213,988 18,912,247 3,783,784 4,514,911
Parts and service........................... 1,233,144 1,537,189 360,277 356,020
----------- ----------- ---------- ----------
18,447,132 20,449,436 4,144,061 4,870,931
----------- ----------- ---------- ----------
Gross profit.................................. 3,050,915 2,975,065 656,473 759,981
Selling, general and administrative
expenses.................................... 2,195,664 1,956,762 471,564 500,157
----------- ----------- ---------- ----------
Income from operations........................ 855,251 1,018,303 184,909 259,824
Interest expense.............................. 45,365 66,811 15,240 22,345
Interest income............................... 152,541 174,892 40,052 34,890
Other (expense) income, net................... 2,987 (4,779) (2,484) (5,630)
----------- ----------- ---------- ----------
Net income.......................... 965,414 1,121,605 207,237 266,739
Dividends paid................................ (411,930) (1,409,000) (299,999) (270,499)
Retained earnings at beginning of year........ 2,238,389 2,791,873 2,791,873 2,504,478
----------- ----------- ---------- ----------
Retained earnings at end of year.............. $ 2,791,873 $ 2,504,478 $2,699,111 $2,500,718
=========== =========== ========== ==========
</TABLE>
See accompanying notes.
F-60
<PAGE> 164
ROBERTSON OLDSMOBILE-CADILLAC, INC. D/B/A
MOSS ROBERTSON MAZDA AND
MOSS ROBERTSON ISUZU
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------- -----------------------
1996 1997 1997 1998
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income...................................... $ 965,414 $1,121,605 $ 207,237 $ 266,739
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation............................... 50,862 45,027 6,359 3,881
Amortization............................... 9,470 9,470 2,368 2,367
Gain (loss) on sale of machinery and
equipment................................ 4,282 (771) -- --
Changes in assets and liabilities:
Accounts receivable...................... (83,622) 97,692 22,190 (118,886)
Prepaid expenses and other current
assets................................ (3,431) (18,765) (21,752) (3,043)
Inventories.............................. (190,283) (425,092) (479,293) (229,695)
Floor plan notes payable................. 307,442 469,431 507,895 221,618
Accounts payable......................... 206,763 (247,295) (267,762) 12,535
Accrued liabilities...................... (34,023) 8,670 59,757 50,770
---------- ---------- ---------- ----------
Net cash provided by operating
activities.......................... 1,232,874 1,059,972 36,999 206,286
INVESTING ACTIVITIES
Purchases of machinery and equipment............ (48,541) (30,813) (4,356) (3,905)
Proceeds on disposal of machinery and
equipment..................................... -- 1,099 -- --
---------- ---------- ---------- ----------
Net cash used in investing
activities.......................... (48,541) (29,714) (4,356) (3,905)
FINANCING ACTIVITIES
Principal payments on long-term debt............ (17,956) (7,663) (4,707) --
Dividends paid.................................. (411,930) (1,409,000) (299,999) (270,499)
Loans (to) from stockholder, net................ (337,661) -- -- --
Payments of stockholder loans, net.............. 337,661 -- -- --
---------- ---------- ---------- ----------
Net cash used in financing
activities.......................... (429,886) (1,416,663) (304,706) (270,499)
---------- ---------- ---------- ----------
Change in cash and cash equivalents............. 754,447 (386,405) (272,063) (68,118)
Cash and cash equivalents at beginning of the
year.......................................... 1,800,371 2,554,818 2,554,818 2,168,413
---------- ---------- ---------- ----------
Cash and cash equivalents at end of the year.... $2,554,818 $2,168,413 $2,282,755 $2,100,295
========== ========== ========== ==========
</TABLE>
See accompanying notes.
F-61
<PAGE> 165
ROBERTSON OLDSMOBILE-CADILLAC, INC. D/B/A
MOSS ROBERTSON MAZDA AND
MOSS ROBERTSON ISUZU
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF BUSINESS
Robertson Oldsmobile-Cadillac, Inc. d/b/a Moss Robertson Mazda and Moss
Robertson Isuzu (the Company) is principally engaged in the business of selling
and servicing new and used vehicles. The Company operates 4 dealerships in
Gainesville, Georgia consisting of Oldsmobile, Cadillac, Mazda, and Isuzu.
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 in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, deposits in banks,
contracts in transit pertaining to the sale of vehicles, and all highly liquid
investments with an original maturity of three months or less at the date of
purchase. The Company's cash equivalents include $1,664,144 at December 31, 1996
and $1,764,144 at December 31, 1997, which it invested with GMAC as collateral
security for the Company's floor plan notes payable under its security agreement
with GMAC. In consideration, the Company receives a reduction in the interest
charged under the security agreement. So long as the Company is not in default
under its security agreement, it may, upon written request, require GMAC to
return all or a portion of the invested balance to it on the next business day
following receipt by GMAC of the request. The Company's management believes that
there is little, if any, credit risk because its investment may not exceed 75%
of the Company's floor plan notes payable to GMAC.
INVENTORIES
All inventory is stated at the lower of cost or market. Cost of new
vehicles and certain parts and accessories is determined using the last-in,
first-out (LIFO) method. Cost of used vehicles and other parts and accessories
is determined using the first-in, first-out (FIFO) method.
MACHINERY AND EQUIPMENT
Machinery and equipment is stated at cost less accumulated depreciation.
Depreciation is provided predominately using accelerated methods over the
estimated useful lives of the assets ranging from 3 to 7 years.
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 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. Gross revenues related to finance fees, insurance and warranty
commissions amounted to
F-62
<PAGE> 166
ROBERTSON OLDSMOBILE-CADILLAC, INC. D/B/A
MOSS ROBERTSON MAZDA AND
MOSS ROBERTSON ISUZU
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
$286,300 and $473,192 for the years ended December 31, 1996 and 1997,
respectively. These revenues are presented net of associated costs of $69,913
and $85,988 for the years ended December 31, 1996 and 1997, respectively in
other revenues. The Company is charged back a portion of fees and commissions
earned on finance or insurance contracts if the customer terminates a contract
prior to its scheduled maturity.
INTANGIBLES
Intangibles consists of goodwill that represents the excess of cost over
assigned fair market value of a dealership acquired and is being amortized on a
straight-line basis over its estimated useful life, not exceeding 40 years.
Accumulated amortization was $24,464 and $33,934 at December 31, 1996 and 1997,
respectively. The carrying amount of the intangible is reviewed if facts and
circumstances suggest that it may be impaired. If this review indicates that the
asset will not be recoverable, as determined based on the estimated undiscounted
cash flows of the entity acquired over the remaining amortization period, the
carrying amount of the asset is reduced by the estimated shortfall of discounted
cash flows.
INCOME TAXES
The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Under those provisions, the Company does not pay
federal or state corporate income taxes. Instead, the stockholders are liable
for individual federal and state income taxes on their respective shares of the
Company's taxable income.
The pro forma provision for federal and state income taxes for the years
ended December 31, 1996 and 1997 would be $367,408 and $428,301, respectively.
The pro forma provision reflects amounts that would have been recorded had the
Company's income been taxed for state and federal purposes as if it were a C
Corporation.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of contracts in transit and
accounts receivable. Also, at times, cash deposits in banks exceed the Federal
Deposit Insurance Corporation insurance limit. Contracts in transit are for
funds received shortly after balance sheet date from contracts financed with
financial institutions. Trade receivables principally result from extending
short-term credit to a large number of customers and other automotive dealers
located in the North Georgia area. Finance companies receivables are commissions
on credit contracts of customers. Receivables also result from transactions with
automotive manufacturers. Although the Company is directly affected by the
economic conditions in the automotive industry, financial institutions, banks,
its customers and the general economy of the Gainesville, Georgia area,
management does not believe significant credit risk exists.
MAJOR SUPPLIER
The Company purchases substantially all of its new vehicles and parts
inventory from automobile manufacturers/distributors at the prevailing prices
charged by the manufacturers/distributors to all franchise 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.
F-63
<PAGE> 167
ROBERTSON OLDSMOBILE-CADILLAC, INC. D/B/A
MOSS ROBERTSON MAZDA AND
MOSS ROBERTSON ISUZU
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING
The Company expenses the cost of advertising as incurred. Advertising
expense was $122,509 and $82,276 for the years ended December 31, 1996 and 1997,
respectively.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company considers the carrying amounts of significant classes of
financial instruments on the balance sheet, including cash and contracts in
transit, floor plan notes payable and long-term debt to be reasonable estimates
of fair value. Fair value of the Company's debt was estimated using discounted
cash flow analysis, based on the Company's current incremental borrowing rates
for similar types of arrangements.
INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements as of March 31, 1998 and
the three months ended March 31, 1997 and 1998 have been prepared on
substantially the same basis as the audited financial statements and include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial information set forth therein.
2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Parts, service and wholesale................................ $ 77,610 $ 42,974
Vehicle receivables......................................... 119,152 35,766
Factory..................................................... 147,141 156,182
Finance companies........................................... 6,010 17,232
Employees and shareholder................................... 6,055 6,122
-------- --------
$355,968 $258,276
======== ========
</TABLE>
3. INVENTORIES
Inventories consist of the following at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
New vehicles................................................ $1,944,514 $2,587,395
Used vehicles............................................... 676,534 494,600
Parts, accessories and other................................ 144,813 123,856
---------- ----------
2,765,861 3,205,851
Less LIFO reserve........................................... (424,056) (438,954)
---------- ----------
$2,341,805 $2,766,897
========== ==========
</TABLE>
F-64
<PAGE> 168
ROBERTSON OLDSMOBILE-CADILLAC, INC. D/B/A
MOSS ROBERTSON MAZDA AND
MOSS ROBERTSON ISUZU
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. MACHINERY AND EQUIPMENT
A summary of machinery and equipment is as follows as of December 31, 1996
and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Machinery and shop equipment................................ $261,726 $259,818
Furniture and fixtures...................................... 250,106 268,765
Parts and accessories equipment............................. 27,972 32,525
Company vehicle............................................. 14,048 14,048
-------- --------
553,852 575,156
Less accumulated depreciation............................... 493,082 528,928
-------- --------
$ 60,770 $ 46,228
======== ========
</TABLE>
5. FLOOR PLAN NOTES PAYABLE
Floor plan notes payable consist of a note payable with a financial
institution. Floor plan notes payable are secured by certain new and used
vehicles. The floor plan arrangement permits the Company to borrow up to
$6,475,000, restricted by new and used vehicle levels. The notes are generally
due within ten days of the vehicle being sold or after the vehicle has been in
inventory for one year for new vehicles and after three months for used
vehicles.
The notes bear interest based on contractual rates which ranged from
approximately 8.5% to 8.25% at December 31, 1996 and 1997. During 1996 and 1997,
total cash paid for interest on floor plan notes payable and long-term debt was
$44,057 and $66,674, respectively. Interest expense related to floor plan notes
payable was reduced by manufacturer floor plan allowances and credits of
$155,437 and $193,925 for 1996 and 1997, respectively.
6. ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
------- -------
<S> <C> <C>
Accrued payroll............................................. $43,841 $51,131
Accrued taxes............................................... 1,250 2,502
Other accrued liabilities................................... 311 439
------- -------
$45,402 $54,072
======= =======
</TABLE>
7. LONG-TERM DEBT
A summary of long-term debt as of December 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------ -------
<S> <C> <C>
Note payable; bearing interest at 7.5%, payable monthly,
balance paid in full June 1997............................ $7,663 $ --
Less current maturities of long-term debt................... 7,663 --
------ -------
$ -- $ --
====== =======
</TABLE>
F-65
<PAGE> 169
ROBERTSON OLDSMOBILE-CADILLAC, INC. D/B/A
MOSS ROBERTSON MAZDA AND
MOSS ROBERTSON ISUZU
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMITMENTS AND TRANSACTIONS WITH RELATED PARTIES
The Company is obligated to stockholder of the Company under certain
non-cancelable leases. The Company has an option to renew this lease for an
additional five year period with rent renegotiated at that time but in no event
for less than rent payable at March 31, 2005. These leases, which cover the
lease of certain buildings, land and equipment provide for the following
payments:
<TABLE>
<S> <C>
1998........................................................ $ 180,000
1999........................................................ 180,000
2000........................................................ 202,500
2001........................................................ 210,000
2002........................................................ 210,000
Thereafter.................................................. 472,500
----------
Total minimum payments...................................... $1,455,000
==========
</TABLE>
Total rent expense for leases with related parties for the years ended
December 31, 1996 and 1997 was $149,600 and $180,000, respectively.
The Company is a guarantor of a mortgage secured by the leased property
referred to above. At December 31, 1996 and 1997, the unpaid balance of the
mortgage amounted to $976,561 and $932,448, respectively. Until full payment and
performance of all obligations of the borrower under the loan, borrower and
guarantor must maintain certain financial ratios and covenants. Failure to do so
would result in a default under the terms of the mortgage loan agreement. It is
not practical to estimate the fair value of the above guarantee, however, the
Company does not expect to incur any significant losses as a result of this
guarantee.
During 1996, the stockholder of the Company borrowed $480,661 from the
Company and repaid it, including interest. In addition, the Company borrowed
$143,000 from the stockholder during 1996, which was also repaid including
interest.
9. GOVERNMENTAL REGULATION
Substantially all of the Company's facilities are subject to federal, state
and local provisions regulating the discharge of materials into the environment.
Compliance with these provisions has not had, nor does the Company expect such
compliance to have any material effect upon the capital expenditures, net
income, financial condition or competitive position of the Company. Management
believes that its current practices and procedures for the control and
disposition of such wastes comply with applicable federal and state
requirements.
10. EMPLOYEE BENEFIT PLAN
The Company has an employee savings plan under Section 401(k) of the
Internal Revenue Code. This plan covers substantially all full time employees
that have been employed by the Company for one year and work at least 1,000
hours annually. Generally, employees can defer from 2% to 15% of their
compensation and the Company can make matching contributions of a designated
percentage at the Company's discretion. The amount charged against income for
the Company's contributions to the plan for the years ended December 31, 1996
and 1997 was $16,105 and $15,248, respectively.
F-66
<PAGE> 170
ROBERTSON OLDSMOBILE-CADILLAC, INC. D/B/A
MOSS ROBERTSON MAZDA AND
MOSS ROBERTSON ISUZU
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
11. SUBSEQUENT EVENT
Subsequent to December 31, 1997, the stockholder of the Company signed an
agreement to sell the stock of the Company. The agreement is subject to several
conditions, including the manufacturers' approval of change in dealership
management and ownership.
F-67
<PAGE> 171
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Day's Chevrolet, Inc.
We have audited the accompanying balance sheets of Day's Chevrolet, Inc. as
of December 31, 1996 and 1997, and the related statements of income and changes
in retained earnings 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.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Day's Chevrolet, Inc. at
December 31, 1996 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
March 26, 1998
F-68
<PAGE> 172
DAY'S CHEVROLET, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 917,181 $ 1,287,204 $ 1,447,609
Accounts receivable................................... 707,353 849,913 835,636
Inventories........................................... 8,095,756 8,113,893 7,787,102
Prepaid expenses and other current assets............. 8,935 5,862 4,763
----------- ----------- -----------
Total current assets.......................... 9,729,225 10,256,872 10,075,110
Property and equipment, net............................. 2,224,636 249,898 271,784
Other assets............................................ 116,715 104,699 322,611
----------- ----------- -----------
$12,070,576 $10,611,469 $10,669,505
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Floor plan notes payable.............................. $ 7,864,591 $ 9,102,706 $ 8,975,041
Note payable.......................................... 273,295 -- --
Accrued liabilities................................... 199,455 310,644 265,068
Accounts payable...................................... 482,918 333,965 229,553
----------- ----------- -----------
Total current liabilities..................... 8,820,259 9,747,315 9,469,662
Stockholders' equity:
Class A voting common stock, $1 par value, 500,000
shares authorized, 110,000 shares issued and
outstanding........................................ 110,000 110,000 110,000
Additional paid-in capital............................ 32,344 32,344 32,344
Retained earnings..................................... 3,107,973 721,810 1,057,499
----------- ----------- -----------
Total stockholders' equity.................... 3,250,317 864,154 1,199,843
----------- ----------- -----------
$12,070,576 $10,611,469 $10,669,505
=========== =========== ===========
</TABLE>
See accompanying notes.
F-69
<PAGE> 173
DAY'S CHEVROLET, INC.
STATEMENTS OF INCOME AND CHANGES IN RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- -------------------------
1996 1997 1997 1998
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Vehicle sales............................. $48,996,779 $50,587,196 $12,422,737 $11,856,249
Parts and service......................... 9,525,159 9,339,883 2,218,446 2,348,378
Finance, commission and other revenues,
net.................................... 997,917 855,957 208,783 254,756
----------- ----------- ----------- -----------
59,519,855 60,783,036 14,849,966 14,459,383
Cost of sales:..............................
Vehicle sales............................. 46,165,607 48,091,556 11,782,331 11,258,605
Parts and service......................... 6,580,364 6,453,453 1,559,829 1,594,034
----------- ----------- ----------- -----------
52,745,971 54,545,009 13,342,160 12,852,639
----------- ----------- ----------- -----------
Gross profit................................ 6,773,884 6,238,027 1,507,806 1,606,744
Selling, general and administrative
expenses.................................. 5,076,021 5,178,182 1,235,273 1,258,291
----------- ----------- ----------- -----------
Income from operations...................... 1,697,863 1,059,845 272,533 348,453
Interest expense............................ 124,764 101,739 35,621 19,952
Interest income............................. 1,888 2,311 578 610
Other income (expense), net................. 7,365 5,812 552 6,578
----------- ----------- ----------- -----------
Net income........................ 1,582,352 966,229 238,042 335,689
Distributions to stockholders............... (989,245) (3,352,392) -- --
Retained earnings at beginning of year...... 2,514,866 3,107,973 3,107,973 721,810
----------- ----------- ----------- -----------
Retained earnings at end of year............ $ 3,107,973 $ 721,810 $ 3,346,015 $ 1,057,499
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-70
<PAGE> 174
DAY'S CHEVROLET, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- -------------------------
1996 1997 1997 1998
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................. $ 1,582,352 $ 966,229 $ 238,042 $ 335,689
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation.............................. 242,590 194,795 31,812 30,039
Gain on disposal of property and
equipment.............................. (1,008) -- -- --
Changes in assets and liabilities:
Accounts receivable.................... (31,583) (142,560) (1,196) 14,277
Inventories............................ (752,170) (18,137) 2,304,166 326,791
Prepaid expenses and other current
assets............................... 854 3,073 (558,598) 1,099
Other assets........................... 10,171 12,016 (644,490) (217,912)
Floor plan notes payable............... 414,653 1,238,115 (2,022,604) (127,665)
Accounts payable and accrued
liabilities.......................... 27,158 (37,764) (27,119) (149,988)
----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities............ 1,493,017 2,215,767 (679,987) 212,330
INVESTING ACTIVITIES
Purchases of property and equipment......... (332,027) (52,611) (8,630) (51,925)
Proceeds on disposal of property and
equipment................................. 188,290 31,483 16,868 --
----------- ----------- ----------- -----------
Net cash used in investing
activities...................... (143,737) (21,128) 8,238 (51,925)
FINANCING ACTIVITIES
Principal payments on note payable.......... (252,288) (273,295) 336,944 --
Dividends paid.............................. (989,245) (1,551,321) -- --
----------- ----------- ----------- -----------
Net cash used in financing
activities...................... (1,241,533) (1,824,616) 336,944 --
----------- ----------- ----------- -----------
Increase (decrease) in cash and cash
equivalents............................... 107,747 370,023 (334,805) 160,405
Cash and cash equivalents at beginning of
the year.................................. 809,434 917,181 917,181 1,287,204
----------- ----------- ----------- -----------
Cash and cash equivalents at end of the
year...................................... $ 917,181 $ 1,287,204 $ 582,376 $ 1,447,609
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-71
<PAGE> 175
DAY'S CHEVROLET, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF BUSINESS
Day's Chevrolet, Inc. (the Company) is principally engaged in the business
of selling and servicing new and used vehicles. The Company operates a Chevrolet
dealership in Acworth, Georgia.
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 in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, contracts in transit
pertaining to the sale of vehicles, and all highly liquid investments with an
original maturity of three months or less at the date of purchase.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts is based on historical bad debt
experience and management's periodic evaluation of individual accounts.
INVENTORIES
All inventory is stated at the lower of cost or market. Cost of new
vehicles and certain parts and accessories is determined using the last-in,
first-out (LIFO) method. Cost of used vehicles and other parts and accessories
is determined using the first-in, first-out (FIFO) method.
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. The Company generates ancillary revenues from its vehicle sales
operation. Such revenues include finance fees, insurance fees, and warranty
contract 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 and warranty commissions are
recognized in income upon customer acceptance of the contract terms as evidenced
by contract execution. Gross revenues related to finance fees, insurance and
warranty commissions amounted to $1,489,104 and $1,404,902 for the years ended
December 31, 1996 and 1997, respectively. These revenues are presented net of
associated costs of $491,187 and $548,945 for the years ended December 31, 1996
and 1997, respectively in other revenues.
The Company is charged back a portion of fees and commissions earned on
finance or insurance contracts if the customer terminates a contract prior to
its scheduled maturity. The estimated allowance for these chargebacks is based
upon the Company's historical experience for prepayments or defaults on the
finance and insurance contracts.
F-72
<PAGE> 176
DAY'S CHEVROLET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost less accumulated depreciation.
Depreciation is provided predominately on the straight-line method over the
estimated useful lives of the assets. The ranges of estimated useful lives are
as follows:
<TABLE>
<S> <C>
Buildings................................................... 15-20 years
Furniture and fixtures...................................... 5-7 years
Leasehold improvements...................................... 5-18 years
Machinery and shop equipment................................ 5-12 years
Rental cars................................................. 3 years
</TABLE>
INCOME TAXES
The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Under those provisions, the Company does not pay
federal or state corporate income taxes. Instead, the stockholders are liable
for individual federal and state income taxes on their respective shares of the
Company's taxable income.
The pro forma provision for federal and state income taxes for the years
ended December 31, 1996 and 1997 would be $608,227 and $640,359, respectively.
The pro forma provision reflects amounts that would have been recorded had the
Company's income been taxed for state and federal purposes as if it were a C
Corporation.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of contracts in transit and
accounts receivable. Also, at times, cash deposits in banks exceed the Federal
Deposit Insurance Corporation insurance limit. Contracts in transit are for
funds received shortly after the balance sheet date from contracts financed with
financial institutions. Trade receivables principally result from extending
short-term credit to a large number of customers and other automotive dealers
located in the metropolitan Atlanta, Georgia area. Finance companies receivables
are commissions on credit contracts of customers. Receivables also result from
transactions with automotive manufacturers. Although the Company is directly
affected by the economic conditions in the automotive industry, financial
institutions, banks, its customers and the general economy of the metropolitan
Atlanta, Georgia area, management does not believe significant credit risk
exists.
MAJOR SUPPLIER
The Company purchases substantially all of its new vehicles and parts
inventory from automobile manufacturers/distributors at the prevailing prices
charged by the manufacturers/distributors to all franchise dealers. The Company
entered into an agreement ("Dealer Agreement") with the manufacturer. The Dealer
Agreement generally limits the location of the dealership and includes
manufacturer approval rights over changes in dealership management and
ownership. The manufacturer is also entitled to terminate the Dealer Agreement
if the dealership is in material breach of its terms.
ADVERTISING
The Company expenses the cost of advertising as incurred. Advertising
expense was $379,209 and $393,487 for the years ended December 31, 1996 and
1997, respectively.
F-73
<PAGE> 177
DAY'S CHEVROLET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company considers the carrying amounts of significant classes of
financial instruments on the balance sheet, including cash and contracts in
transit and note payable to be reasonable estimates of fair value. Fair value of
the Company's debt was estimated using discounted cash flow analysis, based on
the Company's current incremental borrowing rates for similar types of
arrangements.
INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements as of March 31, 1998 and
the three months ended March 31, 1997 and 1998 have been prepared on
substantially the same basis as the audited financial statements and include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial information set forth therein.
2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Parts, service and wholesale................................ $494,572 $547,203
Factory..................................................... 173,143 234,851
Finance companies........................................... 38,348 65,407
Employees................................................... 1,290 2,452
-------- --------
$707,353 $849,913
======== ========
</TABLE>
3. INVENTORIES
Inventories consist of the following at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
New vehicles................................................ $6,443,653 $7,297,211
Used vehicles............................................... 2,484,732 2,000,929
Parts, accessories and other................................ 645,131 608,065
---------- ----------
9,573,516 9,906,205
Less LIFO reserve........................................... 1,477,760 1,792,312
---------- ----------
$8,095,756 $8,113,893
========== ==========
</TABLE>
F-74
<PAGE> 178
DAY'S CHEVROLET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
During 1997, the Company made a distribution of land and buildings to the
stockholders. This is described further in Note 8. A summary of plant and
equipment is as follows as of December 31, 1996 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Land........................................................ $ 496,906 $ --
Buildings................................................... 1,948,790 --
Machinery and shop equipment................................ 434,448 437,768
Furniture and fixtures...................................... 297,914 306,321
Rental cars and company vehicles............................ 410,944 414,515
---------- ----------
3,589,002 1,158,604
Less accumulated depreciation............................... 1,364,366 908,706
---------- ----------
$2,224,636 $ 249,898
========== ==========
</TABLE>
5. FLOOR PLAN NOTES PAYABLE
Floor plan notes payable consist of a note payable with a financial
institution. Floor plan notes payable are secured by certain new and used
vehicles. The floor plan arrangement permits the Company to borrow up to
$11,000,000 for 1996 and 1997, restricted by new and used vehicle levels. The
notes are generally due within ten days of the vehicle being sold or after the
vehicle has been in inventory for one year for new vehicles and after three
months for used vehicles.
The notes bear interest based on contractual rates which were 9.25% and
9.5% at December 31, 1996 and 1997, respectively. During 1996 and 1997, total
cash paid for interest on floor plan notes payable and note payable was $124,764
and $101,739, respectively.
6. NOTE PAYABLE
The Company's note payable to GMAC, bearing interest at 9.25%, payable
monthly, was paid in full in December 1997.
7. ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Salaries, wages, bonus and vacation......................... $ -- $ 150
Finance reserve............................................. 50,000 50,000
Other accrued liabilities................................... 149,455 260,494
-------- --------
$199,455 $310,644
======== ========
</TABLE>
8. COMMITMENTS AND TRANSACTIONS WITH RELATED PARTIES
The Company declared a dividend of its land and buildings which was
transferred to the stockholder, effective September 1, 1997. The land and
buildings were transferred at book values of $496,906 and $1,318,665,
respectively. In addition, the Company leased certain land and buildings from
the stockholders, effective September 1, 1997. The lease, which is cancelable by
either the Company or the stockholders at any
F-75
<PAGE> 179
DAY'S CHEVROLET, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMITMENTS AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
time prior to its expiration in February 1999, requires monthly payments of
$21,667. At December 31, 1997, the Company owed the stockholders $86,667 for
rent relating to this lease.
9. GOVERNMENTAL REGULATION
Substantially all of the Company's facilities are subject to federal, state
and local provisions regulating the discharge of materials into the environment.
Compliance with these provisions has not had, nor does the Company expect such
compliance to have any material effect upon the capital expenditures, net
income, financial condition or competitive position of the Company. Management
believes that its current practices and procedures of the control and
disposition of such wastes comply with applicable federal and state
requirements.
10. EMPLOYEE BENEFIT PLAN
The Company has an employee savings plan under Section 401(k) of the
Internal Revenue Code. This plan covers substantially all full time employees.
The Company matches the employees' contributions of up to four percent of
compensation at the rate of $0.25 per $1.00. The Company's contributions
generally vest over 6 years. The amount charged against income for the Company's
contributions to the plan for the years ended December 31, 1996 and 1997 was
$3,646 and $4,749, respectively.
11. SUBSEQUENT EVENT
Subsequent to December 31, 1997, the stockholders of the Company signed an
agreement to sell the stock of the Company. The agreement is subject to several
conditions, including the manufacturers' approval of change in dealership
management and ownership.
F-76
<PAGE> 180
INDEPENDENT AUDITORS' REPORT
To the Stockholder
South Financial Corporation
Gainesville, Florida
We have audited the accompanying balance sheets of South Financial
Corporation as of December 31, 1997 and 1996, and the related statements of
operations and retained earnings, and cash flows for the years ended December
31, 1997, 1996 and 1995. These financial statements are the responsibility of
South Financial Corporation's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of South Financial Corporation
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years ended December 31, 1997, 1996 and 1995, in conformity with
generally accepted accounting principles.
/s/ DAVIS, MONK & COMPANY
Gainesville, Florida
February 12, 1998
F-77
<PAGE> 181
SOUTH FINANCIAL CORPORATION
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Finance receivables, net.................................... $12,846,772 $17,141,343
Cash........................................................ 64,076 4,184
Other receivables........................................... 38,131 45,089
Due from affiliated companies............................... -- 350,000
Repossessions in liquidation................................ 309,587 --
Property and equipment, net................................. 225,980 286,816
Deposits.................................................... 19,991 22,101
Prepaid expenses............................................ -- 10,022
----------- -----------
Total assets...................................... $13,504,537 $17,859,555
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Contractual obligations payable to dealers on finance
contracts.............................................. $ 726,678 $ 3,919,205
Senior debt............................................... 11,461,888 11,647,230
Subordinated debt......................................... 294,872 967,430
Accounts payable and accrued expenses..................... 93,769 16,771
Deferred tax liability, net............................... 266,486 405,746
----------- -----------
Total liabilities................................. 12,843,693 16,956,382
Stockholder's Equity:
Common stock, $.05 par value per share, 10,000 shares
authorized, 1 share issued and outstanding............. 1 1
Additional paid-in capital................................ 654 654
Retained earnings......................................... 660,189 902,518
----------- -----------
Total stockholder's equity........................ 660,844 903,173
----------- -----------
Total liabilities and stockholder's equity........ $13,504,537 $17,859,555
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-78
<PAGE> 182
SOUTH FINANCIAL CORPORATION
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Interest, fees and loan discount income.................. $4,631,852 $5,447,343 $3,165,858
Insurance commissions.................................... 110,814 275,749 21,430
---------- ---------- ----------
Total revenues................................... 4,742,666 5,723,092 3,187,288
Expenses and losses:
Interest expense......................................... 1,420,125 1,416,083 978,003
Salaries and personnel costs............................. 2,063,241 2,091,580 1,192,368
Dealer incentives........................................ -- 8,830 13,397
Loss on asset disposals.................................. 20,151 -- --
Depreciation............................................. 67,004 58,042 28,702
Other operating expenses................................. 758,618 882,507 545,071
Provision for credit losses.............................. 795,116 525,281 --
---------- ---------- ----------
Total expenses and losses........................ 5,124,255 4,982,323 2,757,541
---------- ---------- ----------
Income (loss) before income taxes.......................... (381,589) 740,769 429,747
Income tax benefit (expense)............................... 139,260 (306,949) (150,548)
---------- ---------- ----------
Net income (loss)................................ (242,329) 433,820 279,199
Retained earnings, beginning of year, as previously
reported................................................. 902,518 468,698 103,738
Prior period adjustment.................................... -- -- 85,761
---------- ---------- ----------
Retained earnings, beginning of year, as restated.......... 902,518 468,698 189,499
---------- ---------- ----------
Retained earnings, end of year............................. $ 660,189 $ 902,518 $ 468,698
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-79
<PAGE> 183
SOUTH FINANCIAL CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).................................... $ (242,329) $ 433,820 $ 279,199
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Provision for credit losses........................ 795,116 525,281 --
Loss on asset disposal............................. 20,151 -- --
Depreciation....................................... 67,004 58,042 28,702
Deferred taxes..................................... (139,260) 204,159 (75,521)
Changes in:
Unearned income................................. (1,080,484) 1,112,404 --
Other receivables and assets.................... 19,090 (40,998) (308,923)
Due from affiliated companies................... -- 64,861 63,356
Contractual obligations payable to dealers...... (1,301,293) (1,221,267) 1,703,128
Due to affiliated companies..................... -- 39,535 --
Accounts payable and accrued expenses........... 76,998 (20,413) 13,031
Income taxes.................................... -- -- 205,751
------------ ------------ ------------
Net cash provided by (used in) operating
activities............................... (1,785,007) 1,155,424 1,908,723
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Finance contracts originated......................... (9,305,267) (12,231,702) (16,288,429)
Principal payments received on finance contracts..... 11,684,385 7,502,004 8,896,552
Advances to affiliated companies..................... -- -- (894,747)
Payments received from affiliated companies.......... -- -- 656,412
Acquisition of property and equipment................ (26,319) (128,778) (188,861)
------------ ------------ ------------
Net cash provided by (used in) investing
activities............................... 2,352,799 (4,858,476) (7,819,073)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments to investors................................ (139,853) (49,810) (118,651)
Advances from investors.............................. -- 37,926 768,482
Borrowings from lending institutions................. 12,193,000 16,839,000 13,833,242
Payments to lending institutions..................... (12,378,342) (13,354,994) (8,545,019)
Net advances from stockholder........................ -- 170,441 58,491
Net payments to stockholder.......................... (182,705) -- (41,331)
------------ ------------ ------------
Net cash provided by (used in) financing
activities............................... (507,900) 3,642,563 5,955,214
------------ ------------ ------------
Net increase (decrease) in cash............ 59,892 (60,489) 44,864
Cash, beginning of year.............................. 4,184 64,673 19,809
------------ ------------ ------------
Cash, end of year.................................... $ 64,076 $ 4,184 $ 64,673
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest (none capitalized)........................ $ 1,420,125 $ 1,416,083 $ 992,341
============ ============ ============
Income taxes....................................... $ -- $ 40,510 $ 20,500
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-80
<PAGE> 184
SOUTH FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
South Financial Corporation (SFC) is a finance company licensed by the
State of Florida as a sales finance company. It has one stockholder, Mr. Thomas
Murphy (the Stockholder). In January, 1998, the Stockholder sold 100% of his
interest in SFC to Boomershine, Inc. of Atlanta, Georgia.
The primary business conducted by SFC is to purchase from retail automobile
dealers (dealers) sales contracts of substandard credit arising from the sale of
used automobiles. At December 31, 1997, dealers are located in Florida (62%),
North Carolina (21%) and Tennessee (17%). Beginning in 1997, the receivables are
purchased without recourse. However, prior to 1997, some receivables were
purchased with recourse. Such contracts are obtained after advancing the dealer
25% to 75% of the principal amount financed on installment sales contracts. As
collateral for each receivable purchased, SFC obtains a security interest in the
vehicle. In the event of default, SFC has the right to take possession of the
vehicle. At that time, SFC has the right to resell the vehicle at a public or
private sale. Contract terms average approximately 35 months and do not exceed
48 months.
FINANCE RECEIVABLES
Finance receivables are carried at the sales contract's unpaid balance
including finance charges. Deferred loan costs are added to the receivable
balance. Deferred finance income, deferred commissions on credit life, deferred
origination fees and purchase discounts are deducted from the balance of finance
receivables. Any discounts on contracts acquired by SFC for less than the face
value are amortized to income over the period of the payments to be received
using the interest method.
When contracts are purchased, the allowance for loan losses is increased by
a portion of the purchase discount. The allowance is decreased by the amount of
chargeoffs, net of recoveries on repossessed collateral. Management records a
charge to income when the allowance is not considered sufficient to cover
estimated losses in the portfolio. In evaluating the level of the allowance for
loan losses, management considers the existence of impairment in the loan
portfolio. This analysis is performed at the portfolio level as the loans in the
portfolio are smaller balance, homogeneous loans to customers. Management's
periodic estimates of the adequacy of the allowance are based on past loan loss
experience, known and inherent risks in the portfolio, adverse situations that
may affect the borrower's ability to repay, the estimated value of any
underlying collateral and current economic conditions. It is reasonably possible
that these estimates could be revised due to changes in the related
circumstances.
For approximately 30% of the portfolio at December 31, 1997, SFC has
agreements with the automobile dealers that contain terms to hold the dealer
responsible for all defaults on related installment contracts. When management
believes that collectibility of these loans is unlikely, losses are first
charged against any obligation payable to dealers.
CASH
Cash consists solely of bank deposits which are fully insured by the
Federal Deposit Insurance Corporation.
PROPERTY AND EQUIPMENT AND DEPRECIATION
Property and equipment is recorded at cost. Depreciation is provided over
the estimated useful lives of the related assets using the straight-line method.
F-81
<PAGE> 185
SOUTH FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REPOSSESSIONS IN LIQUIDATION
Repossessions in liquidation are carried at the vehicle's fair value minus
estimated costs to sell. They represent contracts that have been charged off and
where SFC is proceeding to repossess the vehicle. SFC estimates the carrying
value of repossessions based on historical averages of the number of vehicles
that can be repossessed and the net amount that can be recovered.
CONTRACTUAL OBLIGATIONS PAYABLE TO DEALERS
In addition to advancing to dealers from 25% to 75% of principal amounts
financed, prior to 1997, SFC entered into arrangements with dealers whereby
reserves are established to protect SFC from potential losses associated with
financing of sales finance contracts. As part of SFC's agreement with the
dealers, a portion of the proceeds of finance contracts is retained by SFC and
is available to SFC to offset any losses on specific accounts.
LOAN ORIGINATION FEES AND INSURANCE COMMISSIONS
Fees received and direct costs incurred for the origination of loans as
well as insurance commissions on credit life policies are deferred and amortized
to interest income over the contractual lives of the loans using the interest
method. Insurance commissions on warranty policies are deferred and amortized
over the life of the insurance policy (6 months). Unamortized fee and commission
income amounts are recognized in income at the time the loans are sold or paid
in full.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of deferred taxes related primarily to
differences between the basis of finance receivables for financial and income
tax reporting. The deferred tax assets and liabilities represent the future tax
return consequences of those differences, which will either be taxable or
deductible when the assets and liabilities are recovered or settled. Deferred
taxes are also recognized for operating losses that are available to offset
future taxable income.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires SFC to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could vary from the estimates that were used.
F-82
<PAGE> 186
SOUTH FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. FINANCE RECEIVABLES
The following schedule displays contractual annual maturities of retail
automobile contracts, including interest, and a reconciliation of total
contracts receivable to net finance receivables reported on the balance sheets.
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Due Within:
One year.................................................. $10,660,721 $11,111,293
Two years................................................. 7,135,926 7,412,544
Three years............................................... 2,662,948 3,885,017
Four years................................................ 146,003 575,862
----------- -----------
Total............................................. 20,605,598 22,984,716
Unearned finance income................................... (4,769,768) (5,739,915)
Unearned insurance commissions............................ (80,632) (103,458)
Unearned discount income.................................. (959,529) --
Deferred loan origination costs........................... 87,511 --
----------- -----------
Amortized cost of contracts financed...................... 14,883,180 17,141,343
Allowance for doubtful accounts........................... (2,036,408) --
----------- -----------
Finance receivables, net.................................. $12,846,772 $17,141,343
=========== ===========
</TABLE>
Because a certain portion of contracts receivable will be repaid before or
extended after the contractual maturity dates or charged back to dealers, the
annual maturities stated are not to be regarded as a forecast of future cash
collections. At December 31, 1997, 1996 and 1995, accrued interest income of
$370,246, $321,616 and $112,844, respectively, was included in the finance
receivable balance. Approximately 3,940, 4,100 and 3,500 contracts were being
serviced by SFC at December 31, 1997, 1996 and 1995, respectively.
Contracts deemed uncollectible by management are first charged back to
balances owed by SFC to dealers, if any. Any excess of uncollectible amounts
over amounts due to dealers is charged to the provision for credit losses. The
amount of contracts written off in 1997, 1996 and 1995, net of recoveries, was
$7,285,753 (including $677,564 pertaining to chargebacks against dealers under
recourse arrangements), $10,165,878 and $4,832,587, respectively. This amount
approximated 16.8% and 21% of the gross value of contracts (principal and
interest) owned and originated in 1997 and 1996, respectively. SFC incurred
credit losses of $795,116 in 1997 and $525,281 in 1996 as a result of the above
mentioned charge backs.
The following schedule displays the change in allowance for doubtful
accounts during 1997:
<TABLE>
<S> <C>
Beginning balance........................................... $ --
Provision for credit losses................................. 795,116
Allocation of unearned discount............................. 7,849,481
Charge offs, net of recoveries.............................. (6,608,189)
-----------
$ 2,036,408
===========
</TABLE>
F-83
<PAGE> 187
SOUTH FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
ESTIMATED USEFUL
LIFE IN YEARS 1997 1996
---------------- --------- ---------
<S> <C> <C> <C>
Furniture and fixtures........................ 5-7 $ 137,569 $ 178,445
Leasehold improvements........................ 7 149,970 140,672
Computer equipment............................ 5 69,782 69,781
--------- ---------
357,321 388,898
Less: Accumulated depreciation................ (131,341) (102,082)
--------- ---------
Property and Equipment, net......... $ 225,980 $ 286,816
========= =========
</TABLE>
4. SENIOR DEBT
Senior debt is comprised of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Secured revolving note payable to General Electric Capital
Corporation (G. E. Capital)............................... $11,461,888 $11,647,230
=========== ===========
</TABLE>
The G.E. Capital revolving credit note is secured by finance contracts
assigned to G.E. Capital as well as all other assets of SFC. All contract
collections are remitted directly to G.E. Capital and applied towards the
outstanding loan balance. Under the loan and security agreement, SFC may borrow
up to $15,000,000 by obtaining advances of 90% on SFC's net investment in all
eligible finance contracts. The loan, which is guaranteed by the stockholder,
matures September 18, 1998, with provision for automatic annual renewals unless
terminated by either party. The loan bears interest at the LIBOR rate plus 5.1%
and 5.6%, which resulted in a rate of 10.81% and 10.997% at December 31, 1997
and 1996, respectively.
Primarily due to reserve adjustments made at year end December 31, 1997,
SFC was unable to meet certain financial ratio covenants and was in violation of
its credit agreement with G.E. Capital. Provisions of the credit agreement state
that in event of default, G. E. Capital has the option to make all notes and
loans due and owing immediately and to seize control of all assets to liquidate
these obligations. In a letter dated February 25, 1998, G. E. Capital has waived
compliance with the following covenants effective for the period from December
31, 1997 through June 1, 1998:
Debt ratio not to exceed 4.3 to 1
Interest coverage of at least 1.5 to 1
Management plans to receive additional capital contributions from its parent
company and expects that interest coverage will be adequate due to improved
operations.
5. SUBORDINATED DEBT
The following obligations have no stated maturities. Payment of principal
is postponed and subordinated to all payment obligations of SFC under the G. E.
Capital loan.
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Note payable to Investors Equity Corporation................ $291,122 $353,514
Note payable to HW Investments.............................. -- 350,000
Due to stockholder.......................................... 3,750 186,455
Due to South Funding Corporation............................ -- 39,535
Note payable to Ed Tillman Auto Sales on Cassat, Inc........ -- 37,926
-------- --------
Total subordinated debt........................... $294,872 $967,430
======== ========
</TABLE>
F-84
<PAGE> 188
SOUTH FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. SUBORDINATED DEBT (CONTINUED)
The note payable to Investors Equity Corporation is unsecured and is owed
to an entity in which the Stockholder also owns a 50% interest. The note bears
interest at 18% (27.2%), payable monthly, as of December 31, 1997 (1996).
The note payable to HW Investments is unsecured and is used to
collateralize future borrowing through SFC for the benefit of South Financial
Floorplan, Corp., a related party. The note bears interest at 15% annually. This
note payable was repaid during 1997.
SFC leases Corporate office space from the Stockholder. Total rent expense
paid under these leases for 1997, 1996 and 1995 was $27,000, $31,500 and
$29,729, respectively. Other transactions, combined with those related to rent
expense, result in $3,750 and $186,455 due to the Stockholder at December 31,
1997 and 1996, respectively.
South Funding Corporation is owned by an officer of SFC. The above amount
due to South Funding Corporation was advanced to SFC on a short-term basis and
was repaid in 1997.
Ed Tillman Auto Sales on Cassat, Inc. (Tillman) and SFC entered into an
agreement whereby Tillman would sell SFC certain receivables with full recourse.
SFC is entitled, under the terms of the agreement, to 9.5% of the gross
principal balance of the installment payments collected. In addition, SFC may
advance Tillman up to $500,000 to the extent of any outstanding dealer reserves.
This note payable was repaid during 1997.
6. INCOME TAXES
The following reconciliation displays the relationship between income
(loss) before income taxes and operating tax income (loss).
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- ---------
<S> <C> <C> <C>
Income (loss) before income taxes................ $ (381,589) $ 740,769 $ 429,747
Permanent differences............................ 10,231 11,485 8,748
Temporary differences............................ (812,697) (1,430,443) (349,373)
----------- ----------- ---------
Operating tax income (loss)...................... $(1,184,055) $ (678,189) $ 89,122
=========== =========== =========
</TABLE>
The operating tax loss may be offset against future taxable income. If not
used, the carryforward will expire in the year 2012.
The temporary differences consist primarily of losses recognized on
individual finance contracts which are permitted as deductions from taxable
income. Other differences include the deferral amounts associated with
non-refundable loan origination fees and commissions received on credit life
policies over the life of the contract in accordance with generally accepted
accounting principles.
The net deferred tax liability is comprised of the following:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Deferred tax liability...................................... $ 959,374 $ 654,613
Deferred tax asset.......................................... (692,888) (248,867)
--------- ---------
Deferred tax liability, net....................... $ 266,486 $ 405,746
========= =========
</TABLE>
Measurement of the provision for income taxes is based on the statutory
rate of 34% for federal taxes and approximately 5.5% for state taxes.
F-85
<PAGE> 189
SOUTH FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. TRANSACTIONS WITH RELATED PARTIES
The following schedule displays transactions with related parties during
the years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
SOUTH
SOUTH FINANCIAL
SUPER STAFF, FINANCIAL FLOORPLAN,
EQUILEASE INC. SERVICES INC. TOTAL
--------- ------------ --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Due from related parties,
December 31, 1995........... $ -- $ -- $ -- $ 414,861 $ 414,861
Advances...................... 23,292 1,817,821 28,587 30,525 1,900,225
Payments and other reductions
in amounts due.............. (23,292) (1,817,821) (28,587) (95,386) (1,965,086)
-------- ----------- -------- --------- -----------
Due from related parties,
December 31, 1996........... -- -- -- 350,000 350,000
Obligations accrued........... -- (1,852,767) -- -- (1,852,767)
Cash payments (receipts)...... -- 1,762,999 -- (350,000) 1,412,999
-------- ----------- -------- --------- -----------
Due to related parties,
December 31, 1997........... $ -- $ (89,768) $ -- $ -- $ (89,768)
======== =========== ======== ========= ===========
</TABLE>
SFC leases certain computer equipment from Equilease, another company
wholly-owned by the Stockholder.
SFC leases all its employees, except for the Stockholder, from Super Staff,
Inc., another company wholly-owned by the Stockholder. The amount due to Super
Staff, Inc. is included in Accounts payable and accrued expenses.
Included in transactions with South Financial Services is $24,375 for rent
of SFC's branch office in Gainesville, Florida.
South Financial Floorplan, Inc. finances floorplans for automobile dealers.
8. OPERATING LEASES
Certain office space is rented under operating leases. Certain leases
include options for renewal. Total rent expense for 1997, 1996 and 1995, was
$143,450, $147,131 and $118,598, respectively. Future minimum lease payments
under operating leases with an initial or remaining noncancelable term in excess
of one year at December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 97,428
1999........................................................ 78,373
2000........................................................ 67,013
2001........................................................ 55,434
2002........................................................ 55,434
--------
Total............................................. $353,682
========
</TABLE>
9. PRIOR PERIOD ADJUSTMENT
Retained earnings at the beginning of 1995 has been restated by $85,761.
SFC has corrected its method of computing interest income under the interest
(actuarial) method. The correction increased interest revenue for the years
prior to 1995 by $136,780, net of Federal and State taxes of $51,019.
F-86
<PAGE> 190
======================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, OR AN OFFER TO,
OR A SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE 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 ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION HEREIN CONTAINED IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 12
The Merger............................ 24
The Acquisitions...................... 25
Use of Proceeds....................... 27
Dividend Policy....................... 28
Capitalization........................ 29
Dilution.............................. 30
Selected Financial Data............... 31
Pro Forma Combined and Condensed
Financial Data...................... 33
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 40
Business.............................. 68
Management............................ 85
Principal Shareholders................ 93
Certain Transactions.................. 94
Description of Capital Stock.......... 95
Shares Eligible for Future Sale....... 99
Underwriting.......................... 100
Legal Matters......................... 101
Experts............................... 101
Additional Information................ 102
Index to Financial Statements......... F-1
</TABLE>
---------------------
UNTIL , 1998 (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.
======================================================
======================================================
5,500,000 SHARES
(SUNBELT AUTOMOTIVE GROUP, INC. LOGO)
COMMON STOCK
------------------------
PROSPECTUS
------------------------
RAYMOND JAMES &
ASSOCIATES, INC.
, 1998
======================================================
<PAGE> 191
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an estimate (except for the SEC, NASD and
Nasdaq fees) of the fees and expenses, all of which will be borne by the
Registrant, in connection with the sale and distribution of the securities being
registered, other than underwriting discounts and commissions.
<TABLE>
<CAPTION>
AMOUNT
-------
<S> <C>
SEC Registration Fee........................................ $20,525
NASD Filing Fee............................................. $ 7,457
Legal fees and expenses..................................... $ *
Nasdaq National Market Listing Fee.......................... $63,725
Accounting fees and expenses................................ $ *
Blue Sky fees and expenses.................................. $ *
Printing expenses........................................... $ *
Transfer Agent Fees......................................... $ *
Miscellaneous............................................... $ *
-------
Total............................................. $
=======
</TABLE>
- ---------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation of the Registrant provide that the Registrant
shall indemnify any person to the extent prescribed by the Georgia Business
Corporation Code (the "GBCC").
Section 14-2-851 of the GBCC authorizes, inter alia, a corporation to
indemnify any person ("Indemnitee") who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was an officer or director of such corporation or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided that
he acted in good faith and in a manner he reasonably believed to be in (in the
case of conduct in his official capacity) or not opposed to (in all other
instances) the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Section 14-2-851 further provides that a corporation may not
indemnify a director (1) in connection with a proceeding by or in the right of
the corporation, except for reasonable expenses incurred in connection with the
proceeding if it is determined that the director has met the relevant standard
of conduct under the GBCC; or (2) in connection with any proceeding with respect
to conduct for which he or she was adjudged liable on the basis that personal
benefit was improperly received by him or her, whether or not involving action
in his or her official capacity. In addition to the indemnifications set forth
above, Section 14-2-857 of the GBCC states that a corporation may also indemnify
and advance expenses to an officer, employee or agent of the corporation who is
a party to a proceeding because he or she is an officer, employee or agent of
the corporation to the extent as may be provided by the articles of
incorporation, the bylaws, a resolution of the board of directors, or contract
except for liability arising out of conduct that constitutes: (1) appropriation,
in violation of his or her duties, of any business opportunity of the
corporation; (2) acts or omissions which involve intentional misconduct or a
knowing violation of law; (3) liability for unlawful distribution; or (4)
receipt of an improper personal benefit. Where an officer or director is
successful on the merits or otherwise in defense of any action referred to
above, or in defense of any claim, issue or matter therein, the corporation must
indemnify him against the expenses (including attorneys' fees) which he
II-1
<PAGE> 192
actually and reasonably incurred in connection therewith. Section 14-7-855 of
the GBCC provides that any indemnification shall be made by the corporation only
as authorized in each specific case upon a determination by the (i)
shareholders, (ii) Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to such action, suit or proceeding or by a
majority of the members of a committee of two or more disinterested directors
appointed by vote, or (iii) special legal counsel if a quorum of disinterested
directors so directs or, if there are fewer than two disinterested directors,
selected by the Board of Directors. Section 14-2-859 of the GBCC provides that
indemnification pursuant to its provision is not exclusive of other rights of
indemnification to which a person may be entitled under any bylaw, agreement,
vote of shareholders or disinterested directors or otherwise.
Section 14-2-858 of the GBCC also empowers the Company to purchase and
maintain insurance on behalf of any person who is or was an officer, director,
employee or agent of the Company against liability asserted against or incurred
by him in any such capacity, whether or not the Company would have the power to
indemnify such officer or director against such liability under the provisions
of Part 5 of Article 8 of the GBCC. The Company intends to purchase and maintain
a directors' and officers' liability policy for such purposes.
In accordance with Section 14-2-202 of the GBCC, the Articles of
Incorporation of the Registrant set forth a provision which eliminates the
personal liability of directors to the Registrant or its shareholders for
monetary damages for any action taken, or any failure to take any action, as a
director, provided, however, that no provision eliminates or limits the
liability of a director; (1) for any appropriation, in violation of his duties,
of any business opportunity of the corporation; (2) for acts or omissions which
involve intentional misconduct or a knowing violation of law; (3) for liability
in connection with unlawful distributions; or (4) for any transaction from which
the director received an improper personal benefit; provided that no such
provision shall eliminate or limit the liability of a director for any act or
omission occurring prior to the date when such provision becomes effective.
Reference is made to Section of the Underwriting Agreement (Exhibit
1. ) which provides for indemnification by the Underwriter of the Registrant,
its officers and directors.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following sets forth information, as of the closing date of this
Offering, regarding all sales of unregistered securities of the Registrant
during the past three years. All such shares were issued in reliance upon an
exemption or exemptions from registration under the Securities Act by reason of
Section 4(2) of the Securities Act or Regulation D promulgated thereunder, or
Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions
by an issuer not involving a public offering or transactions pursuant to
compensatory benefit plans and contracts relating to compensation as provided
under Rule 701. In connection with each of these transactions, the securities
were sold to a limited number of persons, such persons were provided access to
all relevant information regarding the Registrant and/or represented to the
Registrant that they were "sophisticated" investors, and such persons
represented to the Registrant that the shares were purchased for investment
purposes only and with no view toward distribution.
- As of December 18, 1997, as part of the original organization of the
Company, the Registrant issued to each of Walter M. Boomershine, Jr.,
Charles K. Yancey and Stephen C. Whicker 2,000 shares each of common
stock of the Company in exchange for $1,000 in cash from each such
shareholder.
- In connection with the Merger, the Registrant will to issue up to an
aggregate of 3,800,160 shares of its common stock to the current
shareholders of Boomershine Automotive.
- In connection with the Collision Centers USA Acquisition, the Registrant
issued to James E. L. Peters stock options to purchase 5,000 shares of
the Registrant's common stock.
- The Registrant will issue the following shares of its common stock to the
following persons in connection with the Acquisitions: (i) 400,000 shares
to the shareholders of the Wade Ford Acquisition in exchange for all of
their interest in Wade Ford, Inc. and Wade Ford Buford, Inc., which sale
occurred as of November 21, 1997; (ii) 580,000 shares to the shareholders
of Day's Chevrolet in
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<PAGE> 193
exchange for all of their interest in Day's Chevrolet, Inc., which sale
occurred as of March 3, 1998; and (iii) 40,000 shares to E. Moss
Robertson, Jr. in exchange for all of his interest in Robertson
Oldsmobile-Cadillac, Inc., which sale occurred as of March 1, 1998.
- On January 8, 1998, the Registrant issued to three of its officers,
pursuant to the Registrant's Incentive Stock Plan, options to purchase an
aggregate of 425,000 shares of the Registrant's common stock.
- On March 13, 1998, the Registrant issued warrants to purchase 50,000
shares of the Registrant's common stock to a consulting firm that has
rendered financial and accounting services to the Registrant in
connection with this Offering.
- On April 22, 1998, the Registrant issued to four of its executive
officers, pursuant to the Registrant's Incentive Stock Plan, options to
purchase an aggregate of 850,000 shares of the Registrant's common stock.
- On April 22, 1998, the Registrant issued to three of its officers,
pursuant to employment agreements with each of those officers, an
aggregate of 249,202 shares of the Registrant's common stock. Such
securities are subject to a risk of forfeiture in the event such
officers' employment with the Company is terminated.
- On the effective date of this Offering, the Registrant will issue to six
of its executive officers and employees, pursuant to the Registrant's
Incentive Stock Plan, options to purchase an aggregate of 317,000 shares
of the Registrant's common stock.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1.1* -- Form of Underwriting Agreement.
2.1 -- Stock Purchase Agreement among Boomershine Automotive Group,
Inc., Sunbelt Automotive Group, Inc., BAG Georgia III, Inc.,
Jay Automotive Group, Inc. and the shareholders of Jay
Automotive Group, Inc., dated January 5, 1998, as amended on
March 23, 1998, and as assigned on March 31, 1998.
2.2** -- Agreement and Plan of Merger and Reorganization among
Boomershine Automotive Group, Inc., BAG Georgia I, Inc., BAG
Georgia II, Inc., Wade Ford, Inc., Wade Ford Buford, Inc.
and the shareholders of Wade Ford, Inc. and Wade Ford
Buford, Inc., dated November 21, 1997, as amended on January
19, 1998, as further amended on March 31, 1998, and as
further amended on April 28, 1998.
2.3** -- Stock Purchase Agreement among Sunbelt Automotive Group,
Inc., Boomershine Automotive Group, Inc., Robertson
Oldsmobile-Cadillac, Inc. and the shareholders of Robertson
Oldsmobile-Cadillac, Inc., dated March 1, 1998.
2.4** -- Agreement and Plan of Merger and Reorganization among
Sunbelt Automotive Group, Inc., BAG Georgia IV, Inc., Day's
Chevrolet, Inc. and the shareholders of Day's Chevrolet,
Inc., dated March 3, 1998.
2.5 -- Stock Purchase Agreement among Sunbelt Automotive Group,
Inc., BAG Tennessee II, Inc., Grindstaff, Inc. and the
shareholders of Grindstaff, Inc., dated December 27, 1997,
as amended on February 24, 1998.
2.6 -- Asset Purchase Agreement among Boomershine Automotive Group,
Inc., BAG North Carolina I, Inc., Hones, Inc. and the
shareholders of Hones, Inc., dated December 11, 1997, as
assigned on January 8, 1998, as amended on January 31, 1998,
and as further amended on March 27, 1998.
2.7** -- Stock Purchase Agreement among BAG Florida II, Inc. and the
shareholder of South Financial Corporation, dated December
23, 1997.
</TABLE>
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<PAGE> 194
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
2.8 -- Stock Purchase Agreement among Boomershine Collision
Centers, Inc. and the shareholder of Southlake Collision
Centers, Inc., Southlake Collision Henry County, Inc. and
Southlake Collision Cobb Parkway, Inc., dated November 6,
1997.
3.1** -- Articles of Incorporation of the Company.
3.2** -- Bylaws of the Company.
4.1* -- Specimen common stock certificate.
5.1* -- Opinion of Schnader Harrison Segal & Lewis LLP.
10.1 -- Form of Employment Agreement between the Company and Walter
M. Boomershine, Jr.
10.2 -- Form of Employment Agreement between the Company and Charles
K. Yancey.
10.3* -- Form of Employment Agreement between the Company and Robert
W. Gundeck.
10.4 -- Form of Employment Agreement between the Company and Stephen
C. Whicker.
10.5 -- Form of Employment Agreement between the Company and Ricky
L. Brown.
10.6* -- Form of Employment Agreement between the Company and Alan K.
Arnold.
10.7* -- Form of Employment Agreement between the Company and R.
Glynn Wimberly.
10.8* -- 1997 and 1998 Incentive Stock Plan of Company.
10.9 -- Twenty-Year Net Lease Agreement by and between Winco Ltd.,
as Lessor, and Boomershine Pontiac, Inc., and Lessee, dated
as of September 16, 1978; as amended on July 13, 1984.
10.10 -- Ten-Year Net Lease Agreement by and between Winco Ltd., as
Lessor, and Boomershine Pontiac-GMC Truck, Inc. d/b/a
Boomershine Nissan, as Lessee, dated as of January 28, 1995.
10.11 -- Lease Agreement by and between Winco, L.P., as Landlord, and
Ford Leasing Development Company, as Tenant, dated August
11, 1992.
10.12 -- Dealership Sublease by and between Ford Lease Development
Company, as Sublandlord, and Boomershine Ford, Inc., as
Subtenant, dated August 11, 1992.
10.13 -- Lease Agreement by and between Winco, L.P., as Lessor, and
Boomershine North Cobb, Inc. d/b/a Boomershine Mitsubishi,
as Lessee, dated January 16, 1996.
10.14 -- Lease Agreement by and between Winco, L.P., as Lessor, and
Thompson Automotive Group, Inc. d/b/a Boomershine Honda, as
Lessee, dated August 1, 1995.
10.15 -- Sub-Lease Agreement by and between Winco, L.P., as Lessor,
and Boomershine Ford, Inc., as Lessee, dated as of February
23, 1996.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Pyke & Pierce, CPA's.
23.3 -- Consent of Davis, Monk & Company.
23.4* -- Consent of Schnader Harrison Segal & Lewis LLP (included in
the opinion filed as Exhibit 5.1).
24.1** -- Powers of Attorney (included on the signature page to this
Registration Statement).
27.1* -- Financial Data Schedule (for SEC use only).
99.1** -- Consent of George D. Busbee.
99.2** -- Consent of Lee M. Sessions, Jr.
99.3** -- Consent of Jack R. Altherr.
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
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<PAGE> 195
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, 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.
(2) For purposes of determining any liability under the Securities
Act, 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.
(4) The undersigned Registrant hereby undertakes 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.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described in Item 14
hereof, 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 thereof 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.
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<PAGE> 196
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on the 22nd day of June, 1998.
SUNBELT AUTOMOTIVE GROUP, INC.
a Georgia corporation
By:/s/ WALTER M. BOOMERSHINE, JR.
------------------------------------
Walter M. Boomershine, Jr.,
Chairman of the Board
and Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board and Senior June 22, 1998
- ----------------------------------------------------- Vice President
Walter M. Boomershine, Jr.
* Chief Operating Officer, June 22, 1998
- ----------------------------------------------------- President and Director
Charles K. Yancey
* Chief Executive Officer and June 22, 1998
- ----------------------------------------------------- Director (Principal Executive
Robert W. Gundeck Officer)
* Chief Financial Officer, Vice June 22, 1998
- ----------------------------------------------------- President of Finance and
Ricky L. Brown Treasurer (Principal Accounting
and Financial Officer)
/s/ STEPHEN C. WHICKER Executive Vice President of June 22, 1998
- ----------------------------------------------------- Corporate Development, General
Stephen C. Whicker Counsel, Secretary and Director
*By: /s/ STEPHEN C. WHICKER
--------------------------------------------------
Stephen C. Whicker
Attorney-in-fact
</TABLE>
II-6
<PAGE> 1
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
BOOMERSHINE AUTOMOTIVE GROUP, INC.,
SUNBELT AUTOMOTIVE GROUP, INC.,
B.A.G. GEORGIA III, INC., AND
JAY AUTOMOTIVE GROUP, INC., AND
JAMES G. STELZENMULLER, III
DATED JANUARY 5, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1.1 CLOSING CONTINGENCY ........................................................ 2
1.2 PURCHASE AND SALE OF THE SHARES ............................................ 3
1.3 SUBMISSION OF DISCLOSURE STATEMENT AND RELATED DOCUMENTS.................... 4
1.4 SATURN...................................................................... 7
1.5 SPIN OFFS .................................................................. 7
2.1 AUTHORIZATION OF TRANSACTION ............................................... 8
2.2 NONCONTRAVENTION ........................................................... 8
2.3 BROKERS' FEES .............................................................. 8
2.4 INVESTMENT.................................................................. 8
2.5 JAG SHARES ................................................................. 8
3.1 ORGANIZATION OF BAG, SUNBELT AND SUB ....................................... 9
3.2 AUTHORIZATION OF TRANSACTION ............................................... 9
3.3 NONCONTRAVENTION ........................................................... 9
3.4 BROKERS' FEES .............................................................. 9
3.5 INVESTMENT ................................................................ 10
3.6 REVIEW OF BOND DOCUMENTS.................................................... 10
4.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER............................ 10
4.2 CAPITALIZATION ............................................................. 10
4.3 NONCONTRAVENTION .......................................................... 11
4.4 BROKERS' FEES............................................................... 11
4.5 TITLE TO ASSETS ............................................................ 11
4.6 SUBSIDIARIES................................................................ 11
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
4.7 FINANCIAL STATEMENTS ................................................. 12
4.8 EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END ..................... 12
4.9 UNDISCLOSED LIABILITIES .............................................. 12
4.10 LEGAL COMPLIANCE ..................................................... 13
4.11 TAX MATTERS .......................................................... 13
4.12 REAL PROPERTY ........................................................ 14
4.13 INTELLECTUAL PROPERTY ................................................ 14
4.14 TANGIBLE ASSETS ...................................................... 14
4.15 INVENTORY............................................................. 14
4.16 CONTRACTS ............................................................ 14
4.17 NOTES AND ACCOUNTS RECEIVABLE ........................................ 14
4.18 POWERS OF ATTORNEY ................................................... 15
4.19 INSURANCE ............................................................ 15
4.20 LITIGATION ........................................................... 15
4.21 EMPLOYEES ............................................................ 15
4.22 EMPLOYEE BENEFITS .................................................... 15
4.23 GUARANTIES ........................................................... 16
4.24 ENVIRONMENT, HEALTH, AND SAFETY MATTERS .............................. 16
4.25 CERTAIN BUSINESS RELATIONSHIPS ....................................... 17
4.26 MINIMUM FLOOR PLAN REQUIREMENT ....................................... 17
5.1 BEST EFFORTS ......................................................... 17
5.2 CONFIDENTIALITY ...................................................... 17
5.3 ANNOUNCEMENTS ........................................................ 18
5.4 CERTAIN CHANGES AND CONDUCT OF BUSINESS .............................. 19
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
5.5 NO INTERCOMPANY PAYABLES OR RECEIVABLES ............................... 19
5.6 NO NEGOTIATION ........................................................ 19
5.7 CONSENTS............................................................... 19
5.8 DEALER FINANCIAL STATEMENTS ........................................... 20
5.9 NOTIFICATION OF CERTAIN MATTERS ....................................... 20
5.10 ASSURANCE BY THE PARTIES .............................................. 20
5.11 ANTITRUST IMPROVEMENTS ACT COMPLIANCE ................................. 21
5.12 USE OF "JAY AUTOMOTIVE" NAME .......................................... 21
5.13 RELATED PARTY/STOCKHOLDER LOAN ........................................ 21
5.14 STOCK RESTRICTION AGREEMENT ........................................... 22
5.15 PERSONAL ITEMS ........................................................ 22
5.16 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT .................. 22
6.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS ................. 22
6.2 AUTHORIZATION; CONSENT ................................................ 23
6.3 OPINION OF SELLER'S COUNSEL ........................................... 23
6.4 ABSENCE OF LITIGATION ................................................. 23
6.5 NO MATERIAL ADVERSE EFFECT ............................................ 24
6.6 NET WORTH ............................................................. 24
6.7 COMPLETION OF DUE DILIGENCE ........................................... 24
6.8 REAL ESTATE LEASES .................................................... 24
6.9 BOARD APPROVAL ........................................................ 24
6.10 CERTIFICATES .......................................................... 24
6.11 LEGAL MATTERS ......................................................... 24
6.12 APPROVAL OF MANUFACTURER AND DISTRIBUTOR .............................. 25
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
6.13 NON-COMPETITION AGREEMENT ............................................. 25
6.14 ENVIRONMENTAL LAWS .................................................... 25
6.15 NONDISTURBANCE AGREEMENT .............................................. 25
6.16 TITLE INSURANCE ....................................................... 25
6.17 LEASE TERMINATION AGREEMENT/MEMORANDUM OF LEASE ....................... 25
6.18 RESIGNATION OF DIRECTORS .............................................. 25
6.19 DISCLOSURE STATEMENT .................................................. 25
6.20 BOND APPROVAL ......................................................... 25
6.21 BUYER PUBLIC OFFERING ................................................. 26
7.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS ............................ 26
7.2 AUTHORIZATION OF THE AGREEMENT; CONSENTS .............................. 26
7.3 OPINION OF BUYER'S COUNSEL ............................................ 27
7.4 ABSENCE OF LITIGATION ................................................. 27
7.5 REAL ESTATE LEASES .................................................... 27
7.6 CERTIFICATES........................................................... 27
7.7 LEGAL MATTERS ......................................................... 27
7.8 RELEASES .............................................................. 27
7.9 BOND APPROVAL ......................................................... 27
8.1 TERMINATION ........................................................... 28
8.2 METHOD OF TERMINATION ................................................. 29
8.3 EFFECT OF TERMINATION ................................................. 29
9.1 SURVIVAL OF CLAIMS .................................................... 30
9.2 SELLER'S INDEMNIFICATION OF THE BUYER ................................. 31
9.3 BUYER'S INDEMNIFICATION OF THE SELLER ................................. 31
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C> <C>
9.4 DETERMINATION OF ADVERSE CONSEQUENCES ................................. 31
9.5 PROCEDURES FOR INDEMNIFICATION ........................................ 31
9.6 REMEDIES .............................................................. 33
9.7 LIMITATION ON INDEMNIFICATION ......................................... 33
9.8 INSURANCE ............................................................. 33
9.9 NOTICE ................................................................ 33
10.1 FEES AND EXPENSES ..................................................... 33
10.2 HEADINGS .............................................................. 34
10.3 NOTICES ............................................................... 34
10.4 ASSIGNMENT ............................................................ 35
10.5 ENTIRE AGREEMENT ...................................................... 36
10.6 WAIVER AND AMENDMENTS ................................................. 36
10.7 COUNTERPARTS .......................................................... 36
10.8 GOVERNING LAW ......................................................... 37
10.9 ACCOUNTING TERMS ...................................................... 37
10.10 DEFINITIONS ........................................................... 37
10.11 SCHEDULES ............................................................. 42
10.12 SEVERABILITY .......................................................... 42
10.13 REMEDIES .............................................................. 42
10.14 TIME IS OF THE ESSENCE ................................................ 42
11 1998 OPERATIONS AND NET INCOME ........................................ 42
</TABLE>
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<PAGE> 7
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement"), is entered into as of
January 5, 1998 by and between BOOMERSHINE AUTOMOTIVE GROUP, INC., a Georgia
corporation ("BAG"), SUNBELT AUTOMOTIVE GROUP, INC. ("Sunbelt"), BAG GEORGIA
III, Inc., a Georgia corporation ("Sub"), JAY AUTOMOTIVE GROUP, INC., a Georgia
corporation (the "Company" or "JAG") and JAMES G. STELZENMULLER, III (the
"Stockholder"). BAG, Sunbelt, Sub, the Company and the Stockholder are sometimes
referred to collectively as the "Parties" and individually as a "Party".
For purposes of convenience, JAG, the JAG Subsidiaries, and the
Stockholder are sometimes referred to collectively as "Seller", and BAG,
Sunbelt and Sub are sometimes referred to collectively as "Buyer".
W I T N E S S E T H:
WHEREAS, the Company, through its wholly-owned subsidiaries which are
listed on the Disclosure Statement to this Agreement (collectively, the "JAG
Subsidiaries" and each individually, a "JAG Subsidiary"), operates Toyota,
Saturn, Mazda, Pontiac, Buick, GMC, Suzuki and Mitsubishi automobile
dealerships in Columbus, Georgia;
WHEREAS, the Stockholder owns all of the issued and outstanding shares
of Common Stock of the Company (the "JAG Shares");
WHEREAS, the Company owns all the issued and outstanding shares of the
JAG Subsidiaries;
WHEREAS, Sunbelt and BAG intent to merge and to form a publicly owned
corporation whose stock is to be traded on a national exchange;
WHEREAS, Sub is a wholly-owned subsidiary of BAG;
WHEREAS, Sub desires to purchase all of the JAG Shares, and the
Stockholder desires to sell the JAG Shares to Sub (upon the terms and subject
to the conditions set forth in this Agreement), so that immediately after the
purchase and sale, Sub will own one hundred percent (100%) of all of the issued
and outstanding JAG shares.
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<PAGE> 8
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, and other good and valuable consideration,
receipt whereof is hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 CLOSING CONTINGENCY. The parties acknowledge and agree that,
notwithstanding anything to the contrary contained in this Agreement:
a. Buyer shall have until March 1, 1998 (the "Due Diligence
Deadline") to conduct their financial and legal due diligence of the Company
and the JAG Subsidiaries, which financial due diligence shall be conducted at
the sole cost and expense of BAG and Sub. From the date hereof until the Due
Diligence Deadline (the "Due Diligence Period"), the Stockholder, the Company,
each JAG Subsidiary, and the officers, employees, agents and representatives of
each, as applicable, shall make their best good faith effort to cooperate with
BAG, Sub, and BAG and Sub's officers, employees, agents and representatives to
enable BAG and Sub to conduct said due diligence, such cooperation to include,
without limitation, the access described in Section 5.2 hereof.
b. Buyer shall have the option to terminate this Agreement at
any time on or before the Due Diligence Deadline if BAG's and/or Sub's due
diligence reveals any matter or matters which, in the sole and absolute
discretion of BAG and/or Sub, materially and adversely affect the valuation of
the Company and the JAG Subsidiaries for purposes of the transactions
contemplated hereby.
c. In the event Buyer elects to terminate this Agreement
pursuant to this Section 1.1, BAG and/or Sub shall provide notice of such
election to the Stockholder on or prior to the Due Diligence Deadline, BAG and
Sub shall pay to the Stockholder the Termination Fee in accordance with Section
8.3(c) hereof, and this Agreement shall terminate with the effect set forth in
Section 8.3 hereof as of the date of such election notice.
d. In the event Buyer does not elect to terminate this Agreement
pursuant to this Section 1.1, or if BAG and/or Sub do not provide the election
notice described in Section l.l(c) above to the Stockholder, then this
Agreement shall remain in full force and effect (unless otherwise terminated in
accordance with Article 8 hereof).
2
<PAGE> 9
1.2 PURCHASE AND SALE OF THE SHARES.
a. PURCHASE AND SALE. The Stockholder shall sell to Sub, and Sub
shall purchase from Stockholder, the JAG Shares for a purchase price of Sixteen
Million Dollars (the "Purchase Price") according to the terms and conditions
set forth herein.
b. CLOSING PROCEDURES. At the consummation of the transactions
contemplated hereby (the "Closing"):
i. the Stockholder shall sell, convey, assign, and
transfer to Buyer the JAG Shares, the Excess Commission Plan and the Excess
Parts Inventory free and clear of all liens;
ii. Sub shall purchase and accept the JAG Shares; and
iii. Included among the assets to be sold to Sub for the
Purchase Price herein will be the Excess Commission Plan with Fidelity Warranty
Services and the Excess Parts Inventory of the Company and Jag Subsidiaries.
c. CLOSING DATE AND LOCATION.
i. The Closing shall occur at a location to be
reasonably agreed upon by the parties, contemporaneously with the BAG Public
Offering, on or before the Closing Date Deadline.
ii. If the BAG Public Offering does not occur on or
before the Closing Date Deadline, then the parties shall have the option (but
not the duty or obligation), at the sole discretion of each party, to
consummate the transactions contemplated hereby upon such terms and conditions
as they mutually agree upon.
d. DELIVERIES AT THE CLOSING. At the Closing:
i. Subject to Article 7, the Stockholder shall deliver
to Sub:
A. Certificates representing the JAG Shares
bearing the restrictive legend customarily placed on securities that have not
been registered under applicable federal and state securities laws, stock
powers executed in blank, and any other documents that are reasonably necessary
to transfer to Sub good and marketable title to all the JAG Shares;
3
<PAGE> 10
B. All opinions, certificates and other
instruments and documents required to be delivered by the Stockholder by this
Agreement at or prior to the Closing;
C. Leases to the extent that such exist for
the continued operation of the automotive dealerships or acceptable assignments
of the existing leases as set forth on the Disclosure Schedule in Section
1.3(a) attached hereto and incorporated herein, executed by the Company, Sub,
BAG, the applicable JAG Subsidiary and the lessor of the subject properties on
which the automobile dealerships of the Company and the JAG Subsidiaries are
operated;
D. A Non-Compete Agreement as set forth in
Section 1.3(b); and
E. All other documents required to be provided
by Stockholder, the Company or the JAG Subsidiaries or on behalf of them
pursuant to Article 6, and as disclosed in the Disclosure Schedules and the due
diligence materials.
ii. The Sub shall deliver to the Stockholder:
A. Cash in the amount of Twelve Million
Dollars ($12,000,000.00) (the "Cash Consideration");
B. A Ninety (90) day, interest-only,
Promissory Note (the "Note"), as set forth in Section 1.3(b), in the amount of
Four Million Dollars ($4,000,000.00), bearing interest at the rate of eight
percent (8%) per annum; and,
C. All other certificates or documents
required to be provided by BAG or Sub or Sunbelt pursuant to Article 6, as set
forth pursuant to Sections 1.3(a) and (b) and Article 6.
iii. The parties shall execute all documents including
leases, subleases and related documents that are required by this Agreement to
be executed prior to or at Closing, in form and content as approved pursuant to
Section 1.3(b).
1.3 SUBMISSION OF DISCLOSURE STATEMENT AND RELATED DOCUMENTS.
A. DISCLOSURE STATEMENT. No later than forty (40) days after the
execution of this Agreement, Stockholder and Company shall deliver to BAG and
Sub a Disclosure Statement setting forth the following information (for
purposes of this Section 1.3, the term "material" shall mean any contract or
agreement which exceeds $100,000.00 in value per annum or in the aggregate):
4
<PAGE> 11
i. Copies of all material real property leases of the
Company and the JAG Subsidiaries;
ii. A description of all material suits, causes of
action, or claims asserted against the Company and the JAG Subsidiaries, and all
potential claims that are known to Stockholder;
iii. Copies of all material insurance contracts of Seller;
iv. A description of all transactions outside the
Ordinary Course of Business that may adversely affect the net worth of the
Company that are not otherwise disclosed;
v. A description of all adverse or potentially adverse
actions, claims or complaints that have been made or asserted by any
governmental agency;
vi. A description of all facts, matters, or issues that
are contrary to the Stockholder's representations and warranties hereunder and
the representations and warranties made on behalf of the Company and the JAG
Subsidiaries;
vii. The names of any employees of the Company and the JAG
Subsidiaries who have expressed an intention to terminate employment within the
next twelve (12) months;
viii. A description of all material contracts of the
Company and the JAG Subsidiaries, and a description of all other matters
required to be disclosed or listed by the provisions of this Agreement;
ix. Any other fact, matter, or issue that Stockholder
reasonably believes the Buyer should be made aware of; and.
x. All other disclosure schedules pursuant to Articles
2, 3, 4 & 5 of this Agreement.
In lieu of a description of the information, the Company and the
Stockholder may attach copies of documents to which the information relates. The
Company and the Stockholder shall provide copies of such documents upon the
request of the Buyer.
The Disclosure Statement shall be in reasonable form, shall provide
sufficient information to appraise Buyer of the item disclosed, and shall be
certified by the
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Shareholder to be true and correct to the best of his Knowledge. The Disclosure
Statement shall be divided into Schedules and/or Exhibits which refer to the
specific Section of this Agreement to which they apply. However, disclosure of
information anywhere therein shall be considered disclosure for all purposes
hereunder. Stockholder shall have the right to supplement and to amend the
Disclosure Statement during the due diligence period. Buyer shall have a
reasonable period of time to review any amended Disclosure Statement or
supplements thereto.
Prior to the Due Diligence Deadline, Buyer shall notify Seller of any
exceptions to the Disclosure Statement. Unless such notice is given, Buyer shall
be deemed to have accepted the Disclosure Statement. Upon acceptance of the
Disclosure Statement, Stockholder shall have no further or additional liability
relating to material set forth on the Disclosure Statement except for any fraud,
misrepresentation or willful or intentional misconduct in preparing the
Disclosure Statement or the items thereon.
B. SUBMISSION AND APPROVAL OF RELATED DOCUMENTS. Within forty (40) days
of the date of execution hereof, each party shall submit to the other parties
the following documents for approval:
i. Stockholder. Stockholder shall submit to BAG and Sub:
(A) The Jay Leasing, Inc. Sublease for the Auto
Mall;
(B) Certificates, opinions and/or other
documents that BAG, Sub, and/or their counsel must execute and deliver at
closing;
(C) Consents, assignments, and/or documents that
may be required by third parties to facilitate the Closing; and
(D) The Promissory Note for the Deferred Portion
of the Purchase Price.
(ii) Sunbelt, BAG and Sub. Sunbelt BAG and Sub shall
submit to the Stockholder:
(A) A Non-competition Agreement;
(B) Certificates, opinions and/or other
documents that Stockholder and/or its counsel must execute and deliver at
closing; and
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(C) Consents, assignments, and/or documents that
may be required by third parties to facilitate the Closing.
The forty (40) day deadline for submission of documents that must be
prepared and/or approved by governmental authorities or third parties shall be
extended until a time that may be reasonable required to obtain said documents,
consents or approvals, as the case may be, taking into account the nature of the
document and the activity which must be completed by third parties. Each party
receiving documents shall have an additional twenty (20) days after receipt to
object to the form and/or content of same, and a failure to object shall
constitute approval. If the parties cannot agree as to the form and/or content
of any document to which an objection is made, or the Disclosure Schedules, then
the objecting party shall have the right to terminate the contract pursuant to
the provisions of Section 8.1 without any liability to the other party for the
same.
1.4 SATURN. If the Saturn Corporation or the Saturn Distribution
Corporation does not provide its consent to this Agreement and approve BAG or
Sub as its authorized dealer for Columbus, Georgia, then BAG shall have the
right, without obtaining the prior approval of any other party hereto, to sell
or cause the Company to sell the capital stock of Jay Automotive Group IV, Inc.
d/b/a Saturn of Columbus any person, assignee or designee of its choice
concurrently or simultaneously with the purchase of the Jay shares.
1.5 SPIN OFFS. Jay Leasing, Inc., J & J Financial, Inc., Jay Automotive
Group III, Inc., Columbus Insurance Associates, Jay Casualty Insurance Company
Limited, and all other non-JAG Subsidiaries shall be spun off or dissolved by
the Company prior to closing. If any Subsidiary is dissolved prior to Closing,
an appropriate adjustment in the Purchase Price will be made to reflect the
value of the additional assets that the Company will retain at Closing. If
Suzuki Motor Company does not consent to the sale, then the Suzuki franchise
shall be surrendered concurrently with the Closing. Buyer acknowledges that
Suzuki will not be part of the new Auto Mall, and its consent is not a condition
to the closing of this transaction. The common stock of Peach State Life
Insurance Company is not involved in this sale.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
Except for any matter contained in the Disclosure Statement, the
Stockholder represents and warrants to the best of his Knowledge and Belief to
the Buyer that the statements contained in this Article 2 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date.
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2.1 AUTHORIZATION OF TRANSACTION. The Stockholder has full power and
authority to execute and deliver this Agreement and to perform his obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Stockholder, enforceable in accordance with its terms and conditions. The
Stockholder, for his own part, need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by this
Agreement.
2.2 NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Stockholder is subject, or (b)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Stockholder is a party or by which
he is bound or to which any of his assets is subject.
2.3 BROKERS' FEES. The Stockholder has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which BAG and Sub could become
liable or obligated.
2.4 INVESTMENT. The Stockholder (a) understands that the Note has not been,
and will not be, registered under the Securities Act, or under any state
securities laws, and is being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public offering, (b) is
acquiring the Note solely for his own account for investment purposes, and not
with a view to the distribution thereof, (c) is a sophisticated investor with
knowledge and experience in business and financial matters, (d) has received
certain information concerning BAG and Sub and has had the opportunity to obtain
additional information as desired in order it evaluate the merits and the risks
inherent in holding the Note, (e) is able to bear the economic risk and lack of
liquidity inherent in holding the Note, and (f) is an accredited investor, as
defined in the Securities Act.
2.5 JAG SHARES. The Stockholder holds of record and owns beneficially all
of the issued and outstanding JAG Shares free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and state
securities laws), taxes, Security Interests, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands. The Stockholder is not a
party to any option, warrant, purchase right or other contract or commitment
that could require the Stockholder to sell, transfer, or otherwise dispose of
any capital stock of the Company (other than this Agreement), or to any voting
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trust, proxy, or other agreement or understanding with respect to the voting of
any capital stock of the Company. Buyer acknowledges that the Bond Documents
place certain restrictions on the transfer of the stock of the Company, and
limits the rights of the Stockholder to transfer the same without the approval
of the Development Authority and Regions Bank.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Seller to the best of their
Knowledge and Belief and belief that the statements contained in this Article 3
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date.
3.1 ORGANIZATION OF BAG, SUNBELT AND SUB. BAG, Sunbelt and Sub are
corporations duly organized, validly existing, and in good standing under the
laws of the jurisdiction of each of their State of incorporation.
3.2 AUTHORIZATION OF TRANSACTION. BAG and Sub have full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform their obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of BAG and Sub, enforceable in
accordance with its terms and conditions. BAG and Sub need not give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
3.3 NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate any constitution, statute, regulation, rule, injunction judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which BAG or Sub is subject or any provision of
the charter or bylaws of either BAG or Sub, or (b) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which BAG or Sub is a party or by which it is bound or to which
any of its assets is subject.
3.4 BROKERS' FEES. Buyer have no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Stockholder could become liable or
obligated.
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3.5 INVESTMENT. Sub is not acquiring the JAG Shares with a view to or for
sale in connection with any distribution thereof within the meaning of the
Securities Act.
3.6 REVIEW OF BOND DOCUMENTS. The Bond Documents and the Authority Lease
will have made available to the Buyer by Closing and by the Closing will have
been reviewed by them to determine the effect they have, if any, on the closing
of this agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES CONCERNING THE
COMPANY AND THE JAG SUBSIDIARIES
Except for any matter contained in the Disclosure Statement, the
Stockholder represents and warrants to Buyer to the best of his Knowledge and
Belief that the statements contained in this Article 4 are correct and complete
as of the date of this Agreement and will be correct and complete as of the
Closing Date.
4.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Each of the Company
and the JAG Subsidiaries is a corporation duly organized, validly existing, and
in good standing under the laws of the jurisdiction of its incorporation. Each
of the Company and the JAG Subsidiaries is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification would not
have a Material Adverse Effect on the business, financial condition, operations,
results of operations, or future prospects of the Company and the JAG
Subsidiaries. Each of the Company and the JAG Subsidiaries has full corporate
power and authority to carry on the businesses in which it is engaged and to own
and use the properties owned and used by it.
4.2 CAPITALIZATION. The entire authorized capital stock of the Company
consists of 500,000 JAG Shares, of which 21,955 JAG Shares are issued and
outstanding, and zero JAG Shares are held in treasury. All of the issued and
outstanding JAG Shares have been duly authorized, are validly issued, fully
paid, and nonassessable, and are held of record by the Stockholder. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights or other contracts or commitments
that could require the Company to issue, sell or otherwise cause to become
outstanding any of its capital stock. There are not outstanding or authorized
appreciation, phantom stock, profit participation or similar rights with respect
to the Company. There are not voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the Company.
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4.3 NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of the Company and the JAG
Subsidiaries is subject or any provision of the charter or bylaws of any of the
Company and the JAG Subsidiaries or (b) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument or other arrangement
to which any of the Company and the JAG Subsidiaries is a party or by which it
is bound or to which any of its assets is subject (or result in the imposition
of any Security Interest upon any of its assets), except where the violation,
conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or Security Interest would not have a
Material Adverse Effect on the business, financial condition, operations,
results of operations, or future prospects of the Company and the JAG
Subsidiaries or on the ability of the Parties to consummate the transactions
contemplated by this Agreement. None of the Company and the JAG Subsidiaries
needs to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement, except
where the failure to give notice, to file, or to obtain any authorization,
consent, or approval would not have a Material Adverse Effect on the business,
financial condition, operations, results of operations, or future prospects of
the Company and the JAG Subsidiaries or on the ability of the Parties to
consummate the transactions contemplated by this Agreement.
4.4 BROKERS' FEES. None of the Company and the JAG Subsidiaries have any
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
4.5 TITLE TO ASSETS. The Company and the JAG Subsidiaries have good and
marketable title to, or a valid leasehold interest in, the properties and assets
used by them, located on their premises, or shown on the Most Recent Dealer
Financial Statement or acquired after the date thereof, free and clear of all
Security Interests.
4.6 SUBSIDIARIES.
a. Section 4.6 of the Disclosure Statement sets forth for each
JAG Subsidiary (i) its name and jurisdiction of incorporation; (ii) the number
of shares of authorized capital stock of each class of its capital stock; (iii)
the number of issued and outstanding shares of each class of its capital stock,
the names of the holders thereof, and the number of shares held by each such
holder; and (iv) the number of shares of its capital stock held in treasury.
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b. All of the issued and outstanding shares of capital stock of
each JAG Subsidiary have been duly authorized and are validly issued, fully
paid, and nonassessable. The Company holds of record and owns beneficially all
of the outstanding shares of each JAG Subsidiary, free and clear of any
restrictions on transfer (other than restrictions under the Securities Act and
state securities laws), taxes, Security Interests, options, warrants, purchase
rights, contracts, commitments, equities, claims, and demands.
c. There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require any of the Company and the JAG
Subsidiaries to sell, transfer, or otherwise dispose of any capital stock of any
of the JAG Subsidiaries or that could require any JAG Subsidiary to issue, sell,
or otherwise cause to become outstanding any of its own capital stock.
d. There are no outstanding stock appreciation, phantom stock,
profit participation, or similar rights with respect to any JAG Subsidiary.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of any JAG Subsidiary.
4.7 FINANCIAL STATEMENTS. The following financial statements (collectively
"the Financial Statements") will be included with the Disclosure Statement:
a. Unaudited consolidated balance sheets as of December 31, 1994,
December 31, 1995, and December 31, 1996 ("Most Recent Fiscal Year End") and the
related statements of income, and retained earnings and cash flows for the years
then ended for JAG and Subsidiaries; and
b. Dealer Financial Statements for each JAG Subsidiary for the
months of January through October 31, 1997 (the "Dealer Financial Statements,"
and the October 31, 1997 Dealer Financial Statement shall be referred to as the
"Most Recent Dealer Financial Statement").
4.8 EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the Most Recent
Fiscal Year End, the Company and the JAG Subsidiaries have been operated in the
Ordinary Course of Business, and there has not been any material adverse change
in the financial condition of the Company and the JAG Subsidiaries taken as a
whole.
4.9 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 4.9 of the
Disclosure Statement, the Company and the JAG Subsidiaries have no material
undisclosed liabilities that would have a Material Adverse Effect on the
financial condition
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of the Company and the JAG Subsidiaries, in the aggregate.
4.10 LEGAL COMPLIANCE. The actions required hereby of the Seller will not
violate any applicable laws including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder. No
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against Seller alleging any
failure so to comply with any applicable law, except where the failure to comply
would not have a Material Adverse Effect on the business, financial condition,
operations, results of operations, or future prospects of the Company and the
JAG Subsidiaries. All exceptions to the representations contained in this
section shall be set forth on Section 4.10 of the Disclosure Statement.
4.11 TAX MATTERS.
a. Each of the Company and the JAG Subsidiaries have filed all
Income Tax Returns that each were required to file. All such Income Tax Returns
were correct and complete in all material respects. All Income Taxes of the
Company and the JAG Subsidiaries owed and currently due (whether or not shown on
any Income Tax Return) have been paid. None of the Company and the JAG
Subsidiaries are currently the beneficiary of any extension of time within which
to file any Income Tax Return. All exceptions to the representations contained
in this section shall be set forth on Section 4.11(a) of the Disclosure
Statement.
b. There is no current material dispute or material claim
concerning any Income Tax liability of the Company or the JAG Subsidiaries
either (i) asserted by any authority in writing or (ii) asserted personally by
any agent of such authority to the Stockholder. All exceptions to the
representations contained in this section shall be set forth on Section 4.11(b)
of the Disclosure Statement.
c. Section 4.11(c) of the Disclosure Statement lists all federal,
state, local, and foreign Income Tax Returns filed with respect to any of the
Company and the JAG Subsidiaries for taxable periods ended on or after December
31, 1996, identifies those Income Tax Returns that have been audited, and
identifies those Income Tax Returns that currently are the subject of audit. The
Stockholder has delivered to BAG and Sub correct and complete copies of all
federal and State Income Tax Returns, examination reports and statements of
deficiencies assessed against, or agreed to by any of the Company and the JAG
Subsidiaries since December 31, 1996. None of the Company and the JAG
Subsidiaries have currently waived any statute of limitations in respect of
Income Taxes or agreed to any extension of time with respect to an Income Tax
assessment or deficiency. All exceptions to the representations contained in
this section shall be set forth on Section 4.11(c) of the Disclosure Statement.
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d. None of the Company and the JAG Subsidiaries have filed a
consent under Code Section 341(f) concerning collapsible corporations. None of
the Company and the JAG Subsidiaries (i) have been a member of an Affiliated
Group filing a consolidated federal Income Tax Return (other than a group the
common parent of which was the Company), or (ii) have any liability for the
taxes of any Person (other than any of the Company and the JAG Subsidiaries)
under Reg. Section-6 issued pursuant to the Code (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract, or
otherwise.
4.12 REAL PROPERTY.
a. The Company and the JAG Subsidiaries do not own any real
property.
b. Section 4.12(b) of the Disclosure Statement lists all real
property leased or subleased to any of the Company or the JAG Subsidiaries, and
Seller has delivered to Buyer true and correct copies of such leases or
subleases. Each such lease or sublease is legal, valid, binding, enforceable and
in full force and effect.
c. Except as set forth on Section 4.12(c) of the Disclosure
Schedule, the Company and the JAG subsidiaries have no leases or other interest
in any real property that would have a Material Adverse Effect on the financial
condition of the company and JAG subsidiaries taken as a whole.
4.13 INTELLECTUAL PROPERTY. The Company and the JAG Subsidiaries do not own
any patents, copyrights, or proprietary software.
4.14 TANGIBLE ASSETS. The tangible assets owned and leased by the Company
have been or will be subject to review and/or inspection by the Buyer and are
accepted as is.
4.15 INVENTORY. The inventory of JAG consists of new, demo, and used cars,
and supplies, manufactured and processed parts, all of which have been or will
be subject to review and/or inspection by an independent auditor and by the
Buyer and are accepted by the Buyer "As Is".
4.16 CONTRACTS. Intentionally Deleted.
4.17 NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable of the
Company and the JAG Subsidiaries are reflected properly on their books and
records, and are valid receivables except as set forth on Section 4.17 of the
Disclosure Schedule.
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4.18 POWERS OF ATTORNEY. There are no material outstanding powers of
attorney executed on behalf of the Company or the JAG Subsidiaries except as set
forth on Section 4.18 of the Disclosure Schedule.
4.19 INSURANCE. Schedule 4.19 of the Disclosure Statement sets forth each
material insurance policy of the Company and the JAG Subsidiaries, and each
material self-insured arrangement. With respect to each such insurance policy:
(i) the policy is legal, valid, binding, enforceable, and in full force and
effect in all material respects as of the date listed; (ii) neither the Company
nor the JAG Subsidiaries is in material breach or default, and no event has
occurred which, with notice or the lapse of time, would constitute such a
material breach or default; and (iii) no party to the policy has repudiated any
material provision thereof.
4.20 LITIGATION. Schedule 4.20 of the Disclosure Statement sets forth each
instance in which the Company or a JAG Subsidiary (a) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (b) is a
party or, is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court, arbitrator or
quasi-judicial or administrative agency.
4.21 EMPLOYEES. None of the Company and the JAG Subsidiaries have committed
any material unfair labor practice.
4.22 EMPLOYEE BENEFITS.
a. Schedule 4.22 of the Disclosure Statement lists each Employee
Benefit Plan that any of the Company and the JAG Subsidiaries maintains or to
which any of the Company and the JAG Subsidiaries contributes.
i. Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in operation in all
respects with the applicable requirements of ERISA and the Code, except where
the failure to comply would not have a Material Adverse Effect on the financial
condition of the Company and the JAG Subsidiaries taken as a whole.
ii. All contributions (including all employer
contributions and employee salary reduction contributions) which are due have
been paid to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
iii. Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan has received a determination letter from the Internal
Service to the effect that it meets the requirements of Code Section 401(a).
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iv. As of the last day of the most recent prior plan
year, the market value of assets under each such Employee Benefit Plan which is
an Employee Pension Benefit Plan (other than any Multi-employer Plan) equaled or
exceeded the present value of liabilities thereunder (determined in accordance
with then current funding assumptions).
v. The Stockholder has delivered to BAG and Sub correct
and complete copies of the plan documents and summary plan descriptions, the
most recent determination letter received from the Internal Revenue Service, the
most recent Form 5500 Annual Report, and all related trust agreements, insurance
contracts, and other funding agreements which implement each such Employee
Benefit Plan.
b. With respect to each Employee Benefit Plan that any of the
Company and the JAG Subsidiaries maintains or ever has maintained or to which
any of them contributes, ever has contributed, or ever has been required to
contribute:
i. No such Employee Benefit Plan which is an Employee
Pension Benefit Plan (other than any Multi-employer Plan) has been completely or
partially terminated or been the subject of a Reportable Event as to which
notices would be required to be filed with the PBGC. No proceeding by the PBGC
to terminate any such Employee Pension Benefit Plan (other than any
Multi-employer Plan) has been instituted.
ii. No action, suit, proceeding, hearing, or
investigation with respect to the administration or the investment of the assets
of any such Employee Benefit Plan (other than routine claims for benefits) is
pending, except where the action, suit, proceeding, hearing, or investigation
would not have a Material Adverse Effect on the financial condition of the
Company and the JAG Subsidiaries taken as a whole.
iii. None of the Company and the JAG Subsidiaries has
incurred any liability to the PBGC (other than PBGC premium payments) or
otherwise under Title IV of ERISA (including any withdrawal liability) with
respect to any such Employee Benefit Plan which is an Employee Pension Benefit
Plan.
4.23 GUARANTIES. Neither the Company nor any JAG Subsidiary is a guarantor
or surety for any liability or obligation of any other Person except as set
forth on Section 4.23 of the Disclosure Schedule.
4.24 ENVIRONMENT, HEALTH, AND SAFETY MATTERS.
a. The Company and the JAG Subsidiaries are in compliance with
Environmental, Health, and Safety Requirements, except for such noncompliance as
would not have a Material Adverse Effect on the financial condition of the
Company and the
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JAG Subsidiaries taken as a whole.
b. The Company and the JAG Subsidiaries have not received any
written notice, report or other information regarding any actual or alleged
material violation of Environmental, Health, and Safety Requirements, or any
material liabilities or potential material liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise), including any investigatory,
remedial or corrective obligations, relating to the Company or the JAG
Subsidiaries or their facilities arising under Environmental, Health, and Safety
Requirements, the subject of which would If eve a Material Adverse Effect on the
financial condition of the Company and the JAG Subsidiaries taken as a whole.
4.2S CERTAIN BUSINESS RELATIONSHIPS. Section 4.25 of the Disclosure
Statement lists all material business arrangements or relationships between (a)
the Stockholder and any of his Affiliates and (b) the Company and the JAG
Subsidiaries within the past twelve (12) months, as well as all material assets
used in the business of the Company and the JAG Subsidiaries which are owned by
Stockholder or his Affiliates.
4.26 MINIMUM FLOOR PLAN REQUIREMENT. As of the Closing Date, each JAG
Subsidiary separately, and all JAG Subsidiaries in the aggregate, shall not be
"Out of Trust" as such term is used in the automotive business.
ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 BEST EFFORTS. Each party hereto shall utilize its respective Best
Efforts to perform its obligations hereunder to satisfy all pre-closing
conditions, and to furnish each other such reasonable information and assistance
as may reasonably be required in connection therewith. If additional action is
reasonably necessary after Closing to complete a party's obligations hereunder,
then such party shall reasonably take such additional action.
5.2 CONFIDENTIALITY.
a. Between the date hereof and the Closing Date, the Stockholder
and the Company will provide reasonable access to, furnish, and/or make
available for inspection and copying, as the case may be, to the officers and
other authorized representatives of BAG, Sunbelt and Sub (a) full access, during
normal business hours, to any and all premises, properties, files, books,
records, documents, and other information of the Company and the JAG
Subsidiaries, (b) any and all financial, technical and operating data and other
information pertaining to the businesses and properties of the Company and the
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JAG Subsidiaries, and (c) true and complete copies of any documents relating to
the foregoing.
b. Between the date hereof and the Closing Date, BAG, Sunbelt,
and Sub will provide reasonable access to, furnish, and/or make available for
inspection and copying, as the case may be, to the officers and other authorized
representatives of JAG (a) full access, during normal business hours, to any and
all reasonable information concerning BAG'S IPO and its IPO process and other
reasonable information concerning BAG, Sunbelt, and Sub, (b) any and all
reasonable other information pertaining to the businesses and properties of the
BAG, Sunbelt and Sub, and (c) true and complete copies of any documents relating
to the foregoing.
c. During the term of this Agreement and for a period of two (2)
years after the Closing or the termination of this Agreement, Buyer and Seller
will hold, and will cause their representatives to hold, in confidence (unless
and to the extent compelled to disclose by judicial or administrative process
or, in the reasonable opinion of its counsel, by other requirements of law) all
Confidential Information and will not disclose the same to any third party
except as may reasonably be necessary to perform this Agreement and the
transactions contemplated hereby. If this Agreement is terminated, each Party
will, and will cause their representatives to, promptly return to the other
Party all Confidential Information furnished by the other Parties, and all
copies and summaries of same.
d. Stockholder shall have the right to make disclosures to
employees, agents and/or others as may reasonably be required to fulfill the
terms of this Agreement and to adequately respond to inquiries that others may
initiate.
e. Buyer has and will continue to actively and vigorously pursue
consummation of the BAG IPO, has and will continue to take any and all actions
necessary or beneficial for the consummation thereof as and when required, has
no knowledge of any fact or circumstance that will or may prevent the
consummation of the BAG IPO by the Closing Deadline, and will notify Seller
immediately upon hearing of any such fact or circumstance.
5.3 ANNOUNCEMENTS. No Party or its representatives shall issue any press
releases or otherwise make any public statement with respect to the transactions
contemplated hereby without the prior consent of each of the other Parties,
except as may be required by law. BAG shall reimburse the Company and the
Stockholder for any reasonable expenses incurred by the Company and the
Stockholder to fulfill its obligations under this Section 5.3.
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5.4 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
Except for actions contemplated by this Agreement or disclosed on or
before the Due Diligence Deadline, until the Closing, Seller:
a. will not cause or permit the Company or the JAG Subsidiaries
to engage in any practice, take any action, or enter into any transaction
outside the Ordinary Course of Business. Without limiting the generality of the
foregoing, the Seller will not cause or permit the Company or the JAG
Subsidiaries to declare, set aside, or pay any dividend or make any distribution
with respect to its capital stock or redeem, purchase, or otherwise acquire any
of its capital stock; and
b. shall not take any action or fail to take any action which
would cause or result in any Material Adverse Effect upon the business or assets
of the Company and the JAG Subsidiaries, either individually or in the
aggregate.
5.5 NO INTERCOMPANY PAYABLES OR RECEIVABLES. At the Closing there will be
no outstanding indebtedness between the Stockholder or any of his Affiliates, on
the one hand, and the Company, or any of the JAG Subsidiaries, on the other
hand.
5.6 NO NEGOTIATION. Until Closing or termination of this Agreement, Seller
will not, and Seller will cause each of its representatives and Affiliates not
to, directly or indirectly solicit, initiate, or encourage any inquiries or
proposals from, discuss or negotiate with, provide any non-public information
to, or consider the merits of any inquiries or proposals from, any Person (other
than Buyer) relating to any transaction involving the sale of the business or
assets (other than in the Ordinary Course of Business) of any JAG Subsidiary or
the Company, or any capital stock of any JAG Subsidiary or the Company, or any
merger, consolidation, business combination, or similar transaction involving
any JAG Subsidiary or the Company.
5.7 CONSENTS. Prior to Closing, Buyer will, at its own expense:
a. obtain all waivers, permits, licenses, approvals,
authorizations, qualifications, orders and consents of all third parties and
governmental authorities;
b. complete all filings and registrations with governmental
authorities for (i) the consummation of the transactions contemplated by this
Agreement; (ii) the ownership or leasing and operating after the Closing by the
Company of all its material properties; and (iii) the conduct after the Closing
by the Company and the JAG Subsidiaries of their businesses as conducted by them
on the date hereof;
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c. obtain the approvals of the Automobile Manufacturers which are
required by Section 6.12 below; and,
d. defend, consistent with applicable principles and requirements
of law, any lawsuit or other legal proceedings, whether judicial or
administrative, whether brought derivatively or on behalf of third persons
(including governmental authorities) challenging this Agreement or the
transactions contemplated hereby.
5.8 DEALER FINANCIAL STATEMENTS. The Company will deliver to Buyer copies
of the Dealer Financial Statements provided by the Company or the JAG
Subsidiaries after the date hereof within five (5) days of their delivery to the
Automobile Manufacturers. All such Statements shall reasonably be prepared in
accordance with factory guidelines.
5.9 NOTIFICATION OF CERTAIN MATTERS. Between the date hereof and the
Closing, each Party to this Agreement will give prompt notice in writing to the
other party hereto of:
a. any information that indicates that any representation and
warranty of such party contained herein was not true and correct as of the date
made or will not be true and correct as of the Closing;
b. the occurrence of any event which could result in the failure
to satisfy a condition specified in ARTICLE 6 or ARTICLE 7 hereof, as
applicable;
c. any notice or other communication from any third person
alleging that the consent of such third person is or may be required in
connection with the transactions contemplated by this Agreement; and
d. in the case of the Stockholder and the Company, any notice of,
or other communication relating to, any default or event which, with notice or
lapse of time or both, would become a default under any contract or agreement
set forth on the Disclosure Statement.
5.10 ASSURANCE BY THE PARTIES. The Stockholder shall use its Best Efforts to
cause the Company to comply with its respective obligations set forth in this
Agreement. BAG and Sub will use their Best Efforts to cause the other to comply
with their respective obligations set forth in this Agreement. Sunbelt, BAG and
Sub shall be jointly and severally liable for the obligations and duties of each
other hereunder and under all documents executed pursuant hereto and for any
damages to the Stockholder, the Company and/or the JAG subsidiaries that result
from any breach of this Agreement and
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from any breach of all documents executed pursuant hereto by any of them.
Stockholder and Company shall be jointly and severally liable for the duties and
obligations of each other hereunder and for any damages to the Buyer or any of
them that result from any breach of this Agreement by Stockholder or Company.
5.11 ANTITRUST IMPROVEMENTS ACT COMPLIANCE. Buyer, as applicable, shall each
file or cause to be filed with the Federal Trade Commission and the United
States Department of Justice any notifications required to be filed by the
respective Ultimate parent" entities under the Hart-Scott-Rodino Antitrust
improvements Act of 1976, as amended (the "H.S.R. Act"). and the rules and
regulations promulgated thereunder, with respect to the transactions
contemplated herein. Buyer shall pay the H.S.R. filing fee relating to such
filings. Buyer (with Company and each JAG Subsidiary's help as may be needed)
shall use its Best Efforts to make such filings promptly, to respond to any
requests for additional information made by either of such agencies, to cause
the waiting periods under the H.S.R. Act to terminate or expire at the earliest
possible date and to resist vigorously, at Buyer's expense (including, without
limitation, the institution or defense of legal proceedings), any assertion that
the transactions contemplated herein constitute a violation of the antitrust
laws, all to the end of expediting consummation of the transactions contemplated
herein; PROVIDED, HOWEVER, that if Buyer shall determine in Buyer's sole
discretion that continuing such resistance is not in the best interest of Buyer,
Buyer may, by written notice to the other Parties, terminate this Agreement with
the effect set forth in Article 8.3(c) hereof.
5.12 USE OF "JAY AUTOMOTIVE" NAME. After the Closing Date, Buyer and the
Company may use the names "JAY Automotive" and "JAY" in connection with business
of the Company and the JAG Subsidiaries in Columbus, Georgia and the surrounding
market area. After the Closing, neither the Stockholder nor any of his
Affiliates shall ever use, without the prior written permission of Buyer, which
permission Buyer may withhold or deny in its sole discretion for any reason
whatsoever, the names "JAY Automotive" and "JAY" in connection with the sale or
servicing of new or used automobiles, light-duty trucks or any other motorized
vehicles. Buyer will not use the name "JAY" or "JAY Automotive" in any
disparaging manner.
5.13 RELATED PARTY/STOCKHOLDER LOAN. On or before the Closing Date, the
Stockholder shall cause the Company to pay, and the Company shall pay, the
outstanding principal and all accrued but unpaid interest on any loans between
the Stockholder, his Affiliates or any parties related to the Company and the
JAG Subsidiaries, on the one hand, and the Company or the JAG Subsidiaries on
the other hand.
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5.14 STOCK RESTRICTION AGREEMENT. On or before the Closing Date, any stock
restriction agreement and any buy/sell agreement involving or affecting the
capital stock of the Company or any JAG Subsidiary (excepting any such provision
in the Bond Documents) shall be terminated in accordance with its terms and the
parties thereto shall have released any and all claims arising under or related
to such agreements and their termination.
5.15 PERSONAL ITEMS. The parties acknowledge and agree that the Stockholder
may retain certain personal items (which items are not reflected as assets on
the Most Recent Dealer Financial Statement and will not be reflected as assets
on the December 31, 1997 financial statements). These items may include personal
pictures, awards and mementos. Stockholder reserves the right to transfer other
similar Company or JAG Subsidiary assets to Stockholder for cash at closing and
to pay the book value for same.
5.16 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The Company and
the Stockholder shall furnish or cause to be furnished to Buyer all of the
information concerning the Company and the Stockholders reasonably required for
inclusion in, and will cooperate fully and completely with Buyer, Buyer's legal
counsel, Buyer's accountants and the Underwriters in the preparation of, the
registration statement for such Buyer Public Offering (the "Registration
Statement") and the prospectus included therein (including any and all audited
financial statements, as required by the applicable securities laws and
regulations, prepared in accordance with generally accepted accounting
principles, in form suitable for inclusion in the Registration Statement), all
at Buyer's expense. The Stockholder shall not be required to be a signatory to
such Registration Statement, shall have no obligation to certify or verify any
information, and shall have no liability of any kind arising out of or related
to this agreement to anyone not a party hereto.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF BUYER TO EFFECT THE CLOSING
The obligations of Buyer to Close shall be subject to the satisfaction,
at or prior to the Closing, of each of the following conditions, unless waived
by the Buyer as provided herein.
6.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS. Each of the
representations and warranties of the Seller contained in this Agreement shall
be true and correct on the date made and shall be true and correct in all
material respects as of the Closing. Each of the obligations of the Company,
each JAG Subsidiary and the Stockholder required by this Agreement to be
performed by them at or prior to the
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Closing shall have been duly performed prior to Closing. At the Closing, Buyer
shall have received a certificate, dated as of the Closing Date and duly
executed by the Stockholder to the effect that the conditions set forth in the
two preceding sentences have been satisfied.
6.2 AUTHORIZATION; CONSENT.
a. All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and all collateral agreements, and
the consummation of the transactions contemplated hereby shall have been duly
and validly taken by the Company and the JAG Subsidiaries.
b. All notices to, and declarations, filings and registrations
with, and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons, including, but not limited to, all
Automobile Manufacturers with whom the Company has a franchise agreement or
comparable instrument, required to consummate the transactions contemplated
hereby and all consents or waivers shall have been made or obtained.
6.3 OPINION OF SELLER'S COUNSEL. Buyer shall have been furnished prior to
or at Closing with the opinion of the Seller's counsel, dated the Closing Date,
in the form and substance acceptable to BAG and Sub and their counsel in the
form attached as Exhibit 6.3.
6.4 ABSENCE OF LITIGATION.
a. No order, stay, injunction or decree of any court of competent
jurisdiction in the United States, except as disclosed at or prior to the Due
Diligence Deadline, shall be in effect that (i) prevents or delays the
consummation of any of the transactions contemplated hereby or (ii) would impose
any limitation on the ability of Buyer effectively to exercise full rights of
ownership of the JAG Shares.
b. No action suit or proceeding before any court or any
governmental or regulatory entity except as disclosed at or prior to the Due
Diligence Deadline, shall be pending (or threatened by any governmental or
regulatory entity), and no investigation by any governmental or regulatory
entity shall have been commenced (and be pending) seeking to restrain or
prohibit (or questioning the validity or legality of) the consummation of the
transactions contemplated by this Agreement or seeking damages in connection
therewith.
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6.5 NO MATERIAL ADVERSE EFFECT. From the date of the Most Recent Dealer
Financial Statement to the Closing Date, there shall not have been any change in
the assets, properties, business, operations, prospects, net income or financial
condition of the Company or the JAG Subsidiaries, either individually or in the
aggregate that has had a material adverse effect on the Company or the JAG
Subsidiaries that has not been disclosed to the Buyer.
6.6 NET WORTH. From the date of the signing of this Agreement to the date of
Closing, the Company and each JAG Subsidiary shall have been operated in an
ordinary and normal manner and shall not have entered into any transaction that
is outside the Ordinary Course of Business, except with respect to the Auto Mall
and the spin-offs anticipated by this Agreement, unless Buyer has approved of
same in writing. The Net Worth of the Company will be the Net Worth as of the
signing date plus or minus the results of the operations that are in the
Ordinary Course of Business and any extraordinary transactions described herein
or permitted in writing by Buyer. This paragraph shall not be interpreted as a
guarantee of Net Worth at any date.
6.7 COMPLETION OF DUE DILIGENCE. Intentionally Deleted.
6.8 REAL ESTATE LEASES. Jay Leasing, Inc. shall have executed the Authority
Sublease and the Company and/or the JAG Subsidiaries shall have entered into or
renewed other leases necessary to permit the continued operation by Buyer at
each of the current locations for the franchised automotive dealerships operated
by the Company and the JAG Subsidiaries.
6.9 BOARD APPROVAL. Intentionally Deleted.
6.10 CERTIFICATES. The Stockholder and the Company shall have furnished BAG and
Sub with such certificates of the Stockholder and the Company's officers and
others to evidence compliance with the conditions set forth in this ARTICLE 6 in
such form and substance as required pursuant to the provisions of Section
1.3(d).
6.11 LEGAL MATTERS. All certificates, instruments, opinions and other documents
required to be executed or delivered by or on behalf of the Stockholder, the
Company and the JAG Subsidiaries under the provisions of this Agreement, and all
other actions and proceedings required to be taken by or on behalf of the
Stockholder, the Company and the JAG Subsidiaries in furtherance of the
transactions contemplated hereby, shall be reasonably satisfactory in form and
substance to counsel for BAG and/or Sub as submitted on the Disclosure Schedules
and with the Related Documents as set forth in Section 1.3(b).
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6.12 APPROVAL OF MANUFACTURER AND DISTRIBUTOR. Each Automobile Manufacturer
having an agreement with the Company, the Stockholder or any of the JAG
Subsidiaries, except Saturn and Suzuki, shall have approved Buyer as its
authorized dealer, on terms and conditions which are comparable with or
substantially similar in form to the terms and conditions of said Automobile
Manufacturer's consent or approvals in other similar transactions that occurred
during the twelve (12) month period immediately preceding the date hereof.
6.13 NON-COMPETITION AGREEMENT. Stockholder shall have executed the
Non-Competition Agreement.
6.14 ENVIRONMENTAL LAWS. The Company shall be in material compliance with all
applicable Environmental, Health and Safety Requirements.
6.15 NONDISTURBANCE AGREEMENT. Jay Leasing, Inc. and all other appropriate
parties shall have executed a Nondisturbance and Estoppel Agreement in the form
set forth on Schedule 6.15 which schedule shall have been prepared and presented
to BAG, Sunbelt and Sub in such form and substance as required pursuant to the
provisions of Section 1.3(d).
6.16 TITLE INSURANCE. The Company shall have obtained title insurance with
respect to the Auto Mall real property in form and substance reasonably
satisfactory to BAG. BAG shall be responsible for the cost of such title
insurance.
6.17 LEASE TERMINATION AGREEMENT/MEMORANDUM OF LEASE. Any existing real
property leases which the Company and the JAG Subsidiaries will not utilize in
their business operations after Closing shall have been terminated.
6.18 RESIGNATION OF DIRECTORS. Each of the persons who is a director of the
Company or any JAG Subsidiary on the Closing Date shall have tendered to Sub in
writing his or her resignation as such in form and substance satisfactory to
BAG.
6.19 DISCLOSURE STATEMENT. Intentionally Deleted.
6.20 BOND APPROVAL. The Company, the JAG Subsidiaries, and all other
appropriate and necessary entities shall have obtained the approval of Regions
Bank of Columbus, Georgia, and all other appropriate and necessary persons and
entities, of Sub as a buyer of the Company and as a subtenant of the Auto Mall
Property. If requested by BAG or Sub, such approvals shall include confirmation
that neither the Company, any JAG Subsidiary, BAG or Sub will have any liability
with respect to the bonds or letter of credit issued in conjunction with the
Auto Mall except for the Authority Sublease and
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the obligations arising thereunder.
6.21 BUYER PUBLIC OFFERING. The Buyer's Registration Statement shall have been
declared effective by the SEC, the Underwriters named therein shall have agreed
to acquire shares of the Sunbelt stock being offered pursuant to said
Registration Statement (the "Sunbelt IPO Stock), and the closing of the sale of
the Sunbelt IPO Stock to the Underwriters shall have occurred simultaneously
with the Closing hereunder.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE SELLER TO EFFECT THE CLOSING
The obligations of the Seller to Close shall be subject to the
satisfaction, at or prior to the Closing, of each of the following conditions,
unless waived by Seller as provided herein:
7.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS. Each of the representations
and warranties of Buyer contained in this Agreement shall be true and correct on
the date made and shall be true and correct in all material respects as of the
Closing. Each of the obligations of BAG and Sub required by this Agreement to be
performed by them at or prior to the Closing shall have been duly performed
prior to Closing. At the Closing, the Stockholder shall have received a
certificate, dated the Closing Date and duly executed by an officer of BAG and
of Sub to the effect that the conditions set forth in the preceding two
sentences have been satisfied.
7.2 AUTHORIZATION OF THE AGREEMENT; CONSENTS.
a. All corporate action necessary to authorize the execution, delivery
and performance of this Agreement and all collateral agreements, and the
consummation of the transactions contemplated hereby shall have been duly and
validly taken by BAG and Sub. All filings required to be made under the H.S.R.
Act in connection with transactions contemplated hereby shall have been made and
all applicable waiting periods with respect to each such filing, including
extensions thereof, shall have expired or been terminated.
b. All notices to, and declarations, filings and registrations with, and
consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons, including, but not limited to, all
automobile manufacturers with whom the Company has a franchise agreement or
comparable instrument, required to consummate the transactions contemplated
hereby and all consents or waivers shall have been made or obtained.
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7.3 OPINION OF BUYER'S COUNSEL. Seller shall have been furnished prior to or
at Closing with the opinion of the Buyer's counsel, dated the Closing Date, in
the form and substance as approved pursuant to the provisions of Section 1.3.
7.4 ABSENCE OF LITIGATION.
a. No order, stay, injunction or decree of any court of competent
jurisdiction in the United States shall be in effect that prevents or delays the
consummation of any of the transactions contemplated hereby or would impose any
limitation on the ability of Seller effectively to exercise full rights of
ownership of the Shares, that was not disclosed.
b. No action, suit or proceeding before any court or any governmental or
regulatory entity shall be pending (or threatened by any governmental or
regulatory entity), and no investigation by any governmental or regulatory
entity shall have been commenced (and be pending) seeking to restrain or
prohibit (or questioning the validity or legality of) the consummation of the
transactions contemplated by this Agreement that was not disclosed.
7.5 REAL ESTATE LEASES. Buyer shall have executed the Authority Sublease and
the Company and/or the JAG Subsidiaries shall have entered into or renewed other
leases necessary to permit the continued operation by Buyer at each of the
current locations for the franchised automotive dealerships operated by the
Company and the JAG Subsidiaries.
7.6 CERTIFICATES. BAG and Sub shall have furnished the Stockholder with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this ARTICLE 7 as may be reasonably requested by the
Stockholder.
7.7 LEGAL MATTERS. All certificates, instruments, opinions and other documents
required to be executed or delivered by or on behalf of BAG or Sub under the
provisions of this Agreement, and all other actions and proceedings required to
be taken by or on behalf of BAG or Sub in furtherance of the transactions
contemplated hereby, shall have been executed, delivered or taken as the case
may be.
7.8 RELEASES. The Stockholder, the Company and the applicable JAG Subsidiary
shall have been released from any guaranties which they may have signed relative
to the floor plan financing, leasing obligations, or any other such obligations
which Buyer has assumed. All parties agree to use their best efforts to obtain
this result.
7.9 BOND APPROVAL. The Company, the JAG Subsidiaries, and all other
appropriate and necessary entities shall have obtained the approval of Regions
Bank of Columbus, Georgia, and all other appropriate and necessary persons and
entities, of Sub
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as a buyer of the Company and as a subtenant of the Auto Mall Property. If
requested by BAG or Sub, such approvals shall include confirmation that neither
the Company, any JAG Subsidiary, BAG or Sub will have any liability with respect
to the bonds or letter of credit issued in conjunction with the Auto Mall except
for the Authority Sublease and the obligations arising thereunder.
ARTICLE 8
TERMINATION
8.1 TERMINATION. This Agreement may be terminated at any time prior to
Closing:
a. By mutual written consent of the Parties;
b. By Seller or Buyer if the Closing shall not have taken place on or
prior to Closing Date Deadline, or such later date as shall have been approved
by Buyer and Seller (provided that the terminating Party is not otherwise in
material breach of its representations, warranties, covenants or agreements
under this Agreement);
c. By Buyer or Seller if any court of competent jurisdiction in the
United States or other United States governmental body shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement, and any
such order, decree, ruling or other action shall have become final and
non-appealable;
d. By the Stockholder if any of the conditions specified in ARTICLE 7
hereof have not been met or waived by the Stockholder by the Closing Date or any
extension thereof (provided that neither the Stockholder nor the Company is
otherwise in material breach of his or its representations, warranties,
covenants or agreements under this Agreement);
e. By Buyer if any of the conditions specified in ARTICLE 6 hereof have
not been met or waived by Buyer by the Closing Date or any extension thereof
(provided that Buyer is not otherwise in material breach of its representations,
warranties, covenants or agreements under this Agreement);
f. By either Buyer or the Stockholder if there has been a material
breach on the part of the other of any representation, warranty, covenant or
agreement set forth in this Agreement, which breach has not been cured within
ten (10) Business Days following receipt by the breaching party of written
notice of such breach;
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g. By either Buyer or Seller if the other party has not accepted,
waived, or approved the form or content of the Related Documents specified in
Section 1.3 (b) hereof;
h. By either Buyer or Seller if Buyer has not accepted, approved or
waived the contents of and the attachments thereto of the Disclosure Schedules
prepared by Stockholder pursuant to Section 1.3(a), and Articles 2 and 4 herein
by the Disclosure Deadline;
i. By either party, due to, any war, natural disaster, or other acts of
God; or
j. By Buyer pursuant to Section 1.1(b).
8.2 METHOD OF TERMINATION. If BAG, Sub, Sunbelt or the Stockholder shall
terminate this Agreement pursuant to the provisions hereof, such termination
shall be effectuated by written notice to the other parties specifying the
provision hereof pursuant to which such termination is made.
8.3 EFFECT OF TERMINATION.
a. Except (i) for any breach of this Agreement prior to its
termination, and (ii) except for the obligations in Section 5.2, 5.6 and 10.1
hereof, and (iii) except for termination pursuant to Sections 8.3(c), 8.3(d) and
8.3(e) below, upon the termination of Agreement pursuant to Section 8.1, this
Agreement shall become null and void and none of the Parties or any of their
respective officers, directors, employees, agents, affiliates, consultants,
stockholders or principals shall have any liability or obligation hereunder with
respect hereto.
b. If this Agreement is terminated pursuant to 8.1(g) or 8.1(h), then
neither party shall have any liability or obligation to the other.
c. If this Agreement is terminated pursuant to the provisions of
Sections 8.1 (b), 8.1(e) or 8.1(f), Buyer shall immediately pay to Seller in
cash a termination fee of One Hundred Thousand and no/1OOths Dollars
($100,000.00) ("Termination Fee").
d. If this Agreement is terminated after due diligence, then Buyer
shall pay to the Seller in cash the Termination Fee of One Hundred Thousand and
No/lOOths ($100,000.00).
e. If this Agreement does not Close as specified herein, as a result
of the failure to obtain governmental approvals, manufacturers' approvals or any
other third party
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approvals, or consents after good faith efforts of all parties, to obtain the
same, then, in that event, the Buyer shall pay to the Seller in cash the
Termination Fee of One Hundred Thousand and No/100ths Dollars ($100,000.00).
f. The Termination Fee shall be the sole and exclusive remedy of the
Stockholder, the Company and the JAG Subsidiaries for damages as a result of a
pre-closing breach of this Agreement by Buyer except for the Buyer's willful and
intentional breach of this agreement. Because the actual damages that the
Stockholder, the Company and the JAG Subsidiaries would sustain if Buyer
breaches its pre-closing obligations under this Agreement are uncertain and
would be impossible or very difficult to ascertain accurately, the Parties agree
in good faith that the Termination Fee would be reasonable and just compensation
for the harm caused by such breach. Therefore, the Stockholder, the Company and
the JAG Subsidiaries acknowledge and agree to accept said Termination Fee, if
due and paid hereunder, as liquidated damages, and not as a penalty, in the
event of a pre-closing breach by Buyer.
ARTICLE 9
INDEMNIFICATION
9.1 SURVIVAL OF CLAIMS. Seller's representations, warranties, covenants and
other obligations contained herein shall survive the Closing to the extent
specified below:
a. All representations, warranties, covenants and other obligations
contained in this Agreement (except as otherwise set forth in Section 9.1(b) and
9.1(c) below) shall survive for a period of two (2) years following the Closing
Date.
b. The representations and warranties contained in Section 4.11 shall
survive as to any Tax covered by such representations and warranties for so long
as any statute of limitations for such Tax remains open, in whole or in part,
including without limitation by reason of waiver of such statute of limitations.
However, Buyer shall have no claim against Seller for any tax liability which
may result from Buyer's reclassification of Seller's inventory or other such
items from Seller's prior tax years (i.e., LIFO adjustments) and Stockholders
shall have no liability to Buyer for any taxes owed by the Company for the year
1998 except as set forth in Article 11 herein.
c. All claims that may be brought by Buyer for Seller's fraud,
misrepresentation or any intentional misconduct against or to the Buyer shall
survive for a period of four (4) years following the Closing Date.
d. Buyer's representations, warranties and covenants shall survive the
Closing.
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9.2 SELLER'S INDEMNIFICATION OF THE BUYER. In the event the Seller breaches
any of its representations, warranties, and covenants contained herein; and if
there is an applicable survival period pursuant to Section 9.1 above; and if the
Buyer gives written notice of the claim for indemnification or brings its claim
for indemnification against any of the Seller pursuant to Section 9.5 below
within such survival period, then the Seller agrees to indemnify the Buyer from
and against all Adverse Consequences caused by the breach that the Buyer shall
suffer through and after the date of the claim for indemnification.
9.3 BUYER'S INDEMNIFICATION OF THE SELLER.
a. In the event the Buyer breaches any of its representations,
warranties, obligations and covenants contained herein; and if, the Seller gives
written notice of the claim or brings the claims for indemnification against the
Buyer as provided for in Section 9.5 below, then the Buyer agrees to indemnify
the Seller from and against the entirety of any Adverse Consequences caused by
the breach that the Seller shall suffer through and after the date of the claim
for indemnification.
b. In addition to Section 9.3(a) above, after the Closing of this
Agreement, the Buyer shall indemnify and hold the Seller harmless from all costs
arising out of the following:
(i) Any claim arising out of or related to the Sunbelt IPO;
(ii) Any claim arising out of or related to Buyer's operation of
the business of the Company, the JAG subsidiaries, or any successor after
Closing;
(iii) Any claim arising out of any Disclosure Schedules not
objected to by Buyer by the Due Diligence Deadline or any Related Documents
produced pursuant to Section 1.3(b) which have not been objected to by the
Buyer.
9.4 DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall make appropriate
adjustments for tax benefits and insurance coverage in determining Adverse
Consequences for purposes of this Article 9.
9.5 PROCEDURES FOR INDEMNIFICATION.
a. THIRD PARTY CLAIMS.
(i) Promptly after receipt by an indemnified party under
Sections 9.2 or 9.3 of the notice of or the commencement of any proceeding
against the indemnified party
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<PAGE> 38
for which indemnification herein may lie (whichever is first received by the
indemnifying party), or which may form part of the basket when the Stockholder
is the indemnifying party, such indemnified party will, if a claim is to be made
against an indemnifying party, give written notice within the applicable
survival period to the indemnifying party of the notice of the commencement of
such claim. If such notice is not timely given, the right to indemnification is
waived.
(ii) If any proceeding referred to in Section 9.5(a) is brought
against an indemnified party and the indemnified party gives written notice to
the indemnifying party of the notice of or commencement of such a proceeding,
the indemnifying party will, unless the claim involves taxes, be entitled to
participate in such proceeding, and, to the extent that it wishes (unless the
indemnifying party is also party to such proceeding and the indemnified party
determines in good faith that joint representation would be inappropriate) to
assume the defense of such proceeding with counsel satisfactory to the
indemnified party, and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such proceeding with
counsel satisfactory to the indemnify party, and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such proceeding, the indemnifying party will not, as long as it
diligently conducts the defense of the claim, be liable to the indemnified party
herein for its legal fees or any other expenses with respect to the defense of
the proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a proceeding,
(i) it will be conclusively established for purposes of this indemnification;
(ii) no compromise or settlement of such claims may be effected by the
indemnifying party without the indemnified party's consent unless (A) there is
no finding or admission of any violation of Legal Requirements or any violation
of the rights of any Person and no effect on any other claims that may be made
against the indemnified party, and (B) the sole relief provided is monetary
damages that are paid in full by the indemnifying party; and (iii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any proceeding and the indemnifying
party does not, within ten (10) days after the indemnified party's notice is
given, give notice to the indemnified party of its election to assume the
defense of such proceeding, the indemnifying party will be bound by any
determination made in such proceeding or any compromise or settlement effected
by the indemnified party.
(b) OTHER CLAIMS.
A claim for indemnification by Buyer for any matter not involving a
third-party claim shall be asserted by giving notice to the Stockholder of the
claim within the survival
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<PAGE> 39
period specified in Section 9.1. If such claim has not been satisfied by the
Stockholder after notice, then the Buyer shall actually file suit in the
appropriate civil court on such claim within the applicable survival period
specified in Section 9.1. If such claim is not filed within the applicable
survival period, such claim is waived.
9.6 REMEDIES. The parties acknowledge and agree that after Closing, the rights
and remedies set forth in this Article 9 shall be the exclusive remedy of the
parties hereto with respect to the transactions contemplated by this Agreement.
9.7 LIMITATION ON INDEMNIFICATION. Stockholder has no obligation to indemnify
the Buyer hereunder (i) until the Buyer has suffered Adverse Consequences by
reason of all such breaches in excess of a $100,000.00 aggregate deductible (the
"Basket"), or (ii) to the extent any Adverse Consequences suffered by the Buyer
by reason of all such breaches exceeds $2,000,000.00 an aggregate ceiling (the
"Cap"), (after which point the Stockholder will have no obligation to indemnify
the Buyer from and against further such Adverse Consequences), except for any
breach or claim arising out of any tax indemnification hereunder, the Seller's
fraud, misrepresentation or any intentional misconduct to or against the Buyer.
Notwithstanding anything to the contrary contained herein, the Stockholder shall
be obligated to fully indemnify the Buyer from and against, any Adverse
Consequences resulting from, arising out of, relating to, in the nature of or
caused by any tax indemnification herein, the Seller's fraud, misrepresentation
or willful or intentional misconduct to or against the Buyer.
9.8 INSURANCE. Buyer shall cause the Company and the JAG Subsidiaries to
maintain liability and truth-in-lending, and efforts and omissions coverages
comparable to those currently maintained by the JAG Subsidiaries and the
company. Seller shall have no obligation to indemnify Buyer for any costs
covered by such policies.
9.9 NOTICE. Any notice required herein of a claim or a proceeding for which
indemnification is sought shall be sent by as provided in Section 10.3.
ARTICLE 10
MISCELLANEOUS
10.1 FEES AND EXPENSES.
a. Except as otherwise expressly provided herein, each Party hereto
shall be responsible for its respective costs incurred in the execution and
performance of this Agreement except that Buyer shall be responsible for, and
shall in any event reimburse Seller for, all of Seller's costs arising out of or
related to the following:
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<PAGE> 40
i. Copies of Seller's business records of every kind;
ii. Filing notices, or obtaining permissions from all
governmental agencies;
iii. Obtaining permissions and consents required or
contemplated hereunder from any Automobile Manufacturer;
iv. Providing information for or with respect to the Sunbelt
IPO; and
v. Fees incurred by Seller's counsel and accountant not to
exceed a total of Fifty Thousand Dollars ($50,000.00). Said fees may be paid by
Company prior to Closing without adjustment to the Purchase Price.
b. Notwithstanding Section 10.1 (a) above, if the Closing does not
occur and Section 5.5 hereof ('No Shop' provision) is breached, the Stockholder
or the Company shall reimburse Buyer, within twenty (20) days after receipt of a
request therefor, for all of the fees, costs and expenses Buyer has paid to
Seller pursuant to Section 10.1 (a) above.
10.2 HEADINGS. The section headings herein are for convenience of reference
only, do not constitute part of this Agreement and shall not be deemed to limit
or otherwise affect any of the provisions hereof.
10.3 NOTICES. All notices, consents, waivers, or other communications required
or permitted hereunder shall be given in writing (and shall be ineffective
otherwise) and shall be deemed given (a) if delivered by hand or recognized
overnight delivery service, upon the earlier of delivery or rejection of
delivery by recipient, (b) if given by facsimile transmission, upon confirmation
of transmission by facsimile, or (c) if delivered by registered or certified
mail, postage prepaid (return receipt requested), upon the earlier of actual
delivery, rejection of delivery by recipient, or three days after being
deposited in the mail, and addressed as follows:
<TABLE>
<S> <C>
If to the Company before the Closing date: with a copy to:
James G. Stelzenmuller, III Richard A. Childs
Post Office Box 1978 Attorney at Law
Columbus, GA 31902 Post Office Box 1625
Fax: 706-324-3984 Columbus, GA 31902
Fax: 706-322-2457
</TABLE>
34
<PAGE> 41
<TABLE>
<S> <C>
If to the Company after the Closing date: with a copy to:
James G. Stelzenmuller, III Richard A. Childs
2420 Downing Drive Attorney at Law
Columbus, GA 31906 Post Office Box 1625
Columbus, GA 31902
Fax: 706-322-2457
If to the Stockholder: with a copy to:
James G. Stelzenmuller, III Richard A. Childs
2420 Downing Drive Attorney at Law
Columbus, GA 31906 Post Office Box 1625
Columbus, GA 31902
Fax: 706-322-2457
If to Sunbelt, BAG or Sub: with a copy to:
Charles K. Yancey Stephen C. Whicker, Esq.
c/o Boomershine Automotive Group c/o The Whicker Law Firm
2150 Cobb Parkway 6111 Peachtree Dunwoody Road, NE
Smyrna, Georgia 30080 Suite 102-D
Fax: 770-618-7285 Atlanta, Georgia 30328
Fax: 770-394-8472
and another copy to:
David S. Cooper, Esq.
Schnader Harrison Segal & Lewis, LLP
Suite 2800, SunTrust Plaza
303 Peachtree Street, NE
Atlanta, Georgia
Fax: (404) 223-5164
</TABLE>
or such other address as shall be furnished in writing by such party.
Notwithstanding the foregoing, any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
10.4 ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure the benefit of the parties hereto (and with respect to
the Stockholder, the
35
<PAGE> 42
personal representatives and heirs of the Stockholder) and their respective
successors and permitted assigns, and the provisions of ARTICLE 9 hereof shall
inure to the benefit of the Indemnified Parties referred to therein; PROVIDED,
HOWEVER, that neither this Agreement nor any of the rights, interests, duties,
benefits, or obligations hereunder may be assigned by any of the parties hereto
without the prior written consent of the other Parties. Notwithstanding the
foregoing, Stockholder shall cause Jay Leasing, Inc. to consent to any
assignment of this Agreement to any affiliate of Sunbelt or BAG upon reasonable
notice to Stockholder; provided, however, that Sunbelt, BAG and Sub, in addition
to the assignee, shall remain fully, jointly, and severally liable for all
obligations hereunder and all obligations that are contained in, arise out of,
or relate to any document contemplated by this Agreement. Any such consent of
Jay Leasing, Inc. shall in no way negate, limit or restrict any right of the
Stockholder or Jay Leasing, Inc. set forth herein, or any document contemplated
hereunder. No consent required herein shall unreasonably be withheld.
10.5 ENTIRE AGREEMENT. This Agreement (including the Schedules and Exhibits
hereto) embody the entire agreement and understanding of the parties with
respect to the transactions contemplated hereby and supersede all prior written
or oral commitments, arrangements or understandings between the Parties with
respect thereto and all prior drafts of this Agreement. There are no
restrictions, agreements, promises, warranties, covenants or undertakings with
respect to the transactions contemplated hereby other than those expressly set
forth herein or in the documents expressly referenced herein. Prior drafts of
this Agreement shall not be used as a basis for interpreting this Agreement.
10.6 WAIVER AND AMENDMENTS. Except as otherwise specifically set forth herein,
the Stockholder, the Company, each JAG Subsidiary, BAG and Sub may by mutual
agreement in writing (i) extend the time for the performance of any of the
obligations or other actions of the other parties, (ii) waive any inaccuracies
in the representations or warranties of the other parties contained in this
Agreement, (iii) waive compliance with any of the covenants of the other parties
contained in this Agreement, (iv) waive performance of any of the obligations of
the other parties created under this Agreement, or (v) waive fulfillment of any
of the conditions to its own obligations under this Agreement. The waiver by any
Party hereto of a breach of any provision of this Agreement shall not operate or
be construed as a waiver of any subsequent breach, whether or not similar. This
Agreement may be amended, modified or supplemented only by a written instrument
executed by the Parties hereto.
10.7 COUNTERPARTS. This Agreement may be executed in any number of counterparts,
all of which shall be considered one and the same agreement and each of which
shall be deemed an original.
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<PAGE> 43
10.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia without giving effect to any
choice or conflict of law provision or rule that would cause the laws of any
other jurisdiction to apply. Any action relating to or arising out of the
Agreement shall be filed in the Superior Court of Muscogee County, Georgia, and
the parties hereto consent to exercise of subject matter and personal
jurisdiction in said court.
10.9 ACCOUNTING TERMS. All accounting terms used herein which are not expressly
defined in this Agreement shall have the respective meanings given to them in
accordance with GAAP or the Dealer Financial Statements as they may apply.
10.10 DEFINITIONS. For purposes of this Agreement, the terms defined below shall
have the following meaning:
a. "Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, liabilities, obligations, taxes, liens,
losses, expenses, and fees, including court costs and reasonable
attorneys' fees and expenses.
b. "Affiliate" of a specified Person shall mean a Person that directly
or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person
specified, and in the case of a specified Person who is a natural
person, his spouse, his issue, his parents, his estate and any trust
entirely for the benefit of his spouse and/or Issue.
c. "Authority Sublease" means the Sublease between Jay Leasing, Inc.
and Sub for the Auto Mall property.
d. "Auto Mall" shall mean the real and personal property in Columbus,
Georgia, that is eased by Jay Leasing, Inc. from the Development
Authority of Columbus, Georgia, and will be subleased to BAG.
e. "Automobile Manufacturers" shall mean the manufacturers of Toyota,
Saturn, Mazda, Pontiac, GMC, Buick, and Mitsubishi vehicles, as
applicable.
f. "Best Efforts" shall be deemed to not include any obligation on the
part of any Person to undertake any liabilities, expend any funds or
perform acts (except liabilities, expenditures or performance, other
than any Best Efforts obligations, expressly required to be
undertaken by the terms of this Agreement) which are materially
burdensome to such Person; PROVIDED,
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<PAGE> 44
HOWEVER, that notwithstanding the foregoing, the term "Best
Efforts" shall include an obligation to take such actions which are
normally incident to or reasonably foreseeable in connection with
such obligation or the transactions contemplated hereby.
g. "Business Day" shall mean any day excluding Saturday, Sunday and any
day which is a legal holiday under Federal law.
h. "Buyer" shall mean BAG, Sunbelt, and Sub, collectively.
i. "Closing Date Deadline" is June 30, 1998.
j. "Code" means the Internal Revenue Code, as amended.
k. "Confidential Information" shall mean all information concerning the
Company and the JAG Subsidiaries obtained by BAG, Sub and their
representatives from the Company and all information concerning BAG
and the Sub obtained by the Company and the JAG Subsidiaries from
BAG and Sub in connection with the transactions contemplated by this
Agreement, except information (x) ascertainable or obtained from
public information, (y) received from a third party not employed by
or otherwise affiliated with the parties or (z) which is or becomes
known to the public, other than through a breach by a Party or any
of its representatives of this Agreement.
1. "Costs" shall mean all liabilities, losses costs and actual damages
(not including consequential damages) and reasonable expenses,
reasonable attorneys' fees, reasonable experts' fees, reasonable
consultants' feast and reasonable disbursements of any kind or of
any nature whatsoever, net of tax savings required in future years.
m. "Dealer Financial Statements" means the financial statements
prepared by each JAG Subsidiary (for the months January through
October 31, 1997) for submission to the Automotive Manufacturer
which reflects the monthly operation of its business.
n. "Disclosure Statement" means the Statement that is to be prepared by
the Stockholder pursuant to the provisions of Section 1.3.
o. "Due Diligence" means the audit, examination, inspection, review,
and investigation of business records, transactions, information
disclosed hereunder, and all relevant information of the Company and
the JAG
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<PAGE> 45
Subsidiaries, and third party records and/or the copying of
same, and queries of the Stockholder, officers and agents of the
Company and third parties relating to the same, to the extent that
is reasonably necessary in order and BAG and Sub to make an informed
decision as to whether to accept the Disclosure Statement,
determine the purchase price, verify the accuracy a the
representations and warranties of the parties hereto, ascertain
that the requirements of this Agreement are met, and for other
reasonable business purposes relating to same.
p. "Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan, (b) qualified defined contribution retirement
plan or arrangement which is an employee Pension Benefit Plan, (c)
qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multi-employer Plan),
or (d) Employee Welfare Benefit Plan or material fringe benefit plan
or program.
q. "Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
r. "Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
s. Environmental, Heath and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations,
ordinances and similar provisions having the force or effect of
law, all judicial and administrative orders and determinations, and
all common law concerning public health and safety worker health
and safety, and pollution or protection of the environment,
including without limitation all those relating to the presence,
use, production, generation, handling' transportation, treatment,
storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances or wastes, chemical substances or
mixtures, pesticides, pollutants, contaminants, toxic chemicals,
petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation.
t. "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
u. Intentionally Deleted.
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<PAGE> 46
v. "Fiduciary" has the meaning set forth in ERISA Section 3(21).
w. "GAAP" shall mean generally accepted accounting principles which are
in effect in the United States on the Closing Date.
x. "Income Tax" means any federal, state, local or foreign income tax,
including any interest. penalty, or additional thereto, whether
disputed or not.
y. "Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to income Taxes,
including any schedule or attachment statement thereto, and
including any amendment thereof.
z. "JAG Subsidiaries" shall mean the wholly owned subsidiaries of the
Company, listed on the Disclosure Statement, which are to remain in
the Company when the JAG Shares are sold to the Buyer pursuant to
this Agreement.
aa. "Knowledge and Belief" means actual knowledge without independent
investigation and, with respect to any corporation, partnership,
company or other entity, shall include the knowledge of such
entity's officers, directors and managers with responsibility over
the relevant subject matter.
bb. "Liens" shall mean any mortgages, pledges, title defects or
objections, liens claims, security interests, conditions and
installment sale agreements, encumbrances or charges of any kind.
cc. "Material Adverse Effect" shall mean any change in, or effect on,
the Company or any JAG Subsidiary (including the business thereof)
which is or could reasonably be expected to be, materially adverse
to the business, operations, assets, condition (financial or
otherwise) or prospects of the Company or any JAG Subsidiary.
dd. "Material Amount" is defined and calculated as provided for in The
AICPA Auto Dealership Engagement Manual, page 4-16, paragraph 4.338,
September, 1995.
ee. "Most Recent Fiscal Year End" means the unaudited consolidated
balance sheets of the Company and the JAG Subsidiaries as of
December 31, 1996 and the related statements of income, and retained
earnings and cash flows
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<PAGE> 47
for the year ended December 31, 1996 for the Company and JAG
Subsidiaries.
ff. "Most Recent Dealer Financial Statement" means the October 31, 1997
Dealer Financial Statements for each JAG Subsidiary.
gg. "Multi-employer Plan" has the meaning set forth in ERISA Section
3(37).
hh. "Net Income" ("EGT") shall mean earnings after all costs, expenses
and interest excepting for income taxes.
ii. "Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to
quantity and frequency).
jj. "Party" has the meaning set forth in the preface above.
kk. "PBGC" means the Pension Benefit Guaranty Corporation.
11. "Person" shall mean and include any individual, corporation, limited
liability company, partnership, joint venture, association, trust,
any other incorporated or unincorporated organization or entity and
any governmental or any department or agency thereto.
mm. "Reportable Event" has the meaning set forth in ERISA Section 4043.
nn. "Securities Act" means the Securities Act of 1933, as amended.
oo. "Securities Exchange Act" means the Securities Exchange Act of 1934
as amended.
pp. "Security interest" means any mortgage, pledge, lien, encumbrance,
charge or other security interest, other than (a) mechanic's,
materialman's and similar liens, (b) liens for taxes not yet due and
payable or for taxes that the taxpayer is contesting in good faith
through appropriate proceedings, (c) purchase money liens and liens
securing rental payments under capital lease arrangements, and (d)
other liens arising in the Ordinary Course of Business and not
incurred in connection with the borrowing of money.
qq. "Seller" shall mean the Stockholder, the Company and the JAG
Subsidiaries, collectively.
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<PAGE> 48
rr. "Sunbelt Public Offering" shall mean the consummation of an
underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the
offering and sale of shares of common stock of BAG on a firm
commitment basis.
ss. "Sunbelt Public Offering Date" shall mean the date on which the
Sunbelt Public Offering occurs.
10.11 SCHEDULES. Disclosure of any matter in any Schedule hereto or in the
Financial Statements shall be considered as disclosure pursuant to any other
provision, subprovision, section or subsection of this Agreement or Schedule to
this Agreement.
10.12 SEVERABILITY. If any one or more of the provisions of this Agreement shall
be held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be
affected thereby. To the extent permitted by applicable law, each Party waives
any provision of law which renders any provision of this Agreement invalid,
illegal or unenforceable in any respect.
10.13 REMEDIES. Prior to Closing, the parties hereto shall have all remedies
provided in law or equity for any claims arising under this Agreement. After
Closing, the remedies provided for any claims arising under this Agreement shall
be as set forth in Article 9.
10.14 TIME IS OF THE ESSENCE. Time is of the essence for purposes of this
Agreement.
ARTICLE 11
1998 OPERATIONS AND NET INCOME
At or prior to Closing, Stockholder shall be allowed to distribute to
himself as additional salary or other additional compensation 100% of the "Net
Income" before taxes ("EBT") of the Company for the period beginning November l,
1997 through Closing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
[SIGNATURES BEGIN ON NEXT PAGE]
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<PAGE> 49
BOOMERSHINE AUTOMOTIVE GROUP, INC.
Attest: /s/ Stephen C. Whicker By: /s/ Charles C. Yancey
--------------------------- --------------------------------
Name: Stephen C. Whicker Name: Charles C. Yancey
--------------------------- ------------------------------
Title: Ass't Secretary Title: Sec. Treas.
--------------------------- ------------------------------
(Corporate Seal)
B.A.G. GEORGIA III, INC.
Attest: /s/ Stephen C. Whicker By: /s/ Charles K. Yancey
---------------------------- --------------------------------
Name: Stephen C . Whicker Name: Charles C. Yancey
--------------------------- ------------------------------
Title: Secretary Title: Sec. Treas CEO
--------------------------- ------------------------------
(Corporate Seal)
SUNBELT AUTOMOTIVE GROUP, INC.
Attest: /s/ Stephen C. Whicker By: /s/ Charles C. Yancey
----------------------------- -------------------------------
Name: Stephen C. Whicker Name: Charles C. Yancey
--------------------------- ------------------------------
Title: Secretary Title: CEO
--------------------------- ------------------------------
(Corporate Seal)
JAY AUTOMOTIVE GROUP, INC.
Attest: By: /s/ James G. Stelzenmuller
----------------------------- ------------------------------
Name: Name: James G. Stelzenmuller
--------------------------- ------------------------------
Title: Title: President
--------------------------- ------------------------------
(Corporate Seal)
/s/ James G. Stelzenmuller III
------------------------------------- ----------------------------------
Witness for Stockholder James G. Stelzenmuller III
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<PAGE> 50
JAY AUTOMOTIVE GROUP, INC. LETTERHEAD
A FULL SERVICE AUTOMOTIVE COMPANY
P.O. BOX 1978
COLUMBUS, GEORGIA 31902
TELEPHONE 706-324-1234
March 23, 1998
Via Hand Delivery
Mr. Charles Yancey
Boomershine Automotive Group, Inc.,
Sunbelt Automotive Group, Inc.
Re: Stock Purchase Agreement by and between Boomershine Automotive Group, Inc.,
Sunbelt Automotive Group, Inc., B.A.G. GEORGIA III, INC. and Jay Automotive
Group, Inc. and James G. Stelzenmuller, III dated January 5, 1998 (the
"Stock Purchase Agreement")
Dear Charles:
This letter summarizes certain activities which must be completed in order for
the transactions contemplated in the Stock Purchase Agreement to be
consummated. Our mutual cooperation is necessary for the completion of each of
these activities. By signing this letter in the space provided below, we
indicate our agreement to use our best efforts in completing these activities
on a timely basis, and to cause our financial and legal advisers to do the same.
1. Financial Audits. We must complete our audits of the 1995, 1996 and 1997
consolidated financial statements for Jay Automotive Group, Inc.
2. Audit Representation Letter. J. G. Stelzenmuller, III will sign a audit
representation letter upon completion of the audit so provided in the
attachments thereto accurately reflect the financial position of the
companies audited.
3. Spare Parts Inventory. Prior to Closing, Jay Automotive Group will amend
its federal income tax returns for tax years 1994, 1995 and 1996, and will
prepare and file its federal income tax return for 1997, to reflect the
spare parts inventory adjustments, and the tax year allocations of those
adjustments, made by Ernst & Young. If the Closing does not occur for any
reason, Sunbelt Automotive Group and Boomershine Automotive Group will
reimburse Jay Automotive Group for the difference between (i) the interest
paid by Jay Automotive Group as a result of the allocation of the spare
parts inventory adjustments to the 1994, 1995 and 1996 amended federal tax
returns and (ii) the interest which would have been paid by Jay Automotive
Group if the spare parts inventory adjustments had all been allocated to
Jay Automotive Group's 1997 federal tax return.
<PAGE> 51
4. Hart-Scott-Rodino Filings. As we discussed, each party to our
transaction must file a separate Hart-Scott-Rodino Notification and
Report Form. We will assist you in completing the Form to be filed for
Jay Automotive Group by providing whatever information you may need. In
addition, we will sign the Certification which appears at the end of
the Form, and an affidavit in substantially the form of the attached
affidavit. I understand that the Hart-Scott-Rodino Forms should be
filed by March 31, 1998.
Sunbelt Automotive Group and Boomershine Automotive Group agree to
indemnify Jay Automotive Group and me, pursuant to Article 9 of the
Stock Purchase Agreement, against any liability arising out of the
information contained in the Hart-Scott-Rodino Notification and Report
Form as well as all other matters involving the Sunbelt IPO, including
any actions performed by Jay Automotive Group or me, on behalf of
B.A.G. or S.A.G. at their direction.
5. Automobile Manufacturer Consents. We will provide assistance in
obtaining the consent of the applicable automobile manufacturers, to
the transactions contemplated in the Stock Purchase Agreement. I have
written all manufacturers except Saturn Corporation and American Suzuki
on Tuesday, March 24, 1998. Copies of these letters are attached
hereto. We both recognize that a copy of the S-1 filing will likely
be required by all manufacturers before approvals will be obtained.
6. Auto Mall Issues. we need to agree upon a Sublease for the Auto Mall
which is satisfactory to you and to us. In addition, as we have
discussed, you would like to have Jay Automotive Group removed as a
guarantor for Jay Leasing's obligations with respect to the bonds and
the letter of credit which secures the bonds. We will need your
cooperation in obtaining all required approvals and consents with
respect to the Sublease, the removal of Jay Automotive group as a
guarantor, and the transactions contemplated by the Stock Purchase
Agreement from the Development Authority, Regions Bank (as bond
trustee and as the issuer of the letter of credit which secures
the bonds) and any other necessary entities. You have agreed to
provide us a S-1 filing no later than April 20, 1998 to begin
this process.
7. Closing Documents. We need to finalize the terms of my post-closing
employment/consulting agreement and noncompetition/confidentiality
agreement. We need to agree upon the form of the promissory note to
be given to me for a portion of the purchase price. Finally, we need
to agree upon the forms for the other documents needed at closing,
including the legal opinions and various certificates to be delivered
by each party. These documents must be prepared by our attorneys who
should meet at their possible convenience.
8. Due Diligence. Angie Lubniewski spent two (2) additional days
completing a review of files and documents which she had requested. You
hereby confirm that my Disclosure Statement Number 1 is accepted as
presented and complies with the
<PAGE> 52
requirements envisioned in the Stock Purchase Agreement. It is further
confirmed that the due diligence period as defined by the Stock Purchase
Agreement is now completed.
9. Leases. You will continue the following leases related to the
dealership operations of Jay Automotive Group; I will terminate all
other leases prior to Closing:
a. Property located at 1801 Box Road, Columbus, Georgia - lease
agreement dated October 6, 1989 between Joyce Maloof and
Southeast Toyota Distributors, with second assignment to Jay
Automotive Group II, Inc. dated July 12, 1990: monthly rental
of $14,000; term expires September 30, 1999.
b. Property located at Veterans Parkway, Columbus, Georgia - leased
from Jay Leasing, Inc. pursuant to an unwritten lease; monthly
rental of $4,000; at Closing, Jay Automotive Group and Jay
Leasing must execute a mutually satisfactory written lease
agreement for this property. You understand that Jay Leasing,
Inc. may sell this property whereupon the used vehicle sales
facility thereon will relocate across the street at the larger
area. The rent will be prorated for the additional space
allowed should this occur.
c. Property located at Victory Drive, Columbus, Georgia - leased
from Stone Wall Jackson Investment Company pursuant to an
unwritten lease; monthly rental of $1500; after the Closing, I
will assist you in our efforts to obtain a mutually satisfactory
written lease agreement for this property.
d. Property located at Box Road, Columbus, Georgia - lease
agreement between Suzanne Barker and Maloof Motor Co., Inc.
dated August 1, 1991, subleased to Jay Automotive Group II
d/b/a Jay Toyota; yearly rental of $27,000; lease expires
July 31, 1998.
10. Assignment. We mutually desire to have Sunbelt acquire the stock of
Jay Automotive Group directly, rather than having B.A.G. GEORGIA III,
Inc. acquire the stock. I understand you also plan to dissolve B.A.G.
GEORGIA III and to merge Boomershine into Sunbelt prior to Closing
this transaction. We should mutually execute the enclosed Consent and
Assignment Instrument to reflect our consent to this.
11. Spin-Offs. I am working with Mr. Dick Childs and Mr. Bob Behar,
in taking the necessary steps to spin off, or dissolve, the
subsidiaries of Jay Automotive Group which will not be purchased by
you, and I agree that any taxes associated with any such spin offs or
liquidations will be my responsibility and not the responsibility of
Jay Automotive Group after the 1997 year end close:
a. Jay Leasing, Inc.
b. J & J Financial Corporation
<PAGE> 53
c. Jay Automotive Group III, Inc.
d. Columbus Insurance Associates, Inc.
e. Jay Casualty Insurance Company, Limited
f. Peach State Life Insurance Company stock and Southeast Family Life
Insurance Company stock will be divided by their respective owner's to
Jay Leasing, Inc.
12. Termination Letter. By signing this letter I agree that the termination
letter dated March 4, 1998, which was sent by Mr. Childs on my behalf,
is hereby rescinded and revoked.
We agree that this letter agreement constitutes the first amendment to the
Stock Purchase Agreement, and that, except as modified by this letter
agreement, the Stock Purchase Agreement remains in full force and effect.
Please sign this letter in the space provided below to indicate your agreement
with the foregoing, and return it to me for my files. The enclosed duplicate
original of this letter is for your files.
Sincerely,
JAY AUTOMOTIVE GROUP, INC.
By: /s/ James G. Stelzenmuller, III
---------------------------------
Name: James G. Stelzenmuller, III
Title: President
/s/ James G. Stelzenmuller, III
- ------------------------------------
JAMES G. STELZENMULLER, III
ACCEPTED AND AGREED TO THIS 26TH DAY OF MARCH, 1998.
/s/ Charles K. Yancey
CHARLES K. YANCEY, ON BEHALF OF
BOOMERSHINE AUTOMOTIVE GROUP, INC.
SUNBELT AUTOMOTIVE GROUP, INC. AND
B.A.G. GEORGIA III, INC.
<PAGE> 54
CONSENT AND ASSIGNMENT INSTRUMENT
THIS IS A CONSENT AND ASSIGNMENT INSTRUMENT (this "Instrument") made on
March 3l , 1998, by and among BOOMERSHINE AUTOMOTIVE GROUP, INC., a Georgia
corporation ("BAG"), B.A.G. GEORGIA III, INC., a Georgia corporation ("Sub"),
SUNBELT AUTOMOTIVE GROUP, INC., a Georgia corporation ("Sunbelt") and JAY
AUTOMOTIVE GROUP, INC., a Georgia corporation (the "Company") and JAY G.
STELZENMULLER, III (the "Stockholder"), with respect to that certain Stock
Purchase Agreement among the parties dated January 5, 1998 (the "Stock Purchase
Agreement"), by which the parties, for good and valuable consideration (the
receipt and sufficiency of which is hereby acknowledged), hereby agree as
follows:
1. CONSENT TO ASSIGNMENT. BAG and Sub wish to assign all of their
rights and obligations under the Stock Purchase Agreement to Sunbelt. BAG also
hereby informs the Company and the Stockholder that, prior to Closing, BAG is
expected to merge with and into Sunbelt, and Sub will be dissolved. If the
proposed merger of BAG into Sunbelt is completed, BAG will cease to exist as a
separate corporation. Subject to the completion of the transactions described in
this paragraph, by their signatures below, as required by Section 10.4 of the
Stock Purchase Agreement, the Company and the Stockholder hereby consent to (i)
the express assignment by BAG and Sub of all of their rights and obligations
under the Stock Purchase Agreement to Sunbelt and Sunbelt's express assumption
of such rights and obligations; (ii) the proposed merger of BAG into Sunbelt, as
a result of which BAG will cease to exist as a separate corporation and will
have no further rights or obligations under the Stock Purchase Agreement, and
Sunbelt, by operation of law, will assume all rights and obligations of BAG
under the Stock Purchase Agreement; and (iii) the dissolution of Sub. At or
prior to the Closing, if any such mergers or future assignments are completed,
Sunbelt shall deliver to the Company and the Stockholder copies of documents
which confirm such actions.
In addition, all parties agree that all references in the Stock
Purchase Agreement to the "Buyer Public Offering," the "Sunbelt Public
Offering," and the "Registration Statement" shall be deemed to refer to a public
offering and sale of shares of the common stock of Sunbelt.
2. ASSIGNMENT. BAG and Sub hereby assign all of their right, title and
interest in and to and all of their obligations under the Stock Purchase
Agreement to Sunbelt.
3. ASSUMPTION. SUNBELT hereby accepts said assignment of the Stock
Purchase Agreement and hereby agrees to perform and carry out the obligations of
BAG and Sub under the Stock Purchase Agreement.
4. EFFECTIVE DATE. This Instrument is effective at the close of
business on March 31, 1998.
5. MISCELLANEOUS PROVISIONS. All capitalized terms that are used but
not expressly defined in this Instrument have the meanings ascribed to them in
the Stock Purchase Agreement, and
1
<PAGE> 55
the definitions of those terms in the Stock Purchase Agreement are incorporated
by reference in this Instrument. Each party to this Instrument hereby agrees to
perform, at the expense of the requesting party, all such further acts and
execute and deliver all such further agreements, instruments and other documents
as the other shall reasonably request to evidence more effectively the actions
taken pursuant to this Instrument. This Instrument and all of its provisions
shall be binding upon the successors and assigns of the parties to this
Instrument and shall inure to the benefit of the permitted successors and
assigns of the parties to this Instrument. The failure of any party at any time
or times to require performance of any provision of this Instrument shall in no
manner affect the right to enforce the same; and no waiver by any party of any
provision (or of a breach of any provision ) of this Instrument, whether by
conduct or otherwise, in any one or more instances shall be deemed or construed
either as a further or continuing waiver of any such provision or breach or as a
waiver of any other provision (or as a breach of any other provision) of this
Instrument. This Instrument shall be governed by and construed and enforced
according to the laws of the State of Georgia. Titles and captions of or in this
Instrument are inserted only as a matter of convenience and for reference and in
no way define, limit, extend or describe the scope of this Instrument or the
intent of any of its provisions. This Instrument may be executed in two or more
copies, each of which shall be deemed an original, and it shall not be necessary
in making proof of this Instrument or its terms to produce or account for more
than one of such copies.
6. The consent of the Company and the Stockholder is made pursuant to
the provisions of Section 10.4 of the Stock Purchase Agreement, which shall
apply here, as well as the specific limitations set forth herein.
IN WITNESS WHEREOF, the parties have caused this Instrument to be duly
executed, under seal, on March 31, 1998.
"BAG:"
ATTEST: BOOMERSHINE AUTOMOTIVE
GROUP, INC.
BY: /s/ S.C. whicker BY: /s/ C. K. Yancey
-------------------------------- --------------------------
Name: S.C. Whicker Name: C. K. Yancey
-------------------------- --------------------
Title: Ass't Secretary Title: Secretary Treasurer
------------------------- -------------------
[CORPORATE SEAL]
2
<PAGE> 56
"Sub:"
ATTEST: B.A.G. GEORGIA III, INC.
BY: /s/ S.C. Whicker BY: /s/ C.K. Yancey
---------------------- --------------------------
Name: S.C. Whicker Name: C. K. Yancey
----------------- ---------------------
Title: Secretary Title: CEO
---------------- --------------------
[CORPORATE SEAL]
"Sunbelt:"
ATTEST: SUNBELT AUTOMOTIVE GROUP,
INC.
BY: /s/ S.C. Whicker BY: /s/ C.K. Yancey
---------------------- --------------------------
Name: S.C. Whicker Name: C. K. Yancey
----------------- ---------------------
Title: Secretary Title: CEO
---------------- --------------------
[CORPORATE SEAL]
The "Company:"
ATTEST: JAY AUTOMOTIVE GROUP, INC.
BY: /s/ Patsy D. Stelzenmuller BY: /s/ J.G. Stelzenmuller
----------------------------- -------------------------
Name: Patsy D. Stelzenmuller Name: J.G. Stelzenmuller
------------------------ --------------------
Title: Secretary Title: President
----------------------- -------------------
[CORPORATE SEAL]
The "Stockholder:"
/s/ James G. Stelzenmuller III [SEAL]
-------------------------------
James G. Stelzenmuller, III
3
<PAGE> 57
As contemplated by Section 10.4 of the Stock Purchase Agreement, Jay
Leasing, Inc. consents to the assignments described in this Instrument,
effective as set forth in Section 4 of this Instrument.
ATTEST: JAY LEASING, INC.
BY: /s/ Patsy D. Stelzenmuller BY: /s/ J.G. Stelzenmuller
------------------------------- -------------------------
Name: Patsy D. Stelzenmuller Name: J. G. Stelzenmuller
------------------------------ -----------------------
Title: Secretary Title: President
----------------------------- ----------------------
[CORPORATE SEAL]
4
<PAGE> 1
EXHIBIT 2.5
GRINDSTAFF CHEVROLET, INC.
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), is entered into as of
December 27, 1997 by and between SUNBELT AUTOMOTIVE GROUP, INC., a Georgia
corporation ("SUNBELT"), BAG TENNESSEE II, INC., a Georgia corporation ("Sub")
(SUNBELT and Sub are sometimes referred to as "Buyers"), GRINDSTAFF, INC.,
d/b/a Grindstaff Chevrolet, Chrysler, Plymouth, Dodge, a Tennessee corporation
(the "Company" or "GCI") and STEVE GRINDSTAFF (90%) AND WES HAMBRICK (10%) (the
"Stockholder"). SUNBELT, Sub, the Company and the Stockholder are sometimes
referred to collectively as the "Parties" and individually as a "Party."
WITNESSETH:
WHEREAS, the Company and its wholly-owned subsidiary, EMPIRE KIA, INC.
("GCI SUBSIDIARY") operates Chevrolet, Jeep-Eagle, Chrysler, Plymouth, Dodge
and Kia automobile dealership businesses in Elizabethton, Tennessee;
WHEREAS, the Stockholder owns all of the issued and outstanding shares of
Common Stock $1,000, par value, of the Company (the "GCI Shares");
WHEREAS, Sub is a wholly-owned subsidiary of SUNBELT; and
WHEREAS, Sub desires to purchase all of the GCI Shares, and the
Stockholder desires to sell the GCI Shares to Sub upon the terms and subject to
the conditions set forth in this Agreement, such that immediately after giving
effect to such purchase and sale, Sub will own one hundred percent (100%) of
all of the issued and outstanding shares of Common Stock of the Company, on a
fully diluted basis.
NOW, THEREFORE, in consideration of the mutual terms, conditions and other
agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF THE SHARES.
(a) PURCHASE AND SALE. Upon the terms and subject to the conditions set
forth in this Agreement, the Stockholder shall sell to Sub, and Sub shall
purchase from the Stockholder, the GCI Shares for an aggregate purchase price
equal to NINE MILLION DOLLARS ($9,000,000) (the "Base Price"), which Base Price
is subject to adjustment after Closing as provided in SECTIONS 1.3 AND 1.4
hereof. The Base Price herein is predicated upon the "FIFO Net Worth" of the
Company which the Company and the Stockholder represent will be no less than to
be determined by Bobby Vawter, CPA on 12/30/97, not counting any operating loss
for January and February, 1998 ("Adjusted Net Worth") as of the Closing Date. At
the Closing referred to in SECTION 1.1(b) hereof:
(i) the Stockholder shall sell, assign, transfer and deliver to Sub the
GCI Shares representing 100% of the outstanding Common Stock, free and clear of
all Liens (as defined in SECTION 10.11), and shall deliver the certificates
representing such Shares accompanied by stock powers duly executed in blank; and
<PAGE> 2
(ii) Sub shall accept and purchase the GCI Shares from the
Stockholder and in payment therefor shall deliver to the Stockholder
immediately available funds in an aggregate amount equal to the cash portion of
the Base Price, less the Escrow Amount (as defined in Section 1.6) by certified
funds; and
(iii) As set forth in Section 1.6, Sub will deliver the
Escrow Amount to the Escrow Agent pursuant the terms of the Escrow Agreement.
(b) CLOSING. (i) Subject to the conditions set forth in this
Agreement, the purchase and sale of the GCI Shares pursuant to this Agreement
(the "Closing") shall take place at a location to be agreed upon by the
parties. The Closing of the transactions contemplated hereby shall take place
within five (5) business days after the later of (a) the last manufacturer's
approval of the Buyer or its designee as Dealer Sales and Service
representatives of the Company's dealership, or (b) after the consummation of
the purchase, sale and transfer of title of the subject real property
contemplated to be sold herein to SUNBELT or its assignee; but in no event
later than March 31, 1998. The date on which the Closing occurs is herein
referred to as the "Closing Date".
(c) DELIVERIES AT THE CLOSING. Subject to the conditions set forth in
this Agreement, at the Closing:
(i) the Stockholder shall deliver to Sub (A) certificates
representing the GCI Shares bearing the restrictive legend customarily placed
on securities that have not been registered under applicable federal and state
securities laws and accompanied by stock powers as required by SECTION
1.1(a)(i) hereof, and any other documents that are necessary to transfer to Sub
good and marketable title to all the GCI Shares, and (B) all opinions,
certificates and other instruments and documents required to be delivered by
the Stockholder at or prior to the Closing or otherwise required in connection
herewith;
(ii) Sub shall pay and deliver to the Stockholder funds as
required by SECTION 1.1(a) (ii) herein and all certificates and other
instruments and documents required to be delivered by Sub at or prior to the
Closing or otherwise required in connection herewith;
(iii) The Company, Sub, SUNBELT and the Owners of each of the
subject real properties wherein the automotive dealerships of the Company and
the GCI Sub are operated at the present time shall have entered into acceptable
agreements for the purchase and sale of the real estate properties; and
(iv) Sub and the Company shall enter into an consulting
agreement with Stockholder in a form mutually acceptable to SUNBELT, Sub and
Stockholder (the "Consulting Agreement") and a Non-Compete Agreement which is
acceptable to Stockholder, Sub and SUNBELT.
1.2 PAYMENT OF BASE PRICE CONSIDERATION. The sum of NINE MILLION DOLLARS
($9,000,000.00) *(the Escrow Amount, as set forth in Section 1.6 below) shall be
paid to Stockholder at Closing in cash or other immediately available funds
("Cash Consideration"); and
1.3 COMPUTATION OF FIFO NET WORTH
(a) Base price adjusted only if net worth @ closing is not at least
adjusted net worth.
* Plus an amount equal to forty percent (40%) of the taxable net income that
must be reported by the selling shareholders for 1997.
<PAGE> 3
(b) In determining the FIFO Net Worth of the Company for purposes of
the Closing Date Balance Sheet, Generally Accepted Accounting Principles
("GAAP"), consistently applied shall be utilized by the Parties.
1.4 NET WORTH ADJUSTMENT
(a) As soon as practicable after the Closing Date, the Stockholder
shall deliver to Sub a balance sheet of the Company dated as the Closing Date
(such balance sheet so delivered is referred to herein as the "Closing Date
Balance Sheet"). SUNBELT shall reimburse the Company for reasonable fees or
expenses incurred by the Company's certified public accountant in connection
with the preparation of the Closing Date Balance Sheet or the Estimated Closing
Date Balance Sheet referred to in SECTION 6.6. The Closing Date Balance Sheet
shall be prepared in good faith on the same basis and in accordance with the
accounting principles, methods and practices used in preparing the Financial
Statements (as defined in SECTION 4.7 hereof), subject to the modifications,
adjustments and exceptions to such accounting principles, methods and practices
set forth on SCHEDULE 1.4(a) hereto (such accounting principles, methods and
practices as so modified and adjusted, and such procedures, are referred to
herein as the "Accounting Principles"). In connection with the preparation of
the Closing Date Balance Sheet, the Stockholder and the Company and the
Reviewer (as defined below) and other representatives of Sub will conduct a
physical inventory at each location where inventory is held by the Company.
From the results of such inventory and prior to the Closing Date, Sub and the
Stockholder (or the respective representatives thereof) will prepare a
schedule, which shall be signed by each of Sub and the Stockholder, setting
forth the nature and quality of such inventory and such other items as shall be
agreed upon by Sub and the Stockholder to be included in the Closing Date
Balance Sheet.
(b) Within thirty (30) days after delivery of the Closing Date Balance
Sheet, (i) Ernst & Young, LLC or such other national accounting firm (the
"Reviewer") selected by Sub, shall audit or otherwise review the Closing Date
Balance Sheet in such manner as Sub and the Reviewer deem appropriate, and (ii)
Sub shall deliver such reviewed balance sheet (the "Reviewed Balance Sheet"),
together with the Reviewer's report thereon, to the Stockholder. The Reviewed
Balance Sheet (i) shall be prepared on the same basis and in accordance with
the Accounting Principles and (ii) shall include a schedule showing the
computation of the final FIFO Net Worth, computed in accordance with the
definition of FIFO Net Worth set forth in SECTION 1.4 (i)-hereof. Sub and the
Reviewer shall have the opportunity to consult with the Stockholder, the
Company and each of the accountants and other representatives of the
Stockholder and the Company and examining the work papers, schedules and other
documents prepared by the Stockholder, the Company and each of such accountants
and other representatives during the preparation of the Closing Date Balance
Sheet. The Stockholder and the Stockholder's independent public accountants
shall have the opportunity to consult with the Reviewer and examine the work
papers, schedules and other documents prepared by Sub and the Reviewer during
the preparation of the Reviewed Balance Sheet.
(c) The Stockholder shall have a period of fifteen (15) days after
delivery to the Stockholder of the Reviewed Balance Sheet to present in writing
to Sub all objections the Stockholder may have to any of the matters set forth
or reflected therein, which objections shall be set forth in reasonable detail.
During said fifteen (15) day period, the Stockholder, his accountants and other
representatives of the stockholder may examine reviewer's work papers,
schedules, research notes and all correspondence between Reviewer and Sub or
sunbelt or any representative of Sub or SUNBELT, which relate to the Closing
Date Balance Sheet or Reviewed
3
<PAGE> 4
Balance Sheet and any entry thereto made or considered by Reviewer. If no
objections are raised within such 15-day period, the Reviewed Balance Sheet
shall be deemed accepted and approved by the Stockholder and a supplemental
closing (the "Supplemental Closing") shall take place within ten (10) Business
Days following the expiration of such 15-day period, or on such other date as
may be mutually agreed upon in writing by Sub and the Stockholder.
(d) If the Stockholder shall raise any objection within the 15-day
period, Sub and the Stockholder shall attempt to resolve the matter or matters
in dispute and, if resolved, the Supplemental Closing shall take place within
ten (10) Business Days following such resolution.
(e) If such dispute cannot be resolved by Sub and the Stockholder
within thirty (30) days after the delivery of the Reviewed Balance Sheet, then
the specific matters in dispute shall be submitted to a firm of independent
certified public accountants having a reputation for special expertise in
automobile dealership accounting and mutually acceptable to Sub and the
Stockholder, which firm shall make a final and binding determination as to such
matter or matters. Such accounting firm shall send its written determination to
Sub and the Stockholder and the Supplemental Closing, if any, shall take place
five (5) Business Days following the receipt of such determination by Sub and
the Stockholder. The fees and expenses of the accounting firm referred to in
this SECTION 1.4(e) shall be paid one half by Sub and one half by the
Stockholder.
(f) Sub and the Stockholder agree to cooperate with each other and
each other's authorized representatives and with any accounting firm selected
by Sub and the Stockholder pursuant to SECTION 1.4(e) hereof in order that any
and all matters in dispute shall be resolved as soon as possible.
(g) If the FIFO Net Worth as shown on the Reviewed Balance Sheet
as finally determined through the operation of SECTIONS 1.4 (a) THROUGH (e) and
Section 1.5 hereof shall be less than the Adjusted Net Worth (the amount of any
such deficiency being referred to herein as the "Net Worth Deficiency"), the
Stockholder shall pay to Sub, by wire transfer of immediately available funds to
an account designated in writing by Sub within thirty (30) Business Days of the
date of the Supplemental Closing, an amount equal to the Net Worth Deficiency,
together with interest on such amount from the Closing Date to the date of the
Supplemental Closing at the prime rate or its equivalent (as announced from time
to time by Citibank, N.A.).
(h) If the FIFO Net Worth as shown on the Closing Date Balance Sheet
is equal to or greater than the Adjusted Net Worth as shown on the Reviewed
Balance Sheet as finally determined through the operation of SECTIONS 1.4(a)
THROUGH (e) and Section 1.5 hereof shall be greater than the Net Worth as shown
on the Closing Date Balance Sheet (the amount of any such excess being referred
to herein as the "Net Worth Excess"), Sub shall pay to the Stockholder, by wire
transfer of immediately available funds to an account designated in writing by
Sub, within ten (10) Business Days of the Supplemental Closing, an amount equal
to the Net Worth Excess, together with interest on such amount from the Closing
Date to the date of the Supplemental Closing at the prime rate or its
equivalent (as announced from time to time by Citibank, N.A.).
(i) "FIFO Net Worth" computed in connection with the Closing Date
Balance Sheet and the Reviewed Balance Sheet shall mean the amount by which the
total assets (plus the amount of any First In First Out ("FIFO") inventory
reserves) exceed the total liabilities reflected, in each case, on the balance
sheets of Company comprising the Closing Date Balance Sheet or the Reviewed
Balance Sheet, as the case may be.
1.5 FIFO COMPUTATION & TAX ADJUSTMENT. In determining the "FIFO Net Worth" of
the Company, the Company's new and used motor vehicle inventories were adjusted
4
<PAGE> 5
from LIFO based accounting principles to FIFO based accounting principles. In
using LIFO based accounting for the new and used motor vehicle inventories,
certain tax liabilities of the Company were deferred. In determining adjusted
FIFO Net Worth, the Company and GCI SUBSIDIARY agree to book the tax deferral
as a current liability against the adjustment to obtain the Net Adjusted FIFO
Worth of the Company's new and used motor vehicle inventories.
1.6 ESCROW. Notwithstanding the payment of the Cash Consideration described in
Section 1.2(a) herein and the payment by the Note described in Section 1.2(b),
Sub shall at Closing deposit into escrow funds in the amount of $500,000.00
(the "Escrow Amount") by delivering such funds to Stephen Whicker as the "Escrow
Agent" which Escrow Amount shall be held and disbursed by the Escrow Agent
pursuant to the terms of an escrow agreement to be agreed upon by the parties.
1.7 KIA DEALERSHIP. If Kia refuses to consent to this Agreement and
approve SUNBELT and Sub as its authorized dealer for Elizabethton, Tennessee,
then SUNBELT may elect not to purchase the Kia franchises, and the Base Price
for this transaction shall be proportionately adjusted.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
The Stockholder represents and warrants to SUNBELT and Sub that the
statements contained in this Article 2 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date
of this Agreement throughout this Article 2) with respect to himself, except as
set forth in Annex I attached hereto.
2.1 AUTHORIZATION OF TRANSACTION. The Stockholder has full power and authority
to execute and deliver this Agreement and to perform his obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Stockholder, enforceable in accordance with its terms and conditions. The
Stockholder need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order to consummate the transactions contemplated by this Agreement.
2.2 NONCONTRAVENTION. Neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (a) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which the Stockholder is subject, or (b) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Stockholder is a party or by
which he is bound or to which any of his assets is subject.
2.3 BROKERS' FEES. The Stockholder has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which SUNBELT and Sub could
become liable or obligated.
2.4 INVESTMENT. The Stockholder (a) understands that the Note has not been, and
will not be, registered under the Securities Act, or under any state securities
laws, and is being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering, (b) is acquiring
the Note solely for his own account for investment purposes, and not with a
view to the distribution thereof, (c) is a sophisticated investor with
knowledge and
5
<PAGE> 6
experience in business and financial matters, (d) has received certain
information concerning SUNBELT and Sub and has had the opportunity to obtain
additional information as desired in order to evaluate the merits and the risks
inherent in holding the Note, (e) is able to bear the economic risk and lack of
liquidity inherent in holding the Note, and (f) is an Accredited Investor for
the reasons set forth on Annex I.
2.5 GCI SHARES. The Stockholder holds of record and owns beneficially all of
the issued and outstanding GCI Shares free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and state
securities laws), taxes, Security Interests, options, warrants, purchase
rights, contracts, commitments, equities, claims, and demands. The Stockholder
is not a party to any option, warrant, purchase right, or other contract or
commitment that could require the Stockholder to sell, transfer, or otherwise
dispose of any capital stock of the Company (other than this Agreement). The
Stockholder is not a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any capital stock of the Company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SUNBELT AND SUB
SUNBELT and Sub represent and warrant to the Stockholder that the
statements contained in this Article 3 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date
of this Agreement throughout this Article 3), except as set forth in Annex II
attached hereto.
3.1 ORGANIZATION OF SUNBELT AND SUB. SUNBELT and Sub are corporations duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of each of their incorporation.
3.2 AUTHORIZATION OF TRANSACTION. SUNBELT and Sub have full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform their obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of SUNBELT and Sub,
enforceable in accordance with its terms and conditions. SUNBELT and Sub need
not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement
3.3 NONCONTRAVENTION. Neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (a) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which SUNBELT or Sub is subject or any provision of the
charter or bylaws of either SUNBELT or Sub, or (b) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which SUNBELT or Sub is a party or by which it is bound or to
which any of its assets is subject.
3.4 BROKERS' FEES. SUNBELT and Sub have no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Stockholder could
become liable or obligated.
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3.5 INVESTMENT. SUNBELT and Sub are not acquiring the GCI Shares with a view to
or for sale in connection with any distribution thereof within the meaning of
the Securities Act.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES CONCERNING THE
COMPANY AND THE GCI SUBSIDIARY
The Stockholder represents, and warrants to SUNBELT and Sub that the
statements contained in this Article 4 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date
of this Agreement throughout this Article 4), except as set forth in the
disclosure schedule delivered by the Stockholder to SUNBELT and Sub NO LATER
THAN THIRTY (30) DAYS AFTER THE EXECUTION OF THIS AGREEMENT and initialed by
the Parties (the "Disclosure Schedule"). The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Article 4.
4.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Each of the Company and
the GCI SUBSIDIARY is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation. Each of
the Company and the GCI SUBSIDIARY is duly authorized to conduct business and
is in good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification would
not have a material adverse effect on the business, financial condition,
operations, results of operations, or future prospects of the Company and the
GCI SUBSIDIARY. Each of the Company and the GCI SUBSIDIARY has full corporate
power and authority to carry on the businesses in which it is engaged and to
own and use the properties owned and used by it.
4.2 CAPITALIZATION. The entire authorized capital stock of the Company consists
of 2000 GCI Shares, of which 100 GCI Shares are issued and outstanding and 8 GCI
Shares are held in treasury. All of the issued and outstanding GCI Shares have
been duly authorized, are validly issued, fully paid, and nonassessable, and
are held of record by the Stockholder. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require the
Company to issue, sell, or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Company. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the Company.
4.3 NONCONTRAVENTION. To the Knowledge of Stockholder, neither the execution
and the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (a) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which any of the Company
and the GCI SUBSIDIARY is subject or any provision of the charter or bylaws of
any of the Company and the GCI SUBSIDIARY or (b) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, Contract, lease, license, instrument, or other
arrangement to which any of the Company and the GCI SUBSIDIARY is a party or by
which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets), except where the
violation, conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or Security Interest would not have a
material adverse effect on the business, financial condition, operations,
results of operations, or future prospects of the Company and the GCI
SUBSIDIARY or on the ability of the Parties to consummate the transactions
contemplated by this Agreement. To the Knowledge of
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Stockholder, neither the Company nor the GCI SUBSIDIARY needs to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement, except where the
failure to give notice, to file, or to obtain any authorization, consent, or
approval would not have a material adverse effect on the business, financial
condition, operations, results of operations, or future prospects of the
Company and the GCI SUBSIDIARY or on the ability of the Parties to consummate
the transactions contemplated by this Agreement.
4.4 BROKERS' FEES. Neither the Company nor the GCI SUBSIDIARY has any liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement
4.5 TITLE TO ASSETS. The Company and the GCI SUBSIDIARY have good and
marketable title to, or a valid leasehold interest in, the properties and
assets used by them, located on their premises, or shown on the Most Recent
Balance Sheet or acquired after the date thereof, free and clear of all
Security Interests, except for properties and assets disposed of in the
Ordinary Course of Business since the date of the Most Recent Balance Sheet.
4.6 SUBSIDIARIES. Section 4.6 of the Disclosure Schedule sets forth for each
GCI SUBSIDIARY (a) its name and jurisdiction of incorporation, (b) the number
of shares of authorized capital stock of each class of its capital stock, (c)
the number of issued and outstanding shares of each class of its capital stock,
the names of the holders thereof, and the number of shares held by each such
holder, and (d) the number of shares of its capital stock held in treasury. All
of the issued and outstanding shares of capital stock of each GCI Subsidiary
have been duly authorized and are validly issued, fully paid, and
nonassessable. The Company holds of record and owns beneficially all of the
outstanding shares of each GCI Subsidiary, free and clear of any restrictions
on transfer (other than restrictions under the Securities Act and state
securities laws), taxes, Security Interests, options, warrants, purchase
rights, contracts, commitments, equities, claims, and demands. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require any of the Company and the GCI Sub to sell, transfer, or
otherwise dispose of any capital stock of any of the GCI Sub or that could
require Subsidiary to issue, sell, or otherwise cause to become outstanding any
of its own capital stock. There are no outstanding stock appreciation, phantom
stock, profit participation, or similar rights with respect to any GCI
Subsidiary. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any capital stock of Subsidiary.
Neither the Company nor the GCI Sub controls directly or indirectly or has any
direct or indirect equity participation in any corporation, partnership, trust,
or other business association which is not a GCI Subsidiary.
4.7 FINANCIAL STATEMENTS. Attached hereto as Schedule 4.7 are the following
financial statements (collectively the "Financial Statement"): (i) audited
consolidated balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended December 31, 1995;
December 31, 1996 (the "Most Recent Fiscal Year End") for the Company and the
GCI Sub; (ii) Dealer Financial Statements for each Dealership Franchisee for
the months January through November 1997 (the "Dealer Statements"); and (iii)
unaudited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow (the "Most Recent Financial Statements") as
of and for the 11 months ended November 8, 1997 (the "Most Recent Fiscal Month
End") for the Company and the GCI Sub. The Financial Statements (including the
notes thereto) have been prepared in accordance with GAAP (except for the
Dealer Statements) applied on a consistent basis throughout the periods covered
thereby and present fairly the financial condition of the Company and the GCI
Sub as of such dates and the results of operations of the Company and the GCI
Sub for such periods; provided, however, that the Most Recent Financial
Statements are subject to normal year-end adjustments (which will not be
material individually or in the aggregate) and lack footnotes and other
presentation items.
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4.8 EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the Most Recent
Fiscal Year End, there has not been any material adverse change in the
financial condition of the Company and the GCI Sub taken as a whole. Without
limiting the generality of the foregoing, since that date neither the Company
nor the GCI Sub have engaged in any practice, taken any action, or entered into
any transaction outside the Ordinary Course of Business.
4.9 UNDISCLOSED LIABILITIES. To the Knowledge of Stockholder, neither the
Company nor the GCI Sub has any material liability (whether known or unknown,
whether asserted or unassorted, whether accrued or unaccrued, whether
liquidated or unliquidated, and whether due or to become due, including any
liability for taxes), except for (a) liabilities set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (b)
liabilities which have arisen after the Most Recent Fiscal Month End in the
Ordinary Course of Business except as otherwise set forth on Schedule 4.9.
4.10 LEGAL COMPLIANCE. To the Knowledge of Stockholder, each of the Company and
the GCI SUBSIDIARY has complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state, local, and foreign governments (and
all agencies thereof), and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply, except where the failure to
comply would not have a material adverse effect on the business, financial
condition, operations, results of operations, or future prospects of the
Company and the GCI SUBSIDIARY.
4.11 TAX MATTERS.
(a) Each of the Company and the GCI SUBSIDIARY has filed all Income
Tax Returns that it was required to file. All such Income Tax Returns were
correct and complete in all material respects. All Income Taxes owed by any of
the Company and the GCI SUBSIDIARY (whether or not shown on any Income Tax
Return) have been paid. Neither the Company nor the GCI SUBSIDIARY currently
is the beneficiary of any extension of time within which to file any Income Tax
Return.
(b) There is no material dispute or claim concerning any Income Tax
liability of any of the Company and the GCI SUBSIDIARY either (i) claimed or
raised by any authority in writing or (ii) as to which the Stockholder and the
directors and officers of the Company and the GCI SUBSIDIARY has Knowledge
based upon personal contact with any agent of such authority.
(c) Section 4.11(c) of the Disclosure Schedule lists all federal,
state, local, and foreign Income Tax Returns filed with respect to any of the
Company and the GCI SUBSIDIARY for taxable periods ended on or after December
31, 1996, indicates those Income Tax Returns that have been audited; and
indicates those Income Tax Returns that currently are the subject of audit. The
Stockholder has delivered to SUNBELT and Sub correct and complete copies of all
federal and State Income Tax Returns, examination reports, and statements of
deficiencies assessed against, or agreed to by any of the Company and the GCI
SUBSIDIARY since December 31, 1996. Neither the Company nor the GCI SUBSIDIARY
has waived any statute of limitations in respect of Income Taxes or agreed to
any extension of time with respect to an Income Tax assessment or deficiency.
(d) Neither the Company nor the GCI SUBSIDIARY has filed a consent
under Code ss.341(f) concerning collapsible corporations. Neither the Company
nor the GCI SUBSIDIARY has made any material payments, is obligated to make any
material payments, or is a party to any agreement that under certain
circumstances could obligate it to make any material payments that will not be
deductible under Code ss.280G. Neither the Company nor the GCI SUBSIDIARY has
been a
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United States real property holding corporation within the meaning of Code
ss.897(c)(2) during the applicable period specified in Code ss.897(c)(1)(A)(ii).
Neither the Company nor the GCI SUBSIDIARY is a party to any tax allocation or
sharing agreement. Neither the Company nor the GCI SUBSIDIARY (i) has been a
member of an Affiliated Group filing a consolidated federal Income Tax Return
(other than a group the common parent of which was the Company) or (ii) has any
liability for the taxes of any Person (other than any of the Company and GCI
SUBSIDIARY) under Reg. ss.1.1502-6 issued pursuant to the Code (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(e) The unpaid Income Taxes of the Company and the GCI SUBSIDIARY
(i) did not, as of the Most Recent Fiscal Month End, exceed by any material
amount the reserve for Income Tax liability (rather than any reserve for
deferred taxes established to reflect timing differences between book and tax
income) set forth on the face of the Most Recent Balance Sheet (rather than in
any notes thereto) arid (ii) will not exceed by any material amount that reserve
as adjusted for operations and transactions through the Closing Date in
accordance with the past custom and practice of the Company and the GCI
SUBSIDIARY in filing their Income Tax Returns.
4.12 REAL PROPERTY.
(a) Section 4.12(a) of the Disclosure Schedule lists all real
property that any of the Company and the GCI SUBSIDIARY owns and all real
property that any of the Company and the GCI SUBSIDIARY leases from a third
party (including names and addresses for the owner of each parcel of leased
real property and a description of the applicable lease agreement). With
respect to each such parcel of owned or leased real property, and except for
matters which would not have a material adverse effect on the financial
condition of the Company and the GCI SUBSIDIARY taken as a whole:
(i) the identified owner has good and marketable title to
the parcel of real property, free and clear of any and all Security Interests
and other Liens, claims and encumbrances except those disclosed on Section
4.12(a) of the Disclosure Schedule, none of which currently, or to the
Knowledge of the Stockholder, in the future will affect the use of the owned or
leased real property or the improvements located thereon for the conduct of the
respective businesses of the Company and the GCI SU13S1DIARY as presently
conducted;
(ii) except for leases to the Company or a GCI SUBSIDIARY,
which are identified in Section 4.12(a) of the Disclosure Schedule, there are
no leases, subleases, licenses, concessions or other agreements granting to any
party or parties the right of use or occupancy of any portion of the parcel of
real property;
(iii) there are no outstanding options or rights of first
refusal to purchase any parcel of real property, or any portion thereof or
interest therein;
(iv) no assessments have been made against any parcel of the
real property which are unpaid (except ad Valorem taxes for the current year
that are not yet due and payable), whether or not they have become Liens; and
(v) there are no disputes concerning the location of the
lines or corners of any parcel of the real property.
(b) The Stockholder has delivered to SUNBELT and Sub correct and
complete copies of the leases and subleases listed in ss.4.12(a) of the
Disclosure Schedule (as amended to date). To the Knowledge of the Stockholder,
each lease and sublease listed in ss.4.12(a) of the Disclosure Schedule is
legal, valid, binding, enforceable, and in full force and effect, except where
the illegality, invalidity, non binding nature, unenforceability, or
ineffectiveness would not have a
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material adverse effect on the financial condition of the Company and the GCI
SUBSIDIARY taken as a whole. Attached to Section 4.12(a) of the Disclosure
Schedule are correct and complete copies of all surveys, title binders, title
insurance policies and any exceptions to title for any of the owned or leased
real property.
4.13 INTELLECTUAL PROPERTY.
(a) Section 4.13(a) of the Disclosure Schedule identifies each patent
or registration which has been issued to any of the Company and the GCI
SUBSIDIARY with respect to any of its Intellectual Property, identifies each
pending patent application or application for registration which any of the
Company and the GCI SUBSIDIARY has made with respect to any of its Intellectual
Property, and identifies each material license, agreement, or other permission
which any of the Company and the GCI SUBSIDIARY has granted to any third party
with respect to any of its Intellectual Property (together with any
exceptions). The Stockholder has delivered to SUNBELT and Sub correct and
complete copies of all such patents, registrations, applications, licenses,
agreements, and permissions (as amended to date). ss.4.13(a) of the Disclosure
Schedule also identifies each material trade name or unregistered trademark
used by any of the Company and the GCI SUBSIDIARY in connection with any of its
businesses.
(b) Section 4.13(b) of the Disclosure Schedule identifies each
material item of Intellectual Property that any third party owns and that any
of the Company and the GCI SUBSIDIARY uses pursuant to license, sublicense,
agreement, or permission. The Stockholder has delivered to SUNBELT and Sub
correct and complete copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date).
4.14 TANGIBLE ASSETS. The buildings, machinery, equipment, and other tangible
assets that the Company and the GCI SUBSIDIARY own and lease are free from
material defects (patent and latent), have been maintained in accordance with
normal industry practice, and are in good operating condition and repair
(subject to normal wear and tear).
4.15 INVENTORY. The inventory of the Company and the GCI SUBSIDIARY consists of
supplies, manufactured and processed parts, all of which is merchantable and
fit for the purpose for which it was procured, and none of which is
slow-moving, obsolete, damaged, or defective, subject only to the reserve for
inventory writedown set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) as adjusted for operations and transactions
through the Closing Date in accordance with the past custom and practice of the
Company and the GCI SUBSIDIARY
4.16 CONTRACTS. Section 4.16 of the Disclosure Schedule lists all written
contracts and other written agreements and describes all unwritten contracts
and other agreements to which any of the Company and the GCI SUBSIDIARY is a
party the performance of which will involve consideration in excess of
$100,000.00. The Stockholder has delivered to SUNBELT and Sub a correct and
complete copy of each written contract or other agreement listed in 4.16 of the
Disclosure Schedule (as amended to date).
4.17 NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable of the
Company and the GCI SUBSIDIARY are reflected properly on their books and
records, are valid receivables subject to no setoffs or counterclaims, are
current and collectible, and will be collected in accordance with their terms
at their recorded amounts, subject only to the reserve for bad debts set forth
on the face of the Most Recent Balance Sheet (rather than in any notes thereto)
as adjusted for operations and transactions through the Closing Date in
accordance with the past custom and practice of the Company and the GCI
subsidiary.
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4.18 POWERS OF ATTORNEY. There are no material outstanding powers of attorney
executed on behalf of any of the Company and the GCI SUBSIDIARY.
4.19 INSURANCE. Section 4.19 of the Disclosure Schedule sets forth the
following information with respect to each material insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) with respect to which any of the
Company and the GCI SUBSIDIARY is a party, a named insured, or otherwise the
beneficiary of coverage:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage is on
a claims made, occurrence, or other basis) and amount (including a description
of how deductibles and ceilings are calculated and operate) of coverage; and
(e) a description of any retroactive premium adjustments or other
material loss-sharing arrangements.
With respect to each such insurance policy: (i) to the Knowledge of Stockholder,
the policy is legal, valid, binding, enforceable, and in full force and effect
in all material respects; (ii) to the Knowledge of Stockholder, neither any of
the Company and the GCI SUBSIDIARY nor any other party to the policy is in
material breach or default (including with respect to the payment of premiums or
the giving of notices), and no event has occurred which, with notice or the
lapse of time, would constitute such a material breach or default, or permit
termination, modification, or acceleration, under the policy; and (iii) to the
Knowledge of Stockholder, no party to the policy has repudiated any material
provision thereof. Section 4.19 of the Disclosure Schedule describes any
material self-insurance arrangements affecting any of the Company and the GCI
SUBSIDIARY.
4.20 LITIGATION. Section 4.20 of the Disclosure Schedule sets forth each
instance in which any of the Company and the GCI SUBSIDIARY (a) is subject to
any outstanding injunction, judgment, order, decree, ruling, or charge or (b) is
a party or, to the Knowledge of Stockholder, is threatened to be made a party to
any action, suit, proceeding, hearing, or investigation of, in, or before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator.
4.21 EMPLOYEES. To the Knowledge of Stockholder, no executive, key employee, or
significant group of employees plans to terminate employment with any of the
Company and the GCI SUBSIDIARY during the next 12 months. Neither the Company
nor the GCI SUBSIDIARY has committed any material unfair labor practice.
4.22 EMPLOYEE BENEFITS.
(a) Section 4.22 of the Disclosure Schedule lists each Employee
Benefit Plan that any of the Company and the GCI SUBSIDIARY maintains or to
which any of the Company and the GCI SUBSIDIARY contributes.
(i) To the Knowledge of Stockholder, each such Employee
Benefit Plan (and each related trust, insurance contract, or fund) complies in
form and in operation in all respects with the applicable requirements of ERISA
and the Code, except where the failure to comply
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would not have a material adverse effect on the financial condition of the
Company and the GCI SUBSIDIARY taken as a whole.
(ii) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have been paid to
each such Employee Benefit Plan which is an Employee Pension Benefit Plan.
(iii) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan has received a determination letter from the Internal
Revenue Service to the effect that it meets the requirements of Code Section
401(a).
(iv) As of the last day of the most recent prior plan year,
the market value of assets under each such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multiemployer Plan) equaled or
exceeded the present value of liabilities thereunder (determined in accordance
with then current funding assumptions).
(v) The Stockholder has delivered to SUNBELT and Sub correct
and complete copies of the plan documents and summary plan descriptions, the
most recent determination letter received from the Internal Revenue Service,
the most recent Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which implement each such
Employee Benefit Plan.
(b) With respect to each Employee Benefit Plan that any of the
Company and the GCI SUBSIDIARY maintains or ever has maintained or to which any
of them contributes, ever has contributed, or ever has been required to
contribute:
(i) No such Employee Benefit Plan which is an Employee
Pension Benefit Plan (other than any Multiemployer Plan) has been completely or
partially terminated or been the subject of a Reportable Event as to which
notices would be required to be filed with the PBGC. No proceeding by the PBGC
to terminate any such Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been instituted.
(ii) No action, Suit, proceeding, hearing, or investigation
with respect to the administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits) is pending,
except where the action, suit proceeding, hearing, or investigation would not
have a material adverse effect on the financial condition of the Company and
the GCI SUBSIDIARY taken as a whole.
(iii) Neither the Company nor the GCI SUBSIDIARY has incurred
any liability to the PBGC (other than PBGC premium payments) or otherwise under
Title IV of ERISA (including any withdrawal liability) with respect to any such
Employee Benefit Plan which is an Employee Pension Benefit Plan.
4.23 GUARANTIES. Neither the Company nor the GCI SUBSIDIARY is a guarantor or
otherwise is responsible for any liability or obligation (including
indebtedness) of any other Person except as set forth on Schedule 4.23.
4.24 ENVIRONMENT, HEALTH, AND SAFETY MATTERS.
(a) To the Knowledge of Stockholder, the Company and the GCI
SUBSIDIARY are in compliance with Environmental, Health, and Safety
Requirements, except for such noncompliance as would not have a Material
Adverse Effect on the financial condition of the Company and the GCI SUBSIDIARY
taken as a whole.
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(b) To the Knowledge of Stockholder, the Company and the GCI
SUBSIDIARY have not received any written notice, report or other information
regarding any actual or alleged material violation of Environmental, Health,
and Safety Requirements, or any material liabilities or potential material
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise),
including any investigatory, remedial or corrective obligations, relating to
the Company or the GCI SUBSIDIARY or their facilities arising under
Environmental, Health, and Safety Requirements, the subject of which would have
a Material Adverse Effect on the financial condition of the Company and the GCI
SUBSIDIARY taken as a whole.
4.25 CERTAIN BUSINESS RELATIONSHIPS. Neither the Stockholder nor any of his
Affiliates has been involved in any material business arrangement or
relationship with any of the Company or the GCI SUBSIDIARY within the past 12
months, and neither the Stockholder nor any of his Affiliates owns any material
asset, tangible or intangible, which is used in the business of any of the
Company and the GCI SUBSIDIARY.
4.26 DISCLOSURE. The representations and warranties contained in this Article 4
do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this Article 4 not misleading.
4.28 MINIMUM FLOOR PLAN REQUIREMENT. As of the Closing Date, each GCI
SUBSIDIARY separately, and all GCI SUBSIDIARY in the aggregate, shall not be
"Out of Trust" as such term is used in the automotive business.
ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 ACCESS; CONFIDENTIALITY. Between the date hereof and the Closing Date, the
Stockholder and the Company will (i) provide to the officers and other
authorized representatives of SUNBELT and Sub full access, during normal
business hours, to any and all premises, properties, files, books, records,
documents, and other information of the Company and GCI SUBSIDIARY and will
cause the Company's officers to furnish to SUNBELT and its authorized
representatives any and all financial, technical and operating data and other
information pertaining to the businesses and properties of the Company and GCI
SUBSIDIARY (including the Real Property and the Improvements), and (ii) make
available for inspection and copying by SUNBELT and Sub true and complete
copies of any documents relating to the foregoing. SUNBELT and Sub will hold,
and will cause their representatives to hold, in confidence (unless and to the
extent compelled to disclose by judicial or administrative process or, in the
opinion of its counsel, by other requirements of law) all Confidential
Information (as defined below) and will not disclose the same to any third
party except in connection with obtaining financing and otherwise as may
reasonably be necessary to carry out this Agreement and the transactions
contemplated hereby, including any due diligence review by or on behalf of
SUNBELT and Sub. If this Agreement is terminated, SUNBELT and Sub will, and
will cause their representatives to, promptly return to the Company and GCI
SUBSIDIARY, upon the reasonable request of the Company, all Confidential
Information furnished by the Company and GCI SUBSIDIARY, including all copies
and
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summaries thereof. As used herein, "Confidential Information" shall mean all
information concerning the Company and its subsidiaries obtained by SUNBELT,
Sub and their representatives from the Company in connection with the
transactions contemplated by this Agreement, except information (x)
ascertainable or obtained from public information, (y) received from a third
party not employed by or otherwise affiliated with the Company or (z) which is
or becomes known to the public, other than through a breach by SUNBELT or Sub
or any of their representatives of this Agreement.
5.2 FURNISHING INFORMATION; ANNOUNCEMENTS. Each Party will, as soon as
practical after reasonable request therefor, furnish to the other Parties all
information concerning such Party or its Affiliates required for inclusion in
any statement or application made by any other Party or Parties to any
governmental or regulatory body or to any manufacturer or distributor or in
connection with obtaining any third party consent in connection with the
transactions contemplated by this Agreement. No Party or its representatives
shall issue any press releases or otherwise make any public statement with
respect to the transactions contemplated hereby without the prior consent of
each of the other Parties, except as may be required by law. SUNBELT shall
reimburse the Company and the Stockholder for any reasonable expenses incurred
by the Company and the Stockholder in connection with this Section.
5.3 CERTAIN CHANGES AND CONDUCT OF BUSINESS. From and after the date of this
Agreement, and until the Closing, the Company and GCI SUBSIDIARY: (a) shall
conduct its business solely in the Ordinary Course of Business; and (b) shall
not take any action or fail to take any action which would cause or result in
any Material Adverse Effect upon the business or assets of the Company and GCI
SUBSIDIARY, either individually or in the aggregate. The Stockholder shall
cause the Company and GCI SUBSIDIARY to comply with the requirements of this
Section 5.3.
5.4 NO INTERCOMPANY PAYABLES OR RECEIVABLES. At the Closing there will be no
intercompany payables or intercompany receivables due and/or owing between the
Stockholder and any of his Affiliates, on the one hand, and the Company and GCI
SUBSIDIARY, on the other hand.
5.5 NEGOTIATIONS. Until the earlier of 180 days from the date hereof and the
termination of this Agreement pursuant to SECTION 8.1 hereof, no Stockholder,
nor the Company, nor the Company's officers, directory, employees, advisors,
agents, representatives, Affiliates or anyone acting on behalf of the
Stockholder, the Company or such persons, shall, directly or indirectly,
encourage, solicit, initiate or engage in discussions or negotiations with, or
provide any information to, any person (other than SUNBELT or its
representatives) concerning any merger, sale of assets (other than in the
ordinary course of business), purchase or sale of shares of capital stock or
similar transaction involving the Company. The Stockholder shall promptly
communicate to SUNBELT any inquiries or communications concerning any such
transaction (including the identity of any person making such inquiry or
communication) which the Stockholder may receive or of which the Stockholder
may become aware.
5.6 CONSENTS; COOPERATION. Subject to the terms and conditions hereof, the
Stockholder and the Company and SUNBELT and Sub will use their respective best
efforts at their own expense:
(a) to obtain prior to the earlier of the date required (if so
required) or the Closing Date, all waivers, permits, licenses, approvals,
authorizations, qualifications, orders and consents of all third parties and
governmental authorities, and make all filings and registrations with
governmental authorities which are required on their respective parts for (i)
the consummation of the transactions contemplated by this Agreement, (b) the
ownership or leasing and operating after the Closing by
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the Company of all its material properties and (iii) the conduct after the
Closing by the Company of its businesses as conducted by it on the date hereof;
(b) to obtain the approvals of the automobile manufacturers which are
required by Section 6.12 below;
(c) to defend, consistent with applicable principles and requirements
of law, any lawsuit or other legal proceedings, whether judicial or
administrative, whether brought derivatively or on behalf of third persons
(including governmental authorities) challenging this Agreement or the
transactions contemplated hereby; and
(d) to furnish each other such information and assistance as may
reasonably be requested in connection with the foregoing.
5.7 ADDITIONAL AGREEMENTS. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best efforts at its own
expense to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers of
the Company shall take all such necessary action.
5.8 FACTORY STATEMENTS. The Company will deliver to SUNBELT copies of the
Dealer Statements provided by the Company or the GCI SUBSIDIARY after the date
hereof within five days of their delivery to the Automobile Manufacturers. All
such Statements shall fairly present the financial position and results of
operations of the Company as of the date or for the periods indicated.
5.9 NOTIFICATION OF CERTAIN MATTERS. Between the date hereof and the Closing,
each party to this Agreement will give prompt notice in writing to the other
party hereto of: (i) any information that indicates that any representation and
warranty of such party contained herein was not true and correct as of the date
made or will not be true and correct as of the Closing, (ii) the occurrence of
any event which could result in the failure to satisfy a condition specified in
ARTICLE 6 or ARTICLE 7 hereof, as applicable, (iii) any notice or other
communication from any third person alleging that the consent of such third
person is or may be required in connection with the transactions contemplated
by this Agreement, and (iv) in the case of the Stockholder and the Company, any
notice of, or other communication relating to, any default or event which, with
notice or lapse of time or both, would become a default under any contract or
agreement set forth in Section 4.16 of the Disclosure Schedule. The Company and
the Stockholder will (x) promptly advise SUNBELT of any event that has, or
could reasonably be expected in the future to have, a Material Adverse Effect
on the Company or GCI SUBSIDIARY, (y) confer on a regular and frequent basis
with one or more designated representatives of SUNBELT to report operational
matters and to report the general status of ongoing operations, and (z) notify
SUNBELT of any emergency or other change in the normal course of business or
relating to the owned or leased real property or improvements of the Company or
GCI SUBSIDIARY and of any governmental complaints, investigations or hearings,
(or communications indicating that the same may be contemplated) or
adjudicatory proceedings involving the Company or GCI SUBSIDIARY, the owned or
leased real property or the improvements and will keep SUNBELT fully informed
of such events and permit SUNBELT'S representatives access to all materials
prepared in connection therewith. The Stockholder shall give prompt notice to
SUNBELT of any notice or other communication from any third person asserting
any right, title or interest in any of the Shares held by such Stockholder,
including, without limitation, any threat to commence, or notice of the
commencement of any action or other proceeding with respect to the Shares, or
the occurrence of
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any other event of which such Stockholder has knowledge which could result in
any failure to consummate the sale of the Shares as contemplated hereby.
5.10 ASSURANCE BY THE STOCKHOLDER. The Stockholder shall use its best efforts
to cause the Company and GCI SUBSIDIARY to comply with its respective covenants
set forth in this Agreement.
5.11 ANTITRUST IMPROVEMENTS ACT COMPLIANCE. SUNBELT, the Stockholder and the
Company, as applicable, shall each file or cause to be filed with the Federal
Trade Commission and the United States Department of Justice any notifications
required to be filed by the respective "ultimate parent" entities under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "H.S.R.
Act"), and the rules and regulations promulgated thereunder, with respect to
the transactions contemplated herein. SUNBELT shall pay the H.S.R. fling fee
relating to such filings. The parties shall use their best efforts to make such
filings promptly, to respond to any requests for additional information made by
either of such agencies, to cause the waiting periods under the H.S.R. Act to
terminate or expire at the earliest possible date and to resist vigorously, at
SUNBELT'S expense (including, without limitation, the institution or defense of
legal proceedings), any assertion that the transactions contemplated herein
constitute a violation of the antitrust laws, all to the end of expediting
consummation of the transactions contemplated herein; PROVIDED HOWEVER, that if
SUNBELT shall determine that continuing such resistance is not in its best
interest, SUNBELT may, by written notice to the other Parties, terminate this
Agreement with the effect set for the in SECTION 8.2 hereof.
5.12 RELATED PARTY/STOCKHOLDER LOAN. On or before the Closing Date, the
Stockholder shall cause the Company to pay, and the Company shall pay the
outstanding principal and all accrued but unpaid interest on the related
Party/Stockholder Loans amounting to $* PER BOOKS (the "Stockholder Loans").
For purposes of this Section, the Stockholder Loans shall mean the loans to the
Company from Stockholder and his Affiliates as set forth on the Company Balance
Sheet in the approximate amount of $* PER BOOKS.
5.13 STOCK RESTRICTION AGREEMENT. Prior to the Closing Date, any Stock
Restriction Agreement and any Buy/Sell Agreement involving or affecting the
capital stock of the Company or GCI SUBSIDIARY shall be terminated in
accordance with its terms and the parties thereto shall have released any and
all claims arising under or relating to any Stock Restriction Agreement and any
Buy/Sell Agreement and its termination.
5.14 PERSONAL ITEMS. The parties acknowledge and agree that the Stockholder may
retain certain personal items (which items are not reflected as assets on the
Most Recent Balance Sheet and will not be reflected as assets at the Closing
Date Balance Sheet). These items will include personal pictures, awards and
mementos.
5.15 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The Company and the
Stockholder shall furnish or cause to be furnished to SUNBELT and the
underwriters of the SUNBELT IPO (the "Underwriters") all of the information
concerning the Company and the Stockholder required for inclusion in, and will
cooperate fully and completely with SUNBELT, SUNBELT'S legal counsel, SUNBELT'S
accountants and the Underwriters in the preparation of, the Registration
Statement and the prospectus included therein, including any and all audited
financial statements, as required by the applicable securities laws and
regulations, prepared in accordance with generally accepted accounting
principles, in form suitable for inclusion the Registration Statement.
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ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF SUNBELT AND SUB TO EFFECT THE CLOSING
The obligations of SUNBELT and Sub required to be performed by them at the
Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by SUNBELT and
Sub as provided herein except as otherwise required by applicable law:
6.1 REPRESENTATION AND WARRANTIES; AGREEMENTS; COVENANTS. Each of the
representations and warranties of the Company, GCI SUBSIDIARY and the
Stockholder contained in this Agreement shall be true and correct on the date
made and shall be true AND CORRECT IN all material respects as of the Closing.
Each of the obligations of the Company, GCI SUBSIDIARY and the Stockholder
required by this Agreement to be performed by them at or prior to the Closing
shall have been duly performed and complied with in all material respects as of
the Closing. At the Closing, Sub shall have received a certificate, dated the
Closing Date and duly executed by the Stockholder to the effect that the
conditions set forth in the two preceding sentences have been satisfied.
6.2 AUTHORIZATION; CONSENT.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and all collateral agreements, and
the consummation of the transactions contemplated hereby shall have been duly
and validly taken by the Company. All filings required to be made under the
H.S.R. Act in connection with transactions contemplated hereby shall have been
made and all applicable waiting periods with respect to each such filing,
including extensions thereof, shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons, including, but not limited to, all
automobile manufacturers with whom the Company has franchise agreements (or
comparable agreements), required to consummate the transactions contemplated
hereby and all consents or waivers shall have been made or obtained.
6.3 OPINIONS OF THE COMPANY'S AND THE STOCKHOLDER'S COUNSEL. SUNBELT and Sub
shall have been furnished with the opinion of the Company's and the
Stockholder's counsel, dated the Closing Date, in the form and substance
satisfactory to SUNBELT and Sub and their counsel.
6.4 ABSENCE OF LITIGATION. No order, stay, injunction or decree of any court of
competent jurisdiction in the United States shall be in effect (i) that
prevents or delays the consummation of any of the transactions contemplated
hereby or (ii) would impose any limitation on the ability of SUNBELT or Sub
effectively to exercise full rights of ownership of the Shares. No action, Suit
or proceeding before any court or any governmental or regulatory entity shall
be pending (or threatened by any governmental or regulatory entity), and no
investigation by any governmental or regulatory entity shall have been
commenced (and be pending), seeking to restrain or prohibit (or questioning the
validity or legality of) the consummation of the transactions contemplated by
this Agreement or seeking damages in connection therewith which SUNBELT or Sub,
in good faith and with the advice of counsel, believes it makes it undesirable
to proceed with the consummation of the transactions contemplated hereby.
6.5 NO MATERIAL ADVERSE EFFECT. During the period from December 31, 1996 to the
Closing Date, there shall not have been any material adverse change in the
assets, properties,
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business, operations, prospects, net income or financial condition of the
Company or GCI SUBSIDIARY either individually or in the aggregate, other than
payments to Stockholder in accordance with the terms of this Agreement.
6.6 NET WORTH. On the Closing Date, the Stockholder shall deliver to Sub a
balance sheet of the Company (including GCI SUBSIDIARY) dated as of the most
recent practicable date preceding the Closing Date, prepared in accordance with
the Accounting Principles (the "Estimated Closing Date Balance Sheet"). The
Estimated Closing Date Balance Sheet shall show as of the date thereof, after
taking into account the payment of any of the fees, costs and expenses by the
Company incurred in connection with this Agreement, FIFO Net Worth no less
than. NET WORTH @ 11/30/97 EXCEPT ANY LOSSES IN JAN & FEB '98 SHALL NOT BE
COUNTED.
6.7 COMPLETION OF DUE DILIGENCE. SUNBELT and Sub shall have completed their
due diligence examination of the Company and GCI SUBSIDIARY and the results of
such examination shall be reasonably satisfactory to SUNBELT and the Sub;
provided, however, that the conditions contained in this Section 6.7 shall not
be a condition precedent to the Obligations of SUNBELT and the Sub hereunder
after the date that is sixty (60) days after the date hereof.
6.8 REAL ESTATE PURCHASE. Stockholder and all other owners of the real
property wherein the automotive dealerships are located shall have entered into
real estate purchase and sale contracts with SUNBELT or its assignee for the
purchase of the real estate property wherein the automotive dealerships are
located.
6.9 CERTIFICATES. The Stockholder and the Company shall have furnished SUNBELT
and Sub with any other certificates of the Stockholder and the Company's
officers as SUNBELT and Sub may reasonably request to evidence compliance with
the conditions set forth in this ARTICLE 6.
6.10 LEGAL MATTERS. All certificates, instruments, opinions and other documents
required to be executed or delivered by or on behalf of the Stockholder and the
Company and the GCI SUBSIDIARY under the provisions of this Agreement, and all
other actions and proceedings required to be taken by or on behalf of the
Stockholder and the Company and the GCI SUBSIDIARY in furtherance of the
transactions contemplated hereby, shall be reasonably satisfactory in form and
substance to counsel for SUNBELT and Sub.
6.11 APPROVAL OF MANUFACTURERS. Each Automobile Manufacturer having an
Agreement with the Company or GCI SUBSIDIARY shall have consented to,
authorized and approved, in writing, the transactions contemplated by this
Agreement and shall have approved SUNBELT and Sub as its authorized dealer, on
terms no less favorable than those granted to the Company and GCI SUBSIDIARY
immediately prior to execution of this Agreement.
6.12 NON-COMPETITION AGREEMENT. SUNBELT, Sub, the Company and Stockholder shall
have entered into a mutually satisfactory Non-Competition Agreement.)
6.13 ENVIRONMENTAL LAWS. The Company shall be in material compliance with all
applicable Environmental Laws.
6.14 NONDISTURBANCE AND ESTOPPEL AGREEMENTS. Stockholder shall have obtained a
nondisturbance and estoppel agreements from Lessors on all applicable real
property in the dealerships presently operate.
6.15 TITLE INSURANCE. Sunbelt and sub shall have obtained title insurance with
respect to the leasehold estates in form and substance satisfactory to them.
SUNBELT shall be responsible for the cost of such title insurance.
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6.16 TERMINATION AGREEMENT/MEMORANDUM OF LEASE. GI and Investors shall have
executed a Lease Termination Agreement and a Memorandum of Lease in form and
substance satisfactory to SUNBELT and Sub.
6.17 RESIGNATION OF DIRECTORS. Each of the persons who is a director of the
Company or GCI SUBSIDIARY on the Closing Date shall have tendered to Sub in
writing his or her resignation as such in form and substance satisfactory to
SUNBELT.
6.18 DISCLOSURE SCHEDULE. The Company and the Stockholder shall have delivered
to SUNBELT and Sub the Disclosure Schedule referred to in ARTICLE 4, and such
Disclosure Schedule shall be acceptable in form and substance to SUNBELT and
Sub.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE STOCKHOLDER TO EFFECT THE CLOSING
The obligations of the Stockholder and the Company and GCI SUBSIDIARY
required to be performed by them at the Closing shall be subject to the
satisfaction, at or prior to the Closing, of each of the following conditions,
each of which may be waived by the Company, GCI SUBSIDIARY and the Stockholder
as provided herein except as otherwise required by applicable law:
7.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS. Each of the representations and
warranties of SUNBELT and Sub contained in this Agreement shall be true and
correct on the date made and shall be true and correct in all material respects
as of the Closing. Each of the obligations of SUNBELT and Sub required by this
Agreement to be performed by them at or prior to the Closing shall have been
duly performed and complied with in all material respects as of the Closing. At
the Closing, the Stockholder shall have received a certificate, dated the
Closing Date and duly executed by an officer of SUNBELT and of Sub to the effect
that the conditions set forth in the preceding two sentences have been
satisfied.
7.2 AUTHORIZATION OF THE AGREEMENT; CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the Lease, and the consummation
of the transactions contemplated hereby shall have been duly and validly taken
by SUNBELT and Sub. All filings required to be made under the H.S.R. Act in
connection with transactions contemplated hereby shall have been made and all
applicable waiting periods with respect to each such filing, including
extensions thereof, shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons, including, but not limited to, all
automobile manufacturers with whom the Company and GCI SUBSIDIARY have a
franchise agreement; dealer sales and services agreement, or
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comparable instrument, that are required to consummate the transactions
contemplated hereby shall have been executed and obtained.
7.4 ABSENCE OF LITIGATION. No order, stay, judgment or decree shall have been
issued by any court and be in effect restraining or prohibiting the
consummation of the transactions contemplated hereby.
7.5 REAL ESTATE PURCHASE Stockholder and all other owners of the real property
wherein the automotive dealerships are located shall have entered into contract
for the purchase and sale of the real property wherein automotive dealerships
are located with SUNBELT or Sub or its assignee.
7.6 CERTIFICATES. SUNBELT and Sub shall have the Stockholder with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this ARTICLE 7 as may be reasonably requested by the
Stockholder.
7.7 LEGAL MATTERS. All certificates, instruments, opinions and other documents
required to be executed or delivered by or on behalf of SUNBELT or Sub under
the provisions of this Agreement, and all other actions and proceedings
required to be taken by or on behalf of SUNBELT or Sub in furtherance of the
transactions contemplated hereby, shall be reasonably satisfactory in form and
substance to counsel for the Stockholder.
ARTICLE 8
TERMINATION
8.1 TERMINATION. This Agreement may be terminated at any time prior to Closing:
(a) by mutual consent of SUNBELT, Sub, and the Stockholder;
(b) by either SUNBELT, Sub or the Stockholder if the Closing shall not
have taken place on or prior to MARCH 1, 1998, or such later date as shall have
been approved by SUNBELT, Sub and the Stockholder, provided that the terminating
party is not otherwise in material breach of its representation, warranties,
covenants or agreements under this Agreement;
(c) by SUNBELT, Sub or the Stockholder if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contemplated
by this Agreement, any such order, decree, ruling or other action shall have
become final and non-appealable;
(d) by SUNBELT and Sub if any of the conditions specified in ARTICLE 6
hereof have not been met or waived by SUNBELT and Sub at such time as such
condition is no longer capable of satisfaction, provided that neither SUNBELT
nor Sub is otherwise in material breach of its representations, warranties,
covenants or agreements under this Agreement;
(e) by the Stockholder if any of the conditions specified in ARTICLE 7
hereof have not been met or waived by the Stockholder at such time as such
condition is no longer capable of satisfaction, provided that neither the
Stockholder nor the Company is otherwise in material breach of his or its
representations, warranties, covenants or agreements under this Agreement; or
(f) by either SUNBELT, Sub or the Stockholder if there has been a
material breach on the part of the other of any representation, warranty,
covenant or agreement set forth in this
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Agreement, breach has not been cured within ten (10) Business Days following
receipt by the breaching party of written notice of such breach.
If SUNBELT, Sub or the Stockholder shall terminate this Agreement pursuant
to the provisions hereof, such termination shall be effectuated by notice to
the other parties specifying the provision hereof pursuant to which such
termination is made.
8.2 EFFECT OF TERMINATION. EXCEPT (i) FOR ANY breach of this Agreement prior to
its termination, and (ii) for the obligations contained in SECTIONS 5.1 AND
10.2 hereof, and (iii) as set forth in SECTION 9.1 and SECTION 9.2 hereof, upon
the termination of this Agreement pursuant to SECTION 8.1 hereof, this
Agreement shall forthwith become null and void and none of the parties hereto
or any of their respective officers, directors, employees, agents, affiliates,
consultants, Stockholder or principals shall have any liability or obligation
hereunder or with respect hereto.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE STOCKHOLDER. Notwithstanding the Closing or the
delivery of the Shares, the Stockholder indemnifies and agrees to fully defend,
save and hold harmless on an after-tax basis SUNBELT, Sub, the Company (after
the Closing), and any of their respective officers, directors, employees,
stockholders, advisors, representatives, agents and affiliates (other than the
Stockholder) (each a "SUNBELT Indemnified Party"), if a SUNBELT Indemnified
Parry (including the Company after the Closing Date) shall at any time or from
time to time suffer any Costs (as deemed in SECTION 9.7 below) arising,
directly or indirectly, out of or resulting from, or shall pay or become
obligated to pay any sum on account of, (i) any and all Stockholder Events of
Breach (as defined below); (ii) any Claim before or by any court, arbitrator,
panel, agency or other governmental, administrative or judicial entity, which
Claim involves, affects or relates to any assets, properties or operations of
the Company or GCI SUBSIDIARY or the conduct of the business of the Company or
the GCI SUBSIDIARY prior to the Closing Date (a "Stockholder Third Party
Claim"); or (iii) any tax liability of the Company or GCI SUBSIDIARY arising
out of the operation of the Company or GCI SUBSIDIARY by the Stockholder or
their employees or their representatives prior to Closing. As used herein,
"Stockholder Event of Breach" shall be and mean any one or more of the
following: (i) any untruth or inaccuracy in any representation of the
Stockholder or the Company or the breach of any warranty of the Stockholder or
the Company contained in this Agreement, including, without limitation, any
misrepresentation in, or omission from, any statement, certificate, schedule,
exhibit, annex or other document furnished pursuant to this Agreement by the
Stockholder or the Company (or any representative of SUNBELT or Sub) and any
misrepresentation in or omission from any document furnished to SUNBELT or Sub
in connection with the Closing, and (ii) any failure of the Stockholder or the
Company to duly perform or observe any term, provision, covenant, agreement or
condition on the part of such Stockholder or the Company to be performed or
observed.
9.2 INDEMNIFICATION BY SUNBELT. Notwithstanding the Closing, SUNBELT
indemnifies and agrees to fully defend, save and hold harmless on an after-tax
basis the Stockholder, the Company (prior to the Closing), and any of their
respective officers, directors, employees, stockholders, advisors,
representatives, agents and affiliates (each a "Stockholder Indemnified
Party"), if a Stockholder Indemnified Party (including the Company prior to
Closing) shall at any time or from time to time suffer any Costs arising,
directly or indirectly, out of or resulting from, or shall pay or become
obligated to pay any sum on account of, (i) any and all SUNBELT Events of
Breach (as defined below) or (ii) any Claim before or by any court, arbitrator,
panel, agency or other governmental, administrative or judicial entity, which
Claim
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involves, affects or relates to any assets, properties or operations of SUNBELT
or Sub or the conduct of the business of SUNBELT prior to the Closing Date (a
"SUNBELT Third Party Claim"). As used herein, "SUNBELT Event of Breach" shall
be and mean any one or more of the following: (i) any untruth or inaccuracy in
any representation of SUNBELT or Sub or the breach of any warranty of SUNBELT
or Sub contained in this Agreement, including, without limitation, any
misrepresentation in, or omission from, any statement, certificate, schedule,
exhibit, annex or other document furnished pursuant to this Agreement by
SUNBELT or Sub (or any representative of SUNBELT or Sub) to the Stockholder (or
any representative of the Stockholder) and any misrepresentation in or omission
from any document furnished to the Stockholder in connection with the Closing,
and (ii) any failure of SUNBELT or Sub duly to perform or observe any term,
provision, covenant, agreement or condition on the part of SUNBELT or Sub to be
performed or observed.
9.3 PROCEDURES. If (i) the Stockholder Event of Breach occurs or is alleged and
a SUNBELT Indemnified Party asserts that the Stockholder has become obligated
to a SUNBELT Indemnified Party pursuant to SECTION 9.1, or if the Stockholder's
Third Party Claim is begun, made or instituted as a result of which the
Stockholder may become obligated to a SUNBELT Indemnified Party hereunder, or
(ii) a SUNBELT Event of Breach occurs or is alleged and a Stockholder
Indemnified Party asserts that SUNBELT has become obligated to a Stockholder
Indemnified Party pursuant to SECTION 9.2, or if any SUNBELT Third party Claim
is begun, made or instituted as a result of which SUNBELT may become obligated
to a Stockholder Indemnified Party hereunder (for purposes of this ARTICLE 9,
any SUNBELT Indemnified Party and Stockholder Indemnified Party is sometimes
referred to as an "Indemnified Party" and SUNBELT and the Stockholder are
sometimes referred to as and "Indemnified Party" and SUNBELT and the
Stockholder are sometimes referred to as an "Indemnifying Party," and any
SUNBELT Third Parry Claim and the Stockholder Third Party Claim is sometimes
referred to as a "Third Party Claim," in each case as the context so requires),
such Indemnified Party shall give written notice to the Indemnifying Party of
its or his obligation lo provide indemnification hereunder, provided that any
failure to so notify the Indemnifying Party, shall not relieve them from any
liability that it or he may have to the Indemnified Party under this ARTICLE 9.
If such notice relates to a Third Party Claim, each Indemnifying Party, jointly
and severally, agrees to defend, contest or otherwise protect such Indemnified
Party against any such Third Party Claim at his or its sole cost and expense.
Such Indemnified Party shall have the right, but not the obligation, to
participate at its own expense in the defense thereof by counsel of such
Indemnified Party's choice and shall in any event cooperate with and assist the
Indemnifying Party to the extent reasonably possible. If the Indemnifying Party
fails timely to defend, contest or otherwise protect against such Third Party
Claim, such Indemnified Party shall have the right to do so, including, without
limitation, the right to make any compromise of settlement thereof, and such
Indemnified Party shall be entitled to recover the entire Cost thereof from the
Indemnifying Party, including, without limitation, attorneys' fees,
disbursements and amounts paid (or of which such Indemnified Party has become
obligated to pay) as the result of such Third Party Claim. Failure by the
Indemnifying Party to notify such Indemnified Party of its or their election to
defend any such Third Party Claim within fifteen (15) days after notice thereof
shall have been given to the Indemnifying Party shall be deemed a waiver by the
Indemnifying Party of its or their right to defend such Third Party Claim. If
the Indemnifying Party assumes the defense of the particular Third Party Claim,
the Indemnifying Party shall not, in the defense of such Third Party Claim,
consent to entry of any judgment or enter into any settlement, except with the
written consent of such Indemnified Party. In addition, the Indemnifying Party
shall not enter into any settlement of any Third Party Claim (except with the
written consent of such Indemnified Party) which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to such
Indemnified Party a full release from all liability in respect of such Third
Party Claim. Notwithstanding the foregoing, the Indemnifying Party shall not be
entitled to control (but shall be entitled to participate at their own expense
in the defense of), and the Indemnified Party shall be entitled to have sole
control over, the defense or settlement of any Third Party Claim to the extent
the Third Party Claim seeks
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an order, injunction or other equitable relief against the Indemnified Party
which, if successful, could materially interfere with the business, operations,
assets, condition (financial or otherwise) or prospects of the Indemnified
Party.
9.4 OFFSET. In addition to and not in limitation of all rights of offset that
an Indemnified Party may have under applicable law, the parties agree that, at
any Indemnified Party's option, any or all amounts owing to such Indemnified
Party under this ARTICLE 9 or any other provision of this Agreement or any
other liability of the other parties (or any Affiliate of the other parties)-
to such Indemnified Party in connection with this Agreement or the transactions
contemplated hereby, may be recovered by the Indemnified Party by an offset
against any or all amounts due to such other parties pursuant to this Agreement
or the transactions contemplated hereby.
9.5 REMEDIES. The rights of an Indemnified Party under this ARTICLE 9 are in
addition to such other rights and remedies which such Indemnified Party may
have under this Agreement, applicable law or otherwise.
9.6 LIMITATION ON INDEMNIFICATION. No Indemnified Party shall be entitled to
indemnification for any Costs hereunder (A) until the Indemnified Party has
suffered Costs by reason of all such breaches in excess of a $100,000.00
aggregate deductible (after which point the Indemnifying Party will be
obligated to indemnify the Indemnified Party from and against all such Costs
relating back to the first dollar, or thereafter (B) to the extent the Costs
the Indemnified Party has suffered by reason of all such breaches exceeds a
$10,000,000.00 aggregate ceiling (after which point the Indemnifying Party will
have no obligation to indemnify the Indemnified Parties from and against such
Costs).
9.7 DEFINITIONS. For purposes of this ARTICLE 9, "Costs" shall mean all
liabilities, losses, costs and actual damages (not including consequential
damages) and reasonable expenses, reasonable attorneys' fees, reasonable
experts' fees, reasonable consultants' fees, and reasonable disbursements of
any kind or of any nature whatsoever. For purposes of application of the
indemnity provisions of this ARTICLE 9, the amount of any Cost arising from the
breach of any representation, warranty, covenant or agreement shall be the
entire amount of any Cost suffered, paid or required to be paid by the
respective Indemnified Parry as a result of such breach.
9.8 TAX SAVINGS. Costs arising or resulting from Stockholder Events of Breach
or SUNBELT Events of Breach shall be reduced to the extent of the amount of any
tax savings resulting from the indemnified matter to which such Costs relate
which are actually realized (or can reasonably be expected to be realized in
future years) by the Indemnified Party.
ARTICLE 10
MISCELLANEOUS
10.1 SURVIVAL OF PROVISIONS.
(a) The respective representations, covenants and agreements of each
of the parties to this Agreement (except covenants and agreements which are
expressly required to be performed and are performed in full on or before the
Closing Date) shall survive the Closing Date and the consummation of the
transactions contemplated by this Agreement, subject to SECTION 10.1 (b) below.
In the event of a breach of any such representations, or covenants, the party
to whom such representations or covenants have been made shall have all rights
and remedies for such breach available to it under the provisions of this
Agreement, regardless of any disclosures to, or investigation made by or on
behalf of, such party on or before the Closing Date.
24
<PAGE> 25
(b) All representations and warranties contained in this Agreement shall
survive the execution and delivery of this Agreement, and examination by or on
behalf of the Parties, and the Closing contemplated herein, only to the extent
specified below:
(i) the representations and warranties contained in ss 2.3, 3.4,
4.4, 4.5, 4.7 through 4.10, 4.12 through 4.23, 4.25, 4.27 and 4.28 shall
survive for a period of two (2) years following the Closing Date;
(ii) the representations and warranties contained in Section 4.24
shall survive for a period of two (2) years following the Closing Date;
(iii) the representations and warranties contained in ss 2.1,
2.2, 2.4, 2.5, 3.1, 3.2, 3.3, 3.5, 4.1, 4.2, 4.3, 4.5, 4.6, and 4.26 shall
survive two (2) years and
(iv) the representations and warranties contained in Section
4.11 shall survive as to any Tax covered by such representations and warranties
for so long as any statute of limitations for such Tax remains open, in whole
or in part, including without limitation by reason by waiver of such statute of
limitations.
(v) Notice of any claims or violations must be made within
thirty (30) days of discovery.
10.2 FEES AND EXPENSES. Except as otherwise expressly provided in this
Agreement, all legal and other fees, costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby through the
Closing Date shall be paid by the party incurring such fees, costs or expenses;
PROVIDED, HOWEVER, that if the Closing does not occur and SECTION 5.5 hereof is
breached, then the Stockholder of the Company shall pay to SUNBELT, within five
(5) Business Days after receipt of a request therefor, an amount equal to all
of the legal and other fees, costs and expenses incurred by SUNBELT and Sub in
connection with this Agreement and the transactions contemplated hereby.
10.3 HEADINGS. The section headings herein are for convenience of reference
only, do not constitute part of this Agreement and shall not be deemed to limit
or otherwise affect any of the provisions hereof.
10.4 NOTICES. All notices or other communications required or permitted
hereunder shall be given in writing and shall be deemed sufficient if delivery
by hand, recognized overnight delivery service or facsimile transmission or
mailed by registered or certified mail, postage prepaid (return receipt
requested), as follows:
If to the Company before the Closing Date: P.O. Box 4301
Elizabethton, TN 37643
with a coy to: Walter Lee Davis, Jr.
121 E. Unaka Ave
Johnson City, TN 37601
If to the Company after the Closing Date: P.O Box 430,
Elizabethton, TN 37644
with a copy to: Walter Lee Davis, Jr.
121 E. Unaka Ave
Johnson City, TN 37601
25
<PAGE> 26
If to the Stockholder:
with a copy to: Walter Lee Davis, Jr.
If to SUNBELT or Sub:
SUNBELT AUTOMOTIVE GROUP, INC.
2150 Cobb Parkway
Smyrna, Georgia 30080
26
<PAGE> 27
with a copy to:
Stephen C. Whicker
c/o The Whicker Law Firm
6111 Peachtree Dunwoody Road, NE
Suite 102-D
Atlanta, Georgia 30328
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so delivered or three (3) days after the date so mailed;
PROVIDED, HOWEVER, that any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
10.5 ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure the benefit of the parties hereto (and with respect to
the Stockholder, the personal representatives and heirs of the Stockholder) and
their respective successors and permitted assigns, and the provisions of ARTICLE
9 hereof shall inure to the benefit of the Indemnified Parties referred to
therein; PROVIDED, HOWEVER, that neither this Agreement nor any of the rights,
interests, or obligations hereunder may be assigned by any of the parties hereto
without the prior written consent of the other parties. Notwithstanding the
foregoing, SUNBELT and Sub shall have the unrestricted right to assign this
Agreement and to delegate all or any part of their obligations hereunder to any
affiliate of SUNBELT, but in such event SUNBELT shall remain fully liable for
the performance of all of such obligations in the manner prescribed in this
Agreement.
10.6 ENTIRE AGREEMENT. This Agreement (including the Schedules hereto) and
the Real Estate Purchase Agreement embody the entire agreement and understanding
of the parties with respect to the transactions contemplated hereby and
supersede all prior written or oral commitments, arrangements or understandings
between the parties with respect thereto and all prior drafts of this Agreement.
There are no restrictions, agreements, promises, warranties, covenants or
undertakings with respect to the transactions contemplated hereby other than
those expressly set forth herein or in the Lease. Prior drafts of this Agreement
shall not be used as a basis for interpreting this Agreement.
10.7 WAIVER AND AMENDMENTS. The Stockholder, the Company, SUNBELT and Sub
may by written notice to the other parties (i) extend the time for the
performance of any of the obligations or other actions of the other parties,
(ii) waive any inaccuracies in the representations or warranties of the other
parties contained in this Agreement, (iii) waive compliance with any of the
covenants of the other parties contained in this Agreement, (iv) waive
performance of any of the obligations of the other parties created under this
Agreement, or (v) waive fulfillment of any of the conditions to its own
obligations under this Agreement. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach, whether or not similar. This Agreement may be amended,
modified or supplemented only by a written instrument executed by the parties
hereto.
10.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which shall be considered one and-the same agreement and
each of which shall be deemed an original.
10.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia without giving effect to any
choice or conflict of law provision or rule that would cause the laws of any
other jurisdiction to apply.
27
<PAGE> 28
10.10 ACCOUNTING TERMS. All accounting terms used herein which are not
expressly defined in this Agreement shall have the respective meanings given to
them in accordance with GAAP.
10.11 CERTAIN DEFINITIONS.
For purposes of this Agreement:
(a) "Affiliate" of a specified Person shall mean a Person that directly
or indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with, the Person specified, and in the case of a
specified Person who is a natural person, his spouse, his issue, his parents,
his estate and any trust entirely for the benefit of his spouse and/or issue.
(c) "Automobile Manufacturers" shall mean Chevrolet, Jeep, Eagle,
Chrysler, Plymouth, Dodge and Kia motor vehicle manufacturers.
(d) "SUNBELT Public Offering Date" shall mean the date of the
consummation of an underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offering and sale of shares of SUNBELT common stock on a firm commitment
basis.
(e) "Best Efforts" shall be deemed to not include any obligation on the
part of any Person to undertake any liabilities, expend any funds or perform
acts (except liabilities, expenditures or performance, other than any best
efforts obligations, expressly required to be undertaken by the terms of this
Agreement) which are materially burdensome to such Person; PROVIDED, HOWEVER,
that notwithstanding the foregoing, the term "best efforts" shall include an
obligation to take such actions which are normally incident to or reasonably
foreseeable in connection with such obligation or the transactions contemplated
hereby.
(f) "Business Day" shall mean any day excluding Saturday, Sunday and
any day which is a legal holiday under Federal law.
(g) "Code" means the Internal Revenue Code, as amended.
(h) "Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
(i) "Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
(j) "Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
(k) "Environmental, Heath and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, and all common law concerning public health and
safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
28
<PAGE> 29
or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation.
(l) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
(m) "Fiduciary" has the meaning set forth in ERISA Section 3(21).
(n) "GAAP" shall mean generally accepted accounting principles which
are in effect in the United States on the Closing Date.
(o) "Income Tax" means any federal, state, local, or foreign income
tax, including any interest, penalty, or additional thereto, whether disputed or
not.
(p) "Income Tax Return" means any return, declaration, report, claim
for refund, or information return or statement relating to Income Taxes,
including any schedule or attachment statement thereto, and including any
amendment thereof.
(q) "Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all transactions, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
(r) "Knowledge" means, with respect to the Stockholder, that the
Stockholder knew, or in the exercise of reasonable diligence, would or should
have known of the particular matter referred to; with respect to the Company,
that the President or the Executive Manager knew, or in the exercise of
reasonable diligence, would or should have known of the particular matter
referred to; and, with respect to SUNBELT, that the President of SUNBELT knew
or, in the exercise of reasonable diligence, would or should have known of the
particular matter referred to.
(s) "Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, conditions and installment sale
agreements, encumbrances or charges of any kind.
(t) "Material Adverse Effect" shall mean any change in, or effect on,
the Company or GCI SUBSIDIARY (including the business thereof) which is, or
could reasonably be expected to be, materially adverse to the business,
operations, assets, condition (financial or otherwise) or prospects of the
Company or GCI SUBSIDIARY.
(u) "Most Recent Balance Sheet" means the balance sheet contained
within the Most RECENT Financial Statements.
(v) "Multiemployer Plan" has the meaning set forth in ERISA Section
3(37).
29
<PAGE> 30
(w) "Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
(x) "Party" has the meaning set forth in the preface above.
(y) "PBGC" means the Pension Benefit Guaranty Corporation.
(z) "Person" shall mean and include any individual, corporation,
limited liability company, partnership, joint venture, association, trust, any
other incorporated or unincorporated organization or entity and any governmental
entity or any department or agency thereto.
(aa) "Reportable Event" has the meaning set forth in ERISA Section
4043.
(bb) "Securities Act" means the Securities Act of 1933, as amended.
(cc) "Securities Exchange Act" means the Securities Exchange Act of
1934 as amended.
(dd) "Subject Property" ______________________________________________.
(ee) "Security Interest" means any mortgage, pledge, lien, encumbrance,
charge or other security interest, other than (a) mechanic's, materialmen's and
similar liens, (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
10.12 SCHEDULES. Disclosure of any matter in any Schedule hereto or in the
Financial Statements shall be considered as disclosure pursuant to any other
provision, subprovision, section or subsection of this Agreement or Schedule to
this Agreement.
10.13 SEVERABILITY. If any one or more of the provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be
affected thereby. To the extent permitted by applicable law, each party waives
any provision of law which renders any provision of this Agreement invalid,
illegal or unenforceable in any respect.
10.14 REMEDIES. None of the remedies provided for in this Agreement,
including termination of this Agreement as set forth in ARTICLE 8,
indemnification as set forth in ARTICLE 9 or the payment of certain fees, costs
and expenses as set forth in SECTION 10.2 shall be the exclusive remedy of
either party for a breach of this Agreement, the parties hereto having the right
to seek any other remedy in law or equity in lieu of or in addition to any
remedies provided in this Agreement, including an action for damages for breach
of contract.
10.15 TIME IS OF THE ESSENCE. Time is of the essence for purposes of this
Agreement.
30
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
SUNBELT AUTOMOTIVE GROUP, INC., A
GEORGIA CORPORATION
By: /s/ Charles Killancey Sec. Treas.
---------------------------------------
Name:
Title:
ATTEST:
By: /s/ Walter Erin Davis, Jr.
---------------------------------------
Name:
BAG TENNESSEE II, INC., A GEORGIA
CORPORATION
By: /s/ Charles Killancey Sec. Treas.
---------------------------------------
Name:
Title:
ATTEST:
By: /s/ Walter Erin Davis, Jr.
---------------------------------------
Name:
Title:
GRINDSTAFF CHEVROLET, INC., A TENNESSEE
CORPORATION
By: /s/ S.G. C.E.O.
---------------------------------------
Name:
Title:
ATTEST
By: /s/ C.M. Roberts, Jr.
---------------------------------------
Name:
Title:
(SIGNATURES CONTINUED ON NEXT PAGE)
31
<PAGE> 32
MOUNTAIN EMPIRE KIA, INC., A TENNESSEE
CORPORATION
By: /s/
---------------------------------------
Name:
Title:
ATTEST
By: /s/ C.M. Roberts, Jr.
---------------------------------------
Name:
Title:
STOCKHOLDER:
/s/ Wes Hambrick /s/ S.G.
- ------------------------------- --------------------------------------------
WES HAMBRICK STEVE GRINDSTAFF, an individual
ATTEST
/s/ C.M. Roberts, Jr. By: /s/ C.M. Roberts, Jr.
- ------------------------------- ---------------------------------------
WITNESS Name:
Title:
Sword to and subscribed before
me this _____ day of _________, 1997.
___________________________________
Notary Public
My Commission Expires:
___________________________________
32
<PAGE> 33
SUNBELT AUTOMOTIVE GROUP, INC.
2150 COBB PARKWAY
SMYRNA, GEORGIA 30080
================================================================================
February 24, 1998
VIA HAND DELIVERY
Mr. Steve Grindstaff
Grindstaff, Inc.
P.O. Box 430
Elizabethton, TN 37644
Re: Stock Purchase Agreement dated December 27, 1997 (the
"Agreement") by and between Sunbelt Automotive Group, Inc.
("Sunbelt"), BAG TENNESSEE II, INC. (the "Sub"), Grindstaff,
Inc. d/b/a Grindstaff Chevrolet, Chrysler, Plymouth, Dodge
(the "Company"), and Steve Grindstaff and Wes Hambrick
(collectively, the "Stockholder")
Dear Steve:
This letter will confirm our agreement to make the following changes
to the Agreement. For ease of reference, all capitalized terms that are used
not expressly defined in this letter have the meanings given to them in the
Agreement, and the definitions of those terms in the Agreement are incorporated
by reference in this letter.
1. We agree to amend the Agreement by replacing Section 1.1(b)(i) of
the Agreement with the following:
"(b) CLOSING. (i) Subject to the conditions set forth in this
Agreement, the purchase and sale of the GCI Shares pursuant to
this Agreement (the "Closing") shall take place at a location
to be agreed upon by the Parties. Subject to the other conditions
set forth in this Agreement, the Closing of the transactions
contemplated hereby shall take place within thirty (30) days after
receipt of the last approval of the transactions contemplated by
this Agreement by each of General Motors, Chrysler, Plymouth,
Dodge and Kia, provided, however, that the Closing shall take
place no later June 30, 1998 (the "Closing Date Deadline"). The
date on which the Closing occurs is herein referred to as the
"Closing Date."
2. We agree to amend the Agreement by replacing Section 8.1(b)
of the Agreement with the following:
"(b) by either SUNBELT, Sub or the Stockholder if the Closing
shall not have taken place on or prior to the Closing Date
Deadline, or such later date as shall have been approved in
<PAGE> 34
Mr. Steve Grindstaff
February 24, 1998
Page 2
writing by SUNBELT, Sub and the Stockholder, provided that the
terminating party is not otherwise in material breach of its
representations, warranties, covenants or agreements under this
Agreement;"
3. We agree to amend the Agreement by replacing Section 6.7 of the
Agreement with the following:
"6.7 COMPLETION OF DUE DILIGENCE. SUNBELT and Sub shall have
completed their due diligence examination of the Company and GCI
Subsidiary and the results of such examination shall be reasonably
satisfactory to SUNBELT and the Sub; provided, however, that the
conditions contained in this Section 6.7 shall not be a condition
precedent to the Obligations of SUNBELT and the Sub hereunder after the
date that is fourteen (14) days after the date on which SUNBELT and the
Sub receive the Disclosure Schedule described in Article 4 of the
Agreement from the Company and the Stockholder. The Company and the
Stockholder shall deliver said Disclosure Schedule to SUNBELT and the
Sub on or before February 27, 1998."
The Agreement, as modified by this written letter agreement,
constitutes the entire, final and exclusive agrement between the parties, and
supersedes any and all prior written or oral commitments, agreements, and
understandings or modifications. We agree that this letter agrement shall be
governed by and construed in accordance with the laws of the State of Georgia
without giving effect to any choice or conflict of law provision or rule that
would cause the laws of any other jurisdiction to apply. We further agree that
this letter agreement shall be effective as of February 24, 1998.
Please have this letter agreement signed on behalf of the Company and
the Stockholder, to indicate your agreement with these changes to the Agreement,
and return it to me for my files. The enclosed duplicate original of this
letter agreement is for your files.
Sincerely,
/s/ Charles K. Yancey,
--------------------------------
Charles K. Yancey, on behalf of
SUNBELT AUTOMOTIVE GROUP, INC. and
BAG TENNESSEE II, INC.
2
<PAGE> 35
Mr. Steve Grindstaff
February 24, 1998
Page 3
ACCEPTED AND AGREED TO THIS 24TH DAY OF FEBRUARY, 1998.
GRINDSTAFF, INC., a Tennessee corporation
By: /s/ Steve Grindstaff
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
/s/ Steve Grindstaff
-----------------------------------------
STEVE GRINDSTAFF, an individual
3
<PAGE> 1
EXHIBIT 2.6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") dated as of December 11, 1997 is
entered into by and between Hones, Inc. d/b/a Bill Holt Ford Mercury, a North
Carolina corporation ("Seller"), Bill Holt, an individual (the "Shareholder")
and Boomershine Automotive Group, Inc., a Georgia Corporation ("BAG") and BAG
North Carolina I, Inc. its wholly owned subsidiary (the "Buyer").
WITNESSETH
WHEREAS, Seller owns and operates a Ford Mercury automotive dealership
known as Bill Holt Ford Mercury, Inc. (the "Business") located at 4910 Sylva
Highway, Franklin, North Carolina 28734
WHEREAS, Seller desires to sell, assign, transfer and convey and
deliver to the Buyer, certain of the Seller's assets used in the Business of
selling and servicing new and used Ford and Mercury motor vehicles as more
specifically set forth herein;
WHEREAS, Buyer is a wholly owned subsidiary of BAG;
WHEREAS, Buyer desires to purchase from the Seller, certain of the
assets owned by the Seller pursuant to the terms and conditions of this
Agreement;
WHEREAS, Shareholder has a Ford and Mercury Dealer Sales and Service
Agreements with Ford Motor Company and Mercury Motor Company for the sale and
service of new and used Ford and Mercury motor vehicles;
WHEREAS, Buyer desires to acquire from the Shareholder all his right,
title and interest in and to the Ford and Mercury Dealer Sales and Service
Agreements for Franklin, North Carolina; and
WHEREAS, subject to the terms and conditions set forth in this
Agreement, Buyer desires to purchase and receive from Seller, and Seller desires
to sell to Buyer, the Business and substantially all of the assets used in or
arising out of the conduct of the Business at Bill Holt Ford Mercury.
NOW, THEREFORE, in consideration of the mutual promises, covenants,
terms, representations and warranties herein set forth, and other good, valuable
and legal consideration, the receipt of which is hereby acknowledged and
intending to be legally bound, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE
SECTION 1. ASSETS PURCHASED. Subject to and upon the terms and
conditions hereof, and in reliance upon the covenants, representations and
warranties contained herein, Seller agrees to sell, transfer, convey, assign and
deliver to Buyer, and Buyer agrees to
<PAGE> 2
purchase and acquire from Seller, all of Seller's right, title and interest in
and to the following described assets (the "Assets"), at the Closing
SECTION 1.1 FIXED ASSETS. The personal property used in
conducting the Seller's Business (the "Fixed Assets") which will not be
consumed or converted into cash or its equivalent during the current
accounting period which is listed on the audited Balance Sheet as of
December 31, 1996, adjusted to include those Fixed Assets acquired by
Seller and to exclude those Fixed Assets disposed by Seller, in the
ordinary course of business subsequent to the audited Balance Sheet as
of December 31, 1996, and which are listed on Schedule 1.1 which will
be completed and initialled by the parties and attached hereto prior to
Closing and adjusted to the date of Closing;
SECTION 1.2.SPECIAL TOOLS. In addition to the Fixed Assets,
Seller agrees to sell, transfer, convey, assign and deliver to Buyer,
and Buyer agrees to purchase and receive from Seller, all of Seller's
right, title and interest in and to the Special Tool Inventory which is
listed on Schedule 1.2 which will be initialled by the parties and
attached hereto prior to Closing. Seller agrees to provide Buyer with
available manufacturers' written summaries and explanations of the uses
of such Special Tools;
SECTION 1.3.PARTS AND ACCESSORIES. All new, unused, undamaged
and current Ford and Mercury Parts and Accessories (as hereinafter
defined) in Seller's inventory as of the Closing Date (as hereinafter
defined). "New, unused, undamaged and current Ford and Mercury Parts
and Accessories" shall mean and include all new non-scrap parts and
accessories marketed by Ford Motors and Mercury Motors and those new
non-scrap parts and accessories marketed by other Ford and Mercury
wholesale distributors of Ford and Mercury parts and accessories;
SECTION 1.4 NEW CARS AND TRUCKS. All new Ford and Mercury
Passenger cars and trucks, including 1997 and 1998 demonstrators; and,
subject to the provisions of Section 4.2.3, all used cars and trucks in
Seller's inventory, at Closing;
SECTION 1.5 PROGRAM CARS. Those certain "Program Used Cars" of
the Seller;
SECTION 1.6 GOODWILL. The expectation of continued public
patronage of Seller's former business, including the right for Buyer to
represent itself as carrying on the Business in succession to the
Seller including the benefit of all pending contracts, purchase orders
and customer contacts;
SECTION 1.7 RECORDS. Access to, and upon the Buyer's request,
copies of all books, records, information and other written materials
(including those comprised in or derived from data, disks, tapes,
manuals, source codes, flow charts and instructions) directly related
to the employee lists, fleet customer lists, customer lists, supplier
lists, parts lists, price sheets, manuals, marketing materials,
catalogs and any similar items used directly in the Business;
SECTION 1.8 LEASES. All right, title and interest of Seller
under those leases listed on Schedule 1.9 which will be completed and
initialed by the parties and attached hereto prior to Closing;
2
<PAGE> 3
SECTION 1.9 CONTRACTS. All right, title and interest of
Seller under the contracts listed on Schedule 1.10 which will be
completed and initialed by the parties and attached hereto prior to
Closing;
SECTION 1.10 LICENSES. All licenses, permits, authorities and
consents (except those which by law or by their terms are not
transferable) necessary to carry on the Business;
SECTION 1.11 OFFICE SUPPLIES. All office supplies, letterhead,
postage, and similar items related to the Business of Bill Holt Ford
Mercury;
SECTION 1.12 NUTS AND BOLTS. All nuts, bolts, brackets, clips
and similar supplies used in connection with the Business;
SECTION 1.13 OTHER ASSETS. All Seller's right, title end
interest to its Customer List, the Ford and Mercury Dealer Sales and
Service Agreements, all Ford and Mercury service literature, all Ford
and Mercury sales literature, all Ford and Mercury Shop and Parts
manuals and microfiche, all Ford Motors and Mercury Motors point of
purchase materials and all Ford and Mercury signs and display material,
and as set forth on Schedule 1.13;
SECTION 1.14 OTHER. On or before "Closing" or "Closing Date"
the Seller shall deliver to the Buyer a Notarized Bill of Sale
conveying to the Buyer all the above assets sold herein.
ARTICLE II
EXCLUDED ASSETS
SECTION 2 EXCLUDED ASSETS. Seller and Buyer mutually acknowledge and
agree that no assets shall be included in the Assets to be sold, transferred,
conveyed, assigned and delivered to Buyer under the terms of this Agreement
except the assets or rights of the Business which are specifically included in
the Assets as enumerated in Section l hereof and that for the sake of
clarification it is agreed that the Excluded Assets include, but are not limited
to, those items set forth on Schedule 2.0.
ARTICLE III
ASSUMED LIABILITIES
SECTION 3 ASSUMED LIABILITIES. Except as set forth in this Article m or
as listed on Schedule 3 attached hereto (the "Assumed Liabilities") and which
such Schedule 3 (Assumed Liabilities) will be updated immediately prior to
Closing, the Buyer is not assuming or undertaking to assume any liability or
obligation of the Seller, including, but not limited to any indebtedness,
account payable, product warranty, extended warranty obligation, assessment,
tax, penalty, contract, salary, wage, compensation or benefit plan obligation,
whether disclosed, unknown, contingent or fixed, arising out of the conduct or
operation of the Business or otherwise, prior to the time of Closing, or as the
result of the consummation of the transactions
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contemplated by this Agreement (the "Liabilities"). All such Liabilities shall
be and remain the obligation to the Seller.
SECTION 3.1 FLOOR PLAN. Buyer shall either pay in full or
assume Seller's floor plan liability secured by liens on vehicles
referenced in Section 1.4. Buyer also agrees to accept delivery of all
merchandise, including new vehicles, on order at Closing, in accordance
with prior practices, and either pay or floor plan the same. The
holdback applicable to the vehicles on which delivery is accepted by
Buyer after the date of Closing, which has been credited to the account
of the Seller by Ford Motor Credit Company or Mercury Motor
Corporation, will be paid to the Buyer by Seller at Closing, or within
ten (10) days after receipt of such holdback by Seller, which ever is
later.
ARTICLE IV
PURCHASE PRICE OF ASSETS
SECTION 4 PURCHASE PRICE. Subject to the terms and conditions of this
Agreement, in reliance on the representations, warranties and agreements of
Seller and the Shareholder's Covenant Not To Compete contained herein, and in
delivery of the Assets and the Shareholder's Covenant Not To Compete, Buyer
shall, in addition to the assumption of the Assumed Liabilities as provided in
Article III hereof, pay or deliver the following (collectively, the "Purchase
Price"):
SECTION 4.1 EARNEST MONEY. Simultaneous with the signing of
this Agreement, Buyer will deposit Twenty-Five Thousand Dollars
($25,000.00) (the "Earnest Money"), with Chicago Title, as escrow
agent, to be applied toward the Purchase Price to be paid at Closing,
in accordance with the Escrow Agreement Attached hereto as Exhibit 4.1.
SECTION 4.2 CASH. At Closing, Buyer shall deliver to Seller,
for the purchase of the Assets, by cashier's check or other immediately
available funds the following:
4.2.1 Seven Hundred Fifty Thousand Dollars
($750,000.00) for all those assets described in Section 1
herein excepting for the new cars and trucks in Section 1.4
herein and excepting for the used cars, plus the following:
4.2.2 An amount for the new Ford and Mercury
passenger cars and trucks calculated as the cash sum equal to
the factory invoice price to the Seller, less any factory
holdback rebate and less any other factory rebates which the
Seller may have received, or to which the Seller may have
become entitled to receive, plus options added at dealer cost,
plus any freight and handling charges. All 1997 and 1998
demonstrators shall be conveyed for a cash sum equal to an
amount as computed above, less $.10 per mile over 2,500 miles
on the odometer as depreciation for the demo service. The
amount to be paid will be decreased by an amount to equal to
Buyer's actually incurred internal cost of repair for any
physically damaged vehicle at Closing. The Seller and Buyer
shall agree on the dollar cost of each needed repair as of the
Closing.
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4.2.3 An amount for the used vehicles in Seller's
inventory at Closing to be purchased by Buyer. Seller and
Buyer will inspect each used car in the Seller's inventory.
Buyer shall have the right, but not the obligation, to
purchase any of the used cars or trucks in Seller's inventory
at a negotiated price per vehicle. To the extent the used
vehicle scheduled price for any unit is unacceptable to Buyer,
Seller must retain ownership of the unit. In the absence of
agreement by Buyer and Seller at Closing, the Seller agrees
that it will not materially alter Seller's normal used vehicle
stock by pre-Closing wholesale or other disposition outside
the normal course of business. The parties agree to negotiate
in good faith on the purchase of the Seller's used cars and
trucks inventory.
SECTION 4.3 REFUND OF EARNEST MONEY. In the event Seller
wrongfully refuses to Close, Ford Motor Company or Mercury Motor
Company fails to approve Buyer as a Ford or Mercury dealer or in the
event of an adverse ruling under the HSR Act, or upon Seller's or
Shareholder's failure to satisfy the conditions precedent set forth in
this Agreement, Buyer shall be entitled to a full return of the Earnest
Money, plus any interest earned thereon which shall be paid to Buyer.
SECTION 4.4 ALLOCATION OF PURCHASE PRICE. Buyer and Seller
agree that the Purchase Price shall be allocated among the Assets in
the manner set forth on Schedule 4.4 which will be completed and
initialed by the parties and attached hereto prior to Closing. All
federal, state, and local tax returns filed after the Closing by either
Buyer or Seller, including, but not limited to, IRS Form 8594, will
contain valuations which are consistent with the valuations set forth
on Schedule 4.4 .
ARTICLE V
PURCHASE AND SALE OF REAL ESTATE
SECTION 5. PURCHASE AND SALE OF REAL ESTATE. Seller and Shareholder
shall cause the real property upon which the Bill Holt Ford Mercury automotive
dealership is located (the "Subject Property") to be sold to the Buyer or its
assign as a part of the business transaction herein. Seller and Shareholder
shall cause the owner of such real property to execute a contract for the
purchase and sale of the real property prior to the Closing herein. The purchase
price for the real estate shall be Two Million Five Hundred Thousand Dollars
($2,500,000.00).
ARTICLE VI
TAXES
SECTION 6. TAXES. Seller shall be responsible for and shall have paid
prior to Closing any and all State of North Carolina sales and use taxes, excise
taxes, federal luxury taxes, withholding taxes, and all other state and federal
taxes related to its automobile business prior to Closing. This covenant and
obligation shall survive Closing. Seller shall be responsible for all other
state and federal taxes, penalties, and fines owed by the Seller. Seller and
Shareholder agree to indemnify, defend and hold Buyer harmless from and against
any and all losses, liabilities, obligations, claims, costs, and expenses
(including attorney's fees) arising out of and resulting
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from the Seller's failure to pay such taxes, penalties or fined to the extent
such failure effects Buyer's title or use of the Assets and subject property
purchased herein.
ARTICLE VII
CLOSING;
SECTION 7. CLOSING. The closing of the transactions contemplated hereby
(the "Closing") shall take place within five (5) business days after the later
of the last manufacturers' approval of the Buyer or its assigns as Dealer Sales
and Service Representatives and after Buyer's or its assignee's obtainment of
its financing for the business transaction contemplated herein and after
consummation of the purchase, sale and transfer of title of the real property,
but in no event later than January 31, 1998, at such time and place as is
mutually agreed in writing by the parties. The date on which the Closing
actually occurs is hereinafter referred to as the "Closing Date". The Closing
Date may be postponed to a later date by the mutual written agreement of the
parties.
ARTICLE VIII
TRANSACTIONS AT CLOSING
SECTION 8. TRANSACTIONS AT CLOSING. The following transactions shall
take place at Closing:
SECTION 8.1 DELIVERIES BY SELLER AND SHAREHOLDER. At the Closing, the
Seller and the Shareholder shall deliver the following to the Buyer:
8.1.1 A Warranty Bill of Sale in the form as attached hereto
as Schedule 8.1.1 (copy to be attached prior to signing) and
all other instruments of sale, transfer, assignment or
conveyance as are necessary, in a form reasonably satisfactory
to Buyer, to convey to Buyer all Seller's right, title and
interest in and to the Assets, to the extent and as provided
in Article I;
8.1.2 Any instruments and other documents specifically
enumerated in and required by this Agreement;
8.1.3 Copies of resolutions of the Board of Directors of the
Seller, duly certified by its Secretary, in form reasonably
satisfactory to Buyer's counsel, authorizing the execution,
delivery and performance of this Agreement, the Assumption
Agreement and the Escrow Agreement and all action to be taken
by Seller hereunder;
8.1.4 The Assignment and Assumption Agreement in the form as
attached hereto as Exhibit 8.1.4 for the Assumed Liabilities
set forth on Schedule 3 duly executed by Seller;
8.1.5 A Seller's Certificate in the form as attached hereto as
Exhibit 8.1.5 duly executed by Seller; and
8.1.6 The Records referred to in Section 1.7;
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8.1.7 Any other instruments or documents deemed reasonably
necessary or desirable by the Buyer in order to consummate the
transactions contemplated hereby;
8.1.8 Copies of the resolutions and approvals of Seller's
Shareholder(s) of the sale herein.
SECTION 8.2 DELIVERIES BY BUYER. At the Closing, the Buyer shall
deliver the following to the Seller:
8.2.1 The Purchase Price;
8.2.2 Any instrument and other documents specifically
enumerated in Section 10;
8.2.3 The Assignment and Assumption Agreement duly executed by
Buyer;
8.2.4 Copies of resolutions of the Board of Directors of the
Buyer, duly certified by its Secretary, in form reasonably
satisfactory to Seller's counsel, authorizing the execution,
delivery and performance of this Agreement, the Assumption
Agreement and the Escrow Agreement and all action to be taken
by Buyer hereunder;
8.2.5 A Buyer's Certificate in the form as attached hereto as
Exhibit 8.2.5 duly executed by Buyer; and
8.2.6 Copies of resolutions of the Board of Directors of
Boomershine Automotive Group, Inc., duly certified by its
Secretary, in form reasonably satisfactory to Seller's
counsel, authorizing the execution, delivery and performance
of this Agreement.
8.2.7 Any other instruments or documents deemed reasonably
necessary or desirable by the Seller in order to consummate
the transactions contemplated hereby, including any other
instruments or documents deemed reasonably necessary or
desirable by the Seller in order for Boomershine Automotive
Group, Inc. to consummate this Agreement in accordance with
the undertaking and tenor hereof.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF THE SELLER
SECTION 9 REPRESENTATIONS AND WARRANTIES OF THE SELLER. In order to
induce the Buyer to enter into this Agreement, the Seller represents, warrants
and covenants to the Buyer, effective as of the date of this Agreement and again
at Closing, each of the following:
SECTION 9.1 ORGANIZATION AND STANDING. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
North Carolina, and is duly qualified to do business as a foreign corporation
and is in good standing in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of the
Business requires it to be so qualified.
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SECTION 9.2 POWER AND AUTHORITY. Seller is a corporation duly organized
and validly existing in good standing under the laws of the State of North
Carolina and has the corporate power and authority to enter into and perform
this Agreement and the transactions contemplated herein. The Shareholder has the
power and authority to enter into and perform this Agreement and the
transactions contemplated herein.
SECTION 9.3 NO CONFLICTS. Seller's execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
do not and will not (i) conflict with or violate any provision of any law,
judgment, governmental rule, regulation or order binding upon Seller or of
Seller's Articles of Incorporation or Bylaws, or (ii) result in the breach of,
or the imposition of any lien, charge, encumbrance or security interest on any
of the Assets pursuant to, or constitute default under, any agreement or
instrument to which Seller is a party or by which Seller is bound.
SECTION 9.4 FINANCIAL STATEMENTS. The Seller has delivered to the Buyer
copies of the following financial statements (collectively referred to herein as
the "Financial Statements") of the Seller at Schedule 9.4:
9.4.1 Dealer Financial and Balance Sheet, as of October 31,
1997.
9.4.2 Dealer Income Statement, as of October 31, 1997.
9.4.3 Balance Sheets and Income Statements for the fiscal
years ended December 31, 1995 and December 31, 1996.
9.4.4 Audited Financial Statements for the fiscal years ending
on December 31, 1995 and December 31, 1996.
To the best of Seller's information, knowledged and belief, the
Financial Statements, including the notes thereto, are true and correct in all
respects and have been compiled in accordance with Ford and Mercury
Corporations' Standard Dealer Financial Statement practices and applied on a
consistent basis throughout the periods indicated. Without limitation of the
foregoing, the Balance Sheet described in 9.4.1 above presents fairly the
financial position of the Seller as of the date indicated thereon, and the
Income Statement described in 9.4.2 above represents fairly the results of
operations of the Seller for the period indicated thereon.
SECTION 9.5 TITLE AND RELATED MATTERS. Seller will convey at Closing
good and marketable title to all of the Assets, and Seller transfers at Closing
such Assets to Buyer free and clear of any and all liens, leases, licenses,
mortgages, pledges, claims, security interests and other encumbrances other than
those that Buyer has specifically agreed to assume.
SECTION 9.6 CONTRACTS, AGREEMENTS AND ADVERSE RESTRICTIONS. All such
contracts and agreements validly entered into by the Seller are in full force
and effect and are binding upon the parties thereto and none of the parties is
in breach of any of the provisions thereof. The Seller is not party to any
contract, agreement or other commitment or instrument or subject to any charter
or other corporate restriction, judgment, order, writ, injunction, decree or
award which, singularly or in the aggregate, materially or adversely affects or
is likely to materially or adversely affect the Business or other operations,
properties, Assets or condition (financial or otherwise) of the Seller.
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SECTION 9.7 LITIGATION AND OTHER PROCEEDINGS. The Seller is not a
party to any pending or threatened claim, action, suit, investigation or
proceeding, nor is it subject to any order, judgment or decree, except for
matters which, in the aggregate, would not have or cannot reasonably be expected
to have, a material adverse effect on the financial condition, results of
operation or Business of the Seller, and none that would relate to or affect the
proposed transaction hereunder.
SECTION 9.8 ENVIRONMENTAL PROTECTION. To the best of Seller's and
Shareholder's information, knowledge and belief, the real property currently
owned, leased or otherwise utilized by the Seller contains no spill, deposit,
release or discharge of any Hazardous Substance, as that term is currently
defined under the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") or any analogous state law. Neither the Seller nor the
Shareholder has received any notification from any governmental authority or any
other person, nor does the Seller or the Shareholder have any knowledge that any
of the current or former properties, Assets or operations of the Seller or its
former subsidiaries, if any, are in violation of any applicable Environmental
Laws.
9.8.1 PHASE II AUDIT. The Seller will obtain at the Seller's
sole expense and deliver to Buyer a Phase II Environmental Audit of the
Seller's real property.
SECTION 9.9 EMPLOYMENT CONTRACTS AND EMPLOYEE BENEFIT PLANS. There
have been no material defaults, breaches, omissions or other failings by the
Seller or any fiduciary under any pension, bonus, profit sharing, retirement,
stock option, medical expense, dental expense, hospitalization, life insurance
or other death benefit, severance, and other benefit plans, agreements,
arrangements or other programs providing enumeration of benefits for Seller's
employees, including available vacation of Seller's employees.
SECTION 9.10 BROKERS AND FINDERS. The Seller has not employed, directly
or indirectly for the Seller's benefit, any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finders' fees, and no broker or finder has acted directly or indirectly for the
Seller in connection with this Agreement or the transactions contemplated
hereby.
SECTION 9.11 EQUIPMENT. To the best of Seller's information, knowledge
and belief, the equipment listed under Fixed Assets is in good repair and
operating conditions and has been regularly and properly maintained and fully
serviced and is suitable for the purposes for which it is presently being used.
SECTION 9.12 CONTINUATION OF BUSINESS. The Seller and Shareholder know
of no reason why the Business will not continue on in the same manner following
the execution of this Agreement and the Closing as it has been operated prior
thereto, except to the extent that the Buyer causes the Business to change
following the Closing. The Seller has no reason to believe that at any time in
the foreseeable future the Business shall be materially or adversely affected by
any event, including but not limited to the loss of customers of its Business,
the reduction in the probability of any existing, pending, or anticipated
contracts or projects of its Business, or otherwise, except to the extent that
the Buyer causes the Business to change following the Closing. The Seller will
use its best efforts to cause the employees, agents, and independent contractors
who have performed services as a part of the Business in the past to continue to
do so following the Closing, to the extent the Buyer so requests.
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SECTION 9.13 COMPLIANCE WITH LAWS. The Seller has no knowledge of any
governmental proceeding or investigation involving the Seller, or has any reason
to believe that any such proceeding or investigation is pending or threatened or
that there exists any basis for any such proceeding or investigation which
materially adversely affects the Business or property of the Seller. The Seller
has no knowledge of any facts which might reasonably be believed to be a basis
for any other action, suit, proceeding, arbitration, claim, or counterclaim
against the Seller which materially adversely affects the Business or property
of the Seller. There are no known existing violations of federal, state or local
laws, ordinances, rules, codes, regulations or orders by the Seller which
materially affect the Business or property of the Seller or the possession, use,
occupancy or operation of any of its facilities or Business.
SECTION 9.14 NO CHANGES. The Seller has not, since October 31, 1997,
(a) operated the Business except in the ordinary course of business; (b)
incurred any debts, liabilities or obligations except as in the ordinary course
of business; (c) discharged or satisfied any liens or encumbrances, or paid any
debts, liabilities or obligations, except in the ordinary course of business;
(d) mortgaged, pledged or subjected to lien or other encumbrance any of its
Assets, tangible or intangible, except in the ordinary course of business; (e)
sold or transferred any of its tangible Assets, or canceled any debts or claims,
except, in each case, in the ordinary course of business; or (f) suffered any
losses or waived any rights which might have a material adverse effect of the
financial condition, Business, results of operations, properties, or Assets of
the Seller.
SECTION 9.15 REAL PROPERTY. Seller is the owner of the Real Property
herein; and has all right, title, and interest in the same; and has taken or
will take all appropriate steps to convey title to the same by Limited Warranty
Deed to Buyer or its assignees.
SECTION 9.16 SHAREHOLDER APPROVAL. All of the issued and outstanding
capital stock of Seller is owned by Bill Holt ("Stockholder"); and the
Stockholder has duly consented to the consummation of the transactions
contemplated herein.
SECTION 9.17 FULL DISCLOSURE. To the best of Seller's knowledge and
belief, all statements, representations and warranties made by Seller and
Shareholder to the Buyer in this Agreement are true and correct. No
representation or warranty of the Seller or Shareholder in this Agreement,
including without limitation, the information in the Schedules and Exhibits
attached to this Agreement, contains any untrue statement of material fact or
omits to state any material fact necessary in order to make the statements
herein, in light of the circumstances in which they are made, not misleading.
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 10 REPRESENTATIONS AND WARRANTIES OF BUYER. The Buyer
represents and warrants to the Seller and the Shareholder effective as of the
date of this Agreement and again at Closing, as follows:
SECTION 10.1 ORGANIZATION AND STANDING OF BUYER. The Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Georgia.
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SECTION 10.2 AUTHORIZATION. The Buyer has full power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
SECTION 10.3 NO CONFLICT. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate, conflict with, or result in a breach of any provision of or constitute
a default (or event which, with the giving of notice or lapse of time, or both,
would constitute a default) under or result in the termination of or accelerate
the performance required by or result in a right of termination or acceleration
under or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Buyer under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which the
Buyer is ar party or to which the Buyer may be subject.
SECTION 10.4 BROKERS AND FINDERS. Buyer has not employed, directly or
indirectly, any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finders' fees, and no broker or
finder has acted directly or indirectly for Buyer in connection with this
Agreement or the transactions contemplated hereby.
ARTICLE XI
BUYER'S CONDITIONS TO CLOSING
SECTION 11 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER. The
obligation of the Buyer to effect the transaction shall be subject, at its
option, to the fulfillment prior to the Closing Date of each of the following
conditions, each of which can be waived by the Buyer, but only in writing:
SECTION 11.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations, warranties, covenants and agreement made by the Seller and the
Shareholder in, or pursuant to, this Agreement shall be true and correct as of
the date hereof and shall be deemed to have been made again at Closing and shall
then be true and correct.
SECTION 11.2 COMPLIANCE WITH AGREEMENT. The Seller and the Shareholder
shall have fully performed and strictly complied with all of their covenants,
agreements, conditions and obligations under this Agreement to be performed or
complied with by Seller and Shareholder on or prior to the Closing Date and the
Seller and Shareholder shall have delivered to the Buyer a duly executed
Agreement.
SECTION 11.3 THIRD PARTY CONSENTS. This Agreement and the transactions
contemplated hereby shall have received all approvals, consents, authorizations,
and waivers from governmental and other regulatory agencies and other third
parties, including lenders and lessors, and including, but not limited to,
approval of Buyer as a Franklin, North Carolina dealer under both the Ford and
Mercury Corporation Dealer Sales and Service Agreement, required to consummate
the transaction.
SECTION 11.4 ABSENCE OF LITIGATION. No material action, suit or
proceeding before any court or any governmental body or authority pertaining to
this transaction, contemplated by this Agreement, or to its consummation, shall
have been instituted or threatened on or before the Closing Date.
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SECTION 11.5 SALE OF REAL PROPERTY. The transfer and conveyance by
limited warranty deed of the Real Property.
SECTION 11.6 LEASES. All material personal property leases have been
assigned to the Buyer upon terms acceptable to Buyer.
SECTION 11.7 ENVIRONMENTAL REPORT. Buyer shall have obtained, at
Seller's sole cost and expense, a Phase II Environmental Audit, the results of
which are reasonably satisfactory to Buyer.
SECTION 11.8 PHYSICAL INVENTORY. Buyer shall have received, at Buyer's
sole cost and expense, a physical inventory of all units, parts, accessories
and the new and used car and truck inventory prepared by a designee of Buyer,
the results of which are satisfactory to Buyer in Buyer's sole discretion. Such
physical inventory shall have been completed in the presence of any agent of
the Seller, and agent of the Buyer and a designee of the Buyer.
SECTION 11.9 APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments and other documents delivered to the Buyer under this
Agreement shall be satisfactory in all reasonable respects to Buyer and its
counsel.
SECTION 11.10 HART-SCOTT-RODINO ACT. The applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "Act"), and
regulations promulgated thereunder, shall have expired.
SECTION 11.11 OTHERS.
11.11.1 The receipt, before January 31, 1998, or before such time as
the parties mutually agree in writing, of the approval of the Buyer (or
its assignee) granting Buyer (or its assignee) of a customary Dealer
Sales and Service Agreement Recognizing the Buyer (or its assignee) to
be an authorized Dealer for the sale and service at the Buyer's
premises at 4910 Sylva Highway, Franklin, North Carolina of the full
line of all Ford and Mercury vehicles now or hereafter offered for sale
by Seller; the Factory Approval of Ford and Mercury of Buyer's
acquisition of the Ford and Mercury franchise at its location at 4910
Sylva Highway, Franklin, North Carolina, and Ford and Mercury approval
and the Factory Approvals of Ford and Mercury of Ford and Mercury of
Buyer as a Ford and Mercury franchise dealer without any contingencies
including, but not limited to, any requirements for capital
expenditures by the Buyer. Seller agrees to cooperate with the Buyer in
connection with obtaining these approvals. If approval is not obtained
by January 31, 1998 and no extensions in writing are obtained as set
forth herein, upon written notice from Buyer to Seller on or before
January 31, 1998 as otherwise set forth herein, the escrow money paid
herein shall be returned to Buyer and this Agreement voided in its
entirety.
11.11.2 Receipt by Buyer of the Assets free and clear of all liens,
claims, security interests, encumbrances, and restrictions of any kind
or nature.
11.11.3 Seller's delivery to Buyer at Closing of appropriate good
standing certificates and corporate resolutions authorizing the
transaction contemplated hereunder.
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11.11.4 Approval of the Possible Acquisition by the Boards of
Directors of the Seller and the Buyer.
11.11.5 Approval of this Agreement by Shareholders of the Seller.
11.11.6 A satisfactory covenant not to compete between the
Shareholder and the Buyer.
11.11.7 Receipt, review and acceptance by Buyer's auditors of all
audited financials of the Seller or the completion by the Buyer of
certified audits of the Seller for fiscal 1995 and fiscal 1996.
ARTICLE XII
SELLER'S CONDITIONS TO CLOSING
SECTION 12 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER. The
obligation of the Seller to effect the transaction shall be subject, at its
option, to the fulfillment prior to the Closing Date of the following
additional conditions each of which can be waived by the Seller, but only in
writing.
SECTION 12.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties made by the Buyer in or pursuant to this
Agreement shall be true and correct as of the date hereof and shall be deemed
to have been made again at Closing and shall then be true and correct.
SECTION 12.2 COMPLIANCE WITH AGREEMENT. The Buyer shall have performed
and complied with all of its obligations under this Agreement that are to be
performed or complied with by it at, or prior to, the Closing and the Buyer
shall have delivered to the Seller a duly executed Agreement.
SECTION 12.3 DELIVERY OF PURCHASE PRICE. The Seller shall have
received the Purchase Price in accordance with Article IV hereof.
SECTION 12.4 APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments and other documents delivered to Seller under this
Agreement shall be satisfactory in all reasonable respects to Seller and its
counsel.
ARTICLE XIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
SECTION 13 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. No
representations and warranties made by the parties in this Agreement or in any
certificate, schedule, statement, document or instrument furnished hereunder or
in connection with the negotiation, execution and performance of this Agreement
shall survive the Closing.
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ARTICLE XIV
COVENANT NOT TO COMPETE
SECTION 14.1 SHAREHOLDER'S AND SELLER'S COVENANT NOT TO COMPETE.
Because of the sale of the Business involves the sale of the goodwill of the
Seller, both the Shareholder and the Seller agree that they will not, either
directly or indirectly, alone or with others, either as an employee, owner,
partner, agent, stockholder, member, director, officer or otherwise, enter into
or engage in the business of operating a car dealership, warranty repair
business or other related business which may compete directly or indirectly
with the Buyer (the "Competitive Business") within the area of Franklin, Macon
County, North Carolina (the "Restricted Area"), for a term which shall be the
greater of: (a) three (3) years from the Closing Date; (b) such other period of
time as may be the maximum permissible period for enforceability of this
covenant under applicable law (the "Restrictive Period"). Neither the
Shareholder nor the Seller will individually, collectively or in conjunction
with others, directly or indirectly, within the Restricted Period and
Restricted Area, (i) (solicit any Competitive Business from any person or
entity which was a customer of the Seller during the twelve (12) months prior
to the date of Closing;), Buyer acknowledges that Seller may be approached by
former customers or a former customer may respond to a general solicitation for
business through print, radio or television advertisement, none of which shall
be in violation of this paragraph; (ii) enter the employ of or render any
services to, any person engaged in the Competitive Business; or (iii) directly
or indirectly solicit any employee of the Buyer or encourage any such employee
to leave such employment unless such employee has already terminated such
employment with the Buyer or the Buyer or the Seller have mutually agreed in
advance to the solicitation or employment. The Seller and the Shareholder also
agree that in the event of a breach of these covenants, the Buyer may protect
its property rights in the goodwill of the Business by injunction or otherwise.
SECTION 14.2 BUYER'S COVENANT NOT TO SOLICIT SELLER'S EMPLOYEES. In
the event there is no Closing pursuant to this Agreement, Buyer agrees for a
period of twelve (12) months from the date of this Agreement, not to directly
or indirectly solicit or hire any employee of the Seller or encourage any such
employee to leave such employment unless such employee has already terminated
such employment with the Seller or the Buyer and Seller have mutually agreed in
advance to the solicitation or employment.
SECTION 14.3 SELLER'S AND SHAREHOLDER'S NONDISCLOSURE OF CONFIDENTIAL
INFORMATION. Both the Seller and the Shareholder recognize and acknowledge that
they have in the past, they currently have, and in the future may possibly have
access to certain confidential information of the Business, including, but not
limited to, lists of accounts, operational policies, and pricing and cost
policies that are valuable, special and unique assets of the Business (the
"Confidential Information"). Except as regards the continuing business of
Seller and/or any business in which the Shareholder has an interest which his
not restricted or prohibited by the provisions of Section 14.l, the Seller and
the Shareholder agree that they will not disclose such Confidential Information
to any person, firm, corporation, association or other entity for any purpose
or reason whatsoever, except to authorized representatives of the Buyer, or as
required by law, unless such Confidential Information becomes known to the
public generally through no fault of the Seller or Shareholder. In the event of
a breach or threatened breach by the Seller or Shareholder of the provisions of
this Section 14.3, the Buyer shall be entitled to an injunction restraining the
Seller or Shareholder from disclosing, in whole or in part, such Confidential
Information. Nothing herein shall be construed as prohibiting the Buyer from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
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SECTION 14.4 BUYER'S NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Buyer
recognizes and acknowledges that it has in the past, it currently has, and in
the future may possibly have access to certain confidential information of the
Seller and the Seller's Business, including, but not limited to, lists of
accounts, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the Business (the "Confidential
Information"). The Buyer agrees that it will not disclose such Confidential
Information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except to affiliated and authorized
representatives of the Buyer, or as required by law, unless such Confidential
Information becomes known to the public generally through no fault of the
Buyer. In the event of a breach or threatened breach by the Buyer of the
provisions of this Section 14.4, the Seller shall be entitled to an injunction
restraining the Buyer from disclosing, in whole or in part, such Confidential
Information. Nothing herein shall be construed as prohibiting the Seller from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
ARTICLE XV
TERMINATION
SECTION 15.1 BY MUTUAL CONSENT. This Agreement may be terminated by
the written consent of the parties.
SECTION 15.2 BY THE BUYER. This Agreement may be terminated by written
notice of termination given by the Buyer to the Seller if a material default
should be made by the Seller or the Shareholder in observance of or in the due
and timely performance by Seller or Shareholder of any of the agreements and
covenants herein contained, or if there shall have been a material breach by
the Seller or the Shareholder of any of the warranties and representations
herein contained, or if the contentions of this Agreement to be complied with
or performed by the Seller or the Shareholder at or before Closing shall not
have been complied with or performed at the time required for such compliance
or performance and such no compliance or nonperformance shall not have been
waived by the Buyer.
SECTION 15.3 BY THE SELLER AND THE SHAREHOLDER. This Agreement may be
terminated by written notice of termination given by the Seller and/or the
Shareholder to the Buyer if a material default should be made by the Buyer in
the observance of or in the due and timely performance by the Buyer of any
agreements and covenants of the Buyer herein contained, or if there shall have
been a material breach by the Buyer of any of the warranties and
representations of the Buyer, or if the conditions of this Agreement to be
complied with or performed by the Buyer at or before Closing shall not have
been complied with or performed at the time required for such compliance or
performance and such noncompliance or nonperformance shall not have been waived
by Buyer need not consult with, or obtain the consent of the Seller) and in the
Buyer's sole discretion prosecute, litigate, settle and perform such other
actions as the Buyer may deem necessary in order fully to protect the Buyer's
interests, and the Seller will remain responsible for indemnification of the
Buyer to the full extent provided in this Article XIV.
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ARTICLE XVI
ADDITIONAL AGREEMENTS AND COVENANTS
SECTION 16.1 BULK SALES COMPLIANCE. Buyer hereby waives compliance by
Seller with the provisions of any applicable bulk sales law, and the parties
acknowledge that such compliance shall not be a condition precedent to the
Closing. Furthermore, Seller and Shareholder warrant and agree to pay and
discharge when due, and indemnify and hold Buyer fully harmless from, all
claims of creditors which could be asserted against Buyer by reason of such
noncompliance with any applicable bulk sales law.
SECTION 16.2 PRE-CLOSING COVENANTS.
16.2.1 NOTICES AND CONSENTS. The Seller will give any notices to
third parties and will use its best efforts to obtain any
applicable third party consents.
16.2.2 CONDUCT OF BUSINESS BY THE COMPANY PRIOR TO THE CLOSING.
During the time period from the date of this Agreement to the
earlier of the Closing Date or the termination of this
Agreement, the Seller shall: (a) conduct its operations
according to their ordinary and usual course of business
reasonably consistent with past and current practices in
light of the Seller's current financial position and use its
best efforts to maintain and preserve its business
organization properties substantially intact, employees and
advantageous business relationships, and retain the services
of its officers and key employees and the Seller will not
engage in any practice, take any action, or enter into any
transaction outside the ordinary course of business. Without
limiting the generality of the foregoing, the Seller will not
hold any kind of liquidation or going out of business sale;
(b) not incur any indebtedness for borrowed money, or assume,
guarantee, endorse or otherwise as an accommodation, become
responsible for the obligations of any other individual or
entity or make any loan or advance other than in the ordinary
course of business; (c) not sell, transfer, mortgage,
encumber or otherwise dispose of any of the Seller's
properties or Assets, or cancel, release or assign any
indebtedness of the Seller or any claims held by the Seller,
except in the ordinary course of business or pursuant to
contracts or agreements in force at the date of this
Agreement; (d) not make any investment either by purchase of
stock or securities, contributions to capital, property
transfers, or purchase of any property or assets of any other
individual, corporation or other entity, except for
transactions in the ordinary course of the Seller's business;
(e) except for transactions in the ordinary course of the
Seller's business, not enter into or terminate any contracts,
other than renewals of contracts and leases without adverse
changes of terms; (f) not increase in any manner the
compensation or fringe benefits of any of the Seller's
employees or officers or pay any pension or retirement
allowance not required by any existing plan or agreement, to
any such employees or officers, or become a party to, amend
or commit itself to any pension, retirement, profit-sharing
or welfare benefit plan or agreement or employment agreement
with or for the benefit of any employee or officer or other
person other than payments consistent past practices and
current incentive compensation plans; (g) not agree to, or
make any commitment to, take any of the actions prohibited by
this Section 15.2.2; (h) not settle any claim, action or
proceeding involving money damages, except in the ordinary
course of business; (i) not make any changes in the Articles
of
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Incorporation or Bylaws of the Seller; (j) not change its
past practices in the acquisition and sale of its used car
inventory; or (k) not change its past practices in the
acquisition and sale of its new car inventory, including but
not limited to, its past practices in the acquisition and
sale of conversion vans.
16.2.3 FULL ACCESS. Strictly subject to the provisions of
Section 14.4, the Seller will permit representatives of the
Buyer to have full access, at all reasonable times, and in a
manner so as not to interfere with the normal business
operations of the Seller, to the Seller's records and
facilities.
16.2.4 NOTICE OF DEVELOPMENTS. The Seller will give prompt
written notice to the Buyer of any material adverse
development causing a breach of any of the representations
and warranties above of which the Seller has knowledge.
16.2.5 STANDSTILL. From the date hereof and through the date of
termination of this Agreement, the Seller shall not, directly
or indirectly, through any officer, director, agent or
otherwise, solicit, or initiate submission of any proposal or
offer from any person or entity (including any of their
officers or employees) relating to any liquidation,
dissolution, recapitalization, merger, consolidation,
acquisition or purchase of all or a material portion of the
Seller's Assets, or any equity interest in the Seller, or
participate in any negotiations regarding, or furnish to any
other person any information with respect to, or otherwise
cooperate in any manner with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other
person or entity to do or seek any of the foregoing.
16.2.6 TECHNICAL ASSISTANCE. Both Buyer and Seller each agree to
use their best efforts to create a workable, smooth and
orderly transition between Seller's and Buyer's operation of
the Business and agree to cooperate in executing the
transactions contemplated by this Agreement.
16.2.7 RISK OF LOSS. Risk of loss or damage by fire or other
casualty to the Assets before Closing is assumed by Seller.
In the event of a material loss or damage to the Assets,
Buyer shall have the option to terminate this Agreement,
provided the Real Estate Agreement is also terminated.
16.2.8 HSR NOTIFICATION. Between the date of this Agreement and
the Closing Date, the Buyer shall, if and to the extent
required by law, file all reports or other documents required
or requested by the Federal Trade Commission ("FTC") or the
United States Department of Justice ("Justice Department")
under the HSR Act, and all regulations promulgated
thereunder, concerning the transactions contemplated hereby,
and comply promptly with any requests by the FTC or Justice
Department for additional information concerning such
transactions, so that the waiting period specified in the HSR
Act will expire as soon as reasonably possible after the
execution and delivery of this Agreement. The parties agree
to furnish to one another such information concerning the
Buyer, the Seller, the Shareholder and the Business as the
parties need to perform their obligations hereunder. The
Buyer agrees to pay all filing fees and costs due
governmental agencies with regard to HSR notification and
compliance.
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SECTION 16.4 WASTE DISPOSAL. Seller agrees, at its sole cost, to
properly dispose of all pollutants, contaminants, or hazardous or toxic
materials or wastes, if any, accumulated by Seller prior to Closing and located
on any of the properties of the Business.
SECTION 16.5 WE OWES. Seller agrees to reimburse Buyer for the cost
of Seller's We Owes accumulated prior to Closing and performed by the Buyer
after Closing. "We Owes" is a term of art in the automobile dealer industry and
its meaning for purposes of this Agreement shall be the same as it is used in
such industry.
SECTION 16.6 RETURN RESERVE. Seller agrees to assign and transfer its
parts and accessories return reserve to the Buyer and allow Buyer to
participate in such return reserve accumulated prior to Closing.
SECTION 16.7 BILLED WEEK. The parties will cooperate on or transfer
of inbound units prior to Closing to properly reflect the billed week
associated with either Buyer or Seller, as appropriate, using Ford and Mercury
related dealer codes.
SECTION 16.8 UTILITY AND TELEPHONE SERVICE. Seller agrees to sign
over all utility and telephone services, including telephone number, to Buyer
once Closing becomes imminent. Seller agrees to allow Buyer to assume all
utility and telephone deposits except that all refundable deposits shall remain
the property of the Seller. Seller agrees to use its best efforts to assure
that there will be no breaks or discontinuances of any utility or telephone
services upon Closing.
SECTION 16.9 EMPLOYEE LIST. Seller agrees to provide, at least 30
days prior to Closing, a list of all employees of the Seller. Such list shall
contain the employee's name, employment description, annual compensation or
formula for computing such annual compensation, accrued vacation and tentative
vacation plans.
SECTION 16.10 WALK THROUGH. Prior to Closing, Seller agrees to allow
an agent of the Buyer access to the Business premises and all facilities
thereon for the purpose of observing the Fixed Assets and the Heavy Line Shop
equipment and any other such assets and matters.
SECTION 16.11 USED CAR INVENTORY. Seller agrees to continue its
ordinary course of business and past practices in selling its used car
inventory up to the Closing Date, and agrees not to sell a substantial
inventory up to the Closing Date, and agrees not to sell a substantial portion
of its best used cars in contemplation of Closing. The parties agree to
negotiate in good faith on the purchase of the used car inventory.
ARTICLE XVIII
GENERAL PROVISIONS
SECTION 18.1 ENTIRE AGREEMENT. This Agreement contains and
constitutes the entire agreement between the parties regarding the subject
matter hereof and supersedes all prior agreements and understandings between
the parties relating to the subject matter of this Agreement. There are no
agreements, understandings, restrictions, warranties or representations between
the parties relating to the subject matter hereof other than those set forth in
this Agreement. All exhibits and schedules attached to this Agreement are
hereby incorporated
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into this Agreement and made a part of this Agreement by reference. This
instrument is not intended to have any legal effect whatsoever, or to be a
legally binding agreement, or any evidence thereof, until it has been signed by
the Seller, the Shareholder and the Buyer.
SECTION 18.2 THIRD PARTY CONSENTS. The Seller and the Buyer mutually
agree to operate and use their respective best efforts to prepare all
documentation, to effect all filings and to obtain all permits, governmental
bodies as may be necessary to consummate the transactions contemplated by this
Agreement.
SECTION 18.3 FURTHER ACTIONS. From time to time, as and when
requested by any party hereto, the other party shall execute and deliver, or
cause to be executed and delivered, all such documents and instruments and
shall take, or cause to be taken, all such further or other actions as such
other party may reasonably deem necessary or desirable to consummate the
transactions contemplated by this Agreement.
SECTION 18.4 PUBLICITY. The parties hereto agree that no public
release or announcement concerning the terms of the transaction contemplated by
this Agreement shall be issued by any party without the prior written consent
of the other parties (which consent shall not unreasonably be withheld), except
as such release or announcement may be required by law, in which cased the
party required to make the release or announcement shall allow the other
parties reasonable time to comment on such release or announcement in advance
of such issuance.
SECTION 18.5 SALES AND TRANSFER TAXES. All sales and transfer taxes,
if any, incurred in connection with the transfer of the Assets contemplated
hereby shall be borne by the Buyer excepting for any such taxes owed prior to
closing herein which shall be borne by the Seller.
SECTION 18.6 AMENDMENT. This Agreement may not be amended, modified
or terminated except by an instrument in writing signed by all the parties to
this Agreement.
SECTION 18.7 GOVERNING LAW. This Agreement shall be construed,
enforced and governed in accordance with the laws of the State of Georgia.
SECTION 18.8 CONSTRUCTION. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter gender thereof or
to be the plurals of each, as the identity of the person or persons or the
context may require. The descriptive headings contained in this Agreement are
for reference purposes only and are not intended to describe, interpret, define
or limit the scope, extent or intent of this Agreement or any provision
contained in this Agreement.
SECTION 18.9 SEVERABILITY. If any provision contained in this
Agreement shall for any reason be held to be invalid, illegal, void or
unenforceable in any respect, such provision shall be deemed modified so as to
constitute a provision conforming as nearly as possible to such invalid,
illegal, void or unenforceable provision which still remaining valid and
enforceable; and the remaining terms or provisions contained herein shall not
be affected thereby.
SECTION 18.10 BINDING EFFECT AND ASSIGNMENT. This Agreement shall be
binding upon, and inure to the benefit of, the parties and their respective
legal representatives, successors, and permitted assigns. Only with the prior
written consent of the Seller, which consent will not be unreasonably denied,
the Buyer may assign its rights under this Agreement to a related entity, and
the Buyer and its assignee shall be fully obligated, responsible
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<PAGE> 20
and liable for performance of the Buyer's obligations hereunder regardless of
any such assignment. The Seller and the Shareholder may not assign any of their
rights or delegate any of their obligations hereunder. Any assignment in
violation hereof shall be void.
SECTION 18.11 ATTORNEYS' FEES. In the event any party institutes
litigation to enforce or protect its rights under this Agreement, the party
prevailing in any such litigation shall be entitled, in addition to all other
relief, to reasonable attorneys' fees, out-of-pocket costs and disbursements
relating to such litigation.
SECTION 18.12 NOTICES. All notices and other communications hereunder
shall be in writing, dated with the current date of such notice and signed by
the party giving such notice. Notices shall be deemed to be duly received (a)
on the date given or delivered personally or by cable, telecopy or telex, or
(b) on the earlier of the date received or three business days after proven
mailing, when mailed by registered or certified mail (return receipt
requested), to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
A. If to Buyer: Boomershine Automotive Group, Inc.
2150 Cobb Parkway
Smyrna, Georgia 30080
Attn: Charles K. Yancey
With a Copy to: Stephen C. Whicker, Esq.
Suite 102, Building D
61ll Peachtree Dunwoody Road
Atlanta, Georgia 30328
B. If to Seller: William L. Holt, Jr.
Holt Ford Mercury
4910 Sylvia Highway
Franklin, North Carolina 28734
With a copy to: James Timothy White, Esq.
Riverwood, Suite 1700
3350 Cumberland Circle
Marietta, Georgia 30339
SECTION 18.13 DEFINITION OF KNOWLEDGE. As used in this Agreement,
"knowledge" is deemed to be limited to the knowledge of the Shareholder or the
Seller or the key management employees of the Business.
SECTION 18.14 EXPENSES. Whether or not the transactions contemplated
hereby are consummated, each of the parties to this Agreement shall be
responsible for his or its own costs and expenses incurred in connection with
the preparation and negotiation of this Agreement and the transactions
contemplated hereby.
SECTION 18.15 TIME IS OF THE ESSENCE. Time is of the essence with
respect to this Agreement and the consummation of the transactions contemplated
hereby.
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SECTION 18.16 WAIVER. No waiver of any breach or default hereunder
shall be considered valid unless in writing and signed by the party giving
such waiver, and no such waive shall be deemed a waiver of any subsequent
breach or default of the same or similar nature.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
SELLER'S WITNESS: SELLER:
WILLIAM L. HOLT, JR.
/s/ By: /s/ William L. Holt, Jr.
- --------------------------- ----------------------------------------
William L. Holt, Jr.
COMPANY'S WITNESSES: COMPANY:
HONES, INC. d/b/a BILL HOLT FORD MERCURY
/s/ By: /s/ William L. Holt, Jr.
- ---------------------------- ----------------------------------------
William L. Holt, Jr.
Its President
- ----------------------------
ATTEST:
By:
----------------------------------------
Name:
-----------------------------------
Secretary/Treasurer
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<PAGE> 22
PURCHASER'S WITNESSES: PURCHASER:
BOOMERSHINE AUTOMOTIVE GROUP, INC.
/s/ By: /s/ Charles K. Yancey
- ------------------------ --------------------------------------
Charles K. Yancey
Its Secretary/Treasurer
Sworn to and subscribed before me
this 11 day of December , 1997.
----- ------------
/s/ Wendy ?? Davis
- --------------------------------------
Notary Public, Cobb County, Georgia
My Commission Expires. My Commission Expires September 11, 199??
-----------------------------------------
ATTEST:
By: /s/ Stephen C. Whicker
-------------------------------------
STEPHEN C. WHICKER
Assistant Secretary
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<PAGE> 23
AMENDMENT TO
ASSET PURCHASE AGREEMENT
This AMENDMENT TO ASSET PURCHASE AGREEMENT (this "Amendment") is
entered into as of January 31, 1998 by and among BOOMERSHINE AUTOMOTIVE GROUP,
INC., a Georgia corporation ("BAG") and BAG NORTH CAROLINA I, INC., a Georgia
corporation which is a wholly-owned subsidiary of BAG ("Buyer"), and HONES,
INC., d/b/a BILL HOLT FORD MERCURY, a North Carolina corporation ("Seller") and
WILLIAM L. HOLT, JR., an individual who resides in the State of North Carolina
and who is the sole shareholder of the Seller (the "Shareholder"). BAG, Buyer,
Seller and the Shareholder are referred to individually as a "Party" and
collectively as the "Parties."
WITNESSETH:
WHEREAS, the Parties are parties to that certain Asset Purchase
Agreement dated as of December 11, 1997 (the "Agreement"); and
WHEREAS, the Parties desire to amend the Agreement, with such
amendment to be effective as set forth in this Amendment.
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the Parties hereto hereby agree as follows:
1. EFFECTIVE DATE OF AMENDMENT. The Parties agree that this Amendment
shall be effective as of January 31, 1998.
2. CLOSING DATE.
(a) The Parties agree to amend the Agreement by replacing Section
7 of the Agreement with the following:
"SECTION 7. CLOSING. The closing of the transactions
contemplated hereby (the "Closing") shall take place on or before the
"Closing Date Deadline," which deadline shall be the later of (a)
within five (5) business days after receipt of the last automobile
manufacturer's approval of the transactions contemplated by this
Agreement and of the Buyer or its designee as Dealer Sales and Service
representatives and after Buyer's or its assignee's obtainment of its
financing for the transactions contemplated by this Agreement, or (b)
April 30, 1998, at such time and place as is mutually agreed in
writing by the parties. The date on which the Closing actually occurs
is hereinafter referred to as the "Closing Date." The Closing Date
Deadline may be postponed to a later date by the mutual written
agreement of the Parties."
(b) The Parties agree to amend the Agreement by replacing Section
11.11.1 of the Agreement with the following:
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<PAGE> 24
"11.11.1 The receipt, before the Closing Date Deadline, or before
such later date as the parties may mutually agree in writing, of the
approval of Buyer (or its assignee) granting the Buyer (or its
assignee) a customary Dealer Sales and Service Agreement recognizing
the Buyer (or its assignee) to be an authorized Dealer for the sale
and service at the premises located at 4910 Sylva Highway, Franklin,
North Carolina of the full line of all Ford and Mercury vehicles now
or hereafter offered for sale by Seller; the Factory Approval of Ford
and Mercury of Buyer's acquisition of the Ford and Mercury franchise
at its location at 4910 Sylva Highway, Franklin, North Carolina, and
Ford and Mercury approval and the Factory Approvals of Ford and
Mercury of Buyer as a Ford and Mercury franchise dealer without any
contingencies including, but not limited to, any requirements for
capital expenditures by the Buyer. Seller agrees to cooperate with
Buyer in connection with obtaining these approvals."
3. PURCHASE PRICE OF ASSETS. The parties agree to amend the Agreement by
adding the following new Section 4.2.4 to the Agreement:
"4.2.4 The amount to be paid by Buyer to Seller at Closing
shall be reduced, on a dollar for dollar basis, by the amount of all
liabilities of Seller which are assumed or paid by Buyer pursuant to
Article III above."
4. EARNEST MONEY. The parties agree to amend the Agreement by deleting
Sections 4.1 and 4.3 in their entirety. The parties agree that the Earnest
Money deposited by Buyer shall be returned to Buyer.
5. TERMINATION FEE. The parties agree to amend the Agreement by adding
the following new Section 15.4 to the Agreement:
"SECTION 15.4 TERMINATION FEE. Buyer has paid to the
Shareholder the sum of One Hundred Thousand and No/100 Dollars
($100,000.00) (the "Termination Fee"). If the Closing does not take
place by April 30, 1998 or by such later date as the parties may have
agreed to in writing (the "Drop Dead Date"), for reasons other than
Seller's and/or the Shareholder's breach of this Agreement, then the
Shareholders shall retain the Termination Fee as liquidated damages
for loss of the transaction, and not as a penalty. If the Closing
does not take place on or before the Drop Dead Date due to Seller's
and/or the Shareholder's breach of this Agreement, then the
Shareholder, within five (5) days of written demand from Buyer, shall
immediately refund the Termination Fee to Buyer. If the Closing does
take place, then the Termination Fee shall be applied towards the
Purchase Price paid by Buyer to Seller, and the amount due from Buyer
to Seller at Closing shall be reduced by the amount of the Termination
Fee. The Termination Fee shall be the sole and exclusive remedy of the
Shareholder and Seller for damages as a result of failure of the
Closing to take place on or before the Drop Dead Date for reasons
other than Seller's and/or the Shareholder's breach of this Agreement.
Because the actual damages that the Shareholder and Seller would
sustain if the Closing does not occur on or before the Drop Dead Date
are uncertain and would be impossible or very difficult to ascertain
accurately, the parties agree in good faith that the Termination Fee
would be
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reasonable and just compensation for the harm caused by such
non-occurrence. Therefore, the Shareholder and Seller acknowledge and
agree to accept said Termination Fee, if due and paid hereunder, as
liquidated damages, and not as a penalty, if the Closing does not occur on
or before the Drop Dead Date for reasons other than Seller's and/or the
Shareholder's breach of this Agreement."
6. ASSIGNMENT BY BOOMERSHINE. BAG wishes to assign all of its rights and
obligations under the Agreement to Sunbelt Automotive Group, Inc. ("Sunbelt"),
a Georgia corporation which is affiliated with BAG. BAG also hereby informs
the Seller and Shareholder that, prior to Closing, BAG is expected to merge with
and into Sunbelt. If this proposed merger is completed, BAG will cease to exist
as a separate corporation. By their signatures below, as required by Section
18.10 of the Agreement, the Seller and the Shareholder hereby consent to (i) the
express assignment to BAG of all of its rights and obligations under the
Agreement to Sunbelt and Sunbelt's express assumption of such rights and
obligations, (ii) the proposed merger of BAG into Sunbelt, as a result of which
BAG will cease to exist as a separate corporation and will have no further
rights or obligations under the Agreement, and Sunbelt, by operation of law,
will assume all rights and obligations of BAG under the Agreement, and (iii) the
future assignment by Sunbelt, whether done expressly or via merger, of all of
Sunbelt's rights and obligations under the Merger Agreement to any person or
entity which is an affiliate of Sunbelt. At or prior to the Closing, if any such
mergers or assignments are completed, Sunbelt shall deliver to the Seller and
the Shareholder copies of documents which confirm such actions. The Seller and
Shareholder agree that all references to BAG in the Agreement shall be deemed to
refer to Sunbelt.
7. USE OF DEFINED TERMS; ENTIRE AGREEMENT. All capitalized terms that are
used but not expressly defined in this Amendment have the meanings ascribed to
them in the Agreement, and the definitions of those terms in the Agreement are
incorporated by reference in this Amendment. Each reference to the Agreement
shall be deemed to refer to the Agreement as amended by this Amendment. This
Amendment and the documents contemplated by it record the final, complete, and
exclusive understanding between the Parties regarding the modification of the
Agreement. Except as amended and modified by this Amendment, the Agreement
remains in full force and effect in accordance with its respective terms.
Execution of this Amendment by Buyer and BAG shall not be deemed to be a waiver
of any breaches of the Agreement by Seller and/or the Shareholder, whether
occurring prior to, on or after the effective date of this Amendment.
8. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Georgia without giving effect to any
choice or conflict of law provision or rule that would cause the laws of any
other jurisdiction to apply.
3
<PAGE> 26
IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly
executed, effective as of the date and year first above written.
ATTEST: "BAG:"
BOOMERSHINE AUTOMOTIVE GROUP, INC.
BY /s/ Ricky L. Brown BY: /s/ C.K. Yancey
-------------------------------- -----------------------------------
Name: Ricky L. Brown Name: C.K. Yancey
-------------------------- ----------------------------
Title: Controller Title: Sec-Treas
-------------------------- ----------------------------
[CORPORATE SEAL]
ATTEST: THE "BUYER:"
BAG NORTH CAROLINA I, INC.
BY /s/ Ricky L. Brown BY: /s/ C.K. Yancey
-------------------------------- -----------------------------------
Name: Ricky L. Brown Name: C.K. Yancey
-------------------------- ----------------------------
Title: Controller Title: Sec-Treas
-------------------------- ----------------------------
[CORPORATE SEAL]
THE "SELLER:"
ATTEST: HONES, INC. D/B/A BILL HOLT FORD
MERCURY
BY /s/ Bill Holt BY: /s/ Bill Holt
-------------------------------- -----------------------------------
Name: Bill Holt Name: Bill Holt
-------------------------- ----------------------------
Title: Sec-Treas. Title: Pres
-------------------------- ----------------------------
[CORPORATE SEAL]
WITNESS: THE "SHAREHOLDER:"
BY /s/ Susan A. Dockery /s/ William L. Holt, Jr. [SEAL]
-------------------------------- -----------------------------
Name: Susan A. Dockery William L. Holt, Jr.
---------------------------
4
<PAGE> 27
ASSIGNMENT INSTRUMENT
THIS IS AN ASSIGNMENT INSTRUMENT (this "Instrument") made effective as
of January 8, 1998, by and between BOOMERSHINE AUTOMOTIVE GROUP, INC., a
Georgia corporation ("BAG") and SUNBELT AUTOMOTIVE GROUP, INC., a Georgia
corporation ("Sunbelt"), with respect to that certain Asset Purchase Agreement
dated December 11, 1997, as amended by an Amendment to Asset Purchase Agreement
dated January 31, 1998, among BAG, BAG NORTH CAROLINA I, INC., Hones, Inc.,
d/b/a Bill Holt Ford Mercury and William L. Holt, Jr. (the "Acquisition
Agreement"), by which the parties, for good and valuable consideration (the
receipt and sufficiency of which is hereby acknowledged), hereby agree as
follows:
1. ASSIGNMENT. BAG hereby assigns all of its right, title and
interest in and to and all of its obligations under the Acquisition Agreement
to Sunbelt.
2. ASSUMPTION. Sunbelt hereby accepts said assignment of the
Acquisition Agreement and hereby agrees to perform and carry out the
obligations of BAG under the Acquisition Agreement.
3. EFFECTIVE DATE. This Instrument is effective at the close of
business on January 8, 1998.
4. MISCELLANEOUS PROVISIONS. All capitalized terms that are used
but not expressly defined in this Instrument have the meanings ascribed to them
in the Acquisition Agreement, and the definitions of those terms in the
Acquisition Agreement are incorporated by reference in this Instrument. Each
party to this Instrument hereby agrees to perform, at the expense of the
requesting party, all such further acts and execute and deliver all such
further agreements, instruments and other documents as the other shall
reasonably request to evidence more effectively the actions taken pursuant to
this Instrument. This Instrument and all of its provisions shall be binding
upon the successors and assigns of the parties to this Instrument and shall
inure to the benefit of the permitted successors and assigns of the parties to
this Instrument. The failure of any party at any time or times to require
performance of any provision of this Instrument shall in no manner affect the
right to enforce the same; and no waiver by any party of any provision (or of a
breach of any provision) of this Instrument, whether by conduct or otherwise,
in any one or more instances shall be deemed or construed either as a further
or continuing waiver of any such provision or breach or as a waiver of any
other provision (or as a breach of any other provision) of this Instrument.
This Instrument shall be governed by and construed and enforced according to
the laws of the State of Georgia. Titles and captions of or in this Instrument
are inserted only as a matter of convenience and for reference and in no way
define, limit, extend or describe the scope of this Instrument or the intent of
any of its provisions. This Instrument may be executed in two or more copies,
each of which shall be deemed an original, and it shall not be necessary in
making proof of this Instrument or its terms to produce or account for more
than one of such copies.
1
<PAGE> 28
IN WITNESS WHEREOF, the parties have caused this Instrument to be duly
executed, under seal, on March 1, 1998.
ATTEST: "BAG:"
BOOMERSHINE AUTOMOTIVE
GROUP, INC.
BY: /s/ S. C. Whicker BY: /s/ C. K. Yancey
-------------------------- -----------------------------------
Name: S. C. Whicker Name: C. K. Yancey
------------------- ----------------------------
Title: Ass't Secretary Title: Sec. Treas.
------------------- ----------------------------
ATTEST: "Sunbelt:"
SUNBELT AUTOMOTIVE
GROUP, INC.
BY: /s/ Ricky L. Brown BY: /s/ Stephen C. Whicker
-------------------------- -----------------------------------
Name: Ricky L. Brown Name: Stephen C. Whicker
------------------- ----------------------------
Title: Treasurer Title: Secretary & General Counsel
------------------- ----------------------------
[CORPORATE SEAL]
2
<PAGE> 29
March 27, 1998
Mr. William L. Holt, Jr.
Hones, Inc. d/b/a Bill Holt Ford Mercury
Re: Asset Purchase Agreement dated as of December 11, 1997, as amended by an
Amendment dated January 31, 1997 (the "Asset Purchase Agreement")
Dear Bill:
This letter will confirm our discussions regarding extension of the
deadline for closing the transactions contemplated by the Asset Purchase
Agreement. We have agreed to extend the Closing Date Deadline and the Drop
Dead Date (terms which are defined in the Asset Purchase Agreement) to June 15,
1998.
We agree that this letter constitutes the second amendment to the Asset
Purchase Agreement.
Please sign this letter in the space provided below to confirm that you
understand and agree to the foregoing, and return it to me. The duplicate
original of this letter is for your files.
Sincerely,
/s/ Charles K. Yancey
Charles K. Yancey, on behalf of
Sunbelt Automotive Group, Inc.,
Boomershine Automotive Group, Inc. and
BAG NORTH CAROLINA I, INC.
ACCEPTED AND AGREED TO THIS 13TH DAY OF APRIL, 1998
HONES, INC. D/B/A BILL HOLT FORD MERCURY
By /s/ William L. Holt, Jr.
------------------------------------
Name: William L. Holt, Jr.
Title:
---------------------------------
- --------------------------------------
WILLIAM L. HOLT, JR.
<PAGE> 1
EXHIBIT 2.8
STOCK PURCHASE AGREEMENT
AMONG
BOOMERSHINE COLLISION CENTERS, INC.
AND
JAMES E. L. PETERS, JR.
NOVEMBER 6, 1997
<PAGE> 2
TABLE OF CONTENTS
Page
1. DEFINITIONS........................................................... 1
2. PURCHASE AND SALE OF TARGET SHARES.................................... 5
(a) Basic Transaction ............................................... 5
(b) Purchase Price .................................................. 5
(c) The Closing ..................................................... 6
(d) Deliveries at the Closing ....................................... 6
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION............. 6
(a) Representations and Warranties of the Seller..................... 6
(i) Authorization of Transaction.............................. 6
(ii) Noncontravention.......................................... 7
(iii) Brokers' Fees............................................. 7
(iv) Investment................................................ 7
(v) Target Shares............................................. 7
(b) Representations and Warranties of the Buyer...................... 7
(i) Organization of the Buyer................................. 8
(ii) Authorization of Transaction.............................. 8
(iii) Noncontravention.......................................... 8
(iv) Brokers' Fees............................................. 8
(v) Investment................................................ 8
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE TARGET COMPANIES........ 8
(a) Organization, Qualification and Corporate Power ................. 9
(b) Capitalization .................................................. 9
(c) Noncontravention ................................................ 9
(d) Brokers' Fees ................................................... 9
(e) Title to Assets ................................................. 9
(f) Financial Statements ............................................ 10
(g) Events Subsequent to Most Recent Accounting Period .............. 10
(h) Undisclosed Liabilities ......................................... 12
(i) Legal Compliance ................................................ 12
(j) Tax Matters ..................................................... 12
(k) Real Property ................................................... 14
(l) Intellectual Property ........................................... 15
(m) Tangible Assets ................................................. 17
(n) Contracts ....................................................... 17
(o) Notes and Accounts Receivable ................................... 18
(p) Powers of Attorney .............................................. 18
(q) Insurance ....................................................... 18
(r) Litigation ...................................................... 19
(s) Employees ....................................................... 19
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<PAGE> 3
(t) Employee Benefits ............................................... 19
(u) Guaranties ...................................................... 21
(v) Environmental, Health, and Safety Matters ....................... 21
(w) Territorial Restrictions ........................................ 22
(x) Disclosure ...................................................... 23
5. PRE-CLOSING COVENANTS................................................. 23
(a) General ......................................................... 23
(b) Notices and Consents ............................................ 23
(c) Operation of Business ........................................... 23
(d) Preservation of Business ........................................ 23
(e) Full Access ..................................................... 23
(f) Notice of Developments .......................................... 23
(g) Exclusivity ..................................................... 23
6. POST-CLOSING COVENANTS................................................ 24
(a) General ......................................................... 24
(b) Litigation Support .............................................. 24
(c) Transition ...................................................... 24
(d) Confidentiality ................................................. 24
(e) Buyer Note ...................................................... 25
7. CONDITIONS TO OBLIGATION TO CLOSE..................................... 25
(a) Conditions to Obligation of the Buyer............................ 25
(b) Conditions to Obligation of the Seller........................... 27
8. REMEDIES FOR BREACHES OF THIS AGREEMENT............................... 28
(a) Survival of Representations and Warranties ...................... 28
(b) Indemnification Provisions for Benefit of the Buyer ............. 28
(c) Indemnification Provisions for Benefit of the Seller ............ 29
(d) Matters Involving Third Parties ................................. 30
(e) Recoupment Under Buyer Note ..................................... 31
(f) Other Indemnification Provisions ................................ 31
9. TAX MATTERS........................................................... 31
(a) Section 338(h)(10) Election ..................................... 31
(b) Tax Periods Ending on or Before the Closing Date ................ 32
(c) Tax Periods Beginning Before and Ending After the Closing Date .. 32
(d) Cooperation on Tax Matters ...................................... 32
(e) Certain Taxes ................................................... 33
10. TERMINATION........................................................... 33
(a) Termination of Agreement ........................................ 33
(b) Effect of Termination ........................................... 34
11. MISCELLANEOUS......................................................... 34
(a) Press Releases and Public Announcements.......................... 34
-ii-
<PAGE> 4
(b) No Third Party Beneficiaries .................................... 34
(c) Entire Agreement ................................................ 34
(d) Succession and Assignment ....................................... 34
(e) Counterparts .................................................... 34
(f) Headings ........................................................ 34
(g) Notices ......................................................... 34
(h) Governing Law ................................................... 36
(i) Amendments and Waivers .......................................... 36
(j) Severability .................................................... 36
(k) Expenses ........................................................ 36
(l) Construction .................................................... 36
(m) Incorporation of Exhibits, Annexes and Schedules ................ 36
(n) Specific Performance ............................................ 36
(o) Submission to Jurisdiction ...................................... 37
Annex I Exceptions to the Seller's Representations and Warranties
Concerning the Transaction
Annex II Exceptions to the Buyer's Representations and Warranties
Concerning the Transaction
Annex III Description of Seller's Software
Exhibit A Form of Buyer Note
Exhibit B Historical Financial Statements
Exhibit C-1 Employment Agreement
Exhibit C-2 Licensing Agreement
Exhibit D Form of Opinion of Counsel to the Seller
Exhibit E Form of Opinion of Counsel to the Buyer
Exhibit F Form of Guaranty of Payment
Exhibit G Real Estate Purchase Agreement (Henry County Property)
Exhibit H Real Estate Purchase Agreement (Clayton County Property)
Exhibit I Assumption of Lease Agreement (Henry County Property)
Exhibit J Assumption of Lease Agreement (Clayton County Property)
Exhibit K Assumption of Lease Agreement (Cobb County Property)
Disclosure Schedule Exceptions to Representations and Warranties Concerning the
Target Companies
-iii-
<PAGE> 5
STOCK PURCHASE AGREEMENT
Agreement entered into on November 6, 1997 by and among BOOMERSHINE
COLLISION CENTERS, INC., a Georgia corporation (the "Buyer"), and JAMES E. L.
PETERS, JR. (the "Seller"). The Buyer and the Seller are referred to
collectively herein as the "Parties."
The Seller in the aggregate owns all of the outstanding capital stock of
SOUTHLAKE COLLISION CENTER, INC., a Georgia corporation, SOUTHLAKE COLLISION
COBB PARKWAY, INC., a Georgia corporation, and SOUTHLAKE COLLISION HENRY COUNTY,
INC., a Georgia corporation (individually, the "Target;" collectively, the
"Target Companies").
This Agreement contemplates a transaction in which the Buyer will
purchase from the Seller, and the Seller will sell to the Buyer, all of the
outstanding capital stock of each of the Target Companies in return for cash and
the Buyer Note.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
ss.1504(a) or any similar group defined under a similar provision of state,
local or foreign law.
"Applicable Rate" means the corporate base rate of interest publicly
announced from time to time by NATIONSBANK OF GEORGIA, N.A.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Buyer Note" has the meaning set forth in ss.2(b) below.
"Closing" has the meaning set forth in ss.2(c) below.
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<PAGE> 6
"Closing Date" has the meaning set forth in ss.2(c) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the
businesses and affairs of the Target that is not already generally available to
the public.
"Controlled Group of Corporation" has the meaning set forth in Code
ss.1563.
"Deferred Intercompany Transaction" has the meaning set forth in Reg.
ss.1.1502-13.
"Disclosure Schedule" has the meaning set forth in ss.4 below.
"Employee Benefit Plan" means any: (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan; (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan; (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan); or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
ss.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
ss.3(1).
"Environmental, Health and Safety Requirements" shall mean all federal,
state, local and foreign statutes, regulations, ordinances and other provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation, each as amended and as now or
hereafter in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excess Loss Account" has the meaning set forth in Reg. ss.1.1502-19.
"Fiduciary" has the meaning set forth in ERISA ss.3(21).
"Financial Statement" has the meaning set forth in ss.4(g) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
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<PAGE> 7
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in ss.8(d) below.
"Indemnifying Party" has the meaning set forth in ss.8(d) below.
"Intellectual Property" means: (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof; (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith; (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith; (d) all mask works and all
applications, registrations, and renewals in connection therewith; (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals); (f) all computer software (including data and
related documentation); (g) all other proprietary rights; and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in ss.4(g)
below.
"Most Recent Fiscal Month End" has the meaning set forth in ss.4(g)
below.
"Most Recent Accounting Period" has the meaning set forth in ss.4(g)
below.
"Multiemployer Plan" has the meaning set forth in ERISA ss.3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
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<PAGE> 8
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Process Agent" has the meaning set forth in ss.10(p) below.
"Prohibited Transaction" has the meaning set forth in ERISA ss.406 and
Code ss.4975.
"Purchase Price" has the meaning set forth in ss.2(b) below.
"Reportable Event" has the meaning set forth in ERISA ss.4043.
"Requisite Sellers" means Sellers holding a majority in interest of the
Target Shares as set forth in ss.4(b) of the Disclosure Schedule.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge
or other security interest, other than: (a) mechanic's, materialmen's and
similar liens; (b) liens for Taxes not yet due and payable; (c) purchase money
liens and liens securing rental payments under capital lease arrangements; and
(d) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Seller's Software" means that certain computer software owned by Seller
and more particularly described on Annex III attached hereto and incorporated
herein.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Survey" has the meaning set forth in ss.5(i) below.
"Target" has the meaning set forth in the preface above.
"Target Companies" has the meaning set forth in the preface above.
"Target Share" means any share of the Common Stock of the Target
Companies.
"Tax" means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code ss.59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
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<PAGE> 9
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in ss.8(d) below.
2. PURCHASE AND SALE OF TARGET SHARES.
(a) BASIC TRANSACTION. On and subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from the Seller, and the Seller
agrees to sell to the Buyer, all of his Target Shares for the consideration
specified below in this ss.2.
(b) PURCHASE PRICE.
(i) The Buyer agrees to pay to the Seller ONE MILLION FIVE
HUNDRED FIFTY THOUSAND DOLLARS ($1,550,000) (the "Purchase
Price") in consideration of the Target Shares in the manner
provided in Section 2(b)(ii) hereof. A portion of the
Purchase Price, in the amount of Two Hundred Thousand
Dollars ($200,000) (the "Purchase Price Deposit"), shall be
paid by Buyer to Seller in immediately available funds upon
the execution by all parties of this Agreement.
(ii) In the event (A) this Agreement is terminated for any
reason whatsoever, (B) the Closing does not occur on or
prior to December 31, 1997 for any reason whatsoever, or
(C) the real estate transactions contemplated by the Real
Estate Purchase Agreements, forms of which are attached
hereto as EXHIBITS G and H, fail to close for any reason
whatsoever on or before December 31, 1997, then Seller
shall, within three (3) days of written demand therefor
from Buyer, repay and refund the Purchase Price Deposit to
Buyer in full; provided, however, that (1) if the Closing
does not occur on or before October 31, 1997 for any reason
other than any breach of Seller or the Target Companies of
their respective representations, warranties or covenants
hereunder, then Seller shall have the right to retain
Twenty-Five Thousand Dollars ($25,000) of said Purchase
Price Deposit as earnest money and not as a penalty, and
(2) if the Closing does not occur on or before November 30,
1997 for any reason other than any breach of Seller or the
Target Companies of their respective representations,
warranties or covenants hereunder, then Seller shall have
the right to retain Fifty Thousand Dollars ($50,000) of
said Purchase Price Deposit as earnest money and not as a
penalty. The $25,000 or $50,000 earnest money, as the case
may be (the "Earnest Money"), shall be the sole and
exclusive remedy of Seller for damages that are a result of
the non-occurrence of the Closing for any reason
whatsoever. Because the actual damages that the Seller
would sustain if the Closing does not occur for any reason
whatsoever are uncertain and would be impossible or very
difficult to ascertain accurately, the parties hereto agree
in good faith that the Earnest Money would be reasonable
and just compensation for the harm caused by the failure of
the Closing to occur. Therefore, the Seller acknowledges
and agrees to accept said Earnest Money,
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<PAGE> 10
if due and paid hereunder, as liquidated damages, and not
as a penalty, in the event the Closing does not occur for
any reason whatsoever.
(iii) The Purchase Price shall be paid by Buyer to Seller at
Closing by delivery of: (i) its promissory note (the "Buyer
Note") in the form of EXHIBIT A attached hereto in the
aggregate principal amount of Seven Hundred Seventy-Five
Thousand Dollars ($775,000), said Buyer Note to be
guaranteed by an Affiliate of Buyer that is mutually
acceptable to Buyer and Seller, pursuant to a guaranty of
payment ("Note Guaranty") in the form of EXHIBIT F; and
(ii) an amount equal to Five Hundred Seventy-Five Thousand
Dollars ($575,000), representing the balance of the
Purchase Price minus the Purchase Price Deposit, in cash,
payable by wire transfer or delivery of other immediately
available funds. Additionally, upon the Closing of the
transactions contemplated hereof, Seller shall retain the
Purchase Price Deposit.
(c) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of SCHNADER HARRISON
SEGAL & LEWIS LLP in Atlanta, Georgia, commencing at 9:00 a.m. local time on the
second business day following the satisfaction or waiver of all conditions to
the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
will take at the Closing itself) or such other date as the Buyer and the Seller
may mutually determine (the "Closing Date"); provided, however, that the Closing
Date shall be no later than December 31, 1997.
(d) DELIVERIES AT THE CLOSING. At the Closing: (i) the Seller will
deliver to the Buyer the various certificates, instruments and documents
referred to in ss.7(a) below; (ii) the Buyer will deliver to the Seller the
various certificates, instruments and documents referred to in ss.7(b) below;
(iii) the Seller will deliver to the Buyer stock certificates representing all
of his Target Shares, endorsed in blank or accompanied by duly executed
assignment documents; and (iv) the Buyer will deliver to the Seller the
consideration specified in ss.2(b) above.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
(a) REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants to the Buyer that the statements contained in this
ss.3(a) are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
ss.3(a)) with respect to himself, except as set forth in Annex I attached
hereto.
(i) AUTHORIZATION OF TRANSACTION. The Seller has full power and
authority to execute and deliver this Agreement and to
perform his obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the
Seller, enforceable in accordance with its terms and
conditions, except as such enforceability may be limited by
the effect of bankruptcy, insolvency or similar laws
affecting creditors' rights generally or by general
principles of equity. The Seller need not give any notice
to, make any filing with, or obtain any authorization,
consent, or approval of any government or
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<PAGE> 11
governmental agency in order to consummate the transactions
contemplated by this Agreement.
(ii) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions
contemplated hereby, will: (A) violate any constitution,
statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge or other restriction of any
government, governmental agency, or court to which the
Seller is subject; or (B) conflict with, result in a breach
of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument or other
arrangement to which the Seller is a party or by which he
is bound or to which any of his assets is subject.
(iii) BROKERS' FEES. The Seller has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this
Agreement for which the Buyer could become liable or
obligated.
(iv) INVESTMENT. The Seller: (A) understands that the Buyer Note
has not been, and will not be, registered under the
Securities Act, or under any state securities laws, and is
being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public
offering: (B) is acquiring the Buyer Note solely for his
own account for investment purposes, and not with a view to
the distribution thereof; (C) is a sophisticated investor
with knowledge and experience in business and financial
matters; (D) has received certain information concerning
the Buyer and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and
the risks inherent in holding the Buyer Note; (E) is able
to bear the economic risk and lack of liquidity inherent in
holding the Buyer Note; and (F) is an Accredited Investor
for the reasons set forth on Annex I.
(v) TARGET SHARES. The Seller holds of record and owns
beneficially the number of Target Shares set forth next to
his name in ss.4(b) of the Disclosure Schedule, free and
clear of any restrictions on transfer (other than any
restrictions under the Securities Act and state securities
laws), Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims
and demands. The Seller is not a party to any option,
warrant, purchase right, or other contract or commitment
that could require the Seller to sell, transfer, or
otherwise dispose of any capital stock of a Target (other
than this Agreement). The Seller is not a party to any
voting trust, proxy, or other agreement or understanding
with respect to the voting of any capital stock of a
Target.
(b) REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrants to the Seller that the statements contained in this ss.3(b) are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this ss.3(b)),
except as set forth in Annex II attached hereto.
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(i) ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation.
(ii) AUTHORIZATION OF TRANSACTION. The Buyer has full power and
authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid
and legally binding obligation of the Buyer, enforceable in
accordance with its terms and conditions except as such
enforceability may be limited by the effect of bankruptcy,
insolvency or similar laws affecting creditors' rights
generally or by general principles of equity. The Buyer
need not give any notice to, make any filing with, or
obtain any authorization, consent or approval of any
government or governmental agency in order to consummate
the transactions contemplated by this Agreement.
(iii) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions
contemplated hereby, will: (A) violate any constitution,
statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge or other restriction of any
government, governmental agency, or court to which the
Buyer is subject or any provision of its charter or bylaws;
or (B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement
to which the Buyer is a party or by which it is bound or to
which any of its assets is subject.
(iv) BROKERS' FEES. The Buyer has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this
Agreement for which the Seller could become liable or
obligated.
(v) INVESTMENT. The Buyer is not acquiring the Target Shares of
Seller with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities
Act.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE TARGET COMPANIES. The
Seller represents and warrants to the Buyer that the statements contained in
this ss.4 are true, correct and complete as of the date of this Agreement and
will be true, correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this Agreement
throughout this ss.4), except as set forth in the disclosure schedule delivered
by the Seller to the Buyer as a part of this Agreement and initialed by the
Parties (the "Disclosure Schedule"). Nothing in the Disclosure Schedule shall be
deemed adequate to disclose an exception to a representation or warranty made
herein, however, unless the Disclosure Schedule identifies the exception with
reasonable particularity and describes the relevant facts in reasonable detail.
Without limiting the generality of the foregoing, the mere listing (or inclusion
of a copy) of a document or other item shall not be deemed adequate to disclose
an exception to a representation or warranty made herein
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<PAGE> 13
(unless the representation or warranty has to do with the existence of the
document or other item itself). The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this ss.4.
(a) ORGANIZATION, QUALIFICATION AND CORPORATE POWER. Each Target is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. Each Target is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. Each Target has full corporate power and
authority and all licenses, permits and authorizations necessary to carry on the
businesses in which it is engaged and in which it presently proposes to engage
and to own and use the properties owned and used by it. ss.4(a) of the
Disclosure Schedule lists the directors and officers of each Target. The Seller
has delivered to the Buyer correct and complete copies of the charter and bylaws
of each Target (as amended to date). The minute book (containing the records of
meetings of the stockholders, the board of directors, and any committees of the
board of directors), the stock certificate books, and the stock record books of
each Target is correct and complete in all material respects. No Target is in
default under or in violation of any provision of its charter or bylaws.
(b) CAPITALIZATION. The entire authorized capital stock of each Target
is as set forth on ss.4(b) of the Disclosure Schedule. The Target Shares of each
Target are issued and outstanding. All of the issued and outstanding Target
Shares have been duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record by the Seller as set forth in ss.4(b) of
the Disclosure Schedule. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require a Target to issue,
sell, or otherwise cause to become outstanding any of its capital stock. There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to a Target. There are no voting
trusts, proxies or other agreements or understandings with respect to the voting
of the capital stock of a Target.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will:
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any government,
governmental agency, or court to which a Target is subject or any provision of
the charter or bylaws of a Target; or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which a Target is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Security Interest upon any
of its assets). Each Target does not need to give any notice to, make any filing
with, or obtain any authorization, consent or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
(d) BROKERS' FEES. Each Target has no Liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
(e) TITLE TO ASSETS. Each Target has good and marketable title to, or
a valid leasehold interest in, the properties and assets used by it, located on
its premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except for
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<PAGE> 14
properties and assets disposed of in the Ordinary Course of Business since the
date of the Most Recent Balance Sheet.
(f) FINANCIAL STATEMENTS. Attached hereto as EXHIBIT B are the
following financial statements of the Target Companies (collectively, the
"Financial Statements"): compiled and unaudited balance sheets and statements of
income, changes in stockholders' equity, and cash flow as of and for the fiscal
years ended December 31, 1995, December 31, 1996, and July 31, 1997 (the "Most
Recent Accounting Period") for each of the Target Companies. The Financial
Statements (including the notes thereto) have been prepared on a consistent
basis throughout the periods covered thereby, present fairly the financial
condition of a Target as of such dates and the results of operations of a Target
for such periods, are correct and complete, and are consistent with the books
and records of a Target (which books and records are correct and complete). The
books of account of each Target are sufficient to prepare the Financial
Statements in accordance with GAAP.
(g) EVENTS SUBSEQUENT TO MOST RECENT ACCOUNTING PERIOD. Since the Most
Recent Accounting Period, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of each Target. Without limiting the generality of the foregoing,
since that date:
(i) each Target has not sold, leased, transferred or assigned
any of its assets, tangible or intangible, other than for a
fair consideration in the Ordinary Course of Business;
(ii) each Target has not entered into any agreement, contract,
lease or license (or series of related agreements,
contracts, leases and licenses) either involving more than
$10,000 or outside the Ordinary Course of Business;
(iii) each Target has not accelerated, terminated, modified or
canceled any agreement, contract, lease or license (or
series of related agreements, contracts, leases and
licenses) involving more than $10,000 to which the Target
is a party or by which it is bound;
(iv) each Target has not imposed any Security Interest upon any
of its assets, tangible or intangible;
(v) each Target has not made any capital expenditure (or series
of related capital expenditures either involving more than
$10,000 or outside the Ordinary Course of Business;
(vi) each Target has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of,
any other Person (or series of related capital investments,
loans and acquisitions) either involving more than $10,000
or outside the Ordinary Course of Business;
(vii) each Target has not issued any note, bond or other debt
security or created, incurred, assumed or guaranteed any
indebtedness for borrowed money or capitalized lease
obligation either involving more than $10,000 singly or
$10,000 in the aggregate;
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<PAGE> 15
(viii) each Target has not delayed or postponed the payment of
accounts payable and other Liabilities outside the
Ordinary Course of Business;
(ix) each Target has not canceled, compromised, waived or
released any right or claim (or series of related rights
and claims) either involving more than $10,000 or outside
the Ordinary Course of Business;
(x) each Target has not granted any license or sublicense of
any rights under or with respect to any Intellectual
Property;
(xi) there has been no changes made or authorized in the
charter or bylaws of a Target;
(xii) each Target has not issued, sold or otherwise disposed of
any of its capital stock, or granted any options,
warrants or other rights to purchase or obtain (including
upon conversion, exchange or exercise) any of its capital
stock;
(xiii) each Target has not declared, set aside or paid any
dividend or made any distribution with respect to its
capital stock (whether in cash or in kind) or redeemed,
purchased or otherwise acquired any of its capital stock;
(xiv) each Target has not experienced any material damage,
destruction or loss (whether or not covered by insurance)
to its property;
(xv) each Target has not made any loan to, or entered into any
other transaction with, any of its directors, officers
and employees outside the Ordinary Course of Business;
(xvi) each Target has not entered into any employment contract
or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or
agreement;
(xvii) each Target has not granted any increase in the base
compensation of any of its directors, officers and
employees outside the Ordinary Course of Business;
(xviii) each Target has not adopted, amended, modified or
terminated any bonus, profit-sharing, incentive,
severance or other plan, contract or commitment for the
benefit of any of its directors, officers and employees
(or taken any such action with respect to any other
Employee Benefit Plan);
(xix) each Target has not made any other change in employment
terms for any of its directors, officers and employees
outside the Ordinary Course of Business;
(xx) each Target has not made or pledged to make any
charitable or other capital contribution outside the
Ordinary Course of Business;
(xxi) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside
the Ordinary Course of Business involving a Target; and
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<PAGE> 16
(xxii) each Target has not committed to any of the foregoing.
(h) UNDISCLOSED LIABILITIES. Each Target has no Liability (and there
is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against it giving rise to any
Liability), except for Liabilities set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto); and (ii) Liabilities which
have arisen after the Most Recent Accounting Period in the Ordinary Course of
Business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort,
infringement or violation of law).
(i) LEGAL COMPLIANCE. Each Target and its respective predecessors and
Affiliates have in all material respects complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings and charges thereunder) of federal, state, local and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand or notice has been
filed or commenced against any of them alleging any failure so to comply.
(j) TAX MATTERS.
(i) Each Target has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and
complete in all respects. All Taxes owed by a Target
(whether or not shown on any Tax Return) have been paid.
Each Target currently is not the beneficiary of any
extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a
jurisdiction where a Target does not file Tax Returns
that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of
the assets of any of a Target that arose in connection
with any failure (or alleged failure) to pay any Tax.
(ii) Each Target has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor,
creditor, stockholder or other third party.
(iii) To the Knowledge of Seller, there are no claims by any
governmental authority to assess any additional Taxes for
any period for which Tax Returns have been filed. There
is no dispute or claim concerning any Tax Liability of a
Target either: (A) claimed or raised by any authority in
writing; or (B) as to which the Seller has Knowledge
based upon personal contact with any agent of such
authority. ss.4(j) of the Disclosure Schedule lists all
federal, state, local and foreign income Tax Returns
filed with respect to any of the Target Companies for
taxable periods ended on or after the date of
incorporation of each Target, and, with respect to each
such Tax Return,ss.4(j) of the Disclosure Schedule also
indicates those Tax Returns that have been audited and
those that currently are the subject of an audit. The
Seller has delivered to the Buyer correct and complete
copies of all income Tax Returns, examination reports,
and statements of deficiencies assessed against or agreed
to by a Target since the date of incorporation of each
Target.
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<PAGE> 17
(iv) No Target has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(v) No Target is subject to any private letter ruling of the
IRS or comparable rulings of other taxing authorities.
(vi) Each Target has properly and timely elected under Section
1362 of the Code, and under each analogous or similar
provision of state or local law in each jurisdiction
where each Target is required to file a Tax Return, to be
treated as an "S" corporation for all taxable periods
since the date of incorporation of each respective
Target. Buyer has received a copy of any such elections
and there has not been any voluntary or involuntary
termination or revocation of any such election.
(vii) No Target has ever owned any subsidiaries nor ever been a
member of any consolidated, combined or affiliated group
of corporations for any Tax purposes.
(viii) No Target has any undistributed earnings and profits nor
had for any taxable years gross receipts more than
twenty-five percent (25%) of which are "passive
investment income" (as defined in Section 1375 of the
Code).
(ix) No Target has filed a consent under Code ss.341(f)
concerning collapsible corporations. No Target has made
any payments, is obligated to make any payments, or is a
party to any agreement that under certain circumstances
could obligate it to make any payments that will not be
deductible under Code ss.280G. No Target has been a
United States real property holding corporation within
the meaning of Code ss.897(c)(2) during the applicable
period specified in Code ss.897(c)(1)(A)(ii). Each Target
has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a
substantial understatement of federal income Tax within
the meaning of Code ss.6662.
(x) None of the Target Companies nor any other Person
(including Seller) on behalf of any of the Target
Companies has: (i) agreed to or is required to make any
adjustments pursuant to Section 481(a) of the Code or any
similar provision of state, local or foreign law by
reason of a change in accounting method initiated by a
Target, or has any knowledge that the IRS has proposed
any such adjustment or change in accounting method, or
has any application pending with any taxing authority
requesting permission for any changes in accounting
methods that relate to the business or operations of a
Target; (ii) executed or entered into a closing agreement
pursuant to Section 7121 of the Code or any predecessor
provision thereof or any similar provision of state,
local or foreign law with respect to a Target; or (iii)
requested any extension of time within which to file any
Tax Return, which Tax Return has since not been filed.
(k) REAL PROPERTY. ss.4(k) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to a Target. The Seller
has delivered to the Buyer correct and complete
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<PAGE> 18
copies of the leases and subleases listed in ss.4(k) of the Disclosure Schedule
(as amended to date). With respect to each lease and sublease listed in ss.4(k)
of the Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on
identical terms following the consummation of the
transactions contemplated hereby;
(iii) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or
lapse of time, would constitute a breach or default or
permit termination, modification or acceleration
thereunder;
(iv) no party to the lease or sublease has repudiated any
provision thereof;
(v) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(vi) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (v) above
are true and correct with respect to the underlying
lease;
(vii) each Target has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in
the leasehold or subleasehold;
(viii) all facilities leased or subleased thereunder have
received all approvals of governmental authorities
(including licenses and permits) required in connection
with the operation thereof and have been operated and
maintained in accordance with: (A) all federal, state,
county, municipal and other governmental statutes, laws,
rules, order, regulations, ordinances or recommendations
affecting said facilities or any part thereof, or the use
thereof including without limitation the Americans with
Disabilities Act, whether or not any such statutes, laws,
rules, orders, regulations, ordinances or recommendations
which may hereafter be enacted involve a change of policy
on the part of the governmental body enacting the same;
(B) all rules, orders and regulations of the National
Board of Fire Underwriters or other bodies exercising
similar functions which apply to said facilities; and (C)
the requirements of all policies public liability, fire
and other insurance which at any time may be in force
with respect to said facilities;
(ix) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for
the operation of said facilities; and
(x) the owner of the facility leased or subleased has good
and marketable title to the parcel of real property, free
and clear of any Security Interest, easement, covenant or
other restriction, except for installments of special
easements not yet delinquent and recorded easements,
covenants and other restrictions which
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<PAGE> 19
do not impair the current use, occupancy, or value, or
the marketability of title, of the property subject
thereto.
(l) INTELLECTUAL PROPERTY.
(i) Each Target owns or has the right to use pursuant to
license, sublicense, agreement or permission all
Intellectual Property necessary for the operation of the
businesses of the Target as presently conducted and as
presently proposed to be conducted. Each item of
Intellectual Property owned or used by a Target
immediately prior to the Closing hereunder will be owned
or available for use by the Target Companies on identical
terms and conditions immediately subsequent to the
Closing hereunder; provided, however, that the Seller's
Software will be available for use by the Target
Companies in accordance with the terms of the License
Agreement attached hereto as EXHIBIT C-2 attached hereto
and incorporated herein. Each Target has taken all
necessary action to maintain and protect each item of
Intellectual Property that it owns or uses.
(ii) Each Target has not interfered with, infringed upon,
misappropriated or otherwise come into conflict with any
Intellectual Property rights of third parties, and the
Seller has not ever received any charge, complaint,
claim, demand or notice alleging any such interference,
infringement, misappropriation or violation (including
any claim that a Target must license or refrain from
using any Intellectual Property rights of any third
party). To the Knowledge of the Seller, no third party
has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual
Property rights of a Target.
(iii) ss.4(l)(iii) of the Disclosure Schedule identifies each
patent or registration which has been issued to a Target
with respect to any of its Intellectual Property,
identifies each pending patent application or application
for registration which a Target has made with respect to
any of its Intellectual Property, and identifies each
license, agreement or other permission which a Target has
granted to any third party with respect to any of its
Intellectual Property (together with any exceptions). The
Seller has delivered to the Buyer correct and complete
copies of all such patents, registrations, applications,
licenses, agreements and permissions (as amended to date)
and has made available to the Buyer correct and complete
copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such
item. ss.4(l)(iii) of the Disclosure Schedule also
identifies each trade name or unregistered trademark used
by a Target in connection with any of its businesses.
With respect to each item of Intellectual Property
required to be identified in ss.4(l)(iii) of the
Disclosure Schedule:
(A) each Target possess all right, title and interest
in and to the item, free and clear of any Security
Interest, license or other restriction;
(B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling or
charge;
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<PAGE> 20
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand
is pending or, to the Knowledge of the Seller, is
threatened which challenges the legality,
validity, enforceability, use or ownership of the
item; and
(D) each Target has never agreed to indemnify any
Person for or against any interference,
infringement, misappropriation or other conflict
with respect to the item.
(iv) ss.(l)(iv) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns
and that a Target uses pursuant to license, sublicense,
agreement or permission. The Seller has delivered to the
Buyer correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to
date). With respect to each item of Intellectual Property
required to be identified in ss.4(l)(iv) of the
Disclosure Schedule:
(A) the license, sublicense, agreement or permission
covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(B) the license, sublicense, agreement or permission
will continue to be legal, valid, binding,
enforceable, and in full force and effect on
identical terms following the consummation of the
transactions contemplated hereby (including the
assignments and assumptions referred to in ss.2
above);
(C) no party to the license, sublicense, agreement or
permission is in breach or default, and no event
has occurred which with notice or lapse of time
would constitute a breach or default or permit
termination, modification or acceleration
thereunder;
(D) no party to the license, sublicense, agreement or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the
representations and warranties set forth in
subsections (A) through (D) above are true and
correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is
not subject to any outstanding injunction,
judgment, order, decree, ruling or charge;
(G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand
is pending or, to the Knowledge of the Seller, is
threatened which challenges the legality, validity
or enforceability of the underlying item of
Intellectual Property; and
(H) each Target has not granted any sublicense or
similar right with respect to the license,
sublicense, agreement or permission.
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<PAGE> 21
(v) To the Knowledge of the Seller, each Target does not
interfere with, infringe upon, misappropriate or
otherwise come into conflict with, any Intellectual
Property rights of third parties as a result of the
continued operation of its businesses as presently
conducted.
(m) TANGIBLE ASSETS. Each Target owns or leases all buildings,
machinery, equipment and other tangible assets necessary for the conduct of its
businesses as presently conducted. To the Seller's Knowledge, each such tangible
asset is free from any material defects (patent and latent), has been maintained
in accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear), and is suitable for the purposes for
which it presently is used.
(n) CONTRACTS. ss.4(n) of the Disclosure Schedule lists the following
contracts and other agreements to which a Target is a party:
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person
providing for lease payments in excess of $10,000 per
annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of supplies, products or other personal
property, or for the furnishing or receipt of services,
the performance of which will extend over a period of
more than one year, result in a material loss to a
Target, or involve consideration in excess of $10,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed
any indebtedness for borrowed money, or any capitalized
lease obligation, in excess of $10,000 or under which a
Target has imposed a Security Interest on any of its
assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement with the Seller or with another Target;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance or other
material plan or arrangement for the benefit of its
current or former directors, officers and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis providing
annual compensation in excess of $10,000 or providing
severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers and employees
outside the Ordinary Course of Business;
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<PAGE> 22
(xi) any agreement under which the consequences of a default
or termination could have a material adverse effect on
the business, financial condition, operations, results of
operations or future prospects of a Target; or
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of
$10,000.
The Seller has delivered to the Buyer a correct and complete copy of each
written agreement listed in ss.4(n) of the Disclosure Schedule (as amended to
date) and a written summary setting forth the terms and conditions of each oral
agreement referred to in ss.4(n) of the Disclosure Schedule. With respect to
each such agreement: (A) the agreement is legal, valid, binding, enforceable,
and in full force and effect; (B) the agreement will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms,
except as such enforceability may be limited by the effect of bankruptcy,
insolvency or similar laws affecting creditors' rights generally or by general
principles of equity following the consummation of the transactions contemplated
hereby; (C) no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification or acceleration, under the agreement; and (D) no party
has repudiated any provision of the agreement.
(o) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable
of each of the Target Companies are reflected properly on its books and records,
are valid receivables subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth on the
face of the Most Recent Balance Sheet of a Target (rather than in any notes
thereto) as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of a Target.
(p) POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of the Target Companies.
(q) INSURANCE. ss.4(q) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability and Workers' Compensation coverage and
bond and surety arrangements) to which a Target has been a party, a named
insured, or otherwise the beneficiary of coverage at any time within the past
five (5) years:
(i) the name, address and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other
basis) and amount (including a description of how
deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
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With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (C) neither the Target Companies nor any other party to the policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default, or permit termination,
modification or acceleration, under the policy; and (D) no party to the policy
has repudiated any provision thereof. Each Target has been covered during the
past five (5) years by insurance in scope and amount customary and reasonable
for the businesses in which it has engaged during the aforementioned period.
ss.4(q) of the Disclosure Schedule describes any self-insurance arrangements
affecting a Target.
(r) LITIGATION. ss.4(r) of the Disclosure Schedule sets forth each
instance in which a Target: (i) is subject to any outstanding injunction,
judgment, order, decree, ruling or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any action, suit,
proceeding, hearing or investigation of, in or before any court or
quasi-judicial or administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator. None of the actions, suits, proceedings,
hearings and investigations set forth in ss.4(r) of the Disclosure Schedule
could result in any material adverse change in the business, financial
condition, operations, results of operations, or future prospects of a Target.
The Seller has no reason to believe that any such action, suit, proceeding,
hearing or investigation may be brought or threatened against a Target.
(s) EMPLOYEES. To the Knowledge of the Seller, no executive, key
employee or group of employees has any plans to terminate employment with a
Target. Each Target is not a party to or bound by any collective bargaining
agreement, nor has it experienced any strikes, grievances, claims of unfair
labor practices, or other collective bargaining disputes. Each Target has not
committed any unfair labor practice. The Seller has no Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of a Target.
(t) EMPLOYEE BENEFITS.
(i) ss.4(t) of the Disclosure Schedule lists each Employee
Benefit Plan that a Target maintains or to which a Target
contributes.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in
form and in operation in all respects with the
applicable requirements of ERISA, the Code, and
other applicable laws.
(B) All required reports and descriptions (including
Form 5500 Annual Reports, Summary Annual Reports,
PBGC-1s, and Summary Plan Descriptions) have been
filed or distributed appropriately with respect to
each such Employee Benefit Plan. The requirements
of Part 6 of Subtitle B of Title I of ERISA and of
Code ss.4980B have been met with respect to each
such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
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<PAGE> 24
(C) All contributions (including all employer
contributions and employee salary reduction
contributions) which are due have been paid to
each such Employee Benefit Plan which is an
Employee Pension Benefit Plan and all
contributions for any period ending on or before
the Closing Date which are not yet due have been
paid to each such Employee Pension Benefit Plan or
accrued in accordance with the past custom and
practice of the Target. All premiums or other
payments for all periods ending on or before the
Closing Date have been paid with respect to each
such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan meets the
requirements of a "qualified plan" under Code
ss.401(a) and has received, within the last two
years, a favorable determination letter from the
Internal Revenue Service.
(E) The market value of assets under each such
Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan)
equals or exceeds the present value of all vested
and nonvested Liabilities thereunder determined in
accordance with PBGC methods, factors, and
assumptions applicable to an Employee Pension
Benefit Plan terminating on the date for
determination.
(F) The Seller has delivered to the Buyer correct and
complete copies of the plan documents and summary
plan descriptions, the most recent determination
letter received from the Internal Revenue Service,
the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts and
other funding agreements which implement each such
Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that a Target
maintains or ever has maintained or to which it
contributes, ever has contributed, or ever has been
required to contribute:
(A) No such Employee Benefit Plan which is an Employee
Pension Benefit Plan (other than any Multiemployer
Plan) has been completely or partially terminated
or been the subject of a Reportable Event as to
which notices would be required to be filed with
the PBGC. No proceeding by the PBGC to terminate
any such Employee Pension Benefit Plan (other than
any Multiemployer Plan) has been instituted or, to
the Knowledge of the Seller, threatened.
(B) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No
Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or
comply in connection with the administration or
investment of the assets of any such Employee
Benefit Plan. No action, suit, proceeding, hearing
or investigation with respect to the
administration or the investment of the assets of
any such Employee Benefit Plan (other than routine
claims for
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<PAGE> 25
benefits) is pending or, to the Knowledge of the
Seller, threatened. The Seller has no Knowledge of
any Basis for any such action, suit, proceeding,
hearing or investigation.
(C) Each Target has not incurred, and the Seller has
no reason to expect that each Target will incur,
any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the
Code with respect to any such Employee Benefit
Plan which is an Employee Pension Benefit Plan.
(iii) Each Target does not contribute to, ever has contributed
to, or ever has been required to contribute to any
Multiemployer Plan or has any Liability (including
withdrawal Liability) under any Multiemployer Plan.
(iv) Each Target does not maintain or ever has maintained or
contributes, ever has contributed, or ever has been
required to contribute to any Employee Welfare Benefit
Plan providing medical, health, or life insurance or
other welfare-type benefits for current or future retired
or terminated employees, their spouses, or their
dependents (other than in accordance with Code ss.4980B).
(u) GUARANTIES. Each Target is not a guarantor or otherwise is liable
for any Liability or obligation (including indebtedness) of any other Person.
(v) ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
(i) Each Target has complied and is in compliance with all
Environmental, Health and Safety Requirements.
(ii) Without limiting the generality of the foregoing, each
Target has obtained and complied with, and is in
compliance with, all permits, licenses and other
authorizations that are required pursuant to
Environmental, Health and Safety Requirements for the
occupation of its facilities and the operation of its
business; a list of all such permits, licenses and other
authorizations is set forth on the attached
"Environmental and Safety Permits Schedule."
(iii) Each Target has not received any written or oral notice,
report or other information regarding any actual or
alleged violation of Environmental, Health and Safety
Requirements, or any liabilities or potential liabilities
(whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or
corrective obligations, relating to any of them or its
facilities arising under Environmental, Health and Safety
Requirements.
(iv) None of the following exists at any property or facility
owned or operated by a Target: (A) underground storage
tanks; (B) asbestos-containing material in any form or
condition; (C) materials or equipment containing
polychlorinated biphenyls; or (D) landfills, surface
impoundments or disposal areas.
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<PAGE> 26
(v) Each Target has not treated, stored, disposed of,
arranged for or permitted the disposal of, transported,
handled, or released any substance, including without
limitation any hazardous substance, or owned or operated
any property or facility (and no such property or
facility is contaminated by any such substance) in a
manner that has given or would give rise to liabilities,
including any liability for response costs, corrective
action costs, personal injury, property damage, natural
resources damages or attorney fees, pursuant to the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), the Solid
Waste Disposal Act, as amended ("SWDA"), or any other
Environmental, Health and Safety Requirements.
(vi) Neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will
result in any obligations for site investigation or
cleanup, or notification to or consent of government
agencies or third parties, pursuant to any of the
so-called "transaction-triggered" or "responsible
property transfer" Environmental, Health and Safety
Requirements.
(vii) Each Target has not, either expressly or by operation of
law, assumed or undertaken any liability, including
without limitation any obligation for corrective or
remedial action, of any other Person relating to
Environmental, Health and Safety Requirements.
(viii) No facts, events or conditions relating to the past or
present facilities, properties or operations of a Target
will prevent, hinder or limit continued compliance with
Environmental, Health and Safety Requirements, give rise
to any investigatory, remedial or corrective obligations
pursuant to Environmental, Health and Safety
Requirements, or give rise to any other liabilities
(whether accrued, absolute, contingent, unliquidated or
otherwise) pursuant to Environmental, Health and Safety
Requirements, including without limitation any relating
to onsite or offsite releases or threatened releases of
hazardous materials, substances or wastes, personal
injury, property damage or natural resources damage.
(w) TERRITORIAL RESTRICTIONS. No Target is restricted by any written
agreement or understanding with any Person from carrying on its business
anywhere in the world. Buyer, solely as a result of its purchase of the Target
Companies from Seller pursuant hereto, will not thereby become restricted in
carrying on any business anywhere in the world.
(x) DISCLOSURE. The representations and warranties contained in this
ss.4 do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this ss.4 not misleading.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
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<PAGE> 27
(a) GENERAL. Each of the Parties will use his or its reasonable best
efforts to take all action and to do all things necessary, proper or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in ss.7 below).
(b) NOTICES AND CONSENTS. The Seller will cause each Target to give
any notices to third parties, and will cause each Target to use its reasonable
best efforts to obtain any third party consents, that the Buyer reasonably may
request in connection with the matters referred to in ss.4(c) above. Each of the
Parties will (and the Seller will cause each Target to) give any notices to,
make any filings with, and use its reasonable best efforts to obtain any
authorizations, consents and approvals of governments and governmental agencies
in connection with the matters referred to in ss.3(a)(ii), ss.3(b)(iii), and
ss.4(c) above.
(c) OPERATION OF BUSINESS. The Seller will not cause or permit any
Target to engage in any practice, take any action, or enter into any transaction
outside the Ordinary Course of Business. Without limiting the generality of the
foregoing, the Seller will not cause or permit any Target to: (i) declare, set
aside, or pay any dividend or make any distribution with respect to its capital
stock or redeem, purchase, or otherwise acquire any of its capital stock; or
(ii) otherwise engage in any practice, take any action, or enter into any
transaction of the sort described in ss.4(g) above.
(d) PRESERVATION OF BUSINESS. The Seller will cause each Target to
keep its business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers and employees.
(e) FULL ACCESS. Upon prior reasonable notice from Buyer, the Seller
will permit, and the Seller will cause each Target to permit, representatives of
the Buyer to have full access at all reasonable times, and in a manner so as not
to interfere with the normal business operations of each Target, to all
premises, properties, personnel, books, records (including Tax records),
contracts and documents of or pertaining to each Target.
(f) NOTICE OF DEVELOPMENTS. The Seller will give prompt written notice
to the Buyer of any material adverse development causing a breach of any of the
representations and warranties in ss.4 above. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of his or its own representations and warranties in ss.3 above. No
disclosure by any Party pursuant to this ss.5(f), however, shall be deemed to
amend or supplement Annex I, Annex II, or the Disclosure Schedule or to prevent
or cure any misrepresentation, breach of warranty, or breach of covenant.
(g) EXCLUSIVITY. The Seller will (and the Seller will not cause or
permit each Target to): (i) solicit, initiate or encourage the submission of any
proposal or offer from any Person relating to the acquisition of any capital
stock or other voting securities, or any substantial portion of the assets, of a
Target (including any acquisition structured as a merger, consolidation or share
exchange); or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any Person to do or seek any of the
foregoing. The Seller will not vote any of their Target Shares in favor of any
such acquisition structured as a merger, consolidation or share exchange. The
Seller will notify the Buyer immediately if any Person makes any proposal,
offer, inquiry or contact with respect to any of the foregoing.
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<PAGE> 28
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect to the
period following the Closing.
(a) GENERAL. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under ss.8 below). The
Seller acknowledges and agrees that from and after the Closing, the Buyer will
be entitled to possession of all documents, books, records (including Tax
records), agreements and financial data of any sort relating to a Target.
(b) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with:
(i) any transaction contemplated under this Agreement; or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction, on or prior
to the Closing Date involving a Target, each of the other Parties will cooperate
with him or it and his or its counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under ss.8
below).
(c) TRANSITION. The Seller will not take any action that is designed
or intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of a Target from maintaining the same
business relationships with a Target after the Closing as it maintained with the
Target prior to the Closing. The Seller will refer all customer inquiries
relating to the businesses of a Target to the Buyer from and after the Closing.
(d) CONFIDENTIALITY. The Seller will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement, and deliver promptly to the Buyer or
destroy, at the request and option of the Buyer, all tangible embodiments (and
all copies) of the Confidential Information which are in his possession. In the
event that the Seller is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand or similar process) to disclose any Confidential
Information, the Seller will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or waive
compliance with the provisions of this ss.6(d). If, in the absence of a
protective order or the receipt of a waiver hereunder, the Seller is, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, the Seller may disclose the
Confidential Information to the tribunal; provided, however, that the Seller
shall use his best efforts to obtain, at the request of the Buyer, an order or
other assurance that confidential treatment will be accorded to such portion of
the Confidential Information required to be disclosed as the Buyer shall
designate. The foregoing provisions shall not apply to any Confidential
Information which is generally available to the public immediately prior to the
time of disclosure.
(e) BUYER NOTE. The Buyer Note will be imprinted with a legend
substantially in the following form:
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<PAGE> 29
The payment of principal and interest on this Note is subject to certain
recoupment provisions set forth in a Stock Purchase Agreement dated as of
November ___, 1997 (the "Purchase Agreement") among the issuer of this
Note, the person to whom this Note originally was issued, and certain
other persons. This Note was originally issued on ____, 19__, and has not
been registered under the Securities Act of 1933, as amended. The
transfer of this Note is subject to certain restrictions set forth in the
Purchase Agreement. The issuer of this Note will furnish a copy of these
provisions to the holder hereof without charge upon written request.
Each holder desiring to transfer the Buyer Note first must furnish the Buyer
with: (i) a written opinion satisfactory to the Buyer in form and substance from
counsel satisfactory to the Buyer by reason of experience to the effect that the
holder may transfer the Buyer Note as desired without registration under the
Securities Act; and (ii) a written undertaking executed by the desired
transferee satisfactory to the Buyer in form and substance agreeing to be bound
by the recoupment provisions and the restrictions on transfer contained herein.
(f) CONSTRUCTION OF HENRY COUNTY PROPERTY. Buyer acknowledges and
agrees that, subsequent to the Closing Date, Buyer will undertake, at Buyer's
cost and expense, the construction of certain leasehold improvements (the
"Leasehold Improvements") upon the real property on which Southlake Collision
Henry County, Inc. conducts its business (the "Henry County Property") for the
purpose of completing the construction of the existing improvements thereon.
This provision shall survive the Closing of the transactions contemplated
hereby.
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.3(a)
and ss.4 above shall be true and correct in all material
respects at and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of
its covenants hereunder in all material respects through
the Closing;
(iii) each Target shall have procured all of the third party
consents specified in ss.5(b) above;
(iv) no action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or
administrative agency of any federal, state, local or
foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling
or charge would: (A) prevent consummation of any of the
transactions contemplated by this Agreement; (B) cause
any of the transactions contemplated by this Agreement to
be rescinded following consummation; (C) affect adversely
the right of the Buyer to own the Target Shares of the
Seller of each Target and to control each Target; or (D)
affect adversely the right of a Target to own its assets
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<PAGE> 30
and to operate its businesses (and no such injunction,
judgment, order, decree, ruling or charge shall be in
effect);
(v) the Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions
specified above in ss.7(a)(i)-(iv) is satisfied in all
respects;
(vi) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have
expired or otherwise been terminated and the Parties,
each Target shall have received all other authorizations,
consents and approvals of governments and governmental
agencies referred to in ss.3(a)(ii), ss.3(b)(ii), and
ss.4(c) above;
(vii) the relevant parties shall have entered into side
agreements in form and substance as set forth in EXHIBITS
C-1 (Employment Agreement), and C-2 (Licensing
Agreement), attached hereto and the same shall be in full
force and effect;
(viii) the Buyer shall have received from counsel to the Seller
an opinion in form and substance as set forth in EXHIBIT
D attached hereto, addressed to the Buyer, and dated as
of the Closing Date;
(ix) the Buyer shall have received the resignations, effective
as of the Closing, of each director and officer of each
Target other than those whom the Buyer shall have
specified in writing at least five business days prior to
the Closing;
(x) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and
all certificates, opinions, instruments, and other
documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in
form and substance to the Buyer and its counsel;
(xi) Buyer and Seller shall have entered into Real Estate
Purchase Agreements in form and substance as set forth on
EXHIBIT G and EXHIBIT H attached hereto and incorporated
herein and the same shall be in full force and effect;
(xii) Buyer and Seller shall have entered into Assumption of
Lease Agreements in form and substance as set forth on
EXHIBIT I and EXHIBIT J as attached hereto and
incorporated herein with respect to the Henry County
Property and the real property on which the business of
Southlake Collision Center, Inc. is conducted (the
"Clayton County Property"), and the same shall be in
full force and effect; and
(xiii) Buyer and the relevant parties shall have entered into an
Assumption to Lease Agreement in form and substance as
set forth on EXHIBIT K as attached hereto with respect to
the lease listed on Section 4(k) of the Disclosure
Schedule that pertains to the real property on which the
business of Southlake Collision Cobb County, Inc. is
conducted, and the same shall be in full force and
effect.
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<PAGE> 31
The Buyer may waive any condition specified in this ss.7(a) if it executes a
writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the
Seller to consummate the transactions to be performed by him in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.3(b)
above shall be true and correct in all material respects
at and as of the Closing Date;
(ii) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through
the Closing;
(iii) no action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or
administrative agency of any federal, state, local or
foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling
or charge would: (A) prevent consummation of any of the
transactions contemplated by this Agreement; or (B) cause
any of the transactions contemplated by this Agreement to
be rescinded following consummation (and no such
injunction, judgment, order, decree, ruling or charge
shall be in effect);
(iv) the Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions
specified above in ss.7(b)(i)-(iii) is satisfied in all
respects;
(v) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have
expired or otherwise been terminated and the Parties,
each Target shall have received all other authorizations,
consents and approvals of governments and governmental
agencies referred to in ss.3(a)(ii), ss.3(b)(ii), and
ss.4(c) above;
(vi) the relevant parties shall have entered into side
agreements in form and substance as set forth in EXHIBITS
C-1 (Employment Agreement), and C-2 (Licensing
Agreement), attached hereto and the same shall be in full
force and effect;
(vii) the Seller shall have received from counsel to the Buyer
an opinion in form and substance as set forth in EXHIBIT
E attached hereto, addressed to the Seller, and dated as
of the Closing Date; and
(viii) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and
all certificates, opinions, instruments and other
documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in
form and substance to the Seller and his counsel.
The Seller may waive any condition specified in this ss.7(b) if they execute a
writing so stating at or prior to the Closing.
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<PAGE> 32
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties contained in this Agreement shall survive execution and delivery
of this Agreement, any examination by or on behalf of the Parties, and the
Closing contemplated herein, only to the extent specified below:
(i) the representations and warranties contained in
ss.3(a)(iii)-(iv), ss.3(b)(iv)-(v), ss.4(a)-(i),
ss.4(k)-(u) and ss.4(w)-(x) shall survive for a period of
two (2) years following the Closing Date;
(ii) the representations and warranties contained in
ss.3(a)(i), (ii) and (v), ss.3(b)(i)-(iii), ss.4(a) and
ss.4(v) shall survive without limitation; and
(iii) the representations and warranties contained in ss.4(j)
shall survive as to any Tax covered by such
representations and warranties for so long as any statute
of limitations for such Tax remains open, in whole or in
part, including without limitation by reason of waiver of
such statute of limitations.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
(i) In the event the Seller breaches (or in the event any
third party alleges facts that, if true, would mean the
Seller has breached) any of his representations,
warranties and covenants contained herein (other than the
covenants in ss.2(a) above and the representations and
warranties in ss.3(a), ss.4(a), ss.4(c), ss.4(j) and
ss.4(v) above), and, if there is an applicable survival
period pursuant to ss.8(a) above, provided that the Buyer
makes a written claim for indemnification against the
Seller pursuant to ss.8(d) below within such survival
period, then the Seller agrees to indemnify the Buyer
from and against the entirety of any Adverse Consequences
the Buyer may suffer through and after the date of the
claim for indemnification (including any Adverse
Consequences the Buyer may suffer after the end of any
applicable survival period) resulting from, arising out
of, relating to, in the nature of, or caused by the
breach (or the alleged breach); provided, however, that
the Seller shall not have any obligation to indemnify the
Buyer from and against any Adverse Consequences resulting
from, arising out of, relating to, in the nature of, or
caused by the breach (or alleged breach) of any
representation or warranty of the Seller contained in
ss.4(a)-(i), ss.4(k)-(u) and ss.4(w)-(x) above until the
Buyer has suffered Adverse Consequences by reason of all
such breaches (or alleged breaches) in excess of a
Thirty-Five Thousand Dollars ($35,000) aggregate
threshold (at which point the Seller will be obligated to
indemnify the Buyer from and against all such Adverse
Consequences that are in excess of said $35,000) not to
exceed a maximum dollar amount of One Million Five
Hundred Fifty Thousand Dollars ($1,550,000).
(ii) In the event the Seller breaches (or in the event any
third party alleges facts that, if true, would mean the
Seller has breached) any of his covenants in ss.2(a)
above or any of his or its representations and warranties
in ss.3(a), ss.4(a), ss.4(c), ss.4(j) or ss.4(v) above,
and, if there is an applicable survival period
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pursuant to ss.8(a) above, provided that the Buyer makes
a written claim for indemnification against the Seller
pursuant to ss.8(d) below within such survival period,
then the Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the
Buyer may suffer through and after the date of the claim
for indemnification (including any Adverse Consequences
the Buyer may suffer after the end of any applicable
survival period) resulting from, arising out of, relating
to, in the nature of, or caused by the breach (or the
alleged breach).
(iii) The Seller agrees to indemnify the Buyer from and against
the entirety of any Adverse Consequences the Buyer may
suffer resulting from, arising out of, relating to, in
the nature of, or caused by any Liability of the Target
for any Taxes of the Target with respect to any Tax year
or portion thereof ending on or before the Closing Date
(or for any Tax year beginning before and ending after
the Closing Date to the extent allocable (determined in a
manner consistent with ss.9(c)) to the portion of such
period beginning before and ending on the Closing Date).
(iv) The Seller agrees to indemnify the Buyer from and against
the entirety of any Adverse Consequences the Buyer may
suffer resulting from, arising out of, relating to, in
the nature of, or caused by any matter that is
discovered, revealed or disclosed as a result of Buyer's
due diligence in connection with the transaction
contemplated hereby and is mutually agreed upon by the
parties hereto in writing.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER. In the event
the Buyer breaches (or in the event any third party alleges facts that, if true,
would mean the Buyer has breached) any of its representations, warranties and
covenants contained herein, and, if there is an applicable survival period
pursuant to ss.8(a) above, provided that the Seller makes a written claim for
indemnification against the Buyer pursuant to ss.8(d) below within such survival
period, then the Buyer agrees to indemnify the Seller from and against the
entirety of any Adverse Consequences the Seller may suffer through and after the
date of the claim for indemnification (including any Adverse Consequences the
Seller may suffer after the end of any applicable survival period) resulting
from, arising out of, relating to, in the nature of, or caused by the breach (or
the alleged breach).
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third
Party Claim") which may give rise to a claim for
indemnification against any other Party (the
"Indemnifying Party") under this ss.8, then the
Indemnified Party shall promptly notify each Indemnifying
Party thereof in writing; provided, however, that no
delay on the part of the Indemnified Party in notifying
any Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is
prejudiced.
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<PAGE> 34
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with
counsel of its choice reasonably satisfactory to the
Indemnified Party so long as: (A) the Indemnifying Party
notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party will indemnify
the Indemnified Party from and against the entirety of
any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim; (B) the
Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party
that the Indemnifying Party will have the financial
resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder; (C)
the Third Party Claim involves only money damages and
does not seek an injunction or other equitable relief;
(D) settlement of, or an adverse judgment with respect
to, the Third Party Claim is not, in the good faith
judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party;
and (E) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with
ss.8(d)(ii) above: (A) the Indemnified Party may retain
separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim; (B)
the Indemnified Party will not consent to the entry of
any judgment or enter into any settlement with respect to
the Third Party Claim without the prior written consent
of the Indemnifying Party (not to be withheld
unreasonably); and (C) the Indemnifying Party will not
consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without
the prior written consent of the Indemnified Party (not
to be withheld unreasonably).
(iv) In the event any of the conditions in ss.8(d)(ii) above
is or becomes unsatisfied, however: (A) the Indemnified
Party may defend against, and consent to the entry of any
judgment or enter into any settlement with respect to,
the Third Party Claim in any manner it reasonably may
deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, any
Indemnifying Party in connection therewith); (B) the
Indemnifying Parties will reimburse the Indemnified Party
promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable
attorneys' fees and expenses); and (C) the Indemnifying
Parties will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent
provided in this ss.8.
(e) RECOUPMENT UNDER BUYER NOTE. The Buyer shall have the option of
recouping all or any part of any Adverse Consequences it may suffer ("Recoupment
Amount") (in lieu of seeking any indemnification to which it is entitled under
this ss.8) by notifying the Seller that the Buyer is reducing the principal
amount outstanding under its Buyer Note. This shall affect the timing and amount
of payments required under the Buyer Note in the same manner as if the Buyer had
made
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a permitted prepayment (without premium or penalty) thereunder. If, within five
(5) days after Buyer's notice regarding said recoupment, Seller provides Buyer
with notice in which Seller objects to said recoupment, then Buyer, in lieu of
reducing said principal amount outstanding under its Buyer Note, shall begin
paying all amounts due under said Buyer Note, up to an amount equal to the
Recoupment Amount, into a court of competent jurisdiction (the "Court Funds").
If the dispute between Buyer and Seller with respect to the Recoupment Amount is
resolved in favor of Buyer, then the Court Funds shall be paid to Seller and the
principal amount outstanding under the Buyer Note shall be reduced by an amount
equal to the Recoupment Amount. If the dispute between Buyer and Seller with
respect to the Recoupment Amount is resolved in favor of Seller, then the Court
Funds shall be paid to Seller.
(f) OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable or common law remedy (including without limitation any such remedy
arising under Environmental, Health and Safety Requirements) any Party may have
with respect to the Target or the transactions contemplated by this Agreement.
The Seller hereby agrees that he will not make any claim for indemnification
against the Target by reason of the fact that he was a director, officer,
employee or agent of any such entity or was serving at the request of any such
entity as a partner, trustee, director, officer, employee or agent of another
entity (whether such claim is for judgments, damages, penalties, fines, costs,
amounts paid in settlement, losses, expenses or otherwise and whether such claim
is pursuant to any statute, charter document, bylaw, agreement or otherwise)
with respect to any action, suit, proceeding, complaint, claim or demand brought
by the Buyer against the Seller (whether such action, suit, proceeding,
complaint, claim or demand is pursuant to this Agreement, applicable law, or
otherwise).
9. TAX MATTERS. The following provisions shall govern the allocation of
responsibility as between Buyer and Seller for certain tax matters following the
Closing Date:
(a) SECTION 338(H)(10) ELECTION. The Seller agrees, if so directed by
the Buyer, to join with Buyer in making an election under Section 338(h)(10) of
the Code (and any corresponding elections under state, local or foreign tax law)
(collectively, a "Section 338(h)(10) Election") with respect to the purchase and
sale of the Target Shares of each Target hereunder. Seller will pay any Tax,
including any liability of each Target for Tax resulting from the application to
it of Treasury Regulation ss.1.338(h)(10)-1(f)(5), attributable to the making of
the Section 338(h)(10) Election, and Seller will indemnify Buyer and each Target
against any Adverse Consequences arising out of any failure to pay such Tax.
Seller will also pay any state, local or foreign Tax (and indemnify the Buyer
and each Target against any Adverse Consequences arising out of any failure to
pay such Tax) attributable to an election under state, local or foreign law
similar to the election available under Section 338(g) of the Code (or which
results from the making of an election under Section 338(g) of the Code) with
respect to the purchase and sale of the Target Shares of each Target hereunder.
(b) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. Buyer shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for each Target for all periods ending on or prior to the Closing Date which are
filed after the Closing Date. Seller shall reimburse Buyer for Taxes of each
Target with respect to such periods within ten (10) business days after payment
by Buyer or a Target of such Taxes to the extent such Taxes are not reflected in
the reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown on
the face of the Closing Balance Sheet of a Target.
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<PAGE> 36
(c) TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING DATE.
Buyer shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of each Target for Tax periods which begin before the Closing Date
and end after the Closing Date. Seller shall pay to Buyer within fifteen (15)
days after the date on which Taxes are paid with respect to such periods an
amount equal to the portion of such Taxes which relates to the portion of such
Taxable period ending on the Closing Date to the extent such Taxes are not
reflected in the reserve for Tax Liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income)
shown on the face of the Closing Balance Sheet. For purposes of this Section, in
the case of any Taxes that are imposed on a periodic basis and are payable for a
Taxable period that includes (but does not end on) the Closing Date, the portion
of such Tax which relates to the portion of such Taxable period ending on the
Closing Date shall: (A) in the case of any Taxes other than Taxes based upon or
related to income or receipts, be deemed to be the amount of such Tax for the
entire Taxable period multiplied by a fraction the numerator of which is the
number of days in the Taxable period ending on the Closing Date and the
denominator of which is the number of days in the entire Taxable period; and (B)
in the case of any Tax based upon or related to income or receipts be deemed
equal to the amount which would be payable if the relevant Taxable period ended
on the Closing Date. Any credits relating to a Taxable period that begins before
and ends after the Closing Date shall be taken into account as though the
relevant Taxable period ended on the Closing Date. All determinations necessary
to give effect to the foregoing allocations shall be made in a manner consistent
with prior practice of each Target.
(d) COOPERATION ON TAX MATTERS.
(i) Buyer, each Target and Seller shall cooperate fully, as
and to the extent reasonably requested by the other
party, in connection with the filing of Tax Returns
pursuant to this Section and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's
request) the provision of records and information which
are reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a
mutually convenient basis to provide additional
information and explanation of any material provided
hereunder. Each Target and Seller agree: (A) to retain
all books and records with respect to Tax matters
pertinent to a Target relating to any taxable period
beginning before the Closing Date until the expiration of
the statute of limitations (and, to the extent notified
by Buyer or Seller, any extensions thereof) of the
respective taxable periods, and to abide by all record
retention agreements entered into with any taxing
authority; and (B) to give the other party reasonable
written notice prior to transferring, destroying or
discarding any such books and records and, if the other
party so requests, each Target or Seller, as the case may
be, shall allow the other party to take possession of
such books and records.
(ii) Buyer and Seller further agree, upon request, to use
their best efforts to obtain any certificate or other
document from any governmental authority or any other
Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but
not limited to, with respect to the transactions
contemplated hereby).
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<PAGE> 37
(iii) Buyer and Seller further agree, upon request, to provide
the other party with all information that either party
may be required to report pursuant to Section 6043 of the
Code and all Treasury Department Regulations promulgated
thereunder.
(e) CERTAIN TAXES. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by Seller
when due, and Seller will, at his own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, if required by
applicable law, Buyer will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
10. TERMINATION.
(a) TERMINATION OF AGREEMENT. Certain of the Parties may terminate
this Agreement as provided below:
(i) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Seller on or before December 31, 1997 if
the Buyer is not reasonably satisfied with the results of
its continuing business, legal, environmental and
accounting due diligence regarding the Target Companies;
(iii) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing:
(A) in the event the Seller has breached any material
representation, warranty or covenant contained in this
Agreement in any material respect, the Buyer has notified
the Seller of the breach, and the breach has continued
without cure for a period of 30 days after the notice of
breach; or (B) if the Closing shall not have occurred on
or before December 31,1997, by reason of the failure of
any condition precedent under ss.7(a) hereof (unless the
failure results primarily from the Buyer itself breaching
any representation, warranty or covenant contained in
this Agreement); and
(iv) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing: (A)
in the event the Buyer has breached any material
representation, warranty or covenant contained in this
Agreement in any material respect, the Seller has
notified the Buyer of the breach, and the breach has
continued without cure for a period of 30 days after the
notice of breach; or (B) if the Closing shall not have
occurred on or before December 31, 1997, by reason of the
failure of any condition precedent under ss.7(b) hereof
(unless the failure results primarily from the Seller
himself breaching any representation, warranty or
covenant contained in this Agreement).
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to ss.10(a) above, all rights and obligations of the Parties hereunder
shall terminate without any Liability of any Party to any other Party (except
for any Liability of any Party then in breach).
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<PAGE> 38
11. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
Buyer and the Seller; provided, however, that any Party may make any public
disclosure it believes in good faith is required by applicable law (in which
case the disclosing Party will use its reasonable best efforts to advise the
other Parties prior to making the disclosure).
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests or obligations hereunder without the prior
written approval of the Buyer and the Seller; provided, however, that the Buyer
may: (i) assign any or all of its rights and interests hereunder to one or more
of its Affiliates; and (ii) designate one or more of its Affiliates to perform
its obligations hereunder (in any or all of which cases the Buyer nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Seller: Mr. James E. L. Peters, Jr.
3056 Lake Park Drive
Jonesboro, Georgia 30236
Phone: 770-673-1786
Copy to: Lawrence M. Merlin, Esq.
ERCK, DEVER & MERLIN, LLC
Suite 2150, Tower Place
3340 Peachtree Road, N.E.
Atlanta, Georgia 30326-1084
Phone: 404-240-9400
Fax: 404-240-9419
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<PAGE> 39
If to Buyer: BOOMERSHINE COLLISION CENTERS, INC.
2150 Cobb Parkway
Smyrna, Georgia 30080
Attn: Mr. David Pollard
Phone: 770-953-1800
Fax: 770-_________________
Copy to: Stephen C. Whicker, Esq.
THE WHICKER LAW FIRM
6111 Peachtree Dunwoody Road, N.E.
Suite 102-D
Atlanta, Georgia 30328
Phone: 770-394-7755
Fax: 770-394-8472
Copy to: David S. Cooper, Esq.
SCHNADER HARRISON SEGAL & LEWIS, LLP
Suite 2800, SunTrust Plaza
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3252
Phone: 404-215-8100
Fax: 404-223-5164
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(h) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Georgia without giving
effect to any choice or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of Georgia.
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(j) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the
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<PAGE> 40
remaining terms and provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any other jurisdiction.
(k) EXPENSES. Each of the Parties and each Target will bear his or its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby. The
Seller agrees that no Target has borne or will bear any of the Seller's costs
and expenses (including any of its legal fees and expenses) in connection with
this Agreement or any of the transactions contemplated hereby.
(l) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty and covenant contained herein shall have
independent significance. If any Party has breached any representation, warranty
or covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty or covenant.
(m) INCORPORATION OF EXHIBITS, ANNEXES AND SCHEDULES. The Exhibits,
Annexes and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(n) SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter (subject to the provisions set forth in ss.10(o) below),
in addition to any other remedy to which they may be entitled, at law or in
equity.
(o) SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state court sitting in Cobb County, Georgia, or federal
court sitting in the Northern District of the State of Georgia in any action or
proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of the action or proceeding may be heard and determined in any
such court. Each Party also agrees not to bring any action or proceeding arising
out of or relating to this Agreement in any other court. Each of the Parties
waives any defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety or other security that might
be required of any other Party with respect thereto. Any Party may make service
on any other Party by sending or delivering a copy of the process to the Party
to be served at the address and in the manner provided for the giving of notices
in ss.10(g) above. Nothing in this ss.10(o), however, shall affect the right of
any Party to bring any action or proceeding arising out of or relating to this
Agreement in any other court or to serve legal process in any other manner
permitted by law or at equity. Each Party agrees that a final judgment in any
action or proceeding so brought
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<PAGE> 41
shall be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law or at equity.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
[as of] the date first above written.
BUYER: BOOMERSHINE COLLISION CENTERS, INC.
By: /s/ DAVID POLLARD
------------------------------------------
Title: President
SELLER: JAMES E.L. PETERS, JR.
/s/ JAMES E.L. PETERS, JR.
---------------------------------------------
JAMES E.L. PETERS, JR.
The Target Companies, by signing below, acknowledge that they have
reviewed this Agreement and agree to be bound by, and, where applicable,
represent and warrant as to the accuracy of, the following provisions of this
Agreement: Section 4(n) and Sections 5(a) - (g).
SOUTHLAKE COLLISION CENTER, INC.,
a Georgia corporation
By: /s/ JAMES E.L. PETERS, JR.
------------------------------------------
Title: President
SOUTHLAKE COLLISION COBB PARKWAY,
INC., a Georgia corporation
By: /s/ JAMES E.L. PETERS, JR.
------------------------------------------
Title: President
SOUTHLAKE COLLISION HENRY COUNTY,
INC., a Georgia corporation
By: /s/ JAMES E.L. PETERS, JR.
------------------------------------------
Title: President
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<PAGE> 1
EXHIBIT 10.1
WALTER M. BOOMERSHINE, JR.
SUNBELT EXECUTIVE EMPLOYMENT AGREEMENT
This SUNBELT EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is dated
as of December 18, 1997 (the "Effective Date"), and is entered into between
SUNBELT AUTOMOTIVE GROUP, INC., a Georgia corporation (hereinafter the "Company"
or "Sunbelt"), and WALTER M. BOOMERSHINE, JR., a resident of Gainesville, Hall
County, Georgia ("Executive").
WHEREAS, the Company wishes to employ Executive as its President from
December 18, 1997 through April 30, 1998, and thereafter, as its Senior Vice
President of Dealer Development, and Executive wishes to perform services for
the Company as a senior level executive officer (hereinafter the positions are
referred to as "Executive Officer"); and
WHEREAS, the Executive and the Company desire to enter into this
Executive Employment Agreement to govern the terms and conditions of Executive's
employment by and with the Company.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements of the parties hereto, the parties hereby covenant and
agree as follows:
ARTICLE I.
EMPLOYMENT, DUTIES AND RESPONSIBILITIES
1.1 EMPLOYMENT. The Company, through its Board of Directors (the
"Board"), hereby agrees to employ Executive as its President from December 18,
1997 through April 30, 1998, and thereafter, as Senior Vice President of the
Company for the Term (defined in Section 2.1 below), and Executive hereby agrees
to accept such employment on the terms and conditions set forth herein.
Executive agrees to devote substantially all of his business time and efforts to
the business of the Company. Anything herein to the contrary notwithstanding,
nothing shall preclude Executive from (a) serving on the boards of directors of
a reasonable number of other corporations or trade associations and/or
charitable organizations, (b) engaging in charitable activities and community
affairs, and (c) managing his and his immediate family's personal investments
and affairs, provided that such activities do not materially interfere with the
proper performance of his duties and responsibilities following the Effective
Date.
1.2 DUTIES AND RESPONSIBILITIES. Commencing as of the 18th day of
December, 1997, Executive shall assume the responsibilities, perform the duties
and exercise the powers as Executive Officer and Chairman of the Board and to
perform such duties and responsibilities as are consistent with his position and
as the Board of Directors may from time to time prescribe.
1
<PAGE> 2
1.3 BOARD AND EXECUTIVE COMMITTEE MEMBERSHIP. During the Term, the
Company will nominate Executive for election to the Board and will use its best
efforts to secure Executive's election to the Board as Chairman.
1.4 REPORTING. Executive, in his capacity as Executive Officer, shall
report in the performance of his duties directly to the Board of Directors of
the Company.
1.5 CONSULTING TERM. At the end of the Term (as defined in Section 2.1
hereof) of this Agreement, Executive shall cease to serve as Executive Officer
or any other other officer of the Company and shall serve as a consultant
thereafter as provided herein. In addition, the Executive may voluntarily resign
as Chairman of the Board and as Executive Officer of the Company at any time
during the Term and elect to serve the Company as a Consultant. As a Consultant
for the Company, the following special rules shall apply:
(i) Any resignation, as Chairman, shall be made ninety (90) days
in advance of the next scheduled or special Board meeting of
the Company and any voluntary resignation shall be effective
thirty (30) days after the same. Any such resignation shall
not be deemed to be a termination by the Executive of his
employment under this Agreement or a breach of this Agreement.
(ii) At the end of the Term set forth in Section 2.1 or upon
voluntary resignation as Executive Officer and Chairman,
Executive shall cease being an employee and officer of the
Company, but shall remain a member of the Board of Directors
and shall be a consultant to the Company (the "Consulting
Term"). As such, Executive shall provide services to the
Company on such matters pertaining to the business of the
Company as may, from time to time, be mutually agreed upon by
the Company and Executive. In this regard, Executive shall be
available at such reasonable times, upon reasonable advance
notice, but subject to scheduling conflicts, to meet with the
Board and/or the officers of the Company, or their designees,
for the purpose of providing such services; provided, however,
that Executive shall only be obligated to perform services
commensurate with his status as a former executive of the
Company and only those services which the Company believes, in
good faith, to be of benefit to the Company. Such services
shall generally not exceed thirty (30) hours per week during
the first two (2) years of the Consulting Term and shall
generally not exceed fifteen (15) hours per week during the
next eight (8) years of the Consulting Term.
(iii) The Consulting Term of this Agreement shall be for a period
of ten (10) years and shall commence upon the expiration of
the Term, set forth in Section 2.1, or upon the effective date
of the Executive's voluntary resignation.
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(iv) During the Consulting Term, Executive's annual Base Salary
pursuant to Section 3.1(a) shall be Two Hundred Thousand
Dollars ($200,000) per year for the first two (2) years of the
Consulting Term and shall be One Hundred Thousand Dollars
($100,000) per year for each of the next eight (8) years of
the Consulting Term. Executive's Annual Cash Bonus under
3.l(b) shall cease to accrue as of the fiscal year of the
Company following the fiscal year in which the Term in Section
2.1 expires.
(v) All of the remaining terms of this Agreement shall remain in
full force and effect, provided that the limitations on
Executive's outside business interests contained in Section
1.1, Section 4.1, and Section 4.2 shall be eliminated, and the
Company's obligations under Section 1.3 shall, likewise, be
eliminated.
ARTICLE II.
TERM
2.1 TERM. The term (the "Term") of Executive's employment as Executive
Officer, or such other acceptable senior level management position, under this
Agreement shall commence on the Effective Date and shall continue until earlier
of (a) December 31, 2000, or (b) the occurrence of a Change in Control (as
defined in Section 6.1 below) followed by Executive's notice of termination for
Good Reason (as defined in Section 5.2) or (c) the commencement of the
Consulting Term. Any Term or Consulting Term may be terminated earlier as
provided in Article V hereof.
ARTICLE III.
COMPENSATION AND EXPENSES
3.1 SALARY, BONUSES AND BENEFITS. As compensation and consideration for
the services to be rendered hereunder during the Term by Executive, the Company
shall pay, and Executive shall accept, the following (subject, in each case, to
the provisions of Article V hereof):
(a) BASE SALARY. Commencing January 2, 1998, the Company shall
pay Executive an annual Base Salary (the "Base Salary") during the Term of TWO
HUNDRED THOUSAND DOLLARS ($200,000.00). All annual Base Salary shall be payable
in accordance with the normal payment procedures of the Company.
(b) ANNUAL CASH BONUS. Commencing with the fiscal year
beginning July
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1, 1998 and for each fiscal year of the Company during the Term, the
Company shall pay Executive an annual cash bonus (the "Annual Cash
Bonus") as determined by the Compensation Committee (or in the absence
of such a committee, by either the Executive Committee or the Board),
based on satisfaction of certain performance criteria to be established
by agreement between the Compensation Committee (or in the absence of
such a committee, by either the Executive Committee or the Board) and
Executive. The Annual Cash Bonus shall be determined (prorated for the
final year of employment) and paid within ninety (90) days after the
end of each fiscal year of the Company during the Term.
(c) STOCK OPTIONS. The Company shall grant to the Executive,
under the Company's Incentive Stock Plan and the Option Grant attached
hereto as Exhibit "A", an option (the "Option") to purchase up to
25,000 SHARES of the Company's Common Stock at an exercise price equal
to the price per share to the public set forth on the cover of the
Company's IPO prospectus. The Option will vest and become exercisable
in two (2) equal installments as follows: One-half (1/2) of the number
of shares covered under the Option on each of the first and second
anniversaries of the Option Grant. The Option shall terminate on the
tenth anniversary of the Option Grant, subject to earlier termination
as may be set forth in this Agreement, the Incentive Stock Plan or the
Option Grant. The Option is in addition to any other option award or
grant which may be made to the Executive during his employment.
(d) BENEFIT PROGRAMS. Executive shall be eligible to
participate in or receive benefits under all of the Company's employee
and executive benefit plans or arrangements including, without
limitation, plans or arrangements providing for health and disability
insurance coverage, life insurance for the benefit of Executive's
beneficiaries, deferred compensation and pension benefits, and personal
financial, investment, legal or tax advice, all at the highest level
that is available through the Company and/or any of its Subsidiaries to
their senior executive management (the "Benefit Programs"). In
addition, Executive shall be entitled to such perquisites of
employment, including, but not limited to, two (2) demo automobiles,
insurance, etc., as are made available to the senior executive
management of the Company and/or its Subsidiaries. If this Agreement is
assigned to any Subsidiaries of the Company or any other party,
Executive shall be granted credit for all service with the Company
and/or its Subsidiaries prior to the date of such assignment for all
purposes of the Benefit Programs, including, but not limited to,
eligibility, vesting and benefits. To the extent there is a period of
employment required as a condition for full benefit coverage under any
Benefit Programs, and Executive would not otherwise meet the
requirements taking into consideration past service granted for service
with the Company and/or its Subsidiaries, to the extent permissible
under applicable law, the Company agrees to take or to cause to be
taken all actions necessary so that Executive will be deemed to have
met such requirement. The Company agrees that whenever Executive is
required to pay for coverage or benefits under a Benefit Program from
his own wages, the Company shall reimburse him for the sum of the
amount of such payments plus federal, state income and social security
and Medicare taxes on the entire reimbursement amount (including the
tax on such taxes) so that Executive will not have incurred any cost in
obtaining such
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coverage or benefit except as otherwise may be specifically set forth herein.
(e) VACATION. Executive shall be entitled to paid vacation
during each year of the Term in an amount equal to four (4) weeks per year.
Executive shall have the right to determine the time and duration of any
vacation so taken, in his sole discretion. Unused vacation days may be
accumulated from year to year, up to a maximum carryover of eight (8) weeks.
3.2 EXPENSES. The Company shall reimburse Executive for reasonable
business-related expenses incurred by him in connection with the performance of
services hereunder during the Term, subject to the Company's policies relating
to business-related expenses as in effect from time to time during the Term.
ARTICLE IV.
EXCLUSIVITY, ETC.
4.1 EXCLUSIVITY. Executive agrees that during the Term he will not
engage in any other business activities, pursued for gain, profit or other
pecuniary advantage, that are competitive with the activities of the Company or
any of its Subsidiaries, except as permitted in Section 1.1 above and Section
4.2 below. Executive agrees that all of his activities as an employee of the
Company shall be in conformity in all material respects with all policies, rules
and regulations and directions of the Company not inconsistent with this
Agreement and which have been expressly communicated to him, in writing.
4.2 OTHER BUSINESS VENTURES. Executive agrees that, so long as he is
employed by the Company, he will not have any financial or other beneficial
interest in any business enterprise which is competitive with any business
engaged in by the Company or any of its Subsidiaries. Notwithstanding the
foregoing or anything contained in Section 4.1 hereof, Executive may own,
directly or indirectly, up to two per cent (2%) of the outstanding capital stock
of any such business having a class of capital stock which is traded on any U.S.
or foreign stock exchange or in the over-the-counter market.
4.3 CONFIDENTIALITY; NON-COMPETITION. (a) Executive agrees that he will
not, at any time during the Term or the Consulting Term, and for a period of
three (3) years following the termination of his employment consulting
hereunder, directly or indirectly, use or divulge to any other person, firm or
corporation any trade or business secret, process, method or means, or any other
confidential information concerning the business or policies of the Company or
any of its Subsidiaries or Affiliates (as "Affiliates" is defined in Section
6.2), except (i) as such disclosure or use may be required or appropriate in
connection with his work as an employee or consultant of the Company or (ii)
when required to do so by a court of law, by any governmental agency having
supervisory authority over the business of the Company or
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by any administrative or legislative body (including a committee thereof) with
apparent jurisdiction to order him to divulge, disclose or make accessible such
information. For purposes of this Agreement, a "trade or business secret,
process, method or means, or any other confidential information" shall mean and
include information treated as confidential or as a trade secret by the Company
or any of its Subsidiaries or Affiliates, that is or has been disclosed or
otherwise becomes or has become known to the Executive as a result of his
employment with the Company, including but not limited to, information regarding
contemplated products, models, compilations, business and financial methods or
practices, marketing, merchandising and selling techniques, customers, vendors,
suppliers, trade secrets, training programs, manuals or materials, technical
information, contracts, systems, procedures, mailing lists, know-how, trade
names, improvements, pricing, price lists, financial or other data (including
the revenues, costs or profits associated with any of the Company's products or
services), business plans, strategy, code books, invoices and other financial
statements, computer programs, software systems, databases, discs and printouts,
other plans (technical or otherwise), customer and industry lists, supplier
lists, correspondence, internal reports, personnel files, sales and advertising
material, telephone numbers, names, addresses or any other compilation of
information, written or unwritten, which is or was used in the business of the
Company or any of its Subsidiaries or Affiliates. Executive's obligation under
this Section 4.3 (a) shall not apply to any information which is generally known
to the public or hereafter becomes generally known to the public without the
fault of Executive. Executive further agrees that upon termination of his
employment, he will not take with him, or retain without written authorization
from the Company, and will promptly deliver to the Company, all confidential
information of the Company and any copies thereof, together with all notes,
extracts, compilations, and other documents, records, and media that contain or
are based upon a trade or business secret, process, method or means, or any
other confidential information. Upon termination of his employment and
consulting, Executive also shall deliver to the Company all other files,
correspondence, and other communications received, maintained, and/or originated
by Executive during the course of his employment and any copies thereof.
(b)(i) Executive acknowledges that the agreements and covenants
contained in this section 4.3(b) are essential to protect the value of the
Company's business and assets and by virtue of his employment with the Company,
Executive has obtained and will obtain knowledge, contacts, know-how, training,
experience and other information relating to the Company's business operations,
and there is a substantial probability that such knowledge, know-how, contacts,
training, experience and information could be used to the substantial advantage
of a competitor of the Company and to the Company's substantial detriment.
Accordingly, for a period commencing on the date of termination of Executive's
employment and consulting with the Company and ending one (1) year from and
after such date (the "Non-Compete Period"), Executive shall not, directly or
indirectly, for himself or on behalf of or in conjunction with any person,
partnership, corporation or other entity, compete, own, operate, control, or
participate or engage in the ownership, management, operation or control of, or
be connected with as an officer, employee, partner, director, shareholder,
representative, consultant, independent
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contractor, guarantor, advisor or in any other manner or otherwise have a
financial interest in, a proprietorship, partnership, joint venture,
association, firm, corporation or other business organization or enterprise that
competes with the Company (which for this purpose shall mean any business or
enterprise that operates dealerships for the retail sales of new and used
automobiles or trucks and businesses ancillary thereto), provided that such
business or enterprise (A) is or becomes located or otherwise engaged within a
100 mile radius of the City of Atlanta, Georgia or within a 100 mile radius of
any automobile or truck dealership or ancillary business in which the Company,
directly or indirectly, has a 50% or greater economic or voting or otherwise
controlling ownership interest as of the termination of Executive's employment
and consulting hereunder or (B) is an automobile or truck dealership or group of
affiliated automobile or truck dealerships (and all businesses ancillary
thereto) whose aggregate gross sales during the 12-month period immediately
preceding the date of Executive's termination exceeded $50,000,000, and provided
further that it shall not be a violation of this Section 4.3 (b) if (x)
Executive owns up to one percent (1%) of the outstanding capital stock of any
such business having a class of capital stock which is traded on any U.S. or
foreign stock exchange or in the over-the-counter market, (y) Executive owns,
operates, is employed by or is otherwise connected with an advertising agency
that serves automobile dealerships, provided Executive does not personally
perform any work for, or otherwise provide any advice with respect to, any
account that is engaged in competitive activity with the Company, or (z)
Executive is employed by or is a consultant or independent contractor for an
entity that competes with the Company but Executive is employed by or is a
consultant or independent contractor for a division or subsidiary of such entity
that does not engage in such competitive activity. During the Non-Compete
Period, Executive shall not interfere with or disrupt, or attempt to interfere
with or disrupt, the relationship, contractual or otherwise, between the Company
and any customer, client, supplier, manufacturer, distributor, consultant,
independent contractor or employee of the Company.
(c) Executive agrees that, at any time and from time to time during and
after the Term, he will execute any and all documents which the Company may
reasonably request to effectuate the provisions of this Section 4.3.
ARTICLE V.
TERMINATION
5.1 TERMINATION BY THE COMPANY. The Company shall have the right to
terminate Executive's employment at any time, with or without "Cause."
(a) TERMINATION FOR CAUSE. For purposes of this Agreement,
"Cause" shall mean:
(i) Executive is convicted of or enters a plea of
guilty to any felony under federal or state law (except under any state's laws
regulating the enforcement of motor
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vehicles involved in accidents);
(ii) Executive engages in conduct that constitutes
gross neglect or willful misconduct in carrying out his duties under this
Agreement, resulting, in either case, in material harm to the Company;
(iii) Executive refuses to follow the instructions,
orders or directives of the Board or the Executive Committee with respect to his
duties and responsibilities hereunder, provided that such refusal shall
constitute Cause only if the instruction, order or directive in question has
been furnished to Executive in writing and provided further that such refusal
shall not constitute Cause if Executive has a good faith and reasonable belief,
based on advice of counsel, that to follow such instruction, order or directive
would be unlawful;
(iv) Executive engages in any of the following acts
which have a material adverse impact on the financial condition of the Company:
(A) actual fraud or other material acts of
dishonesty in fulfilling his assigned responsibilities hereunder; or
(B) the willful or grossly negligent
destruction of any material amount of the Company's tangible property.
The Board shall notify Executive of its intent to terminate him for
Cause by providing written notice ("Notice of Cause") stating in as much detail
as possible the particular event, act or acts, or failure or failures to act,
that constitute the grounds on which the proposed termination for Cause is
based; such Notice of Cause must be given within fifteen (15) days of the date
any of the members of the Board (exclusive of Executive) learns of the
circumstances giving rise to the Notice of Cause. Executive shall have fifteen
(15) days after receipt of the Notice of Cause in which to cure or otherwise
correct the circumstances detailed, provided that in the event any such cure or
correction is incapable upon reasonable diligence of being completed within such
fifteen (15) day period, Executive shall be entitled to commence a cure or
correction within said fifteen (15) day period and thereafter diligently and
continuously pursue such cure or correction to completion. Executive may also,
within such fifteen (15) day period, request by written notice that the Board
hold a hearing at which Executive may contest the proposed termination for
Cause. The hearing shall be held on a date set by the Board within fifteen (15)
days of the date the Board receives Executive's notice of the hearing whether
Executive has been terminated for Cause as set forth in the Notice of Cause. If
Executive does not request a hearing or the circumstances described in the
Notice of Cause have not been cured Executive shall be deemed terminated for
Cause, effective as of the day the Notice of Cause was given by the Company.
(b) TERMINATION WITHOUT CAUSE. The Company may terminate Executive
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without Cause upon sixty (60) days advance written notice to Executive and such
termination shall not constitute a breach of this Agreement.
(c) IPO TERMINATION. This Agreement shall automatically terminate with
no further obligations by either party if the IPO has not been completed and
become effective on or before August 1, 1998. Furthermore, as a part of the
contemplated IPO, should the Company fail to complete its merger with
Boomershine Automotive Group, Inc. (the "Merger"), this Agreement shall
automatically terminate and the Company shall have no past, present or future
obligations to the Executive for Base Salary, Bonus, benefits or any other
covenants or agreements set forth herein for the Term or Consulting Term.
5.2 TERMINATION BY EXECUTIVE.
(a) TERMINATION FOR GOOD REASON. Termination for "Good Reason" shall
mean a termination of Executive's employment at the Executive's initiative
following the occurrence, without Executive's written consent, of one or more of
the following events:
(i) Any relocation by the Company of the Executive's primary
working office outside of the metropolitan Atlanta, Georgia area or outside of
Gainesville, Georgia, without Executive's written consent;
(ii) The failure to elect or re-elect Executive to the Board,
or his removal prior to the expiration of the Term, as Executive Officer of the
Company or such other senior level executive management position acceptable to
Executive or his removal as a full voting member of the Board of Directors,
without the Executive's consent except as otherwise contemplated by Executive's
election pursuant to Section 1.5;
(iii) Any (1) diminution in Executive's duties other than
changes which neither individually nor in the aggregate will or will likely
cause any actual or perceived material reduction in his powers, duties and
responsibilities as enumerated in this Agreement, or (2) assignment to Executive
of duties which are either fundamentally or materially inconsistent with his
position as Executive Officer of the Company;
(iv) As a result of a material breach by the Company or the
Executive Committee, Executive determines that he cannot carry out his duties
and responsibilities as Executive Officer or such other senior level management
position in the manner contemplated by this Agreement;
(v) The occurrence of a Change in Control (as defined in
Section 6.1 hereof);
(vi) The failure of the Company to obtain the absolute and
unqualified
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assumption in writing of its obligation to perform this Agreement by any
successor to all or substantially all of the assets or stock of the Company
within 15 days after a merger, consolidation, sale or similar transaction.
(vii) The Company fails to make any payments due to the
Executive hereunder or otherwise materially breaches its obligations under this
Agreement.
Prior to his termination for Good Reason, Executive shall give written
notice ("Notice of Good Reason") to the Board of his intention to terminate this
Agreement for Good Reason, such Notice of Good Reason (A) to state in detail the
particular event, act or acts or failure or failures to act that constitute the
grounds on which the proposed termination for Good Reason is based, and (B) to
be given within fifteen (15) days of his learning of such event, act or acts or
failures to act. The Company shall have fifteen (15) days after the date that
the Notice of Good Reason has been received by the Board in which to cure or
correct the circumstances giving rise to the Notice of Good Reason. If the
Company fails to cure such conduct within such fifteen (15) day cure period,
Executive's employment shall be terminated for Good Reason as of the expiration
of the fifteen (15) day cure period.
(b) VOLUNTARY TERMINATION. Executive shall have the right to terminate
his employment at any time without cause (a "Voluntary Termination"). A
Voluntary Termination is not a termination for Good Reason or a termination as
the result of Disability (as hereafter defined) or death. A Voluntary
Termination, excepting death, shall be effective upon sixty (60) days' advance
written notice to the Company and shall not constitute a breach of this
Agreement.
5.3 DEATH. In the event Executive dies during the Term, Executive's
employment under this Agreement shall automatically terminate effective upon the
date of Executive's death.
5.4 DISABILITY. In the event that Executive shall suffer a Disability
as defined below, the Company shall have the right to terminate the Agreement,
which shall be effective upon written notice to Executive. "Disability" means a
physical or mental condition which renders Executive incapable of performing
Executive's regular duties hereunder for a period of one hundred twenty (120)
consecutive days. In the event of any disagreement between Executive and the
Company as to whether Executive is suffering from a Disability, the
determination of Executive's Disability shall be made by one or more board
certified licensed physicians practicing the specialty of medicine applicable to
Executive's disorder in the Atlanta metropolitan area in accordance with the
provisions of this Section. If either the Company or Executive desires to
initiate the procedure provided in this Section, such party (the "Initiating
Party") shall deliver written notice to the other party (the "Responding Party")
in accordance with the provisions of this Agreement specifying that the
Initiating Party desires to proceed with a medical examination and the
procedures specified in this Section. Such notice shall include the name,
address and telephone number of the physician selected by the Initiating Party
(the
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"Disability Examination Notice"). If the Responding Party fails within ten (10)
days after the receipt of the Disability Examination Notice to designate a
physician meeting the standards specified herein, the physician designated by
the Initiating Party in the Disability Examination Notice shall make the
determination of Disability as provided in this Section. If the Responding Party
by written notice notifies the Initiating Party within ten (10) days of the
receipt by the Responding Party of the Disability Examination Notice by notice
specifying the physician selected by the Responding Party for purposes of this
Section, then each of the two physicians as so designated by the respective
parties shall each examine Executive. Examinations shall be made by each such
physician within ten (10) days of such physician's respective designation. Each
physician shall render a written report as to whether in such physician's
opinion Executive is suffering a Disability. If the two physicians agree on the
status of Executive for purposes of this Section, such determination shall be
conclusive and dispositive for all purposes of this Section. If the two
physicians cannot so agree, the two physicians shall jointly select a third
physician meeting the standards specified in this Section within ten (10) days
after the later report of the two physicians is submitted. The third physician
shall render a written report on the status of Executive within ten (10) days of
selection and such report shall be dispositive for purposes of this Section. For
purposes of this Section, Executive agrees that he shall promptly submit to such
examinations and tests as such physicians shall reasonably request for purposes
of making a determination of Disability as provided herein. Failure or refusal
of the Executive to submit to the examination as required by this Section shall
constitute a conclusive admission by the Executive that the Executive is
suffering from a Disability as provided herein.
5.5 SEVERANCE PAY UPON TERMINATION. Amounts due under this Section 5.5
are in the nature of severance payments considered to be reasonable by the
Company and are not in the nature of a penalty, provided that such payments
shall be Executive's exclusive remedy relating to the termination of his
employment hereunder.
(a) FOR CAUSE/VOLUNTARY TERMINATION. In the event of termination of
Executive's employment (i) by the Company for Cause, or (ii) by Executive other
than for Good Reason or as provided in Section 1.5, the Company shall pay to
Executive any annual Base Salary and any Annual Cash Bonus earned (for a full
fiscal year or prorated for a partial fiscal year) but not paid to Executive
prior to the effective date of such termination, and Executive shall be entitled
to other additional benefits in accordance with the benefit plans of the
Company. In addition, Executive and his spouse shall be entitled to continued
participation in all medical, dental and hospitalization coverage as set forth
in Section 5.5(e) hereof.
(b) GOOD REASON/WITHOUT CAUSE. In the event of termination of
Executive's employment (i) by the Company other than for Cause, or (ii) by
Executive for Good Reason, then the Executive shall receive the following:
(i) Salary. The Executive shall be paid all earned but unpaid
annual Base Salary and will continue to receive his current annual Base
Salary (subject to withholding
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of all applicable taxes) for the remainder of the Term of this Agreement plus
the amounts to be paid under Section 1.5 for the Consulting Term. For purposes
hereof, the Executive's "current annual Base Salary" shall be the highest rate
in effect during the six-month period prior to the termination of Executive's
employment. The amounts due hereunder for the annual Base Salary shall be paid
in single lump payment which shall be paid within ninety (90) days of
termination. The amounts due for the Consulting Term Payments shall be payable
monthly commencing on the first month after termination and continuing each
month thereafter.
(ii) Bonuses and Incentives. The Executive shall receive any
Annual Cash Bonus then earned (for a full fiscal year or prorated for a
partial fiscal year) plus bonus payments from the Company for the
thirty-six (36) months following the month in which his employment is
terminated in an amount for each such month equal to one-twelfth of the
average of the Annual Cash Bonuses paid to him for the two calendar
years immediately preceding the calendar year in which such termination
occurs (provided that calendar years prior to 1998 shall not be
considered). Any Annual Cash Bonus that the Executive had previously
earned but which may not yet have been paid as of the date of
termination shall be due and payable. All such bonus amounts shall be
paid in a single lump sum payment which shall be paid not later than
ninety days after his termination.
(iii) Health and Life Insurance Coverage. The Executive shall
receive post-termination medical, dental, and hospitalization insurance
coverage as provided in Section 5.5(e).
(iv) Employee Retirement Plans. In addition to the benefits
provided herein, to the extent permitted by the applicable plan, the
Executive will be entitled to continue to participate, consistent with
past practices, in all employee retirement plans maintained by the
Company in effect as of the date of the termination of his employment.
The Executive's participation in such retirement plans shall continue
for a period of thirty-six (36) months from the date of the termination
of his employment (at which point he will be considered to have
terminated employment within the meaning of the plans) and the
compensation payable to the Executive under (i) and (ii) above shall be
treated (unless otherwise excluded) as compensation under such plans.
If continued participation if any plan is not permitted or if any such
plan does not continue to exist, the Company shall pay to the Executive
and, if applicable, his designated beneficiary, a supplemental benefit
equal to the present value on the date of termination of employment
(calculated as provided in the plan) of the excess of (i) the benefit
the Executive would have been paid under such plan if he had continued
to be covered for the 36-month period (less any amounts he would have
been required to contribute) with assumed earnings calculated at eight
percent (8%) per annum, over (ii) the benefit actually payable under
such plan. The Company shall pay such additional benefits (if any) in a
lump sum.
(v) Effect of Lump Sum Payment. The lump sum payments under
(i) or (ii) above shall not alter the amounts Executive is entitled to
receive under the benefit plans
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described in (iv) above. Benefits such plans shall be determined as if
Executive had remained employed and received such payments over a
period of thirty-six (36) months.
(vi) Effect of Death. The benefits payable or to be provided
under this Agreement shall not cease in the event of the Executive's
death and such benefits shall be payable to his designated beneficiary
(in accordance with Section 7.2 hereof) or, if none, the legal
representative of Executive's estate.
(vii) Options. Any options awarded to and granted to the
Executive but not yet vested shall immediately vest and become
exercisable by the Executive as provided in Section 5.6(b).
(c) DISABILITY. IN THE event of termination of Executive's employment
for Disability as described in Section 5.4 hereof, Executive shall be entitled
to receive any Annual Cash Bonus then earned. Further, in the event of
termination of Executive's employment for Disability as described in Section 5.4
hereof, Executive shall be entitled to receive Executive's annual Base Salary
for the remainder of the Term. Executive and his spouse shall be entitled to
continued participation in medical, dental and hospitalization coverage as set
forth in Section 5.5(e) hereof and, if not prohibited by law, in all other
employee plans and programs in which they were participating on the date of
termination of Executive's employment due to Disability until the date, or
dates, Executive and his spouse receive similar coverage and benefits under the
plans and programs of a subsequent employer (such coverages and benefits to be
determined on a coverage-by-coverage, or benefit-by-benefit, basis).
(d) DEATH. In the event of termination of Executive's employment during
the Term or the Consulting Term due to death, then, in addition to the amounts
and other benefits described in this Agreement, the Company shall pay to the
legal representative of Executive's estate the total sum of Two Hundred Thousand
Dollars ($200,000).
(e) POST-TERMINATION MEDICAL, DENTAL AND HOSPITALIZATION INSURANCE
COVERAGE. In the event of termination of Executive's employment for any reason
whatsoever, Executive and his spouse shall be entitled to continued
participation in all of the Company's medical, dental and hospitalization
insurance plans at the Company's expense until the date on which Executive
is employed by any Person other than the Company, or any Affiliate or Subsidiary
of the Company, and Executive becomes covered by the for the medical, dental and
hospitalization insurance coverage through such other Person's plan.
(f) GOLDEN PARACHUTE PAYMENTS. If the aggregate present value
(determined as of the date of termination of employment of Executive in
accordance with the provisions of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") (or any successor section thereof) and the
regulations and rulings thereunder ("Section 280G")) of the sum of (i) severance
payments made to Executive due to his termination for Good Reason as a result of
a
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Change in Control under this Section, and (ii) all other payments to Executive
in the nature of compensation which are contingent on a change in ownership or
effective control of the Company or in the ownership of a substantial portion of
the assets of the Company would result in an excess parachute payment (as
determined under Section 280G), then the Company shall pay to Executive an
additional severance amount under this Subsection (f) equal to the sum of (A)
the amount of tax imposed by Code Section 4999 upon excess parachute payments
received by Executive, and (B) federal and state income and social
security/Medicare taxes (including interest and penalties) payable on both the
tax amount in (A) and the entire amount paid under (B), such that Executive is
reimbursed for, and has no out-of-pocket expenses with respect to, the cost of
all income taxes and social security/Medicare taxes (including interest and
penalties) payable upon amounts paid to Executive under this Subsection (f).
5.6 TREATMENT OF OPTIONS UPON TERMINATION
(a) FOR CAUSE/VOLUNTARY TERMINATION/FAILURE OF IPO/MERGER. In the event
of termination of Executive's employment (i) by the Company for Cause, (ii)
voluntarily by Executive other than for Good Reason, or (iii) by reason of the
failure of the IPO or the Merger, any Options granted to the Executive, to the
extent not then vested and exercisable on the date of such termination, shall be
immediately canceled. To the extent the Options are then vested and exercisable
on the date of such termination, they may be exercised (A) in the event of
termination by the Company for Cause, for a period of ninety(90) days after the
date of such termination, or (B) in the event of Voluntary Termination by
Executive for a period of one (1) year after the date of such termination.
(b) WITHOUT CAUSE OR FOR GOOD REASON OR DUE TO RETIREMENT, DEATH, OR
DISABILITY. In the event of the termination of Executive's employment by the
Company without Cause or by Executive for Good Reason or due to the Retirement,
Death, or Disability of Executive, all grants of restricted stock and all stock
options granted to Executive pursuant to the Company's Incentive Stock Option
Plan shall, to the extent not then vested and exercisable on the date of such
termination, become immediately vested and exercisable for a period of ninety
(90) days after the date of such termination, or such longer period of time as
is permitted under the applicable plan or grant.
5.7 NO MITIGATION; NO OFFSET. In the event of any termination of
employment under this Article V, Executive shall be under no obligation to seek
other employment and there shall be no offset against amounts due Executive
under this Agreement on account of any remuneration attributable to any
subsequent employment that he may obtain, except as specifically provided for
fringe benefits in this Article V.
ARTICLE VI
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CHANGE IN CONTROL
6.1 CHANGE IN CONTROL. A "Change in Control" shall mean the occurrence
of any one of the following events:
(a) Prior to an IPO, the shareholders of the Company or any of its
Affiliates (as defined in Section 6.2 below, individually or collectively, sell
or otherwise transfer to persons or entities who are not Affiliates of the
Company, in one transaction or a series of related transactions, 75% or more of
the Voting Stock (as defined below) of the Company or any of its Affiliates;
(b) Any "person," as such term is used in Sections 3(a)(9) and 13(d) of
the Securities Exchange Act of 1934, becomes a "beneficial owner," as such term
is used in Rule 13s-3 promulgated under that act (other than an Affiliate of the
Company or any "person" who was a "beneficial owner" of 10% or more of the
Voting Stock of the Company on the date hereof or who has received Voting Stock
from Executive), of 50% or more of the Voting Stock of the Company or any of its
Affiliates prior to any IPO and 40% or more of the Voting Stock of the Company
or any of its Affiliates after an IPO;
(c) The majority of the Board consists of individuals other than
"Incumbent Directors," which term means the members of the Board on the date of
this Agreement (excluding Executive) or otherwise designated pursuant to various
agreements among the Company's stockholders in effect on the date hereof;
provided, that any person becoming a director subsequent to such date whose
election or nomination for election was supported by a majority of the directors
who then comprised the Incumbent Directors shall be considered to be an
Incumbent Director;
(d) All or substantially all of the assets or business of the Company
or any of its Affiliates is disposed of pursuant to a merger, consolidation or
other transaction other than to an Affiliate of the Company (unless the
shareholders of the Company immediately prior to such merger, consolidation or
other transaction beneficially own, directly or indirectly, 50% or more of the
Voting Stock or other ownership interests of the entity or entities, if any,
that succeed to the business of the Company); or
(e) The consummation of (i) a merger, consolidation or other business
combination of the Company with any other "person" (as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) or
Affiliate thereof, other than a merger, consolidation or business combination
which would result in the outstanding Common Stock of the Company immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into common stock of the surviving entity or a parent or
Affiliate thereof) (at least fifty percent (50%) of the outstanding Common Stock
of the Company or such surviving entity or parent or Affiliate thereof
outstanding immediately after such merger, consolidation or
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business combination, or (ii) a plan of complete liquidation of the Company; or
(f) The occurrence of any other event or circumstances which is not
covered by (a) through (e), above, which the Board determines affects control of
the Company and, in order to implement the purposes of this Agreement as set
forth above, the Board adopts a resolution that such event or circumstance
constitutes a Change in Control for the purposes of this Agreement.
6.2 OTHER TERMS. For the purposes of this Agreement, (i) "Affiliate" of
a specified person or other entity shall mean a person or other entity that
directly or indirectly controls, is controlled by, or is under common control
with the person or other entity specified, and in the case of a specified person
who is a natural person, his spouse, his issue, his parents, his estate and any
trust entirely for the benefit of his spouse and/or issue; (ii) "Voting Stock"
shall mean capital stock of any class or classes having voting power under
ordinary circumstances, in the absence of contingencies, to elect the directors
of a corporation; and iii) "IPO" shall mean the completion of an underwritten
sale of Common Stock or securities convertible into Common Stock of the Company
(or an entity formed by the Company for the purpose of issuing Common Stock (or
securities convertible into Common Stock) in connection with the IPO) pursuant
to a registration statement which has become effective under the Securities Act
of 1933, as amended.
ARTICLE VII.
MISCELLANEOUS
7.1 INDEMNIFICATION.
(a) The Company agrees that if Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the written request of the Company as a director, officer,
member, employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether or not the basis of such Proceeding is Executive's
alleged action in an official capacity while serving as a director, officer,
member, employee, trustee, or agent, Executive shall be indemnified and held
harmless by the Company to the fullest extent legally permitted or authorized by
the Company's Articles of Incorporation or bylaws or resolutions of the
Company's Board of Directors against all cost, expense, liability and loss
(including, without limitation, reasonable attorney's fees, judgments, fines or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by Executive in connection therewith, and such indemnification shall
continue as to Executive in the event he has ceased to be a director, officer,
member, employee, trustee, or agent of the Company or other entity and shall
inure to the benefit of Executive's heirs, executors and administrators. The
Company shall advance to Executive all reasonable costs and expenses incurred by
him in connection with a Proceeding
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within twenty (20) days after receipt by the Company of a written request for
such advance. Executive shall not be required to repay the amount of such
advance unless it shall ultimately be determined in the proceeding that he has
acted willfully and was grossly negligent in conduct giving rise to the
Proceeding.
(b) The failure of the Company (including the Board, independent legal
counsel or stockholders) to have made a determination prior to the commencement
of any Proceeding concerning payments of amounts claimed by Executive under
Section 7.1(a) above that indemnification of Executive is proper because he has
met the applicable standard of conduct, shall create a presumption that
Executive has met the applicable standard of conduct.
(c) The Company agrees to maintain appropriate insurance coverage for
directors' and officers' liability, errors and omissions and/or blanket
liability protecting against any costs arising from a Proceeding which may be
assessed against Executive. Such coverage shall be provided at the highest level
provided for any employee, director or officer of the Company.
7.2 BENEFIT OF AGREEMENT; ASSIGNMENT; BENEFICIARY. This Agreement shall
inure to the benefit of and be binding upon the Company and its successors and
assigns. No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation in which
the Company is not the continuing entity, or sale of all or substantially all of
the assets of the Company, provided that the assignee or transferee is the
successor to all or substantially all of the assets of the Company and such
assignee or transferee assumes the liabilities, obligations and duties of the
Company, as contained in this Agreement, either contractually or as a matter of
law. It is contemplated that Sunbelt Automotive Group, Inc. will assume the
Company's obligations hereunder in contemplation of an initial public offering.
This Agreement shall also inure to the benefit of, and be enforceable by,
Executive and his personal or legal representatives, executors, administrators,
successors, heirs, distributes, devisees and legatees. If Executive should die
while any amount would still be payable to the Executive hereunder if he had
continued to live, all such amounts shall be paid in accordance with the terms
of this Agreement to Executive's beneficiary, devisee, legatee or other
designee, or if there is no such designee, to Executive's estate. Without
limiting the foregoing, Executive shall be entitled, to the extent permitted
under any applicable law, to select and change a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following Executive's
death by giving the Company written notice thereof. In the event of Executive's
death or a judicial determination of his incompetence, reference in this
Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative.
7.3 NOTICES. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent by
telephone or telex or by registered
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or certified postage prepaid, with return receipt requested, addressed: (a) in
the case of the Company of 5901 Peachtree Dunwoody Road, Building B, Suite 250,
Atlanta, Georgia 30328, Attention: General Counsel, or to such other address
and/or to the attention of such other person as the Company shall designate by
written notice to Executive; and (b) in the case of Executive, to 4959 HABERSHAM
WALK, GAINESVILLE, GEORGIA 30504, or to such other address as Executive shall
designate by written notice to the Company. Any notice given hereunder shall be
deemed to have been given at the time of receipt thereof by the person to whom
such notice is given.
7.4 AMENDMENT. This Agreement may not be changed or modified except by
an instrument in writing signed by both of the parties hereto.
7.5 WAIVER. The waiver by either party of a breach of any provision of
this Agreement shall not operate or be construed as a continuing waiver or as a
consent to or waiver of any subsequent breach hereof. Any waiver must be in
writing and signed by Executive or an authorized officer of the Company, as the
case may be.
7.6 HEADINGS. The Article and Section headings herein are for
convenience of reference only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof.
7.7 GOVERNING LAW. This Agreement shall be governed by, and construed
and interpreted in accordance with, the internal laws of the State of Georgia
without reference to the principles of conflict laws.
7.8 AGREEMENT TO TAKE ACTIONS. Each party hereto shall execute and
deliver such documents, certificates, agreements and other instruments, and
shall take such other actions, as may be reasonably necessary or desirable in
order to perform his or its obligations under this Agreement or to effectuate
the purposes hereof.
7.9 SURVIVORSHIP. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
7.10 INVALIDITY AND SEVERABILITY. The invalidity or unenforceability of
any one or more of the particular provisions of this Agreement shall not affect
the enforceability of the other provisions hereof, all of which are inserted
conditionally on their being valid in law, and in the event one or more
provisions contained herein shall be invalid, this Agreement shall be construed
as if such invalid provision had not been inserted, and if such invalidity shall
be caused by any value, any price, the length of any period of time, the size of
any area, or the scope of activities set forth in any provision hereof, such
value, price, period of time, area, or scope shall be considered to be adjusted
to a value, price, period of time, area or scope which
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would cure such invalidity. The parties hereto agree that the covenants and
obligations contained in this Agreement are severable and divisible, that none
of such covenants or obligations depends on any other covenant or obligation for
its enforceability, that each such covenant and obligation constitutes an
enforceable obligation between the Company and Executive, that each such
covenant and obligation shall be construed as an agreement independent of any
other provision of this Agreement, and that the existence of any claim or cause
of action by one party to this Agreement against another party to this
Agreement, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by any party to this Agreement of any
such covenants or obligations.
7.11 ENTIRE AGREEMENT. This Agreement, and the Agreements and documents
referred to herein, contain the entire understanding and agreement between the
parties concerning the subject matter hereof and supersedes all prior
agreements, understanding, discussions, negotiations and undertakings, whether
written or oral, between the parties with respect thereto.
7.12 RESOLUTION OF DISPUTES. Any disputes arising under or in
connection with this Agreement shall, at the election of either Executive or the
Company, be resolved by binding arbitration, to be held in Atlanta, Georgia in
accordance with the rules and procedures of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof. Each party shall bear his or
its own costs of the arbitration or litigation, provided, however, in the event
the Executive incurs legal fees and other expenses in seeking to obtain any
benefits provided by this Agreement or to enforce any rights or provisions of
this Agreement and is successful, in whole or in part, in obtaining or enforcing
any such rights or benefits through settlement, arbitration or otherwise, the
Company shall promptly pay the Executive's reasonable legal fees and expenses
incurred in obtaining such benefits or enforcing this Agreement. Pending the
resolution of any arbitration or court proceeding, the Company shall continue
payment of all amounts due Executive under this Agreement and all benefits to
which Executive is entitled at the time the dispute arises.
7.13 REPRESENTATIONS. The Company represents that it is fully
authorized and empowered to enter into this Agreement and that the performance
of its obligations under this Agreement will not violate any agreement to which
it is a party or by which it is bound. Executive represents that there is no
agreement to which he is a party or by which he is bound that would be violated
by the performance of his obligations under this Agreement.
7.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement effective as of the date first above written.
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EXECUTIVE: /s/ Walter M. Boomershine, Jr.
----------------------------------
Walter M. Boomershine, Jr.
SUNBELT AUTOMOTIVE GROUP, INC.
By: /s/ Charles K. Yancey
-------------------------------
Title: CEO
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CHARLES K. YANCEY
SUNBELT EXECUTIVE EMPLOYMENT AGREEMENT
This SUNBELT EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is dated
as of December 18, 1997 (the "Effective Date"), and is entered into between
SUNBELT AUTOMOTIVE GROUP, INC., a Georgia corporation (hereinafter the "Company"
or "Sunbelt"), and CHARLES K. YANCEY, a resident of Atlanta, Dekalb County,
Georgia ("Executive").
WHEREAS, Executive has been employed by Boomershine Automotive Group,
Inc. ("Boomershine") as its General Manager, Secretary and Treasurer; and
WHEREAS, the Company intends to reorganize its business structure and
to purchase certain other businesses including Boomershine as a precondition to
engage in an initial public offering of its stock (the "IPO") or other change of
control; and
WHEREAS, the Company wishes to employ Executive as its Chief Executive
Officer ("CEO") through April 30, 1998, and thereafter, as President and Chief
Operating Officer ("COO"), and Executive wishes to perform services for the
Company as a senior level executive officer (hereinafter the positions are
referred to as "Executive Officer"); and
WHEREAS, the Executive and the Company desire to enter into this
Executive Employment Agreement to govern the terms and conditions of Executive's
employment by and with the Company.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements of the parties hereto, the parties hereby covenant and
agree as follows:
ARTICLE I.
EMPLOYMENT, DUTIES AND RESPONSIBILITIES
1.1 EMPLOYMENT. The Company, through its Board of Directors (the
"Board"), hereby agrees to employ Executive as its CEO through April 30, 1998,
and thereafter, as President and COO of the Company, as agreed to by the
parties, for the Term (defined in Section 2.1 below), and Executive hereby
agrees to accept such employment on the terms and conditions set forth herein.
Executive agrees to devote substantially all of his business time and efforts to
the business of the Company. Anything herein to the contrary notwithstanding,
nothing shall preclude Executive from (a) serving on the boards of directors of
a reasonable number of other corporations or trade associations and/or
charitable organizations, (b) engaging in charitable activities and community
affairs, and (c) managing his and his immediate family's personal investments
and affairs, provided that such activities do not materially interfere with
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the proper performance of his duties and responsibilities following the
Effective Date.
1.2 DUTIES AND RESPONSIBILITIES. Commencing as of the 18th day of
December, 1997, Executive shall assume the responsibilities, perform the duties
and exercise the powers as Executive Officer. Executive shall be responsible for
the general management of the operating affairs of the Company (subject to the
day-to-day operating control of certain of the Company's subsidiaries which the
Board or the Executive Committee thereof (the "Executive Committee") may
specifically allocate to other senior officers of the Company or to the extent
required by agreements to which the Company or any of its subsidiaries are
subject (other than agreements with such senior officers), including franchise
agreements with automobile manufacturers or authorized distributors thereof and
shall be required to perform such duties and responsibilities as are consistent
with his position and as the Board or the Executive Committee may from time to
time prescribe.
1.3 BOARD AND EXECUTIVE COMMITTEE MEMBERSHIP. During the Term, the
Company will nominate Executive for election to the Board and will use its best
efforts to secure Executive's election to the Board and his appointment as a
member of the Executive Committee of the Board, if such a committee is
appointed by the Board.
1.4 REPORTING. Executive, in his capacity as Executive Officer, shall
report in the performance of his duties directly to the Board of Directors of
the Company.
1.5 CONSULTING TERM. At the end of the Term or any Renewal Term (as
defined in Section 2.1 hereof) of this Agreement, Executive shall have the right
to resign as Executive Officer of the Company and elect to serve the Company as
a Consultant, in which event the following special rules shall apply:
(i) Any such resignation shall be made on ninety (90) days'
advance written notice, to be effective as of the first day of
the calendar month following such 90th day prior to the end of
the Term or any Renewal Term, and such resignation shall not
be deemed to be a breach of or a termination by Executive of
his employment under this Agreement,
(ii) At the end of the Term or any Renewal Term set forth in
Section 2.1, Executive shall cease being an officer of the
Company, but shall remain a member of the Board of Directors
and shall be a consultant to the Company (the "Consulting
Term"). As such, Executive shall provide services to the
Company on such matters pertaining to the business of the
Company as may, from time to time, be mutually agreed upon by
the Company and Executive. In this regard, Executive shall be
available at such reasonable times, upon reasonable advance
notice, but subject to scheduling conflicts, to meet with the
Board and/or the officers of the Company, or their designees,
for the purpose of providing such services; provided,
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however, that Executive shall only be obligated to perform
services commensurate with his status as a former executive
of the Company and only those services which the Company
believes, in good faith, to be of benefit to the Company.
(iii) The Consulting Term of this Agreement shall be for a period
of five (5) years.
(iv) During the Consulting Term, Executive's annual Base Salary
pursuant to Section 3.l(a) shall be reduced to Fifty
Thousand Dollars ($50,000) per year. Executive's Annual Cas
Bonus under 3.l(b) shall cease to accrue upon commencement
of the Consulting Term.
(v) All of the remaining terms of this Agreement shall remain in
full force and effect, provided that the limitations on
Executive's outside business interests contained in Section
1.1, Section 4.1, and Section 4.2 shall be eliminated, and
the Company's obligations under Section 1.3 shall, likewise,
be eliminated.
ARTICLE II.
TERM
2.1 TERM. The term of Executive's employment as Executive
Officer, or such other acceptable senior level management position, under this
Agreement shall commence on the Effective Date and shall continue until earlier
of (a) June 30, 2003, or (b) the occurrence of a Change in Control (as defined
in Section 6.1 below) or (c) the commencement of the Consulting Term; provided
that the Term shall be renewed for an additional one-year period on the
expiration of the original Term of this Agreement ("Renewal Term") and on each
succeeding anniversary thereof (each, a "Renewal Date"), unless the Company or
Executive gives written notice, at least ninety (90) days prior to a Renewal
Date, of its or his intention not to so renew the Term (the "Term"). Any Term or
Renewal Term may be terminated earlier as provided in Article V hereof.
ARTICLE III.
COMPENSATION AND EXPENSES
3.1 SALARY, BONUSES AND BENEFITS. As compensation and consideration for
the services to be rendered hereunder during the Term and any Renewal Term by
Executive, the Company shall pay, and Executive shall accept, the following
(subject, in each case, to the provisions of Article V hereof):
(a) BASE SALARY. Commencing January 2, 1998, and through June 30, 1999,
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the Company shall pay Executive an annual Base Salary, on an annualized basis,
(the "First Year Base Salary") of TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000.00). Commencing July 1, 1999 and through June 30, 2000, the Company
shall pay Executive an annual Base Salary (the "Second Year Base Salary") of
THREE HUNDRED TWENTY-FIVE DOLLARS ($325,000.00). Commencing July 1, 2000 and
through June 30, 2001, the Company shall pay Executive an annual Base Salary
(the "Third Year Base Salary") of FOUR HUNDRED THOUSAND DOLLARS ($400,000.00).
After the Third Year Base Salary, the Executive shall be paid an annual Base
Salary commensurate with competitive industry data on comparable companies and
as shall be set forth by the Compensation Committee; provided, however, the
annual Base Salary shall in no event be less than the Third Year Base Salary.
All annual Base Salary shall be payable in accordance with the normal payment
procedures of the Company.
(b) ANNUAL CASH BONUS. Commencing with the fiscal year beginning July
1, 1998 and for each fiscal year of the Company during the Term, the Company
shall pay Executive an annual cash bonus (the "Annual Cash Bonus") as determined
by the Compensation Committee (or in the absence of such a committee, by either
the Executive Committee or the Board), based on satisfaction of certain
performance criteria to be established by agreement between the Compensation
Committee (or in the absence of such a committee, by either the Executive
Committee or the Board) and Executive. If the Company meets certain financial
and other performance targets to be agreed upon by the Compensation Committee
(or in the absence of such committee, by the Executive Committee or the Board)
and Executive, the Annual Cash Bonus shall be targeted at an amount at least
equal to fifty percent (50%) of Executive's annual Base Salary as of the year in
question, but in no event shall the Annual Cash Bonus exceed the Executive's
annual Base Salary. However, nothing herein shall be construed as a guarantee of
any amount of an Annual Cash Bonus. The Annual Cash Bonus shall be determined
(prorated for the final year of employment) and paid within ninety (90) days
after the end of each fiscal year of the Company during the Term.
(c) STOCK GRANT. As compensation for services rendered by the Executive
to and through May 1, 1998 and for his part in helping the Company in its IPO
process, and coming to work full-time for the Company, the Company agrees to
award to the Executive the right to purchase 111,081 shares of the Company's
voting common stock (the "IPO Award") at a price of $6.18 per share. These
shares shall be granted pursuant to the Company's 1997 and 1998 Incentive Stock
Plan (the "Incentive Stock Plan") and shall be granted so as to minimize the
cash expenditure and tax consequences to the Executive.
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(d) STOCK OPTIONS.
1. FIRST OPTION. In addition to the IPO Award above, the
Company shall grant to the Executive, under the Incentive Stock Plan, an option
("First Option") to purchase up to 200,000 SHARES of the Company's voting common
stock at the exercise price adopted under the Incentive Stock Plan and as set
forth in the Option Grant, attached hereto as Exhibit "A" and incorporated
herein. The First Option shall terminate on the tenth anniversary of the Option
Grant, subject to earlier termination as may be set forth in this Agreement, the
Incentive Stock Plan or in the Option Grant. The First Option is in addition to
any other option award or grant which may be made to the Executive during his
employment.
2. Second Option. In addition to the IPO Award and the First
Option above, the Company shall grant to the Executive, under the Incentive
Stock Plan, an option (the "Second Option") to purchase up to 240,000 shares of
the Company's voting common stock at the exercise price adopted under the
Company's Incentive Stock Plan and as set forth on the Option Grant, attached
hereto as Exhibit "B" and incorporated herein. The Second Option shall terminate
on the tenth anniversary of the grant of the Second Option, subject to earlier
termination as may be set forth in this Agreement, the Incentive Stock Plan or
the Option Grant. The Second Option is in addition to any other option award or
grant which may be made to the Executive during his employment.
2. THIRD OPTION. In addition to the IPO Award, the First
Option and the Second Option above, the Company shall grant to the Executive,
under the Company's Incentive Stock Plan and the Option Grant attached hereto as
Exhibit "C", an option ("Third Option") to purchase up to 100,000 SHARES of the
Company's voting common stock at an exercise price equal to the price per share
to the public set forth on the cover of the Company's IPO prospectus. The Third
Option shall terminate on the tenth anniversary of the Option Grant, subject to
earlier termination as may be set forth in this Agreement, the Incentive Stock
Plan or the Option Grant. The Third Option is in addition to any other option
award or grant which may be made to the Executive during his employment.
(e) BENEFIT PROGRAMS. Executive shall be eligible to participate in or
receive benefits under all of the Company's employee and executive benefit plans
or arrangements including, without limitation, plans or arrangements providing
for health and disability insurance coverage, life insurance for the benefit of
Executive's beneficiaries, deferred compensation and pension benefits, and
personal financial, investment, legal or tax advice, all at the highest level
that is available through the Company and/or any of its Subsidiaries to their
senior executive management (the "Benefit Programs"). In addition, Executive
shall be entitled to such perquisites of employment, including, but not limited
to, two (2) demo automobiles, insurance, etc., as are made available to the
senior executive management of the Company and/or its Subsidiaries. If this
Agreement is assigned to any Subsidiaries of the Company or any other party,
Executive shall be granted credit for all service with the Company and/or its
Subsidiaries
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prior to the date of such assignment for all purposes of the Benefit Programs,
including, but not limited to, eligibility, vesting and benefits. To the extent
there is a period of employment required as a condition for full benefit
coverage under any Benefit Programs, and Executive would not otherwise meet the
requirements taking into consideration past service granted for service with the
Company and/or its Subsidiaries, to the extent permissible under applicable law,
the Company agrees to take or to cause to be taken all actions necessary so that
Executive will be deemed to have met such requirement. The Company agrees that
whenever Executive is required to pay for coverage or benefits under a Benefit
Program from his own wages, the Company shall reimburse him for the sum of the
amount of such payments plus federal, state income and social security and
Medicare taxes on the entire reimbursement amount (including the tax on such
taxes) so that Executive will not have incurred any cost in obtaining such
coverage or benefit except as otherwise may be specifically set forth herein.
(f) Vacation. Executive shall be entitled to paid vacation during each
year of the Term in an amount equal to four (4) weeks per year. Executive shall
have the right to determine the time and duration of any vacation so taken, in
his sole discretion. Unused vacation days may be accumulated from year to year,
up to a maximum carryover of eight (8) weeks.
3.2 EXPENSES. The Company shall reimburse Executive for reasonable
business-related expenses incurred by him in connection with the performance of
services hereunder during the Term, subject to the Company's policies relating
to business-related expenses as in effect from time to time during the Term.
ARTICLE IV.
EXCLUSIVITY, ETC.
4.1 EXCLUSIVITY. Executive agrees that during the Term or any Renewal
Term, he will not engage in any other business activities, pursued for gain,
profit or other pecuniary advantage, that are competitive with the activities of
the Company or any of its Subsidiaries, except as permitted in Section 1.1 above
and Section 4.2 below. Executive agrees that all of his activities as an
employee of the Company shall be in conformity in all material respects with all
policies, rules and regulations and directions of the Company not inconsistent
with this Agreement and which have been expressly communicated to him, whether
orally or in writing.
4.2 OTHER BUSINESS VENTURES. Executive agrees that, so long as he is
employed by the Company, he will not have any financial or other beneficial
interest in any business enterprise which is competitive with any business
engaged in by the Company or any of its Subsidiaries. Notwithstanding the
foregoing or anything contained in Section 4.1 hereof, Executive may own,
directly or indirectly, up to two per cent (2%) of the outstanding capital stock
of any such business having a class of capital stock which is traded on any U.S.
or foreign
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stock exchange or in the over-the-counter market.
4.3 CONFIDENTIALITY; NON-COMPETITION. (a) Executive agrees that he will
not, at any time during the Term or any Renewal Term, and for a period of three
(3) years following the termination of his employment, any Renewal Term and
Consulting Term, directly or indirectly, use or divulge to any other person,
firm or corporation any trade or business secret, process, method or means, or
any other confidential information concerning the business or policies of the
Company or any of its Subsidiaries or Affiliates (as "Affiliates" is defined in
Section 6.2), except (i) as such disclosure or use may be required or
appropriate in connection with his work as an employee or consultant of the
Company or (ii) when required to do so by a court of law, by any governmental
agency having supervisory authority over the business of the Company or by any
administrative or legislative body (including a committee thereof) with apparent
jurisdiction to order him to divulge, disclose or make accessible such
information. For purposes of this Agreement, a "trade or business secret,
process, method or means, or any other confidential information" shall mean and
include information treated as confidential or as a trade secret by the Company
or any of its Subsidiaries or Affiliates, that is or has been disclosed or
otherwise becomes or has become known to the Executive as a result of his
employment with the Company, including but not limited to, information regarding
contemplated products, models, compilations, business and financial methods or
practices, marketing, merchandising and selling techniques, customers, vendors,
suppliers, trade secrets, training programs, manuals or materials, technical
information, contracts, systems, procedures, mailing lists, know-how, trade
names, improvements, pricing, price lists, financial or other data (including
the revenues, costs or profits associated with any of the Company's products or
services), business plans, strategy, code books, invoices and other financial
statements, computer programs, software systems, databases, discs and printouts,
other plans (technical or otherwise), customer and industry lists, supplier
lists, correspondence, internal reports, personnel files, sales and advertising
material, telephone numbers, names, addresses or any other compilation of
information, written or unwritten, which is or was used in the business of the
Company or any of its Subsidiaries or Affiliates. Executive's obligation under
this Section 4.3 (a) shall not apply to any information which is generally known
to the public or hereafter becomes generally known to the public without the
fault of Executive. Executive further agrees that upon termination of his
employment, he will not take with him, or retain without written authorization
from the Company, and will promptly deliver to the Company, all confidential
information of the Company and any copies thereof, together with all notes,
extracts, compilations, and other documents, records, and media that contain or
are based upon a trade or business secret, process, method or means, or any
other confidential information. Upon termination of his employment and
consulting, Executive also shall deliver to the Company all other files,
correspondence, and other communications received, maintained, and/or originated
by Executive during the course of his employment and any copies thereof.
(b)(i) Executive acknowledges that the agreements and covenants
contained in this section 4.3(b) are essential to protect the value of the
Company's business and assets and by
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virtue of his employment with the Company, Executive has obtained and will
obtain knowledge, contacts, know-how, training, experience and other information
relating to the Company's business operations, and there is a substantial
probability that such knowledge, know-how, contacts, training, experience and
information could be used to the substantial advantage of a competitor of the
Company and to the Company's substantial detriment. Accordingly, for a period
commencing on the date of termination of Executive's employment with the Company
and ending one (1) year from and after such date (the "Non-Compete Period"),
Executive shall not, directly or indirectly, for himself or on behalf of or in
conjunction with any person, partnership, corporation or other entity, compete,
own, operate, control, or participate or engage in the ownership, management,
operation or control of, or be connected with as an officer, employee, partner,
director, shareholder, representative, consultant, independent contractor,
guarantor, advisor or in any other manner or otherwise have a financial interest
in, a proprietorship, partnership, joint venture, association, firm, corporation
or other business organization or enterprise that competes with the Company
(which for this purpose shall mean any business or enterprise that operates
dealerships for the retail sales of new and used automobiles or trucks and
businesses ancillary thereto), provided that such business or enterprise (A) is
or becomes located or otherwise engaged within a 100 mile radius of the City of
Atlanta, Georgia or within a 100 mile radius of any automobile or Buck
dealership or ancillary business in which the Company, directly or indirectly,
has a 50% or greater economic or voting or otherwise controlling ownership
interest at any time during the Non-Compete Period or (B) is an automobile or
truck dealership or group of affiliated automobile or Buck dealerships (and all
businesses ancillary thereto) whose aggregate gross sales during the 12-month
period immediately preceding the date of Executive's termination exceeded
$50,000,000, and provided further that it shall not be a violation of this
Section 4.3 (b) if (x) Executive owns up to one percent (1%) of the outstanding
capital stock of any such business having a class of capital stock which is
traded on any U.S. or foreign stock exchange or in the over-the-counter market,
(y) Executive owns, operates, is employed by or is otherwise connected with an
advertising agency that serves automobile dealerships, provided Executive does
not personally perform any work for, or otherwise provide any advice with
respect to, any account that is engaged in competitive activity with the
Company, or (z) Executive is employed by or is a consultant or independent
contractor for an entity that competes with the Company but Executive is
employed by or is a consultant or independent contractor for a division or
subsidiary of such entity that does not engage in such competitive activity.
During the Non-Compete Period, Executive shall not interfere with or disrupt, or
attempt to interfere with or disrupt, the relationship, contractual or
otherwise, between the Company and any customer, client, supplier, manufacturer,
distributor, consultant, independent contractor or employee of the Company.
(c) Executive agrees that, at any time and from time to time during and
after the Term, he will execute any and all documents which the Company may
reasonably request to effectuate the provisions of this Section 4.3.
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ARTICLE V.
TERMINATION
5.1 TERMINATION BY THE COMPANY. The Company shall have the right to
terminate Executive's employment at any time, with or without "Cause."
(a) TERMINATION FOR CAUSE. For purposes of this Agreement, "Cause"
shall mean:
(i) Executive is convicted of or enters a plea of guilty to
any felony under federal or state law (except under any state's laws
regulating the enforcement of motor vehicles involved in accidents);
(ii) Executive engages in conduct that constitutes gross
neglect or willful misconduct in carrying out his duties under this
Agreement, resulting, in either case, in material harm to the Company;
(iii) Executive refuses to follow the instructions, orders or
directives of the Board or the Executive Committee with respect to his
duties and responsibilities hereunder, provided that such refusal shall
constitute Cause only if the instruction, order or directive in
question has been furnished to Executive in writing and provided
further that such refusal shall not constitute Cause if Executive has a
good faith and reasonable belief, based on advice of counsel, that to
follow such instruction, order or directive would be unlawful;
(iv) Executive engages in any of the following acts which have
a material adverse impact on the financial condition of the Company:
(A) actual fraud or other material acts of dishonesty
in fulfilling his assigned responsibilities hereunder; or
(B) the willful or grossly negligent destruction of
any material amount of the Company's tangible property.
The Board shall notify Executive of its intent to terminate him for
Cause by providing written notice ("Notice of Cause") stating in as much detail
as possible the particular event, act or acts, or failure or failures to act,
that constitute the grounds on which the proposed termination for Cause is
based; such Notice of Cause must be given within fifteen (15) days of the date
any of the members of the Board (exclusive of Executive) learns of the
circumstances giving rise to the Notice of Cause. Executive shall have fifteen
(15) days after receipt of the Notice of Cause in which to cure or otherwise
correct the circumstances detailed, provided that in the event any such cure or
correction is incapable upon reasonable diligence of being completed within such
fifteen (15) day period, Executive shall be entitled to commence a cure or
correction within said fifteen (15) day period and thereafter diligently and
continuously pursue
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such cure or correction to completion. Executive may also, within such fifteen
(15) day period, request by written notice that the Board hold a hearing at
which Executive may contest the proposed termination with Cause. The hearing
shall be held on a date set by the Board within fifteen (15) days of the date
the Board receives Executive's notice of the hearing whether Executive has been
terminated for Cause as set forth in the Notice of Cause. If Executive does not
request a hearing and the circumstances described in the Notice of Cause have
not been cured within the fifteen (15) day period following the date of the
Notice of Cause, Executive shall be deemed terminated for Cause, effective as of
the day the Notice of Cause was given by the Company.
(b) TERMINATION WITHOUT CAUSE. The Company may terminate Executive
without Cause upon sixty (60) days advance written notice to Executive and such
termination shall not constitute a breach of this Agreement.
(c) IPO TERMINATION. This Agreement shall automatically terminate with
no further obligations by either party if the IPO has not been completed and
become effective on or before August 1, 1998.
5.2 TERMINATION BY EXECUTIVE.
(a) TERMINATION FOR GOOD REASON. Termination for "Good Reason" shall
mean a termination of Executive's employment during the Term or any Renewal Term
at the Executive's initiative following the occurrence, without Executive's
written consent, of one or more of the following events:
(i) A reduction in Executive's then current annual Base Salary
or his Annual Cash Bonus;
(ii) The failure to elect or reselect Executive to the Board,
or his removal, as Executive Officer of the Company or such other
senior level executive management position acceptable to Executive or
his removal as a full voting member of the Board of Directors, without
the Executive's consent except as otherwise contemplated by Executive's
election pursuant to Section 1.5;
(iii) Any (1) diminution in Executive's duties other than
changes which neither individually nor in the aggregate will or will
likely cause any actual or perceived material reduction in his powers,
duties and responsibilities as enumerated in this Agreement, or (2)
assignment to Executive of duties which are either fundamentally or
materially inconsistent with his position as Executive Officer of the
Company;
(iv) As a result of a breach by the Company or the Chairman of
the Board or the Chairman of the Executive Committee, Executive
determines that he cannot carry
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out his duties and responsibilities as Executive Officer or such other senior
level management position in the manner contemplated by this Agreement;
(v) The occurrence of a Change in Control (as defined in Section 6.1
hereof);
(vi) The failure of the Company to obtain the absolute and unqualified
assumption in writing of its obligation to perform this Agreement by any
successor to all or substantially all of the assets or stock of the Company
within 15 days after a merger, consolidation, sale or similar transaction.
(vii) The modification of any of the responsibilities, duties and
authority of the Company's senior executive management without Executive's prior
written consent.
(viii) The Company fails to make any payments due to the Executive
hereunder or otherwise materially breaches its obligations under this Agreement.
Prior to his termination for Good Reason, Executive shall give written
notice ("Notice of Good Reason") to the Board of his intention to terminate this
Agreement for Good Reason, such Notice of Good Reason (A) to state in detail the
particular event, act or acts or failure or failures to act that constitute the
grounds on which the proposed termination for Good Reason is based, and (B) to
be given within fifteen (15) days of his learning of such event, act or acts or
failures to act. The Company shall have fifteen (15) days after the date that
the Notice of Good Reason has been received by the Board in which to cure or
correct the circumstances giving rise to the Notice of Good Reason. If the
Company fails to cure such conduct within such fifteen (15) day cure period,
Executive's employment shall be terminated for Good Reason as of the expiration
of the fifteen (15) day cure period.
(b) VOLUNTARY TERMINATION. Executive shall have the right to terminate
his employment at any time without cause (a "Voluntary Termination"). A
Voluntary Termination is not a termination for Good Reason or a termination as
the result of Disability (as hereafter defined) or death. A Voluntary
Termination, excepting death, shall be effective upon sixty (60) days' advance
written notice to the Company and shall not constitute a breach of this
Agreement.
5.3 DEATH. In the event Executive dies during the Term, Executive's
employment under this Agreement shall automatically terminate effective upon the
date of Executive's death.
5.4 DISABILITY. In the event that Executive shall suffer a Disability
as deemed below, the Company shall have the right to terminate the Agreement,
which shall be effective upon written notice to Executive. "Disability" means a
physical or mental condition which
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renders Executive incapable of performing Executive's regular duties hereunder
for a period of one hundred twenty (120) consecutive days. In the event of any
disagreement between Executive and the Company as to whether Executive is
suffering from a Disability, the determination of Executive's Disability shall
be made by one or more board certified licensed physicians practicing the
specialty of medicine applicable to Executive's disorder in the Atlanta
metropolitan area in accordance with the provisions of this Section. If either
the Company or Executive desires to initiate the procedure provided in this
Section, such party (the "Initiating Party") shall deliver written notice to the
other party (the "Responding Party") in accordance with the provisions of this
Agreement specifying that the Initiating Party desires to proceed with a medical
examination and the procedures specified in this Section. Such notice shall
include the name, address and telephone number of the physician selected by the
Initiating Party (the "Disability Examination Notice"). If the Responding Party
fails within ten (10) days after the receipt of the Disability Examination
Notice to designate a physician meeting the standards specified herein, the
physician designated by the Initiating Party in the Disability Examination
Notice shall make the determination of Disability as provided in this Section.
If the Responding Party by written notice notifies the Initiating Party within
ten (10) days of the receipt by the Responding Party of the Disability
Examination Notice by notice specifying the physician selected by the Responding
Party for purposes of this Section, then each of the two physicians as so
designated by the respective parties shall each examine Executive. Examinations
shall be made by each such physician within ten (10) days of such physician's
respective designation. Each physician shall render a written report as to
whether in such physician's opinion Executive is suffering a Disability. If the
two physicians agree on the status of Executive for purposes of this Section,
such determination shall be conclusive and dispositive for all purposes of this
Section. If the two physicians cannot so agree, the two physicians shall jointly
select a third physician meeting the standards specified in this Section within
ten (10) days after the later report of the two physicians is submitted. The
third physician shall render a written report on the status of Executive within
ten (10) days of selection and such report shall be dispositive for purposes of
this Section. For purposes of this Section, Executive agrees that he shall
promptly submit to such examinations and tests as such physicians shall
reasonably request for purposes of making a determination of Disability as
provided herein. Failure or refusal of the Executive to submit to the
examination as required by this Section shall constitute a conclusive admission
by the Executive that the Executive is suffering from a Disability as provided
herein.
5.5 SEVERANCE PAY UPON TERMINATION. Amounts due under this Section 5.5
are in the nature of severance payments considered to be reasonable by the
Company and are not in the nature of a penalty, provided that such payments
shall be Executive's exclusive remedy relating to the termination of his
employment hereunder.
(a) FOR CAUSE/VOLUNTARY TERMINATION/END OF TERM. In the event of
termination of Executive's employment (i) by the Company for Cause, (ii) by
Executive other than for Good Reason or as provided in Section 1.5, or (iii) by
reason of either party's election not to extend the Term or any Renewal Term as
provided in Section 2.1 hereof, the Company
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shall pay to Executive, any annual Base Salary and any Annual Cash Bonus earned
(for a full fiscal year or prorated for a partial fiscal year) but not paid to
Executive prior to the effective date of such termination, and Executive shall
be entitled to other additional benefits in accordance with the benefit plans of
the Company. In addition, Executive and his spouse shall be entitled to
continued participation in all medical, dental and hospitalization coverage as
set forth in Section 5.5(e) hereof.
(b) GOOD REASON/WITHOUT CAUSE. In the event of termination of
Executive's employment (i) by the Company other than for Cause, or (ii) by
Executive for Good Reason, then the Executive shall receive the following:
(i) Salary. The Executive shall be paid all earned but unpaid
annual Base Salary and will continue to receive his current annual Base
Salary (subject to withholding of all applicable taxes) for the
remainder of the Term of this Agreement plus the amounts to be paid
under Section 1.5 for the Consulting Term. For purposes hereof, the
Executive's "current annual Base Salary" shall be the highest rate in
effect during the six-month period prior to the termination of
Executive's employment. The amounts due hereunder for the annual Base
Salary shall be paid in single lump payment which shall be paid within
ninety (90) days of termination. The amounts due for the Consulting
Term Payments shall be payable monthly commencing on the first month
(1st) after termination and continuing each month thereafter.
(ii) Bonuses and Incentives. The Executive shall receive any
Annual Cash Bonus then earned (for a full fiscal year or prorated for a
partial fiscal year) plus bonus payments from the Company for the
thirty-six (36) months following the month in which his employment is
terminated in an amount for each such month equal to one-twelfth of the
average of the Annual Cash Bonuses paid to him for the two calendar
years immediately preceding the calendar year in which such termination
occurs (provided that calendar years prior to 1998 shall not be
considered). Any Annual Cash Bonus that the Executive had previously
earned but which may not yet have been paid as of the date of
termination shall be due and payable. All such bonus amounts shall be
paid in a single lump sum payment which shall be paid not later than
ninety days after his termination.
(iii) Health and Life Insurance Coverage. The Executive shall
receive post-termination medical, dental, and hospitalization insurance
coverage as provided in Section 5.5(e).
(iv) Employee Retirement Plans. In addition to the benefits
provided herein, to the extent permitted by the applicable plan, the
Executive will be entitled to continue to participate, consistent with
past practices, in all employee retirement plans maintained by the
Company in effect as of the date of the termination of his employment.
The Executive's participation in such retirement plans shall continue
for a period of thirty-six (36) months from the date of the termination
of his employment (at which point he will be considered to have
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terminated employment within the meaning of the plans) and the
compensation payable to the Executive under (i) and (ii) above shall be
treated (unless otherwise excluded) as compensation under such plans.
If continued participation if any plan is not permitted or if any such
plan da not continue to exist, the Company shall pay to the Executive
and, if applicable, his designated beneficiary, a supplemental benefit
equal to the present value on the date of termination employment
(calculated as provided in the plan) of the excess of (i) the benefit
the Executive would have been paid under such plan if he had continued
to be covered for the 36-month period (less any amounts he would have
been required to contribute) with assumed earnings calculated at eight
percent (8%) per annum, over (ii) the benefit actually payable under
such plan. The Company shall pay such additional benefits (if any) in a
lump sum.
(v) Effect of Lump Sum Payment. The lump sum payments under
(i) or (ii) above shall not alter the amounts Executive is entitled to
receive under the benefit plans described in (iv) above. Benefits under
such plans shall be determined as if Executive had remained employed
and received such payments over a period of thirty-six (36) months.
(vi) Effect of Death. The benefit payable or to be provided
under the Agreement shall not cease in the event of the Executive's
death and such benefits shall payable to his designated beneficiary (in
accordance with Section 7.2 hereof) or, if none, legal representative
of Executive's estate.
(vii) Options. Any options awarded to and granted to the
Executive 1 not yet vested shall immediately vest and become
exercisable by the Executive as provided Section 5.6(b).
(c) DISABILITY. In the event of termination of Executive's employment
Disability as described in Section 5.4 hereof, Executive shall be entitled to
receive any Annual Cash Bonus then earned. Further, in the event of termination
of Executive's employment for Disability as described in Section 5.4 hereof,
Executive shall be entitled to receive Executive's annual Base Salary for the
remainder of the Term. Executive and his spouse shall be entitled to continued
participation in medical, dental and hospitalization coverage as set forth in
Section 5.5(e) hereof and, if not prohibited by law, in all other employee plans
and programs in which they were participating on the date of termination of
Executive's employment due to Disability until the date, or dates, Executive and
his spouse receive similar coverage and benefits under the plans and programs of
a subsequent employer (such coverages and benefits to be determine on a
coverage-by-coverage, or benefit-by-benefit, basis).
(d) DEATH. In the event of termination of Executive's employment due to
death during the Term, any Renewal Term or the Consulting Term, then, in
addition to the amounts and other benefits described in this Agreement, the
Company shall pay to the legal representative of Executive's estate the greater
of $200,000 or his annual Base Salary plus his average Annual Cash Bonus for a
period of one (1) year following the death of the Executive.
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(e) POST-TERMINATION MEDICAL, DENTAL AND HOSPITALIZATION INSURANCE
COVERAGE. In the event of termination of Executive's employment for any reason
whatsoever, Executive and his spouse shall be entitled to continued
participation in all of the Company's medical, dental and hospitalization
insurance plans at the Company's expense until the date on which Executive is
employed by any Person other than the Company, or any Affiliate or Subsidiary of
the Company, and Executive becomes covered by the medical, dental and
hospitalization insurance coverage through such other Person's plan.
(f) GOLDEN PARACHUTE PAYMENTS. If the aggregate present value
(determined as of the date of termination of employment of Executive in
accordance with the provisions of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") (or any successor section thereof) and the
regulations and rulings thereunder ("Section 280G")) of the sum of (i) severance
payments made to Executive due to his termination for Good Reason as a result of
a Change in Control under this Section, and (ii) all other payments to Executive
in the nature of compensation which are contingent on a change in ownership or
effective control of the Company or in the ownership of a substantial portion of
the assets of the Company would result in an excess parachute payment (as
determined under Section 280G), then the Company shall pay to Executive an
additional severance amount under this Subsection (f) equal to the sum of (A)
the amount of tax imposed by Code Section 4999 upon excess parachute payments
received by Executive, and (B) federal and state income and social
security/Medicare taxes (including interest and penalties) payable on both the
tax amount in (A) and the entire amount paid under (B), such that Executive is
reimbursed for, and has no out-of-pocket expenses with respect to, the cost of
all income taxes and social security/Medicare taxes (including interest and
penalties) payable upon amounts paid to Executive under this Subsection (f).
5.6 TREATMENT OF OPTIONS UPON TERMINATION
(a) FOR CAUSE/VOLUNTARY TERMINATION. In the event of termination of
Executive's employment (i) by the Company for Cause, or (ii) voluntarily by
Executive other than for Good Reason, the Options, to the extent not then vested
and exercisable on the date of such termination, shall be immediately canceled.
To the extent the Options are then vested and exercisable on the date of such
termination, they may be exercised (A) in the event of termination by the
Company for Cause, for a period of ninety (90) days after the date of such
termination, or (B) in the event of Voluntary Termination by Executive for a
period of one (1) year after the date of such termination.
(b) WITHOUT CAUSE OR FOR GOOD REASON OR DUE TO RETIREMENT, DEATH, OR
DISABILITY. In the event of the termination of Executive's employment by the
Company without Cause or by Executive for Good Reason or due to the Retirement,
Death, or Disability of Executive, all grants of restricted stock and all stock
options granted to Executive pursuant to
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the Company's Incentive Stock Plan shall, to the extent not then vested and
exercisable on the date of such termination, become immediately vested and
exercisable for a period of ninety (90) days after the date of such termination,
or such longer period of time as is permitted under the applicable plan or
grant.
5.7 NO MITIGATION; NO OFFSET. In the event of any termination of
employment under this Article V, Executive shall be under no obligation to seek
other employment and there shall be no offset against amounts due Executive
under this Agreement on account of any remuneration attributable to any
subsequent employment that he may obtain, except as specifically provided for
fringe benefits in this Article V.
ARTICLE VI
CHANGE IN CONTROL
6.1 CHANGE IN CONTROL. A "Change in Control" shall mean the occurrence
of any one of the following events:
(a) Prior to an IPO, the shareholders of the Company or any of its
Affiliates (as defined in Section 6.2 below, individually or collectively, sell
or otherwise transfer to persons or entities who are not Affiliates of the
Company, in one transaction or a series of related transactions, 75 % or more of
the Voting Stock (as defined below) of the Company or any of its Affiliates;
(b) Any "person," as such term is used in Sections 3(a)(9) and 13(d) of
the Securities Exchange Act of 1934, becomes a "beneficial owner," as such term
is used in Rule 13s-3 promulgated under that act (other than an Affiliate of the
Company or any "person" who was a "beneficial owner" of 10% or more of the
Voting Stock of the Company on the date hereof or who has received Voting Stock
from Executive), of 50% or more of the Voting Stock of the Company or any of its
Affiliates prior to any IPO and 40% or more of the Voting Stock of the Company
or any of its Affiliates after an IPO;
(c) The majority of the Board consists of individuals other than
"Incumbent Directors," which term means the members of the Board on the date of
this Agreement (excluding Executive) or otherwise designated pursuant to various
agreements among the Company's stockholders in effect on the date hereof;
provided, that any person becoming a director subsequent to such date whose
election or nomination for election was supported by a majority of the directors
who then comprised the Incumbent Directors shall be considered to be an
Incumbent Director;
(d) All or substantially all of the assets or business of the Company
or any of its Affiliates is disposed of pursuant to a merger, consolidation or
other transaction other than to
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an Affiliate of the Company (unless the shareholders of the Company immediately
prior to such merger, consolidation or other transaction beneficially own,
directly or indirectly, 50% or more of the Voting Stock or other ownership
interests of the entity or entities, if any, that succeed to the business of the
Company); or
(e) The consummation of (i) a merger, consolidation or other business
combination of the Company with any other "person" (as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) or
Affiliate thereof, other than a merger, consolidation or business combination
which would result in the outstanding Common Stock of the Company immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into common stock of the surviving entity or a parent or
Affiliate thereof) (at least fifty percent (50%) of the outstanding Common Stock
of the Company or such surviving entity or parent or Affiliate thereof
outstanding immediately after such merger, consolidation or business
combination, or (ii) a plan of complete liquidation of the Company; or
(f) The occurrence of any other event or circumstances which is not
covered by (a) through (e), above, which the Board determines affects control of
the Company and, in order to implement the purposes of this Agreement as set
forth above, the Board adopts a resolution that such event or circumstance
constitutes a Change in Control for the purposes of this Agreement.
6.2 OTHER TERMS. For the purposes of this Agreement, (i) "Affiliate" of
a specified person or other entity shall mean a person or other entity that
directly or indirectly controls, is controlled by, or is under common control
with the person or other entity specified, and in the case of a specified person
who is a natural person, his spouse, his issue, his parents, his estate and any
trust entirely for the benefit of his spouse and/or issue; (ii) "Voting Stock"
shall mean capital stock of any class or classes having voting power under
ordinary circumstances, in the absence of contingencies, to elect the directors
of a corporation; and iii) "IPO" shall mean the completion of an underwritten
sale of Common Stock or securities convertible into Common Stock of the Company
(or an entity formed by the Company for the purpose of issuing Common Stock (or
securities convertible into Common Stock) in connection with the IPO) pursuant
to a registration statement which has become effective under the Securities Act
of 1933, as amended.
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ARTICLE VII.
MISCELLANEOUS
7.1 INDEMNIFICATION.
(a) The Company agrees that if Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the written request of the Company as a director, officer,
member, employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether or not the basis of such Proceeding is Executive's
alleged action in an official capacity while serving as a director, officer,
member, employee, trustee, or agent, Executive shall be indemnified and held
harmless by the Company to the fullest extent legally permitted or authorized by
the Company's Articles of Incorporation or bylaws or resolutions of the
Company's Board of Directors against all cost, expense, liability and loss
(including, without limitation, reasonable attorney's fees, judgments, fines or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by Executive in connection therewith, and such indemnification shall
continue as to Executive in the event he has ceased to be a director, officer,
member, employee, trustee, or agent of the Company or other entity and shall
inure to the benefit of Executive's heirs, executors and administrators. The
Company shall advance to Executive all reasonable costs and expenses incurred by
him in connection with a Proceeding within twenty (20) days after receipt by the
Company of a written request for such advance. Executive shall not be required
to repay the amount of such advance unless it shall ultimately be determined in
the proceeding that he has acted willfully and was grossly negligent in conduct
giving rise to the Proceeding.
(b) The failure of the Company (including the Board, independent legal
counsel or stockholders) to have made a determination prior to the commencement
of any Proceeding concerning payments of amounts claimed by Executive under
Section 7.1(a) above that indemnification of Executive is proper because he has
met the applicable standard of conduct, shall create a presumption that
Executive has met the applicable standard of conduct.
(c) The Company agrees to maintain appropriate insurance coverage for
directors' and officers' liability, errors and omissions and/or blanket
liability protecting against any costs arising from a Proceeding which may be
assessed against Executive. Such coverage shall be provided at the highest level
provided for any employee, director or officer of the Company.
7.2 BENEFIT OF AGREEMENT; ASSIGNMENT; BENEFICIARY. This Agreement shall
inure to the benefit of and be binding upon the Company and its successors and
assigns. No rights or obligations of the Company under this Agreement may be
assigned or
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transferred by the Company except that such rights or obligations may be
assigned or transferred pursuant to a merger or consolidation in which the
Company is not the continuing entity, or sale of all or substantially all of the
assets of the Company, provided that the assignee or transferee is the successor
to all or substantially all of the assets of the Company and such assignee or
transferee assumes the liabilities, obligations and duties of the Company, as
contained in this Agreement, either contractually or as a matter of law. It is
contemplated that Sunbelt Automotive Group, Inc. will assume the Company's
obligations hereunder in contemplation of an initial public offering. This
Agreement shall also inure to the benefit of, and be enforceable by, Executive
and his personal or legal representatives, executors, administrators,
successors, heirs, distributes, devisees and legatees. If Executive should die
while any amount would still be payable to the Executive hereunder if he had
continued to live, all such amounts shall be paid in accordance with the terms
of this Agreement to Executive's beneficiary, devisee, legatee or other
designee, or if there is no such designee, to Executive's estate. Without
limiting the foregoing, Executive shall be entitled, to the extent permitted
under any applicable law, to select and change a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following Executive's
death by giving the Company written notice thereof. In the event of Executive's
death or a judicial determination of his incompetence, reference in this
Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative.
7.3 NOTICES. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent by
telephone or telex or by registered or certified mail, postage prepaid, with
return receipt requested, addressed: (a) in the case of the Company of 5901
Peachtree Dunwoody Road, Building B, Suite 250, Atlanta, Georgia 30328,
Attention: General Counsel, or to such other address and/or to the attention of
such other person as the Company shall designate by written notice to Executive;
and (b) in the case of Executive, to 20 LULLWATER COURT, ATLANTA, GEORGIA 30307
or to such other address as Executive shall designate by written notice to the
Company. Any notice given hereunder shall be deemed to have been given at the
time of receipt thereof by the person to whom such notice is given.
7.4 AMENDMENT. This Agreement may not be changed or modified except by
an instrument in writing signed by both of the parties hereto.
7.5 WAIVER. The waiver by either party of a breach of any provision of
this Agreement shall not operate or be construed as a continuing waiver or as a
consent to or waiver of any subsequent breach hereof. Any waiver must be in
writing and signed by Executive or an authorized officer of the Company, as the
case may be.
7.6 HEADINGS. The Article and Section headings herein are for
convenience of reference only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof.
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may be entered in any court having jurisdiction thereof. Each party shall bear
his or its own costs of the arbitration or litigation, provided, however, in the
event the Executive incurs legal fees and other expenses in seeking to obtain
any benefits provided by this Agreement or to enforce any rights or provisions
of this Agreement and is successful, in whole or in part, in obtaining or
enforcing any such rights or benefits through settlement, arbitration or
otherwise, the Company shall promptly pay the Executive's reasonable legal fees
and expenses incurred in obtaining such benefits or enforcing this Agreement.
Pending the resolution of any arbitration or court proceeding, the Company shall
continue payment of all amounts due Executive under this Agreement and all
benefits to which Executive is entitled at the time the dispute arises.
7.13 REPRESENTATIONS. The Company represents that it is fully
authorized and empowered to enter into this Agreement and that the performance
of its obligations under this Agreement will not violate any agreement to which
it is a party or by which it is bound. Executive represents that there is no
agreement to which he is a party or by which he is bound that would be violated
by the performance of his obligations under this Agreement.
7.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement effective as of the date first above written.
EXECUTIVE:
Charles K. Yancey
/s/ Charles K. Yancey
SUNBELT AUTOMOTIVE
GROUP, INC.
By: /s/
Title:
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<PAGE> 1
EXHIBIT 10.4
STEPHEN C. WHICKER
SUNBELT EXECUTIVE EMPLOYMENT AGREEMENT
This Sunbelt Executive Employment Agreement (hereinafter the "Agreement") is
dated as of December 18, 1998, and is entered into between SUNBELT AUTOMOTIVE
GROUP, INC. a Georgia corporation, and any successor corporation (hereinafter
collectively the "COMPANY"), and STEPHEN C. WHICKER a resident of Woodstock,
Cherokee County, Georgia (hereinafter the "EXECUTIVE").
WHEREAS, the Company intends to reorganize its business structure by
acquiring through merger, acquisition, and reorganization other businesses as a
precondition to engage in an Initial Public Offering of its stock (the "IPO");
and
WHEREAS, Executive has been instrumental in aiding the Company in the
implementation of its business restructuring and IPO by procuring Investment
Bankers, acquisitions, and rendering general business and legal advice;
WHEREAS, the Company wishes to employ Executive as its Executive Vice
President of Corporate Development, General Counsel and Secretary of the Company
(together, "Executive Officer"), and Executive wishes to perform services for
the Company as its Executive Officer prior to and after its IPO; and
WHEREAS, the Executive and the Company desire to enter into this Executive
Employment Agreement to govern the terms and conditions of Executive's
employment by and with the Company.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
and agreements of the parties hereto, the parties hereby covenant and agree as
follows:
ARTICLE I.
EMPLOYMENT, DUTIES AND RESPONSIBILITIES
1.1 EMPLOYMENT. The Company shall employ Executive as Executive Vice
President of Corporate Development, General Counsel, and Secretary as of
December 18, 1997. Executive hereby accepts such employment subject to the terms
set forth herein. Executive agrees to devote substantially all of his business
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time and efforts to the business of the Company except as specifically set forth
herein. Anything herein to the contrary notwithstanding, nothing shall preclude
Executive from (i) serving on the boards of directors of a reasonable number of
other corporations or trade associations and/or charitable organizations, (ii)
engaging in charitable activities and community affairs, (iii) rendering legal
and consulting services to clients on an occasional basis including serving as
"Of Counsel" to a law firm of his choice, and (iv) managing his personal
investments and affairs, provided that such activities do not materially
interfere with the proper performance of his duties and responsibilities as the
Company's Executive Vice President of Corporate Development, General Counsel and
Secretary.
1.2 DUTIES AND RESPONSIBILITIES. Executive shall be responsible for the
general legal affairs of the Company and its subsidiaries; shall be responsible
for the Company's corporate development through its growth by acquisitions,
mergers and consolidation in the automotive industry and as otherwise may be
agreed upon by its Board of Directors; and shall be required to perform such
duties and responsibilities as are consistent with his position as Executive
V.P. Of Corporate Development and General Counsel and Secretary as the Board or
the Executive Committee may from time to time prescribe.
1.3 BOARD & EXECUTIVE COMMITTEE MEMBERSHIP. During the Term (and any Renewal
Term) (as defined in Section 2.1), the Company will nominate Executive for
election to the Board and will use its best efforts to secure Executive's
election to the Board and his appointment as a member of the Executive Committee
and Compensation Committee, if such Committees are appointed by the Company's
Board and if Executive is legally permitted to serve upon the same.
1.4 REPORTING. Executive shall report, in the performance of his duties,
directly and exclusively to the Chief Executive Officer (CEO) of the Company.
ARTICLE II.
TERM
2.1 TERM. The initial term of this Agreement will be for a period commencing
on or about the 18th day of December, 1997 and going to and through June 30,
2003 (the "Term"). After the initial Term, the Executive's employment under this
Agreement shall be a rolling three (3) year term (the "Renewal Term") and shall
be deemed automatically, without further action by either Executive or
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the Company, to be extended each additional day, such that the remaining term of
the Agreement shall continue to be three (3) years at all times.
ARTICLE III.
COMPENSATION AND EXPENSES
3.1 SALARY, BONUSES AND BENEFITS. As compensation and consideration for the
performance by Executive of his obligations under this Agreement, Executive
shall be entitled to the following (subject, in each case, to the provisions of
Article V hereof):
(a) BASE SALARY. Commencing on the 1st day of June 1, 1998 through June 30,
1999, the initial minimum annual base salary to be paid to the Executive shall
be $200,000 per year ("Initial MABS") payable monthly plus those additional
bonus items, stock awards, and stock options as are set forth herein. Commencing
on the 1st day of July, 1999 and for each remaining year of the Term the
Executive's Minimum Annual Base Salary ("MABS") for each year set forth below
shall be no less than the following:
<TABLE>
<S> <C>
1. July 1, 1999 through June 30, 2000: $260,000.00.
2. July 1, 2000 through June 30, 2001: $325,000.00.
3. July 1, 2001 through June 30, 2002: $375,000.00.
4. July 1, 2002 through June 30, 2003: $425,000.00
</TABLE>
The MABS for the Renewal Term shall be as set by Compensation Committee of the
Board but in no event shall it be less than the MABS for the term ending June
30, 2003.
The MABS may be increased by the Compensation Committee/Board of Directors
of the Company from year to year but the MABS may not be lowered at any time
during any term of employment under the MABS figure as set forth herein. The
total annual compensation payable to the Executive will be a component of at
least three (3) items. These items include (1) MABS, (2) Performance
Compensation, and (3) stock options and stock awards. Determination as to any
increase shall be in the sole discretion of the Board or the Compensation
Committee thereof.
(b) ANNUAL BONUS. Commencing July 1, 1998 and for each fiscal year of
Company during the Initial Term and the Renewal Term, the Company shall pay the
Executive an annual cash bonus (the "Bonus") in an amount to be determined by
the Board and its Compensation Committee based upon the satisfaction of
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certain performance criteria set by the Compensation Committee of the Board but
shall generally be predicated upon the Company's acquisitions, future growth and
performance. Notwithstanding anything to the contrary which is set forth above,
the total annual cash Bonus for the Executive shall be targeted to be at least
50% of the Executive's then current MABS and shall not exceed an amount which is
equal to the Executive's then current MABS. However, nothing herein shall be
construed as a guarantee of any amount of Bonus.
(iii) Payment of Bonuses. Any Bonuses earned by the Executive shall be paid
within ninety (90) days after the end of each applicable fiscal year of the
Company.
(c) STOCK GRANT.
As compensation for services rendered by the Executive since December 18,
1997 and for his part in helping the Company in its IPO process; obtaining
financing; obtaining funding; obtaining underwriters; for putting together
various aspects of the IPO process and for leaving his law practice of 24 years
and coming to work full time for the Company (the "Stock Grant"), the Company
agrees to grant to and award to the Executive the right to purchase 64,465
shares of its voting common stock (the "Shares").
(D) STOCK OPTIONS.
(i) FIRST OPTION. In addition to the compensation and the Stock Grant above,
the Company shall grant to the Executive, under the Company's Incentive Stock
Plan, an option ("First Option") to purchase up to 200,000 shares of the
Company's Voting Common Stock ("Common Stock") at the exercise price pursuant to
the Company's Incentive Stock Plan and as set forth on the Option Grant attached
hereto as Exhibit "A". The First Option shall terminate on the tenth anniversary
of the date of the First Option, subject to earlier termination as may be set
forth in this Agreement and the Option Grant.
(ii) SECOND OPTION. In addition to the Stock Grant and the First Option
above, the Company shall grant to the Executive, under the Incentive Stock Plan,
an option (the "Second Option") to purchase up to 240,000 shares of the
Company's voting common stock at the exercise price adopted under the Company's
Incentive Stock Plan and as set forth on the Option Grant, attached hereto as
Exhibit "B" and incorporated herein. The Second Option shall terminate on the
tenth anniversary of the grant of the Second Option, subject to earlier
termination as may be set forth in this Agreement, the Incentive Stock
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Plan or the Option Grant. The Second Option is in addition to any other option
award or grant which may be made to the Executive during his employment.
(iii) THIRD OPTION. In addition to the Stock Grant, the First Option and the
Second Option, the Company shall grant to the Executive, under the Company's
Incentive Stock Plan, an option ("Third Option") to purchase up to an additional
100,000 shares of the Company's Common Stock at an exercise price equal to the
price per share to the public set forth on the cover of the prospectus relating
to the IPO and as set forth on the Option Grant attached hereto and incorporated
herein as Exhibit "C". The Third Option shall terminate on the tenth anniversary
of the IPO Date, subject to earlier termination as may be set forth in this
Agreement. The Third Option is in addition to any other option grant which may
be made to the Executive during his employment.
(iv) LOCK UP. Upon the request of the Company's underwriters managing any
underwritten public offering of the Common Stock, Executive shall not sell, make
any short sale of, grant any option for the purchase of, or otherwise dispose of
any shares of Common Stock acquired upon exercise of the Options for such period
of time from the effective date of such offering as the Company or the
underwriters may specify, provided that any such restriction on such disposition
by Executive shall not exceed 180 days.
(e) BENEFIT PROGRAMS. Executive shall be eligible to participate in or
receive benefits under all of the Company's employee and executive benefit plans
or arrangements including, without limitation, plans or arrangements providing
for health and disability insurance coverage, life insurance for the benefit of
Executive's beneficiaries, deferred compensation and pension benefits, and
personal financial, investment, legal or tax advice, all at the highest level
that is available through the Company and/or any of its Subsidiaries to their
senior executive management (the "Benefit Programs"). In addition, Executive
shall be entitled to such per perquisites of employment, including, but not
limited to, two (2) demo automobiles, insurance, etc., as are made available to
the senior executive management of the Company and/or its Subsidiaries. If this
Agreement is assigned to any Subsidiaries of the Company or any other party,
Executive shall be granted credit for all service with the Company and/or its
Subsidiaries prior to the date of such assignment for all purposes of the
Benefit Programs, including, but not limited to, eligibility, vesting and
benefits. To the extent there is a period of employment required as a condition
for full benefit coverage under any Benefit Programs, and Executive would not
otherwise meet the requirements taking into consideration past service granted
for service with the Company and/or its Subsidiaries, to the extent permissible
under applicable law, the Company agrees to take or to cause to be
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taken all actions necessary so that Executive will be deemed to have met such
requirement. The Company agrees that whenever Executive is required to pay for
coverage or benefits under a Benefit Program from his own wages, the Company
shall reimburse him for the sum of the amount of such payments plus federal,
state income and social security and medicate on the entire reimbursement amount
(including the tax on such taxes) so that Executive will not have incurred any
cost in obtaining such coverage or benefit except as otherwise may be
specifically set forth herein.
(f) VACATION. Executive shall be entitled to a paid vacation in accordance
with Company policy during the Term, but in no event less than four (4) weeks
per year. Unused vacation days in any one year may be accumulated from year to
year up to a maximum of eight (8) weeks per year.
3.2 EXPENSES; PERQUISITES.
(a) The Company will reimburse Executive for reasonable business-related
expenses incurred by him in connection with the performance of his duties
hereunder during all terms of his employment.
(b) During the Term (and any Renewal Term), Executive shall be entitled to
participate in any of the Company's executive fringe benefit arrangements in
accordance with the terms and conditions of such arrangements as are in effect
from time to time for the Company's senior level executives generally.
(c) The Executive shall be afforded such insurance and other benefits as are
normally and customarily provided to comparable Senior level Executives. These
shall include, but not be limited to, at least two (2) DEMO automobiles and the
insurance therefore; disability, life and health insurance; and such other
insurance programs and policies as may adopted by and approved by the Company's
Board.
(d) The Executive shall be provided with an office and staff suitable and
sufficient to perform the work of the corporate development and legal
departments duties. Such staff shall include an administrative assistant for the
Executive, Peggy St. Amant, and one staff lawyer who initially shall be Michael
F. O'Neil.
(e) Company shall pay for the Executive's and his legal staff's Bar Dues,
their annual CLE requirements; and the costs associated with maintaining
Executive and his legal staff's legal licenses as are required.
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ARTICLE IV.
EXCLUSIVITY, ETC.
4.1 EXCLUSIVITY. Executive agrees to perform his duties, responsibilities
and obligations hereunder to the best of his ability. Executive agrees that he
will devote substantially all of his business time, care and attention and best
efforts to such duties, responsibilities and obligations throughout the Term,
except as otherwise provided in Section 1.1 hereof and 4.2 below. Executive also
agrees that during the Term he will not engage in any other business activities,
pursued for gain, profit or other pecuniary advantage, that are competitive with
the activities of the Company or any of its subsidiaries, except as otherwise
permitted herein. Executive agrees that all of his activities as an employee of
the Company shall be in conformity in all material respects with all policies,
rules and regulations and directions of the Company not inconsistent with this
Agreement and which have been expressly communicated to him, whether orally or
in writing.
4.2 LAW PRACTICE; OTHER BUSINESS VENTURES.
Executive agrees that, so long as he is employed by the Company, he will not
have any financial or other beneficial interest in any business enterprise which
is competitive with any business engaged in by the Company or any of its
subsidiaries. Notwithstanding the foregoing or anything contained in Section 4.1
hereof, Executive may continue for a period of at least 12 months from the date
hereof wrap up his legal practice at The Whicker Law Firm and may during and
after the wrap up period continue to provide legal advice and consulting to
clients as an "Of Counsel" member of a law firm other than The Whicker Law Firm
so long as the same does not interfere with or conflict with his duties to the
Company. Likewise, the Executive may own, directly or indirectly, up to two
percent (2%) of the outstanding capital stock of any such business having a
class of capital stock which is traded on any U.S. or foreign stock exchange or
in the over-the-counter markets.
4.3 CONFIDENTIALITY; NON-COMPETITION. (a) Executive agrees that he will not,
at any time during the Term (or any Renewal Term), and for a period of three (3)
years following the termination of his employment, directly or indirectly, use
or divulge to any other person, firm or corporation any trade or business
secret, process, method or means, or any other confidential information
concerning the business or policies of the Company or any of its Subsidiaries or
Affiliates (as "Affiliates" is defined in Section 6.2), except (i) as such
disclosure or use may be required or appropriate in connection with his work as
an employee of the Company or (ii) when required to do so by a court of law, by
any governmental agency having supervisory authority over the business of the
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Company or by any administrative or legislative body (including a committee
thereof) with apparent jurisdiction to order him to divulge, disclose or make
accessible such information. For purposes of this Agreement, a "trade or
business secret, process, method or means, or any other confidential
information" shall mean and include information treated as confidential or as a
trade secret by the Company or any of its Subsidiaries or Affiliates, that is or
has been disclosed or otherwise becomes or has become known to the Executive as
a result of his employment with the Company, including but not limited to,
information regarding contemplated products, models, compilations, business and
financial methods or practices, marketing, merchandising and selling techniques,
customers, vendors, suppliers, trade secrets, training programs, manuals or
materials, technical information, contracts, systems, procedures, mailing lists,
know-how, trade names, improvements, pricing, price lists, financial or other
date (including the revenues, costs or profits associated with any of the
Company's products or services), business plans, strategy, code books, invoices
and other financial statements, computer programs, software systems, databases,
discs and printouts, other plans (technical or otherwise), customer and industry
lists, supplier lists, correspondence, internal reports, personnel files, sales
and advertising material, telephone numbers, names, addresses or any other
compilation of information, written or unwritten, which is or was used in the
business of the Company or any of its Subsidiaries or Affiliates. Executive's
obligation under this Section 4.3(a) shall not apply to any information which is
generally known to the public or hereafter becomes generally known to the public
without fault of Executive. Executive further agrees that upon termination of
his employment, he will not take with him, or retain without written
authorization from the Company, and will promptly deliver to the Company, all
confidential information of the Company and any copies thereof, together with
all notes, extracts, compilations, and other documents, records, and media that
contain or are based upon a trade or business secret, process, method or means,
or any other confidential information. Upon termination of his employment,
Executive also shall deliver to the Company all other files, correspondence, and
other communications received, maintained, and/or originated by Executive during
the course of his employment and any copies thereof.
(b)(i) Executive acknowledges that the agreements and covenants contained in
this section 4.3(b) are essential to protect the value of the Company's business
and assets and by virtue of his employment with the Company, Executive has
obtained and will obtain knowledge, contacts, know-how, training, experience and
other information relating to the Company's business operations, and there is a
substantial probability that such knowledge, know-how, contacts, training,
experience and information could be used to the substantial advantage of a
competitor of the Company and to the Company's substantial detriment.
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Accordingly, for a period commencing on the date of termination of Executive's
employment with the Company and ending one (1) year from and after such date
(the "Non-Compete Period"), Executive shall not, directly or indirectly, for
himself or on behalf of or in conjunction with any person, partnership,
corporation or other entity, compete, own, operate, control, or participate or
engage in the ownership, management, operation or control of, or be connected
with as an officer, employee, partner, director, shareholder, representative,
consultant, independent contractor, guarantor, advisor or in any other manner or
otherwise have a financial interest in, a proprietorship, partnership, joint
venture, association, firm, corporation or other business organization or
enterprise that competes with the Company (which for this purpose shall mean any
business or enterprise that operates dealerships for the retail sales of new and
used automobiles or trucks and businesses ancillary thereto), provided that such
business or enterprise (A) is or becomes located or otherwise engaged within a
100 mile radius of the City of Atlanta, Georgia or within a 100 mile radius of
any automobile or truck dealership or ancillary business in which the Company,
directly or indirectly, has a 50% or greater economic or voting or otherwise
controlling ownership interest as of the termination of Executive's employment
or (B) is an automobile or truck dealership or group of affiliated automobile or
truck dealerships (and all businesses ancillary thereto) whose aggregate gross
sales during the 12-month period immediately preceding the date of Executive's
termination exceeded $50,000,000, and provided further that it shall not be a
violation of this Section 4.3 (b) if (x) Executive owns up to two percent (2%)
of the outstanding capital stock of any such business having a class of capital
stock which is traded on any U.S. or foreign stock exchange or in the
over-the-counter market, (y) Executive owns, operates, is employed by or is
otherwise connected with an advertising agency that serves automobile
dealerships, provided Executive does not personally perform any work for, or
otherwise provide any advice with respect to, any account that is engaged in
competitive activity with the Company, or (z) Executive is employed by or is a
consultant or independent contractor for an entity that competes with the
Company but Executive is employed by or is a consultant or independent
contractor for a division or subsidiary of such entity that does not engage in
such competitive activity. During the Non-Compete Period, Executive shall not
interfere with or disrupt, or attempt to interfere with or disrupt, the
relationship, contractual or otherwise, between the Company and any customer,
client, supplier, manufacturer, distributor, consultant, independent contractor
or employee of the Company.
(c) Executive agrees that, at any time and from time to time during and
after the Term, he will execute any and all documents which the Company may
reasonably request to effectuate the provisions of this Section 4.3.
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ARTICLE V.
TERMINATION
5.1 TERMINATION BY THE COMPANY. The Company shall have the right to
terminate Executive's employment at any time, with or without "Cause."
(a) TERMINATION FOR CAUSE. For purposes of this Agreement, "Cause" shall
mean:
(i) Executive is convicted of or enters a plea of guilty to any felony
under federal or state law (except under any state's laws regulating the
enforcement of motor vehicles involved in accidents);
(ii) Executive engages in conduct that constitutes gross neglect or
willful misconduct in carrying out his duties under this Agreement, resulting,
in either case, in material harm to the Company;
(iii) Executive refuses to follow the material instructions, orders or
directives of the Board or the CEO with respect to his duties and
responsibilities hereunder, provided that such refusal shall constitute Cause
only if the instruction, order or directive in question has been furnished to
Executive in writing and provided further that such refusal shall not constitute
Cause if Executive has a good faith and reasonable belief, based on advice of
counsel or his understanding of the law, that to follow such instruction, order
or directive would be unlawful; or
(iv) Executive engages in any of the following acts which have a
material adverse impact on the financial condition of the Company:
(a) actual fraud or other material acts or dishonesty in fulfilling
his assigned responsibilities hereunder; or
(b) the willful or grossly negligent destruction of any material
amount of the Company's tangible property.
The Board shall notify Executive of its intent to terminate him for Cause by
providing written notice ("Notice of Cause") stating in as much detail as
possible the particular event, act or acts, or failure or failures to act, that
constitute the grounds on which the proposed termination for Cause is based;
such Notice of Cause must be given within fifteen (15) days of the date any of
the members of the
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Board (exclusive of Executive) learns of the circumstances giving rise to the
Notice of Cause. Executive shall have fifteen (15) days after receipt of the
Notice of Cause in which to cure or otherwise correct the circumstances
detailed, provided that in the event any such cure or correction is incapable
upon reasonable diligence of being completed within such fifteen (15) day
period, Executive shall be entitled to commence a cure or correction within said
fifteen (15) day period and thereafter diligently and continuously pursue such
cure or correction to completion. Executive may also, within such fifteen (15)
day period, request by written notice that the Board hold a hearing at which
Executive may contest the proposed termination for Cause. The hearing shall be
held on a date set by the Board within fifteen (15) days of the date the Board
receives Executive's notice of the hearing whether Executive has been terminated
for Cause as set forth in the Notice of Cause. If Executive does not request a
hearing and the circumstances described in the Notice of Cause have not been
cured within the fifteen (15) day period following the date of the Notice of
Cause, Executive shall be deemed terminated for Cause, effective as of the day
the Notice of Cause was given by the Company.
(b) TERMINATION WITHOUT CAUSE. The Company may terminate Executive
without Cause upon sixty (60) days advance written notice to Executive and such
termination shall not constitute a breach of this Agreement.
5.2 TERMINATION BY EXECUTIVE.
(a) TERMINATION FOR GOOD REASON. Termination for "Good Reason" shall
mean a termination of Executive's employment at the Executive's initiative
following the occurrence, without Executive's written consent, of one or more of
the following events:
(i) A reduction in Executive's then current Minimum Annual Base
Salary or his annual Bonus;
(ii) The failure to elect or re-elect Executive, or his removal, as
Executive V.P. of Corporate Development, Secretary or General Counsel of the
Company or as a full voting member of (1) the Board, or (2) the Company's
Executive Committee, (if such a committee is appointed) without the Executive's
consent;
(iii) Any (1) diminution in Executive's duties other than changes
which neither individually nor in the aggregate will or will likely cause any
actual or perceived material reduction in his powers, duties and
responsibilities as enumerated in this Agreement, or (2) assignment to Executive
of duties which are
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either fundamentally or materially inconsistent with his position as Executive
V.P. of Corporate Development and General Counsel of the Company;
(iv) As a result of a material breach by the Company or the
Chairman of the Board or the Chairman of the Executive Committee of Section 1.4
hereof, Executive reasonably determines in good faith that he cannot carry out
his duties and responsibilities in the manner originally contemplated hereunder;
(v) The occurrence of a Change in Control (as defined in Section
6.1 hereof);
(vi) The failure of the Company to obtain the absolute and
unqualified assumption in writing of its obligation to perform this Agreement by
any successor to all or substantially all of the assets or stock of the Company
within 15 days after a merger, consolidation, sale or similar transaction.
(vii) The modification of any of the responsibilities, duties and
authority of the Company's senior executive management without Executive's prior
written consent.
(viii) The failure of the Company to make any payments due to the
Executive hereunder or otherwise materially breaches its obligations under this
Agreement.
(ix) The failure of the Company to complete its IPO and have its
IPO become effective by August 1, 1998.
Prior to his termination for Good Reason, Executive shall give written
notice ("Notice of Good Reason") to the Board of his intention to terminate this
Agreement for Good Reason, such Notice of Good Reason (A) to state in detail the
particular event, act or acts or failure or failures to act that constitute the
grounds on which the proposed termination for Good Reason is based, and (B) to
be given within thirty (30) days of his learning of such event, act or acts or
failures to act. The Company shall have fifteen (15) days after the date that
the Notice of Good Reason has been received by the Board in which to cure or
correct the circumstances giving rise to the Notice of Good Reason. If the
Company fails to cure such conduct within such thirty (30) day cure period,
Executive's employment shall be terminated for Good Reason as of the expiration
of the fifteen (15) day cure period.
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(b) VOLUNTARY TERMINATION. Executive shall have the right to terminate
his employment at any time without cause (a "Voluntary Termination"). A
Voluntary Termination is not a termination for Good Reason or a termination as
the result of Disability (as hereafter defined) or death. A Voluntary
Termination, excepting death, shall be effective upon sixty (60) days' advance
written notice to the Company and shall not constitute a breach of this
Agreement.
5.3 DEATH. In the event Executive dies during the Term, this Agreement shall
automatically terminate effective upon the date of Executive's death.
5.4 DISABILITY. In the event that Executive shall suffer a Disability, the
Company shall have the right to terminate the Agreement, which shall be
effective upon written notice to Executive. "Disability" means a physical or
mental condition which renders Executive incapable of performing Executive's
regular duties hereunder for a period of one hundred twenty (120) consecutive
days. In the event of any disagreement between Executive and the Company as to
whether Executive is suffering from a Disability, the determination of
Executive's Disability shall be made by one or more board certified licensed
physicians practicing the specialty of medicine applicable to Executive's
disorder in the Atlanta metropolitan area in accordance with the provisions of
this Section. If either the Company or Executive desires to initiate the
procedure provided in this Section, such party (the "Initiating Party") shall
deliver written notice to the other party (the "Responding Party") in accordance
with the provisions of this Agreement specifying that the Initiating Party
desires to proceed with a medical examination and the procedures specified in
this Section. Such notice shall include the name, address and telephone number
of the physician selected by the Initiating Party (the "Disability Examination
Notice"). If the Responding Party fails within ten (10) days after the receipt
of the Disability Examination Notice to designate a physician meeting the
standards specified herein, the physician designated by the Initiating Party in
the Disability Examination Notice shall make the determination of Disability as
provided in this Section. If the Responding Party by written notice notifies the
Initiating Party within ten (10) days of the receipt by the Responding Party of
the Disability Examination Notice by notice specifying the physician selected by
the Responding Party for purposes of this Section, then each of the two
physicians as so designated by the respective parties shall each examine
Executive. Examinations shall be made by each such physician within ten (10)
days of such physician's respective designation. Each physician shall render a
written report as to whether in such physician's opinion Executive is suffering
a Disability. If the two physicians agree on the status of Executive for
purposes of this Section, such determination shall be conclusive and dispositive
for all purposes of this Section. If the two physicians cannot so agree, the two
physicians shall jointly select a third
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physician meeting the standards specified in this Section within ten (10) days
after the later report of the two physicians is submitted. The third physician
shall render a written report on the status of Executive within ten (10) days of
selection and such report shall be dispositive for purposes of this Section. For
purposes of this Section, Executive agrees that he shall promptly submit to such
examinations and tests as such physicians shall reasonably request for purposes
of making a determination of Disability as provided herein. Failure or refusal
of the Executive to submit to the examination as required by this Section, shall
constitute a conclusive admission by the Executive that the Executive is
suffering from a Disability as provided herein.
5.5 EFFECT OF TERMINATION; SEVERANCE PAY UPON TERMINATION. Amounts due under
this Section 5.5 are in the nature of severance payments considered to be
reasonable by the Company and are not in the nature of a penalty, provided that
such payments shall be Executive's exclusive remedy relating to the termination
of his employment hereunder.
(a) FOR CAUSE/VOLUNTARY TERMINATION. In the event of termination of
Executive's employment (i) by the Company for Cause, or (ii) pursuant to
Voluntary Termination, the Company shall pay to Executive, any annual Base
Salary and any Annual Cash Bonus earned (for a full fiscal year or prorated for
a partial fiscal year) but not paid to Executive prior to the effective date of
such termination, and Executive shall be entitled to other additional benefits
in accordance with the benefit plans of the Company. In addition, Executive and
his spouse shall be entitled to continued participation in all medical, dental
and hospitalization coverage as set forth in Section 5.5(f) hereof.
(b) GOOD REASON/WITHOUT CAUSE/DURING INITIAL TERM. In the event of
termination of Executive's employment during the initial Term of his employment
(i) by the Company other than for Cause, or (ii) by Executive for Good Reason,
then the Company shall pay Executive as follows:
(i) SALARY. The Executive shall be paid an amount equal to all
earned but unpaid MABS for the year of the termination plus an amount equal to
five (5) times his current MABS (subject to withholding of all applicable
taxes); provided, however that salary payments provided for above shall be paid
in thirty-six (36) equal monthly payments commencing thirty (30) days from the
date of termination and continuing each month thereafter. For purposes hereof,
the Executive's "current MABS" shall be the highest MABS rate in effect during
the six-month period prior to the termination of Executive's employment.
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(ii) BONUSES AND INCENTIVES. The Executive shall receive any Annual
Cash Bonus then earned (for a full fiscal year or prorated for a partial fiscal
year) plus bonus payments from the Company for the thirty-six (36) months
following the month in which his employment is terminated in an amount for each
such month equal to one-twelfth of the average of the Annual Cash Bonuses paid
to him for the two fiscal years immediately preceding the fiscal year in which
such termination occurs (provided that fiscal years prior to 1998 shall not be
considered). Any Annual Cash Bonus that the Executive had previously earned but
which may not yet have been paid as of the date of termination shall be due and
payable on the date of termination.
(iii) HEALTH AND LIFE INSURANCE COVERAGE. The Executive shall
receive post-termination medical, dental, and hospitalization insurance coverage
as provided in Section 5.5(f).
(iv) EMPLOYEE RETIREMENT PLANS. In addition to the benefits
provided herein, to the extent permitted by the applicable plan, the Executive
will be entitled to continue to participate, consistent with past practices, in
all employee retirement plans maintained by the Company in effect as of the date
of the termination of his employment. The Executive's participation in such
retirement plans shall continue for a period of sixty (60) months from the date
of the termination of his employment (at which point he will be considered to
have terminated employment within the meaning of the plans) and the compensation
payable to the Executive under (i) and (ii) above shall be treated (unless
otherwise excluded) as compensation under such plans. If continued participation
in any plan is not permitted or if any such plan does not continue to exist, the
Company shall pay to the Executive and, if applicable, his designated
beneficiary, a supplemental benefit equal to the present value on the date of
termination of employment (calculated as provided in the plan) of the excess of
(i) the benefit the Executive would have been paid under such plan if he had
continued to be covered for the 36-month period (less any amounts he would have
been required to contribute) with assumed earnings calculated at eight percent
(8%) per annum, over (ii) the benefit actually payable under such plan. The
Company shall pay such additional benefits (if any) in a lump sum.
(v) EFFECT OF LUMP SUM PAYMENT. Any lump sum payments paid to the
Executive above shall not alter the amounts Executive is entitled to receive
under the benefit plans described in (iv) above. Benefits under such plans shall
be determined as if Executive had remained employed and received such payments
over a period of thirty-six (36) months.
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(vi) EFFECT OF DEATH. The benefits payable or to be provided under
this Agreement shall not cease in the event of the Executive's death and such
benefits shall be payable to his designated beneficiary (in accordance with
Section 7.2 hereof) or, if none, the legal representative of Executive's estate.
(vii) STOCK OPTIONS. Any stock or options awarded to and granted to
the Executive but not yet vested shall immediately vest and become exercisable
by the Executive as provided for in Section 5.6 (b).
(c) GOOD REASON/WITHOUT CAUSE/DURING RENEWAL TERM. If the Company elects
to terminate the Executive during the Renewal Term of his employment (i) other
than for Cause, or (ii) if the Executive elects to terminate for Good Reason, or
(iii) as a result of a Change of Control as defined herein, then in addition to
the amounts and other benefits described in Section 5.5(a) hereof, the Company
shall pay Executive as follows:
(i) SALARY. The Executive shall be paid an amount equal to all
earned but unpaid MABS for the year of termination, and will further be paid an
amount equal to three (3) times his Current MABS (subject to withholding of all
applicable taxes); provided, however, that salary payments provided for above
shall be paid in a single lump sum payment, to be paid not later than 60 days
after termination of Executive's employment. For purposes hereof, the
Executive's "Current MABS" shall be the highest rate in effect during the
six-month period prior to the termination of Executive's employment.
(ii) BONUSES AND INCENTIVES. The Executive shall also receive any
Annual Cash Bonus then earned (for a full fiscal year or prorated for a partial
fiscal year) plus bonus payments from the Company in an amount equal to three
(3) times the average of the annual cash bonuses paid to him for the two fiscal
years immediately preceding the fiscal year in which such termination occurs
(provided that fiscal years prior to 1998 shall not be considered). Any annual
cash Bonus that the Executive had previously earned but which may not yet have
been paid as of the date of termination shall be due and payable on the date of
termination. All other Bonus amounts shall be paid in a single lump sum payment
which shall be paid not later than 60 days after his termination.
(iii) HEALTH AND LIFE INSURANCE COVERAGE. The Executive shall
receive post-termination medical, dental, and hospitalization insurance coverage
as provided in Section 5.5(f).
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(iv) EMPLOYEE RETIREMENT PLANS. In addition to the benefits
provided herein, to the extent permitted by the applicable plan, the Executive
will be entitled to continue to participate, consistent with past practices, in
all employee retirement plans maintained by the Company in effect as of the date
of the termination of his employment. The Executive's participation in such
retirement plans shall continue for a period of sixty (60) months from the date
of the termination of his employment (at which point he will be considered to
have terminated employment within the meaning of the plans) and the compensation
payable to the Executive under (i) and (ii) above shall be treated (unless
otherwise excluded) as compensation under such plans. If continued participation
in any plan is not permitted or if any such plan does not continue to exist, the
Company shall pay to the Executive and, if applicable, his designated
beneficiary, a supplemental benefit equal to the present value on the date of
termination of employment (calculated as provided in the plan) of the excess of
(i) the benefit the Executive would have been paid under such plan if he had
continued to be covered for the 36-month period (less any amounts he would have
been required to contribute) with assumed earnings calculated at eight percent
(8%) per annum, over (ii) the benefit actually payable under such plan. The
Company shall pay such additional benefits (if any) in a lump sum.
(v) EFFECT OF LUMP SUM PAYMENT. The lump sum payments under (i)
and (ii) above shall not alter the amounts Executive is entitled to receive
under the benefit plans described in (iv) above. Benefits under such plans shall
be determined as if Executive had remained employed and received such payments
over a period of thirty-six (36) months.
(vi) EFFECT OF DEATH. The benefits payable or to be provided under
this Agreement shall not cease in the event of the Executive's death and such
benefits shall be payable to his designated beneficiary (in accordance with
Section 7.2 hereof) or, if none, the legal representative of Executive's estate.
(vii) STOCK/OPTIONS. Any stock or options awarded to and granted to
the Executive but not yet vested shall immediately vest and become exercisable
by the Executive as provided for in Section 5.6 (b).
(d) DISABILITY. In the event of termination of Executive's employment
for Disability as described in Section 5.4 hereof, then, in addition to the
amounts described in Section 5.5(a) hereof, Executive shall be entitled to
receive any annual Base Salary and any annual Bonus then earned (for a full
fiscal year or prorated for a partial fiscal year) plus Executive's annual Base
Salary for the remainder of the term. Executive and his spouse shall be entitled
to continued participation in
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medical, dental and hospitalization coverage as set forth in Section 5.5(f)
hereof and, if not prohibited by law, in all other employee plans and programs
in which they were participating on the date of termination of Executive's
employment due to Disability until the date, or dates, Executive and his spouse
receive similar coverage and benefits under the plans and programs of a
subsequent employer (such coverage and benefits to be determined on a
coverage-by-coverage, or benefit-by-benefit, basis).
(e) DEATH. In the event of termination of Executive's employment due to
death, then, in addition to the amounts and other benefits described in this
Agreement, the Company shall pay to the legal representative of Executive's
estate his then current Minimum Annual MABS plus one (1) years Annual Cash Bonus
determined by computing his average for the preceding three (3) years. These
sums shall be paid to the legal representative of the Executive's estate within
sixty (60) days from his death.
(f) POST-TERMINATION MEDICAL, DENTAL AND HOSPITALIZATION INSURANCE
COVERAGE. In the event of termination of Executive's employment for any reason
whatsoever, Executive and his spouse shall be entitled to continued
participation in all of the Company's medical, dental and hospitalization
insurance plans at the Company's expense until the date on which Executive is
employed by any Person other than the Company, or any Affiliate or Subsidiary of
the Company, and Executive becomes covered by medical, dental and
hospitalization insurance coverage through such other Person's plan.
(g) GOLDEN PARACHUTE PAYMENTS. If the aggregate present value
(determined as of the date of termination of employment of Executive in
accordance with the provisions of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") (or any successor section thereof) and the
regulations and rulings thereunder ("Section 280G")) of the sum of (i) severance
payments made to Executive due to his termination for Good Reason as a result of
a Change in Control under this Section, and (ii) all other payments to Executive
in the nature of compensation which are contingent on a change in ownership or
effective control of the Company or in the ownership of a substantial portion of
the assets of the Company would result in an excess parachute payment (as
determined under Section 280G), then the Company shall pay to Executive an
additional severance amount under this Subsection (f) equal to the sum of (A)
the amount of tax imposed by Code Section 4999 upon excess parachute payments
received by Executive, and (B) federal and state income and social
security/medicare taxes payable on both the tax amount in (A) and the entire
amount paid under (B), such that Executive is reimbursed for, and has no
out-of-pocket expenses with respect
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to, the cost of all income taxes payable upon amounts paid to Executive under
this Subsection (f).
5.6 TREATMENT OF STOCK GRANTS & OPTIONS UPON TERMINATION
(a ) FOR CAUSE/VOLUNTARY TERMINATION. In the event of termination of
Executive's employment (i) by the Company for Cause, or (ii) voluntarily by
Executive other than for Good Reason, any Shares or Options granted to the
Executive, to the extent not then vested and exercisable on the date of such
termination, shall be immediately canceled. To the extent the Shares or Options
are then vested and exercisable on the date of such termination, they may be
exercised (A) in the event of termination by the Company for Cause, for a period
of ninety (90) days after the date of such termination, or (B) in the event of
Voluntary Termination by Executive for a period of one (1) year after the date
of such termination.
(b) WITHOUT CAUSE OR FOR GOOD REASON OR DUE TO RETIREMENT, DEATH, OR
DISABILITY. In the event of the termination of Executive's employment by the
Company without Cause or by Executive for Good Reason or due to the Retirement,
Death, or Disability of Executive, all grants of stock and all stock options
granted to Executive pursuant to the Company's Incentive Stock Plan shall, to
the extent not then vested and exercisable on the date of such termination,
become immediately vested and exercisable for a period of ninety (90) days after
the date of such termination, or such longer period of time as is permitted
under the applicable plan or grant.
5.7 NO MITIGATION; NO OFFSET. In the event of any termination of employment
under this Article V, Executive shall be under no obligation to seek other
employment and there shall be no offset against amounts due Executive under this
Agreement on account of any remuneration attributable to any subsequent
employment that he may obtain, except as specifically provided for fringe
benefits in this Article V.
ARTICLE VI
CHANGE IN CONTROL
6.1 CHANGE IN CONTROL. A "Change in Control" shall mean the occurrence of
any one of the following events:
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(a) Prior to an IPO, the shareholders of the Company or any of its
Affiliates (as defined in Section 6.1(b) below), individually or collectively,
sell or otherwise transfer to persons or entities who are not Affiliates of the
Company, in one transaction or a series of related transactions, 50% or more of
the Voting Stock (as defined below) of the Company or any of its Affiliates;
(b) Any "person," as such term is used in Sections 3(a)(9) and 13(d) of
the Securities Exchange Act of 1934, becomes a "beneficial owner," as such term
is used in Rule 13s-3 promulgated under that act (other than an Affiliate of the
Company or any "person" who was a "beneficial owner" of 10% or more of the
Voting Stock of the Company on the date hereof or who has received Voting Stock
from Executive), of 50% or more of the Voting Stock of the Company or any of
its Affiliates prior to any IPO and 40% or more of the Voting Stock of the
Company or any of its Affiliates after an IPO;
(c) The majority of the Board consists of individuals other than
"Incumbent Directors," which term means the members of the Board on the date of
this Agreement (excluding Executive) or otherwise designated pursuant to various
agreements among the Company's stockholders in effect on the date hereof;
provided, that any person becoming a director subsequent to such date whose
election or nomination for election was supported by a majority of the directors
who then comprised the Incumbent Directors shall be considered to be an
Incumbent Director;
(d) All or substantially all of the assets or business of the Company or
any of its Affiliates is disposed of pursuant to a merger, consolidation or
other transaction other than to an Affiliate of the Company (unless the
shareholders of the Company immediately prior to such merger, consolidation or
other transaction beneficially own, directly or indirectly, 50% or more of the
Voting Stock or other ownership interests of the entity or entities, if any,
that succeed to the business of the Company);
(e) The consummation of (i) a merger, consolidation or other business
combination of the Company with any other "person" (as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) or
Affiliate thereof, other than a merger, consolidation or business combination
which would result in the outstanding Common Stock of the Company immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into common stock of the surviving entity or a parent or
Affiliate thereof) (at least fifty percent (50%) of the outstanding Common Stock
of the Company or such surviving entity or parent or Affiliate thereof
outstanding
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immediately after such merger, consolidation or business combination, or (ii) a
plan of complete liquidation of the Company; or
(f) The occurrence of any other event or circumstances which is not
covered by (a) through (e), above, which the Board determines affects control of
the Company and, in order to implement the purposes of this Agreement as set
forth above, the Board adopts a resolution that such event or circumstance
constitutes a Change in Control for the purposes of this Agreement.
6.2 OTHER TERMS. For the purposes of this Agreement, (i) "Affiliate" of a
specified person or other entity shall mean an person or other entity that
directly or indirectly controls, is controlled by, or is under common control
with the person or other entity specified, and in the case of a specified person
who is a natural person, his spouse, his issue, his parents, his estate and any
trust entirely for the benefit of his spouse and/or issue; (ii) "Voting Stock"
shall mean capital stock of any class or classes having voting power under
ordinary circumstances, in the absence of contingencies, to elect the directors
of a corporation; and iii) "IPO" shall mean the completion of an underwritten
sale of Common Stock or securities convertible into Common Stock of the Company
(or an entity formed by the Company for the purpose of issuing Common Stock (or
securities convertible into Common Stock) in connection with the IPO) pursuant
to a registration statement which has become effective under the Securities Act
of 1933, as amended.
ARTICLE VII.
MISCELLANEOUS
7.1 INDEMNIFICATION.
(a) The Company agrees that if Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the written request of the Company as a director, officer,
member, employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether or not the basis of such Proceeding is Executive's
alleged action in an official capacity while serving as a director, officer,
member, employee, trustee, or agent, Executive shall be indemnified and held
harmless by the Company to the fullest extent legally permitted or authorized by
the Company's articles of incorporation or bylaws or
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resolutions of the Company's Board of Directors and under the Georgia Business
Corporation's Code against all cost, expense, liability and loss (including,
without limitation, reasonable attorney's fees, judgments, fines or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
Executive in connection therewith, and such indemnification shall continue as to
Executive in the event he has ceased to be a director, officer, member,
employee, trustee, or agent of the Company or other entity and shall inure to
the benefit of Executive's heirs, executors and administrators. The Company
shall advance to Executive all reasonable costs and expenses incurred by him in
connection with a Proceeding within twenty (20) days after receipt by the
Company of a written request for such advance. Executive shall not be required
to repay the amount of such advance unless it shall ultimately be determined in
the proceeding that he has acted willfully and was grossly negligent in conduct
giving rise to the Proceeding.
(b) The failure of the Company (including the Board, independent legal
counsel or stockholders) to have made a determination prior to the commencement
of any Proceeding concerning payments of amounts claimed by Executive under
Section 7.1(a) above that indemnification of Executive is proper because he has
met the applicable standard of conduct, shall create a presumption that
Executive has met the applicable standard of conduct.
(c) The Company agrees to maintain appropriate insurance coverage for
directors' and officers' liability, errors and omissions and/or blanket
liability protecting against any costs arising from a Proceeding which may be
assessed against Executive. Such coverage shall be provided at the highest level
provided for any employee, director or officer of the Company.
7.2 BENEFIT OF AGREEMENT; ASSIGNMENT; BENEFICIARY.
(a) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns. No rights or obligations of the Company
under this Agreement may be assigned or transferred by the Company except that
such rights or obligations may be assigned or transferred pursuant to a merger
or consolidation in which the Company is not the continuing entity, or sale of
all or substantially all of the assets of the Company, provided that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the localities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law. This Agreement shall also inure the benefit
of, and be enforceable by, Executive and his personal or legal representatives,
executors, administrators, successors, heirs, distributes, devises and legatees.
If Executive should die while
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any amount would still be payable to the Executive hereunder if he had continued
to live, all such amounts shall be paid in accordance with the terms of this
Agreement to Executive's beneficiary, devises, or other designee, or if there is
no such designee, to Executive's estate. Without limiting the foregoing,
Executive shall be entitled, to the extent permitted under any applicable law,
to select and change a beneficiary or beneficiaries to receive any compensation
or benefit payable hereunder following Executive's death by giving the Company
written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary, estate or other
legal representative.
7.3 NOTICES. Any notice required or permitted hereunder shall be in writing
and shall be sufficiently given if personally delivered or if sent by telegram
or telex or by registered or certified mail, postage prepaid, with return
receipt requested, addressed: (a) in the case of the Company to Suite 250 B,
5901 Peachtree Dunwoody Road, Atlanta, Georgia 30328 Attention: CEO or to such
other address and/or to the attention of such other person as the Company shall
designate by written notice to Executive; and (b) in the case of Executive, to
1103 Fox Creek Court, Woodstock, Georgia 30189 or to such other address as
Executive shall designate by written notice to the Company. Any notice given
hereunder shall be deemed to have been given at the time of receipt thereof by
the person to whom such notice is given.
7.4 AMENDMENT. This Agreement may not be changed or modified except by an
instrument in writing signed by both of the parties hereto.
7.5 WAIVER. The waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a continuing waiver or as a
consent to or waiver of any subsequent breach hereof. Any waiver must be in
writing and signed by Executive or an authorized officer of the Company, as the
case may be.
7.6 HEADINGS. The Article and Section headings herein are for convenience of
reference only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof.
7.7 GOVERNING LAW. This Agreement shall be governed by, and construed and
interpreted in accordance with, the internal laws of the State of Georgia
without reference to the principles of conflict of laws.
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7.8 AGREEMENT TO TAKE ACTIONS. Each party hereto shall execute and deliver
such documents, certificates, agreements and other instruments, and shall take
such other actions, as may be reasonably necessary or desirable in order to
perform his or its obligations under this Agreement or to effectuate the
purposes hereof.
7.9 SURVIVORSHIP. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
7.10 VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not effect the validity or enforceability of
any other provision or provisions of this Agreement, which shall remain in full
force and effect.
7.11 RESOLUTION OF DISPUTES. Any disputes arising under or in connection
with this Agreement shall, at the election of either Executive or the Company,
be resolved by binding arbitration, to be held in Atlanta, Georgia in accordance
with the rules and procedures of the American Arbitration Association. Judgment
upon the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Each party shall bear his or its own costs of the
arbitration or litigation. Pending the resolution of any arbitration or court
proceeding, the Company shall continue payment of all amounts due Executive
under this Agreement and all benefits to which Executive is entitled at the time
the dispute arises.
7.12 ENTIRE AGREEMENT. This Agreement, end the Agreements and documents
referred to herein, contain the entire understanding and agreement between the
parties concerning the subject matter hereof and supersedes all prior
agreements, understanding, discussions, negotiations and undertakings, whether
written or oral, between the parties with respect thereto.
7.13 REPRESENTATIONS. The Company represents that it is fully authorized and
empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement to which it is a
party or by which it is bound. Executive represents that there is no agreement
to which he is a party or by which he is bound that would be violated by the
performance of his obligations under this Agreement.
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7.14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute on and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement effective as of the date first above written.
SUNBELT AUTOMOTIVE GROUP, INC.
By: /s/ Charles K. Yancey
--------------------------------------------
Its CEO: Charles K. Yancey
THE EXECUTIVE
/s/ Stephen C. Whicker
-----------------------------------------------
STEPHEN C. WHICKER
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RICKY L. BROWN
SUNBELT EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT is dated as of December 18, 1997,
(the "Effective Date"), and is entered into between, SUNBELT AUTOMOTIVE GROUP,
INC. ("Sunbelt") a Georgia corporation, (the "Company") and RICKY L. BROWN
("Executive").
WHEREAS, Sunbelt was organized in December of 1997 and intends to acquire,
merge and purchase certain businesses as a part of its strategy to engage in an
initial public offering of its stock (the "IPO") or such other change in
control; and
WHEREAS, the Company wishes to employ Executive as its Chief Financial
Officer and its Vice President of Finance & Controller (hereinafter
collectively, "CFO"), and Executive wishes to perform services for the Company
as CFO; and
WHEREAS, the Executive and the Company desire to enter into this Executive
Employment Agreement to govern the terms and conditions of Executive's
employment by and with the Company.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
and agreements of the parties hereto, the parties hereby covenant and agree as
follows:
ARTICLE I.
EMPLOYMENT, DUTIES AND RESPONSIBILITIES
1.1 EMPLOYMENT. The Company and through its Board of Directors (the
"Board"), hereby agrees to employ Executive as CFO of the Company for the Term
(defined in Section 2.1 below), and Executive hereby agrees to accept such
employment on the terms and conditions set forth herein. Executive agrees to
devote substantially all of his business time and efforts to the business of the
Company. Anything herein to the contrary notwithstanding, nothing shall preclude
Executive from (a) serving on the boards of directors of a reasonable number of
other corporations or trade associations and/or charitable organizations, (b)
engaging in charitable activities and community affairs, and (c) managing his
and his immediate family's personal investments and affairs, provided that such
activities do not materially interfere with the proper performance of his duties
and responsibilities.
1.2 DUTIES AND RESPONSIBILITIES. Commencing as of December 18, 1997,
Executive shall assume the responsibilities, perform the duties and exercise the
powers as CFO. Executive shall be responsible for the general financial affairs
of the Company and its Subsidiaries as prescribed by the Board of the Company
and Sunbelt.
1.3 REPORTING. Executive shall report, in the performance of his duties,
directly to the Chief Executive Officer ("CEO") of the Company.
ARTICLE II.
TERM
2.1 TERM. The term of Executive's employment as the CFO, or such other
acceptable senior level management position, under this Agreement (the "Term")
shall commence on the Effective Date and shall continue until earlier of (a)
June 30, 2003, or (b) the occurrence of a
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Change in Control (as defined in Section 6.1 below); provided that (i) the Term
shall be renewed for an additional one-year period on the expiration of the
original Term of this Agreement and on each succeeding anniversary thereof
(each, a "Renewal Date"), unless the Company or Executive gives written notice,
at least ninety (90) days prior to a Renewal Date, of its or his intention not
to so renew the Term or any Renewal, and (ii) the Term may be terminated earlier
as provided in Article V hereof.
ARTICLE III.
COMPENSATION AND EXPENSES
3.1 SALARY, BONUSES AND BENEFITS. As compensation and consideration for the
services to be rendered hereunder during the Term by Executive, the Company
shall pay, and Executive shall accept, the following (subject, in each case, to
the provisions of Article V hereof):
(a) BASE SALARY. Commencing as of January 2, 1998, the Company shall pay
Executive an annual Base Salary during the Term of One Hundred Thirty-Five
Thousand Dollars ($135,000.00). All annual Base Salary shall be payable in
accordance with the normal payment procedures of the Company.
(b) ANNUAL CASH BONUS. Commencing with the fiscal year beginning July 1,
1998 and for each fiscal year of the Company during the Term and any Renewal
Term, the Company shall pay Executive an annual cash bonus (the "Annual Cash
Bonus") as determined by the Compensation Committee (or in the absence of such a
committee, by either the Executive Committee or the Board), based on
satisfaction of certain performance criteria to be established by agreement
between the Compensation Committee (or in the absence of such a committee, by
either the Executive Committee or the Board) and Executive. If the Company meets
certain financial and other performance targets to be agreed upon by the
Compensation Committee (or in the absence of such a committee, by either the
Executive Committee or the Board) and the Executive, the Annual Cash Bonus shall
be targeted at an amount equal to at least fifty percent (50%) of Executive's
annual Base Salary as of the year in question, but in no event shall the Annual
Cash Bonus exceed the Executive's annual Base Salary. However, nothing herein
shall be construed as a guarantee of any Annual Cash Bonus. The Annual Cash
Bonus shall be determined (prorated for the final year of employment) and paid
within ninety (90) days after the end of each fiscal year of the Company during
the Term.
(c) STOCK GRANT. As compensation for services rendered by the Executive
for his part in helping the Company in its IPO process, and coming to work
full-time for the Company, the Company agrees to award to the Executive the
right to purchase 10,016 shares of its voting common stock (the "IPO Award").
These shares shall be granted pursuant to the Company's 1997 and 1998 Incentive
Stock Plan (the "Incentive Stock Plan") and shall be granted so as to minimize
the cash expenditure and tax consequences to the Executive.
(d) STOCK OPTIONS.
1. First Option. In addition to the IPO Award above, the Company
shall grant to the Executive, under the Incentive Stock Plan, an option (the
"First Option") to purchase up to 25,000 shares of the Company's voting common
stock at the exercise price adopted under the Company's Incentive Stock Plan and
as set forth on the Option Grant, attached hereto as Exhibit "A" and
incorporated herein. The First Option shall terminate on the tenth anniversary
of the grant of the First Option, subject to earlier termination as may be set
forth in this Agreement, the Incentive Stock Plan or the Option Grant. The First
Option is in addition to any other option award or grant which may be made to
the Executive during his employment.
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2. Second Option. In addition to the IPO Award and the First Option
above, the Company shall grant to the Executive, under the Incentive Stock Plan,
an option (the "Second Option") to purchase up to 70,000 shares of the Company's
voting common stock at the exercise price adopted under the Company's Incentive
Stock Plan and as set forth on the Option Grant, attached hereto as Exhibit "B"
and incorporated herein. The Second Option shall terminate on the tenth
anniversary of the grant of the Second Option, subject to earlier termination as
may be set forth in this Agreement, the Incentive Stock Plan or the Option
Grant. The Second Option is in addition to any other option award or grant which
may be made to the Executive during his employment.
3. Third Option. In addition to the IPO Award, the First Option and
Second Option above, the Company shall grant to the Executive, under the
Company's Incentive Stock Plan and the Option Grant, attached hereto as Exhibit
"C" and incorporated herein, an option (the "Third Option") to purchase up to
25,000 shares of the Company's voting common stock at an exercise price equal to
the price per share to the public set forth on the cover of the prospectus
relating to the IPO. The Third Option shall terminate on the tenth anniversary
of the grant of the Third Option, subject to earlier termination as may be set
forth in this Agreement, the Incentive Stock Plan or the Option Grant. The Third
Option is in addition to any other option award or grant which may be made to
the Executive during his employment.
(e) BENEFIT PROGRAMS. Executive shall be eligible to participate in or
receive benefits under all of the Company's employee and executive benefit plans
or arrangements including, without limitation, plans or arrangements providing
for health and disability insurance coverage, life insurance for the benefit of
Executive's beneficiaries, deferred compensation and pension benefits, and
personal financial, investment, legal or tax advice, all at the highest level
that is available through the Company and/or any of its Subsidiaries to their
senior executive management (the "Benefit Programs"). In addition, Executive
shall be entitled to such perquisites of employment, including, but not limited
to, two (2) Demo automobiles, insurance, etc., as are made available to the
senior executive management of the Company and/or its Subsidiaries. If this
Agreement is assigned to any Subsidiaries of the Company or any other party,
Executive shall be granted credit for all service with the Company and/or its
Subsidiaries prior to the date of such assignment for all purposes of the
Benefit Programs, including, but not limited to, eligibility, vesting and
benefits. To the extent there is a period of employment required as a condition
for full benefit coverage under any Benefit Programs, and Executive would not
otherwise meet the requirements taking into consideration past service granted
for service with the Company and/or its Subsidiaries, to the extent permissible
under applicable law, the Company agrees to take or to cause to be taken all
actions necessary so that Executive will be deemed to have met such requirement.
The Company agrees that whenever Executive is required to pay for coverage or
benefits under a Benefit Program from his own wages, the Company shall reimburse
him for the sum of the amount of such payments plus federal and state income
taxes on the entire reimbursement amount (including the tax on such taxes) so
that Executive will not have incurred any cost in obtaining such coverage or
benefit except as otherwise may be specifically set forth herein.
(f) VACATION. Executive shall be entitled to paid vacation during each
year of the Term in an amount equal to four (4) weeks per year. Executive shall
have the right to determine the time and duration of any vacation so taken, in
his sole discretion. Unused vacation days may be accumulated from year to year,
up to a maximum carryover of eight (8) weeks in any given year.
3.2 EXPENSES. The Company shall reimburse Executive for reasonable business-
related expenses incurred by him in connection with the performance of services
hereunder during the Term, subject to the Company's policies relating to
business-related expenses as in effect from time to time during the Term.
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ARTICLE IV.
EXCLUSIVITY, ETC.
4.1 EXCLUSIVITY. Executive agrees that during the Term he will not engage in
any other business activities, pursued for gain, profit or other pecuniary
advantage, that are competitive with the activities of the Company or any of its
Affiliates, except as permitted in Section 4.2 below. Executive agrees that all
of his activities as an employee of the Company shall be in conformity in all
material respects with all policies, rules and regulations and directions of the
Company not inconsistent with this Agreement and which have been expressly
communicated to him, whether orally or in writing.
4.2 OTHER BUSINESS VENTURES. Executive agrees that, so long as he is
employed by the Company, he will not have any financial or other beneficial
interest in any business enterprise which is competitive with any business
engaged in by the Company or any of its Affiliates. Notwithstanding the
foregoing or anything contained in Section 4.1 hereof, Executive may own,
directly or indirectly, up to two percent (2%) of the outstanding capital stock
of any such business having a class of capital stock which is traded on any U.S.
or foreign stock exchange or in the over-the-counter market.
4.3 CONFIDENTIALITY; NON-COMPETITION.
(a) Executive agrees that he will not, at any time during or after the
Term or any Renewal Term, make use of or divulge to any other person, firm or
corporation any trade or business secret, process, method or means, or any other
confidential information concerning the business or policies of the Company or
any of its subsidiaries or Affiliates (as defined in Section 5.3 hereof), except
(i) as such disclosure or use may be required or appropriate in connection with
his work as an employee of the Company or (ii) when required to do so by a court
of law, by any governmental agency having supervisory authority over the
business of the Company or by any administrative or legislative body (including
a committee thereof) with apparent jurisdiction to order him to divulge,
disclose or make accessible such information. For purposes of this Agreement, a
"trade or business secret, process, method or means, or any other confidential
information" shall mean and include information treated as confidential or as a
trade secret by the Company or any of its Subsidiaries or Affiliates, including
but not limited to, information regarding contemplated products, models,
compilations, business and financial methods or practices, marketing,
merchandising and selling techniques, customers, vendors, suppliers, trade
secrets, training programs, manuals or materials, technical information,
contracts, systems, procedures, mailing lists, know-how, trade names,
improvements, pricing, price lists, financial or other data (including the
revenues, costs or profits associated with any of the Company's products or
services), business plans, strategy, code books, invoices and other financial
statements, computer programs, software systems, databases, discs and printouts,
other plans (technical or otherwise), customer and industry lists, supplier
lists, correspondence, internal reports, personnel files, sales and advertising
material, telephone numbers, names, addresses or any other compilation of
information, written or unwritten, which is or was used in the business of the
Company or any of its subsidiaries or Affiliates. Executive's obligation under
this Section 4.3 (a) shall not apply to any information which is generally known
to the public or hereafter becomes generally known to the public without the
fault of Executive. Executive agrees not to remove from the premises of the
Company or except as specifically permitted in writing by the Company, and
Executive agrees and acknowledges that all of such information, in any form, and
copies and extracts thereof, are and shall remain the sole and exclusive
property of the Company, Executive shall return to the Company the originals and
all copies of any such information provided to or acquired by Executive in
connection with the performance of his duties for the Company, and shall return
to the Company all files, correspondence and/or other communications received,
maintained
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and/or originated by Executive during the course of his employment, and no copy
of any such shall be retained by him, except that he may retain his personal
notes, diaries, Rolodexes and correspondence.
(b)(i) Executive acknowledges that the agreements and covenants
contained in this Section 4.3(b) are essential to protect the value of the
Company's business and assets and by virtue of his employment with the Company,
Executive has obtained and will obtain knowledge, contacts, know-how, training,
experience and other information relating to the Company's business operations,
and there is a substantial probability that such knowledge, know-how, contacts,
training, experience and information could be used to the substantial advantage
of a competitor of the Company and to the Company's substantial detriment.
Accordingly, for a period commencing on the date of termination of Executive's
employment with the Company and ending one (1) year from and after such date
(the "Non-Compete Period"), Executive shall not, directly or indirectly, for
himself or on behalf of or in conjunction with any person, partnership,
corporation or other entity, compete, own, operate, control, or participate or
engage in the ownership, management, operation or control of, or be connected
with as an officer, employee, partner, director, shareholder, representative,
consultant, independent contractor, guarantor, advisor or in any other manner or
otherwise have a financial interest in, a proprietorship, partnership, joint
venture, association, firm, corporation or other business organization or
enterprise that competes with the Company (which for this purpose shall mean any
business or enterprise that operates dealerships for the retail sales of new
and used automobiles or trucks and businesses ancillary thereto), provided that
such business or enterprise (A) is or becomes located or otherwise engaged
within a 100 mile radius of the city of Atlanta, Georgia or within a 100-mile
radius of any automobile or truck dealership or ancillary business in which the
Company, directly or indirectly, has a 50% or greater economic or voting or
otherwise controlling ownership interest as of the termination of Executive's
employment hereunder, or (B) is an automobile or truck dealership or group of
affiliated automobile or truck dealerships (and all businesses ancillary
thereto) whose aggregate gross sales during the 12 month period immediately
preceding the date of Executive's termination exceeded $50,000,000, and provided
further that it shall not be a violation of this Section 4.3 (b) if (x)
Executive owns up to one percent (1%) of the outstanding capital stock of any
such business having a class of capital stock which is traded on any U.S. or
foreign stock exchange or in the over-the-counter market, (y) Executive owns,
operates, is employed by or is otherwise connected with an advertising agency
that serves automobile dealerships, provided Executive does not personally
perform any work for, or otherwise provide any advice with respect to, any
account that is engaged in competitive activity with the Company, or (z)
Executive is employed by or is a consultant or independent contractor for an
entity that competes with the Company but Executive is employed by or is a
consultant or independent contractor for a division or subsidiary of such entity
that does not engage in such competitive activity. During the Non-Compete
Period, Executive shall not interfere with or disrupt, or attempt to interfere
with or disrupt, the relationship, contractual or otherwise, between the Company
and any customer, client, supplier, manufacturer, distributor, consultant,
independent contractor or employee of the Company.
(ii) It is the desire and intent of the parties that the provisions
of this Section 4.3(b) shall be enforced to the fullest extent permissible under
the laws and public policies applied in each jurisdiction in which enforcement
is sought. Accordingly, if any particular portion of this Section 4.3(b) shall
be adjudicated to be invalid or unenforceable, this Section 4.3(b) shall be
deemed amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of this
Section 4.3(b) in the particular jurisdiction in which such adjudication is
made.
(c) Executive agrees that, at any time and from time to time during and
after the Term, he will execute any and all documents which the Company may
reasonably request to effectuate the provisions of this Section 4.3.
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ARTICLE V.
TERMINATION
5.1 TERMINATION BY THE COMPANY. The Company shall have the right to
terminate Executive's employment at any time, with or without "Cause."
(A) TERMINATION FOR CAUSE. For purposes of this Agreement, "Cause" shall
mean:
(i) Executive is convicted of or enters a plea of guilty to any
felony under federal or state law (except under any state's laws regulating the
enforcement of motor vehicles involved in accidents);
(ii) Executive engages in continued conduct that constitutes gross
neglect or willful misconduct in carrying out his duties under this Agreement as
the result of alcoholism, drug addiction, or nervous breakdown; or
(iii) Executive refuses to follow the instructions, orders or
directives of the Board or the Executive Committee with respect to his duties
and responsibilities hereunder, provided that such refusal shall constitute
Cause only if the instruction, order or directive in question has been furnished
to Executive in writing and provided further that such refusal shall not
constitute Cause if Executive has good faith and reasonable belief based on
advice of counsel, that to follow such instruction, order or directive would be
unlawful;
(iv) Executive engages in any of the following acts which have a
material adverse impact on the financial condition of the Company:
(a) actual fraud or other material acts or dishonesty in
fulfilling his assigned responsibilities hereunder, or
(b) the willful or grossly negligent destruction of any
material amount of the Company's tangible property.
The Board shall notify Executive of its intent to terminate him for
Cause by providing written notice ("Notice of Cause") stating in as much detail
as possible the particular event, act or acts, or failure or failures to act,
that constitute the grounds on which the proposed termination for Cause is
based; such Notice of Cause must be given within fifteen (15) days of the date
any of the members of the Board (exclusive of Executive) learns of the
circumstances giving rise to the Notice of Cause. Executive shall have fifteen
(15) days after receipt of the Notice of Cause in which to cure or otherwise
correct the circumstances detailed. Executive may also, within such fifteen (15)
day period, request by written notice that the Board hold a hearing at which
Executive may contest the proposed termination for Cause. The hearing shall be
held on a date set by the Board within fifteen (15) days of the date the Board
receives notice of the hearing whether Executive has been terminated for Cause
as set forth in the Notice of Cause. If Executive does not request a hearing and
the circumstances described in the Notice of Cause have not been cured within
the fifteen (15) day period following the date of the Notice of Cause, Executive
shall be deemed terminated for Cause, effective as of the day the Notice of
Cause was given by the Company.
(B) TERMINATION WITHOUT CAUSE. The Company may terminate Executive
without Cause upon sixty (60) days advance written notice to Executive and such
termination shall not constitute a breach of this Agreement.
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(C) IPO TERMINATION. This Agreement shall automatically terminate with
no further obligations by either party if the IPO has not been completed and
become effective on or before August 1, 1998.
5.2 TERMINATION BY EXECUTIVE.
(a) VOLUNTARY TERMINATION. Executive shall have the right to terminate
his employment at any time without cause (a "Voluntary Termination"). A
Voluntary Termination is not a termination for Good Reason (as hereafter
defined) or a termination as the result of Disability (as hereafter defined) or
death. A Voluntary Termination, excepting death) shall be effective upon sixty
(60) days' advance written notice to the Company and shall not constitute a
breach of this Agreement.
(b) TERMINATION FOR GOOD REASON. Termination for "Good Reason" shall
mean a termination of Executive's employment at the Executive's initiative
following the occurrence, without Executive's written consent, of one or more of
the following events:
(i) A reduction in Executive's then current base annual salary;
(ii) The removal of the Executive as CFO of the Company or such
other senior level executive management position;
(iii) Any (1) diminution in Executive's duties other than changes
which neither individually nor in the aggregate will or will likely cause any
actual or perceived material reduction in his powers, duties and
responsibilities as enumerated in this Agreement, or (2) assignment to Executive
of duties which are either fundamentally or materially inconsistent with his
position as CFO of the Company;
(iv) Executive determines that he cannot carry out his duties and
responsibilities as CFO or such other senior level management position in the
manner contemplated by this Agreement;
(v) The occurrence of a Change in Control (as defined in Section
6.1 hereof);
(vi) The failure of the Company to obtain the assumption in writing
of its obligation to perform this Agreement by any successor to the Company
within fifteen (15) days after a merger, consolidation or sale of all or
substantially all of the Company's operating assets or its stock or any such
similar transaction by the Company; or
(vii) The Company fails to make any payments due to the Executive
hereunder or otherwise materially breaches its obligations under this Agreement.
Prior to his termination for Good Reason, Executive shall give written
notice ("Notice of Good Reason") to the Board of his intention to terminate this
Agreement for Good Reason, such Notice of Good Reason (A) to state in detail the
particular event, act or acts or failure or failures to act that constitute the
grounds on which the proposed termination for Good Reason is based, and (B) to
be given within fifteen (15) days of his learning of such event, act or acts or
failures to act. The Company shall have fifteen (15) days after the date that
the Notice of Good Reason has been received by the Board in which to cure or
correct the circumstances giving rise to the Notice of Good Reason. If the
Company fails to cure such conduct within such fifteen (15)
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day cure period, Executive's employment shall be terminated for Good Reason as
of the expiration of the fifteen (15) day cure period.
5.3 DEATH. In the event Executive dies during the Term, this Agreement shall
automatically terminate effective upon the date of Executive's death.
5.4 DISABILITY. In the event that Executive shall suffer a Disability, the
Company shall have the right to terminate the Agreement, which shall be
effective upon written notice to Executive. "Disability" means a physical or
mental condition which renders Executive incapable of performing Executive's
regular duties hereunder for a period of one hundred twenty (120) consecutive
days. In the event of any disagreement between Executive and the Company as to
whether Executive is suffering from a Disability, the determination of
Executive's Disability shall be made by one or more board certified licensed
physicians practicing the specialty of medicine applicable to Executive's
disorder in the Atlanta metropolitan area in accordance with the provisions of
this Section. If either the Company or Executive desires to initiate the
procedure provided in this Section, such party (the "Initiating Party") shall
deliver written notice to the other party (the "Responding Party") in accordance
with the provisions of this Agreement specifying that the Initiating Party
desires to proceed with a medical examination and the procedures specified in
this Section. Such notice shall include the name, address and telephone number
of the physician selected by the Initiating Party (the "Disability Examination
Notice"). If the Responding Party fails within ten (10) days after the receipt
of the Disability Examination Notice to designate a physician meeting the
standards specified herein, the physician designated by the Initiating Party in
the Disability Examination Notice shall make the determination of Disability as
provided in this Section. If the Responding Party by written notice notifies the
Initiating Party within ten (10) days of the receipt by the Responding Party of
the Disability Examination Notice by notice specifying the physician selected by
the Responding Party for purposes of this Section, then each of the two
physicians as so designated by the respective parties shall each examine
Executive. Examinations shall be made by each such physician within ten (10)
days of such physician's respective designation. Each physician shall render a
written report as to whether in such physician's opinion Executive is suffering
a Disability. If the two physicians agree on the status of Executive for
purposes of this Section, such determination shall be conclusive and dispositive
for all purposes of this Section. If the two physicians cannot so agree, the two
physicians shall jointly select a third physician meeting the standards
specified in this Section within ten (10) days after the later report of the two
physicians is submitted. The third physician shall render a written report on
the status of Executive within ten (10) days of selection and such report shall
be dispositive for purposes of this Section. For purposes of this Section,
Executive agrees that he shall promptly submit to such examinations and tests as
such physicians shall reasonably request for purposes of making a determination
of Disability as provided herein. Failure or refusal of Executive to submit to
the examination as required by this Section shall constitute a conclusive
admission by the Executive that Executive is suffering from a Disability as
provided herein.
5.5 SEVERANCE PAY UPON TERMINATION. Amounts due under this Section 5.5 are
in the nature of severance payments considered to be reasonable by the Company
and are not in the nature of a penalty, provided that such payments shall be
Executive's exclusive remedy relating to the termination of his employment
hereunder.
(a) FOR CAUSE/VOLUNTARY TERMINATION/DEATH/END OF TERM. In the event of
termination of Executive's employment (i) by the Company for Cause, (ii) by
Executive other than for Good Reason, (iii) by reason of Executive's death, or
(iv) by reason of either party's election not to extend the Term as provided in
Section 2.1 hereof, the Company shall pay to Executive (or his beneficiary in
the event of his death), any base annual salary and any annual bonus earned (for
a full fiscal year or prorated for a partial fiscal year) but not paid to
Executive prior to the effective date of such termination, and Executive shall
be entitled to other additional
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benefits in accordance with the benefit plans of the Company. In addition,
Executive and his spouse shall be entitled to continued participation in all
medical, dental and hospitalization coverage as set forth in Section 5.5(e)
hereof.
(b) GOOD REASON/WITHOUT CAUSE. In the event of termination of
Executive's employment (i) by the Company other than for Cause, or (ii) by
Executive for Good Reason, then the Executive shall receive the following:
(i) Salary. The Executive shall be paid all earned but unpaid
annual Base Salary and will continue to receive his current annual Base Salary
(subject to withholding of all applicable taxes) for the remainder of the Term
of this Agreement plus the amounts to be paid under Section 1.5 for the
Consulting Term. For purposes hereof, the Executive's "current annual Base
Salary" shall be the highest rate in effect during the six-month period prior to
the termination of Executive's employment. The amounts due hereunder for the
annual Base Salary shall be paid in single lump payment which shall be paid
within ninety (90) days of termination. The amounts due for the Consulting Term
Payments shall be payable monthly commencing on the first month (1st) after
termination and continuing each month thereafter.
(ii) Bonuses and Incentives. The Executive shall receive any Annual
Cash Bonus then earned (for a full fiscal year or prorated for a partial fiscal
year) plus bonus payments from the Company for the thirty-six (36) months
following the month in which his employment is terminated in an amount for each
such month equal to one-twelfth of the average of the Annual Cash Bonuses paid
to him for the two calendar years immediately preceding the calendar year in
which such termination occurs (provided that calendar years prior to 1998 shall
not be considered). Any Annual Cash Bonus that the Executive had previously
earned but which may not yet have been paid as of the date of termination shall
be due and payable. All such bonus amounts shall be paid in a single lump sum
payment which shall be paid not later than ninety days after his termination.
(iii) Health and Life Insurance Coverage. The Executive shall
receive post-termination medical, dental, and hospitalization insurance coverage
as provided in Section 5.5(c).
(iv) Employee Retirement Plans. In addition to the benefits
provided herein, to the extent permitted by the applicable plan, the Executive
will be entitled to continue to participate, consistent with past practices, in
all employee retirement plans maintained by the Company in effect as of the date
of the termination of his employment. The Executive's participation in such
retirement plans shall continue for a period of thirty-six (36) months from the
date of the termination of his employment (at which point he will be considered
to have terminated employment within the meaning of the plans) and the
compensation payable to the Executive under (i) and (ii) above shall be treated
(unless otherwise excluded) as compensation under such plans. If continued
participation if any plan is not permitted or if any such plan does not continue
to exist, the Company shall pay to the Executive and, if applicable, his
designated beneficiary, a supplemental benefit equal to the present value on the
date of termination of employment (calculated as provided in the plan) of the
excess of (i) the benefit the Executive would have been paid under such plan if
he had continued to be covered for the 36-month period (less any amounts he
would have been required to contribute) with assumed earnings calculated at
eight percent (8%) per annum, over (ii) the benefit actually payable under such
plan. The Company shall pay such additional benefits (if any) in a lump sum.
(v) Effect of Lump Sum Payment. The lump sum payments under (i) or
(ii) above shall not alter the amounts Executive is entitled to receive under
the benefit plans described in (iv) above. Benefits under such plans shall be
determined as if Executive had remained employed and received such payments over
a period of thirty-six (36) months.
9
<PAGE> 10
(vi) Effect of Death. The benefits payable or to be provided under
this Agreement shall not cease in the event of the Executive's death and such
benefits shall be payable to his designated beneficiary (in accordance with
Section 7.2 hereof) or, if none, the legal representative of Executive's estate.
(vii) Options. Any options awarded to and granted to the Executive
but not yet vested shall immediately vest and become exercisable by the
Executive as provided in Section 5.6(b).
(c) DISABILITY. In the event of termination of Executive's employment
for Disability as described in Section 5.4 hereof, then, in addition to the
amounts described in Section 5.5(a) hereof, Executive and his spouse shall be
entitled to continued participation in medical, dental and hospitalization
coverage and, if not prohibited by law, in all other employee plans and programs
in which they were participating on the date of termination of Executive's
employment due to Disability until the earlier of (A) the end of the period
during which he is receiving salary continuation payments, and (B) the date, or
dates, they receive similar coverage and benefits under the plans and programs
of a subsequent employer (such coverages and benefits to be determined on a
coverage-by-coverage, or benefit-by-benefit, basis); and (C) plus the benefits
as provided in 5.5(e) herein. In addition, Executive shall be entitled to
continue to receive for one hundred twenty (120) days his base salary in effect
as of the date of the onset of his Disability.
(d) DEATH. In the event of termination of Executive's employment due to
death, then, in addition to the amounts and other benefits described in this
Agreement, the Company shall pay to the legal representative of Executive's
estate the greater of $135,000 or his most recent annual Base Salary plus his
average Cash Bonus for a period of one (1) year following the death of the
Executive.
(e) POST-TERMINATION MEDICAL, DENTAL AND HOSPITALIZATION INSURANCE
COVERAGE. In the event of termination of Executive's employment for any reason
whatsoever, Executive and his spouse shall be entitled to continued
participation in all medical, dental and hospitalization insurance coverage on
the same terms and conditions that are provided to the senior corporate
management of the Company, as any of such insurance coverage may be modified
from time to time with respect to such senior corporate management. Executive
and his spouse shall be entitled to continued participation in the applicable
coverage until the date on which Executive is employed by any Person other than
the Company, or any Affiliate of the Company, and Executive becomes covered by
the medical, dental and hospitalization insurance coverage through such other
Person's plan.
(f) GOLDEN PARACHUTE PAYMENTS. If the aggregate present value
(determined as of the date of termination of employment of Executive in
accordance with the provisions of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") (or any successor section thereof) and the
regulations and rulings thereunder ("Section 280G")) of the sum of (i) severance
payments made to Executive due to his termination for Good Reason as a result of
a Change in Control under this Section, and (ii) all other payments to Executive
in the nature of compensation which are contingent on a change in ownership or
effective control of the Company or in the ownership of a substantial portion of
the assets of the Company would result in an excess parachute payment (as
determined under Section 280G), then the Company shall pay to Executive an
additional severance amount under this Subsection (e) equal to the sum of (A)
the amount of tax imposed by Code Section 4999 upon excess parachute payments
received by Executive, and (B) federal and state income taxes payable on both
the tax amount in (A) and the entire amount paid under (B), such that Executive
is reimbursed for, and has no out-of-pocket expenses with respect to, the cost
of all income taxes payable upon amounts paid to Executive under this Subsection
(f).
5.6 TREATMENT OF OPTIONS UPON TERMINATION
10
<PAGE> 11
(a) FOR CAUSE/VOLUNTARY TERMINATION. In the event of termination of
Executive's employment (i) by the Company for Cause, or (ii) voluntarily by
Executive other than for Good Reason, the Options, to the extent not then vested
and exercisable on the date of such termination, shall be immediately cancelled.
To the extent the Options are then vested and exercisable on the date of such
termination, they may be exercised (A) in the event of termination by the
Company for Cause, for a period of ninety (90) days after the date of such
termination, or (B) in the event of Voluntary Termination by Executive for a
period of one (1) year after the date of such termination.
(b) WITHOUT CAUSE OR FOR GOOD REASON OR DUE TO RETIREMENT, DEATH OR
DISABILITY. In the event of the termination of Executive's employment by the
Company without Cause or by Executive for Good Reason or due to the Retirement,
Death or Disability of Executive, all grants of stock and all stock options
granted to Executive pursuant to the Company's Incentive Stock Plan shall, to
the extent not then vested and exercisable on the date of such termination,
become immediately vested and exercisable for a period of ninety (90) days after
the date of such termination, or such longer period of time as is permitted
under the applicable plan or grant.
5.7 NO MITIGATION; NO OFFSET. In the event of any termination of employment
under this Article V, Executive shall be under no obligation to seek other
employment and there shall be no offset against amounts due Executive under this
Agreement on account of any remuneration attributable to any subsequent
employment that he may obtain, except as specifically provided for fringe
benefits in this Article V.
ARTICLE VI
CHANGE IN CONTROL
6.1 CHANGE IN CONTROL. A "Change in Control" shall mean the occurrence of
any one of the following events:
(a) Prior to an IPO, the shareholders of the Company or any of its
Affiliates (as defined in Section 6.2 below, individually or collectively, sell
or otherwise transfer to persons or entities who are not Affiliates of the
Company, in one transaction or a series of related transactions, 75% or more of
the Voting Stock (as defined below) of the Company or any of its Affiliates;
(b) Any "person," as such term is used in Sections 3(a)(9) and 13(d) of
the Securities Exchange Act of 1934, becomes a "beneficial owner," as such term
is used in Rule 13s-3 promulgated under that act (other than an Affiliate of the
Company or any "person" who was a "beneficial owner" of 10% or more of the
Voting Stock of the Company on the date hereof or who has received Voting Stock
from Executive), of 50% or more of the Voting Stock of the Company or any of
its Affiliates prior to any IPO and 40% or more of the Voting Stock of the
Company or any of its Affiliates after an IPO;
(c) The majority of the Board consists of individuals other than
"Incumbent Directors," which term means the members of the Board on the date of
this Agreement (excluding Executive) or otherwise designated pursuant to various
agreements among the Company's stockholders in effect on the date hereof;
provided, that any person becoming a director subsequent to such date whose
election or nomination for election was supported by a majority of the directors
who then comprised the Incumbent Directors shall be considered to be an
Incumbent Director;
(d) All or substantially all of the assets or business of the Company or
any of its Affiliates is disposed of pursuant to a merger, consolidation or
other transaction other than to an Affiliate of the Company (unless the
shareholders of the Company immediately prior to such merger, consolidation or
other transaction beneficially own, directly or indirectly, 50% or more of
11
<PAGE> 12
the Voting Stock or other ownership interests of the entity or entities, if any,
that succeed to the business of the Company); or
(e) the Company combines with another company (other than an Affiliate
of the Company) and is the surviving corporation but, immediately after the
combination, the shareholders of the Company immediately prior to the
combination, hold, directly or indirectly, less than 50% of the Voting Stock of
the combined company.
6.2 OTHER TERMS. For the purposes of this Agreement, (i) "Affiliate" of a
specified person or other entity shall mean any person or other entity that
directly or indirectly controls, is controlled by, or is under common control
with the person or other entity specified, and in the case of a specified person
who is a natural person, his spouse, his issue, his parents, his estate and any
trust entirely for the benefit of his spouse and/or issue; (ii) "Voting Stock"
shall mean capital stock of any class or classes having voting power under
ordinary circumstances, in the absence of contingencies, to elect the directors
of a corporation; and (iii) "IPO" shall mean the completion of an underwritten
sale of Common Stock or securities convertible into Common Stock of the Company
(or an entity formed by the Company for the purpose of issuing Common Stock (or
securities convertible into Common Stock) in connection with the IPO) pursuant
to a registration statement which has become effective under the Securities Act
of 1933, as amended.
ARTICLE VII
MISCELLANEOUS
7.1 INDEMNIFICATION.
(a) The Company agrees that if Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the written request of the Company as a director, officer,
member, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether or not the basis of such Proceeding is Executive's alleged action
in an official capacity while serving as a director, officer, member, employee
or agent, Executive shall be indemnified and held harmless by the Company to the
fullest extent legally permitted or authorized by the Company's articles of
incorporation or bylaws or resolutions of the Company's Board of Directors
against all cost, expense, liability and loss (including, without limitation,
reasonable attorney's fees, judgments, fines or penalties and amounts paid or to
be paid in settlement) reasonably incurred or suffered by Executive in
connection therewith, and such indemnification shall continue as to Executive
event if he has ceased to be a director, officer, member, employee or agent of
the Company or other entity and shall inure to the benefit of Executive's heirs,
executors and administrators. The Company shall advance to Executive all
reasonable costs and expenses incurred by him in connection with a Proceeding
within twenty (20) days after receipt by the Company of a written request for
such advance. Executive shall not be required to repay the amount of such
advance unless it shall ultimately be determined that he has acted willfully and
was grossly negligent in conduct given rise to the Proceeding.
(b) The failure of the Company (including the Board, independent legal
counsel or stockholders) to have made a determination prior to the commencement
of any Proceeding concerning payments of amounts claimed by Executive under
Section 6.1(a) above that indemnification of Executive is proper because he has
met the applicable standard of conduct, shall create a presumption that
Executive has met the applicable standard of conduct.
12
<PAGE> 13
(c) The Company agrees to maintain appropriate insurance coverage for
directors' and officers' liability, errors and omissions and/or blanket
liability protecting against any costs arising from a Proceeding which may be
assessed against Executive. Such coverage shall be provided at the highest level
provided for any employee or director of the Company.
7.2 BENEFIT OF AGREEMENT; ASSIGNMENT; BENEFICIARY. This Agreement shall
inure to the benefit of and be binding upon the Company and its successors and
assigns. No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation in which
the Company is not the continuing entity, or sale of all or substantially all of
the assets of the Company, provided that the assignee or transferee is the
successor to all or substantially all of the assets of the Company and such
assignee or transferee assumes the localities, obligations and duties of the
Company, as contained in this Agreement, either contractually or as a matter of
law. It is contemplated that Sunbelt Automotive Group, Inc. will assume any
obligations of Boomershine Automotive Group, Inc. hereunder in contemplation of
an initial public offering. This Agreement shall also inure to the benefit of,
and be enforceable by, Executive and his personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If Executive should die while any amount would still be payable to the
Executive hereunder if he had continued to live, all such amounts shall be paid
in accordance with the terms of this Agreement to Executive's beneficiary,
devisee, legatee or other designee, or if there is no such designee, to
Executive's estate. Without limiting the foregoing, Executive shall be entitled,
to the extent permitted under any applicable law, to select and change a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following Executive's death by giving the Company written notice
thereof. In the event of Executive's death or a judicial determination of his
incompetence, reference in this Agreement to Executive shall be deemed, where
appropriate, to refer to his beneficiary, estate or other legal representative.
7.3 NOTICES. Any notice required or permitted hereunder shall be in writing
and shall be sufficiently given if personally delivered or if sent by telephone
or telex or by registered or certified mail, postage prepaid, with return
receipt requested, addressed: (a) in the case of the Company of 5901 Peachtree
Dunwoody Road, Building B, Suite 250, Atlanta, Georgia 30328, Attention: General
Counsel, or to such other address and/or to the attention of such other person
as the Company shall designate by written notice to Executive; and (b) in the
case of Executive, to Ricky L. Brown at 1453 Macy Lane, Lawrenceville, Georgia,
30043, or to such other address as Executive shall designate by written notice
to the Company. Any notice given hereunder shall be deemed to have been given at
the time of receipt thereof by the person to whom such notice is given.
7.4 AMENDMENT. This Agreement may not be changed or modified except by an
instrument in writing signed by both of the parties hereto.
7.5 WAIVER. The waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a continuing waiver or as a
consent to or waiver of any subsequent breach hereof. Any waiver must be in
writing and signed by Executive or an authorized officer of the Company, as the
case may be.
7.6 HEADINGS. The Article and Section headings herein are for convenience of
reference only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof.
7.7 GOVERNING LAW. This Agreement shall be governed by, and construed and
interpreted in accordance with, the internal laws of the State of Georgia
without reference to the principles of conflict laws.
13
<PAGE> 14
7.8 AGREEMENT TO TAKE ACTIONS. Each party hereto shall execute and deliver
such documents, certificates, agreements and other instruments, and shall take
such other actions, as may be reasonably necessary or desirable in order to
perform his or its obligations under this Agreement or to effectuate the
purposes hereof.
7.9 SURVIVORSHIP. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
7.10 VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not effect the validity or enforceability of
any other provision or provisions of this Agreement, which shall remain in full
force and effect.
7.11 ENTIRE AGREEMENT. This Agreement contains the entire understanding and
agreement between the parties concerning the subject matter hereof and
supersedes all prior agreements, understanding, discussions, negotiations and
undertakings, whether written or oral, between the parties with respect thereto.
7.12 RESOLUTION OF DISPUTES. Any disputes arising under or in connection
with this Agreement shall, at the election of either Executive or the Company,
be resolved by binding arbitration, to be held in Atlanta, Georgia in accordance
with the rules and procedures of the American Arbitration Association. Judgment
upon the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Each party shall bear his or its own costs of the
arbitration or litigation. Pending the resolution of any arbitration or court
proceeding, the Company shall continue payment of all amounts due Executive
under this Agreement and all benefits to which Executive is entitled at the time
the dispute arises.
7.13 REPRESENTATIONS. The Company represents that it is fully authorized and
empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement to which it is a
party or by which it is bound. Executive represents that there is no agreement
to which he is a party or by which he is bound that would be violated by the
performance of his obligations under this Agreement.
7.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute on and the same instrument.
14
<PAGE> 15
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement effective as of the date first above written.
COMPANY: EXECUTIVE:
/s/ Ricky L. Brown
SUNBELT AUTOMOTIVE -----------------------------
GROUP, INC. Ricky L. Brown
By: Steph C. Uhizl
----------------------------------
TITLE: Secretary, General Counsel
--------------------------------
15
<PAGE> 1
EXHIBIT 10.9
FIRST AMENDMENT TO TWENTY-YEAR
NET LEASE AGREEMENT
THIS FIRST AMENDMENT TO TWENTY-YEAR NET LEASE AGREEMENT is made and
entered into as of the 15 day of July, 1984, by and between WINCO LTD., a
Georgia limited partnership having Walter M. Boomershine, Jr. and Mrs. WINIFRED
F. BOOMERSHINE as its only general partners (hereafter called "Lessor") and
BOOMERSHINE PONTIAC, INC., a corporation organized and existing under the laws
of the State of Georgia (hereinafter called "Lessee);
WITNESSETH THAT:
WHEREAS, Lessee and Lessor have previously entered into that certain
Twenty-Year Net Lease Agreement made as of September 16, 1978, and executed
October 4, 1978 (the aforesaid instrument being hereinafter called the "Lease
Agreement"); and
WHEREAS, Lessor and Lessee desire to amend the Lease Agreement;
NOW, THEREFORE, for and in consideration of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Lessor and Lessee hereby covenant and agree as
follows:
1.
Section 2.1 of the Lease Agreement is amended so as to provide that the
Demised Term shall end December 31, 1999.
2.
The Lease Agreement is amended so as to add Section 2.3 as follows:
"Section 2.3. Lessor has the right, from and after September
30, 1994 and upon sixty (60) days' prior written notice to Lessee, to
terminate the Lease Agreement upon the satisfaction and cancellation of
that certain Deed to Secure Debt and Security Agreement dated October
4, 1978, and recorded in Deed Book 1933, Page 793, Cobb County,
<PAGE> 2
Georgia records. In the event Lessor terminates the Lease Agreement
prior to December 31, 1999, Lessee shall receive credit for the portion
of the December, 1999 monthly rental installment paid as provided in
Section 3.1."
3.
The Lease Agreement is amended so as to delete Section 3.1 and insert
in lieu thereof the following:
"Section 3.1. Lessee covenants and agrees to pay to Lessor
during the Demised Term the amounts indicated below for the designated
portions of the Demised Term as rent for the Demised Term which sums
shall be due and payable in the indicated monthly installments, each
such installment to be due and payable promptly in advance on the first
day of each month commencing July 1, 1984, and continuing on the first
day of each subsequent month throughout the remainder of the Demised
Term except that Lessee has paid Lessor $15,125.00 of the December,
1999, installment, on or before the execution hereof:
<TABLE>
<CAPTION>
Portion of Demised Annual Monthly Rental
Term Rent Installment
------------------ ------ --------------
<S> <C> <C>
September 16, 1978 through Not Applicable $5,750.00
September 30, 1978 ($11,500 monthly
rental installment
prorated as set
forth in Section
3.2)
October 1, 1978 through $138,000.00 $11,500.00
September 30, 1979
October 1, 1979. through $150,000.00 $12,500.00
September 30, 1983
October 1, 1983 through $165,000.00 $13,750.00
June 30, 1984
July 1, 1984 through $239,400.00 $19,950.00
September 30, 1985
October 1, 1985 through $243,000.00 $20,250.00
September 30, 1987
October 1, 1987 through $246,600.00 $20, 550.00
September 30, 1988
October 1, 1988 through $263,100.00 $21,925.00
September 30, 1989
October 1, 1989 through $271,500.00 $22,625.00"
December 31, 1999
</TABLE>
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<PAGE> 3
4.
Section 14.4 of the Lease Agreement is amended so as to add the
following:
"Notwithstanding the foregoing, Lessor does covenant and agree
to cause the Deed to Secure Debt and Security Agreement dated October
4, 1978, recorded in Deed Book 1933, Page 793, Cobb County, Georgia
records to be amended so as to secure the indebtedness evidenced by the
note and all renewals and modifications thereto in the original amount
of $300,00.00 from Lessee to The Citizens and Southern National Bank,
the note to bear interest at the rate Or 12.80% with monthly payments
amortized over 15 years with a 10 year call. Lessor acknowledges that
the foregoing agreement to encumber the underlying fee interest in the
Demised Premises is part of the business of Lessor authorized under its
limited partnership agreement."
Except as amended and modified hereby the Lease Agreement
shall otherwise remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
affixed their seals as of the 13 day of July, 1984.
LESSOR:
WINCO LTD.,
a Georgia limited partnership
As to Lessor, /s/ Walter M. Boomershine Jr. (SEAL)
signed, sealed and --------------------------------
delivered in the WALTER M. BOOMERSHINE, JR.
presence of:
/s/
---------------------
Unofficial Witness /S/ Mrs Winifred F. Boomershine (SEAL)
--------------------------------
Notary Public Georgia MRS. WINIFRED F. BOOMERSHINE
State at Large Being the only general partners
My Commission Expires of Winco Ltd.
/s/
---------------------
Notary Public
-3-
<PAGE> 4
LESSEE:
------
BOOMERSHINE PONTIAC, INC.,
a Georgia corporation
As to Lessee,
signed, sealed and By: /s/ Charles V. Mancey
delivered in the -----------------------------------
presence of:
Title: SEC Treasurer
-----------------------------
Attest: /s/ David Pallard
-------------------------------
Title: OFFICE MGR.
/s/ Robert Andrew Williams ----------------------------
- --------------------------
Unofficial Witness
/s/
- ---------------------------
Notary Public
Notary Public, Georgia State at Large
My Commission Expires Apr 1, 1998
[CORPORATE SEAL]
-4-
<PAGE> 5
TWENTY-YEAR NET
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") made as of the 16th day of September,
1978 and executed this 4 day of October, 1978, by and between WINCO LTD., a
Georgia limited partnership having Walter M. Boomershine, Jr. and Mrs. Winifred
F. Boomershine as its only general partners (hereinafter called "Lessor"), and
BOOMERSHINE PONTIAC, INC., a corporation organized and existing under the laws
of the State of Georgia (hereinafter called "Lessee");
W I T N E S S E T H:
THAT for and in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties hereto,
Lessor and Lessee covenant and agree as follows:
ARTICLE 1
Premises
Section 1.1. Lessor hereby agrees to lease and does hereby lease and
demise unto Lessee the real property described in Exhibit "A" attached hereto
and by this reference made a part hereof, together with all improvements
thereon, less and except those items set forth on Exhibit "B" attached hereto
and by this reference made a part hereof, and together with all and singular the
tenements, hereditaments, appurtenances, and privileges "hereunto belonging or
in any way appertaining thereto, the aforesaid real property and improvements
being hereinafter called "Demised Premises";
<PAGE> 6
TO HAVE AND TO HOLD, subject to the terms and conditions hereinafter
set forth, for the Demised Term (as hereinafter defined) unless sooner
terminated as provided herein.
Section 1.2. No easements are retained by Lessor, all of the right,
title, interest and attachments of the Lessor in and to the Demised Premises
being leased hereby by Lessee. No personal property is included in this Lease.
ARTICLE 2
Term
Section 2.1. The demised term of this Lease shall be a period of twenty
(20) calendar years and fifteen (15) days (hereinafter called "Demised Term"),
and shall commence on September 16, 1978, and terminate at midnight on September
30, 1998, unless sooner terminated as herein provided.
Section 2.2. The Demised Term shall not be renewed or extended, by
operation of law or otherwise, without the prior written agreement of Lessor and
Lessee.
ARTICLE 3
Rent
Section 3.1. Lessee covenants and agrees to pay to Lessor during the
Demised Term the amounts indicated below for the designated portions of the
Demised Term as rent for the Demised Term which sums shall be due and payable in
the indicated monthly installments, each such installment to be due and payable
promptly in advance on the first day of each month commencing November 1, 1978
and continuing on the first day of
-2-
<PAGE> 7
each subsequent month throughout the remainder of the Demised Term, except that
Lessee shall pay Lessor the monthly rental installments for September, 1978,
October, 1978 and September, 1998 on or before the execution
thereof:
<TABLE>
Portion of Demised Annual Monthly Rental
Term Rent Installment
------------------ ------ --------------
<S> <C> <C>
September 16, 1978 through Not applicable $ 5750.00
September 30, 1978 ($11,500 monthly
rental installment
prorated as set
forth in Section 3.2)
October 1, 1978 through $138,000.00 $11,500.00
September 30, 1919
October 1, 1979 through $150,000.00 $12,500.00
September 30, 1983
October 1, 1983 through $165,000.00 $13,750.00
September 30, 1988
October 1, 1988 through $181,500.00 $15,125.00
September 30,1998
</TABLE>
Section 3 2. Lessee shall pay all rental and other sums, if any,
payable by Lessee to Lessor at the principal place of business of Lessor or at
such other place as Lessor shall request in writing delivered to Lessee. Rent
for a partial month during the Demised Term, if any, shall be prorated on a
daily basis.
ARTICLE 4
Repairs and Maintenance by Lessee
Section 4.1. Lessee accepts the Demised Premises in the present
condition as suitable for all purposes of this Lease, and Lessee, at its sole
cost, risk, expense and liability, covenants and agrees to keep and maintain in
good repair the Demised Premises and any improvements now or hereafter located
thereon, in present condition and in compliance with all
-3-
<PAGE> 8
applicable governmental directions, codes, ordinances and regulations. Lessee
covenants and agrees to return the Demised Premises to Lessor at the termination
of Demised Term in same condition as exists at the commencement of Demised Term,
reasonable wear and tear excepted, subject to the provisions of Article 15
hereof. Lessor shall not be obligated to make any repairs or replacements or
maintain the Demised Premises or the improvements thereon during the Demised
Term.
ARTICLE 5
Changes and Alterations by Lessee
Section 5.1. Lessee may, at any time, and from time to time, effect any
reasonable alterations, changes and modifications in or upon the Demised
Premises as Lessee may desire, including, without limitation, major structural
changes, the construction of additional buildings and expansion of existing
buildings or additional buildings, all at Lessee's sole cost, risk, expense and
liability. Lessor's approval shall not be required for any alterations or
changes made by Lessee; provided, however, in the event the changes or
alterations involve major structural changes or additional structures, Lessee
shall submit to Lessor, for approval in advance of the commencement of
construction, copies of the architect's plans and specifications therefor;
Lessor may disapprove such plans and specifications but only if the disapproval
is based upon structural considerations in accordance with sound architectural
or engineering practices, as opposed to considerations such as value, cost,
design, use or aesthetics; or upon substantial reduction in the area available
for vehicular parking on Demised Premises; provided, however, in
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the event of any assignment or sublease in accordance with Article 9 hereof,
Lessor shall have the unrestricted right of approval for any changes or
alterations involving major structural changes or additional structures, if any,
proposed by an assignee or a sublessee. Failure of Lessor to disapprove the
plans and specifications within twenty (20) business days of submission by
Lessee to Lessor shall be deemed to constitute approval thereof. Notice of
disapproval thereof by Lessor shall be accompanied by a statement specifying the
basis for disapproval, and Lessee shall not be authorized to commence
construction until the plans and specifications are modified to the reasonable
satisfaction of Lessor.
ARTICLE 6
Removal of Trade Fixtures, Appliances,
Other Equipment and Improvements
Section 6.1. All trade fixtures, inventory, appliances and other
equipment and personal property existing, placed or installed in or on Demised
Premises prior to or during the Demised Term by Lessee, including, without
limitation, those items enumerated on Exhibit "B" attached hereto, shall remain
the property of Lessee, and may be removed by Lessee at any time during the
Demised Term, or within thirty (30) calendar days subsequent to the expiration
of Demised Term.
ARTICLE 7
Inspection of Demised Premises by Lessor
Section 7.1. Lessor or Lessor's representative shall have the right at
all reasonable times during the Demised Term, upon
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reasonable notice to Lessee, to enter upon any part of the Demised Premises for
the purpose of determining whether the conditions and covenants contained in
this Lease are being kept and performed. The entry shall be conducted during
reasonable business hours and Lessor or Lessor's representative shall conduct
the entry with Lessee or Lessee's representative.
ARTICLE 8
Utilities
Section 8.1. Lessee shall pay costs of all utilities furnished to the
Demised Premises including; but not limited to, water, gas and electricity,
during the Demised Term.
ARTICLE 9
Assignment and Sublease by Lessee
Section 9.1. Lessee may, without the requirement of any notice to or
approval by Lessor or any mortgagee of Lessor, sublet, assign or encumber this
Lease in whole or in part to any person or persons, natural or corporate
whomsoever. In such event, Lessee shall remain primarily liable for the keeping
and performance of all of its covenants hereunder including, but not limited to,
the prompt and due payment of rent and additional rent. In the event of any
assignment or sublease, Lessor agrees to deliver to the assignee or sublessee a
nondisturbance agreement acknowledging Lessee's continuing primary liability and
the assignee or sublessee's rights and agreeing that this Lease shall remain in
full force and effect as long as all of Lessee's covenants and obligations
hereunder are performed. In the event of any assignment or sublease,
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Lessor, as to any changes and alterations permitted under Article 5 and
undertaken by any assignee or sublessee, shall have the right to require the
assignee or sublessee at its expense to obtain in its favor and in favor of
Lessor payment and performance bonds in a form and an amount reasonably
satisfactory to Lessor and issued by a surety company qualified to do business
in Georgia and reasonably acceptable to Lessor,
ARTICLE 10
Additional Dent
Section 10.1. In addition to all rent as herein provided, Lessee shall
pay on or before the dates the same shall become due and payable, and as
additional rent, all taxes, charges, costs and expenses, or substitutions in
lieu thereof, which Lessee assumes or agrees to pay under this Lease, together
with all interest and penalties that may accrue thereon, land all other damages,
costs and expenses which Lessor may suffer or incur by reason of Lessee's
failure to promptly make agreed payments and any and all other sums which may
become due by reason of any default of Lessee or failure on Lessee's part to
comply with the agreements, terms, covenants and conditions of this Lease on
Lessee's part to be performed. In the event of nonpayment, Lessor shall have the
rights and remedies herein provided for in the case of nonpayment of rent or a
breach of condition.
Section 10.2. The occurrence of any one or more of the following events
shall constitute an event of default:
(a) If Lessee shall totally desert or completely abandon the
Demised Premises and such desertion or abandonment
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shall continue for a period of fifteen calendar (15) days after written notice
by Lessor; or
(b) If Lessee shall default in making payment to Lessor of any
monthly rent, additional rent, or of any money advanced by Lessor and
collectible as additional rent, as and when the same shall become due and
payable and such default in payment shall continue for a period of twenty
calendar (20) days after written notice by Lessor; or
(c) If Lessee shall fail to pay, bond or otherwise discharge
any tax, assessment, water rent, rate or charge, sewer rent or other
governmental imposition, or any other charge or lien against the Demised
Premises which Lessee is required to pay, at least ten calendar (10) days prior
to the expiration of any grace period allowed by law or by the governmental
authority imposing the same and such default shall continue for a period of ten
(10) calendar days after written notice by Lessor or before the issuance of
execution on final judgment following contest by Lessee as provided in Section
11.3; or
(d) If Lessee shall default in complying with any other
agreement, term, covenant or condition of this Lease and such default in
compliance shall continue for a period of thirty (30) calendar days after
written notice by Lessor specifying the claimed default, and Lessee shall not,
in good faith, have commenced, within the thirty day period, to remedy the
default and diligently and continuously proceed therewith; or
(e) If Lessee shall file a petition in bankruptcy or for
reorganization or for an arrangement pursuant to any present or future federal
bankruptcy act or under any similar federal or state law, or shall be
adjudicated a bankrupt or
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become insolvent or shall make an assignment for the benefit of its creditors or
shall admit in writing its inability to pay its debts generally as they become
due; or
(f) If a petition or answer proposing the adjudication of
Lessee as a bankrupt or its reorganization under any present or future federal
bankruptcy act or any similar federal or state law shall be filed in any court
and such petition or answer shall not have been discharged or denied within one
hundred twenty (120) calendar days after the filing thereof; or
(g) If a receiver, trustee, or liquidator of Lessee of all or
substantially all of the assets of Lessee or of Lessee's estate or interest in
the Demised Premises shall be appointed in any proceeding brought against Lessee
and shall not have been discharged within one hundred twenty (120) calendar days
after such appointment or if at any time prior to the discharge of this Lease,
Lessee shall consent to or acquiesce in such appointment: or
(h) If the estate or interest of Lessee in the Demised
Premises or a part thereof shall be levied upon or attached in any proceeding
and such process shall not have been vacated or discharged or security therefor
posted within sixty (60) calendar days after written notice of such levy or
attachment, unless Lessee shall be contesting such levy or attachment in good
faith and such contesting by Lessee operates to suspend the enforcement of such
levy or attachment against the estate or interest of Lessee in the Demised
Premises.
Section 10.3. If Lessee defaults in the performance of any covenants or
obligations of the Lease to be performed by Lessee, Lessor may, after expiration
of the applicable notice
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period set forth in Article 10, or, if in Lessor's reasonable opinion an
emergency exists which could adversely affect Lessor's interest in the Demised
Premises, perform the same without notice for the account and at the expense of
Lessee. If Lessor incurs any expense, including reasonable attorney's fees, in
instituting, prosecuting or defending any action or proceeding by reason of any
default by Lessee, Lessee shall reimburse Lessor the amount of such expense.
Should Lessee, pursuant to this Lease, become obligated to reimburse or
otherwise pay Lessor one or more sums of money in addition to the rent and
additional rent, the amount thereof shall be deemed additional rent and may, at
the option of the Lessor, be added to any subsequent installment of rent due and
payable, in which event Lessor shall have the same remedies for default provided
for non-payment of rent. The provisions of this Section 10.3 shall survive
expiration of the Demised Term.
Section 10.4. Upon the occurrence of any events of default as set forth
in Article 10 and the expiration of the applicable grace or notice periods, and
in the absence of cure or institution of cure of the alleged default as provided
herein, then Lessor may serve a written five (5) calendar day notice of
cancellation and termination of this Lease, and if upon the expiration of said
five (5) days such default has not been remedied, this Lease and the Demised
Term shall end and expire as fully and completely as if the date of expiration
of such five (5) day period were the day herein fixed for the end and expiration
of the Demised Term. The Lessee shall then quit and surrender the Demised
Premises to Lessor as soon as practicable and Lessor may enter into or repossess
the Demised Premises either by force, summary proceedings or otherwise.
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Section 10.5. In the event this Lease is terminated pursuant to Section
10.4 hereof, all of the right, title and estate and interest of the Lessee in
and to the Demised Premises, any improvements thereon made by Lessee, less and
except those items set forth in Exhibit "B" attached hereto which shall belong
to Lessee, and in and to all rents, issues and profits thereof, whether then
accrued or to accrue, and in and to all insurance policies, shall automatically
pass to, vest in and belong to the Lessor, without further action on the part of
either party and without cost or charge to Lessor, free of any claim thereto by
Lessee.
Section 10.6. No receipt of money by Lessor from Lessee after the
termination hereof shall reinstate, continue or extend the term, or affect any
notice theretofore given by Lessor, or operate as a waiver of the right of
Lessor to enforce the payment of any rent and additional rent then due or
thereafter falling due, or operate as a waiver of the right of Lessor to recover
possession of the Demised Premises by proper suit, action, proceeding or other
remedy. After the service of notice of termination by Lessor as herein provided
and the expiration of the time therein specified, or after a final order or
judgment for possession of the Demised Premises, Lessor may demand, receive and
collect any money due, or thereafter falling due, without in any manner
affecting such notice, suit, action, proceeding, order or Judgment, and any and
all such money so collected shall be deemed to be payment on account of the use
and occupation of the Demised Premises or, at the election of Lessor, on account
of Lessee's liability hereunder.
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Section 10.7. In case of any such termination, re-entry or
dispossession by summary proceedings or otherwise, the annual rent and
additional rent and all other charges required to be paid by Lessee hereunder
shall thereupon become due and payable up to the time of such termination,
re-entry or dispossession, and Lessee shall also pay to Lessor all expenses,
brokerage commissions and all other costs reasonably paid or incurred by Lessor
for restoring the Demised Premises to good order and condition.
Section 10.8. Lessor shall use its best efforts to relet the Demised
Premises, in whole or in part, for a term or terms which, at Lessor's option may
be the remainder of the then current term of this Lease, or for any longer or
shorter period. Unless the statute or rule of law which governs the proceeding
in which damages are to be proved limits the amount of damages capable of being
so proved and allowed, in which case Lessor shall be entitled to an amount equal
to, the maximum allowed by any such statute or rule of law, Lessor shall be
entitled to recovery of and from Lessee, damages, payable in monthly
installments, in advance on the first day of each calendar month following such
termination or re-entry, and continuing until the date originally fixed herein
for the expiration of the then current term of this Lease, in an amount equal to
the excess, if any, of the sum of the aggregate expenses paid by Lessor during
the month immediately preceding such calendar month for all such items as, by
the terms of this Lease, are required to be paid by Lessee, plus an amount equal
to the amount of the installment of annual rent which would have been payable by
Lessee hereunder in respect of such calendar month, had this Lease and the
Demised Term not been so
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ARTICLE 11
Taxes and Other Charges
Section 11.1 Lessee shall, without notice or demand, as additional
rent, pay and discharge, on or before the last day on which the same may be paid
without penalty, all taxes, assessments, assessments levied by reason of
restrictive covenants affecting the Demised Premises, rates and charges,
sanitary assessments, and other governmental impositions and charges of every
kind and nature whatsoever, extraordinary as well as ordinary, and each and
every installment thereof together with all interest and penalties thereon,
which shall or may during the Demised Term be levied, assessed or imposed on or
become a lien upon or become due or payable out of or for or by reason of the
use or occupancy of the Demised Premises or any part thereof, the Lessee's or
the Lessor's interest in the Demised Premises and the improvements located
thereon, or any buildings, appurtenances, or equipment now or hereafter erected
or placed thereon or therein or any part thereof, or the sidewalks or streets in
front of or adjoining the Demised Premises. All taxes levied, assessed or
imposed in lieu of or in addition to the foregoing shall be paid by Lessee
together with all interest and penalties thereon, under or by virtue of all
present or future laws, ordinances, requirements, orders, directions, rules or
regulations of the federal, state, county and city or local governments and of
all other governmental authorities whatsoever. Lessee shall pay all taxes and
assessments which shall prior to or during the Demised Term or any renewal term
be levied, assessed or imposed on or become a lien upon the personal property of
Lessee located upon the Demised Premises. Lessee shall be deemed to have
complied with
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for such purpose, Lessee agrees promptly to furnish Lessor with copies of all
correspondence, notices, pleadings and other writings in connection therewith.
Section 11.4. It is expressly agreed, however, that the Lessee shall
not be required to pay, discharge or remove any tax, assessment, tax lien or
other imposition or charge upon or against the Demised Premises, or any part
thereof, or the improvements at any time situated thereon, so long as the Lessee
shall in good faith contest the amount or the validity thereof by appropriate
legal proceedings which shall operate to prevent the collection of the tax,
assessment, tax lien, forfeiture or imposition so contested, or the sale of
Demised Premises or any part thereof, to satisfy the same, and that pending any
such legal proceedings Lessor shall not have the right to pay, remove or
discharge the tax, assessment, tax lien, forfeiture, or imposition thereby
contested.
Section 11.5. Nothing herein contained shall be construed to require
Lessee to pay any inheritance, estate, succession, transfer, gift, franchise,
income, profit or excess profit, capital stock, capital levy, corporate or
unincorporated business tax or other similar tax, that is or may be imposed upon
Lessor, its successors or assigns, or upon the rent payable by lessee.
ARTICLE 12
Insurance
Section 12. Throughout the Demised Term Lessee, at its own cost and
expense, and as additional rent, shall, through an insurance company or
insurance companies qualified to transact
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business tax or other similar tax, that is or may be imposed upon Lessor, its
successors or assigns, or upon the rent payable by Lessee.
ARTICLE 12
Insurance
Section 12.1. Throughout the Demised Term Lessee, at its own cost and
expense, and as additional rent, shall, through an insurance company or
insurance companies qualified to transact business and authorized to write
insurance on risks in the State of Georgia:
(a) Keep the improvements on the Demised Premises insured (in
an amount representing at all times the full insurable value of the
improvements, but in no event shall the amount of insurance at any time be less
than 80% of the fair market value of the improvements existing from time to
time) in the name of Lessor and in the name or names of any and all of Lessor's
mortgagees against loss or damage by fire with extended coverage; and
(b) Keep in force a comprehensive general liability insurance
policy, such, liability policy to be in the amount of not less than $500,000.00
with respect to injury or death of any one person, $1,000,000.00 with respect to
any one accident and $100,000.00 with respect to damage of property.
Section 12.2. All insurance provided by Lessee as required by this
Article 12 shall be carried in favor of Lessor, permitted mortgagees and Lessee
as their respective interests may appear. All policies shall provide that loss,
if any, payable thereunder shall be payable to Lessor and Lessee as their
respective interests may appear.
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Section 12.3. Lessee agrees to deliver to Lessor on date of
commencement of Demised Term true and exact copies of the policies or
certificates of insurance required hereunder to be in the name of Lessor and
certificates of other policies required hereunder. At least twenty (20) business
days prior to the expiration of each such policy, Lessee shall deliver to Lessor
evidence that the policy has been renewed or replaced, and as soon as
practicable thereafter, the new original policy or certificate for renewal or
replacement insurance.
Section 12.4. Lessee shall not violate or knowingly permit to be
violated any of the conditions or provisions of any such policy.
Section 12.5. Lessee and Lessor shall cooperate in connection with the
collection of any insurance monies that may be due in the event of loss, and
Lessee and Lessor shall execute and deliver such proofs of loss and other
instruments which may be required for the purpose of obtaining the recovery of
any such insurance monies. Lessee shall pay all fees and expenses reasonably
incurred in the collection and recovery of any such insurance monies.
Section 12.6. Each such policy (including renewal insurance) or
certificates therefor issued by the insurer shall contain an agreement by the
insurer that such policy shall not be cancelled without at least thirty calendar
(30) days prior written notice to Lessor, and in no event shall such policies be
cancelled by Lessee without Lessor's prior written consent; provided, however,
that nothing herein contained shall prevent Lessee from changing insurance
carriers.
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Section 12.7. Any insurance provided for in this Article 12 may be
effected by a policy or policies of blanket insurance; provided, however, that
the amount of the total insurance allocated to the Demised Premises shall be
such as to furnish in protection the equivalent of separate policies in the
amounts herein required, and provided further that in all other respects, any
such policy or policies shall comply with the other provisions of this Lease. In
any such case it shall not be necessary to deliver the original of any such
blanket policy to Lessor, but Lessor shall be furnished with a certificate or
duplicate of such policy acceptable to Lessor, certified by the applicable
insurance company.
ARTICLE 13
Lessor Not Liable for Injury or Damage
Section 13.1. During the entire Demised Term hereof Lessee shall be
deemed to be in exclusive control and possession of the Demised Premises and
those items set forth in Exhibit "B" attached hereto, and Lessor shall not in
any event whatsoever be liable for any injury or damage to any property or to
any person happening on or about the Demised Premises and in connection with
those items set forth in Exhibit "B" attached hereto, nor for any injury or
damage to the Demised Premises or those items set forth on Exhibit "B" attached
hereto, nor to any property of Lessee, or of any other person except for injury
or damage caused by the negligence of Lessor or by Lessor's breach of this
Lease. The provisions hereof in Article 7 permitting Lessor to enter and inspect
the Demised Premises are made solely for the purpose of enabling Lessor to
become informed as to whether or not Lessee is complying with the agreements,
terms, covenants and conditions hereof.
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Section 13.2. Lessor shall not be liable for any injury or damage to
any person or property in or about the Demised Premises, whether belonging to
Lessee or any other person, caused by any fire, breakage, leakage, defect
(latent or otherwise) or bad condition in any part or portion of the Demised
Premises, or from water, rain or snow that may leak into, issue or flow from
any part of the Demised Premises from the drains, pipes, or plumbing work of
the same, or from any place or quarter, unless such breakage, leakage, defect
or bad condition, injury or damage, may be caused by or result from the
negligence of Lessor or from a breach of this Lease by Lessor.
Section 13.3. In addition to any other indemnities to Lessor
specifically provided for in this Lease, Lessee agrees to protect, defend,
indemnify and save harmless Lessor against and from any and all claims by or on
behalf of any person arising from the operation, conduct or management of, or
from any work or thing whatsoever done in or on the Demised Premises and will
further protect, defend, indemnify and save Lessor harmless against and from
any and all claims arising during the Demised Term from any breach or default
on the part of Lessee in the performance of any covenant or agreement on the
part of the Lessee to be performed, pursuant to the terms of this Lease, and
from and against all costs, expenses and liabilities incurred in or about any
such claim or action or proceedings brought thereon; and in case any action or
proceeding may be brought against Lessor by reason of any such claims, Lessee
upon notice from Lessor covenants to resist or defend such action or proceeding
by and through counsel reasonably satisfactory to Lessor. To the extent that
insurance procured
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by Lessee in accordance with the provisions of this/Lease shall protect,
indemnify and save harmless Lessor, the provisions of this Section 13.3 shall
impose no additional obligation upon Lessee.
ARTICLE 14
Mortgages
Section 14.1. Lessee may, without the requirement of any notice to or
approval by Lessor or any mortgagee of Lessor, encumber the leasehold created
hereby by mortgage; provided that no leasehold mortgaging by Lessee shall
affect the primary liability of Lessee for the keeping and performance of all
of its covenants hereunder including, but not limited to, the prompt and due
payment of rent and additional rent. In the event of such leasehold mortgaging
by Lessee, Lessor agrees, after receipt of a written request from a leasehold
mortgagee, to send copies of all notices to Lessee required or permitted
hereunder to the leasehold mortgagee, and further to permit the leasehold
mortgagee to take any curative action on the part of Lessee to be paid or
performed hereunder and to accept such curative action, provided the same is
accomplished within the applicable time periods required by this Lease.
Section 14.2. Lessor may encumber by mortgage its underlying fee
simple interest in the Demised Premises, subject to the rights of Lessee
hereunder which are and shall remain prior to and senior to any such mortgage
to the extent that a foreclosure of any such mortgage shall not operate to
extinguish this Lease or the rights of Lessee under this Lease; and any such
mortgage shall expressly obligate the mortgagee
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have under this Lease and otherwise, to apply as an offset against the next due
installment or installments' of rent which would otherwise be due and payable
to Lessor, all monies paid in connection therewith plus the reasonable cost of
any other action taken with respect thereto, plus interest thereon at the rate
of nine (9%) per cent per annum and including date or dates of expenditure or
action taken through and including the date or dates of full reimbursement
thereof by Lessor or full reimbursement by means of rental offset.
Section 14.4. Lessor shall not be obligated to subordinate to, or Join
in, or otherwise encumber or affect its underlying fee simple interest in
Demised Premises, with respect to any mortgage or mortgages placed by Lessee on
the leasehold created hereby.
ARTICLE 15
Destruction or Damage
Section 15.1. If during the Demised Term, a substantial portion or all
of the Demised Premises or improvements thereon shall be destroyed or damaged
by fire or by any other cause of whatsoever nature, Lessee shall restore,
rebuild or repair the items destroyed in the event the destruction or damage
occurs on or before September 30, 1996. In the event such destruction or damage
occurs subsequent to September 30, 1996, then in such event Lessee may at
Lessee's option elect not to so restore, rebuild or repair; provided, however,
should Lessee elect not to restore or rebuild or repair as aforesaid, then in
such event Lessee shall at its sole cost and expense raze and remove all such
destroyed or damaged improvements from the Demised
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Premises, not including any foundations thereof, and remove all rubble,
materials and debris therefrom. "Substantial portion" for purposes of this
Lease shall mean so much of Demised Premises as to render them unusable by
Lessee in a commercially reasonable manner.
Section 15.2. Lessee covenants and agrees to effect the necessary
repair, rebuilding or restoration promptly within a reasonable time, all items
or improvements affected to be of no less similar size and value, and of no
less similar design and quality of workmanship as existed immediately prior to
the destruction or damage.
Section 15.3. If during any portion of the Demised Term less than a
substantial portion of the Demised Premises shall be destroyed or damaged by
fire or by any other cause of whatsoever nature, Lessee shall restore, rebuild
or repair the items destroyed, promptly within a reasonable time in accordance
with the standards set forth in Section 15.2.
Section 15.4. Lessee agrees to apply any insurance proceeds received
by Lessee by reason of insurance carried pursuant to Article 12 for the purpose
of restoration, rebuilding or repair required by this Article 15. In the event
of restoration, rebuilding or repair by Lessee pursuant to this Article 15,
Lessor agrees that any insurance proceeds received by Lessor by reason of
insurance carried pursuant to Article 12 shall be held in escrow with a third
party agreeable to Lessor and Lessee for the benefit of Lessee to be applied
toward the restoration, rebuilding or repair. In the event the restoration,
rebuilding or repair work requires more than one month to complete, the escrow
agent shall pay to Lessee, upon
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request of Lessee, no less than once per month, a portion of the insurance
monies in an amount of no less than the costs incurred by Lessee during the
previous month, such costs to be certified by Lessee's architect. The entire
balance of the insurance monies so held shall be paid to Lessee at the time of
completion of the work.
Section 15.5. in the event of destruction or damage which is not
restored, rebuilt or repaired by reason of Lessee's election not to do so,
other than by reason of the retention of insurance proceeds by Lessor's
mortgagee as set forth in Section 15.8, any insurance proceeds received by
Lessor by reason of insurance in favor of Lessor pursuant to Article 12 shall
remain the property of Lessor free of any claim or claims by Lessee thereto.
Excess insurance proceeds received for the restoration, rebuilding or repair of
less than a substantial portion of Demised Premises, if any, shall be the
property of Lessee.
Section 15.6. During such time or times, if any, that Demised Premises
are rendered unusable by Lessee as a site for an automobile dealership
(including, without limitation, an automobile showroom and a servicing
department) as determined solely by Lessee in accordance with the normal
standards for the operation of such a business, by reason of such damage or
destruction, the rent provided in Article 3 shall abate until the same have
been rendered so unusable by Lessee. During such time or times, if any, that
Demised Premises have been damaged or destroyed in part so as not to interfere
with Lessee's use of Demised Premises as aforesaid, the rent provided in
Article 3 shall be reduced by an amount reasonably agreed upon by Lessor and
Lessee until the time of restoration or repair of the partial destruction or
damage.
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Section 15.7. In the event Lessee elects not to restore, rebuild or
repair in accordance with Lessee's option contained in Section 15.1, then in
such event this Lease shall terminate as of the date of Lessee's notice to
Lessor of the aforesaid election.
Section 15.8. Lessee's obligations to repair, rebuild or restore, and
Lessor's obligations to make insurance proceeds available therefor, under the
provisions of this Article 15, are expressly made subject to the agreement by
Lessor's mortgagee to make all applicable insurance proceeds available for the
repair, rebuilding or restoration work. In the event Lessor's mortgagee fails
to make all applicable insurance proceeds so available, then in such event
Lessee, at Lessee's option, may declare this Lease terminated and of no further
force or effect. Under absolutely no circumstances shall Lessee be required
hereunder, without Lessee's consent, to effect any repair, rebuilding or
restoration work absent the application of all available insurance proceeds to
the work without restriction or interference by Lessor or Lessor's mortgagee.
If the insurance proceeds exceed the balance of the aforesaid indebtedness from
Lessor to Lessor's mortgagee, and in the events (a) Lessor's mortgagee, under
the terms of its mortgage, elects to apply a portion of the insurance proceeds
to the payment of the indebtedness, and (b) Lessee elects not to repair,
restore, or rebuild in accordance with this Section 15.8, resulting in the
termination of this Lease, then in such two events the aforesaid excess
insurance proceeds shall be the property of Lessee and shall be paid to Lessee.
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ARTICLE 16
Eminent Domain
Section 16.1. In the event the Demised Premises shall be taken by or
pursuant to any governmental authority or through the exercise of the right of
eminent domain, Lessor and Lessee shall Join and cooperate in resisting such
proceeding if such resistance is feasible and desirable to Lessor and Lessee,
and if it is not, shall join and cooperate in prosecuting their respective
claims for damages incurred from the successful exercise of such right or
proceeding. Lessee reserves unto itself all damages awarded which are based
upon its leasehold interest and ownership of trade fixtures, signs, inventory,
equipment, and interruption of business. Lessor reserves unto itself all
damages awarded which are based upon its underlying fee simple title in the
Demised Premises and Lessor's interest in this Lease. In the event that under
applicable law a single condemnation award is made for the taking of the
Demised Premises, the award shall belong to the Lessor except that Lessee shall
receive from the award the total of (1) a sum attributable to Lessee's
improvements or alterations made to Demised Premises by Lessee in accordance
with this Lease, which improvements or alterations Lessee has the right to
remove from Demised Premises pursuant to this Lease but elects not to remove;
(2) a sum attributable to any excess of the market value of Demised Premises
(exclusive of Lessee's improvements or alterations for which Lessee is
compensated under this section) for the remainder of the Demised Term, over the
present value on date of taking of the monthly rent payable under Section 3.1
for the remainder of the Demised Term; and (3) a sum attributable to that
portion of the award
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<PAGE> 29
constituting severance damages for the restoration of Demised Premises.
Section 16.2. If the whole of the Demised Premises shall be taken or
condemned by any competent authority for any public use or purpose, or so much
thereof so that Lessee is prevented from using the Demised Premises as set
forth in Section 15.6, during the Demised Term, all obligations of the Lessee
under this Lease shall cease upon the date of the taking and any unearned rent
paid by Lessee shall be refunded by Lessor to Lessee.
Section 16.3. In the event a portion of the Demised Premises shall be
taken or condemned by any competent authority for any public use or purpose
during the Demised Term which taking or condemnation shall not interfere with
Lessee's use of the Demised Premises as set forth in Section 15.6, then, in
such event, the rent provided in Article 3 shall be reduced by an amount
reasonably agreed upon by Lessor and Lessee by reason of such partial taking or
condemnation.
ARTICLE 17
Lessee's Certificate
Section 17.1. Lessee shall, without charge, at any time and from time
to time, within fifteen (15) calendar days after request by Lessor, deliver a
written instrument to Lessor or any other person, firm or corporation specified
by Lessor duly executed and acknowledged, certifying:
(a) that this Lease is unmodified and in full force and effect, or if
there has been any modification, that the same is in full force and effect and
stating any such modification;
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<PAGE> 30
(b) whether the Lessor is in default under the Lease, and if so,
specifying the nature of the default;
(c) whether there are then existing any setoffs or defenses against
the enforcement of any of the agreements, terms, covenants or conditions of
this Lease and any modifications thereof upon the part of Lessee to be
performed or complied with, and, if so, specifying the same; and
(d) the dates to which the rent, additional rent and other charges
hereunder have been paid.
Such certificate shall, and Lessee so acknowledges, be deemed to remain current
(but not more than 30 days after its date) and unchanged unless the party to
which it is addressed receives telephonic or telegraphic notice to the contrary
at a telephone number or address specified to Lessee by the party to which the
certificate is addressed.
ARTICLE 18
Lessor's Certificate
Section 18.1. Lessor shall, without charge, at any time and from time
to time, within fifteen (15) calendar days after request by Lessee, deliver a
written instrument to Lessee or any other person, firm or corporation specified
by Lessee, duly executed and acknowledged, certifying whether Lessee has or has
not, as the case may be, faithfully and fully made all payments then and
theretofore due to Lessor and whether Lessor knows or does not know, as the
case may be, of any default by Lessee in the performance by Lessee of all
agreements, terms, covenants and conditions on Lessee's part to be performed,
and if Lessor does know of any default, specifying the same, and further
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<PAGE> 31
certifying whether Lessor has made any assignment of Lessor's interest in this
Lease.
Such certificate shall, and Lessor so acknowledges, be deemed to remain current
(but not more than 30 days after its date) and unchanged unless the party to
which it is addressed receives telephonic or telegraphic notice to the contrary
at a telephone number or address specified to Lessor by the party to which the
certificate is addressed.
ARTICLE 19
No Waiver
Section 19.1. The failure of Lessor or Lessee to insist upon strict
performance of any of the agreements, terms, covenants and conditions hereof
shall not be deemed a waiver of any rights or remedies that said party may have
against the other and shall not be deemed a waiver of any subsequent breach or
default in any of such agreements, terms, covenants and conditions. A receipt
by Lessor of rent or any other payment or the acceptance by Lessor of
performance by Lessee with knowledge of the breach of a term, covenant,
condition, provision, or agreement of this Lease shall not be deemed a waiver
of such breach. No waiver by either Lessor or Lessee of a term, covenant,
condition, provision, or agreement under this Lease shall be deemed to have
been made unless expressed in writing and signed by the waiving party.
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<PAGE> 32
ARTICLE 20
Notices
Section 20.1. Whenever it is provided herein that notice, demand,
request or other communication shall or may be given to, or served upon, either
of the parties by the other, and whenever either of the parties shall desire to
give or serve upon the other any notice, demand, request or other communication
with respect hereto or the Demised Premises, each such notice, demand, request
or other communication shall be in writing and, any law or statute to the
contrary notwithstanding, shall not be effective for any purpose unless the
same shall be given or served as follows:
(a) If given or served by Lessor, by personal delivery or by mailing
the same in the United States Postal System to Lessee by registered or
certified mail, return receipt requested, postage prepaid, addressed to Lessee,
at 390 Spring Street, N.W., Atlanta, Georgia 30308, or at such other
address or addresses as Lessee may from time to time designate by like notice
given to Lessor;
(b) if given or served by Lessee, by personal delivery or by mailing
the same in the United States Postal System to Lessor by registered or
certified mail, return receipt requested, postage prepaid, addressed at 2150
Cobb Parkway South, Smyrna Georgia 30080, or at such other address or addresses
as Lessor may from time to time designate by like notice given to Lessee.
Every notice, demand, request or other communication hereunder shall
be deemed to have been given or served four (4) calendar days subsequent to the
day the same shall have been
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<PAGE> 33
deposited in the United States Postal System as aforesaid, or upon the day of
receipt of the same by the addressee; whichever shall be the earlier.
Article 21
End of Term
Section 21.1. Except as herein otherwise provided, Lessee shall on the
last day of the Demised Term, or upon the sooner termination of the Demised
Term, peaceably and quietly surrender and deliver up to Lessor the Demised
Premises, together with such improvements as may then be on the Demised
Premises, the improvements to be clean and otherwise in the same condition as
exists at the commencement of Demised Term or as exists upon the date of
completion of construction thereof, as applicable (except for replacement of
destruction or damage, then from time of completion of replacement pursuant to
Article 15) except only for reasonable wear and tear. Nothing in this Article,
however, shall prohibit Lessee from exercising the right or obligation of
removal of the items provided for in Article 6 hereof. Lessee covenants and
agrees to repair any damage occasioned by Lessee's removal of items pursuant to
this Lease.
Section 21.2. Upon such termination all rent under this Lease, all
taxes, tax deposits, water rents, rates and charges, sewer rents and other
governmental impositions and charges, premiums on all insurance policies then
in force and any other items payable as additional rent under this Lease shall
be apportioned as of such termination.
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<PAGE> 34
ARTICLE 22
Quiet Enjoyment; Additional Rights of Lessee
Section 22.1. If and so long as Lessee shall pay the rent and
additional rent reserved by this Lease and shall perform and observe all of the
agreements, terms, covenants and conditions of this Lease on the part of the
Lessee to be performed and observed hereunder, Lessee shall peaceably and
quietly have, hold and enjoy the Demised Premises for the term hereby granted
as against Lessor and persons claiming by, through or under the Lessor.
Section 22.2. Lessor represents that it is the owner of the underlying
fee simple title to the Demised Premises; that it has the right to enter into
this Lease; and that title to the Demised Premises is free and clear of all
liens and encumbrances except for those matters set forth in Exhibit "C"
attached hereto and by this reference made a part hereof.
ARTICLE 23
Net, Net, Net Lease
Section 23.1. This Lease Agreement shall be deemed and construed to be
a "net, net, net lease" and, except as otherwise expressly provided, Lessor
shall receive all rent and additional rent and all other payments hereunder to
be made by Lessee free from any charges, assessments, impositions, expenses or
deductions of any and every kind or nature.
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<PAGE> 35
ARTICLE 24
Entire Agreement
Section 24.1. This Lease contains the entire agreement between the
parties and shall not be modified in any manner except by an instrument in
writing executed by the parties.
ARTICLE 25
Successors and Assign
Section 25.1. The agreements, terms, covenants and conditions herein
shall bind and inure to the benefit of Lessor and Lessee and their respective
heirs, successors, sublessees and assigns, except as otherwise provided herein.
ARTICLE 26
Use of Demised Premises
Section 26.1. Lessee shall not make or suffer any illegal or offensive
use of the Demised Premises or any part thereof and shall not cause or
maintain, or suffer to be caused or maintained, any nuisance in, at, or on the
Demised Premises or any part thereof. The Lessee will obey and, at its own
expense, comply with all lawful requirements, rules, regulations, codes,
directives, and ordinances of all legally constituted authorities existing at
any time during the continuance of this Lease and in any way affecting the
Demised Premises, the use and operation of the Demised Premises, or demolition,
excavation, or construction being done on the Demised Premises. Lessee shall
also, at its sole cost and expense, procure or cause to be procured any and all
permits,
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<PAGE> 36
licenses or other authorizations required for the lawful and proper use,
occupation, and management of the Demised Premises.
ARTICLE 27
Recording of Lease
Section 27.1. Lessor and Lessee agree to execute, upon the request of
either party, with the requisite formalities under Georgia law for the purpose
of recording in the appropriate public records of Cobb County, Georgia, this
Lease for the purpose of giving notice of the existence of this Lease and the
rights of the parties hereto. The party requesting such recordation shall bear
all costs in connection therewith.
ARTICLE 28
Miscellaneous
Section 28.1 Lessor and Lessee acknowledge and agree that no realtor,
broker or agent of any kind is a party to this Lease for any purpose including
fee or commission rights as to any rent or additional rent to be paid
hereunder. Lessor and Lessee each covenant and agree to indemnify and hold
harmless the other party hereto from the payment of all commissions, claims and
related expenses in connection with any realtor, broker or agent engaged by the
indemnifying party, or through which indemnifying party any such claim may be
made or asserted, in connection with the negotiating and procuring of this
Lease.
Section 28.2. No relationship as creditor and debtor between the
parties is created or intended to be created by
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<PAGE> 37
this Lease, the relationship between Lessor and Lessee to be solely that of
lessor and lessee. No security agreements or financing statements under the
Uniform Commercial Code or similar statute naming Lessee as a debtor or
otherwise implying that a debtor-creditor relationship exists between Lessee
and Lessor is authorized hereby or permitted hereunder, it being understood,
however, that the parties do not intend the foregoing to prevent Lessor or
Lessee from granting security interests in their respective interests in the
Demised Premises to third parties.
Section 28.3. In the event this Lease is modified at the request of
and for the benefit of Lessee, all costs, expenses and charges incident to such
modification, including without limitation reasonable counsel fees incurred by
Lessor with respect thereto, shall be paid by Lessee. In the event this Lease
is modified at the request of and for the benefit of Lessor, all costs,
expenses and charges incident to such modification, including without
limitation reasonable counsel fees incurred by Lessee with respect thereto,
shall be paid by Lessor.
Section 28.4. The specified remedies to which Lessor may resort under
the terms of this Lease are cumulative and are not intended to be exclusive of
any other remedies or means of redress to which Lessor may be lawfully entitled
in case of any breach or threatened breach by Lessee of any of the terms and
provisions of this Lease. In addition to the other remedies to which Lessor may
be entitled, Lessor shall be entitled to the restraint by injunction of the
violation or attempted violation of any of the terms, covenants, conditions,
provisions or agreements of this Lease.
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<PAGE> 38
Section 28.5. This Lease can not be changed, modified, or discharged
orally but only in writing signed by the party against whom enforcement of the
change, modification or discharge is sought.
Section 28.6. Time is of the essence of this Lease.
Section 28.7. The captions and headings throughout this Lease are for
convenience and reference only, and the words contained therein shall in no way
be held or deemed to define, limit, describe, explain, modify, amplify, or add
to the interpretation, construction or meaning of any provision of or the scope
or intent of this Lease.
Section 28.8. This Lease shall be enforced and construed under the
laws of the State of Georgia.
ARTICLE 29
Severability Provision
Section 29.1. Should any term, condition or provision hereof be deemed
or declared invalid or unenforceable by reason of any law or decision or
governmental regulation of any kind or nature whatsoever, by court decree or
otherwise, such invalidity or unenforceability shall not affect or impair the
validity and enforceability of the remaining terms, conditions and provisions
hereof.
ARTICLE 30
Investment Tax Credit
Section 30.1. Lessor and Lessee agree that all depreciable property
investment tax credit with respect to the
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<PAGE> 39
Demised Premises and the operation thereof, under Section 38 of the United
States Internal Revenue Code of 1954, as amended, and the rules and regulations
promulgated pursuant thereto now or hereafter, and under any applicable state
tax laws and regulations, shall belong to and inure to the benefit of Lessee.
Lessee shall determine the property as to which the investment tax credit is
applicable. Lessor agrees upon request of Lessee, at any time and from time to
time, to execute written statements required under the aforesaid tax codes,
laws and regulations in order to evidence and confirm the investment tax credit
in Lessee and the property subject thereto.
IN WITNESS WHEREOF the undersigned have hereunto set their hands and
affixed their seals this 4th day of October, 1978.
LESSOR:
WINCO LTD., a Georgia limited
partnership
/s/ Walter M. Boomershine, Jr. (SEAL)
As to Lessor, signed, -----------------------------------
sealed and delivered WALTER M. BOOMERSHINE, JR.
in the presence of:
/S/ Winifred F. Boomershine (SEAL)
/s/ John R. Parks ------------------------------------
- ------------------------------ MRS. WINIFRED F. BOOMERSHINE
Unofficial Witness Being the only general partners
of Winco Ltd.
/s/ Eunice Harris
- ------------------------------
Notary Public
Notary Public Georgia State at Large
My Commission Expires Apr. 22, 1979
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<PAGE> 40
LESSEE:
BOOMERSHINE PONTIAC) INC., a
Georgia Corporation
As to Lessee, signed, By: /s/
sealed and delivered -------------------------------------
in the presence of: Title: Pres
----------------------------
/s/ John R. Parks
- --------------------------- Attest: /s/ Charles K. Yancey
Unofficial Witness --------------------------------
Title: Sec Treasurer
/s/ Eunice Harris ---------------------------
- ----------------------------
Notary Public [CORPORATE SEAL]
Notary Public, Georgia State at Large
My Commission Expires Apr.22, 1979
-39-
<PAGE> 41
ALL THAT TRACT OR PARCEL OF LAND lying and being in Land Lots 733 and 780,
17th District, 2nd Section, Cobb County, Georgia, being more particularly
bounded and described as follows:
BEGINNING AT A POINT marked by a concrete monument on the southwestern margin
of the right-of-way of U.S. 41 (having a right-of-way width of 200 feet), which
point of beginning is located 689.92 feet southeasterly, as measured along the
southwestern margin of the right-of-way of U.S. 41, from the intersection of
the southwestern margin of the right-of-way of U.S. 41 with the southeastern
margin of the right-of-way of the Smyrna-Roswell Road; THENCE south 37 degrees
25 minutes 38 seconds east along the southwestern margin of the right-of-way of
U.S. 41 a distance of 394.63 feet to a point marked by an iron pin found;
THENCE south 52 degrees 33 minutes 48 seconds west a distance of 1146.05 feet
to a point marked by an iron pin found; THENCE north 28 degrees 53 minutes 38
seconds west a distance of 384.88 feet to a point marked by a concrete monument
found; THENCE north 51 degrees 49 minutes 33 seconds east a distance of 1089.
03 feet to the POINT OF BEGINNING; being as shown and delineated on plat of
survey for Star Pontiac prepared by Paul E. Lee, Georgia Registered Land
Surveyor with Ross/Lee Consulting Engineers, dated August 4, 1977, as last
revised June 30, 1978, and containing 9.94 acres according to the aforesaid
plat.
LAND LOT
17th District 780 parcels 2 & 5
17780-2}
17780-5} in City of Marietta
EXHIBIT "A"
<PAGE> 42
1. Outside lighting
2. 48-inch exhaust fan
3. 32 tiedowns in body shop
4. fence
5. heavy duty paving
EXHIBIT B
<PAGE> 43
1. The lien of ad valorem taxes for the years 1977 and 1978.
2. A 175 foot Georgia Power Company easement as set forth in that
easement from F. A. Hargrove to Georgia Railway & Power Company dated
April 19, 1912, recorded in Deed Book 00, page 733, Cobb County,
Georgia records and in the easement to Georgia Railway & Power Company
at Deed Book PP page 435, aforesaid records (as shown on that plat of
survey for Star Pontiac dated August 4, 1977, by Paul C. Lee,
registered Surveyor).
3. Usual ancillary easements contained in the Right-of-Way Deed from
John H. Hancock Mutual Life Insurance Company to State Highway Board
of Georgia, dated September 18, 1934, filed September 28, 1935,
recorded in Deed Book 118, page 229, aforesaid records.
4. Drainage easements contained in right-of-way deeds at Deed Book 102,
page 376 and Deed Book 102, page 396, aforesaid records
5. Easement to Georgia Power Company at Deed Book 132, page 380,
aforesaid records.
6. Easement to Southern Bell at Deed Book 105, page 52, aforesaid
records.
7. Right of Georgia Power Company to maintain transmission line as set
forth in deeds at Deed Book 139, page 480,; Deed Book 145, page 63;
Deed Book 178, page 320; Deed Book 180, page 396; Deed Book 197, page
515; and Deed Book 196, page 384, aforesaid records.
8. Easement from Berry Grant, Harriet Grant, (Mrs.) Hattie T. Grant,
Attorney-in-Fact for Bryan M. Grant, Jr. to Georgia Power Company,
dated September 17, 1942, filed September 25, 1942, recorded in Deed
Book 148, page 190, aforesaid records.
9. Right of southern Bell to maintain easement as set forth in deed at
peed Book 196, page 384, aforesaid records.
10. Rights of Boomershine Pontiac, Inc. as lessee under that certain Lease
Agreement made as of September 16, 1978 and executed October 4, 1978
by and between Winco Ltd., as Lessor, and Boomershine Pontiac, Inc. as
Lessee.
11. Plat of survey for Star Pontiac dated August 4, 1977, by Paul C. Lee;
Registered Surveyor shows a branch traversing subject property in a
northerly-southerly direction.
EXHIBIT "C"
<PAGE> 1
EXHIBIT 10.10
TEN-YEAR NET
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") made as of the 28 day of January, 1985 and
executed this 28 day of January 1985, by and between WINCO, LTD., a Georgia
limited partnership having Walter M. Boomershine, Jr. and Mrs. Winifred F.
Boomershine as its only general partners (hereinafter called "Lessor"), and
BOOMERSHINE PONTIAC-GMC TRUCK, INC. d/b/a BOOMERSHINE NISSAN, a corporation
organized and existing under the laws of the State of Georgia (hereinafter
called "Lessee");
W I T N E S S E T H:
THAT for and in consideration of the mutual covenants and agreements herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties hereto,
Lessor and Lessee covenant and agree and follows:
ARTICLE I
Premises
Section 1.1. Lessor hereby agrees to lease and does hereby lease and demise
unto Lessee the real property described in Exhibit "A" attached hereto and by
this reference made a part hereof, together with all improvements thereon, less
and except
1
<PAGE> 2
those items set forth on Exhibit "B" attached hereto and by this reference made
a part hereof, and together with all and singular the tenements, hereditaments,
appurtenances, and privileges thereunto belonging or in any way appertaining
thereto, the aforesaid real property and improvements being hereinafter called
the "Demised Premises";
TO HAVE AND TO HOLD, subject to the terms and conditions hereinafter set
forth, for the Demised Term (as hereinafter defined) unless sooner terminated as
provided herein.
Section 1.2. No easements are retained by Lessor, all of the right, title,
interest and attachments of the Lessor in and to the Demised Premises being
leased hereby by Lessee. No personal property is included in this Lease.
ARTICLE 2
Term
Section 2.1. The Demised Term of this Lease shall be a period of ten (10)
calendar years (hereinafter called "Demised Term"), and shall commence on
February 1, 1985, and terminate at midnight on January 31, 1995, unless sooner
terminated as herein provided. Lessee shall have an option at the end of the
tenth year to renew this Lease for an additional five (5) year period with rent
renegotiated at that time but in no event less than the rent payable for the
period February 1, 1993 through January 31, 1995. Lessee shall notify Lessor its
intent to exercise this option by giving Lessor written notice of the same no
later than sixty (60) days prior to the expiration of the Demised Term.
2
<PAGE> 3
Section 2.2. The Demised Term shall not be renewed or extended, by
operation of law or otherwise, without the prior written agreement of Lessor and
Lessee, subject to the option to renew set forth herein.
ARTICLE 3
Rent
Section 3.1. Lessee covenants and agrees to pay to Lessor during the
Demised Term the amounts indicated below for the designated portions of the
Demised Term as rent for the Demised Term which sums shall be due and payable in
the indicated monthly installments, each such installment to be due and payable
promptly in advance on the first day of each month commencing February 1, 1985
and continuing on the first day of each subsequent month throughout the
remainder of the Demised Term, except that Lessee shall pay Lessor the monthly
rental installments for February 1985 and January 1995 on or before the
execution hereof:
<TABLE>
<CAPTION>
Portion of Demised Annual Monthly Rental
Term Rent Installment
------------------ ------ --------------
<S> <C> <C>
February 1, 1985 through $150,000.00 $12,500.00
January 31, 1986
February 1, 1986 through $162,000.00 $13,500.00
January 31, 1987
February 1, 1987 through $192,000.00 $16,000.00
January 31, 1993
February 1, 1993 through $210,000.00 $17,500.00
January 31, 1995
</TABLE>
3
<PAGE> 4
Section 3.2. Lessee shall pay all rental and other sums payable by Lessee
to Lessor at the principal place of business of Lessor or at such other place as
Lessor shall request in writing delivered to Lessee. Rent for a partial month
during the Demised Term, if any, shall be prorated on a daily basis.
Section 3.3. In addition to all rent as herein provided, Lessee shall pay
on or before the dates the same shall become due and payable, and as additional
rent, all taxes, charges, costs and expenses, or substitutions in lieu thereof,
which Lessee assumes or agrees to pay under this Lease, together with all
interest and penalties that may accrue thereon, and all other damages, costs and
expenses, including attorneys' fees, which Lessor may suffer or incur by reason
of lessee's failure promptly to make agreed payments and any and all other sums
which may become due by reason of default of lessee or failure on Lessee's part
to comply with the agreements, terms, covenants and conditions of this Lease on
Lessee's part to be performed. In the event of nonpayment, Lessor shall have the
rights and remedies herein provided for in case of nonpayment of rent or a
breach of condition.
ARTICLE 4
Repairs and Maintenance by Lessee
Section 4.1. Lessee accepts the Demised Premises in the present condition
as suitable for all purposes of this Lease, and Lessee, at its sole cost, risk,
expense and liability, covenants
4
<PAGE> 5
and agrees to keep and maintain in good repair the Demised Premises and any
improvements now or hereafter located thereon, in present condition and in
compliance with all applicable governmental directions, codes, ordinances and
regulations. Lessee covenants and agrees to return the Demised Premises to
lessor at the termination of Demised Term in same condition as exists at the
commencement of Demised Term, reasonable wear and tear excepted, subject to the
provisions of Article 15 hereof. Lessor shall not be obligated to make any
repairs or replacements or maintain the Demised Premises or the improvements
thereon during the Demised Term.
ARTICLE 5
Changes and Alterations by Lessee
Section 5.1. Subject to Lessee's compliance with the Restrictive Covenants
referred to in Article 22, Lessee may, at any time, and from time to time,
effect any reasonable alterations, changes and modifications in or upon the
Demised Premises as Lessee may desire, including, without limitation, major
structural changes, the construction of additional buildings and expansion of
existing buildings or additional buildings, all at Lessee's sole cost, risk,
expense and liability. Lessor's approval shall not be required for any
alterations or changes made by Lessee, provided, however, in the event the
changes or alterations involve major structural changes or additional
structures, Lessee shall submit to Lessor, for approval in advance of the
5
<PAGE> 6
commencement of construction, copies of the architect's plans and
specifications. Lessor may disapprove such plan and specifications, but only if
the disapproval is based upon structural considerations which do not include
items such as value, cost, design, use or aesthetics; or upon substantial
reduction in the area available for vehicular parking on Demised Premises;
provided, however, in the event of any assignment or sublease in accordance with
Article 9 hereof, Lessor shall have the unrestricted right of approval for any
changes or alterations involving major structural changes or additional
structures, if any, proposed by an assignee or a sublessee. Failure of Lessor to
disapprove the plans and specifications within twenty (20) business days of
submission by Lessee to Lessor shall be deemed to constitute approval thereof.
Notice of disapproval thereof by Lessor shall be accompanied by a statement
specifying the basis for disapproval, and Lessee shall not be authorized to
commence construction until the plans and specifications are modified to the
reasonable satisfaction of Lessor. Notwithstanding anything to the contrary
herein, any approval required by Lessor with respect to this paragraph shall
also require the approval of Lessor's mortgagee.
ARTICLE 6
Removal of Trade Fixtures, Appliances
Other Equipment and Improvements
Section 6.1. All trade fixtures, inventory, appliances and other equipment
and personal property existing, placed or installed in or on Demised Premises
prior to or during the
6
<PAGE> 7
Demised Term by Lessee shall remain the property of Lessee, and may be removed
by Lessee at any time during the Demised Term, or within thirty (30) calendar
days subsequent to the expiration of Demised Term, as long as no Event of
Default has occurred and is continuing and as long as the trade fixtures,
inventory, appliances and other equipment and personal property can be removed
without substantially damaging the Demised Premises. All damage to the Demised
Premises caused by Lessee's removal of such property shall be repaired by the
Lessee at the Lessee's expense, and to the Lessor's reasonable satisfaction.
ARTICLE 7
Inspection of Demised Premises by Lessor
Section 7.1. Lessor or Lessor's representative shall have the right at all
reasonable times during the Demised Term, upon reasonable notice to Lessee, to
enter upon any part of the Demised Premises for the purpose of determining
whether the conditions and covenants contained in this Lease are being kept and
performed. The entry shall be conducted during reasonable business hours and
Lessor or Lessor's representative shall conduct the entry with Lessee or
Lessee's representative.
ARTICLE 8
Utilities
Section 8.1. Lessee shall pay costs of all utilities furnished to the
Demised Premises including, but not limited to water, gas and electricity,
during the Demised Term.
7
<PAGE> 8
ARTICLE 9
Assignment and Sublease by Lessee
Section 9.1 With the prior written consent of the Lessor, which
consent which consent shall not be unreasonably withheld if the Assignee appears
to Lessor to have the ability to make all payments due under this Lease and
otherwise to perform all of Lessee's obligations hereunder, and if all rental
payments and other obligations of the Lessee are current, the Lessee may sublet,
assign or encumber this Lease in whole or in part to any person or persons,
natural or corporate whomsoever. In such event, Lessee shall remain primarily
liable for the keeping and performance of all of its covenants hereunder
including, but not limited to, the prompt and due payment of rent and additional
rent. In the event of any assignment or sublease, Lessor agrees to deliver to
the assignee or sublessee a nondisturbance agreement acknowledging Lessee's
continuing primary liability and the assignee or sublessee's rights and agreeing
that this Lease shall remain in full force and effect as long as all of Lessee's
covenants and obligations hereunder are performed. In the event of any
assignment or sublease, Lessor, as to any changes and alterations permitted
under Article 5 and undertaken by any assignee or sublessee, shall have the
right to require the assignee or sublessee at its expense to obtain in favor of
Lessor payment and performance bonds in a form and an amount reasonably
satisfactory to lessor and issued by a surety company qualified
8
<PAGE> 9
to do business in Georgia and reasonably acceptable to Lessor. If Lessee
assigns this Lease, or sublets to another, the rents due under Article 3 for
the remainder of the Term shall be increased to the rate Lessor reasonably
determines to be the fair market rental for the Demised Premises and that rent
shall be stated in the Consent to Assignment. Lessee's right of assignment is
subject to obtaining the approval of Lessor's mortgagee.
ARTICLE 10
Default and Remedies
Section 10.1. The occurrence of any one or more of the following
events shall constitute an Event of Default:
(a) If Lessee deserts or abandons the Demised Premises and
such abandonment continues for a period of fifteen calendar (15) days; or
(b) If Lessee fails to make payment to Lessor of any monthly
rent, additional rent, or of any money advanced by Lessor and collectible as
additional rent, as and when the same becomes due and payable; or
(c) If Lessee fails to pay, bond or otherwise discharge any
tax, assessment, water rent, rate or charge, sewer rent or other governmental
imposition, or any other charge or lien against the Demised Premises which
Lessee is required to pay, at least ten (10) calendar days prior to the
expiration of any grace period allowed by law or by the governmental authority
imposing the same or ten (10) calendar days after judgment following contest by
Lessee as provided in Section 11.3; or
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(d) If Lessee defaults in complying with any other agreement,
term, covenant or condition of this Lease and such default in compliance
continues for a period of ten (10) calendar days after written notice by Lessor
specifying the claimed default and Lessee has not, in good faith, commenced,
within the ten day period, to remedy the default and diligently and
continuously proceeded therewith; or
(e) If Lessee files a petition in bankruptcy or for
reorganization or for an arrangement pursuant to any present or future federal
bankruptcy act or under any similar federal or state law, or is adjudicated a
bankrupt or becomes insolvent or makes an assignment for the benefit of its
creditors or admits in writing its inability to pay its debts generally as they
become due; or
(f) If a petition or answer proposing the adjudication of
Lessee as a bankrupt or its reorganization under any present or future federal
bankruptcy act or any similar federal or state law is filed in any court and
such petition or answer is not discharged or denied within thirty (30) calendar
days after the filing thereof; or
(g) If a receiver, trustee, or liquidator of Lessee, of all
or substantially all of the assets of Lessee, or of Lessee's estate or interest
in the Demised Premises is appointed in any proceeding brought against Lessee
and is not
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discharged within thirty (30) calendar days after such appointment or, if at
any time prior to the discharge of this Lease, Lessee consents to or acquiesces
in such appointment; or
(h) If the estate or interest of Lessee in the Demised
Premises or a part thereof is levied upon or attached in any proceeding and
such process is not vacated or discharged or security therefor posted within
thirty (30) calendar days after written notice of such levy or attachment,
unless Lessee contests such levy or attachment in good faith and such contest
by Lessee operates to suspend the enforcement of such levy or attachment
against the estate or interest of Lessee in the Demised Premises.
Section 10.2 If an Event of Default occurs, Lessor may perform any
duty imposed on Lessee hereunder without notice for the account and at the
expense of Lessee. If Lessor incurs any expense, including reasonable attorneys'
fees, in instituting, prosecuting or defending any action or proceeding by
reason of any default by Lessee, Lessee shall reimburse Lessor the amount of
such expense. Should Lessee, pursuant to this Lease, become obligated to
reimburse or otherwise pay Lessor one or more sums of money in addition to the
rent and additional rent, the amount thereof shall be deemed additional rent
and may, at the option of the Lessor, be added to any subsequent installment of
rent due
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and payable, in which event Lessor shall have the same remedies for default
provided for non-payment of rent. The provisions of this Section 10.2 shall
survive the expiration of the Demised Term.
Section 10.3. Upon the occurrence of any events of default as set
forth in Article 10, Lessor may serve a written five (5) calendar day notice of
cancellation and termination of this Lease, and if upon the expiration of said
five (5) days such default has not been completely remedied, this Lease and the
Demised Term shall end and expire as fully and completely as if the date of
expiration of such five (5) day period were the day herein fixed for the end
and expiration of the Demised Term. The Lessee shall then quit and surrender
the Demised Premises to Lessor as soon as practicable and Lessor may enter into
or repossess the Demised Premises either by force, summary proceedings or
otherwise.
Section 10.4. If this Lease is terminated pursuant to Section 10.3
hereof, all of the right, title and estate and interest of the Lessee in and to
the Demised Premises, any improvements thereon made by Lessee, and in and to
all rents, issues and profits thereof, whether then accrued or to accrue, and
in and to all insurance policies, shall automatically pass to, vest in and
belong to the Lessor, without further action on the part of either party and
without cost or charge to Lessor, free of any claim thereto by Lessee.
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Section 10.5. No receipt of money by Lessor form Lessee after the
termination hereof shall reinstate, continue or extend the term, or affect any
notice theretofore given by Lessor, or operate as a waiver of the right of
Lessor to enforce the payment of any rent and additional rent then due or
thereafter falling due, or operate as a waiver of the right of Lessor to
recover possession of the Premises by proper suit, action, proceeding
or other remedy. After the service of notice of termination by Lessor as herein
provided and the expiration of the time therein specified, or after a final
order or judgment for possession of the Demised Premises, Lessor may demand,
receive and collect any money due, or thereafter falling due, without in any
manner affecting such notice, suit, action, proceeding, order or judgment, and
any and all such money so collected shall be deemed to be payment on account of
the use and occupation of the Demised Premises or, at the election of Lessor,
on account of Lessee's liability hereunder.
Section 10.6. In case of any termination, re-entry or dispossession by
summary proceedings or otherwise, the annual rent and additional rent and all
other charges required to be paid by Lessee hereunder shall thereupon become
due and payable up to the time of such termination, re-entry or dispossession,
and Lessee shall also pay to Lessor all expenses, brokerage commissions and all
other costs reasonably paid or incurred by Lessor for restoring the Demised
Premises to good order and condition.
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Section 10.7. If this Lease is terminated, Lessor may relet the
Demised Premises, in whole or in part, for a term or terms which, at Lessor's
option may be the remainder of the then current therm of this Lease, or for any
longer or shorter period. Unless the statue or rule of law which governs the
proceeding in which damages are to be proved limits the amount of damages
capable of being so proved and allowed, in which case Lessor shall be entitled
to an amount equal to the maximum allowed by any such statue or rule of law,
Lessor shall be entitled to recover of and from Lessee, all damages, payable in
monthly installments, in advance on the first day of each calendar month
following such termination or re-entry, and continuing until the date originally
fixed herein for the expiration of the ten current term of this Lease, in an
amount equal to the excess, if any, of the sum of the aggregate expenses paid
by Lessor during the month immediately preceding such calendar month for all
such items as, by the terms of this Lease, are required to be paid by Lessee,
plus an amount equal to the amount of the installment of annual rent which
would have been payable by Lessee hereunder in respect of such calendar month,
had this Lease and the Demised Term not been so terminated, or had Lessor not
so re-entered, over the rents, if any, collected by or accruing to Lessor in
respect of such calendar month pursuant to either such reletting, or form any
existing subleases, and any suit or action brought to collect damages for any
calendar month shall not prejudice in any
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way the rights of Lessor to collect damages for any subsequent month by a
similar proceeding. Lessor, at its option, may make such alterations and
repairs in the Demised Premises as in its reasonable judgment Lessor considers
necessary, and the making of such alterations and repairs shall not operate or
be construed to release Lessee from liability hereunder, provided Lessor shall
not charge Lessee for the expense of any such alterations or repairs not
otherwise required of Lessee hereunder. In no event shall Lessee be entitled to
receive any excess of such annual rents collected from reletting over the sums
payable by Lessee to Lessor hereunder. Suit or suits for the recovery of such
damages, or any installments thereof, may be brought by Lessor from time to
time at its election, and nothing herein contained shall be deemed to require
Lessor to postpone suit until the date when the term of this Lease would have
expired if it had not been terminated under the provisions of this Lease, or any
provision of law, or had Lessor not re-entered into or upon the Demised
Premises.
Section 10.8. The rights and remedies given to Lessor in this Lease
are distinct, separate and cumulative and no one of them whether or not
exercised by Lessor, shall be deemed to be in exclusion of any of the other
herein or by law or in equity provided.
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ARTICLE 11
Taxes and Other Charges
Section 11.1. Lessee shall, without notice or demand, as additional
rent, pay and discharge, on or before the last day on which the same may be paid
without penalty, all taxes, assessments, assessments levied by reason of
restrictive covenants affecting the Demised Premises, rates and charges,
sanitary assessments, and other governmental impositions and charges of every
kind and nature whatsoever, extraordinary as well as ordinary, and each and
every installment thereof together with all interest and penalties thereon,
which shall or may during the Demised Term be levied, assessed or imposed on or
become a lien upon or become due or payable out of or for or by any reason of
the use or occupancy of the Demised Premises of any part thereof, the Lessee's
or the Lessor's interest in the Demised Premises and the improvements located
thereon, or any buildings, appurtenances, or equipment now or hereafter erected
or placed thereon or therein or any part thereof, or the sidewalks or streets in
front of or adjoining the Demised Premises. All taxes levied, assessed or
imposed in lieu of or in addition to the foregoing shall be paid by Lessee
together with all interest and penalties thereon, under or by virtue of all
present or future laws, ordinances, requirements, orders, directions, rules or
regulations of the federal, state, county and city or local governments of all
other governmental authorities whatsoever. Lessee shall pay
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all taxes and assessments which shall prior to or during the Demised Term or
any renewal term be levied, assessed or imposed on or become a lien upon the
personal property of Lessee located upon the Demised Premises. Lessee shall be
deemed to have complied with the covenants of this Section 11.1 if payment of
such rents, taxes, assessments, rates and charges, sanitary assessments, and
other governmental impositions and charges, shall have been made prior to ten
(10) days before the expiration of any grace period allowed by law or by the
governmental authority imposing the same during which payment is permitted
without penalty or interest, and either before the same shall become a lien
upon the Demised Premises or shall become delinquent. Lessee shall within
fifteen (15) business days after receipt of written request therefor by Lessor
produce and deliver to Lessor reasonably satisfactory evidence of such payment.
Section 11.2 All such rents, taxes, rates and charges, sanitary
assessments, and other governmental impositions and charges and the current
installments of any assessment which has been converted into periodic
installments under the provisions of Section 11.1 (except the taxes and
assessments levied on the personal property of Lessee) which become due and are
payable in the calendar year in which the Demised Term expires,shall be
apportioned pro-rata between Lessor and Lessee in accordance with the respective
portions of such period during which the Demised Term shall be in effect.
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Section 11.3. Lessee shall have the right to contest or review by
legal proceedings, or in such other manner as it may deem suitable (which, if
instituted, Lessee shall conduct promptly at its own expense, and free of any
expense to Lessor, and, if necessary, in the name of Lessor), any tax,
assessment, rate or charge, sanitary assessment, or other governmental
imposition or charge aforementioned, and for such purpose may pay any such item
under protest. Lessor shall have the right to monitor any such contest or
review by legal proceedings, and, for such purpose, Lessee agrees promptly to
furnish Lessor with copies of all correspondence, notices, pleadings and other
writings in connection therewith.
Section 11.4. Lessee shall not be required to pay, discharge or remove
any tax, assessment, tax lien or other imposition or charge upon or against the
Demised Premises, or any part thereof, or the improvements at any time situated
thereon, as long as the Lessee shall in good faith contest the amount or the
validity thereof by appropriate legal proceedings which shall operate to prevent
the collection of the tax, assessment, tax lien, forfeiture or imposition so
contested, or the sale of that pending any such legal proceedings Lessor shall
not have the right to pay, remove or discharge the tax assessment, tax lien,
forfeiture, or imposition thereby contested.
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Section 11.5. Nothing herein contained shall be construed to require
Lessee to pay any inheritance, estate, succession, transfer, gift, franchise,
income, profit or excess profit, capital stock, capital levy, corporate or
unincorporated business tax or other similar tax, that is or may be imposed upon
Lessor, its successors or assigns, or upon the rent payable by Lessee.
ARTICLE 12
Insurance
Section 12.1. Lessee, throughout the Demised Term, at its own cost and
expense, and as additional rent, shall, through an insurance company or
insurance companies qualified to transact business and authorized to write
insurance on the risks in the State of Georgia:
(a) Keep the improvements on the Demised Premises insured (in an
amount representing at all times the full insurable value of the improvements,
but in no event shall the amount of insurance at any time be lesser of $500,000
or the fair market value of the improvements existing from time to time) in the
name of Lessor and in the name or names of any and all of Lessor's mortgagees
against loss or damage by fire with extended coverage; and
(b) Keep in force a comprehensive general liability insurance policy,
such liability policy to be in the amount of not less than $1,000,000.00 with
respect to injury or death of
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any one person, $3,000,000.00 with respect to any one accident and $500,000.00
with respect to damage of property.
Section 12.2. All insurance provided by Lessee as required by this
Article 12 shall be carried in favor of Lessor, permitted mortgagees and Lessee
as their respective interests may appear. All policies shall provide that loss
payable thereunder shall be payable to Lessor and Lessee as their respective
interests may appear.
Section 12.3. Lessee agrees to deliver to Lessor on date of
commencement of Demised Term true and exact copies of the policies or
certificates of insurance required hereunder to be in the name of Lessor and
certificates of other policies required hereunder. At least twenty (20)
business days prior to the expiration of each such policy, Lessee shall deliver
to Lessor evidence that the policy has been renewed or replaced, and as soon as
practicable thereafter, the new original policy or certificate for renewal or
replacement insurance.
Section 12.4. Lessee shall not violate or knowingly permit to be
violated any of the conditions or provisions of any such policy.
Section 12.5. Lessee and Lessor shall cooperate in connection with
the collection of any insurance monies that my be due in the event of loss, and
Lessee and Lessor shall execute and deliver such proofs of loss and other
instruments which may be required for the purpose of obtaining the recovery of
any such
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insurance monies. Lessee shall pay all fees and expenses reasonably incurred
in the collection and recovery of any such insurance monies.
Section 12.6. Each such policy (including renewal insurance) or
certificates therefor issued by the insurer shall contain an agreement by the
insurer that such policy shall not be cancelled without at least thirty
calendar (30) days prior written notice to Lessor, and in no event shall such
policies be cancelled by Lessee without Lessor's prior written consent;
provided, however, that nothing herein contained shall prevent Lessee from
changing insurance carriers.
Section 12.7. Any insurance provided for in this Article 12 may be
effected by policy or policies of blanket insurance; provided, however, that
the amount of the total insurance allocated to the Demised Premises shall be
such as to furnish in protection the equivalent of separate policies in the
amounts herein required, and provided further that in all other respects, any
such policy or policies shall comply with the other provisions of this Lease.
In any such case it shall not be necessary to deliver the original of any such
blanket policy to Lessor, but Lessor shall be furnished with a certificate or
duplicate of such policy acceptable to Lessor, certified by the applicable
insurance company.
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ARTICLE 13
Lessor Not Liable for Injury or Damage
Section 13.1. During the entire Demised Term hereof Lessee shall be
deemed to be in exclusive control and possession of the Demised Premises and
those items set forth in Exhibit "B" attached hereto, and Lessor shall in no
event whatsoever be liable for any injury or damage to any property or to any
person happening on or about the Demised Premises, nor in connection with those
items set forth in Exhibit "B" attached hereto, nor for any injury or damage to
the Demised Premises for those items set forth on Exhibit "B" attached hereto,
nor to any property of Lessee, or of any other person except for injury or
damage caused by the negligence of Lessor or by Lessor's breach of this Lease.
The provisions hereof in Article 7 permitting Lessor to enter and inspect the
Demised Premises are made solely for the purpose of enabling Lessor to become
informed as to whether or not Lessee is complying with the agreements, terms,
covenants and conditions hereof.
Section 13.2. Lessor shall not be liable for any injury or damage to
any person or property in or about the Demised Premises, whether belonging to
Lessee or any other person, caused by any fire, breakage, leakage, defect
(latent or otherwise) or bad condition in any part or portion of the Demised
Premises, or from water, rain or snow that may leak into, issue or flow from
any part of the Demised Premises from the drains, pipes, or
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plumbing work of the same, or from any place or quarter, unless such breakage,
leakage, defect or bad condition, injury or damage, may be caused by or result
from the negligence of Lessor or from a breach of this Lease by Lessor.
Section 13.3. In addition to any other indemnities to Lessor
specifically provided for in this Lease, Lessee shall protect, defend, indemnify
and save harmless Lessor against and from any and all claims by or on behalf of
any person arising from the operation, conduct or management of, or from any
work or thing whatsoever done in or on the Demised Premises and will further
protect, defend, indemnify and save Lessor harmless against and form any and all
claims arising during the Demised Term from any breach or default on the part of
Lessee in the performance of any covenant or agreement on the part of the Lessee
to be performed, pursuant to the terms of this Lease, and from and against all
costs, expenses and liabilities, including attorneys fees, incurred in or about
or in defending any such claim or action or proceedings brought thereon; and in
case any action or proceeding may be brought against Lessor by reason of any
such claims, Lessee upon notice from Lessor shall resist or defend such action
or proceeding by and through counsel reasonably satisfactory to Lessor. To the
extent that insurance procured by Lessee in accordance with the provisions of
this Lease shall protect, indemnify and save harmless Lessor, the provisions of
this Section 13.3 shall impose no additional obligation upon Lessee.
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ARTICLE 14
Mortgages
Section 14.1. Lessee may, without the requirement of any notice to or
approval by Lessor encumber the leasehold created hereby by mortgage; provided
that no leasehold mortgaging by Lessee shall affect the primary liability of
Lessee for the keeping and performance of all of its covenants hereunder
including, but not limited to, the prompt and due payment of rent and additional
rent; and provided further that any such mortgage will be subordinate to and
subject to any mortgage or deed to secure debt placed upon the Demised Premises
by Lessor.
Section 14.2. Notwithstanding anything herein to the contrary, Lessee
is hereby required to obtain the consent of any Lender holding as security
underlying fee simple interest in the Demised Premises prior to an encumbrance
of Lessee's leasehold rights created hereby, and Lessee's rights hereunder shall
be subject to the rights of such mortgagee.
Section 14.3. Lessor shall not be obligated to subordinate to, or
join in, or otherwise encumber or affect its underlying fee simple interest in
Demised Premises, with respect to any mortgage or mortgages placed by Lessee on
the leasehold created hereby.
ARTICLE 15
Destruction or Damage
Section 15.1. If during the Demised Term, a portion of or all of the
Demised Premises or improvements thereon shall be
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destroyed or damaged by fire or by any other cause of whatsoever nature, Lessee
shall restore, rebuild or repair the items destroyed.
Section 15.2. Lessee covenants and agrees to effect the necessary
repair, rebuilding or restoration promptly within a reasonable time, all items
or improvements affected to be of no less similar size and value, and of no
less similar design and quality or workmanship as existed immediately prior to
the destruction or damage.
Section 15.3. [Omitted intentionally]
Section 15.4. Lessee agrees to apply any insurance proceeds received
by Lessee by reason of insurance carried pursuant to Article 12 for the purpose
of restoration, rebuilding or repair required by this Article 15. In the event
of restoration, rebuilding or repair by Lessee pursuant to this Article 15,
Lessor agrees that any insurance proceeds received by Lessor by reason of
insurance carried pursuant to Article 12 shall be held in escrow with a third
party agreeable to Lessor and Lessee for the benefit of Lessee to be applied
toward the restoration, rebuilding or repair. If the restoration, rebuilding or
repair work require more that one month to complete, the escrow agent shall pay
to Lessee, upon request of Lessee, no less than once per month, a portion of
the insurance monies in an amount equal to the costs incurred by Lessee during
the previous month, such costs to be certified by Lessee's architect. The
entire balance of the insurance monies so held shall be paid to Lessor at the
time of completion of the work.
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Section 15.5. [Omitted intentionally]
Section 15.6. During such time or times that Demised Premises are
rendered totally unusable by Lessee as a site for an automobile dealership
(including, without limitation, an automobile showroom and a servicing
department) as determined in accordance with the normal standards of the
operation of such a business, by reason of such damage or destruction, the rent
provided in Article 3 shall abate until the same have been rendered so usable by
Lessee.
Section 15.7. Lessee's obligations to repair, rebuild or restore, and
Lessor's obligation to make insurance proceeds available therefor, under the
provisions of this Article 15, are expressly made subject to the agreement by
Lessor's mortgagee to make all applicable insurance proceeds available for the
repair, rebuilding or restoration work. If Lessor's mortgagee fails to make all
applicable insurance proceeds so available, then Lessee, at Lessee's option, may
declare this Lease terminated and of no further force and effect. Under
absolutely no circumstances shall Lessee be required hereunder, without Lessee's
consent, to effect any repair, rebuilding or restoration work absent the
application of all available insurance proceeds to the work without restriction
or interference by Lessor or Lessor's mortgagee. Lessor and Lessee acknowledge
insurance proceeds shall first be paid to Lessor's mortgagee and be disbursed in
accordance with the terms of the Security Deed securing the Demised Premises or
in such other manner as approved by Lessor's mortgagee.
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ARTICLE 16
Eminent Domain
Section 16.1. If the Demised Premises are taken by or pursuant to any
governmental authority or through the exercise of the right of eminent domain,
Lessor and Lessee shall join and cooperate in resisting such proceeding if such
resistance is feasible and desirable to Lessor and Lessee, and if it is not,
shall join and cooperate in prosecuting their respective claims for damages
incurred from the successful exercise of such right or proceeding. Lessee
reserves unto itself all damages awarded which are based upon its leasehold
interest and ownership of trade fixtures, signs, inventory, equipment, and
interruption of business. Lessor reserves unto itself all damages awarded which
are based upon its underlying fee simple title in the Demised Premises and
Lessor's interest in this Lease. If under applicable law a single condemnation
award is made for the taking of the Demised Premises, the award shall belong to
the Lessor except that Lessee shall receive from the award the total of (1) a
sum attributable to Lessee's improvements or alterations made to Demised
Premises by Lessee in accordance with this Lease, which Demised Premises
pursuant to this Lease but elects not to remove; (2) a sum attributable to any
excess of the market value of Demised Premises (exclusive of Lessee's
improvements or alterations for which Lessee is compensated under this section)
for the
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remainder of the Demised Term, over the present value on date of taking of the
monthly rent payable under Section 3.1 for the remainder of the Demised Term;
and (3) a sum attributable to that portion of the award constituting severance
damages for the restoration of Demised Premises.
Section 16.2. If the whole of the Demised Premises shall be taken or
condemned by any competent authority for any public use or purpose, or so much
thereof so that Lessee is prevented from using the Demised Premises as set forth
in Section 15.6, during the Demised Term, and the Demised Premises cannot be
restored so as to be used as set forth in Section 15.6, all obligations of the
Lessee under this Lease shall cease upon the date of the taking and any unearned
rent paid by Lessee shall be refunded by Lessor to Lessee.
Section 16.3. If a portion of the Demised Premises shall be taken or
condemned by any competent authority for any public use or purpose during the
Demised Term which taking or condemnation shall not interfere with Lessee's use
of the Demised Premises as set forth in Section 15.6, then, in such event, the
rent provided in Article 3 shall not abate.
Section 16.4. Lessor and Lessee agree to apply all condemnation proceeds
first to Lessor's mortgagee, second to restoring the existing Improvements on
the Demised Premises to make the Premises usable as set forth in Section 15.6
[with the proceeds deposited as provided in Section 15.4], and third as provided
in Section 16.1.
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ARTICLE 17
Lessee's Certificate
Section 17.1. Lessee shall, without charge, at any time and from time to
time, within fifteen (15) calendar days after request by Lessor, deliver a
written instrument to Lessor or any other person, firm or corporation specified
by Lessor duly executed and acknowledged, certifying:
(a) that this Lease is unmodified and in full force and effect, or if there
has been any modification, that the same is in full force and effect and stating
any such modification;
(b) whether the Lessor or the Lessee is in default under the Lease, and if
so, specifying the nature of the default;
(c) whether there are then existing any setoffs or defenses against the
enforcement of any of the agreements, terms, covenants or conditions of the this
Lease and any modifications thereof upon the part of Lessee to be performed or
complied with, and, if so, specifying the same; and
(d) the dates to which the rent, additional rent and other charges
hereunder have been paid.
Such certificate shall, and Lessee so acknowledges, be deemed to remain current
(but not more than 30 days after its date) and unchanged unless the party to
which it is addressed receives telephonic or telegraphic notice to the contrary
at a telephone number or address specified to Lessee by the party to which the
certificate is addressed.
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ARTICLE 18
Lessor's Certificates
Section 18.1. Lessor shall, without charge, at any time and from time
to time, within fifteen (15) calendar days after request by Lessee, delivery a
written instrument to Lessee or any other person, firm or corporation specified
by Lessee, duly executed and acknowledged, certifying whether Lessee has or has
not, as the case may be, faithfully and fully made all payments then and
theretofore due to Lessor and whether Lessor knows or does not know, as the
case may be, of any default by Lessee in the performance by Lessee of all
agreements, terms, covenants and conditions on Lessee's part to be performed,
and if Lessor does know of any default, specifying the same, and further
certifying whether Lessor has made any assignment of Lessor's interest in this
Lease. Such certificate shall, and Lessor so acknowledges, be deemed to remain
current (but not more than 30 days after its date) and unchanged unless the
party to which it is addressed receives telephonic or telegraphic notice to the
contrary at a telephone number or address specified to Lessor by the party to
which the certificate is addressed.
ARTICLE 19
No Waiver
Section 19.1. The failure of Lessor or Lessee to insist upon strict
performance of any of the agreements, terms, covenants and conditions hereof
shall not be deemed a waiver of any
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rights or remedies that said party may have against the other and shall not be
deemed a waiver of any subsequent breach or default if any of such agreements,
terms, covenants and conditions. A receipt by Lessor of rent or any other
payment or the acceptance by Lessor of performance by Lessee with knowledge of
the breach of a term, covenant, condition, provision, or agreement of this
Lease shall not be deemed a waiver of such breach. No waiver by either Lessor
or Lessee of a term, covenant, condition, provision, or agreement under this
Lease shall be deemed to have been made unless expressed in writing and signed
by the waiving party.
ARTICLE 20
Notices
Section 20.1. Whenever it is provided herein that notice, demand, request
or other communication shall or may be given to, or served upon, either of the
parties by the other, and whenever either of the parties shall desire to give
or serve upon the other any notice, demand, request or other communication with
respect hereto or the Demised Premises, each such notice, demand, request or
other communication shall be in writing and, any law or statute to the contrary
and notwithstanding, shall not be effective for any purpose unless the same
shall be given or served as follows:
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<PAGE> 32
(a) If given or served by Lessor, by personal delivery or by mailing
the same in the United States Postal System to Lessee by registered or certified
mail, return receipt requested, postage prepaid, addressed to Lessee, at 2150
Cobb Parkway, Smyrna, Georgia 30080, or at such other address or addressess as
Lessee may from time to time designate by like notice given to Lessor;
(b) If given or served by Lessee, by personal delivery or by mailing
the same in the United States Postal System to Lessor by registered or certified
mail, return receipt requested, postage prepaid, addressed at 3280 Commerce
Drive, Duluth, Georgia 30136, or at such other address or addresses as Lessor
may from time to time desigate by like notice given to Lessee.
Every notice, demand, request or other communication hereunder shall
be deemed to have been given or served four (4) calendar days subsequent to the
day the same shall have been deposited in the United States Postal System as
aforesaid, or upon the day of receipt of the same by addressee, whichever shall
be the earlier.
ARTICLE 21
End of Term
Section 21.1. Except as herein otherwise provided, Lessee shall on
the last day of the Demised Term, or upon the sooner termination of the Demised
Term, peaceably and quietly surrender and deliver up to Lessor the Demised
Premises, together
32
<PAGE> 33
with such improvements as may then be on the Demised premises, the improvements
to be clean and otherwise in the same condition as exists at the commencement
of Demised Term or as exists upon the date of completion of construction
thereof, as applicable (except for replacement of destruction or damage, then
from time of completion of replacement pursuant to Article 15) except only for
reasonable wear and tear. Nothing in this Article, however, shall prohibit
Lessee from exercising the right or obligation of removal of the items provided
for in Article 6 hereof. Lessee covenants and agrees to repair any damage
occasioned by Lessee's removal of items pursuant to this Lease.
Section 21.2. Upon such termination all rent under this Lease, all
taxes, tax deposits, water rents, rates and charges, sewer rents and other
governmental impositions and charges, premiums of all insurance policies then in
force and any other items payable as additional rent under this Lease shall be
apportioned as of such termination.
ARTICLE 22
Quiet Enjoyment; Additional Rights of Lessee
Section 22.1. If and so long as Lessee shall pay the rent and
additional rent reserved by this Lease and shall perform and observe all of
the agreements, terms, covenants and conditions of this Lease on the part of
the Lessee to be performed and observed hereunder, Lessee shall peaceable and
quietly have, hold and enjoy the Demised Premises for the term hereby granted
as against Lessor and persons claiming by, through or under the Lessor.
33
<PAGE> 34
Section 22.2. Lessor represents that it is the owner of the
underlying fee simple title to the Demised Premises; that it has the right to
enter into this Lease; and that title to the Demised Premises is free and clear
of all liens and encumbrances except for those matters set forth in Exhibits
"C" and "D" attached hereto and by this reference made a part hereof.
Section 22.3. Lessee expressly assumes and agrees to perform all of
the duties imposed on the Grantee under the restrictive covenants placed on the
Demised Premised by Partridge Green, Inc. In the event Lessee wishes to take
exception to the restrictive covenants or wishes to ask for a waiver of any
matter set forth in the restrictive covenants, Lessee must first obtain the
written approval of Lessor which shall not be unreasonably withheld. All costs
including reasonable attorney fees shall be borne by Lessee.
ARTICLE 23
Net, Net, Net Lease
Section 23.1. This Lease Agreement shall be deemed and construed to
be a "net, net, net lease" and, except as otherwise expressly provided, Lessor
shall receive all rent and additional rent and all other payments hereunder to
be made by Lessee free from any charges, assessments, impositions, expenses or
deductions of any and every kind or nature, all of which Lessee hereby assumes
and shall pay.
34
<PAGE> 35
ARTICLE 24
Entire Agreement
Section 24.1. This writing contains the entire agreement between the
parties with regard to the subject matter hereof. No promise, representation
or warranty has been made not set forth herein.
ARTICLE 25
Successors and Assigns
Section 25.1. The agreements, terms, covenants and conditions herein
shall bind and inure to the benefit of Lessor and Lessee and their respective
successor, sublessees and assigns, except as otherwise provided herein.
ARTICLE 26
Use of Demised Premises
Section 26.1. Lessee shall not make or suffer any illegal or offensive
use of the Demised Premises or any part thereof and shall not cause or maintain,
or suffer to be caused or maintained, any nuisance in, at, or on the Demised
Premises or any part thereof. The Lessee will obey and, at its own expense,
comply with all lawful requirements, rules, regulations, codes, directives, and
ordinances of all legally constituted authorities existing at any time during
the continuance of this Lease and in any way affecting the demised premises,
the use and operation of the Demised Premises, or demolition, excavation, or
construction being done on the Demised premises. Lessee shall also, at its sole
cost and expense, procure or cause to be procured any and
35
<PAGE> 36
all permits, licenses or other authorizations required for the lawful and
proper use, occupation, and management of the Demised Premises.
ARTICLE 27
Recording of Lease
Section 27.1. Lessor and Lessee agree to execute, upon the request of either
party, with the requisite formalities under Georgia law for the purpose of
recording in the appropriate public records of Gwinnett County, Georgia, this
Lease or a Short Form Lease for the purpose of giving notice of the existence
of this Lease and the rights of the parties hereto. The party requesting such
recordation shall bear all costs in connection therewith.
ARTICLE 28
Miscellaneous
Section 28.1. Lessor and Lessee acknowledge and agree that no realtor, broker
or agent of any kind is a party to this Lease for any purpose including fee or
commission rights as to any rent or additional rent to be paid hereunder.
Lessor and Lessee each covenant and agree to indemnify and hold harmless the
other party hereto from the payment of all commissions, claims and related
expenses in connection with any realtor, broker or agent engaged by the
indemnifying party, or through which indemnifying party any such claim may be
made or asserted, in connection with the negotiating and procuring of this
Lease.
36
<PAGE> 37
Section 28.2. No relationship as creditor and debtor between the parties
is created or intended to be created by this Lease, the relationship between
Lessor and Lessee to be solely that of lessor and lessee. No security
agreements or financing statements under the Uniform Commercial Code or similar
statute naming Lessee as a debtor or otherwise implying that a debtor-creditor
relationship exists between Lessee and Lessor is authorized hereby or permitted
hereunder, it being understood, however, that the parties do not intend the
foregoing to prevent Lessor or Lessee from granting security interests in their
respective interests in the Demised Premises to third parties.
Section 28.3. If this Lease is modified at the request of and for the
benefit of Lessee, all costs, expenses and charges incident to such
modification, including without limitation reasonable counsel fees incurred by
Lessor with respect thereto, shall be paid by Lessee. If this Lease is modified
at the request of and for the benefit of Lessor, all costs, expenses and charges
incident to such modification, including without limitation reasonable counsel
fees incurred by Lessee with respect thereto, shall be paid by Lessor.
Section 28.4. The specified remedies to which Lessor may resort under the
terms of this Lease are cumulative and are not intended to be exclusive of any
other remedies or means of redress to which Lessor may be lawfully entitled in
case of any
37
<PAGE> 38
breach or threatened breach by Lessee of any of the terms and provisions of this
Lease. In addition to the other remedies to which Lessor may be entitled,
Lessor shall be entitled to the restraint by injunction of the violation or
attempted violation of any of the terms, covenants, conditions, provisions or
agreements of this Lease.
Section 28.5. This Lease can not be changed, modified, or discharged
orally but only in writing signed by the party against whom enforcement of the
change, modification or discharge is sought.
Section 28.6. Time is of the essence of this Lease.
Section 28.7. The captions and headings throughout this Lease are for
convenience and reference only, and the words contained therein shall in no way
be held or deemed to define, limit, describe, explain, modify, amplify, or add
to the interpretation, construction or meaning of any provision of or the scope
or intent of this Lease.
Section 28.8. This Lease is made in, intended to be performed and shall be
enforced and construed under the laws of the State of Georgia.
ARTICLE 29
Severability Provision
Section 29.1. Should any term, condition or provision hereof be deemed or
declared invalid or unenforceable by reason
38
<PAGE> 39
of any law or decision or governmental regulation of any kind or nature
whatsoever, by court decree or otherwise, such invalidity or unenforceability
shall not affect or impair the validity and enforceability shall not affect or
impair the validity and enforceability of the remaining terms, conditions and
provisions hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hand and
affixed their seals this 28 day of January, 1995.
LESSOR:
WINCO LTD., a Georgia limited
partnership
/s/ Walter M. Boomershine, Jr. (SEAL)
As to Lessor, signed, ------------------------------
sealed and delivered WALTER M. BOOMERSHINE, JR.
in the presence of:
/s/ Winifred F. Boomershine (SEAL)
- ------------------------ ----------------------------
Unofficial Witness MRS. WINIFRED F. BOOMERSHINE
/s/ Being the only general partners
- ------------------------ of Winco Ltd.
Notary Public
LESSEE:
BOOMERSHINE PONTIAC-GMC TRUCK,
INC., a Georgia corporation
As to Lessee, signed
sealed, and delivered
in the presence of: By: /s/
----------------------------
- ------------------------ Title:
Unofficial Witness -------------------
Attest:
------------------------
- ------------------------ Title:
Notary Public -------------------
39
<PAGE> 40
CERTIFICATE AND AGREEMENT
The undersigned hereby certify unto The Citizens and Southern National Bank
that attached hereto as Exhibit "A" is a true and exact copy of the original
Ten-Year Net Lease Agreement executed by and between Winco Ltd. and
Boomershine Pontiac-GMC Truck d/b/a Boomershine Nissan, dated as of January
28, 1995 (herein called "Lease") which Lease has not been amended or modified
and is in full force and effect.
Boomershine Pontiac-GMC Truck as lessee under the Lease hereby agrees to
attorn to The Citizens and Southern National Bank or its successors or assigns
under the terms of the Lease in the event of a foreclosure.
The undersigned hereby acknowledge that The Citizens and Southern National
Bank shall rely upon this Certificate in making a loan to Winco Ltd. in the
amount of $950,000.00 as of February 1, 1985.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
affixed their seals this 12th day of March, 1985.
WINCO LTD.
<PAGE> 1
EXHIBIT 10.11
LEASE AGREEMENT
LANDLORD:______________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Description Page
- ------- --------------------------------------------------------------------- -----
<S> <C> <C>
Term Sheet T-1
Exhibit 1 Description of Land E-1
Exhibit 2 Title Exceptions E-2
1 Premises and Lease Term 1
2 Basic Rent and Additional Rent 1
3 Taxes, Assessments and Utility Charges 2
4 Authorized Use 3
5 Insurance 3
6 Remedies in Case of Default 4
7 Environmental Assessment 4
8 Assignment and Subletting 4
9 Indemnification 5
10 Repairs and Maintenance 5
11 Early Termination 6
12 Notices 6
13 Alterations and Tenant Equipment 6
14 Right of Each Party to Perform Others' Covenants 6
15 Condemnation 7
16 Quiet Enjoyment 8
17 Holding Over 8
18 Discharge of Lien 8
19 Right of First Refusal To Purchase Or Lease 8
20 Miscellaneous 9
21 Term Sheet; Integration of Documents, Execution 9
</TABLE>
<PAGE> 2
LEASE AGREEMENT
TERM SHEET
Address of Premises: Boomershine Ford, Inc.
------------------------------------------
3230 Satellite Blvd.
------------------------------------------
Duluth, GA 30136
------------------------------------------
Basic Lease Provisions
1. Date of Lease: August 11, 1992
------------------------------------------
2. Landlord: Winco, L.P.,
------------------------------------------
a Georgia Limited Partnership
------------------------------------------
c/o Boomershine Pontiac-GMAC Truck, Inc.
------------------------------------------
2150 South Cobb Parkway, S.E.
------------------------------------------
Smyrna, Georgia 30080
------------------------------------------
ATTN: Walter Boomershine
------------------------------------------
3. Tenant: Ford Leasing Development Company
------------------------------------------
4. Commencement Date: August 11, 1992
------------------------------------------
5. Expiration Date: August 6, 2017
------------------------------------------
6. Basic Rent (initial) 37,500.00 per month
------------------------------------------
Basic Rent may be increased to a maximum of $40,000 per month upon notice by
Landlord of a refinancing action requiring monthly mortgage payments in
excess of $37,500 per month for a mortgage loan with an amortization period
of equal to the Remaining Term of the Lease Agreement (Remaining Term).
Landlord shall provide documentation from the lender indicating the amount,
term, amortization period, and interest rate of the loan. In the event,
that the amortization period is shorter than the Remaining Term, the Basic
Rent increase shall be calculated using an amortization period equal to
the Remaining Term.
7. Taxes:
a) Tax Period: Calendar year
-------------------------------------------
b) Applicable taxes: Assessed as of the tax status day
-------------------------------------------
(sometimes referred to as the "tax
-------------------------------------------
day," "assessment day," "date of finality,"
-------------------------------------------
etc.) occurring within said calendar year.
-------------------------------------------
T-1
<PAGE> 3
TERM SHEET (Continued
8. Notices:
a) Landlord: Winco, L.P.,
---------------------------------------
a Georgia Limited Partnership
---------------------------------------
2150 South Cobb Parkway, SE, Inc.
---------------------------------------
Smyrna, GA 30080
---------------------------------------
ATTN: Mr. Walter F. Boomershine
---------------------------------------
b) Tenant: Ford Leasing Development Company
---------------------------------------
One Parklane Boulevard - Suite 500 East
---------------------------------------
Dearborn, MI 48216
---------------------------------------
Attention: Dealership Real Estate
---------------------------------------
Copy to: Ford Leasing Development Company
----------------------------------------
The American Road
----------------------------------------
Dearborn, MI 48121
----------------------------------------
Attention: Secretary
----------------------------------------
9. Actual Cash Value (Insurance) $4,000,000
----------------------------------------
10. The following Articles are hereby added to the Lease Agreement
Article 8.03
8.03 (d) Landlord shall provide evidence that Winco L.P. and Boomershine
Ford, Inc. are under controlled by the same owners, stockholders, or partners
as defined in this Section 8.03.
Article 22 Option to Purchase
22.01 During a period expiring on February 8, 1994, Tenant, its successors
and assigns shall have the right and option to purchase the Facilities (herein
called the Option to Purchase) in accordance with the terms and conditions set
forth in a Purchase Agreement dated August 9, 1988 (Purchase Agreement) between
Ford Leasing Development company (Seller) and Pat M. Domenicone or his assignees
(Purchaser) except that the Purchase Price of the Facilities as provided in the
Purchase Agreement shall be increased to $4,000,000.
22.01 The death of Walter F. Boomershine and subsequent transfer of shares
in Winco Limited Partnership and Boomershine Ford, Inc. to members of his
immediate family (wife and children) will not be considered an event of option.
T-2
<PAGE> 4
TERM SHEET (Continued)
Article 23 Deferred Option to Purchase
23.01 During a period commencing February 9, 2005 and terminating
February 8, 2006, Tenant, its successors and assigns shall have the right and
option to purchase the Facilities (herein called the Deferred Option to
Purchase) in accordance with the terms and conditions set forth in a Purchase
Agreement dated August 9, 1988 (Purchase Agreement) between Ford Leasing
Development Company (Seller) and Pat M. Domenicone or his assignees
(Purchaser). The Purchase Agreement provides for the purchase price to be
determined by Seller based on the then current fair market value of the
Facilities. The purchase price shall be determined using an Appraisal prepared
by a member of the Appraisal Institute with MAI or equivalent designation who
shall be selected by Ford Leasing Development Company. The appraiser will be
instructed to value the property based on the assumption that the Facilities
will continue to be used as an automotive dealership.
11. Landlord has provided a copy of an Environmental Assessment to Tenant of
the property in accordance with Article 7.
IN WITNESS WHEREOF, Landlord and Tenant have executed the Lease
Agreement to which this Term Sheet is attached by signing and dating this Term
Sheet and by initialling the first page of the Lease Agreement.
Landlord: Tenant:
WINCO L.P., FORD LEASING DEVELOPMENT COMPANY
a Georgia Limited Partnership
by: /s/ by: /s/ Arthur Steuer
------------------------------ ----------------------------
Arthur Steuer
its: G.P. its: Assistant Secretary
----------------------------- ----------------------------
Date: 8/11/92 Date: 8/10/92
---------------------------- ---------------------------
T-3
<PAGE> 5
EXHIBIT 1
Attached to and a part of the Lease Agreement dated as of the date specified
in ITEM 1 OF THE TERM SHEET between the party (herein called Landlord)
identified as Landlord in ITEM 2 OF THE TERM SHEET and the party (herein called
Tenant) identified as Tenant in ITEM 3 OF THE TERM SHEET.
DESCRIPTION OF THE LAND:
ALL THAT TRACT OR PARCEL OF LAND lying and being in Land Lot 206 of the 6th
District of Gwinnett County, Georgia, being Lot 3, Block I, of plat of survey
of "Unit Eight, Gwinnett Place Regional Mall," prepared by Hayes, James &
Associates, J. Dennis Billew, Georgia Registered Land Surveyor No. 2195, dated
July 17, 1984, recorded in Plat Book 27, Page 83, Gwinnett County, Georgia
Records, and being more particularly described as follows:
BEGINNING at the point of intersection of the southern right-of-way line of
Satellite Boulevard (100-foot right-of-way) with the western right-of-way line
of Commerce Avenue (the 88-foot right-of-way of Commerce Avenue being widened at
this point), and running thence South 21 degrees 18 minutes 00 seconds East
along the western right-of-way line of Commerce Avenue 70.71 feet to a point;
running thence in a generally southwesterly direction along the western
right-of-way line of Commerce Avenue the following courses and distances: South
23 degrees 42 minutes 00 seconds West 98.11 feet to a point; and along the arc
of a 910.93 foot radius curve an arc distance of 396.60 feet to a point (said
arc being subtended by a chord lying to the northwest of said arc and bearing
South 36 degrees 10 minutes 22 seconds West a distance of 393.47 feet); thence
leaving said western right-of-way line of Commerce Avenue and running North 41
degrees 21 minutes 17 seconds West 285.00 feet to a point; running thence North
52 degrees 18 minutes 11 seconds West 450.67 feet to a point; running thence
North 23 degrees 42 minutes 00 seconds East 303.10 feet to a point on the
southern right-of-way line of Satellite Boulevard (100-foot right-of-way);
running thence South 66 degrees 18 minutes 00 seconds East along the southern
right-of-way line of Satellite Boulevard 730.69 feet to the POINT OF BEGINNING;
said tract containing, according to plat of survey hereinabove referred to,
7.155 acres.
TOGETHER WITH all easements benefitting the property conveyed hereby as was
acquired by Grantor herein under (i) Grant of Easement by and between Partridge
Greene, Inc. and CF-H Gwinnett Associates, dated March 31, 1982, recorded in
Deed Book 2357, Page 251, aforesaid records; as amended by Corrected and
Restated Grant of Easement between the same parties dated as of March 31, 1982,
recorded in Deed Book 2478, Page 422, aforesaid records, and as further amended
by First Amendment to Corrected and Restated Grant of Easement between the same
parties, dated as of March 31, 1983, recorded in Deed Book 2485, Page 332,
aforesaid records.
Being the same property conveyed by Warranty Deed from Partridge Green, Inc.
to Ford Leasing Development Company, dated September 13, 1984, filed for record
September 17, 1984 at 9:00 A.M., recorded in Deed Book 2875, page 250, in the
Office of the Clerk of the Superior Court of Gwinnett County, Georgia.
E-1
<PAGE> 6
EXHIBIT 2
Attached to and a part of the Lease Agreement dated as of the date specified in
ITEM 1 OF THE TERM SHEET between the party (herein called Landlord) identified
as Landlord in ITEM 2 OF THE TERM SHEET and the party (herein called Tenant)
identified as Tenant in ITEM 3 OF THE TERM SHEET.
TITLE EXCEPTIONS RESPECTING THE PREMISES:
1. The lien of ad valorem real property taxes and special assignments.
2. Visible easements and the state of facts an accurate and up to date
survey and personal inspections would show.
3. Applicable zoning and building laws and regulations.
4. Recorded building and use restrictions, conditions, covenants,
exceptions, leases, easements, and rights and agreements, including
without limitation those that may be listed below.
E-2
<PAGE> 7
LEASE AGREEMENT
LEASE dated as of the date specified in ITEM 1 OF THE TERM SHEET, between the
party (herein called Landlord) identified as Landlord in ITEM 2 OF THE TERM
SHEET and the party (herein called Tenant) identified as Tenant in ITEM 3 OF
THE TERM SHEET.
RECITALS
Landlord has agreed to lease the Premises (hereinafter defined), to
Tenant pursuant to the terms, covenants and conditions hereinafter set forth;
and additionally Tenant has agreed to sublease the Premises to Landlord or a
third party (herein called Dealer) for use as an authorized dealership pursuant
to one or more sales and service agreements (herein collectively called Sales
Agreements) with Ford Motor Company and/or any of its subsidiaries or
affiliates (herein collectively called Ford) pursuant to the terms of a
sublease (herein called the Sublease), executed and delivered by Tenant as
sublandlord and Dealer as subtenant, simultaneously with the execution and
delivery of this Lease. The term Sublease also shall apply to any other
sublease covering the Premises executed by Tenant as sublandlord at any time
during the Lease Term (hereinafter defined).
WITNESSETH:
That for and in consideration of these presents and of the mutual
covenants and undertakings, the parties agree as follows:
ARTICLE 1. PREMISES AND LEASE TERM
1.01 Upon and subject to the terms and provisions hereinafter set
forth; Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
the following property (herein collectively called the Premises) for the term
(herein called the Lease Term) hereinafter provided:
(a) the land described in Exhibit 1; and
(b) all buildings, structures and improvements now or hereafter
erected on such land either prior to the Commencement Date
(hereinafter defined) or during the Lease Term, and all fixtures,
equipment and other property (other than Tenant Equipment as
hereinafter defined) now or hereafter installed therein either
prior to the Commencement Date or during the Lease Term (all of
the foregoing being herein collectively called the Improvements).
1.02 Except as hereinafter provided, the Lease Term shall commence on
the date (herein called the Commencement Date) specified in ITEM 4 OF THE TERM
SHEET and shall expire at midnight on the date (herein called the Expiration
Date) specified in ITEM 5 OF THE TERM SHEET.
1.03 If the Sublease executed and delivered simultaneously with the
execution and delivery of this Lease expires or is terminated for any reason
during the Lease Term, Tenant at its option may terminate this Lease and all of
Tenant's obligations hereunder at any time thereafter upon giving to Landlord
not less than 30 days' prior written notice of such termination. Subsequent
subletting of the Premises shall not constitute a waiver of Tenant's absolute
right to terminate this Lease at any time after the termination of the Sublease.
ARTICLE 2. BASIC RENT AND ADDITIONAL RENT
2.01 Tenant shall pay to Landlord a net monthly rental (herein called
Basic Rent), over and above the other and additional payments to be made by
Tenant, in the amount specified in ITEM 6 OF THE TERM SHEET.
2.02 Basic Rent for the first month or partial month (calculated on
the basis of the actual number of days of such partial month of the Lease Term)
shall be paid to Landlord on or before the Commencement Date and thereafter
each installment of Basic Rent shall be paid on or before the first business
day of each and every calendar month during the Lease Term.
Initials
-------------
Landlord:
Tenant:
1
<PAGE> 8
2.03 Tenant shall pay, as additional rent, all other amounts,
liabilities, obligations and other payments which Tenant herein assumes or
agrees to pay (herein collectively called Additional Rent). Basic Rent and
Additional Rent are herein sometimes collectively called the Rents.
2.04 Rents shall be remitted to Landlord at the address specified
in Section 12.01 or at such other place or to such other person or entity as
Landlord from time to time may designate by notice to Tenant; provided however,
that Tenant's obligation contained in this Section 2.04 shall be deemed
satisfied to the extent of payments made to the holder of any mortgage note
upon the Premises.
2.05 Upon expiration of the Lease Term, Tenant shall remove its
goods and effects and peacefully yield up the Premises to the Landlord.
2.06 If the Lease Term shall terminate prior to its stated
expiration date (except pursuant to Section 6.01), then Landlord shall refund
to Tenant all Rents paid with respect to periods occurring after the
termination of the Lease.
ARTICLE 3. TAXES, ASSESSMENTS AND UTILITIES
3.01 For the purpose of this Lease, "Applicable Taxes" shall mean
ad valorem real and personal Property taxes assessed and levied against the
Premises and Tenant's Property (hereinafter defined).
3.02 (a) Tax Period shall mean the period specified in ITEM 7A OF
THE TERM SHEET.
(b) Applicable Taxes shall mean the period specified in ITEM 7B OF
THE TERM SHEET.
3.03 Landlord shall make all arrangements necessary to have the
collecting authority send all pertinent tax bills directly to Tenant or its
designee. All pertinent tax bills received by Landlord shall be immediately
forwarded directly to Tenant or its designee to permit timely remittance in the
normal course of business. Landlord shall be fully liable for all interest and
penalties reasonably chargeable to its failure to perform as aforesaid.
3.04 Tenant or its designee shall bear the expense of and remit to
the collecting authority Applicable Taxes becoming due and payable during the
Lease Term, and Tenant shall furnish to Landlord receipted copies of tax bills
when they become available. Tenant shall bear the expense of Applicable Taxes
for full Tax Periods during the Lease Term and, additionally, the expense
thereof for the Tax Periods in which the Lease Term begins or terminates in the
proportion that the number of days the Lease Term exists within each of such
Tax Periods bears to the total number of days in such Tax Period. Applicable
Taxes remitted by Tenant or its designee but properly the expense of Landlord,
as set forth herein, shall be paid to Tenant or its designee by Landlord
promptly upon receipt of Tenant's or its designee's written request accompanied
by supporting documents.
3.05 Tenant shall bear the expense of and remit to the collecting
authority special assessments applicable to the Premises, but only to the extent
that such assessments become due and payable after the termination of the Lease
Term shall be the sole responsibility and at the sole expense of Landlord. For
purposes of this Section 3.05, payment in installments over the longest possible
term shall be deemed to have been elected in any instance where a determinable
option so to pay existed, or may exist, notwithstanding that an assessment may
have been, or may hereafter be, paid in full, and Tenant shall bear the expense
of only such installments as would have become due, payable and delinquent
during the Lease Term had the installment option been elected. Landlord agrees
to give Tenant timely notice of and an opportunity to participate in all
hearings and negotiations regarding special assessments affecting the Premises.
3.06 Upon written request of Tenant, or its designee, Landlord
will arrange meetings with proper tax official for the purposes of negotiating
real estate tax assessments against the Premises, and Landlord shall extend to
Tenant or its designee a timely opportunity to participate in all such
negotiations. Landlord shall not negotiate any assessment, nor concur therein,
unless Tenant or its designee has participated as aforesaid, or had declined in
writing to do so.
3.07 Tenant or its designee shall have the unrestricted right in
its name, or in the name of Landlord if required, to pursue such administrative
and judicial procedures as may be necessary to contest and appeal from any
assessment or valuation, and pay under protest any billing of Applicable Taxes
or special assessments, all or part of which are borne by Tenant under the
terms of this Lease. Landlord agrees to cooperate in all reasonable ways to
further any such procedure by Tenant or its designee. Benefits and
2
<PAGE> 9
expenses resulting from any contest with respect to such assessments or
Applicable Taxes for Tax Periods in which the Lease Term begins or terminates
shall be borne ratably by Tenant or its designee and Landlord in proportion to
the amount of the contested Applicable Taxes, or assessments required to be
borne by each pursuant to the terms of this Lease in the absence of a contest
thereof.
3.08 Personal property taxes on property located upon the Premises shall be
remitted by the owner thereof, and the owner shall file any and all personal
property tax returns that may be required in relation thereto. Tenant shall
reimburse Landlord, as Additional Rent, for personal property taxes paid by
Landlord on property located upon the Premises and used therewith. Reimbursement
shall be made within 30 days after paid receipts therefore are delivered by
Landlord to Tenant.
3.09 Tenant shall pay or cause to be paid all changes incurred by Tenant
for water, sewer, gas, electricity, light, heat, and power, and for telephone,
protective and other communication services, and for all other public or private
utility services which are used, rendered or supplied upon, to or in connection
with the Premises at any time during the Lease Term.
ARTICLE 4. AUTHORIZED USE
4.01 Tenant shall use and occupy the Premises only for lawful purposes.
Tenant shall not permit any unlawful occupation, business or trade to be
conducted on the Premises or any part thereof. Tenant shall not breach or
suffer the breach of any enforceable recorded covenants, conditions, agreements
or restrictions affecting the Premises, or any part thereof, or the use of the
same.
ARTICLE 5. INSURANCE
5.01 Tenant shall maintain general or public liability insurance against
claims for bodily injury, death or property damage occurring on, in or about the
Premises and the streets and alleys adjoining the Premises, affording protection
of at least $3,000,000 single limit per occurrence of loss or damage. Tenant
may self-insure for such coverage. All such insurance shall be effected at
Tenant's expense under valid and enforceable policies issued by insurers of
recognized responsibility which are qualified to do business in the state where
the Premises are located. Such policies shall be for a minimum term of one year
and insure Landlord and Tenant, as their respective interests may appear and may
insure other parties. Each policy or certificate to the extent obtainable,
shall contain an agreement by the insurer that such policies shall not be
cancelled or substantially modified without at least 30 days' prior notice to
Landlord. Originals or duplicate originals of such policies shall be delivered
by Tenant to Landlord promptly after the Commencement Date, and similar
replacement policies shall be delivered by Tenant to Landlord promptly after
receipt.
5.02 (a) Tenant shall obtain and maintain throughout the Lease Term, fire
and broad form extended coverage insurance covering the Premises (i) in an
amount not less than the greater of (A) 80% of the then actual cash value of the
Improvements, actual cash value being the cost of replacing the Improvements
exclusive of the cost of excavation, foundations and footings below the lowest
basement floor, less depreciation of the Improvements, (B) the amount which
would cause Tenant to be considered a co-insurer under such insurance, and (ii)
subject to such deductibles as Tenant shall determine in its reasonable
discretion from time to time.
(b) Actual cash value is deemed to be in the amount specified in Item 9 of
the Term Sheet, as of the Commencement Date, and shall at the written request of
Landlord be determined from time to time during the Lease Term (but not more
frequently than once in any 36 calendar months) by an appraiser, engineer,
architect or contractor designated by Tenant, approved in writing by Landlord
and paid by Landlord.
5.03 All such fire and extended coverage insurance shall be effected at
Tenant's expense under valid and enforceable policies issued by insurers of
Tenant's choice; provided such insurers are of recognized responsibility and are
qualified to do business in the State where the Premises are located. Such
policies shall name Tenant as sole loss payee and shall insure Landlord and
Tenant as their respective interests may appear. Each policy or certificate, to
the extent obtainable, shall contain an agreement by the insurer that such
policy shall not be cancelled without at least 10 days' prior notice to
Landlord. Certificates of such policies shall be delivered by Tenant to
Landlord.
5.04 Notwithstanding anything in this Lease to the contrary, Landlord
hereby releases Tenant from any liability or obligation for damage or
destruction caused to the Premises or any portion thereof by fire or any other
perils that are insured under the fire and extended coverage insurance referred
to in this Article, whether or not due to Tenant's negligence.
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ARTICLE 6. REMEDIES IN CASE OF DEFAULT
6.01 If Tenant shall default in its performance of or compliance with any
of its obligations under this Lease and such default shall continue for a period
of 60 days after notice given by Landlord to Tenant of such default (unless in
the case of any default which cannot with due diligence be remedied within such
60 day period, a course of action adequate to remedy the same shall be commenced
by Tenant within such period and thereafter shall be prosecuted with diligence
and continuity), or if Tenant shall be adjudicated a bankrupt or insolvent or
make an assignment for the benefit of creditors, then, in the event of any such
situation, Landlord, at its option may lawfully enter into and upon the Premises
or any part thereof and repossess the same and evict Tenant and all persons
claiming under and through Tenant, and remove any effects, forcibly, if
necessary, without being guilty of trespass and without prejudice to any
remedies which may be available for arrears of Rents or for Tenant's breach of
covenant; and upon entry as aforesaid, this Lease shall terminate and wholly
expire. In the case of any such termination, Landlord will use its best efforts
to relet the Premises at the best possible rent obtainable and, except for the
period subsequent to any termination by Tenant of this Lease and its obligations
pursuant to Section 2.03, Tenant shall indemnify Landlord against all loss of
rent which Landlord may incur during the remainder of the period which would
have been the Lease Term in the absence of such termination.
ARTICLE 7. ENVIRONMENTAL ASSESSMENT
7.01 An Environmental Assessment of the Premises has been obtained. Both
Landlord and Tenant have reviewed the Assessment including any completed
remedial work and find the environmental condition acceptable. Landlord hereby
agrees that it shall indemnify, defend and save Tenant harmless from and against
any and all claims, demands, actions, suits, costs and expenses (including
attorneys' fees) (collectively "claims") caused by or arising out of the
presence or release of any hazardous substance on or from the Premises, whether
or not such claims arose on account of the failure of the Tenant to comply with
any environmental laws or regulations, which presence, release or failure to
comply occurred, in whole or in part, (a) prior to the Commencement Date or (b)
during any Control Period (hereinafter defined).
7.02 If Landlord receives reimbursement from an insurer or governmental
authority for any remediation costs, the monthly Basic Rent shall be
appropriately reduced to reflect such reimbursement, less any costs or expenses
associated with obtaining such reimbursement.
ARTICLE 8. ASSIGNMENT AND SUBLETTING
8.01 During the Lease Term, Tenant, without the consent of Landlord, may
assign this Lease or any interest herein or sublease all or part of the
Premises.
8.02 During any assignment of this Lease or subleasing of the Premises,
Tenant shall remain liable for the payment of the Rents and the performance or
observance of all of the covenants, conditions and undertakings of Tenant
hereunder.
8.03 Notwithstanding anything in this Lease to the contrary, during any
Control Period within the Lease Term:
(a) Tenant shall not have any obligation to pay the Rents or to perform
any other obligation of Tenant under this Lease unless and until all
then due basic rent and additional rent under the Sublease have been
paid and all other obligations of the subtenant under the Sublease
which arose during such period have been performed; and
(b) no default of this Lease shall be deemed to have occurred, nor shall
Landlord have the right to enforce this Lease against Tenant
respecting any circumstances or event which shall have occurred during
any Control Period; and
(c) Landlord shall be and shall remain liable for all obligations of
subtenant under the Sublease, including but not limited to Applicable
Taxes and repairs and maintenance.
The term "Control Period" shall mean a period of time which shall commence
when the subtenant under the Sublease (i) is the same person or entity as
Landlord, (ii) controls or is controlled by Landlord, (iii) along with Landlord
is controlled by a third party, or (iv) is a debtor in possession, trustee in
bankruptcy or a receiver of the original subtenant, and which shall end 30 days
after such affiliations and relationships no longer exist and Landlord so
notifies Tenant. For purposes of this Lease, the terms "controls" and
"controlled by" shall mean the power, whether or not exercised, to direct, or
cause the direction of, the management and/or policies of such person or entity,
whether through the ownership of voting securities or by contract or otherwise.
There shall be no waiver of the provisions of this Section 8.03 in the event
Tenant chooses to make payments or to perform any of the obligations of Tenant
under this Lease, and the provisions of this Section shall not affect or
diminish the validity of this Lease or Tenant's estate in the Premises created
hereby.
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ARTICLE 9. INDEMNIFICATION
9.01 Landlord shall indemnify and save harmless Tenant (and anyone
claiming under Tenant) against and from any loss, damage, claim, liability, cost
and expense (including without limitation reasonable counsel fees and
disbursements) which shall be asserted against and incurred by Tenant (or
anyone claiming under Tenant) occasioned by or arising from (a) any default by
Landlord under this Lease or (b) any negligent or other tortious act of
Landlord with respect to the Premises. To the extent that Tenant recovers from
the insurance carried pursuant to Section 5.01, Landlord is released from this
indemnification.
9.02 Tenant shall indemnify and save harmless Landlord against and from
all loss, damage, claim, liability, cost and expense (including without
limitation reasonable counsel fees and disbursements) which shall be asserted
against or incurred by Landlord and occasioned by or arising from (a) any
default by Tenant under this Lease or (b) any negligent or other tortious act
of Tenant with respect to the Premises. To the extent that Landlord recovers
from the insurance carried pursuant to Section 5.01, Tenant is released from
this indemnification.
ARTICLE 10. REPAIRS AND MAINTENANCE
10.01 Tenant shall make (a) non-structural repairs and replacements to the
Improvements necessary to keep and maintain the Improvements in the condition in
which they were on the Commencement Date, and (b) repairs and replacements
necessitated by Tenant's acts or negligence; except that Tenant shall not be
liable for any repairs and replacements required as a result of ordinary wear
and tear, or for which Landlord is obligated pursuant to this Article 10.
Landlord shall assign and transfer to Tenant any warranty or guaranty received
by Landlord from any party who may have supplied labor, or services and/or
materials with respect to any portion of the Premises which Tenant is required
to repair or replace pursuant to this Lease.
10.02 Landlord shall make (a) repairs and replacements (other than those
which Tenant is obligated to make under the terms of this Lease) which may be
necessary to keep and maintain the Improvements in good repair,, order and
condition, including without limitation, the roof, exterior walls, concrete
floor slabs, foundations, beams, columns, joists, masonry walls and load bearing
partitions, and all other structural portions of the buildings, and (b) repairs
and replacements, though interior and non-structural, necessitated by
Landlord's acts or negligence. Tenant shall permit Landlord to enter upon the
Premises at all reasonable times during normal business hours to examine the
condition of the Improvements and to make such repairs and replacements thereto
as Landlord is required to make pursuant to this Lease. All such repairs and
replacements made by Landlord shall be done at such time and in such manner as
to cause as little inconvenience and disruption as possible to Tenants
business operations in or on the Premises.
10.03 If the Premises shall be damaged by fire, casualty, act of God or
other cause or happening, to an extent which in the reasonable judgement of
Tenant impairs the use or occupancy of the Premises as an automobile or truck
dealership, the Tenant, in its reasonable discretion, shall have the right, by
giving notice to Landlord of any such happening, to terminate this Lease as of
the time of such happening; and Tenant's obligation to pay the Rents shall cease
and the Rents paid shall be apportioned and the unearned portion shall be
refunded to Tenant. In the event this Lease is so terminated, any and all
proceeds from the insurance coverage referred to in Section 5.02 and 5.03 shall
be assigned to Landlord or the first mortgagees, as the case may be. If Tenant
does not elect to terminate this lease, Landlord shall expeditiously rebuild and
restore the Premises as nearly as practicable to the condition existing
immediately prior to such damage, destruction, demolition or removal and the
Rents will abate during the period that Tenant does not use the Premises by
reason of such happening or the rebuilding and restoration of the Premises.
10.04 If the Premises shall be damaged by any aforesaid happening to an
extent which in the reasonable judgement of Tenant does not impair the use or
occupancy of the Premises as an automobile or truck dealership, then Landlord
shall expeditiously rebuild and restore the Premises as nearly as practicable to
the condition existing immediately prior to such damage, destruction,
demolition or removal and the Rents shall abate pro rata during the period that
Tenant is deprived of the use of all or any portion of the Premises by reason
of such happening and the rebuilding and restoration of the Premises.
10.05 Upon the completion of any rebuilding and restoration of the
Premises and the receipt by Tenant of a certified statement of the cost thereof,
Tenant shall reimburse Landlord for the portion of such costs that are covered
by the fire and extended coverage insurance permitted under Section 5.02, less
the permitted deductible.
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10.06 If Landlord fails in any of the foregoing events expeditiously,
and in any event within nine months from the date of such damage, destruction,
demolition or removal, to complete the rebuilding and restoration of the
Premises, in addition to the right of Tenant to cause such rebuilding and
restoration to be made pursuant to Article 14, Tenant shall have the
alternative right by giving notice to Landlord to terminate this Lease as of
the date of the happening.
ARTICLE 11. EARLY TERMINATION
11.01 If any statute, law, ordinance, ruling, order or regulation
(herein called Prohibition) now exists or is hereafter enacted prohibiting or
substantially impairing any use of the Premises for an automobile and truck
sales and service establishment, including without limitation the sale,
storage, display, repair and service of all types of new and used motor vehicle
(including the outdoor sale, storage and repair work and painting, and engine,
chassis and transmission repair work), the sale of such merchandise as is sold
ordinarily by an automobile and truck sales and service establishment, then
Tenant, at any time thereafter, by giving notice to Landlord may designate a
date (which date shall be not later than 60 days after the giving of such
notice) on which this Lease and all of Tenant's liability thereunder shall
terminate and thereupon, on the date fixed in such notice, this Lease and
Tenants' liability hereunder shall terminate as if such date were the date
originally fixed in this Lease for the expiration thereof and the Rents shall
be adjusted and paid to such date of termination.
11.02 Upon any termination of this Lease, other than pursuant to
Section 6.01, Landlord and Tenant shall prorate all Rents required to be paid
by Tenant hereunder so that the Rents attributable to the periods up to and
including the date of any such termination of this Lease shall be borne by
Tenant and the Rents attributable to periods from and after date of any such
termination of this Lease shall be borne by Landlord. The provisions of this
Article shall survive any termination of this Lease.
ARTICLE 12. NOTICES
12.01 All notices and other communications required or permitted to
be given hereunder shall be in writing and shall be mailed by certified or
registered mail, postage prepaid (or if mail service shall be unavailable as
the result of a strike or other cause beyond the control of the party required
to provide such notice, by air or surface parcel delivery service), addressed
as specified in ITEM 8A AND 8B OF THE TERM SHEET or to such other address as
either party may designate to the other by written notice. Any notice by
certified or registered mail shall be deemed to have been given on the date or
certification or registration thereof. Any notice by air or surface parcel
delivery shall be deemed to have been given on the date submitted to the
carrier for delivery.
ARTICLE 13. ALTERATIONS AND TENANT PROPERTY
13.01 Tenant, at its expense, may make additions, alterations, and
improvements to the Premises and may install therein or thereon fixtures,
machinery, equipment and advertising signs (herein collectively called
Tenant's Property) without any consent being required of Landlord other than
for structural additions, alterations and improvements, and all Tenant's
Property (except painting and wall coverings) shall remain Tenant's property,
and at Tenant's election, may be removed prior to termination of this Lease;
provided, however, that Tenant shall repair any physical damage to the
Premises occasioned by removal thereof.
13.02 In no event shall the Rents be changed because of any
additions, improvements, alteration or betterment by Landlord or any other
party (including but not limited to Tenant or any subtenant) unless this Lease
shall be amended in writing and any adjustment in the Rents specifically
stated in the amendment
ARTICLE 14. RIGHT OF EACH PARTY TO PERFORM OTHERS' COVENANTS
14.01 Each party shall have the right at any time, after ten days
notice to the other party (or without notice in case of emergency or in case
any fine, penalty, interest or cost may otherwise be imposed or incurred), to
make any payment including but not limited to Applicable Taxes or to perform
any act required of such other party under any provision of this Lease, any
mortgage note upon the Premises, including without limitation the right of
Tenant to cure any default by Landlord under any mortgage note upon the
Premises, and in exercising such right, to incur necessary or incidental costs
and expenses, including reasonable counsel fees. Nothing herein shall imply
any obligation on the part of either party to make any payment or perform any
act required of the other party, and the exercise of the right so to do shall
not constitute a release of any obligations of a waiver of any default.
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14.02. All payments made and all costs and expenses incurred in
connection with any exercise of such right shall be reimbursed by the other
party to the party making and paying the same within ten days after notice,
together with interest at the rate of 12% per annum compounded monthly, (or if
such amount shall be in excess of the highest rate of interest permitted by
law, then at such highest rate permitted by law), from the respective dates of
the making of such payments or the incurring of such costs and expenses. In
addition to any other rights and remedies available to either party, Landlord
shall have, in respect of Tenant's failure to make reimbursement of any amount
as aforesaid, the same rights and remedies as in the case of default by Tenant
in the payment of Basic Rent, and Tenant shall have, in respect of Landlord's
failure to make reimbursement of any amount as aforesaid, including, but not
limited to, Applicable Taxes, the right to deduct such amount from the Rents
due and payable or to become due and payable hereunder.
ARTICLE 15. CONDEMNATION
15.01 The term "Taking" shall mean (a) a taking during the Lease Term
of all or part of the Premises as a result of condemnation or eminent domain or
by agreement between Landlord and the governmental or other body which has the
power of condemnation, (b) damage to all or part thereof as of the result of
condemnation or eminent domain proceedings, and (c) damage incidental to a
public work. The term "Date of Taking" shall mean the date on which title is
vested in such authority or the damage is imposed, as the case may be. Landlord
shall have the right to prosecute and negotiate any action involving a Taking.
15.02 Forthwith upon the receipt by Landlord or Tenant of any notice of
the institution of any proceeding for a Taking, or for any street widening
other than a Taking or any change of grade affecting the Premises or any part
thereof, the party receiving such notice shall promptly give notice to the
other party to this Lease.
15.03 In the event of a Taking of either the fee of, or the temporary
use of, or a perpetual or temporary easement upon, all of the Premises, the
Lease Term, at the election of Tenant, shall expire as the Date of Taking.
Such election shall be made by notice to Landlord within 120 days after the
Date of Taking.
15.04 In the event of a Taking or temporary use of, or a perpetual or
temporary easement, upon less than all of the Premises, if Tenant, in its
reasonable discretion, shall determine that the remaining portions of the
Premises cannot be used satisfactorily for all the specific purposes set forth
in Section 7.01 and shall forward a notice to Landlord of such determination
within 120 days after the Date of Taking, this Lease shall expire as of the
Date of the Date of Taking, or, if Tenant shall have remained in possession of
the untaken part of the Premises after the Date of Taking, this Lease shall
terminate as of the date specified in such notice by Tenant to Landlord. Such
date shall be no sooner than the date Tenant vacates the Premises, nor later
than the 180th day after the Date of Taking.
15.05 In the event this Lease shall terminate in accordance with the
provisions of Sections 15.03 or 15.04, the aggregate of the awards or other
proceeds of the Taking (including any interest in or paid with respect to such
award or proceeds) on account of Landlord's and Tenant's interests in the
Premises shall be divided between Landlord and Tenant as follows
(a) Tenant shall be entitled to receive such portion of such awards
or proceeds, with the interest thereon, as shall represent (i)
the value, immediately prior to the Date of Taking, of Tenant's
leasehold estate and Tenant's property so taken, and (ii)
damages to the portion of Tenant's Property and leasehold estate
not so taken; and
(b) Landlord shall be entitled to receive the balance of such awards
or proceeds, with the interest thereon.
15.06 In the event of a Taking which does not result in a termination
of this Lease by Tenant pursuant to Section 15.03 or 15.04:
(a) Landlord immediately shall repair and restore the Premises to the
condition that existed immediately prior to the Taking (or if the
Premises are not capable of being so repaired and restored, then
as closely to such condition as is possible and is consistent
with the use of the Premises as an automotive dealership);
(b) the total of the awards or other proceeds of the Taking, with the
interest thereon, shall first be used to reimburse Landlord for
its actual expenses in restoring or repairing the Premises and
the remainder shall be allocated between Landlord and Tenant in
the manner prescribed in Section 15.05; and
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(c) this Lease shall remain in full force and effect with respect to
the remainder of the Premises, except that Basic Rent, from and
after the Date of Taking, shall be equal to the product obtained
by multiplying Basic Rent in effect immediately prior to the
Date of Taking by a fraction, the numerator of which shall be the
fair market value of the Premises immediately following the Date
of Taking and the denominator of which shall be the fair market
value immediately prior the Date of Taking.
15.07 In the event of any street widening (other than a Taking) or
change of grade affecting the Premises the aggregate of the awards or other
proceeds paid in connection therewith (including any interest included in or
paid in respect of such awards or proceeds) after deducting the reasonable
expenses of Landlord and Tenant in collecting the same, shall be allocated
between Landlord and Tenant in the manner prescribed in Section 15.05, and
there shall be the same reduction in Basic Rent and recited in Section 15.06.
15.08 Nothing contained in this Article 15 shall be deemed to give
Landlord any interest in any award for any Taking of any Tenant's Property of
the property of any subtenant, and all such awards shall belong to Tenant
or such subtenant, as the case may be. All claims for any such award may be
filed and prosecuted by Tenant or any subtenant, as the case may be.
ARTICLE 16. Quiet Enjoyment
16.01 Upon Tenant paying the Rents and performing all of Tenant's
obligations under this Lease, Tenant may peacefully and quietly enjoy the
Premises during the Lease Term, subject however, to the provisions of this
Lease and to the matters specified in Exhibit 2.
ARTICLE 17. Holding Over
17.01 Any holding over by Tenant or any assignee or subtenant of
Tenant beyond the expiration of the Lease Term shall give rise to a tenancy
from month to month at the same Basic Rent payable during the last month of the
Lease Term and all other provisions of this Lease shall continue.
ARTICLE 18. Discharge of Lien
18.01 In the event that the Premises or any part thereof or shall
become subject to any vendor's, mechanic's, laborer's, materialman's or other
lien, encumbrance or charge based upon the furnishing of materials or labor to
or for the benefit of Tenant, at any time during the Lease Term, Tenant shall
cause the same at its sole cost and expense, to be satisfied or discharged
within 90 days after notice thereof to Tenant given by or on behalf of the
lienor.
ARTICLE 19. Right of First Refusal To Purchase Or Lease
19.01 During the Lease Term, Tenant, its successors and assigns,
shall have the right and option of first refusal to purchase or lease the
Premises (herein called the Right of First Refusal), all upon and subject to
the terms and provisions of this Article.
19.02 Before selling or leasing, directly or indirectly, the whole or
any part of the Premises, including any beneficial interest in the Premises,
Landlord, its successors and assigns, shall have given notice to Tenant of such
proposed sale or lease, together with a true, correct, and complete copy of a
contract of sale or purchase agreement or lease, duly executed by the proposed
vendee or lessee and by Landlord, as vendor, or lessor containing all other
terms and provisions of the proposed sale or lease. Tenant shall have a period
of 60 days (after receipt of such notice and such contract of sale, purchase
agreement or lease) to purchase or lease the Premises, or the part thereof
which is the subject of such contract of sale or purchase agreement or lessee
at the same price or rental and upon and subject to the terms and provisions as
are contained in such contract of sale or purchase agreement or lease. Tenant
may exercise the Right of First Refusal, Landlord may consummate such sale or
lease in accordance with the terms and provisions of such contract of sale or
purchase agreement or lease. Such sale or lease shall be subject to the Right
of First Refusal, which shall continue to be applicable to the Premises until
the expiration or termination of this Lease as provided herein.
19.03 For the purposes of this Article, if Landlord is a corporation
or a partnership, a sale shall include a transfer, assignment, pledge or other
disposition of (a) all or substantially all the assets of Landlord, or (b) the
transfer of a majority of the outstanding voting stock or other ownership
interest of Landlord.
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ARTICLE 20. MISCELLANEOUS
20.01 Landlord covenants with Tenant that any consent or approval
required of Landlord herein shall not be withheld or delayed unreasonably.
20.02 No failure by Landlord or Tenant to insist upon the strict
performance of any covenant, agreement, term or condition of this Lease or to
exercise any right, power or remedy consequent upon a breach thereof, shall
constitute a waiver of any such breach or of such covenant, agreement, term or
condition. No waiver of any breach shall affect or alter this Lease, but each
and every covenant, agreement, term and condition of this Lease shall continue
in full force and effect with respect to any other then existing or subsequent
breach thereof.
20.03 The rights and obligations contained in this Lease shall bind and
inure to the benefit of Landlord and Tenant and, except as otherwise provided
herein, their respective personal representatives, successors and permitted
assigns.
20.04 If any provision of this Lease or the application thereof to any
person or circumstance, to any extent, shall be invalid or unenforceable, the
remainder of this Lease, or the application of such provision to person or
circumstances other than those as to which it is invalid or unenforceable, shall
not be affected thereby, and each provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
20.05 This Lease shall be construed and enforced in accordance with the
laws of the State where the Premises are located.
20.06 This Lease, including the Exhibits, which are made a part of this
Lease and the Sublease contain the entire agreement between the parties and all
prior negotiations and agreements are merged herein. Neither Landlord nor
Landlord's agents have made any representations or warranties with respect to
the Premises, or this Lease, except as expressly set forth herein, and no rights
or remedies are or shall be acquired by Tenant by implication or otherwise
unless expressly set forth herein.
20.07 The relationship between the parties hereto is solely that of
landlord and tenant and nothing herein contained shall constitute or be
construed as establishing any other relationship between them, including,
without limitation, the relationship of principal and agent, employer and
employee or parties engaged in a partnership or joint venture. Without limiting
the foregoing, it is specifically understood that neither party is the agent of
the other and neither is in any way empowered to bind the other or to use the
name of the other in connection with the construction, maintenance or operation
of the Premises, except as otherwise specifically provided herein.
20.08 Tenant at its option may record this Lease, or at Tenant's or
Landlord's request, each party shall execute a short form, notice or memorandum
of lease for recording purposes. Landlord shall cooperate with Tenant in every
reasonable way to place this Lease (or short form, notice or memorandum, if
executed) in recordable form. Landlord shall not record this Lease without
Tenant's written consent, but may record a short form, notice or memorandum
hereof.
20.09 All of the covenants and agreements of Tenant hereunder shall be
deemed and construed to be "conditions" as well as "covenants" as though the
words specifically expressing or importing covenants and conditions were used in
each separate instance.
20.10 Unless the context otherwise expressly requires, the words
"herein", "hereof" and "hereunder" and other words of similar import refer to
this Lease as a whole and not to any particular Article, Section, subsection or
other subdivision.
20.11 The headings of the Articles in this Lease are for convenience
only and shall not be used to construe or interpret the scope or intent of this
Lease or in any way affect the same.
20.12 Neither this Lease nor any provision hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver or
termination is sought; provided, however, no such instrument shall be deemed
binding on Tenant unless signed by the President, a Vice President, Secretary or
Assistant Secretary of Tenant or by any other person to whom authority to
execute any such instrument shall be delegated in writing by any of such
officers.
ARTICLE 21. TERM SHEET; INTEGRATION OF
DOCUMENTS; EXECUTION
21.01 This Lease consists of this Lease, the Term Sheet, Exhibit I,
Exhibit II and the other Exhibits, if any, specified in the Term Sheet, all of
which shall constitute a single agreement. Landlord and Tenant have executed
this Lease by signing and dating the Term Sheet and by initialling the first
page of this Lease.
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SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
LANDLORD: Winco, L.P. a/k/a Winco Ltd.
----------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Description Page
- ------- ----------- ----
<S> <C> <C>
Term Sheet T-1
Exhibit 1 Description of Land E-1
Recitals 1
Witnesseth 1
1 Definitions 1
2 Subordination 1
3 Mortgagee Benefits 1
4 Tenant Benefits 2
5 Severability 3
6 Notices 3
7 Miscellaneous 3
8 Term Sheet; Integration of Documents; Execution 3
</TABLE>
<PAGE> 17
SUBORDINATION NON-DISTURBANCE AND ATTORNMENT AGREEMENT
TERM SHEET
A. Address of Premises: 3230 Satellite Blvd.
----------------------------------------
Duluth, Georgia 30316
----------------------------------------
B. Basic Leas Provisions
1. Date of Lease: August 11, 1992
----------------------------------------
2. Landlord: Winco, L.P. a/k/a Winco Ltd.
----------------------------------------
c/o Boomershine Pontiac -
----------------------------------------
GMAC Truck, Inc.
----------------------------------------
2150 South Cobb Parkway S.E.
----------------------------------------
Smyrna, Georgia 30080
----------------------------------------
ATTN: Walter Boomershine
----------------------------------------
3. Tenant: Ford Leasing Development Company
----------------------------------------
4. Mortgagee: Ford Motor Credit Company
----------------------------------------
5. Commencement Date: August 11, 1992
----------------------------------------
6. Loan Amount: $4,000,000
----------------------------------------
7. Loan Interest Rate: variable rate with a maximum of 9.75%
----------------------------------------
and a minimum of 6.5%. At closing, the
----------------------------------------
rate will be 7.75%.
----------------------------------------
8. Notices:
a) If to Tenant: Ford Leasing Development Company
One Parklane Boulevard - Suite 1500 East
Dearborn, MI 48126
Attention: Dealership Real Estate
Copy to: Ford Leasing Development Company
The American Road
Dearborn, MI 48121
Attention: Secretary
b) If to Landlord: Winco, L.P.
c/o Boomershine Pontiac -
GMAC Truck, Inc.
2150 South Cobb Parkway S.E.
Smyrna, Georgia 30080
ATTN: Walter Boomershine
T-1
<PAGE> 18
TERM SHEET (Continued)
c) If to Mortgagee: Commercial Financing
--------------------------------
Legal Office, Sr. Attorney
--------------------------------
Ford Motor Credit Company
--------------------------------
P.O. Box 6004
--------------------------------
Dearborn, MI 48084
--------------------------------
10. Main Lease: Lease Agreement between Winco,
L.P. as Landlord and Ford Leasing
Development Company as Tenant
dated August 7, 1992
IN WITNESS WHEREOF, the parties hereto have duly executed the Agreement to
which this Term Sheet is attached by signing and dating this Term Sheet and by
initialling the first page of the Agreement.
<TABLE>
<S> <C> <C>
Landlord: Tenant: Mortgagee:
WINCO, L.P. FORD LEASING DEVELOPMENT COMPANY FORD MOTOR CREDIT COMPANY
by: /s/ by: /s/ Arthur Steuer by: /s/
---------------------------- ---------------------------- ----------------------------
its: G.P. its: Assistant Secretary its: Branch Manager
---------------------------- ---------------------------- ----------------------------
date: 8/11/92 date: 8-10-92 date: 8-11-92
--------------------------- --------------------------- ---------------------------
Witness: Witness: Witness:
/s/ /s/ /s/
- -------------------------------- -------------------------------- --------------------------------
</TABLE>
[SEAL]
<PAGE> 19
STATE OF GEORGIA )
)
) SS.
)
COUNTY OF )
On this the 11th day of August, 1992, before me Marvin M. Tince, the
undersigned officer, personally appeared Walter M. Boomershine Jr., who
acknowledge himself to be the General Partner of Wince L.P., a Georgia limited
partnership, and that he, as such General Partner, being authorized so to do,
executed the foregoing instrument for the purposes therein contained by signing
the name of the partnership by himself as General Partner.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal
this 11th day of August, 1992.
/s/ Marvin M.Tince
------------------------
Commission Expires: 6/16/94
STATE OF MICHIGAN )
)
) SS.
)
COUNTY OF WAYNE )
On this the 10 day of August , 1992, before me, Joann Snavley, the
undersigned officer, personally appeared Arthur Steuer, who acknowledged
himself to be the Assistant Secretary of Ford Leasing Development Company, a
Delaware corporation, and that he, as such Assistant Secretary, being authorized
so to do, executed the foregoing instrument for the purposes therein contained,
by signing the name of the corporation by himself as Assistant Secretray.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal
this 10th day of August, 1992.
/s/ Joann Snavley
------------------------
Joann Snavley
Notary Public, Wayne Count, MI
My Commission Expires October 11, 1993
STATE OF GEORGIA )
)
) SS.
)
COUNTY OF FULTON )
On this the 11 day of August, 1992, before me, Marvin M. Tince, the
undersigned officer, personally appeared F.P. Sanders, who acknowledged himself
to be the Branch Manager of Ford Leasing Development Company, a Delaware
corporation, and that he, as such Branch Manager, being authorized so to do,
executed the foregoing instrument for the purposes therein contained, by signing
the name of the corporation by himself as Branch Manager.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal
this 10th day of August, 1992.
/s/ Marvin M. Tince
------------------------
My Commission Expires 6/18/99
<PAGE> 20
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (herein called this
Agreement) dated as of the date specified in ITEM 1 OF TERM SHEET among the
party (herein called Landlord) identified as Landlord in ITEM 2 OF THE TERM
SHEET; and the party (herein called Tenant) identified as Tenant in ITEM 3 OF
THE TERM SHEET; and the party (herein called Mortgagee) identified as Mortgagee
in ITEM 4 OF THE TERM SHEET.
RECITALS
Landlord and tenant entered into a Lease (hereinafter defined) for a
term of 25 years at the rental and upon and subject to the other terms and
provisions provided in the Lease; and
Mortgagee has agreed to make a mortgage loan in the amount identified
in ITEM 6 OF THE TERM SHEET to Landlord which is to be evidenced by a
promissory note (herein called the Note) in the principal amount of such loan
and bearing interest at the rate identified in ITEM 7 OF THE TERM SHEET, which
is to be secured by a first lien mortgage or deed of trust (herein called the
Mortgage) covering the Premises, (hereinafter described) provided that this
Agreement is executed and delivered by Landlord and Tenant;
WITNESSETH:
Landlord, Tenant, and Mortgagee for an in consideration of these
presents and of the mutual covenants herein contained, agree as follows:
ARTICLE 1. DEFINITIONS
1. The following terms shall have the meaning hereinafter specified,
unless the context otherwise requires.
FORECLOSURE PROCEEDINGS shall mean the foreclosure by any means
provided for in the Mortgage or at law or in equity, including, without
limitation, the taking of possession of the Premises pursuant to the Mortgage.
LEASE shall mean the lease dated as of the date specified in ITEM
1 OF THE TERM SHEET between Landlord and Tenant covering the Premises.
MORTGAGEE shall include, after any assignment of the Note and the
Mortgage, the then holder of the Note and the Mortgage.
PREMISES shall mean the property described in Exhibit 1.
SUBTENANT shall mean the Dealer as defined in the Lease.
ARTICLE 2. SUBORDINATION
2. Tenant agrees that the Lease is and shall continue to be subject
and subordinate to the Mortgage and to all extensions, renewals and amendments
of the Mortgage, provided that any such extensions, renewals or amendments
shall not have the effect of (a) increasing the principal of or the interest
rate on the Note or otherwise increasing the indebtedness secured by the
Mortgage, and/or (b) changing any term or provision of the Note or the
Mortgage so as to make either of them inconsistent or in conflict with the
terms and provisions of this Agreement.
ARTICLE 3. MORTGAGEE BENEFITS
3. Tenants agrees for the benefit of Mortgagee as follows:
(a) Foreclosure Proceedings shall not terminate the Lease. In the
event Mortgagee takes possession of the Premises pursuant to any
Foreclosure Proceeding, tenant agrees to
-----------------------------
INITIALS
-----------------------------
Landlord Tenant Mortgagee
/s/ MJ /s/AS /s/JS
1
<PAGE> 21
EXHIBIT 1
Attached to and a part of the Subordination, Non-Disturbance and Attornment
Agreement dated as of the date specified in ITEM 1 OF THE TERM SHEET between
the party (herein called Landlord) identified as Landlord in ITEM 2 OF THE TERM
SHEET, the party (herein called Tenant) identified as tenant in ITEM 3 OF THE
TERM SHEET, and the party (herein called Mortgagee) identified as Mortgagee in
ITEM 4 OF THE TERM SHEET.
DESCRIPTION OF THE LAND:
ALL THAT TRACT OR PARCEL OF LAND lying and being in Land Lot 206 of the
6th District of Gwinnett County, Georgia, being Lot 3, Block I, of plat of
survey of "Unit Eight, Gwinnett Place Regional Mall," prepared by Hayes,
James & Associates, J. Dennis Billew, Georgia Registered Land Surveyor No.
2195, dated July 17, 1984, recorded in Plat Book 27, Page 83, Gwinnett
County, Georgia Records, and being more particularly described as follows:
BEGINNING at the point of intersection of the southern right-of-way line
of Satellite Boulevard (100-foot right-of-way) with the western
right-of-way line of Commerce Avenue (the 88-foot right-of-way of Commerce
Avenue being widened at this point), and running thence South 21 degrees
18 minutes 00 seconds East along the western right-of-way line of Commerce
Avenue 70.71 feet to a point; running thence in a generally southwesterly
direction along the western right-of-way line of Commerce Avenue the
following courses and distances: South 23 degrees 42 minutes 00 seconds
West 98.11 feet to a point; and along the arc of a 910.93 foot radius
curve an arc distance of 396.60 feet to a point (said arc being subtended
by a chord lying to the northwest of said arc and bearing South 36 degrees
10 minutes 22 seconds West a distance of 393.47 feet); thence leaving said
western right-of-way line of Commerce Avenue and running North 41 degrees
21 minutes 17 seconds West 285.00 feet to a point; running thence North 52
degrees 18 minutes 11 seconds West 450.67 feet to a point; running thence
North 23 degrees 42 minutes 00 seconds East 303.10 feet to a point on the
southern right-of-way line of Satellite Boulevard (100-foot right-of-way);
running thence South 66 degrees 18 minutes 00 seconds East along the
southern right-of-way line of Satellite Boulevard 730.69 feet to the POINT
OF BEGINNING; said tract containing, according to plat of survey
hereinabove referred to, 7.155 acres.
TOGETHER WITH all easements benefitting the property conveyed hereby as
was acquired by Grantor herein under (i) Grant of Easement by and between
Partridge Greene, Inc. and CF-H Gwinnett Associates, dated March 31, 1982,
recorded in Deed Book 2357, Page 251, aforesaid records; as amended by
Corrected and Restated Grant of Easement between the same parties dated as
of March 31, 1982, recorded in Deed Book 2478, Page 422, aforesaid
records, and as further amended by First Amendment to Corrected and
Restated Grant of Easement between the same parties, dated as of March 31,
1983, recorded in Deed Book 2485, Page 332, aforesaid records.
Being the same property conveyed by Warranty Deed from Partridge Green,
Inc. to Ford Leasing Development Company, dated September 13, 1984, filed
for record September 17, 1984 at 9:00 A.M., recorded in Deed Book 2875,
page 250, in the Office of the Clerk of the Superior Court of Gwinnett
County, Georgia.
E-1
<PAGE> 22
attorn to Mortgagee and, in the event of any foreclosure sale conducted
pursuant to any Foreclosure Proceedings, Tenant agrees to attorn to the
purchaser (herein called the Purchaser) at such foreclosure sale.
(b) The terms and provisions of Section 8.03 of the Lease shall be in full
force and effect with respect to obligations of Tenant which accrued or
derived from a state of facts or conditions which occurred or existed
prior to the date of commencement of any Foreclosure Proceedings.
(c) The provisions of Section 8.03 of the Lease shall not be in force and
effect to relieve Tenant of its obligations to perform or observe the
terms and provisions of the Lease;
(i) from and after the commencement of any Foreclosure Proceedings, and
so long as any such Foreclosure Proceedings as conducted with
diligence and good faith by Mortgagee; and
(ii) at such time as Mortgagee or any purchaser other than a person or
entity controlled by or under common control with Landlord and the
Subtenant (which terms "controlled by" or "under common control with",
as used with respect to any person or entity, shall mean the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such person or entity,
whether through the ownership of voting securities or by contract or
otherwise) shall become the owner of the Premises pursuant to any
Foreclosure Proceedings.
(d) The provisions of paragraph 3(c) of this Agreement shall not constitute a
waiver by Tenant of any obligations of the Subtenant under any sublease or
of the Landlord under the Lease, nor otherwise relieve either Subtenant of
its obligations under any sublease nor Landlord of its obligations under
the Lease.
ARTICLE 4. TENANT BENEFITS
4. Mortgagee hereby agrees for the benefit of Tenant as follows:
(a) Notwithstanding anything to the contrary contained in the Mortgage, the
fire and extended coverage insurance on the Premises required by the
Lease shall name Tenant as sole loss payee. Tenant in accordance with the
terms of the Lease will make available any insurance or condemnation
proceeds for the restoration of the building (and other improvements that
are part of the Premises) that are damaged or destroyed or taken in any
condemnation proceedings.
(b) So long as no default by Tenant under the Lease shall have occurred and be
continuing so that Landlord would be entitled to enter into and upon the
Premises and repossess the same and evict Tenant and thereby terminate the
Lease, the Lease shall continue in full force and effect, and the Lease
shall not be terminated, cut off or otherwise disturbed except in
accordance with the terms and provisions of the Lease. In the event of a
Foreclosure Proceedings, Mortgagee shall not name Tenant as a defendant so
as to terminate or disturb the Lease or to obtain a judgement against
Tenant in any Foreclosure Proceedings. Any sale conducted pursuant to any
Foreclosure Proceeding shall be expressly subject to the Lease, and any
purchaser shall assume all duties and obligations of Landlord under the
Lease.
(c) Mortgagee agrees to deliver to Tenant copies of any notice of default
under the Note or Mortgage or notice of any fact or event which, if not
cured, would constitute a default under the Note or Mortgage. Notice of
default under the Note or Mortgage shall not be deemed to be effective
against Landlord unless and until a copy of such notice shall have been
delivered to Tenant, and Tenant shall have the right (but not the
obligation) to cure such default within 60 days after the giving of such
notice to Tenant or curing any default in the payment of any installment of
principal and/or interest and within 90 days for curing any other default.
2
<PAGE> 23
ARTICLE 5. SEVERABILITY
5. If any provision of this Agreement or the application thereof to
any person, entity or circumstance, to any extent, shall be invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to any person, entity or circumstance other than that as to which is
held invalid or unenforceable, as the case may be, shall not be affected
thereby, and each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
ARTICLE 6. NOTICES
6. All notices and other communications required or permitted to be
given hereunder shall be in writing and shall be mailed by certified or
registered mail, postage prepaid (or if mail service shall be unavailable as
the result of a strike or other cause beyond the control of the party required
to provide such notice, by air or surface parcel delivery service), addressed
as specified in ITEM 8A, 8B and 8C of the TERM SHEET or to such other addresses
as either party may designate to the other by written notice. Any notice by
certified or registered mail shall be deemed to have been given on the date of
certification or registration thereof. Any notice by air or surface parcel
delivery shall be deemed to have been given on the date submitted to the
carrier for delivery.
ARTICLE 7. MISCELLANEOUS
7.1 The rights and obligations hereunder shall be binding upon and
shall inure to the parties hereto and their respective personal representative
and successors and assigns. This Agreement shall be governed by the laws of the
State in which the Premises are located. The headings of the Articles are for
convenience only and shall not be used to construe or interpret the scope or
intent of this Agreement.
7.2 Landlord, Tenant and Mortgagee acknowledge receipt of an
Environmental Assessment covering the premises.
ARTICLE 8. TERM SHEET; INTEGRATION OF
DOCUMENTS; EXECUTION
8. This Agreement consists of this Subordination, Non-disturbance and
Attornment Agreement, the Term Sheet, Exhibit I, and other Exhibits, if any,
specified in the Term Sheet, all of which shall constitute a single agreement.
Landlord, Tenant and Mortgagee have executed this Agreement by signing and
dating the Term Sheet and by initialling the first page of this Agreement.
3
<PAGE> 1
EXHIBIT 10.12
DEALERSHIP SUBLEASE
TENANT: BOOMERSHINE FORD, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Description Page
- ------- ----------------------------------------------- ----
<S> <C> <C>
Term Sheet T-1
Exhibit 1 Description of Land E-1
1 Premises and Lease Term 1
2 Basic Rent and Additional Rent 2
3 Taxes, Assessments and Utility Charges 3
4 Authorized Use 5
5 Insurance 5
6 Remedies in Case of Default 6
7 Environmental Matters & Underground Tanks 7
8 Discharge of Lien 9
9 Indemnification of Landlord 9
10 Repairs 10
11 Assignment or Subletting 11
12 Notices 11
13 Alterations and Tenant Equipment 11
14 Right of Entry 12
15 Condemnation 12
16 Subordination and Attornment 13
17 Termination of Sales Agreement 14
18 Miscellaneous 14
19 Term Sheet; Integration of Documents; Execution 15
Exhibit 2 Period Maintenance Chart 16
</TABLE>
<PAGE> 2
DEALERSHIP SUBLEASE
TERM SHEET
Address of Premises: 3230 Satellite Blvd.
------------------------------------
Duluth, Georgia 30136
------------------------------------
Basic Lease Provisions
1. Date of Lease: August 11, 1992
------------------------------------
2. Landlord: Ford Leasing Development Company
------------------------------------
3. Tenant: Boomershine Ford Inc.
------------------------------------
3230 Satellite Blvd.
------------------------------------
Duluth, Georgia 30136
------------------------------------
4. Commencement Date: August 11, 1992
------------------------------------
5. Expiration Date: August 31, 1997
------------------------------------
6. Basic Rent: $37,500. per month
------------------------------------
Landlord as Tenant under a Main Lease, is required by the terms of the
Main Lease to increase the Basic Rent up to a maximum of $40,000 per
month upon notice of refinancing by Main Landlord. Basic Rent has been
determined based in whole or in part on the basic rent that Landlord,
as tenant under the Main Lease, pays or is obligated to pay to Main
Landlord. Changes in Basic Rent shall be effective on the same date as
changes in basic rent under the Main Lease and shall include, without
limitation, changes agreed to by Landlord, as tenant, in order to
obtain extensions or amendments to the Main Lease, or the performance
by the Main Landlord of the Terms and Covenants of the Main Lease,
whether or not done with the Tenant's consent.
7. Taxes:
a) Tax Period: Calendar year.
--------------------------------------------
b) Applicable taxes: Assessed as of the tax status day (sometimes
--------------------------------------------
referred to as the "tax day," "assessment
--------------------------------------------
day," "date of finality," etc.) occurring
--------------------------------------------
within said calendar year.
--------------------------------------------
8. Notices:
a) Landlord: Ford Leasing Development Company
--------------------------------------------
One Parklane Boulevard-Suite 1500 East
--------------------------------------------
Dearborn, MI 48126
--------------------------------------------
Attention: Dealership Real Estate
--------------------------------------------
T-1
<PAGE> 3
Copy to: Ford Leasing Development Company
--------------------------------
The American Road
--------------------------------
Dearborn, MI 48121
--------------------------------
Attention: Secretary
--------------------------------
b) Tenant: Boomershine Ford, Inc.
--------------------------------
3230 Satellite Blvd.
--------------------------------
Duluth, GA 30136
--------------------------------
Attn: Mr. Walter F. Boomershine
--------------------------------
Chairman
--------------------------------
9. Main Lease: Lease Agreement dated August , 1992 between
Winco, L.P., a Georgia limited partnership
(Landlord) and Ford Leading Development Company
(Tenant).
10. Consent to additional franchise:
4.01(c) Landlord hereby consents to Tenant's use of the 1.8 acre
parcel containing one building at the rear of the property shown as
Parcel II on a survey dated September 13, 1992 as prepared by Alvin E.
Vaughn and Associates, for the sales and service of Isuzu products and no
other products without an increase in Basic Rent for a period of 18
months from the Commencement Date of this Lease. Commencing on the first
day of the 19th month of this Lease, Basic rent shall be increased by an
amount equal to one percent of the revenue received from the sales and
service of Isuzu vehicles. This consent may be modified or withdrawn by
Landlord at any time as provided in Article 4.01 (a) herein.
11. Underground Storage Tanks
Tenant agrees that it will remove all underground storage tanks
within 180 days of date of this agreement. Removal will be in compliance
with governmental regulations.
IN WITNESS WHEREOF, Landlord and Tenant have executed the
Dealership Sublease to which this Term Sheet is attached by signing and
dating this Term Sheet and by initialling this first page of the
Dealership Sublease.
Landlord: Tenant:
FORD LEASING DEVELOPMENT COMPANY BOOMERSHINE FORD, INC.
by: /s/ Arthur Steuer by: /s/
--------------------------------- --------------------------
its: Assistant Secretary Pres.
-------------------------------- --------------------------
Date: 7-10-92 Date: 8/11/92
------------------------------- ------------------------
T-2
<PAGE> 4
EXHIBIT 1
Attached to and a part of the Dealership Sublease dated as of the date
specified in ITEM 1 OF THE TERM SHEET between the party (herein called
Landlord) identified as Landlord in ITEM 2 OF THE TERM SHEET and the party
(herein called Tenant) identified as Tenant in ITEM 3 OF THE TERM SHEET.
DESCRIPTION OF THE LAND:
ALL THAT TRACT OR PARCEL OF LAND lying and being in Land Lot 206 of the 6th
District of Gwinnett County, Georgia, being Lot 3, Block I, of plat of survey
of "Unit Eight, Gwinnett Place Regional Mall," prepared by Hayes, James &
Associates, J. Dennis Billew, Georgia Registered Land Surveyor No. 2195, dated
July 17, 1984, recorded in Plat Book 27, Page 83, Gwinnett County, Georgia
Records, and being more particularly described as follows:
BEGINNING at the point of intersection of the southern right-of-way of
Satellite Boulevard (100-foot right-of-way) with the western right-of-way line
of Commerce Avenue (the 88-foot right-of-way of Commerce Avenue being widened
at this point), and running thence South 21 degrees 18 minutes 00 seconds East
along the western right-of-way line of Commerce Avenue 70.71 feet to a point;
running thence in a generally southwesterly direction along the western
right-of-way line of Commerce Avenue the following courses and distances:
South 23 degrees and 42 minutes 00 seconds West 98.11 feet to a point; and
along the arc of a 910.93 foot radius curve an arc distance of 396.60 feet to a
point (said arc being subtended by a chord lying to a northwest of said arc and
bearing South 36 degrees 10 minutes 22 seconds West a distance of 393.47 feet);
thence leaving said western right-of-way line of Commerce Avenue and running
North 41 degrees 21 minutes 17 seconds West 285.00 feet to a point; running
thence North 52 degrees 18 minutes 11 seconds West 450.67 feet to a point;
running thence North 23 degrees 42 minutes 00 seconds East 303.10 feet to a
point on a southern right-of-way line of Satellite Boulevard (100-foot
right-of-way); running thence South 66 degrees 18 minutes 00 seconds East along
the southern right-of-way line of Satellite Boulevard 730.69 feet to the POINT
OF BEGINNING; said tract containing, according to plat of survey hereinabove
referred to, 7.155 acres.
TOGETHER WITH all easements benefitting the property conveyed hereby as was
acquired by Grantor herein under (i) Grant of Easement by and between Partridge
Green, Inc. and CF-H Gwinnett Associates, dated March 31, 1982, recorded in
Deed Book 2357, Page 251, aforesaid records; as amended by Corrected and
Restated Grant of Easement between the same parties dated as of March 31, 1982,
recorded in Deed Book 2478, Page 422, aforesaid records, and as further amended
by First Amendment to Corrected and Restated Grant of Easement between the same
parties, dates of March 31, 1983, recorded in Deed Book 2485, Page 332,
aforesaid records.
Being the same property conveyed by Warranty Deed from Partridge Green, Inc. to
Ford Leasing Development Company, dated September 13, 1984, filed for record
September 17, 1984 at 9:00 A.M., recorded in Deed Book 2875, page 250, in the
Office of the Clerk of the Superior Court of Gwinnett County, Georgia.
E-1
<PAGE> 5
DEALERSHIP SUBLEASE
DEALERSHIP SUBLEASE (herein called this Lease) dated as of the date specified in
Item 1 of the Term Sheet, between the party (herein called Landlord) identified
as Landlord in Item 2 of the Term Sheet and the party (herein called Tenant)
identified as Tenant in Item 3 of the Term Sheet.
WITNESSETH:
That for and in consideration of these presents and of the mutual covenants
herein contained, the parties thereto, intending to be legally bound, hereby
agree as follows:
ARTICLE 1. PREMISES AND LEASE TERM
1.01. Upon and subject to the terms and provisions hereinafter set forth,
Landlord hereby leases to Tenant and Tenant hereby hires from Landlord the
following property (herein collectively called the Premises) for the term
(herein called the Lease Term) hereinafter provided:
(a) the land described in Exhibit 1 hereto; and
(b) all buildings, structures and improvements now or thereafter erected on
such land either prior to the Commencement Date (hereinafter defined)
or during the Lease Term, and all fixtures, equipment and other
property (other than Tenant Equipment, as hereafter defined) now or
hereafter installed therein either prior to the Commencement Date or
during the Lease Term (all of the foregoing being herein collectively
called the Improvements).
SUBJECT, HOWEVER, to the Main Lease (hereinafter defined) and to zoning
ordinances and regulations, covenants, restrictions, easements, liens, charges,
encumbrances, title conditions and exceptions affecting the Premises, or any
part thereof, as of the Commencement Date.
1.02. (a) Except as hereinafter provided, the Lease Term shall commence on
the date (herein called the Commencement Date) specified in Item 4 of the Term
Sheet and shall expire at midnight on the date (herein called the Expiration
Date) specified in Item 5 of the Term Sheet.
(b) Tenant shall have the option to extend the Lease Term for four
additional terms of five years each, upon and subject to the same Basic
Rent contained in this Lease, and subject to the terms and conditions
of the standard form of Dealership Sublease then being used by Landlord
for dealership premises, by giving notice of the exercise of such
option in the manner provided in Article 12 not less than 120 days
prior to the Expiration Date.
(c) If Tenant shall use or occupy all or any part of the Premises prior to
the Commencement Date, such use or occupancy shall be deemed to be
under all the terms and provisions of this Lease, including, without
limitation, the obligation to pay Basic Rent and Additional Rent as
hereinafter provided.
1.03. (a) Tenant covenants that, over and above, and in addition to, its
duties and obligations contained in this lease, it shall at its own cost and
expense, promptly perform and observe all the duties and obligations of Landlord
as tenant under the lease or leases (herein collectively called the Main Lease)
referred to and described in item 9 OF THE TERM SHEET, a copy of which has been
delivered to Tenant, as fully as if it were the tenant under the Main lease, and
shall comply with all duties, obligations, restrictions and requirements of the
Main Lease applicable to landlord as tenant thereunder, irrespective of whether
such duties, obligations, restrictions or requirements are more stringent than
those herein imposed upon Tenant; and Tenant shall not do or cause to be done,
nor omit to be done, any act or thing whereby an event of default shall occur
under any provision of the Main Lease, or which would, after the giving of
notice or a lapse of time, or both, constitute an event of default under the
Main Lease.
INITIALS
------------
Landlord: CS
Tenant: MB
1
<PAGE> 6
(b) Nothing contained in this Lease shall be construed as granting to
Tenant any rights or privileges under the Main Lease, all of Tenant's rights and
privileges are as specified herein. Nothing contained in this Lease shall
obligate Tenant to pay the rent referred to in the Main Lease.
1.04. In any case where a period of grace is granted to Landlord as
tenant under the Main Lease with respect to the performance or observance of any
covenant, condition or obligation (herein collectively called Covenants), Tenant
shall be deemed to be in default under this Lease if it shall not have performed
or observed any such Covenants within one-half the grace period allowed under
the Main Lease for the performance or observance of such Covenants; and in any
case where no grace period is granted under the Main Lease for the performance
or observance by Landlord as tenant thereunder of any Covenants. Tenant shall
perform or observe such Covenant, not less than five days prior to the date when
such Covenant is to be performed or observed pursuant to the applicable
provisions of the Main Lease.
1.05. In any case where, pursuant to any provision of the Main Lease,
Landlord, as tenant under the Main Lease, is required or permitted to give any
notice. Tenant with respect to such provision, shall be required under this
lease to give notice to Landlord 30 days prior to the date on which Landlord as
tenant under the Main Lease is required or permitted to give such notice.
1.06. Except as otherwise expressly provided herein, Landlord does not
make any of the representations or warranties of the landlord (herein called the
Main Landlord) under the Main Lease and does not undertake to perform or observe
any of the terms or covenants of Main Landlord to be performed or observed under
the Main Lease, but Landlord agrees to use reasonable efforts to cause the Main
Landlord to perform or observe such terms and covenants; provided, however,
Landlord shall not be obligated to institute any judicial action or proceeding
to enforce performance or observance by the Main Landlord of such terms or
Covenants.
1.07. In the event Landlord acquires fee ownership of all or any part of
the land described in Exhibit 1 hereto, this Lease shall terminate
simultaneously with such acquisition as though such date were the Expiration
Date.
ARTICLE 2. BASIC RENT AND ADDITIONAL RENT
2.01. Tenant shall pay to Landlord a net monthly rental (herein called
Basic Rent), over and above the other and additional payments to be made by
Tenant, in the amount specified in Item 6 of the Term Sheet.
*[Landlord, as tenant under Main Lease, is required by the terms of the
Main Lease to pay as additional rent any increases over a base amount required
to be paid by Main Landlord pursuant to a variable rate mortgage note(s) secured
by a mortgage(s) covering the Facilities. Tenant shall reimburse Landlord for
such additional rent Landlord is required to pay as Tenant under the Main Lease;
such additional Rent shall be due and payable within 10 days of Tenant receiving
a billing or invoice from Landlord for such Additional Rent.]
*[Basic Rent has been determined based in whole or in part on the basic
rent Landlord, as tenant under the Main Lease, pays to Main Landlord. Basic Rent
shall be adjusted from time to time to reflect the amount of basic rent that
Landlord, as tenant under the Main Lease, pays or is obligated to pay Main
Landlord. Changes in Basic Rent shall be effective on the same date as changes
in basic rent under the Main Lease and shall include, without limitation,
changes agreed to by Landlord, as tenant, in order to obtain extensions or
amendments to the Main Lease, or the performance by the Main Landlord of the
terms and Covenants of the Main Lease, whether or not done with Tenant's
consent.]
2.02. Basic Rent shall be absolutely net to Landlord so that this Lease
shall yield net to Landlord the Basic Rent through the Lease Term.
2.03. Tenant shall pay, as additional rent, all other amounts,
liabilities, obligations and other payments which Tenant herein assumes or
agrees to pay (herein collectively called Additional Rent), and in the event of
any failure on the part of Tenant to pay any item of Additional Rent, Landlord
shall have all rights, powers and remedies provided for herein or by law in the
case of nonpayment of Basic Rent.
2.04. Basic Rent and Additional Rent for the first month or partial month
(calculated on the basis of the actual number of days of such partial month) of
the Lease Term shall be paid to Landlord prior to the Commencement Date, and
thereafter, unless contrary notice is given by Landlord to Tenant, each
installment of Basic Rent and Additional Rent shall be paid in advance through
the Ford Motor Company Dealer Payment System including the Ford Motor Company
Parts Account (herein called the System) by a charge to Tenant's account on the
last day in each that a charge can be made to the System prior to the month for
which Basic Rent and Additional Rent are payable.
2.05. In the event there are not sufficient funds in the System, then any
shortages of Basic Rent and Additional Rent shall be paid to Landlord in advance
on or before the first business day of the applicable month at Post Office Box
55-197A, Detroit, Michigan 48255, or at such place or to such other person or
entity as Landlord from time to time may designate by notice to Tenant, all
without notice, demand, counterclaim, setoff, deduction
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or defense, and without abatement, suspension, deferment, diminution for any
reason whatsoever, except as hereinafter otherwise specifically provided.
Should any payment of Basic Rent or Additional Rent be received by Landlord
subsequent to the 10th day of the month for which it is due, then Tenant shall
pay to Landlord as Additional Rent, at that time, a late charge equal to 2% of
the amount due under this Section.
2.06. On the Expiration Date or earlier termination of this Lease, Tenant
shall remove its goods and effects and peacefully yield up the Premises to
Landlord in the order and condition required by the provisions of Sections
10.01 and 10.03. Tenant shall not be obligated to return the Improvements with
a fair market value equivalent to the fair market value of the Improvements at
the Commencement Date.
2.07. If the Lease Term shall terminate prior to the Expiration
Date (except pursuant to Section 6.01), then Basic Rent and Additional Rent paid
with respect to periods occurring after the termination of the Lease Term shall
be refunded to Tenant, subject, however, to Landlord's right of setoff with
respect to any uncured default by Tenant in the performance of its obligations
under this Lease.
ARTICLE 3. TAXES, ASSESSMENTS AND UTILITY CHARGES
3.01. (a) For the purposes of this Lease, "Applicable Taxes" shall mean ad
valorem real property taxes assessed and levied against the Premises and Tenant
Equipment (but excluding therefrom any taxes which are the obligation of Main
Landlord under the Main Lease).
(b) For the purposes of this Lease "Additional Taxes" shall mean:
(i) all taxes, assessments, levies and charges which are now or
hereafter may be assessed, levied or imposed in addition to, in
replacement of or in substitution for ad valorem real or personal
property taxes, including, without limitation, such taxes, levies
and charges which, in whole or in part, are measured or calculated
by or based upon Basic Rent and/or Additional Rent, including,
without limitation, gross income, gross receipts, license
occupation, privilege, value added, documentary stamp, transfer,
excise, sales and use taxes (but excluding special assessments and
any tax on or measured by the net income of Landlord): and
(ii) all taxes, assessments, levies and charges, including without
limitation, gross income, gross receipts, license, occupation,
privilege, value added, documentary stamp, transfer, excise, sales
and use taxes (but excluding special assessments and any tax on or
measured by the net income of Landlord) and all license, permit and
authorization fees now or hereafter levied or imposed upon, assessed
against, attributable to or becoming a lien upon the Premises, the
appurtenances thereto, the streets or sidewalks adjacent thereto, this
Lease, the leasehold estate created thereby, the instrument creating
the same, the occupancy or use of the Premises, the business conducted
thereon, Basic Rent or Additional Rent payable under this Lease (but
excluding therefrom any taxes, assessments, levies and charges which
are the obligation of the Main Landlord under the Main Lease).
3.02. (a) Tax Period shall mean the period specified in ITEM 7A OF THE
TERM SHEET.
(b) Applicable Taxes shall mean the taxes specified in ITEM 7B OF THE TERM
SHEET.
(c) Tax Period for Additional Taxes shall mean the basis as is customarily
utilized in the community where the Facilities are located.
3.03. Landlord shall remit to the appropriate collecting authorities
before the delinquency date or dates (a) all Applicable Taxes and Additional
Taxes not levied or imposed upon or assessed against Tenant which become due and
payable or which are assessed, imposed or levied for Tax Periods within the
Lease Term and (b) all Applicable Taxes and Additional Taxes which Landlord
has collected from Tenant. Tenant shall remit to the appropriate collecting
authorities, before the delinquency date or dates, all Applicable Taxes and
Additional Taxes levied or imposed upon or assessed against Tenant and which
become due and payable during, or which are levied, imposed or assessed for Tax
Periods within the Lease Term. Within 10 days after request therefor, Tenant
shall furnish to Landlord (or any person or entity specified by Landlord)
receipts or other evidence of payment of the Applicable Taxes and Additional
Taxes required to be remitted by Tenant (but excluding therefrom any taxes,
assessments, levies or charges which are the obligation of the Main Landlord).
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3.04. Tenant shall bear (a) Applicable Taxes and Additional Taxes for
all Tax Periods which fall wholly within the Lease Term and (b) a portion of
the Applicable Taxes and Additional Taxes for Tax Periods in which the
Commencement Date or Expiration Date occurs during the Lease Term in the
proportion that the number of days the Lease Term exists within each such Tax
Period bears to the total number of days in such Tax Period. Tenant shall bear
Applicable Taxes and Additional Taxes regardless of whether such taxes are
required to be remitted by Landlord, Tenant or a third party.
3.05. (a) Tenant shall pay to Landlord on each Basic Rent payment date,
commencing on the first such date, a sum equal to one-twelfth of the total
annual amount, as estimated and specified to Tenant from time to time by
Landlord, of those Applicable Taxes which by the terms of this Article 3 are to
be borne by Tenant (but excluding those Applicable Taxes to be remitted
directly to the tax collecting authorities by Tenant pursuant to Section
3.02). If required by Landlord, Tenant shall make an additional payment to
Landlord, simultaneously with the payment of the first installment of Basic
Rent and on such other Basic Rent payment date or dates as Landlord may require
from time to time, of a sum which, when added to the aforesaid payments for
Applicable Taxes, will provide Landlord with funds sufficient to pay all such
Applicable Taxes at least one month prior to the earlier of (i) the date such
Applicable Taxes become delinquent, (ii) the latest date such Applicable Taxes
could be paid with the greatest available discount, if any, or (iii) the last
day of the current Tax Period; notwithstanding that any or all monies so
deposited may be due to the appropriate collecting authorities in the future.
If at any time Landlord shall determine that the amount of payments made by
Tenant is insufficient to accomplish the purpose of this Subsection 3.05(a),
Tenant shall pay, immediately upon request, the amount of the deficiency to the
Landlord. If at any time during the Lease Term, Landlord shall have advanced
funds for the payment of such Applicable Taxes, Tenant shall remit to Landlord,
immediately upon request, the funds so advanced.
(b) Nothing in this Article shall be deemed to affect any right or
remedy of Landlord under any provision of this Lease or any statute or rule of
law to pay any of such Applicable Taxes and to collect from Tenant as
Additional Rent the amount so paid together with interest at the rate specified
in Section 14.03. All payments to be made by Tenant pursuant to this Section
3.05 shall be applied by Landlord to the payment of those Applicable Taxes to
be remitted by Landlord hereunder. No payments made by Tenant to Landlord
shall earn interest for the benefit of Tenant while held by Landlord. In the
event of a default by Tenant in the performance of any obligation under this
Lease, Landlord shall have the right to apply all such payments to the cost of
curing such default. If Landlord determines that the sum of such payments
exceeds the amounts required to pay such Applicable Taxes, Landlord shall
credit the amount of such excess against future monthly payments required to be
made by Tenant pursuant to this Section 3.05.
3.06. Except to the extent that the same are the obligations of Main
Landlord, special assessments which become due in full or any part and all
installments of special assessments which become due during the Lease Term
(whether or not such assessments or the first of such installments become due
prior to the Commencement Date) shall be borne by Tenant as Additional Rent and
shall be remitted by Landlord. For purposes of this Section 3.06, payment in
installments over the longest possible term will be deemed to have been elected
in any instance where a determinable option so to pay existed or may exist,
notwithstanding that an assessment may have been or may hereafter be paid in
full, and Tenant shall bear the expense of only such installments as would have
become due, payable and delinquent during the Lease Term had the installment
option been elected. Tenant shall make periodic payments in advance (at the
times and otherwise in the manner specified in Section 3.05 for payments with
respect to Applicable Taxes) for special assessment or installments thereof
which Tenant is required to bear pursuant to this Section 3.06.
3.07. (a) Tenant shall not have the right to contest the amount or
validity, in whole or in part, of Applicable Taxes, Additional Taxes or special
assessments, unless Tenant shall have obtained the prior consent of Landlord
thereto, whereupon:
(i) all contest proceedings shall be conducted in good faith
and with due diligence by Tenant and by counsel, if any,
reasonably satisfactory to Landlord; and copies of all
pleadings and other related documents involved in the
contest shall be submitted to Landlord prior to the filing
with any administrative or judicial body;
(ii) the cost of any such contest shall be borne solely by
Tenant; and
(iii) any consent to such contest given by Landlord shall not
relieve Tenant of its obligation to make the payments to
Landlord specified in Subsection 3.05(a) and Section 3.06
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(b) If Landlord elects, or has elected prior to the Commencement
Date, to contest the amount or validity, in whole or in part, of
Applicable Taxes, Additional Taxes or special assessments, the
benefits and expenses resulting from any such contest shall be
shared and borne ratably by Landlord and Tenant in the same manner
in which such Applicable Taxes, Additional Taxes or special
assessments are required to be borne by each pursuant to this
Article 3 in the absence of a contest; provided, however, Tenant
shall not be required to bear expenses in an amount which shall
exceed the benefits in reduced Applicable Taxes, Additional Taxes
or special assessments accruing to Tenant as a result of such
contest. Where the contest involves or involved Applicable Taxes,
Additional Taxes or special assessments which are payable over a
period longer than one year, such benefits will be deemed to be
the aggregate of the benefits for the portion of the Lease Term in
which the assessments are payable.
3.08. Applicable taxes on property located upon the Premises,
shall be remitted by the owner thereof, and the owner shall file any and all
personal property tax returns that may be required in relation thereto. Tenant
shall reimburse Landlord, as Additional Rent, for personal property taxes paid
by Landlord on property located upon the Premises and used therewith.
Reimbursement shall be made within 30 days after paid receipts therefor are
delivered by Landlord to Tenant.
3.09. Tenant shall pay or cause to be paid all charges and taxes
incurred by Tenant for or on account of water, sewer, gas, electricity, light,
heat and power and for protective, telephone, and other communication services
and for all other public or private utility services which may be used,
rendered or supplied upon, to or in connection with the Premises or any part
thereof at any time during the Lease Term.
ARTICLE 4. AUTHORIZED USE
4.01. (a) Tenant shall use and occupy the Premises only for the
operation of a Ford Motor Company authorized automobile and/or truck dealership
and related purposes. The Premises may be used for additional purposes
(including but not limited to the sale, display, storage and/or service of
vehicles not covered by a Ford Motor Company Sales and Service Agreement) only
with the express written consent of Landlord, which consent may be withheld at
Landlord's sole discretion. Landlord shall have the option to increase Basic
Rent (by an amount to be determined by Landlord in its sole discretion) as a
condition to giving any such consent. In addition, Landlord shall have the
right (which right may be exercised by Landlord in its sole discretion), in
each case by giving to Tenant not less than two year's prior notice, (i) to
modify or withdraw any consent previously given pursuant to this Section 4.01
and (ii) to increase Basic Rent (whether or not Basic Rent previously had been
increased) as a condition for continuing any such consent. Tenant shall not
permit any unlawful occupation, business or trade to be conducted on the
Premises or any part thereof. Tenant shall not breach or suffer the breach of
any condition, agreement or restriction, either recorded or of which Tenant has
knowledge, affecting the Premises or any part thereof or the use of the same.
(b) Any portion of Basic Rent imposed pursuant to this
Section 4.01 shall be remitted directly to Landlord notwithstanding that
Landlord may have directed Tenant to remit other portions of Basic Rent to one
or more third parties.
4.02. If any law, ordinance, ruling, order of regulation (herein
collectively called Prohibition) now exists or is hereinafter enacted, adopted
or issued, prohibiting or substantially impairing the use and occupancy of the
Premises as an automobile dealership, then, at any time within one year after
the Prohibition becomes effective, Tenant (unless the Prohibition results from
any act or omission by Tenant) or Landlord, by giving notice to the other, may
designate a date on which this Lease shall terminate (which date shall be not
later than 60 days after the giving of such notice); and, thereupon, on the
date fixed in such notice, this Lease shall terminate as if such date were the
Expiration Date.
ARTICLE 5. INSURANCE
5.01. Tenant shall maintain general or public liability
insurance against claims for bodily injury, death or property damage occurring
on, in or about the Premises and the streets and alleys adjoining the Premises,
affording protection of at least $3,000,000 single limit per occurrence of loss
or damage. In addition, Tenant shall maintain pollution liability insurance
affording protection of at least $1,000,000 single limit per occurrence. Such
coverage shall provide protection for underground storage as required by the
Federal Environmental Protection Agency (EPA) regulations published October 26,
1988 (and any subsequent provisions or amendments), and will include, but not be
limited to, providing protection for taking corrective action and for
compensating third parties for bodily injury and property damage caused by
accidental releases arising from the operation of petroleum underground storage
tanks. Further, this policy shall name Landlord as additional insured. If
during the Lease Term changed conditions or other pertinent factors, in the
reasonable judgement of Landlord, should render inadequate the insurance limits
referred to above, Tenant shall furnish on demand such additional coverage as
reasonably may be required by Landlord. All such insurance shall be effected at
Tenant's
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expense under valid and enforceable policies issued by insurers of recognized
responsibility which are qualified to do business in the state where the
Premises are located, and well rated by national rating organizations and are
acceptable to Landlord. Such policies shall name Main Landlord, Landlord,
Tenant and all mortgagees as insureds, and shall, to the extent obtainable,
contain an agreement by the insurer that such policies shall not be cancelled
or substantially modified without at least 30 days' prior notice to Landlord.
Originals or duplicate originals of such policies shall be delivered by Tenant
to Landlord prior to the Commencement Date, and similar replacement policies
shall be delivered by Tenant to Landlord at least 15 days prior to the
expiration dates of expiring policies. If Tenant does not provide such
evidence to Landlord of valid liability insurance coverage, then Landlord at
its option may provide said coverage at any time and without notice to Tenant.
The cost thereof will be charged to Tenant as Additional Rent.
5.02. Tenant shall pay to Landlord the cost as determined by Landlord
of fire and extended coverage insurance (including, at Landlord's election,
earthquake, flood, and rental income insurance) upon the Premises. Landlord
shall have the right to determine the amount, form, deductible amount and
carriers of such insurance. At Landlord's election, Tenant shall make periodic
payments in advance on account of such costs at the times and otherwise in the
manner specified in Section 3.05 for payments with respect to Applicable Taxes.
5.03 Tenant, at its sole cost and expense, shall carry such other
insurance as customarily is maintained by operators of similar property, or as
reasonably may be required by Landlord from time to time for its protection
against any loss, hazard, or liability to which Landlord may be exposed.
5.04 Landlord hereby waives, to the extent of recovery by Landlord
under Landlord's fire and extended coverage insurance policies, (a) any
obligation on the part of Tenant to make repairs to the Premises necessitated
or occasioned by fire or other casualty that is an insured risk under such
insurance policies and (b) any right of recovery against Tenant for any loss
occasioned by fire or other casualty that is an insured risk under such
policies. Tenant hereby waives any right of recovery against Landlord, or
anyone claiming under Landlord, for any loss occasioned by fire or other
casualty which is an insured risk under Tenant's policies of fire and extended
coverage insurance covering the property of Tenant.
ARTICLE 6. REMEDIES IN CASE OF DEFAULT
6.01. If any one or more of the following events shall occur and be
continuing:
(a) default shall be made by Tenant in the due and punctual payment
of Basic Rent or Additional Rent as and when the same becomes due
and payable, and such default shall continue for a period of ten
days; or
(b) default shall be made by Tenant in the performance of any of the
obligations set forth in Article 8; or
(c) default shall be made by Tenant in the performance of any other
term or provision of this Lease, and such default shall continue
for a period of 20 days after notice by Landlord to Tenant; or
(d) Tenant shall file a voluntary petition in bankruptcy or shall be
adjudicated a bankrupt or insolvent or shall file any petition or
answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any
present or future bankruptcy or other applicable law, or shall
seek or consent to or acquiesce in the appointment of any trustee,
receiver or liquidator of Tenant or of all or any substantial part
of Tenant's property or its leasehold interest in the Premises, or
shall make any general assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts generally as
they become due; or
(e) (i) a court of competent jurisdiction shall enter an order,
judgment or decree approving a petition filed against Tenant
seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under
any present or future bankruptcy or other applicable law, or (ii)
any trustee, receiver or liquidator of Tenant or of all or any
substantial part of Tenant's property or its leasehold interest in
the Premises shall be appointed without the consent or
acquiescence of Tenant; and such order, judgment, decree or
appointment shall remain unvacated or unstayed for an aggregate of
60 days (whether or not consecutive); or
(f) default shall be made by Tenant in the performance of any term or
provision of any lease or sublease between Landlord and Tenant
(other than this Lease) covering any premises used for dealership
purposes in conjunction with the Premises;
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then, in any such event, Landlord, at its option, by notice to Tenant, may
designate a date not less than five days from the giving of such notice on
which this Lease shall terminate in all respects as if such date were the
Expiration Date.
6.02. Upon any such termination, Tenant shall quit and peacefully
surrender its interest in the Premises to Landlord, and Landlord upon and at
any time after such termination may, without further notice, re-enter and
repossess the Premises, either by force, summary proceedings or otherwise,
without being liable to any prosecution therefor.
6.03. At any time or from time to time after such termination of this
Lease, Landlord may relet the Premises or any part thereof for such term or
terms and on such conditions as Landlord in its discretion may determine, and
Landlord may collect and receive the rents therefor. Landlord in no way shall
be responsible or liable for any failure to relet the Facilities or any part
thereof or for any failure to collect any rent upon any such reletting.
6.04. No such termination of this Lease shall relieve Tenant of its
liabilities and obligations under this Lease, and such liabilities and
obligations shall survive any such termination. In the event of any such
termination, whether or not the Premises or any part thereof shall have been
relet, Tenant shall pay Basic Rent and Additional Rent required to be paid
under this Lease by Tenant up to the time of such termination. Thereafter,
until the Expiration Date, Tenant shall pay to Landlord as liquidated damages
for its default (a) Basic Rent and Additional Rent which would have been
payable by Tenant under this Lease were it still in effect, less (b) the net
proceeds of reletting, if any, effected pursuant to Section 6.03, after
deducting all expenses of Landlord in connection with such reletting. Tenant
shall pay such liquidated damages on the days on which Basic Rent and
Additional Rent would have been payable under this Lease if it were still in
effect.
6.05. At any time after a termination of this Lease pursuant to
Section 6.01, whether or not Landlord shall have collected any liquidated
damages pursuant to Section 6.04, Landlord shall be entitled to recover from
Tenant, and Tenant shall pay to Landlord on demand, as and for liquidated final
damages for Tenant's default (herein called Final Damages) and in lieu of all
liquidated damages pursuant to Section 6.04 beyond the date of such demand, an
amount equal to the excess, if any of (x) Basic Rent which would be payable
under this Lease from (i) the date to which Tenant shall have satisfied in full
its obligations to pay liquidated damages pursuant to Section 6.04, to (ii) the
Expiration Date, over (y) the then fair net rental value (net after Additional
Rent) of the Premises for the same period, both discounted to present worth at
the rate of 6% per annum, compounded annually. However, if any statute or rule
of law shall limit the amount of Final Damages to an amount less than the above
agreed upon amount, Landlord shall be entitled to prove as Final Damages the
maximum amount allowable under such statute or rule of law.
6.06. In the event of any expiration or termination of the Lease Term,
Tenant, so far as permitted by law, hereby expressly waives (a) the service of
any notice of intention to re-enter provided for by law, (b) the institution of
legal proceedings for re-entry or repossession, and (c) any and all rights to
redeem, re-enter or repossess the Premises, or to restore the operation of this
Lease. Tenant also waives any right to trial by jury in the event that, upon
any expiration or termination of the Lease Term, legal proceedings shall be
instituted by Landlord and further waives the benefits of any and all laws now
or hereafter in force exempting property from liability for rent or for debt.
The terms "enter", "re-enter", "entry" or "re-entry" as used in this Lease are
not restricted to their technical legal meaning.
ARTICLE 7. ENVIRONMENTAL MATTERS & UNDERGROUND TANKS
7.01. Landlord has obtained an environmental assessment (herein called
the Commencement Assessment) of the Premises and has delivered a copy to
Tenant. Tenant has reviewed the Commencement Assessment prior to entering into
this Lease. The Cost of Work (defined below) for remediation necessitated by
the presence of any Hazardous Substance (defined below) emanating from and/or
upon, above or beneath the Premises shall be added to the monthly Basic Rent in
the manner provided in Section 7.05.
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7.07. For the purpose of this Article 7 and of Article 10, the term
"Hazardous Substance" means any substance: (i) the presence of which requires
investigation or Remediation under any federal, state or local statute,
regulation, ordinance, order, action policy or common law, or (ii) which is or
becomes defined as a "hazardous waste," "hazardous substance," pollutant or
contaminant under any federal, state or local statute, regulation, rule or
ordinance or amendments thereto including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
section 9601 et seq.) and/or the Resource Conservation and Recovery Act (42
U.S.C. section 6901 et seq.); or (iii) which is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise
hazardous and is or becomes regulated by any governmental authority, agency,
department, commission, board, agency or instrumentality of the United States,
the State where the Premises are located, or any political subdivision thereof;
or (iv) the presence of which on the Premises causes or threatens to cause a
nuisance upon the Premises to adjacent properties or poses or threatens to pose
a hazard to the health or safety of persons on or about the Premises; or (v)
without limitation which contains gasoline, diesel fuel or other petroleum
hydrocarbons.
ARTICLE 8. DISCHARGE OF LIEN
8.01. In the event that the Premises or any part thereof of Tenant's
leasehold interest therein shall become subject to any vendor's, mechanic's
laborer's, materialman's or other lien, encumbrance or charge based upon the
furnishing of materials or labor to or at the direction of Tenant, Tenant shall
cause the same, at Tenant's sole cost and expense, to be discharged within 30
days after notice thereof to Tenant given by or on behalf of the lienor.
ARTICLE 9. INDEMNIFICATION OF LANDLORD
9.01. Tenant shall indemnify and save harmless Landlord against and
from any and all liabilities, obligations, damages, penalties, claims, costs,
charges and expenses (including, without limitation, fees and expenses of
attorneys, expert witnesses, architects, engineers and other consultants) which
may be imposed upon, incurred by or asserted against Landlord or Main Landlord
by reason of any of the following occurring during the Lease Term:
(a) any work or thing done by Tenant or any agent, contractor,
employe, licensee or invitee of Tenant in, on or about the Premises
or any part thereof;
(b) any use, nonuse, possession, occupation, condition, operation,
maintenance, or management of the Premises or any part thereof, or
of any street, alley, sidewalk, curb, passageway or space adjacent
thereto, or any Tenant Equipment;
(c) any negligent or tortious act of Tenant or any agent, contractor,
employe, licensee or invitee or Tenant;
(d) any accident, injury or damage to any person or property occurring
in, on or about the Premises or any part thereof or any street,
alley, sidewalk, curb, passageway or space adjacent thereto; and
(e) any failure by Tenant to perform its obligations under this Lease.
In the event that any action or proceeding shall be brought against Landlord by
reason of any claim covered by this Section 9.01, Tenant, upon notice from
Landlord, at Tenant's sole cost and expense, shall resist or defend the same
with counsel approved by Landlord. To the extent of the proceeds received by
Landlord under any insurance furnished to Landlord by Tenant, Tenant's
obligation to indemnify and save harmless Landlord against the hazard which is
the subject of such insurance shall be deemed to be satisfied pro tanto.
9.02. Tenant is fully familiar with the physical condition of the
Premises and accepts it as is. Landlord has made no representations of whatever
nature in connection with the condition of the Premises, and Landlord shall not
be liable for any latent or patent defect therein.
9.03. Tenant shall indemnify Landlord against all costs and expenses,
including, without limitation, fees and expenses of attorneys, expert
witnesses, architects, engineers and other consultants, incurred by Landlord in
(i) obtaining possession of the Premises after default by Tenant or (ii) after
Tenant's default in surrendering possession upon the expiration or earlier
termination of the Lease Term or (iii) in enforcing any obligation of Tenant
under this Lease.
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<PAGE> 13
ARTICLE 10. REPAIRS
10.01. (a) Except to the extent that the same is the obligation of
Main Landlord under the Main Lease Tenant shall keep and maintain the Premises
(including, without limitation, the roofs, walls, floors, ceilings and windows,
the heating, air conditioning, electrical, water, power and plumbing systems
and equipment, the paved or blacktopped areas and the adjacent alleys,
sidewalks and curbs) and Tenant Equipment in first-class order and repair
(including, without limitation, periodic painting, washing and general
refurbishing) and free of accumulations of trash, rubbish, snow, and ice and
any Hazardous Substance or other contaminants. Except as provided in Section
5.04, Tenant shall make all repairs, replacements, alterations, additions and
betterments, ordinary and extraordinary, structural and non-structural,
foreseen and unforeseen, as may be necessary or desirable in order to keep and
maintain the Premises and Tenant Equipment in first-class order and repair and
in a condition suitable for the operation and conduct of Tenant's business and
cleanup and remove and release of Hazardous Substance or other contaminants on
or under the Premises. Without limiting the generality of the foregoing,
Tenant's obligations under this Section shall include the performance of
maintenance at least as frequent and to the extent provided in Exhibit 2 hereto.
(b) Except for the initial construction or alteration of the
Improvements, if any, undertaken by Landlord and except as provided in Section
10.02, Landlord shall not be required to make any repair, replacement,
alteration, addition or betterment to or in the Premises or any part thereof,
Tenant hereby assuming the full and sole responsibility therefor and for the
condition and maintenance thereof during the Lease Term.
10.02. (a) Tenant shall give notice promptly to Landlord if the
Premises or any Tenant Equipment shall be damaged or destroyed by fire or other
casualty, specifying the date, nature and extent of such damage or destruction.
Tenant shall take whatever steps may be necessary to prevent further damage or
destruction to the Premises or Tenant Equipment.
(b) If prior to or during the Lease Term (i) the Improvements shall be
damaged or destroyed by fire or other casualty insured against by Landlord's
fire and extended coverage insurance policy covering the Improvements, (ii)
Landlord shall not have elected to terminate this Lease as provided in
subsection 10.02(c), and (iii) Tenant shall have paid to Landlord upon demand,
the amount of the deductible under the insurance covering the Improvements,
then Landlord shall repair or restore the Improvements so damaged or destroyed.
Landlord shall have no obligation to repair or restore any Tenant Equipment. If
the Premises or any part thereof shall be rendered untenable as a result of
such damage or destruction, there shall be a reduction in Basic Rent to the
extent and for the period of such untenantability, all as shall be determined
by Landlord in its reasonable discretion.
(c) If prior to or during the Lease Term the Improvements shall be so
damaged or destroyed by fire or other casualty that Landlord, in its reasonable
discretion, shall determine that substantial repairs or reconstruction of the
Improvements shall be required, Landlord, within 120 days after such fire or
other casualty, by notice given to Tenant, may designate a date on which this
Lease shall terminate (which date shall be not later than 60 days after the
giving of such notice). Thereupon, on the date fixed in such notice, this Lease
shall terminate as if such date were the Expiration Date.
(d) Other than as specifically provided in subsection 10.02(b), there
shall be no abatement of Basic Rent or Additional Rent on account of any
casualty or destruction to or untenantability of the Premises, any statute or
rule of law to the contrary notwithstanding.
10.03. Tenant at its sole cost and expense shall comply with all laws,
rules and regulations of governmental authorities relating to Tenant's use and
occupancy of the Premises or any part thereof including, without limitation,
all laws, rules, and regulations relating to the environmental condition of the
Premises or the use and presence of any Hazardous Substances on the Premises
and all orders, rules and regulations of the board of fire underwriters or any
other body hereafter exercising similar functions relating to Tenant's use and
occupancy of the Premises. Tenant likewise shall comply with the requirements
of all governmental permits and certificates and all policies of public
liability, fire and other insurance at any time in force with respect to the
Premises. Without limiting the foregoing, Tenant shall promptly deliver to
Landlord copies of any notice or other correspondence sent by Tenant to any
governmental body, or received by Tenant from any governmental body, concerning
the environmental condition of the Premises.
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<PAGE> 14
10.04. Notwithstanding the provisions of Section 10.01(a) and 10.03,
Tenant shall not be responsible for Remediation or cost of compliance relating
to Hazardous Substances or other contaminants located on the Premises if Tenant
can demonstrate to Landlord's reasonable satisfaction that the Hazardous
Substance or contamination existed prior to the time that Tenant came into
possession of the Premises, either pursuant to this Lease or otherwise, and
that Tenant has not contributed to or exacerbated the presence of the Hazardous
Substance or other contamination.
10.05. Tenant hereby assigns to Landlord all contractors' warranties
and guarantees received by Tenant in connection with the performance by Tenant
of it obligations under Section 10.01 or of any other work in or upon the
Premises. If a defect in workmanship or materials is discovered by Tenant which
is covered by a contractor's warranty or guaranty received by Landlord, and
Landlord refuses to enforce such warranty or guaranty after written demand by
Tenant, then Landlord agrees to assign to Tenant, upon demand by Tenant, all
rights of Landlord to enforce such warranty or guaranty to the extent that the
same relates to the defect in question.
ARTICLE 11. ASSIGNMENT OR SUBLETTING
11.01. Without the prior consent of Landlord in each instance, Tenant
shall not assign, encumber or mortgage this Lease or any part thereof or sublet
all or any part of the Premises or permit the Premises or any part thereof to
be occupied or used by any person or entity other than Tenant. Any such consent
given in any one instance shall not relieve Tenant of its obligation to obtain
the prior consent of Landlord to any further assignment, encumbrance, mortgage,
subletting, occupancy or use.
11.02. Tenant hereby irrevocably assigns, transfers and sets over to
Landlord, as collateral security for the payment by Tenant of Basic Rent and
Additional Rent, all rents and other payments, together with the right to
collect and receive the same, now due or which hereafter may become due to
Tenant in connection with any assignment, encumbrance, mortgage, subletting,
occupancy or use by any person or entity other than Tenant, whether or not in
violation of Section 11.01. So long as Tenant is not in default under this
Lease, Tenant shall be permitted to collect and receive all such rents and
other payments so assigned to Landlord.
ARTICLE 12. NOTICES
12.01. All notices and other communications required or permitted to
be given hereunder shall be in writing and shall be mailed by certified or
registered mail, postage prepaid (or if mail service shall be unavailable as
the result of a strike or other cause beyond the control of the party required
to provide such notice, by air or surface parcel delivery service), addressed
as specified in ITEM 8a AND 8b OF THE TERM SHEET or to such other address as
either party may designate to the other by written notice. Any notice by
certified or registered mail shall be deemed to have been given on the date of
certification or registration thereof. Any notice by air or surface parcel
delivery shall be deemed to have been given on the date submitted to the
carrier for delivery.
ARTICLE 13. ALTERATIONS AND TENANT EQUIPMENT
13.01. Tenant shall make no changes, additions, alterations or
leasehold improvements of any nature whatsoever in or to the Premises or any
part thereof (herein collectively called Alterations), without Landlord's prior
consent and shall not demolish or destroy the whole or any part of the
Premises. Tenant, at its expense, may install trade fixtures and equipment
(herein collectively called Tenant Equipment) or make Alterations prior to or
after the commencement of the Lease Term, subject in all cases to the following:
(a) prior to the installation of Tenant Equipment or the making of
Alterations, Tenant shall have furnished Landlord with a written
description thereof, in such reasonable detail as Landlord may
require, and all plans and specifications therefor, and Landlord
shall have given its consent thereto;
(b) the installation and removal of Tenant Equipment and the making of
Alterations shall be accomplished in a good and workmanlike manner
(which means that the quality of workmanship and materials shall
be at least equal to that of the Improvements), without damage to
the Premises or any part thereof and in compliance with all
applicable laws and regulations of governmental authorities having
jurisdiction including, without limitation, those requiring
permits, licenses and authorizations of such governmental
authorities;
(c) the cost of installing and removing Tenant Equipment and the
making of Alterations shall be paid by Tenant so that the Premises
at all times shall be free from any lien, mortgage, conditional
sales agreement, security interest or title retention agreement or
any charge for labor, services, or material supplied or claimed to
have been supplied to the Premises as a result of the installation
or removal of Tenant Equipment or the making of Alterations;
11
<PAGE> 15
(d) title to all Alterations immediately shall become the property of
Landlord, without payment or offset and shall be deemed part of the
Premises and subject to all the terms and provisions of this Lease as
though included in the Premises as of the Commencement Date;
(e) all the terms and provisions of this Lease, including, without
limitation, the provisions of Sections 8.01, 9.01 and 10.03, shall be
in force and effect during the installation and removal of Tenant
Equipment and the making of Alterations;
(f) any consent given to Tenant for the installation of any Tenant
Equipment or the making of Alterations shall not relieve Tenant of its
obligation to obtain the prior consent of Landlord to the installation
of any other Tenant Equipment or the making of any other Alterations;
and
(g) the installation of Tenant Equipment and the making of Alterations
shall be performed so as not to interfere with the construction or
alteration of any improvements undertaken by Landlord.
13.02. Subject to the terms and provisions of the Main Lease, Tenant may
remove all Tenant Equipment at any time during the Lease Term and upon the
Expiration Date or earlier termination of this Lease. Tenant shall repair any
damage to the premises caused by such removal, and all Tenant Equipment not so
removed may be removed by Landlord, at Tenant's cost and expense, or may be
treated by Landlord as abandoned property and part of the Premises. Tenant shall
pay to Landlord on demand the cost of repairing any damage to the Premises
resulting from Landlord's removal of Tenant Equipment.
ARTICLE 14. RIGHT OF ENTRY
14.01. Landlord and Main Landlord and their respective authorized
representatives, including, without limitation, mortgagees and lessors of all
underlying or ground leases, shall have the right to enter the Premises at all
times for the purpose of (a) exercising any right, power or remedy reserved to
Landlord in this Lease or to Main landlord in the Main lease or (b) after not
less than ten days' prior notice to Tenant, performing any obligation of tenant
with respect to which Tenant is in default under this Lease.
14.02. Landlord and its authorized representatives, including, without
limitation, mortgagees and lessors of all underlying or ground leases, shall
have the right to enter the Premises at all reasonable times during normal
business hours for the purpose of (a) examining or inspecting the Premises or
(b) showing the Premises to prospective purchasers, mortgagees or tenants.
14.03. All payments made by Landlord and all costs and expenses (including,
without limitation, fees and expenses of attorneys, expert witnesses,
architects, engineers and other consultants) incurred by Landlord in connection
with the exercise of its rights under Section 14.01, together with interest at
the rate of 15% per annum (or if 15% per annum shall be in excess of the highest
rate of interest permitted by law to be collected from Tenant, then at such
highest rate permitted by law), compounded monthly from the respective dates of
the making of such payments or the incurring of such costs and expenses, shall
constitute Additional Rent and shall be payable to Landlord by Tenant on demand.
14.04. The exercise of any right reserved to Landlord or its authorized
representatives in Sections 14.01 or 14.02 shall not constitute an actual or
constructive eviction, in whole or in part, or entitle Tenant to any abatement
or diminution of Basic Rent or Additional Rent or relieve Tenant from any of its
obligations under this Lease or impose any liability on landlord or its
authorized representatives by reason of inconvenience or annoyance to Tenant or
injury to or interruption of Tenant's business or otherwise.
14.05. In any case in which Landlord, Main landlord or their respective
authorized representative enter the Premises for any of the purposes set forth
in this Article 14, Tenant shall not interfere, directly or in any manner or
form with, and the conduct of any work being performed by or for Landlord.
Tenant hereby releases Landlord from any damages or claims of damages arising
from any loss of business or from any increase in operating costs of Tenant's
business, resulting directly or indirectly from the conduct of any such work,
whether or not due to Landlord's negligence.
ARTICLE 15. CONDEMNATION
15.01. The term "Taking" shall mean a taking prior to or during the lease
Term (but in any event subsequent to the execution of this Lease) of all or part
of the Premises as the result of comdemnation or by agreement between landlord
and the condemning authority. The term "date of Taking" shall mean the date on
which title is vested in the condemning authority.
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<PAGE> 16
15.02. In the event of a Taking of the whole of the Premises, this Lease
shall terminate on the Date of Taking as if such date were the Expiration Date.
15.03. In the event of a Taking of less than all the Premises, Landlord,
within 120 days after the Date of Taking, may terminate this Lease on a date as
shall be specified in a notice given to Tenant by Landlord, which date shall
be not later than 60 days after the giving of such notice. If Landlord shall
not give notice of termination of this Lease within 120 days after the Date of
Taking, then this Lease shall remain in full force and effect with respect to
the part of the Premises not the subject of the Taking. Basic Rent shall be
reduced by an amount equal to the reduction. If any, of Basic Rent payable under
the Main Lease and if Landlord shall receive any award or other compensation
(herein collectively called the Award) on account of the Taking, Basic Rent
payable from and after the Date of Taking shall be reduced further, by an
amount equal to (a) one-twelfth of the rental factor or factors (expressed as a
percentage or percentages) which were used by Landlord in computing Basic Rent,
multiplied by (b) the lesser of (i) the Award received by Landlord as a result
of the Taking, less all costs and expenses incurred by Landlord in collecting
the Award or (ii) the costs of that part of the Premises so taken, as determined
by Landlord on the basis of Landlord's property accounts, less (c) in the case
of either (a) or (b), all costs and expenses incurred by Landlord in connection
with any rebuilding, alteration, or restoration of the Premises undertaken by
Landlord as a result of the Taking.
15.04. Landlord shall be entitled to receive the entire Award for any
Taking, and Tenant hereby assigns to Landlord all its right, title and interest
in and to such Award. However, Tenant shall be entitled to make a claim
against the condemning authority and shall be entitled to receive compensation
for the value of any Tenant Equipment and Tenant's moving expenses which may
be compensable as a result of the Taking. Landlord shall have the right to
settle any threatened or filed condemnation proceeding.
15.05. From time to time during the Lease Term, Landlord may convey title
to, or grant easements in, portions of the land included in the Premises to
governmental authorities or utility companies for road widening, curb rounding
and water, sewer, electrical, communication and other utility lines. Any such
conveyance or grant shall be deemed a Taking only if Landlord receives
compensation therefor; otherwise there shall be no reduction in Basic Rent.
ARTICLE 16. SUBORDINATION AND ATTORNMENT
16.01. This Lease and all rights of Tenant under this Lease are, and shall
remain, subject and subordinate in all respects to all ground or underlying
leases now or hereafter affecting the Premises, to all mortgages which now or
hereafter may affect such leases or the Premises, to all advances made or
hereafter to be made under such mortgages, and to all renewals, modifications,
consolidations, replacements and extensions of, and substitutions for, such
leases and mortgages.
16.02. If at any time prior to the Expiration Date or earlier termination
of this Lease (a) any ground or underlying lease affecting the Premises under
which landlord shall be the lessee shall terminate or be terminated for any
reason, or if any mortgage affecting the Premises shall be in default or
foreclosure and (b) if any owner, mortgagee, or lessor under or resulting from
such lease or mortgage shall then be entitled to possession of the Premises,
Tenant agrees that, upon demand of any such owner, mortgagee or lessor, it
shall attorn to such owner, mortgagee or lessor.
16.03. The provisions of Section 16.01 and 16.02 shall be self-operative,
shall inure to the benefit of any owner, mortgagee or lessor referred to in such
Sections, shall apply notwithstanding that, as a matter of law, this Lease may
terminate upon the termination of any such ground or underlying lease, or upon
the default in or foreclosure of any such mortgage, and no further instruments
of subordination or attornment shall be required in order to give effect to such
provisions. Upon demand of Landlord or any such owner, mortgagee or lessor,
however, Tenant agrees to execute, from time to time, certificates or other
instruments of subordination or attornment in confirmation of the provisions of
Sections 16.01 and 16.02, acknowledging such subordination or attornment, and
setting forth the terms and conditions of its tenancy. Tenant hereby irrevocably
constitutes and appoints Landlord and all such owners, mortgagees or lessors,
acting jointly or severally, as Tenant's agents and attorneys-in-fact to execute
and deliver any such certificate or other instrument for or on behalf of Tenant.
All such certificates or other instruments shall be in form and content
satisfactory to Landlord or to any such owner, mortgagee or lessor demanding the
same. Nothing contained in this Article shall be construed to impair any right
otherwise exercisable by any such owner, mortgagee or lessor.
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<PAGE> 17
16.04. Within 10 days after written request by Landlord, Tenant shall
execute and deliver to Landlord (or to any other person or entity specified by
Landlord) a certificate stating that this Lease is in full force and effect and
has not been modified (or if modified, setting forth the specific nature of all
modifications), setting forth the date or dates to which Basic Rent and
Additional Rent have been paid, and stating whether or not, to the best
knowledge of Tenant, Landlord is in default under this Lease, and if Landlord
is in default, setting forth the specific nature of all such defaults.
ARTICLE 17. TERMINATION OF SALES AGREEMENT
17.01. Tenant represents and warrants to Landlord that Tenant is, or in
any event not later than the Commencement Date that Tenant will be, the holder
of one or more sales and service agreements with Ford Motor company (Herein
collectively called Sales Agreement) whereunder Tenant is or will be
established as an authorized dealer in new cars or trucks, parts and
accessories therefor, and other products of Ford Motor Company for sale at
retail at the Premises.
17.02. If on the Commencement Date, Tenant is not the holder of a valid
and subsisting Sales Agreement, or if any Sales Agreement held by Tenant shall
expire or terminate during the Lease Term and shall not be renewed or replaced,
either Landlord Tenant by notice to the other may designate a date on which
this Lease shall terminate. This Lease shall terminate on the date fixed in
such notice as if such date were the Expiration Date; provided, however, that
if the Sales Agreement is terminated at will by Tenant, Tenant shall be
required to give not less than 30 days notice to Landlord. This 30 day
restriction on Tenant's right to terminate the Lease following an at-will
termination of Sales Agreement shall not affect Landlord's right to earlier
terminate this Lease as set forth in this Section 17.02.
ARTICLE 18. MISCELLANEOUS
18.01. No failure by Landlord or Tenant to insist upon the strict
performance of any covenant, agreement, term or condition of this Lease or to
exercise any right, power or remedy consequent upon a breach thereof, and no
acceptance of full or partial rent by Landlord during the continuance of any
such breach by Tenant, shall constitute a waiver of any such breach, covenant,
agreement, term or condition. No waiver of any breach, covenant, agreement,
term or condition of this Lease otherwise shall continue in full force and
effect.
18.02. Neither this Lease nor any provision hereof may be changed,
waived, discharged or terminated orally. Only an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought shall be binding on the party. No such instrument shall
be deemed binding on Landlord unless signed by the President, a Vice President,
Secretary, or an Assistant Secretary of the Landlord, or by any other person to
whom authority to execute any such instrument shall be delegated in writing by
any of such officers.
18.03. The rights and obligations contained in this Lease shall bind and
inure to the benefit of Landlord and Tenant and, except as otherwise provided
herein, their respective personal representatives, successors and assigns.
However, the obligations of Landlord under this Lease shall no longer be
binding upon Landlord after any sale, assignment, or transfer by Landlord (or
upon any subsequent landlord after the sale, assignment, or transfer by any
such subsequent landlord) of its interest in the Premises. In the event of any
such sale, assignment or transfer, such obligations shall thereafter be binding
upon the grantee, assignee, or other transferee of such interest, and any such
grantee, assignee, or transferee, by accepting such interest, shall be deemed to
have assumed such obligations. A lease of the entire Premises, other than for
occupancy thereof, shall be deemed a transfer within the meaning of this
Section.
18.04. Unless otherwise specifically provided for in this Lease, each
right, power and remedy of Landlord provided for in this Lease shall be
cumulative and concurrent with every other right, power or remedy provided for
in this Lease or now or hereafter existing at law or in equity or by statute or
otherwise, and the exercise or beginning of the exercise by Landlord of any one
or more of such rights, powers or remedies shall not preclude the simultaneous
or later exercise by Landlord of any or all other such rights, powers or
remedies. In the event of any breach or threatened breach by Tenant of any of
the provisions of this Lease, Landlord shall be entitled by injunction to
restrain such breach or threatened breach or to compel performance of such
provisions.
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18.05. If any provision of this Lease or the application thereof to any
person or circumstance shall be invalid or unenforceable to any extent, the
remainder of this Lease, or the application of such provision to persons or
circumstances other than those as to which it is invalid or unenforceable,
shall not be affected thereby, and each provision of this Lease shall be valid
and enforceable to the extent permitted by law.
18.06. This Lease shall be construed and enforced in accordance with the
laws of the State where the Premises are located or if the Main Lease provides
that the laws of another State shall control, then in accordance with the laws
of the State specified in the Main Lease.
18.07. This Lease, including the Exhibits hereto, which are made a part
hereof, contains the entire agreement between the parties, and all prior
negotiations and agreements are merged herein. Neither Landlord nor Landlord's
representatives have made any representations or warranties with respect to the
Premises, the Improvements, or this Lease, except as expressly set forth
herein, and no rights or remedies are or shall be acquired by Tenant by
implication or otherwise unless expressly set forth herein.
18.08. Tenant agrees that neither this Lease nor any memorandum or short
form hereof may be recorded without prior consent of Landlord.
18.09. The relationship between the parties hereto is solely that of
landlord and tenant and nothing contained herein shall constitute or be
construed as establishing any other relationship between the parties,
including, without limitation, the relationship of principal and agent,
employer and employee or parties engaged in a partnership or joint venture.
Without limiting the foregoing, it is specifically understood that neither
party is the agent of the other and neither is any way empowered to bind the
other or to use the name of the other in connection with the construction,
maintenance or operation of the Premises, except as otherwise specifically
provided herein.
18.10. Unless the context otherwise expressly requires, the words
"herein," "hereof," "hereinafter" and "hereunder" and other words of similar
import refer to this Lease as a whole and not to any particular Article,
Section, subsection or other subdivision.
18.11. All the terms and provisions of this Lease shall be deemed and
construed to be "covenants" and "conditions" as though the words specifically
expressing or importing covenants and conditions were used in each separate
term and provision.
18.12. The headings of the Articles in this Lease are for convenience
only and shall not be used to construe or interpret the scope or Intent of this
Lease or in any way affect the same.
18.13. Any holding over by Tenant beyond the Lease Term shall not extend
the Lease Term, but otherwise shall be upon and subject to all the terms and
conditions of this Lease, except that Basic Rent shall be an amount equal to
150% of the greater of (a) Basic Rent reserved herein or (b) an amount equal to
Basic Rent under the Main Lease, if any, plus one-twelfth of the rental factor
or factors (expressed as a percent or percentages) used by Landlord in
computing Basic Rent for other dealership properties on the Expiration Date,
multiplied by the cost of the Premises as determined by Landlord on the basis
of Landlord's property accounts. This Section is not intended to authorize or
permit Tenant to hold over under any circumstance.
ARTICLE 19. TERM SHEET; INTEGRATION OF
DOCUMENT; EXECUTION
19.01. This Lease consists of this Dealership Sublease, the Term Sheet,
Exhibit I, Exhibit II, and the other Exhibits, if any, specified in the Term
Sheet, all of which shall constitute a single agreement. Landlord and Tenant
have executed this Lease by signing and dating the Term Sheet and by initialing
the first page of this Lease.
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<PAGE> 19
EXHIBIT 2
PERIODIC MAINTENANCE CHART
<TABLE>
<CAPTION>
MONTHLY QUARTERLY SEMI-ANNUALLY ANNUALLY OTHER
<S> <C> <C> <C> <C> <C>
PAVING Spring & Fall Dig out badly alli- Every 5 Years
Seal cracks, holes gatored spots and -------------
and ravelling with patch. Fill potholes Suggest appli-
asphalt patching & depressions with cation of
compound. asphalt paving. seal coat.
ROOF Clean off debris. Patch blisters, tears Every 2 Years
Clean out gutters, & cracks with felts -------------
downspouts and & fabric in patching Rearrange or add
roof sumps. cement. Renew duck boards in
pitch pockets. regularly
travelled roof
areas.
OVERHEAD DOORS Oil hinges and Replace worn Tighten, reinforce Every 2 Years
rollers. Tighten rollers, pins and and glue loose -------------
loose screws & hinges. joints. Scrap loose Replace torn
bolts. Adjust paint, prime & touch and crushed
spring tension. up. gaskets. Paint
doors inside &
out.
WALLS (INTERIOR) Remove oil, grease Wash service and Wash showroom & As required in
& smudges from body shop interior office interior Landlord's sole
interior walls. walls. Touch up walls. Patch dam- judgement,
paint. aged areas & paint showroom
touch up paint. & office in-
Paint locker & terior walls.
& toilet rooms. Paint service,
body shop &
related offices
interior walls.
WALLS (EXTERIOR) Repair mortar As required in
joints in Landlord's sole
exterior wall. judgement,
Seal cracks & paint exterior
touch up paint walls and trim.
exterior walls. Reseal exterior
natural masonry
walls.
UNIT HEATERS
(OIL OR GAS) Clean & adjust Clean & adjust Remove rust.
thermostat con- pilot light & Paint flue with
tacts. Lubricate main burner high-temperature
motors, shaft & nozzle. paint.
fan bearings.
HEATING & AIR Change filters. Tighten loose set- Add refrigerant as Clean air ducts, Every 3 Years
CONDITIONING SYSTEM screws, bolts & needed at beginning registers & grills. -------------
(GAS FIRED ROOF nuts. Lubricate of cooling season. Adjust dampers & Repaint unit
TOP UNITS) bearings of At end of cooling deflectors. casing.
motor, shaft & fan. season, clean drain
pan. Inlet screen,
coils, fan housing
& thermostat con-
tacts. Touch up
paint the rust
spots.
OIL INTERCEPTORS Boil out oil Remove sludge &
AND SEPTIC SYSTEM interceptor. crust build-up in
(IF INSTALLED) septic system.
Pump clean &
restart.
AIR COMPRESSOR Change crankcase Lubricate motor Tighten anchor bolts
oil. Test safety shaft, & compressor Add rubber or felt
valve. Clean air bearings. Replace washers as required
intake filter, frayed belts as to eliminate
cooling coil & fan. required. vibration.
LIFTS Tighten superstruc- Touch up paint Every 2 Years
ture bolts & oil on superstruc- -------------
valve. Clean & ture. Replace Professional
tighten packing packing gland Inspection &
gland at cylinder. as required. Check lead test.
Add oil. Lubricate reading of cathodic
piston wall. protection system.
Inspect hose of
traveling piston.
PAINT BOOTH Wash inside of Caulk booth panel Clean heat exchanger Touch up paint
booth. Scrap floor. seams as required. of make up air unit. the rust spots.
Clean floor drain Clean light fix- Clean exhaust fan &
sump. Remove paint tures. Change motor. Adjust belt
& rust from fire filters in air make tension. Replace
sprinkler heads. up unit. Lubricate worn belts.
Check electrical bearings in make up
cords for wear. motors. Oil door
Change filters in hinges.
booth.
ENVIRONMENTAL Maintain reporting and recordkeeping requirements
of State and/or Federal Environmental Agencies.
</TABLE>
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<PAGE> 1
EXHIBIT 10.13
STATE OF GEORGIA
COUNTY OF COBB
This Lease Agreement, made and entered into as of the 16th day of
January, 1996, by and between WINCO, L.P. a Georgia Limited Partnership
(hereinafter called "Lessor"), and BOOMERSHINE NORTH COBB INC., d/b/a
BOOMERSHINE MITSUBISHI, a Georgia corporation (hereinafter called "Lessee");
WITNESSETH:
1. DEMISE OF PREMISES. Lessor leases unto Lessee the premises (hereinafter
called "Premises") located in Cobb County, Georgia, and described in the
exhibit attached hereto and marked "Exhibit A," which exhibit is incorporated
herein by this reference thereto as if fully set out.
2. USE OF PREMISES. The Premises may only be used for operation of a
franchised automobile dealership, and directly related sales and servicing
activities, and shall not be used by anyone for any other purposes without the
prior written consent of Lessor.
3. TERM AND RENEWALS. The initial term of this Lease Agreement shall be for
the period of five (5) years to commence on the 16th day of January, 1996 and
to terminate on the ___ day of ______, 2000. Provided Lessee complies with all
terms and conditions of the within Agreement, Lessee shall have options to
renew the within Lease for three (3) additional terms of five (5) years each on
the same terms and conditions herein except as may be set forth in Section 4
below. If Lessee elects to not exercise such options, notice shall be given at
lease ninety (90) days prior to the expiration of the then current term, and
wherever herein the designation "Term" appears, it shall include any renewal
Term or Terms for which the aforesaid options for renewal have been exercised.
As used herein, the term "Lease Year" shall mean the twelve months period
beginning on the first day of ______ of year one (1) and ending on the ___ day
of ______ of the following year. Failure of Lessee to properly notify Lessor
of the non-exercise of any renewal term shall result in the automatic renewal
thereof for the next term.
4. RENTALS. Lessee shall pay rentals ("Base Rentals") to Lessor as
follows: One Hundred Seventy-Four Thousand Dollars ($174,000.00) per Lease
Year for the years 1995 through the year 2000. Base Rentals for the second
five (5) year period shall be Two Hundred Ten Thousand Dollars ($210,000.00)
per Lease Year. Base Rental for the third five (5) year period shall be Two
Hundred Twenty-Two Thousand Dollars ($222,000.00) per Lease year, and Base
Rentals for the Fourth five (5) year period shall be Two Hundred and
Thirty-Four Thousand Dollars ($234,000.00) per Lease year.
The Base Rentals shall be due and payable in twelve (12) equal monthly
installments of Fourteen Thousand and Five Hundred Dollars ($14,500.00) each,
for the initial five (5) year term; Seventeen Thousand and Five Hundred Dollars
($17,500.00) per months for the second five (5) year term; Eighteen thousand and
Five Hundred Dollars ($18,500.00) per month for the third five (5) year term;
and Nineteen Thousand Five Hundred Dollars ($19,500.00) for the fourth five (5)
year term, all due in advance of the first day of each calendar month for and
during the Term.
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It is the intention of the Lessor and the Lessee that the rentals
hereinabove set forth shall be net, net, net to the Lessor and that all costs,
expenses and obligations of any kind or nature whatsoever (excluding only
principal and interest payments due for Lessor to Lessor's mortgagee) relating
to the Premises shall be borne by the Lessee and Lessee hereby indemnifies the
Lessor against any and all such costs, expenses and obligations. In the event
that the Lessor shall make any expenditure from which the Lessee is
responsible, or which the Lessee should make, then the amount thereof, together
with interest at the lesser of the highest legal rate or prime plus 2% per
annum and costs, may, at the Lessor's election, be added to and shall be due as
additional rental with the next installment of rent.
5. ACCEPTANCE OF PREMISES. Lessee acknowledges that the act of taking
possession of the Premises shall constitute acceptance thereof and conclusive
evidence that Lessee has inspected and examined the entire Premises and utility
installations and that the same were, and are, in good and satisfactory
condition. Notwithstanding the foregoing, upon notice from Lessee, so long as
Lessee is not in default hereunder, (a) Lessor shall be responsible for all
repairs, changes, alterations and additions required to correct any material
defects existing at the date of commencement of the Term hereof, or through the
initial twelve (12) months of the Term, if such material defects are due to
defective materials or workmanship in the original construction of the
Premises; and (b) after said initial twelve (120 month period, Lessor shall
assign to Lessee all of its right, title and interest in and to any rights to
enforce any claim for defective design or construction of the premises.
6. ASSIGNMENT OR SUBLETTING. Lessee shall not have the right to assign the
within Lease or to sublet the Premises in whole or in part, without the prior
written consent of Lessor, which consent shall not be unreasonably withheld.
The passage of control of Lessee to parties other than those who presently
control Lessee shall constitute a permitted assignment of this Lease. Such
consent shall be deemed unreasonably withheld if (a) the proposed assignee or
subtenant has qualified as an automotive franchise representative under
customary forms of agreements for a major manufacturer of motor vehicles, and
(b) Lessee is not in default hereunder. The use provisions relating to this
Lease shall, in any event, remain in full force and effect. Lessee's
obligations hereunder, as well as any guaranties of Lessee's performance
hereunder, in the absence of explicit agreement to the contrary, shall not be
released upon any such assignment or subletting, and Lessee, any guarantors of
Lessee's performance, and such assignee or subtenant shall all, jointly and
severally, be liable for all obligations hereunder. Notwithstanding the above,
Lessee shall not assign the within Lease or sublet the Premises in whole or in
part, without the prior written consent of Lessor's mortgagee, NationsBank of
Georgia, N.A.
7. COMPLIANCE WITH LEGAL AND ENVIRONMENTAL REQUIREMENTS. Lessee shall
comply with all legal and environmental requirements of any governmental or
quasi-governmental body including City, County, State or Federal boards having
jurisdiction thereof, respecting any operation conducted or any equipment,
installations or other property placed upon, in or about the Premises. Lessee
shall neither create nor permit the creation of any nuisance upon, in or about
the Premises, and Lessee shall not make any offensive use thereof. Lessor has
no knowledge of any pending or threatened claim, notice, assessment or other
proceeding relating to the environmental integrity of the premises. Lessor has
heretofore retained the environmental engineering firm of Law Engineering,
Inc., of Atlanta, Georgia to complete an environmental assessment of the
Premises, a copy of which has been delivered to Lessee. Except as indicated
above, Lessor makes no representations as to the environmental integrity of the
Premises. Lessee shall throughout the Term of his Lease, at Lessees' sole cost
and expense, comply with all laws, ordinances and lawful regulations and
requirements of federal, state and municipal governments. Without limiting the
foregoing covenant, Lessee warrants and represent to
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Lessor that the Premises shall be at all times used in full compliance with all
Federal, State and Local environmental laws and regulation, including but not
limited to the Comprehensive Environmental Response Compensation and Liability
Act of 1980 and the Superfund Amendments and Reauthorization Act of 1986 as
amended. If, however, the Lessee shall in good faith desire to contest any such
law, ordinance, regulation or requirement, it shall notify Lessor in writing of
its intention to do so, and it shall not be required to comply therewith so long
as it shall in good faith and at its own cost and expense contest the same or
the validity thereof by appropriate proceedings. Lessee shall indemnify Lessor
from any loss or damage suffered by Lessor because of delay by Lessee in
compliance with any such contested law, ordinance, regulation or requirement,
and Lessor shall refrain from complying with such contested law, ordinance,
regulation or requirement on Lessee's behalf so long as Lessee shall continue to
contest the same. Lessor shall give Lessee such assistance in connection with
any such contest as shall be necessary, reasonable and proper, at no cost or
expense to Lessor, and Lessor agrees to sign and execute for Lessee any
necessary papers or documents for such purpose. In addition, Lessee shall
indemnify and hold Lessor harmless for any and all damages, penalties, fines,
claims, liens, suits, liabilities, costs (including clean-up cost), judgment and
expenses (including reasonable attorneys', consultants', or experts' fees and
expenses) of every kind and nature suffered by or asserted against Lessor as a
direct or indirect result of any warranty or representation made by Lessor in
this Section or any requirement under any law, regulation or ordinance, Local,
State or Federal, which requires the elimination of any hazardous materials,
substances, wastes or other environmentally regulated substances. Lessee's
obligations hereunder to Lessor shall not be limited to any extent by the term
of this Lease, and, as to any act or occurrence prior to termination of said
Lease which gives rise to liability hereunder, but shall continue, survive and
remain in full force and effect notwithstanding termination of said Lease.
8. FIRE INSURANCE. Lessee shall carry at Lessee's expense fire insurance
with extended coverage insuring Lessor and Lessee as their interests may appear
against loss or damage to the buildings or other improvements located on the
Premises and insuring Lessee against loss or damage to Lessee's furnishings,
fixtures, inventory, equipment and other property situated or placed upon, in or
about the Premises with companies and in amounts and with deductibles acceptable
to Lessor. Lessor shall have the right to have the buildings and improvements
insured to their maximum, full replacement cost, insurable value. With respect
to the insurance coverage on the buildings and improvements, the Lessor shall be
named as the insured in such policies and the original policies shall be
delivered to Lessor. With respect to all other insurance required under this
Lease Agreement, memoranda of all policies shall be delivered to Lessor. Lessee
shall further carry at its expense rental (sometimes known as business
interruption) insurance in an amount not less than the sum of the Base Rentals
and Adjustment Rentals for the most recent Lease year, which insurance shall be
payable to Lessor. Lessee shall name mortgagee of Lessor as an additional
insured. All insurance required hereby shall be kept in force during the entire
Term. Notwithstanding the above, all insurance policies provided for herein,
shall be submitted to Lessor's mortgagee, NationsBank of Georgia, N.A., and such
mortgagee shall likewise have the same right of approval that the Lessor has
herein.
9. TAXES AND ASSESSMENTS. Lessor shall timely list the Premises for taxes
but Lessee shall pay assessments of whatever kind or nature assessed against the
Premises. Lessee shall timely list for taxes and pay all tax assessments of
whatever kind or nature assessed against or on Lessee's furnishings, fixtures,
inventory, equipment, leasehold improvements and other property situated or
placed upon, in or about the Premises. Upon reasonable notice to Lessor, Lessee
shall have the right to protest any tax assessment in the name of the Lessor and
as Lessor's agent, but without expense to Lessor. All taxes shall be paid prior
to delinquency.
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10. UTILITIES. Lessee shall pay for all electricity, gas, water, heat and
other utilities consumed or used on the Premises. Lessor shall not be in any
way obligated or responsible for the furnishing of utility services. The lack
of availability of or failure of utility services shall not be deemed
constructive eviction.
11. ADDITIONS, ALTERATIONS, CHANGES AND IMPROVEMENTS. Lessee shall have
the right to make only alterations, changes and improvements in or to the
Premises with Lessor's, and Lessor's mortgagee, NationsBank of Georgia, N.A.,
prior written consent, provided that if such consent is given, all such
alterations, changes and improvements shall be promptly made in a workmanlike
manner, be promptly paid for allowing no liens to attach and shall become the
property of Lessor at the termination of this Lease Agreement. All Lessee's
proposed alterations, changes and improvements must be approved in writing by
Lessor prior to the commencement thereof. Lessee shall have no right to
commence or to cause the commencement of any work prior to delivering to Lessor
documents satisfactory to Lessor indicating that no person, firm or corporation
shall have any right to claim a lien on the Premises by virtue of Lessees' work
and/or the failure to pay therefore. Lessee shall deliver to Lessor, in form
satisfactory to Lessor, prior to the commencement of any work a waiver of liens
signed by all prime contractors, waiving all rights to assert liens, which
shall contain a certification by Lessee that the waiving parties are all of the
prime contractors.
12. REPAIRS. Lessee shall, at Lessee's own expense, keep and maintain the
entire Premises and all parts and systems thereof, including outside walls,
windows and/or plate glass, the roof, and all utility installations and
equipment, in good maintenance, replacement and repair, properly painted and
decorated. All repairs, maintenance and replacement shall be performed in a
prompt, workmanlike manner, shall be promptly paid for by Lessee and no liens
shall be allowed to attach either to the Premise or Lessee's interest therein.
Lessor has no obligation to make any repairs or replacements or to perform any
maintenance. If any lien is asserted against the Premises, based upon any act or
interest of the Lessee or of anyone claiming through it, affecting any material,
machinery, or fixtures used in the construction, repair, or operation by the
Lessee, Lessee shall immediately take whatever action by bonding, deposit or
payments which shall remove the claim of lien or security interest. If Lessee
does not remove the lien within thirty (30) days after notice to it, Lessor may
pay the lien or discharge it by deposit. The amount so paid or deposited, with
interest as provided herein, shall be deemed Additional Rentals under this
Lease, and shall be immediately payable with interest, the default of which
shall be immediately payable with interest, the default of which shall give rise
to the same remedies to Lessor as the case of default of the payment of Base and
any other charges or rentals.
13. SAFE AND SANITARY CONDITION. Lessee shall not permit, allow or cause
any act or deed to be performed upon, in or about the Premises which shall cause
or be likely to cause injury to any person on the Premises, the building or
improvements located thereon, or to any adjoining property. Lessee shall at all
times keep the Premises in a neat and orderly condition and keep the Premises
and the entryways, parking areas, sidewalks and delivery areas (if any)
adjoining the Premises clean and free from rubbish, dirt, snow, standing water
and ice.
14. TRADE FIXTURES. Lessee shall be permitted to install trade fixtures on
the Premises. In addition, Lessee shall be permitted to remove said trade
fixtures from the Premises upon termination of this Lease Agreement; provided
that if Lessee does so remove such trade fixtures. Lessee shall return the
Premises to the same condition as existed at the time of original entry,
ordinary wear and tear excepted. This provision is not
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intended to allow Lessee to remove approved improvements made by Lessee to the
Premises. All such improvements belong to Lessor at the termination hereof and
shall not be removed nor damaged by Lessee's removal of trade fixtures. If
Lessee does not remove the trade fixtures at termination, Lessor shall have the
option either to declare such fixtures abandoned and Lessor the owner thereof
or to demand Lessee remove same at Lessee's expense returning the Premises to
the condition required herein.
15. LESSOR NOT LIABLE FOR DAMAGES OR INJURIES. Lessor shall not be
responsible to Lessee or to any other person, firm, partnership, association
or corporation for damages or injuries by virtue of or arising out of bursted
water pipes, leaks from sprinkler or air conditioning systems, leaks from the
roof, or by virtue of earthquakes, riots, windstorms, overflow of water from
surface drainage, rains, water, fire or by the elements or Acts of God, or by
the neglect of any person, firm partnership, association or corporation. Lessee
shall indemnify and hold Lessor harmless from any and all claims for damages to
person or property to the full extent permitted by law.
16. INDEMNIFICATION. Lessee covenants to indemnify and hold Lessor harmless
from the claims of any and all persons, firms, partnerships, associations and
corporations for the personal injury or damage to property or both arising out
of or in connection with Lessee's use and/or occupancy of the Premises,
including but not limited to any environmental claims. In addition,. Lessee
shall carry public liability insurance in the minimum amount of $2,000,000.00
bodily injury per occurrence and $250,000.00 property damage per occurrence,
and Lessee shall deliver to Lessor memorandum policies of such coverage with
companies satisfactory to Lessor and naming Lessor as additional insured
therein.
17. FIRE OR CASUALTY. If the Premises shall be partially or completely
damaged or destroyed by fire or other casualty, Lessor shall, as soon as
reasonably possible, effect the required repairs and reconstruction of Premises
to place them in substantially the same condition as existed immediately prior
to such damage or destruction but during such time as said repairs or
reconstruction are being made, the rentals hereinabove provided shall not
abate. Any other provisions contained herein notwithstanding, the Lessor shall
be required and obligated to effect repairs or reconstruction only to the
extent of any sums of money, if any, which are received by Lessor under
Lessor's insurance coverage as a direct result of said fire or other casualty.
Should the insurance proceeds be insufficient, the remaining funds necessary
for repair and restoration shall be promptly furnished by Lessee. If at any
time within twelve (12) months before the end of the initial five (5) year
Term, or within twelve (12) months before the end of the initial five (5) year
Renewal Term (whichever is applicable): (a) Lessee has not been served upon
Lessor notice of renewal of extension; (b) the improvements to the Premises are
completely destroyed or as damaged by fire or other casualty, regardless of
whether covered by insurance, so as to render the Premises unfit for their
intended use; and (c) as repair or restoration is not economically feasible,
then, except as provided in the following sentence, either party may terminate
this Lease by written notice to the other within thirty (30) days after the date
of such damage or destruction. Notwithstanding the foregoing, should Lessee
serve upon Lessor irrevocable notice of renewal, then Lessor shall be obligated
to perform as described in this Paragraph 17. If the Lease is so terminated,
all rent shall be apportioned to the date of termination and all insurance
proceeds shall belong to Lessor.
18. WAIVER OF SUBROGATION. Neither Lessor nor Lessee nor anyone claiming by,
through or in their behalf shall have any claim, right or action or right of
subrogation one against the other for or based upon any loss or damage caused
by fire, explosion or other insured casualty (not limited to the foregoing)
relating to the Premises or to any property upon, in, or about the Premises,
whether such fire, explosion or other insured casualty
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shall arise from the negligence of Lessor, Lessee, or their respective agents,
representatives or employees, or otherwise.
19. CONDEMNATION. If the entire Premises are taken or condemned for a public
or quasi-public use (or any transfer is made under threat of condemnation),
then this Lease shall terminate at the later of the vesting of title in the
condemning authority or the acquisition of possession thereby. Rent shall be
apportioned as of that date. Lessee shall have no claim against Lessor for any
of the foregoing. If any part of the Premises shall be taken or condemned for a
public or quasi-public use (or any transfer is made under threat of
condemnation) and a part thereof remains which is reasonably suitable for the
Lessee's use, this Lease shall not terminate, but the rentals payable by the
Lessee shall be adjusted so that the Lessee shall be required to pay for the
remainder of the Term, rentals equitably reduced by the reduction in
tenantability of the Premises. The aforesaid partial condemnation shall be
without prejudice to the rights of either Lessor or Lessee to directly recover
compensation from the condemning authority for any of its loss or damage caused
by such condemnation. Neither Lessor nor Lessee shall have any rights in and to
any part of the award paid for the loss of leasehold rights.
20. SUBORDINATION TO MORTGAGES. From and after Lessee acknowledging that it
has been furnished a non-disturbance agreement in satisfactory form, this Lease
shall be subordinate to the interest of the party furnishing such agreement.
Lessor shall bear all of Lessee's expenses incurred in connection with this
paragraph, including attorney's fees.
21. INSPECTION. Lessor shall have the right at all reasonable to enter and
inspect the Premises.
22. CONDITION OF PREMISES UPON TERMINATION. Upon the termination of this
Lease Agreement, Lessee shall return the Premises to Lessor substantially in
the same conditions received, ordinary wear and tear and approved improvements
excepted.
23. HOLDING OVER. In the event Lessee remains in possession after the
expiration of the Term without the execution of a new lease, Lessee shall
not acquire any right, title or interest in or to the Premises. in such event,
Lessee shall occupy the Premises as a tenant from month-to month and shall
otherwise be subject to all of the conditions, provisions and obligations of
this Lease Agreement insofar as the same shall be applicable.
24. DEFAULT.
(a) Each and every one and all of the following events shall constitute an
Event of Default:
(i) if Lessee files a petition in bankruptcy or insolvency or for
reorganization under a bankruptcy act or voluntarily taken
advantage of any such act or makes an assignment for the benefit
of creditors;
(ii) if involuntary proceedings under any bankruptcy law, insolvency
or receivership action shall be instituted against Lessee, or if
a receiver or trustee shall be appointed for all or
substantially all of the property of Lessee and such proceedings
are not dismissed, or the receivership or trusteeship vacated,
within 10 days after the institution or appointment;
(iii) if Lessee fails to pay any sum due from it in strict accordance
with the provisions of this Lease, and does not make the payment
within ten (10) business days after written notice thereof. For
the purposes hereof, all sums due from Lessee shall constitute
rentals whether denominated as rental or otherwise elsewhere
herein and Lessee has absolutely no right of offset;
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(iv) if Lessee fails to fully perform and comply with each and every
condition and covenant of this Lease Agreement, and such failure of
performance continues for a period of thirty (30) days after notice
thereof;
(v) if Lessee vacates or abandons the Premises;
(vi) if the interest of Lessee is transferred, levied upon or assigned to
any other person, firm or corporation whether voluntarily or
involuntarily except as herein permitted;
(vii) if Lessor, in any three months of any Lease Year, gives any notice
to Lessee pursuant to subparagraphs iii) or iv) above,
notwithstanding Lessee's cure of default within the allowable period
or periods.
b. Upon the occurrence of any Event of Default as set forth above, Lessor
shall have the right, at its option, to utilize any one or more of the
following rights:
(i) to cancel and terminate this Lease Agreement and all interests of
the Lessee hereunder by giving notice of such cancellation and
termination not less than ten (10) days prior to the effective date
of such termination. Upon the expiration of said ten (10) day
period, the Lessee shall have no further rights under this Lease
Agreement (but such cancellation shall not serve to release or
discharge the damages Lessee owes to Lessor); and/or
(ii) to make any payment required to Lessee herein or correct any
condition required to be corrected by Lessee, and Lessor shall have
the right to enter the Premises for the purpose of correcting any
such condition and to remain on the Premises until the complete
correction of of such condition. However, no expenditure by Lessor
on behalf of Lessee shall be deemed to waive or release Lessee's
breach hereof and Lessor shall retain all rights to proceed against
Lessee as set forth herein; and/or
(iii) to reenter the Premises immediately with or without order of court
and without being guilty of trespass, remove the property and
personal of Lessee and store such property in a public warehouse or
such other location selected by Lessor, all at the expense of
Lessee. After such reentry, Lessor shall have the right to terminate
this Lease Agreement by giving ten (10) days notice of termination
to Lessee, but without such notice, the reentry by Lessor shall not
terminate this Lease Agreement. On termination, Lessor may recover
from Lessee all damages resulting from Lessee's breach, including
the cost of recovery of the Premises and placing them in
satisfactory conditions, the value of the Premises for the remainder
of the Term, all of which sums shall be immediately payable to
Lessor from Lessee; and/or
(iv) to relet the Premises or any part thereof for any term, with or
without terminating the Lease, and at such rentals and on such other
terms as Lessor may elect including the right to grant free rental,
and to alter and repair the Premises as Lessor deems necessary.
Should Lessor relate the Premises, Lessee shall pay all expenses of
reletting including brokers' or finders' fees and such reasonable
attorney's fees as Lessor may incur. Lessor shall apply the rent
received from reletting in the following order: (1) to expenses of
reletting; (2) to sums due from Lessee other than sums denominated
in Section 4 above as rentals, and (3) to sums denominated as
rentals in Section 4 above previously due and (4) to sums which were
to become due in the future; and/or
(v) to accelerate the rentals with or without entry; and/or
(vi) all other rights and remedies provided by law to a Lessor with a
defaulting Lessee including all such money damages as Lessor shall
be entitled pursuant to law of damages.
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c. In the event of any conflict between any of the provisions hereof
regarding the amount of time that must elapse without cure after notice of
breach before the same constitutes and Event of Default, then the provisions
establishing the least amount of time to cure after notice shall prevail.
d. Upon any breach hereof, regardless of whether such breach is, or
becomes, an Event of Default; Lessor shall be reimbursed by Lessee for any
attorney's fees incurred by Lessor in connection with such breach.
25. Waiver. No failure by Lessor to exercise any rights hereunder to
which Lessor may be entitled shall be deemed a waiver of Lessor's right to
subsequently exercise same. Lessee shall gain no rights nor become vested with
any power to remain in default under the terms hereof by virtue of Lessor's
failure to timely assert his rights. No acceleration of rentals, regardless of
how often occurring, which Lessor chooses to ignore by thereafter accepting
rental or other performance by Lessee shall constitute a waiver of the right to
thereafter accelerate rentals.
26. Law Applicable. This Lease is entered into in Georgia and shall be
construed under the laws, statutes and ordinances of such jurisdiction.
27. Severability. The provisions hereof are independent covenants and
should any provision or provisions contained in this Lease be declared by a
court or other tribunal of competent jurisdiction to be void, unenforceable or
illegal, then such provision or provisions shall be severable and the remaining
provisions hereof shall remain at Lessor's option in full force and effect.
28. Stamp Tax or Sales Tax on Lease. Should any governmental authority
having jurisdiction over the Premises declare or otherwise assess any tax on
leases or leaseholds whether designated as a stamp tax, sales or otherwise,
then in any of such events, all taxes so declared or charged shall be the
obligation of the Lessee and shall be paid by Lessee to such authority or shall
be promptly paid to Lessor in reimbursement and as additional rental.
29. Easements, Restrictions, Options and Rights of Way. The Premises are
demised subject to all easements, restrictions, options, rights of way and
covenants legally affecting the Premises.
30. Binding Effect and Complete Terms. The terms, covenants, conditions
and agreements herein contained shall be binding upon and inure to the benefit
of and shall be enforceable by Lessor and Lessee and by their respective heirs,
successors and assigns. All negotiations and agreements of Lessor and Lessee
are merged herein. No modification hereof or other purported agreement to the
parties shall enforceable unless the same is in writing and signed by the
Lessor and Lessee.
31. Notices and Written Consents. All notices and written consents
required under this Lease shall be in writing and shall only be deemed properly
served when posted by certified United States mail, postage prepaid, return
receipt requested, addresses to the party to whom directed at the following
address or at such other address as may be from time to time designated in
writing:
To Lessor: Winco, L.P.
c/o Walter M. Boomershine, Jr.
2150 Cobb Parkway
Smyrna, Georgia 30080
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To Lessee: Boomershine North Cobb, Inc.,
d/b/a Boomershine Mitsubishi
c/o Charles K. Yancey
2150 Cobb Parkway
Smyrna, Georgia 30080
Copy to: Stephen C. Whicker, P.C.
6111 Peachtree Dunwoody Road
Building D
Atlanta, Georgia 30328
Notices shall be deemed served upon posting.
32. RENTAL PAYMENTS. All rental payment, until otherwise designated in
writing, shall be made to Lessor at the address above.
33. LESSOR'S PERFORMANCE OF LESSEE'S COVENANTS. Should Lessee, after seven
days' notice from the Lessor, fail to do any of the things required to be done
by it under the provisions of this Lease, Lessor, in addition to any and all
other rights and remedies, may (but shall not be required to) do the same or
cause the same to be done, and the reasonable amount of any money expended by
Lessor in connection therewith shall constitute additional rental due from
Lessee to Lessor and shall be payable as rental on the date for payment of
rentals immediately following such expenditure.
34. RECORDING. This Lease shall not be recorded but a memorandum hereof
may be prepared and may be recorded in the County where the Premises are
located, with recording fees and preparation of memorandum shall contain such
information as is necessary to provide adequate record notice of the existence
of the Lease, including the parties, the term, the property involved and
whether opinions to renew or purchase exist.
35. COVENANT OF TITLE AND QUIET ENJOYMENT. Lessor covenants and warrants
to Lessee that Lessor has full right and lawful authority to enter into this
Lease for the Term hereof and that provided Lessee is not in default hereunder,
Lessee's quiet and peaceable enjoyment of the Premises shall not be disturbed
by anyone claiming through Lessor.
36. CONSTRUCTION OF LEASE. This lease shall not be construed more strictly
against either party regardless of which party is responsible for the
preparation of the same.
37. ESTOPPEL CERTIFICATES. Lessor and Lessee shall certify in writing each
to the other the status of this Lease and the rent payable hereunder, at any
time, upon ten (10) days' written notice. Such certificate shall be in a form
reasonably satisfactory to the prospective purchaser or mortgagee of the fee
title, or assignee of this Lease or subtenant of the Premises.
IN WITNESS WHEREOF, Lessor has caused this Agreement to be executed by
its General Partners under seal, and Lessee has caused this Agreement to be
executed by its officers hereunto duly authorized and has caused its corporate
seal to be hereunto affixed, this the day and year first above written.
[SIGNATURES ON FOLLOWING PAGE]
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WITNESSES: LESSOR:
WINCO, L.P.
/s/ Stephen C. Whicker By: /s/ Walter M. Boomershine, Jr. (SEAL)
- ------------------------------ ----------------------------------
WALTER M. BOOMERSHINE, JR.
GENERAL PARTNER
/s/ Stephen C. Whicker By: /s/ Winifred F. Boomershine (SEAL)
- ------------------------------ ----------------------------------
WINIFRED F. BOOMERSHINE
GENERAL PARTNER
WITNESSES: LESSEE:
BOOMERSHINE NORTH COBB, INC.
/s/ Stephen C. Whicker By: /s/ Charles K. Yancey (SEAL)
- ------------------------------ ----------------------------------
CHARLES K. YANCEY,
SECRETARY TREASURER
ATTEST:
- ------------------------------
(CORPORATE SEAL)
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EXHIBIT 10.14
STATE OF GEORGIA
COUNTY OF BARTOW
This Lease Agreement, made and entered into as of this 1st day of
August, 1995, by and between WINCO II, L.P., a Georgia Limited Partnership
(hereinafter called "Lessor"), and THOMPSON AUTOMOTIVE GROUP, INC., d/b/a
BOOMERSHINE HONDA, a Georgia corporation (hereinafter called "Lessee");
WITNESSETH:
1. DEMISE OF PREMISES. Lessor leases unto Lessee the premises (hereinafter
called "Premises") located in Bartow County, Georgia, and described in the
exhibit attached hereto and marked "Exhibit A," which exhibit is incorporated
herein by this reference thereto as if fully set out.
2. USE OF PREMISES. The Premises may only be used for operation of a
franchised automobile dealership, and directly related sales and servicing
activities, and shall not be used by anyone for any other purposes without the
prior written consent of Lessor.
3. TERM AND RENEWALS. The term of this Lease Agreement shall be for the
period of ten (10) years to commence on August 1, 1995 and to terminate on July
31, 2006. Provided Lessee complies with all terms and conditions of the within
Agreement, Lessee shall have options to renew the within Lease for two (2)
additional terms of five (5) years each on the same terms and conditions herein
except as may be set forth in Section 4 below. If Lessee elects to not
exercise such options, notice shall be given at least ninety (90) days prior to
the expiration of the then current term, and wherever herein the designation
"Term" appears, it shall include any renewal Term or Terms for which the
aforesaid options for renewal have been exercised. As used herein, the term
"Lease Year" shall mean the twelve months period beginning on the first day of
August of one year and ending on the 31st day of July of the following year.
Failure of Lessee to properly notify Lessor of the non-exercise of any renewal
term shall result in the automatic renewal thereof for the next term.
4. RENTALS. Lessee shall pay rentals ("Base Rentals") to Lessor as
follows: One Hundred Twenty Thousand Dollars ($120,000.00) per Lease Year for
the years 1995 through the year 2001. Base Rentals for the period beginning
August 1, 2001 and ending July 31, 2006 shall be One Hundred Forty-Four
Thousand Dollars ($144,000.00) per Lease Year. Base Rentals for the period
beginning August 1, 2006 shall be One Hundred Eighty Thousand Dollars
($180,000.00) per Lease year.
Commencing with the rentals due as of the commencement of the sixth
(6th) Lease Year of the initial Term and thereafter (including any Renewal
Term), in addition to the Base Rentals, Lessee shall pay to Lessor additional
rentals per Lease Year, which shall be hereinafter called the "Adjustment
Rentals." The Adjustment Rentals shall increased to certain minimum "floors"
as described in the capitalized paragraph below, and shall also be computed
based upon the "Consumer Price Index For All Urban Consumers, All Items
(1982=100)" as published in Economic Indicators by the Government Printing
Office for the Joint Economic Committee which shall be hereinafter called the
"Index," subject to the minimum and maximum amounts prescribed in the
capitalized paragraph below. The Index
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Number for "All Item" for the month of July, 1995 shall be hereinafter called
the "Base Index Number" and the corresponding Index Number for the month of
July, 2001, and July, 2006 for the applicable month and year shall be adjusted
effective on the 61st, 121st and 181st months of the Term, shall be hereinafter
called the "Current Index Number."
The Current Index Number shall be divided by the Base Index Number, and
from the quotient thereof, there shall be subtracted the number one (1), and
the result of the third decimal shall be the percentage of increase which, when
multiplied by the Base Rentals shall, subject to the minimum and maximum
amounts prescribed in the capitalized paragraph below, constitute the
Adjustment Rentals. As soon as practical after publication of the applicable
Consumer Index, Lessor shall notify Lessee of the applicable Consumer Index,
Lessor shall notify Lessee of the Adjustment Rentals which shall be applicable
for the respective period or renewal Term. In no event shall the sum of the
Base Rentals and the adjustment Rentals ever be less than the Base Rentals.
Adjustment Rentals shall be computed and effective as follows:
FIRST COMPUTATION: At the beginning of the second five years of the
initial Term (i.e., at the commencement of the 61st month of the initial
Term), and to be effective for the balance of the initial Term.
SECOND COMPUTATION: In the event Lessee elects to renew this Lease for
an additional five year term, at the beginning of said First Renewal
Term (i.e., effective as of the beginning of the 121st month), and to be
effective for the entire First Renewal Term.
THIRD COMPUTATION: In the event Lessee elects to renew the provisions
of this Lease for the second and final Renewal Term, at the beginning of
the Second Renewal Term (i.e., effective as of the beginning of the
181st month), and to be effective for the entire Second Renewal Term.
NOTWITHSTANDING ANY PROVISION OF THIS PARAGRAPH 4 TO THE CONTRARY, IN NO
EVENT SHALL THE SUM OF THE BASE RENTALS AND THE ADJUSTMENT RENTALS EVER BE (a)
MORE THAN $180,000.00 PER LEASE YEAR DURING THE INITIAL TERM, (b) LESS THAN
$180,000.00 NOR MORE THAN $210,000.00 PER LEASE YEAR DURING THE INITIAL FIVE
YEAR RENEWAL TERM, AND (c) LESS THAN $210,000.00 NOR MORE THAN $240,000.00 PER
LEASE DURING THE SECOND FIVE YEAR RENEWAL TERM.
If the publication of the Index shall be discontinue, comparable
statistics computed and published by an agency of the United States Government
or by a responsible financial periodical shall be selected by the parties
hereto for the purpose of computing Adjustment Rentals.
The Base Rentals shall be due and payable in twelve (12) equal monthly
installments of Ten Thousand Dollars ($10,000.00) each, all due in advance of
the first day of each calendar month for and during Term. The Adjustment
Rentals shall be due and payable in advance in twelve (12) equal monthly
installments each due at the same time as the Base Rentals. In the event the
computation of Adjustment Rentals is not delivered to Lessee at the
Commencement of the applicable period, then the Adjustment Rentals for the then
current Lease Year shall be brought current for such Lease Year as soon as the
amount of such Adjustment Rentals for the entire period that the same are due.
Lessor shall provide the computation at its earliest convenience.
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It is the intention of the Lessor and the Lessee that the rentals hereinabove
set forth shall be net, net, net to the Lessor and that all costs, expenses and
obligations of any kind or nature whatsoever (excluding only principal and
interest payments due from Lessor to Lessor's mortgagee) relating to the
Premises shall be borne by the Lessee and Lessee hereby indemnifies the Lessor
against any and all such costs, expense and obligations. In the event that the
Lessor shall make any expenditure for which the Lessee is responsible, or which
the Lessee should make, then the amount thereof, together with interest at the
lesser of the highest legal rate or 24% per annum and costs, may, at the
Lessor's election, be added to and shall be due as additional rental with the
next installment of rent.
5. ACCEPTANCE OF PREMISES. Lessee acknowledges that the act of taking
possession of the Premises shall constitute acceptance thereof and conclusive
evidence that Lessee has inspected and examined the entire Premises and utility
installations and that the same were, and are, in good and satisfactory
condition. Notwithstanding the foregoing, upon notice from Lessee, so long as
Lessee is not in default hereunder, (a) Lessor shall be responsible for all
repairs, changes, alterations and additions required to correct any material
defects existing at the date of commencement of the Term hereof, or through the
initial twelve (12) months of the Term, if such material defects are due to
defective materials or workmanship in the original construction of the Premises;
and (b) after said initial twelve (120 month period, Lessor shall assign to
Lessee all of its right, title and interest in and to any rights to enforce any
claim for defective design or construction of the premises.
6. ASSIGNMENT OR SUBLETTING. Lessee shall not have the right to assign
the within Lease or to sublet the Premises in whole or in part, without the
prior written consent of Lessor, which consent shall not be unreasonably
withheld. The passage of control of Lessee to parties other than those who
presently control Lessee shall constitute a permitted assignment of this Lease.
Such consent shall be deemed unreasonably withheld if (a) the proposed assignee
or subtenant has qualified as the franchise representative under customary
forms of agreements for a major manufacturer of motor vehicles, and (b) Lessee
is not in default hereunder. The sue provisions relating to this Lease shall,
in any event, remain in full force and effect. Lessee's obligations hereunder,
as well as any guaranties of Lessee's performance hereunder, in the absence of
explicit agreement to the contrary, shall not be related upon any such
assignment or subletting, and Lessee, any guarantors of Lessee's performance,
and such assignee or subtenant shall all, jointly and severally, be liable for
all obligations hereunder. Notwithstanding the above, Lessee shall not assign
the within Lease or sublet the Premises in whole or in part, without the prior
written consent of Lessor's mortgagee, NationsBank of Georgia, N.A.
7. COMPLIANCE WITH LEGAL AND ENVIRONMENTAL REQUIREMENTS. Lessee shall
comply with all legal and environmental requirements of any governmental or
quasi-govermental body including City, County, State or Federal boards having
jurisdiction thereof, respecting any operation conducted or any equipment,
installations or other property placed upon, in or about the Premises. Lessee
shall neither create nor permit the creation of any nuisance upon, in or about
the Premises, and Lessee shall not make any offensive use thereof. Lessor has no
knowledge of any pending or threatened claim, notice, assessment or other
proceeding relating to the environmental integrity of the premises. Lessor has
heretofore retained the environmental engineering firm of Law Engineering, Inc.
of Atlanta, Georgia to complete an environmental assessment of the Premises, a
copy of which has been delivered to Lessee. Except as indicated above, Lessor
makes no representations as to the environmental integrity of the Premises.
Lessee shall throughout the Term of his Lease, at Lessees' sole cost and
expense, comply with all laws, ordinances and lawful regulations and
requirements of federal, state and municipal governments. Without limiting the
foregoing covenant Lessee warrants and represents to
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Lessor that the Premises shall be at all times used in full compliance with all
Federal, State and Local environmental laws and regulation, including but not
limited to the Comprehensive Environmental Response Compensation and Liability
Act of 1980 and the Superfund Amendments and Reauthorization Act of 1986 as
amended. If, however, the Lessee shall in good faith desire to contest any such
law, ordinance, regulation or requirement, it shall notify Lessor in writing
of its intention to do so, and it shall not be required to comply therewith so
long as it shall in good faith and at its own cost and expense contest the same
or the validity thereof by appropriate proceedings. Lessee shall indemnify
Lessor from any loss or damage suffered by Lessor because of delay by Lessee in
compliance with any such contested law, ordinance, regulation or requirement,
and Lessor shall refrain from complying with such contested law, ordinance,
regulation or requirement on Lessee's behalf so long as Lessee shall continue
to contest the same. Lessor shall give Lessee such assistance in connection
with any such contest as shall be necessary, reasonable and proper, at not cost
or expense to Lessor, and Lessor agrees to sign and execute for Lessee any
necessary papers work documents for such purpose. In addition, Lessee shall
indemnify and hold Lessor harmless for any and all damages, penalties, fines,
claims, liens, suits, liabilities, costs (including clean-up costs), judgment
and expenses (including reasonable attorneys', consultants', or experts' fees
and expenses) of every kind and nature suffered by or asserted against Lessor
as a direct or indirect result of any warranty or representation made by Lessee
in this Section or any requirement under any law, regulation or ordinance,
Local, State or Federal, which requires the elimination of any hazardous
materials, substances, wastes or other environmentally regulated substances.
Lessee's obligations hereunder to Lessor shall not be limited to any extent by
the term of this Lease, and, as to any act or occurrence prior to termination
of said Lease which gives rise to liability hereunder, but shall continue,
survive and remain in full force and effect notwithstanding termination of said
Lease.
8. FIRE INSURANCE. Lessee shall carry at Lessee's expense fire insurance
with extended coverage insuring Lessor and Lessee as their interests may appear
against loss or damage to the building or other improvements located on the
Premises and insuring Lessee against lost or damage to Lessee's furnishings,
fixtures,inventory, equipment and other property situated or placed upon, in
or about the Premises with companies and in amounts and with deductibles
acceptable to Lessor. lessor shall have the right to have the buildings and
improvements insured to their maximum, full replacement cost, insurable value.
With respect to the insurance coverage on the buildings and improvements, the
Lessor shall be named as the insured in such policies and the original policies
shall be delivered to Lessor. With respect to all other insurance required under
this Lease Agreement, memoranda of all policies shall be delivered to Lessor.
Lessee shall further carry at its expense rental (sometime known as business
interruption) insurance in an mount not less than the sum of the Base Rentals
and Adjustment Rentals for the most recent Lease year, which insurance shall be
payable to Lessor. Lessee shall name mortgagee of Lessor as an additional
insured. All insurance required hereby shall be kept in force during the entire
Term. Notwithstanding the above, all insurance policies provided for herein,
shall be submitted to Lessor's mortgagee, Nations Bank of Georgia, N.A., and
such mortgagee shall likewise have the same right of approval that the Lessor
has herein.
9. TAXES AND ASSESSMENTS. Lessor shall timely list the Premises for taxes
but Lessee shall pay all tax assessments of whatever kind of nature assessed
against the Premises. lessee shall timely list for taxes and pay all tax
assessments of whatever kind or nature assessed against or on Lessee's
furnishings, fixtures, inventory, equipment, leasehold improvements and other
property situated or placed upon, in or about the Premises. Upon reasonable
notice to Lessor, Lessee shall have the right to protest any tax assessment in
the name of the Lessor and as Lessor's agent, but without expense to Lessor.
All taxes shall be paid prior to delinquency.
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10. UTILITIES. Lessee shall pay for all electricity, gas, water, heat and
other utilities consumed or used on the Premises. Lessor shall not be in any
way obligated or responsible for the furnishing of utility services. The lack
of availability of or failure of utility services shall not be deemed
constructive eviction.
11. ADDITIONS, ALTERATIONS, CHANGES AND IMPROVEMENTS. Lessee shall have the
right to make only alterations, changes and improvements in or to the Premises
with Lessor's, and Lessor's mortgagee, NationsBank of Georgia, N.A., prior
written consent, provided that if such consent is given, all such alterations,
changes and improvements shall be promptly made in a workmanlike manner, be
promptly paid for allowing no liens to attach and shall become the property of
lessor at the termination of this Lease Agreement. All Lessee's proposed
alterations, changes and improvements must be approved in writing by lessor
prior to the commencement thereof. Lessee shall have no right to commence or to
cause the commencement of any work prior to delivering to Lessor documents
satisfactory to Lessor indicating that no person, firm or corporation shall
have any right to claim a lien on the Premises by virtue of Lessees' work
and/or the failure to pay therefore. Lessee shall deliver to Lessor, in form
satisfactory to Lessor, prior to the commencement of any work a waiver of liens
signed by all prime contractors, waiving all rights to assert liens, which
shall contain a certification by Lessee that the waiving parties are all of the
prime contractors.
12. REPAIRS. Lessee shall, at Lessee's own expense, keep and maintain the
entire Premises an all parts and systems thereof, including outside walls,
windows and/or plate glass, the roof, and all utility installations and
equipment, in good maintenance, replacement and repair, properly painted and
decorated. All repairs, maintenance and replacements shall be performed in a
prompt, workmanlike manner, shall be promptly paid for by Lessee and no liens
shall be allowed to attach either to the Premise or Lessee's interest therein.
Lessor has no obligation to make any repairs or replacements or to perform any
maintenance. If any lien is asserted against the Premises, based upon any act
or interest of the Lessee or of anyone claiming through it, affecting any
material, machinery, or fixtures use in the construction, whatever action by
bonding, deposit or payments which shall remove the claim of lien or security
interest. If Lessee does not remove the lien within thirty (30) days after
notice to it, Lessor may pay the lien or discharge it by deposit. The amount so
paid or deposited, with interest as provided herein, shall be deemed additional
Rentals under this Lease, and shall be immediately payable with interest, the
default of which shall be immediately payable with interest, the default of
which shall give rise to the same remedies to Lessor as the case of default of
the payment of Base and Adjustment Rentals.
13. SAFE AND SANITARY CONDITION. Lessee shall not permit, allow or cause
any act or deed to be performed upon, in or about the Premises which shall
cause or be likely to cause injury to any person on the Premises, the building
or improvements located thereon, or to any adjoining property. Lessee shall; at
all times keep the Premises in a neat and orderly condition and keep the
Premises and the entryways, parking areas, sidewalks and delivery areas (if
any) adjoining the Premises clean and free from rubbish, dirt, snow, standing
water and ice.
14. TRADE FIXTURES. Lessee shall be permitted to install trade fixtures on
the Premises. In addition, Less shall be permitted to remove said trade
fixtures from the Premises upon termination of this Lease Agreement; provided
that if Lessee does so remove such trade fixtures, Lessee shall return the
Premises to the same condition as existed at the time of original entry,
ordinary wear and tear excepted. This provision is not intended to allow Lessee
to remove approved improvements made by Lessee to the
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Premises. All such improvements belong to Lessor at the termination hereof and
shall not be removed nor damaged by Lessee's removal of trade fixtures. If
Lessee does not remove the trade fixtures at termination, Lessor shall have the
option either to declare such fixtures abandoned and Lessor the owner thereof
or to demand Lessee remove same at Lessee's expense returning the Premises to
the condition required herein.
15. Lessor Not Liable for Damages or Injuries. Lessor shall not be
responsible to Lessee or to any other person, firm, partnership, association or
corporation for damages or injuries by virtue of or arising out of bursted
water pipes, leaks from sprinkler or air conditioning systems, leaks from the
roof, or by virtue of earthquakes, riots, windstorms, overflow of water from
surface drainage, rains, water, fire or by the elements or Acts of God, or by
the neglect of any person, firm partnership, association or corporation. Lessee
shall indemnify and hold Lessor harmless from any and all claims for damages to
person or property to the full extent permitted by law.
16. INDEMNIFICATION. Lessee covenants to indemnify and hold Lessor
harmless from the claims of any and all persons, firms, partnerships,
associations and corporations for the personal injury or damage to property or
both arising out of or in connection with Lessee's use and/or occupancy of the
Premises, including but not limited to any environmental claims. In addition,
Lessee shall carry public liability insurance in the minimum amount of
$2,000,000.00 bodily injury per occurrence and $250,000 property damage per
occurrence, and Lessee shall deliver to Lessor memorandum policies of such
coverage with companies satisfactory to Lessor and naming Lessor as additional
insured therein.
17. FIRE OR CASUALTY. If the Premises shall be partially or completely
damaged or destroyed by fire or other casualty, Lessor shall, as soon as
reasonably possible, effect the required repairs and reconstruction of the
Premises to place them in substantially the same condition as existed
immediately prior to such damage or destruction but during such time as said
repairs or reconstruction are being made, the rentals hereinabove provided shall
not abate. Any other provisions contained herein notwithstanding, the Lessor
shall be required and obligated to effect repairs or reconstruction only to the
extent of any sums of money, if any, which are received by Lessor under
Lessor's insurance coverage as a direct result of said fire or other casualty.
Should the insurance proceeds be insufficient, the remaining funds necessary
for repair and restoration shall be promptly furnished by Lessee. If at any
time within twelve (12) months before the end of the initial Term, or within
twelve (12) months before the end of the initial Renewal Term (whichever is
applicable): (a) Lessee has not served upon lessor notice of renewal of
extension; (b) the improvements to the Premises are completely destroyed or as
damaged by fire or other casualty, regardless of whether covered by insurance,
so as to render the Premises are completely destroyed or as damaged by fire or
other casualty, regardless of whether covered by insurance, so as to render the
Premises unfit for their intended use; and (c) as repair or restoration is not
economically feasible, then, except as provided in the following sentence,
either party may terminate this Lease by written notice to the other within
thirty (30) days after the date of such damage or destruction. Notwithstanding
the foregoing, should Lessee serve upon Lessor irrevocable notice of renewal,
then Lessor shall be obligated to perform as described in this Paragraph 17. If
the Lease is so terminated, all rent shall be apportioned to the date of
termination and all insurance proceeds shall belong to Lessor.
18. WAIVER OF SUBROGATION. Neither Lessor nor Lessee nor anyone claiming
by, through or in their behalf shall have any claim, right or action or right
of subrogation one against the other for or based upon any loss or damage
caused by fire, explosion or other insured casualty (not limited to the
foregoing) relating to the Premises or to any property upon, in, or about the
Premises, whether such fire, explosion or other insured casualty
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shall arise from the negligence of Lessor, Lessee, or their respective agents,
representatives or employees, or otherwise.
19. Condemnation. If the entire Premises are taken or condemned for a
public or quasi-public use (or any transfer is made under threat of
condemnation), then this Lease shall terminate at the later of the vesting of
title in the condemning authority or the acquisition of possession thereby. Rent
shall be apportioned as of that date. Lessee shall have no claim against Lessor
for any of the foregoing. If any part of the Premises shall be taken or
condemned for a public or quasi-public use (or any transfer is made under threat
of condemnation) and a part thereof remains which is reasonably suitable for the
Lessee's use, this Lease shall not terminate, but the rentals payable by the
Lessee shall be adjusted so that the Lessee shall be required to pay for the
remainder of the Term, rentals equitably reduced by the reduction in
tenantability of the Premises. The aforesaid partial condemnation shall be
without prejudice to the rights of either Lessor or Lessee to directly recover
compensation from the condemning authority for any of its loss or damage caused
by such condemnation. Neither Lessor nor Lessee shall have any rights in and to
any award made to the other by such condemning authority. Lessee shall have no
right to any part of the award paid for the loss of leasehold rights.
20. Subordination to Mortgages. From and after Lessee acknowledging that it
has been furnished a non-disturbance agreement in satisfactory form, this Lease
shall be subordinate to the interest of the party furnishing such agreement.
Lessor shall bear all of Lessee's expenses incurred in connection with this
paragraph, including attorney's fees.
21. Inspection. Lessor shall have the right at all reasonable times to
enter and inspect the Premises.
22. Condition of Premises upon Termination. Upon the termination of this
Lease Agreement, Lessee shall return the Premises to Lessor substantially in the
same conditions received, ordinary wear and tear and approved improvements
excepted.
23. Holding Over. In the event Lessee remains in possession after the
expiration of the Term without the execution of a new lease, Lessee shall not
acquire any right, title or interest in or to the Premises. In such event,
Lessee shall occupy the Premises as a tenant from month-to month and shall
otherwise be subject to all of the conditions, provisions and obligations of
this Lease Agreement insofar as the same shall be applicable.
24. Default.
(a) Each and every one and all of the following events shall constitute an
Event of Default:
i) if Lessee files a petition in bankruptcy or insolvency or for
reorganization under any bankruptcy act or voluntarily taken advantage of any
such act or makes an assignment for the benefit of creditors;
ii) if involuntary proceedings under any bankruptcy law, insolvency or
receivership action shall be instituted against Lessee, or if a receiver or
trustee shall be appointed for all or substantially all of the property of
Lessee and such proceedings are not dismissed, or the receivership or
trusteeship vacated, within 10 days after the institution or appointment;
iii) if Lessee fails to pay any sum due from it in strict accordance with
the provisions of this Lease, and does not make the payment within ten (10)
business days after written notice thereof. For the purposes hereof, all sums
due from Lessee shall constitute rentals whether denominated as rental or
otherwise elsewhere herein and Lessee has absolutely no right of offset;
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iv) if Lessee fails to fully perform and comply with each and every
condition and covenant of this Lease Agreement, and such failure of performance
continues for a period of thirty (30) days after notice thereof;
v) if Lessee vacates or abandons the Premises;
vi) if the interest of Lessee is transferred, levied upon or assigned to
any other person, firm or corporation whether voluntarily or involuntarily
except as herein permitted;
vii) if Lessor, in any three months of any Lease Year, gives any notice to
Lessee pursuant to subparagraphs iii) or iv) above, notwithstanding Lessee's
cure of default within the allowable period or periods.
b. Upon the occurrence of any Event of Default as set forth above, Lessor
shall have the right, at its option, to utilize any one or more of the
following rights:
i) to cancel and terminate this Lease Agreement and all interests of the
Lessee hereunder by giving notice of such cancellation and termination not less
than ten (10) days prior to the effective date of such termination. Upon the
expiration of said ten (10) day period, the Lessee shall have no further rights
under this Lease Agreement (but such cancellation shall not serve to release or
discharge the damages Lessee owes to Lessor); and /or
ii) to make any payment required of Lessee herein or correct any condition
required to be corrected by Lessee, and Lessor shall have the right to enter the
Premises for the purpose of correcting any such condition and to remain on the
Premises until the complete correction of such condition. However, no
expenditure by Lessor on behalf of Lessee shall be deemed to waive or release
Lessee's breach hereof and Lessor shall retain all rights to proceed against
Lessee as set forth herein; and/or
iii) to reenter the Premises immediately with or without order of court
and without being guilty of trespass, remove the property and personal of Lessee
and store such property in a public warehouse or such other location selected by
lessor, all at the expense of Lessee. After such reentry, Lessor shall have the
right to terminate this Lease Agreement by giving ten (10) days notice of
termination to Lessee, but without such notice, the reentry by Lessor shall not
terminate this Lease Agreement. On termination, Lessor may recover from Lessee
all damages resulting from Lessee's breach, including the cost of recovery of
the Premises for the remainder of the Term, all of which sums shall be
immediately payable to Lessor from Lessee; and/or
(iv) to relet the Premises or any part thereof for any term, with or
without terminating the Lease, and at such rentals and on such other terms as
Lessor may elect including the right to grant free rental, and to alter and
repair the Premises as Lessor deems necessary. Should Lessor relate the
Premises, Lessee shall pay all expenses of reletting including brokers' or
finders' fees and such reasonable attorney's fees as Lessor may incur. Lessor
shall apply the rent received from reletting in the following order: (1) to
expenses of reletting; (2) to sums due from Lessee other than sums denominated
in Section 4 above as rentals, and (3) to sums denominated as rentals in Section
4 above previously due and (4) to sums which were to become due in the future;
and/or
v) to accelerate the rentals with or without entry; and or
vi) all other rights and remedies provided by law to a Lessor with a
defaulting Lessee including all such money damages as Lessor shall be entitled
pursuant to law of damages.
c. In the event of any conflict between any of the provisions hereof
regarding the amount of time that must elapse without cure after notice of
breach before the same constitutes and Event of Default, then the provisions
establishing the least amount of time to cure after notice shall prevail.
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d. Upon any breach hereof, regardless of whether such breach is, or
becomes, and Event of Default; Lessor shall be reimbursed by Lessee for any
attorney's fees incurred by Lessor in connection with such beach.
25. WAIVER. No failure by Lessor to exercise any rights thereunder to which
Lessor may be entitled shall be deemed a waiver of Lessor's right to
subsequently exercise same. Lessee shall gain no rights nor become vested with
any power to remain in default under the terms hereof by virtue of Lessor's
failure to timely assert his rights. No acceleration of rentals, regardless of
how often occurring, which Lessor chooses to ignore by thereafter accepting
rental or other performance by Lessee shall constitute a waiver of the right to
thereafter accelerate rentals.
26. LAW APPLICABLE. This Lease is entered into in Georgia and shall be
construed under the laws, statutes and ordinances of such jurisdiction.
27. SEVERABILITY. The provisions hereof are independent covenants and
should any provision or provisions contained in this Lease be declared by a
court or other tribunal of competent jurisdiction to be void, unenforceable or
illegal, then such provision or provisions shall be severable and the remaining
provisions hereof shall remain at Lessor's option in full force and effect.
28. STAMP TAX OR SALES TAX ON LEASE. Should any governmental authority
having jurisdiction over the Premises declare or otherwise assess any tax on
leases or leaseholds whether designated as a stamp tax, sales or otherwise, then
in any of such events, all taxes so declared or charged shall be the obligation
of the Lessee and shall be paid by Lessee to such authority or shall be promptly
paid to Lessor in reimbursement and as additional rental.
29. EASEMENTS, RESTRICTIONS, OPTIONS AND RIGHTS OF WAY. The Premises are
demised subject to all easements, restrictions, options and rights of way
legally affecting the Premises. Lessee is aware of the existence of certain
restrictive covenants, assess easement agreement, slope easement agreement,
drainage easement agreement, certain Option to Purchase in favor of Connector
Two, Ltd., a Georgia limited partnership, all of record in Bartow County,
Georgia.
30. BINDING EFFECT AND COMPLETE TERMS. The terms, covenants, conditions and
agreements herein contained shall be binding upon and inure to the benefit of
and shall be enforceable by Lessor and Lessee and by their respective heirs,
successors and assigns. All negotiations and agreements of Lessor and Lessee are
merged herein. No modification hereof or other purported agreement to the
parties shall enforceable unless the same is in writing and signed by the Lessor
and Lessee.
31. NOTICES AND WRITTEN CONSENTS. All notices and written consents required
under this Lease shall be in writing and shall only be deemed properly served
when posted by certified United States mail, postage prepaid, return receipt
requested, addresses to the party to whom directed at the following address or
at such other address as may be from time to time designated in writing:
To Lessor: Winco II, L.P.
2150 Cobb Parkway
Smyrna, Georgia 30080
with carbon copy to:
Nations Bank of Georgia, N.A.
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600 Peachtree Street, N.E.
18th Floor
Atlanta, Georgia 30308
Attn: Mr. Tim Kelley
To Lessee: Thompson Automotive Group, Inc.
d/b/a Boomershine Honda
c/o Harris R. Thompson, Jr., President
595 E. Main Street
Cartersville, Georgia 30120-3355
Notice shall be deemed served upon posting.
32. RENTAL PAYMENTS. All rental payment, until otherwise designated in
writing, shall be made to Lessor at the address above.
33. LESSOR'S PERFORMANCE OF LESSEE'S COVENANTS. Should Lessee, after seven
days' notice from the lessor, fail to do any of the things required to be done
by it under the provisions of this Lease, Lessor, in addition to any and all
other rights and remedies, may (but shall not be required to) do the same or
cause the same to be done, and the reasonable amount of any money expended by
Lessor in connection therewith shall constitute additional rental due from
Lessee to Lessor and shall be payable as rental on the date for payment of
rentals immediately following such expenditure.
34. RECORDING. This Lease shall not be recorded but a memorandum hereof
shall be prepare and recorded in the County where the Premises are located,
with recording fees and preparation of memorandum shall contain such
information as is necessary to provide adequate record notice of the existence
of the Lease, including the parties, the term, the property involved and
whether options to renew or purchase exist.
35. COVENANT OF TITLE AND QUIET ENJOYMENT. Lessor covenants and warrants
to Lessee that Lessor has full right and lawful authority to enter into this
Lease for the Term hereof and that provided Lessee is not in default hereunder,
Lessee's quiet and peaceable enjoyment of the Premises shall not be disturbed
by anyone claiming through Lessor.
36. CONSTRUCTION OF LEASE. This lease shall not be construed more strictly
against either party regardless of which party is responsible for the
preparation of the same.
37. ESTOPPEL CERTIFICATES. Lessor and lessee shall certify in writing each
to the other the status of this Lease and the rent payable hereunder, at any
time, upon ten (10) days' written notice. Such certificate shall be in a form
reasonably satisfactory to the prospective purchaser or mortgagee of the fee
title, or assignee of this Lease or subtenant of the Premises.
IN WITNESS WHEREOF, Lessor has caused this Agreement to be executed by its
General Partners under seal, and Lessee has caused this Agreement to be
executed by its officers hereunto duly authorized and has caused its corporate
seal to be hereunto affixed, this the day and year first above written.
[signatures on following page]
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WITNESSES: LESSOR:
WINCOR II, L.P.
/s/ Pat B. Mitchell By: /s/ Walter M. Boomershine, Jr. (SEAL)
- ------------------- -------------------------------
WALTER M. BOOMERSHINE, JR.
GENERAL PARTNER
/s/ Pat B. Mitchell By: /s/ Winifred F. Boomershine (SEAL)
- ------------------- -------------------------------
WINIFRED F. BOOMERSHINE
GENERAL PARTNER
WITNESSES: LESSEE:
THOMPSON AUTOMOTIVE GROUP, INC.
/s/ Jessie Carroll By: /s/ Harris R. Thompson, Jr. (SEAL)
- ------------------- -------------------------------
HARRIS R. THOMPSON, JR.
PRESIDENT
ATTEST:
/s/ Donna Gammon
- -------------------
(CORPORATE SEAL)
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EXHIBIT 10.15
STATE OF GEORGIA
COUNTY OF GWINNETT
SUBLEASE
This Sub-Lease Agreement, made and entered into as of this 23rd day of
February, 1996, by and between WINCO, L.P., a Georgia Limited Partnership
(hereinafter called "Lessor"), and BOOMERSHINE FORD, INC., a Georgia corporation
(hereinafter called "Lessee");
WITNESSETH:
1. DEMISE OF PREMISES. Lessor leases unto Lessee the premises
(hereinafter called "Premises") located in Gwinett County, Georgia, and
described in the exhibit attached hereto and marked "Exhibit A" which exhibit
is incorporated herein by this reference thereto as if fully set out.
2. USE OF PREMISES. The Premises may only be used for operation of a
automotive repair and Get Ready Facility and all such matters as are related to
the same, and shall not be used by anyone for any other purposes without the
prior written consent of Lessor.
3. TERM AND RENEWALS. The term of this Sub-Lease Agreement shall be for
the period of twenty (20) years to commence on March 1, 1996 and to terminate
on February 26, 2016. As used herein, the term "Lease Year" shall mean the
twelve months period beginning on the first day of 1st day of one year and
ending on the 28th day of February of the following year. Failure of Lessee to
properly notify Lessor of the non-exercise of any renewal term shall result in
the automatic renewal thereof for the next term.
4. RENTALS. Lessee shall pay rentals ("Base Rentals") to Lessor as
follows:
(a) Two Hundred and Forty Thousand and no/100 Dollars ($240,000.00)
per Lease year for the first years; March 1996 to and through February 28, 2001.
(b) Two Hundred and Fifty Two Thousand and no/100 Dollars ($252,000.00)
per Lease year for the second five years beginning on March 1, 2001 to and
through February 28, 2006.
(c) Two Hundred and Sixty Four Thousand and no/100 Dollars
($264,000.00) per Lease year for the third five years beginning on March 1,
2006 to and through February 28, 2011.
(d) Two Hundred and Seventy Six Thousand and no/100 Dollars
($276,000.00) per Lease for the fourth five years beginning on March 1, 2011 to
and through February 28, 2016.
The Base Rentals shall be due and payable in equal monthly
installments, all due in advance of the first day of each calendar month for
and during the Term.
It is the intention of the Lessor and the Lessee that the rentals
hereinabove set forth shall be net, net, net to the Lessor and that all costs,
expenses and obligations of any kind of nature whatsoever (excluding only
principal and interest payments due form Lessor to
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Lessor's mortgagee) relating to the Premises shall be borne by the Lessee and
Lessee hereby idemnifies the Lessor against any and all such costs, expenses and
obligations. In the event that the Lessor shall make any expenditure for which
the Lessee is responsible, or which the Lessee should make, then the amount
thereof, together with interest at the lesser of the highest legal rate or 10%
per annum and costs, may, at the Lessor's election, be added to and shall be
due as additional rental with the next installment of rent.
5. ACCEPTANCE OF PREMISES. Lessee acknowledges that the act of taking
possession of the Premises shall constitute acceptance thereof and conclusive
evidence that Lessee has inspected and examined the entire Premises and utility
installations and that the same were, and are, in good and satisfactory
condition. Notwithstanding the foregoing, upon notice from Lessee, so long as
Lessee is not in default hereunder, (a) Lessor shall be responsible for all
repairs, changes, alterations and additions required to correct any material
defects existing at the date of commencement of the Term hereof, or through the
initial twelve (12) months of the Term, if such material defects are due to
defective materials or workmanship in the original construction of the
Premises; and (b) after said initial twelve (120 month period, Lessor shall
assign to Lessee all of its right, title and interest in and to any rights to
enforce any claim for defective design or construction of the premises.
6. ASSIGNMENT OR SUBLETTING. Lessee shall not have the right to assign
the within Sub-Lease or to sublet the Premises in whole or in part, without the
prior written consent of Lessor, which consent shall not be unreasonably
withheld. The passage of control of Lessee to parties other than those who
presently control the Lessee shall constitute an permitted assignment of this
Sub-Lease. Such consent shall be deemed unreasonably withheld if (a) the
proposed assignee or subtenant has qualified as the franchise representative
under customary forms of agreements for a major manufacturer of motor vehicles,
and (b) Lessee is not in default hereunder. The suc provisions relating to this
Sub-Lease shall, in any event, remain in full force and effect. Lessee's
obligations hereunder, as well as any guaranties of Lessee's performance
hereunder, in the absence of explicit agreement to the contrary, shall not be
released upon any such assignment or subletting, and Lessee, any guarantors of
Lessee's performance, and such assignee or subtenant shall all, jointly and
severally, be liable for all obligations hereunder. Notwithstanding the above,
Lessee shall not assign the within Sub-Lease or sublet the Premises in whole or
in part, without the prior written consent of Lessor's mortgagee, Nations Bank
of Georgia, N.A.
7. COMPLIANCE WITH LEGAL AND ENVIRONMENTAL REQUIREMENTS. Lessee shall
comply with all legal and environmental requirements of any governmental or
quasi-governmental body including City, County, State or Federal boards having
jurisdiction thereof, respecting any operation conducted or any equipment,
installations or other property placed upon, in or about the Premises. Lessee
shall neither create nor permit the creation of any nuisance upon, in or about
the Premises, and Lessee shall not make any offensive use thereof. Lessor has
no knowledge of any pending or threatened claim, notice, assessment or other
proceeding relating to the environmental integrity of the premises. Except as
indicated above, Lessor makes no representations as to the environmental
integrity of the Premises. Lessee shall throughout the Term of his Sub-Lease,
at Lessees" sole cost and expense, comply with all laws, ordinances and lawful
regulations and requirements of federal, state and municipal governments.
Without limiting the foregoing covenant Lessee warrants and represents to
lessor that the Premises shall be at all times used in full compliance with all
Federal, State and Local environmental laws and regulations, including but not
limited to the Comprehensive Environmental Response Compensation and Liability
Act of 1980 and the Superfund Amendments and Reauthorization Act of 1986 as
amended. If, however, the Lessee shall in good faith desire to contest any such
law, ordinance, regulations or requirements, it shall notify lessor in
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writing of its intention to do so, and it shall not be required to comply
therewith so long as it shall in good faith and at its own cost and expense
contest the same or the validity thereof by appropriate proceedings. Lessee
shall indemnify Lessor from any loss or damage suffered by Lessor because of
delay by Lessee in compliance with any such contested law, ordinance, regulation
or requirement, on Lessee's behalf so long as Lessee shall continue to contest
the same. Lessor shall give Lessee such assistance in connection with any such
contest as shall be necessary, at no cost or expense to Lessor, and Lessor
agrees to sign and execute for Lessee any necessary papers or documents for such
purpose. In addition, Lessee shall indemnify and hold Lessor harmless for any
and all damages, penalties, fines, claims, liens, suits, liabilities, costs
(including clean-up cost), judgment and expenses (including reasonable
attorneys', consultants', or experts' fees and expenses) of every kind and
nature suffered by or asserted against Lessor as a direct or indirect result of
any warranty or representation made by Lessee in this Section or any requirement
under any law, regulation or ordinance, Local, State or Federal, which requires
the elimination of any hazardous materials, substances, wastes or other
environmentally regulated substances. Lessee's obligation hereunder to Lessor
shall not be limited to any extent by the term of this Sub-Lease, and as to any
act or occurrence prior to termination of said Sub-Lease which gives rise to
liability hereunder, but shall continue, survive and remain in full force and
effect notwithstanding termination of said Sub-Lease.
8. FIRE INSURANCE. Lessee shall carry at Lessee's expense fire insurance
with extended coverage insuring Lessor and Lessee as their interests may appear
against loss or damage to the buildings or other improvements located on the
Premises and insuring Lessee against loss or damage to Lessee's furnishings,
fixtures, inventory, equipment and other property situated or placed upon, in
or about the Premises with companies and in amounts and with deductibles
acceptable to Lessor. Lessor shall have the right to have the buildings and
improvements insured to their maximum, full replacement cost, insurable value.
With respect to the insurance coverage on the buildings and improvements, the
Lessor shall be named as the insured in such policies and the original policies
shall be delivered to Lessor. With respect to all other insurance required
under this Sub-Lease Agreement, memoranda of all policies shall be delivered to
Lessor. With respect to all other insurance required under this Sub-Lease
Agreement, memoranda of all policies shall be delivered to Lessor. Lessee shall
further carry at its expense rental (sometimes known as business interruption)
insurance in an mount not less than the sum of the Base Rentals for the most
recent Sub-Lease year, which insurance shall be payable to Lessor. Lessee shall
name mortgagee of Lessor as an additional insured. All insurance required
hereby shall be kept in force during the entire Term. Notwithstanding the
above, all insurance policies provided for herein, shall be submitted to
Lessor's mortgagee, Nations Bank of Georgia, N.A.
9. TAXES AND ASSESSMENTS. Lessor shall timely list the Premises for taxes
but Lessee shall pay all tax assessments of whatever kind of nature assessed
against the Premises. Lessee shall timely list for taxes and pay all tax
assessments of whatever kind or nature assessed against or on Lessee's
furnishings, fixtures, inventory, equipment, leasehold improvements and other
property situated or placed upon, in or about the Premises. Upon reasonable
notice to Lessor, Lessee shall have the right to protest any tax assessment in
the name of the Lessor and as Lessor's agent, but without expense to Lessor.
All taxes shall be paid prior to delinquency.
10. UTILITIES. Lessee shall pay for all electricity, gas, water, heat and
other utilities consumed or used on the Premises. Lessor shall not be in any
way obligated or responsible for the furnishing of utility services.
11. ADDITIONS, ALTERATIONS, CHANGES AND IMPROVEMENTS. Lessee shall have the
right to make only alterations, changes and improvements in or to the Premises
with
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Lessor's prior written consent, provided that if such consent is given, all
such alterations, changes and improvements shall be promptly made in a
workmanlike manner, be promptly paid for allowing no liens to attach and shall
become the property of Lessor at the termination of this Sub-Lease Agreement.
All Lessee's proposed alterations, changes and improvements must be approved in
writing by Lessor prior to the commencement thereof. Lessee shall have no right
to commence or to cause the commencement of any work prior to delivering to
Lessor documents satisfactory to Lessor indicating that no person, firm or
corporation shall have any right to claim a lien on the Premises by virtue of
Lessees' work and/or the failure to pay therefore. Lessee shall deliver to
Lessor, in form satisfactory to Lessor, prior to the commencement of any work a
waiver of liens signed by all prime contractors, waiving all rights to assert
liens, which shall contain a certification by Lessee that the waiving parties
are all of the prime contractors.
12. REPAIRS. Lessee shall, at Lessee's own expense, keep and maintain the
entire Premises and all parts and systems thereof, including outside walls,
windows and/or plate glass, the roof, and all utility installations and
equipment, in good maintenance, replacement and repair, properly painted and
decorated. All repairs, maintenance and replacements shall be performed in a
prompt, workmanlike manner, shall be promptly paid for by Lessee and no liens
shall be allowed to attach either to the Premise or Lessee's interest therein.
Lessor has no obligation to make any repairs or replacements or to perform any
maintenance. If any lien is asserted against the Premises, based upon any act
or interest of the Lessee or of anyone claiming through it, affecting any
material, machinery, or fixtures use in the construction, Lessee shall
immediately take whatever action by bonding, deposit or payments which shall
remove the claim of lien or security interest. If Lessee does not remove the
lien within (30) days after notice to it, Lessor may pay the lien or discharge
it by deposit. The amount so paid or deposited, with interest as provided
herein, shall be deemed additional Rentals under this Sub-Lease, and shall be
immediately payable with interest, the default of which shall be immediately
payable with interest, the default of which shall give rise to the same
remedies to Lessor as the case of default of the payment of Base Rentals.
13. SAFE AND SANITARY CONDITION. Lessee shall not permit, allow or cause
any act or deed to be performed upon, in or about the Premises which shall
cause or be likely to cause injury to any person on the Premises, the building
or improvements located thereon, or to any adjoining property. Lessee shall at
all times keep the Premises in a neat and orderly condition and keep the
Premises and the entryways, parking areas, sidewalks and delivery areas (if any)
adjoining the Premises clean and free from rubbish, dirt, snow, standing water
and ice.
14. TRADE FIXTURES. Lessee shall be permitted to install trade fixtures
on the Premises. In addition, Less shall be permitted to remove said trade
fixtures from the Premises upon termination of this Sub-Lease Agreement;
provided that if Lessee does so remove such trade fixtures, Lessee shall
return the Premises to the same condition as existed at the time of original
entry, ordinary wear and tear excepted. This provision is not intended to allow
Lessee to remove approved improvements made by Lessee to the Premises. All such
improvements belong to Lessor at the termination hereof and shall not be
removed nor damaged by lessee's removal of trade fixtures. If Lessee does not
remove the trade fixtures at termination, Lessor shall have the option either
to declare such fixtures abandoned and Lessor the Owner thereof or to demand
Lessee remove same at Lessee's expense returning the Premises to the condition
required herein.
15. LESSOR NOT LIABLE FOR DAMAGES OR INJURIES. Lessor shall not be
responsible to Lessee or to any other person, firm, partnership, association
or corporation for damages or injuries by virtue of or arising out of busted
water pipes, leaks from
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sprinkler or air conditioning systems, leaks from the roof, or by virtue of
earthquakes, riots, windstorms, overflow of water from surface drainage,
rains, water, fire or by the elements or Acts of God, or by the neglect of any
person, firm partnership, association or corporation. Lessee shall indemnify
and hold Lessor harmless from any and all claims for damages to person or
property to the full extent permitted by law.
16. INDEMNIFICATION. Lessee covenants to indemnify and hold Lessor
harmless from the claims of any and all persons, firms, partnerships,
associations and corporations for the personal injury or damage to property or
both arising out of or in connection with Lessee's use and/or occupancy of the
Premises, including but not limited to any environmental claims. In addition,
Lessee shall carry public liability insurance in the minimum amount of
$1,000,000.00 bodily injury per occurrence and $250,000 property damage per
occurrence, and Lessee shall deliver to Lessor memorandum policies of such
coverage with companies satisfactory to Lessor and naming Lessor as additional
insured therein.
17. FIRE OR CASUALTY. If the Premises shall be partially or completed
damaged or destroyed by fire or other casualty, Lessor shall, as soon as
reasonably possible, effect the required repairs and reconstruction of the
Premises to place them in substantially the same condition as existed
immediately prior to such damage or destruction but during such time as said
repairs or reconstruction are being made, the rentals hereinabove provided
shall not abate. Any other provisions contained herein notwithstanding, the
Lessor shall be required and obligated to effect repairs or reconstruction only
to the extent of any sums of money, if any, which are received by Lessor under
Lessor's insurance coverage as a direct result of said fire or other casualty.
Should the insurance proceeds be insufficient, the remaining, funds necessary
for repair and restoration shall be promptly furnished by Lessee. If at any
time within twelve (12) months before the end of the initial Term, or within
twelve (12) months before the end of the initial Renewal Term (whichever is
applicable): (a) Lessee has not served upon lessor notice of renewal of
extension; (b) the improvements to the Premises are completely destroyed or as
damaged by fire or other casualty, regardless of whether covered by insurance,
so as to render the Premises unfit for their intended use; and (c) as repair or
restoration is not economically feasible, then, except as provided in the
following sentence, either party may terminate this Sub-Lease by written notice
to the other within thirty (30) days after the date of such damage or
destruction. Notwithstanding the foregoing, should Lessee serve upon Lessor
irrevocable notice of renewal, then Lessor shall be obligated to perform as
described in this Paragraph 17. If the Sub-Lease is so terminated, all rent
shall be appointed to the date of termination and all insurance proceeds shall
belong to Lessor.
18. WAIVER OF SUBROGATION. Neither Lessor nor Lessee nor anyone claiming
by, through or in their behalf shall have any claim, right or action or right of
subrogation one against the other for or based upon any loss or damage caused by
fire, explosion or other insured casualty (not limited to the foregoing)
relating to the Premises or to any property upon, in, or about the Premises,
whether such fire, explosion or other insured casualty shall arise from the
negligence of Lessor, Lessee, or their respective agents, representatives or
employees, or otherwise.
19. CONDEMNATION. If the entire premises are taken or condemned for a public
or quasi-public use (or any transfer is made under threat of condemnation), then
this Sub-Lease shall terminate at the later of the vesting of title in the
condemning authority or the acquisition of possession thereby. Rent shall be
apportioned as of that date. Lessee shall have no claim against Lessor for any
of the foregoing. If any part of the Premises shall be taken or condemned for a
public or quasi-public use (or any transfer is made under threat of
condemnation) and a part thereof remains which is reasonably suitable for the
Lessee's use,
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this Sub-Lease shall not terminate, but the rentals payable by the Lessee shall
be adjusted so that the Lessee shall be required to pay for the remainder of the
Term, rentals equitably reduced by the reduction in tenantability of the
Premises. The aforesaid partial condemnation shall be without prejudice to the
rights of either Lessor or Lessee to directly recover compensation from the
condemning authority for any of its loss or damage caused by such condemnation.
Neither Lessor nor Lessee shall have any rights in and to any award made to the
other by such condemning authority. Lessee shall have no right to any part of
the award paid for the loss of leasehold rights.
20. SUBORDINATION TO MORTGAGES. From and after Lessee acknowledges that it
has been furnished a non-disturbance agreement in satisfactory from, this
Sub-lease shall be subordinate to the interest of the party furnishing such
agreement. Lessor shall bear all of Lessee's expenses incurred in connection
with this paragraph, including attorney's fees.
21. INSPECTION. Lessor shall have the right at all reasonable times to enter
and inspect the Premises.
22. CONDITION OF PREMISES UPON TERMINATION. Upon the termination of this
Sub-Lease Agreement, Lessee shall return the Premises to Lessor substantially
in the same conditions received, ordinary wear and tear and approved
improvements excepted.
23. HOLDING OVER. In the event Lessee remains in possession after the
expiration of the Term without the execution of a new lease, Lessee shall not
acquire any right, title or interest in or to the Premises. In such event,
Lessee shall occupy the Premises as a tenant from month-to month and shall
otherwise be subject to all of the conditions, provisions and obligations of
this Sub-Lease Agreement insofar as the same shall be applicable.
24. DEFAULT.
A. Each and every one and all of the following events shall constitute
an Event of Default:
i) if Lessee files a petition in bankruptcy or insolvency or for
reorganization under any bankruptcy act or voluntarily taken advantage of any
such act or makes an assignment for the benefit of creditors;
ii) if involuntary proceedings under any bankruptcy law, insolvency or
receivership action shall be instituted against Lessee, or if a receiver or
trustee shall be appointed for all or substantially all of the property of
Lessee and such proceedings are not dismissed, or the receivership or
trusteeship vacated, within 10 days after the institution or appointment;
iii) if Lessee fails to pay any sum due from it in strict accordance with
the provisions of this Sub-Lease, and does not make the payment within ten (10)
business days after written notice thereof. For the purposes hereof, all sums
due from Lessee shall constitute rentals whether denominated as rental or
otherwise elsewhere herein and Lessee has absolutely no right of offset;
iv) if Lessee fails to fully perform and comply with each and every
condition and covenant of this Sub-Lease Agreement, and such failure of
performance continues for a period of thirty (30) days after notice thereof;
v) if Lessee vacates or abandons the Premises;
vi) if the interest of Lessee is transferred, levied upon or assigned to
any other person, firm or corporation whether voluntarily or involuntarily
except as herein permitted; vii) if Lessor, in any three months of any
Sub-Lease Year, gives any notice to Lessee pursuant too subparagraphs iii) or
iv) above, notwithstanding Lessee's cure of default within the allowable period
or periods.
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B. Upon the occurrence of any Event of Default as set forth above, Lessor
shall have the right, at its option, to utilize any one or more of the following
rights:
i) to cancel and terminate this Sub-Lease Agreement and all interests of the
Lessee hereunder by giving notice of such cancellation and termination not less
than ten (10) days prior to the effective date of such termination. Upon the
expiration of said ten (10) day period, the Lessee shall have no further rights
under this Sub-Lease Agreement (but such cancellation shall not serve to release
or discharge the damages Lessee owes to Lessor); and/or
ii) to make any payment required of Lessee herein or correct any condition
required to be corrected by Lessee, and Lessor shall have the right to enter the
Premises for the purpose of correcting any such condition and to remain on the
Premises until the complete correction of such condition. However, no
expenditure by Lessor on behalf of Lessee shall be deemed to waive or release
Lessee's breach hereof and Lessor shall retain all rights to proceed against
Lessee as set forth herein; and/or
iii) to reenter the Premises immediately with or without order of court and
without being guilty of trespass, remove the property and personal of Lessee and
store such property in a public warehouse or such other location selected by
Lessor, all at the expense of Lessee. After such reentry, Lessor shall have the
right to terminate this Sub-Lease Agreement by giving ten (10) days notice of
termination to Lessee, but without such notice, the reentry by Lessor shall not
terminate this Sub-Lease Agreement. On termination, Lessor may recover from
Lessee all damages resulting from Lessee's breach, including the cost of
recovery of the Premises and placing them in satisfactory conditions, the value
of the Premises for the remainder of the Term, all of which sums shall be
immediately payable to Lessor from Lessee; and/or
iv) to relet the Premises or any part thereof for any term, with or without
terminating the Sub-Lease, and at such rentals and on such other terms as Lessor
may elect including the right to grant free rental, and to alter and repair the
Premises as Lessor deems necessary. Should Lessor relate the Premises, Lessee
shall pay all expenses of reletting including brokers' or finders' fees and such
reasonable attorney's fees as Lessor may incur. Lessor shall apply the rent
received from reletting in the following order: (1) to expenses of reletting;
(2) to sums due from Lessee other than sums denominated in Section 4 above as
rentals, and (3) to sums denominated as rentals in Section 4 above previously
due and (4) to sums which were to become due in the future; and/or
v) to accelerate the rentals with or without entry; and/or
vi) all other rights and remedies provided by law to a Lessor with a defaulting
Lessee including all such money damages as Lessor shall be entitled pursuant to
law of damages.
C. In the event of any conflict between any of the provisions hereof
regarding the amount of time that must elapse without cure after notice of
breach before the same constitutes and Event of Default, then the provisions
establishing the least amount of time to cure after notice shall prevail.
D. Upon any breach hereof, regardless of whether such breach is, or
becomes, and Event of Default, Lessor shall be reimbursed by Lessee for any
attorney's fees incurred by Lessor in connection with such beach.
25. WAIVER. No failure by Lessor to exercise any rights hereunder to which
Lessor may be entitled shall be deemed a waiver of Lessor's right to
subsequently exercise same. Lessee shall gain no rights nor become vested with
any power to remain in default under the terms hereof by virtue of Lessor's
failure to timely assert his rights. No acceleration of rentals, regardless of
how often occurring, which Lessor chooses to ignore by thereafter accepting
rental or other performance by Lessee shall constitute a waiver of the right to
thereafter accelerate rentals.
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<PAGE> 8
26. LAW APPLICABLE. This Sub-Lease is entered into in Georgia and shall be
construed under the laws, statutes and ordinances of such jurisdiction.
27. SEVERABILITY. The provisions hereof are independent covenants and should
any provision or provisions contained in this Sub-Lease be declared by a court
or other tribunal of competent jurisdiction to be void, unenforceable or
illegal, then such provision or provisions shall be severable and the remaining
provisions hereof shall remain at Lessor's option in full force and effect.
28. STAMP TAX OR SALES TAX ON SUB-LEASE. Should any governmental authority
having jurisdiction over the Premises declare or otherwise assess any tax on
leases or leaseholds whether designated as a stamp tax, sales or otherwise, then
in any of such events, all taxes so declared or charged shall be the obligation
of the Lessee and shall be paid by Lessee to such authority or shall be promptly
paid to Lessor in reimbursement and as additional rental.
29. EASEMENTS, RESTRICTIONS, OPTIONS AND RIGHTS OF WAY. The Premises are
demised subject to all easements, restrictions, options and rights of way
legally affecting the Premises. Lessee is aware of the existence of certain
restrictive covenants, a Sub-Lease between Lessor herein, and Walter M. and
Winifred F. Boomershine and other such restrictions, easement agreement, slope
easement agreement, drainage easement agreement, certain Option to Purchase in
favor of Connector Two, Ltd., a Georgia limited partnership, all of record in
Bartow County, Georgia.
30. BINDING EFFECT AND COMPLETE TERMS. The terms, covenants, conditions and
agreements herein contained shall be binding upon and inure to the benefit of
and shall be enforceable by Lessor and Lessee and by their respective heirs,
successors and assigns. All negotiations and agreements of Lessor and Lessee
are merged herein. No modification hereof or other purported agreement o the
parties shall enforceable unless the same is in writing and signed by the Lessor
and Lessee.
31. NOTICES AND WRITTEN CONSENTS. All notices and written consents required
under this Sub-Lease shall be in writing and shall only be deemed properly
served when posted by certified United States mail, postage prepaid, return
receipt requested, addresses to the party to whom directed at the following
address or at such other address as may be from time to time designated in
writing:
To Lessor: Winco, L.P.
c/o Walter M. Boomershine, Jr.
2150 Cobb Parkway
Smyrna, Georgia 30080
with copy to:
Nations Bank of Georgia, N.A.
600 Peachtree Street, N.E.
18th Floor
Atlanta, Georgia 30308
Attn: Mr. Tim Kelley
To Lessee: Boomershine Ford, Inc.
c/o Charles K. Yancey
2150 Cobb Parkway
Smyrna, Georgia 30080
8
<PAGE> 9
with copy to:
Stephen C. Whicker, P.C.
6111 Peachtree Dunwoody Road
Building D
Atlanta, Georgia 30328
32. RENTAL PAYMENTS. All rental payment, until otherwise designated in
writing, shall be made to Lessor at the address above.
33. LESSOR'S PERFORMANCE OF LESSEE'S COVENANTS. Should Lessee, after seven
days' notice from the Lessor, fail to do any of the things required to be done
by it under the provisions of this Sub-Lease, Lessor, in addition to any and all
other rights and remedies, may (but shall not be required to) do the same or
cause the same to be done, and the reasonable amount of any money expended by
Lessor in connection therewith shall constitute additional rental due from
Lessee to Lessor and shall be payable as rental on the date for payment of
rentals immediately following such expenditure.
34. RECORDING. This Sub-Lease shall not be recorded (except as maybe required
by Lessor's Lender) but a memorandum hereof may be prepared and recorded in the
County where the Premises are located, with recording fees and preparation of
memorandum to be at the expense of Lessee. The aforesaid memorandum shall
contain such information as is necessary to provide adequate record notice of
the existence of the Sub-Lease, including the parties, the terms, the property
involved and whether options to renew or purchase exist.
35. COVENANT OF TITLE AND QUIET ENJOYMENT. Lessor covenants and warrants to
Lessee that Lessor has full right and lawful authority to enter into this
Sub-Lease for the Term hereof and that provided Lessee is not in default
hereunder, Lessee's quiet and peaceable enjoyment of the Premises shall not be
disturbed by anyone claiming through Lessor.
36. CONSTRUCTION OF LEASE. This Sub-Lease shall not be construed more strictly
against either party regardless of which party is responsible for the
preparation of the same.
37. ESTOPPEL CERTIFICATES. Lessor and Lessee shall certify in writing each to
the other the status of this Sub-Lease and the rent payable hereunder, at any
time, upon ten (10) days' written notice. Such certificate shall be in a form
reasonably satisfactory to the prospective purchaser or mortgagee of the fee
title, or assignee of this Sub-Lease or subtenant of the Premises.
IN WITNESS WHEREOF, Lessor has caused this Agreement to be executed by its
General Partners under seal, and Lessee has caused this Agreement to be executed
by its officers hereunto duly authorized and has caused its corporate seal to be
hereunto affixed, this the day and year first above written.
[signatures on following page]
9
<PAGE> 10
WITNESSES: LESSOR:
WINCO, L.P.
BY: (SEAL)
- --------------------- -----------------------------
WALTER M. BOOMERSHINE, JR.
MANAGING GENERAL PARTNER
WITNESSES: LESSEE:
BOOMERSHINE FORD, INC.
/S/ BY: /S/ Charles F. Yancey (SEAL)
- --------------------- -----------------------------
CHARLES F. YANCEY
SECRETARY/TREASURER
ATTEST:
- ---------------------
(CORPORATE SEAL)
10
<PAGE> 11
GANDY, RICE & SUNDBERG, P.C.
5775 PEACHTREE DUNWOODY ROAD
SUITE 380-C
ATLANTA, GEORGIA 30342
Telephone FACSIMILE
(404) 250-1976 (404) 250-1985
April 15, 1996
Charles K. Yancey
Winco, L.P.
2150 Cobb Parkway
Smyrna, Georgia 30080
Re: NationsBank of Georgia, N.A. Loan
Dear Mr. Yancey:
In connection with the above-referenced transaction, enclosed for your
file please find Ground Lease Agreement dated November 1, 1995 by and between
Walter M. Boomershine, Winifred F. Boomershine and Winco, L.P., f/k/a Winco,
Ltd. which has been recorded in Deed Book 12004, Page 0228, Gwinnett County,
Georgia Records.
Please call if we can be of further assistance.
Sincerely,
/s/ Monique M. Wurst
Monique M. Wurst
Legal Assistant
/mmw
Enclosure
<PAGE> 12
GROUND LEASE AGREEMENT
THIS LEASE made and entered into this 1st day of November, 1995 by and
between WALTER M. AND WINFRED F. BOOMERSHINE, of Gainesville Hall County,
Georgia (hereinafter referred to as "Lessor") and WINCO, L.P. F/K/A WINCO, LTD.,
a Georgia limited partnership with with its principal office located at 2150
Cobb Parkway, Smyrna, Georgia 30080 (hereinafter referred to as "Lessee").
1.0 LEASED PREMISES. Lessor does hereby rent, demise and lease unto the
Lessee the parcel of ground described herein and attached hereto as Exhibit "A"
together will all easements improvements and other appurtenances thereto (the
"Leased Premises").
1.1 "Improvements" as used herein means any additions to the Leased
Premises which by their nature become real property in consideration of the
following mutual covenants, agreements, terms and conditions hereby agreed to
by and between Lessor and Lessee, to wit:
2.0 TERMS. The term of this Lease shall be for twenty (20) years
beginning November 1, 1995 and expiring October 31, 2015 without notice by
either Lessor or Lessee, any custom, usage, practice, law, statute or ordinance
to the contrary notwithstanding.
3.0 RENT. Lessee agrees to pay the sum of $66,000.00 per year, payable
at the rate of $5,500.00 per month commencing December 1, 1995, which payments
shall be made without demand by check made payable to Walter M. Boomershine,
Jr. and Winfred F. Boomershine and mailed by United States Mail addressed to
2150 Cobb Parkway, Smyrna, Georgia 30080 or to the address or to whom Lessor
may designate in writing on the first day of every month for which rent is due
<PAGE> 13
hereunder, as Lessee desires to make the monthly rent payments reserved herein
on the first day of every calendar month during the term of this Lease.
4.0 USE. The Demised Premises may be used for Lessee for the
operation of new and used automobile dealerships and repair and service
facilities, and for all purposes associated therewith. Tenant shall, in
addition, to the other uses expressly provided for herein, have the right to
use the Demised Premises for any other lawful use whatsoever, provided however,
that in such event it shall first serve the consent of the Lessor thereto, such
consent not to be unreasonably withheld. Lessee shall use and occupy the
Demised Premises in a careful, safe and proper manner and keep the Demised
Premises in a clean and safe condition. Lessee shall not use, nor permit the
Demised Premises to be used, for any purpose other than as specified herein.
The Demised Premises shall not be used for any unlawful, disreputable or
immoral purpose. Lessee shall not permit the accumulation of rubbish, trash,
garbage and other refuse in or around the Demised Premises and shall remove the
same at Tenant's expense. In addition to the foregoing, the Demised Premises
may be used to install, service, remove, repair and adjust automobiles and all
automotive parts and accessories and to service, repair and maintain
automobiles including, but not limited to body shop repair on automobiles.
Lessee shall, in addition to the other uses expressly provided for herein, have
the right to use the Demised Premises for any other lawful use. Vacant land
included in the Demised Premises may be used, in addition to the foregoing
uses, for the parking and servicing of motor vehicles.
5.0 ASSIGNMENT AND SUBLETTING. Lessor agrees that Lessee may
sublet the premises to Boomershine Ford, Inc. for the use and purposes and on
the terms set forth in Exhibit "A" attached hereto and incorporated herein.
Otherwise, Lessee shall not, without the prior written consent of the Lessor,
which shall not be unreasonably withheld, further assign this Lease or any
interest hereunder, or further sublet the premises or any part thereof, or
permit the use of the Premises by any party other than the Lessee and
Boomershine Ford, Inc. Consent to any assignment or sub-let shall
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<PAGE> 14
not impair this provision and all later assignments or Lessees shall be made
likewise only on the prior written consent of the Lessor. The Assignee of the
Lessee, at the option of the Lessor, may become directly liable to the Lessor
for all obligations of the Lessee hereunder, if Lessor agrees to the same, but
no further sub-Lease or assignment by the Lessee shall relieve the Lessee of
any liability hereunder.
6.0 SIGNS. Lessee and its Sub-Lessee shall have the right to
construct, erect, place, put, maintain and control on the Demised Premises any
sign or signs which may be removed by Lessee at any time provided that said
sign or signs are constructed and erected in a workmanlike manner and comply
with the rules, regulations, laws, statutes and ordinances of the city and
state in which the Demised Premises are located.
7.0 CHANGES, ALTERATIONS, DEMOLITION, AND ADDITIONAL CONSTRUCTION BY
THE TENANT.
7.01 Lessee shall have the right at any time, and from time to time,
during the term of this Lease, to make, at its sole cost and expense, changes
and alterations in and to make Improvements on the existing Leased Premises,
except as noted otherwise herein, subject, however, in all cases to the
following:
(a) No change or alteration shall be undertaken until the
Lessee shall have procured and paid for, so far as the same may be required,
from time to time, all permits and authorizations of all municipal departments
and governmental subdivisions having jurisdiction and evidence of compliance
with any covenants, conditions, and restrictions applicable to the Leased
Premises. Lessor at Lessee's expense shall join in the application pursuant to
permits and authorizations whenever such action is necessary.
(b) Any improvements shall be made in good and workman
like manner and in compliance with all applicable permits and authorizations
and building and zoning laws and with all other laws, ordinances, orders,
ruled, regulations and requirements of all Federal, State and municipal
governments, departments, commissions, boards and offices, and in accordance
with the orders, rules and regulations of the National Board of Fire
Underwriters or any other such body hereinafter exercising similar functions.
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<PAGE> 15
(c) The cost of any such improvements shall be paid by the
Lessee and the Leased Premises shall at all times be free of liens for labor
and materials supplied or claimed to be supplied to the Leased Premises.
(d) In addition to the insurance coverage required herein
and any other insurance coverage as may be required by law, during the period
of any change, alteration to, or constriction of the Improvements, Lessee shall
maintain workers' compensation insurance (including employers liability
insurance) for amount not less than $1,000,000.00 covering all persons employed
in connection with the work in, on or about the Leased Premises and to provide
the statutory benefits as required by the law in the State of Georgia.
7.02 Lessee shall have the right to erect signage at its cost and
expense and thereafter.
7.03 Lessee shall, at the expiration of the term, surrender the
Leased Premises (i) in the same condition at the commencement of the term of
completion of any renovation, resignage or construction, ordinary wear and tear
and casualty accepted.
7.04 All improvements shall be subject to the following:
(a) Lessee shall pursue all such work with due diligence.
(b) Lessee shall procure and pay for, so far as the same
may be required, from time to time, all permits and authorizations of all
municipal departments and governmental subdivisions having jurisdiction and
evidence of compliance with any covenants, conditions and restrictions
applicable to the Leased Premises. Lessor at Lessee's expense shall join in the
applications for such permits and authorizations whenever such action is
necessary.
(c) All work shall be made in good and workman like manner
and in compliance with all applicable permits and authorizations and building
and zoning laws and with all other laws, ordinances, orders, rules, regulations
and requirements of all Federal, State and Municipal governments, departments,
commissions, boards and offices.
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<PAGE> 16
(d) The cost of all such work shall be paid by the Lessee
so that the Leased Premises shall at all times be fee of liens for labor and
materials supplied or claimed to have been supplied to the Leased Premises,
provided that the Lessor shall promptly pay any sums required to be paid by the
Lessor.
(e) Lessee shall maintain during the full period of the
work during the insurance coverage described herein.
8.0 REMOVAL OF FUTURES. Lessee may, if not if default
hereunder, prior to the expiration of this Lease, or any extensions thereof,
remove all fixtures and equipment which it has placed in the Premise, provided
the Lessee repairs all damage to the Premises caused by such removal. All
improvements made shall remain as part of the realty.
9.0 REPAIRS. Lessee and its Sub-Lessee will be responsible for
all repairs and maintenance of the building structure and parking area
including, but not limited to, roof, walls, flooring, foundation, ceiling,
sewer, electrical and plumbing systems, HVAC, glass and windows during the
Lease term, and subsequent renewal period. Lessor shall not be responsible for
any repairs or maintenance of the building structure, parking area and
premises, except as otherwise may be specifically set forth herein.
10.0 WARRANTY. Lessor warrants and guarantees that at the
commencement of this Lease, the Demised Premises may be used for the purpose
set out in Paragraph 4.0 of this Lease without violating any zoning ordinances
or regulations or restrictive covenants running with the land. Lessor further
represents, warrants and guarantees that it has authority to enter into this
Lease as Lessor.
11.0 DESTRUCTION OF OR DAMAGE TO THE PREMISES.
If the premises are totally destroyed by storm, fire, lightning,
earthquake or any other such casualty, this Lease shall terminate as of the
date of such destruction and rental shall be accounted for as between the
Lessor and Lessee as of that date. If the premises are damaged but not wholly
destroyed by such casualties, rental shall abate in
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<PAGE> 17
such proportion as use of the Premises has been destroyed and Lessor shall
restore the Premises to substantially the same condition as before damage as
speedily as is practical, whereupon full rental shall recommence.
12.0 CONDEMNATION. If the whole of the Premises, or such a
portion thereof as will make the Premises unusable for the purposes herein
Leased, or condemned by any legally constituted authority for any public use of
purpose, then in either of said events the term hereby granted shall cease from
the date when possession was taken by public authorities, and rental shall be
accounted for as between Lessor and Lessee as of said date. Such termination,
however, shall be without prejudice to the rights of either the Lessor or
Lessee to recover compensation and damage caused by the condemnation from the
Condemnor. It is further understood and agreed that neither the Lessee or
Lessor shall have any rights in any award made to the other by any condemnation
authority notwithstanding the termination of the Lease as provided.
13.0 GOVERNMENTAL ORDERS. Lessee agrees, at its own expense, to
comply promptly with all requirements of any legally constituted public
authority made necessary by reason of the Lessee's occupancy of the Premises.
Lessor agrees to comply promptly with any such requirements if not made
necessary by reason of the Lessees occupancy. It is mutually agreed, however,
between Lessor and Lessee, that in order to comply with such requirements, the
cost to the Lessor or Lessee, as the case may be, shall exceed a sum equal to
one year's rent, then the Lessor or Lessee who is obligated to comply with such
requirements may terminate this Lease by giving written notice of the
termination to the other party be registered mail, which termination shall
become effective sixty (60) days after receipt of such notice and which notice
shall eliminate the necessity of compliance with such requirements by giving
such notice, unless the party giving such notice of termination shall, before
termination becomes effective, pay to the party giving notice all costs of
compliance in excess of one year's rent, or secure payment of said sum in a
manner satisfactory to the party going notice.
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<PAGE> 18
14.0 HOLDING OVER. If Lessee remains in possession of the
Premises after expiration of the term hereof, with the Lessor's acquiescence
and without any express agreement of the parties, Lessee shall be a
tenant-at-will at the rental rate which is in effect at the end of this Lease
and there shall be no renewal of this Lease by operation of law. If Lessee
remains in possession of the Premises after expiration of the term hereof
without the Lessor's acquiescence, Lessee shall be a tenant-at-sufferance and
commencing on the date following the date of such expiration, the monthly
rental payable under Paragraph 3 herein shall for each month, or a fraction
thereof during which Lessee so remains in possession of the premises, be twice
the monthly rental otherwise payable under Paragraph 3 herein.
15.0 QUIET ENJOYMENT. Lessor covenants and agrees that Lessee, on
payment of the rent and the performance of the covenants and agreements of this
Lease, shall and may peaceably and quietly have, hold and enjoy, without
interruption, the Demised Premises.
16.0 IMPROVEMENTS.
16.01 With respect to any Improvements, demolition, or new
constriction on the Leased Premises, Lessee agrees as follows:
(a) All such Improvements, demolition, or construction
shall be constructed as the Lessee's sole cost and expense.
(b) Lessee's shall obtain all appropriate government
permits with respect to any such Improvements, demolition, or construction.
(c) Lessee shall make sure that the Improvements,
demolition, or construction are done in accordance with the requirements of law
and local building codes (including, but not limited to, the American's With
Disabilities Act).
(d) Any such Improvements, demolition, or construction
shall be insured during the term of this Lease at the Lessee's sole cost and
expense in the amount equal to the full replacement value and Lessee shall
furnish Landlord with a certification of
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<PAGE> 19
such insurance and rider naming the Lessor as additional insured, which
insurance policy shall meet the requirements set forth herein.
(e) Lessee shall timely pay for all Improvements,
demolition, or construction done on the Leased Premises and any other work done
on or with respect to the Leased Premises so as not to permit any mechanics or
materialman's liens to be recorded against the Leased Premises.
(f) Lessee, at its sole cost and expense, shall keep and
maintain all Improvements therein in reasonable order, condition and repair.
All the Improvements shall remain the property of the Lessee during the term of
this Lease, but such portion of such Improvements that are part of the realty
which the Lessee is not required to remove as set forth herein shall become the
property of Lessor upon the expiration or earlier termination of this Lease.
16.02 In connection with any request by the Lessee for Lessor's
approval of Improvements, or construction and all applications, permissions,
zoning requests, easements, or other documents requiring Lessor's execution in
connection therewith ("documentation"), Lessor agrees that if the Lessor
approves Lessee's request for such construction, alteration, or other action
with respect to any Improvements, which approval shall not be unreasonably
withheld or delayed, Lessor shall execute any and all documentation required
and shall cooperate with the Lessee in making any of the applications for
license or permits required to complete any new contraction, demolition or
repairs. Lessee acknowledges that Lessor's approval, with respect to any
requested action concerning the Improvements shall also take into account any
limitation that any such documentation may make with respect to the use or
occupancy of the Leased Premises or the liability that may be imposed upon
Landlord and Landlord shall not be obligated to agree to anything that would so
limit the use or occupancy of the Leased Premises or impose any liability on
the Landlord unless as to such liability, the Lessee has fully indemnified and
held the Landlord harmless thereto and the Landlord accepts the same.
8
<PAGE> 20
16.03 In the event that there is any damage or destruction with
respect to the Improvements, Lessee shall at its sole cost and expenses,
without regard to insurance, and without regard to the insurance proceeds
available thereof at its option, repair and restore the Improvements with all
deliberate speed and such repair and restoration shall be commenced within ten
(10) days of the damage and completed within 180 days. In the event the Lessee
elects not to repair and restore the Improvements as provided herein, or fails
to timely do so, the Lessor shall immediately restore the site to its condition
prior to the construction of such Improvements.
17.0 EVENTS OF DEFAULT. The happening of any one or more of
the following events (hereinafter any one of which may be referred to as an
"Event of Default") during the term of this Lease, or any renewal or extensions
thereof, shall constitute a breach of this Lease on the part of the Lessee:
17.01 Lessee fails to pay the rental as provided for herein;
17.02 Lessee abandons or vacated the premises;
17.03 Lessee fails to comply with or abide by and perform any
other obligation imposed upon the Lessee under this Lease;
17.04 Lessee is adjudicated a bankrupt;
17.05 A permanent receiver is appointed for Lessee's property and
such receiver is not removed within sixty (60) days after written notice from
the Lessor to the Lessee to obtain such removal;
17.06 Lessee, either voluntarily or involuntarily, takes
advantage of any Debtor or relief proceedings under any present or future law,
whereby the rent or any portion thereof is, or is proposed to be, reduced or
payment thereof deferred;
17.07 Lessee makes an assignment for the benefit of creditors; or
17.08 Lessee effects are levied upon or attached under legal
process against Lessee, which is not satisfied or dissolved within thirty (30)
days after written notice from the Lessor to the Lessee to obtain satisfaction
thereof.
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18.0 REMEDIES UPON DEFAULT. Upon the occurrence of any
event of default, Lessor may pursue any one or more of the following remedies,
separately or concurrently, without prejudice, to any other remedy herein
provided or provided by law;
18.01 If the event of default involved non-payment of rental and
Lessee fails to cure default within ten (10) days after receipt of written
notice hereof from the Lessor, or if the event of default involves a default in
performing any of the terms of provisions of this Lease other than the payment
of rental, and the Lessee fails to cure such default within thirty (30) days
after receipt of written notice of default from the Lessor, Lessor may
terminate this Lease by giving written notice to the Lessee and upon such
termination shall be entitled to recover from the Lessee damaged in an amount
equal to all rental which is then due and the present value (discounted at 10%)
per annum) of all rental which would otherwise have become due throughout the
remaining term of this Lease, or any renewal or any extension thereof (as if
the Lease had not been terminated);
18.02 If the event of default involved a matter other than those
set forth in Item (a) of this paragraph, Lessor may terminate this Lease by
giving written notice to the Lessee and, upon such termination, shall be
entitled to recover from the Lessee damages in an amount equal to all rental
which is then due and the present value (discounted at 10% per annum) of all
rental which would otherwise become due throughout the remaining term of this
Lease, or any renewal or extensions thereof (as if this Lease had not been
terminated); or
18.03 Upon any event of default, Lessor, as Lessee's agent,
without terminating this Lease, may enter upon and rent the Premises in whole
or in part, at the best price obtainable by reasonable effort, without
advertisement and by private negotiations and for any term Lessor deems proper,
with the Lessee being liable to the Lessor for any such deficiency, if any,
between the Lessee's rent as set forth herein and the pace obtained by the
Lessor on re-letting, provided, however, that the Lessor shall not considered
to be
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<PAGE> 22
under any duty by reason of this provision to take any action to mitigate
damages by reason of the Lessee's default. Lessee acknowledges that the
Premises are to be used for commercial purposes, and Lessee expressly waives
the protections and rights set forth in the Official Code of Georgia Annotated
Section 44-7-32.
19.0 LESSOR'S BREACH OF COVENANT. In the event Lessor
shall fail to perform the covenants and/or agreements of this Lease which are
required to be performed by Lessor and/or there is a breach of any warranty
made or implied herein by Lessor, then in addition to damages (which Lessor
agrees Lessee shall have the right to recover), Lessee may require Lessor to
remedy said default or defaults by the service of written notice on Lessor or
Lessor's sent at the address to which rent payments due under this Lease are
forwarded and if at the expiration of ten (10) days from the receipt of said
notice, said default or defaults have not been remedied, then Lessee shall have
an election either to terminate and cancel this Lease on a date after the
expiration of said ten (10 day period, which date shall be selected and
designated by Lessee in a written notice to Lessor addressed to the address for
the forwarding of rent payments due under this Lease, or Lessee may remedy said
breach of covenants, agreement, and/or warranties and the cost of such action
shall be deducted by Lessee from the unpaid rents which shall accrue under the
unexpired term of this Lease or any extension thereof.
20.0 INSPECTION BY LESSOR. Lessor and Lessor's agents,
servants and employees shall have the right to enter the Demised Premises and
to make alterations, changes, and repairs to the Demised Premises as are herein
required, and/or to make repairs for the preservation or maintenance of the
Demised Premises. During the last thirty (3) days of the term of this Lease or
any extension thereof, Lessor shall have the right to post "For Rent" and "For
Sale" signs on the Demised Premises and during said period, Lessor and Lessor's
agents, servants and employees shall have the right to show the Demised
Premises to prospective tenants or purchaser at all reasonable times.
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21.0 ZONING. Without limiting the effect of Paragraph 4.0
hereinabove, to the best of its knowledge, Lessor represent that under
applicable zoning laws, in effect as of the date of the execution of this
Lease, the Leased Premises may be used to remove, install, repair and adjust
any and all automobile parts and accessories and to service, repair and
maintain automobiles. In the event the Leased Premises may not be used for any
of the aforesaid purposes or the purposes set forth in Paragraph 4.0
hereinabove, Lessee shall have the right to terminate this Lease by giving
Lessor at least thirty (30) days written notice of its election so to do, the
notice to set forth the termination date selected by Lessee.
22.0 COMMENCEMENT OF RENT. Rent payments shall commence on
December 1, 1995.
23.0 ACCEPTANCE OF PREMISES. The acceptance of possession
of the Leased Premises shall not waive Lessee's right to insist on full
compliance by Lessor with all covenants and conditions of this Lease required
to be fulfilled by Lessor.
24.0 TAXES. Lessee and its Sub-Lessee shall pay and be
responsible for all real estate taxes incurred or imposed on the Leased
Premises.
25.0 UTILITIES. Lessee and Sub-Lessee shall pay all utility
bills, including, but not limited to, water, sever, gas, electricity, fuel,
light and heat bills for Premises and Lessee shall pay all charges for garbage
collection or other sanitary services.
26.0 INDEMNITY: INSURANCE. Lessee agrees to and hereby does
indemnify and save Lessor, its agents, its servants and its employees, harmless
against all claims for damages to the persons or property by reason of the
Lessee's use or occupancy of the Premises, and all expenses incurred by the
Lessor as a result thereof, including, reasonable attorney's fees and court
costs. Supplementing the foregoing and in addition thereto, Lessee shall during
all items of this Lease and any extensions or renewals thereof, and at the
Lessee expense, maintain in full force and effect comprehensive general
liability insurance with limits of $1,000,000.00 per person and $3,000,000.00
per accident and property damage limits of $250,000.00, which insurance shall
contain a special
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endorsement recognizing and insuring any liability accruing to Lessee under the
first sentence of this paragraph, and naming Lessor as an additional insurer.
Lessee shall provide evidence of such insurance to the Lessor prior to the
commencement of the term of this Lease. Lessor and Lessee each hereby released
and relieve the other, and waive its right to recovery, for loss or damage
arising out of or incident to the perils insured against, which perils occur
in, on or about the Premises, whether due to the negligence of the Lessor or
Lessee or their agents, employees, contractors and/or invites, to the extend
that such loss or damage within the policy limits of said comprehensive general
liability insurance. Lessor and Lessee shall, upon obtaining the policies of
insurance require, give notice to the insurance carrier or carriers that the
foregoing mutual waiver of subrogation is contained in this Lease.
27.0 FIRE AND EXTENDED COVERAGE. In addition to and concurrent with
the indemnity and insurance provided in Paragraph 27 above, Lessee agrees to
carry fire and extended coverage insurance on all the building and permanent
improvements installed and/or owned by Lessor in the Demised Premises in an
amount not less than (80%) of the replacement value of said building and
improvements in some good and solvent insurance company rated by Best's or
similar agency at XII:A or better (or equivalent rating), and Lessee will pay
all premiums on said insurance policy or policies when due. The policy will
require the insurer to notify Lessor and Lessor's mortgagee at least thirty
(30) days prior to cancellation or change of any insurance company of such fire
and extended coverage insurance. Such policy shall name Lessor and Lessor'
mortgagee as an additional insured and Lessee shall furnish to Lessor and
Lessor's mortgagee a certificate of insurance evidencing the coverage as
provided for herein.
28.0 ESTOPPEL CERTIFICATE. Lessor shall at any time and from time
to time, upon not less than twenty (20) days prior written request by Lessee,
execute, acknowledge and deliver to Lessee an estoppel certificate. It is
intended that any statements made therein may be relied upon by any lender of
Lessee, or such lender's successors or
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assigns, or by any prospective transferee or assignee of Lessees interest (or
any part thereof) in the Demised Premises or by any other party providing any
form of financing (including by sale of stock, debt or otherwise) to Lessee.
Lessor hereby agrees that unless such certificate shall have been delivered
when required pursuant to the terms of this paragraph, such certificate shall
be deemed to have been delivered, and the statements and certifications
contained therein shall be deemed to have been made, by Lessor as of the date
of Lessee's request therefore, and that in such event the parties intended
pursuant to terms of this paragraph to rely thereupon shall be able and
entitled to rely thereupon to the same extent as Lessor had actually delivered
such certificate.
29.0 MORTGAGE'S RIGHTS. Lessees rights shall be subject to any
bonafide mortgage or deed to secure debt which is now or may hereinafter be
placed upon he Premises by the Lessor. Lessee shall, if requested by the
Lessor, execute a separate agreement reflecting such subordination.
30.0 ATTORNMENT/NON-DISTURBANCE: RIGHT TO CURE LESSOR DEFAULTS:
This Lease is and shall be subject to the lien of the mortgage
or any successor mortgage placed upon the Leased Premises provided that, in
each such case the mortgagee shall have executed and delivered to Lessee, in
recordable form, a non-disturbance agreement providing that (a) no default
under the mortgage and no proceeding to foreclose the same, deed in lieu of
foreclose, or the exercise or attempted exercise of any right or remedy under
the mortgage will disturb Lessee's possession or other rights under the Lease
(including any right of Lessee to renew or extend the term thereof) and the
Lease will not be affected or cut off thereby, (b) that upon and
notwithstanding any such proceeding to foreclose the mortgage, deed in lieu of
foreclosure or other exercise of or attempt to exercise any right or remedy
under the mortgage or other acquisition of the Leased Premises by mortgagee or
any other mortgagee, or successor of or person acquiring through either, such
parties shall recognize the Lease and Lessee as tenant under the Lease, as well
as all rights of Lessee thereunder (including any right of Lessee to renew or
extend
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the term thereof), and the Lease will not be affected or cut off thereby, (b)
that upon and notwithstanding any such proceeding to foreclose the mortgage,
deed in lieu of foreclosure or other exercise of or attempt to exercise any
right or remedy under the mortgage or other acquisition of the Leased Premises
by mortgagee or any other mortgagee, or successor of or person acquiring
through either, such other parties shall recognize the Lease and Lessee as
tenant under the Lease, as well as all rights of Lessee thereunder (including
any right of Lessee to renew or extend the term thereof), and no default under
the mortgage and no proceeding to foreclose the same, deed in lieu of
foreclosure, or the exercise of or attempt to exercise any right or remedy
under the mortgage will disturb Lessee's possession or other rights under the
Lease and the Lease will not be affected or cut off thereby, and Lessee shall
recognize the Lease shall recognize an attorn to mortgagee or any other owner
as the Lessor under the Lease, (c) mortgagee shall, from time-to-time execute
and/or consent to be bound by such estoppel certificates and consents and
waivers as Lessor is required to execute pursuant to the terms of the Lease,
(d) mortgagee shall permit insurance and any other proceeds and/or awards to be
made available for restoration and repair of the Leased Premises according to
the terms of the Lease, and (e) that in the event of any default (or any event
which with notice or passage of time or both might constitute an event of
default) by the Lessor under any mortgage, or under any renewal, modification,
replacement or extension thereof, the mortgagee shall give notice thereof to
Lessee and Lessee shall have the right (but not the obligation) to (i) cure
such default and/or (ii) withhold from and offset against the rent required to
be paid under the Lease such sums as will be sufficient to enable Lessee to
satisfy Lessor's obligations as to such mortgagee, as they become due, and/or
to cure such default.
31.0 NOTICE. Whenever by the terms of this Lease notice shall or
may be given either to Lessor or Lessee, such nice shall be in writing and
shall be delivered in hand or sent by Certified Mail, Return Receipt Requested,
postage prepaid:
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<PAGE> 27
All notices shall be deemed effective when received and shall be
sent by certified mail, return receipt requested as follows:
To Lessee: Winco, L.P.
c/o Charles K. Yancey
2150 Cobb Parkway
Smyrna, Georgia 30080
To Lessor: Walter M. Boomershine, Jr.
2150 Cobb Parkway
Smyrna, Georgia 30080
32.0 COMMISSIONS. Lessor represents and warrants that there are no
fees, commissions, or other compensation owing to any broker, sale agent or
other person on account of the execution of this Lease Agreement or on account
of Lessee's payments of rent to Lessor, and Lessor will indemnify Lessee and
hold Lessee harmless against any and all demands, claims, suits and liabilities
for such fee, commission and other compensation in connection with the
execution of this Lease Agreement.
33.0 ATTORNEY'S FEES. In the event that any action or proceeding
is brought to enforce any term, covenant or condition of this Lease on the part
of the Lessor or Lessee, the prevailing party in such litigation shall be
entitled to recover their reasonable attorney's fees to be fixed by the court
in such action or proceeding. Furthermore, the Lessor and Lessee agree to pay
reasonable attorney's fees and expenses of one or the other party in this Lease
(either Lessor or Lessee) if it is made a party to litigation because of its
being a party under this Lease and when it has not engaged in any unlawful
conduct itself.
34.0 ENTIRE AGREEMENT. This Lease Agreement, including any
attachments and supplements made a part hereof, contains the entire agreement
of the parties and no representations, inducements, promises or agreements,
oral or otherwise, between the parties not embodied herein shall be of any
force or effect.
35.0 NO ESTATE IN LAND. This Lease shall create the
relationship of Landlord and tenant between the parties hereto. No estate shall
pass out of the Landlord.
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Lessee has only a usufruct not subject to levy and sale, and not assignable by
the Lessee except by the Lessor's consent.
36.0 RIGHTS CUMULATIVE. All rights, powers and privileges conferred
hereunder upon parties hereto shall be cumulative but not restricted to those
given by law.
37.0 SUCCESSORS. The covenants, agreements, terms, conditions and
warranties of this Lease shall be binding upon and inure to the benefit of
Lessor and Lessee and their respective heirs, executors, administrators,
successors and assigns.
38.0 EFFECTIVE TERMINATION OF LEASE. No termination of this Lease prior to
the normal ending thereof, by lapse of timer or otherwise, shall effect the
Lessor's right to collect rent for the period prior to the termination thereof.
39.0 WAIVER OF RIGHTS. No failure of the Lessor to exercise any power
given the Lessor hereunder or to insist upon strict compliance of the Lessee of
its obligations hereunder and no custom or practice of the parties at variance
with the terms hereof shall constitute a waiver of the Lessor's rights to
demand exact compliance with the terms hereof.
40.0 TIME OF THE ESSENCE. Time is of the essence of this Lease.
41.0 CONSENT TO LEASE HOLD SECURITY DEED. Lessor and Lessee consent to
acknowledge lease hold security deed placed on the Leased Premises by Lessor's
grant of the same to NationsBank of Georgia, N.A., on the 14th day of November,
1995.
IN WITNESS WHEREOF, the parties hereto have signed and sealed the
foregoing Lease Agreement on the day and year first above written.
WALTER M. BOOMERSHINE, JR.
(LESSOR)
/s/ /s/ Walter M. Boomershine, Jr.
- ---------------------------------- ----------------------------------
WITNESS WALTER M. BOOMERSHINE, JR., LESSOR
/s/
- ----------------------------------
NOTARY PUBLIC (Seal)
My Commission Expires:
Notary Public, Fulton County, Georgia
My Commission Expires June 15, 1998.
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<PAGE> 29
/s/ /s/ Winifred F. Boomershine
- ------------------------------------- ------------------------------
WITNESS Winifred F. Boomershine
/s/ Carolyn M. Freely
- -------------------------------------
NOTARY PUBLIC (Seal)
My Commission Expires: June 15, 1998
Notary Public, Fulton County, Georgia
[SEAL]
WINCO, L.P.
(LESSEE)
/s/ /s/ Walker M. Boomershine, Jr.
- ------------------------------------- ------------------------------
/s/ Carolyn M. Freely
- -------------------------------------
NOTARY PUBLIC (Seal)
My Commission Expires: June 15, 1998
Notary Public, Fulton County, Georgia
[SEAL]
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<PAGE> 30
EXHIBIT "A"
All that tract or parcel of land lying and being in Land Lot 77 of
the 7th District of Gwinnett County, Georgia, and being more particularly
described as follows:
BEGINNING at an iron pin found formed by the intersection of the
southwestern right-of-way line of Old Norcross-Lawrenceville Road (having an
100 foot right-of-way width) and the land lot and district lines being common
to Land Lot 77 of the 7th District and Land Lot 205 of the 6th District of
Gwinnett County, Georgia; thence leaving the aforesaid land lot and district
lines, run along the southwestern right-of-way line of Old
Norcross-Lawrenceville Road the following four (4) courses and distances and
following the curvature thereof: (1) along the arc of a 2,914.79 foot radius
curve having an arc distance of 338.44 feet to a point (said arc being
subtended by a chord lying to the northeast thereof bearing south 68 degrees 58
minutes 25 seconds east and being 338.25 feet in length); (2) south 72 degrees
18 minutes 00 seconds east a distance of 36.85 feet to a point; (3) south 76
degrees 57 minutes 37 seconds east a distance of 4.07 feet to a point; and (4)
along the arc of a 904.93 foot radius curve to the right having an arc distance
of 705.69 feet to an iron pin set (said arc being subtended by a chord lying to
the southwest thereof bearing south 54 degrees 44 minutes 22 seconds east and
being 687.95 feet in length); thence leaving the southwestern right-of-way line
of Old Norcross-Lawrenceville Road, run south 60 degrees 23 minutes 28 seconds
west a distance of 516.71 feet to an iron pin found located on the land lot and
district lines being common to Land Lot 77 of the 7th District and Land Lot 205
of the 6th District of Gwinnett County, Georgia; thence in a northwesterly
direction along the aforesaid land lot and district lines, run north 30 degrees
44 minutes 06 seconds west a distance of 914.36 feet to an iron pin found
located on the southwestern right-of-way line of Old Norcross-Lawrenceville
Road, said iron pin found being the POINT OF BEGINNING.
The above-described property contains 6.863 acres, more or less, and
is shown and described according to that certain Boundary Survey prepared for
Boomershine Automobile Group, Inc. by Centerline Surveying Systems, Inc.
(Charles C. Franklin, Georgia Registered Land Surveyor No. 2143), dated January
12, 1995, last revised March 15, 1995, which Survey is incorporated herein by
this reference and made a part of this description.
TOGETHER WITH:
All rights created pursuant to a certain Encroachment Agreement of
even date by and between Walter M. Boomershine, Jr., a/k/a Walter M.
Boomershine and Winifred Forbes Boomershine and Georgia Power Company
to be recorded in Gwinnett County, Georgia Records.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated May 11, 1998 with respect to the financial
statements of Sunbelt Automotive Group, Inc., the use of our report dated
January 30, 1998 with respect to the consolidated financial statements of
Boomershine Automotive Group, Inc. and Subsidiaries, the use of our report dated
March 23, 1998 with respect to the financial statements of Jay Automotive Group,
Inc., the use of our report dated February 13, 1998 with respect to the
financial statements of Grindstaff, Inc., the use of our report dated March 26,
1998 with respect to the financial statements of Day's Chevrolet, Inc., and the
use of our report dated January 26, 1998 with respect to the financial
statements of Robertson Oldsmobile-Cadillac, Inc., in Amendment No. 2 to the
Registration Statement (Form S-1 No. 333-51451) and related Prospectus of
Sunbelt Automotive Group, Inc. for the Registration of 5,500,000 shares of its
common stock.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
June 19, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 9, 1998 with respect to the combined
financial statements of Wade Ford, Inc. and Wade Ford Buford, Inc. in Amendment
No. 2 to the Registration Statement (Form S-1 No. 333-51451) and related
Prospectus of Sunbelt Automotive Group, Inc. for the Registration of 5,500,000
shares of its common stock.
/s/ PYKE & PIERCE, CPA'S
Atlanta, Georgia
June 19, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 12, 1998 with respect to the financial
statements of South Financial Corporation in Amendment No. 2 to the Registration
Statement (Form S-1 No. 333-51451) and related Prospectus of Sunbelt Automotive
Group, Inc. for the Registration of 5,500,000 shares of its common stock.
/s/ DAVIS, MONK & COMPANY
Atlanta, Georgia
June 19, 1998
