<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 10, 1998.
REGISTRATION NO. 333-51451
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SUNBELT AUTOMOTIVE GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<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)
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COPIES TO:
<TABLE>
<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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<PAGE> 2
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,
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.
The Company's common stock has been approved for quotation on the Nasdaq
National Market under the symbol "SBLT", subject to notice of issuance.
Sunbelt was formed in December 1997 to acquire automobile dealerships and
related operations and has conducted limited operations to date. The Company has
not received the approval of any automobile manufacturer with respect to the
Merger or the Acquisitions described herein, except for final approval from
Hummer, contingent approval from Ford and verbal approval from several other
manufacturers. See "The Acquisitions." The failure to receive approvals from all
of the manufacturers may have a material adverse effect on the Company's
business, financial condition and results of operations.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 16 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.
<TABLE>
<CAPTION>
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share......................... $ $ $
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Total(3).......................... $ $ $
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</TABLE>
(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.
<PAGE> 3
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."
<PAGE> 4
[DESCRIPTION OF GRAPHICS -- INSIDE FRONT COVER:
PICTURE OF GLOBE AND FOLLOWING TEXT:
THE WORLD OF AUTOMOTIVE RETAILING IS CHANGING . . .
The industry is growing . . .
up 40% over the last 5 years, to more than
$1.0 trillion in total revenues in 1997.
Sunbelt Automotive Group, Inc. believes that the opportunity exists
for industry leaders to create operating efficiencies,
and to improve customer service.]
------------------------
[DESCRIPTION OF GRAPHICS -- INSIDE FRONT COVER:
COMPANY'S LOGO AND FOLLOWING TEXT:
A WHOLE NEW WORLD OF AUTOMOTIVE RETAILING
COMPANY PROFILE:
Upon completion of this Offering, Sunbelt believes it will be one of the 13
largest dealership
groups with $688 million in revenues
Southeast automotive retailing consolidator will initially operate in four
states
Management team with automotive retailing and public company experience
Acquisition strategy focused on medium- and smaller-sized Southeast markets
Diversified revenue base: new cars (61%), used cars (26%) and other ancillary
products (13%)]
------------------------
[DESCRIPTION OF GRAPHICS -- INSIDE FRONT COVER:
COMPANY'S LOGO; MAP OF SOUTHEASTERN UNITED STATES
SHOWING COMPANY'S LOCATIONS AND FOLLOWING TEXT:
Sunbelt Automotive Group, Inc. is located in the Southeast region of the United
States.
Sunbelt will operate 31 automotive dealerships,
4 Collision Centers USA locations and
5 South Financial Corporation locations in 6 southeastern markets.]
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.
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.
------------------------
[DESCRIPTION OF GRAPHICS -- INSIDE BACK COVER:
EMBLEMS OF VARIOUS DEALERSHIP BRANDS OF COMPANY AND FOLLOWING TEXT:
THE SUNBELT AUTOMOTIVE GROUP BRAND PORTFOLIO
Sunbelt Automotive Group, Inc. will offer a well-diversified product
and brand portfolio with a strong mix of domestic and foreign vehicles.]
This Prospectus includes trademarks and service marks of Sunbelt, companies
other than Sunbelt, and the automobile manufacturers, 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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<PAGE> 5
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, preparing for the proposed Merger and Acquisitions and
operating the companies acquired to date. Although certain members of Sunbelt's
management have significant automotive retailing industry experience, Sunbelt
has not managed the combined businesses discussed herein, and the proposed
Merger and certain of the Acquisitions will not occur until the consummation
date of this offering (the "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 all of the
Acquisitions. See "The Merger" and "The Acquisitions." The Acquisitions will be
consummated on or before the closing of the Offering, and the Merger will be
consummated contemporaneously with 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 believes it 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
dealerships that the Company owns or expects to acquire upon consummation of the
Offering 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
3
<PAGE> 6
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.
The automotive dealerships and related businesses that will comprise the
Company upon the consummation of the Merger and the Acquisitions would have had
pro forma combined total revenues of $688 million for the year ended June 30,
1997 and $510 million for the nine months ended March 31, 1998. See "Pro Forma
Combined and Condensed Financial Data."
RISKS ASSOCIATED WITH MANUFACTURERS' APPROVALS
As of the date of this Prospectus, the Company has not received the
approval of any manufacturer with respect to the Merger or the Acquisitions
except for final approval from AM General Corporation ("Hummer"), contingent
approval from Ford and verbal approval from Chrysler, GM and Nissan, and the
Company does not expect to obtain such approvals until after the closing date of
this Offering. In the event that the Company is unable to obtain approvals for
the Merger or any of the Acquisition transactions, the Company may be forced to
divest itself of one or more dealerships or may be forced to accept conditions
imposed by the manufacturer(s) that may have a material adverse effect on the
Company's strategic plan. The failure to obtain such approvals may have a
material adverse effect on the Company's business, financial condition and
results of operations. The failure to obtain such approvals will not have an
effect on the purchase price payable by the Company in the Merger or any of the
Acquisitions.
The following tables set forth certain pro forma combined total sales
revenues and cost of goods sold information relating to the new vehicles sold by
dealerships that the Company owns or expects to acquire upon consummation of the
Offering categorized by manufacturer (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------
1995 1996 1997
-------------------- -------------------- --------------------
SALES % OF SALES SALES % OF SALES SALES % OF SALES
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ford(1).................... $147,965 41.3% $176,156 43.5% $201,508 47.9%
General Motors(2).......... 114,696 32.1 111,798 27.7 98,506 23.5
Nissan..................... 41,453 11.6 44,304 11.0 44,261 10.5
Toyota..................... 17,066 4.8 22,196 5.5 17,473 4.2
Mitsubishi................. 2,369 0.7 5,989 1.5 11,013 2.6
Mazda...................... 2,073 0.6 5,288 1.3 10,469 2.5
Isuzu...................... 15,119 4.2 12,479 3.1 9,434 2.2
Chrysler/Dodge/Plymouth.... 9,574 2.7 7,920 2.0 8,717 2.1
Kia........................ -- -- 4,570 1.1 7,040 1.7
Honda...................... -- -- 6,007 1.5 6,105 1.5
Jeep/Eagle................. 2,736 0.8 3,045 0.8 3,353 0.8
Hummer..................... 1,998 0.6 2,954 0.7 2,140 0.5
Other(3)................... 2,172 0.6 1,171 0.3 -- --
-------- ------- -------- ------- -------- -------
$357,221 100.0% $403,877 100.0% $420,019 100.0%
======== ======= ======== ======= ======== =======
<CAPTION>
NINE MONTHS ENDED MARCH 31,
-------------------------------------------
1997 1998
-------------------- --------------------
SALES % OF SALES SALES % OF SALES
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Ford(1).................... $141,761 46.3% $159,741 50.5%
General Motors(2).......... 77,535 25.3 77,834 24.7
Nissan..................... 30,897 10.1 21,043 6.7
Toyota..................... 16,655 5.4 12,384 3.9
Mitsubishi................. 7,802 2.5 8,386 2.7
Mazda...................... 5,816 1.9 7,628 2.4
Isuzu...................... 7,134 2.3 7,362 2.3
Chrysler/Dodge/Plymouth.... 5,456 1.8 6,246 2.0
Kia........................ 4,406 1.4 5,045 1.6
Honda...................... 5,037 1.6 4,728 1.5
Jeep/Eagle................. 2,098 0.7 2,402 0.8
Hummer..................... 2,140 0.7 2,898 0.9
Other(3)................... -- -- -- --
-------- ------- -------- -------
$306,737 100.0% $315,697 100.0%
======== ======= ======== =======
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------
1995 1996 1997
-------------------- -------------------- --------------------
COSTS % OF COSTS COSTS % OF COSTS COSTS % OF COSTS
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ford(1).................... $141,779 42.0% $167,986 43.7% $191,529 48.1%
General Motors(2).......... 106,683 31.5 104,452 27.2 94,322 23.6
Nissan..................... 39,065 11.5 43,608 11.4 40,647 10.2
Toyota..................... 16,402 4.8 20,868 5.4 16,840 4.2
Mitsubishi................. 2,298 0.7 5,849 1.5 10,506 2.6
Mazda...................... 1,958 0.6 4,935 1.3 9,930 2.5
Isuzu...................... 14,433 4.3 12,033 3.1 9,029 2.3
Chrysler/Dodge/Plymouth.... 9,253 2.7 7,619 2.0 8,399 2.1
Kia........................ -- -- 4,395 1.1 6,752 1.7
Honda...................... -- -- 5,700 1.5 5,740 1.4
Jeep/Eagle................. 2,696 0.8 2,930 0.8 3,249 0.8
Hummer..................... 1,817 0.5 2,617 0.7 2,060 0.5
Other(3)................... 2,074 0.6 1,005 0.3 -- --
-------- ------- -------- ------- -------- -------
$338,458 100.0% $383,997 100.0% $399,003 100.0%
======== ======= ======== ======= ======== =======
<CAPTION>
NINE MONTHS ENDED MARCH 31,
-------------------------------------------
1997 1998
-------------------- --------------------
COSTS % OF COSTS COSTS % OF COSTS
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Ford(1).................... $133,906 46.0% $150,640 50.2%
General Motors(2).......... 72,924 25.0 75,208 25.1
Nissan..................... 30,370 10.4 20,214 6.7
Toyota..................... 15,638 5.4 11,654 3.9
Mitsubishi................. 7,637 2.6 7,938 2.6
Mazda...................... 5,455 1.9 7,108 2.4
Isuzu...................... 6,858 2.4 7,042 2.3
Chrysler/Dodge/Plymouth.... 5,286 1.8 5,994 2.0
Kia........................ 4,306 1.5 4,792 1.6
Honda...................... 4,738 1.6 4,448 1.5
Jeep/Eagle................. 1,986 0.7 2,307 0.8
Hummer..................... 2,010 0.7 2,772 0.9
Other(3)................... -- -- -- --
-------- ------- -------- -------
$291,114 100.0% $300,117 100.0%
======== ======= ======== =======
</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.
(3) Boomershine Automotive Group, Inc. divested its Subaru franchise during the
fiscal year ended June 30, 1996.
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 will be 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,
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.
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<PAGE> 8
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 were 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 another single manufacturer and the
Company has achieved an appropriate sales volume with respect to such
manufacturer's vehicles, the Company intends to implement this
organizational structure for those 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. However, the Company does not know if any
manufacturers, other than Ford, agree with this interpretation, and
therefore, the Company intends to seek the approval of all applicable
manufacturers prior to implementing such a structure with respect to
each such manufacturer's dealerships. As of the date of this
Prospectus, the Company has neither sought, nor received, the approval
of any manufacturer, other than Ford, for its implementation of such a
structure. Ford has approved the Company's organizational structure
for its Ford and Mercury dealerships as part of its contingent
approval of the Company's acquisitions of the Ford and Mercury
dealerships. See "Business -- Dealership Operations" and
"Business -- Business Strategy." 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 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.
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<PAGE> 9
- 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 restructure
its floorplan financing, which the Company anticipates will result in
an overall 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 average annual floorplan rates, and
expects that this lower rate will result in annual cost savings of
$750,000 to $1 million. In addition to the floorplan financing, the
Company is also negotiating a revolving credit 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 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 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 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 expects to offer 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.
7
<PAGE> 10
THE ACQUISITIONS AND THE MERGER
THE ACQUISITIONS
Since November 1997, the Company and/or Boomershine Automotive Group, Inc.
("Boomershine Automotive") (the accounting acquiror), 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. The number of shares of the Company's unregistered common stock that it
expects to issue in each of the acquisitions will be determined by dividing the
aggregate stock consideration to be issued in each acquisition, which is fixed
under the terms of the respective agreements, by the offering price of the
common stock of the Company indicated on the cover page of this prospectus.
Specifically, the acquisitions consist of the following:
- The acquisition by Boomershine Automotive 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, which included cash plus a
promissory note in the amount of $761,000;
- The acquisition by Boomershine Automotive 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 $4.6 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 Grindstaff, Inc., which is involved in the automotive
retailing business. This acquisition was consummated on July 31, 1998 for
consideration of $8.5 million (based on a purchase price of $9.1 million
less closing adjustments of approximately $600,000) in the form of a
short-term promissory note, plus or minus post-closing adjustments
described below;
- 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
$12.0 million in cash and the Company's 90-day promissory note in the
amount of $4.0 million. The purchase price for the Jay Automotive Group,
Inc. acquisition includes payment for the acquisition of the Saturn and
Suzuki dealerships, which the Company expects to divest subsequent to the
consummation of this Offering;
- The acquisition of Wade Ford, Inc. and Wade Ford Buford, Inc. (the "Wade
Ford Dealerships"), 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 $12.0
million in cash and approximately $3.5 million in the form of the
Company's unregistered common stock, plus or minus consideration to be
determined by closing and post-closing adjustments described below;
- 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
$5.6 million in cash and approximately $5.2 million in the form of the
Company's unregistered common stock, plus or minus additional
consideration to be determined by post-closing adjustments described
below; and
- The acquisition of Robertson Oldsmobile-Cadillac, Inc., which is involved
in the automotive retailing business. Based on the March 31, 1998 FIFO net
worth of Robertson Oldsmobile-Cadillac, Inc., the consideration payable in
this acquisition would be approximately $7.7 million in cash and approxi-
8
<PAGE> 11
mately $360,000 in the form of the Company's unregistered common stock.
This consideration is subject to the closing and post-closing adjustments
described below.
Each acquisition is hereinafter individually referred to as an
"Acquisition" and collectively referred to as the "Acquisitions." See "The
Acquisitions."
CLOSING AND POST-CLOSING ADJUSTMENTS
Wade Ford, Inc. and Wade Ford Buford, Inc. The purchase price for the Wade
Ford Dealerships is defined as $14.5 million, plus or minus the following
adjustments. If the Wade Ford Dealerships earn a profit during the period from
January 1, 1998 to the closing date, then Sunbelt shall pay to the selling
shareholders the entire amount of such profit less any distributions made by the
Wade Ford, Dealerships to the selling shareholders during such period. If the
Wade Ford, Dealerships incur a loss during the period from January 1, 1998 to
the closing date, the purchase price will be reduced by such amount. If the
aggregate cash accounts of the Wade Ford Dealerships amount to less than
$800,000, the purchase price will be reduced dollar for dollar by the
deficiency. Additionally, if the Wade Ford Dealerships' floor plan liability
exceeds their floor plan assets by more than 3%, the purchase price will be
reduced by such amount.
Day's Chevrolet, Inc. The purchase price for the Day's Chevrolet, Inc.
Acquisition is defined as $10.5 million, plus or minus the following
adjustments. If Day's Chevrolet, Inc. made distributions in excess of $1.0
million of the previously taxed income, paid-in capital and common stock of
Day's Chevrolet, Inc. as of December 31, 1997 (the "pre-1998 distributions"),
then the purchase price shall be reduced by such excess on a dollar for dollar
basis. The purchase price will be further adjusted to the extent that the
closing date net worth is greater or less than zero. Additionally, if Day's
Chevrolet, Inc.'s floor plan liability exceeds their floor plan assets by more
than 3%, the purchase price shall be reduced by such amount.
Robertson Oldsmobile-Cadillac, Inc. The purchase price for the Robertson
Oldsmobile-Cadillac, Inc. Acquisition is defined as $4.7 million plus the FIFO
net worth of Robertson Oldsmobile-Cadillac, Inc. on the closing date, as
described in the purchase agreement.
Grindstaff, Inc. The purchase price for the Grindstaff, Inc. Acquisition
was calculated to be $8.5 million and is subject to the following additional
adjustments. If the net income of Grindstaff, Inc. for the period from January
1, 1998 to June 30, 1998 is less than $927,944, then the selling shareholders
shall pay the entire amount of such deficiency to the Company. If the net income
of Grindstaff, Inc. for that period is greater than $927,944, then the Company
shall pay the entire amount of such excess to the selling shareholders.
PRICE PROTECTION PROVISIONS
In addition to the consideration described above, the Company may be
required to pay consideration not to exceed approximately $9.8 million in the
aggregate (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 those transactions. Specifically, if
the price of the common stock subject to price protection is more on the date of
the Offering than the price of such common stock (i) on the first anniversary of
the Offering in the case of the Wade Ford Acquisition or (ii) on the second
anniversary of the Offering in the case of the Day's Chevrolet Acquisition, then
the Company is required to compensate the applicable target shareholders for
such price decrease in cash or by issuing additional shares of the Company's
common stock (however, pursuant to current policies of the Securities and
Exchange Commission (the "Commission"), the Company would not be able to deliver
registered stock to Day's Chevrolet and, therefore would be required to
compensate the Day's Chevrolet shareholders in cash for any such decrease). See
"Risk Factors -- Price Protection Provisions" and "Description of Capital
Stock -- Registration Rights and Stock Price Protection."
9
<PAGE> 12
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, based on an exchange ratio of 52.78 shares of the
Company's unregistered common stock in exchange for each share of common stock
of Boomershine Automotive Group, Inc., which is based on an assumed initial
public offering price of $10 per share, the midpoint of the estimated initial
public offering price range, and assumes a discount of 10%, which reflects the
stock's trading restrictions. See "The Merger." There will be no post-closing
adjustments to the consideration payable by the Company in connection with the
Merger.
CONSIDERATION RECEIVED BY CERTAIN PERSONS
The shareholders of Boomershine Automotive will receive the following
amounts of the Company's common stock upon consummation of the Merger: Walter M.
Boomershine, Jr. -- 570,024 shares (excludes 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 -- 633,360 shares.
Walter M. Boomershine, Jr. will serve as Chairman and Senior Vice President of
the Company, while Walter M. Boomershine, III, Lindsey B. Robertson and Patrice
B. Mitchell will serve as employees of the Company. In addition, Charles K.
Yancey and Ricky L. Brown, who are currently executive officers of Boomershine
Automotive, will serve as executive officers of the Company.
Additionally, certain persons receiving consideration in connection with
the Acquisitions will continue as employees of the Company upon consummation of
the Offering. In connection with the Wade Ford Acquisition, Alan K. Arnold and
Gary R. Billings will receive consideration in an aggregate amount of 385,000
shares of common stock and approximately $12.0 million in cash (plus or minus
closing and/or post-closing adjustments), which consideration will be allocated
between Mr. Arnold and Mr. Billings at closing of the Wade Ford Acquisition. Mr.
Arnold will serve as a director of the Company and Vice President of the
Company's Ford Division and Mr. Billings will serve as Executive Manager of Wade
Ford Buford, Inc. upon consummation of the Offering. In connection with the
Collision Centers USA Acquisition, James L. Peters received $1.7 million in the
form of cash and promissory notes as well as an option to purchase 5,000 shares
of the common stock at an exercise price of $8.00 per share. Mr. Peters
currently serves as Vice President of Collision Centers USA, which will be owned
by the Company upon consummation of the Offering. In connection with the
Robertson Acquisition, E. Moss Robertson, Jr. will receive approximately $7.7
million in cash and 40,000 shares of common stock (plus or minus closing and/or
post-closing adjustments). Mr. Robertson will serve as Executive Manager of
Robertson Oldsmobile-Cadillac, Inc. upon consummation of the Offering. In
connection with the Jay Automotive Group Acquisition, James G. Stelzenmuller,
III will receive $16.0 million in the form of cash and a promissory note. Mr.
Stelzenmuller will serve as Executive Manager of Jay Automotive upon
consummation of the Offering. In connection with the Day's Chevrolet
Acquisition, Calvin Diemer will receive $2.8 million in cash and $2.6 million in
common stock (plus or minus closing and post-closing adjustments). Mr. Diemer
will serve as Executive Manager of Day's Chevrolet, Inc. upon consummation of
the Offering. In connection with the Grindstaff Acquisition, Wes Hambrick will
receive approximately $850,000 in cash (plus or minus post-closing adjustments).
Mr. Hambrick will serve as Executive Manager of Grindstaff, Inc. upon
consummation of the Offering.
STOCK OPTIONS TO BE GRANTED TO EXECUTIVE OFFICERS AND DIRECTORS UPON COMPLETION
OF THIS OFFERING
Upon the completion of this Offering, the Company intends to reserve the
following shares underlying options to be granted to its executive officers and
directors: 25,000 shares underlying options to Walter M. Boomershine, Jr.
(executive officer and Chairman of the Board of Directors); 50,000 shares
underlying options to Robert W. Gundeck (executive officer and director);
100,000 shares underlying options to Charles K. Yancey (executive officer and
director); 100,000 shares underlying options to Stephen C. Whicker (executive
officer and director); 25,000 shares underlying options to Ricky L. Brown
(executive officer); and
10
<PAGE> 13
5,000 shares underlying options to each of George D. Busbee, Lee M. Sessions,
Jr. and Jack R. Altherr (directors).
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 hereby............. 5,500,000 shares
Common stock to be outstanding after the
Offering................................ 10,557,862 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 for working capital
and general corporate purposes. 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 issuable 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 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."
11
<PAGE> 14
RISK FACTORS -- GENERAL
The Company's acquisition program may be limited by the automobile
manufacturers with which the Company has a Franchise Agreement (as hereinafter
defined). Pursuant to the manufacturers' policies known to the Company to be in
effect as of the date of this Offering or in connection with the 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, but no additional dealerships in the
12 to 24 month period following this Offering; 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; no contiguous market ownership
of Mazda dealerships; and 61 Nissan and Infiniti dealerships. The Company
has not been advised and is not aware of any limitations on the number of
Hummer, Isuzu, Kia or Mitsubishi dealerships it may own.
- 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; two Toyota dealerships in the Atlanta market and four in the
region; two Lexus dealerships; two Honda dealerships; one Acura
dealership; no contiguous market ownership of Mazda dealerships, but up to
two Mazda dealerships in the Atlanta market; no more than 30 Nissan and
Infiniti dealerships in the Atlanta region; 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; the greater
of one Toyota dealership or 20% of Toyota dealerships in a market and the
lesser of five Toyota dealerships or 5% of the Toyota dealerships in any
Toyota region; 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; 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; no contiguous market ownership of Mazda dealerships,
but may own up to two Mazda dealerships in a metro market; and no more
than 20% of Nissan and Infiniti dealerships in any region.
- A maximum additional number of the following dealerships in the Company's
existing markets: 26 additional Ford/Mercury dealerships; no additional GM
dealerships for at least a 12-month period following the completion of
this Offering, 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; 29 additional Nissan and Infiniti dealerships; with respect
to Mazda dealerships, no contiguous market ownership of dealerships, but
one additional Mazda dealership in each of the Atlanta and Gainesville,
Georgia, metro markets; and an unknown number of additional dealerships of
the following manufacturers: Hummer, Isuzu, Kia and Mitsubishi.
12
<PAGE> 15
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 the manufacturers will not modify such restrictions in the
future, either generally or on a case-by-case basis, and the Company expects
that the manufacturers will impose other general policy restrictions on the
Company in addition to ownership limitations. See "Business -- Relationships
with Manufacturers" and "Risk Factors -- Manufacturers' Restrictions on the
Merger, the Acquisitions and Future Acquisitions."
See "Risk Factors" beginning on page 16 for certain additional information
that should be considered by prospective investors.
13
<PAGE> 16
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The Company will acquire 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........... 1,858 3,717 5,095 8,278 8,372 23,423 6,514 6,701 17,308
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total revenues....... 126,602 178,277 238,320 262,893 247,445 687,969 184,760 178,666 510,290
Cost of sales................ 112,680 159,676 215,646 235,828 222,352 612,273 165,705 158,328 453,299
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit................. 13,922 18,601 22,674 27,065 25,093 75,696 19,055 20,338 56,991
Selling, general and
administrative expenses.... 12,751 16,685 19,927 24,170 22,263 62,935 16,698 16,544 48,137
Depreciation and
amortization............... 428 410 406 600 889 2,550 659 764 1,984
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income from operations....... 743 1,506 2,341 2,295 1,941 10,211 1,698 3,030 6,870
Interest expense, net........ 587 598 1,436 1,774 2,230 3,331 1,408 1,544 1,923
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) 7,156 394 1,665 5,746
Income tax (expense)
benefit.................... (151) (450) (448) (213) 40 (3,109) (119) (398) (2,481)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)............ $ 247 $ 467 $ 735 $ 502 $ (85) $ 4,047 $ 275 $ 1,267 $ 3,265
======== ======== ======== ======== ======== ======== ======== ======== ========
Basic:
Net income per share(3).... $ 0.39 $ 0.32
======== ========
Weighted average shares
outstanding(3)........... 10,309 10,309
======== ========
Fully diluted:
Net income per share(3).... $ 0.38 $ 0.31
======== ========
Weighted average shares
outstanding(3)........... 10,648 10,648
======== ========
OTHER OPERATING DATA:
Gross margin................. 11.0% 10.4% 9.5% 10.3% 10.1% 11.0% 10.3% 11.4% 11.2%
Operating margin............. 0.6% 0.8% 1.0% 0.9% 0.8% 1.5% 0.9% 1.7% 1.3%
Pre-tax margin............... 0.3% 0.5% 0.5% 0.3% (0.0)% 1.0% 0.2% 0.9% 1.1%
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>
<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 $ 18,202
Inventories................................................. 39,553 47,733 115,923
Total assets................................................ 55,672 88,949 223,045
Total debt, including current portion....................... 40,618 70,925 140,599
Total shareholders' equity.................................. 7,973 9,240 65,804
</TABLE>
14
<PAGE> 17
- ---------------
(1) In connection with the Merger and the Offering, Boomershine Automotive
converted 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."
15
<PAGE> 18
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 dealerships that the Company owns or expects to acquire upon
consummation of the Offering 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 company that operates
the automotive dealership ("Franchise Agreement"). The Company will be dependent
to a significant extent on its relationship with such manufacturers and the
terms and conditions of these Franchise Agreements.
The following tables set forth certain pro forma combined total sales
revenues and cost of goods sold information relating to the new vehicles sold by
dealerships that the Company owns or expects to acquire upon consummation of the
Offering categorized by manufacturer (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------
1995 1996 1997
-------------------- -------------------- --------------------
SALES % OF SALES SALES % OF SALES SALES % OF SALES
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ford(1).................... $147,965 41.3% $176,156 43.5% $201,508 47.9%
General Motors(2).......... 114,696 32.1 111,798 27.7 98,506 23.5
Nissan..................... 41,453 11.6 44,304 11.0 44,261 10.5
Toyota..................... 17,066 4.8 22,196 5.5 17,473 4.2
Mitsubishi................. 2,369 0.7 5,989 1.5 11,013 2.6
Mazda...................... 2,073 0.6 5,288 1.3 10,469 2.5
Isuzu...................... 15,119 4.2 12,479 3.1 9,434 2.2
Chrysler/Dodge/Plymouth.... 9,574 2.7 7,920 2.0 8,717 2.1
Kia........................ -- -- 4,570 1.1 7,040 1.7
Honda...................... -- -- 6,007 1.5 6,105 1.5
Jeep/Eagle................. 2,736 0.8 3,045 0.8 3,353 0.8
Hummer..................... 1,998 0.6 2,954 0.7 2,140 0.5
Other(3)................... 2,172 0.6 1,171 0.3 -- --
-------- ------- -------- ------- -------- -------
$357,221 100.0% $403,877 100.0% $420,019 100.0%
======== ======= ======== ======= ======== =======
<CAPTION>
NINE MONTHS ENDED MARCH 31,
-------------------------------------------
1997 1998
-------------------- --------------------
SALES % OF SALES SALES % OF SALES
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Ford(1).................... $141,761 46.3% $159,741 50.5%
General Motors(2).......... 77,535 25.3 77,834 24.7
Nissan..................... 30,897 10.1 21,043 6.7
Toyota..................... 16,655 5.4 12,384 3.9
Mitsubishi................. 7,802 2.5 8,386 2.7
Mazda...................... 5,816 1.9 7,628 2.4
Isuzu...................... 7,134 2.3 7,362 2.3
Chrysler/Dodge/Plymouth.... 5,456 1.8 6,246 2.0
Kia........................ 4,406 1.4 5,045 1.6
Honda...................... 5,037 1.6 4,728 1.5
Jeep/Eagle................. 2,098 0.7 2,402 0.8
Hummer..................... 2,140 0.7 2,898 0.9
Other(3)................... -- -- -- --
-------- ------- -------- -------
$306,737 100.0% $315,697 100.0%
======== ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------
1995 1996 1997
-------------------- -------------------- --------------------
COSTS % OF COSTS COSTS % OF COSTS COSTS % OF COSTS
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ford(1).................... $141,779 42.0% $167,986 43.7% $191,529 48.1%
General Motors(2).......... 106,683 31.5 104,452 27.2 94,322 23.6
Nissan..................... 39,065 11.5 43,608 11.4 40,647 10.2
Toyota..................... 16,402 4.8 20,868 5.4 16,840 4.2
Mitsubishi................. 2,298 0.7 5,849 1.5 10,506 2.6
Mazda...................... 1,958 0.6 4,935 1.3 9,930 2.5
Isuzu...................... 14,433 4.3 12,033 3.1 9,029 2.3
Chrysler/Dodge/Plymouth.... 9,253 2.7 7,619 2.0 8,399 2.1
Kia........................ -- -- 4,395 1.1 6,752 1.7
Honda...................... -- -- 5,700 1.5 5,740 1.4
Jeep/Eagle................. 2,696 0.8 2,930 0.8 3,249 0.8
Hummer..................... 1,817 0.5 2,617 0.7 2,060 0.5
Other(3)................... 2,074 0.6 1,005 0.3 -- --
-------- ------- -------- ------- -------- -------
$338,458 100.0% $383,997 100.0% $399,003 100.0%
======== ======= ======== ======= ======== =======
<CAPTION>
NINE MONTHS ENDED MARCH 31,
-------------------------------------------
1997 1998
-------------------- --------------------
COSTS % OF COSTS COSTS % OF COSTS
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Ford(1).................... $133,906 46.0% $150,640 50.2%
General Motors(2).......... 72,924 25.0 75,208 25.1
Nissan..................... 30,370 10.4 20,214 6.7
Toyota..................... 15,638 5.4 11,654 3.9
Mitsubishi................. 7,637 2.6 7,938 2.6
Mazda...................... 5,455 1.9 7,108 2.4
Isuzu...................... 6,858 2.4 7,042 2.3
Chrysler/Dodge/Plymouth.... 5,286 1.8 5,994 2.0
Kia........................ 4,306 1.5 4,792 1.6
Honda...................... 4,738 1.6 4,448 1.5
Jeep/Eagle................. 1,986 0.7 2,307 0.8
Hummer..................... 2,010 0.7 2,772 0.9
Other(3)................... -- -- -- --
-------- ------- -------- -------
$291,114 100.0% $300,117 100.0%
======== ======= ======== =======
</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.
(3) Boomershine Automotive divested its Subaru franchise during the fiscal year
ended June 30, 1996.
Ford Motor Company ("Ford"), General Motors Corporation ("GM") and Nissan
Motor Co., Ltd. ("Nissan") are the only manufacturers that accounted for more
than 10% of the new vehicle sales of the dealerships that the Company owns or
expects to acquire upon consummation of the Offering during such periods. See
"Business -- New Vehicle Sales," and "Business -- Relationships with
Manufacturers." Accord-
16
<PAGE> 19
ingly, 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 received the
approval of any automobile manufacturer with respect to the Merger, the
Acquisitions or the Offering, except for final approval from Hummer, contingent
approval from Ford and verbal approval from Chrysler, GM and Nissan. There can
be no assurance that the Company will be able to obtain final approval of any
manufacturer, other than Hummer, prior to the closing date of this Offering.
The Company has no reason to believe that it will not be able to replace or
renew all of its Franchise Agreements upon expiration, but there can be no
assurance that any of such agreements will be replaced or renewed or that the
terms and conditions of such replacement or renewal Franchise Agreements will be
favorable to the Company. If a manufacturer terminates or declines to replace or
renew one or more of the Company's significant Franchise Agreements, or if the
terms and conditions for the replacement or 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 will also depend 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 dealerships that the Company owns or expects to
acquire upon consummation of the Offering 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.
The success of each of the dealerships that the Company owns or expects to
acquire upon consummation of the Offering depends to a great extent on the
financial condition, marketing, vehicle design, production capabilities and
management of the respective manufacturers. Additionally, 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 is attempting 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 franchised dealers that
17
<PAGE> 20
the Company owns or expects to acquire upon consummation of the Offering for the
Acquisitions, the Merger and this Offering. As of the date of this Prospectus,
Ford has provided to the Company preliminary approval, and Hummer has provided
to the Company final approval, of the Company's proposed Merger, Acquisitions
and this Offering. The Company has executed the Ford Master Public Agreement and
new Franchise Agreements for each of the proposed acquisitions of Ford and/or
Mercury dealerships. These agreements and Ford's final approval of the Merger,
Acquisitions and this Offering are subject to the Company's completion of this
Offering. GM, Chrysler and Nissan have verbally informed the Company that they
anticipate approving the Merger, the Acquisitions and this Offering and the
proposed acquisitions of GM, Chrysler and Nissan dealerships, as applicable,
pursuant to the Acquisitions and the Merger. The final approvals of GM,
Chrysler, and Nissan are subject to the completion of this Offering. In
addition, the final approvals of Nissan and GM are subject to the execution of
the Nissan Public Ownership Addendum, an Agreement between the Company and
Nissan Motor Corporation USA, and a Supplemental Agreement to the General Motors
Corporation Dealer Sales and Service Agreement. As of the date hereof, the
Company has not obtained the approval of any other manufacturers, and no
manufacturer, other than Hummer, 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. Saturn Corporation ("Saturn") has
generally not approved the public ownership of its dealership franchises.
Although the Company recently requested Saturn's approval, the Company expects
to divest the Jay Automotive Group Saturn dealership in Columbus, Georgia. For
this reason, the financial results of the Jay Automotive Group Saturn dealership
have not been included in this Prospectus.
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.
The restrictions and maximum number of dealerships of each manufacturer
discussed below are based on the correspondence that the Company has received
from each applicable manufacturer. To the extent the Company has not received
any correspondence or other indication from a manufacturer concerning such
manufacturer's restrictions, the table below indicates that such information is
unknown to the Company with respect to such manufacturer. However, there can be
no assurance that the manufacturers will not modify such restrictions in the
future, either generally or on a case-by-case basis, and the Company expects
that the manufacturers will impose other general policy restrictions on the
Company in addition to ownership limitations.
18
<PAGE> 21
The following table sets forth, as of the date of this Prospectus and with
respect to all manufacturers with whom the Company expects to have Franchise
Agreements after the consummation of this Offering, the Merger and the
Acquisitions, (i) the manufacturers' policies on public company ownership; (ii)
the additional restrictions of the manufacturers on the number of dealerships a
public company may own in a particular region, zone or market, to the extent
known to the Company as of the date hereof; (iii) the number of dealerships of
each manufacturer's brands that the Company will own upon the consummation of
the Merger and the Acquisitions as such number is calculated for purposes of the
manufacturers' restrictions; and (iv) the maximum number of additional
dealerships the Company believes it may own/acquire nationally and in the
Southeastern United States pursuant to manufacturer's restrictions. The Company
expects that all of these restrictions will be imposed by the manufacturers on
the Company.
<TABLE>
<CAPTION>
(I) (II) (III) (IV)
------------------- ------------------------------------ --------------- -------------
RESTRICTIONS ON THE MAXIMUM
NUMBER OF NUMBER OF
DEALERSHIPS ADDITIONAL
COMPANY MAY NUMBER OF DEALERSHIPS
OWN/ACQUIRE DEALERSHIPS COMPANY MAY
PURSUANT TO OWNED FOR OWN/ ACQUIRE
PRESENT PURPOSES OF NATIONALLY/IN
MANUFACTURERS' ADDITIONAL RESTRICTIONS ON NUMBER OF MANUFACTURERS' SOUTHEASTERN
MANUFACTURER RESTRICTIONS DEALERSHIPS IN A REGION/ZONE/MARKET RESTRICTIONS(6) U.S.
- ----------------------------- ------------------- ------------------------------------ --------------- -------------
<S> <C> <C> <C> <C>
Chrysler(1).................. No more than 10 No more than maximum of 6 Chrysler 1 9/9
dealerships dealerships in the same sales zone (Chrysler-
(as defined by Chrysler) and 2 Dodge-Jeep-
Chrysler dealerships in the same Plymouth;
market (but no more than 1 like Elizabethton,
vehicle brand in the same market) TN)
Ford/Mercury(2).............. The lesser of (i) No more than 1 Ford dealership in 4 26/26
15 Ford and 15 any market area (as defined by Ford) (2 Ford/
Lincoln Mercury that has 3 or fewer Ford dealerships Mercury,
dealerships or (ii) and no more than 25% of the Ford Buford, GA and
that number of Ford dealerships in a market area having Franklin, NC; 2
and Lincoln Mercury 4 or more Ford dealerships Ford, Smyrna
dealerships and Duluth, GA)
accounting for 2%
of the preceding
year's retail sales
of those brands in
the United States
General Motors(3)............ No additional No more than 50% of the GM 5 None for at
dealerships for at dealerships (by franchise line) in a (2 Pontiac- least 12-24
least 12-24 months; GM-defined geographic market area Buick-GMC, months
Acquisitions of no having multiple GM dealerships, and Smyrna and following
more than 5 GM may further limit acquisitions of Columbus, GA; 2 Offering;
dealerships during GM dealerships by a single public Chevrolet, thereafter 5
a two-year period. company until all existing GM Acworth, GA and nationally
dealerships of that public company Elizabethton, and no more
meet certain GM criteria for sales, TN; 1 than 50% of
market penetration, CSI and other Oldsmobile- the GM
GM-established standards Cadillac, dealerships
Gainesville, (by franchise
GA) line) in a
GM-defined
geographic
market area
having
multiple GM
dealerships
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
(I) (II) (III) (IV)
------------------- ------------------------------------ --------------- -------------
RESTRICTIONS ON THE MAXIMUM
NUMBER OF NUMBER OF
DEALERSHIPS ADDITIONAL
COMPANY MAY NUMBER OF DEALERSHIPS
OWN/ACQUIRE DEALERSHIPS COMPANY MAY
PURSUANT TO OWNED FOR OWN/ ACQUIRE
PRESENT PURPOSES OF NATIONALLY/IN
MANUFACTURERS' ADDITIONAL RESTRICTIONS ON NUMBER OF MANUFACTURERS' SOUTHEASTERN
MANUFACTURER RESTRICTIONS DEALERSHIPS IN A REGION/ZONE/MARKET RESTRICTIONS(6) U.S.
- ----------------------------- ------------------- ------------------------------------ --------------- -------------
<S> <C> <C> <C> <C>
American Honda Co., Inc. 7 Honda dealerships Public companies restricted to (i) 1 1 (Honda, 6 Honda and 3
("Honda")(4)............... and 3 Acura Honda dealership in a "Metro" market Cartersville, Acura/6 Honda
dealerships (defined by Honda as a metropolitan GA) and 3 Acura
market with 2 or more Honda
dealerships) with 2 to 10 dealership
points; (ii) 2 Honda dealerships in
a Metro market with 11 to 20 Honda
dealership points; (iii) 3 Honda
dealerships in a Metro market with
21 or more Honda dealership points;
(iv) no more than 4% of the Honda
dealerships in any 1 of the 10 Honda
geographic zones; (v) 1 Acura
dealership in a "Metro" market (a
metropolitan market with 2 or more
Acura dealership points); and (vi) 2
Acura dealerships in any 1 of the 6
Acura geographic zones
Hummer....................... Restrictions Restrictions unknown to the Company 1 (Smyrna, GA) Unknown
unknown to the
Company
Isuzu........................ Restrictions Restrictions unknown to the Company 2 (Duluth and Unknown
unknown to the Gainesville,
Company GA)
Kia.......................... Restrictions Restrictions unknown to the Company 1 Unknown
unknown to the (Elizabethton,
Company TN)
Mazda........................ No contiguous No contiguous market ownership is 2 (Columbus and No contiguous
market ownership is allowed; provided, however, in a Gainesville, market
allowed; provided, metro market, multiple dealership GA) ownership is
however, in a metro ownership not exceeding 2 allowed;
market, multiple dealerships is allowed provided,
dealership however, in a
ownership not metro market,
exceeding 2 multiple
dealerships is dealership
allowed ownership not
exceeding 2
dealerships
is allowed
Mitsubishi................... Restrictions Restrictions unknown to the Company 2 (Kennesaw, Unknown
unknown to the and Columbus,
Company GA)
Nissan....................... Nationally, no No individual or entity may own more 1 (Duluth, GA) 60/29
individual or than 20% of the region's total
entity may own more number of Nissan and Infiniti
than 5% of the dealerships
total number of
Nissan and Infinity
dealerships
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
(I) (II) (III) (IV)
------------------- ------------------------------------ --------------- -------------
RESTRICTIONS ON THE MAXIMUM
NUMBER OF NUMBER OF
DEALERSHIPS ADDITIONAL
COMPANY MAY NUMBER OF DEALERSHIPS
OWN/ACQUIRE DEALERSHIPS COMPANY MAY
PURSUANT TO OWNED FOR OWN/ ACQUIRE
PRESENT PURPOSES OF NATIONALLY/IN
MANUFACTURERS' ADDITIONAL RESTRICTIONS ON NUMBER OF MANUFACTURERS' SOUTHEASTERN
MANUFACTURER RESTRICTIONS DEALERSHIPS IN A REGION/ZONE/MARKET RESTRICTIONS(6) U.S.
- ----------------------------- ------------------- ------------------------------------ --------------- -------------
<S> <C> <C> <C> <C>
Toyota Motor Corporation 7 Toyota Number of Toyota dealerships that 1 (Toyota, 6 Toyota and
("Toyota")(5).............. dealerships and 3 may be owned by a single public Columbus, GA) 3 Lexus/6
Lexus dealerships company are limited to (i) the Toyota and 3
greater of 1 dealership or 20% of Lexus
the number of Toyota dealer counts
in a "Metro" market (as defined by
Toyota); (ii) the lesser of 5 Toyota
dealerships or 5% of the number of
Toyota dealer counts in any Toyota
region (as defined by Toyota; there
are currently 12 regions); and (iii)
2 Lexus dealerships in any 1 of the
4 Lexus geographic areas
</TABLE>
- ---------------
(1) Chrysler may also ask the Company to limit its acquisitions, or defer any
future acquisitions, of Chrysler or Chrysler division dealerships until the
Company has established a proven performance record with the Chrysler
dealerships it owns or is acquiring in the Acquisitions.
(2) Ford has also informed the Company that it may not make any additional
acquisitions of Ford, Lincoln or Mercury dealerships for a 12-month period
following the closing of this Offering.
(3) GM's communications with the Company to date indicate that GM will restrict
the Company from acquiring any additional GM dealerships for a period of no
less than 12 months -- and up to 24 months -- following the closing of this
Offering.
(4) Honda also prohibits the ownership of contiguous dealerships and the
coupling of a franchise with any other brand without its consent.
(5) The Company also believes that Toyota has required that at least nine months
elapse between acquisitions of its dealerships. Toyota also prohibits the
ownership of contiguous dealerships and the coupling of a franchise with any
other brand without its consent.
(6) The number of dealerships the Company will own upon the consummation of the
Acquisitions and the Merger for purposes of manufacturers' restrictions
differs from the actual number of dealership franchises the Company will own
under separate Franchise Agreements upon the consummation of the
Acquisitions and the Merger because certain manufacturers group their brands
together for purposes of calculating the Company's dealerships for
manufacturer restriction purposes. For example, the Company operates its
Pontiac, Buick and GMC dealerships under separate franchise agreements, but
GM considers each Pontiac-Buick-GMC dealership and each Oldsmobile-Cadillac
dealership as single dealerships for restriction purposes. The actual number
of dealership franchises the Company will own under separate Franchise
Agreements is as follows: 4 Ford dealerships; 2 each of Buick, Chevrolet,
GMC, Isuzu, Mazda, Mercury, Mitsubishi and Pontiac dealerships; and 1 each
of Cadillac, Chrysler, Dodge, Honda, Hummer, Jeep, Kia, Nissan, Oldsmobile,
Plymouth and Toyota dealerships.
Saturn has not been included in the table above because the Company expects
to divest the Jay Automotive Group, Inc. Saturn dealership after the
consummation of the Offering, the Merger and the Acquisitions.
Other automobile manufacturers 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.
21
<PAGE> 24
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. See
"Business -- Relationships with Manufacturers."
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."
The Company's balance sheet immediately following the Merger, the Offering
and the Acquisitions will include an amount designated as "goodwill" that
represents 20% of assets and 67% of shareholders' equity.
22
<PAGE> 25
Goodwill arises when an acquiror pays more for a business than the fair
value of the tangible and separately measurable intangible net assets. GAAP
requires that goodwill and all other intangible assets be amortized over the
period benefited. Management has determined that period to be no less than 40
years.
If management were not to give effect to shorter benefit periods of factors
giving rise to a material portion of the goodwill, earnings reported in periods
immediately following the Acquisitions would be overstated. In later years, the
Company would be burdened by a continuing charge against earnings without the
associated benefit to income valued by management in arriving at the
consideration paid for the business. Earnings in later years could also be
significantly affected if management determines then that the remaining balance
of goodwill was impaired.
Management has reviewed with its independent accountants the allocation of
consideration paid to assets (including goodwill) and liabilities of the
acquired businesses. Management concluded that the anticipated future cash flows
associated with intangible assets recognized in the Acquisitions will continue
indefinitely, and there is no persuasive evidence that any material portion will
dissipate over a period shorter than 40 years.
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 dealership or its
parent. Even if the Company receives all of the relevant manufacturer approvals
to permit the Offering and trading of its 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 causes 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.
STRIKES AND LABOR ACTIONS; GM STRIKE
Events such as strikes and other labor actions by unions could have a
material adverse effect on the Company's business, financial condition and
results of operations. As of the date of this Prospectus, the United Auto
Workers Union has recently settled a labor action it had initiated in the form
of a strike against GM. This strike has had a material adverse effect on the
production of GM vehicles. Although the Company believes that, as of the date of
this Prospectus, the strike has not had a material adverse effect on the
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operations of the dealerships that will comprise the Company upon the
consummation of the Merger and the Acquisitions, because approximately 24.7% of
the Company's pro forma gross revenues for the nine month period ended March 31,
1998 were derived from GM new vehicles, there can be no assurance that GM's
decreased production will not have a material adverse effect on the Company's
business, financial condition and results of operations in the future.
COMPETITION
The automotive retailing industry is highly competitive with respect to
price, service, location and selection. The Company's competition will include
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 will 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 markets in which the Company will operate. "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 Franchise Agreements for the dealerships that the Company owns or
expects to acquire upon consummation of the Offering 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 markets in which the Company will operate.
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."
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
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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 will depend 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 is
currently negotiating new floorplan financing lines of credit of up to $110
million, although no assurance can be given that the Company will be able to
obtain these new lines of credit on terms acceptable to it. In addition, no
assurance can be given that the Company's working capital, the existing and new
floorplan facilities, 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 restructuring of its floorplan financing, and the
Company's prospective 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
dealerships that the Company owns or expects to acquire upon consummation of the
Offering 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 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 installment loans made by South
Financial have a higher probability of delinquency and default and have greater
servicing costs than loans made to other automobile purchasers 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 and the loans it purchases from other automotive dealerships.
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
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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 its loans and its
purchases 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 loans it makes and 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 or has purchased 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. The average portfolio yield of South Financial's loans during
the quarter ended March 31, 1998, was 24.3%. This yield was increased by the
amortization of discount income ($52,000) and decreased by the provision for
loan losses ($29,000) resulting in an effective yield of 24.9% for the quarter.
In addition, because the interest rate at which South Financial borrows is
variable and the interest rate at which South Financial makes loans and
purchases 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 loans South Financial makes and the
contracts that it 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 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.
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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 will depend to a significant degree upon the
continued contributions of 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 these employees. Although the
Company does not currently maintain key-man life insurance on any of these
individuals, the Company intends to obtain such insurance on all of these
individuals following the completion of this Offering. 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 will
operate, 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."
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. As of the date of this Prospectus, the Company believes that one of the
dealerships that will be acquired by the Company upon consummation of the
Offering is not in compliance with the applicable manufacturer's CSI
requirements. During the five-year period preceding the date of this
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Prospectus, the Company believes that the dealerships that the Company owns or
expects to acquire upon consummation of the Offering have been in non-compliance
with manufacturers' CSI requirements 13 times, although the Company believes
that none of such dealerships has 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 dealerships that the Company
owns or expects to acquire upon consummation of the Offering 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 will depend 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 that will be sold by the Company, as well as certain
major components of vehicles that will be retailed by the Company, are of
foreign origin. Accordingly, the Company will be 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. 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 will be 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
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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 facilities and operations of the dealerships that the Company owns or
expects to acquire upon consummation of the Offering 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 and
will be subject to other laws and regulations as a result of the past or present
existence of underground storage tanks at many of the properties of the
dealerships that the Company owns or expects to acquire upon consummation of the
Offering. 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, Chief Executive Officer or Secretary of the Company, by a majority
vote of the Board of Directors, or upon written demand of the holders of at
least 75% of all votes entitled to be cast on any issue proposed to be
considered at such meeting. 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 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
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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 with respect to certain of the Acquisitions 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 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. The consideration payable by the Company to the
Boomershine Automotive shareholders in connection with the Merger was determined
based upon negotiations between the Company's management and the Boomershine
Automotive shareholders. In determining the value of the Merger, the Company
took into account a number of factors, including the projected value of the
Company following an initial public offering, the key role Boomershine
Automotive would play in funding certain of the Company's start-up activities
and in providing key management and employees, and the value of the Boomershine
Automotive name and reputation in the Atlanta market, although no third party
valuation or appraisal of the operations or assets of Boomershine Automotive was
obtained. The number of shares of common stock to be issued in connection with
the Merger was based on an assumed initial public offering price of $10 per
share, the mid point of the estimated offering price range, and assumes a
discount of 10%, which reflects the stock's trading restrictions. 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." In the future, all material transactions which may involve a
potential or actual conflict of interest will be reviewed by disinterested
members of the Board of Directors of the Company to ensure the fairness of such
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
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corporation's business, is of practical advantage to the corporation and is one
in which the corporation has an interest or reasonable expectancy.
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 $7.89 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
Franchise Agreements with vehicle manufacturers generally require the
maintenance of adequate levels of capitalization by the Company or its
prospective dealerships, 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 10,557,862 shares of common stock
outstanding (11,382,862 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
1,002,500 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
31
<PAGE> 34
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 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 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, its executive officers and directors, and the holders of
the Company's unregistered common stock have agreed, subject to certain
exceptions, (i) not, directly or indirectly, without the prior written consent
of the Underwriter, to sell, offer, contract or grant any option to sell
(including without limitation any short sale), pledge, transfer, establish an
open "put equivalent position" within the meaning of Rule 16a-1(h) under the
Securities Exchange Act of 1934 (the "Exchange Act"), or otherwise dispose of
any shares of common stock of the Company, options or warrants to acquire shares
of common stock, or securities exchangeable or exercisable for or convertible
into shares of common stock currently or hereafter owned either of record or
beneficially (as defined in Rule 13d-3 under the Exchange Act) by such person,
or publicly announce such person's intention to do any of the foregoing, until
after the close of trading on the date 180 days after the date of this
Prospectus; and (ii) to the entry of stop transfer instructions with the
Company's transfer agent and registrar against the transfer of shares of common
stock or securities convertible into or exchangeable or exercisable for common
stock held by such person except in compliance with the foregoing restrictions;
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. 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 those
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.
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<PAGE> 35
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; (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;
and (iii) the Company expects to employ the following shareholders of
Boomershine Automotive in the stated positions: Walter M. Boomershine,
Jr. -- Chairman of the Board and Senior Vice President; Walter M. Boomershine,
III -- employee of the Company; Lindsey B. Robertson -- employee of the Company;
and Patrice B. Mitchell -- employee of the Company. All of the common stock that
the Company expects to issue in connection with the Merger will be subject to
certain restrictions affecting the sale, pledge, offer, contract to sell or
purchase, or the sale or purchase of options on such common stock for a period
of 180 days following the date of this Prospectus. See "Shares Eligible for
Future Sale" and "Underwriting."
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, 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
(consummated July 31, 1998), 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 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." All of the common stock that the Company
expects to issue in connection with the Acquisitions will be subject to certain
restrictions affecting the sale, pledge, offer, contract to sell or purchase, or
the sale or purchase of options on such common stock for a period of 180 days
following the date of this Prospectus. See "Shares Eligible for Future Sale" and
"Underwriting."
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"). The Jay Automotive
Group Acquisition is expected to be consummated simultaneously with the closing
of this Offering. The Company will pay $16.0 million in consideration for the
Jay Automotive Group Acquisition. At the closing, the Company will pay $12.0
million in cash, and $4.0 million in the form of a 90-day promissory note (the
"Jay Note") with an interest rate equal to 8% per annum. Mr. Stelzenmuller will
serve as an employee of the Company upon consummation of the Offering. Jay
Automotive Group, Inc. will continue to lease the real properties on which its
facilities are located from the respective landlords of each property. The
purchase price for the Jay
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<PAGE> 36
Automotive Group Acquisition includes payment for the acquisition of Saturn and
Suzuki dealerships, which the Company expects to divest subsequent to the
consummation of the Offering. 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 the Wade Ford
Dealerships, located in Smyrna and Buford, Georgia, respectively (the "Wade Ford
Acquisition"). 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
$12.0 million in cash and approximately $3.5 million in the form of unregistered
common stock of the Company, plus or minus consideration to be determined by
closing and post-closing adjustments. If the Wade Ford Dealerships earn a profit
during the period from January 1, 1998 to the closing date, then the Company
shall pay the selling shareholders the entire amount of such profit less any
distributions made by the Wade Ford Dealerships to the selling shareholders
during such period. If the Wade Ford Dealerships incur a loss during the period
from January 1, 1998 to the closing date, the purchase price will be reduced by
such amount. If the aggregate cash accounts of the Wade Ford Dealerships amount
to less than $800,000, the purchase price will be reduced dollar for dollar by
the deficiency. Additionally, if the Wade Ford Dealerships' floor plan liability
exceeds their floor plan assets by more than 3%, the purchase price will be
reduced by such amount. Approximately $367,000 of the 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."
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. ("Day's Chevrolet"), located
in Acworth, Georgia (the "Day's Chevrolet Acquisition"). 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, plus or minus
additional consideration to be determined by post-closing adjustments. If Day's
Chevrolet made pre-1998 distributions, then the purchase price shall be reduced
by such excess. The purchase price will be further adjusted, to the extent that
the closing date net worth is greater or less than zero. Additionally, if Day's
Chevrolet's floor plan liability exceeds their floor plan assets by more than
3%, the purchase price shall be reduced by such amount. 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."
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<PAGE> 37
The Grindstaff Acquisition. On July 31, 1998, the Company acquired from
Steve E. Grindstaff and Wes Hambrick 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"). The Company paid approximately $8.5 million in
consideration for the Grindstaff Acquisition in the form of a promissory note
which carries an interest rate of 8 3/4% per annum, matures on the earlier of
the consummation date of this Offering or September 4, 1998, and is subject to
certain post-closing adjustments. If the net income of Grindstaff, Inc. for the
period from January 1, 1998 to June 30, 1998 is less than $927,944, then the
selling shareholders shall pay the entire amount of such deficiency to the
Company. If the net income of Grindstaff, Inc. for that period is greater than
$927,944, then the Company shall pay the entire amount of such excess to the
selling shareholders. Upon the satisfaction of the promissory note, $500,000 of
the principal amount will be held in escrow until the expiration of certain
indemnification provisions made by the selling shareholders of Grindstaff, Inc.
In connection with the promissory note, the Company has pledged to the selling
shareholders of Grindstaff, Inc., pursuant to a pledge agreement, all of the
common stock of Grindstaff, Inc. that the Company acquired in the Grindstaff
Acquisition. In connection with the Grindstaff Acquisition, Mr. Grindstaff
executed 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"). The Robertson Acquisition is expected to
be consummated simultaneously with the closing of this Offering. The purchase
price for the Robertson Acquisition will be determined by adding the FIFO net
worth of ROC on the closing date to $4.7 million in accordance with the
agreement. Based on the March 31, 1998 FIFO net worth of ROC, the Company would
pay approximately $8.1 million in consideration for the Robertson Acquisition
consisting of approximately $360,000 in the form of unregistered common stock of
the Company and approximately $7.7 million 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. 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 "Bill
Holt Acquisition"). The Company paid for 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, Boomershine
Automotive 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
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<PAGE> 38
North Carolina (the "South Financial Acquisition"). The purchase price of South
Financial Corporation was approximately $4.6 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, Boomershine
Automotive 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
"Collision Centers USA Acquisition"). The purchase price for the Collision
Centers, in the aggregate, was $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. In connection with the Collision Centers USA
Acquisition, Mr. Peters also received options to purchase 5,000 shares of common
stock of the Company at an exercise price of $8.00 per share, the fair value of
which was included in the purchase price allocation. Mr. Peters' options are not
subject to any lock-up provisions. One of the Collision Notes has been paid and
satisfied and the other note matured on June 30, 1998. The Company is currently
negotiating with Mr. Peters to extend the maturity date of such note to
September 15, 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. 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.
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<PAGE> 39
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 the Acquisitions in the aggregate
amount of approximately $47 million, subject to post-closing adjustments, and
the balance of the proceeds, if any, will be used for working capital and other
general corporate purposes. 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."
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<PAGE> 40
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 acquiror, 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 $114,013
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.................................... 70,565 139,762 139,762
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;
4,808,660 shares issued and outstanding pro forma;
and 10,308,660 shares issued and outstanding pro
forma as adjusted(4)................................ -- 5 10
Preferred stock, $0.001 par value, 50,000,000 shares
authorized, no shares issued or outstanding......... -- -- --
Additional paid-in capital............................. -- 12,993 61,138
Retained earnings...................................... 5,266 4,656 4,656
------- -------- --------
Total shareholders' equity..................... 9,240 17,654 65,804
------- -------- --------
Total capitalization........................... $80,165 $158,253 $206,403
======= ======== ========
</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 6,000 shares of common stock issued to founders
of the Company prior to March 31, 1998. Also, adjusted to give effect to
3,800,160 shares of common stock issued in connection with the Merger.
Adjusted to give effect to the items in (1) above, and the issuance of
1,002,500 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 5,000 shares of common stock
issued to James E. Peters in connection with the Collision Centers USA
Acquisition, 425,000 shares of common stock issued to executive officers in
January 1998, 850,000 shares of common stock issued to executive officers in
April 1998, and 317,000 shares of common stock to be issued to executive
officers and employees on the effective date of the Offering. 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.
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<PAGE> 41
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 $21.7 million, or $2.11 per share. This represents an
immediate increase in pro forma net tangible book value of $1.56 per share to
existing shareholders and an immediate dilution of $7.89 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.............................................. 1.56
----
Pro forma as adjusted net tangible book value per share
after the Offering........................................ 2.11
------
Dilution per share to new investors......................... $ 7.89
======
</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 36.9% $ 3,982,704 5.9% $ 1.05
Acquisition shareholders(2)......... 1,002,500 9.7 9,022,500 13.3 9.00
New investors(3).................... 5,500,000 53.4 55,000,000 80.8 10.00
---------- ----- ----------- -----
10,308,660 100.0% $68,005,204 100.0% $ 6.60
========== ===== =========== =====
</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: 5,000 shares
of common stock granted to James E. Peters in connection with the Collision
Centers USA Acquisition; 425,000 shares of common stock granted to executive
officers in January 1998; 850,000 shares of common stock granted to
executive officers in April 1998 and 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. The
consideration paid assumes a discount of 10%, which reflects the stock's
trading restriction. 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 82.9%,
respectively.
39
<PAGE> 42
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, commissions and
other revenues.......... 1,858 3,717 5,095 8,278 8,372 23,423 6,514 6,701 17,308
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total revenues...... 126,602 178,277 238,320 262,893 247,445 687,969 184,760 178,666 510,290
Cost of sales............... 112,680 159,676 215,646 235,828 222,352 612,273 165,705 158,328 453,299
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit................ 13,922 18,601 22,674 27,065 25,093 75,696 19,055 20,338 56,991
Selling, general and
administrative expenses... 12,751 16,685 19,927 24,170 22,263 62,935 16,698 16,544 48,137
Depreciation and
amortization.............. 428 410 406 600 889 2,550 659 764 1,984
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income from operations...... 743 1,506 2,341 2,295 1,941 10,211 1,698 3,030 6,870
Interest expense, net....... 587 598 1,436 1,774 2,230 3,331 1,408 1,544 1,923
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) 7,156 394 1,665 5,746
Income tax (expense)
benefit................... (151) (450) (448) (213) 40 (3,109) (119) (398) (2,481)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)........... $ 247 $ 467 $ 735 $ 502 $ (85) $ 4,047 $ 275 $ 1,267 $ 3,265
======== ======== ======== ======== ======== ======== ======== ======== ========
Basic:
Net income per share(3)... $ 0.39 $ 0.32
======== ========
Weighted average shares
outstanding(3).......... 10,309 10,309
======== ========
Fully diluted:
Net income per share(3)... $ 0.38 $ 0.31
======== ========
Weighted average shares
outstanding(3).......... 10,648 10,648
======== ========
</TABLE>
40
<PAGE> 43
<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 $ 18,202
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 88,949 223,045
Total debt, including current portion.......... 20,204 24,152 50,106 53,520 40,618 70,925 140,599
Total shareholders' equity..................... 6,263 6,730 7,465 8,059 7,973 9,240 65,804
</TABLE>
- ---------------
(1) In connection with the Merger and the Offering, Boomershine Automotive
converted 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."
41
<PAGE> 44
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. The Acquisitions that
have been consummated are as follows: Southlake Collision Center, Inc.,
Southlake Collision Henry County, Inc. and Southlake Collision Cobb Parkway,
Inc., which was consummated on December 18, 1997 for consideration of
approximately $1.7 million; South Financial Corporation, which was consummated
on January 6, 1998 for consideration of approximately $4.65 million; Hones, Inc.
d/b/a Bill Holt Ford Mercury, which was consummated on June 15, 1998 for
consideration of approximately $750,000. The Acquisitions that the Company
anticipates closing upon the consummation of this Offering are as follows: Jay
Automotive Group, Inc., for consideration estimated for pro forma purposes to be
approximately $16.0 million; Wade Ford, Inc. and Wade Ford Buford, Inc., for
consideration estimated for pro forma purposes to be approximately $15.5
million; Day's Chevrolet, for consideration estimated for pro forma purposes to
be approximately $10.8 million; Grindstaff, Inc., for consideration estimated
for pro forma purposes to be approximately $9.1 million (which was consummated
on July 31, 1998); and Robertson Oldsmobile-Cadillac, Inc., for consideration
estimated for pro forma purposes to be approximately $8.1 million. For pro forma
purposes, the purchase price amounts that were estimated above were calculated
as of March 31, 1998 and include estimates of closing date adjustments that will
ultimately be settled at closing. 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.
42
<PAGE> 45
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... -- 8,372 2,811 2,615 1,854
------ -------- ------- ------- --------
Total revenues..................... -- 247,445 99,268 59,321 154,800
Cost of sales............................. -- 222,352 87,678 52,189 142,458
------ -------- ------- ------- --------
Gross profit.............................. -- 25,093 11,590 7,132 12,342
Selling, general and administrative
expenses................................. -- 22,263 9,288 6,329 10,433
Depreciation and amortization............. -- 889 246 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)
--------------------------------------------------------------------------
ROBERTSON DAY'S SOUTH
OLDSMOBILE- CHEVROLET, FINANCIAL BILL HOLT COLLISION
CADILLAC, INC. INC. CORPORATION(11) FORD MERCURY CENTERS USA
-------------- ---------- --------------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <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... 272 1,376 5,437 686 --
------- ------- ------ ------- ------
Total revenues..................... 20,924 62,133 5,437 35,279 3,362
Cost of sales............................. 18,045 55,742 1,245 31,679 2,256
------- ------- ------ ------- ------
Gross profit.............................. 2,879 6,391 4,192 3,600 1,106
Selling, general and administrative
expenses................................. 2,034 4,947 3,435 2,958 1,122
Depreciation and amortization............. 59 140 63 139 --
------- ------- ------ ------- ------
Income from operations.................... 786 1,304 694 503 (16)
Interest expense, net..................... 61 133 248 296 10
Interest income........................... 171 2 -- -- --
Other income (expense), net............... (2) 8 -- -- --
------- ------- ------ ------- ------
Income (loss) before income taxes......... 894 1,181 446 207 (26)
Income tax (expense) benefit.............. -- -- (376) -- --
------- ------- ------ ------- ------
Net income (loss)......................... $ 894 $ 1,181 $ 70 $ 207 $ (26)
======= ======= ====== ======= ======
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
ACQUISITIONS 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... -- 23,423
------- --------
Total revenues..................... -- 687,969
Cost of sales............................. (1,371)(1) 612,273
------- --------
Gross profit.............................. 1,371 75,696
Selling, general and administrative
expenses................................. 126 (2) 62,935
Depreciation and amortization............. 999 (3) 2,550
(225)(4)
------- --------
Income from operations.................... 471 10,211
Interest expense, net..................... (121)(5) 3,331
(736)(6)
Interest income........................... -- 516
Other income (expense), net............... -- (240)
------- --------
Income (loss) before income taxes......... 1,328 7,156
Income tax (expense) benefit.............. (2,134)(7) (3,109)
------- --------
Net income (loss)......................... $ (806) $ 4,047
======= ========
Basic:
Net income per share(8).................. $ 0.39
========
Weighted average shares outstanding(8)... 10,309
========
Fully diluted:
Net income per share(8).................. $ 0.38
========
Weighted average shares outstanding(8)... 10,648
========
</TABLE>
43
<PAGE> 46
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
AUTOMOTIVE AUTOMOTIVE AUTOMOTIVE WADE FORD
GROUP, INC. GROUP, INC.(10) GROUP, INC. GRINDSTAFF, INC. BUFORD, INC.
----------- --------------- ----------- ---------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Vehicle sales:
New................................... $ -- $113,340 $39,947 $24,024 $ 92,848
Used.................................. -- 39,517 23,456 12,187 18,939
Parts and service....................... -- 19,108 8,956 3,050 7,143
Finance, commission and other
revenues.............................. -- 6,702 2,269 2,031 1,953
------ -------- ------- ------- --------
Total revenues...................... -- 178,667 74,628 41,292 120,883
Cost of sales............................ -- 158,329 65,808 35,665 111,665
------ -------- ------- ------- --------
Gross profit............................. -- 20,338 8,820 5,627 9,218
Selling, general
and administrative
expenses................................ 611 16,544 7,067 5,307 7,487
Depreciation and amortization............ -- 764 158 184 103
------ -------- ------- ------- --------
Income (loss) from operations............ (611) 3,030 1,595 136 1,628
Interest expense, net.................... -- 1,544 174 300 131
Interest income.......................... -- 247 78 3 246
Other income (expense), net.............. -- (68) 1 102 34
------ -------- ------- ------- --------
Income (loss) before income taxes........ (611) 1,665 1,500 (59) 1,777
Income tax (expense) benefit............. -- (398) (570) 3 --
------ -------- ------- ------- --------
Net income (loss)........................ $ (611) $ 1,267 $ 930 $ (56) $ 1,777
====== ======== ======= ======= ========
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 BILL HOLT COLLISION ADJUSTMENTS
OLDSMOBILE- CHEVROLET, FINANCIAL FORD CENTERS FOR THE
CADILLAC, INC. INC. CORPORATION(11) MERCURY USA(12) ACQUISITIONS
-------------- ---------- --------------- --------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Vehicle sales:
New................................... $ 9,508 $21,914 $ -- $14,116 $ -- $ --
Used.................................. 6,549 15,076 -- 11,402 -- --
Parts and service....................... 2,140 6,880 -- 1,343 1,539 --
Finance, commission and other
revenues.............................. 370 1,170 2,321 492 -- --
------- ------- ------ ------- ------ -------
Total revenues...................... 18,567 45,040 2,321 27,353 1,539 --
Cost of sales............................ 16,257 40,298 624 24,450 1,139 (936)(1)
------- ------- ------ ------- ------ -------
Gross profit............................. 2,310 4,742 1,697 2,903 400 936
Selling, general
and administrative
expenses................................ 1,417 3,804 2,362 2,654 620 264 (2)
Depreciation and amortization............ 43 103 33 60 24 706 (3)
(194)(4)
------- ------- ------ ------- ------ -------
Income (loss) from operations............ 850 835 (698) 189 (244) 160
Interest expense, net.................... 56 58 68 233 5 (94)(5)
(552)(6)
Interest income.......................... 123 2 -- -- -- --
Other income (expense), net.............. (9) 14 -- 26 -- --
------- ------- ------ ------- ------ -------
Income (loss) before income taxes........ 908 793 (766) (18) (249) 806
Income tax (expense) benefit............. -- -- 279 -- -- (1,795)(7)
------- ------- ------ ------- ------ -------
Net income (loss)........................ $ 908 $ 793 $ (487) $ (18) (249) $ (989)
======= ======= ====== ======= ====== =======
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
---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C>
Revenues:
Vehicle sales:
New................................... $315,697
Used.................................. 127,126
Parts and service....................... 50,159
Finance, commission and other
revenues.............................. 17,308
--------
Total revenues...................... 510,290
Cost of sales............................ 453,299
--------
Gross profit............................. 56,991
Selling, general
and administrative
expenses................................ 48,137
Depreciation and amortization............ 1,984
--------
Income (loss) from operations............ 6,870
Interest expense, net.................... 1,923
Interest income.......................... 699
Other income (expense), net.............. 100
--------
Income (loss) before income taxes........ 5,746
Income tax (expense) benefit............. (2,481)
--------
Net income (loss)........................ $ 3,265
========
Basic:
Net income per share(8)................. $ 0.32
========
Weighted average shares
outstanding(8)........................ 10,309
========
Fully diluted:
Net income per share(8)................. $ 0.31
========
Weighted average shares
outstanding(8)........................ 10,648
========
</TABLE>
44
<PAGE> 47
- ---------------
(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........................................... 372 206
----- -----
$ 126 $ 264
===== =====
</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 approximately $1.5 million 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 the reduction of
interest rate on approximately $84 million in 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 7.73%, which will become effective in conjunction
with the Merger. The Company has received a commitment for an additional
$60 million floorplan note.
(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
10,308,660 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 1,002,500 shares of common stock
to be issued in connection with the 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.
45
<PAGE> 48
(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 South Financial for the period from July 1, 1997 to
acquisition by Boomershine Automotive on January 6, 1998. Also includes an
adjustment from historical records of South Financial to reclassify amounts
previously reported as operating expenses to cost of sales. These amounts
are directly associated with the generation of finance revenues of South
Financial.
(12) Includes the results of Collision Centers USA for the period from July 1,
1997 to acquisition by Boomershine Automotive on December 18, 1997.
46
<PAGE> 49
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
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 (3,974)(7) 100
4 (7)
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 $(45,213)(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 (38,702)
Property and equipment, net........................ 514 46 272 1,309 (1,034)(2)
Intangible assets, net............................. 25 106 43,704 (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 $ (3,414)
======= ====== ======= ====== ========
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 (1,228)(1)
9,023 (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 (7,156)
------- ------ ------- ------ --------
Total Liabilities and Shareholders'
Equity..................................... $29,357 $5,671 $10,670 $7,859 $ (3,414)
======= ====== ======= ====== ========
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR THE
OFFERING PRO FORMA
----------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents......................... $ 48,150(5) $ 21,251
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........................ 48,150 170,475
Property and equipment, net........................ 7,475
Intangible assets, net............................. 44,097
Notes receivable shareholder.......................
Deferred income taxes.............................. 17
Other assets....................................... 981
-------- --------
Total Assets................................ $ 48,150 $223,045
======== ========
Current Liabilities:
Floor plan notes payable.......................... $ -- $114,013
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................... -- 152,273
Long-term debt, less current maturities............ 837
Income taxes payable............................... 3,774
Other liabilities.................................. 357
Shareholders' Equity:
Common stock...................................... 5(5) 10
Additional paid-in capital........................ 48,145(5) 61,138
Owner's equity....................................
Note receivable...................................
Retained earnings................................. 4,656
-------- --------
Total Shareholders' Equity.................. 48,150 65,804
-------- --------
Total Liabilities and Shareholders'
Equity..................................... $ 48,150 $223,045
======== ========
</TABLE>
47
<PAGE> 50
- ---------------
(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 385,000, 40,000 and 577,500 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 $12,054 $ 7,711 $ 5,589 $ 46,482
Promissory note issued................ 4,000 -- -- -- -- 4,000
Restricted stock issued............... -- -- 3,465 360 5,198 9,023
------- ------- ------- ------- ------- --------
Total........................... 16,000 9,128 15,519 8,071 10,787 59,505
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 $12,686 $ 5,420 $ 9,587 $ 43,704
======= ======= ======= ======= ======= ========
</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. As required by the purchase agreements, the owners of Grindstaff
and Wade Ford, will repay notes of $754,000 and $515,000, respectively, made
to them by their respective businesses.
(2) Reflects the preliminary allocation of the aggregate purchase price of
$750,000 relating to Holt Ford Mercury based on estimated fair value of the
net assets acquired. Also reflects the elimination of certain cash, used
cars, trade receivables, land, buildings, accounts payable, accrued
expenses, the debt related to land and buildings, and a note payable to the
owner in the Bill Holt Acquisition, because they are not being acquired by
the Company. The purchase price has been allocated to assets acquired and
liabilities assumed at their estimated fair market value at the acquisition
date as follows (in thousands):
<TABLE>
<S> <C>
Working capital............................................. $200
Property and equipment...................................... 275
Goodwill.................................................... 275
----
Total................................................ $750
====
</TABLE>
(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."
48
<PAGE> 51
(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 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. The
adjustment reflecting the payment of the cash portion of the purchase price
(i.e., $45,213) is included in footnote (1). 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 in
a transaction to be accounted for as a reverse acquisition/recapitalization.
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
based on a negotiated fixed exchange rate in exchange for the issued and
outstanding capital stock of Boomershine Automotive. As a result of this
stock issuance, the common stock of Boomershine Automotive will be cancelled
and new shares in Sunbelt will be issued. Because Boomershine Automotive had
no par stock and Sunbelt has $0.001 per share par value stock, additional
paid in capital in the amount of $3,970 has been recorded. Boomershine
Automotive has been identified as the accounting acquiror for purposes of
the Acquisitions in accordance with SAB No. 97 as it will hold the largest
voting interest subsequent to the Merger and the Acquisitions.
49
<PAGE> 52
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 $688 million and retail unit
sales of 20,499 new and 9,913 used vehicles for the year ended June 30, 1997,
and revenues of $510 million and retail unit sales of 14,583 new and 7,134 used
vehicles for the nine months ended March 31, 1998. In 1997, based on pro forma
retail new vehicle unit sales, the Company believes it would have ranked 13th on
the Automotive News' listing of the 1997 top 100 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 will have 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 will include sales to retail customers,
other dealers and wholesalers. Other dealership revenue will include revenue
from the sale of financing, insurance and extended service contracts, net of a
provision for anticipated chargebacks and documentary fees charged to customers.
50
<PAGE> 53
The Company's leasing expenses, salary expense, employee benefits costs and
advertising expenses will comprise the majority of its selling, general and
administrative expenses. The Company's interest expense will primarily result
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 dealerships that
the Company owns or expects to acquire upon consummation of the Offering. 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
and/or Boomershine Automotive 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 $43.5
million of goodwill, consisting of $37.6 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 floorplan financing lines of credit of up to
$110 million (the "New Floorplan Facility"). As of March 31, 1998, the Company
had approximately $114 million of floorplan debt outstanding. Currently, the
Combined Companies' (as defined below) floorplan financing is provided by six
different sources. The Company anticipates that its floorplan debt will be
restructured to the extent that the terms of the New Floorplan Facility are more
favorable than the terms of the current floorplan financing arrangements of the
Combined Companies, but there can be no assurance that the New Floorplan
Facility will be on terms which are more favorable than those of the existing
financing arrangements. See "Risk Factors -- Floorplan Financing." The Company
estimates that, upon restructuring the floorplan debt, the interest rate on the
New Floorplan Facility will be approximately 50 to 75 basis points below the
Company's current average 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 is also negotiating a $30 million acquisition, working
capital and general corporate line of credit; however, there can be no assurance
that the Company will be able to obtain this additional line of credit on terms
acceptable to the Company.
The Company believes its cash resources, including the New Floorplan
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-
51
<PAGE> 54
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
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>
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 62.9% $403,877 61.8% $420,019 61.0% $306,737 60.5% $315,697 61.9%
Used vehicle sales.......... 142,801 25.1 166,976 25.5 177,925 25.9 132,098 26.1 127,126 24.9
Parts, service and collision
repair.................... 53,625 9.4 61,682 9.4 66,602 9.7 48,884 9.7 50,159 9.8
Finance, commission and
other revenues............ 14,990 2.6 21,564 3.3 23,423 3.4 18,503 3.7 17,308 3.4
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total revenues........ 568,637 100.0% 654,099 100.0% 687,969 100.0% 506,222 100.0% 510,290 100.0%
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
COST OF SALES:
New vehicle sales........... 338,458 94.7% 383,997 95.1% 399,003 95.0% 291,114 94.9% 300,117 95.1%
Used vehicle sales.......... 132,305 92.6 154,638 92.6 164,736 92.6 123,162 93.2 118,396 93.1
Parts, service and collision
repair.................... 32,315 60.3 34,896 56.6 41,305 62.0 29,671 60.7 30,377 60.6
Finance, commission and
other revenues............ 4,347 29.0 7,739 35.9 7,229 30.9 5,329 28.8 4,409 25.5
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total cost of sales... 507,425 89.2% 581,270 88.9% 612,273 89.0% 449,276 88.8% 453,299 88.8%
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
GROSS PROFIT.................. $ 61,212 10.8% $ 72,829 11.1% $ 75,696 11.0% $ 56,946 11.2% $ 56,991 11.2%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
</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 $ 15,580
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>
52
<PAGE> 55
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 $4.1 million, or 0.8%, from $506.2
million for the nine months ended March 31, 1997 to $510.3 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 $1.2 million, or 6.5%, from
$18.5 million for the nine months ended March 31, 1997 to $17.3 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 increased by $100,000, from $56.9 million for
the nine months ended March 31, 1997 to $57.0 million for the nine months ended
March 31, 1998. This slight increase was primarily due to increased finance
margins and higher margins realized at the Grindstaff dealerships due to a
higher proportion of trucks among new vehicle sales, offset by 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.
53
<PAGE> 56
Year Ended June 30, 1997 Compared to Year Ended June 30, 1996
Revenues. Total revenues increased by $33.9 million, or 5.2%, from $654.1
million for the year ended June 30, 1996 to $688.0 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 $1.8 million, or 8.6%, from $21.6 million for the year ended
June 30, 1996 to $23.4 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 $2.9 million, or 4.0%, from $72.8
million for the year ended June 30, 1996 to $75.7 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 $85.5 million, or 15.0%, from $568.6
million for the year ended June 30, 1995 to $654.1 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 $6.6 million, or
44.0%, from $15.0 million for the year ended June 30, 1995 to $21.6 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 $11.0 million, or 18.0%, from
$61.2 million for the year ended June 30, 1995 to $72.8 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
54
<PAGE> 57
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 65.9% $166,199 63.2% $152,625 61.7% $113,239 61.3% $113,340 63.4%
Used vehicle sales.... 57,047 23.9 64,652 24.6 61,811 25.0 47,318 25.6 39,517 22.1
Parts and service
sales............... 19,223 8.1 23,764 9.0 24,637 10.0 17,689 9.6 19,108 10.7
Other revenues, net... 5,095 2.1 8,279 3.1 8,372 3.3 6,514 3.5 6,701 3.8
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total
revenues...... 238,320 100.0 262,894 100.0 247,445 100.0 184,760 100.0 178,666 100.0
Cost of sales........... 215,646 90.5 235,829 89.7 222,352 89.9 165,705 89.7 158,328 88.6
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Gross profit............ 22,674 9.5 27,065 10.3 25,093 10.1 19,055 10.3 20,338 11.4
Selling, general and
administrative
expenses.............. 20,333 8.5 24,770 9.4 23,152 9.3 17,357 9.4 17,308 9.7
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
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 0.8
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 0.9
Income tax (expense)
benefit............... (448) (0.2) (213) (0.1) 40 0.1 (119) (0.0) (398) (0.2)
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
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 $6.1 million, or 3.3%, from $184.8
million for the nine months ended March 31, 1997 to $178.7 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 $187,000,
or 2.9%, from $6.5 million for the nine months ended March 31, 1997 to $6.7
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.
55
<PAGE> 58
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 $15.4 million, or 5.9%, from $262.9
million for the year ended June 30, 1996 to $247.4 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 $93,000, or 1.1%, from $8.3
million for the year ended June 30, 1996 to $8.4 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 impacted 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 decreased from 10.3% for the year ended
June 30, 1996 to 10.1% 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.
56
<PAGE> 59
Year Ended June 30, 1996 Compared to Year Ended June 30, 1995
Revenues. Total revenues increased by $24.6 million, or 10.3%, from $238.3
million for the year ended June 30, 1995 to $262.9 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 $3.2 million, or 62.5%, from $5.1
million for the year ended June 30, 1995 to $8.3 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, or 30.8%,
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>
As of March 31, 1998 a subsidiary of Boomershine Automotive was not in
compliance with certain terms of a credit agreement; however, the subsidiary
received a waiver of this violation through September 30, 1998. As of the date
of this Prospectus, the subsidiary has cured this violation and now is in
compliance with that credit agreement.
57
<PAGE> 60
Cash Flows
Total cash and cash equivalents at March 31, 1998 were $4.7 million.
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.
58
<PAGE> 61
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, 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 58.5% $56,329 58.6% $ 54,899 54.2% $13,748 54.2% $12,756 51.5%
Used vehicle sales....... 21,990 27.5 26,358 27.4 31,562 31.2 7,462 29.4 7,899 31.9
Parts and service
sales.................. 9,009 11.3 10,636 11.2 11,869 11.7 3,218 12.7 3,207 13.0
Other revenues, net...... 2,190 2.7 2,723 2.8 2,913 2.9 948 3.7 902 3.6
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Total revenues..... 79,952 100.0 96,046 100.0 101,243 100.0 25,376 100.0 24,764 100.0
Cost of sales.............. 70,604 88.3 84,763 88.3 89,272 88.2 22,087 87.0 21,669 87.5
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Gross profit............... 9,348 11.7 11,283 11.7 11,971 11.8 3,289 13.0 3,095 12.5
Selling, general and
administrative
expenses................. 7,134 8.9 8,952 9.3 9,588 9.4 2,411 9.5 2,537 10.3
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
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) (0.8)
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Net income................. $ 1,151 1.4% $ 1,255 1.3% $ 1,316 1.3% $ 495 2.0% $ 341 1.4%
======= ======= ======== ======= =======
</TABLE>
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997
Revenues. Total revenues decreased $612,000, or 2.4%, from $25.4 million
for the three months ended March 31, 1997 to $24.8 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 $46,000, or 4.9%, from $948,000 for the three months ended
March 31, 1997 to $902,000 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.
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<PAGE> 62
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 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 $5.2 million, or 5.4%, from $96.0
million for the year ended December 31, 1996 to $101.2 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
$11.9 million for the year ended December 31, 1997. This increase resulted from
the addition of the Buick dealership. Other dealership revenues increased
$190,000, or 7.0%, from $2.7 million for the year ended December 31, 1996 to
$2.9 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 $16.1 million, or 20.1%, from $79.9
million for the year ended December 31, 1995 to $96.0 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
60
<PAGE> 63
resulted from the Mazda dealership addition. Other dealership revenues increased
$533,000, or 24.3%, from $2.2 million for the year ended December 31, 1995 to
$2.7 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.
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.
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<PAGE> 64
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 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.
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<PAGE> 65
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...... $ 83,486 71.3% $105,696 73.3% $129,942 78.2% $ 33,048 78.9% $ 30,607 76.2%
Used vehicle sales..... 22,905 19.6 27,633 19.2 24,430 14.7 6,006 14.4 6,562 16.4
Parts and service
sales................ 9,118 7.8 8,810 6.1 9,244 5.6 2,326 5.6 2,481 6.2
Other revenues, net.... 1,471 1.3 1,975 1.4 2,424 1.5 480 1.1 501 1.2
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total revenues... 116,980 100.0 144,114 100.0 166,040 100.0 41,860 100.0 40,151 100.0
Cost of sales............ 107,027 91.5 131,982 91.6 153,378 92.4 38,676 92.4 37,231 92.7
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Gross profit............. 9,953 8.5 12,132 8.4 12,662 7.6 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 1.3 547 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 0.1 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>
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 $41.9
million for the three months ended March 31, 1997 to $40.2 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 $21,000, or 4.4%, from
$480,000 for the three months ended March 31, 1997 to $501,000 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 or 254.5%,
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.
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<PAGE> 66
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenues. Total revenues increased by $21.9 million, or 15.2%, from $144.1
million for the year ended December 31, 1996 to $166.0 million for the year
ended December 31, 1997. New vehicle sales increased $24.2 million, or 22.9%
from $105.7 million for the year ended December 31, 1996 to $129.9 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
$3.2 million, or 11.6%, from $27.6 million for the year ended December 31, 1996
to $24.4 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 $434,000, or 4.9%, from $8.8 million for the year ended December
31, 1996 to $9.2 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
$449,000, or 22.7%, from $2.0 million for the year ended December 31, 1996 to
$2.4 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 Dealerships. 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.
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 $117.0
million for the year ended December 31, 1995 to $144.1 million for the year
ended December 31, 1996. New vehicle sales increased $22.2 million, or 26.6%
from $83.5 million for the year ended December 31, 1995 to $105.7 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 $4.7 million, or 20.6%, from $22.9 million for the year
ended December 31, 1995 to $27.6 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 $308,000, or 3.4%, from $9.1 million for the year ended December 31,
1995 to $8.8 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 $504,000 or 34.3%, from $1.5 million for the
year ended December 31, 1995 to $2.0 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.
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<PAGE> 67
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>
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 Corporation.
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.
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<PAGE> 68
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.
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 46.5% $ 28,806 47.0% $ 6,458 43.1% $ 6,559 44.9%
Used vehicle sales........ 21,073 35.1 21,781 35.5 5,965 39.9 5,297 36.3
Parts and service sales... 9,525 15.9 9,340 15.2 2,218 14.8 2,348 16.1
Other revenues, net....... 1,489 2.5 1,405 2.3 327 2.2 391 2.7
------- ----- -------- ----- ------- ----- ------- -----
Total revenues.... 60,011 100.0 61,332 100.0 14,968 100.0 14,595 100.0
Cost of sales............... 53,237 88.7 55,094 89.8 13,460 89.9 12,989 89.0
------- ----- -------- ----- ------- ----- ------- -----
Gross profit................ 6,774 11.3 6,238 10.2 1,508 10.1 1,606 11.0
Selling, general and
administrative expenses... 5,076 8.5 5,178 8.4 1,235 8.3 1,258 8.6
------- ----- -------- ----- ------- ----- ------- -----
Income from operations...... 1,698 2.8 1,060 1.8 273 1.8 348 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 2.6 966 1.6 238 1.6 336 2.3
Income tax expense.......... -- -- -- -- -- -- -- --
------- ----- -------- ----- ------- ----- ------- -----
Net income.................. $ 1,582 2.6% $ 966 1.6% $ 238 1.6% $ 336 2.3%
======= ======== ======= =======
</TABLE>
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997
Revenues. Total revenues decreased $373,000, or 2.5%, from $15.0 million
for the three months ended March 31, 1997 to $14.6 million for the three months
ended March 31, 1998. New vehicle sales increased
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<PAGE> 69
$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 $64,000, or 19.6%, from $327,000 for the three months ended
March 31, 1997 to $391,000 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.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenues. Total revenues increased by $1.3 million, or 2.2%, from $60.0
million for the year ended December 31, 1996 to $61.3 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 $84,000, or 5.6%, from $1.5 million for the
year ended December 31, 1996 to $1.4 million 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.
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<PAGE> 70
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.
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.
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<PAGE> 71
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.
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 56.6% $31,714 56.3% $34,098 58.0% $ 7,083 52.8% $ 7,684 59.0%
Used vehicle sales....... 16,974 32.6 18,671 33.2 18,277 31.1 4,668 34.8 3,663 28.1
Parts and service
sales.................. 2,868 5.5 3,388 6.0 3,898 6.6 903 6.7 1,045 8.0
Other revenues, net...... 2,781 5.3 2,534 4.5 2,517 4.3 765 5.7 635 4.9
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total revenues..... 52,122 100.0 56,307 100.0 58,790 100.0 13,419 100.0 13,027 100.0
Cost of sales.............. 45,862 88.0 49,990 88.8 51,215 87.1 11,562 86.2 11,150 85.6
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Gross profit............... 6,260 12.0 6,317 11.2 7,575 12.9 1,857 13.8 1,877 14.4
Selling, general and
administrative
expenses................. 5,391 10.3 5,864 10.4 6,972 11.9 1,592 11.9 1,652 12.7
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Income from operations..... 869 1.7 453 0.8 603 1.0 265 1.9 225 1.7
Other income and expense:
Interest expense, net.... 168 0.3 421 0.6 432 0.6 137 1.0 119 1.0
Other income (expense)... (18) (0.0) (509) (0.9) 55 0.0 (8) (0.0) (8) (0.0)
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Income (loss) before income
taxes.................... 683 1.4 (477) (0.7) 226 0.4 120 0.9 98 0.7
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 0.8% $ 93 0.7%
======= ======= ======= ======= =======
</TABLE>
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997
Revenues. Total revenues decreased $392,000, or 2.9%, from $13.4 million
for the three months ended March 31, 1997 to $13.0 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
$130,000, or 17.0%, from $765,000 for the three months ended March 31, 1997 to
$635,000 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
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<PAGE> 72
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.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenues. Total revenues increased by $2.5 million, or 4.4%, from $56.3
million for the year ended December 31, 1996 to $58.8 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 $17,000, or 0.7%, from $2.5 million for the year
ended December 31, 1996 to $2.5 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
110.8%, 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 8.0%, from $52.1
million for the year ended December 31, 1995 to $56.3 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
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<PAGE> 73
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 $247,000, or 8.9%, from $2.8 million for the year ended December 31,
1995 to $2.5 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 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
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<PAGE> 74
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.
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.
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<PAGE> 75
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 52.6% $12,145 51.7% $2,288 47.1% $2,583 45.5%
Used vehicle sales................... 7,443 34.5 8,114 34.5 1,774 36.5 2,328 41.0
Parts and service sales.............. 2,500 11.6 2,778 11.8 655 13.5 652 11.5
Other revenues, net.................. 286 1.3 473 2.0 142 2.9 115 2.0
------ ----- ------ ----- ------ ----- ------ -----
Total revenues................. 21,568 100.0 23,510 100.0 4,859 100.0 5,678 100.0
Cost of sales.......................... 18,517 85.9 20,535 87.3 4,202 86.5 4,918 86.6
------ ----- ------ ----- ------ ----- ------ -----
Gross profit........................... 3,051 14.1 2,975 12.7 657 13.5 760 13.4
Selling, general and administrative
expenses............................. 2,196 10.1 1,957 8.4 472 9.7 500 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>
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997
Revenues. Total revenues increased $819,000, or 16.9%, from $4.9 million
for the three months ended March 31, 1997 to $5.7 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 $27,000, or 19.0%, from $142,000 for the three months ended March 31,
1997 to $115,000 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.
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<PAGE> 76
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenues. Total revenues increased by $1.9 million, or 9.0%, from $21.6
million for the year ended December 31, 1996 to $23.5 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 $187,000, or 65.4%, from $286,000 for the year
ended December 31, 1996 to $473,000 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.
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.
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<PAGE> 77
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.
SOUTH FINANCIAL CORPORATION
Results of Operations
South Financial makes installment loans for the purchase of vehicles and
also purchases and services installment loans 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.
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<PAGE> 78
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
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 30.6 1,416 24.7 1,420 29.9
Other income (expense)....................... -- -- -- -- -- --
------ ----- ------ ----- ------- -----
Income (loss) before income taxes.............. 429 13.5 741 13.0 (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.
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.
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<PAGE> 79
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 "G.E. Credit Facility"). The revolving
credit facility has a maximum borrowing capacity of $15 million with advances
permitted under formulas based on percentages of eligible collateral.
As of March 31, 1998, South Financial was not in compliance with certain
terms of the G.E. Credit Facility; however, South Financial received a waiver of
this violation through September 30, 1998. As of the date of this Prospectus,
South Financial has cured this violation and now is in compliance with the G.E.
Credit Facility.
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.
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
77
<PAGE> 80
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
recently settled a labor action against GM. This strike has had a material
adverse effect on the production of GM vehicles. There can be no assurance that
GM's decreased production will not have a material 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 for
those periods on the results of operations of the Company and the dealerships
that the Company owns or expects to acquire upon consummation of the Offering.
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> 81
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 believes it 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
dealerships that the Company owns or expects to acquire upon consummation of the
Offering 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.
The automotive dealerships and related businesses that will comprise the
Company upon the consummation of the Merger and the Acquisitions would have had
pro forma combined total revenues of $688 million for the year ended June 30,
1997 and $510 million for the nine months ended March 31, 1998. See "Pro Forma
Combined and Condensed Financial Data."
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 will be 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
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<PAGE> 82
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 trend toward 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 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 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 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 were 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
another single manufacturer and the Company has achieved an appropriate
sales volume with respect to such manufacturer's vehicles, the Company
intends to implement this 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. However, the Company does not know
if any manufacturers, other than Ford, agree with this interpretation,
and therefore, the Company intends to seek the approval of all applicable
manufacturers prior to implementing such a structure with respect to each
such manufacturer's dealerships. As of the date of this Prospectus, the
Company has neither sought, nor received, the approval of any
manufacturer, other than Ford, for its implementation of such a
structure. Ford has approved the Company's organizational structure for
its Ford and Mercury dealerships as part of its contingent approval of
the Company's acquisitions of the Ford and Mercury dealerships. 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
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<PAGE> 83
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 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 restructure
its floorplan financing, which the Company anticipates will result in an
overall 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 average annual floorplan rates, and
expects that this lower rate will result in annual cost savings of
$750,000 to $1 million. In addition to the floorplan financing, the
Company is also negotiating a revolving credit 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 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 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 expects to offer 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
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<PAGE> 84
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 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 Company intends to organize its dealerships and dealership groups by
manufacturer, so that all dealerships which carry a particular manufacturer's
brands will be grouped together into a single division. Each division, in turn,
will be headed by a Vice President of each manufacturer division ("Division VP")
who has extensive working experience with the applicable manufacturer and will
report to the Company's Chief Operating Officer. The Division VP's role will be
to support the Executive Managers of each dealership that falls within the
Division VP's division. 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 another single manufacturer and the Company has
achieved an appropriate sales volume with respect to such manufacturer's
vehicles, the Company intends to implement this organizational structure for
such dealerships. The Company believes that such a corporate structure does not
require any manufacturer's approval and will not impact the dealership
requirements imposed by the manufacturers. However, the Company does not know if
any manufacturers, other than Ford, agree with this interpretation, and
therefore, the Company intends to seek the approval of all applicable
manufacturers prior to implementing such a structure with respect to each such
manufacturer's dealerships. As of the date of this Prospectus, the Company has
neither sought, nor received, the approval of any manufacturer, other than Ford,
for its implementation of such a structure. Ford has approved the Company's
organizational structure for its Ford and Mercury dealerships as part of its
contingent approval of the Company's acquisitions of the Ford and Mercury
dealerships.
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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 tables set forth certain pro forma combined total sales
revenues and cost of goods sold information relating to the new vehicles sold by
dealerships that the Company owns or expects to acquire upon consummation of the
Offering categorized by manufacturer (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------
1995 1996 1997
-------------------- -------------------- --------------------
SALES % OF SALES SALES % OF SALES SALES % OF SALES
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ford(1).................... $147,965 41.3% $176,156 43.5% $201,508 47.9%
General Motors(2).......... 114,696 32.1 111,798 27.7 98,506 23.5
Nissan..................... 41,453 11.6 44,304 11.0 44,261 10.5
Toyota..................... 17,066 4.8 22,196 5.5 17,473 4.2
Mitsubishi................. 2,369 0.7 5,989 1.5 11,013 2.6
Mazda...................... 2,073 0.6 5,288 1.3 10,469 2.5
Isuzu...................... 15,119 4.2 12,479 3.1 9,434 2.2
Chrysler/Dodge/Plymouth.... 9,574 2.7 7,920 2.0 8,717 2.1
Kia........................ -- -- 4,570 1.1 7,040 1.7
Honda...................... -- -- 6,007 1.5 6,105 1.5
Jeep/Eagle................. 2,736 0.8 3,045 0.8 3,353 0.8
Hummer..................... 1,998 0.6 2,954 0.7 2,140 0.5
Other(3)................... 2,172 0.6 1,171 0.3 -- --
-------- ------- -------- ------- -------- -------
$357,221 100.0% $403,877 100.0% $420,019 100.0%
======== ======= ======== ======= ======== =======
<CAPTION>
NINE MONTHS ENDED MARCH 31,
-------------------------------------------
1997 1998
-------------------- --------------------
SALES % OF SALES SALES % OF SALES
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Ford(1).................... $141,761 46.3% $159,741 50.5%
General Motors(2).......... 77,535 25.3 77,834 24.7
Nissan..................... 30,897 10.1 21,043 6.7
Toyota..................... 16,655 5.4 12,384 3.9
Mitsubishi................. 7,802 2.5 8,386 2.7
Mazda...................... 5,816 1.9 7,628 2.4
Isuzu...................... 7,134 2.3 7,362 2.3
Chrysler/Dodge/Plymouth.... 5,456 1.8 6,246 2.0
Kia........................ 4,406 1.4 5,045 1.6
Honda...................... 5,037 1.6 4,728 1.5
Jeep/Eagle................. 2,098 0.7 2,402 0.8
Hummer..................... 2,140 0.7 2,898 0.9
Other(3)................... -- -- -- --
-------- ------- -------- -------
$306,737 100.0% $315,697 100.0%
======== ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------
1995 1996 1997
-------------------- -------------------- --------------------
COSTS % OF COSTS COSTS % OF COSTS COSTS % OF COSTS
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ford(1).................... $141,779 42.0% $167,986 43.7% $191,529 48.1%
General Motors(2).......... 106,683 31.5 104,452 27.2 94,322 23.6
Nissan..................... 39,065 11.5 43,608 11.4 40,647 10.2
Toyota..................... 16,402 4.8 20,868 5.4 16,840 4.2
Mitsubishi................. 2,298 0.7 5,849 1.5 10,506 2.6
Mazda...................... 1,958 0.6 4,935 1.3 9,930 2.5
Isuzu...................... 14,433 4.3 12,033 3.1 9,029 2.3
Chrysler/Dodge/Plymouth.... 9,253 2.7 7,619 2.0 8,399 2.1
Kia........................ -- -- 4,395 1.1 6,752 1.7
Honda...................... -- -- 5,700 1.5 5,740 1.4
Jeep/Eagle................. 2,696 0.8 2,930 0.8 3,249 0.8
Hummer..................... 1,817 0.5 2,617 0.7 2,060 0.5
Other(3)................... 2,074 0.6 1,005 0.3 -- --
-------- ------- -------- ------- -------- -------
$338,458 100.0% $383,997 100.0% $399,003 100.0%
======== ======= ======== ======= ======== =======
<CAPTION>
NINE MONTHS ENDED MARCH 31,
-------------------------------------------
1997 1998
-------------------- --------------------
COSTS % OF COSTS COSTS % OF COSTS
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Ford(1).................... $133,906 46.0% $150,640 50.2%
General Motors(2).......... 72,924 25.0 75,208 25.1
Nissan..................... 30,370 10.4 20,214 6.7
Toyota..................... 15,638 5.4 11,654 3.9
Mitsubishi................. 7,637 2.6 7,938 2.6
Mazda...................... 5,455 1.9 7,108 2.4
Isuzu...................... 6,858 2.4 7,042 2.3
Chrysler/Dodge/Plymouth.... 5,286 1.8 5,994 2.0
Kia........................ 4,306 1.5 4,792 1.6
Honda...................... 4,738 1.6 4,448 1.5
Jeep/Eagle................. 1,986 0.7 2,307 0.8
Hummer..................... 2,010 0.7 2,772 0.9
Other(3)................... -- -- -- --
-------- ------- -------- -------
$291,114 100.0% $300,117 100.0%
======== ======= ======== =======
</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.
(3) Boomershine Automotive divested its Subaru franchise during the fiscal year
ended June 30, 1996.
The Company's new vehicle sales will 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 will allow the Company to provide
repair service to the lessee throughout the lease term.
The Company will seek to provide customer-oriented service designed to
establish lasting relationships that will result in repeat and referral
business. For example, the Company's dealerships will 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 will continually evaluate ways to improve the buying experience for its
customers and believes
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<PAGE> 86
that its ability to share best practices among its dealerships will give it an
advantage over smaller dealership groups.
The Company will acquire substantially all its new vehicle inventory from
manufacturers. Manufacturers' allocations of new vehicle units are based upon
calculations by the manufacturers which, among other things, include factors
which may require the Company to purchase a larger number of less desirable
models than it would otherwise purchase in order to obtain a sufficient
allocation of the most popular vehicles (a concept commonly known in the
automotive retailing industry as "turn and earn"). Although the other bases for
such calculations are not disclosed to the Company, the Company believes that
additional factors considered by the manufacturers for such calculations include
the applicable dealership's unit sales volumes in prior months. The Company will
finance 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 new vehicle sales of the dealerships that the Company owns or expects to
acquire upon consummation of the Offering 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 NEW 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 will sell 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 grow 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 will
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 will supplement its used vehicle inventory
with used vehicles purchased at auctions.
The Company will generally maintain a 60- to 90-day supply of used vehicles
and will dispose of used vehicles that the Company does not intend to 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 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 franchised dealerships, such as those which will
be operated by the Company, have certain strengths that non-franchised used-car
sales outlets do not have in offering used vehicles, including the following:
(i) access to trade-ins on new vehicle purchases, which are typically lower
mileage
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<PAGE> 87
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 is expected to reduce 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
used vehicle sales of the dealerships that the Company owns or expects to
acquire upon consummation of the Offering 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 will provide parts and service at each of its dealerships
primarily for the vehicle makes sold by its dealerships. The Company will also
provide maintenance and repair services at each of its dealerships and collision
repair centers, and will perform 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. Therefore, unlike
independent service stations, or independent and superstore used car dealerships
with service operations, the Company's dealerships will be 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 will 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 its customers and deepen
customer loyalty.
The dealerships' parts departments support their respective sales and
service divisions. Each of the dealerships that the Company owns or expects to
acquire upon consummation of the Offering 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 dealerships that the Company owns or expects to acquire
upon consummation of the Offering employs its own parts manager and
independently controls its parts inventory and sales.
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<PAGE> 88
The following table sets forth information regarding the parts and service
sales of the dealerships that the Company owns or expects to acquire upon
consummation of the Offering 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 will offer 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 will significantly enhance the Company's ability to sell new and
used vehicles. The Company will provide 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 will provide 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 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. South Financial makes installment loans for the
purchase of vehicles and also purchases and services installment loans from
select automotive
86
<PAGE> 89
dealers in three southeastern states. 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)(2)..... 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.
(2) At March 31, 1998 a survey of seven publicly traded companies involved in
sub-prime automotive financing conducted by the Company using
publicly-available information yielded average delinquencies of 3.55% for
31-60 days and 3.75% for 61 days or more. The Company believes that this
comparative group generally lends to better credit risks than does the
Company.
<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 will offer 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 dealerships that
the Company owns or expects to acquire upon consummation of the Offering, 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 will also offer 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 expects that its marketing and advertising activities will vary
among its dealerships and among its markets. The Company expects to advertise
primarily through newspapers, radio, television and direct mail and to regularly
conduct special promotions designed to focus vehicle buyers on its product
offerings. The Company intends to tailor its marketing efforts to the relevant
marketplace in order to reach the Company's targeted customer base. The Company
intends to employ computer technology to aid salespeople in identifying
potential new customers. Under arrangements with each of the manufacturers, the
Company
87
<PAGE> 90
will receive 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 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 dealerships that the Company owns or expects to acquire upon
consummation of the Offering 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 seeking to amend or replace 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 several automobile manufacturers' approvals of public
company ownership of their respective dealerships during the two-year period
preceding this Offering, 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 additional dealerships. 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."
The restrictions and maximum number of dealerships of each manufacturer
discussed below are based on the correspondence that the Company has received
from each applicable manufacturer. To the extent the Company has not received
any correspondence or other indication from a manufacturer concerning such
manufacturer's restrictions, the table below indicates that such information is
unknown to the Company with respect to such manufacturer. However, there can be
no assurance that the manufacturers will not modify such restrictions in the
future, either generally or on a case-by-case basis, and the Company expects
that the manufacturers will impose other general policy restrictions on the
Company in addition to ownership limitations.
As of the date of this Prospectus, GM, Chrysler and Nissan have verbally
informed the Company that they anticipate approving the Merger, the Acquisitions
and this Offering and the proposed acquisitions of GM, Chrysler and Nissan
dealerships, as applicable, pursuant to the Acquisitions and the Merger. The
final approvals of GM, Chrysler and Nissan are subject to the completion of this
Offering. In addition, the final approvals of Nissan and GM are subject to the
execution of the Nissan Public Ownership Addendum, an Agreement between the
Company and Nissan Motor Corporation USA, and a Supplemental Agreement to
88
<PAGE> 91
the General Motors Corporation Dealer Sales and Service Agreement. Ford has
provided to the Company preliminary approval of the Company's proposed Merger,
Acquisitions and this Offering. The Company has executed the Ford Master Public
Agreement, which sets forth the ownership limitations that Ford will impose on
the Company (as described below) and new Franchise Agreements for each of the
proposed acquisitions of Ford and/or Mercury dealerships. These agreements and
Ford's final approval of the Merger, Acquisitions and this Offering are subject
to the Company's completion of this Offering. The material terms of the Ford
Master Public Agreement include the following: (a) each of the Company's Ford
and Mercury dealerships must be maintained as separate corporations which must
be adequately capitalized; (b) each of the Company's Ford and Mercury
dealerships must have an Executive Manager with complete day-to-day management
control and with full managerial authority and accountability for the operations
of each dealership in accordance with the Ford Franchise Agreement and the Ford
Master Public Agreement; (c) each of the Company's Ford and Mercury dealerships
will be subject to certain performance criteria established by Ford in such
areas as CSI and market penetration; (d) the Company's ownership of Ford and
Mercury dealerships is specifically limited by guidelines set forth by Ford (as
described below) during the Company's first 12 months as a public company and
thereafter; (e) any material changes in ownership of any dealership and of the
Company are subject to Ford's review and approval under certain circumstances;
(f) each of the Company's Ford and Mercury dealerships must be an exclusive Ford
and/or Mercury dealership and cannot be paired with a dealership of another
brand; (g) a limitation on the cross-collateral of each Ford dealership's
assets; and (h) Ford maintains site control in certain instances over the
location of the Company's Ford and Mercury dealerships.
Ford's present public company policy, which Ford has indicated will apply
to the Company upon the consummation of the Offering, 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, which Ford has indicated will apply to the
Company upon the consummation of the Offering: (a) each dealership must be owned
by a separate company that meets Ford's capitalization guidelines; (b) the
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
89
<PAGE> 92
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, Ford's approval will be required for any ownership changes of any
dealership owned or to be acquired by the Company.
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. The Company expects the costs of such
relocation to be approximately $3 million to $4 million, plus any costs of
terminating the existing lease for the land on which the Duluth dealership is
located. 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, which have been
proposed to the Company, 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 proposed to the Company
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 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 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 Company or its GM franchisee subsidiary enter into an agreement
to transfer the assets of the GM franchisee subsidiary to a third party under
the proposed terms of the GM public company agreement, the right of first
refusal described in the GM Dealer Agreement may apply to any such transfer.
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<PAGE> 93
The following sets forth some additional provisions of GM's proposed
agreement 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 acquisitions 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.
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. Honda has
set forth additional restrictions in its Policy on the Public Ownership of Honda
and Acura Dealerships, including, without limitation (i) the percentage of
public ownership must be restricted so that a controlling interest of the
dealership remains in the hands of approved individuals; (ii) in no event may
the percentage of public ownership of a dealership be greater than or equal to
the percentage of private ownership by American Honda-approved individuals and
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privately-held entities; and (iii) the dealership must provide a separate,
freestanding facility that offers exclusively Honda products and services or
Acura products and services and does not offer competing products or services
from its premises.
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. The Company is not aware of any general policy restrictions that
have been announced by Chrysler other than the ownership limitations described
herein.
Mazda's public ownership policy as set forth in the Mazda Motor of America,
Inc. d/b/a Mazda North American Operations Dealer Development/Market
Representation Guidelines, Policies and Procedures provides that an entity may
not own dealerships in contiguous markets; however, an entity may own two
dealerships in one metro market. Additional restrictions include, without
limitation, (i) each dealership must have a "stand alone" entity; and (ii) each
dealership entity must have a majority owner holding 51% of the voting stock.
Nissan's public ownership policy as set forth in the proposed Agreement
Between Nissan Motor Corporation in U.S.A. and Sunbelt Automotive Group, Inc.
provides that: (i) no individual or entity may have an ownership or management
interest, direct or indirect, in dealers whose primary marketing areas (PMA's)
competitive segment registration count comprises more than 5% of Nissan's or
Infiniti's total, national competitive segment registrations based on the sum of
retail competitive segment registrations contained in all PMAs associated with
the dealers; (ii) no individual or entity may hold ownership or management,
direct or indirect, in dealers whose PMA's competitive segment registration
count comprises more than 20% of any Nissan or Infiniti regions total
competitive segment registrations contained in all PMA's associated with dealers
in that region; (iii) in order for any entity to acquire additional Nissan or
Infiniti dealerships, the Nissan or Infiniti dealerships which it owns or
controls, directly or indirectly must: (a) be in full compliance with all the
terms of its respective Dealer Agreements; (b) meet, in all material respects,
all of the applicable Nissan or Infiniti market representation and other
standards and policies; and (c) with respect to the Nissan Division and Region
at issue, the Nissan or Infiniti dealerships which the entity owns or controls
must, in the aggregate and with respect to at least 50% of those individual
dealerships, have performed at or above all performance levels set forth in the
business plans for those dealerships over the proceeding 12 month period; and
(iv) if the proposed acquisition of any Nissan or Infiniti dealership would
cause an individual or entity to exceed the ownership policy, Nissan will reject
a dealer's application for approval of such ownership transfer until such time
as the purchasing individual or entity shall be able to complete the acquisition
within the requirements of that policy. Notwithstanding the foregoing, Nissan
may withhold consent to a proposed acquisition, even if that acquisition
satisfies the parameters of the ownership policy, based on the grounds set forth
in the Nissan Dealer Agreement and applicable state law.
Additional restrictions include, without limitation, (i) if any person or
entity acquires more than 20% of Sunbelt's common stock issued and outstanding
at any time and Nissan determines that such person or entity does not have
interests compatible with those of Nissan, or is otherwise not qualified to have
an ownership interest in a Nissan dealership, Sunbelt must terminate its dealer
agreements with Nissan or transfer the Nissan dealerships to a third party
acceptable to Nissan unless, within 90 days after Nissan's determination, such
person's or entity's ownership interest is reduced to less than 20%; (ii)
Sunbelt shall create and maintain separate legal entities for each Nissan and
Infiniti dealership that it owns, directly or indirectly; and (iii) Sunbelt
shall obtain a separate motor vehicle dealer license for each dealership and
shall maintain separate financial statements for each such dealerships.
Saturn has generally not approved the public ownership of its dealership
franchises. Although the Company recently requested Saturn's approval, the
Company expects to divest the Jay Automotive Group Saturn dealership in
Columbus, Georgia. For this reason, the financial results of the Company's
Saturn dealership in Columbus, Georgia have not been included in this
Prospectus. If Saturn does not approve the
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Company's ownership of the Saturn dealership in Columbus, Georgia, the Company
will sell the Saturn dealership.
The following table sets forth, as of the date of this Prospectus and with
respect to all manufacturers with whom the Company expects to have Franchise
Agreements after the consummation of this Offering, the Merger and the
Acquisitions, (i) the manufacturers' policies on public company ownership; (ii)
the additional restrictions of the manufacturers on the number of dealerships a
public company may own in a particular region, zone or market, to the extent
known to the Company as of the date hereof; (iii) the number of dealerships of
each manufacturer's brands that the Company will own upon the consummation of
the Merger and the Acquisitions as such number is calculated for purposes of the
manufacturers' restrictions; and (iv) the maximum number of additional
dealerships the Company believes it may own/acquire nationally and in the
Southeastern United States pursuant to manufacturer's restrictions. The Company
expects that all of these restrictions will be imposed by the manufacturers on
the Company.
<TABLE>
<CAPTION>
(I) (II) (III) (IV)
------------------- ------------------------------------ --------------- -------------
RESTRICTIONS ON THE MAXIMUM
NUMBER OF NUMBER OF
DEALERSHIPS ADDITIONAL
COMPANY MAY NUMBER OF DEALERSHIPS
OWN/ACQUIRE DEALERSHIPS COMPANY MAY
PURSUANT TO OWNED FOR OWN/ ACQUIRE
PRESENT PURPOSES OF NATIONALLY/IN
MANUFACTURERS' ADDITIONAL RESTRICTIONS ON NUMBER OF MANUFACTURERS' SOUTHEASTERN
MANUFACTURER RESTRICTIONS DEALERSHIPS IN A REGION/ZONE/MARKET RESTRICTIONS(6) U.S.
- ----------------------------- ------------------- ------------------------------------ --------------- -------------
<S> <C> <C> <C> <C>
Chrysler(1).................. No more than 10 No more than maximum of 6 Chrysler 1 9/9
dealerships dealerships in the same sales zone (Chrysler-
(as defined by Chrysler) and 2 Dodge-Jeep-
Chrysler dealerships in the same Plymouth;
market (but no more than 1 like Elizabethton,
vehicle brand in the same market) TN)
Ford/Mercury(2).............. The lesser of (i) No more than 1 Ford dealership in 4 26/26
15 Ford and 15 any market area (as defined by Ford) (2 Ford/
Lincoln Mercury that has 3 or fewer Ford dealerships Mercury,
dealerships or (ii) and no more than 25% of the Ford Buford, GA and
that number of Ford dealerships in a market area having Franklin, NC; 2
and Lincoln Mercury 4 or more Ford dealerships Ford, Smyrna
dealerships and Duluth, GA)
accounting for 2%
of the preceding
year's retail sales
of those brands in
the United States
General Motors(3)............ No additional No more than 50% of the GM 5 None for at
dealerships for at dealerships (by franchise line) in a (2 Pontiac- least 12-24
least 12-24 months; GM-defined geographic market area Buick-GMC, months
Acquisitions of no having multiple GM dealerships, and Smyrna and following
more than 5 GM may further limit acquisitions of Columbus, GA; 2 Offering;
dealerships during GM dealerships by a single public Chevrolet, thereafter 5
a two-year period. company until all existing GM Acworth, GA and nationally
dealerships of that public company Elizabethton, and no more
meet certain GM criteria for sales, TN; 1 than 50% of
market penetration, CSI and other Oldsmobile- the GM
GM-established standards Cadillac, dealerships
Gainesville, (by franchise
GA) line) in a
GM-defined
geographic
market area
having
multiple GM
dealerships
</TABLE>
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<PAGE> 96
<TABLE>
<CAPTION>
(I) (II) (III) (IV)
------------------- ------------------------------------ --------------- -------------
RESTRICTIONS ON THE MAXIMUM
NUMBER OF NUMBER OF
DEALERSHIPS ADDITIONAL
COMPANY MAY NUMBER OF DEALERSHIPS
OWN/ACQUIRE DEALERSHIPS COMPANY MAY
PURSUANT TO OWNED FOR OWN/ ACQUIRE
PRESENT PURPOSES OF NATIONALLY/IN
MANUFACTURERS' ADDITIONAL RESTRICTIONS ON NUMBER OF MANUFACTURERS' SOUTHEASTERN
MANUFACTURER RESTRICTIONS DEALERSHIPS IN A REGION/ZONE/MARKET RESTRICTIONS(6) U.S.
- ----------------------------- ------------------- ------------------------------------ --------------- -------------
<S> <C> <C> <C> <C>
American Honda Co., Inc. 7 Honda dealerships Public companies restricted to (i) 1 1 (Honda, 6 Honda and 3
("Honda")(4)............... and 3 Acura Honda dealership in a "Metro" market Cartersville, Acura/6 Honda
dealerships (defined by Honda as a metropolitan GA) and 3 Acura
market with 2 or more Honda
dealerships) with 2 to 10 dealership
points; (ii) 2 Honda dealerships in
a Metro market with 11 to 20 Honda
dealership points; (iii) 3 Honda
dealerships in a Metro market with
21 or more Honda dealership points;
(iv) no more than 4% of the Honda
dealerships in any 1 of the 10 Honda
geographic zones; (v) 1 Acura
dealership in a "Metro" market (a
metropolitan market with 2 or more
Acura dealership points); and (vi) 2
Acura dealerships in any 1 of the 6
Acura geographic zones
Hummer....................... Restrictions Restrictions unknown to the Company 1 (Smyrna, GA) Unknown
unknown to the
Company
Isuzu........................ Restrictions Restrictions unknown to the Company 2 (Duluth and Unknown
unknown to the Gainesville,
Company GA)
Kia.......................... Restrictions Restrictions unknown to the Company 1 Unknown
unknown to the (Elizabethton,
Company TN)
Mazda........................ No contiguous No contiguous market ownership is 2 (Columbus and No contiguous
market ownership is allowed; provided, however, in a Gainesville, market
allowed; provided, metro market, multiple dealership GA) ownership is
however, in a metro ownership not exceeding 2 allowed;
market, multiple dealerships is allowed provided,
dealership however, in a
ownership not metro market,
exceeding 2 multiple
dealerships is dealership
allowed ownership not
exceeding 2
dealerships
is allowed
Mitsubishi................... Restrictions Restrictions unknown to the Company 2 (Kennesaw, Unknown
unknown to the and Columbus,
Company GA)
Nissan....................... Nationally, no No individual or entity may own more 1 (Duluth, GA) 60/29
individual or than 20% of the region's total
entity may own more number of Nissan and Infiniti
than 5% of the dealerships
total number of
Nissan and Infinity
dealerships
</TABLE>
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<PAGE> 97
<TABLE>
<CAPTION>
(I) (II) (III) (IV)
------------------- ------------------------------------ --------------- -------------
RESTRICTIONS ON THE MAXIMUM
NUMBER OF NUMBER OF
DEALERSHIPS ADDITIONAL
COMPANY MAY NUMBER OF DEALERSHIPS
OWN/ACQUIRE DEALERSHIPS COMPANY MAY
PURSUANT TO OWNED FOR OWN/ ACQUIRE
PRESENT PURPOSES OF NATIONALLY/IN
MANUFACTURERS' ADDITIONAL RESTRICTIONS ON NUMBER OF MANUFACTURERS' SOUTHEASTERN
MANUFACTURER RESTRICTIONS DEALERSHIPS IN A REGION/ZONE/MARKET RESTRICTIONS(6) U.S.
- ----------------------------- ------------------- ------------------------------------ --------------- -------------
<S> <C> <C> <C> <C>
Toyota Motor Corporation 7 Toyota Number of Toyota dealerships that 1 (Toyota, 6 Toyota and
("Toyota")(5).............. dealerships and 3 may be owned by a single public Columbus, GA) 3 Lexus/6
Lexus dealerships company are limited to (i) the Toyota and 3
greater of 1 dealership or 20% of Lexus
the number of Toyota dealer counts
in a "Metro" market (as defined by
Toyota); (ii) the lesser of 5 Toyota
dealerships or 5% of the number of
Toyota dealer counts in any Toyota
region (as defined by Toyota; there
are currently 12 regions); and (iii)
2 Lexus dealerships in any 1 of the
4 Lexus geographic areas
</TABLE>
- ---------------
(1) Chrysler may also ask the Company to limit its acquisitions, or defer any
future acquisitions, of Chrysler or Chrysler division dealerships until the
Company has established a proven performance record with the Chrysler
dealerships it owns or is acquiring in the Acquisitions.
(2) Ford has also informed the Company that it may not make any additional
acquisitions of Ford, Lincoln or Mercury dealerships for a 12-month period
following the closing of this Offering.
(3) GM's communications with the Company to date indicate that GM will restrict
the Company from acquiring any additional GM dealerships for a period of no
less than 12 months -- and up to 24 months -- following the closing of this
Offering.
(4) Honda also prohibits the ownership of contiguous dealerships and the
coupling of a franchise with any other brand without its consent.
(5) The Company also believes that Toyota has required that at least nine months
elapse between acquisitions of its dealerships. Toyota also prohibits the
ownership of contiguous dealerships and the coupling of a franchise with any
other brand without its consent.
(6) The number of dealerships the Company will own upon the consummation of the
Acquisitions and the Merger for purposes of manufacturers' restrictions
differs from the actual number of dealership franchises the Company will own
under separate Franchise Agreements upon the consummation of the
Acquisitions and the Merger because certain manufacturers group their brands
together for purposes of calculating the Company's dealerships for
manufacturer restriction purposes. For example, the Company operates its
Pontiac, Buick and GMC dealerships under separate franchise agreements, but
GM considers each Pontiac-Buick-GMC dealership and each Oldsmobile-Cadillac
dealership as single dealerships for restriction purposes. The actual number
of dealership franchises the Company will own under separate Franchise
Agreements is as follows: 4 Ford dealerships; 2 each of Buick, Chevrolet,
GMC, Isuzu, Mazda, Mercury, Mitsubishi and Pontiac dealerships; and 1 each
of Cadillac, Chrysler, Dodge, Honda, Hummer, Jeep, Kia, Nissan, Oldsmobile,
Plymouth and Toyota dealerships.
Saturn has not been included in the table above because the Company expects
to divest the Jay Automotive Group Saturn dealership after the consummation of
the Offering, the Merger and the Acquisitions.
In addition to the ownership limitations described herein, manufacturers
generally require that the Executive Manager of each of the dealerships that the
Company owns or expects to acquire upon consummation of the Offering have
authority to manage the day-to-day operations of their respective dealership,
particularly as such operations relate to the applicable manufacturers. The
Company expects its Executive Managers to have the authority required by each
manufacturer.
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
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<PAGE> 98
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 be denied a Tennessee license, or
have an existing license revoked or suspended, if the manufacturer unfairly, or
without due regard to the equities or without just provocation cancels or fails
to renew a franchise agreement of a 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 will operate 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 will principally compete
with other new automotive dealers in the same general vicinity of the locations
of the dealerships that the Company owns or expects to acquire upon consummation
of the Offering. Such competing dealerships may offer the same or different
models and makes of vehicles that the Company will sell. In the sale of used
vehicles, the Company will principally compete 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 will compete 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
"superstores" have recently opened in certain markets in which dealerships that
the Company owns or expects to acquire upon consummation of the Offering
compete. In addition, the Company will compete 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 "main street" markets,
the Company believes that 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
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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, will not have any cost advantage in purchasing new vehicles from
manufacturers and expects to typically rely on advertising and merchandising,
sales expertise, service reputation and location of its dealerships to sell new
vehicles.
The Company will compete 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 will compete 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 prices the Company expects to
offer.
GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL MATTERS
A number of regulations affect the Company's prospective 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 prospective 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 prospective 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 prospective 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,
degreasing agents, gasoline and diesel fuels. The Company's prospective 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
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<PAGE> 100
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. The following table identifies, for each of the
properties to be utilized by the Company's operations and the dealerships that
the Company owns or expects to acquire upon consummation of the Offering, 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 2003
Columbus, GA sales; service; 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 2150 Cobb Parkway New and used vehicle 2006
Smyrna, GA (Hummer) sales; service; F&I
Collision Centers USA......... Lease 5548 Old Dixie Highway Collision Center 2009
Forest Park, GA
Lease 1715 Cobb Parkway Collision Center 2003
Marietta, GA
Lease 1110 Highway 155 South Collision Center 2012
McDonough, GA
Lease 2970 Old Norcross Rd. Collision Center 2016
Duluth, GA 30096
Sunbelt Automotive Group,
Inc......................... Lease 5901 Peachtree-Dunwoody Rd. Corporate 1999
Atlanta, GA Administration
</TABLE>
All of the properties utilized by the Company's operations and the
dealerships that the Company owns or expects to acquire upon consummation of the
Offering are leased as set forth in the foregoing table. The Company believes
that these 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
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<PAGE> 101
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 and dealerships that the Company owns or expects to acquire upon
consummation of the Offering 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 the dealerships that the Company owns or
expects to acquire upon consummation of the Offering, 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 or the employees of the dealerships that the Company
owns or expects to acquire upon consummation of the Offering 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 "Risk Factors -- Dependence on
Automobile Manufacturers," "Risk Factors -- Strikes and Labor Actions; GM
Strike" and "Business -- Cyclicality."
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<PAGE> 102
LEGAL PROCEEDINGS AND INSURANCE
From time to time, the Company and the dealerships that the Company owns or
expects to acquire upon consummation of the Offering have been or may be 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 or the dealerships that the Company owns or expects to
acquire upon consummation of the Offering 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> 103
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
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<PAGE> 104
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> 105
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 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> 106
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 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> 107
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> 108
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.
106
<PAGE> 109
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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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.
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> 111
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of June 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 W. Gundeck...................................... 63,640 1.3 *
Stephen C. Whicker..................................... 66,465 1.3 *
Ricky L. Brown......................................... 10,016 * *
Alan K. Arnold......................................... 385,000 7.6 3.7
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 13.8 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)............................................. 1,225,226 24.2% 11.6%
</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, and 116,116 shares
to be issued to The WMB, III/LKB Family Trust U/A, for which Lucinda K.
Boomershine, who is the spouse of Walter M. Boomershine, III, serves as the
sole trustee.
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<PAGE> 112
(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.
(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 dealerships that the Company owns
or expects to acquire upon consummation of the Offering 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
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<PAGE> 113
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 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, Boomershine Automotive
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 matured
on July 7, 1998 and carried an interest rate equal to the prime rate of interest
announced by NationsBank, N.A. from time to time. Boomershine Automotive has
renewed this promissory note on the same terms and conditions for a period of 90
days and 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 Chairman of the Board and
Senior Vice President 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. 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
10,557,862 outstanding shares of common stock (assuming the Underwriters' over-
allotment option is not exercised) and no outstanding shares of preferred stock.
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<PAGE> 114
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 the relevant
provisions of Georgia law. Reference is made to such exhibit and Georgia law for
a detailed description of the provisions thereof summarized below.
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 10,557,862 shares
outstanding (11,382,862 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 were granted.
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<PAGE> 115
REGISTRATION RIGHTS AND STOCK PRICE PROTECTION
As part of the Acquisitions, the Company entered into a registration rights
agreement with the selling shareholders of the Wade Ford Dealerships 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 those
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 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") to the selling shareholders
of the Wade Ford Dealerships and Day's Chevrolet. Specifically, if the price of
the common stock subject to price protection is more on the date of the Offering
than the price of such common stock (i) on the first anniversary of the Offering
in the case of the Wade Ford Acquisition or (ii) on the second anniversary of
the Offering in the case of the Day's Chevrolet Acquisition, then the Company is
required to compensate the applicable target shareholders for such price
decrease in cash or by issuing additional shares of the Company's common stock
(however, pursuant to current policies of the Commission, the Company would not
be able to deliver registered stock to Day's Chevrolet and, therefore, would be
required to compensate the Day's Chevrolet shareholders in cash for any such
decrease).
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
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<PAGE> 116
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 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 (i) the
Chairman, Chief Executive Officer or Secretary of the Company, (ii) by a
majority vote of the Board of Directors of the Company or (iii) upon written
demand of the holders of at least 75% of all votes entitled to be cast on any
issue proposed to be considered at such meeting. 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
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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's common stock has been approved for quotation on the Nasdaq
National Market under the symbol "SBLT", subject to notice of issuance.
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
10,557,862 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 the holders of the
Company's unregistered common stock have agreed, subject to certain exceptions,
(i) not, directly or indirectly, without the prior written consent of the
Underwriter, to sell, offer, contract or grant any option to sell (including
without limitation any short sale), pledge, transfer, establish an open "put
equivalent position" within the meaning of Rule 16a-1(h) under the Exchange Act,
or otherwise dispose of any shares of common stock of the Company, options or
warrants to acquire shares of common stock, or securities exchangeable or
exercisable for or convertible into shares of common stock currently or
hereafter owned either of record or beneficially (as defined in Rule 13d-3 under
the Exchange Act) by such person, or publicly announce such person's intention
to do any of the foregoing, until after the close of trading on the date 180
days after the date of this Prospectus; and (ii) to the entry of stop transfer
instructions with the Company's transfer agent and registrar against the
transfer of shares of common stock or securities convertible into or
exchangeable or exercisable for common stock held by such person except in
compliance with the foregoing restrictions; 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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CERTAIN UNITED STATES FEDERAL TAX
CONSIDERATIONS FOR NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of the
Company's common stock by a "Non-United States Holder." A "Non-United States
Holder" is a person other than a "U.S. Person." For United States federal income
tax purposes, the term "U.S. Person" means (i) any individual who is a citizen
or resident of the United States; (ii) a corporation or partnership created or
organized in the United States or under the laws of the United States or of any
state (other than any partnership treated as foreign under United States
Treasury regulations); (iii) an estate or trust, the income of which is
includable in gross income for United States federal income tax purposes
regardless of its source; or (iv) a trust, if a court within the United States
is able to exercise primary supervision over the trust and one or more United
States persons have the authority to control all substantial decisions of the
trust.
This discussion is based on the Code and administrative interpretations as
of the date hereof, all of which may be changed either retroactively or
prospectively. This discussion does not address all aspects of United States
("U.S.") federal income and estate taxation that may be relevant to Non-United
States Holders in light of their particular circumstances and does not address
any tax consequences arising under the laws of any state, local or foreign
taxing jurisdiction.
PROSPECTIVE HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE
UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES INCOME AND ESTATE TAX
CONSEQUENCES TO THEM OF HOLDING AND DISPOSING OF COMMON STOCK OF THE COMPANY.
DIVIDENDS
Subject to the discussion below, generally dividends paid on the Company's
common stock to a Non-United States Holder not engaged in trade or business in
the United States will be subject to withholding tax at a 30% rate; or such
lower rate as may be specified by an applicable income tax treaty; provided the
dividends are not under the applicable treaty attributable to a United States
permanent establishment of the Non-United States Holder.
If the Non-United States Holder is engaged in trade or business in the
United States, the flat 30% tax rate will not apply unless it can be shown that
the dividend is not effectively connected with that trade or business. Generally
a Form 4224 would be used for this purpose.
If the dividends are effectively connected with the Non-United States
Holder's conduct of a trade or business within the United States or, if an
income tax treaty applies and the dividends are attributable to a United States
permanent establishment of the Non-United States Holder, they will generally be
subject to regular U.S. graduated income tax rates. A Non-United States
corporation that operates a business in the United States may also be subject to
a "branch profits tax" equal to 30% (or such lower rate as may be specified in
an applicable treaty) of the corporation's dividend equivalent amount. This tax
is in addition to U.S. corporate income tax on its effectively connected income.
In order to claim the benefit of an applicable tax treaty rate, a
Non-United States Holder may have to file with the Company or its dividend
paying agent an exemption or reduced treaty rate certificate or letter in
accordance with the terms of such treaty. Under United States Treasury
regulations currently in effect, for purposes of determining whether tax is to
be withheld at a 30% rate or at a reduced rate as specified by an income tax
treaty, the Company ordinarily will presume that dividends paid to an address in
a foreign country are paid to a resident of such country absent knowledge that
such presumption is not warranted (the "address rule"). However, on October 6,
1997, the U.S. Treasury Department issued final regulations on withholding of
income tax payments to foreign persons, effective January 1, 2000, which will
abolish the address rule for purposes of claiming a reduced treaty rate.
Effective January 1, 2000, a Non-United States Holder seeking a reduced rate of
withholding under an income tax treaty would generally be required to provide to
the Company a valid Internal Revenue Service Form W-8 certifying that such
Non-United States Holder is entitled to
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benefits under an income tax treaty. The final regulations also provide special
rules for determining whether, for purposes of assessing the applicability of an
income tax treaty, dividends paid to a Non-United States Holder that is an
entity should be treated as being paid to the entity itself or to the persons
holding an interest in that entity. A Non-United States Holder who is eligible
for a reduced withholding rate may obtain a refund of any excess amounts
withheld by filing an appropriate claim for a refund with the Internal Revenue
Service. Investors should note, however, that there appears to be a growing
trend for the United States to include anti-treaty shopping provisions in tax
treaties. Therefore, there can be no assurance that investors receiving
dividends will be entitled to tax treaty relief if their claims to treaty
benefits are not based on actual residency that has economic substance.
GAIN ON DISPOSITION OF COMMON STOCK
A Non-United States Holder not engaged in trade or business in the United
States generally will not be subject to U.S. federal income tax with respect to
gain realized on a sale or other disposition of the Company's common stock
unless:
- In the case of an individual, he or she is present in the United States
for at least 183 days during the year in which the stock is sold. If the
individual is present in the United States for 183 days in the year of
sale, gain not effectively connected with a trade or business in the
United States is taxed at a flat 30% or lower applicable treaty rate. If
the income is effectively connected with a U.S. trade or business, it is
subject to regular U.S. capital gain tax rates.
- In the case of a Non-United States Holder that is a corporation, the gain
will be taxed in the United States at U.S. capital gain tax rates, if it
is effectively connected with the conduct by the corporation of trade or
business in the United States by the corporation.
- Special rules apply if the Non-United States Holder is subject to tax,
pursuant to the provisions of U.S. tax law applicable to certain U.S.
expatriates whose loss of U.S. citizenship had as one of its principal
purposes the avoidance of U.S. taxes.
- Special rules apply if the Company becomes a "United States real property
holding corporation" within the meaning of sec.sec. 897(c)(2) of the
United States Internal Revenue Code and the Non-United States Holder
held, directly or indirectly, at any time within the five-year period
preceding such disposition, more than 5% of the outstanding common stock
of the Company. Based upon its current and anticipated assets, the
Company believes that it will not become a United States real property
holding corporation. However, since the determination of United States
real property holding corporation status in the future will be based upon
the composition of the assets of the Company from time to time, there can
be no assurance that the Company will not become a United States real
property holding corporation in the future, in which case gain in the
sale of the Company's stock may be subjected to United States tax.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
Under United States Treasury regulations, the Company must report annually
to the Internal Revenue Service and to each Non-United States Holder the amount
of dividends paid to such Holder and any tax withheld with respect to such
dividends. These information reporting requirements apply even if withholding
was not required because the dividends were effectively connected with a trade
or business in the United States of the Non-United States Holder or withholding
was reduced or eliminated by an applicable income tax treaty. Copies of the
information returns reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the Non-United States
Holder is a resident under the provisions of an applicable income tax treaty or
agreement.
United States backup withholding (which generally is a withholding tax
imposed at the rate of 31% on certain payments to persons that fail to furnish
certain information under the United States information reporting requirements)
generally will not apply to: (i) dividends paid to Non-United States Holders
that are subject to the 30% withholding discussed above (or that are not so
subject because a tax treaty applies that
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reduces or eliminates such 30% withholding); or (ii) under current law,
dividends paid to a Non-United States Holder at an address outside of the United
States. However, under final United States Treasury regulations, effective as of
January 1, 2000, a Non-United States Holder generally would be subject to backup
withholding at a 31% rate, unless certain certification procedures (or, in the
case of payments made outside the United States with respect to an offshore
account, certain documentary evidence procedures) are complied with, directly or
through an intermediary. Backup withholding and information reporting generally
will apply to dividends paid to addresses inside the United States on shares of
the Company's common stock to beneficial owners that are not "exempt recipients"
and that fail to provide in the manner required certain identifying information.
The payment of the proceeds of the disposition of the Company's common
stock to or through the U.S. office of a broker is subject to information
reporting unless the disposing holder, under penalty of perjury, certifies its
NonUnited States status or otherwise establishes an exemption. Generally, U.S.
information reporting and backup withholding will not apply to a payment of
disposition proceeds if the payment is made outside the U.S. through a NonUnited
States office of a Non-United States broker. However, information reporting
requirements (but probably, prior to January 1, 2000, not backup withholding)
will apply to a payment of disposition proceeds outside the U.S. if: (A) the
payment is made through an office outside the U.S. of a broker that is either:
(i) a U.S. person; (ii) a foreign person which derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the U.S.;
(iii) a "controlled foreign corporation" for U.S. federal income tax purposes;
or (iv) effective January 1, 2000, but probably not prior to such date, a
foreign broker that is: (1) a foreign partnership, one or more of whose partners
are U.S. persons who, in the aggregate hold more than 50% of the income or
capital interest in the partnership at any time during its tax year; or (2) a
foreign partnership engaged at any time during its tax year in the conduct of a
trade or business in the United States; and (B) the broker fails to maintain
documentary evidence that the holder is a Non-United States Holder and that
certain conditions are met, or that the Holder otherwise is entitled to an
exemption.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the Internal
Revenue Service.
FEDERAL ESTATE TAX
For United States federal income tax purposes, common stock of the Company
that is held by a non-resident alien is deemed property within the United
States. Accordingly, a non-resident alien who is treated as the owner of or has
made certain lifetime transfers of an interest in the Company's common stock may
be required to include the value thereof in his gross estate for U.S. federal
estate tax purposes, and may be subject to U.S. federal estate tax unless an
applicable estate tax treaty provides otherwise. Estates of non-resident aliens
are generally allowed a statutory credit of $13,000 which generally has the
effect of offsetting the U.S. federal estate tax imposed on the first $60,000 of
the taxable estate. However, this credit may be adjusted by an applicable estate
tax treaty.
THE FOREGOING DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY.
ACCORDINGLY, EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT HIS TAX ADVISOR WITH
RESPECT TO THE UNITED STATES FEDERAL INCOME TAX AND FEDERAL ESTATE TAX
CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF THE COMPANY'S COMMON STOCK, AND
THE APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, LOCAL FOREIGN OR OTHER
TAXING JURISDICTION.
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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
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<PAGE> 123
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 the holders of the
Company's unregistered common stock have agreed, subject to certain exceptions,
(i) not, directly or indirectly, without the prior written consent of the
Underwriter, to sell, offer, contract or grant any option to sell (including
without limitation any short sale), pledge, transfer, establish an open "put
equivalent position" within the meaning of Rule 16a-1(h) under the Exchange Act,
or otherwise dispose of any shares of common stock of the Company, options or
warrants to acquire shares of common stock, or securities exchangeable or
exercisable for or convertible into shares of common stock currently or
hereafter owned either of record or beneficially (as defined in Rule 13d-3 under
the Exchange Act) by such person, or publicly announce such person's intention
to do any of the foregoing, until after the close of trading on the date 180
days after the date of this Prospectus; and (ii) to the entry of stop transfer
instructions with the Company's transfer agent and registrar against the
transfer of shares of common stock or securities convertible into or
exchangeable or exercisable for common stock held by such person except in
compliance with the foregoing restrictions; 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.
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.
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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.
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 Exchange. 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.
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INDEX TO DEFINED TERMS
The following list provides the page on which the following defined terms
used in this Prospectus are defined.
<TABLE>
<CAPTION>
PAGE
<S> <C>
Acquisitions................................................ 9
Articles.................................................... 29
Bill Holt Acquisition....................................... 35
Boomershine Automotive...................................... 8
Business Combination Statute................................ 113
Code........................................................ 106
Collision Centers........................................... 36
Collision Note(s)........................................... 36
Collision Centers USA Acquisition........................... 36
Combined Companies.......................................... 51
Commission.................................................. 9
common stock................................................ 3
Company..................................................... Front Cover
CSI......................................................... 6
Day's Chevrolet............................................. 34
Day's Chevrolet Acquisition................................. 34
Disqualifying Disposition................................... 107
Division VP................................................. 82
Employment Agreements....................................... 104
Exchange Act................................................ 32
Executive Manager........................................... 82
Executive Notes............................................. 111
Executive Shares............................................ 111
Fair Price Statute.......................................... 113
FIFO Conversion............................................. 15
Ford........................................................ 16
Franchise Agreement......................................... 16
GBCC........................................................ 29
G.E. Credit Facility........................................ 77
GM.......................................................... 16
GMAC........................................................ 62
Grindstaff Acquisition...................................... 35
Honda....................................................... 20
Hummer...................................................... 4
Incentive Stock Plan........................................ 106
IPO Date.................................................... 107
IPO Price................................................... 107
ISOs........................................................ 106
Jay Note.................................................... 33
Jay Automotive Group Acquisition............................ 33
LIFO Method................................................. 15
Merger...................................................... 33
NADA........................................................ Inside Front Cover
New Floorplan Facility...................................... 51
Nissan...................................................... 16
Non-United States Holder.................................... 117
NSOs........................................................ 106
</TABLE>
<PAGE> 126
<TABLE>
<CAPTION>
PAGE
<S> <C>
Offering.................................................... 3
Price Protection Stock...................................... 113
Registration Statement...................................... 121
Registration Rights Agreement(s)............................ 113
Related Party Leases........................................ 110
Representative.............................................. 120
Robertson Acquisition....................................... 35
ROC......................................................... 35
Saturn...................................................... 18
Securities Act.............................................. 31
South Financial............................................. 7
South Financial Acquisition................................. 36
Sunbelt..................................................... Front Cover
Toyota...................................................... 21
U.S......................................................... 117
U.S. Person................................................. 117
Underwriters................................................ 120
Wade Lease.................................................. 110
Wade Buford Lease........................................... 110
Wade Ford Acquisition....................................... 34
Wade Ford Dealerships....................................... 8
WINCO Partnerships.......................................... 111
</TABLE>
<PAGE> 127
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> 128
<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> 129
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> 130
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> 131
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> 132
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> 133
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> 134
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> 135
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
Robertson 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 also assuming a discount of 10%, which reflects the stocks
trading restrictions). For accounting purposes, Boomershine Group is considered
the accounting acquirer as it will hold the single largest voting interest
subsequent to the Merger with SAG.
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................... 577,500 5,197,500 -- 5,589,000 10,786,500
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
Robertson Group............. 40,000 360,000 -- 7,711,000 8,071,000
Wade Group.................. 385,000 3,465,000 -- $12,054,000 $15,519,000
--------- ---------- ---------- ----------- -----------
4,802,660 $9,022,500 $4,932,000 $52,657,000 $66,611,500
========= ========== ========== =========== ===========
</TABLE>
The Boomershine Group acquisition will be accounted for as a reverse
acquisition/recapitalization 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 $37.6 million.
The promissory note issued in connection with the Boomershine Group
acquisition is due on demand and bears an interest rate of 18%, which reflects
the negotiated settlement with the seller to accept a combination of cash and
notes payable versus all cash at closing. The note to be issued in connection
with the Jay Group
F-9
<PAGE> 136
SUNBELT AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 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.
F-10
<PAGE> 137
SUNBELT AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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
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 administration
expenses amounting to $24,522, $7,500, $162,218 and $416,996, respectively, 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> 138
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> 139
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> 140
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......................... 5,094,956 8,278,826 8,372,554 6,514,094 6,701,569
------------ ------------ ------------ ------------ ------------
238,320,025 262,893,478 247,445,197 184,759,534 178,666,340
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
Finance, commissions and other
revenues......................... 1,239,333 4,059,749 3,032,902 2,158,702 1,302,659
------------ ------------ ------------ ------------ ------------
215,646,608 235,828,722 222,352,618 165,703,974 158,329,010
------------ ------------ ------------ ------------ ------------
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> 141
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............................ (1,477,838) (1,522,891) (1,357,910) (1,055,132) (1,112,253)
Borrowings on notes
payable -- affiliates................. 1,736,902 2,214,844 1,200,621 978,863 5,076,067
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> 142
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 converted 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> 143
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.
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>
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
F-17
<PAGE> 144
BOOMERSHINE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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> 145
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> 146
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. Subsequent to March
31, 1998, SFC cured its debt covenant violation.
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> 147
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, former President and owner of Collision
Centers, Inc., 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> 148
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> 149
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> 150
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> 151
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 as a reverse acquisition/recapitalization.
F-25
<PAGE> 152
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> 153
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> 154
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.................. 2,189,639 2,723,542 2,913,304 948,006 902,144
----------- ----------- ------------ ----------- -----------
79,950,990 96,046,093 101,243,909 25,376,322 24,764,644
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
Finance, commission and other
revenues.................. 468,642 657,382 729,487 195,646 257,431
----------- ----------- ------------ ----------- -----------
70,603,463 84,763,050 89,273,045 22,086,696 21,669,486
----------- ----------- ------------ ----------- -----------
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> 155
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> 156
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.
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
F-30
<PAGE> 157
JAY AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. 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.
F-31
<PAGE> 158
JAY AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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
F-32
<PAGE> 159
JAY AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. BUSINESS COMBINATIONS (CONTINUED)
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> 160
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> 161
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> 162
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> 163
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> 164
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> 165
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................... 2,780,852 2,533,780 2,516,837 765,067 634,930
----------- ----------- ----------- ----------- -----------
52,121,489 56,306,415 58,789,353 13,419,657 13,027,107
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
Finance, commission and other
revenues................... 1,002,577 981,760 1,159,684 297,304 265,143
----------- ----------- ----------- ----------- -----------
45,861,680 49,989,597 51,214,000 11,562,844 11,150,586
----------- ----------- ----------- ----------- -----------
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> 166
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> 167
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> 168
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.
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.
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.
F-42
<PAGE> 169
GRINDSTAFF, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
F-43
<PAGE> 170
GRINDSTAFF, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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>
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>
F-44
<PAGE> 171
GRINDSTAFF, INC.
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>
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> 172
GRINDSTAFF, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Note payable -- General Motors Acceptance Corp.;
bearing interest at prime plus one percent (9.5% at
December 31, 1996 and 10% at December 31, 1997), due
on May 1999, secured by certain fixed assets, parts
and accessories and personal guarantee of a
stockholder of the Company.......................... $285,633 $187,328 $162,752
Note payable -- Reyna Financial Corp., lease on
certain computer equipment, bearing interest which
range between 5% - 11%, payable monthly until 2002,
secured by the equipment leased..................... 133,135 302,320 323,257
-------- -------- --------
418,768 489,648 486,009
Less current maturities of long-term debt and capital
lease............................................... 145,962 163,880 177,835
-------- -------- --------
$272,806 $325,768 $308,174
======== ======== ========
</TABLE>
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.
F-46
<PAGE> 173
GRINDSTAFF, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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>
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> 174
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> 175
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> 176
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.......... 2,424,016 1,974,405 1,470,432 480,980 500,465
------------ ------------ ------------ ----------- -----------
166,039,915 144,113,392 116,979,620 41,860,557 40,150,491
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
Finance, commission and
other revenues.......... 698,148 519,671 439,866 164,248 173,867
------------ ------------ ------------ ----------- -----------
153,378,330 131,981,723 107,026,751 38,676,456 37,230,838
------------ ------------ ------------ ----------- -----------
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> 177
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> 178
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.
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> 179
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> 180
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> 181
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. Revenue from vehicle rentals for 1996 and 1995 was
approximately $224,000 and $580,000, respectively and is included in other
revenues in the combined statements of income.
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
F-55
<PAGE> 182
WADE FORD, INC. AND WADE FORD BUFORD, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. PROFIT SHARING PLAN (CONTINUED)
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.
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.
F-56
<PAGE> 183
WADE FORD, INC. AND WADE FORD BUFORD, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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> 184
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> 185
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> 186
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...... 286,300 473,192 142,225 115,338
----------- ----------- ---------- ----------
21,567,960 23,510,489 4,858,564 5,678,257
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
Finance, commission and other revenues...... 69,913 85,988 58,030 47,345
----------- ----------- ---------- ----------
18,517,045 20,535,424 4,202,091 4,918,276
----------- ----------- ---------- ----------
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> 187
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> 188
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
F-62
<PAGE> 189
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)
contract execution. 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> 190
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> 191
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> 192
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> 193
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> 194
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> 195
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> 196
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.... 1,489,104 1,404,902 327,307 390,916
----------- ----------- ----------- -----------
60,011,042 61,331,981 14,968,490 14,595,543
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
Finance, commission and other revenues.... 491,187 548,945 118,524 136,160
----------- ----------- ----------- -----------
53,237,158 55,093,954 13,460,684 12,988,799
----------- ----------- ----------- -----------
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> 197
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> 198
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.
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> 199
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> 200
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> 201
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> 202
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> 203
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> 204
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> 205
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> 206
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> 207
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> 208
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> 209
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>
Prior to 1997, finance receivables were purchased from dealers on (a) a
recourse basis or (b) subject to a holdback arrangement whereby an agreed-upon
percentage of the loan purchase price was retained (held back) by SFC. This
holdback amount was used by SFC to offset future credit losses in the portfolio
of loans purchased from each dealer.
Early in 1997, SFC began purchasing finance receivables solely on a
non-recourse discount basis. Under this arrangement, SFC purchases the
receivables at a discount with no future obligation to the dealers. In addition,
since the receivable are non-recourse, SFC retains full risk for any credit
loss.
F-83
<PAGE> 210
SOUTH FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. FINANCE RECEIVABLES (CONTINUED)
Management of SFC periodically assesses whether the recourse and holdback
arrangements adequately provide for anticipated credit losses. As a result of
the change in the mix of loan types originated and purchased by SFC, management
established an allowance for doubtful accounts in early 1997 to cover potential
credit losses in its existing loan portfolio. The timing of this event coincided
with SFC's decision to purchase finance receivables on the non-recourse discount
basis.
Since 1996, finance receivables subject to dealer recourse are charged
against the allowance for doubtful accounts when and if the dealer is unwilling
or unable to meet its recourse obligation. Finance receivables subject to a
holdback reserve arrangement are charged against the allowance for doubtful
accounts when the cumulative loss per dealer exceeds the amount in holdback for
that dealer.
Prior to 1997, credit losses on recourse deals were generally recovered
from the dealer. On holdback deals, credit losses reduced the holdback amounts
due to the dealer. Losses were recognized 1) for recourse deals, when the dealer
did not meet its obligation and 2) for holdback deals, when the cumulative loss
per dealer exceeded the amount in holdback for that dealer.
Finance receivables purchased on a non-recourse discount basis are charged
off against the allowance for doubtful accounts when the amount exceeds 60 days
past due or earlier if management concludes that collection is unlikely.
Amounts charged back to dealers under recourse arrangements totaled
$1,853,845 and $677,564 in 1996 and 1997, respectfully.
The following is a presentation of the components of the finance
receivables as of the date indicated:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Dealer recourse receivables................................. $ 1,126,862 $ 2,150,288
Holdback receivables........................................ 3,636,134 14,991,055
Non-recourse discount receivables........................... 10,120,184 --
----------- -----------
$14,883,180 $17,141,343
=========== ===========
</TABLE>
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>
F-84
<PAGE> 211
SOUTH FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. SENIOR DEBT (CONTINUED)
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>
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
F-85
<PAGE> 212
SOUTH FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. SUBORDINATED DEBT (CONTINUED)
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. CONTRACTUAL OBLIGATIONS PAYABLE TO DEALERS
Following is an analysis of contractual obligations payable to dealers for
the years ended December 31, 1995, 1996 and 1997:
<TABLE>
<CAPTION>
RECOURSE HOLDBACK
ACCOUNTS ACCOUNTS TOTAL
----------- ----------- ------------
<S> <C> <C> <C>
Balance at January 1, 1995............................. $ 2,643,498 $ 793,846 $ 3,437,344
Additions, net of payments to dealers for complying
loans............................................. 266,047 6,269,668 6,535,715
Charge-backs......................................... (495,340) (4,337,247) (4,832,587)
----------- ----------- ------------
Balance at December 31, 1995........................... 2,414,205 2,726,267 5,140,472
Additions, net of payments to dealers for complying
loans............................................. 566,930 8,377,681 8,944,611
Charge-backs......................................... (1,853,845) (8,312,033) (10,165,878)
Balance at December 31, 1996........................... 1,127,290 2,791,915 3,919,205
Additions, net of payments to dealers for complying
loans............................................. 276,952 127,289 404,241
Charge-backs......................................... (677,564) (2,194,962) (2,872,526)
Transfer to allowance for doubtful accounts.......... -- (724,242) (724,242)
----------- ----------- ------------
Balance at December 31, 1997........................... $ 726,678 $ -- $ 726,678
=========== =========== ============
</TABLE>
7. 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>
F-86
<PAGE> 213
SOUTH FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES (CONTINUED)
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.
8. 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.
F-87
<PAGE> 214
SOUTH FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. 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>
10. 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-88
<PAGE> 215
- ------------------------------------------------------
- ------------------------------------------------------
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.......................... 16
The Merger............................ 33
The Acquisitions...................... 33
Use of Proceeds....................... 37
Dividend Policy....................... 37
Capitalization........................ 38
Dilution.............................. 39
Selected Financial Data............... 40
Pro Forma Combined and Condensed
Financial Data...................... 42
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 50
Business.............................. 79
Management............................ 101
Principal Shareholders................ 109
Certain Transactions.................. 110
Description of Capital Stock.......... 111
Shares Eligible for Future Sale....... 116
Certain United States Federal Tax
Considerations for Non-United States
Holders............................. 117
Underwriting.......................... 120
Legal Matters......................... 122
Experts............................... 122
Additional Information................ 122
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 LOGO)
COMMON STOCK
------------------------
PROSPECTUS
------------------------
RAYMOND JAMES &
ASSOCIATES, INC.
, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 216
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..................................... 800,000
Nasdaq National Market Listing Fee.......................... 63,725
Accounting fees and expenses................................ 1,545,000
Blue Sky fees and expenses.................................. 5,000
Printing expenses........................................... 500,000
Transfer Agent Fees......................................... 5,000
Miscellaneous............................................... 53,293
----------
Total............................................. $3,000,000
==========
</TABLE>
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> 217
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 8 of the Underwriting Agreement (Exhibit 1.1)
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 the transactions for which an exemption is claimed
pursuant to Section 4(2) of the Securities Act or Regulation D, 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. In connection with the
issuances of securities for which an exemption is claimed pursuant to Rule 701,
the securities have been offered and issued by the Registrant to executive
officers, employees and consultants for compensating purposes pursuant to
written plans or arrangements.
- 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.
II-2
<PAGE> 218
- The Registrant will issue the following shares of its common stock to the
following persons in connection with the Acquisitions: (i) 385,000 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) 577,500 shares to the shareholders
of Day's Chevrolet in 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, as assigned on March 31, 1998, as further
amended on July 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, as further
amended on April 28, 1998, and as further amended on July
31, 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, as amended on July 31, 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.
</TABLE>
II-3
<PAGE> 219
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
2.7** -- Stock Purchase Agreement among BAG Florida II, Inc. and the
shareholder of South Financial Corporation, dated December
23, 1997.
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.
2.9 -- Agreement and Plan of Merger by and between Sunbelt
Automotive Group, Inc. and Boomershine Automotive Group,
Inc., dated April 8, 1998, as amended on June 19, 1998, as
further amended on July 30, 1998.
3.1** -- Articles of Incorporation of the Company.
3.2 -- Articles of Amendment to Articles of Incorporation of the
Company.
3.3 -- Amended and Restated 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 -- 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 May 5, 1998.
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 II, 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.
10.16** -- Hummer Dealer Agreement by and between AM General Sales
Corporation and Boomershine Hummer, Inc., dated July 22,
1992
10.17** -- Form of Dealership Standards Addendum for Boomershine Isuzu,
Inc. by and between Boomershine Isuzu, Inc. and American
Isuzu Motors, Inc.; letter from American Isuzu Motors, Inc.
to Boomershine Isuzu, Inc., dated December 5, 1997
10.18** -- Ford Sales and Service Agreement by and between Boomershine
Ford, Inc. and Ford Motor Company, dated August 12, 1992
10.19** -- Nissan Dealer Sales and Service Agreement by and between
Nissan Division of Nissan Motors Corporation in U.S.A. and
Boomershine Pontiac-GMC Truck, Inc. d/b/a Boomershine
Nissan, dated May 22, 1989, as amended
10.20 -- Buick Motor Division Dealer Sales and Service Agreement by
and between Buick Motor Division of General Motors
Corporation and Boomershine Pontiac-Buick-GMC, Inc., dated
February 6, 1996
10.21 -- GMC Truck Division Dealer Sales and Service Agreement by and
between General Motors Corporation, GMC Truck Division and
Boomershine Pontiac-Buick-GMC, Inc., dated February 16, 1996
</TABLE>
II-4
<PAGE> 220
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.22 -- Pontiac Division Dealer Sales and Service Agreement by and
between General Motors Corporation, Pontiac Division and
Boomershine Pontiac-GMC Truck, Inc., dated November 1, 1995
10.23** -- Agreement by and between Honda Automobile Division, American
Honda Motor Co., Inc. and Thompson Automotive Group, Inc.
d/b/a Boomershine Honda, dated April 9, 1996; Honda
Automobile Dealer Sales and Service Agreement
10.24** -- Mitsubishi Motor Sales of America, Inc. Dealer Sales and
Service Agreement by and between Mitsubishi Motor Sales of
America, Inc. and Boomershine North Cobb, Inc., dated
November 27, 1995
10.25** -- Chevrolet-Geo Dealer Sales and Service Agreement by and
between General Motors Corporation, Chevrolet Motor Division
and Day's Chevrolet, Inc., dated November 27, 1995
10.26** -- Kia Dealer Sales and Service Agreement by and between Kia
Motors America, Inc. and Grindstaff, Inc., dated May 14,
1996
10.27** -- Chrysler Sales and Service Agreement by and between
Grindstaff Chevrolet, Inc. and Chrysler Motor Corporation,
dated April 11, 1990
10.28** -- Plymouth Sales and Service Agreement by and between
Grindstaff Chevrolet, Inc. and Chrysler Motor Corporation,
dated April 11, 1990
10.29** -- Dodge Sales and Service Agreement by and between Grindstaff
Chevrolet, Inc. and Chrylser Motor Corporation, dated April
11, 1990
10.30** -- Jeep Sales and Service Agreement by and between Grindstaff
Chevrolet, Inc. and Chrysler Motor Corporation, dated April
11, 1990
10.31** -- Term Sales and Service Agreement by and between Grindstaff
Chevrolet, Inc. and Chrysler Motor Corporation, dated
December 12, 1988
10.32** -- Oldsmobile Division Dealer Sales and Service Agreement by
and between General Motors Corporation, Oldsmobile Division
and Robertson Oldsmobile-Cadillac, Inc., dated August 28,
1995
10.33** -- Cadillac Motor Car Division Dealer Sales and Service
Agreement by and between General Motors Corporation
(Cadillac Motor Car Division) and Robertson
Oldsmobile-Cadillac, Inc., dated August 28, 1995
10.34** -- Isuzu Dealer Sales and Service Agreement by and between
American Isuzu Motors, Inc. and Robertson Oldsmobile
Cadillac, Inc., dated April 23, 1990
10.35 -- Mazda Dealer Agreement by and between Robertson
Cadillac-Oldsmobile, Inc. and Mazda Motors of America, Inc.,
dated June 3, 1994
10.36** -- Ford Sales and Service Agreement by and between Hones, Inc.
and Ford Motor Company, dated October 14, 1993
10.37** -- Ford Sales and Service Agreement by and between Wade Ford,
Inc. and Ford Motor Company, dated November 8, 1983
10.38** -- Ford Sales and Service Agreement by and between Wade Ford
Buford, Inc. and Ford Motor Company, dated July 3, 1991
10.39** -- Pontiac Dealer Sales and Service Agreement by and between
General Motors Corporation, Pontiac and Jay
Pontiac-Buick-GMC, Inc., dated December 16, 1996
10.40** -- Buick Motor Division Sales and Service Agreement by and
between Buick Motor Division of General Motors Corporation
and Jay Pontiac-Buick-GMC, Inc., dated December 16, 1996
10.41** -- GMC Sales and Service Agreement by and between General
Motors Corporation, GMC and Jay Pontiac-Buick-GMC, Inc.,
dated December 16, 1996
10.42** -- Mitsubishi Motor Sales of America, Inc. Dealer Sales and
Service Agreement by and between Mitsubishi Motor Sales of
America, Inc. and Jay Pontiac-GMC Truck, Inc., dated October
4, 1996
10.43** -- Mazda Dealer Agreement by and between Jay Automotive Group
V, Inc. and Mazda Motor of America, Inc., dated November 28,
1995
</TABLE>
II-5
<PAGE> 221
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.44** -- Toyota Dealer Agreement by and between Southeast Toyota
Distributors, Inc. and Jay Automotive Group II, Inc., dated
December 13, 1995, as extended
10.45** -- Saturn Distribution Corporation Retailer Agreement by and
between Saturn Distribution Corporation and Jay Automotive
Group IV, Inc., dated March 15, 1997
10.46** -- Ford Public Company Agreement (to become effective upon the
completion of the Offering)
10.47** -- Ford Sales and Service Agreement by and between Franklin
Ford Mercury, Inc. and Ford Motor Company (to become
effective upon the completion of the Offering)
10.48** -- Ford Sales and Service Agreement by and between Wade Ford
Buford, Inc. and Ford Motor Company (to become effective
upon the completion of the Offering)
10.49** -- Ford Sales and Service Agreement by and between Wade Ford,
Inc. and Ford Motor Company (to become effective upon the
completion of the Offering)
10.50** -- Ford Sales and Service Agreement by and between Boomershine
Ford, Inc. and Ford Motor Company (to become effective upon
the completion of the Offering)
10.51 -- Sublease between Novacare Outpatient Rehabilitation Division
East, Inc. and Boomershine Automotive Group, Inc., dated
February 5, 1998
10.52 -- Commercial Lease Agreement by and between James E. L.
Peters, Jr. and Boomershine Collision Centers, Inc., dated
April 23, 1998
10.53 -- Commercial Lease Agreement by and between James E. L.
Peters, Jr. and Southlake Collision Center, Inc., effective
as of November 1, 1994
10.54 -- Commercial Lease Agreement by and between James E. L.
Peters, Jr. and Southlake Collision Henry County, Inc.,
effective as of June 1, 1997, as amended on December 1, 1997
10.55 -- Shopping Center Lease by and between Cedar Hills Investors,
LLC and South Financial Corporation, dated March 16, 1998
10.56 -- Lease Agreement by and between WINCO II, L.P. and
Boomershine Pontiac-Buick-GMC, Inc., dated June 26, 1998
(Hummer Lease)
10.57 -- Lease by and between Alan K. Arnold, Wade Ford, Inc. and
Sunbelt Automotive Group, Inc. (Guarantor), dated June 2,
1998
10.58 -- Lease by and between Alan K. Arnold, Wade Ford Buford, Inc.
and Sunbelt Automotive Group, Inc. (Guarantor), dated June
2, 1998
10.59 -- Dealership Lease between Marshall M. Manor and Wade Ford,
Inc., dated September 1, 1983
10.60 -- Lease Agreement by and between KIMCO Autofund, LP and
Franklin Ford Mercury, Inc., dated June 15, 1998
10.61 -- Form of Lease Agreement by and between E. Moss Robertson,
Jr. and Robertson Oldsmobile-Cadillac, Inc.
10.62 -- Form of Sublease Agreement by and between Jay Leasing, Inc.
and Jay Automotive Group, Inc. (Automall Lease)
10.63 -- Form of Lease Agreement by and between Jay Leasing, Inc. and
Jay Automotive Group, Inc. (Veteran's Parkway Lease)
10.64 -- Lease Agreement between Joyce M. Maloof and Southeast Toyota
Distributors, Inc., dated October 6, 1989, as assigned
pursuant to that Assignment of Lease and Option by and
between Southeast Toyota Distributors, Inc. and Columbus
Auto Sales, Inc., dated October 6 1989; as further assigned
pursuant to that Second Assignment of Lease and Option by
and between Columbus Auto Sales, Inc. and Jay Automotive
Group II, Inc., dated July 12, 1990
10.65 -- Form of Ford Motor Company Ford Sales and Service Agreement
Standard Provisions
10.66 -- Form of Nissan Public Ownership Addendum
10.67 -- Form of American Honda Motor Co., Inc. Policy on the Public
Ownership of Honda and Acura Dealerships
10.68 -- Form of Supplemental Agreement to General Motors Corporation
Dealer Sales and Service Agreement
</TABLE>
II-6
<PAGE> 222
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.69 -- Chevrolet-Geo Dealer Sales and Service Agreement, by and
between General Motors Corporation, Chevrolet Motor Division
and Grindstaff Chevrolet, Inc., dated July 7, 1987
10.70 -- Agreement of Lease by and between Kimco Autofund, L.P. and
Grindstaff, Inc., dated July 31, 1998
10.71 -- Form of Agreement between Nissan Motor Corporation in U.S.A.
and Sunbelt Automotive Group, Inc.
10.72 -- Nonrecourse Promissory Note and Stock Pledge Agreement by
Robert W. Gundeck in favor of Sunbelt Automotive Group,
Inc., dated May 1, 1998
10.73 -- Nonrecourse Promissory Note and Stock Pledge Agreement by
Stephen C. Whicker in favor of Sunbelt Automotive Group,
Inc., dated May 1, 1998
10.74 -- Nonrecourse Promissory Note and Stock Pledge Agreement by
Ricky L. Brown in favor of Sunbelt Automotive Group, Inc.,
dated May 1, 1998
10.75 -- Nonrecourse Promissory Note and Stock Pledge Agreement by
Charles K. Yancey in favor of Sunbelt Automotive Group,
Inc., dated May 1, 1998
10.76 -- Form of Commercial Lease Agreement by and between CLD
Properties, L.P. and ALD Properties, L.P., as landlords, and
BAG of Georgia IV, Inc., as tenant
10.77 -- Approval Letter from AM General Corporation (Hummer)
21.1 -- Subsidiaries
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.
99.4 -- Consent of Alan K. Arnold
</TABLE>
- ---------------
** Previously filed.
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.
II-7
<PAGE> 223
(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.
II-8
<PAGE> 224
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 10th day of August, 1998.
SUNBELT AUTOMOTIVE GROUP, INC.
a Georgia corporation
By: /s/ ROBERT W. GUNDECK
------------------------------------
Robert W. Gundeck
Chief Executive Officer
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 August 10, 1998
- ----------------------------------------------------- Senior Vice President
Walter M. Boomershine, Jr.
* Chief Operating Officer, August 10, 1998
- ----------------------------------------------------- President and Director
Charles K. Yancey
* Chief Executive Officer and August 10, 1998
- ----------------------------------------------------- Director (Principal Executive
Robert W. Gundeck Officer)
* Chief Financial Officer, Vice August 10, 1998
- ----------------------------------------------------- President of Finance and
Ricky L. Brown Treasurer (Principal
Accounting and Financial
Officer)
/s/ STEPHEN C. WHICKER Executive Vice President of August 10, 1998
- ----------------------------------------------------- Corporate Development,
Stephen C. Whicker General Counsel, Secretary
and Director
*By: /s/ STEPHEN C. WHICKER
-----------------------------------------------
Stephen C. Whicker
Attorney-in-fact
</TABLE>
II-9
<PAGE> 225
EXHIBIT INDEX
<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, as assigned on March 31, 1998, as further
amended on July 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, as further
amended on April 28, 1998, and as further amended on July
31, 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, as amended on July 31, 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.
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.
2.9 -- Agreement and Plan of Merger by and between Sunbelt
Automotive Group, Inc. and Boomershine Automotive Group,
Inc., dated April 8, 1998, as amended on June 19, 1998, as
further amended on July 30, 1998.
3.1** -- Articles of Incorporation of the Company.
3.2 -- Articles of Amendment to Articles of Incorporation of the
Company.
3.3 -- Amended and Restated 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 -- 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 May 5, 1998.
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.
</TABLE>
<PAGE> 226
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
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 II, 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.
10.16** -- Hummer Dealer Agreement by and between AM General Sales
Corporation and Boomershine Hummer, Inc., dated July 22,
1992
10.17** -- Form of Dealership Standards Addendum for Boomershine Isuzu,
Inc. by and between Boomershine Isuzu, Inc. and American
Isuzu Motors, Inc.; letter from American Isuzu Motors, Inc.
to Boomershine Isuzu, Inc., dated December 5, 1997
10.18** -- Ford Sales and Service Agreement by and between Boomershine
Ford, Inc. and Ford Motor Company, dated August 12, 1992
10.19** -- Nissan Dealer Sales and Service Agreement by and between
Nissan Division of Nissan Motors Corporation in U.S.A. and
Boomershine Pontiac-GMC Truck, Inc. d/b/a Boomershine
Nissan, dated May 22, 1989, as amended
10.20 -- Buick Motor Division Dealer Sales and Service Agreement by
and between Buick Motor Division of General Motors
Corporation and Boomershine Pontiac-Buick-GMC, Inc., dated
February 6, 1996
10.21 -- GMC Truck Division Dealer Sales and Service Agreement by and
between General Motors Corporation, GMC Truck Division and
Boomershine Pontiac-Buick-GMC, Inc., dated February 16, 1996
10.22 -- Pontiac Division Dealer Sales and Service Agreement by and
between General Motors Corporation, Pontiac Division and
Boomershine Pontiac-GMC Truck, Inc., dated November 1, 1995
10.23** -- Agreement by and between Honda Automobile Division, American
Honda Motor Co., Inc. and Thompson Automotive Group, Inc.
d/b/a Boomershine Honda, dated April 9, 1996; Honda
Automobile Dealer Sales and Service Agreement
10.24** -- Mitsubishi Motor Sales of America, Inc. Dealer Sales and
Service Agreement by and between Mitsubishi Motor Sales of
America, Inc. and Boomershine North Cobb, Inc., dated
November 27, 1995
10.25** -- Chevrolet-Geo Dealer Sales and Service Agreement by and
between General Motors Corporation, Chevrolet Motor Division
and Day's Chevrolet, Inc., dated November 27, 1995
10.26** -- Kia Dealer Sales and Service Agreement by and between Kia
Motors America, Inc. and Grindstaff, Inc., dated May 14,
1996
10.27** -- Chrysler Sales and Service Agreement by and between
Grindstaff Chevrolet, Inc. and Chrysler Motor Corporation,
dated April 11, 1990
10.28** -- Plymouth Sales and Service Agreement by and between
Grindstaff Chevrolet, Inc. and Chrysler Motor Corporation,
dated April 11, 1990
10.29** -- Dodge Sales and Service Agreement by and between Grindstaff
Chevrolet, Inc. and Chrylser Motor Corporation, dated April
11, 1990
10.30** -- Jeep Sales and Service Agreement by and between Grindstaff
Chevrolet, Inc. and Chrysler Motor Corporation, dated April
11, 1990
10.31** -- Term Sales and Service Agreement by and between Grindstaff
Chevrolet, Inc. and Chrysler Motor Corporation, dated
December 12, 1988
10.32** -- Oldsmobile Division Dealer Sales and Service Agreement by
and between General Motors Corporation, Oldsmobile Division
and Robertson Oldsmobile-Cadillac, Inc., dated August 28,
1995
10.33** -- Cadillac Motor Car Division Dealer Sales and Service
Agreement by and between General Motors Corporation
(Cadillac Motor Car Division) and Robertson
Oldsmobile-Cadillac, Inc., dated August 28, 1995
10.34** -- Isuzu Dealer Sales and Service Agreement by and between
American Isuzu Motors, Inc. and Robertson Oldsmobile
Cadillac, Inc., dated April 23, 1990
</TABLE>
<PAGE> 227
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.35 -- Mazda Dealer Agreement by and between Robertson
Cadillac-Oldsmobile, Inc. and Mazda Motors of America, Inc.,
dated June 3, 1994
10.36** -- Ford Sales and Service Agreement by and between Hones, Inc.
and Ford Motor Company, dated October 14, 1993
10.37** -- Ford Sales and Service Agreement by and between Wade Ford,
Inc. and Ford Motor Company, dated November 8, 1983
10.38** -- Ford Sales and Service Agreement by and between Wade Ford
Buford, Inc. and Ford Motor Company, dated July 3, 1991
10.39** -- Pontiac Dealer Sales and Service Agreement by and between
General Motors Corporation, Pontiac and Jay
Pontiac-Buick-GMC, Inc., dated December 16, 1996
10.40** -- Buick Motor Division Sales and Service Agreement by and
between Buick Motor Division of General Motors Corporation
and Jay Pontiac-Buick-GMC, Inc., dated December 16, 1996
10.41** -- GMC Sales and Service Agreement by and between General
Motors Corporation, GMC and Jay Pontiac-Buick-GMC, Inc.,
dated December 16, 1996
10.42** -- Mitsubishi Motor Sales of America, Inc. Dealer Sales and
Service Agreement by and between Mitsubishi Motor Sales of
America, Inc. and Jay Pontiac-GMC Truck, Inc., dated October
4, 1996
10.43** -- Mazda Dealer Agreement by and between Jay Automotive Group
V, Inc. and Mazda Motor of America, Inc., dated November 28,
1995
10.44** -- Toyota Dealer Agreement by and between Southeast Toyota
Distributors, Inc. and Jay Automotive Group II, Inc., dated
December 13, 1995, as extended
10.45** -- Saturn Distribution Corporation Retailer Agreement by and
between Saturn Distribution Corporation and Jay Automotive
Group IV, Inc., dated March 15, 1997
10.46** -- Ford Public Company Agreement (to become effective upon the
completion of the Offering)
10.47** -- Ford Sales and Service Agreement by and between Franklin
Ford Mercury, Inc. and Ford Motor Company (to become
effective upon the completion of the Offering)
10.48** -- Ford Sales and Service Agreement by and between Wade Ford
Buford, Inc. and Ford Motor Company (to become effective
upon the completion of the Offering)
10.49** -- Ford Sales and Service Agreement by and between Wade Ford,
Inc. and Ford Motor Company (to become effective upon the
completion of the Offering)
10.50** -- Ford Sales and Service Agreement by and between Boomershine
Ford, Inc. and Ford Motor Company (to become effective upon
the completion of the Offering)
10.51 -- Sublease between Novacare Outpatient Rehabilitation Division
East, Inc. and Boomershine Automotive Group, Inc., dated
February 5, 1998
10.52 -- Commercial Lease Agreement by and between James E. L.
Peters, Jr. and Boomershine Collision Centers, Inc., dated
April 23, 1998
10.53 -- Commercial Lease Agreement by and between James E. L.
Peters, Jr. and Southlake Collision Center, Inc., effective
as of November 1, 1994
10.54 -- Commercial Lease Agreement by and between James E. L.
Peters, Jr. and Southlake Collision Henry County, Inc.,
effective as of June 1, 1997, as amended on December 1, 1997
10.55 -- Shopping Center Lease by and between Cedar Hills Investors,
LLC and South Financial Corporation, dated March 16, 1998
10.56 -- Lease Agreement by and between WINCO II, L.P. and
Boomershine Pontiac-Buick-GMC, Inc., dated June 26, 1998
(Hummer Lease)
10.57 -- Lease by and between Alan K. Arnold, Wade Ford, Inc. and
Sunbelt Automotive Group, Inc. (Guarantor), dated June 2,
1998
10.58 -- Lease by and between Alan K. Arnold, Wade Ford Buford, Inc.
and Sunbelt Automotive Group, Inc. (Guarantor), dated June
2, 1998
10.59 -- Dealership Lease between Marshall M. Manor and Wade Ford,
Inc., dated September 1, 1983
10.60 -- Lease Agreement by and between KIMCO Autofund, LP and
Franklin Ford Mercury, Inc., dated June 15, 1998
10.61 -- Form of Lease Agreement by and between E. Moss Robertson,
Jr. and Robertson Oldsmobile-Cadillac, Inc.
</TABLE>
<PAGE> 228
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.62 -- Form of Sublease Agreement by and between Jay Leasing, Inc.
and Jay Automotive Group, Inc. (Automall Lease)
10.63 -- Form of Lease Agreement by and between Jay Leasing, Inc. and
Jay Automotive Group, Inc. (Veteran's Parkway Lease)
10.64 -- Lease Agreement between Joyce M. Maloof and Southeast Toyota
Distributors, Inc., dated October 6, 1989, as assigned
pursuant to that Assignment of Lease and Option by and
between Southeast Toyota Distributors, Inc. and Columbus
Auto Sales, Inc., dated October 6 1989; as further assigned
pursuant to that Second Assignment of Lease and Option by
and between Columbus Auto Sales, Inc. and Jay Automotive
Group II, Inc., dated July 12, 1990
10.65 -- Form of Ford Motor Company Ford Sales and Service Agreement
Standard Provisions
10.66 -- Form of Nissan Public Ownership Addendum
10.67 -- Form of American Honda Motor Co., Inc. Policy on the Public
Ownership of Honda and Acura Dealerships
10.68 -- Form of Supplemental Agreement to General Motors Corporation
Dealer Sales and Service Agreement
10.69 -- Chevrolet-Geo Dealer Sales and Service Agreement, by and
between General Motors Corporation, Chevrolet Motor Division
and Grindstaff Chevrolet, Inc., dated July 7, 1987
10.70 -- Agreement of Lease by and between Kimco Autofund, L.P. and
Grindstaff, Inc., dated July 31, 1998
10.71 -- Form of Agreement between Nissan Motor Corporation in U.S.A.
and Sunbelt Automotive Group, Inc.
10.72 -- Nonrecourse Promissory Note and Stock Pledge Agreement by
Robert W. Gundeck in favor of Sunbelt Automotive Group,
Inc., dated May 1, 1998
10.73 -- Nonrecourse Promissory Note and Stock Pledge Agreement by
Stephen C. Whicker in favor of Sunbelt Automotive Group,
Inc., dated May 1, 1998
10.74 -- Nonrecourse Promissory Note and Stock Pledge Agreement by
Ricky L. Brown in favor of Sunbelt Automotive Group, Inc.,
dated May 1, 1998
10.75 -- Nonrecourse Promissory Note and Stock Pledge Agreement by
Charles K. Yancey in favor of Sunbelt Automotive Group,
Inc., dated May 1, 1998
10.76 -- Form of Commercial Lease Agreement by and between CLD
Properties, L.P. and ALD Properties, L.P., as landlords, and
BAG of Georgia IV, Inc., as tenant
10.77 -- Approval Letter from AM General Corporation (Hummer)
21.1 -- Subsidiaries
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.
99.4 -- Consent of Alan K. Arnold
</TABLE>
- ---------------
** Previously filed.
<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>
v
<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.
1
<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
5
<PAGE> 12
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
6
<PAGE> 13
(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.
7
<PAGE> 14
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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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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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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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.
36
<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,
37
<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
38
<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.
39
<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
40
<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.
41
<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]
42
<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
43
<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
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<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> 58
EXTENSION OF CLOSING DATE DEADLINE,
APPROVAL OF PARTIAL REDEMPTION, AND
AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS EXTENSION, APPROVAL AND AMENDMENT, made and entered into as of
July 30, 1998, by and between SUNBELT AUTOMOTIVE GROUP, INC., a Georgia
corporation ("Sunbelt"), JAY AUTOMOTIVE GROUP, INC., a Georgia corporation (the
"Company" or "JAG") and JAMES G. STELZENMULLER, III (the "Stockholder"),
WITNESSETH:
THAT WHEREAS, the parties hereto and other parties related to Sunbelt
entered into a Stock Purchase Agreement (the "SPA") dated as of January 5, 1998,
for the sale and purchase of JAG shares owned by the Stockholder to BAG;
WHEREAS, by letter agreement dated March 23, 1998, the parties hereto
agreed to certain revisions and amendments to the SPA as stated therein;
WHEREAS, by a Consent and Assignment instrument dated March 31, 1998,
the other parties to the SPA related to Sunbelt, who are not named herein, with
the consent of the other parties hereto, assigned to Sunbelt all of their rights
and interest in and to the SPA;
WHEREAS, by letter agreement dated June 12, 1998, the parties hereto
agreed to an extension of the Closing Date Deadline as defined in the SPA to and
including July 31, 1998;
WHEREAS, Sunbelt has indicated that the IPO described in the SPA will
not be closed by July 31, 1998, and for that and other reasons, including the
mutual covenants, conditions and considerations set forth herein, the parties
wish
Page 1
<PAGE> 59
to further extend the Closing Date Deadline and agree to certain other
revisions, additions, amendments and modifications to the SPA as set forth
herein,
NOW, THEREFORE, for and 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 agree
as follows:
1. EXTENSION OF CLOSING DATE DEADLINE. The Closing Date Deadline in the
SPA shall be further extended to and including September 4, 1998,
subject to the conditions set forth herein.
2. PARTIAL REDEMPTION. To satisfy the provisions of Paragraphs 1.5 and
Article 11 of the SPA, JAG shall distribute the assets described on
Exhibit A, attached hereto and made a part hereof, to the Stockholder
prior to the IPO closing in partial redemption of JAG stock as
contemplated by the SPA. The parties agree that the amount of the cash
distribution described in Article 11 of the SPA shall be cash in the
amount of $1,339,102.00. All parties hereto agree that said
distribution shall be deemed to satisfy in full the rights of the
Stockholder to receive distribution under Article 11 of the SPA and
to resolve and settle all obligations of the Shareholder to reimburse
Sunbelt and/or JAG for any tax consequences that result from or arise
out of the spin-offs, partial redemption and/or the distributions to
Stockholder described herein, and no party hereto shall have any right
whatsoever to demand repayment, a reduction or an increase of said
amount after closing. The parties hereto further agree that any tax
consequences to Sunbelt, JAG or any subsidiary that may arise or result
from the said spin-offs, partial redemption and/or the distributions
described herein shall be the sole responsibility of such corporation,
and the Stockholder shall have no liability or responsibility
therefor. The parties hereto
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<PAGE> 60
further acknowledge and affirm that they have had adequate and ample
opportunity to investigate and review the books and records of JAG, to
consult with accountants and attorneys and other parties of their
choosing, and to take any and all action necessary for each to approve
said spin-offs, partial redemption and/or the distributions to
Stockholder described herein pursuant to the provisions set forth
herein.
3. REAFFIRMATION. All other provisions of the SPA, amendments and
revisions thereto not in conflict herewith shall remain in full force
and effect and are hereby ratified by the parties.
4. GUARANTIES. If the debts of JAG to First Union National Bank, World
Omni Financial Corporation and/or Regions Bank are not satisfied in
full at closing, Sunbelt shall cause said creditors to release
Stockholder from any guaranties of such indebtedness.
5. CLOSING DOCUMENTS. The parties hereto acknowledge and affirm that they
approve and agree to the form of the following listed documents which
shall be executed at closing:
(a) Sublease;
(b) Employment Agreement;
(c) Non-Competition Agreement; and
(d) Promissory Note.
IN WITNESS WHEREOF, the parties hereto have caused this Extension and
Amendment to Stock Purchase Agreement to be duly executed as of the day and year
first above written.
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<PAGE> 61
SUNBELT AUTOMOTIVE GROUP, INC.
Attest: By: /s/ Charles K. Yancey
---------------------------- ---------------------------------
Name: Name: Charles K. Yancey
------------------------------ -------------------------------
Title: Title: COO
----------------------------- ------------------------------
(Corporate Seal)
[SIGNATURES ON NEXT PAGE]
JAY AUTOMOTIVE GROUP, INC.
Attest: By: /s/ J. G. Stelzenmuller
---------------------------- ---------------------------------
Name: Name: J.G. Stelzenmuller
------------------------------ -------------------------------
Title: Title: President/Chairman
----------------------------- ------------------------------
(Corporate Seal)
/s/ illegible /s/ James G. Stelzenmuller
--------------------------------- ------------------------------------
Witness for Stockholder JAMES G. STELZENMULLER, III
Page 4
<PAGE> 62
EXHIBIT A
1. All of the outstanding shares of the following subsidiary corporations:
Jay Automotive Group III, Inc.
Southeast Family Life Insurance Company
Jay Leasing, Inc.
Columbus Insurance Company, Inc.
J & J Financial Corporation
Peach State Insurance Company, Inc.
Jay Casualty Co., Ltd.
2. Cash in the amount of $ 1,339,102.00.
3. The following real property:
Mazda Property
(Description attached hereto as Exhibit A-1)
4th Avenue Property
(Description attached hereto as Exhibit A-2)
Page 5
<PAGE> 1
EXHIBIT 2.2
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
AMONG
BOOMERSHINE AUTOMOTIVE GROUP, INC.
B.A.G. GEORGIA I, INC.
B.A.G. GEORGIA II, INC.
AND
WADE FORD, INC.
WADE FORD BUFORD, INC.
AND
ALAN K. ARNOLD,
GARY R. BILLINGS,
MILDRED S. ARNOLD CUSTODIAN FOR KELLY R. ARNOLD
UNDER THE UNIFORM TRANSFER TO MINORS ACT OF GEORGIA,
MILDRED S. ARNOLD CUSTODIAN FOR BRETT D. ARNOLD
UNDER THE UNIFORM TRANSFER TO MINORS ACT OF GEORGIA,
MILDRED S. ARNOLD CUSTODIAN FOR KRISTIE A. ARNOLD
UNDER THE UNIFORM TRANSFER TO MINORS ACT OF GEORGIA, AND
MILDRED S. ARNOLD CUSTODIAN FOR ALAN CHAD ARNOLD
UNDER THE UNIFORM TRANSFER TO MINORS ACT OF GEORGIA
NOVEMBER 21, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Certain Definitions............................................................................. 2
ARTICLE 1 GENERAL TRANSACTION............................................................... 7
1.1 Description of Transaction........................................................ 7
1.2 Tax Consequences................................................................. 11
1.3 Further Action................................................................... 11
ARTICLE 2 MINIMUM REQUIREMENTS............................................................. 11
2.1 1997 Year End Minimum Net Worth Requirement...................................... 11
2.2 Determination of 1998 Profit/Loss................................................ 12
2.3 Minimum Cash Requirement......................................................... 14
2.4 Minimum Floor Plan Requirement................................................... 14
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES AND THE STOCKHOLDERS............................................ 14
3.1 Organization and Good Standing................................................... 14
3.2 Subsidiaries..................................................................... 15
3.3 Capitalization................................................................... 15
3.4 Authority, Approvals and Consents................................................ 15
3.5 Financial Statements............................................................. 16
3.6 Absence of Undisclosed Liabilities............................................... 16
3.7 Absence of Material Adverse Effect; Conduct of Business.......................... 17
3.8 Taxes............................................................................ 19
3.9 Legal Matters.................................................................... 21
3.10 Property......................................................................... 22
3.11 Environmental Matters............................................................ 24
3.12 Inventories...................................................................... 26
3.13 Notes and Accounts Receivable.................................................... 26
3.14 Insurance........................................................................ 26
3.15 Contracts........................................................................ 26
3.16 Labor Relations.................................................................. 28
3.17 Employee Benefit Plans........................................................... 29
3.18 Other Benefit and Compensation Plans or Arrangements............................. 31
3.19 Transactions with Insiders....................................................... 32
3.20 Propriety of Past Payments....................................................... 32
3.21 Interest in Competitors.......................................................... 32
3.22 Brokers.......................................................................... 32
3.23 Territorial Restrictions......................................................... 32
3.24 Intellectual Property............................................................ 32
3.25 Deposit Accounts; Powers of Attorney............................................. 33
3.26 Disclosure....................................................................... 34
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS............................... 34
4.1 Ownership of Shares; Title...................................................... 34
4.2 Authority........................................................................ 34
4.3 Broker's Fees.................................................................... 35
4.4 Investment....................................................................... 35
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BAG AND THE SUBS............................... 35
5.1 Organization and Good Standing................................................... 35
5.2 Authority; Approvals and Consents................................................ 36
5.3 Brokers.......................................................................... 36
5.4 Disclosure....................................................................... 36
ARTICLE 6 COVENANTS AND ADDITIONAL AGREEMENTS.............................................. 36
6.1 Access; Confidentiality......................................................... 36
6.2 Furnishing Information; Announcements........................................... 37
6.3 Certain Changes and Conduct of Business.......................................... 37
6.4 No Intercompany Payables or Receivables.......................................... 40
6.5 Negotiations..................................................................... 40
6.6 Consents; Cooperation........................................................... 40
6.7 Additional Agreements............................................................ 41
6.8 Interim Financial Statements..................................................... 41
6.9 Notification of Certain Matters.................................................. 41
6.10 Assurance by the Stockholders.................................................... 42
6.11 Antitrust Improvements Act Compliance............................................ 42
6.12 Use of Business Name............................................................. 42
6.13 Related Party / Stockholders Loan................................................ 42
6.14 Stock Restriction Agreement...................................................... 42
6.15 Personal Items................................................................... 43
6.16 Liability for Transfer Taxes..................................................... 43
6.17 Certificates of Tax Authorities.................................................. 43
6.18 Release by Stockholders.......................................................... 43
6.20 Cooperation in Preparation of Registration Statement............................. 43
6.21 Audits........................................................................... 43
ARTICLE 7 CONDITIONS TO THE OBLIGATIONS OF BAG AND THE SUBS TO
EFFECT THE CLOSING............................................................... 44
7.1 Representations and Warranties; Agreements; Covenants............................ 44
7.2 Authorization; Consent........................................................... 44
7.3 Opinions of Each Company's and the Stockholder's Counsel......................... 44
7.4 Absence of Litigation............................................................ 44
7.5 No Material Adverse Effect....................................................... 45
7.6 Registration Statement........................................................... 45
7.7 Completion of Due Diligence...................................................... 45
7.8 Real Estate Purchase Agreements; Leases.......................................... 45
7.9 Certificates..................................................................... 46
7.10 Legal Matters.................................................................... 46
7.11 Approval of Manufacturer and Distributor......................................... 46
7.13 Employment Agreements; Non Competition Agreements................................ 46
7.14 Environmental Laws............................................................... 46
7.15 Lease Termination Agreement / Memorandum of Lease / Consents and Estoppels....... 46
7.16 Resignation of each Company's Directors and Officers............................. 47
7.17 Schedules........................................................................ 47
7.18 Share Certificates............................................................... 47
7.19 Non Foreign Status............................................................... 47
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
ARTICLE 8 CONDITIONS TO THE OBLIGATIONS OF THE STOCKHOLDERSTO
EFFECT THE CLOSING............................................................... 47
8.1 Representations and Warranties; Agreements....................................... 47
8.2 Authorization of the Agreement; Consents......................................... 47
8.3 Opinions of BAG's and Sub's Counsel.............................................. 48
8.4 Absence of Litigation............................................................ 48
8.5 Real Estate Purchase Agreements; Leases. ....................................... 48
8.6 Certificates..................................................................... 48
8.7 Legal Matters.................................................................... 48
ARTICLE 9 TERMINATION...................................................................... 48
9.1 Termination...................................................................... 48
9.2 Procedure and Effect of Termination.............................................. 49
ARTICLE 10 INDEMNIFICATION AND SURVIVAL..................................................... 50
10.1 Survival of Representations and Warranties....................................... 50
10.2 Indemnification Provisions for Benefit of BAG and the Subs....................... 50
10.3 Indemnification Provisions for Benefit of the Stockholders....................... 51
10.4 Matters Involving Third Parties.................................................. 51
10.5 Other Indemnification Provisions................................................. 52
10.6 Tax Savings...................................................................... 53
ARTICLE 11 TAX MATTERS...................................................................... 53
11.1 Tax Matters...................................................................... 53
11.2 Section 338(h)(10) Election...................................................... 53
11.3 Tax Periods Ending on or Before the Closing Date................................. 53
11.4 Tax Periods Beginning Before and Ending After the Closing Date................... 53
11.5 Cooperation on Tax Matters....................................................... 54
11.6 Certain Taxes.................................................................... 54
ARTICLE 12 MISCELLANEOUS.................................................................... 54
12.1 Fees and Expenses................................................................ 54
12.2 Headings......................................................................... 54
12.3 Notices.......................................................................... 55
12.4 Assignment....................................................................... 56
12.5 Entire Agreement................................................................. 56
12.6 Waiver and Amendments............................................................ 56
12.7 Counterparts..................................................................... 57
12.8 Governing Law.................................................................... 57
12.9 Accounting Terms................................................................. 57
12.10 Schedules........................................................................ 57
12.11 Severability..................................................................... 57
12.12 Remedies......................................................................... 57
12.13 Time Is Of the Essence........................................................... 57
12.14 Authority........................................................................ 57
ADDENDUM 1..................................................................................... 60
ADDENDUM 2..................................................................................... 61
</TABLE>
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<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this
"Agreement"), is entered into as of November 21, 1997 among BOOMERSHINE
AUTOMOTIVE GROUP, INC., a Georgia corporation ("BAG"), B.A.G. GEORGIA I, INC., a
Georgia corporation ("Sub I"), B.A.G. GEORGIA II, INC., a Georgia corporation
("Sub II") (Sub I and Sub II are hereinafter individually referred to as a "Sub"
and collectively referred to as the "Subs"), and WADE FORD, INC., a Georgia
corporation, and WADE FORD BUFORD, INC., a Georgia corporation (individually, a
"Company" and collectively, the "Companies"), and the stockholder(s) listed on
the signature pages hereof (each, a "Stockholder" and, if more than one,
collectively, the "Stockholders"). BAG, the Subs, the Companies and the
Stockholders are referred to individually as a "Party" and collectively as the
"Parties."
W I T N E S S E T H:
WHEREAS, the Companies operate Ford automobile dealership businesses in
Smyrna, Georgia and Buford, Georgia;
WHEREAS, BAG is engaged in the automobile dealership business in
Georgia and in other states of the United States of America;
WHEREAS, the Stockholders own all of the issued and outstanding shares
of common stock, $1.00 par value, of the Companies (the "Wade Shares") in the
following amounts:
(a) WADE FORD, INC.: 10,000 shares authorized; 1,000
shares issued and outstanding:
<TABLE>
<S> <C>
900 shares owned by Alan K. Arnold
25 shares owned by Mildred S. Arnold Custodian for Kelly L. Arnold under
the Uniform Transfer to Minor Act of Georgia
25 shares owned by Mildred S. Arnold Custodian for Brett D. Arnold under
the Uniform Transfer to Minor Act of Georgia
25 shares owned by Mildred S. Arnold Custodian for Kristie A. Arnold
under the Uniform Transfer to Minor Act of Georgia
25 shares owned by Mildred S. Arnold Custodian for Alan Chad Arnold
under the Uniform Transfer to Minor Act of Georgia
</TABLE>
(b) WADE FORD BUFORD, INC.: 500,000 shares authorized;
12,800 shares issued and outstanding:
10,240 shares owned by Alan K. Arnold
2,560 shares owned by Gary R. Billings
WHEREAS, each Sub is a wholly-owned subsidiary of BAG; and
WHEREAS, BAG, the Subs and the Companies intend to effect mergers such
that Wade Ford, Inc. will merge into Sub I, with Sub I being the survivor
entity, and Wade Ford Buford, Inc. will merge into Sub II, with Sub II being the
survivor entity, all in accordance with this Agreement and the Georgia Business
Corporations Code (each, a "Merger," and collectively, the "Mergers"). Upon the
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<PAGE> 6
consummation of the Mergers, the Companies will cease to exist, and each Sub
will continue to exist as the surviving corporation of each Merger.
WHEREAS, it is intended that each Merger qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Code.
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the Parties hereto hereby agree as follows:
CERTAIN DEFINITIONS.
"Accountants" has the meaning set forth in Section 2.1(c) below.
"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 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 Section 1504(a) or any similar group defined under a similar provision of
state, local or foreign law.
"Associate" used to indicate a relationship with any Person means: (i)
any corporation, partnership, joint venture or other entity of which such Person
is an officer or partner or is, directly or indirectly, through one or more
intermediaries, the beneficial owner of thirty percent (30%) or more of: (1) any
class or type of equity securities or other profits interest; or (2) the
combined voting power of interests ordinarily entitled to vote for management or
otherwise; and (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity.
"BAG" has the meaning set forth in the preface above.
"BAG IPO" shall mean the consummation of an underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933.
"BAG IPO Share Price" shall mean the price per share of each share of
common stock offered pursuant to the BAG IPO.
"BAG IPO Stock" shall mean shares of common stock offered pursuant to
the BAG IPO.
"BAG Common Stock" shall mean the unregistered, 0.001 par value,
authorized common stock of BAG.
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<PAGE> 7
"Balance Sheet" means the unaudited balance sheet as of October 31,
1997 with respect to each Company, and the unaudited statements of income and
stockholders' equity for the 10-month period ended on such date with respect to
each Company, together with notes thereto.
"Basis" means any past or present fact, situation, circumstance,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"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 conjunction with such obligation or the transactions contemplated
hereby.
"Business Day" shall mean any day excluding Saturday, Sunday and any
day which is a legal holiday under federal law.
"Claims" shall mean any and all claims, demands, suits, proceedings,
actions or causes of action of any kind or character whatsoever, known or
unknown, fixed or contingent, suspected or unsuspected, direct or indirect,
however arising, whether arising at law or in equity, or pursuant to
administrative rule or regulation or otherwise.
"Closing" has the meaning set forth in Section 1.1(d) below.
"Closing Date" has the meaning set forth in Section 1.1(d) below.
"Closing Date Deadline" shall mean April 30, 1998.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" and "Companies" have the meanings set forth in the preface
above.
"Company Agreement" has the meaning set forth in Section 3.15 below.
"Compensation Commitment" has the meaning set forth in Section 3.18(a)
below.
"Confidential Information" means any and all data or information of a
Party which relates directly and primarily to the business of such Party and
which is not generally known to or by Persons whose businesses are competitive
with the business of such Party, 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, business and marketing plans and
proposals, information relating to sales records, profit and performance
reports, sales and training manuals, selling and pricing procedures, financing
methods, the special demands of particular customers, the current and
anticipated demands of particular customers, specifications of any new products
or services under development, and any other such information treated by a Party
as being confidential or labeled "Confidential," as well as all physical
embodiments of any of the foregoing, except information: (i) ascertainable or
obtained from public information; (ii) received from a third
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<PAGE> 8
party not employed by or otherwise affiliated with the disclosing Party; or
(iii) which is or becomes known to the public other than through a breach of
this Agreement by another Party to it.
"Consent" means any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice to,
any Person, including but not limited to any Governmental Authority.
"Deferred Intercompany Transaction" has the meaning set forth in Reg.
Section 1.1502-13.
"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
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Employment Agreements" has the meaning set forth in Section 7.14
below.
"Employment and Labor Agreement" has the meaning set forth in Section
3.16 below.
"Environmental, Health and Safety Requirements" shall mean all federal,
state, and local 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.
"Environmental Laws" has the meaning set forth in Section 3.11 below.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Plans" means all Employee Pension Benefit Plans and Employee
Welfare Benefit Plans of a Company.
"Escrow Agent" has the meaning set forth in Section 1.1(e)(iii) below.
"Escrow Amount" has the meaning set forth in Section 1.1(e)(iii) below.
"Excess Loss Account" has the meaning set forth in Reg. Section
1.1502-19.
"Factory Statements" has the meaning set forth in Section 3.5(c) below.
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<PAGE> 9
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statement" has the meaning set forth in Section 3.5 below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative function of or pertaining to
government, including without limitation, any government authority, agency,
department, board, commission or instrumentality of the United States, any State
of the United States or any political subdivision thereof, and any tribunal or
arbitrator of competent jurisdiction and any self-regulatory organization.
"Governmental Approval" means any Consent of, with or to any
Governmental Authority.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Hazardous Materials" has the meaning set forth in Section 3.11 below.
"Improvements" has the meaning set forth in Section 3.10 below.
"Indemnified Party" has the meaning set forth in Section 10.4 below.
"Indemnifying Party" has the meaning set forth in Section 10.4 below.
"Insider" shall mean the Stockholders, any director or officer of the
Company, and any Affiliate, Associate or Relative of any of the foregoing
persons.
"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; (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).
"IRS" shall mean the Internal Revenue Service.
"Judgment" has the meaning set forth in Section 3.9 below.
"Knowledge" means actual knowledge after reasonable 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.
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"Leased Real Property" has the meaning set forth in Section 3.10(b)
below.
"Legal Requirements" means laws, ordinances, codes, rules, regulations,
standards, judgments and other requirements of all governmental, administrative
or judicial entities.
"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.
"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.
"Material Adverse Effect" shall mean any change in, or effect on, the
applicable Person (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 said applicable Person.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Net Worth" has the meaning set forth in Section 1.2(g)(iii) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Real Property" has the meaning set forth in Section 3.10(a)
below.
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" means franchises, licenses, permits, registrations,
certificates, consents, approvals or authorizations.
"Permitted Liens" means: (a) Liens reserved against in the Company's
Balance Sheet, to the extent so reserved; (b) Liens for Taxes not yet due and
payable or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
Company's books in accordance with GAAP; or (c) Liens that, individually and in
the aggregate, do not and would not materially detract from the value of any of
the property or assets of the Company or materially interfere with the use
thereof as currently used or contemplated to be used.
"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.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Real Estate Purchase Agreements" has the meaning set forth in Section
7.8 below.
"Relative" of a Person shall mean such Person's spouse, parents,
sisters, brothers, children and the spouses of the foregoing, and any member of
the immediate household of such Person.
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"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Stock Restriction Agreements" has the meaning set forth in Section
6.14 below.
"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.
"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 Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property (including
property taxes paid by the Company pursuant to any lease), 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.
"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 Section 9.4 below.
"Wade Share" has the meaning set forth in the preface above.
ARTICLE 1
GENERAL TRANSACTION
1.1 DESCRIPTION OF TRANSACTION.
(a) MERGER OF WADE FORD, INC. INTO SUB I. Upon the terms and
conditions set forth in this Agreement, at the Effective Time, Wade Ford, Inc.
shall be merged with and into Sub I, and the separate existence of Wade Ford,
Inc. shall cease. Sub I shall continue as the surviving corporation of said
Merger ("Surviving Corporation I").
(b) MERGER OF WADE FORD BUFORD, INC. INTO SUB II. Upon the terms
and conditions set forth in this Agreement, at the Effective Time, Wade Ford
Buford, Inc. shall be merged with and into Sub II, and the separate existence of
Wade Ford Buford, Inc. shall cease. Sub II shall continue as the surviving
corporation of said Merger ("Surviving Corporation II") (Surviving Corporation I
and Surviving Corporation II shall individually be hereinafter referred to as a
"Surviving Corporation" and collectively as the "Surviving Corporations").
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<PAGE> 12
(c) EFFECT OF MERGERS. The Mergers shall have the effects set
forth in this Agreement and in the applicable provisions of the Georgia Business
Corporations Code.
(d) CLOSING; EFFECTIVE TIME.
(i) Subject to the conditions set forth in this
Agreement, the consummation of the Mergers and the
other transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of
SCHNADER HARRISON SEGAL & LEWIS, LLP in Atlanta,
Georgia, or any other location agreed upon by the
Parties, contemporaneously with the BAG IPO described
in the Registration Statement referred to in Section
7.6 hereof.
(ii) If the BAG IPO fails to close on or before the
Closing Date Deadline, then the Subs shall have the
option to consummate the Mergers and the other
transactions contemplated by this Agreement upon such
terms and conditions that are mutually acceptable to
the Parties (in which event said alternate
consummation shall for purposes herein be referred to
as the "Closing"), and said Closing shall take place
at the offices of SCHNADER HARRISON SEGAL & LEWIS,
LLP in Atlanta, Georgia, or any other location agreed
upon by the Parties
(iii) The date on which the Closing actually occurs is
herein referred to as the "Closing Date." On or
before the Closing Date, a properly executed
certificate of merger for each Merger, conforming
with the requirements of the Georgia Business
Corporations Code (each, a "Certificate of Merger")
shall be filed with the Secretary of State of the
State of Georgia. Each Merger shall take effect on
the Closing Date (with respect to each Merger, the
"Effective Time").
(e) MERGER CONSIDERATION. The aggregate consideration for the
Mergers (the "Merger Consideration") shall be (in aggregate) the amount of
Fifteen Million and No/100 Dollars ($15,000,000.00). The Merger Consideration
shall be paid by the Subs as follows:
(i) The sum of ELEVEN MILLION Dollars ($11,000,000.00)
shall be paid to the Stockholders by the Subs at the
Closing in cash or other immediately available funds
("Cash Consideration Amount"), to be divided amongst
the Stockholders in accordance with ADDENDUM 1
attached hereto and incorporated herein.
(ii) The balance of the Merger Consideration, which equals
to a value of FOUR MILLION Dollars ($4,000,000.00),
shall be paid to the Stockholders at the Closing in
the form of BAG Common Stock in accordance with
Section 1.1(g) hereof (the "Stock Consideration Value
Amount"), to be divided amongst the Stockholders in
accordance with ADDENDUM 1 attached hereto and
incorporated herein..
(iii) Notwithstanding the payment of the Cash Consideration
Amount described in Section 1.1(e)(i) hereof and the
payment of the Stock Consideration Value Amount
described in Section 1.1(e)(ii) hereof, at the
Closing, the Subs shall place $366,666.67 of the Cash
Consideration Amount (the "Escrow Funds") in an
interest bearing escrow account with Joyce E.
Kitchens, Esq., or another escrow agent reasonably
satisfactory to BAG and Stockholders (the "Escrow
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<PAGE> 13
Agent"), and the Subs shall also place the number of
shares representing $133,333.33 of the Stock
Consideration Value Amount in escrow with the Escrow
Agent (the "Escrow Stock") (the Escrow Funds and the
Escrow Stock shall hereinafter be collectively
referred to as the "Escrow Consideration"), all in
accordance with an escrow agreement substantially in
the form attached hereto as EXHIBIT A, with such
other changes as the Escrow Agent may reasonably
request (the "Escrow Agreement"). The release of the
Escrow Consideration shall be governed by the terms
and conditions of the Escrow Agreement.
(f) ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Upon the Effective Time:
(i) the Articles of Incorporation of Sub I and Sub II
shall continue as the Articles of Incorporation of
Surviving Corporation I and Surviving Corporation II,
respectively;
(ii) the Bylaws of Sub I and Sub II shall continue as the
Bylaws of Surviving Corporation I and Surviving
Corporation II, respectively;
(iii) The directors and officers of each Surviving
Corporation immediately after the Effective Time
shall be the individuals identified on EXHIBIT B.
(g) CONVERSION OF SHARES. Subject to Section 1.1(i)(iii), the
manner of converting the Wade Shares into shares of BAG Common Stock shall be as
is set forth in this Section 1.1(g). As of the Effective Time of the Merger, all
of the Wade Shares, by virtue of the Mergers without any action on the part of
the holder thereof, automatically shall be deemed to represent that number of
shares of BAG Common Stock that is equal to the number obtained by dividing the
Stock Consideration Value Amount by the BAG IPO Share Price (the "BAG Stock
Consideration Shares"). The BAG Stock Consideration Shares shall be divided
amongst the Stockholders on a pro-rata basis based on their stock ownership
interest in each of the Companies.
(h) CLOSING OF THE COMPANIES' TRANSFER BOOKS. At the Effective
Time, the holders of the Wade Share Certificates (as hereinafter defined) shall
cease to have any rights as stockholders of the Companies, and the stock
transfer books of the Companies shall be closed with respect to all such Wade
Shares. No further transfer of any such Wade Shares shall be made on such stock
transfer books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any Wade Shares is presented to any Sub or
BAG, such certificate shall be canceled and shall be exchanged as provided in
Section 1.1(e)(i) and 1.1(e)(ii), as applicable.
(i) EXCHANGE OF CERTIFICATES.
(i) At the Closing, the Wade Ford, Inc. Stockholders
shall surrender their certificates representing all
of the common stock of Wade Ford Inc. owned by said
Stockholders (the "Wade Ford Share Certificates") to
Surviving Corporation I, together with such
transmittal documents as BAG or Surviving Corporation
I may reasonably require.
(ii) At the Closing, the Wade Ford Buford, Inc.
Stockholders shall surrender their certificates
representing all of the common stock of Wade Ford
Buford, Inc.
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<PAGE> 14
owned by said Stockholders (the "Wade Ford Buford
Share Certificates") to Surviving Corporation II,
together with such transmittal documents as BAG or
Surviving Corporation II may reasonably require. (The
Wade Ford Share Certificates and the Wade Ford Buford
Share Certificates shall hereinafter be referred to
as the "Wade Share Certificates").
(iii) No fractional shares of BAG Common Stock shall be
issued in connection with the Mergers, and no
certificates for any such fractional shares shall be
issued. Any fractional shares shall be rounded up to
the next whole share and any Stockholder who would
otherwise be entitled to receive a fraction of a
share of BAG Common Stock (after aggregating all
fractional shares of BAG Common Stock issuable to
such holder) shall, in lieu of such fractional share,
receive said additional whole share.
(iv) Until surrendered as contemplated by this Section
1.1(i), each Wade Share Certificate shall be deemed
from and after the Effective Time, to represent only
the right to receive a pro-rata share of the Merger
Consideration. If any Wade Share Certificate shall
have been lost, stolen or destroyed, each applicable
Sub may, at its discretion and as a condition
precedent to the delivery of any Merger Consideration
to the Stockholder who owns such lost, stolen or
destroyed Wade Share Certificate, require said owner
to provide an appropriate affidavit and to deliver a
bond (in such sum as BAG or the applicable Sub may
reasonably direct) as indemnity against any Claim
that may be made against BAG or any Sub with respect
to such Wade Share Certificate.
(v) The BAG Stock Consideration Shares to be issued in
the Merger shall be characterized as "restricted
securities" for purposes of Rule 144 under the
Securities Act, and each certificate representing any
of such shares shall bear a legend identical or
similar in effect to the following legend (together
with any other legend or legends required by
applicable state securities laws or otherwise):
THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR UNLESS THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
(vi) The Subs shall be entitled to deduct and withhold
from any consideration payable or otherwise
deliverable to any holder or former holder of the
Wade Shares pursuant to this Agreement such amounts
as the Subs may be required to deduct or withhold
therefrom under the Code or under any provision of
state, local or foreign tax law. To the extent such
amounts are so deducted or withheld, such amounts
shall be treated for all purposes under this
Agreement as having been paid to the Person to whom
such amounts would otherwise have been paid.
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<PAGE> 15
(vii) The Stockholders agree and acknowledge that the Subs
shall not be liable to any holder or former holder of
the Wade Shares for any shares of BAG Common Stock
(or dividends or distributions with respect thereto),
or for any cash amounts, delivered to any public
official pursuant to any applicable abandoned
property, escheat or similar law.
1.2 TAX CONSEQUENCES. For federal income tax purposes, the Mergers are
intended to constitute reorganizations within the meaning of Section 368 of the
Code. The Parties hereby adopt this Agreement as a "plan of reorganization" with
respect to each Company and Sub within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Treasury Regulations.
1.3 FURTHER ACTION. If, at any time after the Effective Time, any further
action is determined by BAG or the Subs to be necessary or desirable to carry
out the purposes of this Agreement or to vest the Subs with full title, right
and possession of and to all rights and property of the applicable Company, the
officers and directors of each Sub shall be fully authorized (in the name of the
applicable Company and otherwise) to take such action.
ARTICLE 2
MINIMUM REQUIREMENTS
The Parties hereby agree that Seller and the Companies shall deliver
the Companies in financial conditions which adhere to the minimum requirements
set forth in this Article 2:
2.1 1997 YEAR END MINIMUM NET WORTH REQUIREMENT.
(a) UPWARD NET WORTH ADJUSTMENT. If the 1997 Aggregate Net Worth
(as hereinafter defined) exceeds the 1997 Minimum Net Worth (as hereinafter
defined), BAG will pay to the Stockholders, on a dollar for dollar basis, the
entire amount of such excess by wire transfer or delivery of other immediately
available funds within three (3) business days after the later of (i) the
Closing Date or (ii) the date on which the Actual 1997 Adjusted EBIT is finally
determined pursuant to SECTION 2.1(e) hereof. This additional amount shall be
allocated to the Stockholders on the same ratio basis as the Merger
Consideration is allocated amongst the Stockholders in accordance with ADDENDUM
1.
(b) DOWNWARD NET WORTH ADJUSTMENT. If the 1997 Aggregate Net Worth
is less than the 1997 Minimum Net Worth, Stockholders will pay to BAG, on a
dollar for dollar basis, the entire amount of such deficiency by wire transfer
or delivery of other immediately available funds within three (3) business days
after the later of (i) the Closing Date or (ii) the date on which the Actual
1997 Adjusted EBIT is finally determined pursuant to SECTION 2.1(e) hereof. If
Stockholders do not pay such deficiency amount to BAG within said three (3) day
period, BAG shall have the right to offset and deduct such deficiency amount, on
a dollar for dollar basis, from the Escrow Funds, and if no Escrow Funds remain
available, then from the Escrow Stock (based on the BAG IPO Share Price). BAG
shall have the option to offset and deduct such deficiency amount from the
Stockholders on the same ratio basis as the Merger Consideration is allocated
amongst the Stockholders in accordance with ADDENDUM 1. Furthermore, if no
Escrow Consideration remains available for payment of all or any portion such
deficiency amount, then each Stockholder shall pay, reimburse and disburse to
BAG all amounts of such deficiency amount that is in excess of any remaining
Escrow Consideration on the same ratio basis as the Merger Consideration is
allocated amongst the Stockholders in accordance with ADDENDUM 1.
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(c) 1997 AGGREGATE NET WORTH. For purposes herein, the "1997
Aggregate Net Worth" of the Companies shall be defined as the following: (i)
Total Stockholders' Equity of the Companies, on a consolidated basis, as of the
December 31, 1996 audited financial statements for Wade Ford, Inc. and Wade Ford
Buford, Inc., which amount equals Two Million Four Hundred Forty-Four Thousand
Four Hundred Ninety-Three and No/100 Dollars ($2,444,493.00) ("1996
Stockholders' Equity"), plus (ii) the Actual 1997 Adjusted EBIT (as hereinafter
defined) of the consolidated Companies as of December 31, 1997, as determined
pursuant to the calculation of the Accountants (hereinafter defined) in
accordance with SECTION 2.1(e) hereof, minus (iii) Seven-Hundred Eighty Seven
Thousand Four Hundred Eight and No/100 Dollars ($787,408.00), which number
represents the aggregate 1997 distributions for taxes as of the date hereof from
the Companies to the Stockholders, minus (iv) Four Hundred Fifty Thousand and
No/100 Dollars ($450,000.00), which number represents the additional 1997
distributions that will be made by the Companies to the Stockholders for income
tax purposes.
(d) 1997 MINIMUM NET WORTH. For purposes herein, "1997 Minimum Net
Worth" shall be an amount equal to Four Million Seven Hundred Seven Thousand
Eighty-Five and No/100 Dollars ($4,707,085.00). This 1997 Minimum Net Worth
amount is based on the sum of (i) the 1996 Stockholders' Equity, plus (ii) a
projected adjusted earnings before interest and taxes for the year 1997 equal to
Three Million Five Hundred Thousand and No/100 Dollars ($3,500,000.00) (the
"Target 1997 Adjusted EBIT"), minus (iii) Seven-Hundred Eighty Seven Thousand
Four Hundred Eight and No/100 Dollars ($787,408.00), which number represents the
aggregate 1997 distributions as of the date hereof from the Companies to the
Stockholders, minus (iv) Four Hundred Fifty Thousand and No/100 Dollars
($450,000.00), which number represents the additional 1997 distributions that
will be made by the Companies to Stockholders for income tax purposes.
(e) EBIT. Within the later of sixty (60) days after the Closing
Date or sixty (60) days after December 31, 1997 (the "Audit Deadline"), BAG's
accountant, Ernst & Young (the "Accountants"), will compute the combined net
income of the Target Companies as of close of business on December 31, 1997
using GAAP (the "1997 Net Income"). Once the 1997 Net Income has been
determined, but in any event prior to the Audit Deadline, the Accountants shall
make the adjustments set forth on ADDENDUM 2 attached hereto and incorporated
herein to the 1997 Net Income in order to determine the combined adjusted
earnings before interest and taxes for the Companies as of the close of business
on December 31, 1997 (the "Actual 1997 Adjusted EBIT"). Additional adjustments
may be made to the 1997 Net Income in order to determine the Actual 1997
Adjusted EBIT, and the determination of the Accountants with respect to whether
or not there are such additional adjustments shall be conclusive and binding
upon the Parties. Furthermore, the determination of the Accountants with respect
to the 1997 Net Income and Actual 1997 Adjusted EBIT shall be conclusive and
binding upon the Parties.
(f) INVENTORY. If required by the Accountants in connection with
the audit described in Section 2.1(c) above, the Stockholders, the applicable
Company, the Accountants and other representatives of BAG or the Subs shall
conduct a physical inventory at each location where inventory is held by the
applicable Company in order to determine the physical inventory of each
applicable Company as of December 31, 1997.
2.2 DETERMINATION OF 1998 PROFIT/LOSS. The Parties intend and understand
that the Companies shall be delivered to Sub I and Sub II on the Closing Date in
substantially the same financial condition as the financial condition of the
Companies as of December 31, 1997. To that end, the Companies and the
Stockholders represent and warrant to BAG, Sub I and Sub II that the net worth
of the Companies, as delivered on the Closing Date, shall not be materially less
than the 1997 Minimum Net Worth. The Parties hereby additionally agree that if
the Closing does not occur on or before December 31, 1997, then the Stockholders
shall retain any profits earned by the Companies during the interim period
beginning
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on January 1, 1998 and ending on the Closing Date (the "Interim Period"), or,
alternatively, that the Stockholders shall reimburse BAG and the Subs for any
losses incurred by the Companies during the Interim Period. The determination of
such profits or losses shall be achieved solely by combining the amounts of the
profits or losses as listed on line 28 of each Company's monthly Factory
Statements during the Interim Period to determine a final amount of either
profit or loss. More specifically:
(a) If the Companies earn a profit for the Interim Period, then
BAG shall pay to the Stockholders, on a dollar for dollar basis, the following
amount by wire transfer or delivery of other immediately available funds on or
before the Interim Due Date (as hereinafter defined): The entire amount of the
1998 Interim Profits (as hereinafter defined) of the Companies less any
distributions made by the Companies to the Stockholders during the Interim
Period (the "1998 Interim Profit Reimbursement"). This 1998 Interim Profit
Reimbursement amount shall be allocated to the Stockholders on the same ratio
basis as the Merger Consideration is allocated amongst the Stockholders in
accordance with ADDENDUM 1; or
(b) If the Companies incur a loss for the Interim Period, then the
Stockholders shall pay to BAG, on a dollar for dollar basis, the entire amount
of the 1998 Interim Loss (as hereinafter defined) of the Companies by wire
transfer or delivery of other immediately available funds on or before the
Interim Due Date. If Stockholders do not pay such 1998 Interim Loss amount to
BAG on or before the Interim Due Date, BAG shall have the right to offset and
deduct such 1998 Interim Loss amount, on a dollar for dollar basis, from the
Escrow Funds, and if no Escrow Funds remain available, then from the Escrow
Stock (based on the BAG IPO Share Price). BAG shall have the option to offset
and deduct such 1998 Interim Loss amount from the Stockholders on the same ratio
basis as the Merger Consideration is allocated amongst the Stockholders in
accordance with ADDENDUM 1. Furthermore, if no Escrow Consideration remains
available for payment of all or any portion such 1998 Interim Loss amount, then
Alan K. Arnold shall pay, reimburse and disburse to BAG all of such 1998 Interim
Loss amount that is in excess of any remaining Escrow Consideration, and BAG
shall not be required to demand the payment of such 1998 Interim Loss amount
from any of the Stockholders other than Alan K. Arnold.
(c) The 1998 Interim Profit or the 1998 Interim Loss shall be
determined by combining the amounts listed on Line 28 (entitled "Profit/Loss")
of each monthly Factory Statement of each Company for each month during the
Interim Period (including the Closing Month, as hereinafter defined); if the
resulting amount is a positive number, it shall be called the "1998 Interim
Profit" for purposes hereunder, and if the resulting amount is a negative
number, then the positive value of such number it shall be called the "1998
Interim Loss."
(d) The Companies shall provide copies of all monthly Factory
Statements for the Interim Period to BAG and the Subs on the Closing Date and
shall provide the Factory Statement of each Company for the month (the "Closing
Month") in which the Closing occurs (the "Closing Month Factory Statement") to
BAG and the Subs within fifteen (15) days after the last day of the Closing
Month, and BAG and the Subs shall have an opportunity to review said monthly
Factory Statements for accuracy. The calculation of the 1998 Interim Profit or
1998 Interim Loss, as the case may be, shall be made no later than thirty-five
(35) days following the last day of the Closing Month, and any payment of the
1998 Interim Profit or 1998 Interim Loss by the paying Party, as the case may
be, shall be made no later than forty (40) days after said last day of the
Closing Month, as set forth in SECTIONS 2.2(a) and (b) hereof (the "Interim Due
Date"). If any disputes arise between the Parties with regard to the calculation
of the 1997 Interim Profit or the 1998 Interim Loss, and the Parties are unable
to resolve such dispute on or before the Interim Due Date, the disputed matter
shall be submitted to binding arbitration for resolution.
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(e) In the event the Closing does not occur on the last day of a
month, then the profit or loss for the Closing Month, as the case may be, shall
be determined by pro-rating the actual profit or loss shown on Line 28
(Profit/Loss) of the Closing Month Factory Statement as of the Closing Date and
including in the calculation of the 1998 Interim Profit or the 1998 Interim
Loss, as the case may be, only that pro-rated portion of the Closing Month
profit/loss which is allocable to the period prior to the Closing Date
(inclusive).
2.3 MINIMUM CASH REQUIREMENT. Notwithstanding anything to the contrary
contained in this Agreement, immediately upon the consummation of the Closing,
the cash account of the Companies must contain a balance equal to an amount that
is no less than Eight Hundred Thousand and No/100 Dollars ($800,000.00), on an
aggregate basis (the "Minimum Cash Balance"). If the Companies' cash accounts
contain a balance, as of the time that is immediately after the consummation of
the Closing, that is less than the Minimum Cash Balance, BAG shall have the
right to offset and deduct any amount of such deficiency, on a dollar for dollar
basis, from the Escrow Funds, and if no Escrow Funds remain available, then from
the Escrow Stock (based on the BAG IPO Share Price).
2.4 MINIMUM FLOOR PLAN REQUIREMENT. As of the Date of the Closing Date, the
Companies shall not be "Out of Trust," as such term is commonly used in the
automotive business and, with respect to Wade Ford, Inc., relates to the floor
plan of its new and used cars. As of the Closing Date, Wade Ford Inc.'s floor
plan liability must not exceed Wade Ford Inc.'s Floor Plan Assets by more than
three percent (3%), where "Floor Plan Assets" shall mean Wade Ford Inc.'s actual
inventory of financed automobiles, plus its contracts in transits, plus its
current (not over ninety (90) days) fleet car receivables. If, as of the date of
Closing Date, the floor plan liability exceeds Wade Ford Inc.'s Floor Plan
Assets by more than three percent (3%), then Stockholders shall pay such excess
to BAG in cash or other immediately available funds at the Closing. If
Stockholders do not pay such excess amount to BAG at the Closing, BAG shall have
the right to offset and deduct such excess amount, on a dollar for dollar basis,
from the Escrow Funds, and if no Escrow Funds remain available, then from the
Escrow Stock (based on the BAG IPO Share Price).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES AND THE STOCKHOLDERS
Subject to the Parties' agreement and acknowledgment that all of the
Schedules referred to in this Article 3 are to be delivered by the Companies and
the Stockholders no later than ten (10) business days after the execution of
this Agreement to BAG and the Subs, the Companies and the Stockholders hereby
jointly and severally represent and warrant to BAG and the Subs 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) as to each Company:
3.1 ORGANIZATION AND GOOD STANDING. Each Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
its incorporation and has the corporate power and authority to own, lease and
operate the properties used in its business and to carry on its business as now
being conducted. Each Company is duly qualified to do business and is in good
standing as a foreign corporation in each state and jurisdiction where
qualification as a foreign corporation is required except where the lack of such
qualification would not have a Material Adverse Effect on each Company. SCHEDULE
3.1(a) hereto lists: (i) the states and other jurisdictions where each Company
is so qualified;
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and (ii) the assumed names under which each Company conducts business and
contains complete and correct copies of each Company's Articles of Incorporation
and Bylaws, each as amended and presently in effect.
3.2 SUBSIDIARIES. Except as set forth in SCHEDULE 3.2 hereof, no Company
has any subsidiaries or any other interest or investment in any Person.
3.3 CAPITALIZATION. The authorized stock of each Company and the number of
shares of capital stock that are issued and outstanding are set forth on
SCHEDULE 3.3(a) hereto. The shares listed on SCHEDULE 3.3(a) hereto constitute
all the issued and outstanding shares of capital stock of each Company, have
been validly authorized and issued, are fully paid and non-assessable, have not
been issued in violation of any pre-emptive rights or of any federal or state
securities law and no personal liability attaches to the ownership thereof.
Except for as set forth on SCHEDULE 3.3(b) hereto, there is no security, option,
warrant, right, call, subscription, agreement, commitment or understanding of
any nature whatsoever, fixed or contingent, that directly or indirectly: (i)
calls for issuance, sale, pledge or other disposition of any shares of capital
stock of any Company or any securities convertible into, or other rights to
acquire, any shares of capital stock of each Company; (ii) obligates each
Company to grant, offer or enter into any of the foregoing; or (iii) relates to
the voting or control of such capital stock, securities or rights, except as
provided in this Agreement. Neither Company has agreed to register any
securities under the Securities Act.
3.4 AUTHORITY, APPROVALS AND CONSENTS. Each Company has the corporate power
and authority to enter into this Agreement and the other documents referenced
herein or related hereto (collectively, the "Transaction Documents") and to
perform its obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and the Transaction Documents and the consummation
of the transactions contemplated hereby and thereby have been duly authorized
and approved by the Board of Directors of each Company and no other corporate
proceedings on the part of each Company are necessary to authorize and approve
this Agreement and the Transaction Documents and the transactions contemplated
hereby and thereby. This Agreement has been duly executed and delivered by, and
constitutes a valid and binding obligation of, each Company, enforceable against
each Company in accordance with its terms. The execution, delivery and
performance by each Company and the Stockholders of this Agreement and the
consummation of the transactions contemplated hereby and thereby do not and will
not:
(a) contravene any provisions of the Charter or Bylaws of any
Company;
(b) except as set forth on SCHEDULE 3.4(b), conflict with, result
in a breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination or
acceleration in respect of, any Company Agreement, require any consent of waiver
of any party to any Company Agreement, except where such conflict or default
would not have a Material Adverse Effect on any Company or on the ability of the
Parties to consummate the transactions contemplated by this Agreement;
(c) result in the creation of any Lien upon, or any Person
obtaining any right to acquire, any properties, assets or rights of any Company
(other than the rights of each Sub to acquire the Wade Shares pursuant to this
Agreement);
(d) violate or conflict with any Legal Requirements applicable to
each Company or any of its businesses or properties, except where such conflict
or default would not have a Material Adverse
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Effect on each Company or on the ability of the Parties to consummate the
transactions contemplated by this Agreement; or
(e) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
Governmental Authority, other than in connection with or in compliance with the
provisions of the Hart-Scott-Rodino Act, except where such conflict or default
would not have a Material Adverse Effect on each Company or on the ability of
the Parties to consummate the transactions contemplated by this Agreement.
Except as referred to above, no permit or approval of, or notice to any
Governmental Authority is necessary to be obtained or made by each Company to
enable each Company to continue to conduct its business and operations and use
its properties after the Closing in a manner which is in all material respects
consistent with that in which they are presently conducted and used.
3.5 FINANCIAL STATEMENTS. Attached as SCHEDULE 3.5 are true and complete
copies of:
(a) the unaudited balance sheets of each Company as of December
31, 1994, December 31, 1995 and the audited balance sheets of each Company as of
December 31, 1996, and the related statements of income, stockholders' equity
and cash flow for the fiscal year ended December 31, 1994, December 31, 1995 and
December 31, 1996, together with the notes thereto;
(b) the unaudited balance sheet of each Company as of October 31,
1997 (with respect to each Company, the "Balance Sheet") and the unaudited
statements of income and stockholders' equity for the 10 month period ended on
such date, together with notes thereto; and
(c) the most recent monthly and year-to-date financial statements
provided to Ford Motor Company (with respect to each Company, the "Factory
Statements");
(the financial statements referred to in clauses (a) and (b) above, including
the notes thereto, being referred to herein collectively as the "Financial
Statements"). The Financial Statements of each Company are in accordance with
books and records of each Company, fairly present the financial position,
results of operations, stockholders' equity and changes in the financial
position of each Company as of the dates and for the periods indicated, are in
conformity with GAAP consistently applied (except as otherwise indicated in such
statements or on SCHEDULE 3.5 hereof) during such periods, and can be
legitimately reconciled with the financial statements and the financial records
maintained and the accounting methods applied by each Company for federal income
tax purposes. The Financial Statements of each Company include all adjustments,
which consist of only normal recurring accruals, necessary for such fair
presentations. The statements of income included in the Financial Statements of
each Company do not contain any items of special or non-recurring income except
as expressly identified therein, and the balance sheets included in the
Financial Statements of each Company do not reflect any write up or revaluation
increasing the book value of any assets except as expressly identified therein.
The books and accounts of each Company are complete and current in all material
respects and fairly reflect all of the transactions, items of income and expense
and all assets and liabilities of the businesses of each Company consistent with
prior practices of each Company. Each Factory Statement is accurate and complete
and was prepared in compliance with the requirements of the appropriate
automobile manufacturer, including, but not limited to, all requirements set
forth in the contract with such automobile manufacturer.
3.6 ABSENCE OF UNDISCLOSED LIABILITIES. Each Company does not have any
material liability of any nature whatsoever (whether known or unknown, due or to
become due, accrued, absolute, contingent or
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otherwise), including, without limitation, any unfunded obligation under
employee benefit plans or arrangements as described in Sections 3.17 and 3.18
hereof or liabilities for Taxes, except for: (a) liabilities reflected or
reserved against in the most recent Financial Statements of each Company; (b)
current liabilities incurred in the ordinary course of business and consistent
with past practice after the date of each Company's Balance Sheet which,
individually and in the aggregate, do not have, and cannot reasonably be
expected to have, a Material Adverse Effect on each Company; and (c) liabilities
disclosed or SCHEDULE 3.6 hereto. Except as set forth in SCHEDULE 3.6 hereto,
each Company is not a party to any Company Agreement, or subject to any Charter
or Bylaw provision, any other corporate limitation or any Legal Requirement
which has, or can reasonably be expected to have, a Material Adverse Effect on
each Company. Except as set forth in SCHEDULE 3.6 hereto, none of the employees
of each Company is now or will with the passage of time become entitled to
receive any vacation time, vacation pay or severance pay attributable to
services rendered prior to the Closing Date.
3.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since December 31, 1996, except as set forth on SCHEDULE
3.7(a) hereto, each Company has operated in the ordinary course of business
consistent with past practice and there has not been:
(i) any material adverse change in the assets,
properties, business, contractual relations,
operations, prospects, net income or financial
condition of each Company and no factor, event,
condition, circumstance or prospective development
exists which threatens or may threaten to have a
Material Adverse Effect on each Company;
(ii) any material loss, damage, destruction or other
casualty to the property or other assets of each
Company, whether or not covered by insurance;
(iii) any material change in any method of accounting or
accounting practice of each Company; or
(iv) any material loss of the employment, services or
benefits of any key employee of each Company.
(b) Since December 31, 1996, except as set forth in SCHEDULE
3.7(b) hereto, each Company has not:
(i) incurred any material obligation or liability
(whether absolute, accrued, contingent or otherwise),
except in the ordinary course of business consistent
with past practice;
(ii) failed to disclose or satisfy any lien or pay or
satisfy any obligation or liability (whether
absolute, accrued, contingent or otherwise), other
than liabilities being contested in good faith and
for which adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any Lien any of
its property or other assets except for mechanics'
liens and liens for taxes not yet due and payable;
(iv) sold or transferred any asset or canceled any debts
or claims or waived any rights, except in the
ordinary course of business consistent with past
practices;
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(v) defaulted on any material obligation;
(vi) entered into any material transaction, except in the
ordinary course of business consistent with past
practice;
(vii) written down the value of any inventory or written
off as uncollectible any accounts receivable or any
portion thereof not reflected in each Company's
Financial Statements;
(viii) received any notice of termination of any contract,
lease or other agreement or suffered any damage,
destruction or loss (whether or not covered by
insurance) which, in any case or in the aggregate,
has had a Material Adverse Effect on any Company;
(ix) transferred or granted any rights under, or entered
into any settlement regarding the breach or
infringement of, any Intellectual Property, or
modified any existing rights with respect thereto;
(x) made any change in the rate of compensation,
commission, bonus or other direct or indirect
remuneration payable, or paid or agreed or orally
promised to pay, conditionally or otherwise, any
bonus, incentive, retention or other compensation,
retirement, welfare, fringe or severance benefit or
vacation pay, to or in respect of any shareholder,
director, officer, employee, salesman, distributor or
agent of each Company other than increases in
accordance with past practices not exceeding ten
percent (10%) in the aggregate;
(xi) encountered any labor union organizing activity, had
any actual or threatened employee strikes, work
stoppages, slowdowns or lockouts, or had any material
change in its relations with its employees, agents,
customers or suppliers;
(xii) failed to replenish inventories and supplies in a
normal and customary manner consistent with its prior
practice, or made any purchase commitment in excess
of the normal, ordinary and usual requirements of its
business or at any price in excess of then-current
market price or upon terms and conditions more
onerous than those usual and customary in the
industry, or made any change in its selling, pricing,
advertising or personnel practices inconsistent with
its prior practice;
(xiii) instituted, settled or agreed to settle any, or had
any material involvement in, litigation, action or
proceeding before any court or governmental body
relating to each Company other than in the ordinary
course of business consistent with past practices but
not in any case involving amounts in excess of
$100,000;
(xiv) entered into any transaction, contract or commitment
other than in the ordinary course of business or paid
or agreed to pay any legal, accounting, brokerage,
finder's fee, Taxes or other expenses in connection
with, or incurred any severance pay obligations by
reason of, this Agreement or the transactions
contemplated hereby;
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(xv) declared, set aside or paid any dividend or other
distribution in respect of any shares of capital
stock of each Company or any repurchase, redemption
or other acquisition by any Stockholder or each
Company of any outstanding shares of capital stock or
other securities of, or other ownership interest in,
each Company;
(xvi) made any individual capital expenditure in excess of
$25,000 (excluding automobiles, vans and other
vehicles that are part of inventory), or aggregate
capital expenditures in excess of $100,000 (excluding
automobiles, vans and other vehicles that are part of
inventory), or additions to property, plant and
equipment other than ordinary repairs and
maintenance;
(xvii) discontinued any franchise or the sale of any
products or product line;
(xviii) incurred any obligation or liability to any employee
for the payment of severance benefits; or
(xix) entered into any agreement or made any commitment to
do any of the foregoing.
3.8 TAXES. Except as set forth on SCHEDULE 3.8, (i) all Tax Returns
required to be filed by or on behalf of each Company have been properly prepared
and duly and timely filed with the appropriate taxing authorities in all
jurisdictions in which such Tax Returns are required to be filed (after giving
effect to any valid extensions of time in which to make such filings), and all
such Tax Returns were true, complete and correct in all material respects, (ii)
all Taxes required to be paid by or on behalf of each Company or in respect of
each Company's income, assets or operations have been fully and timely paid,
(iii) each Company has not executed or filed with the IRS or any other taxing
authority any agreement, waiver or other document or arrangement extending or
having the effect of extending the period for assessment or collection of Taxes
(including, but not limited to, any applicable statute of limitation, and no
power of attorney with respect to any Tax matter is currently in force, and (iv)
all Taxes required to be withheld by each Company have been duly and timely
withheld and have been paid over to the appropriate taxing authorities for all
periods under all applicable Legal Requirements. Copies of all Tax Returns for
each fiscal year since the date of incorporation of each Company have been
furnished or made available to the Subs , as applicable, and to BAG or its
representatives and such copies are accurate and complete as of the date hereof.
Each Company has also furnished or made available to the Subs and BAG correct
and complete copies of all material notices and correspondence sent or received
since December 31, 1992 by each Company to or from any federal, state or local
tax authorities.
(a) The unpaid Taxes of each Company with respect to periods ended
on, prior to or through the date of each Company's Balance Sheet will not exceed
by any material amount the reserve for Taxes reflected on such financial
statements. Each Company has made adequate provision on its books (on an annual
basis) for the payment of all Taxes (including for the current fiscal period)
owed by each Company. Except to the extent reserves therefor are reflected on
each Company's Balance Sheet, each Company is not liable, or will not become
liable, for any Taxes for any period ending on, prior to or through the date of
each Company's Balance Sheet.
(b) Except as set forth on SCHEDULE 3.8 hereto, each Company has
not been subject to a federal or state tax audit of any kind and no adjustment
has been proposed by the IRS or any other taxing authority with respect to any
return for any year. With respect to the audits referred to on SCHEDULE 3.8
hereto, no such audit has resulted in an adjustment in excess of $50,000.
Neither each Company nor any of the Stockholders knows of any basis for any
assertion of a deficiency for Taxes against each Company.
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The Stockholders will cooperate with each Company in the filing of any returns
and in any audit or refund claim proceedings involving Taxes for which each
Company may be liable or with respect to which each Company may be entitled to a
refund.
(c) Except as set forth on SCHEDULE 3.8 hereto, each Company has
not executed or filed with the IRS or any other taxing authority any agreement,
waiver or other document or arrangement extending or having the effect of
extending the period for assessment or collection of Taxes (including, but not
limited to, any applicable statute of limitation), and no power of attorney with
respect to any Tax matter is currently in force;
(d) Except as set forth on SCHEDULE 3.8 hereto, all Taxes required
to be withheld by each Company have been duly and timely withheld and have been
paid over to the appropriate taxing authorities for all periods under all
applicable laws;
(e) SCHEDULE 3.8 lists all material types of Taxes paid and
material types of tax returns filed by or on behalf of each Company. Except as
set forth on SCHEDULE 3.8, no claim has been made by a taxing authority in a
jurisdiction where each Company does not file tax returns such that it is or may
be subject to taxation by that jurisdiction;
(f) Except as set forth on SCHEDULE 3.8, all deficiencies asserted
or assessments made as a result of any examinations by the IRS or any other
taxing authority of the tax returns of or covering or including each Company
have been fully paid, and there are no other audits or investigations by any
taxing authority in progress, nor have Stockholders or each Company received any
notice from any taxing authority that it intends to conduct such an audit or
investigation. No issue has been raised by a federal, state, local or foreign
taxing authority in any current or prior examination which, by application of
the same or similar principles, could reasonably be expected to result in
proposed deficiency for any subsequent Tax period.
(g) Except as set forth on SCHEDULE 3.8, neither each Company nor
any other Person (including the Stockholders) on behalf of each Company 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 each Company or has 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 each
Company; (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 each Company; or (iii) requested
any extension of time within which to file any tax return, which tax return has
not since been filed;
(h) Except as set forth on SCHEDULE 3.8 hereto, no property owned
by each Company is: (i) property required to be treated as being owned by
another Person pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986; (ii) constitutes "tax-exempt use
property" within the meaning of Section 168(h)(1) of the Code; or (iii) is
"tax-exempt bond financed property" within the meaning of Section 168(g) of the
Code;
(i) Except as set forth on SCHEDULE 3.8 hereto, none of the
Stockholders is a foreign Person within the meaning of Section 1445 of the Code;
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(j) Except as set forth on SCHEDULE 3.8 hereto, each Company is
not a party to any tax-sharing or similar agreement or arrangement (whether or
not written) pursuant to which it will have any obligation to make any payments
after the Closing;
(k) Except as set forth on SCHEDULE 3.8 hereto, there is no
contract, agreement, plan or arrangement covering any Person that, individually
or collectively, could give rise to the payment of any amount that would not be
deductible by the Subs or their Affiliates by reason of Section 280G of the
Code, or would constitute compensation in excess of the limitation set forth in
Section 162(m) of the Code;
(l) Except as set forth on SCHEDULE 3.8 hereto, each Company is
not subject to any private letter ruling of the IRS or comparable rulings of
other taxing authorities;
(m) Except as set forth on SCHEDULE 3.8 hereto, there are no Liens
as a result of any unpaid Taxes upon any of the assets of each Company;
(n) Except as set forth on SCHEDULE 3.8 hereto, each Company 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 Company 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
Company. Sub I and Sub II, as applicable, have received a copy of any such
elections and there has not been any voluntary or involuntary termination or
revocation of any such election;
(o) Except as set forth in SCHEDULE 3.8, each Company has never
owned any subsidiaries and has never been a member of any consolidated, combined
or affiliated group of corporations for any Tax purposes;
(p) Except as set forth in SCHEDULE 3.8, each Company does not
have any undistributed earnings and profits and has not 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).
3.9 LEGAL MATTERS.
(a) Except as set forth on SCHEDULE 3.9(a) hereto: (i) to the
Knowledge of Seller and each Company, there is no Claim pending against, or
threatened against or affecting, each Company, any ERISA Plan) or any of their
respective assets, properties or rights before any court, arbitrator, panel,
agency or other governmental, administrative or judicial entity, domestic or
foreign, nor is any basis known to the Stockholders or each Company for any such
Claims; and (ii) neither each Company nor any of its assets are subject to any
judgment, decree, writ, injunction, ruling or order (collectively, "Judgments")
of any Governmental Authority, domestic or foreign. SCHEDULE 3.9(a) hereto
identifies each Claim and Judgment disclosed thereon.
(b) The businesses of each Company are being conducted in
compliance with all Legal Requirements applicable to each Company or any of its
respective businesses or properties. Each Company holds, and is in compliance
with, all Permits required by all applicable Legal Requirements. A list of all
Permits is set forth on SCHEDULE 3.9(b) hereof. No event has occurred and is
continuing which permits, or after notice or lapse of time or both would permit,
any modification or termination of any Permit.
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(c) To the Knowledge of Seller and each Company, there are no
proposed laws, rules, regulations, ordinances, orders, judgments, decrees,
governmental takings, condemnations or other proceedings which would be
applicable to the business, operations or properties of each Company and which
might materially adversely affect the properties, assets, liabilities,
operations or prospects of each Company, either before or after the Closing
Date.
(d) SCHEDULE 3.9(d) sets forth all Governmental Approvals and
other Consents necessary for, or otherwise material to, the conduct of each
Company's business. Except as set forth in SCHEDULE 3.9(d), all such
Governmental Approvals and Consents have been duly obtained and are in full
force and effect, and each Company is in compliance with each of such
Governmental Approvals and Consents held by it.
(e) There have been no citations, notices or complaints issued to
or received by each Company by the Occupational Health and Safety Administration
or any similar state or local agency.
3.10 PROPERTY. The properties and assets owned by or leased to each Company
(including improvements to the Real Property (the "Improvements") and all
machinery, equipment and other tangible property) are in all material respects
adequate for the purposes of which such assets are currently used or are held
for use, and are in good repair and operating condition (subject to normal wear
and tear) and there are no facts or conditions affecting such assets which
could, individually or in the aggregate, interfere in any material respect with
the use, occupancy or operation thereof as currently used, occupied or operated,
or their adequacy for such use.
(a) OWNED REAL PROPERTY. SCHEDULE 3.10 contains a complete list of
all real property owned by each Company (the "Owned Real Property") setting
forth the address and owner of each parcel and describing all improvements
thereon, including without limitation, the properties reflected as being so
owned on each Company's Financial Statements. Each Company has, or on the
Closing Date will have, good, valid and marketable fee simple title to the Owned
Real Property indicated on SCHEDULE 3.10 as being owned by it, free and clear of
all Liens other than Permitted Liens. There are no outstanding leases, options
or rights of first refusal to purchase the Owned Real Property, or any portion
thereof or interest therein.
(b) LEASES. SCHEDULE 3.10 contains a complete list of all leases
of real property setting forth the address, landlord and tenant for each Lease.
Stockholders have delivered to BAG and the Subs complete copies of the Leases.
Each Lease is legal, valid, binding, enforceable, and in full force and effect,
except as may be limited by bankruptcy, insolvency, reorganization and similar
applicable laws affecting creditors generally and by the availability of
equitable remedies. Each Company is not in default, violation or breach in any
respect under any Lease, and no event has occurred and is continuing that
constitutes or, with notice or the passage of time or both, would constitute a
default, violation or breach in any respect under any Lease. Each Lease grants
the tenant under the Lease the exclusive right to use and occupy the demised
premises thereunder (the "Leased Real Property"). Each Company has good and
valid title to the leasehold estate under each Lease free and clear of all Liens
other than Permitted Liens. Each Company enjoys peaceful and undisturbed
possession under its respective Leases for the Leased Real Property.
(c) FEE AND LEASEHOLD INTERESTS. The Real Property constitutes all
the fee and leasehold interests in real property held for use in connection
with, necessary for the conduct of, or otherwise material to, the business of
each Company as it is currently conducted.
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(d) NO PROCEEDINGS. There are no eminent domain or other similar
proceedings pending or threatened affecting any portion of the Real Property.
There is no writ, injunction, decree, order or judgment outstanding, nor any
action, claim, suit or proceeding, pending or threatened, relating to the
ownership, lease, use, occupancy or operation by any Person of any Real
Property.
(e) CURRENT USE. The use and operation of the Real Property by
each Company does not violate in any material respect any instrument of record
or agreement affecting the Real Property. There is no violation of any covenant,
condition, restriction, easement or order of any Governmental Authority having
jurisdiction over such property or of any other Person entitled to enforce the
same affecting the Real Property or the use or occupancy thereof. No damage or
destruction has occurred with respect to any of the Real Property that would,
individually or in the aggregate, have a Material Adverse Effect on any Company.
(f) COMPLIANCE WITH REAL PROPERTY LAWS. The Real Property is in
full compliance with all applicable building, zoning, subdivision and other land
use and similar applicable laws affecting the Real Property (collectively, the
"Real Property Laws"), and each Company and the Stockholders have not received
any notice of violation or claimed violation of any Real Property Law. There is
no pending or anticipated change in any Real Property Law that will have or
result in a Material Adverse Effect upon the ownership, alteration, use,
occupancy or operation of the Real Property or any portion thereof. No current
use by each Company of the Real Property is dependent on a nonconforming use or
other Governmental Approval, the absence of which would materially limit the use
of such properties or assets held for use in connection with, necessary for the
conduct of, or otherwise material to, each Company.
(g) REAL PROPERTY TAXES. Each parcel included in the Real Property
is assessed for real property tax purposes as a wholly independent tax lot,
separate from adjoining land or improvements not constituting a part of that
parcel.
(h) LEASED PREMISES. With respect to Leased Real Property, each
Company has complied with and caused such premises to comply with: (i) all
federal, state, county, municipal and other governmental statutes, laws, rules,
orders, regulations, ordinances or recommendations affecting such premises or
any part thereof, or the use thereof, including without limitation, the
Americans with Disabilities Act, whether or not 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; (ii) all rules, orders and regulations of the National Board of Fire
Underwriters or other bodies exercising similar functions and responsibilities
in connection with the prevention of fire or other correction of hazardous
conditions which apply to such premises; and (iii) the requirements of all
policies of public liability, fire and other insurance which at any time may be
in force with respect to such premises. Each Company is the owner of the
furniture and other personal property utilized in the business and located at
such premises.
(i) CERTIFICATE OF OCCUPANCY; UTILITIES; EMINENT DOMAIN. No
certificate of occupancy is required with respect to the Improvements. All
utilities servicing the Real Property and the Improvements are provided by
publicly dedicated utility lines and are located within public rights-of-way and
do not cross or encumber any private land. No notice of any pending, threatened
or contemplated action by any governmental authority or agency having the power
of eminent domain has been given to each Company or the Stockholders with
respect to the Real Property.
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3.11 ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 3.11(A) hereto: (i) each
Company, the Real Property, the Improvements and any property formerly owned,
occupied or leased by each Company are in compliance with all Environmental Laws
(as defined below); (ii) each Company has obtained all Environmental Permits (as
defined below); (iii) such Environmental Permits are in full force and effect;
and (iv) each Company is in compliance with all terms and conditions of such
Environmental Permits. As used herein, "Environmental Laws" shall mean all
applicable requirements of environ-mental, public or employee health and safety,
public or community right to know, ecological or natural resource laws or
regulations or controls, including all applicable requirements imposed by any
law (including, without limitation, common law), rule, order, or regulations of
any federal, state or local executive, legislative, judicial, regulatory or
administrative agency, board or authority, or any applicable private agreement
(such as covenants, conditions and restrictions), which relate to: (A) noise;
(B) pollution or protection of the air, surface water, groundwater or soil; (C)
solid, gaseous or liquid waste generation, treatment, storage, disposal or
transportation; (D) exposure to Hazardous Materials (as defined below); or (E)
regulation of the manufacture, processing, distribution and commerce, use or
storage of Hazardous Materials. As used herein, "Environmental Permits" shall
mean all permits, licenses, approvals, authorizations, consents or registrations
required under applicable Environmental Law in connection with ownership, use
and/or operation of each Company's business or the Real Property or
Improvements.
As used in this Section 3.11, "Hazardous Materials" shall mean,
collectively: (i) those substances included within the definitions of or
identified as "hazardous chemicals," "hazardous waste," "hazardous substances,"
"hazardous materials," "toxic substances" or similar terms in or pursuant to,
without limitation: the Comprehensive Environmental Response Compensation and
Liability Act of 1980 (42 U.S.C. Section 9601 et seq. ("CERCLA"), as amended by
Superfund Amendments and Reauthorization Act of 1986 (Pub. L. 99-499, 100 State,
1613); the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section
6901 et seq.) ("RCRA"); the Occupational Safety and Health Act of 1970 (29
U.S.C. Section 651 et seq.) ("OSHA"); and the Hazardous Materials Transportation
Act (49 U.S.C. Section 1801 et seq. ("HWA"), and in the regulations promulgated
pursuant to such laws, all as amended; (ii) those substances listed in the
United States Department of Transportation Table (49 CFR 172.101 and amendments
thereto) or by the Environmental Protection Agency (or any successor agency) as
hazardous substances (40 CFR Part 302 and amendments thereto); (iii) any
material, waste or substance which is or contains: (A) petroleum, including
crude oil or any fraction thereof, natural gas or synthetic gas usable for fuel
or any mixture thereof; (B) asbestos; (C) polychlorinated biphenyls; (D)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251 et seq. (33 U.S.C. Section 1317) or listed pursuant
to Section 307 of the Clean Water Act (33 U.S.C. Section 1317); (E) flammable
explosives; (F) radioactive materials; and (iv) such other substances, materials
and wastes which are or become regulated or classified as hazardous, toxic or as
"special wastes" under any Environmental Laws.
(b) Each Company and the Stockholders have not violated, done or
suffered any act which could give rise to liability under, and are not otherwise
exposed to liability under, any Environmental Law. No event has occurred with
respect to the Real Property, the Improvements or an any property formerly
owned, occupied or leased by each Company, which, with the passage of time or
the giving of notice, or both, would constitute a violation of or noncompliance
with any applicable Environmental Law. Each Company has no contingent liability
under any Environmental Law. There are no liens under any Environmental Law on
the Real Property.
(c) Except as set forth on SCHEDULE 3.11(C) hereto: (i) neither
each Company, the Real Property or any portion thereof, the Improvements or any
property formerly owned, occupied or leased by each Company, nor any property
adjacent to the Real Property is being used or has been used for the treatment,
generation, transportation, processing, handling, production or disposal of any
Hazardous
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Materials or as a landfill or the waste disposal site, and there has been no
spill, release or migration of any Hazardous Materials on or under the Real
Property and no Hazardous Material is present on or under the Real Property
(provided, however, that certain petroleum products are stored and handled on
the Real Property in the ordinary course of each Company's business in
compliance with all Environmental Laws including the existing regulations of the
United States Environmental Protection Agency and the State of Georgia requiring
spill protection, overfill protection and corrosion protection by December 22,
1998); (ii) none of the Real Property or portion thereof, the Improvements or
any property formerly owned, occupied or leased by each Company has been subject
to investigation by any Governmental Authority evaluating the need to
investigate or undertake Remedial Action (as defined below) at such property;
and (iii) none of the Real Property, the Improvements or any property formerly
owned, occupied or leased by each Company or any site or location where each
Company sent waste of any kind, is identified on the current or proposed: (A)
National Priorities List under 40 C.F.R. 300 Appendix B; (B) CERCLA Inventory
System list; or (C) any use arising from any statute analogous to CERCLA. As
used herein, "Remedial Action" shall mean any action required to: (i) clean up,
remove or treat Hazardous Materials; (ii) prevent a release or threat of release
of any Hazardous Material; (iii) perform pre-remedial studies, investigations or
post-remedial monitoring and care; (iv) cure a violation of Environmental Law;
or (v) take corrective action under sections 3004(u), 3004(v) or 3008(h) of RCRA
or analogous state law.
(d) Except as set forth in SCHEDULE 3.11(d) hereto, there have
been and are no: (i) above ground or underground storage tanks, subsurface
disposal systems, or wastes, drums or containers disposed of or buried on, in or
under the ground or any surface waters; (ii) asbestos or asbestos containing
materials or radon gas; (iii) polychlorinated biphenyls ("PCB") or
PCB-containing equipment, including transformers; or (iv) wetlands (as defined
under any Environmental Law) located within any portion of the Real Property,
nor have any liens been placed upon any portion of the Real Property, the
Improvements or any property formerly owned, occupied or leased by each Company
in connection with any actual or alleged liability under any Environmental Law.
(e) Except as set forth on SCHEDULE 3.11(e) hereto: (i) there is
no pending or threatened claim, litigation or administrative proceeding, or
known prior claim, litigation or administrative proceeding, arising under any
Environmental Law involving each Company, the Real Property, the Improvements,
any property formerly owned, leased or occupied by each Company, any off site
contamination affecting the business of each Company or any operations conducted
at the Real Property; (ii) there are no ongoing negotiations with or agreements
with any Governmental Authority relating to any Remedial Action or other
environmental related claim; (iii) each Company has not submitted notice
pursuant to Section 103 of CERCLA or analogous statute or notice under any other
applicable Environmental Law reporting a release of a Hazardous Material into
the environment; and (iv) each Company has not received any notice, claim,
demand, suit or request for information from any governmental or private entity
with respect to any liability or alleged liability under any Environmental Law,
nor has any other entity whose liability therefor, in whole or in part, may be
attributed to each Company, received such notice claim, demand, suit or request
for information.
(f) The Stockholders and each Company have provided to BAG all
environmental studies and reports obtained by them or known to them pertaining
to the Real Property, the Improvements, each Company and any property formerly
owned, occupied or leased by each Company, and have permitted (or will have
permitted as of the Closing Date), the testing of the soil, groundwater,
building components, tanks, containers and equipment on the Real Property, the
Improvements, and any property formerly owned, occupied or leased by each
Company, by BAG or BAG's agents or experts as they have or shall have deemed
necessary or appropriate to confirm the condition of such properties.
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3.12 INVENTORIES. The values at which inventories are carried on each
Company's Balance Sheet reflect the normal inventory valuation policies of each
Company, and such values are in conformity with GAAP consistently applied,
except that no adjustment to the LIFO reserves will be recorded on such
financial statement. All inventories reflected on each Company's Balance Sheet
and Company's Factory Statement or arising since the date thereof are currently
marketable, are of good, usable and merchantable quality in all material
respects, and can reasonably be anticipated to be sold at normal mark-ups within
120 days after the date hereof in the ordinary course of business (subject to
the reserve for obsolete, off-grade or slow-moving items that is reflected in
each Company Balance Sheet), except for spare parts inventory which inventory is
good and usable.
3.13 NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable
reflected on each Company's Balance Sheet are good and have been or will have
been collected or are collectible in accordance with their terms at their
recorded amounts, and are subject to no material defenses, setoffs or
counterclaims other than normal cash discounts accrued in the ordinary course of
business, subject to the reserve for bad debts set forth on each Company's
Balance Sheet, as adjusted for operations and transactions through the Closing
Date in the ordinary course of business and consistent with past practices.
3.14 INSURANCE. All material properties and assets of each Company which are
of an insurable character are insured against loss or damage by fire and other
risks to the extent and in the manner reasonable in light of the risks attendant
to the businesses and activities in which each Company is engaged and customary
for companies engaged in similar businesses or owning similar assets. Set forth
on SCHEDULE 3.14 hereto is a list and brief description (including the name of
the insurer, the type of coverage provided, the amount of the annual premium for
the current policy period, the amount of remaining coverage and deductibles and
the coverage period) of all policies for such insurance and each Company has
made or will make available to BAG true and complete copies of all such
policies. All such policies are in full force and effect sufficient for all
applicable requirements of law and will not in any way be effected by or
terminated or lapsed by reason of the consummation of the transactions
contemplated by this Agreement. No notice of cancellation or non-renewal with
respect to, or disallowance of any claim under, any such policy has been
received by each Company.
3.15 CONTRACTS.
(a) SCHEDULE 3.15 contains a complete list of all agreements,
contracts, commitments and other instruments and arrangements (whether written
or oral) of the types described below which exceed $10,000 in value or exceed
one year in duration (excluding any agreements, contracts, commitments and other
instruments and arrangements pertaining to automobiles, vans and other vehicles
that are part of inventory) to which each Company is a party or by which it is
bound ("Company Agreements"):
(i) leases, master rental agreements, service agreements,
insurance policies, Governmental Approvals and other
contracts concerning or relating to the Real Property
(including those referred to on SCHEDULE 3.10);
(ii) employment, consulting, agency, collective bargaining
or other similar contracts, agreements and other
instruments and arrangements relating to or for the
benefit of current, future or former employees,
officers, directors or consultants;
(iii) loan agreements, indentures, letters of credit,
mortgages, security agreements, pledge agreements,
deeds of trust, bonds, notes, guarantees and other
agreements
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and instruments relating to the borrowing of money or
obtaining of or extension of credit;
(iv) licenses, licensing arrangements and other contracts
providing in whole or in part for the use of, or
limiting the use of, any Intellectual Property;
(v) brokerage or finder's agreements;
(vi) joint venture, partnership and similar contracts
involving a sharing of profits or expenses (including
but not limited to joint research and development and
joint marketing contracts);
(vii) asset purchase agreements and other acquisition or
divestiture agreements, including but not limited to
any agreements relating to the sale, lease or
disposal of any assets (other than sales of inventory
in the ordinary course of business) or involving
continuing indemnity or other obligations;
(viii) orders and other contracts for the purchase or sale
of materials, supplies, products or services;
(ix) contracts with respect to which the aggregate amount
that could reasonably be expected to be paid or
received thereunder in the future exceeds $10,000 per
annum or $50,000 in the aggregate;
(x) sales agency, manufacturer's representative, dealer,
marketing or distributorship agreements;
(xi) master lease agreements providing for the leasing of
personal property used in, or held for use in
connection with, each Company's business;
(xii) contracts, agreements or commitments with any
employee, director, officer, stockholder or affiliate
of each Company;
(xiii) powers of attorney;
(xiv) any guaranty, warranty or indemnity, other than
standard warranties from any automobile manufacturers
with whom each Company has a franchise agreement (or
comparable agreement), given by each Company to its
customers; and
(xv) any other contracts, agreements or commitments that
are material to each Company's business.
(b) Each Company and the Stockholders have delivered to BAG and
the Subs complete copies of all written Company Agreements together with all
amendments thereto, and accurate descriptions of all material terms of all oral
Company Agreements set forth or required to be set forth on SCHEDULE 3.15.
(c) All Company Agreements are in full force and effect and
enforceable against each party thereto, except as such enforceability may be
limited by the effect of bankruptcy, insolvency or similar laws affected
creditors' rights generally or by general principles of equity. There does not
exist under
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any Company Agreement any event of default or event or condition that, after
notice or lapse of time or both, would constitute a violation, breach or event
of default thereunder on the part of each Company, or any other party thereto,
except as set forth in SCHEDULE 3.15 and except for such events or conditions
that, individually and in the aggregate: (i) have not had or result in, and will
not have or result in, a Material Adverse Effect on any Company; and (ii) have
not and will not materially impair the ability of each Company or the
Stockholders to perform their obligations under this Agreement. Except as set
forth in SCHEDULE 3.15, no consent of any third party is required under any
Company Agreement as a result of or in connection with, and the enforceability
of any Company Agreement will not be affected in any manner by, the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
(d) There are no material unresolved disputes involving any
Stockholder, each Company or its employees under any Company Agreement.
3.16 LABOR RELATIONS.
(a) Each Company has paid or made provision for the payment of all
salaries and accrued wages and has complied in all material respects with all
applicable laws, rules and regulations relating to the employment of labor,
including those relating to wages, hours, collective bargaining and the payment
and withholding of taxes, and has withheld and paid to the appropriate
Governmental Authority, or is holding for payment not yet due, to such
authority, an amounts required by law or agreement to be withheld from the wages
or salaries of its employees.
(b) Except as Set forth on SCHEDULE 3.16(b) hereto, each Company
is not a party to any: (i) outstanding employment agreements or contracts with
officers or employees that are not terminable at will, or that provide for
payment of any bonus or commission; (ii) agreement, policy or practice that
requires it to pay termination or severance pay to non-exempt or hourly
employees (other than as required by law); (iii) collective bargaining agreement
or other labor union contract applicable to persons employed by each Company,
nor are there any activities or proceedings of any labor union to organize any
such employees. Each Company has furnished to BAG complete and correct copies of
all such agreements ("Employment and Labor Agreements"). Each Company has not
breached or otherwise failed to comply with any material provisions of any
Employment or Labor Agreement.
(c) Except as set forth in SCHEDULE 3.16(c) hereto: (i) there is
no unfair labor practice charge or complaint pending before the National Labor
Relations Board ("NLRB"); (ii) there is no labor strike, material slowdown or
material work stoppage or lockout actually pending or threatened, against or
affecting each Company, and each Company has not experienced any such material
slow down or material work stoppage, lockout or other collective labor action by
or with respect to employees of each Company; (iii) there is no representation
claim or petition pending before the NLRB or any similar foreign agency and no
question concerning representation exists relating to the employees of each
Company; (iv) the are no charges with respect to or relating to each Company
pending before the Equal Employment Opportunity Commission or any state, local
or foreign agency responsible for the prevention of unlawful employment
practices; (v) each Company has not received formal notice from any federal,
state, local or foreign agency responsible for the enforcement of labor or
employment laws of an intention to conduct an investigation of each Company and
no such investigation is in progress; and (vi) the consents of the unions that
are parties to any Employment and Labor Agreements are not required to complete
the transactions contemplated by this Agreement.
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(d) Each Company has never caused any "plant closing" or "mass
layoff" as such actions are defined in the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. Sections 2101-2109, and the
regulations promulgated therein.
3.17 EMPLOYEE BENEFIT PLANS.
(a) Set forth on SCHEDULE 3.17(A) hereto is a true and complete
list of:
(i) each Employee Pension Benefit Plan maintained by each
Company or to which each Company is required to make
contributions;
(ii) each Employee Welfare Benefit Plan maintained by each
Company or to which each Company is required to make
contributions; and
(iii) True and complete copies of all ERISA Plans have been
delivered to or made available to BAG together with,
as applicable with respect to each such ERISA Plan,
trust agreements, summary plan descriptions, all IRS
determination letters or applications therefor with
respect to any Pension Benefit Plan intended to be
qualified pursuant to Section 401(c) of the Code, and
valuation or actuarial reports, accountant's
opinions, financial statements, IRS Form 5500s (or
5500-C or 5500-R) and summary annual reports for the
last three years.
(b) With respect to the ERISA Plans, except as set forth on
SCHEDULE 3.17(b):
(i) there is no ERISA Plan which is a Multiemployer Plan;
(ii) no event has occurred or is threatened or about to
occur which would constitute a prohibited transaction
under Section 406 of ERISA or under Section 4975 of
the Code;
(iii) each ERISA Plan has operated since its inception in
accordance in all material respects with the
reporting and disclosure requirements imposed under
ERISA and the Code and has timely filed Form 5500e
(or 5500-C or 5500-R) and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state, local
or foreign Taxes.
(c) Each Pension Benefit Plan intended to be qualified under
Section 401(a) of the Code:
(i) has been qualified, from its inception, under Section
401(a) of the Code, and the trust established
thereunder has been exempt from taxation under
Section 501(a) of the Code and is currently in
compliance with applicable federal laws;
(ii) has been operated, since its inception, in all
material respects in accordance with its terms and
there exists no fact which would adversely affect its
qualified status; and
(iii) is not currently under investigation, audit or review
by the IRS and no such action is contemplated or
under consideration and the IRS has not asserted that
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any Pension Benefit Plan is not qualified under
Section 401(a) of the Code or that any trust
established under a Pension Benefit Plan is not
exempt under Section 501(a) of the Code.
(d) With respect to each Employee Pension Benefit Plan which is a
defined benefit plan under Section 414(j) and, for the purpose solely of Section
3.17(d)(iv) hereof, each defined contribution plan under Section 414(i) of the
Code:
(i) no liability to the PBGC under Sections 4062-4064 of
ERISA has been incurred by each Company since the
effective date of ERISA and all premiums due and
owing to the PBGC have been timely paid;
(ii) no PBGC has notified each Company or any Employee
Pension Benefit Plan of the commencement of any
proceedings under Section 4042 of ERISA to terminate
any such plan;
(iii) no event has occurred since the inception of any
Employee Pension Benefit Plan or is threatened or
about to occur which would constitute a reportable
event within the meaning of Section 4043(b) of ERISA;
(iv) no Employee Pension Benefit Plan ever has incurred an
"accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Code; and
(v) if any of such Employee Pension Benefit Plans were to
be terminated on the Closing Date: (A) no liability
under Title IV of ERISA would be incurred by each
Company; and (B) all benefits accrued to the day
prior to the Closing Date (whether or not vested)
would be fully funded in accordance with the
actuarial assumptions and method utilized by such
plan for valuation purposes.
(e) With respect to each Employee Pension Benefit Plan, SCHEDULE
3.17(a) contains a list of all Employee Pension Benefit Plans to which ERISA has
applied which have been or are being terminated, or for which a termination is
contemplated, and a description of the actions taken by the PBGC and the IRS
with respect thereto.
(f) The aggregate of the amounts of contributions by each Company
to be paid or accrued under ERISA Plans for the current fiscal year is not
expected to exceed approximately one hundred and ten percent (110%) of the
amounts of such contributions for the past fiscal year. To the extent required
in accordance with GAAP, each Company's Balance Sheet reflects in the aggregate
an accrual of all amounts of employer contributions accrued by and unpaid by
each Company under the ERISA Plans as of the date of each Company's Balance
Sheet.
(g) With respect to any Multiemployer Plan: (i) each Company has
not, since its formation, made or suffered any "complete withdrawal" or "partial
withdrawal" as such terms are respectively defined in Sections 4203 and 4205 of
ERISA; (ii) there is no withdrawal liability of each Company under any
Multiemployer Plan, computed as if a "complete withdrawal" by each Company had
occurred under each such Plan as of the Closing Date; and (iii) each Company has
not received notice to the effect that any Multiemployer Plan is either in
reorganization (as defined in Section 4241 of ERISA) or insolvent (as defined in
Section 4245 of ERISA).
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(h) With respect to the Employee Welfare Benefit Plan:
(i) There are no liabilities of each Company under
Employee Welfare Benefit Plans with respect to any
condition which relates to a claim filed on or before
the Closing Date; and
(ii) No claims for benefits are in dispute or litigation.
3.18 OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS.
(a) Set forth on SCHEDULE 3.18(a) hereto is a true and complete
list of:
(i) each employee stock purchase, employee stock option,
employee stock ownership, deferred compensation,
performance, bonus, incentive, vacation pay, holiday
pay, insurance, severance, retirement, excess benefit
or other plan, trust or arrangement which is not an
ERISA Plan whether written or oral, which each
Company maintains or is required to make
contributions to;
(ii) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral,
with any current or former officer, director or
consultant of each Company pursuant to which payments
may be required to be made at any time following the
date hereof (including, without limitation, any
employment, deferred compensation, severance,
supplemental pension, termination or consulting
agreement or arrangement); and
(iii) each employee of each Company whose aggregate
compensation for the fiscal year ended December 31,
1996 exceeded, and whose aggregate compensation for
the fiscal year ending December 31, 1997 is likely to
exceed, $50,000. True and complete copies of all of
the written plans, arrangements and agreements
referred to on SCHEDULE 3.18(A) ("Compensation
Commitments") have been provided to BAG together
with, where prepared by or for each Company, any
valuation, actuarial or accountant's opinion or other
financial reports with respect to each Compensation
Commitment for the last three years. An accurate and
complete written summary has been provided to BAG
with respect to any Compensation Commitment which is
unwritten.
(b) Each Compensation Commitment:
(i) since its inception, has been operated in all
material respects in accordance with its terms;
(ii) is not currently under investigation, audit or review
by the IRS or any other federal or state agency and
no such action is contemplated or under
consideration;
(iii) has no liability for any federal, state, local or
foreign Taxes;
(iv) has no claim subject to dispute or litigation;
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(v) has met all applicable requirements, if any, of the
Code; and
(vi) has operated, since its inception, in material
compliance with the reporting and disclosure
requirements imposed under ERISA and the Code.
3.19 TRANSACTIONS WITH INSIDERS. Set forth on SCHEDULE 3.19 hereto is a
complete and accurate description of all material transactions between each
Company or any ERISA Plan, on the one hand, and any Insider, on the other hand,
that have occurred since January 1, 1994.
3.20 PROPRIETY OF PAST PAYMENTS. Except as set forth on SCHEDULE 3.20
hereto, no funds or assets of each Company have been used for illegal purposes;
no unrecorded funds or assets of each Company have been established for any
purpose; no accumulation or use of each Company's corporate funds or assets has
been made without being properly accounted for in the respective books and
records of each Company; all payments by or on behalf of each Company have been
duly and properly recorded and accounted for in their respective books and
records; no false or artificial entry has been made in the books and records of
each Company for any reason; no payment has been made by or on behalf of each
Company with the understanding that any part of such payment is to be used for
any purpose other than that described in the documents supporting such payment;
and each Company has not made, directly or indirectly, any illegal contributions
to any political party or candidate, either domestic or foreign. Neither the IRS
nor any other federal, state, local or foreign government agency or entity has
initiated or threatened any investigation of any payment made by each Company
of, or alleged to be, the type described in this Section 3.20.
3.21 INTEREST IN COMPETITORS. Except as set forth on SCHEDULE 3.21, neither
each Company nor the Stockholders, nor any of their Affiliates, have any
interest, either by way of contract or by way of investment (other than as
holder of not more than two percent (2%) of the outstanding capital stock of a
publicly traded Person, so long as such holder has no other connection or
relationship with such Person) or otherwise, directly or indirectly, in any
Person other than each Company that is engaged in the retail sale of automobiles
in the United States of America.
3.22 BROKERS. Except as set forth on SCHEDULE 3.22, neither Company, nor any
director, officer or employee thereof, nor the Stockholders or any
representative of the Stockholders, has employed any broker or finder or has
incurred or will incur any broker's, finder's or similar fees, commissions or
expenses, in each case in connection with the transactions contemplated by this
Agreement.
3.23 TERRITORIAL RESTRICTIONS. Except as set forth on SCHEDULE 3.23, each
Company is not restricted by any written agreement or under-standing with any
Person from carrying on its business anywhere in the world. Sub I and Sub II,
solely as a result of the transactions contemplated hereby, will not thereby
become restricted in carrying on any business anywhere in the world.
3.24 INTELLECTUAL PROPERTY.
(a) TITLE. SCHEDULE 3.24(a) contains a complete list of all
Intellectual Property that is owned by each Company and primarily related to,
used in, held for use in connection with, or necessary for the conduct of, or
otherwise material to each Company (the "Owned Intellectual Property") other
than: (i) inventions, trade secrets, processes, formulae, compositions, designs
and confidential business and technical information; and (ii) Intellectual
Property that is both not registered or subject to application for registration
and not material to each Company. Each Company owns or has the exclusive right
to
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use pursuant to license, sublicense, agreement or permission all Intellectual
Property, free from any Liens (other than Permitted Liens) and free from any
requirement of any past, present or future royalty payments, license fees,
charges or other payments, or conditions or restrictions whatsoever. The
Intellectual Property comprises all of the Intellectual Property necessary for
the Subs to conduct and operate the Companies as now being conducted by the
Stockholders. Each Company does not infringe on or otherwise conflict with any
rights of any Person in respect of any Intellectual Property.
(b) LICENSING ARRANGEMENTS. SCHEDULE 3.24(b) sets for all
agreements, arrangements or laws: (i) pursuant to which each Company has
licensed Intellectual Property to, or the use of Intellectual Property is
otherwise permitted (through non-assertion, settlement or similar agreements or
otherwise) by, any other Person; and (ii) pursuant to which each Company has had
Intellectual Property licensed to it, or has otherwise been permitted to use
Intellectual Property. Except as set forth on SCHEDULE 3.24(b), all of the
agreements or arrangements set forth on SCHEDULE 3.24(b): (A) are in full force
and effect in accordance with their terms and no default exists thereunder by
each Company or by any other party thereto; (B) are free and clear of all Liens;
and (C) do not contain any change in control or other terms or conditions that
will become applicable or inapplicable as a result of the consummation of the
transactions contemplated by this Agreement. Stockholders have delivered to BAG
and the Subs complete copies of all licenses and arrangements (including
amendments) set forth on SCHEDULE 3.24(b). All royalties, license fees, charges
and other amounts payable by, on behalf of, to, or for the account of, each
Company in respect of any Intellectual Property are disclosed in each Company's
Financial Statements to the extent material to each Company's Financial
Statements.
(c) LITIGATION. No claim or demand of any Person has been made,
nor is there any proceeding that is pending or threatened, which: (i) challenges
the rights of each Company in respect of any Intellectual Property; (ii) asserts
that each Company is infringing or otherwise in conflict with, or is, except as
set forth in SCHEDULE 3.24(b), required to pay any royalty, license fee, charge
or other amount with regard to, any Intellectual Property; or (iii) claims that
any default exists under any agreement or arrangement listed on SCHEDULE
3.24(b). None of the Intellectual Property is subject to any outstanding order,
ruling, decree, judgment or stipulation by or with any court, arbitrator or
administrative agency.
(d) DUE REGISTRATION. The Owned Intellectual Property has been
duly registered with, filed in or issued by, as the case may be, the United
States Patent and Trademark Office, United States Copyright Office, or such
other filing offices, and each Company has taken such other actions to ensure
full protection under any applicable laws or regulations, and such
registrations, filings, issuances and other actions remain in full force and
effect.
(e) USE OF NAME AND MARK. Except as set forth in SCHEDULE 3.24(e),
there are, and immediately after the Closing will be, no contractual restriction
or limitation pursuant to any orders, decisions, injunctions, judgments, awards
or decrees of any Governmental Authority on the Subs' right to use the names and
marks "Wade Ford" or "Wade Ford Buford" in the conduct of the businesses as
presently carried on by the Companies or as such businesses may be extended by
the Subs.
3.25 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 3.25 contains an
accurate list, as of the date of this Agreement, of:
(a) the name of each financial institution in which each Company
has accounts or safe deposit boxes;
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(b) the names in which the accounts or boxes are held;
(c) the type of account; and
(d) the name of each Person authorized to draw thereon or have
access thereto.
3.26 DISCLOSURE. Neither each Company nor any Stockholder has made any
material misrepresentation to BAG relating to each Company or the Wade Shares,
and neither each Company nor any Stockholder has omitted to state to BAG any
material fact relating to each Company or the Wade Shares which is necessary in
order to make the information given by or on behalf of each Company or the
Stockholders to BAG not misleading or which if disclosed would reasonably affect
the decision of a Person considering an acquisition of the Wade Shares. No fact,
event, condition or contingency exists or has occurred which has, or in the
future can reasonably be expected to have, a Material Adverse Effect on any
Company, which has not been disclosed in each Company's Financial Statements or
the schedules to this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Subject to the Parties' agreement and acknowledgment that certain of
the Schedules referred to in this Article 4 are to be delivered by each Company
and the Stockholders no later than ten (10) business days from the date this
Agreement is executed, the Stockholders and the Companies hereby jointly and
severally represents and warrant to BAG and the Subs 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) as to each Stockholder:
4.1 OWNERSHIP OF SHARES; TITLE. Each Stockholder is the owner of record and
beneficiary of the Wade Shares set forth on SCHEDULE 4.1 hereof and has, and
shall transfer to the Subs at the Closing, good and marketable title to the Wade
Shares owned by him, free and clear of any and all Liens, claims and
encumbrances and free and clear of any restrictions on transfer (other than
restrictions on transfer imposed by applicable federal and state securities
laws), proxies and voting, or other agreements. Each Stockholder is not a party
to any option, warrant, purchase right or other contract or commitment that
could require any Stockholder to sell, transfer or otherwise dispose of the Wade
Shares (other than this Agreement). Each 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 a Company.
4.2 AUTHORITY. Each Stockholder has all requisite power and authority and
has full legal capacity and is competent to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby (including the
disposition of the Wade Shares to the Subs as contemplated by Agreement). This
Agreement has been duly executed and delivered by each Stockholder and
constitutes a valid and binding obligation of each Stockholder, enforceable
against each Stockholder in accordance with its terms. Except as set forth on
SCHEDULE 4.2, the execution, delivery and performance of this Agreement by each
Stockholder and the consummation of the transactions contemplated hereby, do not
and will not:
(a) (after notice or lapse of time or both) conflict with, result
in a breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination or
acceleration in respect of, any material contract, agreement, commitment,
understanding,
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arrangement or restriction to which any Stockholder is a party or to which any
Stockholder or any of Stockholders' property is subject;
(b) violate or conflict with any Legal Requirements applicable to
any Stockholder or any of such Stockholder's businesses properties; or
(c) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
Governmental Authority, except in connection with or in compliance with the
provisions of the Hart-Scott-Rodino Act.
4.3 BROKER'S FEES. Each 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 or the Subs could
become liable or obligated.
4.4 INVESTMENT. Each Stockholder: (a) understands that any BAG Stock
Consideration Shares have not been, and will not be, registered under the
Securities Act, or under any state securities laws, and are being offered and
sold in reliance upon federal and state exemptions for transactions not
involving any public offering; (b) is acquiring any BAG Stock Consideration
Shares 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 has had the opportunity to obtain additional
information as desired in order to evaluate the merits and risks inherent in
holding any BAG Stock Consideration Shares; (e) is able to bear the economic
risk and lack of liquidity inherent in holding any BAG Stock Consideration
Shares; and (f) is an Accredited Investor for the reasons set forth on ADDENDUM
3. Each Stockholder further acknowledges and understands that the
representations and warranties of the Stockholders and each Company set forth in
this Agreement will be used and relied on by BAG and the Subs to prepare and
file the Registration Statement with the Securities and Exchange Commission.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BAG AND THE SUBS
BAG and the Subs hereby jointly and severally represent and warrant to
each Company and the Stockholders that the statements contained in this Article
5 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 5) as to BAG, Sub I and Sub II:
5.1 ORGANIZATION AND GOOD STANDING. BAG and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and has the corporate power and authority to
own, lease and operate the properties used in its business and to carry on its
business as now being conducted. BAG and each of its subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
each state and jurisdiction where qualification as a foreign corporation is
required, except for such failures to be qualified and in good standing, if any,
which when taken together with all other such failures of BAG and its
subsidiaries would not, or could not reasonably be expected to, in the aggregate
have a Material Adverse Effect on BAG and its subsidiaries, taken as a whole.
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5.2 AUTHORITY; APPROVALS AND CONSENTS. BAG and the Subs have the corporate
power and authority to enter into this Agreement and to perform their respective
obligations hereunder. This Agreement has been duly executed and delivered by,
and constitutes a valid and binding obligation of BAG and the Subs, enforceable
against BAG and the Subs in accordance with its terms. Except as set forth on
SCHEDULE 5.2 hereto, the execution, delivery and performance by BAG and the Subs
of this Agreement and the consummation of the transactions contemplated hereby
do not and will not:
(a) contravene any provisions of the certificate of incorporation
or bylaws of BAG or the Subs;
(b) (after notice or lapse of time or both) conflict with, result
in a breach of any provision, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination or
acceleration in respect of, any agreements to which BAG or the Subs are a party
(the "BAG Agreements") or require any consent or waiver of any party to any BAG
Agreement other than agreements the breach or violation of which could not
reasonably be expected to have a Material Adverse Effect on BAG and its
subsidiaries, taken as a whole;
(c) violate or conflict with any Legal Requirements applicable to
BAG or any of its subsidiaries or any of their respective businesses or
properties; or
(d) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
Governmental Authority, except in connection with or in compliance with the
provisions of the Hart-Scott-Rodino Act.
5.3 BROKERS. Neither BAG, the Subs nor any of their directors, officers or
employees has employed any broker or finder or has incurred or will incur any
broker's, finder's or similar fees, commissions or expenses, in each case in
connection with the transactions contemplated by this Agreement or the Real
Estate Agreement.
5.4 DISCLOSURE. Neither BAG nor the Subs has made any material
misrepresentations to the Stockholders and neither BAG nor the Subs has omitted
to state to the Stockholders any material fact relating to BAG or the Subs which
is necessary in order to make the information given by BAG or the Subs not
misleading or which if disclosed would reasonably affect the decision of a
Person considering the sale of the Wade Shares. No fact, event, condition or
contingency exists or has occurred which has, or in the future can reasonably be
expected to have, a Material Adverse Effect on BAG or Sub I or Sub II, which has
not been disclosed in the financial statements of BAG, Sub I or Sub II.
ARTICLE 6
COVENANTS AND ADDITIONAL AGREEMENTS
6.1 ACCESS; CONFIDENTIALITY. Between the date hereof and the Closing Date,
the Stockholders and each Company will: (a) provide to the officers and other
authorized representatives of BAG and the Subs full access, during normal
business hours and upon reasonable advanced notice, to any and all premises,
properties, files, books, records, documents and other information of each
Company, and will cause each Company's officers to furnish to BAG and its
authorized representatives any and all financial, technical and operating data
with other information pertaining to the businesses and properties of each
Company (including the Real Property and the Improvements); and (b) make
available for inspection and copying by BAG and the Subs true and complete
copies of any documents relating to the foregoing. BAG and
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the Subs will make their best efforts not to cause any material disruptions to
the business operations of each Company in conducting the due diligence
described in the previous sentence. BAG and the Subs will hold, and will cause
their representatives to hold, in confidence (unless and to the extent compiled
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 BAG and the Subs. If this Agreement is
terminated, BAG and the Subs will, and will cause their representatives to,
promptly return to each Company all Confidential Information furnished by such
Company, including all copies and summaries thereof. As used herein,
"Confidential Information" with respect to each Company shall mean all
information concerning such Company obtained by BAG, the Subs and their
representatives from such Company in connection with the transactions
contemplated by this Agreement, except information (i) ascertainable or obtained
from public information; (ii) received from a third party not employed by or
otherwise affiliated with such Company; or (iii) which is or becomes known to
the public other than through a breach by BAG or the Subs or any of their
representatives of this Agreement. The Stockholders and the Companies 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 regarding BAG, Subs or the Registration Statement and will not
disclose the same to any third party or use the same for any purpose except as
may be reasonably necessary to carry out this Agreement and the transactions
contemplated hereby. If this Agreement is terminated, the Stockholders and the
Companies will, and will cause their representatives to, promptly return to BAG,
upon the reasonable request of BAG, all Confidential Information furnished by
BAG or Subs or which relates to the Registration Statement, including all copies
and summaries thereof. If the Closing does occur, the Stockholders shall
continue to comply with and be bound by these nondisclosure and nonuse
obligations for a period of five (5) years following the Closing, except that,
with respect to any such Confidential Information which constitutes a trade
secret under the laws of the State of Georgia, the Stockholders shall continue
to comply with and be bound by these nondisclosure and nonuse obligations for so
long as such Confidential Information remains a trade secret.
6.2 FURNISHING INFORMATION; ANNOUNCEMENTS. The Stockholders and each
Company, on the one hand, and BAG and the Subs, on the other hand, will, as soon
as practical after reasonable request therefor, furnish to the other all
information concerning the Stockholders and each Company or BAG and the Subs,
respectively, required for inclusion in any statement or application made by BAG
or the Subs or a Company or the Stockholders 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. Neither the Stockholders nor any Company, on the one hand, nor BAG or
the Subs, on the other hand, nor any representative thereof, shall issue any
press release or otherwise make any public statement with respect to the
transactions contemplated hereby without the prior consent of the other, except
as may be required by law. BAG shall reimburse each Company and the Stockholders
for any reasonable expenses incurred by such Company and the Stockholders in
connection with this Section.
6.3 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) Except as set forth on SCHEDULE 6.3(a), from and after the
date of this Agreement and until the Closing Date, each Company shall, and the
Stockholders shall cause each Company to, conduct its businesses solely in the
ordinary course consistent with past practices and, without the prior written
consent of BAG, neither the Stockholders nor any Company will, except as
required or settled pursuant to the terms hereof, permit any Company to:
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(i) make any material change in the conduct of its
businesses and operations or enter into any
transaction other than in the ordinary course of
business consistent with past practices;
(ii) make any change in its Bylaws, issue any additional
shares of capital stock or equity securities or grant
any option, warrant or right to acquire any capital
stock or equity securities or issue any security
convertible into or exchangeable for its capital
stock or alter any material term of any if its
outstanding securities or make any change in its
outstanding shares of capital stock or other
ownership interests or its capitalization, whether by
reason of a reclassification, recapitalization, stock
split or combination, exchange or readjustment of
shares, stock dividend or otherwise;
(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or
other corporate securities or grant any option,
warrant or right to purchase any thereof, except
pursuant to transactions in the ordinary course of
business consistent with past practices; (B) issue
any securities convertible or exchangeable for debt
securities of any Company; or (C) issue any options
or other rights to acquire from any Company, directly
or indirectly, debt securities of any Company or any
security convertible into or exchangeable for such
debt securities;
(iv) make any sale, assignment, transfer, abandonment or
other conveyance of any of its assets or any part
thereof, except transactions pursuant to existing
contracts (which will be set forth in SCHEDULE 3.15
hereto) and dispositions in the ordinary course of
business consistent with past practices;
(v) subject any of its assets, or any part thereof, to
any Liens or suffer such to be imposed other than
such liens as may arise in are ordinary course of
business consistent with past practices;
(vi) acquire any assets, raw materials or properties, or
enter into any other transaction, other than in the
ordinary course of business, consistent with past
practices;
(vii) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any new (or
amend any existing) employment severance or
consulting agreement, grant any general increase in
the compensation of officers or employee (including
any such increase pursuit to any bonus, pension,
profit-sharing or other plan or commitment) or grant
any increase in compensation payable or to become
playable to any employee, except in accordance with
pre-existing contractual provisions or consistent
with past practices;
(viii) make or commit to make any individual material
capital expenditure in excess of $10,000, or
aggregate capital expenditures in excess of $50,000,
except in the ordinary course of business;
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(ix) pay, loan or advance any amount to, or sell, transfer
or lease any properties or assets to, or enter into
any agreement or arrangement with, any of its
Affiliates, except in the ordinary course of
business;
(x) guarantee any indebtedness for borrowed money or any
other obligation of any other Person, other than in
the ordinary course of business consistent with past
practice;
(xi) fail to keep in full force and effect insurance
comparable in amount and scope to coverage maintained
by it (or on behalf of it) on the date hereof;
(xii) make any loan, advance or capital contribution to
investment in any Person, except in the ordinary
course of business;
(xiii) make any change in any method of accounting or
accounting principle, method, estimate or practice
except for any such change required by reason of a
concurrent change in GAAP or write-down the value of
any inventory or write-off as uncollectible any
accounts receivable except in the ordinary course of
business consistent with past practices;
(xiv) settle, release or forgive any material claim or
litigation or waive any material right;
(xv) make, enter into, modify, amend in any material
respect or terminate any material commitment, bid or
expenditure, other than in the ordinary course of
business consistent with past practice; or
(xvi) commit itself to do any of the foregoing.
(b) Except as set for the on SCHEDULE 6.3(b), from and after the
date hereof and until the Closing Date, the Stockholders and each Company will
use their reasonable best efforts to cause each Company to:
(i) continue to maintain, in all material respects, each
Company's properties, all Real Property and all
Improvements in accordance with present practices in
a condition suitable for their current use;
(ii) comply with all applicable Environmental Laws, and,
in the event it shall receive notice that there
exists a violation of any Environmental Law with
respect to its operations, any Improvements or any
Real Property, promptly (and in any event within the
time period permitted by the applicable governmental
authority) remove or remedy such violation in
accordance with all applicable Environmental Laws;
(iii) file, when due or required, federal, state, foreign
and other tax returns and other reports required to
be filed and pay when due all Taxes, assessments,
fees and other charges lawfully levied or assessed
against it unless the validity thereof is contested
in good faith and by appropriate proceedings
diligently conducted;
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(iv) keep its books of account, records and files in the
ordinary course and in accordance with existing
practices;
(v) preserve its business organization intact and
continue to maintain existing business relationships
with suppliers, customers and others with whom
business relationships exist other than relationships
that are, at the same time, not economically
beneficial to it; and
(vi) continue to conduct its business in the ordinary
course consistent with past practices.
6.4 NO INTERCOMPANY PAYABLES OR RECEIVABLES. At the Closing there will be
no intercompany payables or intercompany receivables due and/or owing between
the Stockholders and any of their Affiliates, on the one hand, and any Company,
on the other hand, except for the Stockholders' loans as set forth in Section
6.13 hereof, which shall be paid in full on or before the Closing Date.
6.5 NEGOTIATIONS. Until the earlier of the Closing Date Deadline or the
termination of this Agreement pursuant to Section 8.1 hereof, no Stockholder,
nor any Company, nor any Company's officers, directors, employees, advisors,
agents, representatives, Affiliates or anyone acting on behalf of the
Stockholders, any 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 BAG 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 any Company. The Stockholders shall promptly communicate to BAG any
inquiries or communications concerning any such transaction (including the
identity of any Person making such inquiry or communication) which the
Stockholders may receive or of which the Stockholders may become aware.
6.6 CONSENTS; COOPERATION. Subject to the terms and conditions hereof, the
Stockholders and each Company and BAG and the Subs 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 Government Approvals, 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; (ii) the ownership or leasing and operating after the Closing by
each Company of all its material properties; and (iii) the conduct after the
Closing by each Company of its businesses as conducted by it on the date hereof;
(b) to obtain approval of Ford Motor Company of the proposed
Agreement herein and each Company and the Subs and the dealer Wade Ford, Inc. in
Smyrna, Georgia and Wade Ford Buford, Inc. in Buford, Georgia;
(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.
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6.7 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 actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable Legal
Requirements 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 each Company shall take all such necessary action. Furthermore, each
Stockholder and the officers and directors of each Company expressly agree to
execute any and all additional documents, and to provide any and all additional
information, that are required by the Georgia Business Corporation Code, the
rules and regulations of the Securities Act, any other Governmental Authority,
or reasonably requested by counsel to BAG or the Subs, to effectuate the
transactions contemplated by this Agreement.
6.8 INTERIM FINANCIAL STATEMENTS. If requested by BAG and at BAG's expense,
within thirty (30) days after the end of each calendar month after October 31,
1997, each Company shall deliver to BAG unaudited balance sheets of such Company
at the end of such calendar month and at the end of the corresponding calendar
month of the previous fiscal year, together with the related unaudited
statements of income and cash flow for the first months then ended of each
Company. Each Company will also deliver to BAG copies of such Company's Factory
Statements provided to Ford Motor Company after the date hereof within five (5)
days of their delivery to Ford Motor Company. All such financial statements
shall fairly present the financial position and results of operations of each
such Company as of the date or for the periods indicated. All unaudited
financial statements delivered pursuant to this Section 6.8 shall be prepared on
a basis consistent with each Company's Financial Statements.
6.9 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 7 or Article 8 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 Stockholders and
each 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 Company Agreement set forth on SCHEDULE 3.15. Each Company and the
Stockholders will: (a) promptly advise BAG of any event that has, or could
reasonably be expected in the future to have, a Material Adverse Effect on any
Company; (b) confer on a regular and frequent basis with one or more designated
representatives of BAG to report operational matters and to report the general
status of ongoing operations; and (c) notify BAG of any emergency or other
change in the normal course of business or relating to the Real Property or
Improvements of each Company and the Stockholder Real Property and of any
complaints, investigations or hearings (or communications indicating that the
same may be contemplated) of any Governmental Authority or adjudicatory
proceedings involving any Company, the Real Property or the Improvements or the
Stockholder Real Property and will keep BAG fully informed of such events and
permit BAG's representatives access to all materials prepared in connection
therewith. Each Stockholder shall give prompt notice to BAG of any notice or
other communication from any third Person asserting any right, title or interest
in any of the Wade Shares held by such Stockholder, including, without
limitation, any threat to commerce, or notice of the commencement of any action
or other proceeding with respect to the Wade Shares, or the occurrence of any
other event of which such Stockholder has Knowledge which could result in any
failure to consummate the sale of the Wade Shares as contemplated hereby. The
delivery of any notice pursuant to this Section 6.9 shall not be deemed to: (i)
modify the representations and warranties hereunder of the Party
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delivering such notice, which modification may only be made pursuant to the last
part of this Section 6.9; (ii) modify the conditions set forth in Articles 7 and
8; or (iii) limit or otherwise affect the remedies available hereunder to the
Party receiving such notice. Each Party hereto agrees that with respect to the
representations and warranties of such Party contained in this Agreement, such
Party shall have the continuing obligation until the Closing to supplement or
amend promptly the Schedules hereto with respect to any matter hereafter arising
or discovered which, if existing or known at the date of this Agreement, would
have been required to be set forth or described in the Schedules. For all
purposes of this Agreement, including, without limitation, for purposes of
determining whether the conditions set forth in Section 7.1 and Section 8.1 have
been fulfilled, the Schedules hereto shall be deemed to be the Schedules as
amended or supplemented pursuant to this Section 6.9. No amendment or supplement
to a schedule shall be made later than forty-eight (48) hours prior to the
anticipated effectiveness of the Registration Statement.
6.10 ASSURANCE BY THE STOCKHOLDERS. Each Stockholder shall use its best
efforts to cause each Company to comply with its respective covenants set forth
in this Agreement.
6.11 ANTITRUST IMPROVEMENTS ACT COMPLIANCE. BAG, the Stockholders and each
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 Act and the rules and regulations promulgated thereunder with
respect to the transactions contemplated herein. BAG shall pay the
Hart-Scott-Rodino Act filing 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 Hart-Scott-Rodino Act to terminate or expire at the earliest
possible date, and to resist vigorously, at BAG'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 BAG shall determine that continuing such
resistance is not in its best interest, BAG may, by written notice to the other
Parties, terminate this Agreement with the effect set forth in Section 9.2
hereof.
6.12 USE OF BUSINESS NAME. After the Closing Date, BAG and each Company may
use the names "Wade Ford" and "Wade Ford Buford" in connection with business of
each Company, respectively. After the Closing, none of the Stockholders nor any
of their Affiliates shall ever use, without the prior written permission of BAG,
which permission BAG may withhold or deny in its sole discretion for any reason
whatsoever, the names "Wade Ford" and "Wade Ford Buford" in connection with the
sale or servicing of new or used automobiles, light-duty trucks or any other
motorized vehicles.
6.13 RELATED PARTY / STOCKHOLDERS LOAN. On or before the Closing Date, the
Stockholders shall cause each Company to pay, and each Company shall pay, all of
the outstanding principal and all accrued but unpaid interest on any related
Party/Stockholder loans (the "Stockholder Loans"). For purposes of this Section,
the Stockholder Loans shall mean the loans to each Company from Stockholders and
their Affiliates as set forth on such Company's Balance Sheet and listed on
SCHEDULE 6.13.
6.14 STOCK RESTRICTION AGREEMENT. Prior to the Closing Date, any and all
stock restriction agreements, buy/sell agreements, shareholder agreements or
other similar agreements of each Company (the "Stock Restriction Agreement")
shall be terminated in accordance with its terms and the parties thereto shall
have released any and all claims arising under or relating to the Stock
Restriction Agreement and its termination.
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6.15 PERSONAL ITEMS. The Parties acknowledge and agree that the Stockholders
may retain certain personal items (which items are not reflected as assets on
any Company's Balance Sheet). These items will include personal pictures, awards
and mementos.
6.16 LIABILITY FOR TRANSFER TAXES. Stockholders shall be responsible for the
timely payment of, and shall indemnify and hold harmless BAG and the Subs
against, all income, sales (including without limitation bulk sales), use, value
added, documentary, stamp, gross receipts, registration, transfer, conveyance,
excise, recording, license and other similar Taxes and fees ("Transfer Taxes")
arising out of or in connection with or attributable to the transactions
effected pursuant to this Agreement. Stockholders shall prepare and timely file
all tax returns required to be filed in respect of Transfer Taxes (including
without limitation all notices required to be given with respect to bulk sales
taxes), provided that the Subs shall be permitted to prepare any such tax
returns that are the primary responsibility of the Subs under applicable law.
6.17 CERTIFICATES OF TAX AUTHORITIES. On or before the Closing Date,
Stockholders shall provide to the Subs copies of certificates from the
appropriate taxing authority stating that no Taxes are due to any state or other
taxing authority for which the Subs could have liability to withhold or pay
Taxes with respect to the sale of any Company. If Stockholders fail to provide
such certificates, the Subs shall withhold or, where appropriate, escrow such
amount as necessary based upon Sub's reasonable estimate of the amount of such
potential liability, or as determined by the appropriate taxing authority, to
cover such Taxes until such time as certificates are provided.
6.18 RELEASE BY STOCKHOLDERS. The Stockholders hereby agree and confirm that
they hereby fully release, acquit and forever discharge each Company, together
with each Company's successors, assigns, affiliates, parent and related parties,
from any and all Claims, except for compensation payable to the Stockholders by
each applicable Company for the most recent standard payroll period (based upon
each Company's standard practices) which have not been paid plus the reasonable
reimbursable expenses based upon the past practices of each Company.
6.19 ELECTION OF DIRECTOR. At an appropriate time, to be determined by BAG
in its sole discretion, prior to the Closing, Mr. Alan Arnold, if he so desires,
shall be elected to become a member of the board of directors of BAG.
6.20 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The Companies and
the Stockholders shall furnish or cause to be furnished to BAG and the
underwriters of the BAG IPO (the "Underwriters") all of the information
concerning the Companies and the Stockholders required for inclusion in, and
will cooperate fully and completely with BAG, BAG's legal counsel, BAG'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 in the Registration Statement).
6.21 AUDITS. For purposes of any audits that are to be conducted by the
Accountants as required by this Agreement, BAG shall instruct the Accountants to
conduct such audits in a manner that is consistent with the accounting practices
that are utilized by the Accountants in their audits of BAG.
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ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF BAG
AND THE SUBS TO EFFECT THE CLOSING
The Obligations of BAG and the Subs 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 BAG and the
Subs in writing as provided herein except as otherwise required by applicable
law:
7.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS. Each of the
representations and warranties of each Company and the Stockholders 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
each Company and the Stockholders 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 Subs shall have
received a certificate, dated the Closing Date and duly executed by the
Stockholders and each Company, to the effect that the conditions set forth in
the two preceding sentences have been satisfied.
7.2 AUTHORIZATION; CONSENT.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the Transaction Documents, and
the consummation of the transactions contemplated hereby shall have been duly
and validly taken by each Company. All filings required to be made under the
Hart-Scott-Rodino 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 Governmental Authorities, and all Government Approvals and all third
persons, including, but not limited to, all automobile manufacturers with whom
each Company has a franchise agreement (or comparable agreement), required to
consummate the transactions contemplated hereby and all other consents or
waivers shall have been made or obtained.
7.3 OPINIONS OF EACH COMPANY'S AND THE STOCKHOLDER'S COUNSEL. BAG and the
Subs shall have been furnished with the opinion of each Company's and the
Stockholders' counsel, dated the Closing Date, in a form as set forth on EXHIBIT
C-1 attached hereto and incorporated herein.
7.4 ABSENCE OF LITIGATION. No order, stay, injunction or decree of any
court of competent jurisdiction in the United States shall be in effect: (a)
that prevents or delays the consummation of any of the transactions contemplated
hereby; or (b) would impose any limitation on the ability of BAG or the Subs
effectively to exercise all rights of ownership of the Wade 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 the Transaction Documents or seeking damages in connection
therewith which BAG or the Subs, in good faith and with the advice of counsel,
believes it makes it undesirable to proceed with the consummation of the
transactions contemplated hereby.
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7.5 NO MATERIAL ADVERSE EFFECT. During the period from December 31, 1996 to
the Closing Date, there shall not have been any Material Adverse Effect on any
Company, other than payments to Stockholders in accordance with the terms of
this Agreement.
7.6 REGISTRATION STATEMENT. BAG shall have filed with the SEC a
registration statement on Form S-1 (the "Registration Statement") covering the
offer and sale of the BAG IPO Stock. The Registration Statement shall have been
declared effective by the SEC and the underwriters named therein shall have
agreed to acquire, subject to the conditions set forth in the underwriting
agreement, shares of BAG IPO Stock. The closing of the sale of the BAG IPO Stock
to the underwriters shall have occurred simultaneously with the Closing
hereunder.
7.7 COMPLETION OF DUE DILIGENCE. BAG and the Subs shall have completed
their due diligence examination of each Company, and the results of such
examination shall be reasonably satisfactory to BAG and the Subs; provided,
however, that the conditions contained in this SECTION 7.7 shall not be a
condition precedent to the Obligations of BAG and the Subs hereunder after the
date that is sixty (60) days after the date hereof.
7.8 REAL ESTATE PURCHASE AGREEMENTS; LEASES.
(a) REAL ESTATE PURCHASE OPTION. The Stockholders and the Subs or
their respective assignees shall have entered into an option to purchase
substantially in the form attached hereto as EXHIBIT D (the "Real Estate Option
Agreements") pursuant to which Subs or their assignee shall have the options to
purchase one or both of the real property parcels owned by Mr. Alan Arnold and
used in the business of Wade Ford, Inc. and Wade Ford Buford, Inc. (the "Arnold
Properties"). The Subs must exercise their respective options to purchase the
Arnold Properties pursuant to the Real Estate Option Agreements on or before the
date that is thirty (30) days after the Closing Date (the "Real Estate Option
Deadline"), and the real estate transactions underlying each such Real Estate
Option Agreement must be consummated on or before the date that is sixty (60)
days after the date on which each of the Sub's exercises its option.
(b) LEASES. In addition to the Real Estate Option Agreements, the
real estate leases affecting the Arnold Properties as of the date hereof (the
"Arnold Leases") shall have been modified and amended upon terms that are
mutually acceptable to the Parties and substantially as follows: (i) Each Arnold
Lease shall be for a term of ten (10) years and the lessees shall have options
to renew each Arnold Lease for two (2) additional terms of five (5) years each;
(ii) each Arnold Lease shall be a triple net lease; (iii) the base monthly
rental for each Arnold Lease for the period beginning on the Closing Date and
ending on the date that is twelve months after the Closing Date (the "Lease
Anniversary") shall equal the same base monthly rental in effect with respect to
the Arnold Leases as of the date hereof; (iv) the base monthly rental for each
Arnold Lease for the one year period following the Lease Anniversary shall equal
one percent (1%) of the Fair Market Value (as hereinafter defined) of each
respective Arnold Property (the "Initial FMV Rent"); (v) on the second
anniversary after the Closing Date, and on every second (2nd) anniversary
thereafter, the base monthly rental of each Arnold Lease shall increase to an
amount equal to the base monthly rental then in effect plus an amount equal to a
percentage increase in the Consumer Price Index published from time to time by
the United States Department of Labor ("CPI") for the Atlanta metropolitan area
from the time of the last adjustment to the base monthly rental, or, in the
event no CPI is published, a comparable index. BAG or another operating
Subsidiary of BAG reasonably acceptable to the lessors of the Arnold Leases
shall unconditionally guaranty the payments and performance of each lessee under
each Arnold Lease. For purposes herein, the term "Fair Market Value" shall be
the amount determined by the mutual agreement of the Parties subsequent to
valuations of each Arnold Property by an appraiser selected by the Subs and a
second appraiser selected by Mr.
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Alan K. Arnold. If the Parties do not reach an agreement with respect to the
Fair Market Value, a third appraiser shall be selected by the two initial
appraisers and the third appraiser shall determine the Fair Market Value, and
said third appraiser's determination shall be binding on the Parties. The costs
of such a third appraiser, if any, shall be shared equally by the Parties.
7.9 CERTIFICATES. The Stockholders and officers of each Company shall have
furnished BAG and the Subs with a certificate, dated as of the Closing Date and
substantially in the form attached hereto as EXHIBIT E-1 and E-2, executed by
the Stockholders and said officers certifying to the fulfillment of the
conditions set forth in Sections 7.5 and 7.14 hereof, and shall have furnished
BAG and the Subs with such any other certificates of its officers as BAG and the
Subs may reasonably request to evidence compliance with the conditions set forth
in this Article 7.
7.10 LEGAL MATTERS. All certificates, instruments, opinions and other
documents required to be executed or delivered by or on behalf of the
Stockholders and each Company under the provisions of this Agreement, and all
other actions and proceedings required to be taken by or on behalf of the
Stockholders and each Company in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
BAG and the Subs.
7.11 APPROVAL OF MANUFACTURER AND DISTRIBUTOR. Ford Motor Company shall have
consented to, authorized and approved the transactions contemplated by this
Agreement on reasonable terms that are acceptable to BAG and Sub I and Sub II in
their sole discretion.
7.12 REGISTRATION RIGHT AGREEMENT. BAG and the Stockholders shall have
entered into a registration rights agreement with respect to the BAG Stock
Consideration Shares substantially in the form attached hereto as EXHIBIT F (the
"Registration Rights Agreement").
7.13 EMPLOYMENT AGREEMENTS; NON-COMPETITION AGREEMENTS. The Subs, the
Companies, Mr. Alan Arnold, Mr. Gary Billings and other key employees of the
Companies, as mutually selected by the Parties, shall have entered into
employment agreements in the forms attached hereto as EXHIBITS G-1 and G-2 (the
"Employment Agreements") and non-competition agreements in the forms attached
hereto as EXHIBITS H-1 and H-2.
7.14 ENVIRONMENTAL LAWS. Each Company shall be in material compliance with
all applicable Environmental laws.
7.15 LEASE TERMINATION AGREEMENT / MEMORANDUM OF LEASE / CONSENTS AND
ESTOPPELS. The appropriate parties shall have executed a lease termination
agreement and a memorandum of lease with respect to each lease listed in
SCHEDULE 3.10 in form and substance satisfactory to BAG and each Company.
Alternatively, if the transactions contemplated hereby would constitute an
"assignment" pursuant to said leases, Sub I or Sub II, as applicable, shall have
received consents from the lessor of each such lease to the "assignment" of such
lease to Sub I or Sub II, as applicable, to the extent such consent is required
by such applicable lease. Sub I and Sub II shall also have received estoppel
certificates addressed to Sub I or Sub II, as applicable, from the lessor of
each such Lease, dated within thirty (30) days prior to the Closing Date,
identifying the lease documents and any amendments thereto, stating that such
lease is in full force and effect and that the tenant is not in default under
such lease and no event has occurred that, with notice or lapse of time or both,
would constitute a default by the tenant under such lease and containing any
other information reasonably requested by Sub I or Sub II, as applicable.
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7.16 RESIGNATION OF EACH COMPANY'S DIRECTORS AND OFFICERS. Each of the
persons who is a director or officer of each Company on the Closing Date shall
have tendered to the Subs in writing his or her resignation as such director or
officer in a form and substance satisfactory to the Subs and BAG.
7.17 SCHEDULES. Each Company and the Stockholders shall have delivered to
BAG and the Subs all Schedules referred to in Articles 3 and 4 of this Agreement
and such Schedules shall be acceptable in form and substance satisfactory to BAG
and the Subs.
7.18 SHARE CERTIFICATES. Certificates representing one hundred percent
(100%) of the shares of common stock of Wade Ford, Inc. and Wade Ford Buford,
Inc. shall have been, or shall at the Closing be, validly delivered and
transferred to Sub I and Sub II, respectively, free and clear of any and all
Liens.
7.19 NON-FOREIGN STATUS. Each of the Stockholders shall have provided BAG
and the Subs with an affidavit of non-foreign status that complies with Section
1445 of the Code.
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF THE STOCKHOLDERS
TO EFFECT THE CLOSING
The obligations of the Stockholders and each Company 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 Companies and the Stockholders in writing as provided herein
except as otherwise required by applicable law:
8.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS. Each of the representations
and warranties of BAG and the Subs 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 the Subs 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 Stockholders shall have received a certificate, dated the
Closing Date and duly executed by an officer of BAG and of the Subs to the
effect that the conditions set forth in the preceding two sentences have been
satisfied.
8.2 AUTHORIZATION OF THE AGREEMENT; CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated hereby, shall have been duly and validly taken by BAG
and the Subs. All filings required to be made under the Hart-Scott-Rodino 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 Governmental Authorities, and all Government Approvals and all third
persons, including, but not limited to, all automobile manufacturers with whom
each Company has a franchise agreement (or comparable agreement), required to
consummate the transactions contemplated hereby and all consents or waivers
shall have been made or obtained.
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8.3 OPINIONS OF BAG'S AND SUB'S COUNSEL. The Stockholders shall have been
furnished with the opinion of The Whicker Law Firm, counsel to BAG and the Subs,
dated the Closing Date, in a form as set forth on EXHIBIT C-2 attached hereto
and incorporated herein.
8.4 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.
8.5 REAL ESTATE PURCHASE AGREEMENTS; LEASES. The conditions set forth in
SECTION 7.8 above shall have been satisfied.
8.6 CERTIFICATES. BAG and the Subs shall have furnished the Stockholders
with such certificates of its officers and others to evidence compliance with
the conditions set forth in this Article as may be reasonably requested by the
Stockholders.
8.7 LEGAL MATTERS. All certificates, instruments, opinions and other
documents required to be executed or delivered by or on behalf of BAG or the
Subs under the provisions of this Agreement, and all other actions and
proceedings required to be taken by or on behalf of BAG or the Subs in
furtherance of the transactions contemplated hereby, shall be reasonably
satisfactory in form and substance to counsel for the Stockholders.
8.8 REGISTRATION STATEMENT. BAG shall have filed with the SEC the
Registration Statement covering the offer and sale of the BAG IPO Stock. The
Registration Statement shall have been declared effective by the SEC and the
underwriters named therein shall have agreed to acquire, subject to the
conditions set forth in the underwriting agreement, shares of BAG IPO Stock. The
closing of the sale of the BAG IPO Stock to the underwriters shall have occurred
simultaneously with the Closing hereunder.
8.9 REGISTRATION RIGHT AGREEMENT. BAG and the Stockholders shall have
entered into the Registration Rights Agreement with respect to the BAG Common
Stock substantially in the form attached hereto as EXHIBIT F.
8.10 EMPLOYMENT AGREEMENTS. The Subs, the Companies, Mr. Alan Arnold and Mr.
Gary Billings and other key employees of the Companies, as mutually selected by
the Parties, shall have entered into the Employment Agreements.
8.11 STOCK PRICE PROTECTION AGREEMENT. BAG and the Stockholders shall have
entered into the Agreement substantially in the form attached hereto as EXHIBIT
I with respect to certain stock price protection in favor of the Stockholders.
8.12 CONSIDERATION. The Subs shall have tendered to the Stockholders the
Merger Consideration (less the Escrow Consideration) payable to the Stockholders
at the Closing and shall have placed into escrow the Escrow Consideration.
ARTICLE 9
TERMINATION
9.1 TERMINATION. This Agreement may be terminated at any time prior to
Closing:
(a) by written mutual consent of BAG, the Subs and the
Stockholders;
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(b) by either BAG, the Subs or the Stockholders by written notice
if the Closing shall not have taken place on or prior to the Closing Date
Deadline, or such other date as shall have been approved by BAG, the Subs and
the Stockholders in writing (provided that the terminating Party is not
otherwise in material breach of its representation, warranties, covenants or
agreements under this Agreement);
(c) by BAG, the Subs or the Stockholders if any court of competent
jurisdiction in 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 BAG or the Subs if any of the conditions specified in
Article 7 hereof have not been met or waived by BAG or the Subs at such time as
such condition is no longer capable of satisfaction (provided that neither BAG
nor the Subs is otherwise in material breach of its representations, warranties,
covenants or agreements under this Agreement);
(e) by the Stockholders if any of the conditions specified in
Article 8 hereof have not been met or waived by the Stockholders at such time as
such condition is no longer capable of satisfaction (provided that neither the
Stockholders nor any Company is otherwise in material breach of his or its
representations, warranties, covenants or agreements under this Agreement); or
(f) by either BAG, the Subs or the Stockholders 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.
If BAG, the Subs or the Stockholders 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.
9.2 PROCEDURE AND EFFECT OF TERMINATION. If any Party terminates this
Agreement pursuant to Section 9.1 above, 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, stockholders or
principals shall have any liability or obligation hereunder or with respect
hereto, except for (a) any liability arising out of any breach of this Agreement
prior to its termination; (b) the obligations contained in Section 6.1 and
Section 6.2 hereof, and (d) as set forth below in this Section 9.2:
(i) If this Agreement is terminated by the Stockholders
or the Companies pursuant to the provisions of
Section 9.1(b) above, Sub I and Sub II shall, within
five (5) days of written demand therefore by the
Stockholders, pay to the Stockholders in immediately
available funds, as liquidated damages for the loss
of the transaction and not as a penalty, a
termination fee of Five Hundred Thousand Dollars
($500,000) ("Termination Fee").
(ii) Notwithstanding anything to the contrary contained in
Section 9.2(i) hereof or elsewhere in this Agreement,
no Termination Fee shall be due hereunder if the
Closing does not occur on or before the Closing Date
due to any of the following reasons: (A) all
Government Approvals required to consummate the
transactions contemplated hereby have not been
obtained by BAG or the Subs; (B) all consents or
approvals from automobile manufacturers with whom
each Company
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has a franchise agreement (or comparable agreement)
have not been obtained by BAG or the Subs on terms
and conditions which are comparable with or
substantially similar in form to the terms and
conditions of said manufacturer's consent or
approvals in other similar transactions that occurred
during the twelve (12) month period immediately
preceding the date hereof; (C) due to any war,
natural disaster or other acts of God; or (D) there
has been a material breach on the part of any Company
or any Stockholder of any of such Company's or
Stockholder's representation, warranty, covenant or
agreement set forth in this Agreement.
(iii) The Termination Fee shall be the sole and exclusive
remedy of Stockholders and the Companies for damages
as a result of a breach of this Agreement. Because
the actual damages that the Stockholders and the
Companies would sustain if any of BAG, Sub I or Sub
II breaches its 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 Stockholders and the Companies
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 breach by BAG or
Sub I or Sub II.
ARTICLE 10
INDEMNIFICATION AND SURVIVAL
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement shall survive the 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:
(a) the representations and warranties contained in Section 2.2,
Sections 3.5-3.7, Sections 3.9-3.10, Sections 3.12-3.25, Section 4.3, and
Section 5.3 shall survive for a period of two (2) years following the Closing
Date;
(b) the representations and warranties contained in Section 3.11
shall survive for a period of five (5) years following the Closing Date;
(c) the representations and warranties contained in Sections
3.1-3.4, Section 3.26, Section 4.1, Section 4.2, Section 4.4 Section 5.1,
Section 5.2, and Section 5.4 shall survive without limitation; and
(d) the representations and warranties contained in Section 3.8
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.
10.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF BAG AND THE SUBS.
(a) In the event any Stockholder breaches (or in the event any
third party alleges facts that, if true, would mean the Stockholders had
breached) any of his representations, warranties and covenants contained herein
(other than the covenants in Article I above and the representations and
warranties in Sections 3.1-3.4, Section 3.8, 3.11, Section 3.26, Section 4.1,
Section 4.2, and Section 4.4 above), and, if there is an applicable survival
period pursuant to Section 10.1 above, provided that BAG or the Subs make a
written claim for indemnification against
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the Stockholders pursuant to Section 10.4 below within such survival period,
then the Stockholders shall jointly and severally indemnify BAG and the Subs
from and against the entirety of any Adverse Consequences BAG and the Subs may
suffer through and after the date of the claim for indemnification (including
any Adverse Consequences BAG and the Subs 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 Stockholders shall not have any obligation to indemnify BAG and the
Subs 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 Stockholders contained in Section 2.2,
Sections 3.5-3.7, Sections 3.9-3.10, Sections 3.12-3.25, and Section 4.3 above
until BAG and the Subs have suffered Adverse Consequences by reason of all such
breaches (or alleged breaches) in excess of a Two Hundred Thousand Dollars
($200,000) aggregate threshold (at which point the Stockholders will be
obligated to indemnify BAG and the Subs from and against only those Adverse
Consequences which are in excess of said $200,000 amount) not to exceed a
maximum dollar amount of Six Million Two Hundred Fifty Thousand Dollars
($6,250,000).
(b) In the event the Stockholders breach their covenants in
Article I above or any of their representations and warranties in Sections
3.1-3.4, 3.11, Section 3.26, Section 4.1, Section 4.2, and Section 4.4 above,
and, if there is an applicable survival period pursuant to Section 10.1 above,
provided that BAG or the Subs make a written claim for indemnification against
the Stockholders pursuant to Section 10.4 below within such survival period,
then the Stockholders agree to indemnify BAG and the Subs from and against the
entirety of any Adverse Consequences BAG and the Subs may suffer through and
after the date of the claim for indemnification (including any Adverse
Consequences BAG and the Subs 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).
(c) The Stockholders agree to indemnify BAG and the Subs from and
against the entirety of any Adverse Consequences BAG and the Subs may suffer
resulting from, arising out of, relating to, in the nature of, or caused by any
Liability of any Company for any Taxes of any Company with respect to any Tax
period or portion thereof ending on or before the Closing Date (or for any Tax
period beginning before and ending after the Closing Date to the extent
allocable determined in a manner consistent with Section 10.3 to the portion of
such period beginning before and ending on the Closing Date).
10.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE STOCKHOLDERS. In the
event BAG or the Subs breach any of its representations, warranties and
covenants contained herein, and, if there is an applicable survival period
pursuant to Section 10.1 above, provided that the Stockholders make a written
claim for indemnification against BAG or the Subs pursuant to Section 10.4 below
within such survival period, then BAG and the Subs agree to indemnify the
Stockholders from and against the entirety of any Adverse Consequences the
Stockholders may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Stockholders 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).
10.4 MATTERS INVOLVING THIRD PARTIES.
(a) 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 Section 10, then the Indemnified Party shall promptly notify
each Indemnifying Party thereof in writing; provided, however, that no delay on
the part of the Indemnified
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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.
(b) 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 fifteen (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 precedental 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.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with this Section 10.4: (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).
(d) In the event any of the conditions in this Section 10.4 are or
become 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 Section 10.
10.5 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 Laws) any Party may have with respect to any Company
or the transactions contemplated by this Agreement. The Stockholders hereby
agree that they will not make any claim for indemnification against any Company
by reason of the fact that any such Stockholder 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 BAG or the Subs against the Stockholders (whether such action, suit,
proceeding, complaint, claim or demand is pursuant to this Agreement, applicable
Legal Requirements, or otherwise).
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<PAGE> 57
10.6 TAX SAVINGS. Costs arising or resulting from any breaches of
Stockholders or BAG hereunder 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 11
TAX MATTERS
11.1 TAX MATTERS. The following provisions shall govern the allocation of
responsibility as between the Subs and Stockholders for certain tax matters
following the Closing Date:
11.2 SECTION 338(h)(10) ELECTION. The Stockholders agree, if so directed by
the Subs, to join with the Subs 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 stock of each Company hereunder. The Subs agree with
the Stockholders that if the Subs direct the Stockholders to join in the Section
338(h)(10) Election, the Subs will indemnify the Stockholders against any
additional tax liability ascompared to the tax liability of the Stockholders
absent a Section 338(h)(10) Election directly resulting solely from the making
of the Section 338(h)(10) Election. The Subs will also indemnify the
Stockholders against any additional tax liability directly resulting solely from
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 stock of any Company hereunder.
11.3 TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. The Subs shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for each Company for all periods ending on or prior to the Closing Date which
are filed after the Closing Date. The Stockholders shall reimburse the Subs for
Taxes and reasonable Tax Return preparation fees of each Company with respect to
such periods within fifteen (15) days after payment by any Sub or a Company of
such Taxes and fees.
11.4 TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING DATE. The
Subs shall prepare or cause to be prepared and file or cause to be filed any Tax
Returns of each Company for Tax periods which begin before the Closing Date and
end on or after the Closing Date. Stockholders shall pay to the Subs 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. 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 Company.
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<PAGE> 58
11.5 COOPERATION ON TAX MATTERS.
(a) The Subs, each Company and Stockholders 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 Company and Stockholders agrees: (A) to retain all books and
records with respect to Tax matters pertinent to a Company relating to any
taxable period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by the Subs or Stockholders,
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 Parties reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if any other Party so
requests, each Company or Stockholders, as the case may be, shall allow the
other Party to take possession of such books and records.
(b) The Subs and Stockholders 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).
(c) The Subs and Stockholders further agree, upon request, to
provide the other Parties 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.
11.6 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
Stockholders when due, and Stockholders will, at their 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, the Subs will, and will cause its affiliates to,
join in the execution of any such Tax Returns and other documentation.
ARTICLE 12
MISCELLANEOUS
12.1 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 6.5 hereof is
breached, then the Stockholders of each Company shall pay to BAG, 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 BAG in conjunction with
this Agreement and the transactions contemplated hereby.
12.2 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.
-54-
<PAGE> 59
12.3 NOTICES. All notices or other communications required or permitted
hereunder shall be given in writing and shall be deemed sufficient if delivered
by hand, recognized overnight delivery service or facsimile transmission or
mailed by registered or certified mail, postage prepaid and return receipt
requested), as follows:
<TABLE>
<S> <C>
If to the Companies before the Closing Date:
___________________________________________
___________________________________________
___________________________________________
___________________________________________
with a copy to: with an additional copy to:
Mr. Steve Lovett Keith A. O'Daniel, Esq.
THE HARTSFIELD GROUP, INC. 625 Brisbane Manor
Six Concourse Parkway / Suite 1930 Alpharetta, Georgia 30202
Atlanta, Georgia 30328 Phone: 770-475-2365
Phone: 770-901-9000 Fax: 770-475-2456
Fax: 770-901-9100
If to the Companies after the Closing Date:
___________________________________________
___________________________________________
___________________________________________
with a copy to:
___________________________________________
___________________________________________
___________________________________________
___________________________________________
If to the Stockholders:
___________________________________________
___________________________________________
___________________________________________
___________________________________________
___________________________________________
with a copy to: with an additional copy to:
Mr. Steve Lovett Keith A. O'Daniel, Esq.
THE HARTSFIELD GROUP, INC. 625 Brisbane Manor
Six Concourse Parkway / Suite 1930 Alpharetta, Georgia 30202
Atlanta, Georgia 30328 Phone: 770-475-2365
Phone: 770-901-9000 Fax: 770-475-2456
Fax: 770-901-9100
If to BAG or the Subs:
BOOMERSHINE AUTOMOTIVE GROUP, INC.
2150 Cobb Parkway
Smyrna, GA 30080
</TABLE>
-55-
<PAGE> 60
with a copy to:
Stephen C. Whicker, Esq.
THE WHICKER LAW FIRM
6111 Peachtree Dunwoody Road / Suite 102-D
Atlanta, GA 30328
Phone: 770-394-7755
Fax: 770-934-8472
with an additional copy to:
David S. Cooper, Esq.
SCHNADER HARRISON SEGAL & LEWIS LLP
SunTrust Plaza / Suite 2800
303 Peachtree Street, N.E.
Atlanta, GA 30308-3252
Phone: 404-215-8100
Fax: 404-223-5164
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 (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.
12.4 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 Stockholders, the personal representatives and heirs of the Stockholders)
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, BAG and the Subs shall have the unrestricted
right to assign this Agreement and to delegate all or any part of their
obligations hereunder to any Affiliate of BAG, but in such event BAG shall
remain fully liable for the performance of all of such obligations in the manner
prescribed in this Agreement.
12.5 ENTIRE AGREEMENT. This Agreement (including the Exhibits, Addendums,
Annexes and Schedules attached hereto) and the Transaction Documents 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 and the Transaction Documents.
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 Transaction Documents. Prior drafts
of this Agreement and the Transaction Documents shall not be used as a basis for
interpreting this Agreement or the Transaction Documents.
12.6 WAIVER AND AMENDMENTS. Each of the Stockholders, each Company, BAG and
the Subs may by written notice to the other Parties: (a) extend the time for the
performance of any of the obligations or other actions of the other Parties; (b)
waive any inaccuracies in the representations or warranties of the other Parties
contained in this Agreement; (c) waive compliance with any of the covenants of
the other Parties contained in this Agreement; (d) waive performance of any of
the obligations of the other Parties created under this Agreement; or (e) waive
fulfillment of any of the conditions to its own
-56-
<PAGE> 61
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.
12.7 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.
12.8 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.
12.9 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.
12.10 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.
12.11 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.
12.12 REMEDIES. None of the remedies provided for in this Agreement,
including termination this Agreement as set forth in Article 8, the payment of
certain fees, costs and expenses as set forth in Section 12.1 or the specific
performance as set forth in this Section 12.13 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.
12.13 TIME IS OF THE ESSENCE. Time is of the essence for purposes of this
Agreement.
12.14 AUTHORITY. Any Person executing this Agreement on behalf of any
individual Stockholder hereby represents and warrants that said executing Person
has the right, authority and permission to so execute this Agreement on behalf
of said individual Stockholder.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
"BAG:"
ATTEST: BOOMERSHINE AUTOMOTIVE GROUP, INC.
BY: BY: /s/ WALTER M. BOOMERSHINE, JR.
------------------------------- -----------------------------------
Name: ________________________ Name: Walter M. Boomershine, Jr.
Title: ________________________ Title: President
[CORPORATE SEAL]
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<PAGE> 62
"SUB :"
ATTEST: B.A.G. GEORGIA I, INC.
BY: BY: /s/ WALTER M. BOOMERSHINE, JR.
------------------------------- -----------------------------------
Name: ________________________ Name: Walter M. Boomershine, Jr.
Title: ________________________ Title: President
[CORPORATE SEAL]
"SUB II:"
ATTEST: B.A.G. GEORGIA II, INC.
BY: BY: /s/ WALTER M. BOOMERSHINE, JR.
------------------------------- -----------------------------------
Name: ________________________ Name: Walter M. Boomershine, Jr.
Title: ________________________ Title: President
[CORPORATE SEAL]
THE "COMPANIES"
ATTEST: WADE FORD, INC.
BY: BY: /s/ ALAN K. ARNOLD
------------------------------- -----------------------------------
Name: ________________________ Name: Alan K. Arnold
Title: ________________________ Title: President
[CORPORATE SEAL]
ATTEST: WADE FORD BUFORD, INC.
BY: BY: /s/ ALAN K. ARNOLD
------------------------------- -----------------------------------
Name: ________________________ Name: Alan K. Arnold
Title: ________________________ Title: President
[CORPORATE SEAL]
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<PAGE> 63
THE "STOCKHOLDERS"
/s/ ALAN K. ARNOLD [SEAL]
---------------------------------
Alan K. Arnold
/s/ GARY R. BILLINGS [SEAL]
---------------------------------
Gary R. Billings
MILDRED S. ARNOLD CUSTODIAN FOR KELLY L.
ARNOLD UNDER THE UNIFORM TRANSFER TO
MINOR ACT OF GEORGIA:
/s/ ALAN K. ARNOLD / POA
----------------------------------------
[SEAL]
By: Mildred Arnold, Custodian
MILDRED S. ARNOLD CUSTODIAN FOR BRETT D.
ARNOLD UNDER THE UNIFORM TRANSFER TO
MINOR ACT OF GEORGIA:
/s/ ALAN K. ARNOLD / POA
----------------------------------------
[SEAL]
By: Mildred Arnold, Custodian
MILDRED S. ARNOLD CUSTODIAN FOR KRISTIE
A. ARNOLD UNDER THE UNIFORM TRANSFER TO
MINOR ACT OF GEORGIA:
/s/ ALAN K. ARNOLD / POA
----------------------------------------
[SEAL]
By: Mildred Arnold, Custodian
MILDRED S. ARNOLD CUSTODIAN FOR ALAN
CHAD ARNOLD UNDER THE UNIFORM TRANSFER
TO MINOR ACT OF GEORGIA:
/s/ ALAN K. ARNOLD / POA
----------------------------------------
[SEAL]
By: Mildred Arnold, Custodian
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<PAGE> 64
ADDENDUM 1
ALLOCATION OF MERGER CONSIDERATION
[TO BE PROVIDED BY SELLER]
<TABLE>
<CAPTION>
% of Cash % of Stock
Consideration Consideration
------------- -------------
<S> <C> <C>
Alan K. Arnold:
Gary R. Billings:
Mildred S. Arnold Custodian
for Kelly L. Arnold under the
Uniform Transfer to Minor Act of Georgia:
Mildred S. Arnold Custodian
for Brett D. Arnold under the
Uniform Transfer to Minor Act of Georgia:
Mildred S. Arnold Custodian
for Kristie A. Arnold under the
Uniform Transfer to Minor Act of Georgia:
Mildred S. Arnold Custodian
for Alan Chad Arnold under the
Uniform Transfer to Minor Act of Georgia:
</TABLE>
-60-
<PAGE> 65
ADDENDUM 2
ADJUSTMENTS TO 1997 NET INCOME
<TABLE>
<S> <C> <C>
(1) Plus 1996 owner's salaries paid
(2) Minus One-half (1/2) of the old owner's salaries post-acquisition
(3) Plus or Minus Additional rents (different from current lease)
(4) Plus or Minus LIFO - Current year increase (decrease)
(5) Minus LIFO tax liability for the current year
(6) Plus Family members' salaries and owner's benefits
(7) Plus Additional contributions (church)
(8) Plus Christmas bonus (only portion in excess of normal
average)
(9) Plus Management fees
(10) Plus Loss on sales of notes receivable (if determined to be out
of the normal course of business)
(11) Plus Related parties' salaries
(12) Minus Goodwill amortized expense (1 year)
</TABLE>
Additionally, the approximately $160,000 amount due and payable to the
IRS pursuant to the agreement between the IRS and the Companies in connection
with certain LIFO adjustments shall not be deducted as 1997 expenses for
purposes of calculating the 1997 Adjusted EBIT hereunder.
-61-
<PAGE> 66
AMENDMENT TO
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AMENDMENT TO AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
(this "Amendment") is entered into as of January 19, 1998 by and among
Boomershine Automotive Group, Inc., a Georgia corporation ("BAG"), B.A.G.
Georgia I, Inc., a Georgia corporation ("Sub I"), B.A.G. Georgia II, Inc., a
Georgia corporation ("Sub II") (Sub I and Sub II are hereinafter individually
referred to as a "Sub" and collectively referred to as the "Subs"), and Wade
Ford, Inc., a Georgia corporation, and Wade Ford Buford, Inc., a Georgia
corporation (individually, a "Company" and collectively, the "Companies"), and
the stockholder(s) listed on the signature pages hereof (each, a "Stockholder"
and, if more than one, collectively, the "Stockholders"). BAG, the Subs, the
Companies and the Stockholders are referred to individually as a "Party" and
collectively as the "Parties."
W I T N E S S E T H :
WHEREAS, the Parties are parties to that certain Agreement and Plan of
Merger and Reorganization entered into as of November 21, 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 19, 1998.
2. DUE DILIGENCE DEADLINE.
(a) The Parties agree to amend the Agreement by replacing Section 7.7
of the Agreement with the following:
"7.7 COMPLETION OF DUE DILIGENCE. BAG and the Subs shall have completed
their due diligence examination of each Company, and the results of
such examination shall be reasonably satisfactory to Bag and the Subs;
provided, however, that the conditions contained in this Section 7.7
shall not be a condition precedent to the Obligations of BAG and the
Subs hereunder after January 30, 1998."
3. 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.
1
<PAGE> 67
Except as amended and modified by this Amendment, the Agreement remains in full
force and effect in accordance with its respective terms.
4. 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.
IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly
executed, effective as of the date and year first above written.
"BAG:"
ATTEST: BOOMERSHINE AUTOMOTIVE GROUP, INC.
BY: /s/ STEPHEN C. WHICKER BY: /s/ CHARLES K. YANCEY
----------------------------- ------------------------------
Name: Stephen C. Whicker Name: Charles K. Yancey
Title: Assistant Secretary Title: Secretary & Treasurer
[CORPORATE SEAL]
"SUB :"
ATTEST: B.A.G. GEORGIA I, INC.
BY: /s/ STEPHEN C. WHICKER BY: /s/ CHARLES K. YANCEY
----------------------------- ------------------------------
Name: Stephen C. Whicker Name: Charles K. Yancey
Title: Secretary Title: Chief Executive Officer
[CORPORATE SEAL]
"SUB II:"
ATTEST: B.A.G. GEORGIA II, INC.
BY: /s/ STEPHEN C. WHICKER BY: /s/ CHARLES K. YANCEY.
----------------------------- ------------------------------
Name: Stephen C. Whicker Name: Charles K. Yancey
Title: Secretary Title: Chief Executive Officer
[CORPORATE SEAL]
THE "COMPANIES:"
ATTEST: WADE FORD, INC.
2
<PAGE> 68
BY: /s/ K. LAMAR LESTER BY: /s/ ALAN K. ARNOLD
----------------------------- ------------------------------
Name: K. Lamar Lester Name: Alan K. Arnold
Title: Secretary & Treasurer Title: President
[CORPORATE SEAL]
ATTEST: WADE FORD BUFORD, INC.
BY: /s/ JOHN KENNEDY BY: /s/ ALAN K. ARNOLD
----------------------------- ------------------------------
Name: John Kennedy Name: Alan K. Arnold
Title: Secretary & Treasurer Title: President
[CORPORATE SEAL]
THE "STOCKHOLDERS"
/s/ ALAN K. ARNOLD [SEAL]
---------------------------------
Alan K. Arnold
/s/ GARY R. BILLINGS [SEAL]
---------------------------------
Gary R. Billings
MILDRED S. ARNOLD CUSTODIAN FOR KELLY
L. ARNOLD UNDER THE UNIFORM TRANSFER TO
MINOR ACT OF GEORGIA:
/s/ MILDRED ARNOLD [SEAL]
---------------------------------
By: Mildred Arnold, Custodian
MILDRED S. ARNOLD CUSTODIAN FOR BRETT
D. ARNOLD UNDER THE UNIFORM TRANSFER TO
MINOR ACT OF GEORGIA:
/s/ MILDRED ARNOLD [SEAL]
---------------------------------
By: Mildred Arnold, Custodian
MILDRED S. ARNOLD CUSTODIAN FOR KRISTIE
A. ARNOLD UNDER THE UNIFORM TRANSFER TO
MINOR ACT OF GEORGIA:
3
<PAGE> 69
/s/ MILDRED ARNOLD [SEAL]
---------------------------------
By: Mildred Arnold, Custodian
MILDRED S. ARNOLD CUSTODIAN FOR ALAN
CHAD ARNOLD UNDER THE UNIFORM TRANSFER
TO MINOR ACT OF GEORGIA:
/s/ MILDRED ARNOLD [SEAL]
---------------------------------
By: Mildred Arnold, Custodian
-4-
<PAGE> 70
SECOND AMENDMENT TO
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER AND
REORGANIZATION (this "Amendment") is entered into as of March 31, 1998 by and
among Boomershine Automotive Group, Inc., a Georgia corporation ("BAG"), B.A.G.
Georgia I, Inc., a Georgia corporation ("Sub I"), B.A.G. Georgia II, Inc., a
Georgia corporation ("Sub II") (Sub I and Sub II are hereinafter individually
referred to as a "Sub" and collectively referred to as the "Subs"), Sunbelt
Automotive Group, Inc., a Georgia corporation ("Sunbelt") and Wade Ford, Inc., a
Georgia corporation, and Wade Ford Buford, Inc., a Georgia corporation
(individually, a "Company" and collectively, the "Companies"), and the
stockholder(s) listed on the signature pages hereof (each, a "Stockholder" and,
if more than one, collectively, the "Stockholders"). BAG, the Subs, Sunbelt, the
Companies and the Stockholders are referred to individually as a "Party" and
collectively as the "Parties."
W I T N E S S E T H :
WHEREAS, all Parties except Sunbelt are parties to that certain
Agreement and Plan of Merger and Reorganization entered into as of November 21,
1997, which was amended by an Amendment to Agreement and Plan of Merger and
Reorganization dated January 19, 1998 (the "Agreement"); and
WHEREAS, the Parties desire to further 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 8, 1998.
2. REPLACEMENT OF ARTICLE I OF THE AGREEMENT. As a result of the
assignments contemplated by Section 3 of this Amendment, Sunbelt will acquire
the Wade Shares (as defined in the Agreement) directly from the Stockholders,
and the Parties agree that there is no need for the Companies to merge into
Sunbelt. Therefore, the Parties agree to amend the Agreement by replacing
Article I of the Agreement with the following:
-1-
<PAGE> 71
"ARTICLE I"
"PURCHASE AND SALE OF THE SHARES"
"1.1 PURCHASE AND SALE OF THE SHARES."
"(a) Purchase and Sale of the Shares. Upon the terms and subject to the
conditions set forth in this Agreement, the Stockholders shall sell to BAG, and
BAG shall purchase from the Stockholders, the Wade Shares for an aggregate
purchase price equal to FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000.00) (the
"Base Price"), which Base Price is subject to adjustment after Closing as
provided in Article 2 of this Agreement. At the Closing referred to in Section
1.1(b) hereof:"
"(i) the Stockholders shall sell, assign, transfer and deliver
to BAG the Wade Shares representing 100% of the outstanding common
stock of the Companies, free and clear of all Liens, and shall deliver
the certificates representing the Wade Shares accompanied by stock
powers duly executed in blank; and"
"(ii) BAG shall accept and purchase the Wade Shares from the
Stockholders and in payment therefor shall pay the Base Price to the
Stockholders as follows:"
"(A) The sum of Eleven Million Dollars ($11,000,000.00)
shall be paid to the Stockholders by BAG at the
Closing in cash or other immediately available funds
("Cash Consideration Amount"), to be divided amongst
the Stockholders in accordance with ADDENDUM 1
attached hereto and incorporated herein."
"(B) The balance of the Base Price, which equals to a
value of Four Million Dollars ($4,000,000.00), shall
be paid to the Stockholders at the Closing in the
form of BAG Common Stock (the "Stock Consideration
Value Amount"), to be divided amongst the
Stockholders in accordance with ADDENDUM 1 attached
hereto and incorporated herein."
"(C) Notwithstanding the payment of the Cash Consideration
Amount described in Section 1.1(a)(ii)(A) hereof and
the payment of the Stock Consideration Value Amount
described in Section 1.1(a)(ii)(B) hereof, at the
Closing, BAG shall place $366,666.67 of the Cash
Consideration Amount (the "Escrow Funds") in an
interest bearing escrow account with Joyce E.
Kitchens, Esq., or another escrow agent reasonably
satisfactory to BAG and Stockholders (the "Escrow
Agent"), and BAG shall also place the number of
shares representing
-2-
<PAGE> 72
$133,333.33 of the Stock Consideration Value Amount
in escrow with the Escrow Agent (the "Escrow Stock")
(the Escrow Funds and the Escrow Stock shall
hereinafter be collectively referred to as the
"Escrow Consideration"), all in accordance with an
escrow agreement substantially in the form attached
hereto as EXHIBIT A, with such other changes as the
Escrow Agent may reasonably request (the "Escrow
Agreement"). The release of the Escrow Consideration
shall be governed by the terms and conditions of the
Escrow Agreement."
"(B) CLOSING."
"(i) Subject to the conditions set forth in this
Agreement, the purchase and sale of the Wade Shares and the
other transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Schnader
Harrison Segal & Lewis, LLP in Atlanta, Georgia, or any other
location agreed upon by the Parties, contemporaneously with
the BAG IPO described in the Registration Statement referred
to in Section 7.6 hereof."
"(ii) If the BAG IPO fails to close on or before the
Closing Date Deadline, then the Subs shall have the option to
consummate the purchase and sale of the Wade Shares and the
other transactions contemplated by this Agreement upon such
terms and conditions that are mutually acceptable to the
Parties (in which event said alternate consummation shall for
purposes herein be referred to as the "Closing"), and said
Closing shall take place at the offices of Schnader Harrison
Segal & Lewis, LLP in Atlanta, Georgia, or any other location
agreed upon by the Parties."
"(iii) The date on which the Closing actually 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 Stockholders shall deliver to BAG (A)
certificates representing the Wade 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 BAG good title for the Wade Shares,
and (B) all opinions, certificates and other instruments and
documents required to be delivered by the Stockholders and the
Company at or prior to Closing or otherwise required in
connection herewith;"
"(ii) BAG shall pay and deliver to the Stockholders
(A) the Cash Consideration Amount and the Stock Consideration
Amount, and shall deliver the
-3-
<PAGE> 73
Escrow Funds to the Escrow Agent, as required by Section
1.1(a)(ii) hereof, and (B) all opinions, certificates and
other instruments and documents required to be delivered by
BAG at or prior to the Closing or otherwise required in
connection herewith."
"(D) INDEMNIFICATION FOR ADVERSE TAX CONSEQUENCES. BAG agrees to
indemnify the Stockholders against any additional tax liability of the
Stockholders which results solely from the restructuring of this transaction
from a merger to a stock purchase."
3. CONSENT TO ASSIGNMENT. BAG and the Subs wish to assign all of their
rights and obligations under the Agreement to Sunbelt. BAG also hereby informs
the Companies and the Stockholders that, prior to Closing, BAG is expected to
merge with and into Sunbelt, and the Subs will be merged into BAG or dissolved.
If the proposed merger of BAG into Sunbelt is completed, BAG will cease to exist
as a separate corporation. By their signatures below, as required by Section
12.4 of the Agreement, the Companies and the Stockholders hereby consent to (i)
the express assignment by BAG and the Subs of all of their 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; (iii)
the merger of the Subs into BAG, and/or the dissolution of the Subs; and (iv)
the future assignment by Sunbelt, whether done expressly or via merger, of all
of Sunbelt's rights and obligations under the Agreement to any Affiliate of
Sunbelt. At or prior to the Closing, if any such mergers or future assignments
are completed, Sunbelt shall deliver to the Companies and the Stockholders
copies of documents which confirm such actions.
In addition, the Parties agree that all references in the Agreement to
the "BAG IPO," the "BAG IPO Stock" and the "Registration Statement" shall be
deemed to refer to a public offering and sale of shares of the common stock of
Sunbelt, and that all references in the Agreement to the "BAG Common Stock"
shall be deemed to refer to common stock of Sunbelt.
4. ASSIGNMENT TO AND ASSUMPTION BY SUNBELT. BAG and the Subs hereby assign
all of their right, title and interest in and to and all of their obligations
under the Agreement to Sunbelt. Sunbelt hereby accepts said assignment of the
Agreement and hereby agrees to perform and carry out the obligations of BAG and
the Subs under the Agreement.
5. 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 and the
prior Amendment dated January 19, 1998. This Amendment and the documents
contemplated by it record the final, complete, and exclusive understanding
between the Parties regarding the modification of the Agreement described
herein. Except as amended and modified by this Amendment and the prior Amendment
dated January 19, 1998, the Agreement remains in full force and effect in
accordance with its respective terms.
-4-
<PAGE> 74
6. 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.
IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly executed,
effective as of the date and year first above written.
"BAG:"
ATTEST: BOOMERSHINE AUTOMOTIVE GROUP, INC.
BY: /s/ STEPHEN C. WHICKER BY: /s/ CHARLES K. YANCEY
------------------------------ -----------------------------
Name: Stephen C. Whicker Name: Charles K. Yancey
Title: Assistant Secretary Title: Secretary & Treasurer
[CORPORATE SEAL]
"SUB :"
ATTEST: B.A.G. GEORGIA I, INC.
BY: /s/ STEPHEN C. WHICKER BY: /s/ CHARLES K. YANCEY
------------------------------ -----------------------------
Name: Stephen C. Whicker Name: Charles K. Yancey
Title: Secretary Title: Chief Executive Officer
[CORPORATE SEAL]
"SUB II:"
ATTEST: B.A.G. GEORGIA II, INC.
BY: /s/ STEPHEN C. WHICKER BY: /s/ CHARLES K. YANCEY.
------------------------------ -----------------------------
Name: Stephen C. Whicker Name: Charles K. Yancey
Title: Secretary Title: Chief Executive Officer
[CORPORATE SEAL]
"SUNBELT:"
ATTEST: SUNBELT AUTOMOTIVE GROUP, INC.
BY: /s/ STEPHEN C. WHICKER BY: /s/ CHARLES K. YANCEY.
------------------------------ -----------------------------
Name: Stephen C. Whicker Name: Charles K. Yancey
Title: Secretary & General Counsel Title: Chief Executive Officer
[CORPORATE SEAL]
-5-
<PAGE> 75
THE "COMPANIES:"
ATTEST: WADE FORD, INC.
BY: /s/ K. LAMAR LESTER BY: /s/ ALAN K. ARNOLD
------------------------------ -----------------------------
Name: K. Lamar Lester Name: Alan K. Arnold
Title: Secretary & Treasurer Title: President
[CORPORATE SEAL]
ATTEST: WADE FORD BUFORD, INC.
BY: /s/ JOHN KENNEDY BY: /s/ ALAN K. ARNOLD
------------------------------ -----------------------------
Name: John Kennedy Name: Alan K. Arnold
Title: Secretary & Treasurer Title: President
[CORPORATE SEAL]
THE "STOCKHOLDERS"
/s/ ALAN K. ARNOLD [SEAL]
---------------------------
Alan K. Arnold
/s/ GARY R. BILLINGS [SEAL]
---------------------------
Gary R. Billings
Mildred S. Arnold Custodian for
Kelly L. Arnold under the Uniform
Transfer to Minor Act of Georgia:
/s/ MILDRED ARNOLD [SEAL]
---------------------------
By: Mildred Arnold, Custodian
Mildred S. Arnold Custodian for
Brett D. Arnold under the Uniform
Transfer to Minor Act of Georgia:
/s/ MILDRED ARNOLD [SEAL]
---------------------------
By: Mildred Arnold, Custodian
-6-
<PAGE> 76
Mildred S. Arnold Custodian for
Kristie A. Arnold under the Uniform
Transfer to Minor Act of Georgia:
/s/ MILDRED ARNOLD [SEAL]
---------------------------
By: Mildred Arnold, Custodian
Mildred S. Arnold Custodian for
Alan Chad Arnold under the Uniform
Transfer to Minor Act of Georgia:
/s/ MILDRED ARNOLD [SEAL]
---------------------------
By: Mildred Arnold, Custodian
-7-
<PAGE> 77
THIRD AMENDMENT TO
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This THIRD AMENDMENT TO AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
(this "Amendment") is entered into as of April 28, 1998 by and among BOOMERSHINE
AUTOMOTIVE GROUP, INC., a Georgia corporation ("BAG"), B.A.G. GEORGIA I, INC., a
Georgia corporation ("Sub I"), B.A.G. GEORGIA II, INC., a Georgia corporation
("Sub II") (Sub I and Sub II are hereinafter individually referred to as a "Sub"
and collectively referred to as the "Subs"), SUNBELT AUTOMOTIVE GROUP, INC., a
Georgia corporation ("Sunbelt") and WADE FORD, INC., a Georgia corporation, and
WADE FORD BUFORD, INC., a Georgia corporation (individually, a "Company" and
collectively, the "Companies"), and the stockholder(s) listed on the signature
pages hereof (each, a "Stockholder" and, if more than one, collectively, the
"Stockholders"). BAG, the Subs, Sunbelt, the Companies and the Stockholders are
referred to individually as a "Party" and collectively as the "Parties."
W I T N E S S E T H :
WHEREAS, all Parties except Sunbelt are parties to that certain
Agreement and Plan of Merger and Reorganization entered into as of November 21,
1997, which was amended by an Amendment to Agreement and Plan of Merger and
Reorganization dated January 19, 1998 and the Second Amendment to Agreement and
Plan of Merger and Reorganization dated March 31 1998 (the "Agreement"); and
WHEREAS, pursuant to the Second Amendment to Agreement and Plan of
Merger and Reorganization dated March 31, 1998 and an Assignment Instrument
dated March 31, 1998, BAG and the Subs assigned to Sunbelt, and Sunbelt assumed
from BAG and the Subs, all of BAG's and the Subs' right, title and interest in
and to and all of their obligations under the Agreement; and
WHEREAS, the Parties desire to further 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 April 28, 1998.
2. RE-DEFINING THE TERM "CLOSING DATE DEADLINE". As a result of the time
consuming nature of the various requirements for the consummation of the
transactions contemplated by this Agreement, the Parties agree that in the
section captioned "Certain Definitions" beginning on page 2 of the Agreement,
the following definition on page 3 thereof is deleted in its entirety:
"'Closing Date Deadline' shall mean April 30, 1998.'"
The Parties agree that the following definition is substituted
therefor:
-1-
<PAGE> 78
"'Closing Date Deadline' shall mean June 30, 1998.'"
3. PURCHASE AND SALE OF THE SHARES. The Parties hereby agree that:
a. Article 1, Section 1.1(a) of the Agreement is amended by deleting
"FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000.00)" and substituting therefor
"FOURTEEN MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($14,500,000.00)";
and
b. Article 1, Section 1.1(a)(ii)(A) of the Agreement is amended by
deleting "ELEVEN MILLION Dollars ($11,000,000.00)" and substituting therefor
"TEN MILLION SIX HUNDRED AND FIFTY THOUSAND AND NO/100 DOLLARS
($10,650,000.00)"; and
c. Article 1, Section 1.1(a)(ii)(B) of the Agreement is amended by
deleting "FOUR MILLION Dollars ($4,000,000.00)" and substituting therefor "THREE
MILLION EIGHT HUNDRED AND FIFTY THOUSAND AND NO/100 DOLLARS ($3,850,000.00)".
4. MINIMUM REQUIREMENTS. The Parties hereby agree that:
a. Article 2, Section 2.1 of the Agreement is hereby deleted in
its entirety, and Sections 2.2, 2.3 and 2.4 are respectively re-captioned as
Sections 2.1, 2.2 and 2.3.
b. Article 2, Section 2.2 (which becomes Section 2.1 on the
effective date of this Amendment) is amended by the deletion of the first two
sentences of said section in their entirety and the substitution of the
following therefor:
"The Parties intend and understand that the Companies shall be
delivered to the Subs on the Closing Date in substantially the
same financial condition as reflected on the audited financial
statements of the Companies prepared as of December 31, 1997
by Pyke & Pierce, CPAs, reduced by FOUR HUNDRED AND FIFTY
THOUSAND DOLLARS ($450,000.00), which the Parties previously
agreed would be distributed by the Companies to the
Shareholders in 1997 but which the Parties now agree has been
or will be distributed in 1998 prior to the Closing. No other
distributions shall be made from the Companies other than
distributions attributable to 1998 interim earnings, if any,
as described below in this Section 2.1 (formerly captioned as
Section 2.2) of the Agreement."
c. Because of a change by Ford Motor Company in its monthly
Factory Statements reporting form, the references in the Agreement relative to
1998 interim earnings which refer to "line 28" of each Company's monthly Factory
Statements shall be changed to refer to "line 29, page 2, Net Profit After Tax"
of each Company's monthly Factory Statements.
d. The first sentence of Article 2, Section 2.2(a) (which becomes
Section 2.1(a) on the effective date of this Amendment) is hereby deleted in its
entirety and replaced with the following:
-2-
<PAGE> 79
"If the Companies earn a profit for the Interim Period, then
BAG shall pay to the Stockholders, on a dollar for dollar
basis, the following amount by wire transfer or delivery of
other immediately available funds on or before the Interim Due
Date (as hereinafter defined): The entire amount of the 1998
Interim Profits (as hereinafter defined) of the Companies less
any distributions made by the Companies to the Stockholders
during the Interim Period (other than the $450,000.00
distribution described above in this Section 2.1 (formerly
captioned as Section 2.2) of the Agreement) (the "1998 Interim
Profit Reimbursement")."
5. 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 and the
prior Amendments dated January 19, 1998 and March 31, 1998. This Amendment and
the documents contemplated by it record the final, complete, and exclusive
understanding between the Parties regarding the modification of the Agreement
described herein. Except as amended and modified by this Amendment and the prior
Amendment dated January 19, 1998 and March 31, 1998, the Agreement remains in
full force and effect in accordance with its respective terms.
6. 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.
IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly executed,
effective as of the date and year first above written.
"BAG:"
ATTEST: BOOMERSHINE AUTOMOTIVE GROUP, INC.
BY: /s/ STEPHEN C. WHICKER BY: /s/ CHARLES K. YANCEY
------------------------------ -----------------------------
Name: Stephen C. Whicker Name: Charles K. Yancey
Title: Assistant Secretary Title: Secretary & Treasurer
[CORPORATE SEAL]
"SUB :"
ATTEST: B.A.G. GEORGIA I, INC.
BY: /s/ STEPHEN C. WHICKER BY: /s/ CHARLES K. YANCEY
------------------------------ -----------------------------
Name: Stephen C. Whicker Name: Charles K. Yancey
Title: Secretary Title: Chief Executive Officer
[CORPORATE SEAL]
-3-
<PAGE> 80
"SUB II:"
ATTEST: B.A.G. GEORGIA II, INC.
BY: /s/ STEPHEN C. WHICKER BY: /s/ CHARLES K. YANCEY.
------------------------------ -----------------------------
Name: Stephen C. Whicker Name: Charles K. Yancey
Title: Secretary Title: Chief Executive Officer
[CORPORATE SEAL]
"SUNBELT:"
ATTEST: SUNBELT AUTOMOTIVE GROUP, INC.
BY: /s/ STEPHEN C. WHICKER BY: /s/ CHARLES K. YANCEY.
------------------------------ -----------------------------
Name: Stephen C. Whicker Name: Charles K. Yancey
Title: Secretary & General Counsel Title: Chief Executive Officer
[CORPORATE SEAL]
THE "COMPANIES:"
ATTEST: WADE FORD, INC.
BY: /s/ K. LAMAR LESTER BY: /s/ ALAN K. ARNOLD
------------------------------ -----------------------------
Name: K. Lamar Lester Name: Alan K. Arnold
Title: Secretary & Treasurer Title: President
[CORPORATE SEAL]
ATTEST: WADE FORD BUFORD, INC.
BY: /s/ JOHN KENNEDY BY: /s/ ALAN K. ARNOLD
------------------------------ -----------------------------
Name: John Kennedy Name: Alan K. Arnold
Title: Secretary & Treasurer Title: President
[CORPORATE SEAL]
THE "STOCKHOLDERS"
/s/ ALAN K. ARNOLD [SEAL]
---------------------------
Alan K. Arnold
/s/ GARY R. BILLINGS [SEAL]
---------------------------
Gary R. Billings
-4-
<PAGE> 81
Mildred S. Arnold Custodian for Kelly L.
Arnold under the Uniform Transfer to Minor
Act of Georgia:
/s/ MILDRED ARNOLD [SEAL]
---------------------------
By: Mildred Arnold, Custodian
Mildred S. Arnold Custodian for Brett D.
Arnold under the Uniform Transfer to Minor
Act of Georgia:
/s/ MILDRED ARNOLD [SEAL]
---------------------------
By: Mildred Arnold, Custodian
Mildred S. Arnold Custodian for Kristie A.
Arnold under the Uniform Transfer to Minor
Act of Georgia:
/s/ MILDRED ARNOLD [SEAL]
---------------------------
By: Mildred Arnold, Custodian
Mildred S. Arnold Custodian for Alan Chad
Arnold under the Uniform Transfer to Minor
Act of Georgia:
/s/ MILDRED ARNOLD [SEAL]
---------------------------
By: Mildred Arnold, Custodian
-5-
<PAGE> 82
FIFTH AMENDMENT TO
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This FIFTH AMENDMENT TO AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
(this "Amendment") is entered into as of July 31, 1998 by and among BOOMERSHINE
AUTOMOTIVE GROUP, INC., a Georgia corporation ("BAG"), B.A.G. GEORGIA I, INC., a
Georgia corporation ("Sub I"), B.A.G. GEORGIA II, INC., a Georgia corporation
("Sub II") (Sub I and Sub II are hereinafter individually referred to as a "Sub"
and collectively referred to as the "Subs"), SUNBELT AUTOMOTIVE GROUP, INC., a
Georgia corporation ("Sunbelt") and WADE FORD, INC., a Georgia corporation, and
WADE FORD BUFORD, INC., a Georgia corporation (individually, a "Company" and
collectively, the "Companies"), and the stockholder(s) on the signature pages
hereof (each, a "Stockholder" and, if more than one, collectively, the
"Stockholders"). BAG, the Subs, Sunbelt, the Companies and the Stockholders are
referred to individually as a "Party" and collectively as the "Parties."
WITNESSETH:
WHEREAS, the Parties are parties to that certain Agreement and Plan of
Merger and Reorganization entered into as of November 21, 1997, which was
amended by an Amendment to Agreement and Plan of Merger and Reorganization dated
January 19, 1998, a Second Amendment to Agreement and Plan of Merger and
Reorganization dated March 31, 1998, a Third Amendment to Agreement and Plan of
Merger and Reorganization dated April 28, 1998, and a Fourth Amendment to the
Agreement and Plan of Merger and Reorganization dated June 24, 1998 (the
"Agreement"); and
WHEREAS, pursuant to the Second Amendment to Agreement and Plan of
Merger and Reorganization dated March 31, 1998 and an Assignment Instrument
dated March 31, 1998, BAG and the Subs assigned to Sunbelt, and Sunbelt assumed
from BAG and the Subs, all of BAG's and the Subs' right, title and interest in
and to and all of their obligations under the Agreement; and
WHEREAS, the Parties desire to further 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 July 31, 1998.
2. RE-DEFINING THE TERM "CLOSING DATE DEADLINE". In order to accommodate
the consummation of the Sunbelt IPO contemplated as a Closing condition by
Sections 6.20 and 7.6 of the Agreement, the Parties agree that in the section
captioned "Certain Definitions" beginning on page 2 of the Agreement, the
following definition on page 3 thereof, as such definition was amended by the
Third Amendment to Agreement and Plan of Merger and Reorganization, is deleted
in its entirety:
<PAGE> 83
"'Closing Date Deadline' shall mean July 31, 1998."
The Parties agree that the following definition is substituted
therefor:
"'Closing Date Deadline' shall mean August 26, 1998."
4. 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 and the
prior Amendments dated January 19, 1998, March 31, 1998, April 28, 1998, and
June 24, 1998. This Amendment and the documents contemplated by it record the
final, complete, and exclusive understanding between the Parties regarding the
modification of the Agreement described herein. Except as amended and modified
by this Amendment and the prior Amendment dated January 19, 1998, March 31,
1998, April 28, 1998, and June 24, 1998 the Agreement remains in full force and
effect in accordance with its respective terms.
5. 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.
6. COUNTERPARTS. This Amendment may be signed in two or more counterparts,
each of which shall be deemed an original but all of which, when taken together,
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly executed,
effective as of the date and year first above written.
"BAG:"
ATTEST: BOOMERSHINE AUTOMOTIVE GROUP, INC.
BY: BY:
------------------------------ ------------------------------
Name: Name:
----------------------- -----------------------
Title: Title:
----------------------- -----------------------
[CORPORATE SEAL]
(Signatures continued on following page)
<PAGE> 84
(Signatures continued from previous page)
"SUB I:"
ATTEST: B.A.G. GEORGIA I, INC.
BY: BY:
------------------------------ ------------------------------
Name: Name:
----------------------- -----------------------
Title: Title:
----------------------- -----------------------
[CORPORATE SEAL]
"SUB II:"
ATTEST: B.A.G. GEORGIA II, INC.
BY: BY:
------------------------------ ------------------------------
Name: Name:
----------------------- -----------------------
Title: Title:
----------------------- -----------------------
[CORPORATE SEAL]
"SUNBELT:"
ATTEST: SUNBELT AUTOMOTIVE GROUP, INC.
BY: BY:
------------------------------ ------------------------------
Name: Name:
----------------------- -----------------------
Title: Title:
----------------------- -----------------------
[CORPORATE SEAL]
THE "COMPANIES:"
ATTEST: WADE FORD, INC.
BY: /s/ Joy Lyn Arnold BY: /s/ Alan K. Arnold
------------------------------ ------------------------------
Name: Joy Lyn Arnold Name: Alan K. Arnold
----------------------- -----------------------
Title: Title: President
----------------------- -----------------------
[CORPORATE SEAL]
(Signatures continued on following page)
<PAGE> 85
(Signatures continued from previous page)
ATTEST: WADE FORD BUFORD, INC.
BY: /s/ John Kennedy BY: /s/ Gary R. Billings
------------------------------ ------------------------------
Name: John Kennedy Name: Gary R. Billings
----------------------- -----------------------
Title: Sec.-Treas. Title: Vice-Pres.
----------------------- -----------------------
[CORPORATE SEAL]
THE "STOCKHOLDERS:"
[SEAL]
-----------------------------
Alan K. Arnold
/s/ Gary R. Billings [SEAL]
-----------------------------
Gary R. Billings
Mildred S. Arnold Custodian for
Kelly L. Arnold under the Uniform
Transfer to Minor Act of Georgia:
[SEAL]
-----------------------------
By: Mildred Arnold, Custodian
Mildred S. Arnold Custodian for
Brett D. Arnold under the Uniform
Transfer to Minor Act of Georgia:
[SEAL]
-----------------------------
By: Mildred Arnold, Custodian
Mildred S. Arnold Custodian for
Kristie A. Arnold under the Uniform
Transfer to Minor Act of Georgia:
[SEAL]
-----------------------------
By: Mildred Arnold, Custodian
(Signatures continued on following page)
4
<PAGE> 86
(Signatures continued from previous page)
ATTEST:
WADE FORD BUFORD, INC.
BY: BY:
------------------------------ ------------------------------
Name: Name:
----------------------- -----------------------
Title: Title:
----------------------- -----------------------
[CORPORATE SEAL]
THE "STOCKHOLDERS:"
/s/ Alan K. Arnold [SEAL]
-----------------------------
Alan K. Arnold
[SEAL]
-----------------------------
Gary R. Billings
Mildred S. Arnold Custodian for
Kelly L. Arnold under the Uniform
Transfer to Minor Act of Georgia:
/s/ Mildred Arnold POA [SEAL]
-----------------------------
By: Mildred Arnold, Custodian
Mildred S. Arnold Custodian for
Brett D. Arnold under the Uniform
Transfer to Minor Act of Georgia:
/s/ Mildred Arnold POA [SEAL]
-----------------------------
By: Mildred Arnold, Custodian
Mildred S. Arnold Custodian for
Kristie A. Arnold under the Uniform
Transfer to Minor Act of Georgia:
/s/ Mildred Arnold POA [SEAL]
-----------------------------
By: Mildred Arnold, Custodian
(Signatures continued on following page)
<PAGE> 87
(Signatures continued from previous page)
Mildred S. Arnold Custodian for Alan
Chad Arnold under the Uniform
Transfer to Minor Act of Georgia:
/s/ Mildred Arnold POA [SEAL]
-----------------------------
By: Mildred Arnold, Custodian
<PAGE> 1
EXHIBIT 2.4
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
AMONG
SUNBELT AUTOMOTIVE GROUP, INC.
AND
BAG GEORGIA IV, INC.
AND
DAY'S CHEVROLET, INC.
AND
CALVIN DIEMER AND ALVIN DIEMER
MARCH 3, 1998
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE 1
PURCHASE AND SALE OF SHARES.................................................................................-1-
1.1 Description of Transaction....................................................................-1-
1.4 Tax Consequences..............................................................................-6-
1.5 Further Action................................................................................-6-
1.6 Net Worth Adjustment..........................................................................-6-
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS........................................................................-10-
2.1 Organization and Good Standing...............................................................-10-
2.2 Subsidiaries.................................................................................-10-
2.3 Capitalization...............................................................................-10-
2.4 Authority, Approvals and Consents............................................................-11-
2.5 Financial Statements.........................................................................-12-
2.6 Absence of Undisclosed Liabilities...........................................................-12-
2.7 Absence of Material Adverse Effect; Conduct of Business.....................................-12-
2.8 Taxes........................................................................................-14-
2.9 Legal Matters................................................................................-17-
2.10 Property.....................................................................................-17-
(a) Owned Real Property........................................................-17-
(b) Leases.....................................................................-18-
(c) Fee and Leasehold Interests................................................-18-
(d) No Proceedings.............................................................-18-
(e) Current Use................................................................-18-
(f) Compliance with Real Property Laws.........................................-18-
(g) Real Property Taxes........................................................-19-
(h) Leased Premises............................................................-19-
(i) Certificate of Occupancy; Utilities; Eminent Domain......................-19-
2.11 Environmental Matters........................................................................-19-
2.12 Inventories..................................................................................-20-
2.13 Notes and Accounts Receivable................................................................-20-
2.14 Insurance....................................................................................-20-
2.15 Contracts....................................................................................-20-
2.16 Labor Relations..............................................................................-22-
2.17 Employee Benefit Plans.......................................................................-23-
2.18 Other Benefit and Compensation Plans or Arrangements.........................................-25-
2.19 Transactions with Insiders...................................................................-26-
2.20 Propriety of Past Payments...................................................................-26-
2.21 Interest in Competitors......................................................................-26-
2.22 Brokers......................................................................................-26-
2.23 Territorial Restrictions.....................................................................-26-
2.24 Intellectual Property........................................................................-26-
(a) Title......................................................................-26-
(b) Licensing Arrangements.....................................................-27-
(c) Litigation.................................................................-27-
(d) Due Registration...........................................................-27-
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(e) Use of Name and Mark.......................................................-27-
2.25 Deposit Accounts; Powers of Attorney........................................................-27-
2.26 Disclosure...................................................................................-28-
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.............................................................-28-
3.1 Ownership of Target Shares; Title...........................................................-28-
3.2 Authority....................................................................................-28-
3.3 Broker's Fees................................................................................-29-
3.4 Investment...................................................................................-29-
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SAG AND SUB..................................................................-29-
4.1 Organization and Good Standing...............................................................-29-
4.2 Authority; Approvals and Consents...........................................................-29-
4.3 Brokers......................................................................................-30-
4.4 Disclosure...................................................................................-30-
ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS............................................................................-30-
5.1 Access; Confidentiality; Remedies...........................................................-30-
5.2 Furnishing Information; Announcements.......................................................-31-
5.3 Certain Changes and Conduct of Business......................................................-31-
5.4 No Intercompany Payables or Receivables......................................................-34-
5.5 Negotiations.................................................................................-34-
5.6 Consents; Cooperation.......................................................................-34-
5.7 Additional Agreements........................................................................-35-
5.8 Interim Financial Statements.................................................................-35-
5.9 Notification of Certain Matters..............................................................-35-
5.10 Assurance by the Stockholders................................................................-36-
5.11 Antitrust Improvements Act Compliance........................................................-36-
5.12 Use of Business Name.........................................................................-36-
5.13 Related Party / Stockholders Loan............................................................-36-
5.14 Stock Restriction Agreement..................................................................-36-
5.15 Personal Items...............................................................................-36-
5.16 Liability for Transfer Taxes.................................................................-37-
5.17 Release by Stockholders......................................................................-37-
5.18 .............................................................................................-37-
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF SAG AND SUB TO EFFECT THE CLOSING.............................................-37-
6.1 Representations and Warranties; Agreements; Covenants......................................-37-
6.2 Authorization; Consent......................................................................-38-
6.3 Opinions of the Company's and the Stockholder's Counsel......................................-38-
6.4 Absence of Litigation........................................................................-38-
6.5 No Material Adverse Effect...................................................................-38-
6.6 Registration Statement. .....................................................................-38-
6.7 Completion of Due Diligence..................................................................-39-
6.8 Real Estate Lease Agreement..................................................................-39-
6.9 Board Approval...............................................................................-39-
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6.10 Certificates.................................................................................-39-
6.11 Legal Matters................................................................................-39-
6.12 Approval of Manufacturer and Distributor.....................................................-39-
6.13 Employment Agreement;........................................................................-39-
6.14 Environmental Laws...........................................................................-39-
6.15 Lease Termination Agreement/Memorandum of Lease/Consents and Estoppels.
............................................................................................-39-
6.16 Resignation of the Company's Directors.......................................................-39-
6.17 Schedules....................................................................................-40-
6.18 Share Certificates...........................................................................-40-
6.19 Non-Foreign Status...........................................................................-40-
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF THE STOCKHOLDERS
TO EFFECT THE CLOSING..........................................................................................-40-
7.1 Representations and Warranties; Agreements..................................................-40-
7.2 Authorization of the Agreement; Consents....................................................-40-
7.3 Opinions of SAG's and Sub's Counsel..........................................................-40-
7.4 Absence of Litigation........................................................................-41-
7.5 Real Estate Lease Agreement. ................................................................-41-
7.6 Certificates.................................................................................-41-
7.7 Legal Matters................................................................................-41-
ARTICLE 8
TERMINATION....................................................................................................-41-
8.1 Termination..................................................................................-41-
8.2 Effect of Termination........................................................................-42-
ARTICLE 9
INDEMNIFICATION AND SURVIVAL...................................................................................-43-
9.1 Survival of Representations and Warranties...................................................-43-
9.2 Indemnification Provisions for Benefit of the Buyer..........................................-43-
9.3 Indemnification Provisions for Benefit of the Stockholders...................................-44-
9.4 Matters Involving Third Parties..............................................................-45-
9.5 Other Indemnification Provisions.............................................................-45-
9.6 Tax Savings..................................................................................-46-
ARTICLE 10
TAX MATTERS....................................................................................................-46-
10.1 Tax Matters..................................................................................-46-
10.2 Section 338(h)(10) Election..................................................................-46-
10.3 Tax Periods Ending on or Before the Closing Date.............................................-46-
10.4 Tax Periods Beginning Before and Ending After the Closing Date...............................-47-
10.5 Cooperation on Tax Matters...................................................................-47-
10.6 Certain Taxes................................................................................-47-
ARTICLE 11
MISCELLANEOUS..................................................................................................-48-
11.1 Fees and Expenses............................................................................-48-
11.3 Headings.....................................................................................-49-
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11.4 Notices......................................................................................-50-
11.5 Assignment...................................................................................-51-
11.6 Entire Agreement.............................................................................-51-
11.7 Waiver and Amendments........................................................................-51-
11.8 Counterparts.................................................................................-51-
11.9 Governing Law................................................................................-52-
11.10 Accounting Terms.............................................................................-52-
11.11 Schedules....................................................................................-52-
11.12 Severability.................................................................................-52-
11.13 Remedies.....................................................................................-52-
11.14 Time Is Of the Essence.......................................................................-52-
11.15 Certain Definitions..........................................................................-52-
Addendum 1 - Allocation of Merger Consideration Amongst Stockholders
Exhibit A - Escrow Agreement
Exhibit B - Opinion Letter of Company Counsel
Exhibit C - Employment Agreement
Exhibit D - Non-Competition and Confidentiality Agreement
Exhibit E - Opinion Letter of SAG's Counsel
</TABLE>
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<PAGE> 6
AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this
"Agreement"), is entered into as of March 3, 1998 by and between SUNBELT
AUTOMOTIVE GROUP, INC., a Georgia corporation ("SAG"), BAG GEORGIA IV, a Georgia
corporation ("Sub"), DAY'S CHEVROLET, INC., a Georgia corporation (the
"Company"), and CALVIN DIEMER and ALVIN DIEMER (each, a "Stockholder" and
collectively, the "Stockholders"). SAG, Sub, the Company and the Stockholders
are referred to collectively as the "Parties." SAG and Sub are sometimes
collectively referred to as the "Buyer."
W I T N E S S E T H:
WHEREAS, the Company operates a Chevrolet automobile and truck
dealership businesses in Acworth, Georgia;
WHEREAS, the Stockholders own all of the issued and outstanding shares
of common stock, _____ par value, of the Company (the "Target Shares") in the
following amounts:
(a) Calvin Diemer: 50%
(b) Alvin Diemer: 50%
WHEREAS, Sub is a wholly-owned subsidiary of SAG; and
WHEREAS, SAG, Sub and the Company intend to effect a merger of the
Company into Sub in accordance with this Agreement and the Georgia Business
Corporations Code (the "Merger"). Upon consummation of the Merger, the Company
will cease to exist, and the Sub will continue to exist as the surviving
corporation of the Merger;
WHEREAS, it is intended that the Merger qualify as a tax-free
reorganization within the meaning of Section 368(a)(2)(D) of the Code.
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 DESCRIPTION OF TRANSACTION.
(A) MERGER OF THE COMPANY INTO SUB. Upon the terms and conditions set
forth in this Agreement, at the Effective Time, the Company shall be merged with
and into Sub, and the separate existence of the Company shall cease. Sub shall
continue as the surviving corporation of said Merger (the "Surviving
Corporation").
(B) EFFECT OF MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Georgia Business
Corporations Code.
(C) CLOSING; EFFECTIVE TIME.
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<PAGE> 7
(i) Subject to the conditions set forth in this
Agreement, the consummation of the Merger and the
other transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of
SCHNADER HARRISON SEGAL & LEWIS, LLP in Atlanta,
Georgia, or any other location agreed upon by the
Parties, contemporaneously with the SAG IPO described
in the Registration Statement referred to in Section
6.6 hereof.
(ii) If the SAG IPO fails to close on or before the
Closing Date Deadline, as such date may have been
extended pursuant to Section 1.1(d) hereof, then,
upon the mutual agreement of all Parties, the Parties
shall have the option to consummate the Merger and
the other transactions contemplated by this Agreement
upon such terms and conditions that are mutually
acceptable to the Parties (in which event said
alternate consummation shall for purposes herein be
referred to as the "Closing"), and said Closing shall
take place at the offices of SCHNADER HARRISON SEGAL
& LEWIS, LLP in Atlanta, Georgia, or any other
location agreed upon by the Parties
(iii) The date on which the Closing actually occurs is
herein referred to as the "Closing Date." On or
before the Closing Date, a properly executed
certificate of merger for the Merger, conforming with
the requirements of the Georgia Business Corporations
Code (the "Certificate of Merger") shall be filed
with the Secretary of State of the State of Georgia.
The Merger shall take effect on the Closing Date (the
"Effective Time").
(D) LOCK-UP CONSIDERATION; EXTENSION OF CLOSING DATE DEADLINE
(i) In consideration of the covenants contained in
Section 5.5 hereof, SAG shall pay to the Stockholders
the sum of Fifty-Five Thousand Dollars ($55,000)
("Lock-Up Consideration"), which shall be paid as
follows:
(a) SAG shall place into an escrow
account with the law firm of Moore
Ingram Johnson & Steele, LLP (the
Company's legal counsel) ("Escrow
Agent"), simultaneously with the
execution of this Agreement, the sum
of Ten Thousand Dollars ($10,000)
(the "Lock-Up Deposit"), all in
accordance with an escrow agreement
substantially in the form attached
hereto as EXHIBIT A (the "Escrow
Agreement"). The release of the
Lock-Up Deposit shall be governed by
the terms and conditions of the
Escrow Agreement.
(b) If the Closing occurs on or prior to
11:59 p.m. EST on June 30, 1998 (the
"Closing Date Deadline"), the
Lock-Up Deposit amount shall be
credited against and deducted from
the Merger Consideration due
hereunder, and the balance of the
Lock Up Consideration shall no
longer be due.
(c) If the Closing does not occur on or
before the Closing Date Deadline, or
if this Agreement is terminated by
SAG or Sub prior to Closing Date
Deadline for any reason, the Escrow
Agent
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<PAGE> 8
shall pay the Lock-Up Deposit to the
Stockholders in accordance with the
terms and conditions of the Escrow
Agreement, and, in addition thereto,
SAG shall pay to the Stockholders,
on or before the earlier of (i) July
3, 1998 or (ii) three (3) business
days following the termination of
this Agreement, as applicable, the
balance of the Lock-Up Consideration
(the sum of Forty-Five Thousand
Dollars ($45,000)) in immediately
available funds.
(ii) In the event the Closing does not occur on or before
the Closing Date Deadline, SAG shall have the
unconditional right and option, in SAG's sole
discretion, to extent the Closing Date Deadline to
11:59 p.m. EST on July 31, 1998 (in which event, for
all purposes in this Agreement, the Closing Date
Deadline shall mean 11:59 p.m. EST on July 31, 1998),
provided that SAG shall pay to the Stockholders, on
or prior to June 30, 1998, the sum of Fifteen
Thousand Dollars ($15,000) ("First Extension
Consideration") as consideration for such extension,
such amount to be in addition to the Lock-Up
Consideration. If the Closing occurs on or prior to
the Closing Date Deadline as extended by this Section
1.1(d)(ii), the Lock-Up Consideration and the First
Extension Consideration amounts shall be credited
against and deducted from the Merger Consideration
due hereunder.
(iii) In the event SAG elects to extended the initial
Closing Date Deadline pursuant to Section 1.1(d)(ii)
above, and in the event the Closing does not occur on
or before 11:59 p.m. EST on July 31, 1998, SAG shall
have the unconditional right and option, in SAG's
sole discretion, to extent the Closing Date Deadline
(as extended pursuant to Section 1.1(d)(ii) above) to
11:59 p.m. EST on August 31, 1998 (in which event,
for all purposes in this Agreement, the Closing Date
Deadline shall mean 11:59 p.m. EST on August 31,
1998), provided that SAG shall pay to the
Stockholders, on or prior to July 31, 1998, the sum
of Fifteen Thousand Dollars ($15,000) as
consideration for such additional extension, such
amount to be in addition to the Lock-Up Consideration
and the First Extension Consideration. If the Closing
occurs on or prior to the Closing Date Deadline as
extended by this Section 1.1(d)(iii), the Lock-Up
Consideration, the First Extension Consideration and
the Second Extension Consideration amounts shall be
credited against and deducted from the Merger
Consideration due hereunder.
(E) MERGER CONSIDERATION. The aggregate consideration for the
Merger (the "Merger Consideration") shall be TEN MILLION FIVE HUNDRED THOUSAND
Dollars ($10,500,000.00). The Merger Consideration shall be allocated amongst
the Stockholders in accordance with ADDENDUM 1 attached hereto and shall be paid
by the Sub as follows:
(i) Forty-Five percent (45%) of the Merger Consideration
shall be paid to the Stockholders by the Sub at the
Closing in cash or other immediately available funds
("Cash Consideration"), to be divided amongst the
Stockholders on a pro-rata basis based on their stock
ownership interest in the Company.
(ii) Fifty-Five percent (55%) of the Merger Consideration,
which represents the balance of the Merger
Consideration, shall be paid to the Stockholders at
the Closing in the form of SAG Common Stock in
accordance with Section 1.1(g) hereof (the "Stock
Consideration").
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(F) ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Upon the Effective Time:
(i) the Articles of Incorporation of Sub shall continue
as the Articles of Incorporation of the Surviving
Corporation;
(ii) the Bylaws of Sub shall continue as the Bylaws of the
Surviving Corporation;
(iii) The directors and officers of the Surviving
Corporation immediately after the Effective Time
shall be selected by SAG.
(G) CONVERSION OF SHARES. Subject to Section 1.1(i)(iii), the
manner of converting the Target Shares into shares of SAG Common Stock shall be
as is set forth in this Section 1.1(g). As of the Effective Time of the Merger,
all of the Target Shares, by virtue of the Merger without any action on the part
of the holder thereof, automatically shall be deemed to represent that number of
shares of SAG Common Stock that is equal to the number obtained by dividing the
Stock Consideration by the SAG IPO Share Price (the "SAG Stock Consideration
Shares"). The SAG Stock Consideration Shares shall be divided amongst the
Stockholders on a pro-rata basis based on their stock ownership interest in the
Company.
(H) CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective
Time, the holders of the Target Share Certificates (as hereinafter defined)
shall cease to have any rights as stockholders of the Company, and the stock
transfer books of the Company shall be closed with respect to all such Target
Shares. No further transfer of any such Target Shares shall be made on such
stock transfer books after the Effective Time. If, after the Effective Time, a
valid certificate previously representing any Target Shares is presented to Sub
or SAG, such certificate shall be canceled and shall be exchanged as provided in
Section 1.1(i).
(I) EXCHANGE OF CERTIFICATES.
(i) At the Closing, each Stockholder shall surrender its
certificate representing any of the common stock of
the Company owned by said Stockholder (the "Target
Share Certificates") to Surviving Corporation,
together with such transmittal documents as SAG or
Surviving Corporation may reasonably require.
(ii) No fractional shares of SAG Common Stock shall be
issued in connection with the Merger, and no
certificates for any such fractional shares shall be
issued. Any fractional shares shall be rounded up to
the next whole share and any Stockholder who would
otherwise be entitled to receive a fraction of a
share of SAG Common Stock (after aggregating all
fractional shares of SAG Common Stock issuable to
such holder) shall, in lieu of such fractional share,
receive said additional whole share.
(iii) Until surrendered as contemplated by this Section
1.1(i)(iii), each Company Share Certificate shall be
deemed from and after the Effective Time, to
represent only the right to receive a pro-rata share
of the Merger Consideration. If any Company Share
Certificate shall have been lost, stolen or
destroyed, the Sub may, at its discretion and as a
condition precedent to the delivery of any Merger
Consideration to the Stockholder who owns such lost,
stolen or destroyed
-4-
<PAGE> 10
Company Share Certificate, require said owner to
provide an appropriate affidavit and to deliver a
bond (in such sum as SAG or the Sub may reasonably
direct) as indemnity against any Claim that may be
made against SAG or Sub with respect to such Company
Share Certificate.
(iv) The shares of SAG Shares to be issued in the Merger
shall be characterized as "restricted securities" for
purposes of Rule 144 under the Securities Act, and
each certificate representing any of such shares
shall bear a legend identical or similar in effect to
the following legend (together with any other legend
or legends required by applicable state securities
laws or otherwise):
THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR UNLESS THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
(v) The Sub shall be entitled to deduct and withhold from
any consideration payable or otherwise deliverable to
any holder or former holder of the Target Shares
pursuant to this Agreement such amounts as the Sub
may be required to deduct or withhold therefrom under
the Code or under any provision of state, local or
foreign tax law. To the extent such amounts are so
deducted or withheld, such amounts shall be treated
for all purposes under this Agreement as having been
paid to the Person to whom such amounts would
otherwise have been paid.
(vi) The Sub shall not be liable to any holder or former
holder of the Target Shares for any shares of SAG
Common Stock (or dividends or distributions with
respect thereto), or for any cash amounts, delivered
to any public official pursuant to any applicable
abandoned property, escheat or similar law.
1.2 PRE-JANUARY 1, 1998 TAXED INCOME DISTRIBUTIONS AND BASIS. Between the
date of this Agreement and the Closing Date, the Company shall be entitled to
make distributions to the Stockholders of previously taxed income, additional
paid-in-capital and basis in common stock (each, a "Pre-1998 Distribution" and
collectively the "Pre-1998 Distributions"). The amount will be distributed with
respect to the Stockholders' previously taxed income, additional paid-in-capital
and common stock which, as of December 31, 1997, equaled One Million Dollars
($1,000,000). The Company or the Stockholders will provide written notice to SAG
and Sub at least five (5) business days prior to the Closing Date of each
planned or executed Pre-1998 Distribution. In the event the Pre-1998
Distributions, in the aggregated, exceed said One Million Dollar ($1,000,000)
amount, the Merger Consideration shall be reduced by such excess, on a
dollar-for-dollar basis.
1.3 1998 EARNINGS DISTRIBUTIONS. Between the date of this Agreement and the
Closing Date, the Company shall be entitled to make distributions to the
Stockholders of any 1998 Earnings (hereinafter defined) of the Company ("1998
Earnings Distributions"), provided that the Company or the Stockholders will
provide written notice to SAG and Sub at least five (5) business days prior to
the Closing Date of each planned or executed 1998 Earnings Distribution. For
purposes herein, "1998 Earnings" shall equal
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<PAGE> 11
the accrual basis income and expenses of the Company after December 31, 1997,
which amount shall be computed on a basis consistent with the closing records
(for tax purposes) of the Company as of December 31, 1997, except that: (a) 1998
Earnings shall include sixty percent (60%) of the increase in the computed
last-in/first-out ("LIFO") reserve for the period commencing on January 1, 1998
and ending on the Closing Date; (b) used car and truck inventories of the
Company shall be mutually agreed upon by the Parties; and (c) bad debt reserve
shall be mutually agreed upon by the Parties.
1.4 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The Parties hereby adopt this Agreement as a "plan of reorganization" with
respect to the Company and Sub within the meaning of Sections 1.368- 2(g) and
1.368-3(a) of the United States Treasury Regulations.
1.5 FURTHER ACTION. If, at any time after the Effective Time, any further
action is determined by SAG or the Sub to be necessary or desirable to carry out
the purposes of this Agreement or to vest the Sub with full title, right and
possession of and to all rights and property of the Company, the officers and
directors of the Sub shall be fully authorized (in the name of the Company and
otherwise) to take such action, except as otherwise provided in Section 10.3
hereof.
1.6 NET WORTH ADJUSTMENT.
(a) Within forty-five (45) days after the Closing Date, ERNST & YOUNG,
LLC (the "Accountants") shall prepare, at the cost and expense of SAG and/or
Sub, a balance sheet of the Company dated as of the Closing Date (the "Closing
Date Balance Sheet"). The Accountants shall prepare the Closing Date Balance
Sheet on the same basis and in accordance with the accounting principles,
methods and practices used in preparing the Company's 1997 Balance Sheet (as
hereinafter defined) prepared on a first-in/first-out basis ("FIFO") by Mr. John
Carpentier of the accounting firm of Tarpley & Underwood, P.C., accountants to
the Company, and agreed to by Mr. Ricky Brown, Controller of SAG (the
"Accounting Principles"). Within thirty (30) days after the Parties' receipt of
the completed Closing Date Balance Sheet, Mr. Carpentier and Mr. Brown shall
mutually determine the net worth of the Company as of the Closing Date (the
"Closing Date Net Worth"). The Closing Date Net Worth shall be determined based
on the Closing Date Balance Sheet prepared by the Accountants and using the
Accounting Principles, provided, however, that inventory shall be determined on
a LIFO basis and sixty percent (60%) of the increase in the LIFO reserve for the
period commencing on January 1, 1998 and ending on the Closing Date shall be
added to determine the Closing Date Net Worth. The determination by Mr.
Carpentier and Mr. Brown with respect to the Closing Date Balance Sheet and the
Closing Date Net Worth shall be conclusive and binding upon the Parties.
(b) In connection with the preparation of the Closing Date Balance
Sheet, the Accountants will conduct, at the cost and expense of SAG and/or Sub,
a physical inventory at the location where inventory is held by the Company and,
from the results of such inventory and prior to the Closing Date, prepare, at
the cost and expense of SAG and/or Sub, a schedule setting forth the nature and
quality of such inventory to be included in the Closing Date Balance Sheet. The
determination of the Accountants with respect to such inventory shall be
conclusive and binding upon the Parties.
(c) If the Closing Date Net Worth is less than zero (0) (the amount of
any such deficiency being referred to herein as the "Net Worth Deficiency"), the
Stockholders shall pay to Sub, on a dollar for dollar basis, the entire amount
of such Net Worth Deficiency (the "New Worth Deficiency Payment Amount") by wire
transfer or other immediately available funds within three (3) business days
after the date on which the Closing Date Net Worth has been determined (the
"CDNW Determination Date"),
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together with interest on such amount from the Closing Date to the date of the
CDNW Determination Date at the prime rate or its equivalent (as announced from
time to time by Citibank, N.A.).
(d) If the Closing Date Net Worth is greater than zero (0) (the amount
of any such excess being referred to herein as the "Net Worth Excess"), the Sub
shall pay to the Stockholders, on a dollar for dollar basis, the entire amount
of such Net Worth Excess (the "Net Worth Excess Payment Amount") by wire
transfer or other immediately available funds within three (3) business days
after the CDNW Determination Date, together with interest on such amount from
the Closing Date to the date of the CDNW Determination Date at the prime rate or
its equivalent (as announced from time to time by Citibank, N.A.). The Net Worth
Excess Payment Amount shall be allocated to the Stockholders on the same ratio
basis as the Merger Consideration is allocated amongst the Stockholders in
accordance with ADDENDUM 1.
1.7 MINIMUM FLOOR PLAN REQUIREMENT. As of the Date of the Closing Date, the
Company shall not be "Out of Trust," as such term is commonly used in the
automotive business and relates to the floor plan of the Company's new and used
cars. As of the Closing Date, the Company's floor plan liability must not exceed
the Company's Floor Plan Assets by more than three percent (3%), where "Floor
Plan Assets" shall mean the Company's actual inventory of financed automobiles,
plus its contracts in transits, plus its current (not over ninety (90) days)
fleet car receivables. If, as of the date of Closing Date, the floor plan
liability exceeds the Company's Floor Plan Assets by more than three percent
(3%), then such excess shall be offset against and deducted from the Cash
Consideration at the time of Closing.
1.8 PRICE PROTECTION FOR STOCK CONSIDERATION.
(a) PRICE PROTECTION. SAG acknowledges and agrees that the Stockholders
accept the Stock Consideration with the understanding that, during the period
beginning on the Closing Date and ending on the second anniversary of the
Closing Date (the "Second Anniversary Date") (such two-year period is
hereinafter referred to as the "Valuation Period), they will realize an
aggregate value of no less than Five Million Seven Hundred Seventy Five Thousand
and No/100 Dollars ($5,775,000) (the "Monetary Consideration Value") for such
Stock Consideration. If, on the Second Anniversary Date, there is a deficiency
between the amount of cash consideration the Stockholders have received from the
liquidation of any or all of the Stock Consideration and the Monetary
Consideration Value, SAG covenants and agrees to make the Stockholders whole for
such deficiency through the issuance of registered stock or the payment of cash
equal to any such deficiency, as hereinafter set forth (the "Price Protection").
To help ensure that the Stockholders realize the Monetary Consideration Value
during the Valuation Period, SAG may utilize or select to implement, at SAG's
sole cost and expense, various types of methodologies (including, without
limitation, the filing of a registration statement with the Securities and
Exchange Commission, the use of collars, or any other method selected by SAG),
designed to maintain the value of SAG's common stock.
(b) LIQUIDATION AGENT. The Stockholders covenant and agree that
throughout the Valuation Period, they shall utilize Raymond James and
Associates, Inc. (the "Raymond James") as their sole liquidation agent for the
purpose of liquidating any of the Stock Consideration, unless SAG consents to
the use of another liquidation agent in writing, which consent SAG may withhold
or deny in SAG's sole discretion (an "Approved Agent"). If Stockholders fail to
so utilize Raymond James or an Approved Agent for the liquidation of any or all
of the Stock Consideration during the Valuation Period, the Price Protection set
forth in this Section 1.8 shall become completely null and void and SAG shall no
longer be required to provide any Price Protection to any of the Stock
Consideration.
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<PAGE> 13
(c) LIQUIDATION OF STOCK. The Stockholders covenant and agree that
throughout the Valuation Period, they shall liquidate any or all of the Stock
Consideration at the times, in the manner and in the amounts directed by Raymond
James. If Raymond James directs the Stockholders to liquidate any or all of the
Stock Consideration (in each such instance, such stock is hereinafter referred
to as the "Directed Stock"), and the Stockholders fail to so liquidate any or
all of the Directed Stock at the times, in the manner and in the amounts
directed by Raymond James (such non-complying Directed Stock is hereinafter
referred to as the "Non-Complying Directed Stock"), then the Price Protection
set forth in this Section 1.8 shall become completely null and void only with
respect to the Non-Complying Directed Stock, and SAG shall no longer be required
to provide any Price Protection with respect to the Non-Complying Directed
Stock. SAG shall pay all of the brokerage fees, expenses or commissions due to
Raymond James and/or any Approved Agent in connection with the sale or
liquidation of any properly sold or liquidated Directed Stock or any or all of
the Stock Consideration that is sold or liquidated through an Approved Agent
(the "Brokerage Expenses"). The Stockholders may subsequently liquidate or sell
any Non-Complying Directed Stock for cash consideration only. In the event of
any such subsequent sale or liquidation of the NonComplying Directed Stock,
Raymond James or the Approved Agent, as the case may be, who will act as the
liquidating agent, shall promptly provide notice to SAG of such sale or
liquidation, and such notice shall include the date on which the Non-Complying
Directed Stock is sold or liquidated, the number of shares of Non-Complying
Directed Stock sold, and the aggregate consideration for which the NonComplying
Directed Stock was sold or liquidated (such amount is hereinafter referred to as
the "NonComplying Directed Stock Value").
(d) COOPERATION. The Stockholders covenant and agree to cooperate fully
with SAG, at SAG's expense, in SAG's efforts to maintain the value of SAG's
common stock, and the Stockholders covenant and agree to execute any and all
reasonable documentation as may be required to effectuate the methodologies
selected by SAG to maintain said value.
(e) SECOND ANNIVERSARY PRICE PROTECTION. If, on the Second Anniversary
Date, (i) the Stockholders still have a right to receive Price Protection
pursuant to this Section 1.8, and (ii) the Aggregate Stock Value ("Aggregate
Stock Value," for purposes herein, shall mean the aggregate cash consideration
(net of any Brokerage Expenses) that the Stockholders receive for the sale of
any or all of the Stock Consideration (including any Non-Complying Directed
Stock) during the Valuation Period plus the value, as of the Second Anniversary
Date, of any portion of the Stock Consideration (including any Non-Complying
Directed Stock) that is still owned by the Stockholders on the Second
Anniversary Date) is less than the Monetary Consideration Value (such deficiency
between the Aggregate Stock Value and the Monetary Consideration Value is
hereinafter referred to as the "Second Anniversary Deficiency Amount"), then SAG
shall compensate the Stockholders for the Second Anniversary Deficiency Amount.
SAG, at its sole option, may select one of the following methods of compensating
the Stockholders for the Second Anniversary Deficiency Amount:
(i) SAG may issue to the Stockholders additional shares of
registered common stock of SAG that are eligible for
immediate sale under the Securities Act and the Securities
Exchange Act, in accordance with the following formula:
Divide the Second Anniversary Deficiency Amount
by the SAG IPO Share Price on the Second
Anniversary Date to obtain the number of
additional shares of registered common stock of
SAG to be issued to the Stockholders.
SAG shall issue the additional shares of registered SAG
common stock, if any, due to the Stockholders within five
(5) business days following the Second
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Anniversary Date. No fractional shares of registered
SAG common stock shall be issued in connection with
the Price Protection, and no certificates for any
such fractional shares shall be issued. Any
fractional shares shall be rounded up to the next
whole share and any Stockholder who would otherwise
be entitled to receive a fraction of a share of
registered SAG common stock (after aggregating all
fractional shares of registered SAG common stock
issuable to such holder) shall, in lieu of such
fractional share, receive said additional whole
share.
(ii) SAG may pay the Stockholders cash consideration in an
amount equal to the Second Anniversary Deficiency
Amount. If SAG elects to so compensate the
Stockholders for the Second Anniversary Deficiency
Amount, SAG shall pay said cash consideration, if
any, due to the Stockholders via immediately
available funds delivered within five (5) business
days following the Second Anniversary Date.
(f) REIMBURSEMENT OF BROKERAGE EXPENSES.
(i) If at any time during the Valuation Period, but prior
to the Second Anniversary Date, the aggregate cash
consideration (net of any Brokerage Expenses) that
the Stockholders receive for the sale of any or all
of the Stock Consideration (including any
Non-Complying Directed Stock) exceeds the Monetary
Consideration Value (such excess is hereinafter
referred to as the "Excess Value Amount"), then the
Stockholders shall, within three (3) business days
following the sale or liquidation of any or all of
the Stock Consideration as a result of which an
Excess Value Amount is obtained, and in immediately
available funds, reimburse SAG for all of the
Brokerage Expenses incurred by SAG during the
Valuation Period, provided, however, that the
Stockholders shall not be obligated to reimburse SAG
for the Brokerage Expenses to the extent such
Brokerage Expenses would exceed the Excess Value
Amount.
(ii) If, on the Second Anniversary Date, the Aggregate
Stock Value is greater than the Monetary
Consideration Value (such excess is hereinafter
referred to as the "Second Anniversary Excess
Amount"), then the Stockholders shall, within three
(3) business days following the Second Anniversary
Date and in immediately available funds, reimburse
SAG for all of the Brokerage Expenses incurred by SAG
during the Valuation Period, provided, however, that
the Stockholders shall not be obligated to reimburse
SAG for the Brokerage Expenses to the extent such
Brokerage Expenses would exceed the Second
Anniversary Excess Amount.
(g) RECEIPT OF MONETARY CONSIDERATION VALUE. The Parties
acknowledge and agree that the intent of the Price Protection provided hereunder
is to ensure that the Stockholders receive all of the Monetary Consideration
Value. As such, notwithstanding anything to the contrary contained herein except
Section 1.8(f) above, if at any time during the Valuation Period the aggregate
cash consideration (net of any Brokerage Expenses) that the Stockholders receive
for the sale or liquidation of any or all of the Stock Consideration (including
any Non-Complying Directed Stock) equals or exceeds the Monetary Consideration
Value, then the Price Protection set forth in this Section 1.8 shall become
completely null and void, and SAG shall no longer be required to provide any
further Price Protection to the Stockholders for any of the Stock Consideration,
it being understood and acknowledged by the Parties that in such an event the
Stockholders will have been made whole and no further Price Protection will be
necessary.
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<PAGE> 15
(h) SURVIVAL. The provisions, terms and conditions of this Section
1.8 shall survive the execution of this Agreement and the Closing of the
transactions contemplated hereby. SAG's obligation to provide the Price
Protection shall expire and terminate upon the delivery by SAG to the
Stockholders of the registered common stock of SAG pursuant to Section 1.8(e)(i)
hereof or the payment by SAG to the Stockholders of the cash pursuant to Section
1.8(e)(ii) hereof, unless such Price Protection is terminated with respect to
any or all of the Stock Consideration as otherwise provided in this Section 1.8.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
Subject to the Parties' agreement and acknowledgment that all of the
Schedules referred to in this Article 2 are to be delivered by the Company and
the Stockholders no later than ten (10) days after the execution of this
Agreement to SAG and Sub, the Company and the Stockholders hereby jointly and
severally represent and warrant to SAG 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) as to the Company:
2.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
its incorporation and has the corporate power and authority to own, lease and
operate the properties used in its business and to carry on its business as now
being conducted. The Company is duly qualified to do business and is in good
standing as a foreign corporation in each state and jurisdiction where
qualification as a foreign corporation is required except where the lack of such
qualification would not have a Material Adverse Effect on the Company. SCHEDULE
2.1 hereto lists: (i) the states and other jurisdictions where the Company is so
qualified; and (ii) the assumed names under which the Company conducts business
and contains complete and correct copies of the Company's Articles of
Incorporation and Bylaws, each as amended and presently in effect.
2.2 SUBSIDIARIES. Except as set forth in SCHEDULE 2.2 hereof, the Company
does not have any subsidiaries or any other interest or investment in any
Person.
2.3 CAPITALIZATION. The authorized stock of the Company and the number of
shares of capital stock that are issued and outstanding are set forth on
SCHEDULE 2.3(A) hereto. The shares listed on SCHEDULE 2.3(A) hereto constitute
all the issued and outstanding shares of capital stock of the Company, have been
validly authorized and issued, are fully paid and non-assessable, have not been
issued in violation of any pre-emptive rights or of any federal or state
securities law and no personal liability attaches to the ownership thereof.
Except for as set forth on SCHEDULE 2.3(B) hereto, there is no security, option,
warrant, right, call, subscription, agreement, commitment or understanding of
any nature whatsoever, fixed or contingent, that directly or indirectly: (i)
calls for issuance, sale, pledge or other disposition of any shares of capital
stock of the Company or any securities convertible into, or other rights to
acquire, any shares of capital stock of the Company; (ii) obligates the Company
to grant, offer or enter into any of the foregoing; or (iii) relates to the
voting or control of such capital stock, securities or rights, except as
provided in this Agreement. The Company has not agreed to register any
securities under the Securities Act.
2.4 AUTHORITY, APPROVALS AND CONSENTS. The Company has the corporate power and
authority to enter into this Agreement and the other documents referenced herein
or related hereto (collectively, the "Transaction Documents") and to perform its
obligations hereunder and thereunder. The execution,
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<PAGE> 16
delivery and performance of this Agreement and the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized and approved by the Board of Directors of the Company and no other
corporate proceedings on the part of the Company are necessary to authorize and
approve this Agreement and the Transaction Documents and the transactions
contemplated hereby and thereby. This Agreement has been duly executed and
delivered by, and constitutes a valid and binding obligation of, the Company,
enforceable against the Company in accordance with its terms. The execution,
delivery and performance by the Company and the Stockholders of this Agreement
and the consummation of the transactions contemplated hereby and thereby do not
and will not:
(a) contravene any provisions of the Charter or Bylaws of the Company;
(b) except for the consent, authorization and approval that the Parties
must obtain from the Chevrolet Division of General Motors Corporation in
connection with the transactions contemplated hereby, and except as set forth on
SCHEDULE 2.4(B), conflict with, result in a breach of any provision of,
constitute a default under, result in the modification or cancellation of, or
give rise to any right of termination or acceleration in respect of, any Company
Agreement, require any consent of waiver of any party to any Company Agreement,
except where such conflict or default would not have a Material Adverse Effect
on the Company or on the ability of the Parties to consummate the transactions
contemplated by this Agreement;
(c) result in the creation of any Lien upon, or any Person obtaining
any right to acquire, any properties, assets or rights of the Company (other
than the rights of Sub to acquire the Target Shares pursuant to this Agreement);
(d) violate or conflict with any Legal Requirements applicable to the
Company or any of its businesses or properties, except where such conflict or
default would not have a Material Adverse Effect on the financial condition of
the Company or on the ability of the Parties to consummate the transactions
contemplated by this Agreement; or
(e) require any authorization, consent, order, permit or approval of,
or notice to, or filing, registration or qualification with, any Governmental
Authority, other than in connection with or in compliance with the provisions of
the Hart-Scott-Rodino Act, except where such conflict or default would not have
a Material Adverse Effect on the Company or on the ability of the Parties to
consummate the transactions contemplated by this Agreement.
Except as referred to above, no permit or approval of, or notice to any
Governmental Authority is necessary to be obtained or made by the Company to
enable the Company to continue to conduct its business and operations and use
its properties after the Closing in a manner which is in all material respects
consistent with that in which they are presently conducted and used.
2.5 FINANCIAL STATEMENTS. Attached as SCHEDULE 2.5 are true and complete
copies of:
(a) the unaudited balance sheets of the Company as of December 31,
1995, December 31, 1996 and December 31, 1997 (the December 31, 1997 balance
sheet is hereinafter referred to as the "1997 Balance Sheet"), and the related
statements of income, stockholders' equity and cash flow for the
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<PAGE> 17
fiscal year ended December 31, 1995, December 31, 1996 and December 31, 1997,
together with the notes thereto; and
(b) the most recent monthly and year-to-date financial statements
provided to the Chevrolet Motor Division of General Motors Corporation (the
"Factory Statements");
(the financial statements referred to in clauses (a) and (b) above, including
the notes thereto, being referred to herein collectively as the "Financial
Statements"). The Financial Statements of the Company are in accordance with
books and records of the Company, fairly present the financial position, results
of operations, stockholders' equity and changes in the financial position of the
Company as of the dates and for the periods indicated, and can be legitimately
reconciled with the financial statements and the financial records maintained
and the accounting methods applied by the Company for federal income tax
purposes. The Financial Statements of the Company include all adjustments, which
consist of only normal recurring accruals, necessary for such fair
presentations. The statements of income included in the Financial Statements of
the Company do not contain any items of special or non-recurring income except
as expressly identified therein, and the balance sheets included in the
Financial Statements of the Company do not reflect any write up or revaluation
increasing the book value of any assets except as expressly identified therein.
The books and accounts of the Company are complete and current in all material
respects and fairly reflect all of the transactions, items of income and expense
and all assets and liabilities of the businesses of the Company consistent with
prior practices of the Company. Each Factory Statement is accurate and complete
and was prepared in compliance with the requirements of the appropriate
automobile manufacturer, including, but not limited to, all requirements set
forth in the contract with such automobile manufacturer.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not have any
material liability of any nature whatsoever (whether known or unknown, due or to
become due, accrued, absolute, contingent or otherwise), including, without
limitation, any unfunded obligation under employee benefit plans or arrangements
as described in Sections 2.17 and 2.18 hereof or liabilities for Taxes, except
for: (a) liabilities reflected or reserved against in the most recent Financial
Statements of the Company; (b) current liabilities incurred in the ordinary
course of business and consistent with past practice after the date of the
Company's 1997 Balance Sheet which, individually and in the aggregate, do not
have, and cannot reasonably be expected to have, a Material Adverse Effect on
the Company; and (c) liabilities disclosed or SCHEDULE 2.6 hereto. The Company
is not a party to any Company Agreement, or subject to any Charter or Bylaw
provision, any other corporate limitation or any Legal Requirement which has, or
can reasonably be expected to have, a Material Adverse Effect on the Company.
Except as set forth in SCHEDULE 2.6 hereto, none of the employees of the Company
is now or will with the passage of time become entitled to receive any vacation
time, vacation pay or severance pay attributable to services rendered prior to
the date of the Closing Date.
2.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since the date of the 1997 Balance Sheet, except as set forth on
SCHEDULE 2.7(A) hereto, the Company has operated in the ordinary course of
business consistent with past practice and there has not been:
(i) any material adverse change in the assets,
properties, business, contractual relations,
operations, prospects, net income or financial
condition of the Company and no factor, event,
condition, circumstance or prospective development
exists which threatens or may threaten to have a
Material Adverse Effect on the Company;
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<PAGE> 18
(ii) any material loss, damage, destruction or other
casualty to the property or other assets of the
Company, whether or not covered by insurance;
(iii) any change in any method of accounting or accounting
practice of the Company; or
(iv) any loss of the employment, services or benefits of
any key employee of the Company.
(b) Since the date of the 1997 Balance Sheet, except as set forth
in SCHEDULE 2.7(B) hereto, the Company has not:
(i) incurred any material obligation or liability
(whether absolute, accrued, contingent or otherwise),
except in the ordinary course of business consistent
with past practice;
(ii) failed to disclose or satisfy any lien or pay or
satisfy any obligation or liability (whether
absolute, accrued, contingent or otherwise), other
than liabilities being contested in good faith and
for which adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any Lien any of
its property or other assets except for mechanics'
liens and liens for taxes not yet due and payable;
(iv) sold or transferred any asset or canceled any debts
or claims or waived any rights, except in the
ordinary course of business consistent with past
practices;
(v) defaulted on any material obligation;
(vi) entered into any material transaction, except in the
ordinary course of business consistent with past
practice;
(vii) written down the value of any inventory or written
off as uncollectible any accounts receivable or any
portion thereof not reflected in the Company's
Financial Statements;
(viii) received any notice of termination of any contract,
lease or other agreement or suffered any damage,
destruction or loss (whether or not covered by
insurance) which, in any case or in the aggregate,
has had a Material Adverse Effect on the Company;
(ix) transferred or granted any rights under, or entered
into any settlement regarding the breach or
infringement of, any Intellectual Property, or
modified any existing rights with respect thereto;
(x) made any change in the rate of compensation,
commission, bonus or other direct or indirect
remuneration payable, or paid or agreed or orally
promised to pay, conditionally or otherwise, any
bonus, incentive, retention or other compensation,
retirement, welfare, fringe or severance benefit or
vacation pay, to or in respect of any shareholder,
director, officer, employee, salesman,
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distributor or agent of the Company other than
increases in accordance with past practices not
exceeding ten percent (10%);
(xi) encountered any labor union organizing activity, had
any actual or threatened employee strikes, work
stoppages, slowdowns or lockouts, or had any material
change in its relations with its employees, agents,
customers or suppliers;
(xii) failed to replenish inventories and supplies in a
normal and customary manner consistent with its prior
practice, or made any purchase commitment in excess
of the normal, ordinary and usual requirements of its
business or at any price in excess of then-current
market price or upon terms and conditions more
onerous than those usual and customary in the
industry, or made any change in its selling, pricing,
advertising or personnel practices inconsistent with
its prior practice;
(xiii) instituted, settled or agreed to settle any, or had
any material involvement in, litigation, action or
proceeding before any court or governmental body
relating to the Company other than in the ordinary
course of business consistent with past practices but
not in any case involving amounts in excess of
$100,000;
(xiv) entered into any transaction, contract or commitment
other than in the ordinary course of business or paid
or agreed to pay any legal, accounting, brokerage,
finder's fee, Taxes or other expenses in connection
with, or incurred any severance pay obligations by
reason of, this Agreement or the transactions
contemplated hereby;
(xv) declared, set aside or paid any dividend or other
distribution in respect of any shares of capital
stock of the Company or any repurchase, redemption or
other acquisition by any Stockholder or the Company
of any outstanding shares of capital stock or other
securities of, or other ownership interest in, the
Company;
(xvi) made any individual capital expenditure in excess of
$25,000, or aggregate capital expenditures in excess
of $100,000, or additions to property, plant and
equipment other than ordinary repairs and
maintenance;
(xvii) discontinued any franchise or the sale of any
products or product line;
(xviii) incurred any obligation or liability to any employee
for the payment of severance benefits; or
2.8 TAXES. Except as set forth on SCHEDULE 2.8, (i) all Tax Returns required to
be filed by or on behalf of the Company have been properly prepared and duly and
timely filed with the appropriate taxing authorities in all jurisdictions in
which such Tax Returns are required to be filed (after giving effect to any
valid extensions of time in which to make such filings), and all such Tax
Returns were true, complete and correct in all material respects, (ii) all Taxes
required to be paid by or on behalf of the Company or in respect of the
Company's income, assets or operations have been fully and timely paid, (iii)
the Company has not executed or filed with the IRS or any other taxing authority
any agreement, waiver or other document or arrangement extending or having the
effect of extending the period for assessment or collection of Taxes (including,
but not limited to, any applicable statute of limitation, and no power of
attorney with respect to any Tax matter is currently in force, and (iv) all
Taxes required to be withheld by the Company have been duly and timely withheld
and have been paid over to the appropriate taxing
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<PAGE> 20
authorities for all periods under all applicable Legal Requirements. Copies of
all Tax Returns of the Company for each of the five (5) fiscal years preceding
the date hereof have been furnished or made available to the Sub and to SAG or
its representatives and such copies are accurate and complete as of the date
hereof. The Company has also furnished or made available to the Sub and SAG
correct and complete copies of all material notices and correspondence sent or
received since December 31, 1992 by the Company to or from any federal, state or
local tax authorities.
(a) The unpaid Taxes of the Company with respect to periods ended on,
prior to or through the date of the Company's 1997 Balance Sheet will not exceed
by any material amount the reserve for Taxes reflected on such financial
statements. The Company has made adequate provision on its books (on an annual
basis) for the payment of all Taxes (including for the current fiscal period)
owed by the Company. Except to the extent reserves therefor are reflected on the
Company's 1997 Balance Sheet, the Company is not liable, or will not become
liable, for any Taxes for any period ending on, prior to or through the date of
the Company's 1997 Balance Sheet.
(b) Except as set forth on SCHEDULE 2.8 hereto, the Company has not
been subject to a federal or state tax audit of any kind and no adjustment has
been proposed by the IRS with respect to any return for any year. With respect
to the audits referred to on SCHEDULE 2.8 hereto, no such audit has resulted in
an adjustment in excess of $50,000. Neither the Company nor any of the
Stockholders knows of any Basis for any assertion of a deficiency for Taxes
against the Company. The Stockholders will cooperate with the Company in the
filing of any returns and in any audit or refund claim proceedings involving
Taxes for which the Company may be liable or with respect to which the Company
may be entitled to a refund.
(c) Except as set forth on SCHEDULE 2.8 hereto, the Company has not
executed or filed with the IRS or any other taxing authority any agreement,
waiver or other document or arrangement extending or having the effect of
extending the period for assessment or collection of Taxes (including, but not
limited to, any applicable statute of limitation), and no power of attorney with
respect to any Tax matter is currently in force;
(d) Except as set forth on SCHEDULE 2.8 hereto, all Taxes required to
be withheld by the Company have been duly and timely withheld and have been paid
over to the appropriate taxing authorities for all periods under all applicable
laws;
(e) SCHEDULE 2.8 lists all material types of Taxes paid and material
types of tax returns filed by or on behalf of the Company. Except as set forth
on SCHEDULE 2.8, no claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns such that it is or may be subject to
taxation by that jurisdiction;
(f) Except as set forth on SCHEDULE 2.8, all deficiencies asserted or
assessments made as a result of any examinations by the IRS or any other taxing
authority of the tax returns of or covering or including the Company have been
fully paid, and there are no other audits or investigations by any taxing
authority in progress, nor have Stockholders or the Company received any notice
from any taxing authority that it intends to conduct such an audit or
investigation. No issue has been raised by a federal, state, local or foreign
taxing authority in any current or prior examination which, be application of
the same or similar principles, could reasonably be expected to result in
proposed deficiency for any subsequent tax period.
(g) Except as set forth in SCHEDULE 2.8, neither the Company nor any
other Person (including the Stockholders) on behalf of the Company has: (i)
agreed to or is required to make any adjustments
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<PAGE> 21
pursuant to ss.481(a) of the Code or any similar provision of state, local or
foreign law be reason of a change in accounting method initiated by the Company
or has 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 the Company; (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
the Company; or (iii) requested any extension of time within which to file any
tax return, which tax return has not since been filed;
(h) Except as set forth on SCHEDULE 2.8 hereto, no property owned by
the Company is: (i) property required to be treated as being owned by another
Person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately prior to the enactment of the
Tax Reform Act of 1986; (ii) constitutes "tax-exempt use property" within the
meaning of Section 168(h)(1) of the Code; or (iii) is "tax-exempt bond financed
property" within the meaning of Section 168(g) of the Code;
(i) Except as set forth on SCHEDULE 2.8 hereto, none of the
Stockholders is a foreign person within the meaning of Section 1445 of the Code;
(j) Except as set forth on SCHEDULE 2.8 hereto, the Company is not a
party to any tax-sharing or similar agreement or arrangement (whether or not
written) pursuant to which it will have any obligation to make any payments
after the Closing;
(k) Except as set forth on SCHEDULE 2.8 hereto, there is no contract,
agreement, plan or arrangement covering any person that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible by Buyer or its affiliates by reason of Section 280G of the Code, or
would constitute compensation in excess of the limitation set forth in Section
162(m) of the Code;
(l) Except as set forth on SCHEDULE 2.8 hereto, the Company is not
subject to any private letter ruling of the IRS or comparable rulings of other
taxing authorities;
(m) Except as set forth on SCHEDULE 2.8 hereto, there are no Liens as a
result of any unpaid Taxes upon any of the assets of the Company;
(n) Except as set forth on SCHEDULE 2.8 hereto, the Company 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
the Company is required to file a tax return, to be treated as an "S"
corporation for all taxable periods since the date of the Company's initial "S"
corporation election, and there has not been any voluntary or involuntary
termination or revocation of any such election;
(o) Except as set forth on SCHEDULE 2.8 hereto, the Company has never
owned any subsidiaries and has never been a member of any consolidated, combined
or Affiliated Group of corporations for any Tax purposes;
(p) Except as set forth in SCHEDULE 2.8, as of December 31, 1997, the
Company does not have any undistributed earnings and profits and has not 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).
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2.9 LEGAL MATTERS.
(a) Except as set forth on SCHEDULE 2.9(A) hereto: (i) there is no
Claim pending against, or threatened against or affecting, the Company, any
ERISA Plan or any of their respective assets, properties or rights before any
court, arbitrator, panel, agency or other governmental, administrative or
judicial entity, domestic or foreign, nor is any Basis known to the Stockholders
or the Company for any such Claims; and (ii) neither the Company nor any of its
assets are subject to any judgment, decree, writ, injunction, ruling or order
(collectively, "Judgments") of any Governmental Authority, domestic or foreign.
SCHEDULE 2.9(A) hereto identifies each Claim and Judgment disclosed thereon.
(b) The businesses of the Company are being conducted in compliance
with all Legal Requirements applicable to the Company or any of its respective
businesses or properties, and the Company has no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand or notice has been
filed or commenced against the Company for failure to so comply. The Company
holds, and is in compliance with, all Permits required by all applicable Legal
Requirements. A list of all Permits is set forth on SCHEDULE 2.9(B) hereof. No
event has occurred and is continuing which permits, or after notice or lapse of
time or both would permit, any modification or termination of any Permit.
(c) Except as set forth on SCHEDULE 2.9(C) hereto, to the knowledge of
the Company and the Stockholders, there are no proposed laws, rules,
regulations, ordinances, orders, judgments, decrees, governmental takings,
condemnations or other proceedings which would be applicable to the business,
operations or properties of the Company and which might materially adversely
affect the properties, assets, liabilities, operations or prospects of the
Company, either before or after the Closing Date.
(d) SCHEDULE 2.9(D) sets forth all Governmental Approvals and other
Consents necessary for, or otherwise material to, the conduct of the Company's
business. Except as set forth in SCHEDULE 2.9(D), all such Governmental
Approvals and Consents have been duly obtained and are in full force and effect,
and the Company is in compliance with each of such Governmental Approvals and
Consents held by it.
(e) There have been no citations, notices or complaints issued to or
received by the Company by the Occupational Health and Safety Administration or
any similar state or local agency.
2.10 PROPERTY. The properties and assets owned by or leased to the Company
(including improvements to the Owned Real Property (the "Improvements") and all
machinery, equipment and other tangible property) are in all material respects
adequate for the purposes of which such assets are currently used or are held
for use, and are in good repair and operating condition (subject to normal wear
and tear) and there are no facts or conditions affecting such assets which
could, individually or in the aggregate, interfere in any material respect with
the use, occupancy or operation thereof as currently used, occupied or operated,
or their adequacy for such use.
(A) OWNED REAL PROPERTY. SCHEDULE 2.10(A) contains a complete list of
all real property owned by the Company (the "Owned Real Property"), setting
forth the address and owner of each parcel and describing all improvements
thereon, including without limitation, the real property of the Stockholders
on which the Company's dealership operations are located in Acworth, Georgia
(the "Dealership Real Estate") and any other properties reflected as being so
owned on the Company's Financial Statements. Except as otherwise set forth on
SCHEDULE 2.10(A), the Company has, or on the Closing Date will have, good, valid
and marketable fee simple title to the Owned Real Property indicated on SCHEDULE
2.10(A) as being owned by it, free and clear of all Liens other than Permitted
Liens. There are no outstanding leases, options or rights of first refusal to
purchase the Owned Real Property, or any portion thereof or interest therein.
Since the date of the Company's incorporation, the Company has not
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owned or held any ownership interest in any real property other than the Owned
Real Property set forth on SCHEDULE 2.10(A).
(B) LEASES. SCHEDULE 2.10(B) contains a complete list of all leases of
real property setting forth the address, landlord and tenant for each Lease.
Stockholders have delivered to Buyer complete copies of the Leases. Each Lease
is legal, valid, binding, enforceable, and in full force and effect, except as
may be limited by bankruptcy, insolvency, reorganization and similar applicable
laws affecting creditors generally and by the availability of equitable
remedies. The Company is not in default, violation or breach in any respect
under any Lease, and no event has occurred and is continuing that constitutes
or, with notice or the passage of time or both, would constitute a default,
violation or breach in any respect under any Lease. Each Lease grants the tenant
under the Lease the exclusive right to use and occupy the demised premises
thereunder (the "Leased Real Property"). The Company has good and valid title to
the leasehold estate under each Lease free and clear of all Liens other than
Permitted Liens. The Company enjoys peaceful and undisturbed possession under
its respective Leases for the Leased Real Property. Since the date of the
Company's incorporation, the Company has not leased or held any leasehold or
other possessory interest in any real property other than the Leased Real
Property set forth on SCHEDULE 2.10(B).
(C) FEE AND LEASEHOLD INTERESTS. The Leased Real Property constitutes
all the fee and leasehold interests in real property held for use in connection
with, necessary for the conduct of, or otherwise material to, the business of
the Company as it is currently conducted.
(D) NO PROCEEDINGS. Except as otherwise set forth on SCHEDULE 2.10(D),
to the knowledge of the Company and the Stockholders, there are no eminent
domain or other similar proceedings pending or threatened affecting any portion
of the Owned Real Property or the Leased Real Property. There is no writ,
injunction, decree, order or judgment outstanding, nor any action, claim, suit
or proceeding, pending or threatened, relating to the ownership, lease, use,
occupancy or operation by any Person of any Owned Real Property or Leased Real
Property.
(E) CURRENT USE. The use and operation of the Owned Real Property or
the Leased Real Property by the Company does not violate in any material respect
any instrument of record or agreement affecting the Owned Real Property or the
Leased Real Property. There is no violation of any covenant, condition,
restriction, easement or order of any Governmental Authority having jurisdiction
over such property or of any other Person entitled to enforce the same affecting
the Owned Real Property or the Leased Real Property or the use or occupancy
thereof. No damage or destruction has occurred with respect to any of the Owned
Real Property or the Leased Real Property that would, individually or in the
aggregate, have a Material Adverse Effect on the Company.
(F) COMPLIANCE WITH REAL PROPERTY LAWS. The Owned Real Property is in
full compliance with all applicable building, zoning, subdivision and other land
use and similar applicable laws affecting the Owned Real Property (collectively,
the "Real Property Laws"), and the Company and the Stockholders have not
received any notice of violation or claimed violation of any Real Property Law.
No current use by the Company of the Owned Real Property or the Leased Real
Property is dependent on a nonconforming use or other Governmental Approval, the
absence of which would materially limit the use of such properties or assets
held for use in connection with, necessary for the conduct of, or otherwise
material to, the Company.
(G) REAL PROPERTY TAXES. Each parcel included in the Owned Real
Property is assessed for real property tax purposes as a wholly independent tax
lot, separate from adjoining land or improvements not constituting a part of
that parcel.
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<PAGE> 24
(H) LEASED PREMISES. With respect to Leased Real Property, the Company
has complied with: (i) all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances or
recommendations affecting such premises or any part thereof, or the use thereof,
including without limitation, the Americans with Disabilities Act, whether or
not 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; (ii) all rules, orders and
regulations of the National Board of Fire Underwriters or other bodies
exercising similar functions and responsibilities in connection with the
prevention of fire or other correction of hazardous conditions which apply to
such premises; and (iii) the requirements of all policies of public liability,
fire and other insurance which at any time may be in force with respect to such
premises. The Company is the owner of the furniture and other personal property
utilized in the business and located at such premises.
(I) CERTIFICATE OF OCCUPANCY; UTILITIES; EMINENT DOMAIN. No certificate
of occupancy is required with respect to the Improvements. All utilities
servicing the Owned Real Property or the Leased Real Property and the
Improvements are provided by publicly dedicated utility lines and are located
within public rights-of-way and do not cross or encumber any private land. No
notice of any pending, threatened or contemplated action by any governmental
authority or agency having the power of eminent domain has been given to the
Company or the Stockholders with respect to the Owned Real Property or the
Leased Real Property.
2.11 ENVIRONMENTAL MATTERS.
(a) To the Knowledge of any of the Stockholders and the Company, the
Company is 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 taken as a whole.
(b) To the Knowledge of any of the Stockholders and the Company, the
Company 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 the Company, the Owned Real
Property or the Company's 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 taken as a whole.
(c) To the Knowledge of any of the Stockholders and the Company, the
Company 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.
(d) The Stockholders and the Company have provided to SAG all
environmental studies and reports obtained by them or known to them pertaining
to the Owned Real Property, the Improvements, the Company and any property
formerly owned, occupied or leased by the Company, and have permitted (or will
have permitted as of the Closing Date), the testing of the soil, groundwater,
building components, tanks, containers and equipment on the Owned Real Property,
the Improvements, and any property formerly owned, occupied or leased by the
Company, by SAG or SAG's agents or experts as they have or shall have deemed
necessary or appropriate to confirm the condition of such properties.
2.12 INVENTORIES. The values at which inventories are carried on the Company's
1997 Balance Sheet reflect the normal inventory valuation policies of the
Company. All inventories reflected on the
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Company's 1997 Balance Sheet and Company's Factory Statement or arising since
the date thereof are currently marketable, are of good, usable and merchantable
quality in all material respects, and can reasonably be anticipated to be sold
at normal mark-ups within 120 days after the date hereof in the ordinary course
of business (subject to the reserve for obsolete, off-grade or slow-moving items
that is reflected in the Company Balance Sheet), except for spare parts
inventory which inventory is good and usable.
2.13 NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable
reflected on the Company's 1997 Balance Sheet are, and all notes and accounts
receivable that will be or will have been reflected on the Closing Date Balance
Sheet of the Company will be, good and have been or will have been collected or
are collectible in accordance with their terms at their recorded amounts, and
are subject to no material defenses, setoffs or counterclaims other than normal
cash discounts accrued in the ordinary course of business, subject to the
reserve for bad debts set forth on the Company's 1997 Balance Sheet, as adjusted
for operations and transactions through the Closing Date in the ordinary course
of business and consistent with past practices.
2.14 INSURANCE. All material properties and assets of the Company which are
of an insurable character are insured against loss or damage by fire and other
risks to the extent and in the manner reasonable in light of the risks attendant
to the businesses and activities in which the Company is engaged and customary
for companies engaged in similar businesses or owning similar assets. Set forth
on SCHEDULE 2.14 hereto is a list and brief description (including the name of
the insurer, the type of coverage provided, the amount of the annual premium for
the current policy period, the amount of remaining coverage and deductibles and
the coverage period) of all policies for such insurance and the Company has made
or will make available to SAG true and complete copies of all such policies. All
such policies are in full force and effect sufficient for all applicable
requirements of law and will not in any way be effected by or terminated or
lapsed by reason of the consummation of the transactions contemplated by this
Agreement. No notice of cancellation or non-renewal with respect to, or
disallowance of any claim under, any such policy has been received by the
Company.
2.15 CONTRACTS.
(a) SCHEDULE 2.15 contains a complete list of all agreements,
contracts, commitments and other instruments and arrangements (whether written
or oral) of the types described below to which the Company is a party or by
which it is bound ("Company Agreements"):
(i) leases, master rental agreements, service agreements,
insurance policies, Governmental Approvals and other
contracts concerning or relating to the Owned Real
Property or the Leased Real Property (including those
referred to on SCHEDULE 2.10);
(ii) employment, consulting, agency, collective bargaining
or other similar contracts, agreements and other
instruments and arrangements relating to or for the
benefit of current, future or former employees,
officers, directors or consultants;
(iii) loan agreements, indentures, letters of credit,
mortgages, security agreements, pledge agreements,
deeds of trust, bonds, notes, guarantees and other
agreements and instruments relating to the borrowing
of money or obtaining of or extension of credit;
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(iv) licenses, licensing arrangements and other contracts
providing in whole or in part for the use of, or
limiting the use of, any Intellectual Property;
(v) brokerage or finder's agreements;
(vi) joint venture, partnership and similar contracts
involving a sharing of profits or expenses (including
but not limited to joint research and development and
joint marketing contracts);
(vii) asset purchase agreements and other acquisition or
divestiture agreements, including but not limited to
any agreements relating to the sale, lease or
disposal of any assets (other than sales of inventory
in the ordinary course of business) or involving
continuing indemnity or other obligations;
(viii) orders and other contracts for the purchase or sale
of materials, supplies, products or services, each of
which involves aggregate payments in excess of
$10,000 in the case of purchases or $10,000 in the
case of sales;
(ix) contracts with respect to which the aggregate amount
that could reasonably be expected to be paid or
received thereunder in the future exceeds $10,000 per
annum or $10,000 in the aggregate;
(x) sales agency, manufacturer's representative, dealer,
marketing or distributorship agreements;
(xi) master lease agreements providing for the leasing of
personal property used in, or held for use in
connection with, the Company's business;
(xii) contracts, agreements or commitments with any
employee, director, officer, stockholder or affiliate
of the Company;
(xiii) powers of attorney;
(xiv) any guaranty, warranty or indemnity, other than
standard warranties from any automobile manufacturers
with whom each Company has a franchise agreement (or
comparable agreement), given by each Company to its
customers; and
(xv) any other contracts, agreements or commitments that
are material to the Company's business.
(b) The Company and the Stockholders have delivered to Buyer
complete copies of all written Company Agreements together with all amendments
thereto, and accurate descriptions of all material terms of all oral Company
Agreements set forth or required to be set forth on SCHEDULE 2.15.
(c) All Company Agreements are in full force and effect and
enforceable against each party thereto, except as such enforceability may be
limited by the effect of bankruptcy, insolvency or similar laws affected
creditors' rights generally or by general principles of equity. There does not
exist under any Company Agreement any event of default or event or condition
that, after notice or lapse of time or both, would constitute a violation,
breach or event of default thereunder on the part of the Company, or any other
party thereto, except as set forth in SCHEDULE 2.15 and except for such events
or conditions
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that, individually and in the aggregate: (i) have not had or result in, and will
not have or result in, a Material Adverse Effect on the Company; and (ii) have
not and will not materially impair the ability of the Company or the
Stockholders to perform their obligations under this Agreement. Except as set
forth in SCHEDULE 2.15, no consent of any third party is required under any
Company Agreement as a result of or in connection with, and the enforceability
of any Company Agreement will not be affected in any manner by, the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
(d) There are no material unresolved disputes involving any
Stockholder, the Company or its employees under any Company Agreement.
2.16 LABOR RELATIONS.
(a) The Company has paid or made provision for the payment of all
salaries and accrued wages and has complied in all material respects with all
applicable laws, rules and regulations relating to the employment of labor,
including those relating to wages, hours, collective bargaining and the payment
and withholding of taxes, and has withheld and paid to the appropriate
Governmental Authority, or is holding for payment not yet due, to such
authority, an amounts required by law or agreement to be withheld from the wages
or salaries of its employees.
(b) Except as Set forth on SCHEDULE 2.16(B) hereto, the Company is not
a party to any: (i) outstanding employment agreements or contracts with officers
or employees that are not terminable at will, or that provide for payment of any
bonus or commission; (ii) agreement, policy or practice that requires it to pay
termination or severance pay to non-exempt or hourly employees (other than as
required by law); (iii) collective bargaining agreement or other labor union
contract applicable to persons employed by the Company, nor are there any
activities or proceedings of any labor union to organize any such employees. The
Company has furnished to SAG complete and correct copies of all such agreements
("Employment and Labor Agreements"). The Company has not breached or otherwise
failed to comply with any material provisions of any Employment or Labor
Agreement.
(c) Except as set forth in SCHEDULE 2.16(C) hereto: (i) there is no
unfair labor practice charge or complaint pending before the National Labor
Relations Board ("NLRB"); (ii) there is no labor strike, material slowdown or
material work stoppage or lockout actually pending or threatened, against or
affecting the Company, and the Company has not experienced any such material
slow down or material work stoppage, lockout or other collective labor action by
or with respect to employees of the Company; (iii) there is no representation
claim or petition pending before the NLRB or any similar foreign agency and no
question concerning representation exists relating to the employees of the
Company; (iv) the are no charges with respect to or relating to the Company
pending before the Equal Employment Opportunity Commission or any state, local
or foreign agency responsible for the prevention of unlawful employment
practices; (v) the Company has not received formal notice from any federal,
state, local or foreign agency responsible for the enforcement of labor or
employment laws of an intention to conduct an investigation of the Company and
no such investigation is in progress; and (vi) the consents of the unions that
are parties to any Employment and Labor Agreements are not required to complete
the transactions contemplated by this Agreement.
(d) The Company has never caused any "plant closing" or "mass layoff"
as such actions are defined in the Worker Adjustment and Retraining Notification
Act, as codified at 29 U.S.C. ss.ss.2101-2109, and the regulations promulgated
therein.
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2.17 EMPLOYEE BENEFIT PLANS.
(a) Set forth on SCHEDULE 2.17(A) hereto is a true and complete
list of:
(i) each Employee Pension Benefit Plan maintained by the
Company or to which the Company is required to make
contributions;
(ii) each Employee Welfare Benefit Plan maintained by the
Company or to which the Company is required to make
contributions; and
(iii) True and complete copies of all ERISA Plans have been
delivered to or made available to SAG together with,
as applicable with respect to each such ERISA Plan,
trust agreements, summary plan descriptions, all IRS
determination letters or applications therefor with
respect to any Pension Benefit Plan intended to be
qualified pursuant to Section 401(c) of the Code, and
valuation or actuarial reports, accountant's
opinions, financial statements, IRS Form 5500s (or
5500-C or 5500-R) and summary annual reports for the
last three years.
(b) With respect to the ERISA Plans, except as set forth on
SCHEDULE 2.17(B):
(i) there is no ERISA Plan which is a Multiemployer Plan;
(ii) no event has occurred or is threatened or about to
occur which would constitute a prohibited transaction
under Section 406 of ERISA or under Section 4975 of
the Code;
(iii) each ERISA Plan has operated since its inception in
accordance in all material respects with the
reporting and disclosure requirements imposed under
ERISA and the Code and has timely filed Form 5500e
(or 5500-C or 5500-R) and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state, local
or foreign Taxes.
(c) Each Pension Benefit Plan intended to be qualified under
Section 401(a) of the Code:
(i) has been qualified, from its inception, under Section
401(a) of the Code, and the trust established
thereunder has been exempt from taxation under
Section 501(a) of the Code and is currently in
compliance with applicable federal laws;
(ii) has been operated, since its inception, in all
material respects in accordance with its terms and
there exists no fact which would adversely affect its
qualified status; and
(iii) is not currently under investigation, audit or review
by the IRS and no such action is contemplated or
under consideration and the IRS has not asserted that
any Pension Benefit Plan is not qualified under
Section 401(a) of the Code or that any trust
established under a Pension Benefit Plan is not
exempt under Section 501(a) of the Code.
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<PAGE> 29
(d) With respect to each Employee Pension Benefit Plan which is a
defined benefit plan under Section 414(j) and, for the purpose solely of
ss.2.17(d)(iv) hereof, each defined contribution plan under Section 414(i) of
the Code:
(i) no liability to the PBGC under Sections 4062-4064 of
ERISA has been incurred by the Company since the
effective date of ERISA and all premiums due and
owing to the PBGC have been timely paid;
(ii) no PBGC has notified the Company or any Employee
Pension Benefit Plan of the commencement of any
proceedings under Section 4042 of ERISA to terminate
any such plan;
(iii) no event has occurred since the inception of any
Employee Pension Benefit Plan or is threatened or
about to occur which would constitute a reportable
event within the meaning of Section 4043(b) of ERISA;
(iv) no Employee Pension Benefit Plan ever has incurred an
"accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Code; and
(v) if any of such Employee Pension Benefit Plans were to
be terminated on the Closing Date: (A) no liability
under Title IV of ERISA would be incurred by the
Company; and (B) all benefits accrued to the day
prior to the Closing Date (whether or not vested)
would be fully funded in accordance with the
actuarial assumptions and method utilized by such
plan for valuation purposes.
(e) With respect to each Employee Pension Benefit Plan, SCHEDULE
2.17(A) contains a list of all Employee Pension Benefit Plans to which ERISA has
applied which have been or are being terminated, or for which a termination is
contemplated, and a description of the actions taken by the PBGC and the IRS
with respect thereto.
(f) The aggregate of the amounts of contributions by the Company
to be paid or accrued under ERISA Plans for the current fiscal year is not
expected to exceed approximately one hundred and ten percent (110%) of the
amounts of such contributions for the past fiscal year. To the extent required
in accordance with GAAP, the Company's 1997 Balance Sheet reflects in the
aggregate an accrual of all amounts of employer contributions accrued by and
unpaid by the Company under the ERISA Plans as of the date of the Company's 1997
Balance Sheet.
(g) With respect to any Multiemployer Plan: (i) the Company has
not, since its formation, made or suffered any "complete withdrawal" or "partial
withdrawal" as such terms are respectively defined in Sections 4203 and 4205 of
ERISA; (ii) there is no withdrawal liability of the Company under any
Multiemployer Plan, computed as if a "complete withdrawal" by the Company had
occurred under each such Plan as of the Closing Date; and (iii) the Company has
not received notice to the effect that any Multiemployer Plan is either in
reorganization (as defined in Section 4241 of ERISA) or insolvent (as defined in
Section 4245 of ERISA).
(h) With respect to the Employee Welfare Benefit Plan:
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(i) There are no liabilities of the Company under
Employee Welfare Benefit Plans with respect to any
condition which relates to a claim filed on or before
the Closing Date; and
(ii) No claims for benefits are in dispute or litigation.
2.18 OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS.
(a) Set forth on SCHEDULE 2.18(A) hereto is a true and complete
list of:
(i) each employee stock purchase, employee stock option,
employee stock ownership, deferred compensation,
performance, bonus, incentive, vacation pay, holiday
pay, insurance, severance, retirement, excess benefit
or other plan, trust or arrangement which is not an
ERISA Plan whether written or oral, which the Company
maintains or is required to make contributions to;
(ii) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral,
with any current or former officer, director or
consultant of the Company pursuant to which payments
may be required to be made at any time following the
date hereof (including, without limitation, any
employment, deferred compensation, severance,
supplemental pension, termination or consulting
agreement or arrangement); and
(iii) each employee of the Company whose aggregate
compensation for the fiscal year ended December 31,
1996 exceeded, and whose aggregate compensation for
the fiscal year ending December 31, 1997 is likely to
exceed, $50,000. True and complete copies of all of
the written plans, arrangements and agreements
referred to on SCHEDULE 2.18(A) ("Compensation
Commitments") have been provided to SAG together
with, where prepared by or for the Company, any
valuation, actuarial or accountant's opinion or other
financial reports with respect to each Compensation
Commitment for the last three years. An accurate and
complete written summary has been provided to SAG
with respect to any Compensation Commitment which is
unwritten.
(b) Each Compensation Commitment:
(i) since its inception, has been operated in all
material respects in accordance with its terms;
(ii) is not currently under investigation, audit or review
by the IRS or any other federal or state agency and
no such action is contemplated or under
consideration;
(iii) has no liability for any federal, state, local or
foreign Taxes;
(iv) has no claim subject to dispute or litigation;
(v) has met all applicable requirements, if any, of the
Code; and
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(vi) has operated, since its inception, in material
compliance with the reporting and disclosure
requirements imposed under ERISA and the Code.
2.19 TRANSACTIONS WITH INSIDERS. Set forth on SCHEDULE 2.19 hereto is a
complete and accurate description of all material transactions between the
Company or any ERISA Plan, on the one hand, and any Insider, on the other hand,
that have occurred since January 1, 1994.
2.20 PROPRIETY OF PAST PAYMENTS. Except as set forth on SCHEDULE 2.20
hereto, no funds or assets of the Company have been used for illegal purposes;
no unrecorded funds or assets of the Company have been established for any
purpose; no accumulation or use of the Company's corporate funds or assets has
been made without being properly accounted for in the respective books and
records of the Company; all payments by or on behalf of the Company have been
duly and properly recorded and accounted for in their respective books and
records; no false or artificial entry has been made in the books and records of
the Company for any reason; no payment has been made by or on behalf of the
Company with the understanding that any part of such payment is to be used for
any purpose other than that described in the documents supporting such payment;
and the Company has not made, directly or indirectly, any illegal contributions
to any political party or candidate, either domestic or foreign. Neither the IRS
nor any other federal, state, local or foreign government agency or entity has
initiated or threatened any investigation of any payment made by the Company of,
or alleged to be, the type described in this ss.2.20.
2.21 INTEREST IN COMPETITORS. Except as set forth on SCHEDULE 2.21, neither
the Company nor the Stockholders, nor any of their Affiliates, have any
interest, either by way of contract or by way of investment (other than as
holder of not more than two percent (2%) of the outstanding capital stock of a
publicly traded Person, so long as such holder has no other connection or
relationship with such person) or otherwise, directly or indirectly, in any
Person other than the Company that is engaged in the retail sale of automobiles
in the United States of America.
2.22 BROKERS. Except as set forth on SCHEDULE 2.22 hereto, neither the
Company, nor any director, officer or employee thereof, nor the Stockholders or
any representative of the Stockholders, has employed any broker or finder or has
incurred or will incur any broker's, finder's or similar fees, commissions or
expenses, in each case in connection with the transactions contemplated by this
Agreement.
2.23 TERRITORIAL RESTRICTIONS. Except as set forth on SCHEDULE 2.23, the
Company is not restricted by any written agreement or under-standing with any
Person from carrying on its business anywhere in the world. Buyer, solely as a
result of the transactions contemplated hereby, will not thereby become
restricted in carrying on any business anywhere in the world.
2.24 INTELLECTUAL PROPERTY.
(A) TITLE. SCHEDULE 2.24(A) contains a complete list of all
Intellectual Property that is owned by the Company and primarily related to,
used in, held for use in connection with, or necessary for the conduct of, or
otherwise material to the Company (the "Owned Intellectual Property") other
than: (i) inventions, trade secrets, processes, formulae, compositions, designs
and confidential business and technical information; and (ii) Intellectual
Property that is both not registered or subject to application for registration
and not material to the Company. The Company owns or has the exclusive right to
use pursuant to license, sublicense, agreement or permission all Intellectual
Property, free from any Liens (other than Permitted Liens) and free from any
requirement of any past, present or future royalty payments, license fees,
charges or other payments, or conditions or restrictions whatsoever. The
Intellectual Property comprise all of the Intellectual Property necessary for
Buyer to conduct and operate
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the Company as now being conducted by the Stockholders. The Company does not
infringe on or otherwise conflict with any rights of any Person in respect of
any Intellectual Property.
(B) LICENSING ARRANGEMENTS. SCHEDULE 2.24(B) sets for all agreements,
arrangements or laws: (i) pursuant to which the Company has licensed
Intellectual Property to, or the use of Intellectual Property is otherwise
permitted (through non-assertion, settlement or similar agreements or otherwise)
by, any other Person; and (ii) pursuant to which the Company has had
Intellectual Property licensed to it, or has otherwise been permitted to use
Intellectual Property. Except as set forth on SCHEDULE 2.24(B), all of the
agreements or arrangements set forth on SCHEDULE 2.24(B): (A) are in full force
and effect in accordance with their terms and no default exists thereunder by
the Company or by any other party thereto; (B) are free and clear of all Liens;
and (C) do not contain any change in control or other terms or conditions that
will become applicable or inapplicable as a result of the consummation of the
transactions contemplated by this Agreement. Stockholders have delivered to
Buyer complete copies of all licenses and arrangements (including amendments)
set forth on SCHEDULE 2.24(B). All royalties, license fees, charges and other
amounts payable by, on behalf of, to, or for the account of, the Company in
respect of any Intellectual Property are disclosed in the Company's Financial
Statements to the extent material to the Company's Financial Statements.
(C) LITIGATION. No claim or demand of any Person has been made, nor is
there any proceeding that is pending or threatened, which: (i) challenges the
rights of the Company in respect of any Intellectual Property; (ii) asserts that
the Company is infringing or otherwise in conflict with, or is, except as set
forth in SCHEDULE 2.24(B), required to pay any royalty, license fee, charge or
other amount with regard to, any Intellectual Property; or (iii) claims that any
default exists under any agreement or arrangement listed on SCHEDULE 2.24(B).
None of the Intellectual Property is subject to any outstanding order, ruling,
decree, judgment or stipulation by or with any court, arbitrator or
administrative agency.
(D) DUE REGISTRATION. The Owned Intellectual Property has been duly
registered with, filed in or issued by, as the case may be, the United States
Patent and Trademark Office, United States Copyright Office, or such other
filing offices, and the Company has taken such other actions to ensure full
protection under any applicable laws or regulations, and such registrations,
filings, issuances and other actions remain in full force and effect.
(E) USE OF NAME AND MARK. Except as set forth in SCHEDULE 2.24(E),
there are, and immediately after the Closing will be, no contractual restriction
or limitation pursuant to any orders, decisions, injunctions, judgments, awards
or decrees of any Governmental Authority on Buyer's right to use the name and
mark "Day's Chevrolet" in the conduct of the business as presently carried on by
the Company or as such business may be extended by Buyer.
2.25 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 2.25 contains an
accurate list, as of the date of this Agreement, of:
(a) the name of each financial institution in which the Company has
accounts or safe deposit boxes;
(b) the names in which the accounts or boxes are held;
(c) the type of account; and
(d) the name of each Person authorized to draw thereon or have access
thereto.
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2.26 DISCLOSURE. To the best knowledge of the Company and the Stockholders,
neither the Company nor any Stockholder has made any material misrepresentation
to SAG relating to the Company or the Target Shares, and neither the Company nor
any Stockholder has omitted to state to SAG any material fact relating to the
Company or the Target Shares which is necessary in order to make the information
given by or on behalf of the Company or the Stockholders to SAG not misleading
or which if disclosed would reasonably affect the decision of SAG or the Sub to
consummate the transactions contemplated hereby. No fact, event, condition or
contingency exists or has occurred which has, or in the future can reasonably be
expected to have, a Material Adverse Effect on the Company, which has not been
disclosed in the Company's Financial Statements or the schedules to this
Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Subject to the Parties' agreement and acknowledgment that certain of
the Schedules referred to in this Article 3 are to be delivered by the Company
and the Stockholders no later than ten (10) days from the date this Agreement is
executed, each Stockholder hereby jointly and severally represents and warrants
to SAG and Sub 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):
3.1 OWNERSHIP OF TARGET SHARES; TITLE. Each Stockholder is the owner of
record and beneficiary of the Target Shares set forth on SCHEDULE 3.1 hereof and
has, and shall transfer to Sub at the Closing, good and marketable title to the
Target Shares owned by him, free and clear of any and all Liens, claims and
encumbrances and free and clear of any restrictions on transfer (other than
restrictions on transfer imposed by applicable federal and state securities
laws), proxies and voting, or other agreements. Each Stockholder is not a party
to any option, warrant, purchase right or other contract or commitment that
could require any Stockholder to sell, transfer or otherwise dispose of the
Target Shares (other than this Agreement). Each 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.
3.2 AUTHORITY. Each Stockholder has all requisite power and authority and
has full legal capacity and is competent to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby (including the
disposition of the Target Shares to Sub as contemplated by Agreement). This
Agreement has been duly executed and delivered by each Stockholder and
constitutes a valid and binding obligation of each Stockholder, enforceable
against each Stockholder in accordance with its terms. Except as set forth on
SCHEDULE 3.2, the execution, delivery and performance of this Agreement by each
Stockholder and the consummation of the transactions contemplated hereby, do not
and will not:
(a) (after notice or lapse of time or both) conflict with, result in a
breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination or
acceleration in respect of, any material contract, agreement, commitment,
understanding, arrangement or restriction to which any Stockholder is a party or
to which any Stockholder or any of Stockholders' property is subject;
(b) violate or conflict with any Legal Requirements applicable to any
Stockholder or any of such Stockholder's businesses properties; or
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(c) require any authorization, consent, order, permit or approval of,
or notice to, or filing, registration or qualification with, any Governmental
Authority, except in connection with or in compliance with the provisions of the
Hart-Scott-Rodino Act.
3.3 BROKER'S FEES. Each 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 the Buyer could become
liable or obligated.
3.4 INVESTMENT. Each Stockholder: (a) understands that any SAG Stock
Consideration Shares have not been, and will not be, registered under the
Securities Act, or under any state securities laws, and are being offered and
sold in reliance upon federal and state exemptions for transactions not
involving any public offering; (b) is acquiring any SAG Stock Consideration
Shares 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 SAG and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and risks inherent in
holding any SAG Stock Consideration Shares; (e) is able to bear the economic
risk and lack of liquidity inherent in holding any SAG Stock Consideration
Shares; and (f) is an Accredited Investor for the reasons set forth on ADDENDUM
1. Each Stockholder further acknowledges and understands that the
representations and warranties of the Stockholders and the Company set forth in
this Agreement will be used and relied on by SAG and Sub to prepare and file the
Registration Statement with the Securities and Exchange Commission.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SAG AND SUB
Each of SAG and Sub hereby jointly and severally represents and
warrants to the Company and the Stockholders 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):
4.1 ORGANIZATION AND GOOD STANDING. SAG and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and has the corporate power and authority to
own, lease and operate the properties used in its business and to carry on its
business as now being conducted. SAG and each of its subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
each state and jurisdiction where qualification as a foreign corporation is
required, except for such failures to be qualified and in good standing, if any,
which when taken together with all other such failures of SAG and its
subsidiaries would not, or could not reasonably be expected to, in the aggregate
have a Material Adverse Effect on SAG and its subsidiaries, taken as a whole.
4.2 AUTHORITY; APPROVALS AND CONSENTS. SAG and Sub have the corporate power
and authority to enter into this Agreement and to perform their respective
obligations hereunder. This Agreement has been duly executed and delivered by,
and constitutes a valid and binding obligation of SAG and Sub, enforceable
against SAG and Sub in accordance with its terms. Except as set forth on
SCHEDULE 4.2 hereto, the execution, delivery and performance by SAG and Sub of
this Agreement and the consummation of the transactions contemplated hereby do
not and will not:
(a) contravene any provisions of the certificate of incorporation or
bylaws of SAG or Sub;
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(b) (after notice or lapse of time or both) conflict with, result in a
breach of any provision, constitute a default under, result in the modification
or cancellation of, or give rise to any right of termination or acceleration in
respect of, any SAG Agreement (as defined below) or require any consent or
waiver of any party to any SAG Agreement other than agreements the breach or
violation of which could not reasonably be expected to have a Material Adverse
Effect on SAG and its subsidiaries, taken as a whole;
(c) violate or conflict with any Legal Requirements applicable to SAG
or any of its subsidiaries or any of their respective businesses or properties;
or
(d) require any authorization, consent, order, permit or approval of,
or notice to, or filing, registration or qualification with, any Governmental
Authority, except in connection with or in compliance with the provisions of the
Hart-Scott-Rodino Act.
4.3 BROKERS. Neither SAG, Sub nor any of their directors, officers or
employees has employed any broker or finder or has incurred or will incur any
broker's, finder's or similar fees, commissions or expenses, in each case in
connection with the transactions contemplated by this Agreement or the Real
Estate Agreement.
4.4 DISCLOSURE. Neither SAG nor Sub has made any material
misrepresentations to the Stockholders and neither SAG nor Sub has omitted to
state to the Stockholders any material fact relating to SAG or Sub which is
necessary in order to make the information given by SAG or Sub not misleading or
which if disclosed would reasonably affect the decision of a Person considering
the sale of the Target Shares.
ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 ACCESS; CONFIDENTIALITY; REMEDIES.
(a) Between the date hereof and the Closing Date, the Stockholders and
the Company will: (i) provide to the officers and other authorized
representatives of SAG 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 will cause the Company's officers to furnish to
SAG and its authorized representatives any and all financial, technical and
operating data with other information pertaining to the businesses and
properties of the Company (including the Owned Real Property or the Leased Real
Property and the Improvements); and (ii) make available for inspection and
copying by SAG and Sub true and complete copies of any documents relating to the
foregoing. SAG and Sub will hold, and will cause their representatives to hold,
in confidence (unless and to the extent compiled 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 SAG and Sub. If this Agreement is terminated, SAG and Sub will, and
will cause their representatives to, promptly return to the Company, upon the
reasonable request of the Company, all Confidential Information furnished by
such Company, including all copies and summaries thereof. If the Closing does
occur, the Stockholders shall continue to comply with and be bound by these
nondisclosure and nonuse obligations for a period of five (5) years following
the Closing, except that, with respect to any such Confidential Information
which constitutes a trade secret under the laws of the State of Georgia, the
Stockholders shall
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continue to comply with and be bound by these nondisclosure and nonuse
obligations for so long as such Confidential Information remains a trade secret.
(b) The Stockholders and the Company 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 regarding
SAG, Sub or the Registration Statement and will not disclose the same to any
third party or use the same for any purpose except as may be reasonably
necessary to carry out this Agreement and the transactions contemplated hereby.
If this Agreement is terminated, the Stockholders and the Company will, and will
cause their representatives to, promptly return to SAG, upon the reasonable
request of SAG, all Confidential Information furnished by SAG or Sub or which
relates to the Registration Statement, including all copies and summaries
thereof.
(c) Each of the Parties acknowledges and agrees that the other Party
would be damaged irreparably in the event any of the provisions of this Section
5.1 are not performed in accordance with their specific terms otherwise are
breached. Accordingly, each of the Parties agrees that the other Party shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Section 5.1 and to enforce specifically the terms and provisions of this
Section 5.1 in any action instituted in any court of the United States or any
state thereof having jurisdiction over the Parties and the matter, in addition
to any other remedy to which it may be entitled, at law or in equity.
5.2 FURNISHING INFORMATION; ANNOUNCEMENTS. The Stockholders and the
Company, on the one hand, and SAG and Sub, on the other hand, will, as soon as
practical after reasonable request therefor, furnish to the other all
information concerning the Stockholders and the Company or SAG and Sub,
respectively, required for inclusion in any statement or application made by SAG
or Sub or the Company or the Stockholders 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. Neither the Stockholders nor the Company, on the one hand, nor SAG or
Sub, on the other hand, nor any representative thereof, shall issue any press
release or otherwise make any public statement with respect to the transactions
contemplated hereby without the prior consent of the other, except as may be
required by law. SAG shall reimburse the Company and the Stockholders for any
reasonable expenses incurred by such Company and the Stockholders in connection
with this Section.
5.3 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) Except as set forth on SCHEDULE 5.3(A), from and after the date of
this Agreement and until the Closing Date, the Company shall, and the
Stockholders shall cause the Company to, conduct its businesses solely in the
ordinary course consistent with past practices and, without the prior written
consent of SAG, neither the Stockholders nor the Company will, except as
required or settled pursuant to the terms hereof, permit the Company to:
(i) make any material change in the conduct of its
businesses and operations or enter into any
transaction other than in the ordinary course of
business consistent with past practices;
(ii) make any change in its Bylaws, issue any additional
shares of capital stock or equity securities or grant
any option, warrant or right to acquire any capital
stock or equity securities or issue any security
convertible into or exchangeable for its capital
stock or alter any material term of any if its
outstanding securities or make any change in its
outstanding shares of capital stock or other
ownership
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interests or its capitalization, whether by reason of
a reclassification, recapitalization, stock split or
combination, exchange or readjustment of shares,
stock dividend or otherwise;
(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or
other corporate securities or grant any option,
warrant or right to purchase any thereof, except
pursuant to transactions in the ordinary course of
business consistent with past practices; (B) issue
any securities convertible or exchangeable for debt
securities of the Company; or (C) issue any options
or other rights to acquire from the Company, directly
or indirectly, debt securities of the Company or any
security convertible into or exchangeable for such
debt securities;
(iv) make any sale, assignment, transfer, abandonment or
other conveyance of any of its assets or any part
thereof, except transactions pursuant to existing
contracts (which will be set forth in SCHEDULE 2.15
hereto) and dispositions in the ordinary course of
business consistent with past practices;
(v) subject any of its assets, or any part thereof, to
any Liens or suffer such to be imposed other than
such liens as may arise in are ordinary course of
business consistent with past practices;
(vi) declare, set aside or pay any dividends or other
distribution (whether in cash, stock, property or any
combinations thereof) in respect of any shares of its
capital stock or redeem, retire, purchase or
otherwise acquire, directly or indirectly, any shares
of capital stock of the Company, except for any
Pre-1998 Distributions permitted to be distributed
pursuant to Section 1.2 hereof or unless otherwise
expressly provided hereunder;
(vii) acquire any assets, raw materials or properties, or
enter into any other transaction, other than in the
ordinary course of business, consistent with past
practices;
(viii) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any new (or
amend any existing) employment severance or
consulting agreement, grant any general increase in
the compensation of officers or employee (including
any such increase pursuit to any bonus, pension,
profit-sharing or other plan or commitment) or grant
any increase in compensation payable or to become
playable to any employee, except in accordance with
pre-existing contractual provisions or consistent
with past practices;
(ix) make or commit to make any individual material
capital expenditure in excess of $10,000, or
aggregate capital expenditures in excess of $50,000,
except in the ordinary course of business;
(x) pay, loan or advance any amount to, or sell, transfer
or lease any properties or assets to, or enter into
any agreement or arrangement with, any of its
Affiliates, except in the ordinary course of
business;
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(xi) guarantee any indebtedness for borrowed money or any
other obligation of any other Person, other than in
the ordinary course of business consistent with past
practice;
(xii) fail to keep in full force and effect insurance
comparable in amount and scope to coverage maintained
by it (or on behalf of it) on the date hereof;
(xiii) make any loan, advance or capital contribution to
investment in any Person, except in the ordinary
course of business;
(xiv) make any change in any method of accounting or
Accounting Principle, method, estimate or practice
except for any such change required by reason of a
concurrent change in GAAP or write-down the value of
any inventory or write-off as uncollectible any
accounts receivable except in the ordinary course of
business consistent with past practices;
(xv) settle, release or forgive any material claim or
litigation or waive any material right;
(xvi) make, enter into, modify, amend in any material
respect or terminate any material commitment, bid or
expenditure, other than in the ordinary course of
business consistent with past practice; or
(xvii) commit itself to do any of the foregoing.
(b) Except as set for the on SCHEDULE 5.3(B), from and after the
date hereof and until the Closing Date, the Stockholders and the Company will
use their reasonable Best Efforts to cause the Company to:
(i) continue to maintain, in all material respects, the
Company's properties, all Owned Real Property and
Leased Real Property and all Improvements in
accordance with present practices in a condition
suitable for their current use;
(ii) comply with all applicable Environmental Laws, and,
in the event it shall receive notice that there
exists a violation of any Environmental Law with
respect to its operations, any Improvements or any
Owned Real Property or Leased Real Property, promptly
(and in any event within the time period permitted by
the applicable governmental authority) remove or
remedy such violation in accordance with all
applicable Environmental Laws;
(iii) file, when due or required, or extend as reasonably
necessary, federal, state, foreign and other tax
returns and other reports required to be filed and
pay when due all Taxes, assessments, fees and other
charges lawfully levied or assessed against it unless
the validity thereof is contested in good faith and
by appropriate proceedings diligently conducted;
(iv) keep its books of account, records and files in the
ordinary course and in accordance with existing
practices;
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(v) preserve its business organization intact and
continue to maintain existing business relationships
with suppliers, customers and others with whom
business relationships exist other than relationships
that are, at the same time, not economically
beneficial to it; and
(vi) continue to conduct its business in the ordinary
course consistent with past practices.
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 Stockholders and any of their Affiliates, on the one hand, and the Company,
on the other hand, except for the Stockholders' loans as set forth in ss.5.13
hereof, which shall be paid in full on or before the Closing Date.
5.5 NEGOTIATIONS. Until the earlier of Closing Date Deadline or the
termination of this Agreement pursuant to ss.8.1 hereof, no Stockholder, nor the
Company, nor the Company's officers, directors, employees, advisors, agents,
representatives, Affiliates or anyone acting on behalf of the Stockholders, 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 SAG 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 Stockholders shall promptly communicate to SAG any inquiries or
communications concerning any such transaction (including the identity of any
Person making such inquiry or communication) which the Stockholders may receive
or of which the Stockholders may become aware.
5.6 CONSENTS; COOPERATION. Subject to the terms and conditions hereof, the
Stockholders and the Company and SAG and Sub will use their respective Best
Efforts at their own expense (unless otherwise set forth herein):
(a) to take all actions and do all things necessary, proper or
advisable, and to cooperate with each other, to expeditiously consummate the
transactions contemplated hereby;
(b) to obtain prior to the earlier of the date required (if so
required) or the Closing Date, all Government Approvals, 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; (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 of its businesses as conducted by it on the date hereof;
(c) to obtain approval of the Chevrolet Motor Division of General
Motors Corporation (at SAG's expense) of the proposed Agreement herein and the
Company and Sub and the dealer Day's Chevrolet, Inc. in Acworth, Georgia;
(d) 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
(e) to furnish each other such information and assistance as may
reasonably be requested in connection with the foregoing.
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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 actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable Legal
Requirements 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 INTERIM FINANCIAL STATEMENTS. If requested by SAG and at SAG's expense,
within thirty (30) days after the end of each calendar month after December 31,
1997, the Company will deliver to SAG unaudited balance sheets of the Company at
the end of such calendar month and at the end of the corresponding calendar
month of the previous fiscal year, together with the related unaudited
statements of income and cash flow for the first months then ended. The Company
will also deliver to SAG copies of the Company's Factory Statements provided to
the Chevrolet Motor Division of General Motors Corporation after the date hereof
within five (5) days of their delivery to the Chevrolet Motor Division of
General Motors Corporation. All such financial statements shall fairly present
the financial position and results of operations of such Company as of the date
or for the periods indicated. All unaudited financial statements delivered
pursuant to this ss.5.8 shall be prepared on a basis consistent with the
Company's Financial Statements.
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 Stockholders 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
Company Agreement set forth on SCHEDULE 2.15. The Company and the Stockholders
will: (a) promptly advise SAG of any event that has, or could reasonably be
expected in the future to have, a Material Adverse Effect on the Company; (b)
confer on a regular and frequent basis with one or more designated
representatives of SAG to report operational matters and to report the general
status of ongoing operations; and (c) notify SAG of any emergency or other
change in the normal course of business or relating to the Owned Real Property
or the Leased Real Property or Improvements of the Company and the Stockholder
Real Property and of any complaints, investigations or hearings (or
communications indicating that the same may be contemplated) of any Governmental
Authority or adjudicatory proceedings involving the Company, the Owned Real
Property, the Leased Real Property or the Improvements or the Stockholder Real
Property and will keep SAG fully informed of such events and permit SAG's
representatives access to all materials prepared in connection therewith. Each
Stockholder shall give prompt notice to SAG of any notice or other communication
from any third Person asserting any right, title or interest in any of the
Target Shares held by such Stockholder, including, without limitation, any
threat to commerce, or notice of the commencement of any action or other
proceeding with respect to the Target Shares, or the occurrence of any other
event of which such Stockholder has Knowledge which could result in any failure
to consummate the sale of the Target Shares as contemplated hereby.
5.10 ASSURANCE BY THE STOCKHOLDERS. Each Stockholder shall use its Best
Efforts to cause the Company to comply with its respective covenants set forth
in this Agreement.
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5.11 ANTITRUST IMPROVEMENTS ACT COMPLIANCE. SAG, the Stockholders 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 Act and the rules and regulations promulgated thereunder with
respect to the transactions contemplated herein. SAG shall prepare all of the
filings required pursuant to this Section 5.11 and SAG shall pay the
Hart-Scott-Rodino Act filing fee relating to such filings, provided, however,
that each Party shall pay the attorney's, consulting, accounting and other
consulting fees or expenses in connection with the preparation of each
respective Person's filing. 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
Hart-Scott-Rodino Act to terminate or expire at the earliest possible date, and
to resist vigorously, at SAG'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 SAG shall determine that continuing such
resistance is not in its best interest, SAG may, by written notice to the other
Parties, terminate this Agreement with the effect set forth in SS.8.2 hereof.
5.12 USE OF BUSINESS NAME. After the Closing Date, SAG and the Company may
use the names "Day's Chevrolet" in connection with business of the Company.
After the Closing, none of the Stockholders nor any of their Affiliates shall
use the names "Day's Chevrolet" in connection with the sale or servicing of new
or used automobiles, light-duty trucks or any other motorized vehicles.
5.13 RELATED PARTY/STOCKHOLDERS LOAN. On or before the Closing Date, the
Stockholders shall cause the Company to pay, and the Company shall pay, all
outstanding principal and all accrued but unpaid interest on any related
Party/Stockholder Loans (the "Stockholder Loans"). For purposes of this Section,
the Stockholder Loans shall mean the loans to the Company from Stockholders and
their Affiliates as set forth on such Company's 1997 Balance Sheet and listed on
SCHEDULE 5.13.
5.14 STOCK RESTRICTION AGREEMENT. Prior to the Closing Date, any and all
stock restriction agreements, buy/sell agreements, shareholder agreements or
other similar agreements of the Company (the "Stock Restriction Agreement")
shall be terminated in accordance with its terms and the parties thereto shall
have released any and all claims arising under or relating to the Stock
Restriction Agreement and its termination.
5.15 PERSONAL ITEMS. The Parties acknowledge and agree that the Stockholders
may retain certain personal items (which items are not reflected as assets on
any of the Company's balance sheets and will not be reflected as assets on the
Closing Date Balance Sheet of the Company). These items will include personal
pictures, awards and mementos.
5.16 LIABILITY FOR TRANSFER TAXES. Except for Tax that may become due as a
result of SAG's or Sub's election under Section 338(h)(10) of the Code pursuant
to Section 10.2 hereof, Stockholders shall be responsible for the timely payment
of, and shall indemnify and hold harmless SAG and Sub against, all income, sales
(including without limitation bulk sales), use, value added, documentary, stamp,
gross receipts, registration, transfer, conveyance, excise, recording, license
and other similar Taxes and fees ("Transfer Taxes") arising out of or in
connection with or attributable to the transactions effected pursuant to this
Agreement. Stockholders shall prepare and timely file all tax returns required
to be filed in respect of Transfer Taxes (including without limitation all
notices required to be given with respect to bulk sales taxes), provided that
Sub shall be permitted to prepare any such tax returns that are the primary
responsibility of Sub under applicable law.
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5.17 RELEASE BY STOCKHOLDERS. The Stockholders hereby agree and confirm that
they hereby fully release, acquit and forever discharge the Company, together
with the Company's successors, assigns, affiliates, parent and related parties,
from any and all Claims, except for compensation payable to the Stockholders by
the Company for the most recent standard payroll period (based upon the
Company's standard practices) which have not been paid plus the reasonable
reimbursable expenses based upon the past practices of the Company.
5.18 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The Company and
the Stockholders shall furnish or cause to be furnished to SAG and the
underwriters of the SAG IPO (the "Underwriters") all of the information
concerning the Company and the Stockholders required for inclusion in, and will
cooperate fully and completely with SAG, SAG's legal counsel, SAG'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 in the Registration Statement). SAG shall be responsible for and
reimburse the Company and/or Stockholders for the reasonable expenses and fees
the Company and/or the Stockholders may incur in connection with their
compliance with this Section 5.18.
5.19 REAL ESTATE RELATED OBLIGATIONS. The Stockholders covenant and agree
that on or prior to the Closing Date, the Stockholders or the entity designated
by the Stockholders as the transferee of the Dealership Real Estate shall have
assumed any and all outstanding debt, mortgage or other indebtedness of any kind
encumbering and/or associated with the real estate so that the Company is
completely and unconditionally released from all of such debt, mortgage or other
indebtedness of any kind. On or prior to the Closing Date, the Stockholders
shall provide written evidence to SAG and/or Sub, in a form reasonably
satisfactory to SAG and/or Sub, that the conditions and requirements set forth
in this Section 5.19 have been fulfilled.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF SAG AND SUB TO EFFECT THE CLOSING
The Obligations of SAG 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 SAG and Sub in
writing as provided herein except as otherwise required by applicable law:
6.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS. Each of the
representations and warranties of the Company and the Stockholders 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 and the Stockholders 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
Stockholders and the Company, 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 the Transaction Documents, 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
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the Hart-Scott-Rodino 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
Governmental Authorities, and all Government Approvals and all third persons,
including, but not limited to, all automobile manufacturers with whom the
Company has a franchise agreement (or comparable agreement), required to
consummate the transactions contemplated hereby and all other consents or
waivers shall have been made or obtained.
6.3 OPINIONS OF THE COMPANY'S AND THE STOCKHOLDER'S COUNSEL. SAG and Sub
shall have been furnished with the opinion of the Company's and the
Stockholders' counsel, dated the Closing Date, in a form as set forth on EXHIBIT
B attached hereto and incorporated herein.
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: (a)
that prevents or delays the consummation of any of the transactions contemplated
hereby; or (b) would impose any limitation on the ability of SAG or Sub
effectively to exercise all rights of ownership of the Target 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 the Transaction Documents or seeking damages in connection
therewith which SAG 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 the date of the 1997
Balance Sheet to the Closing Date, there shall not have been any Material
Adverse Effect on the Company, other than payments to Stockholders in accordance
with the terms of this Agreement.
6.6 REGISTRATION STATEMENT. SAG shall have filed with the SEC a
registration statement on Form S-1 (the "Registration Statement") covering the
offer and sale of the SAG IPO Stock. The Registration Statement shall have been
declared effective by the SEC and the underwriters named therein shall have
agreed to acquire, subject to the conditions set forth in the underwriting
agreement, shares of SAG IPO Stock. The closing of the sale of the SAG IPO Stock
to the underwriters shall have occurred simultaneously with the Closing
hereunder.
6.7 COMPLETION OF DUE DILIGENCE. SAG and Sub shall have completed their due
diligence examination of the Company, and the results of such examination shall
be satisfactory to SAG and Sub.
6.8 REAL ESTATE LEASE AGREEMENT. The Stockholders or the entity designated
by the Stockholders as the transferee of the Dealership Real Estate and the
Company or its assignee shall have entered into a real estate lease agreement
(the "Dealership Lease") upon terms that are mutually acceptable to the Parties.
6.9 BOARD APPROVAL. The Board of Directors of SAG and Sub shall have
approved the consummation of all of the transactions contemplated by this
Agreement.
6.10 CERTIFICATES. The Stockholders and officers of the Company shall have
furnished SAG and Sub with certificates, dated as of the Closing Date, executed
by the Stockholders and said officers certifying
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to the fulfillment of the conditions set forth in Sections 6.5 and 6.14, and
shall have furnished SAG and the Sub with such any other certificates of its
officers as SAG and the Sub may reasonably request to evidence compliance with
the conditions set forth in this Article 6.
6.11 LEGAL MATTERS. All certificates, instruments, opinions and other
documents required to be executed or delivered by or on behalf of the
Stockholders and the Company under the provisions of this Agreement, and all
other actions and proceedings required to be taken by or on behalf of the
Stockholders and the Company in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
SAG and Sub.
6.12 APPROVAL OF MANUFACTURER AND DISTRIBUTOR. The Chevrolet Motor Division
of General Motors Corporation shall have consented to, authorized and approved
the transactions contemplated by this Agreement on reasonable terms that are
acceptable to SAG and Sub in their sole discretion.
6.13 EMPLOYMENT AGREEMENT; NON-COMPETITION AGREEMENTS. The Sub, the Company
and Mr. Calvin Diemer shall have entered into an employment agreement in the
form attached hereto as EXHIBIT C (the "Employment Agreement") and a
non-competition agreement in the form attached hereto as EXHIBIT D
("Non-Competition Agreement").
6.14 ENVIRONMENTAL LAWS. The Company shall be in material compliance with
all applicable Environmental laws.
6.15 LEASE TERMINATION AGREEMENT/MEMORANDUM OF LEASE/CONSENTS AND
ESTOPPELS. The appropriate parties shall have executed a lease termination
agreement and a memorandum of lease with respect to each Lease listed in
SCHEDULE 2.10 in form and substance satisfactory to SAG and the Company.
Alternatively, Buyer shall have received consents from the lessor of each such
Lease to the assignment of such Lease to Buyer, to the extent such consent is
required by such applicable Lease. Buyer shall also have received estoppel
certificates addressed to Buyer from the lessor of each Lease, dated within
thirty (30) days prior to the Closing Date, identifying the Lease documents and
any amendments thereto, stating that the Lease is in full forced and effect and
that the tenant is not in default under the Lease and no event has occurred
that, with notice or lapse of time or both, would constitute a default by the
tenant under the Lease and containing any other information reasonably requested
by Buyer.
6.16 RESIGNATION OF THE COMPANY'S DIRECTORS. Each of the persons who is a
director of the Company on the Closing Date shall have tendered to Sub in
writing his or her resignation as such in form and substance satisfactory to
SAG.
6.17 SCHEDULES. The Company and the Stockholders shall have delivered to SAG
and Sub all Schedules referred to in Articles 2 and 3 of this Agreement and such
Schedules shall be acceptable in form and substance satisfactory to SAG and Sub.
6.18 SHARE CERTIFICATES. Certificates representing one hundred percent
(100%) of the Target Shares of the Company shall have been, or shall at the
Closing be, validly delivered and transferred to Sub, free and clear of any and
all Liens.
6.19 NON-FOREIGN STATUS. Each of the Stockholders shall have provided Buyer
with an affidavit of non-foreign status that complies with Section 1445 of the
Code.
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ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF THE STOCKHOLDERS
TO EFFECT THE CLOSING
The obligations of the Stockholders and the Company 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 and the Stockholders in writing as provided herein except
as otherwise required by applicable law:
7.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS. Each of the representations
and warranties of SAG 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 SAG 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 Stockholders shall have received a certificate, dated the
Closing Date and duly executed by an officer of SAG 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 SAG
and Sub. All filings required to be made under the Hart-Scott-Rodino 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,
Governmental Authorities, and all Governmental Approvals and all third persons,
including, but not limited to, all automobile manufacturers with whom the
Company has a franchise agreement (or comparable agreement), required to
consummate the transactions contemplated hereby and all consents or waivers
shall have been made or obtained.
7.3 OPINIONS OF SAG'S AND SUB'S COUNSEL. The Stockholders shall have been
furnished with the opinion of The Whicker Law Firm, counsel to SAG and Sub,
dated the Closing Date, in a form as set forth on EXHIBIT E attached hereto and
incorporated herein.
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 LEASE AGREEMENT. The Stockholders and the Company or its
assignee shall have entered into the Dealership Lease.
7.6 CERTIFICATES. SAG and Sub shall have furnished the Stockholders with
such certificates of its officers and others to evidence compliance with the
conditions set forth in this Article as may be reasonably requested by the
Stockholders.
7.7 LEGAL MATTERS. All certificates, instruments, opinions and other
documents required to be executed or delivered by or on behalf of SAG or Sub
under the provisions of this Agreement, and all other actions and proceedings
required to be taken by or on behalf of SAG or Sub in furtherance of the
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transactions contemplated hereby, shall be reasonably satisfactory in form and
substance to counsel for the Stockholders.
7.8 REGISTRATION STATEMENT. SAG shall have filed with the SEC the
Registration Statement. The Registration Statement shall have been declared
effective by the SEC and the underwriters named therein shall have agreed to
acquire, subject to the conditions set forth in the underwriting agreement,
shares of SAG IPO Stock. The closing of the sale of the SAG IPO Stock to the
underwriters shall have occurred simultaneously with the Closing hereunder.
7.9 EMPLOYMENT AGREEMENT; NON-COMPETITION AGREEMENT. The Sub, the Company
and Calvin Diemer shall have entered into the Employment Agreement and the
Non-Competition Agreement.
ARTICLE 8
TERMINATION
8.1 TERMINATION. This Agreement may be terminated at any time prior to
Closing:
(a) by written mutual consent of SAG, Sub and the Stockholders;
(b) by either SAG, Sub or the Stockholders by written notice if the
Closing shall not have taken place on or prior to Closing Date Deadline, as such
date may have been extended pursuant to Section 1.1(d) hereof, or such other
date as shall have been approved by SAG, Sub and the Stockholders in writing
(provided that the terminating Party is not otherwise in material breach of its
representation, warranties, covenants or agreements under this Agreement);
(c) by SAG, Sub or the Stockholders if any court of competent
jurisdiction in 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 SAG or Sub if any of the conditions specified in Article 6
hereof have not been met or waived by SAG or Sub at such time as such condition
is no longer capable of satisfaction (provided that neither SAG nor Sub is
otherwise in material breach of its representations, warranties, covenants or
agreements under this Agreement);
(e) by the Stockholders if any of the conditions specified in Article 7
hereof have not been met or waived by the Stockholders at such time as such
condition is no longer capable of satisfaction (provided that neither the
Stockholders nor the Company is otherwise in material breach of his or its
representations, warranties, covenants or agreements under this Agreement); or
(f) by either SAG, Sub or the Stockholders 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.
If SAG, Sub or the Stockholders 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.
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8.2 EFFECT OF TERMINATION. If any Party terminates this Agreement pursuant
to Section 8.1 above, 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, stockholders or principals shall
have any liability or obligation hereunder or with respect hereto, except for
(a) any liability arising out of any breach of this Agreement prior to its
termination; (b) the obligations contained in ss.5.1 hereof, and (d) as set
forth below in this Section 8.2:
(i) If this Agreement is terminated by the Stockholders
or the Company pursuant to the provisions of Section
8.1(b) above, Sub shall, within five (5) days of
written demand therefore by the Stockholders, pay to
the Stockholders in immediately available funds, as
liquidated damages for the loss of the transaction
and not as a penalty, all reasonable attorneys' fees
and expenses of Moore Ingram Johnson & Steele, LLP
and all reasonable accountant's fees and expenses of
Tarpley & Underwood, P.C. actually incurred by the
Company in connection with the transactions
contemplated hereby (the ("Expense Reimbursement") as
presented to SAG in written itemized billing
statements, provided, however, that neither Sub nor
SAG shall be required or obligated hereby to pay any
Expense Reimbursements that exceed, in the aggregate,
the sum of One Hundred Thousand Dollars ($100,000).
(ii) Notwithstanding anything to the contrary contained in
Section 8.2(i) hereof or elsewhere in this Agreement,
no Expense Reimbursement shall be due hereunder if
the Closing does not occur on or before the Closing
Date due to any of the following reasons: (A) all
Government Approvals required to consummate the
transactions contemplated hereby have not been
obtained by SAG or Sub; (B) SAG or Sub have not
received all necessary consents or approvals from
automobile manufacturers with whom the Company has a
franchise agreement (or comparable agreement), or SAG
or Sub have provided reasonable written evidence to
the Stockholders that such consents or approvals are
on terms and conditions which are not comparable with
or substantially similar in form to the terms and
conditions of said manufacturer's consents or
approvals in other similar transactions that occurred
during the twelve (12) month period immediately
preceding the date hereof; (C) due to any war,
natural disaster or other acts of God; (D) the legal
and/or financial due diligence of SAG and Sub reveals
any matter which, in the reasonable opinion of SAG,
are material; (E) there has been a material breach on
the part of the Company or any Stockholder of any of
the Company's or any Stockholder's representation,
warranty, covenant or agreement set forth in this
Agreement; or (F) the conditions set forth in Section
6.6 (Registration Statement) hereof have not been
fulfilled for any reason whatsoever.
(iii) The Expense Reimbursement shall be the sole and
exclusive remedy of Stockholders and the Company for
damages as a result of a breach of this Agreement.
Because the actual damages that the Stockholders and
the Company would sustain if any of SAG or Sub
breaches its obligations under this Agreement are
uncertain and would be impossible or very difficult
to ascertain accurately, the Parties agree in good
faith that the Expense Reimbursement would be
reasonable and just compensation for the harm caused
by such breach. Therefore, the Stockholders and the
Company acknowledge and agree to accept said Expense
Reimbursement, if due and paid hereunder, as
liquidated damages,
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and not as a penalty, in the event of a breach by SAG
or Sub. Notwithstanding anything to the contrary
contained herein, this Section 8.2(d)(iii) shall not
affect the Parties' remedies under Section 1.8 (Price
Protection) hereof.
ARTICLE 9
INDEMNIFICATION AND SURVIVAL
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement shall survive the 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:
(a) the representations and warranties contained in ss.2.1
(Organization & Good Standing), ss.2.2 (Subsidiaries), ss.2.3 (Capitalization),
ss.2.4 (Authority; Approval & Consents), ss.2.11 (Environmental), ss.2.26
(Disclosures), ss.3.1 (Ownership of Target Shares), ss.3.2 (Authority), 3.4
(Investment), ss.4.1 (Organization & Good Standing), ss. 4.2 (Authority;
Approval & Consents) and ss.4.4 (Disclosures) shall survive without limitation;
and
(b) the representations and warranties contained in ss.2.8 (Taxes)
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; and
(c) all representations and warranties other than those listed in
Sections 9.1(a) and 9.1(b) above shall survive for a period of one (1) year
following the Closing Date.
9.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
(a) In the event the Stockholders breach (or in the event any third
party alleges facts that, if true, would mean the Stockholders had breached) any
of their representations, warranties and covenants contained herein (other than
the covenants in Article 1 and ss.5.1 above and the representations and
warranties in the sections listed in ss.9.1(a) and ss.9.1(b) above), and, if
there is an applicable survival period pursuant to ss.9.1 above, provided that
SAG or Sub make a written claim for indemnification against the Stockholders
pursuant to ss.9.4 below within such survival period, then the Stockholders
agree to indemnify SAG and Sub from and against the entirety of any Adverse
Consequences SAG and Sub may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences SAG and Sub 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
(i) the Stockholders shall not have any obligation to indemnify
SAG and Sub 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 covenant,
representation or warranty of the Stockholders listed in
Section 9.1(c) above (other than those in Article 1,ss.5.1
orss.2.6 (Absence of Undisclosed Liabilities) hereof) until
SAG and Sub have suffered Adverse Consequences by reason of
all such breaches (or alleged breaches) in excess of a TWO
HUNDRED FIFTY THOUSAND Dollars ($250,000) aggregate threshold
(at which point the Stockholders will be obligated to
indemnify SAG and Sub from and against all such Adverse
Consequences which are in excess of such $250,000) not to
exceed a maximum dollar amount of FIVE MILLION DOLLARS
($5,000,000); and
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(ii) the Stockholders shall not have any obligation to
indemnify SAG and Sub 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 Stockholders contained in ss.2.6 (Absence of
Undisclosed Liabilities) hereof until SAG and Sub
have suffered Adverse Consequences by reason of all
such breaches (or alleged breaches) in excess of a
TWO HUNDRED FIFTY THOUSAND Dollars ($250,000)
aggregate threshold (at which point the Stockholders
will be obligated to indemnify SAG and Sub from and
against all such Adverse Consequences which are in
excess of such $250,000) not to exceed the Merger
Consideration amount.
(b) In the event the Stockholders breach their covenants in
Article 1 or ss.5.1 above or any of their representations and warranties listed
in ss.9.1(a) above, and, if there is an applicable survival period pursuant to
ss.9.1 above, provided that SAG or Sub make a written claim for indemnification
against the Stockholders pursuant to ss.9.4 below within such survival period,
then the Stockholders agree to indemnify SAG and Sub from and against the
entirety of any Adverse Consequences SAG and Sub may suffer through and after
the date of the claim for indemnification (including any Adverse Consequences
SAG and Sub 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).
(c) The Stockholders agree to indemnify SAG and Sub from and
against the entirety of any Adverse Consequences SAG and Sub may suffer
resulting from, arising out of, relating to, in the nature of, or caused by any
Liability of the Company for any Taxes of the Company with respect to any Tax
period or portion thereof ending on or before the Closing Date (or for any Tax
period beginning before and ending after the Closing Date to the extent
allocable determined in a manner consistent with ss.10.4 to the portion of such
period beginning before and ending on the Closing Date).
9.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE STOCKHOLDERS. In the
event SAG or Sub breach any of their representations, warranties and covenants
contained herein, and, if there is an applicable survival period pursuant to
ss.9.1 above, provided that the Stockholders make a written claim for
indemnification against SAG or Sub pursuant to ss.9.4 below within such survival
period, then SAG and Sub agree to indemnify the Stockholders from and against
the entirety of any Adverse Consequences the Stockholders may suffer through and
after the date of the claim for indemnification (including any Adverse
Consequences the Stockholders 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).
9.4 MATTERS INVOLVING THIRD PARTIES.
(a) 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 Article 9, 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.
(b) 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 fifteen (15)
days after the
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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 precedental 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.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with this ss.9.4: (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).
(d) In the event any of the conditions in this ss.9.4 are or become
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.9.
9.5 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 Laws) any Party may have with respect to the Company
or the transactions contemplated by this Agreement. The Stockholders hereby
agree that they will not make any claim for indemnification against the Company
by reason of the fact that any such Stockholder 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 SAG or Sub against the Stockholders (whether such action, suit, proceeding,
complaint, claim or demand is pursuant to this Agreement, applicable Legal
Requirements, or otherwise).
9.6 TAX SAVINGS. Costs arising or resulting from any breaches of
Stockholders or SAG hereunder 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.
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ARTICLE 10
TAX MATTERS
10.1 TAX MATTERS. The following provisions shall govern the allocation of
responsibility as between Sub and Stockholders for certain tax matters following
the Closing Date:
10.2 SECTION 338(H)(10) ELECTION. The Stockholders agree, if so directed by
Sub or SAG, to join with Sub 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 stock of the Company hereunder. The Sub agrees to determine prior to
the Closing whether or not Sub will make a Section 338(h)(10) Election, and if
Sub elects to make such a Section 338(h)(10) Election, then prior to or at
Closing, Sub shall deposit into escrow, pursuant to an escrow agreement that is
mutually acceptable to the Parties, any additional tax liability (as compared to
the tax liability of the Stockholders absent a Section 338(h)(10) Election) that
will directly result solely from the making of the Section 338(h)(10) Election,
and such escrow agreement shall provide that the Stockholders shall receive said
escrowed taxes in the event such additional taxes become due and payable as a
result of said Section 338(h)(10) Election.
10.3 TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE.
(a) Stockholders shall prepare or cause to be prepared and file or
cause to be filed the final S corporation income tax returns of the Company, and
Stockholders shall provide copies of said returns to SAG within ten (10)
business days of the date such returns have been filed. In the event
Stockholders fail to timely file said income tax returns (or properly request
extension for the filing date thereof), then SAG shall be authorized to prepare
or file such income tax returns of the Company.
(b) Sub shall prepare or cause to be prepared and file or cause to be
filed all Tax Returns (other than the income tax returns of the Company
described in Section 10.3(a) hereof) for the Company for all periods ending on
or prior to the Closing Date which are filed after the Closing Date.
Stockholders shall reimburse Sub for Taxes of the Company with respect to such
periods within fifteen (15) days after payment by Sub or the Company of such
Taxes.
10.4 TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING DATE. Sub
shall prepare or cause to be prepared and file or cause to be filed any Tax
Returns of the Company for Tax periods which begin before the Closing Date and
end after the Closing Date. Stockholders shall pay to Sub 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. 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 the Company.
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10.5 COOPERATION ON TAX MATTERS.
(a) Sub, the Company and Stockholders 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. The Company and Stockholders agree: (A) to retain all books and
records with respect to Tax matters pertinent to the Company relating to any
taxable period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by Sub or Stockholders, 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 any other Party so
requests, the Company or Stockholders, as the case may be, shall allow the other
Party to take possession of such books and records.
(b) Sub and Stockholders 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).
(c) Sub and Stockholders 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.
10.6 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
Stockholders when due, and Stockholders will, at their 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, Sub will, and will cause its affiliates to, join in
the execution of any such Tax Returns and other documentation.
ARTICLE 11
MISCELLANEOUS
11.1 FEES AND EXPENSES.
(a) 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 (i)
Buyer shall pay the fees and expenses payable to the Accountants for financial
audits of the Company performed by the Accountants, and (ii) if the Closing does
not occur and ss.5.5 hereof is breached, then the Stockholders shall pay to SAG,
within five (5) Business Days after receipt of a request therefor, an amount
equal to all of the reasonable legal and other fees, costs and expenses incurred
by SAG in conjunction with this Agreement and the transactions contemplated
hereby, provided, however, that the Stockholders shall not be required or
obligated hereby to pay any such legal or other fees, costs or expenses that
exceed, in the aggregate, the sum of One Hundred Thousand Dollars ($100,000).
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(b) Notwithstanding anything to the contrary in Section 11.1 (a), the
Company may pay the reasonable fees, costs and expenses of Stockholders in
connection with the transactions contemplated hereby, provided, however, that
the Stockholders, and not the Company, must pay and all fees, costs and expenses
in connection with this Agreement and the transactions contemplated hereby which
are payable to any brokers, attorneys, advisers or other consultants for
personal services provided by such persons to the Stockholders.
11.2 RIGHT OF FIRST REFUSAL.
(a) GRANT OF RIGHT OF FIRST REFUSAL. SAG does hereby grant to
Stockholders a right of first refusal (the "ROFR") for the purchase of all of
the then outstanding stock or substantially all of the assets of the Company
upon the terms and conditions set forth in this Section 11.2, said ROFR to be
exercisable only during the ROFR Period, as hereinafter defined.
(b) ROFR PERIOD. The ROFR may be exercised by the Stockholders, upon
the terms and conditions set forth in this Section 11.2, at any time during the
period (herein referred to as the "ROFR Period") commencing after the Closing
Date and continuing for so long as Mr. Calvin Diemer is an employee of SAG, Sub,
the Company or any of their Affiliates or Associates.
(c) EXERCISE OF ROFR.
(i) SAG shall give written notice to Stockholders, as
hereinafter provided, of each and every Original
Offer (as that term is hereinafter defined) received
and intended to be accepted by SAG for the sale of
all of outstanding stock of the Company or
substantially all of the assets of the Company. For
purposes herein, the term "Original Offer" shall mean
and refer to a bona fide written offer to purchase
all of the stock or substantially all assets of only
the Company (and no other Affiliate or Associate of
the Company, SAG, or Sub) received by SAG or SAG's
Affiliates or Associates during the ROFR Period from
any person setting forth in detail the true and
complete terms and conditions of such offer. The
Parties expressly acknowledge and understand that the
ROFR shall apply only to an offer which proposes to
acquire only the Company (i.e. the single dealership
known as of the date hereof as Day's Chevrolet, Inc.)
and the Stockholders shall not have a ROFR with
respect to any offer that proposes to acquire any or
all stock or any or all assets of the Company as part
of a larger acquisition that includes any other
Affiliates, Associates or related entities of SAG.
(ii) Before SAG shall agree to accept any such Original
Offer or otherwise agree to sell all of the then
outstanding stock or substantially all of the assets
of the Company (such stock or assets which are the
subject of an Original Offer being hereinafter
referred to as the "Subject Property") to any Person
during the ROFR Period, SAG shall, by giving written
notice to Stockholders, offer (hereinafter referred
to as the "Offer") the Subject Property to
Stockholders at a purchase price or consideration
equal to the highest price or consideration of the
range of prices contemplated by or negotiated between
SAG and the Person making the Original Offer.
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(iii) No later than three (3) business days after the date
on which SAG provides the Offer to the Stockholders
(the "Election Period"), the Stockholders may elect
to acquire the Subject Property upon the terms and
conditions set forth in any such Offer by (A)
providing written notice of such election to SAG (the
"Acceptance Notice")(such notice to be received by
SAG within the Election Period), and (B) paying the
sum of One Hundred Thousand Dollars ($100,000) to SAG
within the Election Period as a non-refundable
earnest money deposit which shall be credited toward
the purchase price of the Subject Property.
(iv) In the event Stockholders shall elect to acquire the
Subject Property in accordance with the provisions
herein set forth, acceptance of any such Offer shall
be deemed to create a legally binding contract for
the acquisition of the Subject Property by
Stockholders upon the terms and conditions set forth
in said Offer, and the closing of such acquisition of
the Subject Property shall be consummated no later
than ninety (90) days after the date on which SAG
receives the Acceptance Notice.
(v) In the event Stockholders shall fail to give notice
to SAG of their election to acquire the Subject
Property within the Election Period, SAG shall be
free to accept the Original Offer from such other
Person, upon the terms and conditions therein set
forth, at any time thereafter. In the event the
transaction contemplated by the Original Offer is not
consummated for any reason, SAG and the Subject
Property which is the subject matter of such Original
Offer shall again be subject to the restrictions
imposed by this Section 11.2.
(d) ASSIGNMENT; SURVIVAL. Stockholders' rights and duties under
this Section 5.1 shall not be transferable or assignable (either in whole or in
part, voluntarily or by operation of law) by Stockholders. The terms, conditions
and provisions of this Section 5.1 shall survive the Closing until the
expiration of the Offer Period.
11.3 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.
11.4 NOTICES. All notices or other communications required or permitted
hereunder shall be given in writing and shall be deemed sufficient if delivered
by hand, recognized overnight delivery service or facsimile transmission or
mailed by registered or certified mail, postage prepaid and return receipt
requested), as follows:
If to the Company before the Closing Date:
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with a copy to:
Matthew J. Howard, Esq. and Daniel A. Landis, Esq.
MOORE INGRAM JOHNSON & STEELE, LLP
192 Anderson Street
Marietta, Georgia 30060
Phone: 770-429-1499
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Fax: 770-429-8631
If to the Company after the Closing Date:
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with a copy to:
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If to the Stockholders:
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with a copy to:
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If to SAG or Sub:
Sunbelt Automotive Group, Inc.
2150 Cobb Parkway
Smyrna, GA 30080
with a copy to:
Stephen C. Whicker, Esq.
THE WHICKER LAW FIRM
6111 Peachtree Dunwoody Road/Suite 102-D Atlanta, GA 30328
with an additional copy to:
David S. Cooper, Esq.
SCHNADER HARRISON SEGAL & LEWIS LLP
SunTrust Plaza/Suite 2800
303 Peachtree Street, N.E.
Atlanta, GA 30308-3252
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 (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.
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11.5 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 Stockholders, the personal representatives and heirs of the Stockholders)
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, SAG 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 SAG, but in such event SAG shall remain fully
liable for the performance of all of such obligations in the manner prescribed
in this Agreement.
11.6 ENTIRE AGREEMENT. This Agreement (including the Schedules hereto) and
the Transaction Documents 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 and the
Transaction Documents. 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
Transaction Documents.
11.7 WAIVER AND AMENDMENTS. Each of the Stockholders, the Company, SAG and
Sub may by written notice to the other Parties: (a) extend the time for the
performance of any of the obligations or other actions of the other Parties; (b)
waive any inaccuracies in the representations or warranties of the other Parties
contained in this Agreement; (c) waive compliance with any of the covenants of
the other Parties contained in this Agreement; (d) waive performance of any of
the obligations of the other Parties created under this Agreement; or (e) 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.
11.8 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.
11.9 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.
11.10 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.
11.11 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.
11.12 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.
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11.13 REMEDIES. None of the remedies provided for in this Agreement,
including termination of this Agreement as set forth in Article 8, the payment
of certain fees, costs and expenses as set forth in ss.11.1 or the specific
performance as set forth in ss.5.1, 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.
11.14 TIME IS OF THE ESSENCE. Time is of the essence for purposes of this
Agreement.
11.15 CERTAIN DEFINITIONS.
"Accountants" has the meaning set forth in ss.1.6 hereof.
"Accounting Principles" has the meaning set forth in ss.1.6 hereof.
"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 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.
"Associate" used to indicate a relationship with any Person means: (i)
any corporation, partnership, joint venture or other entity of which such Person
is an officer or partner or is, directly or indirectly, through one or more
intermediaries, the beneficial owner of thirty percent (30%) or more of: (1) any
class or type of equity securities or other profits interest; or (2) the
combined voting power of interests ordinarily entitled to vote for management or
otherwise; and (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity.
"1997 Balance Sheet" has the meaning set forth in ss.2.5 hereof.
"Basis" means any past or present fact, situation, circumstance,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"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 conjunction with such obligation or the transactions contemplated
hereby.
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"Business Day" shall mean any day excluding Saturday, Sunday and any
day which is a legal holiday under federal law.
"Cash Consideration" has the meaning set forth in ss.1.1(e)(i) hereof.
"Claims" shall mean any and all claims, demands, suits, proceedings,
actions or causes of action of any kind or character whatsoever, known or
unknown, fixed or contingent, suspected or unsuspected, direct or indirect,
however arising, whether arising at law or in equity, or pursuant to
administrative rule or regulation or otherwise.
"Closing" has the meaning set forth in ss.1.1(c)(i) hereof.
"Closing Date" has the meaning set forth in ss.1.1(c) (iii) hereof.
"Closing Date Balance Sheet" has the meaning set forth in ss.1.6
hereof.
"Closing Date Deadline" has the meaning set forth in ss.1.1(d) hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preface above.
"Company Agreement" has the meaning set forth in ss.2.15 hereof.
"Compensation Commitment" has the meaning set forth in ss.2.18(a)
hereof.
"Confidential Information" means all information concerning a given
Party obtained by another Party in connection with the transactions contemplated
by this Agreement, including, without limitation, 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, business and
marketing plans and proposals, information relating to sales records, profit and
performance reports, sales and training manuals, selling and pricing procedures,
financing methods, the special demands of particular customers, the current and
anticipated demands of particular customers, specifications of any new products
or services under development, and any other such information treated by the
Party providing the Confidential Information as being confidential or labeled
"Confidential," as well as all physical embodiments of any of the foregoing,
except information (i) ascertainable or obtained from public information; (ii)
received from a third party not employed by or otherwise affiliated with the
Party providing such Confidential Information; or (iii) which is or becomes
known to the public other than through a breach by the receiving Party any of
the receiving Party's representatives of this Agreement.
"Consent" means any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice to,
any Person, including but not limited to any Governmental Authority.
"Controlled Group of Corporation" has the meaning set forth in Code
ss.1563.
"Dealership Leases" has the meaning set forth in ss.6.8 hereof.
"Dealership Real Estate" has the meaning set forth in ss.6.8 hereof.
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"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).
"Employment Agreement" has the meaning set forth in ss.6.14 hereof.
"Employment and Labor Agreement" has the meaning set forth in ss.2.16
hereof.
"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.
"ERISA Plans" means all Employee Pension Benefit Plans and Employee
Welfare Benefit Plans of the Company.
"Expense Reimbursement" has the meaning set forth in ss.8.2(d)(i)
hereof.
"Factory Statements" has the meaning set forth in ss.2.5(b) hereof.
"Fiduciary" has the meaning set forth in ERISA ss.3(21).
"Financial Statement" has the meaning set forth in ss.2.5 hereof.
"Floor Plan Assets" means the Company's actual inventory of financed
automobiles, plus its contracts in transits, plus its current (not over ninety
(90) days) fleet car receivables.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative function of or pertaining to
government, including without limitation, any government authority, agency,
department, board, commission or instrumentality of the United States, any State
of the United States or any political subdivision thereof, and any tribunal or
arbitrator of competent jurisdiction and any self-regulatory organization.
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"Governmental Approval" means any Consent of, with or to any
Governmental Authority.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Hazardous Materials" means, collectively: (i) those substances
included within the definitions of or identified as "hazardous chemicals,"
"hazardous waste," "hazardous substances," "hazardous materials," "toxic
substances" or similar terms in or pursuant to, without limitation: the
Comprehensive Environmental Response Compensation and Liability Act of 1980 (42
U.S.C. ss.9601 et seq. ("CERCLA"), as amended by Superfund Amendments and
Reauthorization Act of 1986 (Pub. L. 99-499, 100 State, 1613); the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. ss.6901 et seq.) ("RCRA"); the
Occupational Safety and Health Act of 1970 (29 U.S.C. ss.651 et seq.) ("OSHA");
and the Hazardous Materials Transportation Act (49 U.S.C. ss.1801 et seq.
("HWA"), and in the regulations promulgated pursuant to such laws, all as
amended; (ii) those substances listed in the United States Department of
Transportation Table (49 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto); (iii) any material, waste
or substance which is or contains: (A) petroleum, including crude oil or any
fraction thereof, natural gas or synthetic gas usable for fuel or any mixture
thereof; (B) asbestos; (C) polychlorinated biphenyls; (D) designated as a
"hazardous substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C.
ss.1251 et seq. (33 U.S.C. ss.1317) or listed pursuant to Section 307 of the
Clean Water Act (33 U.S.C. ss.1317); (E) flammable explosives; (F) radioactive
materials; and (iv) such other substances, materials and wastes which are or
become regulated or classified as hazardous, toxic or as "special wastes" under
any Environmental, Health and Safety Requirements.
"Improvements" has the meaning set forth in ss.2.10 hereof.
"Indemnified Party" has the meaning set forth in ss.9.4 hereof.
"Indemnifying Party" has the meaning set forth in ss.9.4 hereof.
"Insider" shall mean the Stockholders, any director or officer of the
Company, and any Affiliate, Associate or Relative of any of the foregoing
persons.
"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; (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).
"IRS" shall mean the Internal Revenue Service.
"Judgment" has the meaning set forth in ss.2.9 hereof.
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<PAGE> 61
"Knowledge" means actual knowledge after reasonable investigation and,
with respect to any corporation, partnership, company or other entity, shall
include the knowledge of such entity's officers, directors, managers and
employees with responsibility over the relevant subject matter.
"Leased Real Property" has the meaning set forth in ss.2.10(b) hereof.
"Legal Requirements" means laws, ordinances, codes, rules, regulations,
standards, judgments and other requirements of all governmental, administrative
or judicial entities.
"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.
"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.
"Material Adverse Effect" shall mean any change in, or effect on, the
Company (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.
"Merger Consideration" has the meaning set forth in ss.1.1(e) hereof.
"Multiemployer Plan" has the meaning set forth in ERISA ss.3(37).
"Non-Competition Agreement" has the meaning set forth in ss.6.14
hereof.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Out of Trust" shall have the meaning commonly ascribed to such term in
the automotive business and relates to the floor plan of the Company's new and
used cars.
"Owned Real Property" has the meaning set forth in ss.2.10(a) hereof.
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" means franchises, licenses, permits, registrations,
certificates, consents, approvals or authorizations.
"Permitted Liens" means: (a) Liens reserved against in the Company's
1997 Balance Sheet, to the extent so reserved; (b) Liens for Taxes not yet due
and payable or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
Company's books in accordance with GAAP; or (c) Liens that, individually and in
the aggregate, do not and would not materially detract from the value of any of
the property or assets of the Company or materially interfere with the use
thereof as currently used or contemplated to be used.
-56-
<PAGE> 62
"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.
"Prohibited Transaction" has the meaning set forth in ERISA ss.406 and
Code ss.4975.
"Relative" of a Person shall mean such Person's spouse, parents,
sisters, brothers, children and the spouses of the foregoing, and any member of
the immediate household of such Person.
"Reportable Event" has the meaning set forth in ERISA ss.4043.
"SAG" has the meaning set forth in the preface above.
"SAG IPO" shall mean the consummation of an underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933.
"SAG IPO Share Price" shall mean the price per share of each share of
common stock offered pursuant to the SAG IPO.
"SAG IPO Stock" shall mean shares of common stock offered pursuant to
the SAG IPO.
"SAG Common Stock" shall mean the unregistered, $0.001 par value,
authorized common stock of SAG.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Stock Consideration" has the meaning set forth in ss.1.1(e)(ii).
"Stockholder Loans" has the meaning set forth in ss.5.13 hereof.
"Stock Restriction Agreement" has the meaning set forth in ss.5.14
hereof.
"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. "Subsidiaries" shall mean more than one Subsidiary.
"Surviving Corporation" has the meaning set forth in ss.1.1(a) hereof.
"Target Shares" has the meaning set forth in the preface above.
"Transaction Documents" has the meaning set forth in ss.2.4 hereof.
"Transfer Taxes" has the meaning set forth in ss.5.16 hereof.
"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 (including property taxes
paid by the Company pursuant
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<PAGE> 63
to any lease), 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.
"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.9.4 hereof.
"Underwriters" has the meaning set forth in ss.5.18 hereof.
* * *
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
<TABLE>
<S> <C> <C>
BUYER:
ATTEST: SUNBELT AUTOMOTIVE GROUP, INC.
BY: /s/ STEPHEN C. WHICKER BY: /s/ CHARLES K. YANCEY
------------------------------------------------ -------------------------------------------------
Name: Stephen C. Whicker Name: Charles K. Yancey
Title: Secretary & General Counsel Title: Chief Executive Officer
(Signatures Continued on Following Page)
(Signatures Continued From Previous Page)
SUB:
ATTEST: BAG GEORGIA IV, INC.
BY: /s/ STEPHEN C. WHICKER BY: /s/ CHARLES K. YANCEY
------------------------------------------------ -------------------------------------------------
Name: Stephen C. Whicker Name: Charles K. Yancey
Title: Secretary & General Counsel Title: Chief Executive Officer
THE COMPANY:
ATTEST: DAY'S CHEVROLET, INC.
BY: /s/ REBECCA D. DIEMER BY: /s/ CALVIN L. DIEMER
------------------------------------------------ -------------------------------------------------
Name: Rebecca D. Diemer Name: Calvin L. Diemer
Title: Secretary Title: President
</TABLE>
-58-
<PAGE> 64
<TABLE>
<S> <C> <C>
THE STOCKHOLDER(S):
WITNESS: /s/ DANIEL LANDIS /s/ CALVIN DIEMER [SEAL]
------------------------------ --------------------------------------------
Name: Daniel Landis Name: CALVIN DIEMER
WITNESS: /s/ DANIEL LANDIS /s/ ALVIN DIEMER [SEAL]
------------------------------ --------------------------------------------
Name: Daniel Landis Name: ALVIN DIEMER
Boomershine Automotive Group, Inc. unconditionally guarantees SAG's obligation to pay the
Expense Reimbursement as may be required pursuant to Section 8.2 of this Agreement.
BOOMERSHINE AUTOMOTIVE GROUP, INC.
ATTEST:
BY: /s/ STEPHEN C. WHICKER BY: /s/ CHARLES K. YANCEY
----------------------------------------------- ----------------------------------
Name: Stephen C. Whicker Name: Charles K. Yancey
Title: Assistant Secretary Title: Chief Executive Officer
</TABLE>
-59-
<PAGE> 65
SUNBELT AUTOMOTIVE GROUP, INC.
5901 PEACHTREE-DUNWOODY ROAD
SUITE 250-B
ATLANTA, GA 30328
================================================================================
July 31, 1998
VIA HAND DELIVERY
- -----------------
Day's Chevrolet, Inc.
4461 South Main Street
Acworth, Georgia 30101
Mr. Calvin Diemer
Day's Chevrolet, Inc.
4461 South Main Street
Acworth, Georgia 30101
Mr. Alvin Diemer
Day's Chevrolet, Inc.
4461 South Main Street
Acworth, Georgia 30101
RE: Agreement and Plan of Merger and Reorganization entered into as of
March 3, 1998 by and among Sunbelt Automotive Group, Inc. ("Sunbelt"),
BAG GEORGIA IV, INC. ("Sub"), Day's Chevrolet, Inc. (the "Company")
and Calvin Diemer and Alvin Diemer (collectively, the "Stockholders"),
as amended by the Letter Amendment dated June 17, 1998 (the "Merger
Agreement")
Dear Messrs. Diemer:
This letter will confirm our agreement to make the following changes to
the Merger Agreement. For ease of reference, all capitalized terms that are
used but not expressly defined in this letter have the meanings given to them
in the Merger Agreement, and the definitions of those terms in the Merger
Agreement are incorporated by reference in this letter.
1. Closing Date Deadline. In order to accommodate the consummation of
the Sunbelt IPO contemplated as a Closing condition in Sections 6.6 and 7.8 of
the Merger Agreement, we agree to extend the Closing Date Deadline to the
earliest practicable date following the date of the funding of the Sunbelt IPO
by Sunbelt's underwriters in accordance with the underwriting
<PAGE> 66
agreement, but no later than September 4, 1998; provided, however, that the
effective date of the transactions contemplated by the Merger Agreement shall
be July 31, 1998.
2. Payment of Lock-Up Consideration. We have agreed that notwithstanding
the provisions of the Merger Agreement, Sunbelt shall be obligated to pay the
balance of the Lock-Up Consideration (which equals $45,000) to the Stockholders
if and only if the Closing does not become effective on July, 31, 1998 as
provided for herein. In the event that the Closing does not become effective on
July 31, 1998, then Sunbelt shall pay the balance of the Lock-Up Consideration
($45,000) to the Stockholders on September 4, 1998 in immediately available
funds.
3. Payment of First Extension Consideration. We have agreed that
notwithstanding the provisions of the Merger Agreement, Sunbelt shall be
obligated to pay the First Extension Consideration (which equals $15,000) to
the Stockholders if and only if the Closing does not become effective on July
31, 1998 as provided for herein. In the event that the Closing does not become
effective on July 31, 1998, then Sunbelt shall pay the First Extension
Consideration ($15,000) to the Stockholders on September 4, 1998 in immediately
available funds.
4. Payment of Second Extension Consideration. We have agreed that
notwithstanding the provisions of the Merger Agreement, Sunbelt shall be
obligated to pay the Second Extension Consideration (which equals $15,000) to
the Stockholders if and only if the Closing does not become effective on July
31, 1998 as provided for herein. In the event that the Closing does not become
effective on July 31, 1998, then Sunbelt shall pay the Second Extension
Consideration ($15,000) to the Stockholders on September 4, 1998 in immediately
available funds.
5. Registration Statement. In the event that the Registration Statement of
the Sunbelt IPO fails to become effective on or before August 13, 1998, then
Sunbelt shall immediately pay to the Escrow Agent the balance of the balance of
the Lock-Up Consideration, the First Extension Consideration, and the Second
Extension Consideration.
We agree that this letter agreement constitutes an amendment to the Merger
Agreement, and that, except as modified by this letter agreement, the Merger
Agreement remains in full force and effect.
<PAGE> 67
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,
/s/ Charles K. Yancey
Charles K. Yancey, on behalf of Sunbelt
Automotive Group, Inc. and BAG
GEORGIA IV, INC.
ACCEPTED AND AGREED TO THIS 31st DAY OF JULY, 1998.
DAY'S CHEVROLET, INC.
By: /s/ Calvin Diemer
----------------------------------
Name: Calvin Diemer
Title: President
/s/ Calvin Diemer
--------------------------------------
CALVIN DIEMER
/S/ Alvin Diemer
--------------------------------------
ALVIN DIEMER
cc: Matthew J. Howard, Esq. (via fax)
Daniel A. Landis, Esq. (via fax)
Stephen C. Whicker, Esq.
David S. Cooper, Esq.
<PAGE> 1
EXHIBIT 2.9
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") made and entered
into this 8th day of April by and between BOOMERSHINE AUTOMOTIVE GROUP, INC., a
GEORGIA corporation ("Boomershine" or the "Absorbed Corporation") and SUNBELT
AUTOMOTIVE GROUP, INC., a GEORGIA corporation ("hereinafter Sunbelt" or the
"Surviving Corporation") (Sunbelt and Boomershine are sometimes hereinafter
referred to as the "Constituent Corporations").
RECITALS
WHEREAS, Boomershine is a corporation duly organized and existing under
the laws of the State of Georgia;
WHEREAS, Sunbelt is a corporation duly organized and existing under
the laws of the State of Georgia;
WHEREAS, the respective Boards of Directors of Sunbelt and Boomershine
deem it advisable and in the best interests of the corporations' respective
shareholders that Boomershine be acquired by Sunbelt through a merger
("Merger") of Boomershine and Sunbelt, in which Sunbelt shall acquire all of
the business, assets and goodwill, subject to the liabilities, of Boomershine
and that shares of Boomershine common stock shall be converted to shares of
Sunbelt common stock on the terms and conditions hereinafter set forth;
WHEREAS, under proper approval and authorization of their respective
Boards of Directors and Shareholders, Sunbelt and Boomershine desire to enter
into this Agreement to merge Boomershine into Sunbelt in accordance with the
applicable provisions of the Georgia Business Corporation Code, as amended (the
"Georgia Code"), which merger is intended to qualify as a tax free
reorganization under sec.368 of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the premises and the mutual
warranties and covenants set forth herein, the parties hereto agree as follows:
SECTION 1.0
MERGER
1.1. Adoption of Plan. Sunbelt and Boomershine hereby adopt the plan
of reorganization encompassed by this Agreement and hereby agree that
Boomershine shall merge with and into Sunbelt on the terms and conditions set
forth herein. Boomershine will, upon the filing of the Articles or Certificate
of Merger (or upon the effective date set forth in the Articles or Certificate
of Merger) contemplated by the Georgia Code Section 14-2-1105 (the "Effective
Date"), merge with and into Sunbelt, and thereafter the separate existence of
Boomershine will cease. As of the Effective Date, Sunbelt shall succeed to all
of the rights, privileges, powers and property, including, without limitation,
all contracts, patents, copyrights and other assets of every kind and
description, of Boomershine, and Sunbelt shall assume all of the obligations
and liabilities of Boomershine, excepting and excluding, (i) the minute books
and stock records of Boomershine insofar as they relate solely to its
organization and capitalization, and (ii) the rights of Boomershine arising out
of this Agreement. The Merger will occur in accordance with the Georgia Code.
1.2. Pending and Subsequent Actions. Boomershine will cooperate, and
will cause its officers, directors and other employees to cooperate, with
Sunbelt on and after the Effective Date
<PAGE> 2
(i) in effecting the collection of all receivables and other items owing to
Boomershine and (ii) in prosecuting claims and furnishing information, testimony
and other assistance in connection with all actions, proceedings, arrangements
or disputes based upon contracts, arrangements or acts of Boomershine which
were in effect or which occurred on or prior to the Merger.
1.3. Compliance with Georgia Code. The acts and things required to be
done by the Georgia Code in order to make this Agreement effective, including
the submission of this Agreement to the shareholders of both of the Constituent
Corporations and the filing of the Articles or Certificate of Merger in the
manner provided for in the Georgia Code, shall be attended to and done by the
proper officers of the Constituent Corporations as soon as practicable.
SECTION 2.0
DELIVERY OF STOCK; ARTICLES, BYLAWS, DIRECTORS,
OFFICERS OF SURVIVING CORPORATION, ASSUMPTION OF LIABILITIES
2.1. Conversion of Stock. Effective as of the Effective Date, each
stock certificate representing shares of Boomershine common stock, along with
any and all accrued and unpaid dividend rights with respect thereto, shall be
deemed to represent a corresponding number of converted shares of Sunbelt
common stock (the "Converted Shares"), and each right to purchase shares of
Boomershine common stock shall be deemed to represent a right to purchase the
respective number of Converted Shares of Sunbelt common stock, in each case as
is determined by Section 2.2.
2.2. Conversion Shares. For purposes of this Agreement "Converted
Shares" shall mean the number of shares of Sunbelt common stock into which each
share of Boomershine common stock will be converted on the Effective Date. All
Boomershine common stock shall be converted, as a result of the Merger, into a
number of Converted Shares which, in the aggregate, shall have a market value
(based on the initial public offering price of the Sunbelt common stock as of
the date the IPO is priced) equal to the total market value of Sunbelt minus
the following (all as determined as of the pricing date of the IPO): (a) the
aggregate market value of all Sunbelt common stock that is issued to the public
pursuant to the IPO, (b) the aggregate market value of all Sunbelt common stock
that is issued to the shareholders of Day's Chevrolet, Inc., Robertson
Oldsmobile-Cadillac, Inc., Wade Ford, Inc. and Wade Ford Buford, Inc., (c) the
aggregate market value of the Sunbelt common stock reserved pursuant to the
Sunbelt 1997 and 1998 Stock Incentive Plan, on a fully liquidated basis, and
(d) the aggregate market value of all shares of Sunbelt common stock issued to
officers of Sunbelt; provided, however, that said aggregate market value of the
Converted Shares (the "Converted Shares Value") shall be no less than
Thirty-Seven Million Dollars ($37,000,000.00). The Converted Shares shall be
divided amongst the stockholders of Boomershine on a pro-rata basis on their
stock ownership interest in Boomershine.
2.3. Issuance and Delivery of Sunbelt Common Stock. Upon surrender of
certificates representing Boomershine common stock, Sunbelt will issue and
deliver, as provided in Section 2.4, certificates representing a number of
whole shares of its common stock determined pursuant to Section 2.2 hereof.
Fractional shares of Sunbelt common stock shall not be issued, but their cash
value, as determined in good faith by the Board of Directors of Sunbelt, shall
be paid for the fractional shares.
2.4. Surrender and Conversion of Boomershine Share Certificates. All
persons holding shares of Boomershine common stock shall surrender the
certificates representing the shares of Boomershine common stock, either by
certified mail, return receipt requested, or in person to: Charles K. Yancey,
Chief Executive Officer of Sunbelt, at 5901 Peachtree-Dunwoody Road, Building
B, Suite 250, Atlanta, Georgia 30328, or such other location as Sunbelt shall
advise
2
<PAGE> 3
such holders in writing. Upon receipt of the surrendered share certificate(s) of
Boomershine common stock, a replacement certificate reflecting shares of Sunbelt
common stock, in a number prescribed by Section 2.2 hereof, shall be issued and
caused to be delivered in accordance with this Agreement.
2.5 Articles, Bylaws, Directors and Officers of Surviving Corporation.
2.5.1. Articles of Incorporation and Bylaws. From and after the
Effective Date, the Articles of Incorporation of Sunbelt, as in effect at such
date, shall be the Articles of Incorporation of the Surviving Corporation and
shall continue in effect until the same shall be altered, amended or repealed as
therein provided or as provided by law. From and after the Effective Date, the
Bylaws of Sunbelt, in effect at such date, shall be the Bylaws of the Surviving
Corporation and shall continue in effect until the same shall be altered,
amended or repealed as therein provided or as provided by law.
2.5.2 Directors and Officers. The persons who are directors and
officers of Sunbelt immediately prior to the Effective Date shall continue as
the directors and officers of the Surviving Corporation and shall continue to
hold office as provided in the Bylaws of the Surviving Corporation, Sunbelt.
2.6 Employee Plans.
2.6.1. Employment Agreements. As of the Effective Date, Sunbelt will
assume all employment agreements and employment, salary and fringe benefit
arrangements and obligations of Boomershine.
2.6.2. Other Agreements. As of the Effective Date, Sunbelt will
assume mutatis mutandis any and all agreements of Boomershine, and agrees to be
bound by the terms and conditions of each such agreement.
SECTION 3.0
DISSENTING RIGHTS
3.1 Notwithstanding anything in this Agreement to the contrary, shares of
Boomershine's common stock that are issued and outstanding immediately prior to
the Effective Date and that are held by stockholders who have not voted such
shares in favor of the Merger and who have delivered a written demand for
appraisal of such shares in the manner provided in Georgia Code Section
14-2-1301 et. seq. ("Dissenting Shares") shall have no right to receive any
cash payment or other consideration based upon the applicable exchange rate
unless and until such holder shall have failed to perfect, or shall have
effectively withdrawn or lost, such holder's right to appraisal and payment
under Georgia Code Section 14-2-1301 et. seq. If such holder shall have so
failed to perfect, or shall have effectively withdrawn or lost such right, such
holder's shares of Boomershine's common stock shall thereupon be deemed to have
been cancelled and converted as described in Section 2 at the Effective Date,
and each such share shall represent the right to receive the appropriate cash
payment based upon the applicable exchange rate. Boomershine shall give Sunbelt
prompt notice of any demands received by Boomershine for appraisal of its
shares.
3
<PAGE> 4
SECTION 4.0
BOOMERSHINE REPRESENTATIONS
AND WARRANTIES
4.1. Corporate Organization. Boomershine is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia.
4.2. Validity of Transaction. Boomershine has full right, power and
authority to enter into this Agreement and to perform its obligations
hereunder. This Agreement has been duly authorized, executed and delivered by
Boomershine and constitutes the valid and legally binding obligation of
Boomershine.
4.3. Capitalization. Immediately prior to the Effective Date, the
authorized capital stock of Boomershine shall consist solely of 500,000 shares
of common stock, of which 72,000 shares will be issued and outstanding.
Boomershine has no agreement or understanding to issue any other or additional
capital stock.
4.4. Litigation. Boomershine is not a party to any litigation or any
governmental proceeding which would materially impact its financial condition
and, to the best of its knowledge, there is no valid basis for any such
litigation or proceeding. There is no judgment or order of any court or
governmental authority in effect against Boomershine which would materially
impact its financial condition.
SECTION 5.0
SUNBELT REPRESENTATIONS
AND WARRANTIES
5.1. Corporate Organization. Sunbelt is a corporation duly organized,
validly existing and in good standing under the laws of the State of Georgia,
and is duly qualified to do business as a foreign corporation in each other
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business as presently conducted and as proposed to be conducted.
5.2. Validity of Transaction. Sunbelt has full right, power and
authority to enter into this Agreement and to perform its obligations
hereunder. This Agreement has been duly authorized, executed and delivered by
Sunbelt and constitutes the valid and legally binding obligation of Sunbelt.
5.3. Capitalization. Immediately prior to the Effective Date, the
authorized capital stock of Sunbelt shall consist solely of 450,000,000 shares
of Common stock, $.001 par value, of which 3,000 shares will be issued and
outstanding, and 50,000,000 shares of Preferred Stock, $.001 par value.
5.4. Litigation. Sunbelt is not a party to any litigation or any
governmental proceeding and, to the best of its knowledge there is no valid
basis for any such litigation or proceeding. There is no judgment or order of
any court or governmental authority in effect against Sunbelt.
4
<PAGE> 5
SECTION 6.0
SUNBELT'S CONDITIONS
PRECEDENT TO CLOSE
6.1. Performance of Acts and Undertakings of Boomershine. Each of the
acts and undertakings of Boomershine to be performed on or before the Closing
Date pursuant to the terms of this Agreement shall have been duly performed.
6.2. Certified Resolutions. Boomershine shall have furnished Sunbelt
with a copy, certified by Boomershine's secretary, of (1) a resolution or
resolutions duly adopted by Boomershine's board of directors authorizing and
approving this Agreement and directing that it be submitted to a vote of
Boomershine's board of directors authorizing and approving this Agreement and
directing that it be submitted to a vote of Boomershine's shareholders, and (2)
a resolution or resolutions adopting this Plan and Agreement of Merger, duly
approved by the holders of at least a majority of the total number of issued
and outstanding shares of common stock of Boomershine.
6.3. Approvals From Authorities. Sunbelt shall have received, or shall
have satisfied itself that it will receive, in form satisfactory to Sunbelt,
all necessary approvals of the transactions contemplated by this Agreement from
authorities having any jurisdiction over the business of Boomershine or any
Boomershine Subsidiary, so that Boomershine and Boomershine Subsidiaries may
continue to carry on their business as presently conducted after consummation
of the Merger; and no such approval shall have been withdrawn or suspended.
6.4. Consents. All consents of other parties necessary to permit
consummation of the Merger shall have been obtained.
6.5. Adoption of Merger by Shareholders. At least a majority of the
outstanding shares of Boomershine Common stock shall have been voted for the
adoption of this Agreement and Plan of Merger.
6.6. Filing of Articles or Certificates of Merger of Georgia. The
Articles or Certificate of Merger shall have been filed in the office of the
Secretary of State Articles or Certificates of for the Merger to become
effective, or Sunbelt shall have satisfied itself that all such filings will be
or are capable of being made effective as of the Closing Date.
6.7. Registration Statement Effective. The Registration Statement on
Form S-1 filed, or to be filed, pursuant to the Securities Act of 1933 with the
Securities and Exchange Commission shall have been declared effective and shall
not be subject to a stop order or any threatened stop order.
SECTION 7.0
BOOMERSHINE'S CONDITIONS PRECEDENT TO CLOSE
Boomershine's obligation to consummate the Merger is subject to the
satisfaction on or prior to the Closing Date of the following conditions:
7.1. Performance of Acts and Undertakings by Sunbelt. Each of
Sunbelt's acts and undertakings to be performed on or before the Closing Date
pursuant to this Agreement shall have been performed.
5
<PAGE> 6
7.2. Certified Resolutions. Sunbelt shall have furnished Boomershine
with certified copies of (1) resolutions duly adopted by the board of
directors of Sunbelt authorizing and approving the execution and delivery of
this Plan and Agreement of Merger and authorizing the consummation of the
transactions contemplated by this Agreement, and (2) resolutions adopting the
Plan of Merger approved by the holders of at least a majority of the total
number of issued and outstanding shares of common stock of Sunbelt.
7.3. Shareholder Vote. At least a majority of the outstanding shares
of common stock of Sunbelt shall have been voted for the adoption of this
Agreement and Plan of Merger.
SECTION 8.0
FURTHER ASSURANCES
Sunbelt and Boomershine each agrees that from time to time, as and when
requested by the other, it will execute, acknowledge, deliver and file all
proper deeds, assurances, assignments, bills of sale, assumptions and other
documents, and do, or cause to be done, all other acts and things necessary or
proper in order to vest, perfect, assure or confirm in Sunbelt title to and
possession of all the property, rights, privileges, powers, franchises, bank
accounts, contracts, patents, copyrights, and stated liabilities of
Boomershine, or otherwise necessary or proper to carry out the intent and
purposes of this Agreement.
SECTION 9.0
TERMINATION OF THIS AGREEMENT
This Agreement and the transactions contemplated under this Agreement
may be terminated at any time prior to the Closing Date, either before or after
the meeting of Boomershine's shareholders:
(a) By mutual consent of Sunbelt and Boomershine;
(b) By Boomershine or by Sunbelt if the Effective Date referred
to in paragraph 1.1 has not occurred by January 1, 1999.
(c) By Sunbelt or Boomershine if the Registration Statement for
Sunbelt's IPO has not been declared effective by July 1, 1998.
SECTION 10.0
RIGHT TO PROCEED
In the event that this Agreement is terminated pursuant to Section 9
because of the failure to satisfy any of the conditions specified in Section 6
or Section 7, all further obligations of Sunbelt and of Boomershine under this
Agreement shall terminate without further liability of Sunbelt to Boomershine
or Boomershine to Sunbelt.
6
<PAGE> 7
SECTION 11.0
RETURN OF DOCUMENTS IN EVENT OF TERMINATION
In the event of the termination of this Agreement for any reason,
Sunbelt will return to Boomershine all documents, work papers, and other
materials (including copies) relating to the transactions contemplated by this
Agreement, whether obtained before or after execution of this Agreement.
Sunbelt will not use any information so obtained for any purpose, and will take
all practicable steps to have such information kept confidential
SECTION 12.0
MISCELLANEOUS
12.1. Amendments. At any time before or after approval and adoption
by the shareholders of Boomershine, this Agreement may be amended in any manner
(except that the provisions of Section 2 may not be amended without the approval
of the shareholders of Boomershine) as may be determined in the judgment of the
respective Boards of Directors of Sunbelt and Boomershine to be necessary,
desirable or expedient in order to clarify the intention of the parties hereto
or to effect or facilitate the purposes and intentions of this Agreement
12.2. Attorney Fees and Costs in Event of Termination. In the event of
the termination of this Agreement for any reason, each party shall bear its own
costs and expenses, including attorney fees.
12.3. Public Announcement. Neither Sunbelt nor Boomershine, without
the consent of the other, shall make any public announcement or issue any press
release with respect to this Agreement or the transactions contemplated by it,
which consent shall not be unreasonably withheld.
12.4. Meeting of Boomershine's Shareholders. Boomershine shall take
all necessary steps to call a meeting of its shareholders, if unanimous consent
is not obtained, to be held no later than ten (10) days from the date of this
Agreement.
12.5. Governing Law; Successors and Assigns; Counterparts; Entire
Agreement. This Agreement (a) shall be construed under and in accordance with
the laws of the state of Georgia, without regard to conflict or choice of law
principles; (b) shall be binding on and shall inure to the benefit of the
parties to the Agreement and their respective successors and assigns; (c) may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement, and shall become effective when one or more counterparts
shall have been signed by each of the parties and delivered to Sunbelt and
Boomershine; and (d) embodies the entire agreement and understanding,
superseding all prior agreements and understanding, superseding all prior
agreements and understandings between Boomershine and Sunbelt relating to
the subject matter of this Agreement.
12.6. Notices. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on the party
to whom notice is to be given, on the first day after delivery to or pickup by
an overnight courier (e.g., Federal Express) with instructions for next day
delivery, or on the third day after mailing if mailed to the party to whom
notice is to be given, by first class mail, registered or certified, postage
prepaid, and properly addressed as follows:
7
<PAGE> 8
To Boomershine and its Subsidiaries at:
2150 Cobb Parkway
Smyrna, GA 30080
Attn.: Walter M. Boomershine, Jr.
To Sunbelt and its Subsidiary at:
To Sunbelt and its Subsidiaries at:
5901 Peachtree Dunwoody Road
Building B, Suite 250
Atlanta, GA 30328
Attn: General Counsel
Any party may change its address for purposes of this paragraph by
giving the other parties written notice of the new address in the manner set
forth above.
12.7. Expenses. If the Merger contemplated hereby becomes effective,
all expenses incurred hereunder shall be borne by the Surviving Corporation.
If, for any reason other than breach of the covenants of the parties set forth
herein, the Merger shall not become effective or shall be abandoned, then each
of the Constituent Corporations shall bear its own expenses, separately
incurred in connection herewith, with no liability to the other party hereto,
and each shall pay one-half of the expenses incurred by them jointly.
12.8. No Broker. Each of the Constituent Corporations represents to
the other that it has not incurred and will not incur any liability for
brokerage fees or agents' commissions in connection with the Agreement and the
Merger contemplated hereby.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by their duly authorized officers and their corporate
seals to be hereto affixed effective as of the date first written above.
BOOMERSHINE AUTOMOTIVE GROUP, INC.
a Georgia corporation
By:/s/ Walter M. Boomershine, Jr.
--------------------------------
Walter M. Boomershine, Jr.,
President
ATTEST:
/s/ Charles K. Yancey
- ------------------------
Charles K. Yancey
Secretary/Treasurer
[Corporate Seal]
(SIGNATURES CONTINUED ON NEXT PAGE)
8
<PAGE> 9
SUNBELT AUTOMOTIVE GROUP, INC.,
a Georgia corporation
By: /s/ Stephen C. Whicker
-------------------------------------
Stephen C. Whicker, Secretary
and General Counsel
ATTEST:
/s/ Ricky L. Brown
- -----------------------------
Ricky L. Brown, Treasurer
and Assist. Secretary
[Corporate Seal]
9
<PAGE> 10
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this
"Amendment") is entered into as of June 19, 1998 by and among BOOMERSHINE
AUTOMOTIVE GROUP, INC., a Georgia corporation ("BAG") and SUNBELT AUTOMOTIVE
GROUP, INC., a Georgia corporation ("Sunbelt"). BAG and Sunbelt are referred to
individually as a "Party" and collectively as the "Parties."
W I T N E S S E T H:
WHEREAS, the Parties are parties to that certain Agreement and Plan of
Merger entered into as of April 8, 1998 (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 and in the Agreement, the Parties hereto
hereby agree as follows:
1. EFFECTIVE DATE OF AMENDMENT. The Parties agree that this Amendment
shall be effective as of the date first set forth above.
2. AMENDMENTS TO AGREEMENT. The Parties agree that the following sections
of the Agreement shall be amended as follows:
a. Section 9.0(c) of the Agreement shall be deleted in its
entirety and the following provision shall be inserted in lieu thereof:
(c) By Sunbelt or Boomershine if the Registration Statement for
Sunbelt's IPO has not been declared effective on or before July 31,
1998.
b. Sections 2.2 and 2.3 of the Agreement shall be deleted in
their entirety and the following provisions shall be inserted in lieu thereof:
2.2 Converted Shares. For purposes of this Agreement, "Converted
Shares" shall mean the number of shares of Sunbelt common
stock into which each share of Boomershine common stock will
be converted on the Effective Date.
2.3 Issuance and Delivery of Sunbelt Common Stock. Upon surrender
of certificates representing Boomershine common stock,
Sunbelt will issue and deliver, as provided in Section 2.4
hereof, certificates representing a number of whole shares of
Sunbelt's unregistered common stock determined by the
following exchange rate: subject to the terms and conditions
of this Agreement, fifty-two and 78/100 (52.78) shares of
Sunbelt's unregistered
1
<PAGE> 11
common stock shall be issued in exchange for each one (1)
share of Boomershine common stock issued and outstanding as
of the Effective Date. Fractional shares of Sunbelt common
stock shall not be issued, but their cash value, as
determined in good faith by the Board of Directors of
Sunbelt, shall be paid for any fractional shares.
c. The words "3,000 shares" in Section 5.3 of the Agreement
shall be deleted and the words "255,202 shares" shall be inserted in lieu
thereof.
3. 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 described herein. Except as amended and modified by this Amendment
the Agreement remains in full force and effect in accordance with its
respective terms.
4. 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.
IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly
executed, effective as of the date and year first above written.
"BAG:"
ATTEST: BOOMERSHINE AUTOMOTIVE GROUP, INC.
BY: BY: /s/ Walter M. Boomershine, Jr.
-------------------------------- --------------------------------
Charles K. Yancey Walter M. Boomershine, Jr.
Secretary/Treasurer President
[CORPORATE SEAL]
"SUNBELT:"
ATTEST: SUNBELT AUTOMOTIVE GROUP, INC.
BY: BY: /s/ S. C. Whicker
-------------------------------- --------------------------------
Name: Name: /s/ Stephen C. Whicker
-------------------------- --------------------------
Title: Title: Secretary
-------------------------- --------------------------
[CORPORATE SEAL]
2
<PAGE> 12
SECOND AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
This SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this
"Amendment") is entered into as of July 30, 1998 by and among BOOMERSHINE
AUTOMOTIVE GROUP, INC., a Georgia corporation ("BAG"), and SUNBELT AUTOMOTIVE
GROUP, INC., a Georgia corporation ("Sunbelt"). BAG and Sunbelt are referred to
individually as a "Party" and collectively as the "Parties."
W I T N E S S E T H :
WHEREAS, the Parties are parties to that certain Agreement and Plan of
Merger entered into as of April 8, 1998, which was amended by a First Amendment
to Agreement and Plan of Merger dated June 19, 1998 (the "Agreement"); and
WHEREAS, the Parties desire to further 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 the date first set forth above.
2. AMENDMENTS TO AGREEMENT. The Parties agree that the Agreement shall be
amended as follows:
a. Section 9.0(c) of the Agreement shall be deleted in its entirety
and the following provision shall be inserted in lieu thereof:
"(c) By Sunbelt or Boomershine if the Registration Statement for
Sunbelt's IPO has not been declared effective on or before
September 1, 1998."
b. A new Section 1.4 shall be inserted which will read as follows:
"1.4 Filing of Certificate of Merger. Sunbelt shall, pursuant to
Section 14-2-1105 of the Georgia Business Corporation Code, file
a Certificate of Merger substantially in the form attached
hereto as Exhibit "A" with the Secretary of State immediately
upon the occurrence of the following two conditions:
(i) the Registration Statement of Sunbelt has been declared
effective by the Securities and Exchange Commission, and
1
<PAGE> 13
(ii) the Underwriting Agreement between Sunbelt and Raymond
James & Associates, Inc. has been signed by both parties."
3. 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 and the
prior Amendment dated June 19, 1998. This Amendment and the documents
contemplated by it record the final, complete, and exclusive understanding
between the Parties regarding the modification of the Agreement described
herein. Except as amended and modified by this Amendment and the prior Amendment
dated June 19, 1998, the Agreement remains in full force and effect in
accordance with its respective terms.
4. 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.
IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly executed,
effective as of the date and year first above written.
"BAG:"
ATTEST: BOOMERSHINE AUTOMOTIVE GROUP, INC.
BY: /s/ Charles K. Yancey BY: /s/ Walter M. Boomershine, Jr.
------------------------------ ----------------------------------
Name: Charles K. Yancey Name: Walter M. Boomershine, Jr.
------------------------ ----------------------------
Title: Sec. Title: Pres.
------------------------ ----------------------------
[CORPORATE SEAL]
"SUNBELT:"
ATTEST: SUNBELT AUTOMOTIVE GROUP, INC.
BY: /s/ Nicholas S. Gibson BY: /s/ Charles K. Yancey
------------------------------ ----------------------------------
Name: Nicholas S. Gibson Name: Charles K. Yancey
------------------------- ----------------------------
Title: Ass't Sec. Title: Pres.
------------------------ ----------------------------
[CORPORATE SEAL]
2
<PAGE> 1
EXHIBIT 3.2
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
SUNBELT AUTOMOTIVE GROUP, INC.
1.
The name of the Corporation is Sunbelt Automotive Group, Inc.
2.
The Articles of Incorporation are hereby amended by inserting the
following new paragraph immediately following paragraph (C) of Article VI:
D. Any vacancy on the Board of Directors resulting
from any increase in the authorized number of Directors shall
be filled by a majority vote of the remaining Directors,
though less than a quorum, and the Directors so chosen shall
hold office for a term expiring at the next annual meeting of
the shareholders at which a successor shall be elected and
shall qualify.
3.
The Articles of Incorporation are hereby further amended by deleting
Article X in its entirety and inserting in lieu thereof the following paragraph:
Article X.
Special meetings of the Shareholders, for any purpose, unless
otherwise prescribed by statute, may be called by the Chairman
of the Board, the Chief Executive Officer or the Secretary,
and shall be called by the Chairman of the Board, the Chief
Executive Officer or the Secretary: (a) when so directed by
the Board of Directors, (b) at the request in writing by a
majority of the Directors then holding such office, delivered
to such Officer, or (c) when the holders of at least
seventy-five percent (75%) of all votes entitled to be cast on
any issue proposed to be considered at the proposed special
meeting sign, date and deliver to the Secretary one or more
written demands for the meeting.
<PAGE> 2
4.
The amendment was duly adopted by the Board of Directors of
the Corporation on June 22, 1998 and was consented to by the shareholders of the
Corporation on June 22, 1998.
IN WITNESS WHEREOF, the corporation has caused this Amendment
to its Articles of Incorporation to be executed by its duly authorized officer.
/s/ STEPHEN C. WHICKER
--------------------------------------
Stephen C. Whicker, Secretary
<PAGE> 1
EXHIBIT 3.3
AMENDED & RESTATED
BYLAWS
OF
SUNBELT AUTOMOTIVE GROUP, INC.
ARTICLE 1
OFFICES
The Corporation shall at all times maintain a registered office in the
State of Georgia and a registered agent at that address, but may have other
offices located within or without the State of Georgia as the Board of Directors
may determine.
ARTICLE 2
SHAREHOLDERS' MEETINGS
2.1 ANNUAL MEETING. A meeting of shareholders of the Corporation shall
be held annually. The annual meeting shall be held at such time and place and on
such date as the Directors shall determine from time to time and as shall be
specified in the notice of the meeting. At such meeting, the Shareholders
entitled to vote will elect Directors and transact such other business as may
properly be brought before the meeting.
2.2 SPECIAL MEETINGS. Special meetings of the Shareholders, for any
purpose, unless otherwise prescribed by statute or the Articles of
Incorporation, may be called by the Chairman of the Board, the Chief Executive
Officer or the Secretary, and shall be called by the Chairman of the Board, the
Chief Executive Officer or the Secretary: (a) when so directed by the Board of
Directors, (b) at the request in writing by a majority of the Directors then
holding such office, delivered to such Officer, or (c) when the holders of at
least seventy-five percent (75%) of all votes entitled to be cast on any issue
proposed to be considered at the proposed special meeting sign, date and deliver
to the Secretary one or more written demands for the meeting. All such written
requests shall state the purpose of the proposed meeting. Special meetings shall
be held at such a time and place and on such a date as shall be specified in the
notice of the meeting to the Shareholders.
2.3 PLACE. Annual or special meetings of Shareholders may be held
within or without the State of Georgia.
2.4 NOTICE OF MEETINGS. The Corporation shall notify Shareholders of
the date, time and place of each annual and special Shareholders' meeting no
fewer than ten (10) nor more than sixty (60) days before the meeting date.
Notice of such meetings shall be given to each Shareholder by mail or by telex,
facsimile, electronic mail or other similar means of communication. Unless the
Georgia Business Corporation Code (the "Code") or the Articles of Incorporation
require otherwise, the Corporation is required to give notice only to
Shareholders entitled to vote at the meeting. Unless the Code or the
<PAGE> 2
Articles of Incorporation require otherwise, notice of an annual meeting need
not include a description of the purpose for which the meeting is called. Notice
of a special meeting must include a description of the purpose for which the
meeting is called. If not otherwise fixed pursuant to Code ss.14-2-703, as
amended, or Section 2.9 of these Bylaws, the record date for determining
Shareholders entitled to notice of and to vote at annual or special
Shareholders' meetings is the close of business on the date before the first
notice is delivered to the Shareholders. Unless other provisions of these Bylaws
require otherwise, if an annual or special Shareholders' meeting is adjourned to
a different date, time or place, notice need not be given of the new date, time
or place if the new date, time or place is announced at the meeting before
adjournment. If a new record date for the adjourned meeting is or must be fixed
pursuant to Section 2.9 of these Bylaws, however, notice of the adjourned
meeting must be given under this Section to persons who are Shareholders as of
the new record date. If mailed, such notice shall be deemed to be delivered when
deposited in the U. S. mail with first class postage thereon paid, addressed to
the Shareholder at his address as it appears on the Corporation's record of
Shareholders. If sent be telex, facsimile, electronic mail or other similar
means of communication, such notice shall be deemed to be delivered the day such
notice is transmitted to the Shareholder. At the adjourned meeting, the
Corporation may transact any business which might have been transacted at the
original meeting.
2.5 WAIVER OF NOTICE. A Shareholder may waive any notice required by
the Code, the Articles of Incorporation, or these Bylaws before or after the
date and time stated in the notice. The waiver must be in writing, be signed by
the Shareholder entitled to the notice, and be delivered to the Corporation for
inclusion in the minutes or filing with the corporate records. A Shareholder's
attendance at a meeting: (a) waives objection to lack of notice or defective
notice of the meeting, unless the Shareholder at the beginning of the meeting
objects to holding the meeting or transacting business at the meeting; and (b)
waives objection to consideration of a particular matter at the meeting that is
not within the purpose described in the meeting notice, unless the Shareholder
objects to considering the matter when it is presented. Unless otherwise
required by these Bylaws, neither the business transacted nor the purpose of the
meeting need be specified in the waiver; provided, however, that any waiver of
notice of a meeting required with respect to an amendment of the Articles of
Incorporation pursuant to Code ss.14-2-1003, as amended, a plan of merger or
share exchange pursuant to Code ss.14-2-1202, as amended, or any other action
which would entitle the Shareholders to dissent pursuant to Code ss.14-2-1302,
as amended, shall only be effective upon compliance with Code ss.14-2-706, as
amended.
2.6 QUORUM. Shares entitled to vote as a separate voting group may take
action on a matter at a meeting only if a quorum of those shares, present in
person or represented by proxy, exists with respect to that matter. Unless the
Articles of Incorporation, other provisions of these Bylaws or the Code provide
otherwise, a majority of the votes entitled to be cast on the matter by the
voting group constitutes a quorum of that voting group for action on that
matter. Once a share is represented for any purpose at a meeting other than
solely to object to holding the meeting or transacting business at the meeting,
it is deemed present for quorum purposes for the remainder of the meeting and
for any adjournment of that meeting unless a new record date is or must be set
for that adjourned meeting. When a quorum is once present at a meeting, it is
not broken by the subsequent withdrawal of any of those present. The holders of
a majority of the voting shares represented at a meeting, whether or not a
quorum is present, may adjourn such meeting from time to time.
2.7 VOTING. If a quorum exists, action on a matter (other than the
election of Directors) by a voting group is approved if the votes cast within
the voting group favoring the action exceed the votes cast opposing the action,
unless the Articles of Incorporation, a Bylaw adopted by the Shareholders
-2-
<PAGE> 3
pursuant to Code ss.14-2-1021, as amended, or the Code, requires a greater
number of affirmative votes. Unless otherwise provided in the Articles of
Incorporation, Directors are elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present. Except as provided in subsections (b) and (c) of Code ss.14-2-721, as
amended, or unless the Articles of Incorporation provide otherwise, each
outstanding share, regardless of class, is entitled to one vote in person or by
proxy on each matter voted on at a Shareholders' meeting. Only outstanding
shares are entitled to vote. The Board of Directors, by a resolution duly
adopted by them, may require the use of written ballots at any annual or special
meeting of the Shareholders. In the absence of such a resolution, written
ballots will not be required.
2.8 PROXIES. A Shareholder may vote his or her shares in person or by
proxy. A Shareholder or his or her agent or attorney-in-fact may appoint a proxy
to vote or otherwise act for him or her by signing an appointment form, either
personally or by his or her attorney-in-fact. An appointment of a proxy is
effective when a signed appointment form or facsimile transmission of the signed
appointment is received by the inspector of election or the officer or agent of
the Corporation authorized to tabulate votes. An appointment is valid for eleven
(11) months from its date unless a longer period is expressly provided in the
appointment form. An appointment of a proxy is revocable by the Shareholder
unless the appointment form or facsimile transmission states that it is
irrevocable and the appointment is coupled with an interest in accordance with
Code ss.14-2-722, as amended.
2.9 RECORD DATE. The Board of Directors, in order to determine the
Shareholders entitled to notice of or to vote at any meeting of the Shareholders
or any adjournment thereof, or entitled to express consent to corporate action
in writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights or entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, shall fix in advance a record date which shall not be
more than seventy (70) days before the date of such meeting, nor more than
seventy (70) days prior to any other action, and in such case only such
Shareholders as shall be Shareholders of record on the date so fixed, shall be
entitled to such notice of or to vote at such meeting or any adjournment
thereof, or entitled to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights or entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, as the case may be, notwithstanding any transfer of any stock on the
books of the Corporation after any such record date is fixed as aforesaid.
2.10 CONDUCT OF MEETINGS. The Chairman of the Board of Directors, or in
his absence the President, or in their absence a person appointed by the Board
of Directors, shall preside at meetings of the Shareholders. The Secretary of
the Corporation, or in the Secretary's absence, any person appointed by the
presiding Officer, shall act as Secretary for meetings of the Shareholders.
2.11 INSPECTORS OF ELECTION. All votes by ballot at any meeting of
Shareholders shall be conducted by such number of inspectors of election as are
appointed for the purpose by either the Board of Directors or by the Chairman of
the meeting. The inspectors of election shall decide upon the qualifications of
voters, count the votes and declare the results.
2.12 NOTICE OF SHAREHOLDER PROPOSALS. A proposal for action to be
presented by any Shareholder at an annual or special meeting of Shareholders,
including notice of any nominations of persons for election to the Board of
Directors, shall be out of order and shall not be acted upon at such
-3-
<PAGE> 4
meeting unless such proposal was specifically described in the Corporation's
notice to all Shareholders of the meeting and the matters to be acted upon
thereat, or unless: (a) such proposal shall have been submitted in writing to
the Chairman of the Board of Directors and received at the principal executive
offices of the Corporation at least sixty (60) days prior to the date of such
annual or special meeting by the Shareholder who intends to present such
proposal; and (b) such proposal shall set forth: (1) as to each person whom the
Shareholder proposes to nominate for election as Director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of Directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(including such person's written consent to being named in the Proxy Statement
as a nominee and to serving as Director if elected), and evidence reasonably
satisfactory to the Corporation that such nominee has no interests that would
limit his ability to fulfill the duties of office; (2) as to any other business
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any material interest such business of such Shareholder and the beneficial
owner, if any, on whose behalf the proposal is made; and (3) as to the
Shareholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made: (i) the name and address of such
Shareholder, as they appear on the Corporation's books, and of such beneficial
owner; and (ii) the class and number of shares of the Corporation that are owned
beneficially and held of record by such Shareholder and such beneficial owner.
ARTICLE 3
BOARD OF DIRECTORS
3.1 MANAGEMENT. Subject to the Articles of Incorporation, these Bylaws
and any lawful agreement between the Shareholders, the full and entire
management of the affairs and business of the Corporation shall be vested in the
Board of Directors, which shall have and may exercise all of the powers that may
be exercised or performed by the Corporation.
3.2 CLASSIFICATION; NUMBER; TERM. The number of Directors of the
Corporation shall be between three (3) and fifteen (15), the exact number of
which shall be determined from time to time by the affirmative vote of the
holders of at least two-thirds (2/3) of the shares of the Corporation entitled
to vote for the election of Directors. The Board of Directors shall be divided
into three (3) classes, as nearly equal in number as possible, with respect to
the first time for which they shall severally hold office. Each Director of the
First Class first chosen shall hold office until the first annual meeting of the
Shareholders following his election, and until a successor shall be elected and
qualified, or until his earlier death, resignation, incapacity to serve, or
removal; each Director of the Second Class first chosen shall hold office until
the second annual meeting of the Shareholders following his election, and until
a successor shall be elected and qualified, or until his earlier death,
resignation, incapacity to serve, or removal; each Director of the Third Class
first chosen shall hold office until the third annual meeting of the
Shareholders following his election, and until a successor shall be elected and
qualified, or until his earlier death, resignation, incapacity to serve, or
removal. At each annual meeting of Shareholders held thereafter, the successors
to the class of Directors whose terms shall expire at that time shall be elected
to hold office until the third succeeding annual meeting of the Shareholders
following their election, and until their successors shall be elected and
qualified, or until their earlier deaths, resignations, incapacities to serve,
or removals. Any increase or decrease in the number of Directors shall be so
apportioned among the classes as to make all classes authorized by the requisite
number of Shareholders as nearly equal in number as possible.
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3.3 QUALIFICATIONS. Directors need not be Shareholders nor employees of
the Corporation.
3.4 VACANCIES. A vacancy on the Board of Directors shall exist upon the
death, resignation, removal, or incapacity to serve of any Director; upon the
increase in the number of authorized Directors; and upon the failure of the
Shareholders to elect the full number of Directors authorized. Any vacancy on
the Board of Directors resulting from the death, resignation or retirement of a
Director, or from any other cause other than removal by the Shareholders or
increase in the number of Directors, shall be filled by a majority vote of the
remaining Directors, though less than a quorum, for a term corresponding to the
unexpired term of his predecessor in office. Any vacancy on the Board of
Directors occurring as a result of the removal of a Director by the Shareholders
shall be filled by the Shareholders or, if authorized by the Shareholders, by a
majority vote of the remaining Directors, though less than a quorum, for a term
corresponding to the unexpired term of his predecessor in office. Newly-created
Directorships resulting from any increase in the authorized number of Directors
shall be filled by a majority vote of the remaining Directors, though less than
a quorum, and the Directors so chosen shall hold office for a term expiring at
the next annual meeting of Shareholders at which a successor shall be elected
and shall qualify.
3.5 RESIGNATION. A Director may resign at any time by delivering
written notice to the Board of Directors, the Chairman, or to the Corporation. A
resignation is effective when the notice is delivered unless the notice
specifies a later effective date. If the resignation is effective at a future
time, a successor may be elected before that time to take office when the
resignation becomes effective.
3.6 REGULAR MEETINGS. Regular meetings of the Board of Directors may be
held at such time and place within or without the State of Georgia as shall from
time to time be determined by the Board of Directors by resolution, and such
resolution shall constitute notice thereof. No further notice shall be required
in order legally to constitute such regular meeting.
3.7 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by the Chairman, the President, the Chief Executive Officer or on the
written request of any two (2) or more members of the Board of Directors. Notice
of each special meeting will be given to each Director in writing actually
received not less than twenty-four (24) hours prior to the meeting or in writing
mailed by deposit in the U. S. mail, first class postage prepaid, addressed to
the Director at the Director's address appearing on the records of the
Corporation not less than forty-eight (48) hours prior to the meeting. Special
meetings of the Directors may also be held at any time without prior notice when
all members of the Board of Directors are present and consent to a special
meeting. Special meetings of the Directors will be held at any place designated
by a majority of the Board of Directors. No notice of any special meeting of the
Board of Directors need state the purpose thereof.
3.8 ELECTRONIC COMMUNICATION. The Board of directors may permit
Directors to participate in a meeting by any means of communication by which all
of the persons participating in the meeting can hear each other at the same
time. Participation in such meeting will constitute presence in person at the
meeting.
3.9 WAIVER OF NOTICE. A Director may, at any time, waive any notice
required by these Bylaws, the Articles of Incorporation, or the Code. Except as
otherwise provided in this Section, the waiver must be in writing signed by the
Director, must specify the meeting for which notice is waived,
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and must be delivered to the Corporation for inclusion in the minutes and filing
in the corporate records. A Director's attendance at a meeting waives any
required notice, unless the Director at the beginning of the meeting or promptly
upon the Director's arrival objects to the holding of the meeting or transacting
business at the meeting and does not thereafter vote for or assent to any action
taken at the meeting.
3.10 QUORUM. Unless otherwise required by the Articles of
Incorporation, Bylaws or the Code, a quorum of the Board of Directors consists
of a majority of the number of Directors prescribed by Section 3.2 hereof, or,
if no number is prescribed, the number in office immediately before the meeting
begins. If a quorum is present when a vote is taken, the affirmative vote of a
majority of Directors present is the act of the Board of Directors unless the
Articles of Incorporation, other provisions of these Bylaws or the Code
otherwise require the vote of a greater number of Directors. If a quorum shall
not be present at any meeting of the Board or committee, the members present at
such meeting may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
3.11 VOTING. The act of the majority of the Directors present at the
meeting at which a quorum is present will for all purposes constitute the act of
the Board of Directors, unless otherwise provided by the Articles of
Incorporation, these Bylaws or the Code.
3.12 PRESUMPTION OF ASSENT. A Director who is present at a meeting of
the Board of Directors or a committee of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken unless: (a) he
objects at the beginning of the meeting (or promptly upon his arrival) to
holding it or transacting business at the meeting; (b) his dissent or abstention
from the action taken is entered in the minutes of the meeting; or (c) he
delivers written notice of his dissent or abstention by telex, facsimile,
electronic mail or other similar means of communication to the presiding officer
of the meeting before its adjournment or to the Corporation immediately after
adjournment of the meeting. The right of dissent or abstention is not available
to a Director who votes in favor of the action taken.
3.13 ACTION WITHOUT MEETING. Unless otherwise provided by the Articles
of Incorporation, any action required or permitted to be taken at a Board of
Directors meeting may be taken without a meeting if a written consent describing
the action taken is signed by each and every Director and delivered to the
Corporation for inclusion in the minutes and filed in the corporate records. The
action is effective when the last Director signs the consent, unless the consent
specifies an earlier or later effective date. A consent signed under this
Section has the effect of an act of the Board of Directors at a meeting and may
be described as such in any document.
3.14 ORGANIZATION. Meetings of the Board of Directors shall be presided
over by the Chairman of the Board, or in his absence, Vice Chairman of the
Board, or in his absence, the President, or in his absence, the meeting shall be
presided over by a chairman chosen at the meeting. The Secretary of the
Corporation, or in the Secretary's absence any person appointed by the presiding
Officer, shall act as Secretary for meetings of the Board of Directors.
3.15 CHAIRMAN OF THE BOARD. The Board of Directors shall elect one of
its members to be Chairman of the Board of Directors by a majority vote of the
Directors entitled to vote on the matter. The Chairman of the Board shall serve
for a term of one (1) year from the date elected and until a successor is
elected and qualified. The Chairman of the Board will advise and consult with
the Board
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of Directors and the officers of the Corporation as to the determination of
policies of the Corporation and will preside at all meetings of the Board of
Directors and of the Shareholders. The Chairman of the Board may be removed from
office at any meeting of the Directors expressly called for that purpose, for
good and reasonable cause shown, by the affirmative vote of not less than the
majority of the Directors then entitled to vote at an election of the Chairman
of the Board.
3.16 COMPENSATION OF DIRECTORS. The Board of Directors shall have the
authority to fix the compensation of the Directors.
ARTICLE 4
COMMITTEES
4.1 EXECUTIVE COMMITTEE. The Board of Directors may by resolution
adopted by a majority of the entire Board, designate an Executive Committee of
three or more Directors, with equal representation from each class of Directors.
Each member of the Executive Committee shall hold office until the first meeting
of the Board of Directors after the annual meeting of the Shareholders next
following his election and until his successor member of the Executive Committee
is elected, or until his death, resignation, removal, or until he shall
otherwise cease to be a Director.
4.2 EXECUTIVE COMMITTEE POWERS. During intervals between meetings of
the Board of Directors, the Executive Committee may exercise all powers of the
Board of Directors in the management of the business affairs of the Corporation,
including all powers specifically granted to the Board of Directors by these
Bylaws or by the Articles of Incorporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided, however,
that the Executive Committee shall not have the power to amend or repeal any
resolution of the Board of Directors that by its terms shall not be subject to
amendment or repeal by the Executive Committee, and the Executive Committee
shall not have the authority of the Board of Directors in reference to: (a)
amending the Articles of Incorporation; (b) adopting, amending or approving a
plan of merger or share exchange; (c) adopting, amending or repealing the Bylaws
of the Corporation; (d) the filling of vacancies on the Board of Directors or on
any committee; (e) approving or proposing to Shareholders action that the Code
requires to be approved by Shareholders; (f) a sale, lease, exchange or other
disposition of all or substantially all the property or assets of the
Corporation; (g) the removal of any or all of the Officers of the Corporation;
or (h) a voluntary dissolution of the Corporation or a revocation of any such
voluntary dissolution.
4.3 EXECUTIVE COMMITTEE MEETINGS. The Executive Committee shall meet
from time to time on call of the Chairman of the Board, the President, or any
two (2) or more members of the Executive Committee. Meetings of the Executive
Committee may be held at such places, within or without the State of Georgia, as
the Executive Committee shall determine or as may be specified or fixed in the
respective notices of such meetings. The Executive Committee may fix its own
rules of procedure, including provision for notice of its meetings, shall keep a
record of its proceedings, and shall report these proceedings to the Board of
Directors at the meeting thereof held next after such meeting of the Executive
Committee. All such proceedings shall be subject to revision or alteration by
the Board of Directors, except to the extent that action shall have been taken
pursuant to or in reliance upon such proceedings prior to any such revision or
alteration. The Executive Committee shall act by a majority vote of its members.
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4.4 OTHER COMMITTEES. The Board of Directors, by resolution adopted by
a majority of the entire Board, may designate one or more additional committees,
each committee to consist of three (3) or more Directors, which shall have such
name and shall have and may exercise such powers of the Board of Directors in
the management of the business affairs of the Corporation, except the powers
denied to the Executive Committee, as may be determined from time to time by the
Board of Directors.
4.5 ALTERNATE MEMBERS. The Board of Directors, by resolution adopted in
accordance with Section 4.1, may designate one or more Directors as alternate
members of a committee, who may act in the place and stead of any absent member
at any meeting of such committee.
4.6 REMOVAL OF COMMITTEE MEMBERS. The Board of Directors shall have the
power at any time to remove any or all of the members of any committee, with or
without cause, and to fill vacancies on and to dissolve any such committee.
ARTICLE 5
OFFICERS
5.1 COMPOSITION. The Board of Directors, at its first meeting after
each annual meeting of Shareholders, shall elect a President and may elect such
other of the following Officers: Chairman of the Board, Chief Executive Officer,
Vice President, Chief Operating Officer, Chief Financial Officer, Treasurer,
Executive Vice President of Corporate Development, Secretary, and may include
one or more Executive Vice Presidents, Senior Vice Presidents, Vice Presidents,
one or more Assistant Secretaries, and one or more Assistant Treasurers, who
shall hold their offices for such terms as shall be determined by the Board of
Directors, and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors or the Chairman of the
Board.
5.2 RESIGNATION OR REMOVAL. Any Officer may resign at any time upon
written notice to the Board of Directors or President or Secretary of the
Corporation. Such resignation shall take effect at the time specified in the
notice, and unless otherwise specified in the notice, no acceptance of the
resignation shall be necessary to make it effective. The Board of Directors may
remove any Officer, assistant officer or agent, with or without cause, at any
time. Any such removal shall be without prejudice to the contractual rights of
such Officer, if any, with the Corporation, but the election of an Officer shall
not of itself create contractual rights.
5.3 POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD. The Chairman of the
Board shall preside at all meetings of the Board of Directors and at all
meetings of the Shareholders at which he is present, and shall have and may
exercise such powers as may from time to time be assigned to him by the Board of
Directors or as may be provided by law.
5.4 POWERS AND DUTIES OF THE PRESIDENT. The President shall have the
powers and duties set forth by the Board of Directors from time to time.
5.5 POWERS AND DUTIES OF THE CHIEF EXECUTIVE OFFICER. The Chief
Executive Officer will be responsible for implementing the policies and goals of
the Corporation as stated by the Board of Directors, and will have general
supervisory responsibility and authority over the property, business and
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affairs of the Corporation. The Chief Executive Officer may sign any documents
or instruments of the Corporation which require signature of the President or
other corporate Officer under the Code.
5.6 POWERS AND DUTIES OF THE VICE CHAIRMAN OF THE BOARD. In the absence
of the Chairman of the Board, the Vice Chairman of the Board shall preside at
all meetings of the Board of Directors and at all meetings of the Shareholders
at which he is present.
5.7 POWERS AND DUTIES OF THE VICE PRESIDENT. The Vice President will
have such responsibilities and authority as may be prescribed by the Board of
Directors or any may be delegated by the Chief Executive Officer or the
President to such Vice President. The Vice President shall have all of the
powers and perform all of the duties of the President during the absence or
disability of the President.
5.8 POWERS AND DUTIES OF THE CHIEF OPERATING OFFICER. The Chief
Operating Officer shall have the powers and duties set forth by the Board of
Directors or the Chief Executive Officer from time to time.
5.9 POWERS AND DUTIES OF THE CHIEF FINANCIAL OFFICER. The Chief
Financial Officer shall have the powers and duties set forth by the Board of
Directors or the Chief Executive Officer from time to time.
5.10 POWER AND DUTIES OF THE SECRETARY. The Secretary shall attend all
meetings of the Board of directors, all meetings of the Shareholders and record
all votes and the minutes of all proceedings in books to be kept for that
purpose, and shall perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, any notice required to
be given of any meetings of the Shareholders and of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors,
the Chairman of the Board or the Chief Executive Officer, under whose
supervision the Secretary shall be. The Secretary may sign any documents or
instruments of the Corporation which require signature of the President or other
corporate Officer under the Code. The Secretary may in the name of the
Corporation affix the seal of the Corporation to all contracts of the
Corporation and attest the seal of the Corporation thereto, and he or she may
sign with other appointed officers all certificates for shares of stock of the
Corporation.
5.11 POWERS AND DUTIES OF THE TREASURER. The Treasurer shall have
charge of all funds and securities of the Corporation, shall endorse the same
for deposit or collection when necessary and deposit same to the credit of the
Corporation in such banks or depositories as the Board of Directors may
authorize. The Treasurer may endorse all commercial documents requiring
endorsements for or on behalf of the Corporation and may sign all receipts and
vouchers for payments made to the Corporation. The Treasurer shall have all such
powers and duties as generally are incident to the position of corporate
treasurer or as may be assigned by the President or the Board of Directors.
5.12 POWERS AND DUTIES OF THE EXECUTIVE VICE PRESIDENT OF CORPORATE
DEVELOPMENT. The Executive Vice President for Corporate Development shall have
the powers and duties set forth by the Board of Directors or the Chief Executive
Officer.
5.13 OTHER OFFICERS. The other Officers, if any, of the Corporation
shall have such powers and duties as shall be stated in a resolution of the
Board of Directors which is not inconsistent with these
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Bylaws. The other Officers shall have all such powers and duties as may be
assigned by the Board of Directors or the President.
5.14 ABSENCES. In case of the absence of any Officer of the
Corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board of Directors may delegate, for the time being, any or all
of the powers or duties of such Officer to any Officer or to any Director.
ARTICLE 6
STOCK
6.1 CERTIFICATES. The interest of each Shareholder shall be evidenced
by a certificate or certificates representing shares of the Corporation, which
shall be in such form as the Board of Directors may from time to time adopt, and
shall be numbered, and shall be entered in the books of the Corporation as they
are issued. Each certificate representing shares shall set forth upon the face
thereof the following:
(a) the name of the Corporation;
(b) that the Corporation is organized under the laws of the
State of Georgia;
(c) the name(s) of the person(s) to whom the certificate is
issued;
(d) the number and class of shares, the designation of the
series, if any, which the certificate represents, and the par value of each
share or a statement that the shares are without par value; and
(e) if any shares represented by the certificate are nonvoting
shares, a statement or notation to that effect; and, if the shares represented
by the certificate are subordinate to shares of any other class or series with
respect to dividends or amounts payable on liquidation, the certificate shall
contain a clear and concise statement of either the face or the back of the
certificate to that effect.
Each certificate shall be signed by the President or Chief Executive
Officer, and the Secretary, and may also (but need not be) be signed by the
Executive Vice President, Treasurer, Assistant Treasurer or an Assistant
Secretary, and may be sealed with the seal of the Corporation or a facsimile
thereof. If a certificate is countersigned by a transfer agent or registered by
a registrar, other than the Corporation itself or an employee of the
Corporation, the signature of any such Officer of the Corporation may be a
facsimile. In case any Officer(s) who shall have signed, or whose facsimile
signature(s) shall have been used on, any such certificate(s) shall cease to be
such Officer(s) of the Corporation, whether because of death, resignation or
otherwise, before such certificate(s) shall have been delivered by the
Corporation, such certificate(s) may nevertheless be delivered as though the
person(s) who signed such certificate(s) or whose facsimile signature(s) have
been used thereon had not ceased to be such Officer(s).
6.2 CLASS; SERIES; PREFERRED. If the Corporation is authorized to issue
more than one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or
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back of the certificate which the Corporation shall issue to represent such a
class or series of stock; provided, that, except as otherwise provided by law,
in lieu of the foregoing requirements, there may be set forth on the face or
back of the certificate which the Corporation shall issue to represent such
class or series of stock a statement that the Corporation will furnish without
charge to each Shareholder who so requests the powers, designations, preferences
and relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
6.3 SHAREHOLDER LIST. The Corporation shall keep or cause to be kept a
record of the Shareholders of the Corporation which readily shows, in
alphabetical order or by alphabetical index, by voting group and, within each
group, by classes or series of stock, if any, the names of the Shareholders
entitled to vote, with the address of and the number of shares held by each.
Said record shall be presented and kept open at all meetings of the
Shareholders.
6.4 TRANSFERS.
(A) MANNER OF MAKING TRANSFER. Transfers of shares of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his duly-authorized attorney, or with a transfer clerk or
transfer agent appointed as provided in Section 6.5 of this Article, and on
surrender of the certificate(s) for such shares properly endorsed and the
payment of all taxes thereon.
(B) RECORD OWNER. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive any distributions, to vote as such owner, and for all other
purposes, and shall not be bound to recognize any equitable or other claim to or
interest in such share(s) on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise provided by law.
(C) DELIVERY OF CERTIFICATE. Shares of the Corporation may be
transferred by delivery of the certificate(s) therefore, accompanied either by
any assignment in writing on the back of the certificate(s) or by separate
written power of attorney to sell, assign or transfer the same, signed by the
record holder thereof, or by his duly-authorized attorney-in-fact, but no
transfer shall affect the right of the Corporation to make any distribution to
the holder of record as holder in fact thereof for all purposes, and no transfer
shall be valid, except between the parties thereto, until such transfer shall
have been made upon the books of the Corporation as herein provided.
(D) ADDITIONAL REQUIREMENTS. The Board may from time to time
make such additional rules and regulations as it may deem expedient, not
inconsistent with these Bylaws or the Articles of Incorporation, concerning the
issue, transfer and registration of certificates for shares of the Corporation.
6.5 TRANSFER AGENTS AND REGISTRARS. The Board of Directors may appoint
one or more transfer agents and one or more registrars and may require each
stock certificate to bear the signature(s) of a transfer agent or a registrar,
or both.
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6.6 LOST CERTIFICATES. The Board of Directors may direct that a new
certificate be issued in place of any certificate theretofore issued by the
Corporation and alleged to have been lost, stolen or destroyed. When authorizing
such issue of a new certificate, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
6.7 FRACTIONAL SHARES OR SCRIP. The Corporation may, when and if
authorized by the Board of Directors, issue certificates for fractional shares
or scrip in order to effect share transfers, share distributions or
reclassifications, mergers, consolidations or reorganizations. Holders of
fractional shares shall be entitled, in proportion to their fractional holdings,
to exercise voting rights, receive dividends and participate in any of the
assets of the Corporation in the event of liquidation. Holders of scrip shall
not, unless expressly authorized by the Board of Directors, be entitled to
exercise any rights of a Shareholder of the Corporation, including voting
rights, dividend rights or the right to participate in any of the assets of the
Corporation in the event of liquidation. In lieu of issuing fractional shares or
scrip, the Corporation may pay in cash the fair value of fractional interests as
determined by the Board of Directors; and the Board of Directors may adopt
resolutions regarding rights with respect to fractional shares or scrip as it
may deem appropriate, including, without limitation, the right for persons
entitled to receive fractional shares to sell such fractional shares or purchase
such additional fractional shares as may be needed to acquire one full share, or
sell such fractional shares or scrip for the account of such persons.
ARTICLE 7
INDEMNIFICATION
7.1 DEFINITIONS. For purposes of this Article 7, the terms "director,"
"officer," "disinterested director," "expenses," "liability," "official
capacity," "party" and "proceeding" shall have the meanings found in Code
ss.14-2-850, as amended.
7.2 AUTHORITY TO INDEMNIFY.
(A) GOOD FAITH CONDUCT. Except as otherwise provided in this
Section, the Corporation shall indemnify an individual who is a party to a
proceeding because he is or was a Director against liability incurred in the
proceeding if: (1) such individual conducted himself in good faith; and (2) such
individual reasonably believed: (A) in the case of conduct in his official
capacity, that such conduct was in the best interests of the Corporation; (B) in
all other cases, that such conduct was at least not opposed to the best
interests of the Corporation; and (C) in the case of any criminal proceeding,
that the individual had no reasonable cause to believe such conduct was
unlawful.
(B) EMPLOYEE BENEFIT PLANS. A Director's conduct with respect
to an employee benefit plan for a purpose he believed in good faith to be in the
interests of the participants in and beneficiaries of the plan is conduct that
satisfies the requirement of subsection (a)(2)(B) of this Section 7.2.
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(C) PROCEEDINGS. The termination of a proceeding by
judgment, order, settlement or conviction, or upon a plea of nolo contendere or
its equivalent, is not, of itself, determinative that the Director did not meet
the standard of conduct described in this Section 7.2
(D) PROHIBITIONS ON INDEMNIFICATION. The Corporation may
not indemnify a Director under this Section:
(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 this Section; or
(2) In connection with any proceeding with
respect to conduct for which he was adjudged
liable on the basis that personal benefit
was improperly received by him, whether or
not involving action in his official
capacity.
7.3 MANDATORY INDEMNIFICATION. The Corporation shall indemnify a
Director who was wholly successful, on the merits or otherwise, in the defense
of any proceeding to which he was a party because he was a Director of the
Corporation against reasonable expenses incurred by the Director in connection
with the proceeding.
7.4 ADVANCE FOR EXPENSES.
(A) CONDITIONS. The Corporation may, before final
disposition of a proceeding, advance funds to pay for or reimburse the
reasonable expenses incurred by a Director who is a party to a proceeding
because he is a Director if he delivers to the Corporation:
(1) A written affirmation of his good faith
belief that he has met the relevant standard
of conduct described in this Section or that
the proceeding involves conduct for which
liability has been eliminated under a
provision of the Articles of Incorporation
of the Corporation as authorized by Code
ss.14-2-202(b)(4), as amended; and,
(2) His written undertaking to repay any funds
advanced if it is ultimately determined that
the Director is not entitled to
indemnification under this Article.
(B) REPAYMENT OBLIGATION. The undertaking required by
Section 7.4(a)(2) must be an unlimited general obligation of the Director but
need not be secured and may be accepted without reference to the financial
ability of the Director to make repayment.
(C) AUTHORIZATIONS. Authorizations under this Section 7.4
shall be made:
(1) By the Board of Directors:
(A) When there are two or more
disinterested Directors, by a
majority vote of all the
disinterested Directors (a majority
of
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whom shall for such purpose
constitute a quorum), or by a
majority of the members of a
committee of two or more
disinterested Directors appointed
by such a vote; or
(B) When there are fewer than two
disinterested Directors, by the vote
necessary for action by the Board of
Directors in accordance with Code
ss.14-2-824(c), as amended, in which
authorization Directors who do not
qualify as disinterested Directors
may participate; or
(2) By the Shareholders, but shares owned or
voted under the control of a director who at
the time does not qualify as a disinterested
director with respect to the proceeding may
not be voted on the authorization.
7.5 COURT-ORDERED INDEMNIFICATION AND ADVANCES FOR EXPENSES. A
Director of the Corporation who is a party to a proceeding because he is a
Director may apply for indemnification or advance for expenses to the court
conducting the proceeding or to another court of competent jurisdiction.
7.6 DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION.
(A) DETERMINATION REQUIRED. The Corporation may not
indemnify a Director under Section 7.2 unless authorized thereunder and a
determination has been made for a specific proceeding that indemnification of
the Director is permissible in the circumstances because he has met the relevant
standard of conduct set forth in Section 7.2.
(B) METHOD OF DETERMINATION. The determination shall be
made:
(1) If there are two or more disinterested
Directors, by the Board of Directors by a
majority vote of all the disinterested
Directors (a majority of whom shall for such
purpose constitute a quorum) or by a
majority of the members of a committee of
two or more disinterested Directors
appointed by such a vote;
(2) By special legal counsel:
(A) Selected in the manner prescribed
in paragraph (1) of this
subsection; or
(B) If there are fewer than two
disinterested Directors, selected by
the Board of Directors (in which
selection Directors who do not
qualify as disinterested Directors
may participate); or
(3) By the Shareholders, but shares owned by or
voted under the control of a Director who at
the time does not qualify as a disinterested
Director may not be voted on the
determination.
- 14 -
<PAGE> 15
(C) EXPENSES. Authorization of indemnification or an
obligation to indemnify and evaluation as to reasonableness of expenses shall be
made in the same manner as the determination that indemnification is
permissible, except that if there are fewer than two disinterested Directors or
if the determination is made by special legal counsel, authorization of
indemnification and evaluation as to reasonableness of expenses shall be made by
those entitled under Section 7.6(b)(2)(B) of this Article to select special
legal counsel.
7.7 SHAREHOLDER APPROVED INDEMNIFICATION.
(A) APPROVAL OF SHAREHOLDERS. The Corporation may
indemnify or obligate itself to indemnify a Director made a party to a
proceeding, including a proceeding brought by or in the right of the
Corporation, without regard to the limitations found in other sections of these
Bylaws or the Code, but shares owned or voted under the control of a Director
who at the time does not qualify as a disinterested Director with respect to any
existing or threatened proceeding that would be covered by the authorization may
not be voted on the authorization.
(B) EXCEPTIONS. The Corporation shall not indemnify a
Director under this Section 7.7 for any liability incurred in a proceeding in
which the Director is adjudged liable to the Corporation or is subjected to
injunctive relief in favor of the Corporation:
(1) For any appropriation, in violation of the
Director's 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 the types of liability set forth in Code
ss.14-2-832, as amended; or
(4) For any transaction from which he received
an improper personal benefit.
(C) EXPENSES. Where approved or authorized in the manner
described in subsection (a) of this Section 7.7, the Corporation may advance or
reimburse expenses incurred in advance of final disposition of the proceeding
only if:
(1) The Director furnishes the Corporation a
written affirmation of his good faith belief
that his conduct does not constitute
behavior of the kind described in subsection
(b) of this Section 7.7; and
(2) The Director furnishes the Corporation a
written undertaking, executed personally or
on his behalf, to repay any advances if it
is ultimately determined that the Director
is not entitled to indemnification under
this Section 7.7.
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<PAGE> 16
7.8 INDEMNIFICATION OF OFFICERS, EMPLOYEES AND AGENTS.
(A) OFFICERS. The Corporation shall indemnify and advance
expenses under this Article 7 to an Officer of the Corporation who is a party to
a proceeding because he is an Officer of the Corporation:
(1) To the same extent as a Director; and
(2) If he is not a Director, to the same extent,
and subject to the same conditions, as a
Director of the Corporation is entitled to
and subject to under Sections 7.2 - 7.7,
except for liability arising out of conduct
that constitutes:
(A) Appropriation, in violation of his
duties, of any business opportunity
of the Corporation;
(B) Acts or omissions which involve
intentional misconduct or a knowing
violation of law;
(C) The types of liability set forth in
Code Section 14-2-832, as amended;
or
(D) Receipt of an improper personal
benefit.
(B) OFFICERS. The provisions of subsection 7.8(a)(2)
shall apply to an Officer who is also a Director if the sole basis on which he
is made a party to the proceeding is an act or omission solely as an Officer.
(C) APPLICATION TO COURT. An Officer of the Corporation
who is not a Director is entitled to mandatory indemnification under Section
7.3, and may apply to the court under Section 7.5 for indemnification or
advances for expenses, in each case to the same extent to which a Director may
be entitled to indemnification or advances for expenses under those provisions.
(D) EMPLOYEES AND AGENTS. An employee or agent of the
Corporation who is not a Director or Officer is entitled to indemnification and
advancement of expenses to the same extent, and subject to the same conditions,
as a Director of the Corporation is entitled to and subject to under Sections
7.2 - 7.6.
7.9 INSURANCE. The Corporation may purchase and maintain insurance
on behalf of an individual who is a Director, Officer, employee or agent of the
Corporation or who, while a Director, Officer, employee or agent of the
Corporation, serves at the Corporation's request as a Director, Officer,
partner, trustee, employee or agent of another domestic or foreign corporation,
partnership, joint venture, trust, employee benefit plan, or other entity
against liability asserted against or incurred by him in that capacity or
arising from his status as a Director, Officer, employee or agent, whether or
not the Corporation would have power to indemnify or advance expenses to him
against the same liability under this Article 7.
- 16 -
<PAGE> 17
7.10 APPLICATION OF ARTICLE.
(a) Any provision for indemnification of or advance for
expenses to Directors, Officers, employees, agents or others contained in the
Articles of Incorporation, these Bylaws, a resolution of the Corporation's
Shareholders or Board of Directors, or in a contract or otherwise, is valid only
if and to the extent the provision is allowable under the Code. If the Articles
of Incorporation limit indemnification or advance for expenses, indemnification
and advance for expenses are valid only to the extent consistent with the
Articles of Incorporation. This Article 7 does not limit the Corporation's power
to pay or reimburse expenses incurred by a Director in connection with his
appearance as a witness in a proceeding at a time when he is not a party. Except
as expressly provided in Section 7.8, this Article 7 does not limit the
Corporation's power to indemnify, advance expenses to, or provide or maintain
insurance on behalf of an employee or agent of the Corporation.
(b) The indemnification and/or advancement of expenses
provided by or granted pursuant to this Article 7 shall not be deemed exclusive
of any other rights, in respect of indemnification, advancement of expenses, or
otherwise, to which those persons seeking indemnification or advancement of
expenses may be entitled under, to the extent applicable, any other provision of
these Bylaws, the Articles of Incorporation, or a valid resolution, agreement or
contract, to the extent consistent with the Code.
7.11 SEVERABILITY. In the event that any of the provisions of this
Article 7 (including any provision within a single sentence) is held by a court
of competent jurisdiction to be invalid, void or otherwise unenforceable, the
remaining provisions are severable and shall remain enforceable to the fullest
extent permitted by law.
7.12 AMENDMENT TO CODE. This Article 7 is intended to authorize
indemnification of Directors, Officers, agents and employees of the Corporation
to the fullest extent permitted by the Code. If the Code hereafter is amended to
authorize broader indemnification of Directors, Officers, agents and employees,
then the indemnification of such Directors, Officers, agents and employees of
the Corporation shall be expanded to the fullest extent permitted by the Code as
amended.
ARTICLE 8
MISCELLANEOUS
8.1 INSPECTION OF BOOKS. The Board of Directors shall have the
power to determine which accounts, books and records for the Corporation, if
any, shall be open to the inspection of Shareholders, except with respect to
such accounts, books and records as may by law be specifically open to
inspection by Shareholders, and shall have the power to fix reasonable rules and
regulations not in conflict with applicable laws, if any, for the inspection of
accounts, books and records which by law or by determination of the Board shall
be restricted and limited accordingly.
8.2 SEAL. The corporate seal shall be in such form as the Board of
Directors may from time to time determine. In the event it is inconvenient to
use such a seal at any time, the signature of the Corporation followed by the
word "SEAL" enclosed in parenthesis or scroll shall be deemed the seal of the
Corporation.
- 17 -
<PAGE> 18
8.3 APPOINTMENT OF AGENTS. The Chairman of the Board, the
President, the Secretary or any Vice President shall be authorized and empowered
in the name of and as the act and deed of the Corporation to name and appoint
general and special agents, representatives and attorneys to represent the
Corporation in the United States or in any foreign country; to name and appoint
attorneys and proxies to vote any shares of stock in any other corporation at
any time owned or held of record by the Corporation; to prescribe, limit and
define the powers and duties of such agents, representatives, attorneys and
proxies; and to make substitution, revocation or cancellation in whole or in
part of any power or authority conferred on any such agent, representative,
attorney or proxy. All powers of attorney or other instruments under which such
agents, representatives, attorneys or proxies shall be so named and appointed
shall be signed by the Chairman of the Board, the President, the Secretary or a
Vice President, and the corporate seal shall be affixed thereto. Any
substitution, revocation or cancellation shall be signed in like manner,
provided always that any agent, representative, attorney or proxy, when so
authorized by the instrument appointing him, may substitute or delegate his
powers in whole or in part and revoke and cancel such substitutions or
delegations. No special authorization by the Board of Directors shall be
necessary in connection with the foregoing, but these Bylaws shall be deemed to
constitute full and complete authority to the Officers above designated to do
all the acts and things as they deem necessary or incidental thereto or in
connection therewith.
8.4 FISCAL YEAR. The fiscal year of the Corporation shall be
determined by the Board of Directors.
8.5 BUSINESS COMBINATIONS. All of the requirements within
ss.ss.14-2-1110 through 14-2-1113 and ss.ss.14-2-1131 through 14-2-1133 of the
Code shall be applicable to "business combinations" (as that term is defined
therein) of the Corporation.
8.6 CHECKS; NOTES; DRAFTS. Checks, notes, drafts, acceptances,
bills of exchange and other orders or obligations for the payment of money shall
be signed by such Officer(s) or person(s) as the Board of Directors by
resolution shall from time to time designate.
ARTICLE 9
AMENDMENTS
The Bylaws of the Corporation may be altered or amended and new Bylaws
may be adopted by the Shareholders at any annual or special meeting of the
Shareholders or by the Board of Director at any regular or special meeting of
the Board of Directors; provided, however, that is such action is to be taken at
a meeting of the Shareholders, notice of the general nature of the proposed
change in the Bylaws shall be given in the notice of the meeting. Action by the
Shareholders with respect to Bylaws shall be taken by an affirmative vote of at
least two-thirds (2/3) of all shares entitled to elect Directors, and action by
the Board of Directors with respect to Bylaws shall be taken by an affirmative
vote of a majority of all Directors then holding office.
- 18 -
<PAGE> 19
ARTICLE 10
SEVERABILITY
If any provision of these Bylaws is found, in any action, suit or
proceeding, to be invalid or ineffective, the validity and effect of the
remaining provisions shall not be affected.
ADOPTED by action of the Board of Directors of Sunbelt Automotive
Group, Inc. as of the 22nd day of June, 1998.
/s/ STEPHEN C. WHICKER
- ----------------------------------------
Stephen C. Whicker, Secretary
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<PAGE> 1
EXHIBIT 5.1
SCHNADER HARRISON
SEGAL & LEWIS LLP
ATTORNEYS AT LAW
SUITE 2800
SUNTRUST PLAZA
303 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30308-3252
404-215-8100
FAX: 404-223-5164
http://www.shsl.com
August 10, 1998
Sunbelt Automotive Group, Inc.
5901 Peachtree-Dunwoody Road
Suite 250-B
Atlanta, Georgia 30328
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted an special counsel to Sunbelt Automotive Group, Inc., a
Georgia corporation (the "Company"), in connection with the registration of
6,325,000 shares of the Company's Common Stock, par value $0.001 per share,
including 825,000 shares subject to an over-allotment option (collectively, the
"Shares"), pursuant to a Registration Statement on Form S-1 (Registration No.
333-51451), as amended (the "Registration Statement"), filed with the Securities
and Exchange Commission under the Securities Act of 1933, an amended.
In connection with this opinion, we have examined and relied upon
originals or copies, certified or otherwise identified to our satisfaction, of
such documents, corporate records, certificates of public officials and other
instruments as we have deemed necessary or appropriate to form the basis for the
opinions hereinafter set forth. In all such examinations, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the originals of all documents submitted to
us as copies, and as to certificates of public officials, we have assumed the
same to be accurate and to have been properly given. As to various matters of
fact material to this opinion, we have relied, to the extent we deemed
appropriate, upon representations, statements and certificates of officers and
representatives of the Company and others.
<PAGE> 2
Based upon the foregoing, we are of the opinion that the Shares to be
registered for sale by the Company have been duly authorized by the Company, and
when issued, delivered and paid for in accordance with the terms of the
underwriting agreement referred to in the Registration Statement and in
accordance with the resolutions adopted by the Board of Directors of the
Company, will be, validly issued, fully paid and nonassessable.
The opinions expressed herein are limited in all respects to the Georgia
Business Corporation Code, and no opinion is expressed with respect to the laws
of any other jurisdiction. This opinion is given as the date hereof, and we
assume no obligation to advise you of facts or circumstances that come to our
attention or changes in the law that occur after the date hereof which could
affect our opinion.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and we consent to the use of our name under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement.
Very truly yours,
/s/ SCHNADER HARRISON
SEGAL & LEWIS LLP
<PAGE> 1
EXHIBIT 10.10
LEASE AGREEMENT
---------------------
THIS LEASE AGREEMENT (hereinafter sometimes referred to as this "Lease")
is made and entered into as of the 5 day of May, 1998, by and between WINCO,
LTD., a Georgia limited partnership (herein sometimes referred to as to
"Landlord") and Boomershine Automotive Group, Inc., d/b/a Boomershine Nissan
(herein sometimes referred to as "Tenant").
W I T N E S S E T H T H A T:
For valuable consideration, Landlord and Tenant, intending to be legally
bound, hereby agree with each other as follows:
ARTICLE I - DEFINITIONS AND FUNDAMENTAL PROVISIONS
The following terms shall have the meanings set forth below when used in
this Lease, except as may otherwise be specifically provided:
1.1 Addresses:
Landlord: 2150 Cobb Parkway, Smyrna, Georgia 30080
Tenant: 2150 Cobb Parkway, Smyrna, Georgia 30080
or such other address or addresses as a party may designate by written notice
to the other party.
1.2 Property: That certain tract or parcel of land located in LL 206 of
the 6th District of Gwinnett County, Georgia, which is more particularly
described and/or depicted on Exhibit A, attached hereto and by this reference
made a part hereof (the "Property"), the street address being 3280 Commerce
Avenue, Duluth, Georgia, 30096.
1.3 Premises: The Property and the improvements now or hereafter thereon,
which Premises, include an automobile dealership presently comprised of two
(2) main structures (the "Buildings").
1.4 Lease Year: Each Lease Year shall be a period of twelve (12)
consecutive calendar months, beginning on the expiration of the prior Lease
Year. The first Lease Year shall commence May 1, 1998 (the "Commencement
Date"), and end at the end of the twelfth (12th) full calendar month
thereafter. At the request of either party, the parties shall execute a
stipulation stating the Commencement Date, the expiration of the first Lease
Year and of the Initial Term after Landlord has delivered the Premises to
Tenant.
<PAGE> 2
1.5 Basic Rent: Tenant agrees to pay as "Basic Rent" the amounts, as
adjusted, as hereinafter described, in strict accordance with the terms and
provisions of Article III hereof, as follows:
Monthly Basic Rent for the period from the Commencement Date through
the Tenth (10th) Lease Year shall be as follows:
May 1, 1998, through October 31, 1998 - $17,500 per month
November 1, 1998 through April 30, 1999 - $17,500 per month
May 1, 1999, through April 30, 2000 - $20,000 per month
May 1, 2000, through April 30, 2001 - $21,500 per month
May 1, 2001, through April 30, 2002 - $23,000 per month
May 1, 2002, through April 30, 2003 - $24,500 per month
May 1, 2003, through April 30, 2004 - $27,000 per month
May 1, 2004, through April 30, 2005 - $27,810 per month
May 1, 2005, through April 30, 2006 - $28,644 per month
May 1, 2006, through April 30, 2007 - $29,503 per month
May 1, 2007, through April 30, 2008 - $30,388 per month
1.6 Permitted Use. The Premises shall be used for the operation of an
automobile dealership, selling primarily new automobiles, and initially
operating the following franchise: Nissan, together, at Tenant's election, with
such operations and services as are ancillary and integrally related to the
operation of an automobile dealership (for example, car leasing operations
and/or automobile repair shop), provided Tenant shall, at all times, continue
as its primary business at the Premises a new car dealership, and for no other
purpose, whatsoever.
1.7 Rent. "Rent" shall mean and include Basic Rent and all other amounts
and charges payable by Tenant under any provision of this Lease. Sums other
than Basic Rent that are designated as "Rent" or "Additional Rent" (or any
similar term indicating rent or rental) are so designated solely for the
purpose of enabling Landlord to enforce its rights hereunder, and Landlord
shall have the same remedies for Tenant's failure to pay same as for
non-payment of Basic Rent. Such sums shall not be deemed rent for purposes of
computing taxes or for governmental regulations thereon.
1.8. Term. Ten (10) Lease Years (being sometimes herein referred to as the
"Initial Term") to commence on the Commencement Date.
1.9 Memorandum of Lease. Tenant shall not record or permit the recording
of this Lease without Landlord's written consent. At Landlord's request, Tenant
shall execute and deliver a written statement in recordable form, identifying
the parties hereto and the Property, specifying the Commencement Date and
termination date of the Lease Term and the Permitted Use, and incorporating
this Lease by reference.
1.10 Net Lease. This Lease is to be absolutely net to Landlord. Tenant
shall pay for all expenses, costs, impositions, taxes and other charges imposed
upon or affecting the Premises during
-2-
<PAGE> 3
the Term, and Landlord shall have no obligation to pay for any matter affecting
the Premises during the Term, except as may be explicitly set forth herein.
ARTICLE II -- DEMISED PREMISES
2.1 Demise of Premises. Landlord hereby leases and demises to Tenant for
the Term and Permitted Use specified herein, and Tenant rents from Landlord the
Premises, subject to the terms and conditions herein contained, and all
encumbrances, easements, restrictions, mortgages, zoning laws and governmental
or other regulations affecting the Premises (such other encumbrances and other
matters sometimes collectively referred to herein as the "Encumbrances").
2.2 Quiet Enjoyment. Tenant, upon timely paying the Rent herein, reserved
and performing and observing all of the other terms, covenants and conditions of
this Lease, shall peaceably and quietly have, hold and enjoy the Property during
the Term, without interference by Landlord, subject to the terms of this Lease
and the Encumbrances.
ARTICLE III -- RENT AND OTHER CHARGES
3.1 Payment of Rent. During the Term, Tenant covenants and agrees to pay to
Landlord, in advance, at the place designated in Section 1.1 hereof, without
demand, deduction or set-off, all Rent as defined in Section 1.7 hereof.
3.2 Payment of Basic Rent. On the Commencement Date, and thereafter,
monthly Basic Rent shall be due and payable on or before the first (1st) day of
each and every calendar month during the Term, in advance, without demand,
deduction or set-off as set forth in Section 1.5 hereinabove.
3.3 Past Due Rent and Additional Rent. If Tenant shall fail to pay, when
the same is due and payable, any Rent or any Additional Rent, or amounts or
charges of any character whatsoever owed to Landlord, such unpaid amounts shall
bear interest from the due date thereof to the date of payment at the rate which
is the lesser of (i) eighteen percent (18%) per annum, or (ii) the maximum
interest rate permitted by law (the "Default Rate").
3.4 Payments on Behalf of Tenant. In case of any default by Tenant in the
payment of any amounts herein provided to be paid by Tenant, including, without
limitation, the procuring of insurance as hereinafter provided for, or in any
other payment required to be made by Tenant hereunder, Landlord, on behalf of
Tenant, may make such payment or payments, or procure any such insurance, and
Tenant covenants to reimburse and pay Landlord any amount paid or expended
immediately upon demand, with interest from the date of disbursement by Landlord
at the Default Rate.
3.5 Utilities. Tenant shall make application for, obtain, pay for, and be
solely responsible for all utilities required, used or consumed in the Premises,
including, but not limited to, gas, water (including water for domestic uses and
for fire protection), telephone, electricity, sewer service, garbage collection
services, or a similar service (herein sometimes collectively referred to as the
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<PAGE> 4
"Utility Services"). In the event that any charge or assessment for any Utility
Service supplied to the Premises, that has or could become a lien on the
Premises or any portion thereof or interest therein, is not paid by Tenant to
the utility supplier when due, then, ten (10) days after written notice to
Tenant, Landlord may, but shall not be required to, pay such charge for and on
behalf of Tenant, with any such amount paid by Landlord being repaid by Tenant
to Landlord with interest at the Default Rate, as Additional Rent, within ten
(10) days after demand by Landlord, Landlord shall have absolutely no obligation
with respect to any Utility Service to the Premises and shall not be liable for
any interruptions or curtailment in Utility Services whatsoever.
3.6 Taxes. Tenant shall be responsible for the timely payment of all
taxes, public charges and assessments, of whatsoever nature, directly or
indirectly assessed or imposed upon the land, buildings, equipment and
improvements constituting the Premises and the rents therefrom, including, but
not limited to, all real property taxes, rates, duties and assessments, local
improvement taxes, import charges or levies, whether general or special, that
are levied, charged or assessed against the Premises by any lawful taxing
authority, whether federal, state, county, municipal, school or otherwise (other
than income, inheritance and franchise taxes thereon) (the "Taxes"). Taxes for
any partial tax period shall be prorated. If Landlord initially pays the Taxes,
Tenant shall reimburse Landlord thereof upon demand.
Tenant shall also promptly pay, when due, all taxes on its trade fixtures
and other personal property in or on the Premises.
ARTICLE IV -- USE OF PREMISES
4.1 Tenant's Use. Tenant shall use the Premises solely for the Permitted
Use specified in Section 1.6, and for no other purpose whatsoever. Tenant shall
not vacate or abandon the Premises during the Term.
4.2 Legal Operation of Premises. Tenant shall not use, or suffer or
permit the Premises, or any part thereof, to be used for any purpose or use in
violation of any law, ordinance or regulation of any governmental authority, or
in any manner that will constitute a nuisance or an annoyance, or for any
hazardous purpose. Nothing contained in this Section 4.2 shall be construed to
interfere with Tenant's right to operate in the Premises for the uses and in the
manner set forth in Section 1.6 hereof, so long as they are lawful. In the
event, at any time during the Term of this Lease, any addition, alteration,
change or repair or other work of any nature, structural or otherwise, shall be
required or ordered or become necessary or account of any law, ordinance or
regulation of any governmental authority now in effect or hereafter adopted,
passed or promulgated, or on account of any other reason with respect to the
Premises, the entire expense thereof, regardless of when the same shall be
incurred or become due, shall be the liability of Tenant and in no event shall
Landlord be called upon to contribute thereto or do or pay for any work of any
nature whatsoever on or relating to the Premises. Tenant takes the Property
subject to all zoning regulations and ordinances now or hereafter in force.
-4-
<PAGE> 5
4.3 Alterations to Premises. Except as described in Section 5.3
hereinbelow, Tenant shall not alter the exterior of the Premises, or make
interior structural changes or make any other changes or alterations to the
Premises without first obtaining Landlord's written approval for such
alterations, which approval shall not be unreasonably withheld or delayed. All
alterations shall remain upon the Premises and shall become Landlord's property
upon the expiration or other termination of this Lease; provided, however, that
Landlord may require any alteration or improvement made by Tenant without
Landlord's written consent to be removed by Tenant by written notice thereof
given to Tenant no later than sixty (60) days after the expiration or earlier
termination of the Term. There shall be no signs or any other equipment on the
roof of any of the Buildings or any other structure now or hereafter existing on
the Property. Notwithstanding the foregoing, Tenant shall be permitted without
the requirement of Landlord's prior consent, to make interior, cosmetic,
non-structural alterations to the Premises; provided that: (i) the value and
structural integrity of the Premises are not decreased or diminished thereby;
(ii) all such work is expeditiously completed in a good and workmanlike fashion
and in compliance with all applicable laws, ordinances and regulations and in
conformity with all provisions of this Lease; and (iii) Tenant obtains lien
waivers consistent with the provisions of Section 4.4 hereof.
4.4 Liens. Tenant will not create or permit to be created or to remain, and
will discharge, any lien (including, but not limited to, the liens of mechanics,
laborers or materialmen for work or materials alleged to be done or furnished in
connection with the Premises), encumbrance or other charge upon the Premises or
any part thereof. Landlord reserves the right to enter the Premises to post and
keep posted notice of non-responsibility for any such lien.
ARTICLE V -- REPAIRS AND MAINTENANCE
5.1 No Maintenance or Repair by Landlord. Landlord shall have no obligation
to improve, alter, replace, maintain and/or repair the Premises, or any part
thereof. Landlord may inspect the Premises as all reasonable times to determine
whether Tenant has fulfilled its maintenance and repair obligations under this
Lease and to otherwise inspect or exhibit the Premises; provided, however, that
Landlord shall never be obligated to inspect the Premises for any reason.
5.2 Maintenance, Repair and Replacement Obligations of Tenant. Tenant
shall, at Tenant's expense, at all times keep and maintain the entire Premises
in good repair and condition, including without limitation, the diligent and
prompt repair of the roof and all exterior supporting walls, foundations, HVAC,
plumbing, electrical and other systems, rain gutters and spouting and all
esthetic aspects of the Premises and shall also keep the non-structural portions
of the Premises (specifically including the storefront, windows and automatic or
other doors of the Premises) in good order, condition, and repair, clean,
sanitary and a safe, including the replacement of equipment, fixtures and all
broken glass (with glass of the same size and quality). Tenant shall also,
during the Term hereof, maintain in good condition and repair the non-building
areas of the Property, including the sidewalks, driveways, landscaped areas and
parking areas, and including patching, striping, cleaning, sweeping and other
maintenance. In the event Tenant fails to perform any of it obligations as
required hereunder, Landlord may (but shall not be required to) perform and
satisfy same, and Tenant hereby agrees to reimburse Landlord, as Additional
Rent, for the cost thereof, together with interest at the
-5-
<PAGE> 6
Default Rate, promptly upon demand. The parties agree that it shall be Tenant's
sole responsibility at all times during the Term of this Lease to maintain the
Premises in structurally sound, leak-free condition so that the Premises shall
be maintained at all times as if operations therein were to continue beyond the
expiration of the Term, and so that all normal maintenance and repair during the
Term shall be completed when the Premises are surrendered to Landlord.
5.3 Improvements. Landlord and Tenant acknowledge that Tenant may make
certain improvements to the Buildings, from time to time ("Tenant's
Improvements"), as provided or required pursuant to the terms of this Lease.
Tenant's Improvements shall be subject to all of the terms of this Lease and
must first be approved by Landlord in writing, which approval shall not be
unreasonably withheld or delayed. All such Tenant's Improvements which are
fixtures shall become the property of Landlord upon the installation thereof.
5.4 As-Is Lease. Tenant acknowledges that Tenant is leasing the Premises "as
is" without any warranty or representation and that Landlord has not made, and
is not hereby making, any warranties or representations pertaining to the
physical condition of the Premises, any part thereof or any improvements
thereon.
ARTICLES VI -- ACCESS TO PREMISES
Tenant agrees that Landlord, its agents, employees or servants or any
person authorized by Landlord may enter the Premises to inspect the condition
of same, to cure defaults of Tenant as provided for herein, and to exhibit the
same to prospective tenants, purchasers, mortgagees or others interested in the
Premises. Such entry, cure or exhibition shall not constitute an eviction of
Tenant, in whole or in part, Landlord agreeing to employ its reasonable efforts
in attempting to minimize any interruption to the business operations of Tenant
resulting from Landlord's (or its designated representatives') entry to the
Premises. Nothing herein contained, however, shall be deemed or construed to
impose upon Landlord any obligation or liability, whatsoever, for the
inspection, care, supervision, repair, improvement, addition, change or
alteration of the Premises.
ARTICLE VII -- INSURANCE AND INDEMNIFICATION
7.1 Tenant Liability Insurance. Tenant shall maintain, at its sole
expense, during the Term hereof, General Commercial Liability or General Garage
Liability insurance, insuring both Tenant and Landlord covering the Premises
with single limit coverage of at least One Million Dollars ($1,000,000) per
occurrence and not less than Two Million Dollars ($2,000,000) in the aggregate
in companies licensed and in good standing in the State of Georgia in the joint
names of Landlord and Tenant. Tenant shall further maintain at its sole expense
a commercial umbrella policy with single limit coverage of a least Five Million
Dollars ($5,000,000) per occurrence and not less than Five Million Dollars
($5,000,000) in the aggregate in companies licensed and in good standing in the
State of Georgia in the joint names of Landlord and Tenant. Tenant shall keep
in force all-risk (Special Form) coverage insurance for the full replacement
value of all of Tenant's personal property within the Premises and on the
Property, including, but not limited to, fixtures, inventory, trade fixtures,
furnishings and other personal property. In addition, Tenant shall keep in
force workers
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compensation or similar insurance to the extent required by law. Finally, Tenant
shall maintain, at its sole cost and expense, Special Form ("all-risk") property
insurance covering the Buildings for the full replacement cost thereof
(excluding footings and foundations), providing protection against perils
included in the Special Form ("all-risk") insurance policy. All insurance
required under this Section 7.1 shall be written by companies rated A or better
in the most current edition of Best's Insurance Report. Tenant will cause such
insurance policies to name Landlord and its agents (and, at Landlord's election,
any lender whose loan is secured by the Premises (a "mortgagee")) as a named
insured thereunder with respect to liability policies and to be written so as to
provide that the insurer waives all right of recovery by way of subrogation
against Landlord (and, at Landlord's election, any mortgagees) in connection
with any loss or damage covered by the all-risk (Special Form) policy in
accordance with the provisions of Section 7.2 hereof. Tenant shall deliver said
policies of liability, workers compensation and all-risk insurance or
certificates thereof to Landlord at or prior to its execution of this Lease, and
thereafter from time to time at the reasonable request of Landlord. Should
Tenant fail to effect the insurance called for in this Lease, Landlord may, but
shall not be obligated to, procure said insurance and pay the requisite
premiums, in which event, Tenant shall promptly pay all sums so expended by
Landlord as Additional Rent following invoice. Each insurer under the policies
required hereunder shall agree by endorsement on the policy issued by it, or by
independent instrument furnished to Landlord that it will give Landlord at least
thirty (30) days prior written notice before the policy or policies in question
shall be altered or canceled. Tenant's property insurance policy shall insure
Landlord and any mortgagee, as their interests may appear.
7.2 Waiver of Subrogation. Tenant hereby releases Landlord and anyone
claiming through or under Landlord by way of subrogation from any and all
liability for any loss of or damage to property, regardless of whether caused by
the negligence or fault of Landlord, to the extent same is required to be
insured pursuant to the requirements of this Lease. In addition, Tenant shall
cause each such insurance policy carried by it insuring the Buildings or
Tenant's personal property therein (and including the insurance coverages
required in Section 7.1 hereinabove) to be written to provide that the insurer
waives all rights of recovery by way of subrogation against Landlord in
connection with any loss or damage covered by the policy.
7.3 Indemnification and Release. Tenant hereby agrees to indemnify,
protect, defend and hold Landlord harmless from any and all claims, damages,
liabilities or expenses (including, without limitation, attorney's fees and
other costs of legal representation) (collectively "Claims") arising out of (i)
any and all claims by third parties arising from any breach or default in the
performance of any obligation of Tenant hereunder and (ii) any act, omission or
negligence of Tenant, its agents or employees on or about the Premises or
otherwise in connection with this Lease. Tenant further releases Landlord from
liability for any damages sustained by Tenant, or any other person claiming by,
through or under Tenant, due to the Premises or any part thereof or any
appurtenances thereto being or becoming out of repair or due to the happening of
any accident, including, but not limited to, any damage caused by water, snow,
ice, windstorm, tornado, gas, steam, electrical wiring, sprinkler system,
plumbing, heating and air conditioning apparatus. Notwithstanding the foregoing,
Tenant's indemnification pursuant to this Section 7.3 shall not apply to any
Claims arising solely as a result of the willful acts or negligence of Landlord,
or its agents, representatives, invitees,
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employees or contractors. Landlord shall not be liable for any damage to, or
loss of, Tenant's personal property, inventory, fixtures or improvements from
any cause whatsoever.
ARTICLE VIII -- CASUALTY AND CONDEMNATION
8.1 Fire, Explosion or Other Casualty. In the event the Premises are
endangered by fire, explosion or any other casualty, except as otherwise
provided herein, the damage shall be repaired by Tenant, said repairs to be
substantially completed within two hundred seventy (270) days after the
casualty causing damage has occurred, subject to force majeure events beyond
Tenant's reasonable control.
In the event the Premises shall be damaged or destroyed to the extent of
seventy-five percent (75%) or more of the total square footage of all Buildings
and other improvements on the Premises (hereinafter, a "Casualty"), and such
Casualty shall occur after the first five (5) Lease Years of the Term of the
Lease, then and in such event, Tenant may elect by written notice to Landlord
delivered within thirty (30) days after such a Casualty either to repair or
rebuild the Premises, as aforesaid, or to terminate this Lease, effective as of
the date Tenant's notice is delivered to Landlord. If Tenant elects to
terminate the Lease pursuant to this Section 8.1, then Tenant shall direct its
insurance company(s) to deliver directly to Landlord all insurance proceeds to
be paid for or in connection with said Casualty; provided, in no event shall
the amount of such insurance proceeds payable to Landlord be less than the full
replacement value of all such improvements which have been so damaged or
destroyed, as reasonably determined by Landlord's insurance adjuster. If the
insurance proceeds are less than the full replacement value as aforesaid,
Tenant shall pay such deficiency to Landlord upon demand. If Tenant fails to
deliver notice of its election to Landlord within the thirty (30) day period
referenced above, Tenant shall be deemed to have elected to repair or rebuild
the Premises and the Lease shall remain in full force and effect.
If this Lease is not terminated pursuant to the preceding paragraph, then
Tenant shall restore and repair the Buildings and other improvements in an
expeditious manner. If Tenant purchases, at its sole option, rent insurance to
compensate Landlord for any lost rents as a result of damage or destruction to
the Premises, then Basic Rent (and other Rent) shall abate during any period
following damage to the Premises in a fair and equitable fashion according to
the proportion of the Premises that cannot reasonably be utilized by Tenant,
provided that the amount of such abatement shall not exceed the rent insurance
proceeds actually received by Landlord with respect thereto. Notwithstanding
the provisions of this Section 8.1, Tenant shall be the owner of its trade
fixtures and shall be entitled to any insurance proceeds attributable to said
trade fixtures.
8.2 Condemnation. If the whole of the Premises, or so much thereof as to
render the balance unusable by Tenant, shall be taken under power of eminent
domain, or otherwise transferred in lieu thereof, this Lease shall
automatically terminate as of the date possession is taken by the condemning
authority. No award for any total or partial taking of any real property
interest in or to the Premises shall be apportioned, and Tenant hereby
unconditionally assigns to Landlord any award which may be made for real
property interests in such taking or condemnation. In the event of a partial
taking,
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which does not result in the termination of this Lease, Basic Rent shall be
apportioned according to the part of the Buildings remaining usable by Tenant.
8.3 Condemnation Award. All compensation awarded or paid for any taking or
acquiring under the power or threat of eminent domain, whether for the whole or
part of the Premises, shall be the property of Landlord, and Tenant hereby
assigns to Landlord all of Tenant's right, title and interest in and to any such
award. Notwithstanding the foregoing, Tenant shall be entitled to claim, prove
and receive in the condemnation proceeding or by separate action, such awards as
may be allowed for loss of lease, moving expense, fixtures and other equipment
installed by it, but only if such awards shall be made by the condemnation court
in addition to the award made by it for the land and the Buildings or part
thereof so taken.
ARTICLE IX -- ASSIGNMENT AND SUBLETTING
9.1 Assignment and Subletting. Tenant's interest in the Premises shall be
limited to the use and occupancy thereof in accordance with the provisions
hereof and shall be non-transferable without Landlord's prior written consent,
which consent shall not be unreasonably withheld conditioned or delayed. Any
attempts by Tenant to assign its interest in the Lease, or to sublet the
Premises in whole or in part, or to sell, assign, lien, encumber or in any
manner transfer this Lease or any interest therein, without Landlord's prior
written consent shall constitute a default hereunder, as shall any attempt by
Tenant to assign or delegate the management or to permit the use or occupancy of
the Property or the Premises or any part thereof by anyone other than Tenant,
Landlord and Tenant acknowledge and agree that the foregoing provisions have
been freely negotiated by the parties hereto and that Landlord would not have
entered into this Lease without Tenant's consent to the terms of this Section
9.1. Any attempt by Tenant to assign this Lease or to sublet all or any portion
of the Premises, to encumber same, or to in any manner transfer, convey or
assign Tenant's interest therein without Landlord's prior written consent shall
be void ab initio.
Notwithstanding anything contained herein to the contrary, Tenant may,
without the prior consent of Landlord, (i) assign this Lease or sublet the
Premises to any wholly-owned subsidiary of Tenant, to the parent corporation of
Tenant, or to a wholly-owned subsidiary of the parent corporation of Tenant, or
(ii) transfer its capital stock to the parent corporation of Tenant, or to a
wholly-owned subsidiary of Tenant or of Tenant's parent corporation; provided
that, in the case of any such transfer, all of the assets held by Tenant prior
to such transfer remain or become assets of the continuing corporation. If
Tenant survives as an entity after such assignment or sublease, Tenant shall
remain fully and primarily liable for performance of all obligations of the
tenant under the Lease and shall not be released as a result thereof.
9.2 Change of Control. In furtherance of the provisions of Section 9.1
hereof, if Tenant is a partnership, limited liability company, corporation or
banking association and if the person or persons who own a majority of its
voting shares or interests at the time of the execution hereof cease to own a
majority of such shares or interests at any time hereafter (except as a result
of transfers by gift, bequest or inheritance by or among immediate family
members), Tenant shall so notify Landlord. In the event of such change of
ownership, regardless of whether Tenant has notified Landlord thereof,
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Landlord may terminate this Lease by notice to Tenant effective sixty (60) day
from the date of such notice from Tenant, or the date on which Landlord first
has knowledge of such transfer, whichever shall first occur.
ARTICLE X -- SUCCESSION TO LANDLORD'S INTEREST
10.1 Attornment. Tenant shall attorn and be bound to any of Landlord's
successors under all the terms, covenants and conditions of this Lease for the
balance of the remaining term.
10.2 Subordination.
(a) This Lease shall be subordinate to the lien of any mortgage or
security deed or the lien resulting from any other method of financing or
refinancing now or hereafter in force against the Premises or any portion
thereof, and to any and all advances to be made under such security
instruments, and all renewals, modifications, extensions, consolidations
and replacements thereof. The aforesaid provisions shall be self-operative
and no further instrument of subordination shall be required to evidence
such subordination. Tenant covenants and agrees to execute and deliver,
upon demand, such further instrument or instruments subordinating this
Lease on the foregoing basis to the lien of any such security instruments
as shall be desired by Landlord and any mortgages or proposed mortgagees.
(b) Notwithstanding anything to the contrary set forth in subsection
(a) above, any mortgagee may at any time subordinate its mortgage to this
Lease, without Tenant's consent, by execution of a written document
subordinating such mortgage to this Lease to the extent set forth therein
and thereupon this Lease shall be deemed prior to such mortgage to the
extent set forth in such written document, without regard to their
respective dates of execution, delivery and/or recording. In that event, to
the extent set forth in such written document, such mortgagee shall have
the same rights with respect to this Lease as though this Lease had been
executed and a memorandum thereof recorded prior to the execution, delivery
and recording of the mortgage and as though this Lease had been assigned to
such mortgagee.
10.3 Estoppel Certificate. Within ten (10) days after request therefor by
Landlord, or in the event that upon any sale, assignment or hypothecation of the
Premises and/or the land thereunder by Landlord an estoppel certificate shall be
required from Tenant, Tenant agrees to deliver in recordable form, a certificate
to any proposed mortgagee or purchaser, or to Landlord, certifying that this
Lease is unmodified and in full force and effect (or, if there have been
modifications, that the same is in full force and effect as modified and stating
the modifications), that there are no defenses or offsets thereto (or stating
those claimed by Tenant) and the dates to which Basic Rent and other charges
have been paid, and such other matters as Landlord may reasonably require.
ARTICLE XI -- DEFAULT, REMEDIES AND BANKRUPTCY
11.1 Default of Tenant. In the event that Tenant (a) fails to pay all or
any portion of any sum due from Tenant hereunder or pursuant to any exhibit
hereto when due and such failure to pay
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continues for more than five (5) business days after receipt of written notice
from Landlord (provided that such five (5) day grace period shall not be
available more than three (3) times in any twelve (12) month period); (b) fails
to perform any other terms, covenants and conditions hereof, or is otherwise in
breach of any of Tenant's obligations hereunder or commits any other act or
omission in violation of this lease and such failure to perform or violation
continues for more than thirty (30) days after receipt of written notice from
Landlord (provided such thirty (30) day grace period shall not be available more
than three (3) times in any twelve (12) month period); (c) becomes bankrupt,
insolvent or files any debtor proceeding takes or has taken against Tenant any
petition of bankruptcy; takes action or has action taken against Tenant for the
appointment of a receiver for all or a portion of Tenant's assets, files a
petition for a corporate reorganization; makes an assignment for the benefit of
creditors, or if in any other manner Tenant's interest hereunder shall pass to
another by operation of law (any or all of the occurrences in this subsection
11.1(c) shall be deemed a default on account of bankruptcy for the purposes
hereof and such default on account of bankruptcy shall apply to and include any
guarantor of this Lease); or (d) commits waste to the Premises or removes any
betterments or improvements thereof; then Tenant shall be in default hereunder
and Landlord may, at its option and without further notice to Tenant, terminate
Tenant's right to possession of the Premises and without terminating this Lease
re-enter and resume possession of the Premises and/or declare this Lease
terminated, and may, thereupon, in either event remove all persons and property
from the Premises with or without resort to process of any court, either by
force or otherwise Notwithstanding such re-entry by Landlord, Tenant hereby
indemnifies, protects, defends and holds Landlord harmless from any and all loss
or damage which Tenant may incur by reason of the termination of this Lease
and/or Tenant's right to possession hereunder. In no event shall Landlord's
termination of this Lease and/or Tenant's right of possession of the Premises
abrogate Tenant's agreement to pay Rent and additional charges due hereunder for
the full term hereof. Following re-entry of the Premises by Landlord, Tenant
shall promptly pay all arrearages then due and overdue and shall continue to pay
all such Rent and additional charges as same become due under the terms of this
Lease, together with all other expenses incurred by Landlord in regaining
possession until such time, if any, as Landlord relets same and the Premises are
occupied by such successor, it being understood that Landlord shall have no
obligation to mitigate Tenant's damages by reletting the Premises. Upon
reletting, sums received from such new lessee by Landlord shall be applied first
to payment of costs incident to reletting; any excess shall then be applied to
any indebtedness to Landlord from Tenant other than for Basic Rent; and any
excess shall then be applied to the payment of Basic Rent due and unpaid. The
balance, if any, shall be applied against the deficiency between all amounts
received hereunder and sums to be received by Landlord on reletting, which
deficiency Tenant shall pay to Landlord in full, within five (5) days of notice
of same from Landlord. Tenant shall have no right to any proceeds for reletting
that remain following application of same in the manner set forth herein.
11.2 Rights and Remedies. The various rights and remedies herein granted
to Landlord shall be cumulative and in addition to any others Landlord may be
entitled to by law or in equity, and the exercise of one or more rights or
remedies shall not impair Landlord's right to exercise any other right or
remedy. All such rights and remedies may be exercised and enforced concurrently
or consecutively, and whenever and as often as Landlord shall deem desirable.
The failure of Landlord to insist upon strict performance by Tenant of any of
the covenants, conditions and agreements of this Lease shall not be deemed a
waiver of any of said rights and remedies concerning any subsequent or
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continuing breach or default by Tenant of any of the covenants, conditions, or
agreements of this Lease. No surrender of the Premises shall be effected by
Landlord's acceptance of Rent or by any other means whatsoever unless the same
be evidenced by Landlord's written acceptance of such as a surrender. In all
events, Landlord shall have the right upon notice to Tenant to cure any breach
by Tenant at Tenant's sole cost and expense, and Tenant shall reimburse
Landlord for such expense upon demand. Tenant shall reimburse Landlord for
attorney's fees and other expenses incurred by Landlord under this Article XI.
11.3 Landlord's Default. If Tenant alleges a breach or default by Landlord
hereunder, Tenant shall provide Landlord (and any mortgagee of Landlord of whom
Tenant has notice) with written notice thereof and provide thirty (30) days
thereafter for Landlord or its mortgagee to cure same prior to exercising any
right or remedy Tenant may have for said breach or default.
11.4 Bankruptcy. If Landlord shall not be permitted to terminate this
Lease as hereinabove provided because of the provisions of Title 11 of the
United States Code relating to Bankruptcy, as amended ("Bankruptcy Code"), then
Tenant as a debtor in possession or any trustee for Tenant agrees promptly,
within no more than fifteen (15) days upon request by Landlord to the
Bankruptcy Court, to assume or reject this Lease and Tenant on behalf of
itself, and any trustee agrees not to seek or request any extension or
adjournment of any application to assume or reject this Lease by Landlord with
such Court. In such event, Tenant or any trustee for Tenant may only assume
this Lease if (a) it cures or provides adequate assurance that the trustees
will promptly cure any default hereunder, (b) it compensates or provides
adequate assurance that Tenant will promptly compensate Landlord for any actual
pecuniary loss to Landlord resulting from Tenant's defaults, and (c) it
provides adequate assurance of performance during the fully stated Term hereof
of all of the terms, covenants and provisions of this Lease to be performed by
Tenant. In no event after the assumption of this Lease shall any then-existing
default remain uncured for a period in excess of the earlier of ten (10) days
or the time period set forth herein. Adequate assurance of performance of this
Lease as set forth hereinabove shall include, without limitation, adequate
assurance (1) of the source of Rent reserved hereunder and (2) the assumption
of this Lease will not breach any provision hereunder.
ARTICLE XII -- SURRENDER OF PREMISES
12.1 Surrender of Premises. At the expiration or earlier termination of
this Lease, Tenant shall surrender the Premises to Landlord broom clean and in
good condition, and in a condition which complies with all applicable laws,
reasonable wear and tear and insured casualty (for which Landlord receives the
proceeds) excepted. Tenant shall promptly remove Tenant's sign, personal
property and trade fixtures upon such expiration or termination and repair any
damage or disturbance to the Premises caused by the removal of any furniture,
trade fixtures or other personal property placed in the Premises. Tenant's
failure to remove all or part of Tenant's sign, personal property and trade
fixtures within ten (10) days after such expiration or termination shall be
deemed an abandonment to Landlord of such sign, personal property and trade
fixtures and, if Landlord elects to remove all or any part of said same, such
removal, including the cost of repairing any damage to the Premises caused by
or resulting from such removal, shall be paid by Tenant.
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12.2 Holding Over. Should Tenant, with Landlord's written consent, hold
over at the end of the Term of the Lease, Tenant shall become a tenant-at-will
and any such holding over shall not constitute an extension of this Lease.
During such holding over, Tenant shall pay Rent and other charges at the
highest monthly rate provided for herein, plus an additional fifty percent (50%)
of the Basic Rent in effect at the expiration of the Term hereof. If Tenant
holds over at the end of the Term of the Lease without Landlord's written
consent, Tenant shall be a tenant-at-sufferance.
ARTICLE XIII - MISCELLANEOUS
13.1 Notices. Notices and demands required or permitted to be given
hereunder may be given by personal delivery to the addresses designated in
Section 1.1 hereinabove (including courier and expedited delivery services) to
either party or any officer or other representative of the party to be notified,
or may be sent by certified mail, return receipt requested, addressed, postage
prepaid, to said addresses. Mailed notices and demands shall be deemed to have
been given upon the date of the executed return receipt (provided that (i) if
any party shall refuse delivery or (ii) if delivery fails because of an address
change that has not been received as required by this Section 13.1, then, in
either of such events, notices shall be deemed given when mailed), or, if made
by personal, courier or other expedited delivery to the addresses designated in
Section 1.1 hereinabove, then upon the delivery. Notice of change of address for
notices shall not be deemed made until received or rejected. Unless otherwise
specified by Landlord, the payment of Rent shall be to the first address of
Landlord as set forth in Section 1.1 herein.
13.2 Successors and Assigns. All covenants, promises, conditions,
representations and agreements herein contained shall be binding upon, apply and
inure to the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns.
13.3 Entire Agreement. This Lease, the Environmental Addendum and the
Exhibits attached hereto constitute the sole and exclusive agreement between the
parties with respect to the Premises. No amendments, modifications of or
supplements to this Lease shall be effective unless in writing and executed by
Landlord and Tenant.
13.4 Time is of the Essence. The time of the performance of all of the
covenants, conditions and agreements of this Lease is of the essence of this
Lease.
13.5 Relationship of Parties; Usufruct. The parties hereto shall always be
as Landlord and Tenant and nothing herein shall be construed so as to constitute
a joint venture or partnership between Landlord and Tenant. This Lease creates a
usufruct not subject to levy and sale and no estate in or with respect to the
Premises, or any portion thereof, is granted or conveyed hereby.
13.6 Litigation. It is mutually agreed that in the event Landlord commences
any summary proceeding for non-payment of any Rent, Tenant will not interpose
any non-compulsory counterclaim of whatever nature or description in any such
proceeding. Landlord and Tenant hereby waive the right to a trial by jury in
connection with any dispute arising out of this Lease or the use or possession
of the Premises by Tenant.
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13.7 Governing Law. This Lease shall be construed under the laws of the
State of Georgia.
13.8 Partial Invalidity. If any provision of this Lease or the application
thereof to any person or circumstance shall to any extent be held invalid, then
the remainder of this Lease or the application of such provision to persons or
circumstances other than those as to which it is held invalid shall not be
affected thereby, and each provision of this Lease shall be valid and enforced
to the fullest extent permitted by law.
13.9 Submission of Lease. The submission of this Lease for examination does
not constitute an offer to lease, or a reservation of or option for the
Property, and this Lease shall be effective only upon execution and delivery
thereof by Landlord and Tenant.
13.10 Interpretation. In interpreting this Lease in its entirety, the
printed provisions of this Lease and any additions written or typed thereon
shall be given equal weight, and there shall be no inference, by operation of
law or otherwise, that any provision of this Lease shall be construed against
either party hereto.
13.11 Broker. Landlord and Tenant hereby agree that, in connection with
this Lease, neither have dealt with any broker or other person or entity
entitled to any brokerage commission, fee or other compensation. Each party
shall indemnify, defend and hold harmless the other, their agents and legal
representatives against any fee, commission or other compensation due to any
person, firm or corporation claiming to have acted in said party's behalf.
13.12 Limitation of Liability. Landlord's liability to Tenant for damages
or otherwise with respect to the Lease shall be limited solely to and recovered,
if at all, solely from Landlord's interest in the Property. Landlord shall, at
any time and from time to time, have the absolute right to sell, assign, pledge
or otherwise transfer its interest in the Premises or this Lease. Landlord shall
be relieved of all its obligation and liability hereunder after Landlord has
conveyed the Premises and assigned this Lease to a successor Landlord. Landlord
may assign this lease to an entity in connection with the acquisition of the
Premises, in which case Landlord will be released from all liability hereunder.
13.13 Survival of Obligations. The provisions of this Lease with respect
to any obligation of Tenant to pay any sum in order to perform any act required
by this Lease after the expiration or other termination of this Lease shall
survive the expiration or other termination of this Lease.
13.14 Headings, Captions and References. The section captions contained in
this Lease are for convenience only and do not in any way limit or amplify any
term of provision hereof. The use of the terms "hereof," "hereunder" and
"herein" shall refer to this Lease as a whole, inclusive of the Exhibits, except
when noted otherwise. The use of the masculine or neuter genders herein shall
include the masculine, feminine and neuter genders and the singular form shall
include the plural when the context so requires.
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13.15 Attorneys' Fees. The unsuccessful party in any action or proceeding
shall pay for all costs, expenses and reasonable attorneys' fees incurred by the
prevailing party or its agents or both in enforcing the covenants and agreements
of this Lease. The term "prevailing party," as used herein, shall include,
without limitation, a party who obtains legal counsel and brings an action
against the other party by reason of the other party's breach or default and
obtains substantially the relief sought, whether by compromise, settlement or
judgment.
13.16 Hazardous Substances. SEE ENVIRONMENTAL ADDENDUM ATTACHED TO THIS
LEASE.
13.17 Waiver. The waiver by Landlord of any breach of any term, covenant
or condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition or any subsequent breach of the same or any other term,
covenant or condition herein contained. The subsequent acceptance of Rent
hereunder by Landlord shall not be deemed to be a waiver of any proceeding
breach by Tenant of any term, covenant or condition of this Lease, other than
the failure of Tenant to pay the particular Rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
Rent. No covenant, term or condition of this Lease shall be deemed to have been
waived by Landlord, unless such waiver be in writing by Landlord and delivered
to Tenant.
13.18 Accord and Satisfaction. No payment by Tenant or receipt by Landlord
of a lesser amount than the Rent herein stipulated shall be deemed to be other
than on account of the earliest stipulated Rent, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment as Rent
be deemed an accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
Rent or pursue any other remedy provided in this Lease.
13.19 Tenant Defined, Use of Pronoun. The word "Tenant" shall be deemed
and taken to mean each and every person or party mentioned as a Tenant herein,
be the same one or more; and if there shall be more than one Tenant, any notice
required or permitted by the terms of this Lease may be given by or to anyone
thereof, and shall have the same force and effect as if given by or to all
thereof. The use of the neuter singular pronoun to refer to Landlord or Tenant
shall be deemed a proper reference even though Landlord or Tenant may be an
individual, a corporation, or a group of two or more individuals or
corporations. The necessary grammatical changes required to make the provisions
of this Lease apply in the plural sense where this is more than one Landlord or
Tenant and to either corporations, associations, partnerships or individuals,
males or females, shall, in all instances, be assumed as though in each case
fully expressed.
13.20 Covenant to Operate. Commencing on the Commencement Date, and
thereafter for the balance of the Term, Tenant hereby covenants that it shall
continuously occupy and use the Premises solely for conducting the Permitted
Use, as defined herein.
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This Section 13.21 shall apply during the term of the Lease, as same may
be extended. Upon the last day of the Term, Landlord shall redeliver possession
of any such vehicle to Tenant.
IN WITNESS WHEREOF, this Lease has been executed under seal as of the day
and year first above written.
LANDLORD:
WINCO, LTD., a Georgia limited partnership, by
its two (2) sole general partners
DONNA GAMMON By: /s/ WALTER M. BOOMERSHINE, JR.
- ---------------------- -------------------------------------------
Witness Walter M. Boomershine, Jr., General Partner
By: /s/ WINIFRED F. BOOMERSHINE
-------------------------------------------
Winifred F. Boomershine, General Partner
TENANT:
BOOMERSHINE AUTOMOTIVE GROUP, INC.
d/b/a BOOMERSHINE NISSAN
/s/ [Illegible signature]
- ------------------------- By: /s/ Charles K. Yancey
Witness -----------------------------------------
Its: CEO
------------------------------------
Attest: /s/ DONNA GAMMON
-----------------------------------------
ITS: AUDITOR
------------------------------------
(CORPORATE SEAL)
-16-
<PAGE> 17
APPENDIX I
ENVIRONMENTAL ADDENDUM
------------------------------------
This is an Addendum to the Lease dated the 5th day of May, 1998 ("Lease")
between WINCO, LTD., a Georgia limited partnership, as Landlord, and Boomershine
Automotive Group, Inc. d/b/a Boomershine Nissan, as Tenant. Each capitalized
term which is not defined in this Addendum shall have the meaning ascribed to
such term in the Lease. In the event of any conflict between the provisions of
the Lease and the provisions of this Addendum, this Addendum shall control.
1. Control of the Premises. Tenant has had the opportunity to examine the
Premises and hereby agrees to accept them in the "as is" condition existing on
the Commencement Date. Tenant further acknowledges that Landlord has not made
any representations as to the present or future condition of the Premises, or
the presence or absence of hazardous substances (as hereinafter defined)
therein. If the Premises, the Buildings, or any equipment, trade fixtures or
other mechanical apparatus therein contains any hazardous substances, Landlord,
at its election, shall have the right to (i) case Tenant to remove and properly
dispose of same, all at Tenant's sole costs and expense and in compliance with
the provisions hereof, or (ii) perform the removal and disposal thereof itself,
in which event Tenant shall reimburse Landlord, on demand, for the cost incurred
by Landlord in doing so and securing the certifications referred to below.
2. Use. Landlord acknowledges that Tenant's intended use of the Premises
is for the operation of an automobile dealership and that said use may, as part
of Tenant's normal business operations, include the handling, storage,
production, disposal, sale or transportation of hazardous substances as
hereinafter defined. Except in connection with its normal business operations or
as otherwise specifically permitted herein, Tenant shall not cause or permit any
hazardous substances to be brought upon, generated, treated, kept or used in or
about the Premises by Tenant, its agents, employees, contractors or invitees.
3. Compliance with Laws. With respect to Tenant's use of the Premises,
Tenant shall at all times, at its own cost and expense, comply with all federal,
state and local laws, ordinance, regulations and standards relating to the use,
analysis, production, storage, sale, disposal or transportation of any hazardous
materials ("Hazardous Substance Laws"), including oil or petroleum products or
their derivatives, solvents, PCB's, explosive substances, asbestos, radioactive
materials or waste, and any other toxic, ignitable, reactive, corrosive,
contaminating or pollution materials ("hazardous substances") which are now or
in the future subject to any governmental regulations.
4. Notice to Landlord. Tenant shall give written notice to Landlord within
three (3) business days after the date on which Tenant learns or first has
reason to believe that:
4.1 There has or will come to be located on or about the Premises any
hazardous substance, the production, transportation, storage, use or
handling of which requires a permit or license from any federal, state or
local governmental agency. The notice provisions of this Addendum shall not
apply to, and Landlord shall not have any right to terminate the Lease
<PAGE> 18
on account of any use by Tenant in the course of a trade or business
conducted on the Premises of a substance which (a) is classified as a
hazardous substance under the Hazardous Substance Laws; (b) is of a type
which, under current industry practice, is commonly used as an integral
part of Tenant's approved business use of the Premises; (c) is so used by
Tenant in full compliance with applicable provisions of all Hazardous
Substance Laws; and (d) Tenant has given Landlord complete prior notice of
its use at the Premises.
4.2 Any release, discharge or emission of any hazardous substance has
occurred on or about the Premises.
4.3 Any (a) enforcement, cleanup, removal or other governmental or
regulatory action has been threatened or commenced against Tenant or with
respect to the Premises pursuant to any Hazardous Substance Laws; or (b)
any claim has been made or threatened by any person or entity against
Tenant or the Premises on account of any alleged loss or injury claimed to
result from the alleged presence or release on the Premises of any
hazardous substances; or (c) any report, notice or complaint has been made
to or filed with any governmental agency concerning the presence, use or
disposal of any hazardous substances on the Premises. Any such notice shall
be accompanied by copies of any such claim, report, complaint, notice,
warning or other communication that is in the possession of or is
reasonably available to Tenant.
Any notice required under this Section 4.3 shall be accompanied by (i)
a copy of all permits, licenses, proofs of disclosure to governmental
agencies pertaining to hazardous substances that have not previously been
furnished to Landlord; and (ii) copies of any Material Safety Data Sheets
pertaining to such substances that are required by applicable law.
5. Disposal. Except for materials that are (a) lawfully discharged from
the Premises, or (b) lawfully maintained on the Premises and/or sold in the
ordinary course of Tenant's business, Tenant shall cause any hazardous
substances to be removed from the Premises for disposal and to be transported
solely by duly licensed hazardous substances transporters to duly licensed
facilities for final disposal to the extent required by and in accordance with
applicable Hazardous Substances Laws, and shall upon request deliver to Landlord
copies of any hazardous waste manifest reflecting the proper disposal of such
substances.
6. Actions and Proceedings. Except in emergencies or as otherwise required
by law, Tenant shall not take any remedial action in response to the presence or
release of any hazardous substances on or about the Premises without first
giving written notice of the same to Landlord. Tenant shall not enter into any
settlement agreement, consent decree or other compromises with respect to any
claims relating to any hazardous substances in any way connected with the
Premises without first notifying Landlord of Tenant's intention to do so and
affording Landlord the opportunity to participate in any such proceedings.
7. Environmental Audits. Landlord may, but shall not be required to,
engage such independent contractors as Landlord determines to be appropriate to
perform, from time to time, an
-2-
<PAGE> 19
audit, including environmental sampling and testing of (a) the Premises, the
surrounding soil and any adjacent areas, and any groundwater located under or
adjacent to the Premises and/or any adjoining property, (b) Tenant's compliance
with all Hazardous Substances Laws and the provisions of this Addendum, and (c)
the provisions made by Tenant for carrying out any remedial action that may be
required by reason of the nature of Tenant's business and its operations of the
Premises (collectively an "Environmental Audit").
7.1 Costs and Expenses. All costs and expenses incurred by Landlord
in connection with any such Environmental Audit shall be paid by Landlord,
except that if any such Environmental Audit shows that Tenant has failed to
comply with the provisions of this Addendum, or that the Premises
(including surrounding soil and any underlying or adjacent property or
groundwater) have become contaminated due to the operations or activities
of Tenant at the Premises, then all the costs and expenses of such
Environmental Audit shall be paid by Tenant. Notwithstanding the foregoing,
if Landlord elects to have an Environmental Audit performed upon the
expiration or earlier termination of the Lease (the "Final Environmental
Audit"), then Landlord and Tenant shall each pay one-half (1/2) of the cost
of such Final Environmental Audit; provided that, if such Final
Environmental Audit shows that Tenant has failed to comply with the
provisions of this Addendum, or that the Premises (including surrounding
soil and any underlying or adjacent property or groundwater) have become
contaminated due to the operations or activities of Tenant at the Premises,
than all of the costs and expense of such Final Environmental Audit shall
be paid by Tenant.
7.2 Conduct of Audit. Each Environmental Audit (excepting only the
Final Environmental Audit, which shall not require any notice to Tenant)
shall be conducted (a) only after advance notice thereof has been provided
to Tenant at least twenty-four (24) hours prior to the date of such audit,
and (b) in a manner reasonably designed to minimize the interruption of
Tenant's operations and use of the Premises. Any damages to the Premises or
to Tenant's property which is caused by the independent contractor
conducting the Environmental Audit shall be paid for by the party
responsible for paying for the Environmental Audit, as determined pursuant
to Section 7.1 above.
8. Termination of Lease. Upon the expiration or earlier termination of the
term of the Lease, Tenant shall (a) cause all hazardous substances previously
owned, stored or used by Tenant to be removed from the Premises and disposed of
in accordance with applicable provisions of law; (b) remove any aboveground or
underground storage tanks or other containers installed or used by Tenant to
store any hazardous substances on the Premises, and repair any damage to the
Premises caused by such removal; (c) cause any soil, groundwater or other
portion of the Premises which is contaminated, to be decontaminated, detoxified
or otherwise cleaned up in accordance with the requirements of any governmental
authority with control over the Premises; (d) cause any property adjacent to the
Premises which is owned or controlled by Landlord which has become contaminated
by any hazardous substances brought onto, stored or used by Tenant on the
Premises; to be decontaminated, detoxified or otherwise cleaned up in accordance
with the requirements of any governmental authority with control over such
property; and (e) surrender possession of the Premises to Landlord free of
hazardous substances.
-3-
<PAGE> 20
9. Indemnification by Tenant. Tenant shall indemnify, defend with counsel
reasonably acceptable to Landlord and hold Landlord free and harmless from any
and all liabilities, damages, claims, penalties, fines, settlements, causes of
action, costs or expense, including reasonable attorneys' fees, environmental
consultant and laboratory fees, and the costs and expense of investigating and
defending any claims or proceedings, resulting from or attributable to (a) the
presence, disposal, release or threatened release of any hazardous substance
that is on, from or affecting the Premises including the soil, water,
vegetation, buildings, personal property, persons, animals or otherwise; (b) any
personal injury (including wrongful death) or property damage (real or
personal) arising out of or relating to the hazardous substance; (c) any lawsuit
or administrative order relating to the hazardous substance; and (d) any
violation of any laws applicable to the hazardous substance.
10. Survival. Tenant's indemnification obligations set forth herein shall
survive the expiration or earlier termination of the term of the Lease.
-4-
<PAGE> 1
EXHIBIT 10.20
BUICK MOTOR DIVISION
DEALER SALES AND SERVICE AGREEMENT
This Agreement, effective February 6, 1996, is between Buick Motor Division of
General Motors Corporation, a Delaware corporation, located at 902 East
Hamilton Avenue, Flint, Michigan 48550 ("Buick") and BOOMERSHINE
PONTIAC-BUICK-GMC, INC., a
[X] Georgia corporation, incorporated on September 30, 1992;
[ ] proprietorship;
[ ] partnership;
[ ] other - specify
-------------------------------------------------------
doing business at 2150 Cobb Parkway
Smyrna, Georgia 30080-7699 ("Dealer").
PREAMBLE
The Buick mission is to market Premium American Motorcars known for
substantial, distinctive, powerful and mature character and value. Buick
intends to fulfill that mission through mutual commitment with Buick dealers.
Buick and Dealer acknowledges that the public expects, and customers of Buick
Products demand quality, professionalism and respect from Buick and Dealer.
Buick and Dealer commit to the satisfaction of Buick customers and recognize
that achieving that objective will facilitate attainment of our mutual business
success.
This Agreement is intended to strengthen the business relationship that exists
between Buick and Buick dealers. Buick and Dealer recognize the critical need
for open and candid communications enabling each party to not only meet, but
exceed, our mutual expectations. As in any mutually beneficial business
relationship, an equitable distribution of responsibility and accountability
must be present to assure continuous improvement in that relationship. Our
future depends on establishing and meeting heightened standards of excellence
that are reasonable, measurable and attainable. This Agreement sets forth those
standards.
<PAGE> 2
First
COMMUNICATION
Buick and Dealer recognize the need for enhanced communication to facilitate
our mutual business and marketing planning, as well as Buick's and Dealer's
respective ongoing operations. Buick has established three groups of dealer
representatives to counsel with Buick pertaining to our mutual concerns, goals
and objectives. They are:
NATIONAL DEALER COUNCIL
The mission and responsibility of the National Dealer Council is to consult
with Buick regularly about the concerns of Buick dealers regarding the
relationship between Buick and Buick dealers and to work as liaison between
Buick and Buick dealers. The National Dealer Council consists of Buick dealers,
elected by Buick dealers, representing the various geographical regions of the
United States including members that represent large and small volume dealers
as well as multiple-line and single-line dealers. The National Automobile
Dealers Association Buick Line Chairman is also a guest member of the National
Dealer Council.
The National Dealer Council will meet with Buick periodically to express the
concerns, comments and suggestions of Buick dealers and to permit Buick to
respond. Much progress and improvement has been made over the years as a result
of National Dealer Council input, and Buick is committed to ensuring that this
avenue of communication continues.
BUSINESS ADVISORY BOARD
The mission and responsibility of the Business Advisory Board is to consult
with Buick regularly for the purpose of advising Buick about how Buick conducts
business with the dealer body. Buick will consult with the Business Advisory
Board to discuss the merits of proposed modifications to the Agreement that
would affect the performance required of Dealer prior to making a final
decision.
The Business Advisory Board consists of dealers appointed by Buick. It is
intended that the Business Advisory Board meet with Buick no less than twice
nor more than four times annually, to review current planning. The Chairman of
the National Dealer Council and National Automobile Dealers Association Buick
Line Chairman will be invited to attend all Business Advisory Board meetings.
MARKETING ADVISORY BOARD
The mission and responsibility of the Marketing Advisory Board is to consult
with Buick regularly for the purpose of advising Buick regarding matters
affecting how the public may perceive Buick, Buick Products and Buick dealers.
The Marketing Advisory Board consists of dealers appointed by Buick. It is
intended that the Marketing Advisory Board meet with Buick no less than twice
nor more than four times annually, to review current planning. The Chairman of
the National Dealer Council and the National Automobile Dealers Association
Buick Line Chairman will be invited to attend all Marketing Advisory Board
meetings.
COMMITMENT TO PARTICIPATE
Dealer acknowledges that to ensure success of the joint effort of Buick and its
dealers, Dealer participation is required. Dealer agrees to permit Dealer
Operator to serve when requested on the National Dealer Council, Business
Advisory Board or Marketing Advisory Board. This participation may require
travel and expenditures of time. Buick agrees to involve the appropriate
management in meetings with these dealer groups to maximize the effectiveness
of the joint process.
<PAGE> 3
Second
CUSTOMER ENTHUSIASM
Buick and Dealer recognize that it is our mutual obligation to deliver Products
and services that will be of such value that they provide life-cycle customer
enthusiasm exceeding buyer's expectations throughout the consideration,
purchase, ownership, service and repurchase process. By taking advantage of
each opportunity to listen to our customers and satisfy their expectations,
customers will be encouraged to purchase our Products and services, and will
encourage others to do the same. Buick and Dealer commit to actively seek out
customer comments and complaints and follow established guidelines for
resolutions thereby providing for continuous improvement in customer
relationships.
Buick commits to advise selected dealers, at least quarterly, regarding the
results of customers enthusiasm surveys, including a comparison of the
customer enthusiasm index for Dealer to the average customer enthusiasm index
of Buick dealers in the nation and local area. In the event that the customer
enthusiasm index for Dealer is significantly lower than the average customer
enthusiasm index for other dealers in the nation or local area for a period in
excess of one year, Dealer shall, upon the request of Buick, cooperate in a
comprehensive review of Dealer's customer enthusiasm performance and
participate in a customer enthusiasm improvement program designed by Dealer and
Buick.
Third
DEALER OPERATOR
Dealer agrees that the following Dealer Operator will provide personal services
in accordance with Article 2 of the Standard Provisions:
WALTER M. BOOMERSHINE, JR.
-------------------------------------------------------
-------------------------------------------------------
Fourth
REVIEW OF DEALER SALES PERFORMANCE
The decision by Buick to enter into this Agreement with Dealer is based, in
part, on Dealer's commitment to effectively sell and promote the purchase,
lease and use of Buick vehicles by consumers in Dealer's Area of Primary
Responsibility. Indeed, the success of Buick and Dealer is dependent on taking
full advantage of the sales opportunities available and obtaining a maximum
share of those segments of the automobile market in which we participate. To
assist Dealer to achieve this commitment, Buick commits to regularly review the
sales effectiveness of Dealer and provide to Dealer, at least once a year, a
written report on Dealer sales performance so that Dealer may take prompt
action, if necessary, to achieve satisfactory sales performance. Any written
comments on a sales performance report received from Dealer will become part
of the report.
<PAGE> 4
Fourth
The sales performance report will describe the retail sales opportunities
available in Dealer's Area of Primary Responsibility by taking Buick national
average retail penetration in each segment, multiplied by total industry retail
registrations in each appropriate segment for Dealer's Area of Primary
Responsibility. The sum of the appropriate segment's results will become the
number of retail units that Buick reasonably expects to be registered in
Dealer's Area of Primary Responsibility. This number will also be expressed as a
percentage of total retail sales opportunities. Dealer's retail sales will then
be compared to those expected registrations to determine Dealer's sales
effectiveness. Other factors, such as sales to fleet customers and significant
local conditions that may have affected Dealer's performance, will also be
considered in the overall sales performance review.
If, in some cases, relevant information, such as registration data, is not
available, Buick may rely on other data which it believes most reasonably
depict the purchases of new motor vehicles by customers located in Dealer's
Area of Primary Responsibility.
Buick will provide Dealer a detailed explanation of the sales performance
review process and advise Dealer of any refinements or modifications to the
process that may occur during the term of the Agreement. Buick will consult
with the Business Advisory Board to discuss the merits of any proposed
modifications prior to making a final decision.
Fifth
REVIEW OF DEALER'S SERVICE PERFORMANCE
Buick commits to regularly evaluate the service performance of Dealer and
provide to Dealer, at least once a year, a written report on Dealers's
performance of its responsibilities for service in areas such as service
management and operating procedures, personnel, facilities, new vehicle
pre-delivery service, parts operations and shop tools and equipment. Buick will
provide Dealer a detailed explanation of the service performance review
process, including any tool and equipment requirements, and advice Dealer of
any refinements or modifications to the process or requirements that may occur
during the term of the Agreement. Buick will consult with the Business Advisory
Board to discuss the merits of any proposed modifications to the service
performance review process prior to making a final decision.
Sixth
DEALER FACILITY APPEARANCE & USE
Buick has invested extensive resources and effort to develop and promote an
image and identity for Buick Products in the marketplace. This effort creates
customer expectations concerning Buick, its Products, and its dealers. As the
point of customer contact with Buick Products, the appearance and quality of
dealership facilities play a significant role in determining whether a
customer's sale and service experience is consistent with these expectations.
Dealer and Buick recognize that to capitalize fully on Buick's investments, and
to be consistent with Buick's overall marketing strategy, it is essential that
Buick's image and identity be reinforced at the dealership level. Dealer,
therefore, agrees to provide facilities which are consistent in appearance and
environment with Buick's reasonable requirements. To assist Dealer, Buick
agrees to counsel and advise Dealer concerning facility appearance, and will
make available counsel and advice on facility design. Buick will consult with
<PAGE> 5
Sixth
the Business Advisory Board to discuss the merits of overall dealership
appearance and facility requirements prior to making a final decision.
Buick and Dealer recognize the importance of fully promoting Buick Products. As
a result, Dealer agrees to provide prominent display of Buick Products in new
vehicle display and storage areas and conspicuously display Buick literature,
signage and logos throughout the dealership facility.
Seventh
ADVERTISING AND PROMOTIONAL ACTIVITIES
Buick and Dealer recognize the need to employ ethical business practices in
order to enhance the reputation of Buick, Buick Products and Buick dealers.
Buick and Dealer agree to safeguard and promote the reputation of Buick
Products in the conduct of their respective businesses and to avoid business
practices that may detract from that reputation. Buick and Dealer shall strive
to promote activities that may enhance that reputation and be consistent with
the public interest, and to expose and promote that image and reputation
through the appropriate media.
Buick and Dealer recognize the need to maintain uniformly high standards of
ethical advertising consistent with the reputation of Buick, Buick Products and
Buick dealers. Neither Buick nor Dealer will use advertising or merchandising
programs that mislead the public or impair the image or reputation of Buick,
Buick Products, or Buick dealers.
Buick believes Dealer Marketing Groups have proven to be extraordinarily
beneficial to dealer members and Buick through the use of collective resources
to advertise and promote the sale of Buick Products. Buick encourages Dealer to
support and participate in Dealer's local Dealer Marketing Group.
Eighth
TRAINING
Buick will consult with the Business Advisory Board to discuss the merits of
requiring additional training courses or programs prior to making a final
decision.
Ninth
BUICK DISPUTE RESOLUTION PROCESS
The purpose of the Buick Dispute Resolution Process ("Process") is to provide
a fair, speedy and inexpensive process for dealers to resolve disputes with
decisions made by Buick under this Agreement. Buick agrees to consult with the
Business Advisory Board prior to making revisions to the Process. The process
is and will be funded jointly and equally by Buick and its dealers under the
auspices of the Buick National Dealer Council.
Dealer agrees to attempt to resolve any dispute that it may have with Buick
arising out of the Agreement pursuant to the procedures set forth in this
Process prior to resorting to any other remedies Dealer may have under federal,
state or local laws.
<PAGE> 6
Ninth
The Process is available for use by current Buick dealers (not terminated or
prospective dealers or any third party) to resolve any dispute under the
Agreement except terminations for insolvency, seven-day closing, license
revocation, fraud or felony convictions. Standing to bring disputes or protests
to the Process will be the same as state law in the jurisdiction of the
proposed action. Should there be no state law to determine standing, standing
will be determined by the Administrator of the Process after consulting with
the provider of independent facilitators to the Process.
In the event that Dealer refers a dispute to this Process, Buick will take no
further action relative to the dispute until the Process is completed. Should
there be no more than one dealer protesting or disputing a proposed action, the
dealers requesting mediation will have a consolidated mediation panel hearing.
Step One - Management Review
If a dispute is not resolved by the Branch or Zone Manager to Dealer's
satisfaction, Dealer may request management review. To obtain
management review, Dealer must submit a written request to the Area
Assistant General Sales Manager (or appropriate similar position)
responsible for the geographic area in which Dealer is located, with a
description of the dispute and a request for meeting, if desired. The
request must be submitted within 60 days after Dealer receives the
Buick decision that is the cause of the dispute.
The meeting, if requested, or review by Area Assistant General Sales
Manager (or similar appropriate position) will be provided to Dealer
within 30 days of the receipt of the request for review.
Step Two - Mediation
In the event that the dispute is not resolved by management review,
Dealer may submit a written request for mediation to the General Sales
and Service Manager within 30 days. The General Sales and Service
Manager may then resolve the dispute in favor of the Dealer or refer
the matter to the Mediation Review Board.
Selection of Mediation Review Board
The Mediation Review Board will consist of Buick and Buick dealer
members, plus an independent facilitator who will assist in
administration of the Process. The dealer members will be elected
periodically as necessary by Buick dealers, from voluntary candidates
representing each Zone and Dealer Assistance Center, East and West.
The only requirement for election as a dealer board member is to have
been a Buick Dealer Operator for a minimum of three years.
Buick board members will be eight to twelve senior management Buick
employees designated by the General Sales and Service Manager. Buick
and dealer board members will attend training provided by the
facilitator in consensus decision making and dispute resolution
procedures. The facilitator will be chosen by Buick after consultation
with the Business Advisory Board.
Selection of Mediation Review Board Panel
Upon receipt of notice of a dispute referred to the Mediation Review
Board, the facilitator will randomly select three dealer board members
and notify Dealer. Dealer shall dismiss one dealer board member.
<PAGE> 7
NINTH
The facilitator will also provide Dealer with the list of Buick board
members. Dealer shall select three Buick board members, and Buick shall
dismiss one.
The Mediation Review Board Panel that will conduct the mediation will
consist of two dealer and two Buick board members, together with the
facilitator. The facilitator shall have no decision-making authority
with respect to the dispute, but will assist the panel with conducting
the mediation process in accordance with the procedure agreed to by
the panel.
The facilitator will schedule the mediation within 30 days of request
of review in the nearest zone city to the requesting Dealer.
Representation by legal counsel is permitted, if requested by Dealer.
If Dealer chooses to be represented by legal counsel, Buick will also
be permitted to be represented by legal counsel
The Mediation Review Board Panel will permit Buick and Dealer to
present arguments regarding the dispute and will make a consensus
decision, prior to adjourning the panel, either by resolving the
dispute in favor of Dealer or Buick, designing a compromise, or
rendering no decision. A written notice confirming the decision (or
lack thereof) will be issued by the Mediation Review Board Panel
within three working days of adjournment of the mediation.
Buick mediations are privileged and confidential proceedings.
Therefore, disputants are barred from forcing Mediation Review Panel
Members to testify or otherwise participate in any subsequent legal
proceeding of a disputed matter that was not resolved in mediation.
Effect of Mediation Review
A decision agreed upon by all members of the Mediation Review Board
Panel binds Buick if Dealer accepts the decision.
Dealer agrees to make good-faith consideration of the decision of the
Mediation Review Board Panel but is not bound to accept it.
Tenth
TERM OF AGREEMENT
This Agreement shall expire on OCTOBER 31, 2000, or ninety (90) days after the
death or incapacity of a Dealer Operator or Dealer Owner, whichever occurs
first, unless earlier terminated. Dealer is assured the opportunity to enter
into a new Dealer Agreement with Buick at the expiration date, if Buick
determines Dealer has fulfilled its obligations under this Agreement.
<PAGE> 8
Eleventh
INCORPORATION OF STANDARD PROVISIONS
The "Standard Provision" (Form GMMS 1013) are incorporated as a part of this
Agreement.
Twelfth
BUSINESS PLANS & ADDITIONAL AGREEMENTS
Buick and Dealer acknowledge that circumstances may arise that require
preparation of a specific business plan by Dealer which may address dealership
facilities and layout, dealer advertising activities, customer enthusiasm,
sales effectiveness, service operations, personnel requirements, training, or
merchandising programs. In the event that Buick and Dealer agree upon the need
for a business plan, Buick agrees to assist Dealer in developing such a plan.
Should there be additional agreements that modify this Agreement, they may be
incorporated into this Agreement by being affixed to the Agreement under the
heading:
"BUICK/DEALER ADDITIONAL AGREEMENT(S) TO BUICK AGREEMENT"
X Additional agreements affixed, consisting of
- -------
10 pages.
- -------
There are no additional agreements.
- -------
<PAGE> 9
Thirteenth
EXECUTION OF AGREEMENT
This Agreement and related agreements are valid only if signed:
(a) on behalf of the Dealer by its duly authorized representative and,
in the case of this Agreement, by its Dealer Operator; and
(b) this Agreement as set forth below, on behalf of Buick by its
General Sales and Service Manager and his authorized representative.
All related agreements will be executed by the General Sales and
Service Manager or his authorized representative.
If Dealer is an authorized dealer for more than one division of
General Motors, PONTIAC DIVISION will be primarily responsible for
administering the provisions of the Dealer Agreements relating to
the Dealer Statement of Ownership, Dealership Location and Premises
Addendum, and Capital Standard Addendum, and will execute or extend
those documents on behalf of all divisions.
BOOMERSHINE PONTIAC-BUICK-GMC, INC.
-----------------------------------------------------------------------
DEALER FIRM NAME
BUICK MOTOR DIVISION
General Motors Corporation
By:/s/ [ILLEGIBLE] 2/6/96 By:/s/ [ILLEGIBLE]
------------------------------- -------------------------------------
Dealer Operator Date General Sales and Service Manager
By:/s/ [ILLEGIBLE] Feb 06 1996
-------------------------------------
Authorized Representative Date
<PAGE> 1
EXHIBIT 10.21
GMMS 1012-1
USA 11-95
DNPS 11/29/94
GMC TRUCK DIVISION
DEALER SALES AND SERVICE AGREEMENT
This Agreement, effective FEBRUARY 16, 1996, is entered into by General Motors
----------------
Corporation, GMC Truck Division ("GMC Truck"), a Delaware corporation, and
BOOMERSHINE PONTIAC-BUICK-GMC, INC.
- --------------------------------------------------------------------------,a
/x/ GEORGIA corporation, incorporated on SEPTEMBER 30, 1992;
------------------ ------------------
/ / proprietorship;
/ / partnership;
/ / other - specify
-----------------------------------------------------
doing business at 2150 COBB PARKWAY
---------------------------------------------
SMYRNA, GEORGIA 30080-7699 ("Dealer").
---------------------------------------------
PREAMBLE
GMC Truck and its Dealer Partners... Leaders in Delivering Best-In-Class Trucks,
Vans and Innovative Services with a Personal Touch Achieving Total Customer
Enthusiasm.
To attain these goals, GMC Truck and its Dealer Partners firmly acknowledge:
That achieving total customer enthusiasm must be the objective of every
endeavor;
That continuous improvement is critical to our ongoing success;
That teamwork is essential to our survival;
That mutual trust and respect are absolute.
GMC Truck is committed to providing good value to dealers and customers through
sound marketing, sales and service programs, quality products, effective
resource deployment, simplified administrative activities, and effective
communications.
GMC Truck is committed to building a business relationship of preference for
General Motors dealers.
In pursuit of total customer enthusiasm, it is essential that GMC Truck and its
Dealer Partners work closely in a spirit of mutual trust and continuous
improvement.
This Agreement is founded on these mutually shared business goals, and is based
upon certain mutual commitments:
<PAGE> 2
GMMS 1012-2
USA 11-95
DNPS 11/29/94
First
TERM OF AGREEMENT
This Agreement shall expire on FEBRUARY 15, 2001 or ninety (90) days after the
----------------
death or incapacity of a Dealer Operator or Dealer Owner, whichever occurs
first, unless earlier terminated. Dealer is assured the opportunity to enter
into a new Dealer Agreement with GMC Truck at the expiration date if GMC Truck
determines Dealer has fulfilled its obligations under this Agreement. Dealer
will be provided notice of possible nonrenewal of the Agreement in accordance
with Article 13.2 of the Standard Provisions in order that Dealer may correct
any failure or breach of the Dealer Agreement prior to its expiration or
nonrenewal. If the breach of the Agreement or failure to perform the conditions
of the Agreement is corrected to the satisfaction of GMC Truck, a replacement
Agreement will be offered at the appropriate time.
Second
INCORPORATION OF PROVISIONS
The "Standard Provisions" (Form GMMS 1013) are incorporated as a part of this
Agreement.
Third
DEALER OPERATOR
Dealer agrees that the following Dealer Operator will provide personal services
in accordance with Article 2 of the Standard Provisions:
WALTER M. BOOMERSHINE, JR.
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-----------------------------------------------------------------
Fourth
BUSINESS PLAN
To achieve our mutual commitments, GMC Truck Dealer will develop an appropriate
Business Plan focused on continuous improvement of Dealer's operations. Such
Business Plan will address all sales and service aspects of Dealer's operations,
including an emphasis on total customer enthusiasm.
Such Business Plan will be developed and reviewed annually. GMC Truck will
assist in preparing the Dealer's Business Plan that is in keeping with the
objectives of GMC Truck and Dealer.
GMC Truck will provide Dealer with business goals, business planning
consultation, performance standards to assist Dealer in the evaluation of its
performance, and information directed to the specific requirements of Dealer.
Dealer will provide GMC Truck with sales and customer satisfaction forecasts and
business goals that are supported by action plans and are based upon market
analysis, arrived at through the Business Plan process. Dealer will provide, on
an ongoing basis, continuous market-driven information regarding customer needs
and expectation.
<PAGE> 3
GMMS 1012-3
USA 11-95
DNPS 11/29/94
Fifth
DEALER SALES AND SERVICE REPORTS
At least once a year GMC Truck will provide to Dealer written reports on
Dealer's sales, service and customer satisfaction performance.
The sales report will provide Dealer with specific information relating to the
minimum number of retail units GMC Truck expected to register as its percentage
of market share and compare Dealer's retail sales to those Expected
registrations. A Retail Sales Index of 100 is the minimum standard for Dealer to
be considered in compliance with its commitment under Article 5.1 to effectively
sell and promote the purchase, lease and use of GMC Truck Products. GMC Truck
also expects Dealer to pursue available sales opportunities exceeding the
minimum acceptable standard. Dealers authorized to sell and service GMC Truck
medium duty product will be provided specific information relating to the total
medium truck business available in the Dealer's APR. GMC Truck will review the
service and customer satisfaction performance of Dealer and provide Dealer with
a written report or reports at least once a year. The reports will be based
primarily on customer responses to owner survey questions. GMC Truck will
consult with the National Dealer Council before deciding to materially change
the way these reports are developed.
Dealer's performance based upon expected performance levels will become the
target toward which Dealer attains continuous improvement. The Business Plan
provides the process by which Dealer continually improves.
GMC Truck will provide periodic updates of marketing data that reflect market
conditions within Dealer's APR.
Sixth
CUSTOMER ENTHUSIASM
GMC Truck and Dealer recognize that it is in our mutual interest to deliver
products and services that exceed customer expectations. GMC Truck and Dealer
will use the procedures designated in GM's Service Policies and Procedures
Manual to resolve customer complaints. Periodically, GMC Truck will survey
customers of Dealers to determine their overall satisfaction with their selling
and servicing dealer.
GMC Truck will review Dealer's performance of the Standards for customer
enthusiasm. At least annually GMC Truck will inform Dealer in writing of its
Customer Satisfaction Information ("CSI") for overall satisfaction based upon
both purchase/delivery experience and service experience. GMC Truck will relate
this index to comparable indices representing local and national geography. If
Dealer's index places Dealer in an unsatisfactory position when compared to
other dealers for more than one year, Dealer will, at GMC Truck's request,
participate in a comprehensive review of Dealer's performance and plan for
improvement. Before making any changes to the CSI procedure, GMC Truck will
consult with the appropriate Dealer Council committee.
Seventh
COMMUNICATIONS/DEALERSHIP EQUIPMENT
To improve Dealer and GMC Truck communications and customer enthusiasm, and to
enhance value to Dealer, Dealer will install and maintain the systems, equipment
and supporting software as required by GMC Truck. Such systems, equipment and
support software includes but may not be limited to:
- Dealer Communication System (DCS) and trained DCS operators
- GM Pulsat Network
- GM PROSPEC
<PAGE> 4
GMMS 1012-4
USA 11-95
DNPS 11/29/94
Seventh
New or existing communications and dealership equipment systems and technology
that may became available will be reviewed with the National Dealer Council
before the decision is made to require their use by Dealer.
GMC Track acknowledges the importance of dealer input on matters that affect the
dealer's business. GMC Truck will endeavor to seek counsel from the appropriate
dealer advisory committees to the extent marketplace conditions allow, before
making decisions on matters that directly affect all GMC Truck dealers. Dealer
input will not normally be solicited for matters involving specific dealers,
dealer network planning, and production and distribution of Product.
Eight
DEALER TRAINING
In addition to the requirements specified in Article 8 of the Standard
Provisions, Dealer agrees to utilize other sources to supplement its training in
order to meet the minimum operations requirements.
Dealer will also have appropriate personnel participate in the following
required courses:
- Professional Performance Network (PPN)
- Trans-Tech Guild
- Service Training Standards courses, and their prerequisites,
as required, at GM Training Centers or other approved training
institutions.
- Certified Plus Programs provided by GMC Truck as high priority
for in-dealership service training.
GMC Truck will train its wholesale organization to effectively address the needs
of Dealer.
Future required training will be reviewed by the National Dealer Council prior
to determining training courses or programs for use by Dealer.
Ninth
DEALER IDENTIFICATION, IMAGE AND FACILITIES
Dealer and GMC Truck recognize the importance of representing GMC Truck Products
to the fullest extent possible. Accordingly, Dealer agrees to prominently
display GMC Trucks in new vehicle display areas and new vehicle storage areas;
to conspicuously display GMC Truck literature, merchandising elements and marks;
both inside and outside the dealer facilities; and to maintain facilities that
will enhance the effective performance of Dealership Operations.
GMC Truck supports the On-Going Merchandising Programs for Light, Medium
Conventional, and Medium Low Cab Forward as well as the Service Merchandising
Program, and GMC Truck encourages Dealer to support and participate in the
merchandising programs for each product line Dealer is authorized to sell and
service.
Dealer and GMC Truck acknowledge the importance of providing one consistent
facility image nationwide for a single line GMC Truck dealer. Accordingly,
Dealer agrees to totally implement the approved GMC Truck Facility Image Program
when a facility is built or renovated. If Dealership includes another General
Motors Division(s) and Dealer implements that Division's facility image program,
Dealer agrees to implement GMC Truck Image elements as specified by GMC Truck.
<PAGE> 5
GMMS 1012-5
USA 11-95
DNPS 11/29/94
Ninth
Dealer will prominently use GMC Truck's marks on all Dealer advertising,
merchandising and other literature. Dealer will also include GMC Truck in its
name whenever Dealer name includes the name of other vehicle name plates or
brands.
GMC Truck will consult with the National Dealer Council before deciding to
modify facility requirements.
Tenth
DEALER ADVERTISING
GMC Truck supports dealer advertising associations and encourages Dealer to
support and participate in an advertising association in its respective area.
Eleventh
DEALER COUNCIL REPRESENTATION
GMC Truck will support two National Dealer Councils comprised of a
representative number of dealers, elected by GMC Truck and Chevrolet Medium Duty
Truck dealers as appropriate, who will convey the concerns of dealers to GMC
Truck. A Light Duty National Dealer Council will be comprised of GMC Truck light
truck dealers, and a Medium Duty National Dealer Council comprised of GMC Truck
and Chevrolet Medium Truck dealers. The National Dealer Council representatives,
GMC Truck management, and GMC Truck dealers will serve jointly on committees
which are created to focus on issues of mutual concern to dealers and GMC
Truck. Chevrolet Medium Truck dealers will serve on Medium Duty Council
committees. GMC Truck will meet with its National Dealer Council periodically to
review those concerns and other mutual business issues.
The responsibility of the GMC Truck National Dealer Council is to develop and
maintain a business relationship between GMC Truck and the dealer body that
fosters the mutual interests of both Dealer and GMC Truck. Council
representatives will communicate with the dealer body in the Zone/Area they are
representing by providing feedback on dealer council activities and informing
the Dealer Council and GMC Truck of dealer body concerns.
Twelfth
BUSINESS MANAGEMENT RESPONSIBILITY
If Dealer is an authorized dealer for more than one division of General Motors,
PONTIAC DIVISION will be primarily responsible for administering the provisions
of the Dealer Agreements relating to the Dealer Statement of Ownership,
Dealership Location and Premises Addendum, and Capital Standard Addendum.
PONTIAC DIVISION will execute or extend those documents for all divisions.
Thirteenth
DISPUTE RESOLUTION
GMC Truck and Dealer expect that their differences will be few. If Dealer
believes that a decision by GMC Truck is unfair, Dealer may have it reviewed by
GMC Truck management so that it can be addressed and, if possible, resolved.
Management review will promote a better understanding of the positions of GMC
Truck and Dealer and will provide for the mutually satisfactory resolution of
most issues. However, if Dealer is not satisfied with the results of management
review, Dealer is encouraged to submit the dispute to arbitration under the
Dispute Resolution Process. The steps by which Dealer can seek management review
and arbitration are described in a separate booklet (currently, GMMS 1019).
<PAGE> 6
GMMS 1012-6
USA 11-95
DNPS 11/29/94
Fourteenth
EXECUTION OF AGREEMENT & RELATED DOCUMENTS
This Agreement and related agreements are valid only if signed:
(a) On behalf of Dealer by its duly authorized representative and,
in the case of this Agreement, by its Dealer Operator; and
(b) this Agreement as set forth below, on behalf of GMC Truck
Division by its General Sales Manager and an authorized
representative. All related agreements will be executed by the
General Sales Manager or an authorized representative.
The following agreements and understandings are hereby incorporated into this
Agreement:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
and all existing addenda (other than Successor Addendum) relating to Dealer
Statement of Ownership, Dealer Location and Premise Addendum, Capital Standards
Addendum, Area of Primary Responsibility, Motor Vehicle Addendum and Multiple
Dealer Operator Addendum, if applicable, which have not been re-executed at the
time of the Agreement.
BOOMERSHINE PONTIAC-BUICK-GMC, INC.
- ------------------------------------------------------------------------------
Dealer Firm Name
GMC TRUCK DIVISION
General Motors Corporation
By /s/ ILLEGIBLE 3/12/96 By /s/ ILLEGIBLE
----------------------------------- --------------------------------
Dealer Operator Date General Sales and Service Manager
By By /s/ ILLEGIBLE 5/17/96
----------------------------------- --------------------------------
Signature and Title Date Authorized Representative Date
By
-----------------------------------
Signature and Title Date
<PAGE> 1
EXHIBIT 10.22
PONTIAC DIVISION
DEALER SALES AND SERVICE AGREEMENT
In reliance upon the agreement by the parties to fulfill their respective
commitments, this Agreement, effective NOVEMBER 01, 1995, is entered into by
General Motors Corporation, Pontiac Division ("PONTIAC"), a Delaware
Corporation, and
BOOMERSHINE PONTIAC-GMC TRUCK, INC. , a
- ----------------------------------------------------------------------
[X] GEORGIA corporation, incorporated on DECEMBER 31, 1958;
[ ] proprietorship;
[ ] partnership;
[ ] other - specify
-------------------------------------------------
doing business at 2150 COBB PARKWAY
SMYRNA, GEORGIA 30080-7699 ("Dealer").
PREAMBLE
The future of PONTIAC and PONTIAC dealers depends on setting and meeting high
standards of excellence. We will succeed by achieving total customer enthusiasm
through selling and servicing vehicles with innovative styling and engineering
as well as outstanding performance and roadability.
PONTIAC'S Dealer Sales and Service Agreement is intended to clarify and
strengthen the business relationship between PONTIAC and PONTIAC dealers.
PONTIAC recognizes the need for open and candid communication with dealers so
that mutual goals are achieved. Sharing responsibility and accountability will
improve cooperation.
PONTIAC will offer and promote innovative and exciting Products and provide
competitive programs and services that assist dealers. Dealers will ethically
promote and advertise PONTIAC vehicles and related products and provide quality
sales and service through a professional staff that includes knowledgeable and
well-trained service technicians and sales personnel.
First TERM OF AGREEMENT
This Agreement shall expire on OCTOBER 31, 2000, or ninety days after the death
or incapacity of a Dealer Operator or Dealer Owner, whichever occurs first,
unless earlier terminated. Dealer is assured the opportunity to enter into a new
Dealer Agreement with PONTIAC at the expiration date if PONTIAC determines
Dealer has fulfilled its obligations under this Agreement.
Second INCORPORATION OF STANDARD PROVISIONS
The "Standard Provisions" (Form GMMS 1013) are incorporated as a part of this
Agreement.
<PAGE> 2
Third DEALER OPERATOR
Dealer agrees that the following Dealer Operator will provide personal services
in accordance with Article 2 of the Standard Provisions:
WALTER M. BOOMERSHINE, JR.
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--------------------------------------------------------------------
Fourth BUSINESS MANAGEMENT RESPONSIBILITY
If Dealer is an authorized Dealer for more than one division of General Motors,
PONTIAC DIVISION will be primarily responsible for administering the provisions
of the Dealer Agreements relating to the Dealer Statement of Ownership,
Dealership Location and Premises Addendum, and Capital Standard Addendum.
PONTIAC DIVISION will execute or extend these documents for all divisions.
Fifth COMMUNICATIONS
PONTIAC acknowledges the importance of dealer input on matters that affect the
way dealers do business. PONTIAC will endeavor to seek counsel from appropriate
dealer advisory committees to the extent marketplace conditions allow before
making decisions on matters that directly affect PONTIAC dealers. Dealer input
will not normally be solicited for matters involving specific dealers, dealer
network planning, and production and distribution of Product. Dealer
acknowledges that, to ensure the success of PONTIAC and its dealers,
participation in dealer input mechanisms may be required. Dealer hereby agrees
to serve when requested on PONTIAC'S Dealer Communication committees or any
subcommittees and other dealer committees intended to promote communication.
Sixth SOFTWARE
From time to time during the term of this Agreement, GM will make available to
Dealer certain information, data, software or firmware ("software")
electronically, incorporated into tools or other products or by other means.
This Software may be owned outright by GM, or jointly with, or wholly by, a GM
affiliated company or authorized supplier. Dealer agrees to limit its use of
the Software to Dealership Operations and comply with any other restrictions on
its use.
Seventh DISPUTE RESOLUTION
PONTIAC and Dealer expect their differences will be few. If Dealer believes
that a decision by PONTIAC is unfair, Dealer may have it reviewed by PONTIAC
management so that it can be addressed and, if possible, resolved. Management
review will promote a better understanding of the positions of PONTIAC and
Dealer and will provide for the mutually satisfactory resolution of most
issues. However, if Dealer is not satisfied with the results of management
review, Dealer is encouraged to submit the dispute to binding arbitration under
the Dispute Resolution Process. The steps by which Dealer can seek management
review and binding arbitration are described in a separate booklet (GMMS 1019).
<PAGE> 3
Eighth ADVERTISING AND PROMOTIONAL ACTIVITIES
Dealer shall promote the reputation of PONTIAC Products in the conduct of its
business. PONTIAC and Dealer shall not use any advertising or promotional
activity that may be harmful to that reputation. PONTIAC and Dealer shall not
engage in any unethical practices.
Ninth TRAINING
PONTIAC and Dealer agree that professional and knowledgeable sales and service
personnel are essential to a satisfactory customer sales and service
experience. PONTIAC commits to providing training to its personnel. PONTIAC
also agrees to make available new Product and service training to all dealers.
Dealer agrees that it will require its personnel to attend training identified
by PONTIAC as necessary. If PONTIAC identifies Dealer deficiencies, Dealer
agrees that its sales and service personnel will complete courses specified by
PONTIAC to address those deficiencies. PONTIAC agrees to consult with the
established dealer advisory committee before adopting additional required
training. PONTIAC will consider the committee's recommendations as to content,
cost and frequency of additional required training.
Tenth DEALER FACILITY APPEARANCE
Customers have high expectations for PONTIAC, its Products and dealers. As the
point of customer contact with PONTIAC Products, dealership Premises play a
significant role in determining whether a customer's sales and service
experience is consistent with these expectations. PONTIAC and Dealer recognize
it is essential that PONTIAC'S image and identity be reinforced at the
dealership level. Dealer therefore agrees to provide facilities that meet, in
appearance and quality, PONTIAC'S reasonable requirements. To assist Dealer,
PONTIAC will counsel and advise Dealer concerning facility appearance and
design. PONTIAC agrees to consult with the established dealer advisory
committee when developing appearance guidelines.
Eleventh TOOLS AND EQUIPMENT
PONTIAC and Dealer acknowledge that a properly equipped dealership promotes
customer satisfaction and sale of PONTIAC Products. PONTIAC agrees to provide
Dealer with lists of essential tools and necessary equipment. DEALER will
endeavor to select tools and equipment whose acquisition cost is reasonable.
Dealer agrees that it will acquire and use essential tools and necessary
equipment identified by PONTIAC. PONTIAC agrees to consult with the established
dealer advisory committee prior to recommending or requiring tools or equipment
other than those determined by PONTIAC to be essential or necessary.
Twelfth BUSINESS PLANNING
PONTIAC has established a business planning process to assist dealers. Dealer
agrees to prepare and submit any reasonable business plan required by PONTIAC.
PONTIAC agrees to provide Dealer with information specific to its dealership
and to assist Dealer in its business planning. PONTIAC agrees to improve the
business planning process based on experience with it and to consult with the
established dealer advisory committee before making substantive changes to the
process.
Thirteenth DEALER SALES AND SERVICE REVIEW
PONTIAC'S willingness to enter into this agreement with Dealer is based in part
on Dealer's commitment to effectively sell and promote the purchase, lease and
use of PONTIAC Products in Dealer's Area of Primary Responsibility ("APR"). The
success of PONTIAC and Dealer depends to a substantial degree on Dealer's
taking advantage of available sales opportunities.
<PAGE> 4
Thirteenth
Given this Dealer commitment, it is appropriate that PONTIAC regularly review
the sales effectiveness of Dealer. Accordingly, PONTIAC will provide an annual
written report advising dealer of Dealer's Retail Sales Index. The report will
also include Dealer's state ranking based on Dealer's Retail Sales Index, fleet
registrations in Dealer's APR and an area retail registration index. PONTIAC
agrees to consult with the established dealer advisory committee before making
any changes to the sales review process.
A Retail Sales Index of 100 is the minimum standard for Dealer to be considered
in compliance with its commitment under Article 5.1 to effectively sell and
promote the purchase, lease and use of PONTIAC Products. PONTIAC also expects
Dealer to pursue available sales opportunities exceeding the minimum acceptable
standard. Additionally, PONTIAC'S expectations for performance in an area may
exceed the minimum acceptable standard for individual dealer compliance.
Fourteenth CUSTOMER ENTHUSIASM
PONTIAC and Dealer recognize that it is in our mutual interest to deliver
products and services that exceed customer expectations and thereby achieve
customer enthusiasm. PONTIAC and Dealer will use the customer response
procedures designated in PONTIAC'S Service Policies and Procedures Manual to
resolve customer concerns. Periodically, PONTIAC will conduct Customer
Satisfaction Information Surveys (CSI) to determine customers overall
satisfaction with their purchase or service experience. Before making any
changes to the CSI procedure, PONTIAC will consult with the appropriate dealer
committee.
PONTIAC will review Dealer's performance of its responsibilities for customer
enthusiasm measured by the CSI. At least annually PONTIAC will inform Dealer in
writing of its CSI for overall satisfaction based upon both purchase experience
and service experience. We will relate this index to comparable indices
representing local and national geography. If Dealer's index places Dealer in
an unsatisfactory position for more than one year when compared to other
dealers, Dealer will, at PONTIAC'S request, participate in a comprehensive
review of Dealer's performance and develop a plan for improvement satisfactory
to Pontiac.
Fifteenth ADDITIONAL AGREEMENTS AND UNDERSTANDINGS
The following agreements and understandings are hereby incorporated into this
Agreement:
TRUST LETTER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
and all existing addenda (other than Successor Addendum) relating to Dealer
Statement of Ownership, Dealer Location and Premises Addendum, Capital Standard
Addendum, Area of Primary Responsibility, Motor Vehicle Addendum and MDO
Addendum, if applicable, which have not been reexecuted at the time of this
agreement.
<PAGE> 5
EXECUTION OF AGREEMENT
This Agreement and related statements are valid only if signed:
(a) on behalf of Dealer by its duly authorized representative
and, in the case of this Agreement, by its Dealer Operator;
and
(b) this Agreement as set forth below, on behalf of PONTIAC by
its General Sales and Service Manager and his authorized
representative. All related agreements will be executed by
the General Sales and Service Manager or his authorized
representative.
BOOMERSHINE PONTIAC-GMC TRUCK, INC.
- --------------------------------------------------------------------------------
Dealer Firm Name
PONTIAC MOTOR DIVISION
General Motors Corporation
By /s/ [ILLEGIBLE] 9/18/95 By /s/ [ILLEGIBLE]
---------------------------------- -------------------------------------
Dealer Operator Date General Sales and Service Manager
By /s/ [ILLEGIBLE] 9-20-95
-------------------------------------
Authorized Representative Date
<PAGE> 1
EXHIBIT 10.35
MAZDA DEALER AGREEMENT MAZDA
- --------------------------------------------------------------------------------
Signature Page
TERM June 3, 1996 through December 31, 1994
---------------------------- ------------------------------
DEALER DEALER's Legal Name Robertson Cadillac-Oldsmobile, Inc.
---------------------------------------------------
d/b/a Moss Robertson Mazda
---------------------------------------------------
DEALER's Approved Location 2355 Browns Bridge Road
--------------------------------------
Gainesville, Georgia
--------------------------------------
By /s/ E.M. Robertson, Jr. Title President
-------------------------------- -----------------------
E. Moss Robertson, Jr.
MAZDA MAZDA MOTOR OF AMERICA, INC. 7766 Irvine Center Drive
Irvine, California 92718
By /s/ John A. English Title Vice President
-------------------------------- -----------------------
John A. English
The MAZDA Dealer Agreement shall be effective only
upon the written approval of the President or any of
the Vice Presidents of MAZDA.
<PAGE> 2
SCHEDULE OF DOCUMENTS MAZDA
- --------------------------------------------------------------------------------
I. BASIC AGREEMENT Basic Agreement
Sales and Service Obligations of MAZDA and DEALER
MAZDA Image
Customer Satisfaction
Essential MAZDA Programs
MAZDA Information Systems
Reasonable Expectations of DEALER AND MAZDA
Communications and Review Procedures
Additional Provisions
Term
DEALER Acknowledgment
--------------------------------------------------
II. ADDITIONAL AGREEMENT General Terms and Conditions
Definitions
General Provisions
Purchase Terms and Conditions
Dealership Location
DEALER Review and Action Plan
MAZDA Image
Renewal and Termination
Renewal
Termination
Effect of Expiration or Termination
Mutual Releases
Other Actions
Ownership and Transfer
General
Rights to Spouses and Children
Transfer to Other Nominees
Dispute Resolution
Non-Judicial Resolution
Third Party Non-Judicial Resolution
Judicial Resolution
<PAGE> 3
BASIC AGREEMENT MAZDA
- --------------------------------------------------------------------------------
The purpose of the MAZDA Dealer Agreement is
to provide for the sale and service of MAZDA
Products in a manager that will promote: (i) the
mutual interests of MAZDA and DEALER while
maintaining high levels of satisfied customers of
MAZDA Products; (ii) the image, reputation and
goodwill of DEALER, MAZDA, MAZDA Products and all
MAZDA Dealers generally; and (iii) an effective
and efficient distribution system for MAZDA
Products. MAZDA and DEALER recognize that the
relationship between them requires effective
communications and reasonable cooperation.
DEALER also recognizes that the successful sale
and service of MAZDA Products on a national basis
requires that DEALER and all other MAZDA Dealers
enter into standardized forms of agreement
established by MAZDA, participate in programs
offered by MAZDA and comply with obligations that
apply to MAZDA Dealers generally. Accordingly,
MAZDA and DEALER agree to deal in good faith with
each other and with customers of MAZDA Products.
MAZDA and DEALER further agree:
--------------------------------------------------
1. SALES AND SERVICE 1. MAZDA's Obligations.
OBLIGATIONS OF MAZDA MAZDA agrees to establish programs supporting an
AND DEALER effective and efficient distribution system for
MAZDA Products, MAZDA Dealers generally, and
DEALER's efforts to promote, sell and service
MAZDA Products at DEALER's Approved Location.
Accordingly, and without limitation, MAZDA shall
perform the following obligations in addition to
those provided elsewhere in the MAZDA Dealer
Agreement:
(a) review and evaluate DEALER's facilities,
as well as the sales, service, parts and other
authorized operations of DEALER, based on:
(i) DEALER's inventories and demonstrated sales
performance; (ii) MAZDA Vehicles in use and
DEALER's potential for selling MAZDA Products in
the local area where DEALER is located; and (iii)
the type of full-service facilities reasonably
necessary for maintaining the image and
competitive position of MAZDA Productions in the
local area where DEALER does business.
(b) offer MAZDA Products to DEALER from the
supply which is available to MAZDA,
(c) employ qualified and trained personnel to
visit DEALER's facilities on a periodic basis to
review and discuss sales, service, parts and
general management matters,
(d) advertise in national and regional media
selected by MAZDA and assist dealer advertising
associations,
(e) participate in regional auto shows and
product exhibitions,
(f) prepare and offer retail sales promotion
materials for DEALER's use, such as catalogs,
banners, product information centers and other
point-of-sale materials,
(g) prepare and offer aids for use by
DEALER's sales, service and parts personnel,
(h) establish and offer incentive programs
for DEALER sales, service, parts and
administrative personnel,
(i) conduct training programs for DEALER's
sales, service, parts, administrative and
management personnel, and
(j) offer special tools, manuals and
equipment for DEALER's personnel.
2. DEALER's Obligations.
DEALER agrees to energetically and effectively
promote, sell and service MAZDA Products at
DEALER's Approved Location. Accordingly, and
without limitation, DEALER shall perform the
following obligations in addition to those
provided elsewhere in the MAZDA Dealer Agreement:
(a) maintain dealership facilities for sales,
service, parts and other operations with reference
to MAZDA's evaluation of DEALER, including but not
necessarily limited to showroom, sales, business
office, outside vehicle display, vehicle storage,
service, parts and customer parking facilities,
(b) maintain and display an adequate
inventory of MAZDA Products which are offered to
DEALER by MAZDA,
<PAGE> 4
BASIC AGREEMENT MAZDA
- --------------------------------------------------------------------------------
(c) employ qualified and trained personnel
for the sale and service of MAZDA Products, (d)
advertise MAZDA Products and services in the local
area where DEALER is located, using media selected
by DEALER, (e) participate in local auto shows and
product exhibitions, (f) use retail sales
promotion materials prepared by MAZDA for use by
MAZDA Dealers, such as catalogs, banners, product
information centers and other point-of-sale
materials, (g) use sales aids prepared by MAZDA
for use by sales, service and parts personnel of
MAZDA Dealers,
(h) encourage DEALER's sales, service, parts
and administrative personnel to participate in
incentive programs offered by MAZDA.
(i) cause DEALER's eligible employees to
fully participate in training programs conducted
by MAZDA for sales, service, parts,
administrative and management personnel of MAZDA
Dealers, and
(j) acquire, maintain and use special tools,
manuals and equipment offered by MAZDA for use by
DEALER's personnel.
--------------------------------------------------
II. MAZDA IMAGE MAZDA and DEALER acknowledge that the following
are essential purposes of the MAZDA Dealer
Agreement:
(a) to safeguard and promote the image,
goodwill and reputation of the MAZDA Trademarks,
MAZDA Products, MAZDA, DEALER and MAZDA Dealers
generally, and
(b) to avoid any and all deceptive,
misleading, illegal, unethical and discourteous
practices by the parties and their personnel.
Accordingly, MAZDA and DEALER agree to
conduct all activities between them and others in
such manner as is consistent with and in
furtherance of these essential purposes, and to
take any action reasonably required to correct a
situation having an adverse effect on the MAZDA
image.
--------------------------------------------------
III. CUSTOMER SATISFACTION 1. Acknowledgement.
MAZDA and DEALER acknowledge that, in maintaining
and preserving the image, reputation and goodwill
of the MAZDA Trademarks, MAZDA Products, DEALER,
MAZDA and MAZDA Dealers generally, the highest
priority shall be given to ensure that customers
are continually informed about and satisfied with
MAZDA Products and services provided by MAZDA and
DEALER. MAZDA and DEALER further acknowledge that
the principal contact with customers will be
DEALER, the DEALER shall have the primary
responsibility for handling customer satisfaction
matters, and that MAZDA shall support DEALER's
efforts by providing technical information and
assistance regarding MAZDA Products. Accordingly,
in addition to their own obligations under the
MAZDA Dealer Agreement, MAZDA and DEALER agree to
the following provisions.
2. MAZDA's Obligations.
MAZDA shall:
(a) cause qualified personnel to visit
DEALER's facilities on a periodic basis to discuss
customer satisfaction matters,
(b) designate a person having the principal
responsibility and authority on behalf of MAZDA to
handle and resolve customer satisfaction matters
with customers and DEALER,
(c) prepare and offer to DEALER consumer
materials about MAZDA Products and services,
(d) establish consumer communications
programs,
(e) keep DEALER promptly and fully advised
with respect to customer matters involving DEALER,
and timely respond to notices from DEALER in
situations involving claims of defects in MAZDA
Products, and
(f) provide suitable information to permit
DEALER to respond to customers, consumer
organizations and government agencies in a timely
and courteous fashion in customer satisfaction
matters involving DEALER.
3. DEALER's Obligations.
DEALER shall:
(a) ensure proper training in customer
satisfac-
2
<PAGE> 5
BASIC AGREEMENT MAZDA
- --------------------------------------------------------------------------------
tion matters for sales, service, parts and
administrative personnel, and causes DEALER's
personnel at all times to treat customers in a
prompt, courteous and professional manner,
(b) designate a person having the principal
responsibility and authority on behalf of DEALER
to handle and resolve customer satisfaction
matters with customer sand MAZDA,
(c) provide to customers materials prepared
by MAZDA about MAZDA Products and services,
(d) participate in consumer communications
programs established by MAZDA,
(e) keep MAZDA promptly and fully advised
with respect to claims of defects in MAZDA
Products and other customer matters in which
MAZDA has expressed an interest, and
(f) cooperate with consumer organizations
and government agencies in customer satisfaction
matters in a fair and honest manner which will
maintain the goodwill of customers and the image
and reputation of MAZDA Products.
--------------------------------------------------
IV. ESSENTIAL MAZDA MAZDA shall develop and offer programs for
PROGRAMS the benefit of (i) customers, (ii) MAZDA Dealers
or (iii) MAZDA concerning, without limitation,
advertising, sales, data processing, consumer
information and service and training. MAZDA's
general manager may reasonably deem participation
by MAZDA Dealers generally in certain programs to
be essential for maintaining an affective and
efficient distribution system for MAZDA Products.
Accordingly, DEALER shall participate in these
essential programs pursuant to their terms and
conditions as part of the performance by DEALER
of its obligations under the MAZDA Dealer
Agreement. MAZDA reserves the right to limit
DEALER's participation in other programs of MAZDA
if DEALER fails or refuses to participate in an
essential program.
--------------------------------------------------
V. MAZDA INFORMATION 1. Establishment and Purpose.
SYSTEMS MAZDA shall establish, from time to time,
information systems for use by MAZDA Dealers
generally and MAZDA to maintain an affective and
efficient distribution system for MAZDA Products,
to facilitate the efficient and timely performance
of their obligations to one another, and to
enhance the competitive position of MAZDA Products
in the marketplace. These systems shall, without
limitation relate to:
(a) distribution, sales and inventories of
MAZDA Products.
(b) warranty claims,
(c) consumer communications,
(d) product quality assurance.
(e) DEALER financial information, and
(f) transportation claims.
2. DEALER Utilization.
DEALER shall utilize these information systems, in
accordance with policies and procedures applicable
to MAZDA Dealers generally and established by
MAZDA from time to time. As part of such
utilization, DEALER shall report, update and
verify information as may be required by MAZDA for
processing and maintaining information under such
systems.
3. Electronic Systems.
MAZDA and DEALER acknowledge that effective and
efficient communications of information between
them is increasingly likely to require DEALER to
utilize electronic communication and data
processing hardware and software which can
communicate with and is otherwise compatible with
MAZDA's hardware and software. Accordingly, DEALER
shall acquire and maintain hardware and software
deemed by MAZDA to be necessary for this purpose.
DEALER shall implement necessary changes and
modifications in its hardware and software as may
be required by MAZDA for this purpose upon MAZDA's
giving at least three month's advance written
notice to DEALER of such changes.
3
<PAGE> 6
BASIC AGREEMENT MAZDA
- -------------------------------------------------------------------------------
4. Accurate Information
DEALER acknowledges that maintaining accurate
information regarding DEALER's Business on a
current basis is important for the management and
evaluation of DEALER's Business and also to
permit MAZDA to identify and develop programs and
services for the benefit of MAZDA Dealers and
customers generally. Accordingly, DEALER agrees
that all information submitted to MAZDA shall be
complete and accurate and submitted in the form
and at the times requested by MAZDA. DEALER will
verify the accuracy of all information prior to
its being submitted to MAZDA so that no
information will be false or misleading. In
addition to any other remedies available to MAZDA
under the MAZDA Dealer Agreement, DEALER agrees
to fully compensate MAZDA for all costs incurred
by MAZDA in identifying and correcting false or
misleading information problems.
-------------------------------------------------
VI. REASONABLE EXPECTATIONS 1. Business Expectations.
OF DEALER AND MAZDA The reasonable expectations of DEALER and MAZDA
are to deal in good faith with each other in
pursuit of their respective interests and the
intends and purposes of the MAZDA Dealer
Agreement. Each party acknowledges that meeting
its goals and objectives for the business
relationship contemplated hereby is and will
continue to be dependent upon its own conduct,
business judgment and performance hereunder.
DEALER and MAZDA further acknowledge: (i) that by
entering into the MAZDA Dealer Agreement, each
party is and will continue to be involved in an
inherently speculative business venture that
requires each party to assume significant
business risks; (ii) that the success or failure
of the business contemplated hereby is uncertain;
and (iii) that no profit or specific level of
profitability is represented or can be assured to
either party. The MAZDA Dealer Agreement is not
intended to eliminate the business risks, but is
intended to fairly and reasonably allocate the
business risks between DEALER and MAZDA.
Accordingly, except as expressly set forth in the
MAZDA Dealer Agreement, DEALER makes no
representations or warranties to MAZDA, including
without limitation any representation or warranty
that DEALER will sell a particular number of
MAZDA Products, or otherwise achieve any
particular level of market penetration in any
area served from DEALER's Approved Location.
Similarly, except as expressly set forth in the
MAZDA Dealer Agreement, MAZDA makes no
representations or warranties to DEALER,
including without limitation any representation
or warranty with respect to the future success or
profitability of the business contemplated
hereby, or that MAZDA will be able to satisfy
DEALER's requirements for MAZDA Products when and
as they arise from time to time.
2. Acknowledgements. DEALER and MAZDA acknowledge
that they may not fulfill their respective
expectations for the business contemplated by the
MAZDA Dealer Agreement and agree that in such
event the parties may take any one or more of the
following actions, consistent with applicable law:
(i) DEALER or MAZDA may elect to terminate or not
renew the MAZDA Dealer Agreement as provided
herein; (ii) DEALER may elect to utilize some of
its resources to engage in businesses involving
the promotion, sale and service of products other
than MAZDA Products; or (iii) if MAZDA determines
it would be in the best interest of customers of
MAZDA to do so, MAZDA may elect to appoint another
dealer to promote, sell and service MAZDA Products
near DEALER's Approved Location. DEALER and MAZDA
shall give each other at least sixty days' written
notice prior to taking any of the foregoing
actions, for the purpose of enabling the parties
to discuss whether there exist any mutually
agreeable alternative to the proposed action. To
the extent any consent is required from a party,
such party will not unreasonably withhold its
content to any of the foregoing actions by the
other.
4
<PAGE> 7
BASIC AGREEMENT MAZDA
- -------------------------------------------------------------------------------
3. DEALER's Representations.
DEALER represents and warrants and MAZDA enters
into the MAZDA Dealer Agreement in reliance upon
DEALER's representation that the Information
contained in the MAZDA Dealer Representations
made to MAZDA by DEALER are true, complete and
not misleading.
-------------------------------------------------
VII. COMMUNICATIONS AND 1. Periodic Review.
REVIEW PROCEDURES From time to time one or more designated
representatives from MAZDA and DEALER shall meet
to review the past performance under the MAZDA
Dealer Agreement, anticipated sales, service,
parts and other matters affecting the past,
present and future conduct of DEALER's Business
and DEALER's relationship with MAZDA. Both
parties shall make every effort towards
continuing frank, open and constructive
discussions to best promote the continuing and
successful performance of MAZDA and DEALER under
the MAZDA Dealer Agreement and to enhance the
relationship between the parties.
2. Responsibility of MAZDA Representatives.
DEALER acknowledges that designated field
representatives of MAZDA having responsibility
for communications with DEALER on behalf of MAZDA
with respect to day-to-day operational matters do
not have authority to represent MAZDA or make
commitments on behalf of MAZDA concerning matters
of interpretation of the MAZDA Dealer Agreement
or matters involving: (i) methods of allocation
for MAZDA Products; (ii) the determination by
MAZDA of essential MAZDA programs necessary for
Dealer Agreement; (iii) whether MAZDA has
fulfilled its reasonable expectations for the
business contemplated by the MAZDA Dealer
Agreement; (iv) the appointment of another Dealer
near DEALER's Approved Location: or (v) the
termination or renewal of the MAZDA Dealer
Agreement. Accordingly, DEALER may not rely on
any such field representative of MAZDA with
respect to such matters. If DEALER has any
questions concerning matters of interpretation of
the MAZDA Dealer Agreement or other policy
matters, DEALER shall consult with an appropriate
officer of MAZDA having executive responsibility
for the matter in question, including MAZDA's
general manager.
3. DEALER's General Manager.
DEALER agrees to employ at all times qualified
and competent personnel to manage DEALER's
business, including one individual who shall act
as DEALER's General Manager. Such General Manager
shall have principal responsibility for the
overall management of DEALER's Business, shall
have full authority to make decisions and act on
DEALER's behalf, and shall devote his or her full
time and attention to serving in that capacity.
If DEALER is an individual, DEALER shall act as
such General Manager. If DEALER is not an
individual, DEALER shall inform MAZDA in writing
in advance and on a continuing basis of the name
and qualifications of each individual employee
who is designated by DEALER from time to time to
act as such General Manager. DEALER acknowledges
that any such designation shall not relieve
DEALER of its responsibilities under the MAZDA
Dealer Agreement even though MAZDA may rely upon
such individual to act on DEALER's behalf.
-------------------------------------------------
VIII. ADDITIONAL PROVISIONS 1. Components of MAZDA Dealer Agreement.
DEALER and MAZDA acknowledge that the business
relationship between them involves many matters
requiring detailed terms and conditions governing
their respective contractual rights and
obligations, and that the terms and conditions of
their relationship may be changed or supplemented
because of changes in market conditions and other
relevant factors. Accordingly, MAZDA and DEALER
agree to the following additional
5
<PAGE> 8
BASIC AGREEMENT MAZDA
- -----------------------------------------------------------------------------
provisions, which are incorporated by this
reference into and made a part of the MAZDA
Dealer Agreement:
(a) those provisions which are set forth in the
additional agreements attached hereto,
(b) those provisions which currently are set
forth in written instructions issued by MAZDA to
MAZDA Dealers generally, as amended from time to
time, including but not limited to MAZDA warranty
policies and procedures, MAZDA transportation
claims policies and procedures, MAZDA parts
bulletins, MAZDA parts policies and procedures,
the MAZDA service organization and facilities
guide and the MAZDA Dealer identification
policies,
(c) those provisions which are set forth in
other additional agreements or written
instructions which are issued by MAZDA. In the
future to be generally applicable to all MAZDA
Dealers, it being understood and agreed by DEALER
that the conduct of DEALER's business is to be
governed by requirements established by MAZDA as
applicable to all MAZDA Dealers generally.
2. Definition of Terms.
All terms which are defined in the additional
provisions, when so used in the MAZDA Dealer
Agreement, shall have the same meaning as set
forth therein.
3. Amendments.
MAZDA may amend the MAZDA Dealer Agreement
(including any of the above referenced additional
provisions) or issue a new Dealer Agreement,
without further consideration, provided that
MAZDA takes any such action with respect to all
MAZDA Dealers generally.
-------------------------------------------------
IX. TERM The MAZDA Dealer Agreement and all additional
provisions incorporated by reference under
Section VIII shall be in effect with respect to
DEALER for the term stated on the signature page
of the MAZDA Dealer Agreement unless terminated
sooner pursuant to the additional agreement
entitled "Renewal and Termination."
X. DEALER ACKNOWLEDGMENT DEALER has read and understands the terms and
conditions of the MAZDA Dealer Agreement,
including the Basic Agreement and all additional
provisions incorporated by reference under
Section VIII of the Basic Agreement, and is fully
aware of the obligations of DEALER and MAZDA.
DEALER and MAZDA each acknowledge that they are
entering into the MAZDA Dealer Agreement as their
free and voluntary act in order to pursue their
independent business interests and in the
expectation that their business relationship will
be to their mutual economic benefit. In so doing
DEALER and MAZDA are relying upon their own
judgment and the counsel of their advisors.
DEALER Initials: /s/ EMR
-------------------------------------------------
6
<PAGE> 9
GENERAL TERMS AND CONDITIONS MAZDA
- -------------------------------------------------------------------------------
This General Terms and Conditions document is
an additional agreement under the MAZDA Dealer
Agreement between MAZDA and DEALER and as such is
incorporated by reference into the MAZDA Dealer
Agreement and is binding upon MAZDA and DEALER as
if executed by each of them.
-------------------------------------------------
1. DEFINITIONS As used in the MAZDA Dealer Agreement the
following terms shall have the following meanings:
1. "DEALER" means the business entity identified
as dealer on the signature page of the MAZDA
Dealer Agreement.
2. "DEALER's Approved Locations" means the address
of DEALER set forth on the signature page of the
MAZDA Dealer Agreement.
3. "DEALER's Business" means all activities of
DEALER relating to the promotion, sale and
service of MAZDA Products and all other
activities of DEALER under the MAZDA Dealer
Agreement.
4. "Manufacturer" means MAZDA Motor Corporations,
a corporation, or any other corporation which
manufactures MAZDA Vehicles.
5. "MAZDA" means the business entity identified
as MAZDA on the signature page of the MAZDA
Dealer Agreement.
6. "MAZDA Dealers" means others who promote, sell
and service MAZDA Products pursuant to an
agreement with MAZDA authorizing them to engage
in business under the MAZDA Trademarks and to
participate in the distribution system
established by MAZDA for MAZDA Products.
7. "MAZDA Dealer Representations" means the
application, related documents and information,
and representations previously submitted or made
by DEALER to MAZDA for the purpose of enabling
MAZDA to evaluate DEALER and to determine
whether to enter into or renew the MAZDA Dealer
Agreement with DEALER including but not limited
to the information set forth on any attachment
hereto entitled MAZDA Dealer Representations,
which is incorporated herein by reference.
8. "MAZDA Parts and Accessories" means new parts
and accessories designed for use on MAZDA
Vehicles and marketed by MAZDA, or other parts
and accessories specifically designated by MAZDA
in writing as MAZDA Parts and Accessories.
9. "MAZDA Products" means MAZDA Vehicles and MAZDA
Parts and Accessories.
10. "MAZDA Vehicles" means new cars and trucks
which bear the trademark MAZDA and are sold by
MAZDA to MAZDA Dealers.
11. "MAZDA Trademarks" means the various
trademarks, service marks, names, logos and
designs (including the name "MAZDA"), and all
registration thereof, now or hereafter owned,
claimed, adopted, acquired or used by
Manufacturer, MAZDA or any other company
involved in the chain of distribution for MAZDA
Products.
--------------------------------------------------
II. GENERAL PROVISIONS 1. Relationship Between DEALER and MAZDA. DEALER
and MAZDA acknowledge that the MAZDA Dealer
Agreement does not make either party the agent,
partner, or legal representative of the other for
any purpose, and that neither party has any power
or authority to act as agent for the other or
assume or create any obligation on behalf of or in
the name of the other, or bind such party in any
manner. DEALER and MAZDA further acknowledge that
all dealings between them shall be at arm's
length, and that the business relationship between
them does not create any franchise, special trust,
confidential or other fiduciary relationship, or
any duties arising from such relationship. Each
party shall be solely responsible for any and all
expenditures and liabilities incurred by it in
connection with the MAZDA Dealer Agreement or the
performance of obligations hereunder. DEALER has
not paid to MAZDA and MAZDA has not received any
fee or charge for the rights to enter
<PAGE> 10
GENERAL TERMS AND CONDITIONS MAZDA
- -------------------------------------------------------------------------------
into the MAZDA Dealer Agreement or engaged in any
of the business activities contemplated hereby.
DEALER shall perform all customer sales
and service functions under the MAZDA Dealer
Agreement as an independent contractor and not as
the agent of MAZDA or any other company involved
in the chain of distribution for MAZDA Products.
2. Good Faith.
DEALER and MAZDA agree that the term "good faith"
as used in the MAZDA Dealer Agreement shall have
the meaning set forth in Section 2-103 of the
Uniform Commercial Code, and all cases
interpreting that Section. DEALER and MAZDA
further agree that any failure to act in good
faith under the MAZDA Dealer Agreement shall not
give rise to a cause of action under the tort law
of the state having jurisdiction over the MAZDA
Dealer Agreement.
3. Inability to Perform.
Neither DEALER nor MAZDA shall be liable for
failure to perform any obligation under the MAZDA
Dealer Agreement due to fire, flood, other Acts
of God, accident, strike or other labor dispute,
riot, insurrection, war, governmental act or
regulation, or act or failure to act of
Manufacturer or any other company involved in the
chain of distribution for MAZDA Products.
4. No Implied Waivers. The failure of either
DEALER or MAZDA to require any performance under
the MAZDA Dealer Agreement shall not affect the
right to require such performance at any time
thereafter. The waiver by either party of any
rights upon a breach of the MAZDA Dealer Agreement
shall not constitute a waiver of those rights upon
any subsequent breach. The election by either
party of a particular remedy shall not be
exclusive of any other remedy, and all rights and
remedies of the parties shall be cumulative.
5. Notices.
Unless otherwise specified, any notice required
to be given either DEALER or MAZDA to the other
under or in connection with the MAZDA Dealer
Agreement shall be in writing and delivered by
hand or by mail to the other party at its address
as set forth on the signature page of the MAZDA
Dealer Agreement or as DEALER or MAZDA may
designate to the other in writing.
6. Maintenance and Inspection of Records. DEALER
agrees to maintain and retain books and records
pertaining to DEALER's Business of the type and
for the periods of time as may be required by
MAZDA. MAZDA may inspect and copy DEALER's books
and records during normal business hours for the
purpose of varifying any information relating to
the MAZDA Dealer Agreement, and may audit from
time to time all of DEALER's customer, sales,
service and warranty files and records.
7. Local Taxes.
Except as may be indicated by DEALER to the
contrary. DEALER warrants that all MAZDA Products
purchased from MAZDA shall be purchased for
resale in the regular course of DEALER's
Business. DEALER has furnished and agrees to
furnish to MAZDA all applicable resale
certificates relating to the resale transactions,
in the form required by law. DEALER has obtained
and agrees to maintain all permits and licenses
required to collect sales, use and similar taxes
imposed upon the resale or use by DEALER of MAZDA
Products, and DEALER shall timely collect, report
and pay all of the taxes. DEALER agrees to pay
and hold MAZDA harmless from all sales, use or
similar taxes, and all claims or demands made by
tax authorities with respect to such taxes,
relating to the sale of MAZDA Products by MAZDA to
DEALER or by DEALER to others, or the use of MAZDA
products by DEALER.
8. Compliance with the Law.
Each party agrees to comply with all applicable
laws and regulations in the conduct of their
respective businesses, including but not limited
to laws relating to automobile emissions controls,
automobile safety, maintenance and repair
service, and disclosure of information to retail
customers. Each party agrees to hold the other
harmless from any damages or liabilities
resulting from any failure on its part to comply
fully with such laws or regulations. Each party
agrees to provide to the other such information
and assistance as may be reasonably requested in
connection with compliance with such laws.
2
<PAGE> 11
GENERAL TERMS AND CONDITIONS MAZDA
- --------------------------------------------------------------------------------
9. Assignment and Delegation. MAZDA may at its
option assign any or all of its rights or delegate
any or all of its obligations hereunder to other
parties chosen by it. Notwithstanding the
foregoing MAZDA shall at all times be responsible
for the performance of its obligations hereunder
except that, in the event it delegates all of its
obligations hereunder to another party, such other
party shall be solely responsible for the
performance of those obligations. DEALER may not
assign any or all of its rights and may not
delegate any or all of its obligations hereunder
without the prior written approval of MAZDA.
Ownership interests in DEALER may be transferred
under certain conditions as set forth in the
additional agreement entitled "Ownership and
Transfer."
10. Severability.
If any provision of the MAZDA Dealer Agreement
is held to be invalid or unenforceable under the
law of any jurisdiction, or inconsistent with the
law of any jurisdiction, the provision shall be
severable from the MAZDA Dealer Agreement and the
provision shall in that jurisdiction be modified
as required to conform with law, or, if not
possible, be deleted from the MAZDA Dealer
Agreement. The remainder of the MAZDA Dealer
Agreement shall continue to be valid and binding.
11. Titles.
The titles appearing in the MAZDA Dealer
Agreement are for convenience only, and shall not
affect the construction or interpretation of any
provisions of the MAZDA Dealer Agreement.
12. Interpretation.
The various terms and conditions of the MAZDA
Dealer Agreement shall be read and interpreted in
harmony with each other and consistent with the
intents and purposes of the MAZDA Dealer
Agreement. The parties acknowledge that the MAZDA
Dealer Agreement consists of the Basic Agreement,
as well as the additional agreements and written
instructions issued by MAZDA to MAZDA Dealers
generally as identified in Section VIII of the
Basic Agreement. If there is a conflict between
them, provisions set forth in the Basic Agreement
shall govern over the additional agreements, which
shall govern over the written instructions. If
DEALER has a question with respect to a matter
involving a potentially conflicting interpretation
of the provisions of the MAZDA Dealer Agreement,
DEALER shall consult with the appropriate officer
of MAZDA having executive responsibility for the
matter in question, including MAZDA's general
manager.
13. Entire Agreement.
The MAZDA Dealer Agreement, including all
additional provisions described in Section VIII
of the Basic Agreement, constitutes the entire
agreement and understanding between DEALER and
MAZDA with respect to the subject matter hereof
and supersedes all prior or present agreements and
understandings, written or oral, between the
parties with respect to the subject matter
hereof. The MAZDA Dealer Agreement may be
amended, modified, supplemented or interpreted
only by a written instrument signed by DEALER and
the President or any of the Vice Presidents of
MAZDA.
3
<PAGE> 12
PURCHASE TERMS AND CONDITIONS MAZDA
- -------------------------------------------------------------------------------
This Purchase Terms and Conditions document
is an additional agreement under the MAZDA Dealer
Agreement between MAZDA and DEALER, and as such is
incorporated by reference into the MAZDA Dealer
Agreement and is binding upon MAZDA and DEALER as
if executed by each of them.
-------------------------------------------------
PURCHASE TERMS AND 1. Orders.
CONDITIONS DEALER agrees to submit orders for
MAZDA Products to MAZDA in such form and under
such terms and conditions as may be required by
MAZDA from time to time. Any such orders are
subject to acceptance by MAZDA, and may be
accepted in whole or in part. Orders may be
accepted by notice to DEALER or by shipment of the
MAZDA Products ordered. Orders shall be
irrevocable for 120 days after submission to
MAZDA, and shall be irrevocable after shipment to
DEALER of the MAZDA Products ordered.
2. Changes in MAZDA Products.
MAZDA may fill DEALER orders with MAZDA Products
incorporating the most recent improvements or
changes, including those made after an order is
placed, without any obligation to make the same or
similar changes on MAZDA Products previously
purchased by or shipped to DEALER. MAZDA may
install any equipment required by applicable law
to be installed on any MAZDA Products ordered by
DEALER, whether or not such item of equipment is
included in DEALER's order for the MAZDA Products.
MAZDA may at any time, without incurring liability
to DEALER, discontinue sales or shipments of any
model or type of MAZDA Products. MAZDA may act
under the provisions of this paragraph without
notice and without any obligation to DEALER by
reason of DEALER's previous purchases.
3. Delivery.
MAZDA shall endeavor to deliver MAZDA Products to
DEALER as soon as practicable after acceptance of
DEALER's order. MAZDA shall not be liable for
delay or nondelivery of MAZDA Products, nor shall
MAZDA be obligated to deliver to DEALER any
particular quantity or mix of MAZDA Products.
MAZDA may deliver MAZDA Products by any means or
carrier. MAZDA Products may be shipped to DEALER
at DEALER's Approved Location or at the nearest
practicable unloading point to DEALER's Approved
Location. Upon delivery of the MAZDA Products to
the first carrier or to DEALER, whichever occurs
first, risk of loss of the MAZDA Products shall
pass to DEALER or to the financing institution
previously designated by DEALER in writing to
MAZDA. Title to the MAZDA Vehicles shall pass to
DEALER upon payment in full therefor, while title
to MAZDA Parts and Accessories shall pass upon
delivery as set forth in the previous sentence.
MAZDA shall retain a lien on the MAZDA Products
securing payment for the MAZDA Products until paid
for in full. DEALER shall make written claim for
any shortage or damage in any shipment of MAZDA
Products within the time and in the manner as may
be required by MAZDA.
4. MAZDA Product Supply.
DEALER and MAZDA acknowledge that the supply of
MAZDA Products to MAZDA can vary from time to time
for many reasons beyond the control of MAZDA.
Accordingly, MAZDA may not at all times have an
available supply of all makes, models and colors
of MAZDA Vehicles or of MAZDA Parts and
Accessories sufficient to meet the demands of all
MAZDA Dealers generally or the specific demands of
DEALER or its customers; or at other times MAZDA
may have a greater supply of MAZDA Vehicles or of
MAZDA Parts and Accessories than is required by
all MAZDA Dealers generally or specifically by
DEALER or its customers. In order to maintain an
effective distribution system for MAZDA Products,
it may be necessary for MAZDA to allocate its
supply of MAZDA Products among all MAZDA Dealers,
utilizing uniform methods of allocation from time
to time which take into consideration such factors
as MAZDA deems relevant, including without
limitation the size, sales performance,
inventories and sales potential of MAZDA Dealers.
Accordingly, MAZDA has not made, and cannot make
any representation or warranty to DEALER that
DEALER can expect to receive a particular quantity
or mix of MAZDA Products,
<PAGE> 13
PURCHASE TERMS AND CONDITIONS MAZDA
- --------------------------------------------------------------------------------
including particular makes, models or colors of
MAZDA Vehicles. DEALER acknowledges that it is not
entering into the MAZDA Dealer Agreement on the
basis of any such representation or warranty, and
that it may not at all times have such quantities
of MAZDA Products available or in its inventories
as it desires or deems necessary to meet the
demands therefor from prospective customers of
MAZDA Products available or in its inventories as
it desires or deems necessary to meet the demands
therefor from prospective customers of MAZDA
Products, or to satisfy DEALER's objectives for
sales of MAZDA Products. DEALER agrees to conduct
DEALER's Business in accordance with the terms and
conditions of allocation systems established by
MAZDA from time to time for all MAZDA Dealers
generally. MAZDA acknowledges that DEALER is not
required to purchase any specific quantity of
MAZDA Products, and that DEALER may from time to
time decline to purchase from MAZDA any or all
MAZDA Products allocated to DEALER under MAZDA's
allocation system; provided DEALER acknowledges
that any refusal to purchase MAZDA Products
allocated to it may adversely affect its ability
relative to other MAZDA Dealers to receive MAZDA
Products thereafter or to participate in other
programs of MAZDA available to other MAZDA
dealers. DEALER acknowledges that the allocation
system presently utilized by MAZDA for MAZDA
Vehicles has been explained to and understood by
DEALER and that it is a fair and reasonable system
for allocating MAZDA Vehicles among all MAZDA
Dealers generally.
5. Prices.
DEALER agrees to purchase MAZDA Products according
to the prices, charges and terms established by
MAZDA from time to time and in effect on the date
of shipment, including destination charges. MAZDA
reserves the right, without prior notice, to
change prices, charges and terms for any MAZDA
Products.
6. Taxes.
DEALER agrees to pay all excise or other taxes
levied on MAZDA Products purchased by DEALER or on
the sale, shipment, ownership or use of the MAZDA
Products to or by DEALER.
7. Reshipment and Diversion.
MAZDA agrees to pay all expenses incurred by
DEALER in reshipping to MAZDA any MAZDA Products
not ordered by DEALER, provided that DEALER
reships the MAZDA Products promptly as directed by
MAZDA. DEALER agrees to pay any expenses incurred
by MAZDA for any diversion of MAZDA Products
resulting from DEALER's failure or refusal to
accept any MAZDA Products ordered by and shipped
to DEALER or to make timely payment for any MAZDA
Products.
8. Payment.
DEALER agrees to pay MAZDA for MAZDA Products sold
to DEALER on terms established by MAZDA from time
to time. DEALER agrees to pay MAZDA's cost of
collection (including attorneys' fees) of any
amount owed by DEALER to MAZDA. MAZDA may offset
any amount owed by MAZDA to DEALER. All MAZDA
Products purchased by DEALER from MAZDA (other
than MAZDA Vehicles) shall be charged to DEALER's
parts account, unless otherwise specified by MAZDA
prior to the date of purchase. If any payment of
DEALER's parts account is delinquent, MAZDA may
ship MAZDA Products purchased by DEALER on a
C.O.D. or prepaid basis.
9. Financial Resources.
DEALER agrees to maintain and employ in DEALER's
Business at all times financial resources
sufficient to enable DEALER to satisfy DEALER's
obligations under the MAZDA Dealer Agreement.
These resources shall include the amounts of
working capital, new vehicle flooring, and other
financial resources which MAZDA may reasonably
require; provided that no such requirement shall
be deemed to be a warranty by MAZDA of the
adequacy of such financial resources for the
successful conduct of DEALER's Business.
<PAGE> 14
DEALERSHIP LOCATION MAZDA
- --------------------------------------------------------------------------------
This Dealership Location document is an additional
agreement under the MAZDA Dealer Agreement between
MAZDA and DEALER, and as such is incorporated by
reference into the MAZDA Dealer Agreement and is
binding upon MAZDA and DEALER as if executed by
each of them.
--------------------------------------------------
DEALERSHIP LOCATION DEALER's Approved Location.
DEALER agrees to conduct DEALER's Business at
DEALER's Approved Location and at no other
location. DEALER acknowledges that DEALER's
Approved Location is an integral part of MAZDA's
network of MAZDA Dealers which promote, sell and
service MAZDA Products, and the continued conduct
of DEALER's Business at DEALER's Approved Location
is essential to maintain an effective and
efficient distribution system for MAZDA Products.
Accordingly, MAZDA will not require DEALER to
relocate its facilities to another location unless
such relocation is deemed reasonably necessary to
meet changes in sales and service requirements of
customers of MAZDA Products. In addition, DEALER
shall not sell or transfer any interest of DEALER
in DEALER's facilities or the underlying property
of DEALER's Approved Location without the prior
written consent of MAZDA.
<PAGE> 15
DEALER REVIEW AND ACTION PLAN MAZDA
- --------------------------------------------------------------------------------
This DEALER Review and Action Plan document
is an additional agreement under the MAZDA Dealer
Agreement between MAZDA and DEALER, and as such
is incorporated by reference into the MAZDA
Dealer Agreement and is binding upon MAZDA and
DEALER as if executed by each of them.
--------------------------------------------------
DEALER REVIEW 1. Purpose
AND ACTION PLAN MAZDA and DEALER acknowledge that it is desirable
for MAZDA to review, evaluate and suggest to
DEALER goals related to the sales, service, parts
and other operations of DEALER which DEALER
should reasonably expect to accomplish so as to:
(1) provide for high levels of satisfied
customers of MAZDA products; (ii) promote the
image, reputation and goodwill of DEALER, MAZDA,
MAZDA Products, and MAZDA Dealers generally; and
(iii) permit DEALER to operate as an affective
member of the nationwide distribution system for
MAZDA Products.
2. Information From DEALER.
DEALER acknowledges that MAZDA will require
information on a continuing basis for DEALER
regarding DEALER's facilities, operations and
personnel in order for MAZDA to review and
evaluate DEALER's operations. DEALER agrees to
provide such information in a prompt and helpful
manner as requested from time to time by MAZDA.
MAZDA intends to utilize such information to
compile data regarding MAZDA Dealers and the
local areas where they do business as part of
MAZDA's review program.
3. Individualized Annual Action Plan.
Based on the information from DEALER and other
information developed by MAZDA, MAZDA will
evaluate DEALER's representation of MAZDA in the
local area where DEALER does business, MAZDA will
prepare and present to DEALER at least annually
an individualized action plan for DEALER with
respect to DEALER's operations, facilities,
personnel, tools, equipment and support services
which MAZDA reasonably determines need to be
improved to provide effective representation of
MAZDA under the MAZDA Dealer Agreement. MAZDA
agrees to discuss with DEALER the analysis and the
goals for improvement presented in the action
plan.
4. Voluntary Nature of Compliance.
DEALER acknowledges that the individual action
plan for DEALER will be prepared by MAZDA to
benefit DEALER and MAZDA Dealers generally, and
to enhance the effectiveness and efficiency of
the nationwide distribution system for MAZDA
Products. DEALER agrees to consider seriously and
to use its best efforts to accomplish within a
reasonable period of time, on a cost effective
basis for DEALER, those goals for improvement
which MAZDA presents to DEALER in an action plan.
MAZDA agrees to cooperate with DEALER and help
DEALER accomplish those goals. DEALER
acknowledges that its failure to make adequate
progress toward accomplishing the goals suggested
by MAZDA in an action plan may mean that DEALER
will not be able to provide effective
representation of MAZDA in the local area in
which DEALER does business, and that MAZDA will
not be able to fulfill its reasonable
expectations for the business relationship with
DEALER contemplated by the MAZDA Dealer Agreement.
<PAGE> 16
MAZDA IMAGE MAZDA
- --------------------------------------------------------------------------------
This MAZDA Image document is an additional
agreement under the MAZDA Dealer Agreement
between MAZDA and DEALER, and as such is
incorporated by reference into the MAZDA Dealer
Agreement and is binding upon MAZDA and DEALER as
if executed by each of them.
--------------------------------------------------
MAZDA IMAGE 1. Use of MAZDA Trademarks.
In connection with DEALER's performance of its
obligations under the MAZDA Dealer Agreement,
DEALER may use the MAZDA Trademarks as authorized
by MAZDA. DEALER shall not use any MAZDA
Trademarks, or any mark, word, symbol, trade dress
or logo similar to any MAZDA Trademark, in
connection with the sale of any property other
than MAZDA Products. DEALER shall use the MAZDA
Trademarks only in the color, size, form and style
required or approved by MAZDA from time to time.
No MAZDA Trademark or mark, name or word similar
thereto may be used in any trademark registration
by DEALER. Except as provided below, DEALER shall
use the word "MAZDA" in its assumed business name,
and shall not use the word in DEALER's legal
name. The word "MAZDA" may be used in DEALER's
legal name only when required by law or when
DEALER may not legally utilize an assumed business
name containing the word "MAZDA." DEALER's use of
the word "MAZDA" in its assumed business name or
in its legal name shall be made only with the
prior written approval of MAZDA and upon such
terms and conditions as MAZDA may specify from
time to time. No company owned by or affiliated
with DEALER or any person who is an owner of
DEALER may use the MAZDA Trademarks or other
marks, names or words similar thereto without the
prior written permission of MAZDA. At MAZDA's
request, DEALER agrees to discontinue or change
the manner in which DEALER uses any MAZDA
Trademarks.
2. Ownership and Protection of MAZDA Trademarks.
DEALER shall not impair the value or contest the
right of Manufacturer or MAZDA to the exclusive
ownership and use of any MAZDA Trademark. DEALER's
use of any MAZDA Trademark shall not create, or be
deemed to create, any right, title or interest in
the MAZDA Trademarks in DEALER or any other party,
and any such use shall insure to the benefit of
the owner of the MAZDA Trademarks. To help protect
the MAZDA Trademarks, DEALER agrees to notify
MAZDA promptly whenever DEALER learns of an
infringement or misuse of MAZDA Trademarks by any
person. DEALER shall not represent as MAZDA
Products any products which are not MAZDA
Products.
3. DEALER Facilities.
DEALER's place of business shall be satisfactory
to MAZDA in appearance and condition.
4. Signs.
DEALER agrees to provide identification and
departmental signs required by MAZDA. DEALER
agrees to prominently display, illuminate,
maintain and repair the signs at DEALER's
Approved Location, at DEALER's expense and in a
manner approved by MAZDA.
5. Advertising.
DEALER agrees to actively and adequately
advertise MAZDA Products in a manner that will
develop interest and confidence in MAZDA Products
in the local area where DEALER does business.
DEALER shall not use any advertising which in
MAZDA's opinion tends to mislead or deceive the
public. DEALER's advertising will conform to
MAZDA's advertising standards, will adequately
maintain the image, reputation and goodwill of
the MAZDA Trademarks, MAZDA Products, MAZDA and
other MAZDA Dealers, and will not conflict with
other national and regional advertising for MAZDA
Products. DEALER agrees to discontinue immediately
any advertising that MAZDA determines: (i) may be
injurious to the image, goodwill or reputation of
the MAZDA Trademarks, MAZDA, MAZDA Products, and
other MAZDA Dealers; or (ii) may be likely to
mislead or deceive the public; or (iii) which is
inconsistent with MAZDA's advertising of the
requirements of this paragraph.
<PAGE> 17
RENEWAL AND TERMINATION MAZDA
- --------------------------------------------------------------------------------
This Renewal and Termination document is an
additional agreement under the MAZDA Dealer
Agreement between MAZDA and DEALER, and as such
is incorporated by reference into the MAZDA
Dealer Agreement and is binding upon
MAZDA and DEALER as if executed by each of them.
--------------------------------------------------
I. RENEWAL MAZDA AND DEALER agree to renew the MAZDA
Dealer Agreement upon the expiration of its
stated period for such renewal period as
MAZDA may reasonably offer to DEALER at least
ninety days prior to expiration, unless:
(a) DEALER refuses to agree to special
conditions for the conduct of DEALER'S Business
proposed in good faith by MAZDA, which refusal
shall give MAZDA good cause for non-renewal, or
(b) Any event or series of events has
occurred during the period of the MAZDA Dealer
Agreement which gives DEALER or MAZDA the right
to terminate.
--------------------------------------------------
II. TERMINATION 1. Termination by Mutual Consent.
The MAZDA Dealer Agreement may be terminated at
any time by the written consent of DEALER and
MAZDA. The termination shall be effective on the
date specified in the written consent. If MAZDA
and DEALER fail to renew the MAZDA Dealer
Agreement pursuant to Section 1, the MAZDA
Dealer Agreement shall be deemed to be terminated
by mutual consent of DEALER and MAZDA.
2. New Form of Dealer Agreement.
If MAZDA at any time offers a new form of MAZDA
dealer agreement to MAZDA Dealers generally, MAZDA
may terminate the MAZDA Dealer Agreement by a
written notice to DEALER which offers the new
form of dealer agreement to DEALER. The
termination shall be effective ninety days after
DEALER receives the notice or, if it occurs
earlier, on the date upon which the new MAZDA
Dealer Agreement between MAZDA and DEALER becomes
effective.
3. Termination by DEALER.
DEALER may terminate the MAZDA Dealer Agreement
at any time by written notice to MAZDA. DEALER
acknowledges that MAZDA has made a significant
investment in servicing DEALER and in performing
its obligations under the MAZDA Dealer Agreement
in order to maintain customer satisfaction and
supply of MAZDA Products in the local area where
DEALER does business. DEALER acknowledges further
that in order to preserve and protect that
investment, MAZDA requires adequate notice in
order to engage a substitute dealer in the event
DEALER wishes to terminate the relationship with
MAZDA under the MAZDA Dealer Agreement.
Accordingly, the termination shall be effective
sixty days after receipt by MAZDA of the notice.
4. Termination for Cause by MAZDA.
(a) Immediate. The following events are so
contrary to the spirit, nature and purposes of the
MAZDA Dealer Agreement that MAZDA shall have the
right upon the occurrence of any of them to
terminate the MAZDA Dealer Agreement, effective
as of the date of the event, by sending notice of
termination to DEALER by registered or certified
mail or telegram:
(i) The insolvency of DEALER; the filing by
DEALER of a voluntary petition in bankruptcy;
the filing of an involuntary petition to have
DEALER declared bankrupt, if the petition is
not vacated within thirty days from the date of
filing; the appointment of a receiver or
trustee for DEALER, if the appointment is not
vacated within thirty days from the date of
appointment; the execution by DEALER of an
assignment for the benefit of creditors; any
other act of bankruptcy by DEALER; or any of
the foregoing with respect to any partner in
DEALER.
(ii) Except as provided for elsewhere in the
MAZDA Dealer Agreement the death or inca-
<PAGE> 18
RENEWAL AND TERMINATION MAZDA
- -------------------------------------------------------------------------------
pacity of DEALER to perform the obligations of
DEALER hereunder, if an individual, or of any
partner of DEALER, if a partnership, or the
dissolution or liquidation of DEALER (or the
taking of any action to dissolve or liquidate
DEALER), if a partnership or corporation.
(iii) The conduct of DEALER's Business at
other than DEALER's Approved Location without the
prior written approval of MAZDA.
(iv) DEALER's entering into any contract for
the sale, transfer or assignment by DEALER of any
rights or privileges of DEALER under the MAZDA
Dealer Agreement, or for the transfer or
delegation by DEALER of any material obligations
of DEALER under the MAZDA Dealer Agreement, unless
such contract contains a provision requiring
MAZDA's written approval of the purchaser,
transferee or assignee before the closing of the
transaction, and DEALER delivers to MAZDA a copy
of such contract within seven days following
DEALERS's execution thereof.
(v) DEALER's entering into any contract for
the sale, transfer, or assignment of the principal
assets of DEALER required for the conduct of
DEALER's Business, unless such contract contains a
provision requiring MAZDA's written determination
before the closing of the transaction that the
transaction will not impair DEALER's ability to
conduct DEALER's Business at DEALER's Approved
Location, and DEALER delivers to MAZDA a copy of
such contract within seven days following DEALER's
execution thereof.
(vi) The conviction of DEALER or of any owner
or manager of DEALER referred to in the MAZDA
Dealer Agreement of any crime which may have a
material adverse effect on DEALER's Business or
the image, goodwill or reputation of MAZDA, MAZDA
Products or other MAZDA Dealers.
(vii) The failure of DEALER to be open for
business at DEALER's Approved Location for seven
or more consecutive days (excluding Sundays).
(viii) The termination of MAZDA's rights to
distribute MAZDA Products to DEALER.
(b) Within Sixty Days. The following events are so
contrary to the spirit, nature and purposes of the
MAZDA Dealer Agreement that if any of them continue
to exist sixty days after MAZDA has sent to DEALER a
written notice of the existence of any such event
listed below and MAZDA's intention to terminate if
such event is not remedied, MAZDA may terminate the
MAZDA Dealer Agreement, effective immediately, by
sending final notice of termination to DEALER by
registered or certified mail or telegram:
(i) A voluntary or involuntary change in the
ownership of DEALER without the prior written
approval of MAZDA.
(ii) The failure of DEALER to have any
license or permit required by law for the conduct
of DEALER's Business under the MAZDA Dealer
Agreement.
(iii) Any conduct of DEALER detrimental to
the image, goodwill or reputation of MAZDA, MAZDA
Products or MAZDA Dealers generally. (iv) The
failure to pay any amount due MAZDA within 7 days
following receipt of notice that an amount due has
not been paid.
(v) Any chronic or repeated default in
reporting, record keeping, or other business
requirement of DEALER arising out of the MAZDA
Dealer Agreement, and the business contemplated
hereby.
(vi) Any other material breach by DEALER of
DEALER's warranties, obligations or performance
under the MAZDA Dealer Agreement.
5. Notices.
(a) DEALER agrees to immediately give MAZDA
written notice upon the occurrence of any of the
events specified in Section II.4. If DEALER fails to
give MAZDA written notice within seven days after the
occurrence of any event set forth in Section II.4(b),
the notice of intention to terminate the MAZDA Dealer
Agreement from MAZDA under Section II.4(b) shall be
deemed to have been sent to DEALER on the date of the
event.
(b) If DEALER is deemed to be a debtor under the
Bankruptcy Code and a Debtor-in-Possession or Trustee
of DEALER has a right to accept or reject the MAZDA
Dealer Agreement, the MAZDA Dealer Agreement shall be
deemed to be rejected if it is not accepted by the
Debtor-in-Possession or Trustee within sixty days
following the filing of the petition in bankruptcy.
2
<PAGE> 19
RENEWAL AND TERMINATION MAZDA
- ----------------------------------------------------------------------------
III. EFFECT OF EXPIRATION 1. General.
OR TERMINATION The provisions of this Section shall govern the
rights and obligations of the parties upon
expiration or termination of the MAZDA Dealer
Agreement. Except as provided in this Section,
DEALER shall immediately upon expiration or
termination of the MAZDA Dealer Agreement cease
to be, or act as, or represent itself to be an
authorized dealer of MAZDA Products.
2. Further Transactions.
If, after the expiration or termination of the
MAZDA Dealer Agreement, MAZDA accepts any orders
from DEALER or otherwise transacts business with
DEALER, all such transactions shall be governed by
terms identical to those in the MAZDA Dealer
Agreement. Nevertheless, the acceptance of orders
or transaction of other business shall not waive
the expiration or termination, or constitute an
extension or renewal of the MAZDA Dealer
Agreement.
3. Signs, Trademarks and Names.
DEALER agrees to immediately discontinue and
abandon the direct or indirect use of all MAZDA
Trademarks with the word "MAZDA," or any other
words, symbols or expressions including or
resembling MAZDA Trademarks, whether appearing on
signs, posters, advertising matter or stationery,
in any legal name or assumed business name, or in
any other form. If DEALER fails to comply with the
requirements of this paragraph following
expiration or termination of the MAZDA Dealer
Agreement, MAZDA or Manufacturer may bring a legal
action against DEALER seeking any remedy available
to MAZDA or Manufacturer, including without
limitation the issuance of an injunction against
any unauthorized use of a MAZDA Trademark, and in
such case all costs, attorneys' fees and expenses
incurred in the action by MAZDA or Manufacturer
shall be paid by DEALER.
4. Repurchase by MAZDA.
MAZDA agrees to repurchase from DEALER, and DEALER
agrees to sell to MAZDA, all of the following
property owned by DEALER:
(a) All saleable, unused and undamaged
current model MAZDA Vehicles, at a price equal to
DEALER's net cost (excluding the cost of inland
freight and all parts and accessories other than
MAZDA Parts and Accessories) or the price last
established by MAZDA for the sale by MAZDA to
MAZDA Dealers of identical MAZDA Vehicles,
whichever is lower, less prior refunds or
allowances thereon, and less any costs required
to place the MAZDA Vehicles in new-car condition.
(b) All new, unused and undamaged MAZDA
Parts and Accessories which appear on MAZDA's
then current price list and are in good and
saleable condition, at a price equal to the price
established by MAZDA for the sale to MAZDA
Dealers of identical MAZDA Parts and Accessories,
less MAZDA's then current charge for the cost of
handling and restocking.
(c) All tools, manuals, equipment specially
designed for servicing MAZDA Vehicles, and any
other materials bearing any MAZDA Trademark which
are in good and useable condition and were
purchased by DEALER from MAZDA, as well as all
authorized MAZDA signs at DEALER's Approved
Location. Tools, equipment and signs shall be
sold at prices to be agreed upon by MAZDA and
DEALER or determined by a third party selected by
MAZDA and DEALER.
5. Inventory and Inspection.
Within thirty days after expiration or termination
of the MAZDA Dealer Agreement, DEALER shall
deliver to MAZDA an accurate inventory in the form
required by MAZDA of all property to be
repurchased by MAZDA. If DEALER fails to timely
deliver the inventory, MAZDA may enter DEALER's
place of business to prepare the inventory and
DEALER shall reimburse MAZDA for the cost to MAZDA
of preparation. MAZDA may inspect the property at
any time.
6. Delivery.
As soon as possible after MAZDA receives and
reviews the inventory of property to be
repurchased, MAZDA shall furnish DEALER with
shipping instructions and DEALER agrees to make
delivery of the property to be repurchased,
transportation charges prepaid, to destinations
within
3
<PAGE> 20
RENEWAL AND TERMINATION MAZDA
- -------------------------------------------------------------------------------
the United States designated by MAZDA, DEALER
agrees to take action and execute and deliver
instruments as may be required by MAZDA to convey
to MAZDA or its nominee good and marketable title
to the property upon delivery to MAZDA or the
shipper, comply with any applicable state law
relating to bulk sales or transfers, and satisfy
and discharge any liens or encumbrances on the
property prior to delivery.
7. Payment.
MAZDA agrees to pay DEALER for the property
repurchased under this Section within sixty days
after delivery of the property. All or part of the
payment may be made by MAZDA, at its option, to
any financing institution or other person to
discharge any lien or encumbrance on the property.
The expiration or termination of the MAZDA Dealer
Agreement shall not release DEALER from any
obligation to pay any amounts which DEALER may
then owe MAZDA. MAZDA may deduct from the purchase
price of any property repurchased by MAZDA under
this Section any amounts owned by DEALER to MAZDA.
8. Customer Records.
Immediately upon expiration or termination of the
MAZDA Dealer Agreement, DEALER shall inform MAZDA
of all unfilled orders for sale of MAZDA Products
by DEALER. Within thirty days after expiration or
termination, DEALER agrees to delivery to MAZDA
copies of all DEALER's customer, service and
warranty files and records which are requested by
MAZDA during the thirty-day period, provided MAZDA
agrees to pay the reasonable costs of the copies.
-------------------------------------------------
IV. MUTUAL RELEASES Effective upon (i) the renewal of the MAZDA
Dealer Agreement pursuant to Section I, (ii)
ninety days after the termination of the MAZDA
Dealer Agreement pursuant to Section II, or (iii)
DEALER's transfer of the principal assets of
DEALER used in DEALER's Business or the
cumulative transfer of a controlling interest in
DEALER, it is the express intention of each party
to release the other party and each party shall
be deemed to have released the other party from
all claims, causes of action, costs or expenses,
including attorneys' fees, whether known or
unknown, as of such effective date, arising from
or related to the MAZDA Dealer Agreement, except
that DEALER shall not be deemed to have released
any claims related to defects in the design or
manufacture of MAZDA Products, MAZDA and DEALER
shall not be deemed to have released any claims
for amounts which the other then owes it under
the MAZDA Dealer Agreement, and neither party
shall be deemed to have released any claim arising
from the termination or refusal to renew the
MAZDA Dealer Agreement or any claim to enforce
the provisions of this Section IV. Upon the
request of any party deemed to have been released
hereunder, the other party shall execute and
deliver a written release in form satisfactory to
the releasing party.
--------------------------------------------------
V. OTHER ACTIONS DEALER acknowledges that if good cause for
non-renewal or termination by MAZDA arises under
Section I or II, MAZDA will be unable to fulfill
its reasonable expectations of economic benefits
from DEALER's performance under the MAZDA Dealer
Agreement. Accordingly, if MAZDA is prevented for
any reason from refusing not to renew or from
terminating the MAZDA Dealer Agreement, where the
terms of the MAZDA Dealer Agreement would
otherwise permit such action, MAZDA shall be
entitled to limit its obligations under the MAZDA
Dealer Agreement to those which are reasonably
related to the economic benefits which MAZDA
expects to derive from DEALER's actual
performance hereunder.
4
<PAGE> 21
OWNERSHIP AND TRANSFER MAZDA
- -----------------------------------------------------------------------------
This Ownership and Transfer document is an additional agreement under the
MAZDA Dealer Agreement between MAZDA and DEALER, and as such is incorporated
by reference into the MAZDA Dealer Agreement and is binding upon MAZDA and
DEALER as if executed by each of them.
------------------------------------------------
I. GENERAL As part of its MAZDA Dealer Representations,
DEALER has stated the name, address and percentage
of ownership of each person who is an owner of
DEALER. MAZDA has entered into the MAZDA Dealer
Agreement in reliance upon this statement. DEALER
agrees to give MAZDA prior written notice of any
proposed change in the persons or percentages set
forth in this statement. If such change would
cause a change in the control of DEALER or would
be equivalent to a sale, transfer or assignment of
substantially all of the DEALER's Business or of
any right under the MAZDA Dealer Agreement
("Ownership Change"), no such change shall be
effective without the prior written consent of
MAZDA, which consent shall not be unreasonably
withheld. MAZDA will give its consent as provided
in Sections II and III below.
--------------------------------------------------
II. RIGHTS OF SPOUSES AND Upon the death or incapacity of DEALER to
CHILDREN perform the obligations of DEALER hereunder (of an
individual) or of any person owning an interest in
DEALER (if a partnership or corporation), MAZDA
agrees to consent to the transfer of the MAZDA
Dealer Agreement or the ownership interest to the
spouse or children of the deceased or
incapacitated person, if all of the following
conditions are met:
(a) Prior to his death or incapacity, the
deceased or incapacitated person shall have
delivered to MAZDA a written notice nominating as
his successor his spouse or children and
specifying the proportion in which ownership is to
be transferred to each of them;
(b) Within ninety days after the death or
incapacity, all of the persons nominated shall
have submitted to MAZDA a written application for
the transfer to them of the MAZDA Dealer Agreement
or the ownership interest;
(c) MAZDA shall have determined that after
the transfer to them of the MAZDA Dealer Agreement
or the ownership interest, DEALER will satisfy all
of DEALER's obligations under the MAZDA Dealer
Agreement, including but not limited to the
requirements set forth in the MAZDA Dealer
Representations; and
(d) DEALER and all of the persons nominated
shall have provided MAZDA with all information
requested by MAZDA and shall have executed all
documents needed by MAZDA to effect the transfer.
--------------------------------------------------
III. TRANSFER TO OTHER The MAZDA Dealer Agreement, any ownership
NOMINEES interest in DEALER, and the principal assets of
DEALER required for conduct of DEALER's Business
may be transferred only with the prior written
consent of MAZDA. MAZDA will give its consent as
set forth below. In the event of the death or
incapacity of DEALER to perform the obligations of
DEALER hereunder (if an individual) or of any
person owning an interest in DEALER (if a
partnership or corporation), MAZDA shall consent
to the transfer of the MAZDA Dealer Agreement or
the ownership interest to any persons referred to
in the MAZDA Dealer Representations and with
respect to whom MAZDA has received prior written
notice as provided in the MAZDA Dealer
Representations, if all of the following
conditions are met:
(a) Prior to his death or incapacity, the
deceased or incapacitated person shall have
delivered to MAZDA a written notice nominating as
his successor one or more of the persons referred
to in the MAZDA Dealer Representations
4
<PAGE> 22
OWNERSHIP AND TRANSFER MAZDA
- -------------------------------------------------------------------------------
and specifying the proportions in which ownership
is to be transferred to each of them;
(b) Within ninety days after the death or
incapacity, all of the persons nominated shall
have submitted to MAZDA a written application for
the transfer to them of the MAZDA Dealer Agreement
or the ownership interest;
(c) MAZDA shall have determined that after
the transfer of the MAZDA Dealer Agreement or the
ownership interest, DEALER will satisfy all of
DEALER's obligations under the MAZDA Dealer
Agreement, including but not limited to the
requirements set forth in the MAZDA Dealer
Representations; and
(d) DEALER and all of the persons nominated
shall have provided MAZDA with all information
requested by MAZDA and shall have executed all
documents needed by MAZDA to effect the transfer.
5
<PAGE> 23
DISPUTE RESOLUTION MAZDA
- --------------------------------------------------------------------------------
This Dispute Resolution is an additional
agreement under the MAZDA Dealer Agreement between
MAZDA and DEALER, and as such is incorporated by
reference into the MAZDA Dealer Agreement and is
binding upon MAZDA and DEALER as if executed by
each of them.
--------------------------------------------------
I. NON-JUDICIAL RESOLUTION 1. Acknowledgement.
DEALER and MAZDA recognize that from time to time
disputes may arise between them involving matters
affecting their business relationship and
performance under the MAZDA Dealer Agreement.
DEALER and MAZDA further recognize that frequent
disputes or the continuation of unresolved
disputes between them is not consistent with the
spirit of dealing in good faith between them, and
may interfere with fulfilling the various purposes
of the MAZDA Dealer Agreement, including without
limitation those of maintaining high levels of
customer satisfaction, the image, reputation and
goodwill of the MAZDA Trademarks, MAZDA Products,
DEALER, MAZDA and MAZDA Dealers generally, and an
effective and efficient distribution system for
MAZDA Products. Accordingly, DEALER and MAZDA
agree in all circumstances to seek prompt and
expeditious non-judicial resolution of disputes
between them through good faith negotiations,
involving open, frank and constructive discussions
having reference to the spirit, intents and
purposes of the MAZDA Dealer Agreement.
2. Management Review.
If requested in writing by DEALER's General
Manager, MAZDA agrees to cause any matter in
dispute, including without limitation matters
involving participation in MAZDA programs, supply
of MAZDA Products, interpretation of the MAZDA
Dealer Agreement and policies affecting the
relationship between DEALER and MAZDA, to be
reviewed by the appropriate officer of MAZDA
having management responsibility for the matter,
including MAZDA's general manager. Neither party
shall be required to be represented by legal
counsel in the course of the foregoing review
process.
--------------------------------------------------
II. THIRD PARTY 1. Stipulation as to Facts and Issues in Dispute.
NON-JUDICIAL RESOLUTION If MAZDA and DEALER have any dispute between
them that has not been resolved pursuant to
Section I, and if either party wishes to pursue
the matter further, the initiating party shall
first give written notice to the other, which
notice shall set forth in detail every basis
claimed for liability and each issue of fact
which the initiating party reasonably believes
supports its claims. Within thirty days
thereafter the responding party shall inform the
initiating party in writing of (i) all factual
issues as to which the responding party agrees;
(ii) all factual issues to which it does not
agree and the reasons therefor; (iii) its
statement of additional issues of fact not
identified by the initiating party but which the
responding party believes are relevant to the
claims and (iv) any additional claims and
supporting facts the responding party wishes to
assert against the initiating party. Within
thirty days following receipt of such response,
the initiating party shall state in writing to
the responding party: (i) all facts that it
agrees to; and (ii) all facts to which is does
not agree and the reasons therefor. Within thirty
days thereafter, both parties shall stipulate in
a single writing: (i) all facts as to which they
agree; and (ii) all of the remaining contested
issues of fact. Upon the execution of the
stipulation, either party may pursue the dispute
based on those facts agreed to or alleged in such
stipulation and no others.
2. Third Party Resolution.
DEALER and MAZDA agree to submit promptly the
unresolved dispute to a non-judicial third party
review process where required by law, or where
the parties mutually agree such review is likely
to result in a prompt resolution of the dispute.
Neither party shall be required to be represented
by legal counsel in the course of the foregoing
review process.
<PAGE> 24
DISPUTE RESOLUTION MAZDA
- -------------------------------------------------------------------------------
3. Binding Arbitration.
If a controversy or claim arising out of or
relating to the MAZDA Dealer Agreement, the
breach thereof or the business relationship
between DEALER and MAZDA under the MAZDA Dealer
Agreement, cannot be resolved by a legally
required third party non-judicial review process,
or where the parties cannot mutually agree on
some other third party non-judicial review
process, either party may submit the matter to
binding arbitration in accordance with the
Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the
award rendered by the Arbitrator may be entered
in any court having jurisdiction thereof. Any
demand for arbitration under this paragraph must
be filed in writing with the American
Arbitration Association within thirty days
following a written notice by DEALER or MAZDA to
the other that, in the notifying party's opinion,
the controversy or claim cannot be resolved by
the means specified in the second paragraph of
this Section II. The demand for arbitration shall
be filed in the city in which MAZDA's principal
place of business is located. Either party shall
be entitled to appear at the arbitration
proceedings and take or give testimony by
telephone.
4. Confidentiality of Proceedings.
DEALER and MAZDA acknowledge that the foregoing
non-judicial procedures are intended to provide a
private resolution of disputes between them.
Accordingly, all documents, records, and other
information relating to the dispute shall at all
times be maintained in the strictest confidence
and not disclosed to any third party except when
necessary for the specific purpose of resolving
the pending dispute.
5. Costs and Expenses.
Each party shall bear its own expenses, including
without limitation professional fees and costs,
incurred in connection with the non-judicial
resolution of any dispute between them. The
parties shall share equally the costs and
expenses of any third party participating in a
non-judicial review process or in an arbitration
proceeding.
------------------------------------------------
III. JUDICIAL RESOLUTION 1. Acknowledgment.
The parties acknowledge and agree that their
business relationship and performance under the
MAZDA Dealer Agreement involves transactions in
or affecting interstate commerce, and that they
intend and agree that all disputes between them
shall be resolved by the non-judicial procedures
set forth in this additional agreement. The
foregoing obligation shall not be enforceable by
either party as to any issue in dispute when
expressly prohibited by law, in which event
DEALER and MAZDA agree to seek judicial
resolution of such unresolved issue in dispute
only after all reasonably available non-judicial
resolution of such unresolved issue in dispute
only after all reasonably available non-judicial
means have been fully explored and exhausted in
accordance with Section I above, and the
procedures have been followed for the execution
of the written stipulation of facts and issues in
dispute as set forth in Section II above.
2. Court Litigation.
Any party who brings a judicial proceeding shall
file the same in the jurisdiction in which the
principal office of the other party is located.
The complaint in such action shall include and
incorporate by reference the stipulation of facts
and issues in dispute referred to in Section II
above. For the purposes of expediting the
resolution of their dispute, the parties agree to
limit the litigation and discovery to the
contested issues of fact contained in the
stipulation, and not litigate or take discovery
with respect to any other factual matters.
3. Costs and Expenses.
All costs, attorneys' fees and expenses incurred
in a judicial proceeding by the prevailing party
shall be paid by the other.
2
<PAGE> 25
DEALER INFORMATION SERVICE MAZDA
- --------------------------------------------------------------------------------
This Dealer Information Service document is an
additional agreement under the MAZDA Dealer
Agreement between MAZDA and DEALER, and as such
is incorporated by reference into the MAZDA
Dealer Agreement and is binding upon MAZDA and
DEALER as if executed by each of them.
--------------------------------------------------
DEALER INFORMATION 1. MAZDA Dealer Information Service.
SERVICE MAZDA has developed a computer-based
communication and information retrieval service
designed to provide DEALER and MAZDA Dealers
generally with a system for communicating
electronically with MAZDA, and for remotely
accessing and retrieving information from MAZDA
(hereinafter referred to as "MDIS"). MDIS
consists of (i) data bases of information resident
on a host computer; (ii) proprietary
communications software resident on the host
computer; (iii) telecommunications equipment;
(iv) computer hardware approved by MAZDA for use
by DEALER at DEALER's Approved Location, which
computer hardware will enable DEALER to access
the host computer (hereafter referred to as
"Hardware"); and (v) proprietary application and
communications software for use by DEALER with
the Hardware (hereafter referred to as
"Software").
2. License.
MAZDA grants to DEALER the non-exclusive right
and license to (i) use information made available
to DEALER through MDIS for the purpose of
operating DEALER's Mazda dealership; and (ii)
otherwise communicate with MAZDA through MDIS.
3. Effective Date.
This additional agreement shall commence on the
date established by MAZDA (hereinafter referred
to as "Effective Date").
4. Monthly Charges.
A monthly subscription charge for the license
granted to DEALER hereunder shall be established
by MAZDA, and will be due on the first day of
each month following the Effective Date. MAZDA
shall be entitled to change the monthly charge
from time to time by giving thirty days' advance
written notice to DEALER by mail or through MDIS.
DEALER shall pay all applicable sales, use,
personal property and other taxes resulting from
DEALER's subscription to MDIS, exclusive of
income taxes based on subscription charges paid
to MAZDA hereunder. DEALER will be billed for
subscription charges on MAZDA's monthly parts
account statement to DEALER. DEALER agrees to pay
such amount when and as such parts account
payment is due.
5. Equipment.
DEALER shall provide at DEALER's expense all
telephone equipment required for utilization of
MDIS at DEALER's Approved Location. MAZDA shall
provide Hardware at MAZDA's expense, unless
DEALER elects to provide Hardware.
6. Proprietary Rights and Limitations.
(a) DEALER shall use MDIS in accordance with
the MDIS Operator's Manual provided by MAZDA and
any amendments thereto;
(b) Except as expressly provided in this
additional agreement or as otherwise authorized
in writing by MAZDA, DEALER shall have no right
to: (i) use Software on equipment other than
Hardware, (ii) use, print, alter, copy, display
or misuse Software in whole or in part; (iii)
disclose, publish, release or transfer Software
to a third party whether or not for consideration;
(iv) reproduce Software for the use or benefit of
anyone other than DEALER and DEALER's authorized
employees; (v) modify Software; (vi) analyze
Software or any portion thereof; (vii) use any
computer software or equipment other than
Software or Hardware in conjunction with MDIS; or
(viii) allow any lien, claim or encumbrance to
become attached to or placed upon Software or
Hardware provided by MAZDA, DEALER shall acquire
no property rights in Software or Hardware
provided by MAZDA.
<PAGE> 26
DEALER INFORMATION SERVICE MAZDA
- --------------------------------------------------------------------------
(c) DEALER acknowledges that MDIS and the
information contained in MDIS data bases
constitute valuable and proprietary property. If
DEALER wishes to use MDIS or any information
obtained from MDIS in a manner not expressly
permitted by this additional agreement, DEALER
shall request permission from MAZDA by mailing to
MAZDA a written description of the intended use
and such other information as MAZDA may request.
Permission may be granted at MAZDA's sole
discretion, and then only in writing by an
authorized officer of MAZDA.
7. Changes and Improvements.
MAZDA reserves the right to: (i) alter the
content or format of MDIS; (ii) add, alter or
delete any information from MDIS data bases;
(iii) add, alter or delete any feature,
procedure, technique or documentation with
respect to MDIS; or (iv) change any Hardware or
Software. A list of the significant changes in
MDIS affecting MAZDA Dealers generally shall be
published from time to time by MAZDA either
electronically through MDIS or by written notice
to DEALER. If MAZDA determines that any Hardware
provided by MAZDA is no longer necessary for
DEALER's use of MDIS, DEALER shall promptly
return such Hardware as directed by MAZDA and at
MAZDA's expense.
8. Maintenance Repair and Risk of Loss.
(a) DEALER will be responsible for providing
maintenance for Hardware pursuant to instructions
from the manufacturer or supplier of Hardware, or
the MDIS Operator's Manual, or as otherwise
directed by MAZDA from time to time.
(b) DEALER may not remove Software or Hardware
from DEALER's Approved Location. DEALER shall
assume the risk of loss, theft, destruction or
damage to Hardware while it is in the care,
custody or control of DEALER. In case of loss,
theft or destruction of Hardware provided by
MAZDA, DEALER shall pay MAZDA any cost incurred
by MAZDA in connection with the repair or
replacement of such Hardware. Such reimbursement
shall not reduce the monthly charges otherwise
due and shall not release either party from any
obligations hereunder.
(c) In the event of the any malfunction in,
failure of or damage to any item of Hardware
provided by MAZDA, DEALER will ship such Hardware
to MAZDA at MAZDA's direction and expense. MAZDA
shall cause such Hardware to be repaired and
DEALER shall reimburse MAZDA for the cost of such
repairs. In no instance shall DEALER allow a
third party to repair such Hardware.
(d) If Software or the MDIS Operator's Manual
are lost or damaged during shipment from MAZDA,
MAZDA will replace the same at no additional cost
to DEALER. If Software or the MDIS Operator's
Manual are lost or damaged while in possession of
DEALER, MAZDA will replace the same at MAZDA's
fee then in effect for replacement, processing
and distribution.
9. Suspension of License.
If DEALER fails to fulfill or perform any
obligation under this additional agreement, and
such failure is not cured by DEALER within ten
days following notice of such default by MAZDA to
DEALER, MAZDA may suspend the license granted to
DEALER hereunder. Any unpaid charges due
hereunder shall become immediately due and
payable. MAZDA or its designee shall be entitled
to immediate possession of the Software, Hardware
provided by MAZDA, and the MDIS Operator's
Manual. DEALER shall ship or dispose of such
items pursuant to instructions issued by MAZDA.
MAZDA or its designee may enter any premises
where such items may be located and retake
possession thereof with or without process of
law, and without prejudice to any other rights
or remedies which MAZDA may have.
10. Warranties
(a) MDIS AND ALL RELATED SERVICES ARE PROVIDED
HEREUNDER BY MAZDA ON AN
2
<PAGE> 27
DEALER INFORMATION SERVICE MAZDA
- -----------------------------------------------------------------------------
"AS IS" BASIS, MAZDA MAKES NO WARRANTIES OF ANY
KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING,
BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. DEALER ACKNOWLEDGES THAT DEALER MAY NOT
BE ABLE TO USE MDIS IN CERTAIN CIRCUMSTANCES SUCH
AS POWER FAILURE, TELECOMMUNICATIONS FAILURE, OR
BREAKDOWN OF EQUIPMENT.
(b) MAZDA SHALL NOT BE LIABLE FOR ANY LOSS OF
PROFITS, LOSS OF USE, OR INDIRECT, SPECIAL,
INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES OF
ANY KIND IN CONNECTION WITH OR ARISING OUT OF
FAILURE TO FURNISH, FURNISHING, PERFORMANCE,
MAINTENANCE OR USE OF ANY SOFTWARE, HARDWARE OR
SERVICES PROVIDED HEREUNDER. MAZDA'S MAXIMUM
LIABILITY REGARDLESS OF THE FORM OF ACTION TAKEN
SHALL NOT IN ANY EVENT EXCEED THE MONTHLY CHARGES
PAID HEREUNDER DURING THE MONTH IN WHICH THE
LIABILITY ARISES.
11. General.
(a) This additional agreement shall govern the
relationship between MAZDA and DEALER with
respect to DEALER's use of MDIS.
(b) This additional agreement shall be deemed
to have been entered into in the State of
California, and fully performed by MAZDA in the
State of California, and its validity,
performance and construction shall be governed by
the laws of the State of California.
(c) Except for collection actions by MAZDA
against DEALER, no action arising under this
additional agreement may be brought more than one
year after the cause of action has accrued.
(d) DEALER may not sublet, transfer, assign or
otherwise encumber Software or Hardware provided
by MAZDA, or allow the same to be used by anyone
other than DEALER or DEALER's authorized
employees without MAZDA's prior written consent.
Any prohibited attempt at assignment, transfer or
subletting shall be void.
3
<PAGE> 28
MAZDA MOTOR OF AMERICA, INC.
September, 19, 1997
CERTIFIED MAIL
Return Receipt Requested
Mr. E. Moss Robertson
Moss Robertson Mazda
2355 Browns Bridge Road
Gainesville, GA 30504
Dear Moss:
Mazda Motor of America, Inc. (Mazda) hereby extends the duration of the Mazda
Dealer Agreement currently existing between you and Mazda to and including
December 31, 1998.
This extension is automatic and does not require any action by you, but you
should keep this letter with your executed Mazda Dealer Agreement.
Sincerely,
/s/ John A. English
- ------------------------
John A. English
Regional General Manager
/bs
<PAGE> 1
EXHIBIT 10.51
SUBLEASE
BETWEEN NOVACARE OUTPATIENT
REHABILITATION DIVISION EAST, INC.
A DELAWARE CORPORATION, SUBLESSOR
AND
BOOMERSHINE AUTOMOTIVE GROUP, INC., SUBLESSEE
1. PARTIES.
This Sublease dated February 5, 1998 is made between NOVACARE
OUTPATIENT REHABILITATION DIVISION EAST, INC. ("Sublessor") and BOOMERSHINE
AUTOMOTIVE GROUP, INC. (Sublessee).
2. MASTER LEASE
Sublessor is the lessee under a written lease dated October 18, 1993,
wherein LAING MANAGEMENT COMPANY ("Lessor") leased to Sublessor the real
property located in the city of Atlanta, County of Fulton, State of Georgia,
described as 5901B Peachtree Dunwoody Road ("Master Premises"). Said lease is
herein collectively referred to as the "Master Lease" and is attached hereto as
Exhibit "A".
3. PREMISES.
Sublessor hereby subleases to Sublessee on the terms and conditions set
forth in this Sublease the following portion of the Master Premises
("Premises"): 4,708 rentable square feet of Suite 250 at 5901B Peachtree
Dunwoody Road, Atlanta, Georgia 30328.
<PAGE> 2
4. WARRANTY BY SUBLESSOR.
Sublessor warrants and represents to Sublessee that the Master Lease
has not been amended or modified except as expressly set forth herein, that
Sublessor is not now and, as of the commencement of the Term hereof, will not be
in default or breach of any of the provisions of the Master Lease, and that
Sublessor has no knowledge of any claim by Lessor that Sublessor is in default
or breach of any of the provisions of the Master Lease.
5. TERM.
The term of this Sublease shall commence on March 1, 1998, and shall
end on March 31, 1999, ("Termination Date"), unless otherwise sooner terminated
in accordance with the provisions of this Sublease. Possession of the Premises
("Possession") shall be delivered to Sublessee on the Commencement Date or
sooner by mutual agreement. If Sublessor permits Sublessee to take Possession
prior to the Commencement Date, such early Possession shall not advance the
Termination Date, but Sublessee shall be subject to the provisions of this
Sublease as of such date, including without limitation the payment of rent.
6. RENT.
6.1 Minimum Rent. Sublessee shall pay to Sublessor minimum rent,
without deduction, set-off, notice or demand, at the following address: 1016 W.
Ninth Avenue, King of Prussia, Pennsylvania 19406, or at such other place as
Sublessor shall designate from time to time by notice in writing to Sublessee,
the sum of Four Thousand Seven Hundred Eight Dollars ($4,708.00) per month, in
advance on the first day of each month of the Term. Sublessee shall pay to
Sublessor upon execution of this Sublease the sum of Four Thousand Seven Hundred
Eight Dollars ($4,708.00) as rent for March 1998. If the Term begins or ends on
a day other than the first or
2
<PAGE> 3
last day of month, the rent for the partial month shall be prorated on a per
diem basis based on a 360 day year.
6.2 Late Payment. In the event that any payment required by Sublessee
under the provisions hereof shall not be paid within three (3) days of the date
when due, Sublessee shall, upon demand, pay a late charge to Sublessor in an
amount computed at 10 percent per annum of each dollar overdue and such late
charge shall be deemed "rent" for all purposes under this Sublease.
7. SECURITY DEPOSIT.
Sublessee shall deposit with Sublessor, upon execution of this
Sublease, the sum of Five Thousand Four Hundred Ninety-two Dollars and 67/100
($5,492.67) as security for Sublessee's faithful performance of Sublessee's
obligations hereunder ("Security Deposit"). If Sublessee fails to pay rent or
other charges when due under this Sublease, or fails to perform any of its other
obligations hereunder, Sublessor may use or apply all or any portion of the
Security Deposit for payment of any rent or other amount then due hereunder and
unpaid, for the payment of any other sum for which Sublessor may become
obligated by reason of Sublessee's default or breach, or for any loss or damage
(including attorney's fees) sustained by Sublessor as a result of Sublessee's
default or breach. If Sublessor so uses any portion of the Security Deposit,
Sublessee shall, within 10 days after written demand by Sublessor, restore the
Security Deposit to the full amount originally deposited, and Sublessee's
failure to do so shall constitute a default under this Sublease. Sublessor shall
not be required to keep the Security Deposit separate from its general accounts,
and shall have no obligation or liability for payment of interest on the
Security Deposit. In the event Sublessor assigns its interest in this Sublease.
Sublessor shall deliver to its assignee so much of the Security Deposit as is
then held by Sublessor. Within 30 days after the term has expired, or
3
<PAGE> 4
Sublessee has vacated the Premises, or any final adjustment pursuance to
Subsection 6.3 hereof has been made, whichever shall last occur, and provided
Sublessee is not then in default of any of its obligations hereunder, the
Security Deposit, or so much thereof as had not therefore been applied by
Sublessor, shall be returned to Sublessee, or to the last assignee if any, of
Sublessee's interest hereunder.
8. USE OF PREMISES.
Sublessee represents that the use of the Premises shall be the use as
set forth in the Lease Summary. Sublessee shall not permit the Sublease Premises
to be used for any other purpose without the prior written consent of both
Sublessor and the Lessor, but in no event shall such use violate the terms of
the Master Lease. Sublessee shall comply with all present and future laws,
ordinances, regulations, and requirements of all federal, state, and other
governmental authorities relating to the use of the Sublease Premises. Sublessee
shall not permit the Sublease Premises to be used in any manner that would
constitute a public or private nuisance or that would interfere with any other
tenant's use of the Building or the project in which the Building is located.
Sublessee shall observe and abide by all rules and regulations that are
established by Lessor relating to the Sublease Premises or the use of any other
part of the Building or projection on which the Building is located.
9. CONDITION OF PREMISES.
(a) Sublessee agrees to accept the Sublease Premises in "as is"
condition as of the commencement of the term of this Sublease. Sublessee
acknowledges that Sublessor is not making any representations or warranties
regarding the Sublease Premises, except as may be set forth in this Sublease.
Sublessee shall surrender the Sublease Premises to Sublessor upon the expiration
or
4
<PAGE> 5
termination of this Sublease, in as good condition as they are at the
commencement of this Sublease, ordinary wear and tear excepted.
(b) During the term of this Sublease, Sublessee shall not make or
install any additions, renovations, alterations, improvements, or changes in or
to the Sublease Premises, or any part thereof, without first obtaining the prior
written consent of both Sublessor and the Lessor. If approved by Sublessor and
Lessor, all work will be in accordance with all laws and regulations, including
the Americans with Disabilities Act. The Sublessee shall be obligated to obtain
all necessary permits at its expense. At the expiration of the sublease term,
Sublessee shall remove, if requested by Sublessor or Lessor, any improvements or
installations constructed by Sublessee.
10. REPAIRS AND MAINTENANCE.
Throughout the term of this Sublease, Sublessee shall, at its sole cost
and expense, keep and maintain the Sublease Premises in good condition, ordinary
wear and tear excepted. Any damage or injury to the Sublease Premises that is
caused by the negligent act or omission of Sublessee, or any of its employees,
subcontractors, agents, servants or visitors, shall be promptly repaired by
Sublessee at its sole cost and expense. In the event that Sublessee does not
make any repairs which it is obligated to make under this Paragraph, Sublessor
shall have the right to make such repairs and Sublessee shall pay to Sublessor
all costs and expenses thereof as additional rent.
11. BUILDING SERVICES.
To the extent that any utility, elevator or cleaning services are
furnished to the Sublease Premises by Lessor, Sublessee shall be entitled to the
use and benefit of such services; provided, however, that Sublessor shall not
have any liability or responsibility to Sublessee for the quality of such
services or for any interruptions, failure or disruption in the availability of
such services
5
<PAGE> 6
unless such interruption, failure or disruption results from the negligent act
or omission of Sublessor. Sublessee shall pay for all its utility expenses, such
as telephone service, etc. (electricity is paid by landlord)
12. INDEMNIFICATION.
Sublessee shall defend, indemnify, and hold harmless Sublessor, its
agents and employees from and against all liabilities, obligations, damages,
penalties, claims, costs, charges, and expenses, including reasonable attorney's
fees, which may be imposed upon or incurred by Sublessor or asserted by reason
of any of the following which shall occur during the term of this Sublease or
during any period of time prior to the Commencement Date when Sublessee may have
been given access to or possession of all or any portion of the Sublease
Premises:
(a) any work or act done in, on, or about the Sublease Premises or any
part thereof at the direction of Sublessee, its agents, contractors,
subcontractors, servants, employees, licensees, or invitees, unless such work or
act is done or performed by Sublessor or its agents or employees;
(b) any negligence or other wrongful act or omission on the part of
Sublessee or any of its agents, contractors, subcontractors, servants,
employees, sublessees, licensees, or invitees;
(c) any accident, injury, or damage to any person or property occurring
in, on, or about the Sublease Premises or any part thereof, unless caused by the
gross negligence or willful misconduct of Sublessor, its employees, or agents;
and
(d) any failure on the part of Sublessee to perform or comply with any
of the covenants, agreements, terms, provisions, conditions, or limitations
contained in this Sublease on its part to be performed or complied with.
6
<PAGE> 7
13. ASSIGNMENT AND SUBLETTING.
Sublessee shall not assign this Sublease, or any interest therein, or
further sublease the Sublease Premises, or any part thereof, or permit any other
person to use the Sublease Premises without first obtaining the prior written
consent of both Sublessor and Lessor in accordance with the terms of the Master
Lease. Any attempted assignment, pledge or hypothecation of this Sublease, or
any other attempted subletting of the Sublease Premises without Sublessor's and
Lessor's prior written consents shall be null and void and shall, at the option
of Sublessor, be a default, and terminate this Sublease.
14. SUCCESSORS AND ASSIGNS.
Subject to the restrictions on assignment and subletting by Sublessee,
this Sublease shall be binding upon and shall inure to the benefit of the
parties hereto, their successors, permitted assigns, and legal representatives.
15. ASSUMPTION OF MASTER LEASE PROVISIONS.
All applicable terms and conditions of the Master Lease are
incorporated into and made a part of this Sublease as if Sublessor were the
lessor thereunder, Sublessee the lessee thereunder, and the Premises the Master
Premises. Sublessee assumes and agrees to perform the lessee's obligations under
the Master Lease during the Term to the extent that such obligations are
applicable to the Premises except that the obligation to pay rent to Lessor
under the Master Lease shall be considered performed by Sublessee to the extent
and in the amount rent is paid to Sublessor in accordance with this Sublease.
Sublessee shall not commit or suffer any act or omission that will violate any
of the provisions of the Master Lease. Sublessor shall exercise due diligence in
attempting to cause Lessor to perform its obligations under the Master Lease for
the benefit of
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Sublessee. If the Master Lease terminates, this Sublease shall terminate and the
parties shall be relieved of any further liability or obligation under this
Sublease provided, however, that if the Master Lease terminates as a result of a
default or breach by Sublessee under this Sublease and/or the Master Lease, then
the Sublessee shall be liable to the Sublessor for all damages suffered as a
result of such termination or if it terminates as a result of a breach or
default by Sublessor under the Master Lease, then Sublessor shall be liable to
Sublessee for all damages suffered as a result of such termination.
Notwithstanding the foregoing, if the Master Lease gives Sublessor any right to
terminate the Master Lease in the event of the partial or total damage,
destruction, or condemnation of the Master Premises or the building or project
of which the Master Premises are a part, the exercise of such right by Sublessor
shall not constitute a default or a breach hereunder.
16. DEFAULT.
In the event that Sublessee shall fail to pay, when due, any rental or
other payment required to be paid by Sublessee hereunder or shall fail to
observe or perform any covenant, obligation or condition required to be
performed or observed by Sublessee hereunder, including, but not limited to,
committing any act which may constitute a default of the Lease, and any such
failure shall continue uncured for a period of ten (10) days after written
notice hereof to Sublessee or such other period as provided for in the Lease,
all amounts owed under this Sublease, including unpaid rent, shall become
immediately due and payable and Sublessor shall have the right to terminate this
Sublease, to recover immediate possession of the Sublease Premises, and to
remove all personal property of Sublessee from the Sublease Premises at
Sublessee's cost and expense. In addition, in the event of any default by
Sublessee hereunder, Sublessor shall be entitled to all remedies permitted by
law, and those permitted the Lessor under the Master Lease, including reasonable
attorney's fees, and to enforce all remedies available to Sublessor at law or in
equity, or as set forth
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in the Master Lease, which remedies shall be cumulative, the exercise of one not
to preclude later exercise of another. Sublessor shall not be responsible or
liable for any failure to resublet the Sublease Premises or any part thereof.
17. SUBLESSEE'S INSURANCE.
Throughout the term of this Sublease, Sublessee shall obtain and
maintain through insurance carriers reasonably satisfactory to both Sublessor
and Lessor and licensed to do business in the State in which the Sublease
Premises are located, insurance against claims for personal injury (including
death) and property damage, under a policy of general liability insurance, in
such reasonable minimum amount as is approved by Sublessor from time to time
sufficient to comply with Sublessor's obligations pursuant to the Master Lease.
Sublessee's insurance policy shall name both Sublessor and Lessor as additional
insureds thereunder and provide that such policy cannot be canceled without
thirty (30) days' prior written notice given to both Sublessor and Lessor.
Sublessee shall provide both Sublessor and Lessor with certificates of insurance
or a receipt evidencing payment of premiums for such insurance. Sublessee will
insurance its personal property and improvements.
18. SUBLESSEE'S OBLIGATIONS.
18.01 Premises. Sublessee shall do nothing on the Premises that tends
unreasonably to injure or depreciate the property, or that affects or endangers
Sublessor's or Sublessee's insurance or that it illegal, unlawful, or prohibited
by any law, ordinance, rule, regulation of any applicable public authority, or
which is a nuisance, or disturbs the quiet enjoyment of other lessees. Sublessee
shall not locate any hazardous or toxic materials on the Premises, except for
nominal amounts used in the ordinary course of Sublessee's business.
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18.02 Operation of Business. Sublessee shall conduct its business in
the Sublease Premises continuously during such days and hours customarily
observed by Sublessee.
19. NOTICES.
All notices shall be in writing and shall be delivered in person or by
certified mail at the following address:
Sublessor:
NovaCare, Inc. NovaCare Outpatient
1016 West Ninth Ave. Rehabilitation Division
King of Prussia, PA 19406 1016 West Ninth Avenue
Attention: General Counsel King of Prussia, PA 19406
Attention: President
NovaCare, Inc. Stephen F. Mackell,
1016 West Ninth Ave. General Manager
King of Prussia, PA 19406 Business Development Serv.
Attn: Accounts Payable Manager 625 Ridge Pike, Building E
Conshohocken, PA 19428
Sublessee:
Boomershine Automotive Group, Inc.
2150 Cobb Parkway
Smyrna, GA 30080
20. BROKER PARTICIPATION.
Sublessor and Sublessee warrant and represent that they have dealt with
CB Commercial (representing Sublessor) and The Fulton Group (representing
Sublessee) in connection with this Sublease. Sublessor agrees to pay The Fulton
Group 36.1 percent of the first month's rental plus 4 percent of the remaining
total base rentals ($1,699.59 plus $2,259.84 = $3,959.43). Sublessor agrees to
pay CB Commercial an additional 50 percent of The Fulton Group's fee
($3,959.43/2 = $1,979.72).
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21. ATTORNEY'S FEES.
If Sublessor or Sublessee shall commence an action against the other
arising out of or in connection with this Sublease, the prevailing party shall
be entitled to recover its costs of suit and reasonable attorney's fees, which
shall be set by the Court.
22. CONSENT BY LESSOR.
THIS SUBLEASE SHALL BE OF NO FORCE OR EFFECT UNLESS THE FOLLOWING ITEMS
ARE CONSENTED TO BY LESSOR WITHIN 10 DAYS AFTER EXECUTION HEREOF:
(a) Landlord shall agree and approve the Sublessee as an approved
Sublessee under the Master Lease, and shall execute the consent attached hereto
and identified as Appendix A.
(b) Landlord agrees and promises for the benefit of the Sublessee that
in the event of a default or breach by the Sublessor of the Master Lease, that
Lessor will provide written notice of said breach or default to the Sublessee
and that Sublessee shall have 20 days from the date of the written notice to
cure the Sublessor's default or breach.
23. SUBLESSOR ACCESS.
Sublessor shall have the right at all reasonable times and after
reasonable prior notice (or without notice, for emergencies) to enter the
Sublease Premises for the purpose of examining the same, providing services or
maintenance, or making repairs, or alterations as the Sublessor shall deem
necessary. However, the foregoing shall not obligate Sublessor to make any
repairs.
24. TERMINATION.
Upon the termination of this Sublease for any cause whatsoever,
Sublessee shall remove Sublessee's trade fixtures and all other personal
property which can be removed without damage to
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the Demised Premises and shall likewise remove such other items as Sublessor
shall designate for removal by Sublessee (such as improvements constructed by
Sublessor during the term of this sublease), upon expiration of the term hereof
(and in such case Sublessee shall be obligated to restore any damage caused
thereby), and shall quit and deliver up the Sublease Premises to Sublessor
peaceably and quietly in as good order and condition as at the inception of the
term of this Sublease (or in such condition as same hereafter may be improved by
Sublessee or Sublessor), reasonable wear and tear, damage by fire or other
casualty, and repairs which are Sublessor's obligation excepted.
25. GENERAL PROVISIONS.
(a) The waiver by Sublessor of breach of any covenant, obligation or
condition set forth herein shall not be deemed to be a waiver of any subsequent
breach of the same or of any other covenant, obligation or condition of this
Sublease.
(b) This Sublease shall be governed by and construed in accordance with
the laws of the State in which the Sublease Premises are located.
(c) This Sublease constitutes the entire agreement between the parties
hereto and may not be modified except by a written instrument executed by the
parties hereto.
(d) If any provision of this Sublease is declared invalid or
unenforceable, the remainder of the Sublease shall continue in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Sublease as
of the day, month, and year first above written.
Attest: SUBLESSOR:
NOVACARE OUTPATIENT
REHABILITATION DIVISION EAST, INC.
- -------------------------------- -------------------------------------
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By:
----------------------------------
Title:
-------------------------------
Attest: SUBLESSEE:
- -------------------------------- --------------------------------------
By:
----------------------------------
Title: Secretary Treasurer
-------------------------------
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EXHIBIT 10.52
COMMERCIAL LEASE AGREEMENT
THIS COMMERCIAL LEASE AGREEMENT (the "AGREEMENT") is made this 23 day of
April, 1998, and effective as of April 1, 1998 (the "COMMENCEMENT DATE"), by
and between JAMES E. L. PETERS, JR. (hereinafter called "LANDLORD") and
BOOMERSHINE COLLISION CENTERS, INC., a Georgia corporation (hereinafter called
"TENANT").
W I T N E S S E T H
PREMISES
1. Landlord, for and in consideration of the rents, covenants,
agreements and stipulations hereinafter mentioned, provided for and contained
to be paid, kept and performed by Tenant, leases and rents unto Tenant, that
certain building described on EXHIBIT "A" attached hereto and made a part
hereof (the "PREMISES"), along with that certain parcel of real property
owned by the Landlord and more particularly described on EXHIBIT "B" attached
hereto (hereinafter called the "PROPERTY"). Tenant hereby leases and takes
the Premises and the Property "AS-IS" upon the terms and conditions which
hereinafter appear. The No easement for light or air is included in the
Premises. Tenant has satisfied itself as to the suitability of the Premises for
its intended use.
TERM
2.1 GENERAL.
The term of this lease (the "TERM") shall be for a period of five
(5) years commencing on the Commencement Date.
2.2 EXTENSION TERM.
Provided that Tenant is not in uncured material default (which has
not been waived by Landlord) under this Lease, beyond any applicable cure
periods, as of the date upon which Tenant notifies Landlord of its intention to
extend the term of this Lease pursuant to this SECTION, Tenant shall have the
option to extend the term of this Lease for one (1) five (5)-year period (the
"EXTENSION TERM") on the terms and conditions contained herein, including
adjustment of Minimum Rent as provided in SECTION 3.2. Other than as set forth
herein, Tenant shall have no further option to extend this Lease. Exercise of
such extension option shall be by written notice given to Landlord at least
one hundred-eighty (180) days and not more than three hundred-sixty (360) days
prior to the last day of the original Term. Tenant's failure to give timely
notice of exercise of such option shall render the option void. The extension
option under this Section may
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be exercised only by the named Tenant and any permitted assignee or subtenant
of Tenant, and is not assignable to any other person or entity whatsoever.
RENTAL
3.1 MINIMUM RENT.
Beginning on the Commencement Date and continuing during the entire
Term, Tenant shall pay to Landlord minimum rent ("MINIMUM RENT") in the amount
of Twelve Thousand Dollars ($12,000.00) per month. Minimum Rent shall be paid
in advance on or before the first day of each calendar month during the Term.
Upon execution of this Lease, Tenant shall pay to Landlord a deposit in the
amount of Twelve Thousand Dollars ($12,000.00). Such amount shall be held by
Landlord as a security deposit ("SECURITY DEPOSIT"). If Tenant is not in
default, Landlord shall return the balance Security Deposit not used to restore
the Premises and the Tenant Improvements to their original condition, ordinary
wear and tear alone excepted. Such refund shall be made to Tenant within thirty
(30) days after the termination of the Term, or any extension or renewal
thereof. If the first month of the Term shall be a partial month, Minimum Rent
shall be prorated on a daily basis.
3.2 MINIMUM RENT ADJUSTMENT.
Should Tenant exercise its option to extend the initial Term as set
forth in SECTION 2.2 hereinabove, then the monthly Minimum Rent payable during
such option period shall increase, beginning with the first day of the
extension term and on each anniversary thereof thereafter. The initial increase
and each annual increase thereafter shall be in a percentage equal to the
greater of (i) three percent (3.0%) of the Minimum Rent in effect during the
preceding period, or (ii) the percentage increase, if any, in the consumer
price index for Urban Wage Earners and Clerical Workers (1982-1984=100), U.S.
City Average For All Items, as published by the United States Department of
Labor, Bureau of Labor Statistics (the "CPI"). If such CPI is discontinued or
revised during the term hereof, then such other index or computation with which
it is replaced shall be used. The CPI increase, if any, shall be calculated by
comparing the CPI figure for the month immediately preceding the adjustment
date with the CPI figure for the same month of the proceeding year. Landlord
shall submit a statement to Tenant each year of the extension term reflecting
the increase, if any, in the CPI as herein provided. If such statement is
delayed, Tenant shall pay increased Minimum Rent based on the three percent
(3.0%) minimum increase stated above, effective upon the adjustment date, and
shall immediately pay to Landlord any deficiency in rent due upon submission of
said CPI statement.
3.3 NO WAIVER.
Payment by Tenant or receipt by Landlord of a lesser amount than the
Minimum Rent or Additional Rent or other charges due herein may, at Landlord's
sole option, be deemed to be on account of the earliest due rent or other
charges, or deemed to be on account of rent owing for the current period only,
notwithstanding any instructions by or on behalf of Tenant to the contrary,
which instructions shall be null and void, and no endorsement or statement on
any check
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or any letter accompanying any check or other payment as rent or other charges
shall be deemed an accord and satisfaction, and Landlord shall accept such
check or payment without prejudice to Landlord's right to recover the balance
of such rent or other charges or pursue any other remedy in this Lease or in
law or in equity against Tenant.
LATE CHARGES
4. If Landlord fails to receive any payment of Minimum Rent or Additional
Rent (hereinafter defined) within five (5) business days after it becomes due,
Tenant shall pay Landlord, as additional rental, a late charge equal to five
percent (5%) of the overdue amount for each month of the delinquency. The
parties agree that such late charge represents a fair and reasonable estimate
of the costs Landlord will incur by reason of such late payment.
UTILITY BILLS
5. Tenant shall pay all utility bills, including, but not limited to
water, sewer, gas, electricity, fuel, light, and heat bills for the Premises
and the Tenant Improvements (hereinafter defined) and Tenant shall pay all
charges for garbage collection or other sanitary services.
USE OF PREMISES AND TENANT IMPROVEMENTS
6. The Premises and Tenant Improvements shall be used as for automotive
related purposes only and no other purposes. The Premises and Tenant
Improvements shall not be used for any illegal purposes, nor in any manner to
create any nuisance or trespass, nor in any manner to vitiate the insurance or
increase the rate of insurance on the Premises or the Tenant Improvements.
Notwithstanding the foregoing, Tenant (or a permitted subtenant) may utilize a
portion of the Premises or the Tenant Improvements for vehicle sales and/or
leasing.
ABANDONMENT OF THE PREMISES OR TENANT IMPROVEMENTS
7. Tenant agrees to continuously operate in the Premises and Tenant
Improvements, and further agrees not to abandon or vacate the Premises or the
Tenant Improvements during the Term of this Lease, or any extension thereof, and
agrees to use the Premises and Tenant Improvements for the purposes herein
leased until the expiration hereof.
INDEMNITY; INSURANCE
8.1 Indemnity.
Tenant shall indemnify, defend, protect and save harmless Landlord, and
Landlord's officers, directors, employees, agents, contractors and customers
(collectively, the "LANDLORD INDEMNITIES") from and against any claim, loss,
liability, damage, cost, expense, attorney's fees, suit or judgment, arising
out of or connection with (i) the condition, use, occupancy, management, or
control of the Premises or the Tenant Improvements, (ii) any default of Tenant
under the terms of this Lease, (iii) the negligent acts or omissions of Tenant,
its agents, independent contractors,
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suppliers, officers, directors, employees, guests, or invitees, and (iv) any
claims by Tenant's employees, agents, representatives, or invitees of personal
injury, however caused, to the extent the same is covered or required to be
covered by workers' compensation insurance. The above indemnity shall not apply
to the extent the claim is directly caused by the gross negligence or wilful and
intentional act of Landlord. Tenant shall, at its own cost and expense, defend
any and all suits or other actions which may be brought against any Landlord
Indemnitee either alone or in conjunction with others upon any such
above-mentioned cause or claim, and shall satisfy, pay, and discharge any and
all judgments that may be recovered against any Landlord Indemnitee in any such
action or actions in which a Landlord Indemnitee may be a party defendant.
Supplementing the foregoing and in addition thereto, Tenant shall at all times
during the Term of this Lease and any extension or renewal thereof, and at
Tenant's expense, maintain in full force and effect comprehensive general
liability insurance with limits of $1,000,000.00 per person and $1,000,000.00
per occurrence, and property damage limits of $1,000,000.00, which insurance
shall contain a special endorsement recognizing and insuring any liability
accruing to Tenant under the first sentence of this SECTION, and naming
Landlord as additional insured. Tenant shall provide evidence of such insurance
to Landlord prior to the commencement of the Term of this Lease and shall give
Landlord written notice thirty (30) days before expiration or termination of
any such policy. All policies of insurance required hereunder shall contain an
endorsement providing that the insurer will not cancel or amend the policy or
policies without first giving at least thirty (30) days prior written notice
thereof to Landlord. Landlord and Tenant each hereby release and relieve the
other, and waive its right of recovery, for loss or damage arising out of or
incident to the perils insured against which perils occur in, on or about the
Premises and the Tenant Improvements (hereinafter defined), whether due to the
negligence of Landlord or Tenant or their agents, employees, contractors and/or
invitees, to the extent that such loss or damage is within the policy limits of
said comprehensive general liability insurance. Landlord and Tenant shall, upon
obtaining the policies of insurance required, give notice to the insurance
carrier or carriers that the foregoing mutual waiver of subrogation is contained
in this Lease.
8.2 INSURANCE.
Tenant agrees to pay directly Landlord's reasonable cost of carrying
fire and extended coverage insurance and general liability insurance
("INSURANCE") on the Premises, the Property and the Tenant Improvements
(hereinafter defined). Semi-annually Landlord shall submit an invoice to Tenant
for the amount which will be due and payable for that particular period, and
payment to the insurance company shall be due within ten (10) days of
submission of such invoice. The Insurance account of Tenant shall be reconciled
annually.
PROPERTY TAXES
9.1 PERSONAL PROPERTY TAXES.
Tenant shall be liable for all taxes levied against personal property
and trade fixtures placed by Tenant in the Premises and the Tenant Improvements
(hereinafter defined). If any such personal property taxes of Tenant are levied
against Landlord or Landlord's property and if
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Landlord elects to pay the same or if the assessed value of Landlord's property
is increased by inclusion of personal property and trade fixtures placed by
Tenant in the Premises and the Tenant Improvements (hereinafter defined), and
Landlord elects to pay the taxes based on such increase, Tenant shall pay to
Landlord its proportionate share of such taxes within ten (10) days after
written notice from Landlord setting forth the amount of such taxes applicable
Property together with a copy of the tax bill and other evidence documenting
that such tax is properly payable by Tenant.
9.2 REAL PROPERTY TAXES.
Tenant agrees to pay directly all taxes, assessments, and
governmental charges of any kind and nature whatsoever (hereinafter
collectively referred to as the "Taxes"), levied or assessed against the
Premises, the Property, and the Tenant Improvements (hereinafter defined).
Annually, Landlord shall submit an invoice to Tenant for the amount of taxes
which will be due and payable for that particular year based on the amount of
such taxes due the preceding year, and Tenant shall pay such invoice within ten
(10) days of submission of such invoice. The Tax account of Tenant shall be
reconciled annually. If the Tenant's total Tax payments are less than the
actual Taxes on the Premises, the Property and the Tenant Improvements
(hereinafter defined). Tenant shall pay to Landlord the difference within ten
(10) days after written demand together with paid receipts and such other
information as Tenant shall reasonably request; if the total Tax payments of
Tenant are more than the actual Taxes on the Premises, the Property and the
Tenant Improvements (hereinafter defined). Landlord shall promptly refund such
excess. Notwithstanding anything contained herein to the contrary, Tenant shall
not be required to pay any income, estate, corporate, inheritance, succession,
business or transfer tax of Landlord. Upon Lease termination, Landlord will
promptly refund to Tenant its pro rata portion of real property taxes for the
portion of the year Tenant will not be occupying the Premises.
9.3 FAILURE TO PAY.
If Tenant should fail to timely pay (i) any insurance premiums as set
forth in Section 8.2 hereinabove, or (ii) any Additional Rent when due and
required to be paid by Tenant hereunder, in addition to any other remedies
provided herein, Landlord may, if it so elects, pay such amounts and charges.
Any sums so paid by Landlord shall be deemed to be so much additional rent
owing by Tenant to Landlord and shall be due and payable ten (10) days after
written demand, plus interest accruing at the rate of eighteen percent (18%)
per annum from the date of payment by Landlord until repaid by Tenant. Failure
to pay (i) insurance premiums as set forth in Section 8.2, or (ii) Additional
Rent shall also constitute a material default of this Lease.
9.4 CHANGE OF TAXING METHODOLOGY.
If at any time during the Term of this Lease, or any extension or
renewal hereof, the present method of taxation shall be changed so that in lieu
of the whole or any part of any taxes, assessments, levies, or charges levied,
assessed, or imposed on real estate and the improvements thereon, there shall
be levied, assessed, or imposed on Landlord a capital levy or other tax
directly on the rents received therefrom and/or a franchise tax, assessment,
levy, or charge measured by or
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based, shall be deemed to be included within the term "Taxes" for the purposes
hereof, but only to the extent that any such change in the present method of
taxation or assessment is in lieu of, a substitute for, or such a supplement
to, taxes as they are now assessed and only to the extent that such taxes would
be payable if the Premises were the only property of Landlord subject to such
taxes or the income from operation of the Premises were Landlord's only income,
as the case may be.
REPAIRS BY LANDLORD
10. Landlord shall have no responsibility whatsoever to make any repairs
to the Premises, the Property or the Tenant Improvements, such obligation being
the sole obligation of Tenant. This Lease is intended by the parties to be a
triple net lease, and Tenant shall timely pay all such expenses of every type
relating to the Premises, the Property and the Tenant Improvements after the
Commencement Date, and Minimum Rent and Additional Rent shall be received by
Landlord without any deduction, set-off, abatement or offset of any kind
whatsoever.
REPAIRS BY TENANT
11. Tenant accepts the Premises and the Property "AS-IS" in their present
condition and as suited for the uses intended by Tenant. Tenant shall,
throughout the initial Term of this Lease, and any extension or renewal
thereof, at its sole expense, keep in good repair the roof, foundations and
exterior walls of the Premises and the Tenant Improvements (inclusive of all
glass and exterior doors) and underground utility and sewer pipes outside the
exterior walls of the Premises and the Tenant Improvements. Without limiting
the generality of the foregoing, Tenant will keep the interior of the Premises
and the Tenant Improvements, together with all electrical, plumbing and other
mechanical installations therein in good order and repair. Tenant will not
overload the electrical wiring serving the Premises and the Tenant Improvements
or within the Premises and the Tenant Improvements, and will install at its
expense any additional electrical wiring which may be required in connection
with Tenant's apparatus, such wiring and its installation to be in compliance
with all applicable laws, codes, ordinances, and regulations. Further, Tenant
shall provide for the mowing of grass, care of shrubs and general landscaping
and maintenance of the parking area, and proper maintenance, repair and
replacement of the HVAC system. Tenant agrees to return the Premises, the
Property, and the Tenant Improvements to Landlord at the expiration, or prior
termination of this Lease, in as good condition and repair as when first
received, natural wear and tear, damage by storm, fire, lighting, earthquake or
other casualty alone excepted.
TENANT IMPROVEMENTS
12.1 CONSTRUCTION.
Tenant agrees, at its sole cost and expense, to construct on the
Property a building of approximately four thousand six hundred-twenty _____
(4,620) square feet in accordance with plans and specifications approved by
Landlord, using materials and equipment of a quality equal to or better than
the quality used on the existing building on the Property ("TENANT
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IMPROVEMENTS"). It is estimated that the Tenant Improvements shall cost
approximately Two Hundred Fifty Thousand Dollars ($250,000.00). Plans and
specifications for the Tenant Improvements, including the type of materials to
be used by Tenant, must be set forth in detail and submitted to Landlord for
approval within thirty (30) days after full execution of this Lease. Tenant
agrees to commence construction of the Tenant Improvements promptly upon
approval by Landlord of such plans and specifications. All such construction
must be completed by contractors approved by Landlord. All Tenant Improvements
shall conform to all applicable statutes, ordinances, regulations and codes,
and Tenant shall obtain all required permits and licenses therefor. Tenant
shall also comply with such other reasonable rules and regulations concerning
such Tenant work as the Landlord may determine at its sole discretion (e.g.,
installation of chemical extinguishing devices; installation of gas cut-off
devices).
12.2 MECHANIC'S/CONSTRUCTION LIENS
No work performed by Tenant pursuant to this Lease, whether in the
nature of erection, construction, alteration or repair, shall be deemed to be
for the immediate use and benefit of Landlord, so that no mechanic's,
construction or other liens shall be allowed against the estate of Landlord by
reason of any consent given by Landlord to Tenant to construct the Tenant
Improvements or to otherwise improve the Premises and/or the Property. Tenant
shall place such contractual provisions as Landlord may request in all
contracts and subcontracts for Tenant Improvements or other approved
alterations assuring Landlord that no mechanic's or construction liens will be
asserted against Landlord's interest in the Premises, the Tenant Improvements
or the Property. Tenant shall pay promptly all persons furnishing labor or
materials with respect to any work performed by Tenant or its contractors on or
about the Premises, the Property and the Tenant Improvements. If any
mechanic's, construction or other liens shall at any time be filed against the
Premises, the Property, or the Tenant Improvements, by reason of work, labor,
services or materials performed or furnished, or alleged to have been
performed or furnished to Tenant or to anyone holding the Premises, the
Property or the Tenant Improvements through or under Tenant, and regardless of
whether any such lien is asserted against the interest of Landlord or Tenant,
Tenant shall forthwith cause the same to be discharged of record or bonded to
the satisfaction of Landlord. If Tenant shall fail to cause such lien forthwith
to be so discharged or bonded after being notified of the filing thereof, then
in addition to any other right or remedy of Landlord, Landlord may bond over or
discharge the same by paying the amount claimed to be due, and the amount so
paid by Landlord, including reasonable attorney's fees incurred by Landlord
either in defending against such lien or in procuring the bond or discharge of
such lien, together with interest thereon at the rate of twenty-one percent
(21%) per annum, shall be due and payable by Tenant to Landlord as Additional
Rent. All contractors, subcontractors, materialmen, mechanics, laborers and
others contracting with Tenant and/or any other subtenant of Tenant, and/or any
other occupants of the Premises, the Property or the Tenant Improvements for
the erection, construction, installation, alteration or repair of any
improvements to the Premises, the Property or the Tenant Improvements are
hereby charged with notice that they must look only to Tenant and to Tenant's
interest in the Premises, the Property, or the Tenant Improvements to secure the
payment of any charges for work done or materials furnished to the Premises,
the Property, or the Tenant Improvements.
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12.3 FAILURE TO CONSTRUCT TENANT IMPROVEMENTS.
Should Tenant fail to initiate and/or diligently pursue to completion the
construction of the Tenant Improvements as set forth above in this SECTION,
then Landlord shall have the right, but not the obligation, to complete the
Tenant Improvements at its expense and to charge Tenant directly for all costs
of completion of the Tenant Improvements, plus eighteen percent (18%) per annum
interest on all amounts so expended. Any such amount paid by Landlord to
complete the Tenant Improvements shall be represented by a promissory note
executed by Tenant in favor of Landlord, in form and substance reasonably
acceptable to counsel for Landlord. Such promissory note (i) may be prepaid at
any time without penalty or premium, and (ii) shall be amortized over a term
equal to the remaining Term of the Lease.
ALTERATIONS
13. Except as may be otherwise set forth herein, Tenant shall not make
any alterations, additions, or improvements to the Premises, the Tenant
Improvements once completed, or the Property without Landlord's prior written
consent, which consent shall not be unreasonably withheld or delayed. All
approved alterations, additions, and improvements will be accomplished in a
good and workmanlike manner, in conformity with all applicable laws and
regulations.
DESTRUCTION OF OR DAMAGE TO PREMISES
14. If the Premises or the Tenant Improvements are totally destroyed by
storm, fire, lightning, earthquake or other casualty, this Lease shall
terminate as of the date of such destruction and rental shall be accounted for
as between Landlord and Tenant as of that date. If the Premises or the Tenant
Improvements are damaged but not wholly destroyed by any such insured
casualties, rental shall abate in such proportion as use of the Premises or the
Tenant's Improvements has been destroyed and Landlord shall restore Premises or
the Tenant's Improvements to substantially the same condition as before
damage as speedily as is practicable, whereupon full rental shall recommence.
CONDEMNATION
15. If the whole of the Premises and/or the Tenant Improvements, or such
portion thereof as will make the Premises and/or the Tenant Improvements
unusable for the purposes herein leased, are condemned by any legally
constituted authority for any public use or purpose, then in either of said
events the term hereby granted shall cease from the date when possession thereof
is taken by public authorities, and rental shall be accounted for as between
Landlord and Tenant as of said date. Such termination, however, shall be
without prejudice to the rights of either Landlord or Tenant to recover
compensation and damage caused by condemnation from the condemnor. It is
further understood and agreed that neither the Tenant nor Landlord shall have
any rights in any award made to the other by any condemnation authority
notwithstanding the termination of the Lease as herein provided. Any
condemnation proceeds paid pursuant to condemnation of the Tenant Improvements
shall belong to Tenant.
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ASSIGNMENT AND SUBLETTING
16. Tenant shall not, without the prior written consent of Landlord,
assign this Lease or any interest hereunder, or sublet the Premises, the Tenant
Improvements or the Property or any part thereof, or permit the use of the
Premises, the Tenant Improvements or the Property by any party other than the
Tenant. Any attempted transfer in violation of the requirements of this SECTION
shall be null and void and, at the option of Landlord, constitute an Event of
Default that entitles Landlord to terminate this Lease and/or to exercise its
other rights and remedies for such Event of Default. Consent to any assignment
or sublease shall not impair this provision and all later assignments or
subleases shall be made likewise only on the prior written consent of Landlord.
The assignee of Tenant, at option of Landlord, shall become directly liable to
Landlord for all obligations of Tenant hereunder, but no sublease or assignment
by Tenant shall relieve Tenant of any liability hereunder. Notwithstanding the
foregoing, Tenant may sublease all or a portion of the Premises and/or the
Tenant Improvements to an affiliated entity without Landlord's consent.
EVENTS OF DEFAULT
17. 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 extension thereof, shall constitute a material
breach of this Lease on the part of the Tenant: (1) Tenant fails to pay Minimum
Rent, insurance premium payments (as set forth in SECTION 8.2 hereinbelow) or
Additional Rent as provided for herein; (2) Tenant abandons or vacates the
Premises or the Tenant Improvements; (3) Tenant fails to comply with or abide
by and perform any other material obligation imposed upon Tenant under this
Lease including, but not limited to, full and timely completion of the Tenant
Improvements; (4) Tenant is adjudicated bankrupt; (5) a permanent receiver is
appointed for Tenant's property and such receiver is not removed within sixty
(60) days after written notice from Landlord to Tenant to obtain such removal;
(6) Tenant, either voluntarily or involuntarily, takes advantage of any debt or
relief proceedings under any present or future law, whereby the rent or any
part thereof is, or is proposed to be, reduced or payment thereof deferred; (7)
Tenant makes an assignment for benefit of creditors; (8) Tenant's effects are
levied upon or attached under process against Tenant, which is not satisfied or
dissolved within thirty (30) days after written notice from Landlord to Tenant
to obtain satisfaction thereof; or (9) Tenant's attempting to make any transfer
without Landlord's prior written consent to the extent required under SECTION
16.
REMEDIES UPON DEFAULT
18. Upon the occurrence of Event of Default, Landlord 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; (a) if the Event of
Default involves nonpayment of Minimum Rent, the insurance premiums set forth in
SECTION 8.2 or Additional Rent and Tenant fails to cure such default within
five (5) days after receipt or refusal of written notice thereof from Landlord,
or if the Event of Default involves a default in performing any of the terms or
provisions of this Lease other than the payment of Minimum Rent, or Additional
Rent, and Tenant fails to cure such default within thirty (30) days after the
mailing of written notice of default from Landlord, Landlord may
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terminate this Lease by giving written notice to Tenant and upon such
termination shall be entitled to recover from Tenant damages in an amount equal
to all Minimum Rent or Additional Rent which is then due and the present value
(discounted at five percent (5%) per annum) of all Minimum Rent or Additional
Rent which would otherwise have become due throughout the remaining Term of this
Lease, or any renewal or extension thereof (as if this Lease had not been
terminated); or (b) if the Event of Default involves any matter other than those
set forth in item (a) of this Section, Landlord may terminate this Lease by
giving written notice to Tenant, and upon such termination, shall be entitled to
recover from the Tenant damages in an amount equal to all rental which is then
due and the present value (discounted at five percent (5%) annum) of all Minimum
Rent and Additional Rent which would otherwise have become due throughout the
remaining Term of this Lease, or any renewal or extension thereof (as if this
Lease had not been terminated); or (c) upon any Event of Default, Landlord, as
Tenant's agent, without terminating this Lease may enter upon and rent the
Premises, the Property, and the Improvements in whole or in part, at the best
price obtainable by reasonable effort, without advertisement and by private
negotiations and for any term Landlord deems proper, with Tenant being liable to
Landlord for the deficiency, if any, between Tenant's Minimum Rent and
Additional Rent hereunder and the price obtained by Landlord on reletting,
provided, however, that Landlord shall not be considered to be under any duty by
reason of this provision to take any action to mitigate damages by reason of
Tenant's default.
EXTERIOR SIGNS
19. Tenant may place signs upon the outside walls or roof of the Premises
and the Tenant Improvements. Any and all signs placed on the Premises and the
Tenant Improvements by Tenant shall be maintained in compliance with
governmental rules and regulations governing such signs and Tenant shall be
responsible to Landlord for any damage caused by installation, use or
maintenance of said signs, and all damage incident to such removal.
LANDLORD'S ENTRY OF PREMISES AND TENANT IMPROVEMENTS
20. Landlord may card the Premises and the Tenant Improvements "For Rent"
or "For Sale" sixty (60) days before the termination of this Lease. Landlord
may enter the Premises and the Tenant Improvements at reasonable hours to
exhibit same to prospective purchasers or tenants and to make repairs of
Landlord under the terms hereof or to make repairs to Landlord's adjoining
property, if any.
EFFECT OF TERMINATION OF LEASE
21. No termination of this Lease prior to the normal ending thereof, by
lapse of time or otherwise, shall affect Landlord's right to collect Minimum
Rent and Additional Rent for the period prior to termination thereof.
MORTGAGEE'S RIGHTS
22. Tenant's rights shall be subject to any bona fide mortgage or deed to
secure debt which is now or may hereafter be placed upon the Premises, the
Property or the Tenant
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Improvements by Landlord. Tenant shall, if requested by Landlord, execute a
separate agreement reflecting such subordination.
QUIET ENJOYMENT
23. So long as Tenant observes and performs the covenants and agreements
contained herein, it shall be all times during the Lease term peacefully and
quietly have and enjoy possession of the Premises, the Property or the Tenant
Improvements, but always subject to the terms hereof.
NO ESTATE IN LAND
24. This Lease shall create the relationship of Landlord and Tenant
between the parties hereto. No estate shall pass out of Landlord. Tenant has
only a usufruct not subject to levy and sale, and not assignable by Tenant
except by Landlord consent.
ATTORNEY'S FEES
25. In the event that any action or proceeding is brought to enforce any
term, covenant or condition of this Lease on the part of Landlord or Tenant,
the prevailing party in such litigation shall be entitled to recover reasonable
attorney's fees in such action or proceeding.
RIGHTS CUMULATIVE
26. All rights, powers and privileges conferred hereunder upon parties
hereto shall be cumulative and not restrictive of those given by law.
WAIVER OF RIGHTS
27. No failure of Landlord to exercise any power given Landlord hereunder
or to insist upon strict compliance by Tenant of its obligations hereunder and
no custom or practice of the parties at variance with the terms hereof shall
constitute a waiver of Landlord's right to demand exact compliance with the
terms hereof.
TIME OF ESSENCE
28. Time is of the essence of this Lease.
DEFINITIONS
29. "Landlord" as used in this Lease shall include the undersigned, its
heirs, representative, assigns and successors in title to the Premises, the
Property or the Tenant Improvements. "Tenant" shall include the undersigned and
its representatives, assigns and successors, and if this Lease shall be validly
assigned or sublet, shall include also Tenant's assignees or sublessee as to the
Premises, the Property or the Tenant Improvements covered by such assignment or
sublease.
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NOTICES
30. All notices required or permitted under this Lease shall be in writing
and shall be personally delivered or sent by U.S. Certified Mail, return receipt
requested, postage prepaid. Notices to Tenant shall be delivered or sent to the
address shown below, except that upon Tenant's taking possession of the
Premises, then the Premises shall be Tenant's address for notice purposes. All
notices shall become effective upon receipt or refusal by Tenant or Landlord, as
the case may be. Notices to Landlord and Agent shall be delivered or sent to the
addresses hereinafter stated, to wit:
Landlord: James E. L. Peters, Jr.
3056 Lake Park Drive
Jonesboro, Georgia 30236
with a copy to: Lawrence M. Merlin, Esquire
Erck, Dever & Merlin, LLC
3340 Peachtree Road, N.E.
Suite 2150
Atlanta, Georgia 30326-1084
Tenant: Boomershine Collision Centers, Inc.
----------------------------
----------------------------
with a copy to: David S. Cooper, Esquire
Schnader, Harrison, Segal & Lewis, LLP
Suite 2800, SunTrust Plaza
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3252
ENTIRE AGREEMENT
31. This Lease contains the entire agreement of the parties hereto, and no
representations, inducements, promises or agreements, oral or otherwise, between
the parties, not embodied herein, shall be of any force or effect.
NO PARTNERSHIP CREATED
32. Landlord is not by virtue of this Lease a partner or joint venturer
with Tenant in connection with the business carried on under this Lease, and
shall have no obligation whatsoever with respect to Tenant's debts or
liabilities or Tenant's employees. The nature of the relationship between
Landlord and Tenant is strictly one of Landlord and Tenant with respect to
Tenant's leasing of the Premises, the Property and the Tenant Improvements.
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INTERPRETATION
33. In interpreting or construing this Lease, it is understood that Tenant
may be one or more than one person or entity, that if the context so requires,
the singular pronoun shall be taken to mean and include the plural, and that
generally all grammatical changes shall be made, assumed, and implied to make
the provisions herein apply equally to corporations, partnerships, limited
liability companies, and individuals. Section headings are for convenience only
and shall in no way affect any of the provisions of this Lease.
MISCELLANEOUS
34.1 SEVERABILITY.
If any provision of this Lease or the application thereof to any
person or entity or circumstance is, at any time or to any extent, held to be
invalid or unenforceable, the remainder of this Lease, or the application of
such provision to persons, entities or circumstances other than those to which
it is held 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.
34.2 SURVIVAL.
All agreements (including, but not limited to, indemnification
agreements) set forth in this Lease, the full performance of which are not
required prior to the expiration or earlier termination of this Lease, shall
survive the expiration or earlier termination of this Lease and shall be fully
enforceable thereafter.
34.3 ATTORNMENT.
In the event any proceedings are brought for foreclosure, or in the
event of the exercise of the power of sale under any mortgage or trust deed
made by Landlord covering the Premises, the Property or the Tenant
Improvements, Tenant shall attorn to the purchaser upon any such foreclosure or
sale and recognize such purchaser as Landlord under this Lease.
34.4 GOVERNING LAW.
This Lease shall be governed by and construed in accordance with the
internal laws of the state of Georgia, without regard to principles of
conflicts of laws.
34.5 COUNTERPARTS.
This Lease may be executed in counterparts, which when taken together
shall constitute an original.
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34.6 RESTRICTIONS.
This Lease is subject to all easements, restrictions, agreements of
record, mortgages and deeds of trust, zoning and building laws, and all other
laws, statutes, codes, ordinances, rules, regulations and other governmental
requirements now in effect or becoming effective after the date this Lease is
executed.
34.7 AUTHORITY.
The person executing this Lease on behalf of Tenant hereby covenants
and warrants that the execution of this Lease is duly authorized by Tenant, and
that the persons signing on behalf of Tenant was authorized by Tenant to bind
Tenant to this Lease.
34.8 LANDLORD DEFAULT.
Landlord shall not be considered in default of any obligation under
this Lease unless Landlord fails to perform such obligation within a reasonable
period of time after receipt of written notice by Landlord from Tenant
specifying the non-performance at issue. A reasonable period of time shall mean
the greater of thirty (30) days or such longer period of time as may be
reasonably necessary to effect performance of such obligation.
34.9 NON-RECOURSE LEASE.
The liability of Landlord under this Lease shall be limited in all
circumstances to Landlord's interest in the Premises, the Tenant Improvements
and the Property, and any judgment against Landlord shall be enforceable solely
against Landlord's interest in the Premises, the Tenant Improvements and the
Property.
34.10 TRANSFER BY LANDLORD.
In the event the original Landlord hereunder, or any successor owner
of the Premises, the Tenant Improvements or the Property, shall sell, convey or
otherwise transfer its interest in the Premises, the Tenant Improvements or the
Property, all liabilities and obligations on the part of the original Landlord,
or any successor owner, under this Lease accruing thereafter shall terminate.
All liabilities and obligations of Landlord accruing thereafter shall be
binding upon the new owner, and Landlord shall transfer any Security Deposit
received from Tenant to such successor.
34.11 ESTOPPEL CERTIFICATE.
Tenant shall from time to time, within ten (10) days following
Tenant's receipt of Landlord's written request, deliver to Landlord, or to any
person designated by Landlord, a statement in writing, in the form submitted to
Tenant by Landlord, certifying whether this Lease is unmodified and in full
force and effect, the dates to which rent or other sums and charges payable
hereunder have been paid, that there are no defaults or events which, with
notice and passage of
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time may become defaults under this Lease (or specifying any such defaults or
events), and any other information concerning this Lease as Landlord reasonably
requests.
34.12 LANDLORD'S RIGHT TO CURE DEFAULT.
If Tenant shall fail to perform any of the covenants or obligations
to be performed by Tenant, Landlord, in addition to all other remedies provided
herein, shall have the option (but not the obligation) to cure such default.
All of Landlord's expenditures incurred to correct the default shall be
reimbursed by Tenant upon demand with interest from the date of expenditure at
the rate of twenty-one percent (21%) per annum. Landlord's right to cure
defaults is for the sole protection of Landlord, and the existence of this
right shall not release Tenant from the obligation to perform all of the
covenants herein provided to be performed by Tenant, or deprive Landlord of any
other right which Landlord may have by reason of such default by Tenant.
34.13 INSPECTION.
Landlord and Landlord's agents and representatives, shall have the
right to enter the Premises, the Tenant Improvements and the Property at any
time to determine Tenant's compliance with this Lease, to post notices of
non-responsibility, to show the Premises, the Tenant Improvements and the
Property to any prospective tenants or purchasers, or for any other lawful
purpose. Tenant shall at all times provide Landlord with a key to all doors at
the Premises and the Tenant Improvements and with access codes where security
systems are deployed. Tenant shall have no claim for abatement of rent or
otherwise for any disturbance or interruption resulting from Landlord's entry
for such purposes.
34.14 SUBORDINATION.
Tenant's interest hereunder shall be automatically subject and
subordinate to all ground leases, mortgages, trust deeds, and other financing
and security instruments placed on the Premises, the Tenant Improvements, and
the Property by Landlord from time to time ("MORTGAGES"). The provisions of
this SECTION shall be self-operating. Notwithstanding the foregoing, Tenant
agrees upon demand to execute such further instruments subordinating this Lease
as Landlord may reasonably request. Landlord shall, at Tenant's written
request, obtain from the holders of its Mortgages subordination,
non-disturbance, and attornment agreements regarding their Mortgages on such
holder's standard form, which Tenant shall in turn execute and delivery.
34.15 REMOVAL OF TENANT IMPROVEMENTS AND TRADE FIXTURES.
All leasehold improvements, including the Tenant Improvements (as
distinguished from trade fixtures and apparatus) installed or constructed on or
about the Property at any time, whether by or on behalf of Tenant or by or on
behalf of Landlord, shall not be removed from the Property at any time, unless
such removal is consented to in writing in advance by Landlord; and at the
expiration or earlier termination of this Lease, all such leasehold
improvements, including the Tenant Improvements, shall be deemed to be part of
the Property, shall not be removed by Tenant when it vacates the Premises and
the Tenant Improvements, and title thereto shall vest solely in
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Landlord without payment of any nature to Tenant. All trade fixtures and
apparatus (as distinguished from leasehold improvements,including the Tenant
Improvements), owned by Tenant and installed in the Premises, the Tenant
Improvements or on the Property shall remain the property of Tenant and shall be
removable at any time, including upon the expiration of the Term; provided
Tenant shall not at such time be in default of any terms and covenants of this
Lease, and provided further that Tenant shall repair any damage to the Premises,
the Property and the Tenant Improvements caused by the removal of said trade
fixtures and apparatus and shall restore the Premises, the Property and the
Tenant Improvements to substantially the same condition as existed prior to the
installation of said trade fixtures and apparatus. The provisions of this
Section shall survive the expiration of termination of this Lease.
34.16 HOLDOVER.
If Tenant does not vacate the Premises, the Property and the Tenant
Improvements at the time required, Landlord shall have the option to treat
Tenant as a Tenant from month-to-month, subject to all of the provisions of this
Lease except the provision for the term, and except the Minimum Rent and
Additional Rent provided herein shall double during the period of the
month-to-month tenancy. Failure of Tenant to remove fixtures, furniture,
furnishings or trade fixtures which Tenant is required to remove under this
Lease shall constitute a failure to vacate to which this SECTION shall apply if
the property not removed will substantially interfere with the occupancy of the
Premises, the Property and the Tenant Improvements by another tenant or with
occupancy by Landlord for any purpose including preparation for a new tenant. If
a month-to-month tenancy results from a holdover by Tenant under this SECTION,
the tenancy shall be terminable at will by Landlord.
HAZARDOUS MATERIALS
35. Tenant shall not use, store or dispose of, or permit the use, storage
or disposal of, upon the Premises, the Tenant Improvements or the Property, any
hazardous, toxic or flammable materials, contaminants, oil, radioactive or other
material, the removal of which is required or the maintenance of which is
prohibited, regulated or penalized by any local, state or federal agency,
authority or governmental unit. Notwithstanding the foregoing, Tenant shall have
the right to use, store or dispose of such materials as are customarily used
in the ordinary course of its business, provided, however, that such use,
storage and disposal is in strict compliance with all applicable local, state
and federal laws, regulations and ordinances. Landlord shall indemnify Tenant
for its reasonable expenses incurred from liability for any hazardous materials
on the Property as of the Commencement Date, including without limitation,
Tenant's reasonable attorneys' fees actually incurred.
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IN WITNESS WHEREOF, the parties herein have hereunto set their hands and
seals, in triplicate, the date and year first above written.
LANDLORD:
/S/ James E. L. Peters, Jr. (SEAL)
-----------------------------
JAMES E. L. PETERS, JR.
TENANT:
BOOMERSHINE COLLISION
CENTERS,INC.
By: /s/ David Pollard Pres
--------------------------
President/David Pollard
ATTEST: /S/ Amanda Vernon
----------------------
[CORPORATE SEAL]
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EXHIBIT 10.53
COMMERCIAL LEASE AGREEMENT
THIS COMMERCIAL LEASE AGREEMENT (the "Agreement") is made this 17 day of
November, 1997 and effective as of November 1, 1994, by and between JAMES E. L.
PETERS, JR. (hereinafter called "Landlord") and SOUTHLAKE COLLISION CENTER,
INC., a Georgia corporation (hereinafter called "Tenant").
WITNESSETH
PREMISES
1. Landlord, for and in consideration of the rents, covenants,
agreements and stipulations hereinafter mentioned, provided for and contained
to be paid, kept and performed by Tenant, leases and rents unto Tenant, and
Tenant hereby leases and takes upon the terms and conditions which hereinafter
appear, the property described on Exhibit "A" attached hereto (hereinafter
called the "Premises"). No easement for light or air is included in the
Premises.
TERM
2. The Tenant shall have and hold the Premises for a term of fifteen
(15) years beginning on the 1st day of November, 1994, and ending on the 31st
day of October, 2009, at midnight, unless sooner terminated as hereinafter
provided.
RENTAL
3. Tenant agrees to pay to Landlord at the address of Landlord as stated
in this Lease, without demand, deduction or set off, monthly rental of Twelve
Thousand Dollars ($12,000.00) payable in advance on the first day of each
calendar month during the term hereof. Rental for any period during the term
hereof which is for less than one month shall be a pro-rated portion of the
monthly rental due.
LATE CHARGES
4. If Landlord fails to receive any rent payment within ten (10) days
after it becomes due, Tenant shall pay Landlord, as additional rental, a late
charge equal to five percent (5%) of the overdue amount. The parties agree that
such late charge represents a fair and reasonable estimate of the costs
Landlord will incur by reason of such late payment.
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UTILITY BILLS
5. Tenant shall pay all utility bills, including, but not limited
to water, sewer, gas, electricity, fuel, light, and heat bills for the Premises
and Tenant shall pay all charges for garbage collection or other sanitary
services.
USE OF PREMISES
6. Premises shall be used for a automotive collision repair facility
only and no other purpose. The Premises shall not be used for any illegal
purposes, nor in any manner to create any nuisance or trespass, nor in any
manner to vitiate the insurance or increase the rate of insurance on the
Premises.
ABANDONMENT OF THE PREMISES
7. Tenant agrees not to abandon or vacate the Premises during the term
of this Lease and agrees to use the Premises for the purposes herein leased
until the expiration hereof.
INDEMNITY; INSURANCE
8.
A. Tenant agrees to and hereby does indemnify and save Landlord
harmless against all claims for damages to persons or property by reason of
Tenant's use or occupancy of the Premises, and all expenses incurred by
Landlord because thereof, including attorney's fees and court costs.
Supplementing the foregoing and in addition thereto, Tenant shall during all
times of this Lease and any extension or renewal thereof, and at Tenant's
expense, maintain in full force and effect comprehensive general liability
insurance with limits of $500,000.00 per person and $1,000,000.00 per accident,
and property damage limits of $100,000.00, which insurance shall contain a
special endorsement recognizing and insuring any liability accruing to Tenant
under the first sentence of this Section, and naming Landlord as additional
insured. Tenant shall provide evidence of such insurance to Landlord prior to
the commencement of the term of this Lease. Landlord and Tenant each hereby
release and relieve the other, and waive its right of 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 Landlord
or Tenant or their agents, employees, contractors and/or invitees, to the
extent that such loss or damage is within the policy limits of said
comprehensive general liability insurance. Landlord and Tenant shall, upon
obtaining the policies of insurance required, give notice to the insurance
carrier or carriers that the foregoing mutual waiver of subrogation is
contained in this Lease.
B. Tenant agrees to pay as additional rental Landlord's reasonable
annual cost of carrying fire and extended coverage insurance and general
liability insurance ("INSURANCE") on the Premises. During each month of the
term of this Lease, Tenant shall make a monthly escrow deposit with Landlord
equal to 1/12 of such Insurance which will be due and payable for that
particular year. Each Insurance Escrow Payment shall be due and payable at the
same time and
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manner of the payment of Rental as provided herein. The amount of the initial
monthly Insurance Escrow Payment will be $_____. The initial monthly Insurance
Escrow Payment is based upon the estimated Insurance for the year in question,
and the monthly Insurance Escrow Payment is subject to increase or decrease no
more frequently than semi-annually as determined by Landlord to reflect an
accurate monthly escrow of the cost of the Insurance. The Insurance Escrow
Payment account of Tenant shall be reconciled annually. If the Tenant's total
Insurance Escrow Payments are less than the actual cost of the Insurance on the
Premises, Tenant shall pay the difference to Landlord within thirty (30) days
after written demand together with receipt of invoices and other such
supporting information as Tenant shall reasonably request; if the total
Insurance Escrow Payments of Tenant are more than the actual cost of the
Insurance on the Premises, Landlord shall promptly refund such excess.
PROPERTY TAXES
9.
A. Tenant shall be liable for all taxes levied against personal
property and trade fixtures placed by Tenant in the Premises. If any such
personal property taxes of Tenant are levied against Landlord or Landlord's
property and if Landlord elects to pay the same or if the assessed value of
Landlord's property is increased by inclusion of personal property and trade
fixtures placed by Tenant in the Premises and Landlord elects to pay the taxes
based on such increase, Tenant shall pay to Landlord its proportionate share of
such taxes within thirty (30) days after written notice from Landlord setting
forth the amount of such taxes applicable to Personal Property together with a
copy of the tax bill and other evidence documenting that such tax is properly
payable by Tenant.
B. Tenant agrees to pay all taxes, assessments, and governmental
charges of any kind and nature whatsoever (hereinafter collectively referred to
as the "TAXES"), levied or assessed against the Premises. During each month of
the term of this Lease, Tenant shall make a monthly escrow deposit with
Landlord equal to 1/12 of the Taxes on the Premises which will be due and
payable for that particular year. Each Tax Escrow Payment shall be due and
payable at the same time and in the same manner as the time and manner of the
payment of Rental as provided herein. The amount of the initial monthly Tax
Escrow Payment will be $______. The initial monthly Tax Escrow Payment is based
upon the estimated Taxes on the Premises for the year in question, and the
monthly Tax Escrow Payment is subject to increase and decrease no more
frequently than semi-annually as determined by Landlord to reflect an accurate
escrow of the amount of the Taxes. The Tax Escrow Payment account of Tenant
shall be reconciled annually. If the Tenant's total Tax Escrow Payments are
less than the actual Taxes on the Premises, Tenant shall pay to Landlord the
difference within thirty (30) days after written demand together with paid
receipts and such other information as Tenant shall reasonably request; if the
total Tax Escrow Payments of Tenant are more than the actual Taxes on the
Premises, Landlord shall promptly refund such excess. Notwithstanding anything
contained herein to the contrary, Tenant shall not be required to pay any
income, estate, corporate, inheritance, succession, business or transfer tax of
Landlord.
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C. If Tenant should fail to pay taxes, assessments, or governmental
charges when due and required to be paid by Tenant hereunder, in addition to any
other remedies provided herein, Landlord may, if it so elects, pay such taxes,
assessments, and governmental charges. Any sums so paid by Landlord shall be
deemed to be so much additional rental owing by Tenant to Landlord and due and
payable upon thirty (30) days after written demand as additional rental plus
interest at the rate of fifteen percent (15%) per annum from the date of payment
by Landlord until repaid by Tenant.
D. If at any time during the term of this Lease, the present
method of taxation shall be changed so that in lieu of the whole or any part of
any taxes, assessments, levies, or charges levied, assessed, or imposed on real
estate and the improvements thereon, there shall be levied, assessed, or imposed
on Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy, or charge measured by or based, in
whole or in part, upon such rents or the present or any future building or
buildings on the Premises, then all such taxes, assessments, levies, or charges,
or the part thereof so measured or based, shall be deemed to be include within
the term "Taxes" for the purposes hereof, but only to the extent that any such
change in the present method of taxation or assessment is in lieu of, a
substitute for, or such a supplement to, taxes as they are now assessed and only
to the extent that such taxes would be payable if the Premises were only
property of Landlord subject to such taxes or the income form operation of the
Premises were Landlord's only income, as the case may be.
REPAIRS BY LANDLORD
10. Landlord shall have no responsibility whatsoever to make any repairs
to the Premises, such obligation being the sole obligation of Tenant.
REPAIRS BY TENANT
11. Tenant accepts the Premises in their present condition and as suited
for the uses intended by Tenant. Tenant shall, throughout the initial term of
this Lease, and any extension or renewal thereof, at its sole expense, keep in
good repair the roof, foundations and exterior walls of the Premises (inclusive
of all glass and exterior doors) and underground utility and sewer pipes outside
the exterior walls of the Premises. Further, Tenant shall provide for the mowing
of grass, care of shrubs and general landscaping, and proper maintenance, repair
and replacement of the HVAC system. Tenant agrees to return the Premises to
Landlord at the expiration, or prior to termination of this Lease, in as good
condition and repair as when first received, natural wear and tear, damage by
storm, fire, lighting, earthquake or other casualty alone excepted.
ALTERATIONS
12. Tenant shall not make any alterations, additions, or improvements to
the Premises without Landlord's prior written consent, which consent shall not
be unreasonably withheld or delayed. All approved alterations, additions, and
improvements will be accomplished in a good and workmanlike manner, in
conformity with all applicable laws and regulations.
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REMOVAL OF FIXTURES
13. Tenant may (if not in default hereunder) prior to the expiration of
this Lease, or any extension or renewal thereof, remove all fixtures and
equipment which it has placed in the Premises (but not any fixtures or equipment
place in the Premises by a prior tenant), provided Tenant repairs all damage to
the Premises caused by such removal.
DESTRUCTION OF OR DAMAGE TO PREMISES
14. If the Premises are totally destroyed by storm, fire, lightning,
earthquake or other casualty, this Lease shall terminate as of the date of such
destruction and rental shall be account for as between Landlord and Tenant as of
that date. If the Premises are damaged but not wholly destroyed by any such
casualties, rental shall abate in such proportion as use of the Premises has
been destroyed and Landlord shall restore Premises to substantially the same
condition as before damage as speedily as is practicable, whereupon full rental
shall recommence.
CONDEMNATION
15. If the whole of the Premises, or such portion thereof as will make
the Premises unusable for the purposes herein leased, are condemned by any
legally constituted authority for any public use or purpose, then in either of
said events the term hereby granted shall cease from the date when possession
thereof is taken by public authorities, and rental shall be accounted for as
between Landlord and Tenant as of said date. Such termination, however, shall be
without prejudice to the rights of either Landlord of Tenant to recover
compensation and damage caused by condemnation from the condemnor. It is further
understood and agreed that neither the Tenant nor Landlord shall have any rights
in any award made to the other by any condemnation authority notwithstanding the
termination of the Lease as herein provided.
ASSIGNMENT AND SUBLETTING
16. Tenant shall not, without the prior written consent of Landlord,
which shall not be unreasonably withheld or delayed, assign this Lease or any
interest hereunder, or sublet the Premises or any part thereof, or permit the
use of the Premises by any party other than the Tenant. Consent to any
assignment or sublease shall not impair this provision and all later assignments
or subleases shall be made likewise only on the prior written consent of
Landlord. The Assignee of Tenant, at option of Landlord, shall become directly
liable to Landlord for all obligations of Tenant hereunder, but no sublease or
assignment by Tenant shall relieve Tenant of any liability hereunder.
EVENTS OF DEFAULT
17. 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 extension thereof, shall
constitute a breach of this Lease on the part of the Tenant: (1) Tenant fails to
pay the rental as provided for herein; (2) Tenant abandons or vacates the
Premises; (3) Tenant fails to comply with or abide by and perform any other
material obligation imposed upon
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Tenant under this Lease; (4) Tenant is adjudicated bankrupt; (5) a permanent
receiver is appointed for Tenant's property and such receiver is not removed
within sixty (60) days after written notice from Landlord to Tenant to obtain
such removal; (6) Tenant, either voluntarily or involuntarily, takes advantage
of any debt or relief proceedings under any present or future law, whereby the
rent or any part thereof is, or is proposed to be, reduced or payment thereof
deferred; (7) Tenant makes an assignment of benefit of creditors; or (8)
Tenant's effects are levied upon or attached under process against Tenant, which
is not satisfied or dissolved within thirty (30) days after written notice from
Landlord to Tenant to obtain satisfaction thereof.
REMEDIES UPON DEFAULT
18. Upon the occurrence of Event of Default, Landlord 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; (a) if the Event of
Default involves nonpayment of rental and Tenant fails to cure such default
within ten (10) days after receipt of written notice thereof from Landlord, or
if the Event of Default involves a default in performing any of the terms or
provisions of this Lease other than the payment of rental, and Tenant fails to
cure such default within thirty (30) days after the receipt of written notice of
default from Landlord, Landlord may terminate this Lease by giving written
notice to Tenant and upon such termination shall be entitled to recover from
Tenant damages in an amount equal to all rental which is then due and the
present value (discounted at ten percent (10%) per annum) of all rental which
would otherwise have become due throughout the remaining term of this Lease, or
any renewal or extension thereof (as if this Lease had not been terminated); or
(b) if the Event of Default involves any matter other than those set forth in
time (a) of this Section, Landlord may terminate this Lease by giving written
notice to Tenant, and upon such termination, shall be entitled to recover from
he Tenant damages in an amount equal to all rental which is then due and the
present value (discounted at ten percent (10%) annum) of all rental which would
otherwise have become due throughout the remaining term of this Lease, or any
renewal or extension thereof (as if this Lease had not been terminated); or (c)
upon any Event of Default, Landlord, as Tenant'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 Landlord deems proper, with Tenant being liable to
Landlord for the deficiency, if any, between Tenant's rent hereunder and the
price obtained by Landlord on reletting, provided, however, that Landlord shall
not be considered to be under any duty by reason of this provision to take any
action to mitigate damages by reason of Tenant's default.
EXTERIOR SIGNS
19. Except as are currently on the Premises, Tenant shall place no
signs upon the outside walls or roof of the Premises except with the written
consent of the Landlord, such consent not to be unreasonably withheld or
delayed. Any and all signs placed on the Premises by Tenant shall be maintained
in compliance with governmental rules and regulations governing such signs and
Tenant shall be responsible to Landlord for any damage caused by installation,
use or maintenance of said signs, and all damage incident to such removal.
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LANDLORD'S ENTRY OF PREMISES
20. Landlord may card the Premises "For Rent" or "For Sale" sixty (60)
days before the termination of this Lease. Landlord may enter the Premises at
reasonable hours to exhibit same to prospective purchasers or tenants and to
make repairs required of Landlord under the terms hereof or to make repairs to
Landlord's adjoining property, if any.
EFFECT OF TERMINATION OF LEASE
21. No termination of this Lease prior to the normal ending thereof, by
lapse of time or otherwise, shall affect Landlord's right to collect rent for
the period prior to termination thereof.
MORTGAGEE'S RIGHTS
22. Tenant's rights shall be subject to any bona fide mortgage or deed to
secure debt which is now or may hereafter be placed upon the Premises by
Landlord. Tenant shall, if requested by Landlord, execute a separate agreement
reflecting such subordination.
QUIET ENJOYMENT
23. So long as Tenant observes and performs the covenants and agreements
contained herein, it shall at all times during the Lease term peacefully and
quietly have and enjoy possession of the Premises, but always subject to the
terms hereof.
NO ESTATE IN LAND
24. This Lease shall create the relationship of Landlord and Tenant
between the parties hereto. No estate shall pass out of Landlord. Tenant has
only a usufruct no subject to levy and sale, and not assignable by Tenant
except by Landlord consent.
ATTORNEY'S FEES
25. In the event that any action or proceeding is brought to enforce any
term, covenant or condition of this Lease on the part of Landlord or Tenant,
the prevailing party in such litigation shall be entitled to recover reasonable
attorney's fees to be fixed by the court in such action or proceeding.
RIGHTS CUMULATIVE
26. All rights, powers and privileges conferred hereunder upon parties
hereto shall be cumulative and not restrictive of those given by law.
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WAIVER OF RIGHTS
27. No failure of Landlord to exercise any power given Landlord hereunder
or to insist upon strict compliance by Tenant of its obligations hereunder and
no custom or practice of the parties at variance with the terms hereof shall
constitute a waiver of Landlord's right to demand exact compliance with the
terms hereof.
TIME OF ESSENCE
28. Time is of the essence of this Lease.
DEFINITIONS
29. "Landlord" as used in this Lease shall include the undersigned, its
heirs, representative, assigns and successors in title to the Premises.
"Tenant" shall include the undersigned and its heirs, representatives, assigns
and successors, and if this Lease shall be validly assigned or sublet, shall
include also Tenant's assignees or sublessee as to the Premises covered by such
assignment or sublease.
NOTICES
30. All notices required or permitted under this Lease shall be in
writing and shall be personally delivered or sent by U.S. Certified Mail,
return receipt requested, postage prepaid. Agent shall be copied with all
required or permitted notices. Notices to Tenant shall be delivered or sent to
the address shown below, except that upon Tenant's taking possession of the
Premises, then Premises shall be Tenant's address for notice purposes. Notices
to Landlord and Agent shall be delivered or sent to the addresses hereinafter
stated, to wit:
Landlord: James E. L. Peters, Jr.
3056 Lake Park Drive
Jonesboro, Georgia 30236
Tenant: Southlake Collision Center, Inc.
5548 Old Dixie Highway
Forest Park, Georgia 30297
ENTIRE AGREEMENT
31. This Lease contains the entire agreement of the parties hereto, and
no representations, inducements, promises or agreements, oral or otherwise,
between the parties, not embodied herein, shall be of any force or effect.
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SPECIAL STIPULATIONS
32. Any special stipulations are set forth below. In so far as said
Special Stipulations conflict with any of the foregoing provisions, said
Special Stipulations shall control:
[NONE]
IN WITNESS WHEREOF, the parties herein have hereunto set their hands and
seals, in triplicate, the date and year first above written.
LANDLORD:
/s/ James E. L. Peters, Jr. (SEAL)
----------------------------------
JAMES E.L. PETERS, JR.
TENANT:
SOUTHLAKE COLLISION CENTER, INC.
BY: /s/ James E.L. Peters Jr. (Pres.)
----------------------------------
President
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EXHIBIT A
All that tract or parcel of land lying and being in Land Lot 12 of the 12th
District of Clayton County, Georgia, being Lot 5, Block D, North Shore, Unit
IV, as per plat recorded in Deed Book 1150, page 258, Clayton County, Georgia
Records, to which reference is made for the purpose of incorporating the same
as a part herein, being improved property known as No. 8576 Shoreview Court,
according to the present system of numbering houses in Clayton County.
This Deed is given subject to a prior Deed to Secure Debt from James E. L.
Peters, Jr. and Lois E. Peters to C & S Real Estate Services, Inc., dated
8/1/91, recorded in Deed Book 1726, Page 133, Clayton County, Georgia Records
and any default in said prior Deed to Secure Debt or the Note secured thereby
shall, at the option of the Grantee herein, be and constitute a default under
this instrument. In the event that Grantor should default in making any of the
required payments under said prior Deed to Secure Debt, Grantee shall have the
right to advance whatever funds may be necessary to cure such default and all
funds so advanced by Grantee shall be added to the indebtedness from Grantor to
Grantee and shall be secured by this Deed to Secure Debt. In the event that the
holder of said prior Deed to Secure Debt exercises its power of sale as
contained therein and forecloses on the above described property, Grantor
hereby assigns to Grantee any and all surplus proceeds from said foreclosure
sale to the extent necessary to satisfy the indebtedness secured hereby.
<PAGE> 1
EXHIBIT 10.54
COMMERCIAL LEASE AGREEMENT
THIS COMMERCIAL LEASE AGREEMENT (the "AGREEMENT") is made this 17 day of
November, 1997 and effective as of June 1, 1997, by and between JAMES E. L.
PETERS, JR. (hereinafter called "LANDLORD") and SOUTHLAKE COLLISION HENRY
COUNTY, INC., a Georgia corporation (hereinafter called "TENANT").
WITNESSETH
PREMISES
1. Landlord, for an in consideration of the rents, covenants, agreements
and stipulations hereinafter mentioned, provided for and contained to be paid,
kept and performed by Tenant, leases and rents unto Tenant, and Tenant hereby
leases and takes upon the terms and conditions which hereinafter appear, the
property described on Exhibit "A" attached hereto (hereinafter called the
"PREMISES"). No easement for light or air is included in the Premises.
TERM
2. The Tenant shall have and hold the Premises for a term of fifteen
(15) years beginning on the 1st day of June, 1997, and ending on the 31st day
of May, 2012, at midnight, unless sooner terminated as hereinafter provided.
RENTAL
3. Tenant agrees to pay to Landlord at the address of Landlord as stated
in this Lease, without demand, deduction or set off, monthly rental of Seven
Thousand Dollars ($7,000.00) payable in advance on the first day of each
calendar month during the term hereof. Rental for any period during the term
hereof which is for less than one month shall be a pro-rated portion of the
monthly rental due.
LATE CHARGES
4. If Landlord fails to receive any rent payment within ten (10) days
after it becomes due, Tenant shall pay Landlord, as additional rental, a late
charge equal to five percent (5%) of the overdue amount. The parties agree that
such late charge represents a fair and reasonable estimate of the costs
Landlord will incur by reason of such late payment.
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UTILITY BILLS
5. Tenant shall pay all utility bills, including, but not limited to
water, sewer, gas, electricity, fuel, light, and heat bills for the Premises
and Tenant shall pay all charges for garbage collection or other sanitary
services.
USE OF PREMISES
6. Premises shall be used for a automotive collision repair facility only
and no other purpose. The Premises shall not be used for any illegal purposes,
nor in any manner to create any nuisance or trespass, nor in any manner to
vitiate the insurance or increase the rate of insurance on the Premises.
ABANDONMENT OF THE PREMISES
7. Tenant agrees not to abandon or vacate the Premises during the term
of this Lease and agrees to use the Premises for the purposes herein leased
until the expiration hereof.
INDEMNITY; INSURANCE
8.
A. Tenant agrees to and hereby does indemnify and save Landlord
harmless against all claims for damages to persons or property by reason of
Tenant's use or occupancy of the Premises, and all expenses incurred by
Landlord because thereof, including attorney's fees and court costs.
Supplementing the foregoing and in addition thereto, Tenant shall during all
times of this Lease and any extension or renewal thereof, and at Tenant's
expense, maintain in full force and effect comprehensive general liability
insurance with limits of $500,000.00 per person and $1,000,000.00 per accident,
and property damage limits of $100,000.00, which insurance shall contain a
special endorsement recognizing and insuring any liability accruing to Tenant
under the first sentence of this Section, and naming Landlord as additional
insured. Tenant shall provide evidence of such insurance to Landlord prior to
the commencement of the term of this Lease. Landlord and Tenant each hereby
release and relieve the other, and waive its right of 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 Landlord
or Tenant or their agents, employees, contractors and/or invitees, to the
extent that such loss or damage is within the policy limits of said
comprehensive general liability insurance. Landlord and Tenant shall, upon
obtaining the policies of insurance required, give notice to the insurance
carrier or carriers that the foregoing mutual waiver of subrogation is
contained in this Lease.
B. Tenant agrees to pay as additional rental Landlord's reasonable
annual cost of carrying fire and extended coverage insurance and general
liability insurance ("INSURANCE") on the Premises. During each month of the term
of this Lease, Tenant shall make a monthly escrow deposit with Landlord equal to
1/12 of such Insurance which will be due and payable for that particular year.
Each Insurance Escrow Payment shall be due and payable at the same time and
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manner of the payment of Rental as provided herein. The amount of the initial
monthly Insurance Escrow Payment will be $_________. The initial monthly
Insurance Escrow Payment is based upon the estimated Insurance for the year in
question, and the monthly Insurance Escrow Payment is subject to increase or
decrease no more frequently than semi-annually as determined by Landlord to
reflect an accurate monthly escrow of the cost of the Insurance. The Insurance
Escrow Payment account of Tenant shall be reconciled annually. If the Tenant's
total Insurance Escrow Payments are less than the actual cost of the Insurance
on the Premises, Tenant shall pay the difference to Landlord within thirty (30)
days after written demand together with receipt of invoices and other such
supporting information as Tenant shall reasonably request; if the total
Insurance Escrow Payments of Tenant are more than the actual cost of the
Insurance on the Premises, Landlord shall promptly refund such excess.
PROPERTY TAXES
9.
A. Tenant shall be liable for all taxes levied against personal
property and trade fixtures placed by Tenant in the Premises. If any such
personal property taxes of Tenant are levied against Landlord or Landlord's
property and if Landlord elects to pay the same or if the assessed value of
Landlord's property is increased by inclusion of personal property and trade
fixtures placed by Tenant in the Premises and Landlord elects to pay the taxes
based on such increase, Tenant shall pay to Landlord its proportionate share of
such taxes within thirty (3) days after written notice from Landlord setting
forth the amount of such taxes applicable to Personal Property together with a
copy of the tax bill and other evidence documenting that such tax is properly
payable by Tenant.
B. Tenant agrees to pay all taxes, assessments, and governmental
charges of any kind and nature whatsoever (hereinafter collectively referred to
as the "TAXES"), levied or assessed against the Premises. During each month of
the term of this Lease, Tenant shall make a monthly escrow deposit with
Landlord equal to 1/12 of the Taxes on the Premises which will be due and
payable for that particular year. Each Tax Escrow Payment shall be due and
payable at the same time and in the same manner as the time and manner of the
payment of Rental as provided herein. The amount of the initial monthly Tax
Escrow Payment will be $_________. The initial monthly Tax Escrow Payment is
based upon the estimated Taxes on the Premises for the year in question, and
the monthly Tax Escrow Payment is subject to increase and decrease no more
frequently than semi-annually as determined by Landlord to reflect an accurate
escrow of the amount of the Taxes. The Escrow Payment account of Tenant shall
be reconciled annually. If the Tenant's total Tax Escrow Payments are less than
the actual Taxes on the Premises, Tenant shall pay to Landlord the difference
within thirty (30) days after written demand together with paid receipts and
such other information as Tenant shall reasonably request; if the total Tax
Escrow Payments of Tenant are more than the actual Taxes on the Premises,
Landlord shall promptly refund such excess. Notwithstanding anything contained
herein to the contrary, Tenant shall not be required to pay any income, estate,
corporate, inheritance, succession, business or transfer tax of Landlord.
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C. If Tenant should fail to pay taxes, assessments, or
governmental charges when due and required to be paid by Tenant hereunder, in
addition to any other remedies provided herein, Landlord may, if it so elects,
pay such taxes, assessments, and governmental charges. Any sums so paid by
Landlord shall be deemed to be so much additional rental owing by Tenant to
Landlord and due and payable upon thirty (30) days after written demand as
additional rental plus interest at the rate of fifteen percent (15%) per annum
from the date of payment by Landlord until repaid by Tenant.
D. If at any time during the term of this Lease, the present
method of taxation shall be changed so that in lieu of the whole or any part of
any taxes, assessments, levies, or charges levied, assessed, or imposed on real
estate and the improvements thereon, there shall be levied, assessed, or
imposed on Landlord a capital levy or other tax directly on the rents received
therefrom and/or a franchise tax, assessment, levy, or charge measured by or
based, in whole or in part, upon such rents or the present or any future
building or buildings on the Premises, then all such taxes, assessments,
levies, or charges, or the part thereof so measured or based, shall be deemed
to be included within the term "Taxes" for the purposes hereof, but only to the
extent that any such change in the present method of taxation or assessment is
in lieu of, a substitute for, or such a supplement to, taxes as they are now
assessed and only to the extent that such taxes would be payable if the
Premises were the only property of Landlord subject to such taxes or the income
from operation of the Premises were Landlord's only income, as the case may be.
REPAIRS BY LANDLORD
10. Landlord shall have no responsibility whatsoever to make any
repairs to the Premises, such obligation being the sold obligation of Tenant.
REPAIRS BY TENANT
11. Tenant accepts the Premises in their present condition and as
suited for the uses intended by Tenant. Tenant shall, throughout the initial
term of this Lease, and any extension or renewal thereof, at its sole expense,
keep in good repair the roof, foundations and exterior walls of the Premises
(inclusive of all glass and exterior doors) and underground utility and sewer
pipes outside the exterior walls of the Premises. Further, Tenant shall provide
for the mowing of grass, care of shrubs and general landscaping, and proper
maintenance, repair and replacement of the HVAC system. Tenant agrees to return
the Premises to Landlord at the expiration, or prior to termination of this
Lease, in as good condition and repair as when first received, natural wear and
tear, damage by storm, fire, lightning, earthquake or other casualty alone
excepted.
ALTERATIONS
12. Tenant shall not make any alterations, additions, or improvements
to the Premises without Landlord's prior written consent, which consent shall
not be unreasonably withheld or delayed. All approved alterations, additions,
and improvements will be accomplished in a good and workmanlike manner, in
conformity with all applicable laws and regulations.
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REMOVAL OF FIXTURES
13. Tenant may (if not in default hereunder) prior to the expiration of
this Lease, or any extension or renewal thereof, remove all fixtures and
equipment which it has placed in the Premises (but not any fixtures or equipment
placed in the Premises by a prior tenant), provided Tenant repairs all damage to
the Premises caused by such removal.
DESTRUCTION OF OR DAMAGE TO PREMISES
14. If the Premises are totally destroyed by storm, fire, lightning,
earthquake or other casualty, this Lease shall terminate as of the date of such
destruction and rental shall be accounted for as between Landlord and Tenant as
of that date. If the Premises are damaged but not wholly destroyed by any such
casualties, rental shall abate in such proportion as use of the Premises has
been destroyed and Landlord shall restore Premises to substantially the same
condition as before damage as speedily as is practicable, whereupon full rental
shall recommence.
CONDEMNATION
15. If the whole of the Premises, or such portion thereof as will make
the Premises unusable for the purposes herein leased, are condemned by any
legally constituted authority for any public use or purpose, then in either of
said events the term hereby granted shall cease from the date when possession
thereof is taken by public authorities, and rental shall be accounted for as
between Landlord and Tenant as of said date. Such termination, however, shall
be without prejudice to the rights of either Landlord of Tenant to recover
compensation and damage caused by condemnation from the condemnor. It is
further understood and agreed that neither the Tenant nor Landlord shall have
any rights in any award made to the other by any condemnation authority
notwithstanding the termination of the Lease as herein provided.
ASSIGNMENT AND SUBLETTING
16. Tenant shall not, without the prior written consent of Landlord,
which shall not be unreasonably withheld or delayed, assign this Lease or any
interest hereunder, or sublet the Premises or any part thereof, or permit the
use of the Premises by any party other than the Tenant. Consent to any
assignment or sublease shall not impair this provision and all later
assignments or subleases shall be made likewise only on the prior written
consent of Landlord. The Assignee of Tenant, at option of Landlord, shall
become directly liable to Landlord for all obligations of Tenant hereunder, but
no sublease or assignment by Tenant shall relieve Tenant of any liability
hereunder.
EVENTS OF DEFAULT
17. 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 extension thereof, shall
constitute a breach of this Lease on the part of the Tenant: (1) Tenant fails
to pay the rental as provided for herein; (2) Tenant abandons or vacates the
Premises; (3) Tenant fails to comply with or abide by and perform any other
material obligation imposed upon
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Tenant under this Lease; (4) Tenant is adjudicated bankrupt; (5) a permanent
receiver is appointed for Tenant's property and such receiver is not removed
within sixty (60) days after written notice from Landlord to Tenant to obtain
such removal; (6) Tenant, either voluntarily or involuntarily, takes advantage
of any debt or relief proceedings under any present or future law, whereby the
rent or any part thereof is, or is proposed to be, reduced or payment thereof
deferred; (7) Tenant makes an assignment for benefit of creditors; or (8)
Tenant's effects are levied upon or attached under process against Tenant,
which is not satisfied or dissolved within thirty (30) days after written
notice from Landlord to Tenant to obtain satisfaction thereof.
REMEDIES UPON DEFAULT
18. Upon the occurrence of Event of Default, Landlord 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; (a) if the
Event of Default involves nonpayment of rental and Tenant fails to cure such
default within ten (10) days after receipt of written notice thereof from
Landlord, or if the Event of Default involves a default in performing any of
the terms or provisions of this Lease other than the payment of rental, and
Tenant fails to cure such default within thirty (30) days after the receipt of
written notice of default from Landlord, Landlord may terminate this Lease by
giving written notice to Tenant and upon such termination shall be entitled to
recover from Tenant damages in an amount equal to all rental which is then due
and the present value (discounted at ten percent (10%) per annum) of all rental
which would otherwise have become due throughout the remaining term of this
Lease, or any renewal or extension thereof (as if this Lease had not been
terminated); or (b) if the Event of Default involves any matter other than
those set forth in item (a) of this Section, Landlord may terminate this Lease
by giving written notice to Tenant, and upon such termination, shall be
entitled to recover from the Tenant damages in an amount equal to all rental
which is then due and the present value (discounted at ten percent (10%) annum)
of all rental which would otherwise have become due throughout the remaining
term of this Lease, or any renewal or extension thereof (as if this Lease had
not been terminated); or (c) upon any Event of Default, Landlord, as Tenant'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 Landlord seems
proper, with Tenant being liable to Landlord for the deficiency, if any,
between Tenant's rent hereunder and the price obtained by Landlord on
reletting, provided, however, that Landlord shall not be considered to be under
any duty by reason of this provision to take any action to mitigate damages by
reason of Tenant's default.
EXTERIOR SIGNS
19. Except as are currently on the Premises, Tenant shall place no
signs upon the outside walls or roof of the Premises except with the written
consent of the Landlord, such consent not to be unreasonably withheld or
delayed. Any and all signs placed on the Premises by Tenant shall be maintained
in compliance with governmental rules and regulations governing such signs and
Tenant shall be responsible to Landlord for any damage caused by installation,
use or maintenance of said signs, and all damage incident to such removal.
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<PAGE> 7
LANDLORD'S ENTRY OF PREMISES
20. Landlord may card the Premises "For Rent" or "For Sale" sixty (60)
days before the termination of this Lease. Landlord may enter the Premises at
reasonable hours to exhibit same to prospective purchasers or tenants and to
make repairs required of Landlord under the terms hereof or to make repairs to
Landlord's adjoining property, if any.
EFFECT OF TERMINATION OF LEASE
21. No termination of this Lease prior to the normal ending thereof, by
lapse of time or otherwise, shall affect Landlord's right to collect rent for
the period prior to termination thereof.
MORTGAGEE'S RIGHTS
22. Tenant's rights shall be subject to any bona fide mortgage or deed to
secure debt which is now or may hereafter be placed upon the Premises by
Landlord. Tenant shall, if requested by Landlord, execute a separate agreement
reflecting such subordination.
QUIET ENJOYMENT
23. So long as Tenant observes and performs the covenants and agreements
contained herein, it shall at all times during the Lease term peacefully and
quietly have and enjoy possession of the Premises, but always subject to the
terms hereof.
NO ESTATE IN LAND
24. This Lease shall create the relationship of Landlord and Tenant
between the parties hereto. No estate shall pass out of Landlord. Tenant has
only a usufruct no subject to levy and sale, and not assignable by Tenant
except by Landlord consent.
ATTORNEY'S FEES
25. In the event that any action or proceeding is brought to enforce any
term, covenant or condition of this Lease on the part of Landlord or Tenant,
the prevailing party in such litigation shall be entitled to recover reasonable
attorney's fees to be fixed by the court in such action or proceeding.
RIGHTS CUMULATIVE
26. All rights, powers and privileges conferred hereunder upon parties
hereto shall be cumulative and not restrictive of those given by law.
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<PAGE> 8
WAIVER OF RIGHTS
27. No failure of Landlord to exercise any power given Landlord hereunder
or to insist upon strict compliance by Tenant of its obligations hereunder and
no custom or practice of the parties at variance with the terms hereof shall
constitute a waiver of Landlord's right to demand exact compliance with terms
hereof.
TIME OF ESSENCE
28. Time is of the essence of this Lease.
DEFINITIONS
29. "Landlord" as used in this Lease shall include the undersigned, its
heirs, representative, assigns and successors in title to the Premises.
"Tenant" shall include the undersigned and its heirs, representatives, assigns
and successors, and if this Lease shall be validly assigned or sublet, shall
include also Tenant's assignees or sublessee as to the Premises covered by such
assignment or sublease.
NOTICES
30. All notices required or permitted under this Lease shall be in
writing and shall be personally delivered or sent by U.S. Certified Mail,
return receipt requested, postage prepaid. Agent shall be copied with all
required or permitted notices. Notices to Tenant shall be delivered or sent to
the address shown below, except that upon Tenant's taking possession of the
Premises, then Premises shall be Tenant's address for notice purposes. Notices
to Landlord and Agent shall be delivered or sent to the addresses hereinafter
stated, to wit:
Landlord: James E.L. Peters, Jr.
3056 Lake Park Drive
Jonesboro, Georgia 30236
Tenant: Southlake Collision Henry County, Inc.
1110 Highway 155 South
McDonough, Georgia 30253
ENTIRE AGREEMENT
31. This Lease contains the entire agreement of the parties hereto, and
no representations, inducements, promises or agreements, oral or otherwise,
between the parties, not embodied herein, shall be of any force or effect.
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<PAGE> 9
SPECIAL STIPULATIONS
32. Any special stipulations are set forth below. In so far as said
Special Stipulations conflict with any of the foregoing provisions, said
Special Stipulations shall control:
[NONE]
IN WITNESS WHEREOF, the parties herein have hereunto set their hands and
seals, in triplicate, the date and year first above written.
LANDLORD:
/s/ JAMES E.L. PETERS, JR. (SEAL)
---------------------------------
JAMES E.L. PETERS, JR.
TENANT:
SOUTHLAKE COLLISION HENRY
COUNTY, INC.
by: JAMES E.L. PETERS, JR. (Pres.)
-------------------------------
President
<PAGE> 10
All that tract or parcel of land lying and being in Land Lot 221 of the 7th
District of Henry County, Georgia, and containing 2.87 acres, and being
designated as Parcel A according to a plat of survey made by Joe Evans,
Registered Surveyor #1105, State of Georgia, dated February, 1982, and being
more particularly described as follows:
BEGINNING at a point located on the North right-of-way of Georgia State Highway
#155, said point being where said North right-of-way of State Route #155
intersects the Western right-of-way of Industrial Parkway Drive, and from said
point running South 59 degrees 25 minutes 40 seconds West along North
right-of-way of State Route #155 a distance of 433.46 feet (chord), said point
marked by an iron pin stake; thence North 00 degrees 28 minutes 00 seconds East
a distance of 580.50 feet to the Southwestern right-of-way of Industrial Parkway
Drive, said point being marked by an iron pin stake; thence running Southwestern
right-of-way of Industrial Parkway Drive to the POINT OF BEGINNING, said
distance as measured South 45 degrees 47 minutes 58 seconds East a distance of
515.16 feet (chord). Said property described according to the above referred
plat and designated as Parcel A on said plat which is marked Exhibit "A"
attached hereto and made a part hereof.
ALSO:
All that tract or parcel of land lying and being in Land Lot 221 of the 7th
Land District of Henry County, Georgia, and being Parcel B as identified on a
plat of survey made February 19, 1982, said plat being recorded in Book 495,
Page 64, Henry County records.
BEGINNING at the point where the North right-of-way of State Route #155
intersects the East line of Parcel B, as shown on said plat and from said point
running South 52 degrees 25 minutes 46 seconds West along said North
right-of-way a distance of 200.00 feet (chord) to an iron pin found; thence
North 00 degrees 28 minutes 00 seconds East 762.24 feet to the South
right-of-way of Industrial Parkway; thence South 64 degrees 53 minutes 12
seconds East along said right-of-way a distance of 188.54 (chord); thence South
00 degrees 28 minutes 00 seconds West a distance of 580.50 feet to the POINT OF
BEGINNING. Said tract containing 2.65 acres. Said description made according to
plat heretofore referred to, a copy of which is attached hereto and made a part
of this deed.
EXHIBIT "A"
<PAGE> 11
EXHIBIT "B"
All that tract or parcel of land lying and being in Land Lot 221 of the 7th
Land District of Henry County, Georgia, and being designated as 2.23 acres of
land with existing building located thereon and all other improvements, as
shown on a plat of survey prepared for James E. Peters, Jr. by S. L. Colwell &
Assoc., Inc., dated April 29, 1997, and by reference to said plat of survey
being more particularly described as follows:
BEGINNING at a point located at the intersection of the Northwestern
right-of-way line of State Route 155 (100' R/W), with the Southwestern
right-of-way line of Industrial Parkway (100' R/W); thence leaving the
Southwestern right-of-way line of Industrial Parkway and proceeding along the
Northwestern right-of-way line of State Route 155 South 59 degrees 23 minutes 14
seconds West 371.32 feet to a point; thence leaving said right-of-way line North
30 degrees 36 minutes 46 seconds West 43.28 feet to a point; thence proceeding
North 00 degrees 00 minutes 00 seconds East 135.81 feet to a point; thence
proceeding North 46 degrees 25 minutes 34 seconds West 107.03 feet to a point;
thence proceeding North 43 degrees 34 minutes 26 seconds East 283.87 feet to a
point located on the Southwestern right-of-way line of Industrial Parkway;
thence proceeding along said right-of-way line and following the curvature
thereof along an arc a distance of 347.73 feet, said arc being subtended by a
chord having a bearing and distance of South 40 degrees 18 minutes 44 seconds
East 345.44 feet, to a point located at the intersection of the Southwestern
right-of-way line of Industrial Parkway with the Northwestern right-of-way line
of State Route 155, said point being the POINT OF BEGINNING.
<PAGE> 12
FIRST AMENDMENT TO COMMERCIAL LEASE AGREEMENT
THIS FIRST AMENDMENT TO COMMERCIAL LEASE AGREEMENT (the "FIRST
AMENDMENT") is made this 1st day of December, 1997, and effective as of December
1, 1997, by and between JAMES E. L. PETERS, JR. (hereinafter called "LANDLORD")
and SOUTHLAKE COLLISION HENRY COUNTY, INC., a Georgia corporation (hereinafter
called "TENANT").
W I T N E S S E T H:
WHEREAS, Landlord and Tenant are parties to that certain Commercial Lease
Agreement dated November 17, 1997, and effective as of June 1, 1997, governing
Tenant's facility located in Henry County, Georgia (the "LEASE"); and
WHEREAS, Landlord and Tenant desire to amend the terms of the Lease.
NOW, THEREFORE, for and in consideration of the mutual promises contained
herein and contained in the Lease, and for other good and valuable
considerations, the receipt, adequacy, and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
1. Section 3 of the Lease is hereby amended by increasing the monthly
rental from Seven Thousand Dollars ($7,000.00) per month to Twelve Thousand
Dollars ($12,000.00) per month.
2. Except as herein amended, all terms and conditions of the Lease shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have affixed their hands and seals
the day and year first above written.
/s/ James E. L. Peters, Jr. (SEAL)
------------------------------
JAMES E. L. PETERS, JR.
SOUTHLAKE COLLISION HENRY
COUNTY, INC.
By: /s/ James E. L. Peters, Jr.
----------------------------
Title: President
-------------------------
[CORPORATE SEAL]
<PAGE> 1
EXHIBIT 10.55
SHOPPING CENTER LEASE
THIS INDENTURE, made as of the 16th day of March, 1998 by and between
CEDAR HILLS INVESTORS, LLC, a Florida Limited Liability Company, hereinafter
referred to as "Lessor", and, South Financial Corporation hereinafter
referred to as "Lessee".
W I T N E S S E T H
WHEREAS, Lessee is desirous of leasing from Lessor and Lessor is desirous
of leasing to Lessee certain premises hereinafter described, upon the terms,
covenants and conditions set forth herein;
NOW, THEREFORE,
1. PREMISES
In consideration of the rents hereinafter reserved and all other
terms, conditions, covenants and agreements hereinafter contained, Lessor
hereby leases and demises to Lessee, and Lessee hereby rents, leases, and takes
from Lessor, that store space measuring approximately 3,560 square feet, said
measurements being from center of partition to center of partition (except that
in the event the Premises is an end or corner store, said measurements shall
include the full width of the end wall), as crosshatched and depicted on the
attached Plot Plan and being from the outside of the front wall to the outside
of the rear wall. The Premises is delineated in the approximate location shown
on the Plot Plan ("Plan") annexed hereto as Exhibit "A" and made a part hereof,
together with the building to be constructed thereon by Lessor for use of
Lessee (said land and building hereinafter sometimes referred to as "Premises")
within the Shopping Center located in Cedar Hills Shopping Center,
Jacksonville, Florida, which Shopping Center is more fully described in
Exhibit "A-1" annexed hereto and made a part hereof (the "Shopping Center"),
subject to its restrictions, covenants, easements and conditions.
Lessee shall have the rights of access and parking in the Shopping Center
as hereinafter provided, together with all other easements, privileges, rights
tenements, appurtenances, hereditaments, and fixtures appurtenant thereto;
subject however, to the limitations in Lessee's rights of use as provided
herein.
2. TERM
(a) The term of the Lease shall be Five (5) years from and after the
"Commencement Date", which date shall be Fifteen (15) days following written
notice from Lessor to Lessee, notifying Lessee to proceed with fixture
improvements and modifications that Lessee is to make to the Premises in order
to conduct customary business.
(b) the term "Lease Year" as used herein shall mean a period of
twelve (12) consecutive full calendar months plus the partial month, if any,
beginning on the Commencement Date hereof. Each succeeding Lease Year shall
commence upon the anniversary date of the first full calendar month.
(c) The parties hereto agree upon demand of the other, to execute a
written document in recordable form expressing the commencement and termination
dates of the term hereof as such have been determined in accordance with the
provisions of the previous paragraph.
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<PAGE> 2
3. USE AND RESTRICTION
(a) Upon the commencement of the term of this Lease, Lessee shall
proceed with due diligence to open for business in the Premises and shall
thereafter continually, actively and diligently during the term of this Lease
(except during any times when the Premises may be untenable by reason of any
conditions beyond the control of Lessee), during usual and customary business
days and hours, occupy and use the Premises for administrative offices and
related items and for no other use without the prior written consent of Lessor.
Lessee hereby acknowledges that the anchor tenants of the
Shopping Center may have the unrestricted use of the premises leased by such
anchor tenants and the anchor tenants may have the unrestricted right to sublet
or assign all or a portion of the anchor tenants' premises to a tenant or
tenants for any lawful use. Lessee hereby acknowledges that no such use,
subletting or assignment of the anchor tenant premises shall be deemed or
construed in any way to be a violation, contradiction or default by Lessor of
any provision of the Lease. Lessor, at Lessor's sole option, reserves the right
to grant, whether now or in the future, rights of exclusive use to any tenant
of the Shopping Center and Lessee shall honor such rights of exclusive use.
(b) As long as Lessee occupies the Premises in the Shopping Center
(as the Shopping Center may be enlarged), Lessee, together with its customers,
invitees and business guests, shall have the right to use, free of Lessees,
invitees and business guests, all of the access and parking areas, access
roads, service driveways, footways, sidewalks, exits, entrances and areas and
facilities for the parking of automobiles at any time and from time to time
existing in the Shopping Center, except for parking or other access areas
reserved for the exclusive use of other Lessee or occupants of the Shopping
Center, and except for periods of time during which said areas are being
repaired, altered, or reconstructed.
(c) Lessee covenants and agrees that no employees of Lessee shall
use the parking areas in the Shopping Center for the parking of their personal
vehicles, except in an area to be designated by Lessor for that purpose.
Neither Lessor nor Lessee nor anyone holding under or through either of them
shall make any charge for the use of the foregoing facilities to the other or
to the customers, invitees or business guests of Lessor or of Lessee or of
anyone else hereinbefore granted the right to use said facilities existing upon
the Shopping Center, nor will either Lessor or Lessee permit anyone else to
make any such charge for such use.
4. ANNUAL RENT
Lessee covenants and agrees to pay in lawful money to the United
States minimum rent as follows: For months one (1) through thirty-six (36)
thirty-two thousand and forty dollars ($32,040) annually in equal monthly
installments of two-thousand six-hundred and seventy dollars ($2,670.00). For
months thirty-seven (37) through sixty (60) thirty-three thousand nine-hundred
ninety-eight dollars ($33,998) annually in equal monthly installments of
two-thousand eight-hundred and thirty-three dollars and seventeen cents
($2,833.17), in advance on the first day of each month during said term at the
office of Lessor or such other place and to such other person as Lessor may
designate, without any setoff or deduction whatsoever, except a) herein
provided, with Lessee's covenant to pay rent being independent of any other
covenant herein contained. If the term of this Lease shall commence on a date
other than the first day of a calendar month, the monthly rent shall be
prorated and shall be paid on the Commencement Date of the term hereof.
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<PAGE> 3
5. PERCENTAGE RENT
(a) In addition to any other sums payable under this Lease, Lessee
agrees to pay to Lessor, annually, in arrears, a percentage rental, equal to
the amount by which N/A of Lessee's gross sales from the Premises, exceeds the
annual minimum rental. The term "Gross Sales" as used herein is hereby defined
to mean and shall be the total amount of the dollar value of all sales of
merchandise and services and all revenues of every kind and character derived
from, arising out of or payable on account of the business and all business
transactions conducted at or from said Premises, both for cash and on credit,
including all orders for merchandise or services taken or sold at or from said
Premises. The amount of the dollar value of bond fide refunds or credit granted
for return of merchandise and of all sales, use and excise taxes collected by
Lessee from its customers and remitted to appropriate taxing authorities shall
be charged as a credit in reduction of the gross amount of sales for the period
within which such refunds, credits or taxes shall have been made or paid.
(b) Lessee, during the term of this Lease, shall maintain and keep,
or cause to be maintained and kept, at the principle office, a full, complete
and accurate permanent record and account of all sales of merchandise and
services and all sums of money paid or payable for or on account of or arising
out of the business and all business transactions conducted at or from the
Premises for each day of the term hereof, and such records and accounts and
all supporting records at all times shall be open to inspection and audit at
the principal office by Lessor and its fully authorized agents or
representatives at all reasonable times during ordinary business hours. Lessee
shall keep and preserve or cause to be kept and preserved said records for not
less that twenty-four (24) months after the due date and payment of any
percentage rental due under the terms hereof.
(c) On or before the date ten (10) days following the close of each
calendar month during the term hereof, Lessee at the place where the rent herein
reserved shall be payable, shall deliver to Lessor, or the person, firm or
corporation to whom such rent shall be payable, a complete written statement,
showing in all reasonable detail the gross amount of sales for the preceding
month, including therein a statement of the total amount of sales taxes and
excise taxes paid or payable on account thereof and the number and dollar amount
of all refunds and credits for return of the merchandise, if any, made during
such period. Lessee shall concurrently with the delivery of such statement pay
to the Lessor all percentage rental payments then due hereunder, each such
monthly statement shall be signed by the Lessee, or if Lessee is a corporation
then by one of its principal officers. Lessee shall also submit an annual
statement, prepared and submitted by an accountant, to be selected by and the
cost of which shall be borne by Lessee, and such statement to be furnished
within sixty (60) days following the close of Lessee's fiscal year. The
foregoing notwithstanding, as of the close of the Lessee's fiscal year,
percentage rental payments shall be adjusted so as to annualize the percentage
rental payments, any partial year being prorated on the basis of a 365 day year,
and appropriate additional payment or refund made.
(d) If Lessee shall fail to pay, when the same is due and payable,
the Minimum Guaranteed Rental, percentage rental, or any additional rent or
other charges required hereunder, such unpaid amount shall bear interest from
the due date thereof to the date of payment at the rate which is the lesser of
eighteen percent (18%) per annum or the maximum interest rate permitted by law.
6. STATUS
Lessee agrees at any time and from time to time, upon not less than
twenty (20) days prior notice by Lessor, to execute, acknowledge and deliver to
Lessor a statement in writing certifying that this Lease is in full force and
effect (or if there have been modifications, that the same is in full force and
effect as modified and stating the modifications) and the dates to which the
rent and other charges have been paid in advance, if any, and stating whether
or not Lessor is in default in performance of any covenant, agreement or
condition contained in this Lease, and if so, specifying each such default, it
being intended that any such statement delivered pursuant to this paragraph may
be relied upon by any party to whom such certificate may be delivered by Lessor.
6
<PAGE> 4
7. CONSTRUCTION
(a) Exhibit "A" indicates the approximate location of existing
buildings, if any; buildings under construction, if any; proposed buildings
(which may or may not be constructed at option of Lessor) and certain areas
reserved for future construction. Although Lessor need not build any buildings
in the Shopping Center other than the buildings shown on Exhibit "A", Lessor
shall have the right to build additional buildings in the areas so specified on
Exhibit "A". Lessor shall construct, at Lessor's sole cost and expense, except
as hereinafter expressly provided to the contrary, the buildings shown on
Exhibit "A" at the approximate location and having the approximate outside
dimensions shown on Exhibit "A".
(b) Lessee shall have the right, subject to the consent of the
general contractor, to install its fixtures and equipment during construction,
provided Lessee does not interfere with the construction and all work is
performed in conformance with local ordinances and prevailing labor practices
and adequate and proper insurance is furnished to Lessor. Such installation is
and shall be at Lessee's sole cost and risk.
(c) In the event Lessee claims that some or all of the construction
requirements have not been complied with by Lessor, upon delivery of the notice
of completion by Lessor, as provided herein, Lessee shall, within thirty (30)
days of said date (or the date Lessee opens for the transaction of business,
whichever date is sooner) submit to Lessor a written list of work Lessee claims
is to be performed by Lessor, and Lessor shall have forty-five (45) days
thereafter to complete such work. If Lessor fails to complete such work, the
sole remedy of Lessee shall be to complete such work and Lessee shall have the
right to set off the reasonable cost thereof from the rent due Lessor in order
to reimburse Lessee for the cost and expense of the completion of the work.
Upon written request of Lessor, Lessee will, within fifteen (15) days, furnish
to Lessor a written statement that the construction and the improvements have
been completed in accordance with Lessor's obligations or in lieu thereof, a
list of the work Lessee claims to be uncompleted, and further stating, if
requested, that Lessee is in occupancy of same, paying rent, and the
commencement and termination dates of this Lease.
8. ADDITIONAL CONSTRUCTION IN PARKING AREAS
Notwithstanding anything in this Lease to the contrary, Lessor shall
be entitled (1) to construct or to have constructed, and thereafter lease or
sublease, a building or buildings on any portion of the parking area of the
Shopping Center, or (2) to Lease or to sublease or to sell any portion of the
parking area of the Shopping Center for the construction thereon of a building
or buildings, provided however, (a) no such building or buildings shall exceed
one (1) story in height, shall unreasonably obstruct ingress to and egress from
the Shopping Center, or shall be allowed to be operated in such a fashion as to
violate any provision this Lease limiting the types of business operations
which Lessor may permit or conduct in the Shopping Center, to the extent such
limitation is now or hereafter permitted by law, and (b) the parking area of
the Shopping Center shall not be allowed to drop below the ratio of (4) parking
spaces for each one thousand (1,000) square feet of floor space in all
buildings of the Shopping Center or any other parking ratio or required number
of parking spaces provided for elsewhere in this Lease, whichever is greater.
9. ALTERATIONS AND REPAIRS
(a) No alterations or additions to the Premises shall at any time be
made by Lessee without Lessor's prior written consent. If Lessor shall give its
consent, all work, repairs and alterations made by Lessee shall be done in a
good and workmanlike manner and in compliance with any applicable governmental
rules and regulations and the cost thereof shall be paid by Lessee in cash or
equivalent, so that the Premises shall at all times be free of liens for labor
and materials supplied or claimed to have been supplied to the Premises. Any
alterations shall immediately become the property of Lessor, subject only to
the use of same by Lessee during the term of this lease.
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<PAGE> 5
(b) Lessor agrees to make all repairs and replacements to the roof
and to the exterior structural portions of the building, exclusive of all plate
glass windows and doors. Lessee agrees to make all other repairs and
replacement to the Premises and the mechanical systems thereof, and Lessee
agrees to keep the sidewalk in front of the Premises free and clear. Lessee
agrees to make all repairs and replacements to the heating and air conditioning
systems. Lessor agrees to make available to Lessee all warranties on the
aforementioned structures and equipment.
(c) Lessee shall indemnify and save harmless Lessor from and against
any and all costs, expenses, claims, losses, damages, fines or failure to
comply with the provisions of subparagraphs (a) and (b) of this Paragraph 9 and
Lessee shall not call upon Lessor for any disbursement or outlay of money
whatsoever in connection with such work, and hereby expressly releases and
discharges Lessor of and from any liability or responsibility whatsoever in
connection therewith.
(d) Nothing contained in this Lease shall authorize Lessee to do any
act which may create or be the foundation for any lien, mortgage or other
encumbrance upon the reversion or other estate of Lessor, or of any interest
thereof; it being agreed that should Lessee cause any alterations, changes,
additions, improvements or repairs to be made to the Premises, neither Lessor
nor the Premises shall, under any circumstances, be liable for the payment of
any expenses incurred or for the value of any work done or material furnished
to the Premises or any part thereof; Lessee shall upon request of Lessor
deliver such documents as may be required by Lessor in order to effectuate the
lien protection required by this paragraph; all such alterations, changes,
additions, improvements and repairs and materials and labor shall be at
Lessee's expense and Lessee shall be solely and wholly responsible to
contractor, laborers and materialmen furnishing labor and material to said
premises and building or any part thereof. If order for the payment of money
shall be filed against the Premises or any building or improvement thereon, or
against Lessor (whether or not such lien or order is valid or enforceable as
such), Lessee shall, at Lessee's own cost and expense, within fifteen (15) days
after the date of filing thereof, cause the same to be canceled and discharged
of record, or furnish Lessor with a surety bond issued by a surety company of
reasonable satisfaction to Lessor, protecting Lessor from any loss because of
nonpayment of such lien claim and further shall indemnify and save harmless
Lessor from and against any all costs, expenses, claims, losses or damages,
including reasonable counsel fees, resulting thereupon or by reason thereof.
10. INDEMNITY AND LIABILITY
(a) Lessee agrees to and does hereby indemnify and save Lessor
harmless against any and all claims, demands, damages, costs and expenses,
including reasonable attorneys' fees for the defense thereof, arising from the
conduct or management of the business conducted by Lessee in the Premises, or
from any breach or default on the part of Lessee in the performance of any
covenant or agreement on the part of Lessee to be performed, pursuant to the
terms of this Lease, or from any act or negligence of Lessee, its agents,
contractors, servants and employees, in or about the Premises, the sidewalks
adjoining same and the other areas of the Shopping Center used by Lessee in
common with others. In the event any action or proceeding is brought against
Lessor by reason of any such claim, Lessee covenants to defend such action or
proceeding by counsel satisfactory to Lessor except that any counsel which has
been retained by Lessee's General Liability carrier for the specific purpose of
defending such action or proceeding shall be deemed satisfactory to Lessor.
(b) Lessee will, during the term of this Lease, at its own cost and
expense, maintain and provide general liability insurance for the benefit and
protection of Lessor and Lessee (said policy to name Lessor as a co-insured),
in an amount not less than $500,000.00 for injuries to any one person, and not
less than $1,000,000.00 for injuries to more than one person and for damage to
property in an amount of not less that $100,000.00 arising out of any one
accident or occurrence. Said policy shall cover the Premises, the sidewalks
adjoining same and the other areas of the Shopping Center used by Lessee. The
public liability policy or a certificate thereof shall be delivered to Lessor
at the commencement of the term together with proof of payment of premium and
renewals thereof not less than twenty (20) days before its expiration date.
Said policy and/or
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<PAGE> 6
certificate shall contain an undertaking by the insurer to give Lessor not less
than ten (10) days written notice of any cancellation or change in scope or
amount of coverage of such policy. If Lessee fails to comply with this
requirement, Lessor may obtain such insurance and keep same in effect and
Lessee shall pay Lessor the cost thereof upon demand as additional rent.
11. FIRE AND OTHER CASUALTY DAMAGE
If the Premises shall be partially damaged by fire, natural disaster
or acts of God, the damages shall be repaired by and at the expense of Lessor
and the rent until such repairs shall be made shall be apportioned according to
the part of the Premises which is usable by Lessee. No penalty shall accrue for
reasonable delay which may arise by reason of adjustment of insurance on the
part of Lessor and for reasonable delay on account of "labor troubles," or any
other cause beyond Lessor's control. If the Premises are totally damaged or are
rendered wholly untenable by fire or other cause, or if the building shall be so
damaged the Lessor shall decide to demolish it or to rebuild it, then or in any
of such events Lessor may, within sixty (60) days after such fire or other
cause, give Lessee a notice in writing of such decision and thereupon the term
of this Lease shall expire by lapse of time upon the thirtieth (30th) day after
such notice is given, and Lessee shall vacate the Premises and surrender the
same to Lessor.
12. ENVIRONMENTAL LIABILITY INSURANCE
(a) In the event Lessee's use of, or operations or activities in the
Premises involve the use, storage or creation of any hazardous substance or any
other pollutant, toxic waste or other regulated substance, Lessee will
immediately notify Lessor of the circumstances thereof, and unless Lessor waives
this requirement in writing Lessee shall, before undertaking the use, operation
or activity that involves such materials, and at Lessee's expense, procure and
maintain during the balance of their Lease Term, Environmental Impairment
Liability Insurance (also known as Pollution liability insurance) covering the
Premises. Such insurance shall be in an amount not less than One Million Dollars
($1,000,000.00) combined single limit per occurrence and shall otherwise be
issued on terms and conditions (including, without limitation, deductibles and
exclusions) acceptable to Lessor. Such coverage shall insure against any
contamination or other environmental impairment of the Premises, the Shopping
Center and any property in the vicinity of the Premises arising or occurring
during the Lease Term.
(b) MISCELLANEOUS Such other liability insurance as may become
necessary or customarily carried by like business in the area where the
Shopping Center is located to protect the interests of Lessor and/or Lessee.
Executed copies of such insurance policies or a certificate thereof,
which shall be non-cancelable and non-amendable without thirty (30) days prior
written notice to Lessor, shall be delivered to Lessor within ten (10) days
after delivery of possession of the Premises to Lessee and thereafter as often
as any such policy shall expire or terminate, renewal or additional policies of
insurance or certificates thereof shall be delivered to Lessor within ten (10)
days of such change. In the event Lessee fails to comply with the requirements
of this Article 12, Lessor may obtain such required insurance and submit a bill
thereof to Lessee, which bill shall be paid by Lessee without deduction or
offset with ten (10) days after it is submitted.
(c) Lessee's obligation to carry the insurance required by Articles
11 and 12 may be brought within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by Lessee; provided however, that
Lessor shall be named as an additional insured thereunder as its interests may
appear and that the coverage afforded Lessor will not be reduced or diminished
by reason of the use of such blanket policy of insurance, and provided further
that the requirements set forth herein are otherwise satisfied. Lessee agrees
to permit Lessor at all reasonable times to inspect the policies of insurance
of Lessee covering risks upon the premises.
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5. WAIVER OF SUBROGATION
Lessee releases and waives any claim or right of recovery against
Lessor, its agents, subsidiaries and affiliated corporations for any loss
resulting from causes covered by insurance and shall procure a waiver of
subrogation on the part of the insurer against Lessor by an endorsement to all
insurance policies whereby the insurer recognizes that the insured has waived
any right of recovery from Lessor, its agents, subsidiaries and affiliated
corporations. A copy of such endorsement shall be deposited with Lessor. Lessor
shall not be liable for any damage to or destruction of any of Lessee's goods,
merchandise, fixtures or property caused by fire or any other cause whatsoever.
14. CONDEMNATION
The parties hereto agree that should the Premises, or such portion
thereof as will make the premises unusable for the purposes herein leased be
taken or condemned by competent authority for public or quasi-public use, then
this Lease shall terminate from the date when possession of the part so taken
shall be required for the use and purpose for which it has been taken. If the
Lease continues after a partial taking, the rent shall abate proportionately as
to the part taken. All compensation awarded from such taking of the building,
the fee and the leasehold shall belong to and be the property of the Lessor;
except, however, that Lessor shall not be entitled to any portion of the award
made to Lessee for the value of Lessee's trade fixtures or leasehold
improvements added by Lessee. Lessee shall not be entitled to any damages for
unexpired portion of the term of this Lease, or injury to its leasehold
interest.
15. ASSIGNMENT AND SUBLETTING
Lessee, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, expressly
covenants that it shall not assign, mortgage or encumber this Lease, nor
sublet, nor suffer or permit the Premises or any part thereof to be used by
others without the prior written consent of Lessor in each instance. If, with
consent of Lessor, this Lease be assigned, or the Premises or any part thereof
be sublet or occupied by anyone other than Lessee, Lessor may, after default by
Lessee, collect rent from the assignee, sublease or occupant, and apply the net
amount collected to the rent herein reserved, but no such assignment,
subletting, occupancy or collection shall be deemed to relieve Lessee of any of
its obligations hereunder nor be deemed a waiver of this covenant, or the
acceptance of the assignee, sublease or occupancy as Lessee, or a release of
Lessee named herein from the further performance by such Lessee of the
covenants on the part of Lessee herein contained, it being understood and
agreed that Lessee named herein shall at all times remain the primary obligor
under this Lease. The consent by Lessor to an assignment or subletting shall
not in any way be construed to relieve Lessee or any other Lessee or occupancy
of the Premises from obtaining the express consent in writing of Lessor to any
further assignment or subletting.
16. TAXES, INSURANCE AND COMMON AREA CHARGES
(a) Lessee shall pay as additional rent Lessee's proportionate share
of taxes, insurance and common area charges.
(i) As used in this Paragraph 16(a)-(c), the term "Taxes" shall
include all taxes and assessments assessed, imposed or levied upon the
Shopping Center, the Premises, the common area, or the land underlying any of
the foregoing during any fiscal tax year which occurs wholly or partially
during the term of this Lease. Further, the term "Taxes" as used in this
Paragraph 16(a)-(c) embraces taxes and assessments which are special,
unforeseen, or any governmental authorities imposes, assesses or levies of a
tax on rent or any other tax upon Lessor as a substitute tax shall be deemed to
be a tax within the meaning of this Paragraph
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and shall be deemed to have been levied upon the Shopping Center. The term
"Taxes" as used in this Paragraph 16(a)-(c) shall also include all real estate
taxes relating to any other portion of the Shopping Center which Lessee enjoys
rights of use under this Lease. The term "Taxes" as used in this Paragraph
16(a)-(c) shall not include those taxes or assessments enumerated in Paragraph
16(e) and 16(f).
(ii) The term "Insurance" as used in this Paragraph 16(a) shall
include premiums for fire and extended coverage and general liability coverage
for the Shopping Center and common area.
(iii) The term "Common Area Charges" as used in this Paragraph
16(a)-(c) shall include, but is not limited to, the cost of maintaining,
repairing, cleaning, sweeping, restriping, repaving or patching the parking lot,
driveways and sidewalks of the Shopping Center, keeping said parking area free
of snow, ice, dirt and rubbish, routine trash removal from trash receptacle
placed in the parking lot or sidewalks, the cost of maintaining, repairing and
replacing the lighting fixtures and equipment and bulbs which illuminate the
parking areas in the Shopping Center and the cost of electricity consumed to
light the parking area and sidewalks in the Shopping Center, planting and
maintenance of landscaped areas, sanitary control, without limitation, all costs
of maintaining and operating any wells, sewer, septic or waste disposal
installation which services the Shopping Center, security systems, monitoring
Charges for the fire sprinkler system and a sum equal to fifteen percent (15%)
of the foregoing "Common Area Charges" for the management, administrative and
accounting expenses associated with the management of the Shopping Center.
(b) Lessee's share of the foregoing costs shall be based on the
proportion of said charges which is equal to the ratio of the number of square
feet in the Premises over the total number of square feet of the building in
the Shopping Center and shall be estimated at three-hundred fifty-six dollars
($356.00) per month, payable upon the first day of each month.
Lessee's said share of the costs numerated in Paragraph 16(a) is based
upon Lessor's best estimate of such costs during the initial Lease Year.
Lessor's estimate is based upon an allocation of:
($186.90) per month for taxes,
($41.53) per month insurance, and
($127.57) per month for common area charges.
In the event that Lessee's actual share of taxes for any applicable tax
billing period exceeds the above estimated allocation for taxes, Lessee agrees
to reimburse Lessor for any underpayment within twenty (20) days of being
billed therefore. Likewise, Lessor shall reimburse Lessee for any overpayment.
Lessor will perform an annual accounting of all common area charges and
insurance costs at the end of each fiscal year. If the cost to Lessor of
Lessee's share of common area charges and/or insurance, as determined by such
accounting, should during any Lease Year of the term or the extended term hereof
exceed the amount allocated in Paragraph 16(b) as Lessee's share, Lessee agrees
to reimburse Lessor for the excess within thirty (30) days of being billed
therefor. Likewise, Lessor shall reimburse Lessee for any overpayment.
(c) In the event another Lessee in the Shopping Center has agreed to
pay for the entire costs of those items enumerated in Paragraph 16(a), Lessee
agrees to reimburse said Lessee or whoever else pays for the same, at the
direction of Lessor, upon receipt of bills therefor. Upon written request of
Lessee, Lessor agrees to provide an itemized statement of such costs and
expenses.
(d) In the event Lessee shall fail to make the payments or
reimbursements provided for in Paragraph 16(a)-(c) above, Lessor shall have the
same rights as if Lessee had failed to pay rent hereunder.
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(e) Lessee shall also pay, as and when they shall be due and payable,
all water taxes, rates and/or meter charges, sewer taxes and sewer rental
taxes, sales taxes or other government taxes, impositions or assessments based
on rental or occupancy, charges for public utilities, charges for gas, electric
and other utilities or public utilities consumed on the Premises and
assessments on the Premises.
(f) Lessee shall also pay all taxes levied against personal property
and trade fixtures placed by Lessee in or about the Premises, including, but
not limited to, shelves, counters, vaults, vault doors, wall safes, partitions,
fixtures, machinery, refrigerators, and heating, ventilation and air
conditioning equipment. If any such taxes are levied against Lessor or Lessor's
property, and if Lessor pays same, or if the assessed value of Lessor's
premises is increased by the including therein of the value placed on such
property, and if Lessor pays the taxes based on such increased assessment,
Lessee, upon demand, shall repay Lessor, Lessee's proportional share of such
taxes resulting from such increased assessment.
17. REMEDIES
(a) (i) If Lessee shall default in the payment of the rent reserved
herein after the due date thereof, or in the payment of any other monies due
hereunder within five (5) days from notice from Lessor for payment of the same,
or any part of same, or Lessee shall default in the observance of any other
terms, covenants and conditions of this Lease after twenty (20) days notice
from Lessor; or
(ii) If Lessee shall fail to open to the public within sixty
(60) days from the commencement of the term of this Lease and thereafter during
the term hereof continue to stay open for business to the public, or if the
Premises shall be abandoned, deserted or vacated, or if Lessee shall sublet the
Premises or assign this Lease except as herein provided; or
(iii) If Lessee shall file a voluntary petition of bankruptcy, or
be adjudicated as bankrupt by any court and such adjudication shall not be
vacated within thirty (30) days, or Lessee takes the benefit of any insolvency
act, or Lessee shall be dissolved voluntarily or involuntarily or shall have a
receiver of Lessee's property appointed in any proceedings other than bankruptcy
proceedings, and such appointment shall not be vacated within thirty (30) days
after it has been made; then, upon the happening of any one or more of the
default or events specified above, this Lease and the term hereof shall at the
option and election of the Lessor, in Lessor's sole and absolute discretion,
wholly cease and terminate, and thereupon or at any time thereafter, Lessor may
re-enter said premises either by force or otherwise and have possession of the
same and/or may recover possession thereof by summary proceedings or otherwise
(notwithstanding the foregoing Lessee shall remain liable to Lessor as
hereinafter provided.)
(b) In the event of any one or more of the defaults set out in the
Paragraph 17(a)-(i)-(iii) above, all payments of rent, additional rent or of any
other monies due from Lessee during the term of this Lease or any extension
thereof, shall, at the option of Lessor, become immediately due and payable in
full. Lessor may re-enter the Premises using such force for that purpose as may
be necessary without being liable to any prosecution therefor, and Lessor may
repair or alter the Premises in such manner as to Lessor may deem reasonably
necessary or advisable, and/or let or re-let the Premises and any and all
parts thereof for the whole or any part of the remainder of the original term
hereof or for a longer period, in Lessor's name, or as the agent of Lessee,
and, out of any rent so collected or received, Lessor shall, first, pay to
itself the expense and cost of retaking repossessing, repairing and/or altering
the Premises, and the expense of removing all persons and property therefrom,
and, second, pay to itself any cost or expense sustained in securing any new
Lessee or Lessees, and, third, if Lessor shall have declared all payments
hereunder immediately due and payable in full as provided in this paragraph,
pay to itself any balance remaining on account of Lessee's liability to Lessor
for such accelerated payments, provided, however, that nothing herein shall
be interpreted as prohibiting Lessor from proceeding against Lessee for the full
amount of such accelerated payments immediately upon the declaration thereof.
Any entry or re-entry by Lessor, whether had or taken under summary proceedings
or otherwise, shall not absolve or discharge Lessee from liability hereunder.
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(c) Lessee hereby expressly waives service of any notice of intention
to re-enter in the event of default. Lessee hereby waives any and all right to
recover or regain possession of the Premises or to reinstate or to redeem this
Lease as is permitted or provided by or under any statute, law or decision now
or hereafter in force and effect
(d) In the event of default, Lessor, in addition to the other rights
and remedies given herein, and notwithstanding any statute or rule of law to the
contrary, may retain as liquidated damages, any rent, security deposit or
moneys received by Lessor from Lessee or others in behalf of Lessee upon the
execution hereof.
(e) Lessee hereby expressly agrees to reimburse Lessor for any
reasonable attorney's fees and any and all costs and expenses incurred by Lessor
in enforcing or defining Lessor's right and remedies under this Lease.
18. ACCESS TO PREMISES
Lessor and Lessor's representatives shall have the right to enter upon
the Premises at all reasonable times and without unreasonable interference with
Lessee's business for the purpose of inspecting same or for making repairs,
additions or alterations, or for the purpose of exhibiting the same to
prospective Lessees, purchasers or others, and during the last six (6) months
of the term of this Lease, Lessor may maintain "For Lease" signs upon the
Premises.
19. REQUIREMENTS OF LAW
Lessee shall comply with all laws, orders and regulations of federal,
state, city, county and municipal authorities and fire insurance rating
organizations such as I.S.O. Commercial Risk Services, Inc., which shall impose
and duty upon the occupant of the Premises.
20. NOTICES
All notices to be given pursuant to this Lease shall be in writing and
shall either be served personally or sent by certified or registered mail,
postage prepaid, to the address of the parties below specified or at such
other address as may be given by written notice in the manner prescribed in this
paragraph. Notice shall be deemed to be given when delivered personally, if
delivered, or on the date mailed as provided above, if mailed. Any notices to
Lessor shall be sent to Lessor:
CEDAR HILLS INVESTORS, LLC
506 45th Street, Suite B-5
Columbus, Georgia 31904
Lessee's address for notices shall be: South Financial Corporation
3500 Blanding Boulevard
Jacksonville, FL 32210
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21. MEMORANDUM OF LEASE
The parties agree, upon request of either, to execute in recordable
form a short form lease entitled "Memorandum of Lease," it being the intention
of the parties that this Lease will not be recorded, but only a memorandum
thereof, unless recording of this instrument is required by law or any mortgagee
of Lessor.
22. NO WAIVER
No delay or omission of the exercise of any right by either party
hereto shall impair such right or shall be construed as a waiver of any default
or an acquiescence therein. One or more waivers of any covenant, term or
condition of this Lease by either party shall not be construed by the other
party as a waiver of a subsequent breach of the same covenant, term or
condition. No requirements whatsoever of this Lease shall be deemed waived or
varied because of either party's failure or delay in taking advantage of any
default, and Lessor's acceptance of any payment from Lessee with knowledge of
any default shall not constitute a waiver of Lessor's rights in respect to such
default, nor of any subsequent or continued breach of any such default or any
other requirements of this Lease. All remedies provided for herein shall be
construed as cumulative and shall be in addition to every other remedy
otherwise available to Lessor.
23. END OF TERM
Upon the expiration or other termination of the term of this Lease,
Lessee shall quit and surrender to Lessor the Premises together with all
buildings and improvements thereon, "broom-clean," in good order and condition,
ordinary wear and tear and damage by the elements excepted. If the last day of
the term of this Lease or any renewal thereof falls on a Sunday, this Lease
shall expire on the business day immediately following. Lessee shall remove all
property of Lessee as directed by Lessor and failing to do so, Lessor may cause
all of the said property to be removed at the expense of Lessee, and Lessee
hereby agrees to pay all costs and covenant shall survive the expiration or
other termination of the terms of this Lease.
24. LESSEE'S SIGNS
Lessee shall have the right to erect and maintain a sign on the front
wall of the building forming a part of the Premises, provided the letters of the
sign are mounted on a raceway and the sign is in compliance with the Sign
Criteria of the Shopping Center attached hereto as Exhibit "F" and provided
Lessor has given its written consent to same, which consent shall not be
unreasonably withheld. Said sign shall conform in every way with the rules and
regulations of the governing authorities and with all laws or ordinances of the
state, county and municipality, and Lessee agrees to and does hereby indemnify
and hold Lessor harmless from all claims by reason of the erection or
maintenance of said sign. Before erection of any such sign, Lessee shall submit
a drawing to Lessor for approval, and Lessee shall pay in advance of erections
thereof the costs of any structural changes made by Lessor because of the
erection of such sign. No sign or support thereof shall be placed on any roof.
25. CAPTION
The paragraph captions contained herein are for convenience only and
do not define, limit or construe the contents of such paragraphs and are in no
way to be construed as a part of this Lease.
26. DEFINITIONS
Words of any gender used in this Lease shall be held to include any
other gender and words in the singular number and shall be held to include the
plural when the sense requires.
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27. SECURITY
Lessee has deposited with Lessor the sum of Zero Dollars ($0.00) as
security for the faithful performance and observance by Lessee of the terms,
provisions and conditions of this Lease. Lessee acknowledges that Lessor
maintains the right to hold via a third party management company such security
as may be required by the Lessor to ensure the faithful performance and
observance by Lessee of the terms, provisions, and conditions of the lease;
while being held by the Lessor's management company, such security shall be
held in the management company's trust account.
It is agreed that in the event Lessee defaults in respect of any of
the terms, provisions and conditions of this Lease, including, but not limited
to, the payment of rent and additional rent, Lessor may use, apply or retain
the whole or any part of the securities so deposited to the extent required for
the payment of any rent and additional rent or to any other sums as to which
Lessee is in default or for any sum which Lessor may expend or may be required
to expend by reason of Lessee's default in respect of any of the terms,
covenants and conditions of this Lease, including, but not limited to, any
damages or deficiency accrued before or after summary proceedings or other
re-entry by Lessor.
Lessor shall have the right to use the security deposit to pay part
of the cost of the improvements to be constructed by Lessor hereunder.
28. EXCULPATION
Lessee agrees that Lessee shall look solely to Lessor's interest in
the Shopping Center property of which the Premises are part and Lessor's
personal property used in connection therewith for the satisfaction of any
claim, judgment or decree requiring the payment of money by Lessor based upon
any default hereunder, and no other property or assets of Lessor, its heirs,
successors or assigns shall be subject to levy, execution or other enforcement
procedure for the satisfaction of any such claim, judgment, injunction or
decree.
29. AUTHORITY TO EXECUTE
Lessor or Lessee do each hereby respectively represent to the other
that it has the capacity and the authority to enter into this agreement. Lessor
owns a fee simple or leasehold interest in the property described in Exhibit
"A" and Exhibit "A-1" or will own same prior to the commencement of the term
herein.
30. ENTIRE AGREEMENT
This instrument of lease contains the entire and only agreement
between the parties concerning the Premises and no prior oral or written
statements or representations, if any, of any party hereto, not contained in
this instrument, shall have any force or effect. This Lease shall not be
modified in any way except by a writing executed by Lessor and Lessee, and no
oral agreement or representations for rental shall be deemed to constitute a
Lease other than this agreement. This agreement shall not be binding until it
shall have been executed by Lessee and Lessor.
31. SUCCESSORS IN INTEREST
All provisions herein contained shall bind and inure to the benefit
of the respective parties hereto, their heirs, personal representatives,
successors and assigns. In the event Lessor or any successor-owner of the
Premises shall convey or otherwise dispose of the Premises and/or the Shopping
Center of which the Premises form a part, all liabilities and obligations of
Lessor or such successor-owned as Lessor under this Lease shall terminate upon
such conveyance or disposal and written notice thereof the Lessee. Lessor shall
have the right to assign this Lease without the consent of Lessee and
thereafter Lessor shall have no liability hereunder.
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32. LESSOR'S RIGHT TO CANCEL
Should the operation of Lessee's business be or become, or attract
customers whose conduct is offensive, noxious, disruptive, abusive, obscene or
threatening to the Lessor, the other Lessees in the Shopping Center, or the
customers, invitees or employees of said other Lessees, the Lessor may, at
Lessor's option, cancel and terminate this Lease, effective thirty (30) days
after written notice thereof to Lessee.
33. MERCHANT'S ASSOCIATION
Provided that at least one-half (1/2) of the other Lessees in the
Shopping Center do so, Lessee agrees to join and maintain membership in good
standing in the merchants' association composed of Lessees having premises in
the Shopping Center, and Lessee agrees to comply with and abide by all the
rules and regulations of said merchants' association as shall be in force and
effect from time to time. The object of such merchants' association shall be,
among other things, to assist the business of the Lessees by sales promotions
and centerwide advertising. Nothing in the bylaws or regulations or rules of
said merchants' association shall be in conflict with the provisions of this
Lease, and in the event of such conflict, the provisions of this Lease shall
prevail.
34. SUBORDINATIONS
Lessee agrees that this Lease shall, at Lessor's option, at all times
be subject and subordinate to the lien of any mortgage (which term shall
include all security instruments that may be placed on the Premises by Lessor,
and Lessee agrees, upon demand and without cost, to execute such instruments as
may be required to effectuate such subordination; provided, however, as a
condition to this subordination provision, Lessor shall obtain from any such
mortgagee an agreement in writing, which shall be delivered to Lessee,
providing in substance that, so long as Lessee shall faithfully discharge the
obligations on its part to be kept and performed under the terms of this Lease,
its tenancy shall be and remain undisturbed, nor shall this Lease be affected
by any default under such mortgage, and in the event of foreclosure or any
enforcement of any such mortgage, the rights of Lessee hereunder shall
expressly survive, and this Lease shall in all respects continue in full force
and effect, provided, however, that Lessee fully performs all of its obligations
under this Lease.
35. EXTENSIONS
So long as Lessee shall not be in default under this Lease, Lessee
shall have the option to extend the initial term of this Lease for five (5)
years. Lessee shall exercise said option to extend this Lease by giving Lessor
written notice not later than six (6) months prior to the expiration of the
then existing term. Any such extension period shall begin upon the expiration
of the immediately preceding term. The terms and conditions of this Lease shall
apply during any such extension term except that the annual minimum rental for
the option years shall be as follows:
Option Period: $36,490 per annum paid in monthly installments of $3,040.83
per month.
36. EXHIBITS AND ADDENDUM
EXHIBITS "A" through "F" are hereby expressly made a part of this
Lease.
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37. CONSTRUCTION OF THE PREMISES
(a) Lessor shall at its own expense construct the Premises in accordance
with plans and specifications prepared by the Lessor's architect, incorporating
in the construction of the Premises Lessor's standard structural systems,
materials and finishes. Lessee shall at its own cost and expense construct
those improvements to the Premises that are necessary to complete the Premises
for Lessees use and occupancy. The respective obligations, covenants and
agreements of Lessor and Lessee to construct the Premises, including the
division of responsibilities and procedures for design and construction and for
payment of costs and expenses, are as more specifically set forth in Exhibit
"B" attached hereto and incorporated herein by this reference.
(b) All construction work, alterations and improvements to the interior
or exterior of the Premises are subject to the prior written approval of Lessor
and Lessor's architect. Lessee may not require an exterior design, finish or
construction other than one which has been approved by Lessor and Lessor's
architect. Without Lessor's written consent, which may be withheld on the basis
of aesthetics or other standards, Lessee shall not:
(1) make any changes to the store front as shown in the working
drawings.
(2) install any exterior lighting, awnings or canopy, or any exterior
decorations or paintings; or
(3) install any exterior sign which is not in accordance with
Lessor's sign criteria.
(c) Upon notification by Lessor that Lessor's construction obligations
are substantially complete or that the commencement of Lessee's work is
necessary to allow the completion of Lessor's work, Lessee shall perform all
work required of Lessee under Exhibit "B" of this lease (Lessee's work).
Lessee's work shall be performed through the services of a licensed, bondable
contractor approved by Lessor, in a good and workmanlike manner, free of any
liens or encumbrances, and in strict accordance with the plans and
specifications prepared by Lessee's architect at Lessee's sole cost and
expenses and approved by Lessor in writing and with all applicable statutes
ordinances, rules, regulations and building codes of any governmental authority
having jurisdiction over the Premises. During the course of Lessee's
construction, Lessor may enter upon the Premises at all times for the purpose
of completing Lessor's work and inspecting the construction of Lessee's Work.
If Lessor shall find any workmanship inferior, defective or not in accordance
with the plans and specifications, Lessor may notify Lessee and if so notified,
Lessee shall promptly correct such inferior, defective or deficient
construction. Lessor's authority to act under this paragraph shall not give
rise to a duty of Lessor to make inspections or otherwise enforce Lessee's
compliance with this Article. Lessee's failure to perform or cause to have
performed Lessee's Work in a good and workmanlike manner shall constitute a
default of this Lease.
(d) At the time Lessee enters the Premises to perform the work required
of Lessee:
(1) All of Lessee's obligations under this Lease, except the
obligation to pay rent shall be in full force and effect.
(2) Lessee agrees to maintain heating, ventilating and air
conditioning in the Premises and to pay for the utilities (heat, gas, water and
electricity) which shall be furnished to the Premises from that time.
(3) Lessee shall maintain liability insurance in accordance with
Article 10 of this Lease.
(4) Lessee shall require Lessee's contractor(s) to maintain
Workmen's Compensation Insurance as required by law and public liability
insurance with limits equal to those set forth in Article 10. Lessee agrees to
indemnify, save, and hold harmless against any loss, liability injury or damage
to persons or property resulting from such work including the activities of
Lessee's contractor(s).
(5) The Premises shall be deemed to be in good and satisfactory
condition.
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(e) Lessee shall have no right to enter the Premises and to perform
Lessee's Work prior to Lessor's notice that the Premises are substantially
completed or that the commencement of Lessee's Work is required to allow Lessor
to complete its work, without Lessor's prior written consent. If Lessor does so
consent, Lessee shall comply with the directions of Lessor and shall not
interfere with any of Lessor's construction activities.
(f) Prior to the commencement of the Lease term, any work performed by
Lessee, or any fixtures or personal property moved onto the Premises, shall be
at Lessee's own risk. Neither Lessor nor Lessor's agents or contractors shall
be responsible to Lessee for damage or destruction of Lessee's Work or
property, including damage or destruction occasioned by Lessor's own
negligence. Lessee agrees to indemnify Lessor and hold Lessor harmless against
claims made with respect to damage or destruction of property of third persons
moved onto the Premises by Lessee or at Lessee's request.
(g) Notwithstanding anything herein to the contrary, should Lessor fail
to secure or obtain construction and permanent financing acceptable to Lessor
in Lessor's sole and absolute discretion within six (6) months after completion
of final plans and specifications for the Shopping Center, Lessor may so notify
Lessee in writing, and this Lease shall, at Lessor's option, thereupon cease
and terminate and each of the parties hereto shall be released and discharged
from any and all liability and responsibility hereunder. If Lessor can obtain
financing only upon the basis of modifications of the terms and provisions of
this Lease, then Lessor shall have the right to cancel this Lease if Lessee
refuses to approve in writing any such modifications within Ten (10) days after
Lessor's request therefor. If such right to cancel is exercised, this Lease
shall thereafter be null and void, any money or other security deposited
hereunder shall be returned to Lessee, and neither party shall have any
liability to the other by reason of such cancellation.
(h) Lessor reserves the right to add land to and/or withdraw land from
the Shopping Center and to reconfigure the Common Areas.
38. COMPLETION OF CONSTRUCTION
Lessor agrees to use its best efforts to complete the construction of the
building on or before May 1, 1998 and immediately thereafter deliver possession
of the Premises to Lessee. If possession is not so delivered by June 1, 1998
then, at Lessee's option, this Lease shall become void and of no force or
effect. Lessor agrees that adequate parking and access to the Premises will be
available by the aforementioned date.
39. LANDLORDS RIGHT TO RELOCATE
Lessor shall have the right to relocate Lessee within the Shopping Center
to another premises of reasonably similar size and shape under the same terms
and conditions as contained in the Lease together with all amendments and
modifications thereto. Lessor shall provide Lessee thirty (30) days prior
written notice of Lessor's intent to relocate Lessee. Lessor shall provide
finishes and improvements within the relocation premises similar to those
required to be provided by Lessor in the original Premises.
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40. ENVIRONMENTAL COMPLIANCE
Lessee shall, at its expense, comply with all applicable laws,
regulations, rules and orders, regardless of their effective date, including
without limitation those relating to health, safety, noise, environmental
protection, waste disposal and water and air quality. Lessee shall furnish
Lessor evidence satisfactory to Lessor of such compliance upon Lessor's
request. Should any discharge, leakage, spillage, emission, or pollution of any
type occur upon or from the Premises due to Lessee's use and occupancy thereof,
Lessee, at its expense, shall be obligated to clean the Premises to the
satisfaction of Lessor and any governmental body having jurisdiction thereover.
Lessee agrees to indemnify, hold harmless and defend Lessor against all
liability, cost, and expense including without limitation any fines, penalties,
judgments, litigation costs and attorney's fees incurred by Lessor as a result
of Lessee's breach of this Article, or as a result of any such discharge,
leakage, spillage emission or pollution, regardless of whether such liability,
cost or expense arises during or after the term of this Lease. Lessee shall pay
all amounts due Lessor hereunder as additional rent upon Lessor's demand.
Signed, sealed and delivered:
LESSOR: CEDAR HILLS INVESTORS, LLC, a LESSEE: South Financial Corporation
Florida Limited Liability a Florida Corporation
Company
By: /s/ ILLEGIBLE By: /s/ ILLEGIBLE
------------------------------- -------------------------------
Its: Manager Its: President
------------------------------- -------------------------------
Witness: /s/ Lyra B. Watkins Witness: /s/ ILLEGIBLE
--------------------------- ---------------------------
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EXHIBIT 10.56
LEASE AGREEMENT
----------------------------
THIS LEASE AGREEMENT (hereinafter sometimes referred to as this "Lease") is
made and entered into as of the 26 day of June, 1998, by and between WINCO II
LP, a Georgia limited partnership (herein sometimes referred to as to
"Landlord") and Boomershine-Pontiac-Buick-GMC, Inc. (herein sometimes referred
to as "Tenant").
STATEMENT OF FACT
On or about February 7, 1996, the parties entered into a triple net lease
of the Property (Article 1.2 below is hereby incorporated by reference herein).
The lease of February 7, 1996 provided for an approximate ten year term, with
no extension options, and an expiration date of March 1, 2006, with equal
monthly lease payments of Ten Thousand, Nine Hundred Dollars ($10,900.00).
Neither party is able to locate the aforementioned lease or a copy thereof.
Accordingly, the parties have caused this Lease to be drafted and executed as a
replacement lease for the February 7, 1996 lease.
For valuable consideration, Landlord and Tenant, intending to be legally
bound, hereby agree with each other as follows:
ARTICLE I - DEFINITIONS AND FUNDAMENTAL PROVISIONS
The following terms shall have the meanings set forth below when used in
this Lease, except as may otherwise be specifically provided:
1.1 Addresses:
Landlord: 2150 Cobb Parkway, Smyrna, Georgia 30080
Tenant: 2150 Cobb Parkway, Smyrna, Georgia 30080
or such other address or addresses as a party may designate by written notice
to the other party.
1.2 Property: That certain tract or parcel of land located in Land Lots
733, 779 and 780, 17th District, 2nd Section, of Cobb County, Georgia, which is
more particularly described and/or depicted on Exhibit A, attached hereto and by
this reference made a part hereof (the "Property").
1.3 Premises: The Property and the improvements now or hereafter thereon.
1.4 Lease Year: Each Lease Year shall be a period of twelve (12)
consecutive calendar months. The first Lease Year shall commence February 7,
1996, (the "Commencement Date"), and end at the end of the twelfth (12th) full
calendar month thereafter.
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1.5 Basic Rent: Tenant agrees to pay as "Basic Rent" the amounts, as
adjusted, as hereinafter described, in strict accordance with the terms and
provisions of Article III hereof, as follows:
Monthly Basic Rent for the period from the Commencement Date through
the Tenth (10th) Lease Year shall be Ten Thousand, Nine Hundred Dollars
($10,900.00).
1.6 Permitted Use. The Premises shall be used for the operation of an
automobile dealership, selling primarily new automobiles, together, at Tenant's
election, with such operations and services as are ancillary and integrally
related to the operation of an automobile dealership (for example, car leasing
operations and/or automobile repair shop), provided Tenant shall, at all times,
continue as its primary business at the Premises a new car dealership, and for
no other purpose, whatsoever.
1.7 Rent. "Rent" shall mean and include Basic Rent and all other amounts
and charges payable by Tenant under any provision of this Lease. Sums other
than Basic Rent that are designated as "Rent" or "Additional Rent" (or any
similar term indicating rent or rental) are so designated solely for the
purpose of enabling Landlord to enforce its rights hereunder, and Landlord
shall have the same remedies for Tenant's failure to pay same as for
non-payment of Basic Rent. Such sums shall not be deemed rent for purposes of
computing taxes or for governmental regulations thereon.
1.8 Term. Ten (10) Lease Years (being sometimes herein referred to as the
"Initial Term") to commence on the Commencement Date.
1.9 Memorandum of Lease. Tenant shall not record or permit the recording
of this Lease without Landlord's written consent. At Landlord's request, Tenant
shall execute and deliver a written statement in recordable form, identifying
the parties hereto and the Property, specifying the Commencement Date and
termination date of the Lease Term and the Permitted Use, and incorporating
this Lease by reference.
1.10 Net Lease. This Lease is to be absolutely net to Landlord. Tenant
shall pay for all expenses, costs, impositions, taxes and other charges imposed
upon or affecting the Premises during the Term, and Landlord shall have no
obligation to pay for any matter affecting the Premises during the Term, except
as may be explicitly set forth herein.
ARTICLE II - DEMISED PREMISES
2.1 Demise of Premises. Landlord hereby leases and demises to Tenant for
the Term and Permitted Use specified herein, and Tenant rents from Landlord the
Premises, subject to the terms and conditions herein contained, and all
encumbrances, easements, restrictions, mortgages, zoning laws and governmental
or other regulations affecting the Premises (such other encumbrances and other
matters sometimes collectively referred to herein as the "Encumbrances").
2.1 Quiet Enjoyment. Tenant, upon timely paying the Rent herein, reserved
and performing and observing all of the other terms, covenants and conditions
of this Lease, shall peaceably and
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quietly have, hold and enjoy the Property during the Term, without interference
by Landlord, subject to the terms of this Lease and the Encumbrances.
ARTICLE III - RENT AND OTHER CHARGES
3.1 Payment of Rent. During the Term, Tenant covenants and agrees to pay
to Landlord, in advance, at the place designated in Section 1.1 hereof, without
demand, deduction or set-off, all Rent as defined in Section 1.7 hereof.
3.2 Payment of Basic Rent. On the Commencement Date, and thereafter,
monthly Basic Rent shall be due and payable on or before the first (1st) day of
each and every calendar month during the Term, in advance, without demand,
deduction or set-off as set forth in Section 1.5 hereinabove.
3.3 Past Due Rent and Additional Rent. If Tenant shall fail to pay, when
the same is due and payable, any Rent or any Additional Rent, or amounts or
charges of any character whatsoever owed to Landlord, such unpaid amounts shall
bear interest from the due date thereof to the date of payment at the rate
which is the lesser of (i) eighteen percent (18%) per annum, or (ii) the
maximum interest rate permitted by law (the "Default Rate").
3.4 Payments on Behalf of Tenant. In case of any default by Tenant in the
payment of any amounts herein provided to be paid by Tenant, including, without
limitation, the procuring of insurance as hereinafter provided for, or in any
other payment required to be made by Tenant hereunder, Landlord, on behalf of
Tenant, may make such payment or payments, or procure any such insurance, and
Tenant covenants to reimburse and pay Landlord any amount paid or expended
immediately upon demand, with interest from the date of disbursement by
Landlord at the Default Rate.
3.5 Utilities. Tenant shall make application for, obtain, pay for, and be
solely responsible for all utilities required, used or consumed in the
Premises, including, but not limited to, gas, water (including water for
domestic uses and for fire protection), telephone, electricity, sewer service,
garbage collection services, or any similar service (herein sometimes
collectively referred to as the "Utility Services"). In the event that any
charge or assessment for any Utility Service supplied to the Premises, that has
or could become a lien on the Premises or any portion thereof or interest
therein, is not paid by Tenant to the utility supplier when due, then, the (10)
days after written notice to Tenant, Landlord may, but shall not be required
to, pay such charge for and on behalf of Tenant, with any such amount paid by
Landlord being repaid by Tenant to Landlord with interest at the Default Rate,
as Additional Rent, within ten (10) days after demand by Landlord. Landlord
shall have absolutely no obligation with respect to any Utility Service to the
Premises and shall not be liable for any interruptions or curtailment in
Utility Services whatsoever.
3.6 Taxes. Tenant shall be responsible for the timely payment of all
taxes, public charges and assessments, of whatsoever nature, directly or
indirectly assessed or imposed upon the land, buildings, equipment and
improvements constituting the Premises and the rents therefrom, including, but
not
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limited to, all real property taxes, rates, duties and assessments, local
improvement taxes, import charges or levies, whether general or special, that
are levied, charged or assessed against the Premises by any lawful taxing
authority, whether federal, state, county, municipal, school or otherwise
(other than income, inheritance and franchise taxes thereon) (the "Taxes").
Taxes for any partial tax period shall be prorated. If Landlord initially pays
the Taxes, Tenant shall reimburse Landlord therefor upon demand.
Tenant shall also promptly pay, when due, all taxes on its trade fixtures
and other personal property in or on the Premises.
ARTICLE IV - USE OF PREMISES
4.1 Tenant's Use. Tenant shall use the Premises solely for the Permitted
Use specified in Section 1.6, and for no other purpose whatsoever. Tenant shall
not vacate or abandon the Premises during the Term.
4.2 Legal Operation of Premises. Tenant shall not use, or suffer or
permit the Premises, or any part thereof, to be used for any purpose or use in
violation of any law, ordinance or regulation of any governmental authority, or
in any manner that will constitute a nuisance or an annoyance, or for any
hazardous purpose. Nothing contained in this Section 4.2 shall be construed to
interfere with Tenant's right to operate in the Premises for the uses and in
the manner set forth in Section 1.6 hereof, so long as they are lawful. In the
event, at any time during the Term of this Lease, any addition, alteration,
change or repair or other work of any nature, structural or otherwise, shall be
required or ordered or become necessary or account of any law, ordinance or
regulation of any governmental authority now in effect or hereafter adopted,
passed or promulgated, or on account of any other reason with respect to the
Premises, the entire expense thereof, regardless of when the same shall be
incurred or become due, shall be the liability of Tenant and in no event shall
Landlord be called upon to contribute thereto or do or pay for any work of any
nature whatsoever on or relating to the Premises. Tenant takes the Property
subject to all zoning regulations and ordinances now or hereafter in force.
4.3 Alterations to Premises. Except as described in Section 5.3
hereinbelow, Tenant shall not alter the exterior of the Premises, or make
interior structural changes or make any other changes or alterations to the
Premises without first obtaining Landlord's written approval for such
alterations, which approval shall not be unreasonably withheld or delayed. All
alterations shall remain upon the Premises and shall become Landlord's property
upon the expiration or other termination of this Lease; provided, however, that
Landlord may require any alteration or improvement made by Tenant without
Landlord's written consent to be removed by Tenant by written notice thereof
given to Tenant no later than sixty (60) days after the expiration or earlier
termination of the Term. There shall be no signs or any other equipment on the
roof of any of the Buildings or any other structure now or hereafter existing
on the Property. Notwithstanding the foregoing, Tenant shall be permitted,
without the requirement of Landlord's prior consent, to make interior,
cosmetic, non-structural alterations to the Premises; provided that: (i) the
value and structural integrity of the Premises are not
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decreased or diminished thereby; (ii) all such work is expeditiously completed
in a good and workmanlike fashion and in compliance with all applicable laws,
ordinances and regulations and in conformity with all provisions of this Lease;
and (iii) Tenant obtains lien waivers consistent with the provisions of Section
4.4 hereof.
4.4 Liens. Tenant will not create or permit to be created or to remain,
and will discharge, any lien (including, but not limited to, the liens of
mechanics, laborers or materialmen for work or materials alleged to be done or
furnished in connection with the Premises), encumbrance or other charge upon
the Premises or any part thereof. Landlord reserves the right to enter the
Premises to post and keep posted notice of non-responsibility for any such lien.
ARTICLE V - REPAIRS AND MAINTENANCE
5.1 No Maintenance or Repair by Landlord. Landlord shall have no
obligation to improve, alter, replace, maintain and/or repair the Premises, or
any part thereof. Landlord may inspect the Premises at all reasonable times to
determine whether Tenant has fulfilled its maintenance and repair obligations
under this Lease and to otherwise inspect or exhibit the Premises; provided,
however, that Landlord shall never be obligated to inspect the Premises for any
reason.
5.2 Maintenance, Repair and Replacement Obligations of Tenant. Tenant
shall, at Tenant's expense, at all times keep and maintain the entire Premises
in good repair and condition, including without limitation, the diligent and
prompt repair of the roof and all exterior supporting walls, foundations, HVAC,
plumbing, electrical and other systems, rain gutters and spouting and all
esthetic aspects of the Premises and shall also keep the non-structural
portions of the Premises (specifically including the storefront, windows and
automatic or other doors of the Premises) in good order, condition, and repair,
clean, sanitary and safe, including the replacement of equipment, fixtures and
all broken glass (with glass of the same size and quality). Tenant shall also,
during the Term hereof, maintain in good condition and repair the non-building
areas of the Property, including the sidewalks, driveways, landscaped areas and
parking areas, and including patching, striping, cleaning, sweeping and other
maintenance. In the event Tenant fails to perform any of its obligations as
required hereunder, Landlord may (but shall not be required to) perform and
satisfy same, and Tenant hereby agrees to reimburse Landlord, as Additional
Rent, for the cost thereof, together with interest at the Default Rate,
promptly upon demand. The parties agree that it shall be Tenant's sole
responsibility at all times during the Term of this Lease to maintain the
Premises in structurally sound, leak-free condition so that the Premises shall
be maintained at all times as if operations therein were to continue beyond the
expiration of the Term, and so that all normal maintenance and repair during
the Term shall be completed when the Premises are surrendered to Landlord.
5.3 Improvements. Landlord and Tenant acknowledge that Tenant may make
certain improvements to the Buildings, from time to time ("Tenant's
Improvements"), as provided or required pursuant to the terms of this Lease.
Tenant's Improvements shall be subject to all of the terms of this Lease and
must first be approved by Landlord in writing, which approval shall not be
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unreasonably withheld or delayed. All such Tenant's Improvements which are
fixtures shall become the property of Landlord upon the installation thereof.
5.4 As-Is Lease. Tenant acknowledges that Tenant is leasing the
Premises "as is" without any warranty or representation and that Landlord has
not made, and is not hereby making, any warranties or representations
pertaining to the physical condition of the Premises, any part thereof or any
improvements thereon.
ARTICLE VI - ACCESS TO PREMISES
Tenant agrees that Landlord, its agents, employees or servants or any person
authorized by Landlord may enter the Premises, at reasonable times, or at any
time in case of an emergency, to inspect the condition of same, to cure defaults
of Tenant as provided for herein, and to exhibit the same to prospective
tenants, purchasers, mortgagees or others interested in the Premises. Such
entry, cure or exhibition shall not constitute an eviction of Tenant, in whole
or in part, Landlord agreeing to employ its reasonable efforts in attempting to
minimize any interruption to the business operations of Tenant resulting from
Landlord's (or its designated representatives') entry to the Premises. Nothing
herein contained, however, shall be deemed or construed to impose upon Landlord
any obligation or liability, whatsoever, for the inspection, care, supervision,
repair, improvement, addition, change or alteration of the Premises.
ARTICLE VII - INSURANCE AND INDEMNIFICATION
7.1 Tenant Liability Insurance. Tenant shall maintain, at its sole
expense, during the Term hereof, General Commercial Liability and General
Garage Liability insurance, insuring both Tenant and Landlord covering the
Premises with single limit coverage of at least One Million Dollars
($1,000,000) per occurrence and not less than Two Million Dollars ($2,000,000)
in the aggregate in companies licensed and in good standing in the State of
Georgia in the joint names of Landlord and Tenant. Tenant shall further maintain
at its sole expense a commercial umbrella policy with single limit coverage of
at least Five Million Dollars ($5,000,000) per occurrence and not less than
Five Million Dollars ($5,000,000) in the aggregate in companies licensed and in
good standing in the State of Georgia in the joint names of Landlord and
Tenant. Tenant shall keep in force "All-Risk" or Special Form Coverage Insurance
for the full replacement value of all of Tenant's personal property within the
Premises and on the Property, including, but not limited to, fixtures,
inventory, trade fixtures, furnishings and other personal property. In
addition, Tenant shall keep in force workers compensation or similar insurance
to the extent required by law. Finally, Tenant shall maintain, at its sole cost
and expense, Special Form ("All-Risk") property insurance covering the
Buildings for the full replacement cost thereof (excluding footings and
foundations), providing protection against perils included in the Special Form
("All-Risk") insurance policy. All insurance required under this Section 7.1
shall be written by companies rated A or better in the most current edition of
Best's Insurance Report. Tenant will cause such insurance policies to name
Landlord and its agents (and, at Landlord's election, any lender whose loan is
secured by the Premises (a "mortgagee")) as named insured thereunder with
respect to liability policies and request that the insurer waives all right of
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recovery by way of subrogation against Landlord (and, at Landlord's election,
any mortgagees) in connection with any loss or damage covered by the "All-Risk"
or Special Form Policy in accordance with the provisions of Section 7.2 hereof.
Tenant shall deliver said policies of liability, workers compensation and
all-risk insurance or certificates thereof to Landlord at or prior to its
execution of this Lease, and thereafter from time to time at the reasonable
request of Landlord. Should Tenant fail to effect the insurance called for in
this Lease, Landlord may, but shall not be obligated to, procure said insurance
and pay the requisite premiums, in which event, Tenant shall promptly pay all
sums so expended by Landlord as Additional Rent following invoice. Each insurer
under the policies required hereunder shall agree by endorsement on the policy
issued by it, or by independent instrument furnished to Landlord that it will
give Landlord at least thirty (30) days prior written notice before the policy
or policies in question shall be altered or canceled. Tenant's property
insurance policy shall insure Landlord and any mortgagee, as their interests
may appear.
7.2 Waiver of Subrogation. Tenant hereby releases Landlord and anyone
claiming through or under Landlord by way of subrogation from any and all
liability for any loss of or damage to property, regardless of whether caused
by the negligence or fault of Landlord, to the extent same is required to be
insured pursuant to the requirements of this Lease. In addition, Tenant shall
request each such insurance policy carried by it insuring the Buildings or
Tenant's personal property therein (and including the insurance coverages
required in Section 7.1 hereinabove) to be written to provide that the insurer
waives the all rights of recovery by way of subrogation against Landlord in
connection with any loss or damage covered by the policy.
7.3 Indemnification and Release. Tenant hereby agrees to indemnify,
protect, defend and hold Landlord harmless from any and all claims, damages,
liabilities or expenses (including, without limitation, attorney's fees and
other costs of legal representation) (collectively "Claims") arising out of (i)
any and all claims by third parties arising from any breach or default in the
performance of any obligation of Tenant hereunder and (ii) any act, omission or
negligence of Tenant, its agents or employees on or about the Premises or
otherwise in connection with this Lease. Tenant further releases Landlord from
liability for any damages sustained by Tenant, or any other person claiming by,
through or under Tenant, due to the Premises or any part thereof or any
appurtenances thereto being or becoming out of repair or due to the happening
of any accident, including, but not limited to, any damage caused by water,
snow, ice, windstorm, tornado, gas, steam, electrical wiring, sprinkler system,
plumbing, heating and air conditioning apparatus. Notwithstanding the
foregoing, Tenant's indemnification pursuant to this Section 7.3 shall not
apply to any Claims arising solely as a result of the willful acts or
negligence of Landlord, or its agents, representatives, invitees, employees or
contractors. Landlord shall not be liable for any damage to, or loss of,
Tenant's personal property, inventory, fixtures or improvements from any cause
whatsoever.
ARTICLE VIII - CASUALTY AND CONDEMNATION
8.1 Fire, Explosion or Other Casualty. In the event the Premises are
damaged by fire, explosion or any other casualty, except as otherwise provided
herein, the damage shall be repaired by Tenant, said repairs to be
substantially completed within two hundred seventy (270) days after the
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casualty causing damage has occurred, subject to force majeure events beyond
Tenant's reasonable control.
In the event the Premises shall be damaged or destroyed to the extent of
seventy-five percent (75%) or more of the total square footage of all Buildings
and other improvements on the Premises (hereinafter, a "Casualty"), and such
Casualty shall occur after the first five (5) Lease Years of the Term of the
Lease, then and in such event, Tenant may elect by written notice to Landlord
delivered within thirty (30) days after such a Casualty either to repair or
rebuild the Premises, as aforesaid, or to terminate this Lease, effective as of
the date Tenant's notice is delivered to Landlord. If Tenant elects to
terminate the Lease pursuant to this Section 8.1, then Tenant shall direct its
insurance company(s) to deliver directly to Landlord all insurance proceeds to
be paid for or in connection with said Casualty; provided, in no event shall
the amount of such insurance proceeds payable to Landlord be less than the full
replacement value of all such improvements which have been so damaged or
destroyed, as reasonably determined by the insurance company's adjuster. If the
insurance proceeds are less than the full replacement value as aforesaid,
Tenant shall pay such deficiency to Landlord upon demand. If Tenant fails to
deliver notice of its election to Landlord within the thirty (30) day period
referenced above, Tenant shall be deemed to have elected to repair or rebuild
the Premises and the Lease shall remain in full force and effect.
If this Lease is not terminated pursuant to the preceding paragraph, then
Tenant shall restore and repair the Buildings and other improvements in an
expeditious manner. If Tenant purchases, at its sole option, rent insurance to
compensate Landlord for any lost rents as a result of damage or destruction to
the Premises, then Basic Rent (and other Rent) shall abate during any period
following damage to the Premises in a fair and equitable fashion according to
the proportion of the Premises that cannot reasonably be utilized by Tenant,
provided that the amount of such abatement shall not exceed the rent insurance
proceeds actually received by Landlord with respect thereto. Notwithstanding
the provisions of this Section 8.1, Tenant shall be the owner of its trade
fixtures and shall be entitled to any insurance proceeds attributable to said
trade fixtures.
8.2 Condemnation. If the whole of the Premises, or so much thereof as
to render the balance unusable by Tenant, shall be taken under power of
eminent domain, or otherwise transferred in lieu thereof, this Lease shall
automatically terminate as of the date possession is taken by the condemning
authority. No award for any total or partial taking of any real property
interest in or to the Premises shall be apportioned, and Tenant hereby
unconditionally assigns to Landlord any award which may be made for real
property interests in such taking or condemnation. In the event of a partial
taking, which does not result in the termination of this Lease, Basic Rent
shall be apportioned according to the part of the Buildings remaining usable by
Tenant.
8.3 Condemnation Award. All compensation awarded or paid for any
taking or acquiring under the power or threat or eminent domain, whether for
the whole or part of the Premises, shall be the property of Landlord, and
Tenant hereby assigns to Landlord all of Tenant's right, title and interest in
any to any such award. Notwithstanding the foregoing, Tenant shall be entitled
to claim, prove and receive in the condemnation proceeding or by separate
action, such awards as may be
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allowed for loss of lease, moving expense, fixtures and other equipment
installed by it, but only if such awards shall be made by the condemnation
court in addition to the award made by it for the land and the Buildings or
part thereof so taken.
ARTICLE IX - ASSIGNMENT AND SUBLETTING
9.1 Assignment and Subletting. Tenant's interest in the Premises shall
be limited to the use and occupancy thereof in accordance with the provisions
hereof and shall be non-transferable without Landlord's prior written consent,
which consent shall not be unreasonably withheld, conditioned or delayed. Any
attempts by Tenant to assign its interest in the Lease, or to sublet the
Premises in whole or in part, or to sell, assign, lien, encumber or in any
manner transfer this Lease or any interest therein, without Landlord's prior
written consent, shall constitute a default hereunder, as shall any attempt by
Tenant to assign or delegate the management or to permit the use or occupancy
of the Property or the Premises or any part thereof by anyone other than
Tenant. Landlord and Tenant acknowledge and agree that the foregoing provisions
have been freely negotiated by the parties hereto and that Landlord would not
have entered into this Lease without Tenant's consent to the terms of this
Section 9.1. Any attempt by Tenant to assign this Lease or to sublet all or any
portion of the Premises, to encumber same, or to in any manner transfer, convey
or assign Tenant's interest therein without Landlord's prior written consent
shall be void ab initio.
Notwithstanding anything contained herein to the contrary, Tenant may,
without the prior consent of Landlord, (i) assign this Lease or sublet the
Premises to any wholly-owned subsidiary of Tenant, to the parent corporation of
Tenant, or to a wholly-owned subsidiary of the parent corporation of Tenant, or
(ii) transfer its capital stock to the parent corporation of Tenant, or to a
wholly-owned subsidiary of Tenant or of Tenant's parent corporation; provided
that, in the case of any such transfer, all of the assets held by Tenant prior
to such transfer remain or become assets of the continuing corporation. If
Tenant survives as an entity after such assignment or sublease, Tenant shall
remain fully and primarily liable for performance of all obligations of the
tenant under the Lease and shall not be released as a result thereof.
9.2 Change of Control. In furtherance of the provisions of Section 9.1
hereof, if Tenant is a partnership, limited liability company, corporation or
banking association and if the person or persons who own a majority of its
voting shares or interests at the time of the execution hereof cease to own a
majority of such shares or interests at any time hereafter (except as a result
of transfers by gift, bequest or inheritance by or among immediate family
members), Tenant shall so notify Landlord. In the event of such change of
ownership, regardless of whether Tenant has notified Landlord thereof, Landlord
may terminate this Lease by notice to Tenant effective sixty (60) day from the
date of such notice from Tenant, or the date on which Landlord first has
knowledge of such transfer, whichever shall first occur. Notwithstanding the
foregoing, the merger of Lessee with Sunbelt Automotive Group, Inc. shall not
constitute a change of control under this Lease.
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ARTICLE X - SUCCESSION TO LANDLORD'S INTEREST
10.1 Attornment. Tenant shall attorn and be bound to any of Landlord's
successors under all the terms, covenants and conditions of this Lease for the
balance of the remaining term.
10.2 Subordination
(a) This Lease shall be subordinate to the lien of any mortgage or
security deed or the lien resulting from any other method of financing or
refinancing now or hereafter in force against the Premises or any portion
thereof, and to any and all advances to be made under such security
instruments, and all renewals, modifications, extensions, consolidations
and replacements thereof. The aforesaid provisions shall be self-operative
and no further instrument of subordination shall be required to evidence
such subordination. Tenant covenants and agrees to execute and deliver,
upon demand, such further instrument or instruments subordinating this
Lease on the foregoing basis to the lien of any such security instruments
as shall be desired by Landlord and any mortgagees or proposed mortgagees.
(b) Notwithstanding anything to the contrary set forth in subsection
(a) above, any mortgagee may at any time subordinate its mortgage to this
Lease, without Tenant's consent, by execution of a written document
subordinating such mortgage to this Lease to the extent set forth therein
and thereupon this Lease shall be deemed prior to such mortgage to the
extent set forth in such written document, without regard to their
respective dates of execution, delivery and/or recording. In that event, to
the extent set forth in such written document, such mortgagee shall have
the same rights with respect to this Lease as though this Lease had been
executed and a memorandum thereof recorded prior to the execution, delivery
and recording of the mortgage and as though this Lease had been assigned to
such mortgagee.
10.3 Estoppel Certificate. Within ten (10) days after request therefor by
Landlord, or in the event that upon any sale, assignment or hypothecation of the
Premises and/or the land thereunder by Landlord an estoppel certificate shall be
required from Tenant, Tenant agrees to deliver in recordable form, a
certificate to any proposed mortgagee or purchaser, or to Landlord, certifying
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that the same is in full force and effect as modified and
stating the modifications), that there are no defenses or offsets thereto (or
stating those claimed by Tenant) and the dates to which Basic Rent and other
charges have been paid, and such other matters as Landlord may reasonably
require.
ARTICLE XI - DEFAULT, REMEDIES AND BANKRUPTCY
11.1 Default of Tenant. In the event that Tenant (a) fails to pay all or
any portion of any sum due from Tenant hereunder or pursuant to any exhibit
hereto when due and such failure to pay continues for more than five (5)
business days after receipt of written notice from Landlord (provided that such
five (5) day grace period shall not be available more than three (3) times in
any twelve (12) month period; (b) fails to perform any other terms, covenants
and conditions hereof, or is otherwise
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<PAGE> 11
in breach of any of Tenant's obligations hereunder or commits any
other act or omission in violation of this Lease and such failure to perform or
violation continues for more than thirty (30) days after receipt of written
notice from Landlord (provided such thirty (30) day grace period shall not be
available more than three (3) times in any twelve (12) month period); (c)
becomes bankrupt, insolvent or files any debtor proceeding; takes or has taken
against Tenant any petition of bankruptcy; takes action or has action taken
against Tenant for the appointment of a receiver for all or a portion of
Tenant's assets, files a petition for a corporate reorganization; makes an
assignment for the benefit of creditors, or if in any other manner Tenant's
interest hereunder shall pass to another by operation of law (any or all of the
occurrences in this subsection 11.l(c) shall be deemed a default on account of
bankruptcy for the purposes hereof and such default on account of bankruptcy
shall apply to and include any guarantor of this Lease); and any such petition,
assignment or proceeding is not dismissed within sixty (60) days of filing,
assignment or institution of proceedings; or (d) commits waste to the Premises
or removes any betterments or improvements thereof; then Tenant shall be in
default hereunder and Landlord may, at its option and without further notice to
Tenant, terminate Tenant's right to possession of the Premises and without
terminating this Lease re-enter and resume possession of the Premises and/or
declare this Lease terminated, and may, thereupon, in either event remove all
persons and property from the Premises with or without resort process of any
court, either by force or otherwise. Notwithstanding such re-entry by Landlord,
Tenant hereby indemnifies, protects, defends and holds Landlord harmless from
any and all loss or damage which Landlord may incur by reason of the termination
of this Lease and/or Tenant's right to possession hereunder. In no event shall
Landlord's termination of this Lease and/or Tenant's right of possession of the
Premises abrogate Tenant's agreement to pay Rent and additional charges due
hereunder for the full term hereof. Following re-entry of the Premises by
Landlord, Tenant shall promptly pay all arrearages then due and overdue and
shall continue to pay all such Rent and additional charges as same become due
under the terms of this Lease, together with all other expenses incurred by
Landlord in regaining possession until such time, if any, as Landlord relets
same and the Premises are occupied by such successor. Upon reletting, sums
received from such new lessee by Landlord shall be applied first to payment of
costs incident to reletting; any excess shall then be applied to any
indebtedness to Landlord from Tenant other than for Basic Rent; and any excess
shall then be applied to the payment of Basic Rent due and unpaid. The balance,
if any, shall be applied against the deficiency between all amounts received
hereunder and sums to be received by Landlord on reletting, which deficiency
Tenant shall pay to Landlord in full, within five (5) days of notice of same
from Landlord. Tenant shall have no right to any proceeds of reletting that
remain following application of same in the manner set forth herein.
11.2 Rights and Remedies. The various rights and remedies herein
granted to Landlord shall be cumulative and in addition to any others Landlord
may be entitled to by law or in equity, and the exercise of one or more rights
or remedies shall not impair Landlord's right to exercise any other right or
remedy. All such rights and remedies may be exercised and enforced concurrently
or consecutively, and whenever and as often as Landlord shall deem desirable.
The failure of Landlord to insist upon strict performance by Tenant of any of
the covenants, conditions and agreements of this Lease shall not be deemed a
waiver of any of said rights and remedies concerning any subsequent or
continuing breach or default by Tenant of any of the covenants, conditions, or
agreements of this
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<PAGE> 12
Lease. No surrender of the Premises shall be effected by Landlord's acceptance
of Rent or by any other means whatsoever unless the same be evidenced by
Landlord's written acceptance of such as a surrender. In all events, Landlord
shall have the right upon notice to Tenant to cure any breach by Tenant at
Tenant's sole cost and expense, and Tenant shall reimburse Landlord for such
expense upon demand. Tenant shall reimburse Landlord for attorney's fees and
other expenses incurred by Landlord under this Article XI.
11.3 Landlord's Default. If Tenant alleges a breach or default by
Landlord hereunder, Tenant shall provide Landlord (and any mortgagee of Landlord
of whom Tenant has notice) with written notice thereof and provide thirty (30)
days thereafter for Landlord or its mortgagee to cure same prior to exercising
any right or remedy Tenant may have for said breach or default.
11.4 Bankruptcy. If Landlord shall not be permitted to terminate this
Lease as hereinabove provided because of the provisions of Title 11 of the
United States Code relating to Bankruptcy, as amended ("Bankruptcy Code"), then
Tenant as a debtor in possession or any trustee for Tenant agrees promptly,
within no more than fifteen (15) days upon request by Landlord to the Bankruptcy
Court, to assume or reject this Lease and Tenant on behalf of itself, and any
trustee agrees not to seek or request any extension or adjournment of any
application to assume or reject this Lease by Landlord with such Court. In such
event, Tenant or any trustee for Tenant may only assume this Lease if (a) it
cures or provides adequate assurance that the trustees will promptly cure any
default hereunder, (b) it compensates or provides adequate assurance that Tenant
will promptly compensate Landlord for any actual pecuniary loss to Landlord
resulting from Tenant's defaults, and (c) it provides adequate assurance of
performance during the fully stated Term hereof of all of the terms, covenants
and provisions of this Lease to be performed by Tenant. In no event after the
assumption of this Lease shall any then-existing default remain uncured for a
period in excess of the earlier of ten (10) days or the time period set forth
herein. Adequate assurance of performance of this Lease as set forth hereinabove
shall include, without limitation, adequate assurance (1) of the source of Rent
reserved hereunder and (2) the assumption of this Lease will not breach any
provision hereunder.
ARTICLE XII - SURRENDER OF PREMISES
12.1 Surrender of Premises. At the expiration or earlier termination of
this Lease, Tenant shall surrender the Premises to Landlord broom clean and in
good condition, and in a condition which complies with all applicable laws,
reasonable wear and tear and insured casualty (for which Landlord receives the
proceeds) excepted. Tenant shall promptly remove Tenant's sign, personal
property and trade fixtures upon such expiration or termination and repair any
damage or disturbance to the Premises caused by the removal of any furniture,
trade fixtures or other personal property placed in the Premises. Tenant's
failure to remove all or part of Tenant's sign, personal property and trade
fixtures within ten (10) days after such expiration or termination shall be
deemed an abandonment to Landlord of such sign, personal property and trade
fixtures and, if Landlord elects to remove all or any part of said same, such
removal, including the cost of repairing any damage to the Premises caused by or
resulting from such removal, shall be paid by Tenant.
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12.2 Holding Over. Should Tenant, with Landlord's written consent, hold
over at the end of the Term of the Lease, Tenant shall become a tenant-at-will
and any such holding over shall not constitute an extension of this Lease.
During such holding over, Tenant shall pay Rent and other charges at the highest
monthly rate provided for herein, plus an additional fifty percent (50%) of the
Basic Rent in effect at the expiration of the Term hereof. If Tenant holds over
at the end of the Term of the Lease without Landlord's written consent, Tenant
shall be a tenant-at-sufferance.
ARTICLE XIII - MISCELLANEOUS
13.1 Notices. Notices and demands required or permitted to be given
hereunder may be given by personal delivery to the addresses designated in
Section 1.1 hereinabove (including courier and expedited delivery services) to
either party or any officer or other representative of the party to be notified,
or may be sent by certified mail, return receipt requested, addressed, postage
prepaid, to said addresses. Mailed notices and demands shall be deemed to have
been given upon the date of the executed return receipt (provided that (i) if
any party shall refuse delivery or (ii) if delivery fails because of an address
change that has not been received as required by this Section 13.1, then, in
either of such events, notices shall be deemed given when mailed), or, if made
by personal, courier or other expedited delivery to the addresses designated in
Section 1.1. hereinabove, then upon the delivery. Notice of change of address
for notices shall not be deemed made until received or rejected. Unless
otherwise specified by Landlord, the payment of Rent shall be to the first
address of Landlord as set forth in Section 1.1 herein.
13.2 Successors and Assigns. All covenants, promises, conditions,
representations and agreements herein contained shall be binding upon, apply and
inure to the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns.
13.3 Entire Agreement. This Lease, the Environmental Addendum and the
Exhibits attached hereto constitute the sole and exclusive agreement between the
parties with respect to the Premises. No amendments, modifications of or
supplements to this Lease shall be effective unless in writing and executed by
Landlord and Tenant.
13.4 Time is of the Essence. The time of the performance of all of the
covenants, conditions and agreements of this Lease is of the essence of this
Lease.
13.5 Relationship of Parties: Usufruct. The parties hereto shall always be
as Landlord and Tenant and nothing herein shall be construed so as to constitute
a joint venture or partnership between Landlord and Tenant. This Lease creates
a usufruct not subject to levy and sale and no estate in or with respect to the
Premises, or any portion thereof, is granted or conveyed hereby.
13.6 Litigation. It is mutually agreed that in the event Landlord
commences any summary proceeding for non-payment of any Rent, Tenant will not
interpose any non-compulsory counterclaim of whatever nature or description in
any such proceeding. Landlord and Tenant hereby waive the
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<PAGE> 14
right to a trial by jury in connection with any dispute arising out of this
Lease or the use or possession of the Premises by Tenant.
13.7 Governing Law. This Lease shall be construed under the laws of
the State of Georgia.
13.8 Partial Invalidity. If any provision of this Lease or the
application thereof to any person or circumstance shall to any extent be held
invalid, then the remainder of this Lease or the application of such provision
to persons or circumstances other than those as to which it is held invalid
shall not be affected thereby, and each provision of this Lease shall be valid
and enforced to the fullest extent permitted by law.
13.9 Submission of Lease. The submission of this Lease for
examination does not constitute an offer to lease, or a reservation of or option
for the Property, and this Lease shall be effective only upon execution and
delivery thereof by Landlord and Tenant.
13.10 Interpretation. In interpreting this Lease in its entirety, the
printed provisions of this Lease and any additions written or typed thereon
shall be given equal weight, and there shall be no inference, by operation of
law or otherwise, that any provision of this Lease shall be construed against
either party hereto.
13.11 Broker. Landlord and Tenant hereby agree that, in connection
with this Lease, neither have dealt with any broker and other person or entity
entitled to any brokerage commission, fee or other compensation. Each party
shall indemnify, defend and hold harmless the other, their agents and legal
representatives against any fee, commission or other compensation due to any
person, firm or corporation claiming to have acted in said party's behalf.
13.12 Limitation of Liability. Landlord's liability to Tenant for
damages or otherwise with respect to the Lease shall be limited solely to and
recovered, if at all, solely from Landlord's interest in the Property. Landlord
shall, at any time and from time to time, have the absolute right to sell,
assign, pledge or otherwise transfer its interest in the Premises or this Lease.
Landlord shall be relieved of all its obligation and liability hereunder after
Landlord has conveyed the Premises and assigned this Lease to a successor
Landlord. Landlord may assign this Lease to an entity in connection with the
acquisition of the Premises, in which case Landlord will be released from all
liability hereunder.
13.13 Survival of Obligations. The provisions of this Lease with
respect to any obligation of Tenant to pay any sum in order to perform any act
required by this Lease after the expiration or other termination of this Lease
shall survive the expiration or other termination of this Lease.
13.14 Headings, Captions and References. The section captions
contained in this Lease are for convenience only and do not in any way limit or
amplify any term of provision hereof. The use of the terms "hereof,"
"hereunder" and "herein" shall refer to this Lease as a whole, inclusive of the
Exhibits, except when noted otherwise. The use of the masculine or neuter
genders herein shall
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include the masculine, feminine and neuter genders and the singular form shall
include the plural when the context so requires.
13.15 Attorneys' Fees. The unsuccessful party in any action or
proceeding shall pay for all costs, expenses and reasonable attorneys' fees
incurred by the prevailing party or its agents or both in enforcing the
covenants and agreements of this Lease. The term "prevailing party," as used
herein, shall include, without limitation, a party who obtains legal counsel and
brings an action against the other party by reason of the other party's breach
or default and obtains substantially the relief sought, whether by compromise,
settlement or judgment.
13.16 Hazardous Substances. SEE ENVIRONMENTAL ADDENDUM ATTACHED TO
THIS LEASE.
13.17 Waiver. The waiver by Landlord of any breach of any term,
covenant or condition herein contained shall not be deemed to be a waiver of
such term, covenant or condition or any subsequent breach of the same or any
other term, covenant or condition herein contained. The subsequent acceptance
of Rent hereunder by Landlord shall not be deemed to be a waiver of any
proceeding breach by Tenant of any term, covenant or condition of this Lease,
other than the failure of Tenant to pay the particular Rent so accepted,
regardless of Landlord's knowledge of such preceding breach at the time of
acceptance of such Rent. No covenant, term or condition of this Lease shall be
deemed to have been waived by Landlord, unless such waiver be in writing by
Landlord and delivered to Tenant.
13.18 Accord and Satisfaction. No payment by Tenant or receipt by
Landlord of a lesser amount than the Rent herein stipulated shall be deemed to
be other than on account of the earliest stipulated Rent, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as Rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such Rent or pursue any other remedy provided in this Lease.
13.19 Tenant Defined, Use of Pronoun. The word "Tenant" shall be
deemed and taken to mean each and every person or party mentioned as a Tenant
herein, be the same one or more; and if there shall be more than one Tenant, any
notice required or permitted by the terms of this Lease may be given by or to
anyone thereof, and shall have the same force and effect as if given by or to
all thereof. The use of the neuter singular pronoun to refer to Landlord or
Tenant shall be deemed a proper reference even though Landlord or Tenant may be
an individual, a corporation, or a group of two or more individuals or
corporations. The necessary grammatical changes required to make the provisions
of this Lease apply in the plural sense where this is more than one Landlord or
Tenant and to either corporations, associations, partnerships or individuals,
males or females, shall, in all instances, be assumed as though in each case
fully expressed.
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13.20 Covenant to Operate. Commencing on the Commencement Date, and
thereafter for the balance of the Term, Tenant hereby covenants that it shall
continuously occupy and use the Premises solely for conducting the Permitted
Use, as defined herein.
IN WITNESS WHEREOF, this Lease has been executed under seal as of the day
and year first above written.
LANDLORD: WINCO II LP, a Georgia limited partnership, by its
two (2) sole general partners
/s/ ILLEGIBLE By: /s/ Walter M. Boomershine, Jr.
- -------------------- ----------------------------------------------
Witness Walter M. Boomershine, Jr., General Partner
By:
----------------------------------------------
Winifred F. Boomershine, General Partner
TENANT: BOOMERSHINE AUTOMOTIVE GROUP, INC.
By: /s/ ILLEGIBLE
- -------------------- ----------------------------------------------
Witness
Its:
-----------------------------------------
Attest:
-----------------------------------------
Its:
-----------------------------------------
(CORPORATE SEAL)
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<PAGE> 1
EXHIBIT 10.57
LEASE
BY AND BETWEEN
ALAN K. ARNOLD, as Lessor
AND
WADE FORD, INC., as Lessee
AND
SUNBELT AUTOMOTIVE GROUP, INC., as Guarantor
1. PARTIES. This Lease is made this 2nd day of June, 1998, by and among
Alan K. Arnold, individually, a Georgia resident, (herein called "Lessor"), Wade
Ford, Inc., a Georgia corporation (herein called "Lessee") and Sunbelt
Automotive Group, Inc., a Georgia corporation (herein called "Guarantor").
2. PREMISES. Lessor hereby leases to Lessee and Lessee leases from Lessor,
upon all of the conditions set forth herein, that certain real property situated
in Cobb County, Georgia, commonly known as 3860 South Cobb Drive, Smyrna,
Georgia 30080 and more particularly described as in Exhibit "A" attached hereto
and made a part hereof. Said real property, including the land and all
improvements thereon, is herein called the "Property."
3. TERM AND POSSESSION.
3.1 Initial Term. The initial term hereof shall be for ten (10) years
commencing on the Closing Date as that term is defined in the Agreement and Plan
of Merger and Reorganization dated November 21, 1997, as amended, among Wade
Ford, Inc., its shareholders, and Boomershine, et al ("Commencement Date") and
ending on the Tenth (10th) anniversary of the Closing Date, unless sooner
terminated pursuant to any provision hereof.
3.2 Extended Term(s). The Lessee shall have the option, to be exercised as
hereinafter provided, to extend the term of this Lease for two (2) successive
period(s) of five (5) years(s) each (each such period herein referred to as the
"Extended Term"), upon the condition that the Lease is in full force and effect
and there is no default in the performance of any condition hereof at the time
of exercise of the option and at the commencement of the Extended Term. Each
Extended Term shall be upon the same conditions and terms, and the rent
determined and payable, as provided in this Lease, except that there shall be no
privilege to extend the term beyond the expiration of the second Extended Term.
The Lessee shall exercise the option for an Extended Term by notifying the
Lessor in writing at least six (6) months prior to the expiration of the then
<PAGE> 2
current term. Upon such exercise, this Lease shall be deemed extended without
the execution of any further lease or other instrument. Any reference herein to
the lease term shall include, in addition to the Initial Term, the Extended
Term(s) as to which Lessee exercises its option.
4. RENT.
4.1 Rent Payment, Proration and Sales Taxes. All rental payments due
hereunder shall be paid without notice or demand, and without abatement,
deduction or setoff for any reason unless specifically provided herein. Rent for
any period during the term hereof which is for less than one month shall be a
pro rata portion of the monthly rent installment based on the number of days in
such period and the number of days in the month in question. Rent shall be
payable in lawful money of the United States to Lessor at the address stated
herein or to such other persons or at such other places as Lessor may designate
in writing. In addition, Lessee shall pay to Lessor all sales and use taxes
imposed by the State of Georgia or any other governmental authority from time to
time, upon said rent and any other charges hereunder upon which sales and use
taxes are imposed.
4.2 No Waiver. The acceptance by the Lessor of monies from the Lessee as
rent or other sums due shall not be an admission of the accuracy or the
sufficiency of the amount of such rent or other sums due nor shall it be deemed
a waiver by Lessor of any right or claim to additional or further rent or other
sums due.
4.3 Initial Rent. Beginning on the Closing Date and ending on the date
that is Twelve (12) months after the Closing Date (the "Lease Anniversary")
Lessee shall pay to Lessor as rent for the Property monthly payments of minimum
rent in the amount of Fifteen Thousand Dollars ($15,000.00), in advance, on or
before the first day of each month throughout the first lease year.
4.4 Rent Adjustments. Commencing at the beginning of the second lease
year, the base monthly rental for the one year period following the Lease
Anniversary shall equal one percent (1%) of the Fair Market Value (as
hereinafter defined) of the Property (the "Initial FMV Rent"); provided,
however, the Initial FMV Rent shall not be less than the base monthly rent then
in effect. On the second anniversary after the Closing Date, and on every second
anniversary thereafter, the base monthly rental for the Property shall increase
to an amount equal to the base monthly rental then in effect plus an amount
equal to the percentage increase in the Consumer Price Index ("C.P.I") published
from time to time by the United States Department of Labor [Bureau of Labor
Statistics]. The sum so calculated shall constitute the new monthly minimum rent
hereunder until the subsequent adjustment, but in no event shall any adjustment
reduce the minimum rent to an amount lower than the minimum rent payable for the
month immediately preceding the date of adjustment. No delay in establishing the
rent adjustment shall be a waiver of Lessor's right to later collect the
difference between the rental at the rate prior to adjustment, which shall
continue to be paid until the adjustment is established, and the rental rate
after adjustment. In the event the compilation and/or publication of the C.P.I.
shall be transferred to any other governmental department or bureau or agency or
shall be discontinued, then the index
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<PAGE> 3
most nearly the same as the C.P.I. shall be used to make such calculation. In
the event that Lessor and Lessee cannot agree on an alternative index, then the
matter shall be submitted for decision to the American Arbitration Association
in accordance with the then rules of said association and the decision of the
arbitrators shall be binding upon the parties. The cost of said arbitration
shall be paid equally by Lessor and Lessee. For purposes herein, the term "Fair
Market Value shall be the amount determined by the mutual agreement of the
Parties subsequent to a valuation of the Property by an appraiser selected and
paid for by Wade Ford, Inc. and a second appraiser selected and paid for by Mr.
Alan K. Arnold. If the Parties do not reach an agreement with respect to the
Fair Market Value, a third appraiser shall be selected by the two initial
appraisers and the third appraiser shall determine the Fair Market Value, and
said third appraiser's determination shall be binding on the Parties. The costs
of such a third appraiser, if any, shall be shared equally by the Parties.
5. USE.
5.1 Use. The Property shall be used and occupied only for an automobile
dealership and ancillary uses and for no other purpose. Without limiting the
foregoing, Lessee shall not use nor permit the use of the Property in any manner
that will tend to create waste or a nuisance.
5.2 Compliance with Law and Restrictions. Lessee shall, at Lessee's
expense, execute and comply with all statutes, ordinances, rules, orders,
regulations and requirements of the federal, state, county and city government,
and of any and all of their departments and bureaus, applicable to the Property,
as well as all covenants and restrictions of record, and other requirements in
effect during the term or any part thereof, which regulate the use by Lessee of
the Property. To the best of Lessor's knowledge, the Property is in good
operating condition, reasonable wear and tear excepted.
6. MAINTENANCE, REPAIRS AND ALTERATIONS.
6.1 Casualty and Condemnation. The specific provisions hereof relating to
repairs after casualty or condemnation shall take precedence over the terms of
this Section 6, but only to the extent in conflict herewith.
6.2 Maintenance. Lessee shall, at Lessee's sole cost and expense, maintain
the Property and all components thereof throughout the lease term, (including
maintenance of lighting fixtures) in good, safe and clean order, condition and
repair, including without limitation all plumbing, heating, air conditioning,
ventilating, and electrical facilities and all components thereof, serving the
Property, excepting (a) reasonable wear and tear, (b) loss or damage resulting
from a casualty loss and (c) loss or damage resulting from a condemnation. Upon
the occurrence and continuance of an Event of Default, and, if Lessee fails to
perform Lessee's obligations under this Section 6 or under any other section
hereof, Lessor may at Lessor's option enter upon the Property after ten (10)
days' prior written notice to Lessee (except in the case of emergency, in which
case no notice shall be required), perform such obligations on Lessee's behalf,
and put the Property in good, safe
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<PAGE> 4
and clean order, condition and repair, and the cost thereof together with
interest thereon at the Default Rate (as hereinafter defined), shall be due and
payable as additional rent to Lessor together with Lessee's next rental
installment. Lessee expressly waives the benefits of any statute now or
hereafter in effect which would otherwise afford Lessee the right to make
repairs at Lessor's expense or to terminate this Lease because of Lessor's
failure to keep the Property in good order, condition and repair.
6.3 Plate Glass. Lessee shall maintain all plate glass, if any, within
or on the perimeter of the Property.
6.4 Termination of Lease. On the last day of the term hereof, or on
any sooner termination, other than due from casualty loss, Lessee shall
surrender the Property to Lessor in the same condition as received, ordinary
wear and tear excepted, clean and free of debris. Lessee's moveable machinery,
furniture, fixtures and equipment, other than that which is affixed to the
Property, may be removed by Lessee upon expiration of the lease term. Lesse
shall repair all damage caused by this removal. Lessee shall repair any damage
to the Property occasioned by the installation or removal of its trade fixtures,
furnishings and equipment. Upon termination of this Lease for any cause
whatsoever, if Lessee fails to remove its effects, they shall be deemed
abandoned, and Lessor may, at its option, remove the same in any manner that the
Lessor shall choose, store them without liability to the Lessee for loss
thereof, and the Lessee agrees to pay the Lessor on demand any and all expenses
incurred in such removal, including court costs, attorney's fees and storage
charges for any length of time the same shall be in the Lessor's possession.
Lessee shall deliver all keys and combinations to locks within the Property to
Lessor upon termination of this Lease for any reason. Lessee's obligations to
perform under this provision shall survive the end of the lease term.
7. Alterations and Additions.
(a) Lessee shall not, without Lessor's prior written consent, make any
material alterations, improvements, additions, or Utility Installations (as
defined below) in, on, or to the Property. Upon Lessor's written consent, Lessor
may require Lessee to provide Lessor, at Lessee's sole cost and expense, a lien
and completion bond in an amount equal to the estimated cost of such
improvements, to insure Lessor against any liability for construction liens and
to insure completion of the work. Lessor may require that Lessee remove any or
all of said alterations, improvements, additions or Utility Installations at the
expiration of the term, and restore the Property to its prior condition. Should
Lessee make any alterations, improvements, additions or Utility Installations
without the prior approval of Lessor, in addition to all other remedies of
Lessor for Lessee's breach, Lessor may require that Lessee remove any or all of
the same. As used in this Section, the term "Utility Installation" shall mean,
air lines, power panels, electrical distribution systems, air conditioning and
plumbing, if any.
(b) Any material alteration, improvement, addition or Utility
Installation in or to the Property that Lessee shall desire to make shall be
presented to Lessor for approval in written
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form, with proposed detailed description or plans. If Lessor shall give its
consent, the consent shall be deemed conditioned upon Lessee acquiring all
necessary permits to do the work from appropriate governmental agencies, the
furnishing of a copy thereof to Lesser prior to the commencement of the work,
and the compliance by Lessee with all conditions of said permits.
(c) Lessee shall pay, when due, and hereby agrees to indemnify and hold
harmless Lessor for and from, all claims for labor or materials furnished or
alleged to have been furnished to or for Lessee, at or for use in the Property,
which claims are or may be secured by any construction lien against the Property
or any interest therein. Lessee shall give Lessor not less than ten (10) days'
notice prior to the commencement of any work on the Property which might give
rise to any such lien or claim of lien, and Lessor shall have the right to post
notices of non-responsibility in or on the Property as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense, defend itself and Lessor against
the same and shall pay and satisfy any adverse judgment that may be rendered
thereon before the enforcement thereof against the Lessor or the Property, upon
the condition that if Lessor shall require, Lessee shall furnish to Lessor a
surety bond satisfactory to Lessor in an amount equal to such contested lien,
claim or demand indemnifying Lessor against liability for the same and holding
the Property free from the effect of such lien, claim or demand. In addition,
Lessor may require Lessee to pay Lessor's attorney's fees and costs in
participating in such action if Lessor shall decide it is in its best interests
to do so.
(d) Unless Lessor requires their removal, all alterations, improvements,
additions and Utility Installations made on the Property shall become the
property of Lessor and remain upon and be surrendered with the Property at the
expiration of the lease term without compensation to Lessee.
7.1 Lessor's Interest Not Subject to Liens. The interest of Lessor shall
not be subject to liens for improvements made by Lessee, and Lessee agrees to
notify any contractor making such improvements of this provision.
8. INSURANCE; INDEMNITY.
8.1 Property Insurance - Lessee. Lessee shall at all times during the
term hereof, at its expense, maintain a policy or policies insuring the
Property against loss or damage by fire, explosion, and other hazards and
contingencies ("all risk," as such term is used in the insurance industry), and
plate glass insurance as required in the reasonable discretion of Lessor, in an
amount of not less than one hundred percent (100%) of the full replacement
value, as same may change from time to time.
8.2 Liability Insurance - Lessee. Lessee shall, at Lessee's sole expense,
obtain and keep in force during the term hereof a policy of bodily injury and
property damage insurance, insuring Lessee and Lessor against any liability
arising out of the use, occupancy or maintenance of the Property and the
parking areas, walkways, driveways, landscaped areas and other areas exterior
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to the Property and appurtenant thereto. Such insurance shall be in an amount
not less than One Million Dollars ($1,000,000.00) combined single limit, and
umbrella liability coverage for an additional Ten Million Dollars
($10,000,000.00). The policy shall insure performance by Lessee of the
indemnity provisions of this Section 8. The limits of said insurance shall not,
however, limit the liability of lessee hereunder. Upon demand, Lessee shall
provide Lessor, at Lessor's expense, with such increased amounts of insurance
as Lessor may reasonably require to afford Lessor adequate protection for risks
insured under this Section. Lessee, as a material part of the consideration to
Lessor, hereby assumes all risk of damage to property or injury to persons, in,
upon or about the Property arising from any cause and Lessee hereby waives all
claims in respect thereof against Lessor.
8.3 Employees Compensation - Lessee. Lessee shall maintain and keep in
force all employees' compensation insurance required with respect to Lessee's
operations of the Property under the laws of the State of Georgia, and such
other insurance as may be necessary to protect Lessor against any other
liability to person or property arising hereunder by operation of law, whether
such law is now in force or is adopted subsequent to the execution hereof.
8.4 Lessee's Default. Should Lessee fail to keep in effect and pay for
such insurance as it is in this section required to maintain, Lessor may do so,
in which event, the insurance premiums paid by Lessor, together with
interest thereon at the Default Rate from the date paid by Lessor, shall become
due and payable forthwith and failure of Lessee to pay same on demand shall
constitute a breach hereof.
8.5 Lessee's Compliance. Lessee shall not do or permit to be done
anything which shall invalidate the insurance policies referred to in Section
8. Lessee agrees to pay any increase in the amount of insurance premiums over
and above the rate now in force that may be caused by Lessee's use or occupancy
of the Property. In the event any increase in premiums is caused by the act or
omission of Lessee in violation of the terms hereof, payment by Lessee of such
increase shall not release Lessee from liability for such violation.
8.6 Insurance Policies. Insurance required hereunder shall be with good
and solvent insurance companies satisfactory to Lessor; in the absence of other
specific directions, such companies shall hold a "General Policyholders Rating"
of at least A minus, or such other rating as may be required by a lender having
a lien on the Property, as set forth in the most current issue of "Best's
Insurance Guide". All policies shall name Lessor as an additional insured.
Lessee shall deliver to Lessor copies of policies of insurance required to be
provided by Lessee under this Section 8 or certificates evidencing the
existence and amounts of such insurance and its compliance with the conditions
set forth in this Section 8. No such policy shall be cancelable or subject to
reduction of coverage or other modification except after thirty (30) days'
prior written notice to Lessor, and the interest of Lessor under such policies
shall not be affected by any default by Lessee under the provisions of such
policies. Lessee shall, at least thirty (30) days prior to the expiration of
such policies, furnish Lessor with renewals or "binders" thereof, or Lessor may
order such insurance and charge the cost thereof to Lessee, which amount shall
be payable by
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Lessee upon demand. If required by any mortgage encumbering the Property, the
mortgagee shall also be a named or additional insured and the terms of all
insurance policies shall comply with all other requirements of such mortgage.
8.7 Waiver of Subrogation. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other,
for loss or damage arising out of, or incident to the perils actually insured
against under this Section 8, which perils will occur in, on, or about the
Property, whether due to the negligence of Lessor or Lessee or their agents,
employees, contractors and/or invitees. Lessee and Lessor shall, upon obtaining
the policies of insurance required hereunder, give notice to the insurance
carrier or carriers that the foregoing mutual waiver of subrogation is
contained in this Lease.
8.8 Indemnity. Lessee shall indemnify and hold harmless Lessor from and
against any and all injury, expense, damages and claims arising from Lessee's
use of the Property, whether due to damage to the Property, claims for injury to
the person or property of any other Lessee of the building (if applicable) or
any other person rightfully in or about the Property, from the conduct of
Lessee's business or from any activity, work or things done, permitted or
suffered by Lessee or its agents, servants, employees, licensees, customers, or
invitees in or about the Property or elsewhere or consequent upon or arising
from Lessee's failure to comply with applicable laws, statutes, ordinances or
regulations, and Lessee shall further indemnify and hold harmless Lessor from
and against any and all such claims and from and against all costs, attorney's
fees, expenses and liabilities incurred in the investigation, handling or
defense of any such claim or any action or proceeding brought in connection
herewith by a third person or any governmental authority; and in case any action
or proceeding is brought against Lessor by reason of any such claim, Lessee upon
notice from Lessor shall defend the same at Lessee's expense by counsel
satisfactory to Lessor. This indemnity shall not require payment as a condition
precedent to recovery.
8.9 Exemption of Lessor from Liability. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or for damage to the goods, wares, merchandise or other property of
Lessee, Lessee's employees, invitees, customers, or any other person in or
about the Property, whether such damage or injury is caused by or results from
fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause, whether the
said damage or injury results from latent defects or other conditions arising
upon the Property or upon other portions of the building(s) of which the
Property is a part, or from other sources or places and regardless of whether
the cause of such damage or injury or the means of repairing the same is
inaccessible to Lessee. Lessor shall not be liable for any damages arising from
any act or neglect of any other Lessee of the building in which the Property is
located.
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9. DAMAGE OR DESTRUCTION.
9.1 Damage or Destruction. In the event that the Property should be
damaged or destroyed by fire, tornado or other casualty then Lessor shall within
sixty (60) days after the date of such damage, commence to rebuild or repair the
Property and shall proceed with reasonable diligence to restore the Property to
substantially the same condition in which it was immediately prior to the
happening of the casualty, except that Lessor shall not be required to rebuild,
repair or replace any part of the furniture, equipment, fixtures and other
improvements which may have been placed by Lessee or others within the Property,
and in any event Lessor's obligation to repair shall be limited to the extent
proceeds of insurance are available for such purpose. Lessor shall, unless such
damage is the result of any negligence or willful misconduct of Lessee or
Lessee's employees or invitees, allow Lessee a fair diminution of rent during
the time that the Property is unfit for occupancy. Notwithstanding any of the
foregoing, in the event any mortgagee, under a deed of trust, security agreement
or mortgage on the Property, should require that the insurance proceeds be used
to retire the mortgage debt, Lessor shall have no obligation to rebuild and this
Lease shall terminate upon notice to Lessee. Any insurance which may be carried
by Lessor or Lessee against loss or damage to the Property shall be for the sole
benefit of the Lessor and under its sole control. Notwithstanding the above, in
the event such damage or destruction occurs in the last two years of the Initial
Term or Extended Term, either Lessor or Lessee may, at their option elect to
terminate this Lease.
9.2 Abatement of Rent; Lessee's Remedies.
(a) In the event of damage described in this Section 9 which Lessor or
Lessee repairs or restores, the rent payable hereunder for the period during
which such damage, repair or restoration continues shall be abated in proportion
to the degree to which Lessee's use of the Property is impaired. Except for
abatement of rent, if any, Lessee shall have no claim against Lessor for any
damage suffered by reason of any such damage, destruction, repair or
restoration.
(b) If Lessor shall be obligated to repair or restore the Property under
the provisions of this Section 9 and shall not commence such repair or
restoration within sixty (60) days after such obligation shall accrue, Lessee
may at Lessee's option cancel and terminate this Lease by giving Lessor written
notice of Lessee's election to do so at any time prior to the commencement of
such repair or restoration. In such event this Lease shall terminate as of the
date of such notice and Lessee shall have no other rights against Lessor. Having
commenced repairs or restoration, Lessor shall have a good faith obligation to
proceed with same on a timely basis until such work is completed.
10. PROPERTY TAXES.
10.1 Definition of "Real Property Taxes". As used herein, the term "real
property taxes" shall include any form of tax or assessment, general, special,
ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than
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inheritance, personal income or estate taxes) imposed on the Property by any
authority having the direct or indirect power to tax, including any city, state
or federal government, or any school, agricultural, sanitary, fire, street,
drainage or other improvement district thereof, against any legal or equitable
interest of Lessor in the Property or in the real property of which the Property
is a part. The term "real property tax" shall also include any tax, fee, levy,
assessment or charge (i) in substitution of, partially or totally, any tax, fee,
levy, assessment or charge hereinabove included within the definition of "real
property tax" or (ii) the nature of which was hereinbefore included within the
definition of "real property tax," or (iii) which is imposed as a result of a
transfer, either partial or total, of Lessor's possessory interest in the
Property, or which is added to a tax or charge hereinbefore included within the
definition of real property tax by reason of such transfer, or (iv) which is
imposed by reason of this transaction, any modifications or changes hereto, or
any transfers hereof. The term "real property tax" shall not include any income,
estate or inheritance tax assessed against Lessor, documentary stamp tax imposed
as a result of Lessor's transfer of the fee interest in the Property, or any
sales tax on rent or other payments due from Lessee hereunder.
10.2 Payment of Taxes. Lessee shall pay the real property taxes, as
defined in Section 10.1, applicable to the Property throughout the lease term.
If the term hereof shall not commence or expire concurrently with the beginning
or expiration of the tax year, Lessee's liability for real property taxes for
the first and last partial lease years shall be prorated on an annual basis.
10.3 Personal Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon trade fixtures, furnishings, equipment
and all other personal property of Lessee contained on the Property or elsewhere
or on any leasehold improvements made to the Property by Lessee, regardless of
the validity thereof or whether title to such improvements shall be in the name
of Lessee or Lessor. When possible, Lessee shall cause said trade fixtures,
furnishings, equipment and all other personal property to be assessed and billed
separately from the real property of Lessor. If any of Lessee's personal
property shall be assessed with Lessor's real property, Lessee shall pay Lessor
the taxes attributable to Lessee's personal property within ten (10) days after
receipt of a written statement from Lessor setting forth the taxes applicable to
Lessee's property.
11. UTILITIES.
(a) Lessee shall punctually pay for all water and sewer charges, and for
all gas, heat, electricity, telephone, garbage collection and all other
utilities and services consumed during the term hereof at the Property, together
with any taxes thereon.
(b) If charges to be paid by Lessee hereunder are not paid when due and
Lessor elects to pay same, interest shall accrue thereon from the date paid by
Lessor at the Default Rate, and such charges and interest shall be added to the
subsequent month's rent and shall be collectible from Lessee in the same manner
as rent. Lessor shall not be liable for damage to Lessee's business and/or
inventory or for any other claim by Lessee resulting from an interruption in
utility services.
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12. ASSIGNMENT AND SUBLETTING.
12.1 Assignment or Subletting. Lessee may not sublet the demised premises
or any portion thereof or assign this Lease for the whole or any part of the
term hereof without the consent of the Landlord, which consent may not be
unreasonably withheld. For purposes of this Lease, the sale or transfer of a
controlling interest in Lessee shall constitute an assignment. If Lessee desires
to assign this Lease or sublet the Property or any portion thereof, it shall
submit in writing to Lessor; (i) the name of the assignee or Sublessee; (ii) the
nature of the assignee's or Sublessee's business to be conducted on the
Property; (iii) the terms of the assignment or sublease; and (iv) such financial
information as Lessor may reasonably request concerning the assignee or
Sublessee.
12.2 No Release or Waiver. Unless Lessor agrees in writing to the contrary,
no subletting or assignment shall release Lessee from Lessee's obligation or
alter the primary liability of Lessee to pay the rent and to perform all other
obligations to be performed by Lessee hereunder. The acceptance of rent by
Lessor from any other person shall not be deemed to be a waiver by Lessor of any
provision hereof. Consent to one assignment or subletting shall not be deemed
consent to any subsequent assignment or subletting. In the event of default by
any assignee of Lessee or any successor of Lessee in the performance of any of
the terms hereof, Lessor may proceed directly against Lessee without the
necessity of exhausting remedies against said assignee. Lessor may consent to
subsequent assignments or subletting hereof or amendments or modifications to
this Lease with assignees of Lessee or any successor of Lessee, and without
obtaining its or their consent thereto and such action shall not relieve Lessee
of liability hereunder.
13. DEFAULTS; REMEDIES.
13.1 Defaults. The occurrence and continuance of any one or more of the
following events shall constitute an Event of Default by Lessee:
(a) The failure by Lessee to make any payment of rent or any other payment
required to be made by Lessee hereunder, as and when due, where such failure
shall continue for a period of ten (10) days after written notice thereof from
Lessor to Lessee. In the event that Lessor serves Lessee with a notice to pay
rent or vacate pursuant to applicable unlawful detainer or other statutes, such
notice shall also constitute the notice required by this subsection;
(b) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions hereof to be observed or performed by Lessee, other
than described in Subsection a) above, where such failure shall continue for a
period of thirty (30) days after written notice thereof from Lessor to Lessee.
(c) (i) The making by Lessee of any general arrangement or assignment for
the benefit of creditors; (ii) Lessee becomes a "debtor" as defined under the
Federal Bankruptcy Code or any successor statute thereto or any other statute
affording debtor relief, whether state or federal,
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(unless, in the case of a petition filed against Lessee, the same is dismissed
within (30) days), or admits in writing its present insolvency or inability to
pay its debts as they mature; (iii) the appointment of a trustee or receiver to
take possession of all or a substantial portion of Lessee's assets located at
the Property or of Lessee's interest in this Lease; or (iv) the attachment,
execution or other judicial seizure of all or a substantial portion of Lessee's
assets located at the Property or of Lessee's interest in this Lease; and/or (e)
The discovery by Lessor that any financial statement, warranty, representation
or other information given to Lessor by Lessee, any assignee of Lessee, any
Sublessee of Lessee, any successor in interest of Lessee or any guarantor of
Lessee's obligation hereunder, in connection with this Lease, was materially
false or misleading when made or furnished.
13.2 Remedies. Upon the occurrence and during the continuance of an event
of default by Lessee, Lessor may (but shall not be obligated), with or without
notice or demand and without limiting Lessor in the exercise of any right or
remedy which Lessor may have by reason of such default or breach, independently
or simultaneously:
(a) Terminate Lessee's right to possession of the Property by any lawful
means, in which case this Lease shall terminate and Lessee shall immediately
surrender possession of the Property to Lessor. In such event Lessor shall be
entitled to recover from Lessee all damages incurred by Lessor by reason of
Lessee's default, including accrued rent, the cost of recovering possession of
the Property, expenses of reletting, reasonable attorney's fees, and any
customary and normal real estate commission actually paid to third parties;
(b) Reenter and take possession of the Property and relet or attempt to
relet same for Lessee's account, holding Lessee liable in damages for all
expenses incurred by Lessor in any such reletting and for any difference between
the amount of rents received from such reletting and those due and payable under
the terms hereof. In the event Lessor relets the Property, Lessor shall make
reasonable efforts to lease the Property or portions thereof for such periods of
time and such rentals and for such use and upon such covenants and conditions as
Lessor, in its reasonable discretion, may elect, and Lessor may make such
repairs to the Property as Lessor may deem reasonably necessary. Lessor shall be
entitled to bring such actions or proceedings for the recovery of any deficits
due to Lessor as it may deem advisable, without being obliged to wait until the
end of the term, and commencement or maintenance of any one or more actions
shall not bar Lessor from bringing other or subsequent actions for further
accruals, nor shall anything done by Lessor pursuant to this Subsection 13.2(b)
limit or prohibit Lessor's right at any time to pursue other remedies of Lessor
hereunder;
(c) Declare all rents and charges due hereunder immediately due and
payable, and thereupon all such rents and fixed charges to the end of the term
shall thereupon be accelerated, and Lessor may, at once, take action to collect
the same by distress or otherwise. In the event of acceleration of rents and
other charges due hereunder which cannot be exactly determined as of the date of
acceleration and/or judgment, the amount of said rent and charges shall be as
determined by trier of fact in a reasonable manner based on information such as
previous
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fluctuations in the C.P.I. and the like;
(d) Perform any of Lessee's obligations on behalf of Lessee in such manner
as Lessor shall reasonably deem appropriate, including payment of any moneys
necessary to perform such obligation or obtain legal advice, and all expenses
incurred by Lessor in connection with the foregoing, as well as any other
amounts necessary to compensate Lessor for all detriment caused by Lessee's
failure to perform which in the ordinary course would be likely to result
therefrom, shall be immediately due and payable from Lessee to Lessor upon
Lessee's receipt of an invoice from Lessor for the same, with interest at the
Default Rate; such performance by Lessor shall not cure the default of Lessee
hereunder, unless Lessee reimburses Lessor for such performance within ten (10)
days of demand for the same, and Lessor may proceed to pursue any or all
remedies available to Lessor on account of Lessee's Event of default; if
necessary Lessor may enter upon the Property after ten (10) days' prior written
notice to Lessee (except in the case of emergency, in which case no notice shall
be required), perform any of Lessee's obligations with respect to which an Event
of Default on the part of Lessee is in default; and/or
(e) Pursue any other remedy now or hereafter available to Lessor under
applicable law Unpaid installments of rent and other unpaid monetary obligations
of Lessee under the terms hereof shall bear interest from the date due at the
Default Rate.
13.3 No Waiver. No reentry or taking possession of the Property by Lessor
shall be construed as an election on its part to terminate this Lease, the
acceptance of a surrender of the Property or release Lessee from any obligations
hereunder, unless a written notice of such intention be given to Lessee.
Notwithstanding any such reletting or reentry or taking possession, Lessor may
at any time thereafter elect to terminate this Lease for a previous default.
Pursuit of any of the foregoing remedies shall not preclude pursuit of any of
the other remedies herein provided or any other remedies provided by law, nor
shall pursuit of any remedy herein provided constitute a forfeiture or waiver of
any rent due to Lessor hereunder or of any damages accruing to Lessor by reason
of the violation of any of the terms, provisions and covenants herein contained.
No waiver by Lessor of any violation or breach of any of the terms, provisions,
and covenants herein contained shall be deemed or construed to constitute a
waiver of any other or subsequent violation or breach of any of the terms,
provisions, and covenants herein contained. Forbearance by Lessor to enforce one
or more of the remedies herein provided upon an event of default shall not be
deemed or construed to constitute a waiver of any other or subsequent violation
or default. The loss or damage that Lessor may suffer by reason of termination
of this Lease or the deficiency from any reletting as provided for above shall
include the expense of repossession and any repairs which are the obligation of
Lessee under this Lease undertaken by Lessor following possession. Subject to
Section 13.2, in addition to any other remedy Lessor may have, Lessor may
recover from Lessee all damages Lessor may incur by reason of such default,
including the cost of recovering the Property and the loss of rent for the
remainder of the Lease term. Lessor's consent to or approval of any act shall
not be deemed to render unnecessary the obtaining of Lessor's consent to or
approval of any subsequent act by Lessee. The delivery of keys to any employee
or agent of Lessor shall not operate as a termination hereof or a surrender
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of the Property.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed on Lessor by the
terms of any mortgage or trust deed covering the Property. Accordingly, if any
installment of rent or any other sum due from Lessee shall not be received by
Lessor or Lessor's designee within ten (10) days after such amount shall be due,
then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a
late charge equal to three percent (3%) of such arrearage. The parties hereby
agree that such late charge represents a fair and reasonable estimate of the
costs Lessor will incur by reason of late payment by Lessee. Acceptance of such
late charge by Lessor shall in no event constitute a waiver of Lessee's default
with respect to such overdue amount, nor prevent Lessor from exercising any of
the other rights and remedies granted hereunder. The parties agree that the
payment of late charges and the payment of interest as provided elsewhere herein
are distinct and separate from one another in that the payment of interest is to
compensate Lessor for the use of Lessor's money by Lessee and the payment of
late charges is to compensate Lessor for administrative and other expenses
incurred by Lessor.
13.5 Interest on Past-Due Obligations. Except as expressly herein provided,
any amount due to Lessor not paid when due shall bear interest at a rate per
annum equal to 18% (the "Default Rate") from the date due. Payment of such
interest shall not excuse or cure any default by Lessee under this lease,
provided, however, that interest shall not be payable on late charges incurred
by Lessee. Notwithstanding any other term or provision hereof, in no event shall
the total of all amounts paid hereunder by Lessee and deemed to be interest
exceed the amount permitted by applicable usury laws, and in the event of
payment by Lessee of interest in excess of such permitted amount, the excess
shall be applied towards damages incurred by Lessor, if any, or returned to
Lessee.
13.6 Impounds. In the event that a late charge is payable hereunder,
whether or not collected, for three (3) installments of rent or other monetary
obligation which Lessee is late in paying, Lessee shall pay to Lessor, if Lessor
shall so request, in addition to any other payments required under this Lease,
monthly advance installments, payable at the same time as the rent is paid for
the month to which it applies, in amounts required as estimated by Lessor to
establish a fund for real property tax and insurance premiums on the Property
which are payable by Lessee under the terms hereof. Such fund shall be
established to insure payment when due, before delinquency, of any or all such
real property taxes and insurance premiums. If the amounts paid to Lessor by
Lessee under the provisions of this Section 13.6 are insufficient to discharge
the obligations of Lessee to pay such real property taxes and insurance premiums
as the same become due, Lessee shall pay to Lessor, upon Lessor's demand,
additional sums necessary to pay such obligations. All moneys paid to Lessor
under this Section 13.6 may be intermingled with other monies of Lessor and
shall not bear interest.
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13.7 Default by Lessor. Lessor shall not be in default unless (a) Lessor
breaches its obligations under Section 23 or (b) Lessor fails to perform
obligations required of Lessor within a reasonable time after written notice by
Lessee to Lessor and to the holder of any first mortgage or deed of trust
covering the Property whose name and address shall have theretofore been
furnished to Lessee in writing, specifying the obligation that Lessor has failed
to perform.
14. CONDEMNATION. If the Property or any portion thereof is taken under the
power of eminent domain, or sold under the threat of the exercise of said power
(either of which is herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than twenty five percent (25%) of
the Property or such portion thereof as will make the Property unusable for the
purposes herein leased is taken by condemnation, Lessee may terminate this Lease
by notice to the Lessor, in writing, only within thirty (30) days after Lessor
shall have given Lessee written notice of such condemnation or pending
condemnation (or in the absence of such notice, within ten (10) days after the
condemning authority shall have taken possession), such termination to take
effect as of the date the condemning authority takes possession. If Lessee does
not terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Property remaining,
except that the rent shall be reduced in the proportion that the area of the
Property taken bears to the total area of the Property, and Lessee shall have no
other rights or remedies as a result of such condemnation. Both Lessor and
Lessee shall have the right to claim and collect any award or settlement from
the condemnation proceedings for damages to their respective interest in the
Property, at their respective expense.
15. ESTOPPEL CERTIFICATE.
15.l Certificate. Lessee shall at any time upon not less than ten (10)
business days' prior written notice from Lessor execute, acknowledge and deliver
to Lessor and/or any lender or purchaser designated by Lessor a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance, if applicable, and (ii)
acknowledging that there are not, to Lessee's knowledge, any uncured defaults on
the part of Lessor hereunder, or specifying such defaults if any are claimed;
provided, however, that if such statement from Lessee is not received within the
time period set forth above, Lessor shall provide a second written notice and
Lessee shall respond within five (5) business days. Any such statement may be
conclusively relied upon by any purchaser or encumbrancer of the Property.
15.2 Failure to Deliver Certificate. At Lessor's option, Lessee's failure
to deliver such statement within such time shall be a material breach by Lessee
under this Lease or shall be conclusive upon Lessee (i) that this Lease is in
full force and effect, without modification except as may be represented by
Lessor, (ii) that there are no uncured defaults in Lessor's performance, and
(iii) that no rent has been paid in advance.
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<PAGE> 15
15.3 Financial Statements. If Lessor desires to finance, refinance, or sell
the Property, or any part thereof, Lessee hereby agrees to deliver to Lessor and
any lender or purchaser designated by Lessor the past three (3) years financial
statements of Lessee and any guarantor, in such detail as may be reasonably
required by such lender or purchaser. All such financial statements shall be
received by Lessor and such lender or purchaser in confidence and shall be used
only for the purposes of assessing the status of Lessee's tenancy and the value
of the Property.
16. SUBORDINATION.
Lessor agrees to utilize its reasonable best efforts to obtain a
subordination, non-disturbance and attornment agreement on terms reasonably
satisfactory to Lessee, with respect to all current and future mortgages
encumbering all or a portion of the Property.
17. NOTICES.
All notices, approvals, requests, consents and other communications given
pursuant to this Lease shall be in writing and shall be deemed to have been duly
given (i) when actually received by the addressee if hand delivered, sent by
facsimile transmission (provided that any notice so sent shall also be mailed to
the recipient), sent by private mail or courier service or sent by United States
regular mail; or (ii) two days after the date on which the same was deposited in
a regularly maintained receptacle for the deposit of United States mail, if sent
by registered or certified mail, postage and charges prepaid, addressed as
follows or at such other address as either party may specify from time to time
by notice to the other party:
TO LESSEE:
Wade Ford, Inc.
Attn: General Counsel
5901 Peachtree Dunwoody Road
Suite 2503
Atlanta, Georgia 30328
Telephone: 678-443-8100
Facsimile: 678-443-8124
cc: David S. Cooper
Schnader Harrison Segal & Lewis LLP
Suite 2800
303 Peachtree Street N.E.
Atlanta, Georgia 30308-3252
Telephone: 404-215-8100
Facsimile: 404-223-5164
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<PAGE> 16
TO LESSOR: Alan K. Arnold
9340 Collonade Trail
Alpharetta, Georgia 30022
Telephone: 770-664-7551
Facsimile: 770-664-4757
cc: Keith A. O'Daniel
625 Brisbaine Manor
Alpharetta, Georgia 30022-5575
Telephone: 770-475-2365
Facsimile: 770-475-2456
TO GUARANTOR: Sunbelt Automotive Group, Inc.
Attn: General Counsel
5901 Peachtree Dunwoody Road
Suite 2503
Atlanta, Georgia 30328
Telephone: 678-443-8100
Facsimile: 678-443-8124
TO MORTGAGEE: First Union National Bank
Attn: Marsha Lee Dollar
4570 Ashford Dunwoody Road
Atlanta, Georgia 30346
Telephone:
Facsimile:
18. INCORPORATION OF PRIOR AGREEMENTS: AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
agreement or understanding pertaining to any such matter shall be effective.
This Lease may be modified in writing only, signed by the parties in interest at
the time of the modification. Except as otherwise stated in this Lease, Lessee
hereby acknowledges that neither the Lessor nor any of its employees or agents
has made any oral or written warranties or representations to Lessee relative to
the condition or use by Lessee of said Property, and Lessee acknowledges that
Lessee assumes all responsibility regarding the Occupational Safety Health Act,
the legal use and adaptability of the Property, and the compliance thereof with
all applicable laws and regulations in effect during the term hereof, except as
otherwise specifically stated in this Lease.
19. ATTORNEY'S FEES. If either party brings an action to enforce the terms
hereof or declare rights hereunder, the prevailing party in any such action
shall be entitled to recover reasonable attorney's and legal assistant's fees
and costs incurred in connection therewith, on appeal or otherwise, including
those incurred in arbitration (other than any C.P.I. arbitration proceeding
referenced in Section 4.4 above), mediation, administration or bankruptcy
proceedings
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<PAGE> 17
and in enforcing right to indemnity herein.
20. FORCE MAJEURE. Whenever a period of time is herein prescribed for
action to be taken by Lessor or Lessee (other than monetary payments, owed by
Lessee to Lessor), Lessor or Lessee, as applicable, shall not be liable or
responsible for, and there shall be excluded from the computation for any such
period of time, any delays due to strikes, riots, acts of God, shortages of
labor or materials, war, governmental laws, regulations or restrictions or any
other causes of any kind whatsoever which are beyond the control of Lessor or
Lessee, as applicable.
21. HOLDING OVER. If Lessee, with Lessor's consent, remains in possession
of the Property or any part thereof after the expiration of the term hereof,
such occupancy shall be a tenancy from month to month upon all the provisions
hereof pertaining to the obligations of Lessee, but all options and rights of
first refusal, if any, granted under the terms hereof shall be deemed terminated
and be of no further effect during said month to month tenancy. If Lessee shall
hold over without Lessor's express written consent, Lessee shall become a Lessee
at sufferance and rental shall be due at a rate equal to 150% of the rent
payable immediately prior to the expiration of the term. The foregoing
provisions shall not limit Lessor's rights hereunder or provided by law in the
event of Lessee's default.
22. LESSOR'S ACCESS. Lessor and Lessor's agents shall have the right to
enter the Property at reasonable times for the purpose of inspecting the same,
posting notices of non-responsibility, showing the same to prospective
purchasers, lenders, or Lessees, performing any obligation of Lessee hereunder
of which Lessee is in default, all without being deemed guilty of an eviction of
Lessee and without abatement of rent, Lessor hereby indemnifies and holds Lessee
harmless from all loss, claims, damage, liability and expenses (including,
without limitation, reasonable attorney's fees) incurred as a result of the
exercise by Lessor of its rights hereunder. No provision hereof shall be
construed as obligating Lessor to perform any repairs, alterations or to take
any action not otherwise expressly agreed to be performed or taken by Lessor.
Lessor may at any time place on or about the Property reasonable "For Sale"
signs and Lessor may at any time during the last ninety (90) days of the term
hereof place on or about the Property reasonable "For Lease" signs, all without
rebate of rent or liability to Lessee.
23. QUIET ENJOYMENT. Upon Lessee paying the rent for the Property and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shalt have quiet
possession of the Property for the entire term hereof subject to all of the
provisions hereof.
24. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean only
the owner or owners at the time in question of the fee title of the Property,
and in the event of any transfer of such title or interest, Lessor herein named
(and in case of any subsequent transfers then the grantor) shall be relieved
from and after the date of such transfer of all liability as respects Lessor's
obligations thereafter to be performed, provided that any funds previously
delivered by Lessee to Lessor or the then grantor at the time of such transfer,
in which Lessee has an interest,
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shall be delivered to the grantee. The obligations contained in this Lease to be
performed by Lessor shall, subject to transfer of funds as aforesaid, be binding
on Lessor's successors and assigns only during their respective periods of
ownership.
25. BINDING EFFECT: CHOICE OF LAW. This Lease shall bind the parties, their
personal representatives, successors and assigns. This Lease shall be governed
by the laws of the State of Georgia.
26. SEVERABILITY. The invalidity of any provision hereof under applicable
law shall in no way affect the validity of any other provision hereof.
27. TIME OF ESSENCE. Time is of the essence hereof.
28. ADDITIONAL RENT: SURVIVAL. Any and all monetary obligations of Lessee
under the terms hereof shall be deemed to be rent, shall be secured by any
available lien for rent, and to the extent accrued shall survive expiration or
termination of the term hereof.
29. COVENANTS AND CONDITIONS. Each provision hereof performable by Lessee
shall be deemed both a covenant and a condition.
30. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable
to Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of Lessee, its agents and
invitees from acts of third parties.
31. AUTHORITY. If Lessee is a corporation, trust, or general or limited
partnership, each individual executing this lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and deliver
this Lease on behalf of said entity, and Lessee shall, within fifteen (15) days
after execution hereof, deliver to Lessor evidence of such authority
satisfactory to Lessor.
32. CONSTRUCTION. Any conflict between the printed provisions hereof and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions. The terms "Lessons" and "Lessee. shall include the
plural and the singular and all grammar shall be deemed to conform thereto. If
more than one person executes this Lease, their obligations shall be joint and
several. The use of the words "include," "includes" and "including" shall be
without limitation to the items which may follow.
33. CAPTIONS. The parties mutually agree that the headings and captions
contained in this Lease are inserted for convenience or reference only, and are
not to be deemed part of or used in construing this Lease.
34. ARBITRATION. In the event of any dispute between the Lessor and Lessee
with
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<PAGE> 19
respect to any issue specifically mentioned in this Lease as a matter to be
decided by arbitration, such dispute shall be determined by arbitration in
accordance with the laws of the State of Georgia dealing with arbitration, or in
the absence of such laws, the rules of the American Arbitration Association. The
decision resulting from the arbitration shall be binding, final and conclusive
on the parties, and a decision thereon may be entered by a court having
jurisdiction.
35. ENVIRONMENTAL COMPLIANCE.
(a) Lessee shall not use, generate, manufacture, produce, store, release,
discharge or dispose of, on, under or about the Property, or transport to or
from the Property, any Hazardous Substance (as defined below), except in
compliance with applicable Environmental Law, or allow any other person or
entity to do so. Lessee shall keep and maintain the Property in compliance with,
and shall not cause or permit the Property to be in violation of, any
Environmental Laws (as defined below). It being agreed that Lessee has no
obligations with respect to any pre-existing condition.
(b) Lessee shall give reasonably prompt notice to Lessor of (i) any
proceeding against or formal written inquiry to Lessee by any governmental
authority (including without limitation the Georgia Environmental Protection
Agency or Georgia Department of Health) with respect to the presence of any
Hazardous Substance on the Property or the migration thereof from or to other
property; and (ii) all claims received by Lessee that are made or threatened by
any third party against Lessee, Lessor or the Property relating to any loss or
injury resulting from any Hazardous Substance or Lessee's obtaining actual
knowledge of any occurrence or condition on any real property adjoining or in
the vicinity of the Property that may reasonably be expected to cause the
Property or any part thereof to be subject to any restrictions on the ownership,
occupancy, transferability or use of the Property under any Environmental Law or
any regulation adopted in accordance therewith.
(c) Lessee shall, indemnify and hold harmless Lessor, its directors,
officers, employees, agents, successors and assigns from and against any and all
loss, damage, cost, expense or liability (including attorneys' fees and costs)
arising out of or attributable to the use, generation, manufacture, production,
storage, release, threatened release, discharge, disposal, transport or presence
of a Hazardous Substance on, under, about, to or from the Property, including
without limitation the costs of any necessary repair, cleanup or detoxification
of the Property, in any way arising from the acts of Lessee.
(d) "Environmental Laws" shall mean any federal, state or local law,
statute, ordinance or regulation pertaining to the environmental conditions on,
under or about the Property, including without limitation the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended from
time to time ("CERCLA"), 42 U.S.C. Sections 9601 et seg., and the Resource
Conservation and Recovery Act of 1976, as amended from time to time ("RCRA"), 42
U.S.C. Sections 901 et seq. The term "Hazardous Substance" shall include without
limitation: (i) those substances included within the definition of "hazardous
substances,"
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<PAGE> 20
"hazardous materials," "toxic substances," or "solid waste" in CERCLA, RCRA, and
the Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et seq., and
in the regulations promulgated pursuant to said laws; (ii) those substances
defined as "hazardous wastes" in any Georgia Statute and in the regulations
promulgated pursuant to any Georgia Statute; (iii) those substances listed in
the United States Department of Transportation Table (49 CFR 172.101 and
amendments thereto) or by the Environmental Protection Agency (or any successor
agency) as hazardous substances (40 CFR Part 302 and amendments thereto); (iv)
such other substances, materials and wastes which are or become regulated under
applicable local, state or federal law, or which are classified as hazardous or
toxic under federal, state or local laws or regulations; and (v) any material,
waste or substance which is (1) petroleum, (2) asbestos, (3) polychlorinated
biphenyls, (4) designated as a "hazardous substance" pursuant to Section 311 of
the Clean Water Act, 33 U.S.C. Sections 1251 et seq., or listed pursuant to
Section 307 of the Clean Water Act, (5) flammable explosive, or (6) radioactive
materials.
(e) Lessor shall have the right to inspect the Property and audit Lessee's
operations thereon to ascertain Lessee's compliance with the provisions of this
Lease at any reasonable time. Lessor shall have the right, but not the
obligation, to enter upon the Property and perform any obligation of Lessee
hereunder of which Lessee is in default, including without limitation any
remediation necessary due to environmental impact of Lessee's operations on the
Property, without waiving or reducing Lessee's liability for Lessee's default
hereunder.
(f) Lessor shall indemnify and hold harmless Lessee, its directors,
officers, employees, agents, successor and assigns from and against any and all
loss, damage, cost, expense or liability (including attorneys' fees and costs)
arising out of the use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal, transport or presence of a Hazardous
Substance on, under, about, to or from the Property, in any way arising from the
acts of Lessor, any predecessors-in-title of Lessor, any third party for which
Lessor is responsible, or otherwise arising before the date hereof.
(g) All of the terms and provisions of this Section 35 shall survive
expiration or termination of this Lease for any reason whatsoever.
36. GUARANTY OF LEASE.
Guarantor hereby guarantees all of the obligations and duties of Lessee
under this lease.
LESSOR, LESSEE, AND GUARANTOR HAVE CAREFULLY READ AND REVIEWED THIS LEASE
AND EACH TERM AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE,
SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE
THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE
COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND
LESSEE WITH RESPECT TO THE PROPERTY.
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<PAGE> 21
IN WITNESS WHEREOF, the Parties have caused this Lease Agreement to be
duly executed, effective as of the date and year first above written.
LESSEE:
Signed, Sealed and Delivered in the Wade Ford, Inc.
presence of:
/s/ By: /s/ Alan K. Arnold
- ------------------------------------- -------------------------------------
Unofficial Witness Name: Alan K. Arnold
-----------------------------------
Title: President
----------------------------------
/s/ Keith A. O'Daniel
- -------------------------------------
Notary Public
My Commission Expires: 1/11/00
---------------
Signed, Sealed and Delivered in the LESSOR:
presence of:
/s/ /s/ Alan K. Arnold
- ------------------------------------- ----------------------------------------
Unofficial Witness Alan K. Arnold
/s/ Keith A. O'Daniel
- -------------------------------------
Notary Public
My Commission Expires: 1/11/00
---------------
Signed, Sealed and Delivered in the GUARANTOR:
presence of: Sunbelt Automotive Group, Inc.
/s/ By: /s/ C.K. Yancey
- ------------------------------------- -------------------------------------
Unofficial Witness Name: C.K. Yancey
-----------------------------------
Title: COO
----------------------------------
/s/
- -------------------------------------
Notary Public
My Commission Expires: June 21, 1999
---------------
(SEAL)
21
<PAGE> 1
EXHIBIT 10.58
LEASE
BY AND AMONG
ALAN K. ARNOLD, as Lessor
AND
WADE FORD BUFORD, INC., as Lessee
AND
SUNBELT AUTOMOTIVE GROUP, INC., as Guarantor
1. PARTIES. This Lease is made this 2nd day of June, 1998, by and among
Alan K. Arnold, individually, a Georgia resident, (herein called "Lessor"), Wade
Ford Buford, Inc., a Georgia corporation (herein called "Lessee") and Sunbelt
Automotive Group, Inc., a Georgia corporation (herein called "Guarantor").
2. PREMISES. Lessor hereby leases to Lessee and Lessee leases from Lessor,
upon all of the conditions set forth herein, that certain real property situated
in Cobb County, Georgia, commonly known as 4525 Nelson Brogdon Boulevard,
Buford, Georgia 30518 and more particularly described as in Exhibit "A"
attached hereto and made a part hereof. Said real property, including the land
and all improvements thereon, is herein called the "Property."
3. TERM AND POSSESSION.
3.1 Initial Term. The initial term hereof shall be for ten (10) years
commencing on the Closing Date as that term is defined in the Agreement and Plan
of Merger and Reorganization dated November 21, 1997, as amended, among Wade
Ford Buford, Inc., its shareholders, and Boomershine, et al ("Commencement
Date") and ending on the Tenth (10th) anniversary of the Closing Date, unless
sooner terminated pursuant to any provision hereof.
3.2 Extended Term(s). The Lessee shall have the option, to be exercised as
hereinafter provided, to extend the term of this Lease for two (2) successive
period(s) of five (5) years(s) each (each such period herein referred to as the
"Extended Term"), upon the condition that the Lease is in full force and effect
and there is no default in the performance of any condition hereof at the time
of exercise of the option and at the commencement of the Extended Term. Each
Extended Term shall be upon the same conditions and terms, and the rent
determined and payable, as provided in this Lease, except that there shall be no
privilege to extend the term beyond the expiration of the second Extended Term.
The Lessee shall exercise the option for an Extended Term by notifying the
Lessor in writing at least six (6) months prior to the expiration of the then
<PAGE> 2
current term. Upon such exercise, this Lease shall be deemed extended without
the execution of any further lease or other instrument. Any reference herein to
the lease term shall include, in addition to the Initial Term, the Extended
Term(s) as to which Lessee exercises its option.
4. RENT.
4.1 Rent Payment, Proration and Sales Taxes. All rental payments due
hereunder shall be paid without notice or demand, and without abatement,
deduction or setoff for any reason unless specifically provided herein. Rent for
any period during the term hereof which is for less than one month shall be a
pro rata portion of the monthly rent installment based on the number of days in
such period and the number of days in the month in question. Rent shall be
payable in lawful money of the United States to Lessor at the address stated
herein or to such other persons or at such other places as Lessor may designate
in writing. In addition, Lessee shall pay to Lessor all sales and use taxes
imposed by the State of Georgia or any other governmental authority from time to
time, upon said rent and any other charges hereunder upon which sales and use
taxes are imposed.
4.2 No Waiver. The acceptance by the Lessor of monies from the Lessee as
rent or other sums due shall not be an admission of the accuracy or the
sufficiency of the amount of such rent or other sums due nor shall it be deemed
a waiver by Lessor of any right or claim to additional or further rent or other
sums due.
4.3 Initial Rent. Beginning on the Closing Date and ending on the date
that is Twelve (12) months after the Closing Date (the "Lease Anniversary")
Lessee shall pay to Lessor as rent for the Property monthly payments of minimum
rent in the amount of Twenty Thousand Dollars ($20,000.00), in advance, on or
before the first day of each month throughout the first lease year.
4.4 Rent Adjustments. Commencing at the beginning of the second lease year,
the base monthly rental for the one year period following the Lease Anniversary
shall equal one percent (1%) of the Fair Market Value (as hereinafter defined)
of the Property (the Initial FMV rent"); provided, however, the Initial FMV Rent
shall not be less than the base monthly rent then in effect. On the second
anniversary after the Closing Date, and on every second anniversary thereafter,
the base monthly rental for the Property shall increase to an amount equal to
the base monthly rental then in effect plus an amount equal to the percentage
increase in the Consumer Price Index ("C.P.I.") published from time to time by
the United States Department of Labor [Bureau of Labor Statistics]. The sum so
calculated shall constitute the new monthly minimum rent hereunder until the
subsequent adjustment, but in no event shall any adjustment reduce the minimum
rent to an amount lower than the minimum rent payable for the month immediately
preceding the date of adjustment. No delay in establishing the rent adjustment
shall be a waiver of Lessor's right to later collect the difference between the
rental at the rate prior to adjustment, which shall continue to be paid until
the adjustment is established, and the rental rate after adjustment. In the
event the compilation and/or publication of the C.P.I. shall be transferred to
any other governmental department or bureau or agency or shall be discontinued,
then the index
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<PAGE> 3
most nearly the same as the C.P.I. shall be used to make such calculation. In
the event that Lessor and Lessee cannot agree on an alternative index, then the
matter shall be submitted for decision to the American Arbitration Association
in accordance with the then rules of said association and the decision of the
arbitrators shall be binding upon the parties. The cost of said arbitration
shall be paid equally by Lessor and Lessee. For purposes herein, the term "Fair
Market Value" shall be the amount determined by the mutual agreement of the
Parties subsequent to a valuation of the Property by an appraiser selected and
paid for by Wade Ford Buford, Inc. and a second appraiser selected and paid for
by Mr. Alan K. Arnold. If the Parties do not reach an agreement with respect to
the Fair Market Value, a third appraiser shall be selected by the two initial
appraisers and the third appraiser shall determine the Fair Market Value, and
said third appraiser's determination shall be binding on the Parties. The costs
of such a third appraiser, if any, shall be shared equally by the Parties.
5. USE.
5.1 Use. The Property shall be used and occupied only for an automobile
dealership and ancillary uses and for no other purpose. Without limiting the
foregoing, Lessee shall not use nor permit the use of the Property in any manner
that will tend to create waste or a nuisance.
5.2 Compliance with Law and Restrictions. Lessee shall, at Lessee's
expense, execute and comply with all statutes, ordinances, rules, orders,
regulations and requirements of the federal, state, county and city government,
and of any and all of their departments and bureaus, applicable to the Property,
as well as all covenants and restrictions of record, and other requirements in
effect during the term or any part thereof, which regulate the use by Lessee of
the Property. To the best of Lessor's knowledge, the Property is in good
operating condition, reasonable wear and tear excepted.
6. MAINTENANCE, REPAIRS AND ALTERATIONS.
6.1 Casualty and Condemnation. The specific provisions hereof relating to
repairs after casualty or condemnation shall take precedence over the terms of
this Section 6, but only to the extent in conflict herewith.
6.2 Maintenance. Lessee shall, at Lessee's sole cost and expense, maintain
the Property and all components thereof throughout the lease term, (including
maintenance of lighting fixtures) in good, safe and clean order, condition and
repair, including without limitation all plumbing, heating, air conditioning,
ventilating, and electrical facilities and all components thereof, serving the
Property, excepting (a) reasonable wear and tear, (b) loss or damage resulting
from a casualty loss and (c) loss or damage resulting from a condemnation. Upon
the occurrence and continuance of an Event of Default, and, if Lessee fails to
perform Lessee's obligations under this Section 6 or under any other section
hereof, Lessor may at Lessor's option enter upon the Property after ten (10)
days' prior written notice to Lessee (except in the case of emergency, in which
case no notice shall be required), perform such obligations on Lessee's behalf,
and put the Property in good, safe
3
<PAGE> 4
and clean order, condition and repair, and the cost thereof together with
interest thereon at the Default Rate (as hereinafter defined), shall be due and
payable as additional rent to Lessor together with Lessee's next rental
installment. Lessee expressly waives the benefits of any statute now or
hereafter in effect which would otherwise afford Lessee the right to make
repairs at Lessor's expense or to terminate this Lease because of Lessor's
failure to keep the Property in good order, condition and repair.
6.3 Plate Glass. Lessee shall maintain all plate glass, if any, within or
on the perimeter of the Property.
6.4 Termination of Lease. On the last day of the term hereof, or on any
sooner termination, other than due from casualty loss, Lessee shall surrender
the Property to Lessor in the same condition as received, ordinary wear and tear
excepted, clean and free of debris. Lessee's moveable machinery, furniture,
fixtures and equipment, other than that which is affixed to the Property, may be
removed by Lessee upon expiration of the lease term. Lessee shall repair all
damage caused by this removal. Lessee shall repair any damage to the Property
occasioned by the installation or removal of its trade fixtures, furnishings and
equipment. Upon termination of this Lease for any cause whatsoever, if Lessee
fails to remove its effects, they shall be deemed abandoned, and Lessor may, at
its option, remove the same in any manner that the Lessor shall choose, store
them without liability to the Lessee for loss thereof, and the Lessee agrees to
pay the Lessor on demand any and all expenses incurred in such removal,
including court costs, attorney's fees and storage charges for any length of
time the same shall be in the Lessor's possession. Lessee shall deliver all keys
and combinations to locks within the Property to Lessor upon termination of this
Lease for any reason. Lessee's obligations to perform under this provision shall
survive the end of the lease term.
7. Alterations and Additions.
(a) Lessee shall not, without Lessor's prior written consent, make any
material alterations, improvements, additions, or Utility Installations (as
defined below) in, on, or to the Property. Upon Lessor's written consent,
Lessor may require Lessee to provide Lessor, at Lessee's sole cost and expense,
a lien and completion bond in an amount equal to the estimated cost of such
improvements, to insure Lessor against any liability for construction liens and
to insure completion of the work. Lessor may require that Lessee remove any or
all of said alterations, improvements, additions or Utility Installations at the
expiration of the term, and restore the Property to its prior condition. Should
Lessee make any alterations, improvements, additions or Utility Installations
without the prior approval of Lessor, in addition to all other remedies of
Lessor for Lessee's breach, Lessor may require that Lessee remove any or all of
the same. As used in this Section, the term "Utility Installation" shall mean,
air lines, power panels, electrical distribution systems, air conditioning and
plumbing, if any.
(b) Any material alteration, improvement, addition or Utility Installation
in or to the Property that Lessee shall desire to make shall be presented to
Lessor for approval in written
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<PAGE> 5
form, with proposed detailed description or plans. If Lessor shall give its
consent, the consent shall be deemed conditioned upon Lessee acquiring all
necessary permits to do the work from appropriate governmental agencies, the
furnishing of a copy thereof to Lessor prior to the commencement of the work,
and the compliance by Lessee with all conditions of said permits.
(c) Lessee shall pay, when due, and hereby agrees to indemnify and hold
harmless Lessor for and from, all claims for labor or materials furnished or
alleged to have been furnished to or for Lessee, at or for use in the Property,
which claims are or may be secured by any construction lien against the Property
or any interest therein. Lessee shall give Lessor not less than ten (10) days'
notice prior to the commencement of any work on the Property which might give
rise to any such lien or claim of lien, and Lessor shall have the right to post
notices of non-responsibility in or on the Property as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense, defend itself and Lessor against
the same and shall pay and satisfy any adverse judgment that may be rendered
thereon before the enforcement thereof against the Lessor or the Property, upon
the condition that if Lessor shall require, Lessee shall furnish to Lessor a
surety bond satisfactory to Lessor in an amount equal to such contested lien,
claim or demand indemnifying Lessor against liability for the same and holding
the Property free from the effect of such lien, claim or demand. In addition,
Lessor may require Lessee to pay Lessor's attorney's fees and costs in
participating in such action if Lessor shall decide it is in its best interests
to do so.
(d) Unless Lessor requires their removal, all alterations, improvements,
additions and Utility Installations made on the Property shall become the
property of Lessor and remain upon and be surrendered with the Property at the
expiration of the lease term without compensation to Lessee.
7.1 Lessor's Interest Not Subject to Liens. The interest of Lessor shall
not be subject to liens for improvements made by Lessee, and Lessee agrees to
notify any contractor making such improvements of this provision.
8. INSURANCE; INDEMNITY.
8.1 Property Insurance - Lessee. Lessee shall at all times during the term
hereof, at its expense, maintain a policy or policies insuring the Property
against loss or damage by fire, explosion, and other hazards and contingencies
("all risk," as such term is used in the insurance industry), and plate glass
insurance as required in the reasonable discretion of Lessor, in an amount of
not less than one hundred percent (100%) of the full replacement value, as same
may change from time to time.
8.2 Liability Insurance - Lessee. Lessee shall, at Lessee's sole expense,
obtain and keep in force during the term hereof a policy of bodily injury and
property damage insurance, insuring Lessee and Lessor against any liability
arising out of the use, occupancy or maintenance of the Property and the parking
areas, walkways, driveways, landscaped areas and other areas exterior
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to the Property and appurtenant thereto. Such insurance shall be in an amount
not less than One Million Dollars ($1,000,000.00) combined single limit, and
umbrella liability coverage for an additional Ten Million Dollars
($10,000,000.00). The policy shall insure performance by Lessee of the indemnity
provisions of this Section 8. The limits of said insurance shall not, however,
limit the liability of Lessee hereunder. Upon demand, Lessee shall provide
Lessor, at Lessor's expense, with such increased amounts of insurance as Lessor
may reasonably require to afford Lessor adequate protection for risks insured
under this Section. Lessee, as a material part of the consideration to Lessor,
hereby assumes all risk of damage to property or injury to persons, in, upon or
about the Property arising from any cause and Lessee hereby waives all claims in
respect thereof against Lessor.
8.3 Employees Compensation - Lessee. Lessee shall maintain and keep in
force all employees' compensation insurance required with respect to Lessee's
operations of the Property under the laws of the State of Georgia, and such
other insurance as may be necessary to protect Lessor against any other
liability to person or property arising hereunder by operation of law, whether
such law is now in force or is adopted subsequent to the execution hereof.
8.4 Lessee's Default. Should Lessee fail to keep in effect and pay for such
insurance as it is in this section required to maintain, Lessor may do so, in
which event, the insurance premiums paid by Lessor, together with interest
thereon at the Default Rate from the date paid by Lessor, shall become due and
payable forthwith and failure of Lessee to pay same on demand shall constitute a
breach hereof.
8.5 Lessee's Compliance. Lessee shall not do or permit to be done anything
which shall invalidate the insurance policies referred to in this Section 8.
Lessee agrees to pay any increase in the amount of insurance premiums over and
above the rate now in force that may be caused by Lessee's use or occupancy of
the Property. In the event any increase in premiums is caused by the act or
omission of Lessee in violation of the terms hereof, payment by Lessee of such
increase shall not release Lessee from liability for such violation.
8.6 Insurance Policies. Insurance required hereunder shall be with good and
solvent insurance companies satisfactory to Lessor; in the absence of other
specific directions, such companies shall hold a "General Policyholders Rating"
of at least A minus, or such other rating as may be required by a lender having
a lien on the Property, as set forth in the most current issue of "Best's
Insurance Guide". All policies shall name Lessor as an additional insured.
Lessee shall deliver to Lessor copies of policies of insurance required to be
provided by Lessee under this Section 8 or certificates evidencing the existence
and amounts of such insurance and its compliance with the conditions set forth
in this Section 8. No such policy shall be cancelable or subject to reduction of
coverage or other modification except after thirty (30) days' prior written
notice to Lessor, and the interest of Lessor under such policies shall not be
affected by any default by Lessee under the provisions of such policies. Lessee
shall, at least thirty (30) days prior to the expiration of such policies,
furnish Lessor with renewals or "binders" thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by
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Lessee upon demand. If required by any mortgage encumbering the Property,
the mortgagee shall also be a named or additional insured and the terms of all
insurance policies shall comply with all other requirements of such mortgage.
8.7 Waiver of Subrogation. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other,
for loss or damage arising out of, or incident to the perils actually insured
against under this Section 8, which perils occur in, on, or about the Property,
whether due to the negligence of Lessor or Lessee or their agents, employees,
contractors and/or invitees. Lessee and Lessor shall, upon obtaining the
policies of insurance required hereunder, give notice to the insurance carrier
or carriers that the foregoing mutual waiver of subrogation is contained in this
Lease.
8.8 Indemnity. Lessee shall indemnify and hold harmless Lessor from and
against any and all injury, expense, damages and claims arising from Lessee's
use of the Property, whether due to damage to the Property, claims for injury to
the person or property of any other Lessee of the building (if applicable) or
any other person rightfully in or about the Property, from the conduct of
Lessee's business or from any activity, work or things done, permitted or
suffered by Lessee or its agents, servants, employees, licensees, customers, or
invitees in or about the Property or elsewhere or consequent upon or arising
from Lessee's failure to comply with applicable laws, statutes, ordinances or
regulations, and Lessee shall further indemnify and hold harmless Lessor from
and against any and all such claims and from and against all costs, attorney's
fees, expenses and liabilities incurred in the investigation, handling or
defense of any such claim or any action or proceeding brought in connection
herewith by a third person or any governmental authority; and in case any action
or proceeding is brought against Lessor by reason of any such claim, Lessee upon
notice from Lessor shall defend the same at Lessee's expense by counsel
satisfactory to Lessor. This indemnity shall not require payment as a condition
precedent to recovery.
8.9 Exemption of Lessor from Liability. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or for damage to the goods, wares, merchandise or other property of
Lessee, Lessee's employees, invitees, customers, or any other person in or about
the Property, whether such damage or injury is caused by or results from fire,
steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause, whether the said
damage or injury results from latent defects or other conditions arising upon
the Property or upon other portions of the building(s) of which the Property is
a part, or from other sources or places and regardless of whether the cause of
such damage or injury or the means of repairing the same is inaccessible to
Lessee. Lessor shall not be liable for any damages arising from any act or
neglect of any other Lessee of the building in which the Property is located.
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9. DAMAGE OR DESTRUCTION.
9.1 Damage or Destruction. In the event that the Property should be damaged
or destroyed by fire, tornado or other casualty then Lessor shall within sixty
(60) days after the date of such damage, commence to rebuild or repair the
Property and shall proceed with reasonable diligence to restore the Property to
substantially the same condition in which it was immediately prior to the
happening of the casualty, except that Lessor shall not be required to rebuild,
repair or replace any part of the furniture, equipment, fixtures and other
improvements which may have been placed by Lessee or others within the Property,
and in any event Lessor's obligation to repair shall be limited to the extent
proceeds of insurance are available for such purpose. Lessor shall, unless such
damage is the result of any negligence or willful misconduct of Lessee or
Lessee's employees or invitees, allow Lessee a fair diminution of rent during
the time that the Property is unfit for occupancy. Notwithstanding any of the
foregoing, in the event any mortgagee, under a deed of trust, security agreement
or mortgage on the Property, should require that the insurance proceeds be used
to retire the mortgage debt, Lessor shall have no obligation to rebuild and this
Lease shall terminate upon notice to Lessee. Any insurance which may be carried
by Lessor or Lessee against loss or damage to the Property shall be for the sole
benefit of the Lessor and under its sole control. Notwithstanding the above, in
the event such damage or destruction occurs in the last two years of the Initial
Term or Extended Term, either Lessor or Lessee may, at their option elect to
terminate this Lease.
9.2 Abatement of Rent; Lessee's Remedies.
(a) In the event of damage described in this Section 9 which Lessor or
Lessee repairs or restores, the rent payable hereunder for the period during
which such damage, repair or restoration continues shall be abated in proportion
to the degree to which Lessee's use of the Property is impaired. Except for
abatement of rent, if any, Lessee shall have no claim against Lessor for any
damage suffered by reason of any such damage, destruction, repair or
restoration.
(b) If Lessor shall be obligated to repair or restore the Property under
the provisions of this Section 9 and shall not commence such repair or
restoration within sixty (60) days after such obligation shall accrue, Lessee
may at Lessee's option cancel and terminate this Lease by giving Lessor written
notice of Lessee's election to do so at any time prior to the commencement of
such repair or restoration. In such event this Lease shall terminate as of the
date of such notice and Lessee shall have no other rights against Lessor. Having
commenced repairs or restoration, Lessor shall have a good faith obligation to
proceed with same on a timely basis until such work is completed.
10. PROPERTY TAXES.
10.1 Definition of "Real Property Taxes". As used herein, the term "real
property taxes" shall include any form of tax or assessment, general, special,
ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than
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inheritance, personal income or estate taxes) imposed on the Property by any
authority having the direct or indirect power to tax, including any city, state
or federal government, or any school, agricultural, sanitary, fire, street,
drainage or other improvement district thereof, against any legal or equitable
interest of Lessor in the Property or in the real property of which the Property
is a part. The term "real property tax" shall also include any tax, fee, levy,
assessment or charge (i) in substitution of, partially or totally, any tax, fee,
levy, assessment or charge hereinabove included within the definition of " real
property tax" or (ii) the nature of which was hereinbefore included within the
definition of "real property tax," or (iii) which is imposed as a result of a
transfer, either partial or total, of Lessor's possessory interest in the
Property, or which is added to a tax or charge hereinbefore included within the
definition of real property tax by reason of such transfer, or (iv) which is
imposed by reason of this transaction, any modifications or changes hereto, or
any transfers hereof. The term "real property tax" shall not include any income,
estate or inheritance tax assessed against Lessor, documentary stamp tax imposed
as a result of Lessor's transfer of the fee interest in the Property, or any
sales tax on rent or other payments due from Lessee hereunder
10.2 Payment of Taxes. Lessee shall pay the real property taxes, as defined
in Section 10.1, applicable to the Property throughout the lease term. If the
term hereof shall not commence or expire concurrently with the beginning or
expiration of the tax year, Lessee's liability for real property taxes for the
first and last partial lease years shall be prorated on an annual basis.
10.3 Personal Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon trade fixtures, furnishings, equipment
and all other personal property of Lessee contained on the Property or elsewhere
or on any leasehold improvements made to the Property by Lessee, regardless of
the validity thereof or whether title to such improvements shall be in the name
of Lessee or Lessor. When possible, Lessee shall cause said trade fixtures,
furnishings, equipment and all other personal property to be assessed and billed
separately from the real property of Lessor. If any of Lessee's personal
property shall be assessed with Lessor's real property, Lessee shall pay Lessor
the taxes attributable to Lessee's personal property within ten (10) days after
receipt of a written statement from Lessor setting forth the taxes applicable to
Lessee's property.
11. UTILITIES.
(a) Lessee shall punctually pay for all water and sewer charges, and for
all gas, heat, electricity, telephone, garbage collection and all other
utilities and services consumed during the term hereof at the Property, together
with any taxes thereon.
(b) If charges to be paid by Lessee hereunder are not paid when due and
Lessor elects to pay same, interest shall accrue thereon from the date paid by
Lessor at the Default Rate, and such charges and interest shall be added to the
subsequent month's rent and shall be collectible from Lessee in the same manner
as rent. Lessor shall not be liable for damage to Lessee's business and/or
inventory or for any other claim by Lessee resulting from an interruption in
utility services.
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12. ASSIGNMENT AND SUBLETTING.
12.1 Assignment or Subletting. Lessee may not sublet the demised premises
or any portion thereof or assign this Lease for the whole or any part of the
term hereof without the consent of the Landlord, which consent may not be
unreasonably withheld. For purposes of this Lease, the sale or transfer of a
controlling interest in Lessee shall constitute an assignment. If Lessee desires
to assign this Lease or sublet the Property or any portion thereof, it shall
submit in writing to Lessor; (i) the name of the assignee or Sublessee; (ii) the
nature of the assignee's or Sublessee's business to be conducted on the
Property; (iii) the terms of the assignment or sublease; and (iv) such financial
information as Lessor may reasonably request concerning the assignee or
Sublessee.
12.2 No Release or Waiver. Unless Lessor agrees in writing to the contrary,
no subletting or assignment shall release Lessee from Lessee's obligation or
alter the primary liability of Lessee to pay the rent and to perform all other
obligations to be performed by Lessee hereunder. The acceptance of rent by
Lessor from any other person shall not be deemed to be a waiver by Lessor of any
provision hereof. Consent to one assignment or subletting shall not be deemed
consent to any subsequent assignment or subletting. In the event of default by
any assignee of Lessee or any successor of Lessee in the performance of any of
the terms hereof, Lessor may proceed directly against Lessee without the
necessity of exhausting remedies against said assignee. Lessor may consent to
subsequent assignments or subletting hereof or amendments or modifications to
this Lease with assignees of Lessee or any successor of Lessee, and without
obtaining its or their consent thereto and such action shall not relieve Lessee
of liability hereunder.
13. DEFAULTS; REMEDIES.
13.1 Defaults. The occurrence and continuance of any one or more of the
following events shall constitute an Event of Default by Lessee:
(a) The failure by Lessee to make any payment of rent or any other payment
required to be made by Lessee hereunder, as and when due, where such failure
shall continue for a period of ten (10) days after written notice thereof from
Lessor to Lessee. In the event that Lessor serves Lessee with a notice to pay
rent or vacate pursuant to applicable unlawful detainer or other statutes, such
notice shall also constitute the notice required by this subsection;
(b) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions hereof to be observed or performed by Lessee, other
than described in Subsection a) above, where such failure shall continue for a
period of thirty (30) days after written notice thereof from Lessor to Lessee.
(c) (i) The making by Lessee of any general arrangement or assignment for
the benefit of creditors; (ii) Lessee becomes a "debtor" as defined under the
Federal Bankruptcy Code or any successor statute thereto or any other statute
affording debtor relief, whether state or federal,
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(unless, in the case of a petition filed against Lessee, the same is dismissed
within thirty (30) days), or admits in writing its present insolvency or
inability to pay its debts as they mature; (iii) the appointment of a trustee or
receiver to take possession of all or a substantial portion of Lessee's assets
located at the Property or of Lessee's interest in this Lease; or (iv) the
attachment, execution or other judicial seizure of all or a substantial portion
of Lessee's assets located at the Property or of Lessee's interest in this
Lease; and/or (e) The discovery by Lessor that any financial statement,
warranty, representation or other information given to Lessor by Lessee, any
assignee of Lessee, any Sublessee of Lessee, any successor in interest of Lessee
or any guarantor of Lessee's obligation hereunder, in connection with this
Lease, was materially false or misleading when made or furnished.
13.2 Remedies. Upon the occurrence and during the continuance of an event
of default by Lessee, Lessor may (but shall not be obligated), with or without
notice or demand and without limiting Lessor in the exercise of any right or
remedy which Lessor may have by reason of such default or breach, independently
or simultaneously:
(a) Terminate Lessee's right to possession of the Property by any lawful
means, in which case this Lease shall terminate and Lessee shall immediately
surrender possession of the Property to Lessor. In such event Lessor shall be
entitled to recover from Lessee all damages incurred by Lessor by reason of
Lessee's default, including accrued rent, the cost of recovering possession of
the Property, expenses of reletting, reasonable attorney's fees, and any
customary and normal real estate commission actually paid to third parties;
(b) Reenter and take possession of the Property and relet or attempt to
relet same for Lessee's account, holding Lessee liable in damages for all
expenses incurred by Lessor in any such reletting and for any difference between
the amount of rents received from such reletting and those due and payable under
the terms hereof. In the event Lessor relets the Property, Lessor shall make
reasonable efforts to lease the Property or portions thereof for such periods of
time and such rentals and for such use and upon such covenants and conditions as
Lessor, in its reasonable discretion, may elect, and Lessor may make such
repairs to the Property as Lessor may deem reasonably necessary. Lessor shall
be entitled to bring such actions or proceedings for the recovery of any
deficits due to Lessor as it may deem advisable, without being obliged to wait
until the end of the term, and commencement or maintenance of any one or more
actions shall not bar Lessor from bringing other or subsequent actions for
further accruals, nor shall anything done by Lessor pursuant to this Subsection
13.2(b) limit or prohibit Lessor's right at any time to pursue other remedies of
Lessor hereunder;
(c) Declare all rents and charges due hereunder immediately due and
payable, and thereupon all such rents and fixed charges to the end of the term
shall thereupon be accelerated, and Lessor may, at once, take action to collect
the same by distress or otherwise. In the event of acceleration of rents and
other charges due hereunder which cannot be exactly determined as of the date of
acceleration and/or judgment, the amount of said rent and charges shall be as
determined by trier of fact in a reasonable manner based on information such as
previous
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fluctuations in the C.P.I. and the like;
(d) Perform any of Lessee's obligations on behalf of Lessee in such manner
as Lessor shall reasonably deem appropriate, including payment of any moneys
necessary to perform such obligation or obtain legal advice, and all expenses
incurred by Lessor in connection with the foregoing, as well as any other
amounts necessary to compensate Lessor for all detriment caused by Lessee's
failure to perform which in the ordinary course would be likely to result
therefrom, shall be immediately due and payable from Lessee to Lessor upon
Lessee's receipt of an invoice from Lessor for the same, with interest at the
Default Rate; such performance by Lessor shall not cure the default of Lessee
hereunder, unless Lessee reimburses Lessor for such performance within ten (10)
days of demand for the same, and Lessor may proceed to pursue any or all
remedies available to Lessor on account of Lessee's Event of default; if
necessary Lessor may enter upon the Property after ten (10) days' prior written
notice to Lessee (except in the case of emergency, in which case no notice shall
be required), perform any of Lessee's obligations with respect to which an Event
of Default on the part of Lessee is in default; and/or
(e) Pursue any other remedy now or hereafter available to Lessor under
applicable law Unpaid installments of rent and other unpaid monetary obligations
of Lessee under the terms hereof shall bear interest from the date due at the
Default Rate.
13.3 No Waiver. No reentry or taking possession of the Property by Lessor
shall be construed as an election on its part to terminate this Lease, the
acceptance of a surrender of the Property or release Lessee from any obligations
hereunder, unless a written notice of such intention be given to Lessee.
Notwithstanding any such reletting or reentry or taking possession, Lessor may
at any time thereafter elect to terminate this Lease for a previous default.
Pursuit of any of the foregoing remedies shall not preclude pursuit of any of
the other remedies herein provided or any other remedies provided by law, nor
shall pursuit of any remedy herein provided constitute a forfeiture or waiver of
any rent due to Lessor hereunder or of any damages accruing to Lessor by reason
of the violation of any of the terms, provisions and covenants herein contained.
No waiver by Lessor of any violation or breach of any of the terms, provisions,
and covenants herein contained shall be deemed or construed to constitute a
waiver of any other or subsequent violation or breach of any of the terms,
provisions, and covenants herein contained. Forbearance by Lessor to enforce one
or more of the remedies herein provided upon an event of default shall not be
deemed or construed to constitute a waiver of any other or subsequent violation
or default. The loss or damage that Lessor may suffer by reason of termination
of this Lease or the deficiency from any reletting as provided for above shall
include the expense of repossession and any repairs which are the obligation of
Lessee under this Lease undertaken by Lessor following possession. Subject to
Section 13.2, in addition to any other remedy Lessor may have, Lessor may
recover from Lessee all damages Lessor may incur by reason of such default,
including the cost of recovering the Property and the loss of rent for the
remainder of the Lease term. Lessor's consent to or approval of any act shall
not be deemed to render unnecessary the obtaining of Lessor's consent to or
approval of any subsequent act by Lessee. The delivery of keys to any employee
or agent of Lessor shall not operate as a termination hereof or a surrender
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of the Property.
13.4 Late Charges. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Lessor by the terms of any mortgage or trust deed covering the Property.
Accordingly, if any installment of rent or any other sum due from Lessee shall
not be received by Lessor or Lessor's designee within ten (10) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to three percent (3%) of such arrearage.
The parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Lessor will incur by reason of late payment by Lessee.
Acceptance of such late charge by Lessor shall in no event constitute a waiver
of Lessee's default with respect to such overdue amount, nor prevent Lessor from
exercising any of the other rights and remedies granted hereunder. The parties
agree that the payment of late charges and the payment of interest as provided
elsewhere herein are distinct and separate from one another in that the payment
of interest is to compensate Lessor for the use of Lessor's money by Lessee and
the payment of late charges is to compensate Lessor for administrative and other
expenses incurred by Lessor.
13.5 Interest on Past-Due Obligations. Except as expressly herein
provided, any amount due to Lessor not paid when due shall bear interest at a
rate per annum equal to 18% (the "Default Rate") from the date due. Payment of
such interest shall not excuse or cure any default by Lessee under this lease,
provided, however, that interest shall not be payable on late charges incurred
by Lessee. Notwithstanding any other term or provision hereof, in no event shall
the total of all amounts paid hereunder by Lessee and deemed to be interest
exceed the amount permitted by applicable usury laws, and in the event of
payment by Lessee of interest in excess of such permitted amount, the excess
shall be applied towards damages incurred by Lessor, if any, or returned to
Lessee.
13.6 Impounds. In the event that a late charge is payable hereunder,
whether or not collected, for three (3) installments of rent or other monetary
obligation which Lessee is late in paying, Lessee shall pay to Lessor, if Lessor
shall so request, in addition to any other payments required under this Lease,
monthly advance installments, payable at the same time as the rent is paid for
the month to which it applies, in amounts required as estimated by Lessor to
establish a fund for real property tax and insurance premiums on the Property
which are payable by Lessee under the terms hereof. Such fund shall be
established to insure payment when due, before delinquency, of any or all such
real property taxes and insurance premiums. If the amounts paid to Lessor by
Lessee under the provisions of this Section 13.6 are insufficient to discharge
the obligations of Lessee to pay such real property taxes and insurance premiums
as the same become due, Lessee shall pay to Lessor, upon Lessor's demand,
additional sums necessary to pay such obligations. All moneys paid to Lessor
under this Section 13.6 may be intermingled with other monies of Lessor and
shall not bear interest.
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13.7 Default by Lessor. Lessor shall not be in default unless (a)
Lessor breaches its obligations under Section 23 or (b) Lessor fails to perform
obligations required of Lessor within a reasonable time after written notice by
Lessee to Lessor and to the holder of any first mortgage or deed of trust
covering the Property whose name and address shall have theretofore been
furnished to Lessee in writing, specifying the obligation that Lessor has failed
to perform.
14. CONDEMNATION. If the Property or any portion thereof is taken under
the power of eminent domain, or sold under the threat of the exercise of said
power (either of which is herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority takes
title or possession, whichever first occurs. If more than twenty five percent
(25%) of the Property or such portion thereof as will make the Property unusable
for the purposes herein leased is taken by condemnation, Lessee may terminate
this Lease by notice to the Lessor, in writing, only within thirty (30) days
after Lessor shall have given Lessee written notice of such condemnation or
pending condemnation (or in the absence of such notice, within ten (10) days
after the condemning authority shall have taken possession), such termination to
take effect as of the date the condemning authority takes possession. If Lessee
does not terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Property remaining,
except that the rent shall be reduced in the proportion that the area of the
Property taken bears to the total area of the Property, and Lessee shall have no
other rights or remedies as a result of such condemnation. Both Lessor and
Lessee shall have the right to claim and collect any award or settlement from
the condemnation proceedings for damages to their respective interest in the
Property, at their respective expense.
15. ESTOPPEL CERTIFICATE.
15.1 Certificate. Lessee shall at any time upon not less than ten (10)
business days' prior written notice from Lessor execute, acknowledge and deliver
to Lessor and/or any lender or purchaser designated by Lessor a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance, if applicable, and (ii)
acknowledging that there are not, to Lessee's knowledge, any uncured defaults on
the part of Lessor hereunder, or specifying such defaults if any are claimed;
provided, however, that if such statement from Lessee is not received within the
time period set forth above, Lessor shall provide a second written notice and
Lessee shall respond within five (5) business days. Any such statement may be
conclusively relied upon by any purchaser or encumbrancer of the Property.
15.2 Failure to Deliver Certificate. At Lessor's option, Lessee's
failure to deliver such statement within such time shall be a material breach by
Lessee under this Lease or shall be conclusive upon Lessee (i) that this Lease
is in full force and effect, without modification except as may be represented
by Lessor, (ii) that there are no uncured defaults in Lessor's performance, and
(iii) that no rent has been paid in advance.
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15.3 Financial Statements. If Lessor desires to finance, refinance, or
sell the Property, or any part thereof, Lessee hereby agrees to deliver to
Lessor and any lender or purchaser designated by Lessor the past three (3) years
financial statements of Lessee and any guarantor, in such detail as may be
reasonably required by such lender or purchaser. All such financial statements
shall be received by Lessor and such lender or purchaser in confidence and shall
be used only for the purposes of assessing the status of Lessee's tenancy and
the value of the Property.
16. SUBORDINATION.
Lessor agrees to utilize its reasonable best efforts to obtain a
subordination, non-disturbance and attornment agreement on terms reasonably
satisfactory to Lessee, with respect to all current and future mortgages
encumbering all or a portion of the Property.
17. NOTICES.
All notices, approvals, requests, consents and other communications
given pursuant to this Lease shall be in writing and shall be deemed to have
been duly given (i) when actually received by the addressee if hand delivered,
sent by facsimile transmission (provided that any notice so sent shall also be
mailed to the recipient), sent by private mail or courier service or sent by
United States regular mail; or (ii) two days after the date on which the same
was deposited in a regularly maintained receptacle for the deposit of United
States mail, if sent by registered or certified mail, postage and charges
prepaid, addressed as follows or at such other address as either party may
specify from time to time by notice to the other party:
TO LESSEE: Wade Ford Buford, Inc.
Attn: General Counsel
5901 Peachtree Dunwoody Road
Suite 2503
Atlanta, Georgia 30328
Telephone: 678-443-8100
Facsimile: 678-443-8124
cc: David S. Cooper
Schnader Harrison Segal & Lewis LLP
Suite 2800
303 Peachtree Street N.E.
Atlanta, Georgia 30308-3252
Telephone: 404-215-8100
Facsimile: 404-223-5164
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<PAGE> 16
TO LESSOR: Alan K. Arnold
9340 Collonade Trail
Alpharetta, Georgia 30022
Telephone: 770-664-7551
Facsimile: 770-664-4757
cc: Keith A. O'Daniel
625 Brisbaine Manor
Alpharetta, Georgia 30022-5575
Telephone: 770-475-2365
Facsimile: 770-475-2456
TO GUARANTOR: Sunbelt Automotive Group, Inc.
Attn: General Counsel
5901 Peachtree Dunwoody Road
Suite 2503
Atlanta, Georgia 30328
Telephone: 678-443-8100
Facsimile: 678-443-8124
TO MORTGAGEE: First Union National Bank
Attn: Marsha Lee Dollar
4570 Ashford Dunwoody Road
Atlanta, Georgia 30346
Telephone:
Facsimile:
18. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
agreement or understanding pertaining to any such matter shall be effective.
This Lease may be modified in writing only, signed by the parties in interest at
the time of the modification. Except as otherwise stated in this Lease, Lessee
hereby acknowledges that neither the Lessor nor any of its employees or agents
has made any oral or written warranties or representations to Lessee relative to
the condition or use by Lessee of said Property, and Lessee acknowledges that
Lessee assumes all responsibility regarding the Occupational Safety Health Act,
the legal use and adaptability of the Property, and the compliance thereof with
all applicable laws and regulations in effect during the term hereof, except as
otherwise specifically stated in this Lease.
19. Attorney's Fees. If either party brings an action to enforce the terms
hereof or declare rights hereunder, the prevailing party in any such action
shall be entitled to recover reasonable attorney's and legal assistant's fees
and costs incurred in connection therewith, on appeal or otherwise, including
those incurred in arbitration (other than any C.P.I. arbitration proceeding
referenced in Section 4.4 above), mediation, administrative or bankruptcy
proceedings
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<PAGE> 17
and in enforcing any right to indemnity herein.
20. FORCE MAJEURE. Whenever a period of time is herein prescribed for
action to be taken by Lessor or Lessee (other than monetary payments, owed by
Lessee to Lessor), Lessor or Lessee, as applicable, shall not be liable or
responsible for, and there shall be excluded from the computation for any such
period of time, any delays due to strikes, riots, acts of God, shortages of
labor or materials, war, governmental laws, regulations or restrictions or any
other causes of any kind whatsoever which are beyond the control of Lessor or
Lessee, as applicable.
21. HOLDING OVER. If Lessee, with Lessor's consent, remains in
possession of the Property or any part thereof after the expiration of the term
hereof, such occupancy shall be a tenancy from month to month upon all the
provisions hereof pertaining to the obligations of Lessee, but all options and
rights of first refusal, if any, granted under the terms hereof shall be deemed
terminated and be of no further effect during said month to month tenancy. If
Lessee shall hold over without Lessor's express written consent, Lessee shall
become a Lessee at sufferance and rental shall be due at a rate equal to 150% of
the rent payable immediately prior to the expiration of the term. The foregoing
provisions shall not limit Lessor's rights hereunder or provided by law in the
event of Lessee's default.
22. LESSOR'S ACCESS. Lessor and Lessor's agents shall have the right to
enter the Property at reasonable times for the purpose of inspecting the same,
posting notices of non-responsibility, showing the same to prospective
purchasers, lenders, or Lessees, performing any obligation of Lessee hereunder
of which Lessee is in default, all without being deemed guilty of an eviction of
Lessee and without abatement of rent, Lessor hereby indemnifies and holds Lessee
harmless from all loss, claims, damage, liability and expenses (including,
without limitation, reasonable attorney's fees) incurred as a result of the
exercise by Lessor of its rights hereunder. No provision hereof shall be
construed as obligating Lessor to perform any repairs, alterations or to take
any action not otherwise expressly agreed to be performed or taken by Lessor.
Lessor may at any time place on or about the Property reasonable "For Sale"
signs and Lessor may at any time during the last ninety (90) days of the term
hereof place on or about the Property reasonable "For Lease" signs, all without
rebate of rent or liability to Lessee.
23. QUIET ENJOYMENT. Upon Lessee paying the rent for the Property and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Property for the entire term hereof subject to all of the
provisions hereof.
24. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean
only the owner or owners at the time in question of the fee title of the
Property, and in the event of any transfer of such title or interest, Lessor
herein named (and in case of any subsequent transfers then the grantor) shall be
relieved from and after the date of such transfer of all liability as respects
Lessor's obligations thereafter to be performed, provided that any funds
previously delivered by Lessee to Lessor or the then grantor at the time of such
transfer, in which Lessee has an interest,
17
<PAGE> 18
shall be delivered to the grantee. The obligations contained in this Lease to be
performed by Lessor shall, subject to transfer of funds as aforesaid, be binding
on Lessor's successors and assigns only during their respective periods of
ownership.
25. BINDING EFFECT; CHOICE OF LAW. This Lease shall bind the parties,
their personal representatives, successors and assigns. This Lease shall be
governed by the laws of the State of Georgia.
26. SEVERABILITY. The invalidity of any provision hereof under
applicable law shall in no way affect the validity of any other provision
hereof.
27. TIME OF ESSENCE. Time is of the essence hereof.
28. ADDITIONAL RENT; SURVIVAL. Any and all monetary obligations of
Lessee under the terms hereof shall be deemed to be rent, shall be secured by
any available lien for rent, and to the extent accrued shall survive expiration
or termination of the term hereof.
29. COVENANTS AND CONDITIONS. Each provision hereof performable by
Lessee shall be deemed both a covenant and a condition.
30. SECURITY MEASURES. Lessee hereby acknowledges that the rental
payable to Lessor hereunder does not include the cost of guard service or other
security measures, and that Lessor shall have no obligation whatsoever to
provide same. Lessee assumes all responsibility for the protection of Lessee,
its agents and invitees from acts of third parties.
31. AUTHORITY. If Lessee is a corporation, trust, or general or
limited partnership, each individual executing this lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on behalf of said entity, and Lessee shall, within fifteen
(15) days after execution hereof, deliver to Lessor evidence of such authority
satisfactory to Lessor.
32. CONSTRUCTION. Any conflict between the printed provisions hereof
and the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions. The terms "Lessor" and "Lessee" shall
include the plural and the singular and all grammar shall be deemed to conform
thereto. If more than one person executes this Lease, their obligations shall be
joint and several. The use of the words "include," "includes" and "including"
shall be without limitation to the items which may follow.
33. CAPTIONS. The parties mutually agree that the headings and
captions contained in this Lease are inserted for convenience or reference only,
and are not to be deemed part of or used in construing this Lease.
34. ARBITRATION. In the event of any dispute between the Lessor and
Lessee with
18
<PAGE> 19
respect to any issue specifically mentioned in this Lease as a matter to be
decided by arbitration, such dispute shall be determined by arbitration in
accordance with the laws of the State of Georgia dealing with arbitration, or in
the absence of such laws, the rules of the American Arbitration Association. The
decision resulting from the arbitration shall be binding, final and conclusive
on the parties, and a decision thereon may be entered by a court having
jurisdiction.
35.4 ENVIRONMENTAL COMPLIANCE.
(a) Lessee shall not use, generate, manufacture, produce, store, release,
discharge or dispose of, on, under or about the Property, or transport to or
from the Property, any Hazardous Substance (as defined below), except in
compliance with applicable Environmental Law, or allow any other person or
entity to do so. Lessee shall keep and maintain the Property in compliance with,
and shall not cause or permit the Property to be in violation of, any
Environmental Laws (as defined below). It being agreed that Lessee has no
obligations with respect to any pre-existing condition.
(b) Lessee shall give reasonably prompt notice to Lessor of (i) any
proceeding against or formal written inquiry to Lessee by any governmental
authority (including without limitation the Georgia Environmental Protection
Agency or Georgia Department of Health) with respect to the presence of any
Hazardous Substance on the Property or the migration thereof from or to other
property; and (ii) all claims received by Lessee that are made or threatened by
any third party against Lessee, Lessor or the Property relating to any loss or
injury resulting from any Hazardous Substance or Lessee's obtaining actual
knowledge of any occurrence or condition on any real property adjoining or in
the vicinity of the Property that may reasonably be expected to cause the
Property or any part thereof to be subject to any restrictions on the ownership,
occupancy, transferability or use of the Property under any Environmental Law or
any regulation adopted in accordance therewith.
(c) Lessee shall, indemnify and hold harmless Lessor, its directors,
officers, employees, agents, successors and assigns from and against any and all
loss, damage, cost, expense or liability (including attorneys' fees and costs)
arising out of or attributable to the use, generation, manufacture, production,
storage, release, threatened release, discharge, disposal, transport or presence
of a Hazardous Substance on, under, about, to or from the Property, including
without limitation the costs of any necessary repair, cleanup or detoxification
of the Property, in any way arising from the acts of Lessee.
(d) "Environmental Laws" shall mean any federal, state or local law,
statute, ordinance or regulation pertaining to the environmental conditions on,
under or about the Property, including without limitation the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended from
time to time ("CERCLA"), 42 U.S.C. Sections 9601 et seq., and the Resource
Conservation and Recovery Act of 1976, as amended from time to time ("HRCRA"),
42 U.S.C. Sections 901 et seq. The term "Hazardous Substance" shall include
without limitation: (i) those substances included within the definition of
"hazardous substances,"
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<PAGE> 20
"hazardous materials," "toxic substances," or "solid waste" in CERCLA, RCRA, and
the Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et seq., and
in the regulations promulgated pursuant to said laws; (ii) those substances
defined as "hazardous wastes" in any Georgia Statute and in the regulations
promulgated pursuant to any Georgia Statute; (iii) those substances listed in
the United States Department of Transportation Table (49 CFR 172.101 and
amendments thereto) or by the Environmental Protection Agency (or any successor
agency) as hazardous substances (40 CFR Part 302 and amendments thereto); (iv)
such other substances, materials and wastes which are or become regulated under
applicable local, state or federal law, or which are classified as hazardous or
toxic under federal, state or local laws or regulations; and (v) any material,
waste or substance which is (1) petroleum, (2) asbestos, (3) polychlorinated
biphenyls, (4) designated as a "hazardous substance" pursuant to Section 311 of
the Clean Water Act, 33 U.S.C. Sections 1251 et seq., or listed pursuant to
Section 307 of the Clean Water Act, (5) flammable explosive, or (6) radioactive
materials.
(e) Lessor shall have the right to inspect the Property and audit
Lessee's operations thereon to ascertain Lessee's compliance with the provisions
of this Lease at any reasonable time. Lessor shall have the right, but not the
obligation, to enter upon the Property and perform any obligation of Lessee
hereunder of which Lessee is in default, including without limitation any
remediation necessary due to environmental impact of Lessee's operations on the
Property, without waiving or reducing Lessee's liability for Lessee's default
hereunder.
(f) Lessor shall indemnify and hold harmless Lessee, its directors,
officers, employees, agents, successor and assigns from and against any and all
loss, damage, cost, expense or liability (including attorneys' fees and costs)
arising out of the use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal, transport or presence of a Hazardous
Substance on, under, about, to or from the Property, in any way arising from the
acts of Lessor, any predecessors-in-title of Lessor, any third party for which
Lessor is responsible, or otherwise arising before the date hereof.
(g) All of the terms and provisions of this Section 35 shall survive
expiration or termination of this Lease for any reason whatsoever.
36. GUARANTY OF LEASE.
Guarantor hereby guarantees all of the obligations and duties of Lessee
under this lease.
LESSOR, LESSEE, AND GUARANTOR HAVE CAREFULLY READ AND REVIEWED THIS
LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS
LEASE, SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY
AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE
COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND
LESSEE WITH RESPECT TO THE PROPERTY.
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<PAGE> 21
IN WITNESS WHEREOF, the Parties have caused this Lease Agreement to be
duly executed, effective as the date and year first above written.
LESSEE:
Signed, Sealed and Delivered in Wade Ford Buford, Inc.
the presence of:
/s/ K. LAMAR LESTER By: /s/ ALAN K. ARNOLD
- ---------------------------------- ------------------------------------
Unofficial Witness Name: ALAN K. ARNOLD
-------------------------------
Title: President
------------------------------
KEITH A. O'DANIEL
- ----------------------------------
Notary Public
My Commission Expires: 1/11/00
------------
LESSOR:
Signed, Sealed and Delivered in Wade Ford Buford, Inc.
the presence of:
/s/ K. LAMAR LESTER By: /s/ ALAN K. ARNOLD
- ---------------------------------- ------------------------------------
Unofficial Witness Alan K. Arnold
KEITH A. O'DANIEL
- ----------------------------------
Notary Public
My Commission Expires: 1/11/00
------------
Signed, Sealed and Delivered in GUARANTOR:
the presence of:
/s/ D.S. GIBSON By: /s/ C.K. YANCEY
- ---------------------------------- ------------------------------------
Unofficial Witness Name: C.K. YANCEY
-------------------------------
Title: COO
------------------------------
/s/
- ----------------------------------
Notary Public
My Commission Expires: 6/21/1999
------------
21
<PAGE> 1
EXHIBIT 10.59
STATE OF GEORGIA
COUNTY OF COBB
DEALERSHIP LEASE
LEASE made as of the 1st day of September, 1983, between MARSHALL M.
MANOR, an individual residing at 10837 Quail Covey Rd., Boynton Beach, Florida
33436 (herein called Landlord), and WADE FORD, INC., a Georgia corporation,
having an office and place of business at 3860 South Cobb Drive, Smyrna, Georgia
30080 (herein called Tenant):
WITNESSETH:
ARTICLE 1
Construction
1.01. All of the covenants 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.
1.02. 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.
ARTICLE 2
Demised Premises - Basic Rent
2.01. For and in consideration or the payment of the Basic Rent, and
the Additional Rent as hereinafter provided and of the performance by Tenant of
the covenants and undertakings hereinafter set forth, Landlord hereby leases to
Tenant, and Tenant
<PAGE> 2
hereby hires from Landlord the following property (herein collectively called
the Demised Premises), for the Lease Term hereinafter provided:
(a) the land described in Exhibit 1 hereto (herein called the
Land); and
(b) the buildings, structures, improvements, fixtures,
equipment and other property now erected thereon or installed therein
and/or to be erected thereon or installed therein by Landlord after the
date hereof (herein collectively called the Improvements).
SUBJECT, HOWEVER, to zoning ordinances and regulations and covenants,
restrictions, easements, liens, charges, encumbrances, title conditions and
exceptions affecting the Demised Premises, or any part thereof, as of the date
hereof.
2.02. This Lease shall be for a term commencing as of October 1,
1983 and ending 25 years thereafter unless such term shall be sooner terminated
as hereinafter provided.
2.03. Tenant shall pay to Landlord a net monthly rental over and
above the other and additional payments to be made by Tenant as hereinafter
provided (such net monthly rental being herein called the Basic Rent) of $12,000
per month for the first 24 months of the term, of $14,000 per month for the
second 24 months of the term and shall be increased $1,000 per month for each
succeeding 24-month period thereafter.
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<PAGE> 3
2.04. The Basic Rent shall be absolutely net to the Landlord (except
as hereinafter otherwise expressly stated), so that this Lease shall yield net
to Landlord such Basic Rent throughout the term of this Lease.
2.05. Basic Rent for the first month or partial month (calculated on
the basis of the actual number of days of such partial month) shall be paid to
Landlord prior to the commencement of the Lease Term, and thereafter, each
installment of Basic Rent shall be paid in advance on or before the first
business day of each and every calendar month during the Lease Term. The Basic
Rent and the Additional Rent shall be punctually paid to Landlord at 10837 Quail
Covey Rd., Boynton Beach, Florida 33436, or at such place or to such agent as
Landlord from time to time may designate by written notice to Tenant, all
without notice, demand, counterclaim, setoff, deduction or defense, and without
abatement, suspension, deferment, diminution or reduction for any reason
whatsoever, except as hereinafter otherwise provided.
2.06. Tenant covenants to pay, as additional rent, all other
amounts, liabilities and obligations which Tenant herein assumes or agrees to
pay (herein collectively called the 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 the Basic Rent.
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<PAGE> 4
Landlord, at its sole discretion, may spread all or certain of the
items of the Additional Rent over periods of 12 calendar months each during the
Lease Term, and Landlord may collect the Additional Rent from Tenant, and Tenant
shall pay it, in regular monthly payments; but Landlord shall give Tenant a
statement of such collection, and disbursements therefrom, at least once each
such period, and shall, from time to time adjust such payments to match
disbursements.
2.07. Upon expiration of the Lease Term, Tenant shall remove its
goods and effects and peacefully yield up the Demised Premises to Landlord in
the condition required by Article 9 hereof.
ARTICLE 3
Taxes
3.01. For the purposes of this Article 3:
(a) "Applicable Taxes" shall mean only those ad valorem real estate
taxes assessed and levied against the Demised Premises;
(b) "Lease Term" shall include the initial term of this Lease and all
extensions thereof unless this Lease be terminated or canceled earlier (other
than pursuant to Article 6 hereof) as provided in this Lease in which case the
"Lease Term" shall include only the abbreviated period;
(c) "Applicable Taxes" are for and pertain to the calendar year in
which occurs the tax status day (sometimes referred to as
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<PAGE> 5
the "tax day", "assessment day", "date of finality", etc.) used in the
determination of said taxes.
3.02. Landlord shall remit to the collecting authority Applicable
Taxes becoming due and payable during the Lease Term. Applicable Taxes remitted
by Landlord but properly the expense of Tenant, as set forth herein, shall be
reimbursed to Landlord by Tenant within ten days of receipt of Landlord's
written request accompanied by supporting documents.
3.03. Tenant shall bear the expense of Applicable Taxes for full
calendar years within the Lease Term and, additionally, the expense thereof for
the calendar years in which the Lease Term begins or terminates in the
proportion that the number of days the Lease Term exists within each of such
years bears to the total numbers of days in such year.
3.04. Special assessments which become due in full, or in
installments, during the Lease Term shall be remitted by Landlord. Tenant shall
bear as Additional Rent the expense of full assessments, or installments, which
fall due during the Lease Term. For purposes of this Section 3.04, 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
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<PAGE> 6
delinquent during the Lease Term had the installment option been elected.
3.05. Landlord agrees to cooperate with Tenant and at Tenant's
expense in all reasonable ways requested by Tenant to minimize taxes and special
assessments to be borne by Tenant.
3.06. Personal property taxes on property located upon the Demised
Premises and used therewith shall be borne and remitted by Tenant, who also
shall file any and all Personal Property Tax returns that may be required in
relation thereto.
ARTICLE 4
Tenant's Right to Terminate
4.01. If any law, ordinance, ruling, order or regulation now exists
or is hereafter enacted prohibiting or, in Landlord's reasonable opinion,
substantially impairing the use of the Demised Premises for an automobile sales
and service establishment, then Tenant, at its option, may terminate this Lease,
and all of its liability hereunder shall cease from and after the later of the
date of termination or the date when such law, ordinance, ruling, or regulation,
or prohibition becomes effective, and any advance rental shall be apportioned
and refunded to Tenant provided such law, ordinance, ruling or regulation, or
prohibition is not enacted as a result of any act by Tenant.
-6-
<PAGE> 7
ARTICLE 5
Insurance
5.01. Tenant shall maintain general or public liability insurance
against claims for bodily injury or death and property damage occurring on, in
or about the Demised Premises and the streets and alleys adjoining the Demised
Premises, affording protection with respect to bodily injury or death of at
least $200,000 for any one person and at least $500,000 for any one accident and
protection with respect to property damage of at least $100,000 Such amounts
shall be increased from time to time if, and as reasonably requested by,
Landlord to the extent necessary in Landlord's reasonable opinion to adequately
protect Landlord. 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 Demised Premises are
located, are well rated by national rating organizations and are acceptable to
Landlord. Such policies shall insure Landlord and Tenant, as their respective
interests may appear. Each such policy or a certificate therefor shall, to the
extent obtainable, contain an agreement by the insurer that such policies shall
not be canceled without at least ten days' prior written notice to Landlord.
Originals of such policies shall be delivered by Tenant to Landlord promptly
after delivery of this Lease, and thereafter at least 15 days before the
expiration dates of each expiring policy.
-7-
<PAGE> 8
5.02. From time to time during the term hereof, upon presentation of
bills by Landlord, Tenant shall pay to Landlord the cost as determined by
Landlord of fire and extended coverage insurance upon the Demised Premises.
Landlord shall have the right to determine the amount of such insurance.
5.03. Tenant shall obtain and carry, at its expense, workmen's
compensation insurance, when such insurance is required by applicable law or
regulation.
5.04. Landlord hereby waives all claims against Tenant for loss or
damage to the Improvements caused by fire or perils insured against by
Landlord's standard fire and extended coverage insurance policy. Tenant hereby
waives all claims against Landlord for loss or damage to its property on the
Demised Premises caused by fire or perils usually insured against by a standard
fire and extended coverage insurance policy.
ARTICLE 6
Remedies in Case of Default
6.01. If during the term of this Lease Tenant shall:
(a) fail to pay any installment of the Basic Rent or any
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 in the performance of or compliance with Article 7
hereof; or
-8-
<PAGE> 9
(c) default in its performance of or compliance with any of
the other agreements, terms or conditions of this Lease, and such
default shall continue for a period of 20 days after notice by Landlord
to Tenant; or
(d) file a voluntary petition in bankruptcy or be adjudicated
a bankrupt or insolvent, or file any petition or answer seeking any
reorganization, composition, readjustment or similar release under any
present or any future bankruptcy or other applicable law, or 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 the Demised
Premises; or
(e) fail, for a period of 30 days after the filing of an
involuntary petition in bankruptcy against Tenant or the commencement
of any proceeding against Tenant seeking any reorganization,
composition, readjustment or similar relief under any law, to have such
petition or proceeding dismissed.
6.02. Upon any such termination, Tenant shall quit and peacefully
surrender its interest in the Demised Premises to Landlord, and Landlord upon
and at any time after such termination may, without further notice, re-enter and
repossess the
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<PAGE> 10
Demised Premises as against Tenant, 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 Demised Premises or any part thereof in the
name of Landlord or otherwise for such term or terms and on such conditions as
Landlord in its discretion may determine and may collect and receive the rents
therefor. Landlord shall in no way be responsible or liable for any failure to
relet the Demised Premises or any part thereof or for any failure to collect any
rent upon any such releting.
6.04. No such termination of this Lease shall relieve Tenant of its
liability and obligations under this Lease, and such liability and obligations
shall survive any such termination. In the event of any such termination,
whether or not the Demised Premises or any part thereof shall have been relet,
Tenant shall pay the Basic Rent and all Additional Rent required to be paid
under this Lease by Tenant, up to the time of such termination, and thereafter
Tenant, until the end of the period which would have been the expiration of the
term of this Lease in the absence of such termination, shall pay as agreed and
liquidated damages for its default (a) the Basic Rent and Additional Rent which
would be payable by Tenant under this Lease if this Lease were still in effect,
less (b) the net proceeds of any reletting effected pursuant to Article 6.03,
after deducting all Landlord's
-10-
<PAGE> 11
expenses in connection with such reletting. Tenant shall pay such liquidated
damages on the days on which rent would have been payable under this Lease if it
were still in effect, and Landlord shall be entitled to recover from Tenant each
payment with respect to liquidated damages as the same shall arise.
6.05. At any time after a termination of this Lease pursuant to
Article 6.01 hereof, whether or not Landlord shall have collected any liquidated
damages pursuant to Article 6.04 hereof, Landlord shall be entitled to recover
from Tenant, and Tenant shall pay to Landlord, on demand, as and for liquidated
and agreed final damages for Tenant's default (herein called "Final Damages")
and in lieu of all liquidated damages pursuant to Article 6.04 hereof beyond the
date of such demand, an amount equal to the excess, if any, of (x) the Basic
Rent and Additional Rent which would be payable under this Lease from (i) the
date to which Tenant shall have satisfied in full its obligations under this
Article 6.05 to pay liquidated damages pursuant to Article 6.04 hereof to (ii)
the date on which the then unexpired term of this Lease would end if the same
remained in effect, over (y) the then fair net rental value (net after all
Additional Rent) of the Demised Premises for the same period, both discounted to
present worth at the rate of 4% per annum, compounded annually. If however, any
statute or rule of law governing a proceeding in which such liquidated Final
Damages are to be proved or determined shall validly limit the amount thereof to
an amount less
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<PAGE> 12
than the above agreed upon amount, Landlord shall be entitled to prove as and
for liquidated Final Damages for Tenant's default the maximum amount allowable
under such statute or rule of law.
6.06. In the event of any expiration of the term of this Lease,
Tenant, so far as permitted by law, hereby expressly waives and will waive the
service of any notice of intention to re-enter provided for in any statute, or
of the institution of legal proceedings to that end, and also waives and will
waive any and all right of redemption or re-entry or repossession or to restore
the operation of this Lease in case Tenant shall be dispossessed by a judgment
or by warrant of any court or judge or in case of re-entry or repossession by
Landlord or in case of any expiration of the term of this Lease. Tenant also, as
far as permitted by law, waives and will waive any and all right to a trial by
jury in the event that, upon any expiration of the term of this Lease, summary
proceedings shall be instituted by Landlord, and 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.
6.07. Each right, power and remedy of Landlord provided for in this
Lease shall be cumulative and concurrent and shall be in addition to 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
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<PAGE> 13
exercise by Landlord of any one or more of the rights, powers or remedies
provided for in this Lease or now or hereafter existing at law or in equity or
by statute or otherwise shall not preclude the simultaneous or later exercise by
Landlord of any or all other rights, powers or remedies provided for in this
Lease or now or hereafter existing at law or in equity or by statute or
otherwise. In the event of any breach or threatened breach by Tenant of any of
the provisions of this Lease, Landlord shall be entitled to restrain by
injunction such breach or threatened breach or to a decree compelling
performance of such provisions.
ARTICLE 7
Discharge of Liens
7.01. In the event that the Demised Premises or any part thereof or
Tenant's leasehold interest therein shall, at any time during the term of this
Lease, 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, Tenant shall cause the same, at its sole
cost and expense to be satisfied or discharged within 30 days after notice
thereof.
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<PAGE> 14
ARTICLE 8
Indemnification of Landlord
8.01. Tenant will indemnify and save harmless Landlord from and
against any and all liabilities, obligations, damages, penalties, claims, costs,
charges and expenses, including reasonable attorneys' fees, which may be imposed
upon or incurred by or assessed against Landlord by reason of any of the
following occurring during the term of this Lease:
(a) any work or thing done by Tenant or any agent, contractor,
employee, licensee or invitee of Tenant in, on or about the Demised
Premises or any part thereof;
(b) any use, nonuse, possession, occupation, condition,
operation, maintenance or management of the Demised Premises or any
part thereof or any street, alley, sidewalk, curb passageway or space
adjacent thereto;
(c) any negligence of Tenant or any agent, contractor,
employee, licensee or invitee of Tenant;
(d) any accident, injury or damage to any person or property
occurring in, on or about the Demised Premises or any part thereof or
any street, alley, sidewalk, curb, passageway or space adjacent
thereto; and
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<PAGE> 15
(e) any failure on the part of Tenant to perform or comply
with any of the agreements, terms or conditions contained in this Lease
on its part to be performed or complied with.
In the event that any action or proceeding shall be brought against Landlord by
reason of any claim covered by this Article, Tenant, upon written notice from
Landlord, will at Tenant's sole cost and expense resist or defend the same. To
the extent of the proceeds received by Landlord under any insurance furnished or
supplied 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 pro tanto to be satisfied.
8.02. Tenant is fully familiar with the physical condition of the
Demised Premises. Landlord has made no representations of whatever nature in
connection with the condition of the Demised Premises, and Landlord shall not be
liable for any latent or patent defect therein.
8.03. Tenant covenants and agrees to pay, and to indemnify the
Landlord against, all legal costs and charges, including counsel fees, lawfully
and reasonably incurred in obtaining possession of the Demised Premises after
default by Tenant or after Tenant's default in surrendering possession upon the
expiration or earlier termination of the term of this Lease or enforcing any
covenant or agreement of Tenant herein contained.
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<PAGE> 16
ARTICLE 9
Repairs
9.01. Tenant shall maintain and keep the Demised Premises in
first-class order and repair and make all such repairs and replacements as may
be necessary in order to maintain the Improvements in a condition suitable for
the operation and conduct of Tenant's business therein, but excluding from
Tenant's obligations such repairs and replacements made necessary by damages
caused by fire and the perils covered by the usual policy of extended coverage
insurance in effect in the area where the Demised Premises are located.
Notwithstanding anything to the contrary contained herein, such obligation of
Tenant shall include, without limitation, such current repairs, maintenance and
replacements as are required to keep the Demised Premises in first-class order
and repair, including, without limitation, the following: sidewalks and
blacktopping, heating and air conditioning systems and equipment, lighting and
electrical systems and equipment, water, power, and plumbing systems and
equipment, roofs, walls, floors, ceilings, and windows, and also shall include,
without limitation, periodic painting and general refurbishing so as to maintain
the Demised Premises at all times in an attractive, clean and pleasing
appearance. Tenant shall assign to Landlord all contractors' guarantees received
by Tenant in connection with repairing the Demised Premises.
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<PAGE> 17
9.02. If the Demised Premises shall be damaged by fire, explosion,
perils insured against by Landlord's standard fire and extended coverage
insurance policy, casualty, or other cause or happening or if any lawful
authority shall order demolition or removal of any structure covered by this
Lease, so as-to render them, in Landlord's reasonable discretion, substantially
unfit in their entirety for Tenant's proposed use, then this Lease, at
Landlord's option, shall terminate and Tenant's obligation to pay rent shall
cease, and any unearned rent paid in advance shall be refunded to Tenant.
If the Demised Premises shall be partially destroyed by fire,
explosion, or perils insured against by Landlord's standard fire and extended
coverage insurance policy, or if Landlord shall not have exercised the above
option to terminate, then the Demised Premises shall be restored by Landlord and
a just proportion of the basic rent specified shall abate until they shall have
been restored and put in proper condition for Tenant's use and occupancy.
9.03. Tenant at its sole cost and expense shall comply with all
laws, rules and regulations of any applicable governmental authority as related
to Tenant's use and occupancy of the Demised Premises, or any part thereof and
all orders, rules and regulations of the cognizant board of Fire Underwriters or
any other body hereafter exercising similar functions, as related to Tenant's
use and occupancy of the Demised Premises, or any part thereof.
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<PAGE> 18
Tenant shall likewise observe and comply with the requirements of all policy of
public liability, fire and other insurance at any time in force with respect to
the Demised Premises.
9.04. 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 made by Tenant, then Landlord agrees, upon written demand by Tenant, to
assign to Tenant all its right to enforce such warranty or guaranty to the
extent only that the same relates to the defect in question.
ARTICLE 10
Authorized Use
10.01. Tenant shall use and occupy the Demised Premises for the
purposes only of maintaining an automobile dealership, and related purposes.
ARTICLE 11
Assignment of Lease
11.01. Tenant shall not assign this Lease, or any part thereof, or
sublet all or any part of the Demised Premises without the written consent of
Landlord, and such consent given in any one instance shall not apply to further
subleases or assignments.
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ARTICLE 12
Notices
12.01. All notices, demands, consents and requests required or
permitted to be given or made under this Lease shall be in writing and shall be
deemed to have been properly given if sent by certified or registered mail,
postage prepaid, addressed to Landlord or Tenant, as the case may be, as
follows:
To the Landlord:
Mr. Marshall M. Manor
10837 Quail Covey Rd.
Boynton Beach, Florida 33436
To the Tenant:
Wade Ford, Inc.
3860 South Cobb Drive
Smyrna, Georgia 30080
Either party may change its address by giving notice to the other in
the manner aforesaid.
ARTICLE 13
Changes
13.01. Tenant shall make no changes, additions to, or alterations of
any nature whatsoever in the Demised Premises, or any part thereof, without
Landlord's prior written consent as stated in a notice from Landlord given in
the manner set forth in Article 12, and shall not demolish or destroy the whole
or any part of the Demised Premises.
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<PAGE> 20
13.02. Tenant may, at Tenant's expense, install trade fixtures and
equipment in or upon the Demised Premises provided:
(a) Tenant shall have assumed any and/or all liabilities or
obligations in any way growing out of or connected with such
installations;
(b) such installations, in Landlord's sole discretion, shall
not interfere with construction of the Improvements;
(c) Tenant shall have, prior to such installation, furnished
Landlord with a written schedule of all such trade fixtures and
equipment, and shall have secured written consent for such
installations from Landlord as stated in a notice from Landlord given
in the manner set forth in Article 12;
(d) Landlord shall be authorized to enter the Demised Premises
at any time during business hours to inspect and inventory such trade
fixtures and equipment.
13.03. Tenant may, at any time during the term of this Lease, and
upon the termination of this Lease shall, at Landlord's request, remove all such
trade fixtures and equipment, provided that:
(a) such removal shall be done in a good, careful and
workmanlike manner and in compliance with all applicable laws,
ordinances or regulations
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<PAGE> 21
and any damage to the Demised Premises resulting from such removal
shall be repaired by Tenant at Tenant's sole cost and expense; and
(b) any and all such trade fixtures and equipment not removed
by Tenant prior to the expiration of the term of this Lease shall, at
the election of Landlord, be deemed abandoned by Tenant and all
Tenant's right, title and interest in and to such fixtures and
equipment shall be deemed assigned to Landlord.
ARTICLE 14
Right of Entry
14.01. Landlord, and persons designated by Landlord, during the term
of this Lease, at reasonable times and during usual business hours, may enter
the Demised Premises to view them, and show them for purposes of rental or sale.
14.02. Landlord also shall have the right at all reasonable times
during the term of this Lease to enter the Demised Premises to make inspection,
and to make such repairs and alterations as Tenant is not obliged to make under
this Lease or which Landlord may be required or find desirable to make by reason
of any laws, rules, orders, and regulations of a governmental authority or board
of Fire Underwriters, or by reason of any insurance requirement or by reason of
Landlord performing an obligation of Tenant
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<PAGE> 22
under this Lease which Tenant shall have failed to observe or perform. All
payments made by Landlord and all costs and expenses incurred by Landlord in
connection with performing an obligation of Tenant under this Lease, together
with interest at the rate of the higher of twelve percent per annum or the then
prevailing prime commercial rate announced by the First National Bank of
Atlanta, 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 within ten days after demand.
ARTICLE 15
Condemnation
15.01. If all or a part of the Demised Premises shall be taken by
condemnation, or if Landlord conveys all or a part of the Demised Premises to a
governmental or other body which has the power of condemnation and which has
threatened to exercise such power with respect to all or such part of the
Demised Premises conveyed, and the remaining part of the Demised Premises, in
the opinion of Landlord, shall be insufficient for the uses specified in Article
10.01 hereof, this Lease shall terminate as of the date of the vesting of title
in the condemning authority, or, at Landlord's option, as of the date that
possession shall be taken. Tenant shall not have the right to claim or receive
any damages or to share in any award for the value of this leasehold or
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otherwise, except only for damage or loss suffered by Tenant in connection with
Tenant's trade fixtures and equipment. Basic and Additional Rent shall be
apportioned and the unearned portion thereof shall be refunded to Tenant upon
such termination. If this Lease does not terminate as a result of condemnation,
this Lease shall continue with respect to the untaken part of the Demised
Premises and a just proportion of the Basic Rent shall abate.
ARTICLE 16
Lease Subject to Mortgages
16.01. This Lease is and shall be at all times subject and
subordinate in lien to the lien of any deed to secure debt, mortgage or
mortgages now existing or which Landlord or any subsequent owner of the Demised
Premises shall make covering the Demised Premises and to any and all advances
made or to be made thereunder and to the interest thereon. Tenant shall execute,
acknowledge and deliver upon request all documents demanded by Landlord,
purchaser from Landlord, or any mortgagee, to subordinate this Lease to any deed
to secure debt or mortgage.
16.02. Landlord may at any time during the Lease Term enter into
utility easement agreements affecting portions of the Demised Premises provided
that such easement agreements do not interfere substantially with Tenant's use
of the Demised Premises as an automobile sales and service establishment.
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ARTICLE 17
Waivers and Changes
17.01. 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 or 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.
17.02. 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 Landlord unless signed by the Secretary or an Assistant Secretary of
Landlord or by any other person to whom authority to execute any such instrument
shall be delegated by such Secretary or Assistant Secretary in writing.
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<PAGE> 25
ARTICLE 18
Utilities
18.01. Tenant shall pay or cause to be paid all charges incurred by
Tenant for gas, electricity, light, heat and power and for telephone, protective
and other communication services and for all other public or private utility
services which shall be used, rendered or supplied upon, to or in connection
with the Demised Premises or any part thereof at any time during the term of
this Lease.
ARTICLE 19
Severability
19.01. If any provision of this Lease is illegal or unenforceable,
the remainder of the Lease shall not be affected thereby.
ARTICLE 20
Rights of Successors and Assigns
20.01. Except as otherwise provided in Article 11.01, the terms and
conditions of this Lease shall inure to the benefit of land be binding upon the
parties and their respective heirs, representatives, successors or assigns.
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and caused their seals to be affixed as of the day and year first above written.
WITNESSES: WADE FORD, INC. Lessee
/s/ Howard E. Turner By: /s/ J. C. Arnold, Jr.
- --------------------------- ----------------------------
/s/ Lois M. Mauk Attest:
- ---------------------------
Notary Public
Notary Public, Georgia State at Large
My Commission Expires April 28, 1997
/s/ K.L. Lesta
--------------------------------
Secretary
[SEAL]
WITNESSES: MARSHALL M. MANOR, Lessor
/s/ Howard E. Turner By: /s/ Marshall M. Manor
- --------------------------- ----------------------------
/s/ Lois M. Mauk
- ---------------------------
Notary Public
Notary Public, Georgia State at Large
My Commission Expires April 28, 1997
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<PAGE> 1
EXHIBIT 10.60
LEASE AGREEMENT
LEASE AGREEMENT ("AGREEMENT" or "LEASE") dated the ____day
of_________, 1998 made by and between KIMCO AUTOFUND, LP, a Delaware Limited
Partnership, having an office at 3333 New Hyde Park Road, New Hyde Park, New
York (hereinafter called "LANDLORD") and FRANKLIN FORD MERCURY, INC., a Georgia
corporation having an office at Suite 250, Bldg. B, 5901 Peachtree Dunwoody
Road, Atlanta, GA 30328 (hereinafter called "TENANT").
STATEMENT OF FACTS
Landlord is the fee owner of that certain real property situated in
the State of North Carolina, more fully described in Exhibit A annexed hereto
and by this reference made a part hereof. Landlord desires to lease to Tenant,
and Tenant desires to hire from Landlord, those certain plots, pieces and
parcels of land described on Exhibit A (hereinafter called the "LAND") together
with the building and other structures located thereon thereinafter called the
"IMPROVEMENTS") (the Land and Improvements are hereinafter called the "LEASED
PREMISES").
All capitalized terms used in this Lease, not otherwise defined, shall
have the meanings ascribed to them in Article 42.
NOW, THEREFORE, in consideration of Ten ($10.00) Dollars, each to the
other in hand paid, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, Landlord and Tenant hereby
agree as follows:
ARTICLE 1
DEMISE; TERM
1.1 Landlord hereby leases the Leased Premises to Tenant, and Tenant
hereby hires the Leased Premises from Landlord, upon, and subject to, the
terms, covenants and conditions contained in this Lease.
1.2 The initial Term of Tenant's leasehold estate in and to the Leased
Premises shall be for a period of approximately eighteen (18) years, commencing
upon the date hereof (hereinafter called the "COMMENCEMENT DATE") and expiring
on the eighteenth anniversary of the last day of the month in which the
Commencement Date occurs (hereinafter called the "EXPIRATION DATE"), unless
this Lease shall sooner terminate or expire as hereinafter provided.
<PAGE> 2
1.3 Landlord grants to Tenant the options (the "EXTENSION OPTIONS") to
extend the Term of this Lease for five (5) additional terms of five (5) years
each (the "OPTION TERMS") upon and subject to the terms and conditions set
forth in this Section 1.3. Each Extension Option shall be exercised, if at all,
by written notice given to Landlord at least twelve (12) months prior to the
then scheduled Expiration Date of the Term of this Lease, in which case the
expiration date for the applicable Option Term shall become the Expiration Date
for the Term of this Lease. Anything contained herein to the contrary, an
Extension Option may not be exercised if an Event of Default (as hereafter
defined) exists and is continuing at the time Tenant exercises such Extension
Option or at the commencement date of the additional Term resulting from the
exercise of such Option.
ARTICLE 2
FIXED NET RENT; ADDITIONAL RENT; CPI RENT
2.1 Tenant covenants and agrees to pay to Landlord a "FIXED NET RENT"
under this Lease for each Lease Year during the Term equal to the sum of:
(a) For the first five (5) Lease Years, Fixed Net Rent for the
Leased Premises shall be at the rate of Two Hundred Fifty-Two Thousand Five
Hundred ($252,500) per annum; after the fifth Lease Year Fixed Net Rent shall
be the sum of the Fixed Net Rent for the first Lease Year; plus
(b) The amount of any CPI Rent (as such term is defined in Section
2.4) payable by Tenant to Landlord with respect to such Lease Year pursuant to
the terms of Section 2.6 below. The Fixed Net Rent shall be paid by Tenant to
Landlord in equal monthly installments in advance on the Commencement Date and
on the first day of each and every month thereafter during the Term of this
Lease at Landlord's office, or at such other place and/or to such agent as
Landlord may designate by notice to Tenant, in lawful money of the United
States of America. The first and last installments of Fixed Net Rent payable
under this Lease shall be suitably prorated, if applicable.
2.2 All such sums, charges, costs, expenses and other sums of money
(other than the Fixed Net Rent) as Tenant shall agree to pay under, or pursuant
to, this Lease shall be deemed to be "ADDITIONAL RENT" hereunder, for default
in the payment of which (which default remains uncured after any applicable
notice or grace period) Landlord shall have the same remedies as for a default
in the payment of Fixed Net Rent.
2.3 Tenant shall pay the Fixed Net Rent reserved herein, as well as
the items of additional rent assumed or payable by Tenant pursuant hereto or
hereunder, promptly, without demand therefor, and without any abatement,
setoff, or deduction of any kind whatsoever.
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<PAGE> 3
2.4 For purposes of this Article 2, the following terms shall have the
respective meanings ascribed to them below:
(a) "PRICE INDEX" shall mean, subject to the terms of Section 2.7,
"The Consumer Price Index" for All Urban Consumers (CPI-U)-U.S. City Average,
All Items (1982-84 = 100), issued by the Bureau of Labor Statistics of the
United States Department of Labor;
(b) "CPI COMPUTATION PERIOD" shall mean the period commencing on
the Commencement Date and expiring on the last day of the month in which shall
occur the day preceding the fifth anniversary of the Commencement Date, and
each consecutive five year period thereafter occurring during the balance of
the Term;
(c) "BASE PRICE INDEX" shall mean the Price Index as it exists on
the Commencement Date;
(d) "PERCENTAGE OF CPI INCREASE" shall mean, with respect to each
CPI Computation Period occurring during the Term after the expiration of the
first CPI Computation Period, the percentage, if any, by which the Price Index
existing as of the last day of the prior CPI Computation Period exceeds the
Base Price Index; and
(e) "CPI RENT" shall mean, with respect to each year occurring
during the Term after the expiration of the first CPI Computation Period, an
amount computed by multiplying:
(i) the then aggregate rent for all properties comprising the
Leased Premises with respect to the immediately preceding CPI Computation
Period; by
(ii) the Percentage of CPI Increase with respect to the last
day of the CPI Computation Period in which such year occurs, provided however
that the Percentage of CPI Increase shall not exceed the rate of 3% per annum
for the applicable CPI Computation Period.
2.5 After the expiration of each CPI Computation Period occurring
during the Term and the publication of the appropriate Index, Landlord shall
send a written notice (hereinafter called a "CPI NOTICE") to Tenant, setting
forth the Base Price Index, the Price Index existing as of the last day of the
expired CPI Computation Period, the Percentage of CPI Increase with respect to
the then current CPI Computation Period and the CPI Rent payable by Tenant to
Landlord for each year during the then current CPI Computation Period. Every
CPI Notice given by Landlord shall be conclusive and binding upon Tenant,
unless Tenant shall:
(a) notify Landlord within thirty (30) days after its receipt of
such notice that it disputes the correctness of the computations made thereon,
specifying the particular respects in which such computations are claimed to be
incorrect; and
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<PAGE> 4
(b) submit its dispute to arbitration, in the manner provided in
Article 21, within ninety (90) days after its receipt of the disputed CPI
Notice, if such dispute shall not theretofore be settled by agreement.
Pending the resolution of such dispute by agreement or arbitration as
aforesaid, Tenant shall commence to pay the CPI Rent set forth in such CPI
Notice, but such payment shall be without prejudice to Tenant's position.
2.6 In consideration of the length of the Term of this Lease, Tenant
shall pay to Landlord as a part of the Fixed Net Rent reserved in this Lease,
with respect to each year occurring after the expiration of the first CPI
Computation Period, the annual CPI Rent applicable during the CPI Computation
Period in which such year occurs, which applicable annual CPI Rent shall be
payable in equal monthly installments in advance. In the event that, following
the commencement of any CPI Computation Period (other than the first CPI
Computation Period), the CPI Rent payable by Tenant during such CPI Computation
Period shall not have been fixed in a CPI Notice given by Landlord to Tenant,
Tenant shall continue to pay the monthly installments on account of the CPI
Rent, if any. applicable during the preceding CPI Computation Period and,
within ten (10) days after the receipt of a CPI Notice. Tenant shall pay the
CPI Rent for each month prior to the month following the giving of such notice.
2.7 In the event that the Price Index ceases to use the 1982-84
average of 100 as the basis of calculation, or if a substantial change is made
in the term of, or items contained in, the Price Index, the Price Index shall
be adjusted to the figure that would have been arrived at had the change in the
manner of computing the Price Index in effect as of the Commencement Date not
occurred. In the event that such Price Index (or a successor or substitute
index) is not available, a reliable governmental or other non-partisan
publication evaluating the information theretofore used in determining the
Price Index shall be used.
2.8 Landlord's failure to prepare and deliver a CPI Notice with
respect to any period, or Landlord's failure to make a demand, shall not in any
way cause Landlord to forfeit or surrender its rights to collect the CPI Rent
payable hereunder, provided no adjustment in CPI rent shall be made more than
24 months after the year in question.
ARTICLE 3
IMPOSITIONS AND CHARGES
3.1 Tenant shall, as additional rent, pay and discharge:
(a) all real estate taxes, assessments, water charges, water meter
charges (including, without limitation, any expenses incident to the
installation, repair or replacement of any water meter), sewer rents, sewer
charges and all other charges, taxes, rents, levies and sums of every kind or
nature whatsoever, extraordinary as well as ordinary, whether
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<PAGE> 5
or not now within the contemplation of the parties, as shall, during the Term,
be imposed by any governmental public authority upon, or become a lien in
respect of, the Leased Premises, any Improvement situated on the Leased
Premises, or any part thereof, or upon any sidewalk or street in front of or
adjacent to the Leased Premises, or that may become due and payable with
respect thereto, and any and all taxes, assessments and charges levied,
assessed, or imposed upon the Leased Premises in lieu of, or in addition to,
the foregoing, under or by virtue of any present or future laws, rules,
requirements orders, directives, ordinances, or regulations of the United
States of America, or of the State, County, Town, Village, or City government,
or of any municipal bureau, department, or other lawful authority whatsoever;
(b) all charges for fire alarm service, gas, electricity, steam
and all other public utility or similar service or services furnished during
the Term to the Leased Premises, any Improvement situated on the Leased
Premises, or any part thereof, all fees and charges of the Federal, State,
County, Town, Village, or City government, or of any municipal bureau,
department, or other lawful authority whatsoever, for the construction,
maintenance or use of any street or sidewalk adjacent to the Leased Premises
and all fees and charges for the construction, maintenance, use, or occupancy,
during the Term, of the Leased Premises, any Improvement now or hereafter
situated on the Leased Premises, or any part thereof; and
(c) all taxes and assessments that shall or may, during the Term,
be charged, levied, assessed, or imposed upon, or become a lien upon, the
personal property of Tenant used in connection with the operation of the Leased
Premises, any Improvement situated on the Leased Premises, or any part thereof,
or in connection with Tenant's business conducted thereon or therein.
Nothing herein contained shall be construed so as to require Tenant to pay, or
be liable for any gift, inheritance, estate, franchise, income, profits,
capital, or similar tax imposed upon Landlord, unless such tax shall be imposed
or levied upon, or with respect to, the rents payable to Landlord hereunder in
lieu of one or more of the charges or impositions described in subsection (a),
(b) and/or (c) above, in which event Tenant covenants and agrees to pay such
tax as if the Leased Premises were the only property owned by Landlord.
3.2 Tenant shall be deemed to have complied with the requirements of
Section 3.1 if Tenant shall:
(a) pay each such imposition or charge prior to the expiration of
the period within which payment is permitted without penalty or interest;
(b) promptly procure an official receipt from the appropriate
taxing authority, if available, or other evidence of payment, evidencing each
such payment; and
(c) within forty-five (45) days after the expiration of the
payment period described in subsection (a) above, and upon Landlord's request
therefor, exhibit to
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<PAGE> 6
Landlord such official receipt, or such other evidence of payment as Landlord
shall reasonably request.
In the event that, at any time during the Term of this Lease, either:
(i) Tenant shall fail to pay any such imposition or charge as
and when provided in subsection (a) above;
(ii) Tenant shall fail to deliver to Landlord any receipt or
other evidence of payment required to be delivered to Landlord pursuant to the
term of subsection (c) above on or before the date when the same is required to
be delivered pursuant to the terms thereof;
(iii) any of the events set forth in subsections (a) through
(e) of Section 15.1 shall occur; and/or
(iv) an Event of Default (as such term is defined in Section
16.1) shall occur,
then, notwithstanding anything to the contrary provided in this Section 3.2,
Landlord shall have the right, at Landlord's option and in addition to all
other rights and remedies that shall be available to Landlord as a result
thereof, to require Tenant to:
(x) promptly deposit with Landlord funds for the payment of
all then current impositions and charges of the nature described in Section 3.1
required to be paid by Tenant hereunder; and
(y) also, to the extent Landlord is required to do so by an
institutional lender or lenders holding a mortgage on any portion of the Leased
Premises, deposit one-twelfth (1/12) of the current impositions and charges
(with respect to such portion), as estimated by Landlord but in no event less
than those of the preceding year(s) if the current amount(s) thereof have not
been fixed, on the first day of each month in advance, except that all
additional funds required for any payments thereof shall also be deposited as
aforesaid on the first day of the final month during which, or at the end of
which, a payment is due and payable without interest or penalty.
3.3 In any action or proceeding involving any question arising under
the provisions of this Article 3, a search, certificate, or receipt made or
given by any person or entity legally authorized to make or give the same,
certifying or showing, or purporting to certify or show, that any charge or
imposition referred to in this Article 3 is due and payable on the date of said
search or certificate, or has been paid as of the date of such receipt, shall
be prima facie evidence that such charge or imposition was due and payable, a
lien upon, or a charge against, the Leased Premises or the Improvements, or
paid, as the case may be, Landlord or Tenant shall
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be protected in any action that it may take in reliance upon any such
certificate, search, or receipt.
3.4 Tenant may, at its own expense, contest in good faith and by
appropriate proceedings, any tax, assessment, imposition or charge referred to
in this Article 3, and to appeal any adverse determination, provided that
Tenant shall have deposited with the fee mortgagee with respect to the Leased
Premises (or, if the Leased Premises are not subject to a fee mortgage, with a
national title insurance company designated by Landlord), if Landlord so
requires the amount of the item so contested (or, where permitted by law, paid
the same under protest), together with such additional sums as may reasonably
be required to cover interest or penalties accrued and to accrue on any such
item or items, and provided further, that no Event of Default shall have
occurred and be continuing under the terms of this Lease. Any refund obtained
by Tenant or Landlord (net of recovery costs) on account of taxes paid by
Tenant shall be Tenant's sole property. If such contest involves real estate
taxes, any additional taxes, interest, court costs, penalties and/or other
charges directed to be paid as a result of such contest shall be forthwith
deposited by Tenant with the fee mortgagee or title company (as the case may
be), if Landlord so requires, to enable Landlord to comply with the
adjudication of said contest. Nothing herein contained, however, shall relieve
Tenant of the obligation and duty to pay and discharge such contested items, as
finally adjudicated, with interest and penalties, and all other charges
directed to be paid in or by any such adjudication, less such sums as shall
have been deposited as aforesaid. Any such contest or legal proceeding shall be
begun by Tenant as soon as reasonably possible after the imposition of any
contested item and shall be prosecuted to final adjudication with all
reasonable promptness and dispatch except, however, that Tenant may, in its
discretion, consolidate any proceeding to obtain a reduction in the assessed
valuation of the Leased Premises and the Improvements for real estate tax
purposes relating to any tax year with any similar proceeding or proceedings
relating to one or more other tax years. Anything to the contrary herein
notwithstanding, Tenant shall pay all such contested items before the time when
the Leased Premises or any part thereof might be forfeited as a result of
nonpayment.
3.5 At the commencement and expiration of the Term, all impositions
and charges referred to in this Article 3 for the period or periods in which
the Commencement Date or the Expiration Date (as the case may be) shall occur
whether accrued or prepaid (as the case may be), shall be apportioned between
Landlord and Tenant in accordance with the usual practice and custom then in
effect in the City, County and State where each property comprising the Leased
Premises is located.
3.6 If, by law, any assessment for a public improvement with respect
to the Leased Premises or any Improvements situated thereon is payable, at the
option of the taxpayer, in installments, Tenant may, whether or not interest
shall accrue on the unpaid balance thereof, pay the same, and any accrued
interest or any unpaid balance thereof, in installments, as each installment
becomes due and payable, but in any event before any fine, penalty, interest,
or cost may be added thereto for non-timely payment of any installment or
interest.
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ARTICLE 4
SUBORDINATION
4.1 Subject to the terms and conditions contained herein, this Lease
is subject and subordinate to all ground, overriding, or underlying leases, as
well as, at the election of the holder of any such lease or mortgage, to all
mortgages that may now or, subject to the provisions of Sections 4.2 and 4.3
below, hereafter affect such leases or the Leased Premises, and to all
renewals, modifications, consolidations, replacements and extensions of any
such leases and/or mortgages. This Section 4.1 shall be self-operative, and no
further instrument of subordination shall be required by any such ground or
underlying lessor or mortgagee who so elects. In confirmation of such
subordination, Tenant shall execute promptly any reasonable certificate that
Landlord, or any such lessor or mortgagee, may request.
4.2 Landlord shall use diligent, good faith efforts to obtain a
non-disturbance agreement substantially in the form hereinafter described from
any existing mortgagees, but the failure to obtain the same shall not be a
Landlord default, so long as Landlord uses good faith, diligent efforts.
Landlord represents to Tenant that as of the date of this Lease there are no
ground, overriding or underlying leases affecting the Leased Premises which are
superior to this Lease. The subordination of this Lease to ground, overriding,
or underlying leases entered into after the date of this Lease is subject to
the express conditions that, so long as this Lease shall be in full force and
effect in the event of termination of the term of any such ground, overriding,
or underlying lease by reentry, notice, summary proceedings or other action or
proceeding, or if the term of such ground, overriding, or underlying lease
shall otherwise or expire before the termination or expiration of the Term of
this Lease:
(a) Tenant shall not be made a party to any action or proceeding
to remove or evict Tenant or the tenant under such ground, overriding, or
underlying lease, or to disturb its possession by reason of, or based upon,
such termination or expiration of the term of such ground, overriding, or
underlying lease; and
(b) this Lease shall continue in full force and effect as a direct
lease between Tenant and the then owner of the fee or the less or of such
ground, overriding, or underlying lease, as the case may be, upon all of the
obligations of this Lease, except that said owner or lessor shall not:
(i) be liable for any previous act or omission of any prior
landlord (including Landlord) under this Lease;
(ii) be subject to any offset that shall have theretofore
accrued to Tenant against Landlord; or
(iii) be bound by:
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(x) any previous modification of this Lease, not
expressly provided for in this Lease, where Tenant shall have, prior to such
modification, received notice of such ground, overriding, or underlying lease;
or
(y) any previous prepayment of more than one month's
fixed rent or any additional rent then due,
unless such modification or prepayment shall have been expressly approved in
writing by the owner of the fee or lessor of the superior lease.
4.3 The subordination of this Lease to the liens of mortgages granted
or modified by Landlord after the date of this Lease is subject to the express
conditions that, so long as this Lease shall be in full force and effect:
(a) Tenant shall not be named or joined in any action or
proceeding to foreclose any such mortgage;
(b) such action or proceeding shall not result in a cancellation
or termination of the Term of this Lease:
(c) if the holder of any such mortgage becomes the owner of the
fee or the assignee of any ground or underlying lease referred to in Section
4.1, or the lessee of any other lease given in substitution therefor, or if the
Land or the Improvements shall be sold as a result of any action or proceeding
to foreclose such mortgage, this Lease shall continue in full force and effect
as a direct lease between Tenant and the then owner of the fee, the then lessee
of such ground, overriding, or underlying lease, the lessee of any other lease
given in substitution therefor, or such purchaser of the Land or Building. as
the case may be, upon all of the obligations of this Lease, except that such
owner, lessee, or purchaser shall not:
(i) be liable for any previous act or omission of any prior
landlord (including Landlord) under this Lease:
(ii) be subject to any offset, not expressly provided for in
this Lease, that shall have theretofore accrued to Tenant against Landlord; or
(iii) be bound by:
(x) any previous modification of this Lease where
Tenant shall have, prior to such modification, either received notice of such
mortgage; or
(y) any previous prepayment of more than one month's
fixed rent or any additional rent then due,
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unless such modification or prepayment shall have been expressly approved in
writing by the holder of the superior mortgage through, or by reason of which,
such owner, lessee, or purchaser shall have succeeded to the rights of Landlord
under this Lease.
4.4 If Tenant shall give Landlord any notice of a claimed default or
breach by Landlord, Tenant agrees to give a similar written notice to the
holder(s) of record of any fee mortgage(s) with respect to the Leased Premises,
provided that Tenant has received written notice of the existence of such fee
mortgage(s), including the name and address of the then holder(s) of such
mortgage(s). Such notice(s) to be given by Tenant to the holder(s) of record of
any fee mortgage(s) shall be sent by registered or certified mail to such
holder(s) at their respective addresses specified in the mortgage instruments,
or to any different address that they may designate for the purpose by written
notice given to Tenant in the manner provided in this Lease for notices to be
given to Tenant. Such mortgagee(s) shall be permitted to correct or remedy
Landlord's breach or default within thirty (30) days after the last day on
which Landlord may do so, and with like effect as if Landlord had done so. In
the event, however, that such breach or default is of a nature that the same
cannot be corrected or remedied by such mortgagee(s) without first obtaining
possession of the Leased Premises from Landlord, and such mortgagee(s) inform
Tenant that it (they) intend to cure following the obtaining of possession, the
time hereinbefore allowed to such mortgagee(s) to cure shall be extended for
the period necessary to obtain possession of the Leased Premises from Landlord.
Tenant's failure to give any holder of a fee mortgage the notice provided in
this paragraph shall not be deemed a default by Tenant under this Lease, but no
notice given by Tenant to Landlord of any claim, default, or breach by Landlord
shall be deemed legally effective until Tenant shall have given such notice to
any and all such holders of fee mortgages with respect to the Leased Premises.
4.5 In the event that any mortgagee comes into possession or ownership
of the fee title to the Leased Premises, or acquires the leasehold interest of
Landlord, by foreclosure of its mortgage, by proceedings on the underlying bond
or debt, or otherwise, Tenant agrees to attorn to such mortgagee as its new
lessor. In no event, however, shall Tenant be entitled to credit against such
mortgagee in possession of the Leased Premises, or against any mortgagee or
other party that otherwise becomes the new lessor of Tenant as provided in this
Section 4.5, for any Fixed Net Rent paid by Tenant to the predecessor of such
mortgagee or other party for more than one (1) month in advance or any
additional rent then due. The provisions for attornment hereinbefore set forth
in this Article 4 shall not require the execution of any further instrument.
However, if the holder of any fee mortgage and/or any party to whom Tenant
agrees to attorn as aforesaid reasonably requests a further instrument
expressing such attornment, Tenant agrees to execute the same in form
reasonably acceptable to such mortgagee and/or party within fifteen (15) days
after a request made do so in accordance with the provisions of this Lease,
provided such instrument does not increase Tenant's obligations or adversely
affect Tenant's rights.
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ARTICLE 5
USE OF THE LEASED PREMISES
5.1 Except as otherwise provided in this Article 5, Tenant shall be
permitted to use the Leased Premises as an automobile dealership, subject,
however to:
(a) the laws, ordinances, orders, rules and regulations
(including, without limitation, zoning ordinances) now in effect or hereafter
adopted by all governmental and quasi-governmental authorities having or
asserting jurisdiction; and
(b) such conditions, restrictions and other encumbrance, if any,
to which the Leased Premises are subject at the date of this Lease,
5.2 Notwithstanding anything to the contrary provided in Section 5.1,
Tenant shall not use or occupy the Leased Premises, permit or suffer the same
to be used or occupied and/or do, or permit or suffer anything to be done, in
or on the Leased Premises or any part thereof, that would, in any manner or
respect:
(a) violate any certificate of occupancy in force relating to any
Improvement situated on the Leased Premises (unless Tenant obtains an amendment
to the certificate of occupancy in order to avoid such violation);
(b) make void or voidable any insurance then in force with respect
to the Leased Premises, or render it impossible to obtain fire or other
insurance thereon required to be furnished by Tenant under this Lease;
(c) cause structural or other injury to any of the Improvements,
or constitute a private or public nuisance or waste; and/or
(d) render the Leased Premises incapable of being used or occupied
after the expiration or sooner termination of the Term of this Lease for the
purposes for which the same were used and occupied on the Commencement Date
(such use being automotive sales, servicing, leasing, financing and automotive
insurance).
5.3 If Tenant proposes to change the use (including discontinuing any
use) at a particular location as an automobile dealership, Tenant shall provide
Landlord with written notice, including a description of the proposed use, the
name and credit information of any user, the date when the use is proposed to
change, and the basic business terms of the proposed transaction. Within 30
days after receipt of Tenant's notice, (i) Landlord shall inform Tenant whether
or not Landlord consents to the change in use or (ii) Landlord may, at its
option, notify Tenant that it has elected to recapture such portion of the
Leased Premises, in which event this Lease shall terminate as to such portion
at the end of such 30 day period, or such later date as Tenant proposed to
change the use. If Landlord does not elect the option in clause (ii) of the
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preceding sentence, Landlord's consent shall not be unreasonably withheld.
Among the factors Landlord may consider are whether the change may cause the
loss of certain "grandfathered" zoning or use rights to use such location as an
automobile dealership.
5.4 Nothing contained in this Lease, and no action or inaction by
Landlord, shall be deemed or construed to mean that Landlord has granted to
Tenant any right, power, or authority to do any act, or to make any agreement
that may create, give rise to, or be the foundation to any right, title,
interest, lien, charge, or other encumbrance upon the estate of Landlord in the
Leased Premises.
ARTICLE 6
NO REPRESENTATIONS BY LANDLORD
6.1 (a) Tenant acknowledges to Landlord that Tenant has examined
Landlord's title to, as well as the physical condition of, the Leased Premises
prior to the execution and delivery of this Lease and has found the same to be
satisfactory to it for all purposes hereof. In view thereof, Tenant has
accepted the Leased Premises "AS IS" and "WHERE IS" without any representation
or warranty by Landlord of any kind or nature, including, without limitation as
to Landlord's title to the Leased Premises, the physical and environmental
condition of the Leased Premises or the use or occupancy that may be made of
the Leased Premises.
(b) Tenant assumes the sole responsibility for the condition,
operation, maintenance and management of the Leased Premises, and Landlord
shall not be required to furnish any facilities or services or make any repairs
or alterations thereto. Without limiting the foregoing, Tenant shall have no
claims or recourse against Landlord with respect to the condition (including
environmental conditions) or permitted uses of the Leased Premises as of the
date of this Lease, and Tenant hereby waives any such claims against Landlord.
ARTICLE 7
LANDLORD NOT LIABLE FOR FAILURE OF WATER SUPPLY, ETC.
7.1 Landlord shall not be liable for:
(a) any failure of water supply, gas, or electric current, nor for
any injury or damage to person or property for any reason whatsoever,
including, without limitation, that caused by or resulting from:
(i) hurricane, tornado, flood, wind, or similar storms or
disturbances; or
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(ii) the leakage or flow of gasoline, oil, gas, electricity,
steam, water, rain, or snow from the street, sewer, gas mains, tanks, wires,
lines, any subsurface area, any part of the Improvement pipes, appliances,
plumbing works, or any other place; or
(b) any interference with light or other incorporeal hereditaments
by anybody, or caused by operations by or of any public or quasi-public work.
ARTICLE 8
TENANT TO REPAIR
8.1 Tenant shall take good care of the Leased Premises and of the
Improvements now or hereafter situated thereon, both inside and outside, and
keep the same and all parts thereof (including, without limitation the
generality thereof, the roofs, foundations and appurtenances thereto, together
with any and all alterations, additions and improvements therein or thereto) in
good order and condition, suffering no waste or injury. Subject to the terms of
Section 8.3 and Articles 13 and 20 below. Tenant shall, at Tenant's expense,
promptly make all needed repairs and replacements, structural or otherwise,
ordinary and extraordinary, in and to the Improvements now or hereafter erected
upon the Leased Premises, including, but not limited to sidewalks, curbs,
water, electric lines, and gas connections, pipes and mains, and all other
fixtures, machinery and equipment now or hereafter belonging to or used in
connection with the Leased Premises (whether or not located thereon) or used in
the operation of the Improvements. All such repairs and replacements shall be
of good quality sufficient for the proper maintenance and operation of the
Leased Premises and the Improvements thereon, and shall be constructed and,
subject to Section 9.2 below, installed in compliance with all requirements of
all governmental authorities having jurisdiction thereof, and of the Board of
Fire Underwriters or any successor thereof. Tenant shall not permit the
accumulation of waste or refuse matter, nor permit anything to be done upon the
Leased Premises or the Improvements that would invalidate or prevent the
procurement of any insurance policies that may at any time be required pursuant
to the provisions of Article 12, Tenant shall not obstruct, or permit the
obstruction of any street, road, walk, or sidewalk located on or adjoining the
Leased Premises, except as may be permitted by all governmental authorities
having jurisdiction thereof, and shall keep any sidewalks adjoining the Leased
Premises clean and free of snow and ice.
8.2 Landlord shall not, under any circumstance, be required to build
on the Leased Premises, or to make any repairs, restorations, replacements,
alterations, or renewals of any nature or description to the Leased Premises or
to any of the Improvements, whether interior or exterior, ordinary or
extraordinary, structural or nonstructural? foreseen or unforeseen, to make any
expenditure whatsoever in connection with this Lease, or to inspect or maintain
the Leased Premises in any way. Tenant hereby waives the right to make repairs,
restorations, replacements, alterations, or renewals at the expense of Landlord
pursuant to any law. Additionally, Tenant shall not make any claim or demand
upon or bring any action against Landlord for any loss, cost, injury, damage,
or other expense caused by any failure or defect, structural or non-structural,
of the Leased Premises or any part thereof.
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8.3 Notwithstanding anything to the contrary contained in Section 8.1
above, but subject in all respects to the provisions of Section 8.2 above, and
further provided that Tenant is not in default under this Lease beyond any
applicable notice and/or grace period, Tenant shall have the right to elect not
to make any structural repair or structural repairs in or to the Leased Premises
(however, Tenant shall continue to be obligated with respect to nonstructural
repair or repairs) during the last two (2) years of the Term, provided, and upon
the conditions, that:
(a) Tenant shall give to Landlord written notice of such election,
which notice shall describe the repair or repairs to which such notice relates
with reasonable detail and set forth Tenant's good faith estimate of the cost
and expense of performing the same;
(b) if the need for such repair or repairs shall result from
condemnation, then, notwithstanding anything to the contrary provided in this
Lease, Tenant shall have no right to assert any claim against the condemning
authority, or to receive any award or damages therefrom, for consequential
damage to the portion of the Leased Premises not taken or for restoration costs
and/or expenses (all such claims and rights to claim, as well as all such awards
and/or damages, in such circumstances being hereby irrevocably and
unconditionally assigned by Tenant to Landlord), which awards and/or damages
shall be payable to Landlord in addition to the amounts described in
subsections (a) and (b) of Section 20.3 below and in reduction of any amount
payable to Tenant pursuant to subsection (c) of Section 20.3, and the terms of
Section 20.3 shall not apply thereto;
(c) if the need for such repair or repairs shall result from the
happening of an event as to which insurance is, or is required to be,
maintained by Tenant pursuant to the terms of this Lease, then, notwithstanding
anything to the contrary provided in this Lease:
(i) Landlord shall be entitled to adjust the loss with
Tenant's insurance carrier and to settle the same (in Tenant's name, if
required), without obtaining Tenant's consent thereto;
(ii) Landlord shall be entitled to receive and retain for its
own account any and all insurance proceeds becoming available in connection
therewith (Tenant hereby irrevocably and unconditionally assigning to Landlord
all of Tenant's right, title and interest in and to such proceeds), and any
such proceeds received by Tenant shall be received as trust funds for
Landlord's account and shall be promptly remitted by Tenant to Landlord; and
(iii) in the event that the proceeds of insurance provided by
Tenant actually received by Landlord shall be insufficient to compensate
Landlord for the entire loss, whether due to an insufficiency in coverage or
otherwise, Tenant shall pay to Landlord, as additional rent hereunder within
ten (10) days after Landlord's demand therefor, the amount of the shortfall;
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(d) neither the failure of such repair or repairs to be made nor
Landlord's election to make the same pursuant to subsection (f) below shall:
(i) entitle Tenant to terminate this Lease;
(ii) permit Tenant to a reduction or abatement of, or a credit
or off-set against, the full Fixed Net Rent and/or additional rent otherwise
thereafter becoming due hereunder; nor
(iii) otherwise affect or diminish, in any manner or respect
whatsoever, any of Landlord's rights and/or Tenant's other obligations under
this Lease;
(e) notwithstanding the foregoing, Tenant shall make such repair
or repairs at its sole cost and expense, as set forth in Section 8.1, if (x)
the need for such repair or repairs shall result other than from condemnation
and other than from the happening of an event as to which insurance is, or is
required to be, maintained by Tenant pursuant to this Lease and (y) the failure
to make such repair or repairs shall or could:
(i) create or lead to an unsafe condition of any nature
whatsoever;
(ii) result in the invalidation of any policy or policies of
insurance maintained, or required to be maintained, by Tenant pursuant to the
terms of this Lease, or result in the reduction of the coverage provided, or to
be provided thereunder; or
(iii) constitute a crime or an offense punishable by fine or
imprisonment (including, without limitation, result in the filing of a
violation against the Leased Premises or the issuance of any other order or
directive to make such repair or repairs by any governmental agency or
authority having jurisdiction); and
(f) if the failure to make such repair or repairs shall or could
constitute a default under any fee mortgage or if the nature of such repair or
repairs is such that Tenant would be required to make the same pursuant to
subsection (e) above but for the provisions of sub-subsection (x) of such
subsection (e), Tenant shall, if Landlord so elects in its sole discretion,
afford Landlord with all necessary and/or desirable access to the Leased
Premises so as to enable Landlord to perform such repair or repairs for its own
account, and Tenant shall otherwise cooperate with Landlord in connection with
the same in all reasonable respects.
In the event that Landlord shall make a demand upon Tenant pursuant to
sub-subsection (iii) of subsection (c) above and Tenant shall dispute the
amount claimed by Landlord, the dispute shall be resolved, upon the petition of
either party, by an arbitration conducted by the parties in accordance with the
provisions of Article 21 below. Tenant's obligations under subsections (b) and
(c) and, if applicable, subsection (e) of this Section 8.3 shall survive the
expiration or sooner termination of the Term.
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ARTICLE 9
TENANT TO COMPLY WITH LAWS; ENVIRONMENTAL MATTERS
9.1 Tenant shall, at Tenant's expense, promptly comply with:
(a) the requirements of every applicable statute, law, ordinance,
regulation, or order now or hereafter made by any Federal, State, County,
municipal, or other public body, department, bureau, officer or authority, with
respect to:
(i) the Leased Premises, the Improvements and appurtenances
thereto;
(ii) the use or occupation of the Leased Premises and the
Improvements, including the making of any alteration or addition in or to any
structure upon, connected with, or appurtenant to, the Leased Premises; and
(iii) the removal of any encroachment, but only if required to
do so by order of any court, department, or bureau having jurisdiction:
(b) the requirements of all easements, restrictions and other
documents existing of record as of the date of this Agreement of Lease and/or
hereafter granted by Landlord with the prior written consent or joinder of
Tenant, which consent or joinder shall not be unreasonably withheld or delayed
by Tenant; and
(c) any applicable regulation or order of the Board of Fire
Underwriters, Fire Insurance Rating Organization, or other body having similar
functions whether or not such compliance involves structural repairs or
changes, whether or not such compliance is required on account of any
particular use to which the Leased Premises, the Improvements, or any part
thereof may be put, whether or not any such statute, law, ordinance,
requirement, regulation, or order is of a kind now within the contemplation of
the parties hereto and regardless of the cost thereof.
9.2 Provided that non-compliance therewith shall not constitute a
crime or an offense punishable by fine or imprisonment, and provided, further,
that no Event of Default shall have occurred and be continuing under the terms
of this Lease, Tenant may, at Tenant's expense, contest the validity of any
such law, ordinance, regulation, order, or requirement, and such noncompliance
by Tenant during such contest, provided that such contest shall be diligently
prosecuted, shall not be deemed a breach of this covenant, provided that,
before the commencement of such contest, Tenant shall furnish to Landlord, if
Landlord so requires, either:
(a) the bond of a surety company reasonably satisfactory to
Landlord, which bond shall:
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(i) be as to its provisions and form, satisfactory to
Landlord, but in any event such as will cause the discharge of any lien on
Landlord's fee title to the Leased Premises;
(ii) be in an amount at least equal to one hundred and ten per
centum (110%) of the estimated cost of such compliance but not less than
required to discharge any such lien; and
(iii) indemnify Landlord against the cost of such compliance,
as well as against all liability for any damages, interests, penalties and
expense (including reasonable fees of attorneys or counsel), resulting from or
incurred in connection with such contest or non-compliance: or
(b) other security, in lieu of such bond that is reasonably
satisfactory to Landlord as to form and amount.
9.3 (a) Subject to Section 9.2 above, Tenant shall conduct, and cause
to be conducted, all operations and activity at the Leased Premises in
compliance with, and shall in all other respects applicable to the Leased
Premises comply with, all applicable present and future federal, state,
municipal and other governmental statutes, ordinances, regulations, orders,
directives, guidelines and other requirements, and all present and future
requirements of common law, concerning the environment (hereinafter called
"ENVIRONMENTAL STATUTES") including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Sections 9601
et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Sections 9601 et
seq., the Clean Air Act, 42 U.S.C. Sections 7401 et seq., and the Toxic
Substances Control Act, 15 U.S.C. Sections 2601 et seq., those relating to the
generation, use, handling, treatment, storage, transportation, release,
emission, disposal, remediation or presence of any material, substance, liquid,
effluent or product, including, without limitation, hazardous substances,
hazardous waste or hazardous materials, those concerning conditions at, above or
below the surface of the ground and those concerning conditions in, at or
outside of buildings.
(b) Tenant, in a timely manner, shall obtain and maintain in full
force and effect all permits, licenses and approvals, and shall make and file
all notifications and registrations, as required by Environmental Statutes.
Tenant (subject to Tenant's right to contest as elsewhere provided) shall at
all times comply with the terms and conditions of any such permits, licenses,
approvals, notifications and registrations.
(c) Tenant shall provide to Landlord copies of the following,
forthwith after each shall have been submitted, prepared or received by Tenant
or any affiliate of Tenant: (i) all applications and associated materials
submitted to any governmental agency relating to any Environmental Statute;
(ii) all permits, licenses, approvals, and amendments or modifications thereof,
obtained under any Environmental Statute; and (iii) any notice of violation,
summons, order, or complaint, received by Tenant or any occupant of the Leased
Premises pertaining to compliance with any Environmental Statute.
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(d) Tenant, without the prior written consent of Landlord, shall
not install or cause, suffer or permit the installation of, any above or
underground storage tank at the Leased Premises. If Tenant does install or
cause, suffer or permit the installation of any such tank, Tenant shall comply
with all applicable laws as to its installation, maintenance, operation and
closure, including any requirement for the maintenance of liability insurance
with respect to risks associated with any such tank. If such liability
insurance is required to be maintained, Landlord shall be named as an
additional insured thereunder. Upon termination of this Lease, Landlord shall
have the option of requiring that Tenant, at Tenant's sole cost and expense,
remove any tank installed by Tenant and any associated contaminated material
and other contamination and perform all tests required by Landlord and any
required by Environmental Statutes and any other applicable governmental
requirements and provide Landlord and all required government agencies with
the results of such tests in such form as reasonably required by Landlord or
as required by law.
(e) Tenant shall not cause or suffer or permit to occur at, in, on
or under the Leased Premises any generation, use, manufacturing, refining,
transportation, emission, release, treatment, storage, disposal, presence or
handling of hazardous substances, hazardous wastes or hazardous materials (as
such terms are now or hereafter defined under any Environmental Statute)
(herein called "HAZARDOUS SUBSTANCES"), except that construction materials
(other than asbestos or polychlorinated biphenyls), office equipment, fuel and
similar products and cleaning solutions, and other maintenance materials that
are or contain Hazardous Substances, and other Hazardous Substances which are
contained in a suitable and safe manner, may be used, generated, handled or
stored on the Leased Premises, provided such is incident to and reasonably
necessary for the operation and maintenance of the Leased Premises as an
automobile dealership and service center or other uses permitted hereunder and
is in compliance with all Environmental Statutes and all other applicable
governmental requirements. Should any release of any Hazardous Substance occur
at the Leased Premises, Tenant shall promptly contain, remove and dispose of
off the Leased Premises, such Hazardous Substances, and any material that was
contaminated by the release and remedy and mitigate all threats to human health
or the environment relating to such release as and to the extent required by
applicable Environmental Law. When conducting any such measures, Tenant shall
comply with Environmental Statutes.
(f) If the use of the Leased Premises by Tenant, or any operation
or activity conducted at the Leased Premises during the Term of this Lease,
shall be such as requires, under any present or future Environmental Statute,
the obtaining of an approval (herein called an "ENVIRONMENTAL APPROVAL OF
TRANSFER OR CHANGE") by any governmental agency, or an acknowledgment by such
agency that such approval is not required, (i) in order to change or transfer
ownership of the Leased Premises, (ii) in order to change or transfer Tenant's
interest in this Lease or any interest in Tenant or in any entity which
directly or indirectly controls Tenant or (iii) in connection with: (A)
cessation of all or any operations or activity at the Leased Premises for any
reason or (B) a change in or transfer of any operations or activity at the
Leased Premises or (C) the expiration or termination of this Lease (each of the
transactions and occurrences referred to in the foregoing clauses (i), (ii) or
(iii) being hereinafter called a
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"CHANGE"). Tenant, at Tenant's sole cost and expense, shall, in compliance with
all Environmental Statutes, apply for, and prior to the Change deliver to
Landlord, a copy of the required approval or acknowledgment and Tenant shall
perform or cause to be performed all remedial actions required by such
governmental agency for the issuance of the approval, in whole or in part by
reason of Tenant's use of the Leased Premises or operations or activities at
the Leased Premises during the Term of this Lease; provided that as to any
Change which is a change or transfer of ownership of the Leased Premises or of
an interest in Landlord or in any entity which directly or indirectly controls
Landlord, Tenant shall instead (x) promptly comply with any request of Landlord
to provide such information, statements or affidavits as to operations and
activities at the Leased Premises during the Term of this Lease, and as to the
use of the Leased Premises by Tenant, as may be determined by Landlord to be
necessary, (y) either promptly perform or, at the option of Landlord, reimburse
Landlord within 15 days after demand for Landlord's costs of, all remedial
actions required by any governmental agency for issuance of the Environmental
Approval of Transfer or Change and (z) pay, or reimburse Landlord for, all
other costs and expenses which are attributable to the existence of Tenant's
tenancy or to Tenant's use of the Leased Premises or to any operation or
activity at the Leased Premises during the Term of this Lease and were incurred
to obtain such required approval or acknowledgment. Tenant covenants,
represents and warrants that any application, statement or information made or
provided by or through Tenant pursuant to this subsection shall be true and
complete. If there should be an Environmental Statute which requires an
Environmental Approval of Transfer or Change, but such requirement shall not
have been made applicable by Tenant's use of the Leased Premises or operations
or activities conducted at the Leased Premises during the Term of this Lease.
and if an official statement of such non-applicability shall be obtainable from
the applicable governmental agency, then, whether or not the obtaining of such
statement is required by law, Tenant, at Tenant's sole cost and expense, shall
obtain and deliver such statement to Landlord before the change occurs (in the
case of a change described in clause (ii) or clause (iii) above) or promptly
upon request of Landlord (in the case of a change described in clause (i)
above).
(g) Tenant agrees to permit Landlord and its authorized
representatives to enter, inspect and assess the Leased Premises at reasonable
times for the purpose of determining Tenant's compliance with the provisions of
this Section 9.3.
(h) Tenant hereby agrees to indemnify and to hold harmless
Landlord of, from and against any and all expense, loss or liability suffered
by Landlord by reason of Tenant's breach of any of the provisions of this
Section 9.3, including, but not limited to, (i) any and all expenses that
Landlord may incur in complying with any Environmental Statutes, (ii) any and
all costs that Landlord may incur in studying, assessing, containing, removing,
remedying, mitigating, or otherwise responding to, the release of any
Hazardous Substance or waste at or from the Leased Premises, (iii) any and all
costs for which Landlord may be liable to any governmental agency for studying,
assessing, containing, removing, remedying, mitigating, or otherwise responding
to. the release of a Hazardous Substance or waste at or from the Leased
Premises, (iv) any and all fines or penalties assessed, or threatened to be
assessed, upon Landlord by reason of a failure of Tenant to comply with any
obligations, covenants or conditions set forth
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in this Section 9.3, and (v) any and all legal fees and costs incurred by
Landlord in connection with any of the foregoing.
(i) No subsequent modification or termination of this Lease by agreement of the
parties, or otherwise shall be construed to waive, or to modify, any provisions
of this Section 9.3, unless the termination or modification agreement or other
document so states in writing and makes specific reference to this Section 9.3.
ARTICLE 10
INTENTIONALLY OMITTED
10.1 Intentionally omitted.
ARTICLE 11
NET LEASE; NON-TERMINABILITY
11.1 This Lease is a net lease, and the Fixed Net Rent, additional
rent and all other sums payable hereunder to, or on behalf of, Landlord shall
be paid without notice or demand and without setoff, counterclaim, abatement,
suspension deduction, or defense, Landlord and Tenant each hereby further agree
and confirm that, notwithstanding anything to the contrary contained in this
Lease, it is the purpose and intent of both Landlord and Tenant that the rents
payable under this Lease shall be absolutely net to Landlord, so that this
Lease shall yield, net to Landlord, the Fixed Net Rent specified herein in each
year during the Term.
11.2 Except as otherwise expressly provided herein, this Lease shall
not terminate, nor shall Tenant have any right to terminate this Lease or be
entitled to the abatement of any rent or any reduction thereof, nor shall the
obligations hereunder of Tenant be otherwise affected, any present or future
law to the contrary notwithstanding, by reason of:
(a) any damage to, or the destruction of; the Leased Premises, the
Improvements, or any portion thereof, from whatever cause;
(b) the taking of the Leased Premises, the Improvements, or any
portion thereof by condemnation or otherwise, except as, and to the extent,
provided to the contrary in Article 20 below;
(c) the prohibition, limitation, or restriction of Tenant's use of
the Leased Premises, the Improvements, or any portion thereof (including,
without limitation, any diminution in the amount of space usable by Tenant at
the Leased Premises caused by legally required changes in the construction,
equipment, fixture, motors, machinery, operation, or use of the Leased
Premises), or the interference with such use by any private person or entity;
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(d) Tenant's acquisition of the fee ownership of the Leased
Premises or the Improvements; or
(e) any other cause whatsoever, whether similar or dissimilar to
the foregoing, it being the intention of the parties hereto that the Fixed Net
Rent and additional rent reserved hereunder shall continue to be payable in all
events, and the obligations of Tenant hereunder shall continue unaffected,
unless the requirement to pay or perform the same shall be terminated pursuant
to an express provision of this Lease.
11.3 Except as provided in Article 20 below, Tenant waives all rights
now or hereafter conferred by law to:
(a) quit, terminate, or surrender this Lease or the Leased
Premises, the Improvements or any part thereof; or
(b) any abatement, suspension, determent, or reduction of the
Fixed Net Rent, additional rent, or any other sums payable under this Lease,
regardless of whether such rights shall arise from any present or future
constitution, statute, or rule of law.
ARTICLE 12
INSURANCE
12.1 Throughout the Term, Tenant shall, at its own cost and expense:
(a) keep the Improvements insured against loss or damage by fire,
windstorm, and other perils included in so-called "All Risk" or Special Form
Insurance policies and also including coverage for floods, earthquakes, and
sinkholes. Insurance amounts shall be provided for 100% of the full replacement
cost value of buildings and other land improvements. Coverage extensions shall
include: Replacement Cost Value with a Coinsurance Waiver or Agreed amount
Endorsement, and Demolition and Increased Cost of Construction (Law and
Ordinance). Such insurance shall:
(i) be issued by insurance companies authorized to do business
in the State where the Leased Premises are located and be rated in the latest
publication of A.M. Best rating guide or equivalent rating guide at A:IX or
A:VIII or greater, under insurance policies in form and content reasonably
satisfactory to Landlord;
(ii) be carried in the name, and in favor, of Landlord, Tenant
and any fee mortgagee(s), as their respective interests may appear;
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(iii) effectively provide that the respective interests of
Landlord and any fee mortgagee(s) shall not be subject to cancellation by
reason of any act or omission of Tenant without sixty (60) days prior written
notice of such cancellation, however, when cancellation is for nonpayment of
premium the insurance company may cancel the policy by giving at least ten (10)
days prior written notice of such cancellation;
(iv) subject to the requirements of any fee mortgagee, provide
that the loss, if any, under any such policies shall be adjusted by Tenant,
that Landlord may participate in the loss adjustment, and Landlord may adjust
the loss if Tenant fails to do so, and provide that the loss shall be paid by
the insurance company or companies as provided in Section 12.7; and
(v) provide Business Interruption or Rental Value insurance
including coverage for the continuing rental obligations under this Lease on an
Actual Loss Sustained basis in amounts not less than 12 months insurable value
with loss payable endorsement thereunder in favor of the Landlord; and
(vi) provide Comprehensive Boiler & Machinery insurance
covering all pressure vessels, boilers, mechanical, and electrical equipment at
the Leased Premises. This coverage shall include Extra Expense and insurance
for the continuing rental obligations under this Lease. Insurance amounts shall
be as reasonably required by Landlord, but not less than $5 million per
accident; and
(vii) provide such other insurance as may from time to time be
reasonably required by the Landlord as insurance against insurable hazards that
are customarily and generally required to be insured with respect to similar
premises, with due regard for the height, depth and type of the Improvements,
their construction and their use and occupancy.
(b) provide Landlord and any fee mortgagee(s) with public
liability insurance policies which insurance shall comply with the requirements
of subsections 12.1 (a)(i) and (iii) and shall provide at least the following:
(i) Commercial General Liability covering the Leased Premises
and operations of the Tenant in amounts not less than $1 million per occurrence
and $2 million in the annual aggregate per location and including coverage for
Products and Completed Operations Liability;
(ii) Commercial Automobile Liability, including Garage
Liability, covering all Owned, Hired, Non Owned Automobiles including customer
and demonstrator vehicles, any other vehicle usual to the Tenant's business in
amounts not less than $1 million per accident;
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(iii) Garagekeepers Legal Liability providing coverage for
vehicles of others in the possession of the automobile dealer for physical
damage to those vehicles;
(iv) Workers Compensation and Employers Liability, which
coverage shall meet the statutory requirements of the state in which the Leased
Premises is located;
(v) Umbrella Liability in excess of the Commercial General,
Automobile, Garage, and Employers Liability in amounts not less than
$10,000,000 per occurrence and in the annual aggregate;
(vi) all Third Party liability policies shall name the
Landlord and any fee mortgagee(s) as an "Additional Insured" and be evidenced
by a certificate of insurance policy endorsement specifically indicating the
Landlord's and any fee mortgagee(s) Additional Insured status;
(vii) other insurance as is customary to the operations of the
Tenant or as may reasonably be required by the Landlord as good commercial
practice would dictate.
In the event of any dispute between Landlord and Tenant with respect to the
amount of general liability coverage to be maintained by Tenant and/or the
types and amounts of such other insurance as Landlord may reasonably require
Tenant to carry from time to time, as above provided, such dispute shall be
arbitrated pursuant to the provisions of Article 21 of this Lease.
12.2 Tenant shall procure policies for the insurance required to be
carried pursuant to Section 12.1 for periods of from one (1) to five (5)
years, as Tenant shall elect, and shall deliver to Landlord original
certificates thereof with evidence, by stamping or otherwise, of the payment of
the premiums thereon. Any such policies shall contain a loss payable
endorsement which shall provide that (i) the loss, if any, under such policies
shall be paid by the insurance companies as provided in Section 12.7 below,
(ii) the insurer will not cancel or modify such policy except after sixty (60)
days prior written notice to Landlord, however, if the cancellation is for
nonpayment of premium, the insurance company may cancel the policy after ten
(10) days' prior written notice to Landlord, and (iii) any loss payable
thereunder shall not be invalidated by any act or neglect of the Tenant, nor by
any foreclosure or other proceedings or notice of sale relating to the Leased
Premises nor by any change in the title or ownership of said property, nor by
the occupation of the locations for purposes more hazardous than are permitted
by the Policy.
12.3 All premiums and charges for Tenant's insurance policies
(including, without limitation, for the insurance policies required to be
carried pursuant to Section 12.1) shall be paid by Tenant. If Tenant shall fail
to make any such payment when due, or shall fail to carry any such policy, the
provisions of Article 14 shall apply.
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12.4 Tenant shall pay the premiums for Tenant's initial policies of
insurance required hereunder and all renewals thereof not later than the due
date thereof so as to prevent a lapse of coverage. Prior to the expiration of
each policy of insurance, Tenant shall deliver to Landlord a certificate of
such renewal policy with evidence, by stamping or otherwise, of the payment of
the premiums thereon. If any such premiums shall not be paid when due or if
such a certificate of any renewal policy required to be delivered hereunder
shall not be so delivered, the provisions of Article 14 shall apply.
12.5 Tenant shall not violate, or permit to be violated, any of the
conditions or Provisions of any such policy, and Tenant shall so perform and
satisfy the reasonable requirements of the companies writing such policies.
12.6 Tenant shall not carry separate insurance, concurrent in coverage
or contributing in the event of loss with any insurance required to be
furnished by Tenant under the provisions of this Article 12, if the effect of
such separate insurance would be to reduce the protection or the payment to be
made under said insurance required to be furnished by Tenant, unless Landlord
and any fee mortgagee(s) (where the insurance required to be carried requires
the inclusion of the fee mortgagee(s)) are included as additional insureds,
with loss payable as hereinabove provided. Tenant shall promptly notify
Landlord of the issuance of any such separate insurance and shall cause such
policies or certificates of insurance to be delivered to Landlord and any fee
mortgagee(s) as provided in this Article 12.
12.7 The loss proceeds of any fire and extended coverage insurance
shall be:
(a) if less than Five Hundred Thousand ($500,000.00) Dollars, paid
to Tenant as a trust fund, to be deposited in a separate bank account
maintained by Tenant and used, applied and paid to the repair and restoration
of the damage of the Improvements on the Leased Premises (such $500,000 figure
shall be increased every five years by the corresponding increase in the CPI);
or
(b) if in excess of Five Hundred Thousand ($500.000.00) Dollars
(such $500,000 figure shall be increased every five years by the corresponding
increase in the CPI), paid to, and deposited with, the Depositary, which shall
hold, apply, and make available the proceeds of such insurance to pay the cost
of repair of the damage and replacement or rebuilding of the Improvements as
more particularly provided in Article 13.
12.8 In the event that Landlord receives any rent insurance proceeds,
Tenant shall be credited therefor as payments made to Landlord on account of
Fixed Net Rent and additional rent payable by Tenant.
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ARTICLE 13
FIRE OR CASUALTY
13.1 If, during the Term of this Lease, the Improvements now or
hereafter erected upon the Leased Premises shall be destroyed or damaged, in
whole or in part, by fire, as a result, directly or indirectly, of war, by act
of God, or by reason of any other cause or causes whatsoever (whether or not
insurable), Tenant shall give prompt notice thereof to Landlord and file prompt
proof of loss with the appropriate insurance company or companies (if insured).
At Tenant's own cost and expense, Tenant shall thereafter promptly repair,
replace and rebuild the Improvements, at least to the extent of the value and as
nearly as practicable to the character of the Improvements existing immediately
prior to such occurrence. Such repairs, replacements, or rebuilding shall be
made by Tenant in accordance with the following terms and conditions:
(a) the same shall be made in accordance with plans and
specifications therefor, if required by law;
(b) at least ten (10) days before commencing such work,
Tenant shall notify Landlord of Tenant's intention to commence the same, and
Tenant shall pay the increased premiums, if any, charged by the insurance
companies carrying insurance on the Improvements in order to cover the
additional risk during the course of such work;
(c) before commencing any such work:
(i) plans and specifications therefor shall be
filed and approved by all governmental departments and other authorities having
jurisdiction thereof;
(ii) a firm estimate for the cost of such work
shall be obtained;
(iii) Tenant shall, at its own cost and expense,
deliver to Landlord appropriate endorsements to be attached to, and made part
of, the fire and liability policies more particularly described in Article 12,
which endorsements shall cover all of the risks concerned during the course of
such work and shall be in form and content reasonably satisfactory to Landlord;
(d) such work shall be commenced within one hundred
twenty (120) days after settlement shall have been made with the insurance
companies and the insurance monies shall have been turned over to Tenant or the
Depositary as provided in Article 12 hereof and all necessary governmental
approvals shall have been obtained; and
(e) such work shall be completed:
(i) within a reasonable time after the
commencement of the same, due regard being had to conditions;
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(ii) free and clear of all liens and
encumbrances; and
(iii) in accordance with the plans and
specifications therefor.
Any dispute with respect to any of the insurance endorsements referred to in
subsection (c)(iii) above shall be determined by arbitration as hereinafter
provided.
13.2 The Depositary shall, provided that this Lease shall then be
in full force and effect, apply the net proceeds of any insurance deposited with
it to the payment of the cost of such repairing or rebuilding as the same
progresses, payments to be made against properly certified vouchers of a
competent architect in charge of the work selected by Tenant. The Depositary
shall advance out of such insurance proceeds, toward each payment to be made by
or on behalf of Tenant, the amount that shall bear the same portion to such
payment as the whole amount received by the Depositary shall bear to the total
estimated cost of the repairing or rebuilding, except, however, if the contract
provides for a retainage, the Depositary shall withhold from each amount so to
be paid by it ten percent (10%) as a retainage until:
(a) the work of repairing or rebuilding shall have been
completed; and
(b) reasonable proof is furnished to the Depositary and
Landlord that no lien or liability has attached, or will attach, to the Leased
Premises, to the Improvements, or to Landlord in connection with such repairing
or rebuilding.
If at any time the total estimated cost of the repairs or rebuilding shall
exceed the amount of the net proceeds of such insurance received by the
Depositary, the Depositary shall require of Tenant that, before such repairing
or rebuilding be commenced or continued, the Depositary be secured by a surety
bond or cash equal to the amount of the excess of such estimated cost over the
net insurance proceeds as security for the due completion, within a reasonable
time, of such repairs or rebuilding. The total cost of all such rebuilding
shall, at all events, be borne by Tenant without any contribution thereto by
Landlord. If the insurance proceeds shall exceed the cost of repairs or
rebuilding, the balance remaining after payment of the cost of repairs or
rebuilding shall be paid over and belong to Tenant.
13.3 If:
(a) the work of repairing, replacing, or rebuilding such
damage or destroyed Improvements shall not have been commenced within the one
hundred twenty (120) day period (subject to force majeure causes) provided for
in subdivision (d) of Section 13.1; or
(b) such work, after commencement, shall not be
expeditiously proceeded with, unless such work is delayed by strikes, lockouts,
labor disputes, or other causes unavoidable or reasonably beyond the control of
Tenant,
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Landlord shall have the right to terminate this Lease and the Term by giving
Tenant not less than thirty (30) days written notice of Landlord's intention so
to do, and, upon the expiration of the date fixed in such notice, this Lease and
the Term shall wholly cease and expire, and the insurance proceeds received and
receivable under any and all policies of insurance shall be retained by
Landlord, or by any mortgagee of the fee to whom the same day be payable, as
their interests may appear, without claim thereon by Tenant, but Tenant shall
continue liable as provided in Article 17 hereof. Any dispute under this Section
13.3 shall be determined by arbitration as hereinafter provided.
13.4 Except as provided in Section 13.3, this Lease shall not
terminate or be affected in any manner by reason of the destruction or damage,
in whole or in part, of the Improvements, or by reason of the untenantability of
the Improvements, or the Leased Premises, and the Fixed Net Rent reserved in
this Lease, as well as all other charges payable hereunder to the extent that
the same are not actually paid pursuant to rent insurance, shall be paid by
Tenant in accordance with the terms, covenants and conditions of this Lease
without abatement, diminution, or reduction.
ARTICLE 14
LANDLORD MAY CURE DEFAULTS
14.1 If Tenant shall default in:
(a) making any payment required to be made by Tenant
under this Lease and such default is not cured within any applicable notice
and/or grace period pursuant to Section 16.1 hereof after written notice has
been given under Article 29 below; or
(b) performing any term, covenant, or condition of this
Lease on the part of Tenant to be performed and such default is not cured within
the applicable grace period pursuant to Section 16.1 (b) hereof, Landlord may,
at its option (but shall not be obligated to do so) and for the account of
Tenant, make such payment or expend such sum as may be necessary or desirable to
perform and fulfill such term, covenant, or condition. However, no such payment
or expenditure by Landlord shall be deemed a waiver of Tenant's default, nor
shall the same affect any other remedy of Landlord by reason of such default.
14.2 Any and all sums paid or expended by Landlord pursuant to
Section 14.1, as well as any other out of pocket cost or expense (including,
without limitation, reasonable attorneys fees, disbursements and court costs)
incurred by Landlord in instituting, prosecuting, or defending any action or
proceeding instituted by reason of, or relating to, any default by Tenant under
this Lease (provided, however, that, as to such costs and expenses related to an
action or proceeding, Landlord prevails therein), shall:
(a) be repaid by Tenant to Landlord as additional rent
under this Lease within 30 days after Landlord's written demand therefor; and
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(b) bear interest from the date of Landlord's payment or
expenditure thereof to the date of Tenant's repayment of the same to Landlord,
both dates inclusive, at the rate of two (2%) percent per annum plus the
so-called prime, base, index, or reference interest rate publicly announced by
The Chase Manhattan Bank, N.A., from time to time in effect (but in no event in
excess of any then lawful maximum interest rate then applicable to Tenant).
ARTICLE 15
BANKRUPTCY, INSOLVENCY, REORGANIZATION, LIQUIDATION OR DISSOLUTION OF TENANT
15.1 The occurrence of any of the following events at any time
during the Term shall constitute and be deemed a material breach of this Lease
and a default by Tenant, entitling Landlord, at its option to exercise such
remedies as may be available to it at law or in equity, including, to the extent
permitted by applicable law, to cancel and terminate this Lease upon giving
Tenant a thirty (30) day notice in writing of Landlord's intention so to do,
whereupon this Lease shall terminate and come to an end at the expiration of
said thirty (30) days as if said expiration date were the time originally fixed
for the termination of this Lease, and Tenant shall quit and surrender the
Leased Premises and the Improvements to Landlord:
(a) the filing of a petition by or against Tenant under
this Lease and/or by or against any guarantor of the obligations of Tenant under
this Lease (herein called a "GUARANTOR") under the provisions of the United
States Bankruptcy Act, or under the provisions of any other federal or state law
of similar import now or hereafter in effect, for an arrangement,
reorganization, adjudication of bankruptcy and/or any other relief thereunder;
(b) the dissolution or liquidation of Tenant under this
Lease and/or any Guarantor, or the commencement of any action or proceeding by
or against Tenant under this Lease and/or any Guarantor for its dissolution or
liquidation, that shall be other than a voluntary dissolution, liquidation,
spinoff, split-off, or other similar proceeding pursuant to the United States
Internal Revenue Code whereby the assets of Tenant and/or such Guarantor are
distributed to its stockholders or to a partnership comprised of any such
stockholders;
(c) the appointment of a permanent receiver or a
permanent trustee of all or substantially all of the property of Tenant under
this Lease and/or any Guarantor or the commencement of any action or proceeding
by or against Tenant and/or such Guarantor for such appointment;
(d) the seizure of the property of Tenant under this
Lease and/or any Guarantor by any governmental officer or agency pursuant to
statutory authority for the dissolution, rehabilitation, reorganization or
liquidation of Tenant and/or such Guarantor; or
(e) the assignment by Tenant under this Lease and/or any
Guarantor of its property for the benefit of creditors,
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However, if any event described in subsection (a), (b), (c), or (d) occurs and
is not voluntarily initiated or commenced by Tenant and/or such Guarantor, or on
behalf of Tenant and/or such Guarantor, the event in question shall not
constitute or be deemed a default hereunder provided that the same is removed or
remedied by appropriate discharge or dismissal of the action or proceeding
concerned, and the discharge or any receiver, trustee, or other judicial
custodian appointed for the property of Tenant and/or such Guarantor within one
hundred twenty (120) days from the commencement date of such action, proceeding,
or appointment.
15.2 It is stipulated and agreed that, in the event of the
termination of this Lease pursuant to Section 15.1 hereof, Landlord, at its
election, shall forthwith be entitled to recover from Tenant, as and for
liquidated damages an amount computed pursuant to Section 17.2 hereof.
If the Leased Premises, or any part thereof, is re-let by
Landlord for the unexpired portion of the Term, or any part thereof, before
presentation of proof of such liquidated damages to any court, commission, or
tribunal, the amount of rent reserved upon such reletting shall be prima facie
evidence that it is the fair and reasonable rental value for such part or the
whole of the Leased Premises so re-let during the term of the re-letting.
Nothing herein contained shall limit or prejudice the right of Landlord to prove
for and obtain, as liquidated damages by reason of such termination, an amount
equal to the maximum allowed by any statute or rule of law in effect at the time
when, and governing the proceedings in which, such damages are to be proved,
whether or not such amount is greater or less than, or equal to, the amount of
the difference referred to above.
ARTICLE 16
DEFAULT CLAUSES
16.1 Upon the occurrence of any of the following events
(hereinafter called "EVENTS OF DEFAULT"), Landlord shall have the right, at
Landlord's option, in addition to exercising its remedies under Section 16.4
and/or Articles 14 or 17, to terminate this Lease and the Term, as well as all
of the right, title and interest of Tenant in and to the Leased Premises
hereunder, by giving Tenant ten (10) days' notice in writing of such
termination, whereupon this Lease and the Term, as well as all of the right,
title and interest of Tenant in and to the Leased Premises, shall wholly cease
and expire in the same manner, and with the same force and effect (except as to
Tenant's liability), as if the date fixed by such notice were the expiration
date of the Term:
(a) if Tenant shall fail to pay any installment of Fixed
Net Rent, any other item of additional rent, or any part thereof as and when the
same shall become due and payable, and such default shall continue for a period
of five (5) business days after written notice from Landlord, provided no such
notice shall be required more than three times in any 12 month period;
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(b) subject to Section 16.2 below, if Tenant shall
violate, fail to comply with, or fail to perform any other covenant, term, or
condition of this Lease, other than requiring payment of a sum of money, and
such default shall continue for a period of thirty (30) days after written
notice from Landlord:
(c) if any execution or attachment shall be issued
against Tenant or any of Tenant's property, whereby the Leased Premises or the
Improvements shall be taken or occupied, or attempted to be taken or occupied by
someone other than Tenant, and such condition shall continue for a period of
thirty (30) days after written notice from Landlord; or
(d) if Tenant's right, title and interest in this Lease,
or the estate of Tenant hereunder, shall be transferred or passed to, or devolve
upon, any other person, firm, or corporation, except in the manner provided in
this Lease.
On or before the expiration of the ten (10) days termination notice referred
to above, Tenant shall immediately quit and surrender the Leased Premises, the
Improvements and each and every part thereof to Landlord, and Landlord may enter
into or repossess the Leased Premises and the Improvements by summary or other
suitable proceedings.
16.2 If any of the events described in subsection (b) of Section
16.1 occurs and is of such a nature that it cannot practicably be cured and
remedied within the applicable notice period, an Event of Default shall not be
deemed to exist with respect thereto if Tenant shall:
(a) commence the work, or initiate the action, required
to cure and remedy such event promptly within the applicable notice period; and
(b) thereafter prosecute such work or action in good
faith diligently to completion.
16.3 No default shall be deemed waived by Landlord unless such
waiver is confirmed in a writing signed by Landlord.
16.4 In the event that Tenant shall fail to make any payment of
Fixed Net Rent or additional rent required to be paid pursuant to this Lease on
or before the due date for the payment thereof (without regard to the notice and
grace provisions provided for in Section 16.1), the same shall accrue interest
from and after such due date and until Tenant's payment thereof at a rate equal
to two (2%) per annum plus the so-called prime, base, index, or reference
interest rate publicly announced by The Chase Manhattan Bank, N.A., from time to
time in effect (but in no event in excess of any then lawful maximum interest
rate then applicable to Tenant). In addition to the foregoing interest, as well
as in addition to the other remedies available to Landlord for a default by
Tenant under this Lease and otherwise at law and in equity, in the event that
Tenant shall fail to make any payment of Fixed Net Rent or additional rent
required to be paid pursuant to this Lease on or before the due date for the
payment thereof (without regard to notice and grace provisions provided in
Section 16.1), Tenant shall pay to Landlord, as
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additional rent, in addition to such payment and interest, a charge equal to
five (5%) percent of such late payment in reimbursement for Landlord's
administrative and other expenses in connection with handling and processing
such late payment. Neither this Section 16.4 nor any other provision of this
Lease shall require the payment of interest in excess of the maximum amount
permitted by law. If any excess of interest in such respect is provided for, or
shall be adjudicated to be so provided for, Tenant shall not be obligated to pay
such interest in excess of the maximum amount permitted by law, the right to
demand the payment of any such excess shall be, and hereby is, waived and any
such excess interest nonetheless paid to Landlord shall be promptly resumed to
Tenant.
ARTICLE 17
LANDLORD'S REMEDIES
17.1 Upon the occurrence of any Event of Default.
(a) Landlord or its agents or representatives may with or
without terminating the Lease re-enter and resume possession of the Leased
Premises and the Improvements, either by summary proceedings or by a suitable
action or proceeding at law or otherwise, without being liable for any damages
therefor, and no such reentry by Landlord shall be deemed an acceptance of a
surrender of this;
(b) the rent (the aggregate of all Fixed Net Rent, CPI
Rent and additional rent) shall become due thereupon and be paid up to the time
of such reentry, dispossess and/or termination, together with such counsel fees
and expenses as Landlord may incur in connection therewith;
(c) Landlord may, in its own name, but as agent for
Tenant (if this Lease is not terminated) or on its own behalf (if this Lease is
terminated):
(i) relet the whole or any portion of the Leased
Premises and/or the Improvements for any period equal to, or greater or less
than, the remainder of the Term, for any sum that it deems reasonable
(including, without limitation, free rent concessions), to any tenant that it
may deem suitable and satisfactory and for any use and purpose that it may deem
appropriate; and
(ii) in connection with any such reletting, make
such changes in the character of the Improvements as Landlord may determine to
be appropriate or helpful in effecting such lease, provided, however, that
Landlord shall, in no event, be:
(x) under any obligation to relet the
Leased Premises or the Improvements other than to undertake commercially
reasonable efforts to do so; or
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(y) required to pay to Tenant any
surplus of any sums received by Landlord on a reletting of the Leased Premises
or the Improvements in excess of the Fixed Net Rent and additional rent reserved
in this;
(d) Tenant shall pay to Landlord an amount equal to any
out-of-pocket costs and expenses (including, without limitation, attorneys'
fees, disbursements and court costs) incurred by Landlord in re-entering,
repairing and reletting of the Leased Premises and the Improvements, as well as
all costs and expenses incurred by Landlord for the care of the Leased Premises
and the Improvements while vacant, which amounts shall be due and payable by
Tenant to Landlord at such time or times as such costs and expenses shall have
been incurred by Landlord; and
(e) Unless this Lease has terminated, Tenant shall also
pay to Landlord, at the same time as its other rent obligations are payable, as
damages for the failure of Tenant to observe and perform Tenant's covenants
herein contained, any deficiency for each month of the period that would have
otherwise constituted the balance of the Term between:
(i) Fixed Net Rent and additional rent hereby
reserved and/or covenanted to be paid for such month; and
(ii) the net amount, if any, of the rents
collected for such month on account of any re-letting of the Leased Premises,
and, in computing such damages, there shall be added to the deficiency such
out-of-pocket expenses as Landlord may incur in connection with re-letting,
including, without limitation, legal expenses, attorneys' fees, disbursements
and court costs, brokerage and the costs and expenses of keeping the Leased
Premises in good order and preparing the same for reletting.
The damages described in subsection (e) shall be paid in installments by Tenant
on the rent day specified in this Lease, and any suit brought by Landlord to
collect the amount of the deficiency for any period shall not prejudice in any
way the right of Landlord to collect the deficiency for any subsequent period by
a similar action or proceeding. Nothing contained herein shall be deemed to
require Landlord to postpone suit until the date when the Term of this Lease
would have expired if it had not been so terminated by reason of Tenant's
default.
17.2 Upon the termination of this Lease by Landlord, Landlord
shall, at its sole discretion, in lieu of the damages described in subsection
(e) of Section 17. 1, be entitled to receive, as liquidated damages, an amount
equal to the difference between:
(a) the aggregate of all Fixed Net Rent and CPI Rent and
additional rent reserved hereunder for the then unexpired portion of the Term
(conclusively presuming that the CPI Rent and the additional rent for each year
included in such unexpired portion of the Term will escalate at the rate of
three (3%) per annum), discounted to present value at a rate
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equal to the prime, base, index or refinance interest rate publicly announced by
The Chase Manhattan Bank, N.A., in effect as of the date of default minus 2% per
annum; and
(b) the then fair and reasonable rental value of the
Leased Premises for the same period.
If the Leased Premises, or any part thereof, is re-let by Landlord for the
unexpired portion of the Term, or any part thereof, before presentation of proof
of such liquidated damages to any court, commission, or tribunal, the amount of
rent reserved upon such reletting shall be prima facie evidence that it is the
fair and reasonable rental value for such part or the whole of the Leased
Premises so re-let during the term of the re-letting.
17.3 Landlord, at its option, may make such alterations,
replacements and/or decorations in and to the Leased Premises and/or the
Improvements as Landlord, in Landlord's sole judgment, considers advisable and
necessary for the purpose of re-letting the Leased Premises and/or the
Improvements for similar uses, and the making of such alterations, replacements
and/or decorations shall not operate or, be construed, to release Tenant from
liability hereunder as aforesaid.
17.4 Landlord shall not be liable to Tenant in any respect
whatsoever for Landlord's failure to re-let the Leased Premises and/or the
Improvements provided that it has undertaken commercially reasonable efforts to
do so or, in the event that the Leased Premises and/or the Improvements are
re-let, for Landlord's failure to collect the rent thereof under such
re-letting. No such failure shall relieve Tenant's liability for, and obligation
to pay, all of the amounts which Landlord shall be entitled under this Article
17 or otherwise at law or in equity.
17.5 In the event of a breach by Tenant or Landlord of any of the
covenants or provisions of this Lease, the non-breaching party shall have the
right of injunction, as well as to invoke any remedy allowed at law or in
equity, as if re-entry, summary proceedings and other remedies were not herein
provided for.
17.6 Nothing contained in this Article 17 shall be construed to
limit or preclude recovery by Landlord against Tenant of any sums or damages to
which, in addition to the damages particularly provided above, Landlord may
lawfully be entitled by reason of any default hereunder on the part of Tenant.
ARTICLE 18
TENANT TO INDEMNIFY LANDLORD
18.1 Tenant shall not do any act or thing upon the Leased Premises
or the Improvements, or permit any such act or thing to be done, that may
subject Landlord to any liability by reason of any illegal business or conduct
upon the Leased Premises or the Improvements or by reason of any violation of
law or of any legal requirement of public
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authority, or by reason of any other cause whatsoever. In addition to the
provisions of Section 9.3(h) above, Tenant agrees to defend and shall indemnify
and hold Landlord harmless for, from and against and from any and all liability,
fines, suits, claims, demands, actions, costs and expenses of each and every
kind or nature whatsoever to the fullest extent permitted by law (including,
without limitation, reasonable attorneys' fees disbursements and court costs)
due to or arising out of any:
(a) breach, violation, or non-performance of any term,
covenant, or condition of this Lease on the part of Tenant to be fulfilled,
kept, observed, or performed; and/or
(b) injury to any person or persons (including, without
limitation, the death of any person or persons) or damage to any property
occurring in or about the Leased Premises and/or the Improvements at any time
during the Term, whether or not such injury or damage is occasioned by Tenant's
use and occupancy of the Leased Premises and/or the Improvements, by any use or
occupancy that Tenant may permit or suffer to be made thereof.
If Tenant is required to defend any action or proceeding pursuant to this
Article 18 to which Landlord is made a party, Tenant shall do so through counsel
reasonably acceptable to Landlord (provided, however, that counsel selected by
Tenant's insurance carrier shall be deemed to be acceptable to Landlord).
Landlord shall reasonably cooperate with Tenant's counsel in connection with
resolving the action or proceeding, provided, however, that Landlord shall not
be required to expend any money with respect thereto or to undertake any action
not consistent with its own best interests. Landlord shall be entitled to
participate in such defense, at its election, by counsel of its own choosing and
at Tenant's expense, and Tenant and its counsel shall consult and otherwise
cooperate with Landlord's counsel in all reasonable respects in connection with
such participation provided that neither Tenant nor its counsel shall be
required to expend any money with respect thereto and such participation by
Landlord does not limit or render void any liability of any insurer of Landlord
or Tenant hereunder in respect to the claim or matter in question. Tenant's
liability under this Article 18 shall be reduced by the net proceeds actually
collected on any insurance effected by Tenant on the risks in question for
Landlord's benefit, recovered by Landlord under Tenant's policies. However,
nothing contained in this Article 18 shall vary the insurance requirements
contained in Article 12.
ARTICLE 19
MECHANICS' LIENS
19.1 Notice is hereby given that Landlord shall not be liable for
any labor or materials furnished, or to be furnished, to Tenant, and that no
mechanic's or other lien for any such labor or materials shall attach to, or
otherwise affect, the reversion or other estate or interest of Landlord in and
to the Leased Premises or the Improvements.
19.2 Tenant covenants that, whenever and as often as any mechanic's
lien shall have been filed against the Leased Premises or the Improvements,
other than any mechanic's lien
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that shall have been filed based upon any act or omission of Landlord or anyone
acting on behalf of Landlord, Tenant shall forthwith (and in any event, within
thirty (30) days) take such action, by bonding, deposit, or payment, as will
remove or satisfy the lien.
ARTICLE 20
CONDEMNATION
20.1 If, at any time during the Term, any person or corporation,
municipal, public, private or otherwise, shall lawfully condemn and acquire
title to all or substantially all of the Leased Premises in or by condemnation
proceedings in pursuance of any law, general, special, or otherwise or by
agreement between Landlord, Tenant and those authorized to exercise such right:
(a) this Lease and the Term shall terminate and expire on
the date of such taking; and
(b) the Fixed Net Rent and additional rent herein
reserved and provided to be paid by Tenant shall be apportioned and paid to the
date of such taking.
20.2 If less than all or substantially all of the Leased Premises
shall be taken as aforesaid, (i) if it is economically infeasible for Tenant to
operate its business in the manner so operated immediately prior to the taking
(any disputes as to such infeasibility shall be subject to arbitration in the
manner provided in Article 21), Tenant may terminate this Lease as to the
location so taken, and in all other cases (ii) this Lease and the Term shall
continue notwithstanding such taking, but the Fixed Net Rent thereafter payable
by Tenant shall be equitably apportioned and reduced, as and from the date of
such partial taking, which apportionment and reduction shall be made only as and
when the particular award shall ultimately be received by Landlord. If Landlord
and Tenant cannot mutually agree upon such equitable apportionment and
reduction, it shall be determined by arbitration in the manner provided in
Article 21.
20.3 In the event of a partial condemnation where Tenant is
obligated to restore, the net proceeds of the award shall be made available to
Tenant for such purpose. The rights of Landlord and Tenant in and to the award
and/or damages which are not used for restoration upon any taking of all or a
portion of the Leased Premises (including, without limitation, the value of the
fee estate of Landlord, the value of the leasehold estate of Tenant, the
consequential damages to the part of the Leased Premises not taken and the cost
of reconstruction) shall be determined as follows:
(a) first, Landlord shall be entitled to receive the
aggregate amount, with interest thereon, that shall represent compensation for:
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(i) the value of Landlord's reversionary estate
and interest in and to the entire Leased Premises or the portion of the Leased
Premises taken, as the case may be; and
(ii) if the entire Leased Premises shall not be
taken, the amount of any consequential damages to Landlord's reversionary estate
and interest in and to the portion of the Leased Premises not taken;
(b) second, to the extent that the award and/or damages
upon such taking shall be sufficient therefor, Landlord shall be entitled to
receive an amount. with interest thereon, equal to the "Lost Rental
Compensation" (as such term is defined below); and
(c) third, Tenant shall be entitled to receive any
balance of the award and/or damages remaining after Landlord shall be paid the
amounts described in subsections (a) and (b) above.
In the event that the total amount of the award and/or damages upon any taking
of all or a portion of the Leased Premises shall be insufficient to pay Landlord
all of the amounts described in subsections (a) and (b) above, Tenant shall pay
to Landlord, within thirty (30) days after Landlord's written demand therefor as
additional rent under this Lease, the amount of the deficiency with interest
thereon, it being the intent and understanding of the parties that Landlord
shall receive from Tenant and/or the condemning authority, as the case may be,
and retain for its own account, in an events whatsoever, a net payment to the
sum of the amounts described in subsections (a) and (b) above, with interest
thereon. Tenant's obligation to pay any deficiency and/or interest to Landlord
hereunder shall survive the termination and/or expiration of this Lease and/or
the Term. As such term is used in this Section 20.3. the term "LOST RENTAL
COMPENSATION" shall mean, either:
(a) as to a taking that shall result in the termination
of this Lease and the Term pursuant to Section 20.1 above, an amount equal to
the aggregate of the Fixed Net Rent reserved hereunder for the then unexpired
portion of the Term (conclusively presuming that the CPI Rent for each year
included in such unexpired portion of the Term will be the same as was payable
for the year immediately preceding the termination of this Lease), discounted to
present value at a rate equal to two (2%) percent below the so-called prime,
base, index, or reference interest rate publicly announced by The Chase
Manhattan Bank, N.A., in effect as of the date of the taking; or
(b) as to a taking that shall not result in the
termination of this Lease and the Term pursuant to Section 20.1 above, an amount
equal to the aggregate of the reductions in the Fixed Net Rent reserved
hereunder pursuant to Section 20.2 above for the then unexpired portion of the
Term (conclusively presuming that the CPI Rent for each year included in such
unexpired portion of the Term will be the same as was payable for the year
immediately preceding the termination of this Lease), discounted to present
value at a rate equal to two (2%)
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percent per annum less than the so-called prime, base, index, or reference
interest rate publicly announced by The Chase Manhattan Bank. N.A., in effect as
of the date of the taking.
20.4 If any or all of the amounts due to Landlord pursuant to
Section 20.3 above shall not be fixed in the proceedings for such taking in
accordance with the agreement of the parties set forth in Section 20.3, and if
the parties shall not agree in writing as to the unfixed amount or amounts to be
paid to Landlord thereunder within ninety (90) days after the date of the final
determination in such proceedings, such unfixed amount or amounts shall be
determined by arbitration in the manner provided in Article 21.
20.5 Except as otherwise provided elsewhere herein. if the
Improvements shall be damaged or partially destroyed by any taking of less than
all or substantially all of the Leased Premises, Tenant shall proceed, with
reasonable diligence and at Tenant's own cost and expense, to conduct any
necessary demolition and to repair, replace, or rebuild any remaining part of
the Improvements not so taken, so as to constitute such remaining part thereof a
complete and rentable building, in good condition and repair, having a
configuration, design and suitability for nature of use as similar as is
practicable under the circumstances to the configuration, design and suitability
for nature of use of the Leased Premises immediately prior to the taking. Tenant
shall cause to be paid to an independent Depositary reasonably satisfactory to
Landlord in trust, any portion of the award and/or damages upon such
condemnation to be received and retained by Tenant pursuant to the terms in
Section 20.3 above, to apply the same to cost and expense of such demolition,
repair, replacement and rebuilding by whatsoever incurred. If such amount
received and retained by Tenant is insufficient to pay for the cost of such
demolition, repair, replacement and/or rebuilding, Tenant shall make up the
deficiency at its own cost and expense. Conversely, if such amount received and
retained by Tenant is more than sufficient to pay the cost of such demolition,
repair, replacement and/or rebuilding the amount of any excess remaining after
such demolition, repair, replacement and/or rebuilding is completed and the cost
thereof is fully paid shall belong to Tenant. The provisions of Articles 5.8,
9, 13, 18 and 19 shall apply to the work required to be done under this Section
20.5 and to the disbursement of the condemnation proceeds.
20.6 If, at any time during the Term, any person or corporation,
municipal, public, private, or otherwise, shall lawfully condemn and acquire the
temporary use of the Leased Premises in or by condemnation proceedings in
pursuance of any law, general, special, or otherwise, or by agreement with
Landlord, Tenant and those authorized to exercise such right:
(a) the Term shall not be reduced or affected in any way;
(b) Tenant shall continue to pay the full Fixed Net Rent
and additional rent herein reserved and provided to be paid by Tenant; and
(c) Tenant shall be entitled to make claim for. recover
and retain any award or awards, whether in the form of rental or otherwise,
recovered in respect of such possession or occupancy, provided, however, that,
if such possession or occupancy shall extend
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beyond the date fixed as the Expiration Date, the award shall be apportioned
between Landlord and Tenant as of such date.
ARTICLE 21
ARBITRATION
21.1 In the event of a dispute between Landlord and Tenant with
respect to any issue of fact (other than one determined by a condemnation court)
arising out of a taking referred to in Article 20 or specifically mentioned and
provided for elsewhere in this Lease as a matter to be decided by arbitration,
such dispute shall be determined by arbitration as provided in this Article 21.
21.2 Landlord and Tenant shall each appoint as an arbitrator a fit
and impartial person from a panel proposed by the American Arbitration
Association who shall have had at least ten (10) years' experience in the City,
County and State where the property is located in a calling connected with the
subject matter of the dispute. Such appointment shall be signified in writing by
each party to the other. If either Landlord or Tenant shall fail to appoint an
arbitrator as set forth in this Section 21.2 for a period of twenty (20) days
after written notice from the other party to make such an appointment, then the
arbitrator appointed by the party who shall have made such an appointment shall
appoint the second arbitrator.
21.3 The arbitrators. after being duly sworn to perform their
duties with impartiality and fidelity, shall proceed with all reasonable
dispatch to determine the question submitted, by first appointing an umpire,
whose determination shall be conclusive in the event that the arbitrators and
the umpire shall fail to render their decision within thirty (30) days after
their appointment. The arbitration shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and the
award of the arbitrators and/or umpire shall be binding, final and conclusive
and non-appealable by the parties. The decision of the arbitrators and/or umpire
shall be rendered within thirty (30) days after their appointment, and such
decision shall be in writing and in duplicate, one counterpart thereof to be
delivered to each of the parties. If within ten (10) days after their
appointment. the arbitrators fail to agree upon the identity of the person to
act as umpire, such umpire shall be appointed by the American Arbitration
Association from its qualified panel of arbitrators, and shall be a person
having at least ten (10) years' recent experience as to the subject matter in
question.
21.4 If an umpire is appointed as provided in Section 21.3, the
arbitrators and the umpire, after the umpire is duly sworn to perform his or her
duties with impartiality and fidelity, shall proceed with all reasonable
dispatch to determine the question submitted.
21.5 The fees of the arbitrators and any umpire. as well as the
expenses incident to the proceedings, shall be borne by the party whose written
position stated before the commencement of the arbitration, is furthest from the
determination of the arbitrator (or, if neither party's position is upheld, such
fees and expenses shall be borne by the parties equally).
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The fees of respective counsel engaged by the parties. and the fees of expert
witnesses and other witnesses called or engaged by the parties, shall be paid by
respective party engaging such counsel or calling or engaging such witnesses.
21.6 Wherever in this Lease it is provided that Landlord's consent
or approval shall not be unreasonably withheld (or word of like import), if
Landlord shall withhold its consent or approval such adverse determination by
Landlord shall be an arbitrable dispute as provided in this Article 21. Ten (10)
days after Tenant's receipt of Landlord's adverse determination, Landlord's
determination shall be conclusive, unless prior to the end of such 10 day period
Tenant shall give notice of demand for arbitration under this Article 21, in
which event Landlord, within 10 days after receipt of Tenant's demand, shall (if
Landlord has not already done so) specify in writing Landlord's reasons for the
adverse determination. Anything in this Article 21 to the contrary
notwithstanding, (i) the proceeding referred to in this Section 21.6 shall occur
on an expeditious basis, with all time periods for performance at any stage of
the arbitration proceeding to be 10 days, rather than 20 or 30 days as provided
above, and (ii) the losing party shall pay all costs of such arbitration,
including the legal fees and witness or expert fees of the prevailing party. The
submission to arbitration in accordance with this Lease shall be the sole remedy
of Tenant as respect to any consent or approval which may not be unreasonably
withheld. If a determination is made by the arbitrators that the withholding of
consent or approval was unreasonable the arbitrators shall annul such
withholding of consent or approval. Except for the costs and expenses referred
to above, no damages of any kind, and no other monetary or other remedy may be
awarded in such circumstances, it being agreed that such annulment shall be
Tenant's sole remedy.
ARTICLE 22
SHORING
22.1 To the extent required by law, Tenant shall allow an adjoining
owner desiring to excavate on its premises, or a municipality desiring to
excavate a nearby street, to enter onto the Leased Premises and the Improvements
and shore up a perimeter wall during such excavation. Tenant shall, at Tenant's
own expense, repair, or cause to be repaired, any damage caused to any part of
the Leased Premises and/or the Improvements because of any excavation,
construction work, or other work of a similar nature that may be done on any
property adjoining or adjacent to the Leased Premises, and Landlord hereby
releases to Tenant any and all rights to sue for and/or recover against such
adjoining owners, or the parties causing such damages, the amounts expended or
injuries sustained by Tenant because of the provisions of this Article 22
requiring Tenant to repair any damages sustained by such excavations,
construction work, or other work.
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ARTICLE 23
WAIVER OF REDEMPTION
23.1 Tenant, for itself and for all persons claiming through or
under it, hereby expressly waives any and all rights which are or may be
conferred upon Tenant by any present or future law to redeem the Leased
Premises, or to any new trial in any action of ejectment under any provision of
law, after re-entry thereupon, or upon any part thereof, by Landlord, or after
any warrant to dispossess or judgment in ejectment. If Landlord shall have
acquired possession of the Leased Premises by summary proceedings, or in any
other lawful manner without judicial proceedings, it shall be deemed a re-entry
within the meaning of that word as used in this Lease.
ARTICLE 24
[INTENTIONALLY OMITTED.]
ARTICLE 25
COVENANT OF QUIET ENJOYMENT
25.1 If, and for so long as, Tenant shall pay the Fixed Net Rent
and additional rent reserved by or payable pursuant to this Lease, and shall
perform and observe all of the other terms, covenants and conditions herein
contained on the part of Tenant to be performed and observed, Tenant shall
quietly enjoy the Leased Premises, subject, however, to the terms, covenants and
conditions of this (including, without limitation, the terms of Article 34), to
the ground leases, underlying leases, overriding leases and mortgages referred
to in Article 4 and to the matters relating to title. However, no failure by
Landlord to comply with the foregoing covenant shall give Tenant any right to
cancel or terminate this Lease, to abate, reduce, or make any deduction from, or
offset against, the Fixed Net Rent or additional rent payable under this Lease,
or to fail to perform any other obligation of Tenant hereunder.
ARTICLE 26
NON-MERGER
26.1 There shall not be a merger of:
(a) Tenant's interest in this Lease or the leasehold
estate created
hereby;
(b) Tenant's interest in the improvements; or
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(c) the fee estate in the Leased Premises or any part
thereof,
by reason of the fact that the same person may acquire, own, hold, directly or
indirectly, all or part of the interests or estates described in subsections
(a), (b) and/or (c) above and no such merger shall occur unless and until all
persons (including, without limitation, Landlord, Tenant and all mortgagees)
having an interest in all of such interests and estates shall join in a written
instrument effecting such merger and shall duly record the same.
ARTICLE 27
WAIVER OF COUNTERCLAIM AND JURY TRIAL
27.1 In the event that Landlord shall commence any summary
proceeding or action for non-payment of rent or of additional rent hereunder,
Tenant shall not interpose any counterclaim of any nature or description in such
proceeding or action. The parties hereto waive a trial by jury on any or all
issues arising in any action or proceeding between them or their successors
under or connected with this Lease or any of its provisions, any negotiations in
connection therewith, or Tenant's use or occupation of the Leased Premises.
ARTICLE 28
ASSIGNMENT AND SUBLETTING
28.1 Provided that no Event of Default shall have occurred and be
continuing under this Lease and except as hereinafter provided in this Article
28. Tenant shall have the right to assign this Lease and Tenant's rights
hereunder, whether in whole or in part, or to sublet the entire, or portions of,
the Leased Premises only with Landlord's prior written consent, which shall not
be unreasonably withheld. As to any assignment or subletting in which the use
shall be and remain a new car automobile dealership and activities incidental
thereto, Landlord's prior consent shall not be required, so long as all of the
following conditions are met: (i) such assignment or subletting is made
concurrently with the sale of, or move by Tenant of, substantially all of the
business and assets of an automobile dealership franchise being operated at such
property by Tenant or its subsidiary immediately prior to such assignment or
subletting (however, in the case of a move from such location by Tenant or its
subsidiary, another automobile dealership franchise is to be operated thereon)
to the assignee or subtenant, and such operation is and shall remain a new car
automobile dealership and activities incidental thereto, (ii) such assignee or
subtenant has been qualified and approved by the automobile manufacturer, and
(iii) a security deposit equivalent to one month's rent shall be deposited with
Landlord, and (iv) Tenant's liability hereunder and the Guaranty of Tenant's
performance hereunder by Boomershine Automotive Group, Inc., its successors and
assigns ("Guarantor") following such subletting shall remain in full force and
effect and Tenant and said Guarantor shall confirm the same in writing at the
request of Landlord.
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28.2 In connection with any assignment or subletting (whether or
not approved or required to be approved by Landlord) Tenant and the assignee or
subtenant shall each comply with the following terms, covenants and conditions,
which shall be conditions precedent thereto:
(a) Tenant shall give Landlord written notice of each
such assignment or subletting, as well as of the effective date thereof, not
less than ten (10) days prior to the execution of such assignment or sublease;
(b) such assignment or subletting shall be in writing,
duly executed and acknowledged by Tenant and the assignee (and by the sublessee,
in the case of a subletting) in proper form for recording, and in form prepared
by or reasonably approved by Landlord;
(c) a duplicate original of such assignment or sublease
shall be delivered to Landlord not more than ten (10) days after the execution
of such assignment or sublease;
(d) the business to be conducted on the Leased Premises
by such assignee or subtenant shall:
(i) be permitted pursuant to the then existing
Certificate of Occupancy for the Leased Premises or pursuant to any revised or
amended Certificate of Occupancy obtained by Tenant or by the assignee or
subtenant; and
(ii) not render the Leased Premises incapable of
being used or occupied after the expiration or sooner termination of the Term of
this Lease for the purposes for which the same were use and occupied on the
Commencement Date
(e) such assignment or sublease shall be consistent with,
and subordinate and subject to, all of the terms, covenants and conditions of
this Lease.
(f) if the transaction in question is an assignment,
Landlord shall receive. prior to the effective date thereof, an original
counterpart of an instrument, signed by the assignee in recordable form,
pursuant to which the assignee agrees to unconditionally assume all of the
obligations of this Lease on the part of the tenant hereunder to perform from
and after the effective date thereof;
(g) if the transaction in question is a sublease, the
expiration date of the Term thereof shall not be later than one (1) day prior to
the Expiration Date hereunder;
(h) if the transaction in question is a sublease, the
sublease shall contain a provision to the effect that (i) such sublease is
subject and subordinate to all of the terms and provisions of this Lease and to
the rights of Landlord hereunder, (ii) in the event this Lease shall terminate
or be rejected before the expiration of such sublease, the sublessee either will
at Landlord's option, attorn to Landlord or waive any right the sublessee may
have to
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terminate the sublease or surrender possession thereunder, as a result of the
termination of this Lease and (iii) in the event the sublessee thereunder
receives a written notice from Landlord stating that Tenant is under default
under this Lease beyond any applicable notice or cure period, that the sublessee
shall then and after be obligated to pay all rentals accruing under said
sublease directly to Landlord such notice, or as Landlord may otherwise direct,
unless and until notified otherwise by Landlord;
(i) notwithstanding anything herein to the contrary, no
proposed assignment of this Lease by Tenant or subletting of all or a portion of
the Leased Premises shall be permitted if such assignment or subletting would
provide for a rental or other payment for the leasing, use, occupancy or
utilization of all or any portion of the Leased Premises based, in whole or in
part, on the income or profits derived by any person from the property so
leased, used, occupied or utilized other than an amount based on a fixed
percentage or percentages of gross receipts or sales.
No such assignment or sublease shall release, or otherwise affect or reduce, the
obligations of Tenant under this Lease or of any guarantors of this Lease.
28.3 (a) Tenant shall have the right, without the consent of
Landlord, to assign this Lease or sublet the Leased Premises or portions thereof
to any "Related Entity" or Successor Entity" (as hereinafter defined), provided,
however, that Tenant and such Related Entity or Successor Entity shall by
jointly and severally liable for all of the covenants and obligations of Tenant
in this Lease. As used herein, the term "RELATED ENTITY" means any entity
controlled by Tenant, but only if such assignee or sublessee entity continues to
remain at all times controlled by Tenant while such entity is a tenant or
sublessee with respect to all or any portion of the Leased Premises, and the
term "SUCCESSOR ENTITY" means any entity resulting from the merger,
consolidation or acquisition of all or substantially all of the assets and
business or a majority of the voting stock or voting control of Tenant.
Notwithstanding the foregoing, an assignment or subletting to a Successor Entity
may be made without Landlord's consent on any two occasions and thereafter shall
be subject to Landlord's consent under this Article 28.
(b) For the purposes of this Lease, the sale or issuance
of stock or other interests of Tenant (other than a public offering or the sale
of Tenant's stock on a publicly traded stock exchange) or a merger or
consolidation or other transaction whereby control of Tenant's interest in this
Lease and/or all or any portion of this Leased Premises is transferred shall be
an "assignment" subject to the provisions of this Article 28, unless made with
or to a Related Entity or Successor Entity, in which event Section 28.3(a) shall
be applicable.
28.4 In determining whether to consent to Tenant's proposed
assignment or subletting, the Landlord may consider all factors which in
Landlord's reasonable business judgment, are pertinent to such decision, and the
parties agree that the following, without limitation, are examples of such
factors:
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a. Whether the financial strength of the proposed
assignee (including net worth and working capital)
are sufficient to assure the future performance by
such assignee of its obligation under this Lease;
b. The character, business reputation, and managerial
skills of the assignee or subtenant;
c. Whether the assignee or subtenant, has substantial
experience in the sale, service and leasing of motor
vehicles or other uses permitted by this Lease; and
d. Whether the use of the Leased Premises by the
proposed assignee or subtenant is identical to the
use conducted prior to such assignment or subletting.
In the event a dispute should arise between Landlord and Tenant as to whether
Landlord has acted reasonably in failing to give its consent to any
proposed assignment or sublease, Tenant's sole remedy shall be an action for an
arbitration on such issue pursuant to Article 21 above, and in no event shall
Landlord be liable to Tenant for any damages (direct or consequential) allegedly
suffered by Tenant or any such assignee or subtenant as a result of such failure
to consent.
28.5 (a) Any consent by Landlord to an assignment or
subletting or use or occupancy by others shall be held to apply only to the
specific transaction thereby authorized and shall not constitute a waiver of the
necessity for such consent to any subsequent assignment or subletting or use or
occupancy by others, including, but not limited to, a subsequent assignment or
subletting by any trustee, receiver liquidator, or personal representative of
Tenant, nor shall the references anywhere in this Lease to subtenants, licensees
and concessionaires be construed as a consent by Landlord to an assignment. If
this Lease or any interest herein be assigned or if the Leased Premises be
sublet or used or occupied in whole or in part by anyone other than Tenant, with
or without Landlord's prior written consent having been obtained thereto,
Landlord may nevertheless collect rent (including but not limited to, Fixed Net
Rent, CPI Rent and additional leased rent) from the assignee, sublessee, user or
occupant and apply the net amount collected to the rents herein reserved. No
such assignment, subletting, use, occupancy or collection shall be deemed a
waiver of the covenant herein against assignment, subletting or use or occupancy
by others, or the acceptance of the assignee, subtenant, user or occupant as
Tenant hereunder, or constitute a release of Tenant from the further performance
by Tenant of the terms and provisions of this Lease, or a cure of Tenant's
default.
(b) In the event of a sublease, in no event will Landlord be
obligated to give any notice to or join such sublessee in any proceeding
Landlord institutes against Tenant, or recognize the continued existence of such
sublessee as Landlord's tenant in the event Tenant defaults under this Lease,
and the agreement, sublease and/or other agreement relating to the portion of
the Leased Premises in question between Tenant and the sublessee will by their
own
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terms automatically end upon the expiration or sooner termination of this Lease
unless Landlord, at its option, requests such sublessee to attorn to Landlord.
(c) In all cases in which Tenant desires to assign or sublet this
Lease, Tenant shall send Landlord an assignment notice not less than sixty (60)
days prior to the proposed date of such assignment and subletting ("ASSIGNMENT
NOTICE"), which Assignment Notice shall include, inter alia, (i) the name of the
proposed assignee or subtenant: (ii) the current financial statement showing the
net worth working capital and liabilities of Tenant; (iii) a "resume" or other
description setting forth the managerial experience of such assignee or
subtenant; (iv) a list of other locations (and trade names if different from the
trade name to be utilized in the proposed location) then operated by such
assignee or subtenant; (v) a complete description of the use of the Leased
Premises intended by such assignee or subtenant; and (vi) if then available, a
copy of the proposed assignment and assumption agreement or sublease, as the
case may be, which must be in form and substance reasonably acceptable to
Landlord. In addition, Tenant will supply such other information as Landlord may
reasonably require to make its decision as to whether or not to consent to the
proposed assignment or subletting. If the proposed assignment and assumption
agreement or sublease is not available at the time Tenant submits its Assignment
Notice to Landlord, such assignment or sublease shall not be deemed to be
effective unless and until Landlord approves the applicable agreement.
(d) Upon the occurrence of any assignment or subletting. whether
voluntary, involuntary, by operation of law, or otherwise, without the prior
written consent of Landlord where required (whether or not Tenant shall have
given notice thereof to Landlord), Landlord may treat any such occurrence as an
immediate Event of Default.
ARTICLE 29
NOTICES
29.1 Any notice, demand, election, or other communication
(hereinafter called a "NOTICE") that, under the terms of this Lease or under any
statute, must or may be given by the parties hereto shall be in writing and
shall be given in the manner hereinafter set forth in this Article 29,
addressed:
(a) in the case of notices to Landlord, to Landlord at:
c/o Kimco Realty Corporation
3333 New Hyde Park Road - Suite 100
P.O. Box 5020
New Hyde Park, NY 11042-0020
Attention: General Counsel
Fax: (516) 869-7117
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with a copy at the same time to:
Wolf, Block, Schorr & Solis-Cohen, LLP
Twelfth Floor Packard Building
11 South 15th Street
Philadelphia, PA 19102
Attention: Alvin H. Dorsky, Esquire
Fax: (215) 977-2727
(b) in the case of notices to Tenant, to Tenant at:
4910 Sylva Highway
Franklin, NC 28734
with copies to:
Sunbelt Automotive Group, Inc.
5901 Peachtree Dunwoody Road
Atlanta, GA 30328
Attn: General Counsel
Fax: (678) 443-8124
Either Landlord or Tenant may designate, by notice in writing, a new or other
address to which notices shall thereafter be given. Any notice given hereunder
shall be deemed given three (3) business days after the same is deposited in a
United States general or branch post office, or in an official United States
mail depositary, by prepaid certified mail wrapper, return receipt requested,
the later of one day after sent by a nationally recognized overnight courier
service, charges prepaid for next day delivery or the date upon which delivery
shall be made or tendered, addressed as hereinabove provided or upon delivery,
if hand delivered.
No notice from Tenant to Landlord the effect of which would be that
Landlord's approval, consent or other response would be deemed given in the
absence of a response thereto from Landlord, shall be deemed to have been given
to Landlord and Landlord shall not be bound thereby, unless such notice
expressly refers to the provision of this Lease pursuant to which the notice is
given and sets forth that if Landlord fails to respond within the applicable
time period (which shall be stated in the notice), its approval or consent will
be deemed to have been given.
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ARTICLE 30
BROKER
30.1 Landlord and Tenant covenant, warrant and represent that there
was no broker or finder instrumental in consummating this Lease and that no
conversations or negotiations were had with any broker or finder concerning the
leasing of the Leased Premises.
ARTICLE 31
WAIVERS AND SURRENDERS TO BE IN WRITING
31.1 The receipt of rent by Landlord, with knowledge of any breach
of this Lease by Tenant or of any default on the part of Tenant in the
observance or performance of any of the conditions or covenants of this Lease,
shall not be deemed to be a waiver of any provision of this Lease. No failure on
the part of Landlord or Tenant to enforce any covenant or provision herein
contained, nor any waiver of any right hereunder by Landlord or Tenant (unless
such waiver is in a writing signed by the party to be charged), shall discharge
or invalidate such covenant or provision, or affect the right of Landlord or
Tenant to enforce the same in the event of any subsequent breach or default. The
receipt by Landlord of any rent, or other sum of money, or any other
consideration paid by Tenant after the expiration or termination, in any manner
of the Term shall not reinstate, continue, or extend the Term, unless so agreed
to in writing and signed by Landlord. Neither acceptance of the keys to any
Improvement, nor any other act or thing done by Landlord or any agent or
employee during the Term, shall be deemed to be an acceptance of a surrender of
the Leased Premises excepting only an agreement in writing signed by Landlord
accepting or agreeing to accept such a surrender.
ARTICLE 32
RIGHTS AND REMEDIES CUMULATIVE
32.1 The rights given to Landlord herein are in addition to any
rights that may be given to Landlord by any statute or otherwise. All of the
rights and remedies of Landlord under this Lease or pursuant to present or
future law shall be deemed to be separate, distinct and cumulative, and no one
or more of them, whether exercised or not, nor any mention of, or reference to,
any one or more of them in this Lease shall be deemed to be in exclusion of, or
a waiver of, any of the others, or of any of the other rights or remedies that
Landlord may have, whether by present or future law or pursuant to this Lease.
Landlord shall have, to the fullest extent permitted by law, the right to
enforce any rights or remedies separately, and to take any lawful action or
proceedings to exercise or enforce any right or remedy, without thereby waiving,
or being barred or estopped from exercising and enforcing, any other rights and
remedies by appropriate action or proceedings.
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32.2 Except where Tenant's rights or remedies are expressly limited
by this Lease: the rights given to Tenant herein are in addition to any rights
that may be given to Tenant by any statute or otherwise; all of the rights and
remedies of Tenant under this Lease or pursuant to present or future law shall
be deemed to be separate, distinct and cumulative; no one or more of them,
whether exercised or not, nor any mention of, or reference to, any one or more
of them in this Lease, shall be deemed to be in exclusion of, or a waiver of,
any of the others Tenant may have, whether by present or future law or pursuant
to this Lease; and Tenant shall have, to the fullest extent permitted by law,
the right to enforce any such rights or remedies separately, and to take any
lawful action or proceedings to exercise or enforce any such right or remedy,
without thereby waiving, or being barred or estopped from exercising and
enforcing, any other rights and remedies by appropriate action or proceedings.
ARTICLE 33
REMOVAL OF PERSONAL PROPERTY AND FIXTURES
33.1 Tenant shall, on or before the last day of the Term, or on the
sooner termination thereof, peaceably and quietly leave, surrender and yield up
unto Landlord all and singular the Leased Premises and the Improvements, free of
all subtenancies (except to the extent that Landlord shall have consented to the
continuation of such subtenancies), broomclean, together with all alterations,
additions and improvements that may have been made upon the Leased Premises
(except movable furniture, movable personal property, or movable trade fixtures
put in at the expense of Tenant, or at the expense of any subtenant, subject,
however, to the subsequent provisions hereof). All furniture, personal property
and trade fixtures properly removable pursuant to the provisions of this Article
33 shall be removed by Tenant on or before the last day of the Term, or on the
sooner termination thereof, and all property not so removed shall be deemed
abandoned by Tenant. If the Leased Premises and the Improvements are not so
surrendered at the end of the term, Tenant shall make good to Landlord all
damage that Landlord shall suffer by reason thereof, and shall indemnify
Landlord against all claims made by any succeeding tenant against Landlord
founded upon delay by Tenant in delivering possession of the Leased Premises to
such succeeding tenant, so far as such delay is occasioned by the failure of
Tenant to so surrender the Leased Premises. For purposes of this Lease "TRADE
FIXTURES" shall be deemed to include hydraulic lifts and other moveable
machinery and equipment used in connection with the operation of the business of
an automobile dealership, all of which shall be removed upon Landlord's demand.
33.2 Should Landlord incur any expense in removing any subtenant.
or any other Person holding by, through, or under Tenant, who has failed to so
surrender the Leased Premises, the Improvements, or any part thereof, Tenant
shall reimburse Landlord for the reasonable cost and expense (including, without
limitation, reasonable attorneys' fees, disbursements and court costs) of
removing such subtenant or such person, provided that Tenant shall have failed
to have effected such removal after written demand.
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ARTICLE 34
SALE OR CONVEYANCE OF LEASED PREMISES;
LIMITS OF LIABILITY OF LANDLORD
34.1 The term "LANDLORD", as used in this Lease, means only the
owner at any time of fee title to the Leased Premises, so that, in the event of
any sale of the Leased Premises, the seller shall be, and hereby is, entirely
freed and relieved of all covenants and obligations of Landlord hereunder
thereafter arising, and it shall be deemed and construed, without further
agreement between the parties or between the parties and the purchaser of the
Leased Premises, that such purchaser has assumed and agreed to carry out any and
all covenants and obligations of Landlord hereunder thereafter arising. If
Landlord and/or any successor in interest of Landlord shall be an individual or
individuals who are joint venturers, tenants in common, members of a firm, a
general or limited partnership, or a corporation, it is specifically understood
and agreed that the monetary liability of such individual, or of the members or
other principals of such firm, partnership, or joint venture, or of the
officers, directors and/or shareholders of such corporation, whether disclosed
or undisclosed, in relation to any covenants or conditions under this Lease
shall be unconditionally and completely limited to the equity of Landlord in the
Leased Premises, in the event of a breach by Landlord of any of the terms,
covenants and conditions of this Lease to be performed by Landlord. Except as
expressly otherwise provided in this Lease, there shall be no personal liability
with respect to any of the foregoing persons and/or entities.
ARTICLE 35
ALTERATIONS
35.1 (a) Provided that no Event of Default shall have occurred
and be continuing under this Lease, Tenant shall have the right:
(i) with Landlord's consent, which shall not be
unreasonably withheld or delayed, to make non-structural interior changes in, or
non-structural additions to, the Improvements; and
(ii) with Landlord's prior written consent, which
may be given or withheld in Landlord's sole and absolute discretion, to make
structural interior changes in, or additions to, the Improvements.
(b) In determining whether to consent to Tenant's
proposed non-structural interior changes in, or non-structural additions to the
Improvements, Landlord may consider all factors which in Landlord's reasonable
business judgment, are pertinent to such decision, and the parties agree that
the following are examples of such factors:
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(i) whether the work will convert any
Improvement that is, prior to such alterations, a complete, self-contained
operating unit into a structure that is not a complete, self-contained operating
unit or impair the structural integrity of any Improvement;
(ii) whether the work will decrease the value of
any location which is part of the Leased Premises below the value of the same as
of the date of commencement of such alterations or materially decrease the size
of the rentable space contained therein;
(iii) whether the work will convert the use of any
location which is part of the Leased Premises from the use thereof as of the
date of this Lease, unless (x) prior to making any such alterations, Landlord
shall notify Tenant that Tenant shall be obligated to restore the Leased
Premises to the use thereof existing as of the date of this Lease at the sole
cost and expense of Tenant, on or before the last day of the Term, or the sooner
expiration or termination thereof, and Tenant shall agree in writing to so
restore and (y) such alterations shall be of such a nature as to reasonably
permit such restoration to be made without excessive cost or expense, or
(iv) whether the work will constitute the
demolition of all or a substantial portion of the structure of any Improvement.
35.2 No alterations shall be commenced until Tenant shall have
submitted to Landlord for approval by Landlord, plans and specifications for the
proposed work in sufficient detail to permit Landlord to evaluate the impact of
the work on the Leased Premises and Tenant shall have procured all necessary
permits and authorizations of all public authorities having jurisdiction. All
alterations shall be made promptly, in good and workmanlike manner, and so as
not to permit Landlord's fee title to the Leased Premises to be subjected to a
mechanics or other lien, and in compliance with all applicable permits,
authorizations, laws, ordinances, regulations and requirements of all public
authorities having jurisdiction and in accordance with the orders, rules and
regulations of the applicable Board of Fire Underwriters having jurisdiction
over the Leased Premises, the Insurance Services Office and any other body
exercising similar functions to either of the foregoing.
35.3 Prior to commencing any construction, alterations, or
additions to the Leased Premises or the Improvements estimated to cost in excess
of Two Hundred Fifty Thousand ($250,000.00) Dollars, increased every five years
by the corresponding increase in the CPI, Tenant shall, if Landlord so elects,
deliver to Landlord, at Tenant's expense, payment and performance bonds, which
bonds shall be issued by a company or companies, and in form and content,
reasonably satisfactory to Landlord and in an amount not less than the estimated
cost of such construction, alterations, or additions.
35.4 Any and all alterations, additions and improvements made with
respect to, or placed upon, the Leased Premises or the Improvements by Tenant,
as well as all fixtures and articles of personal property attached to, or used
in connection with, the Leased Premises or the
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improvements, shall become, be and remain the property of Tenant for the Term of
this Lease. but shall become the property of, and surrendered to, Landlord at
the end or other termination of this Lease, provided, however, that the
furniture and other movable personal property and movable trade fixtures put in
at the expense of Tenant or any subtenant that, pursuant to the provisions of
Article 33 hereof may be or shall be removed by Tenant, or by any subtenant upon
Landlord's demand, at or before the expiration or sooner termination of this
Lease, shall not be deemed to be attached to the freehold nor the property of,
nor surrendered to, Landlord.
ARTICLE 36
TENANT AND LANDLORD TO FURNISH STATEMENTS
36.1 Each party shall, within twenty (20) days after the actual
receipt of a written request of the other partly or of any holder or potential
holder of a fee mortgage or leasehold mortgage on the Leased Premises or any
portion thereof, furnish a written statement, duly acknowledged, of the
following items:
(a) the amount of Fixed Net Rent and additional rent due,
if any;
(b) whether this Lease is unmodified and in full force
and effect (or, if there have been modifications, whether this Lease is in full
force and effect as modified and stating the modifications).
(c) whether. to the best knowledge and belief of the
requested party, the requesting party is in default;
(d) whether Tenant has given Landlord or Landlord has
given Tenant any notice of default under this Lease, and if given, whether the
default set forth therein remains uncured; and
(e) such other items as may be reasonably requested by
the requesting party.
Any such statement shall be for the sole benefit of Landlord or its assigns, or
such holder or prospective holder requesting the same or its assigns, and shall
have no effect, as an estoppel or otherwise, with respect to any third party.
36.2 Upon the failure of Tenant to furnish any such statement
within the said twenty (20) day period, it shall be conclusively presumed that
this Lease is in full force and effect and that there are no defaults by
Landlord hereunder.
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ARTICLE 37
INSPECTIONS BY LANDLORD
37.1 Upon reasonable prior notice from Landlord (except in an
emergency, in which event no notice shall be necessary), and with Landlord
undertaking reasonable efforts not to cause an unreasonable interference with
Tenant's use, Tenant shall permit an inspection of the Leased Premises and the
Improvements by Landlord, by Landlord's agents or representatives, and by, or on
behalf of, prospective purchasers and/or mortgagees of the fee interest in the
Leased Premises at any time and from time to time during the Term. During the
three (3) year period next preceding the Expiration Date, Tenant shall permit
inspection thereof by or on behalf of prospective tenants. If admission to the
Leased Premises or any Improvement for the foregoing purposes cannot be
obtained, or if at any time by reason of an emergency condition an entry shall
be deemed necessary for the protection of the Leased Premises or the
Improvements, whether for the benefit of Tenant or not, Landlord, or Landlord's
agents or representatives, may enter the Leased Premises or the Improvements and
accomplish such purposes. The provisions contained in this Article 37 are not
intended to create or increase, and are not to be construed as creating or
increasing, any obligations on Landlord's part hereunder.
ARTICLE 38
SURRENDER AT THE END OF THE TERM
38.1 On the last day of the Term, or on the earlier termination of
the Term, Tenant shall peaceably and quietly leave, surrender and deliver the
Leased Premises and the Improvements to Landlord (together with any instrument
necessary to transfer title to or to confirm that Landlord shall succeed to such
title upon the expiration or sooner termination of the term, with respect to
alterations or improvements made by Tenant, with any transfer tax, recording
fees, or documentary stamp taxes or fees to be the sole cost and expense of
Tenant), together with any machinery, equipment, or other personal property of
any kind or nature that Tenant may have installed or affixed on, in, or to the
Leased Premises or the Improvements for use in connection with the operation and
maintenance of the Leased Premises and/or the Improvements for the purposes for
which they are intended (whether or not such property is deemed to be fixtures),
in good repair, order and condition (subject to the terms of Section 8.3
hereof), reasonable use, wear and tear and insured casualty excepted. If the
Leased Premises and the Improvements are not so surrendered, Tenant shall make
good to Landlord all expenses that Landlord shall incur by reason thereof, and,
in addition, Tenant shall indemnify Landlord from and against all claims made by
any succeeding lessee against Landlord, founded upon delay by Landlord in
delivering possession of the Leased Premises and the Improvements to such
succeeding lessee, so far as such delay is occasioned by the failure of Tenant
to surrender the Leased Premises and the Improvements.
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ARTICLE 39
COVENANTS BINDING ON SUCCESSORS AND ASSIGNS
39.1 The covenants, agreements, terms, provisions and conditions
contained in this Lease shall apply to, inure to the benefit of and be binding
upon Landlord, Tenant and their respective successors and assigns, except as
expressly otherwise hereinbefore provided, but shall not inure to any third
party beneficiaries.
ARTICLE 40
ENTIRE AGREEMENT
40.1 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 or their respective successors in interest.
ARTICLE 41
MISCELLANEOUS
41.1 Except as otherwise herein specifically provided to the
contrary, where the consent or approval of either party hereto shall be
required, the parties hereto agree that such consent shall not be unreasonably
withheld or delayed.
41.2 The captions of this Lease and the index preceding this Lease
are for convenience and reference only and in no way define, limit or describe
the scope or intent of this Lease, nor in any way affect this Lease.
41.3 All the provisions of this Lease 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
provision hereof.
41.4 Words of any gender in this Lease shall be held to include any
other gender and words in the singular number shall be held to include the
plural when the sense requires.
41.5 If and to the extent that a provision of this Lease shall be
unlawful or contrary to public policy, the same shall not be deemed to
invalidate the other provisions of this Lease.
41.6 This Lease shall be governed by, and construed and interpreted
in accordance with the laws of the State where the Leased Premises are located,
applicable to agreements made and to be performed entirely therein.
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41.7 Landlord represents to Tenant that Landlord has the right to
enter into this Lease with Tenant.
ARTICLE 42
CERTAIN DEFINITIONS
42.1 As the same are used in this Lease, the following terms shall
have the following meanings:
(a) "COMMENCEMENT DATE" shall have the meaning set forth
in Section 2.1;
(b) "DEPOSITORY" shall mean a bank or trust company
having offices in the City, County and State of New York or the City of Atlanta,
Fulton County and State of Georgia and a net worth of not less than Twenty-Five
Million ($25,000,000.00) Dollars, to be selected by Tenant, subject to the
written approval of Landlord, to act as insurance trustee;
(c) "EVENT OF DEFAULT" shall have the meaning set forth
in Section 16.1;
(d) "EXPIRATION DATE" shall mean the ending, termination,
or expiration date of the Term of this Lease,
(e) "FIXED NET RENT" shall have the meaning set forth in
Section 2.1,
(f) "IMPROVEMENTS" shall mean the structures or
buildings, and replacements thereof, now on the Leased Premises or hereafter
erected on the Leased Premises, including all building equipment, apparatus,
machinery and fixtures of every kind and nature forming part of such structures
or buildings, or of any structures or buildings hereafter standing on the Leased
Premises or on any part thereof and articles of personal property owned by the
Tenant now or at any time hereafter affixed to, attached to, placed upon, or
used in any way in connection with the complete and comfortable use, enjoyment,
occupancy or operation of, any such structures or buildings (provided, however,
that nothing in the foregoing definition shall be construed to be in limitation
of Tenant's rights and obligations pursuant to the terms of Section 33.1 to
remove certain personal property and trade fixtures (including hydraulic lifts)
from the Leased Premises on or before the Expiration Date);
(g) "LANDLORD" shall mean the then holder of the fee
title to the Leased Premises at the time in question;
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(h) "LEASED PREMISES" shall have the meaning set forth in
the Statement of Facts to this Lease; and
(i) "NOTICE" shall have the meaning set forth in Section
29.1.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement of Lease as of the day and year first above written.
TENANT: LANDLORD:
FRANKLIN FORD MERCURY, INC. KIMCO AUTOFUND, LP
By: /s/ Charles K. Yancey By: KIMCO AUTOVENTURE, INC.
---------------------------- General Partner
Name: Charles K. Yancey
-----------------------
Title: CEO
----------------------
Attest: /s/ Stephen C. Whicker By: /s/ Michael V. Pappagallo
------------------------ --------------------------------
Name: Stephen C. Whicker Name: Michael V. Pappagallo
----------------------- ------------------------------
Title: Secretary Title: Vice President
---------------------- -----------------------------
Attest: /s/ Michael E. Pam
----------------------------
Name: Michael E. Pam
------------------------------
Title: Assistant Secretary
-----------------------------
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<PAGE> 1
EXHIBIT 10.61
LEASE AGREEMENT
THIS LEASE AGREEMENT (hereinafter sometimes referred to as this
"Lease") is made and entered into as of the ____ day of ________, 1998, by and
between E. MOSS ROBERTSON, JR., an individual (herein sometimes referred to as
the "Landlord") and ROBERTSON OLDSMOBILE-CADILLAC, INC., a Georgia corporation
(herein sometimes referred to as the "Tenant").
WITNESSETH THAT:
For valuable consideration, Landlord and Tenant, intending to be
legally bound, hereby agree with each other as follows:
ARTICLE I
DEFINITIONS AND FUNDAMENTAL PROVISIONS
The following terms shall have the meanings set forth below when used
in this Lease, except as may otherwise be specifically provided:
1.1 Addresses:
Landlord: E. Moss Robertson, Jr.
2418 Island Drive
Gainesville, Georgia 30501
Tenant: Robertson Oldsmobile-Cadillac, Inc.
2355 Browns Bridge Road
Gainesville, Georgia 30501
Attention:
-------------------------
or such other address or addresses as a party may designate by written notice
to the other party.
1.2 Property: That certain tract or parcel of land located at
2355 Browns Bridge Road, in Gainesville, Hall County, Georgia, which is more
particularly described and/or depicted on EXHIBIT "A" attached hereto and by
this reference made a part hereof (the "Property").
1.3 Premises: The Property and the improvements now or hereafter
thereon, which Premises include an automobile dealership presently comprised of
three separate buildings (the "Buildings").
1.4 Lease Year: Each Lease Year shall be a period of twelve (12)
consecutive calendar months, beginning on the expiration of the prior Lease
Year. The first Lease Year shall commence on the date that Landlord tenders
delivery of the Premises to Tenant (the "Commencement Date") and ending at the
end of the twelfth (12th) full calendar month thereafter. If Landlord has not
<PAGE> 2
tendered delivery of the Premises on or before __________________, 1998, this
Lease shall automatically expire and terminate and the parties shall have no
further obligations or rights hereunder. At the request of either party, the
parties shall execute a stipulation stating the Commencement Date, the
expiration of the first Lease Year and of the Initial Term after Landlord has
delivered the Premises to Tenant.
1.5 Basic Rent: Tenant agrees to pay as "Basic Rent" the amounts, as
adjusted, as hereinafter described, in strict accordance with the terms and
provisions of Article III hereof, as follows:
(a) Monthly Basic Rent for the period from the Commencement Date
through the 10th Lease Year, shall be as follows:
<TABLE>
<S> <C> <C>
Commencement Date through 2nd Lease Year $17,000.00
3rd Lease Year through 5th Lease Year $18,000.00
6th Lease Year through end of Initial Term $20,000.00
</TABLE>
(b) If the Extension Options (as defined in Section 1.9 below) are
duly exercised, the monthly Basic Rent shall be as follows:
Years 11-12 The greater of the monthly "Fair Rental Value" of
the Premises as of the date determined by Landlord
(or otherwise), as provided in Section 1.5(c)
hereof, or $20,000.00.
Years 13-15 The sum of (i) monthly Basic Rent payable for
Years 11-12, plus (ii) $1,000.00.
Years 16-17 The greater of the monthly "Fair Rental Value" of
the Premises as of the date determined by Landlord
(or otherwise), as provided in Section 1.5(c)
hereof, or the monthly Basic Rent payable during
Years 13-15.
Years 18-20 The sum of (i) monthly Basic Rent payable for
Years 16-17, plus (ii) $1,000.00.
(c) Fair Rental Value. (i) The monthly "Fair Rental Value" of the
Premises shall be initially determined by Landlord, from time to time, by
taking the average rental rates for comparable leases (in terms of length of
term, space, size and character of underlying premises and other relevant
factors) in rental markets that are similar to the rental market in which the
Premises is located. Landlord shall give Tenant written notice of its
determination of Fair Rental Value not less than nine (9) months, nor more than
twelve (12) months prior to the end of the Initial Term or any Extension
Period, as applicable. Tenant shall have thirty (30) days after receipt of
Landlord's notice of Fair Rental Value to notify Landlord that Tenant is
contesting same. Tenant's failure to so notify Landlord within such thirty (30)
day period shall be deemed an acceptance of the Fair Rental
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<PAGE> 3
Value set forth in Landlord's notice and a waiver of Tenant's right to
contest Landlord's determination of Fair Rental Value. If Tenant timely
contests Landlord's determination of Fair Rental Value, then the parties
shall have thirty (30) days after Landlord receives Tenant's notice of
contest in accordance herewith in which to agree on the Fair Rental Value
for the applicable Extension Period. If the parties are able to agree on an
amount of rent mutually satisfactory, then such agreement shall be placed
in writing and shall be signed by the parties hereto and shall thereupon
become a part of this Lease.
(ii) If the parties hereto are unable to agree upon the
amount of the Fair Rental Value for either Extension Period at least
thirty (30) days prior to the commencement of such Extension Period,
then the disagreement shall be promptly submitted to arbitration and
each party hereto will select an arbitrator of experience and
competence in the matter, and said arbitrators shall immediately meet
for the purpose of hearing and deciding the dispute and fixing the
Fair Rental Value for the applicable Extension Period.
(iii) If the two arbitrators selected cannot agree, they shall
select a third arbitrator with qualifications similar to their own,
and if said two arbitrators cannot agree on the said third arbitrator,
they shall petition the presiding judge of the Superior Court of the
State of Georgia, in and for the County of Hall and the City of
Gainesville to appoint such arbitrator with said qualifications and
said third arbitrator shall act as an umpire between the arbitrators
selected by Landlord and Tenant, and his/her decision, made in concert
with either one or both, or individually if unable to agree with
either upon rendering the decision. The decision shall be signed by
both parties and shall thereupon become a part of this Lease. The rent
fixed by said decision shall constitute the Fair Rental Value for the
subject Years, and the Lease shall be modified to that extent only and
not otherwise. Each party shall be responsible for the fees and costs
of its own appraiser and will share equally in the cost of the third
appraiser, if needed.
1.6 Permitted Use: The Premises shall be used for the operation of an
automobile dealership selling primarily new automobiles, and initially
operating the following franchises: Cadillac, Oldsmobile, Mazda and Isuzu,
together, at Tenant's election, with such operations and services as are
ancillary and integrally related to the operation of an automobile dealership
(for example, car leasing operations and/or automobile repair shop), provided
Tenant shall at all times continue as its primary business at the Premises a
new car automobile dealership; and for no other purpose whatsoever.
1.7 Rent: "Rent" shall mean and include Basic Rent and all other amounts
and charges payable by Tenant under any provision of this Lease. Sums other than
Basic Rent that are designated as "Rent" or "additional rent" (or any similar
term indicating rent or rental) are so designated solely for the purpose of
enabling Landlord to enforce its rights hereunder, and Landlord shall have the
same remedies for Tenant's failure to pay same as for non-payment of Basic Rent.
Such sums shall not be deemed rent for purposes of computing taxes or for
governmental regulations thereon.
1.8. Reserved.
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<PAGE> 4
19. TERM: Ten (10) Lease Years (being sometimes herein referred to as the
"Initial Term") to commence on the Commencement Date. Tenant shall have two (2)
options ("Extension Options") to extend the term of this Lease for a period of
five (5) Lease Years each ("Extension Periods") if exercised in strict
compliance with this Section 1.9. The Extension Options shall only be exercised,
if at all, by written notice from Tenant to Landlord given no earlier than
twenty-four (24) months and no later than six (6) months prior to the expiration
of the then existing Initial Term or first Extension Period, as applicable. (The
Initial Term and all duly exercised Extension Periods may be herein referred to
collectively as the "Term" of this Lease.) If an Extension Option is duly
exercised, then the Term shall be extended for the applicable Extension Period
pursuant to the provisions hereof, with Basic Monthly Rent as set forth in
Section 1.5 above. If Tenant shall fail to timely exercise any Extension Option
in strict accordance with the provisions of this Section 1.9, then such
Extension Option and any succeeding Extension Option shall terminate.
1.10 MEMORANDUM OF LEASE: Tenant shall not record or permit the recording
of this Lease without landlord's written consent. At Landlord's request, Tenant
shall execute and deliver a written statement in recordable form identifying the
parties hereto and the Property, specifying the Rental Commencement Date and
termination date of the Lease Term and the Permitted Use, and incorporating this
Lease by reference.
1.11 NET LEASE: This Lease is to be absolutely net to Landlord. Tenant
shall pay for all expenses, costs, impositions, taxes and other charges imposed
upon or affecting the Premises during the Term, and Landlord shall have no
obligation to pay for any matter affecting the Premises during the term hereof
except as may be explicitly set forth herein.
ARTICLE II
DEMISED PREMISES
2.1 Demise of Premises:
(a) Landlord hereby leases and demises to Tenant for the Term and
Permitted Use specified herein and Tenant rents from Landlord the Premises,
subject to the terms and conditions herein contained, and all encumbrances,
easements, restrictions, mortgages, zoning laws, and governmental or other
regulations affecting the Premises (such other encumbrances and other matters
sometimes collectively referred to herein as the "Encumbrances").
(b) The parties hereby acknowledge that there is an existing cemetery
adjacent to, but not a part of, the Premises. This cemetery is on land owned by
Landlord. Tenant has been informed by Landlord that visitors to the cemetery
have been granted the right by Landlord to park their vehicles on the Premise,
when visiting the cemetery, and have further been granted pedestrian access
across the Premises to the extent necessary to access the cemetery. Tenant
acknowledges and agrees that, during the Term of this Lease, it shall continue
to permit visitors to the cemetery to park on the Premises and to permit
pedestrian access across the Premises to the cemetery.
2.2 QUIET ENJOYMENT: Tenant, upon timely paying the Rent herein reserved
and performing and observing all of the other terms, covenants and conditions of
this Lease, shall
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<PAGE> 5
peaceably and quietly have, hold and enjoy the Property during the Term without
interference by Landlord, subject to the terms of this Lease and the
Encumbrances.
ARTICLE III
RENT AND OTHER CHARGES
3.1 PAYMENT OF RENT: During the Term, Tenant covenants and agrees to pay
to Landlord, in advance, at the place designated in Section 1.1 hereof, without
demand, deduction or set-off, all Rent as defined in Section 1.7 hereof.
3.2 PAYMENT OF BASIC RENT: On the Rental Commencement Date and,
thereafter, monthly Basic Rent shall be due and payable on or before the first
(1st) day of each and every calendar month during the Term, in advance, without
demand, deduction or offset, as set forth in Section 1.5 hereinabove.
3.3 PAST DUE RENT AND ADDITIONAL RENT: If Tenant shall fail to pay, when
the same is due and payable, any Rent or any additional rent, or amounts or
charges of any character whatsoever owed to Landlord, such unpaid amounts shall
bear interest from the due date thereof to the date of payment at the rate (the
"Default Rate") which is the lesser of (i) eighteen percent (18%) per annum, or
(ii) the maximum interest rate permitted by law.
3.4 PAYMENTS ON BEHALF OF TENANT: In case of any default by Tenant in the
payment of any amounts herein provided to be paid by Tenant, including without
limitation the procuring of insurance as hereinafter provided for or in any
other payment required to be made by Tenant hereunder, Landlord, on behalf of
Tenant, may make such payment or payments or procure any such insurance, and
Tenant covenants to reimburse and pay Landlord any amount paid to expended
immediately upon demand, with interest from the date of disbursement by Landlord
at the rate set forth in Section 3.3 hereof.
3.5 UTILITIES: Tenant shall make application for, obtain, pay for, and be
solely responsible for all utilities required, used or consumed in the Premises,
including, but not limited to gas, water (including water for domestic uses and
for fire protection), telephone, electricity, sewer service, garbage collection
services, or any similar service (herein sometimes collectively referred to as
the "Utility Services"). In the event that any charge or assessment for any
Utility Service supplied to the Premises that has or could become a lien on the
premises or any portion thereof or interest therein is not paid by Tenant to the
utility supplier when due, then Landlord may, ten (10) days after written notice
to Tenant, but shall not be required to, pay such charge for and on behalf of
Tenant, with any such amount paid by Landlord being repaid by Tenant to Landlord
with interest at the Default Rate, as additional rent, within ten (10) days
after demand by Landlord. Landlord shall have absolutely no obligation with
respect to any Utility Service to the Premises and shall not be liable for any
interruptions or curtailment in Utility Services whatsoever.
3.6 TAXES: Tenant shall be responsible for the timely payment of all
taxes, public charges and assessments of whatsoever nature directly or
indirectly assessed or imposed upon the land, buildings, equipment and
improvements constituting the Premises and the rents therefrom, including
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<PAGE> 6
but not limited to all real property taxes, rates, duties and assessments,
local improvement taxes, import charges or levies, whether general or special,
that are levied, charged or assessed against the Premises by any lawful taxing
authority whether federal, state, county, municipal, school or otherwise (other
than income, inheritance and franchise taxes thereon) (the "Taxes"). Taxes for
any partial tax period shall be prorated. If Landlord initially pays the Taxes,
Tenant shall reimburse Landlord therefor upon demand.
Tenant shall also promptly pay when due all taxes on its trade fixtures and
other personal property in or on the Premises.
ARTICLE IV
USE OF PREMISES
4.1 Tenant's Use: Tenant shall use the Premises solely for the Permitted
Use specified in Section 1.6, and for no other purpose whatsoever. Tenant shall
not vacate or abandon the Premises during the Term.
4.2 Legal Operation of Premises: Tenant shall not use, or suffer or
permit the Premises, or any part thereof, to be used for any purpose or use in
violation of any law, ordinance or regulation of any governmental authority, or
in any manner that will constitute a nuisance or an annoyance, or for any
hazardous purpose. Nothing contained in this Section 4.2 shall be construed to
interfere with Tenant's right to operate in the Premises for the uses and in
the manner set forth in Section 1.6 hereof, so long as they are lawful. In the
event, at any time during the Term of this Lease, any addition, alteration,
change or repair or other work of any nature, structural or otherwise, shall be
required or ordered or become necessary on account of any law, ordinance or
regulation of any governmental authority now in effect or hereafter adopted,
passed or promulgated, or on account of any other reason with respect to the
Premises, the entire expense thereof, regardless of when the same shall be
incurred or become due, shall be the liability of Tenant and in no event shall
Landlord be called upon to contribute thereto or do or pay for any work of any
nature whatsoever on or relating to the Premises. Tenant takes the Property
subject to all zoning regulations and ordinances now or hereafter in force;
provided, however, that if any zoning regulation or ordinance to which the
Premises is or becomes directly subject makes it impossible for Tenant to
continue to operate an automobile dealership at the Premises, then in such
event, Tenant may terminate this Lease by delivering ninety (90) days' advance
written notice thereof to Landlord within ninety (90) days after the date such
regulation or ordinance becomes effective as to the Premises. Such notice shall
indicate with reasonable particularity the reason such regulation or ordinance
makes it impossible for Tenant to continue to operate an automobile dealership
at the Premises and shall include a citation of such regulation or ordinance.
4.3 Alterations to Premises: Except as described in Section 5.3
hereinbelow, Tenant shall not alter the exterior of the Premises, or make
interior structural changes or make any other changes or alterations to the
Premises without first obtaining Landlord's written approval for such
alterations, which approval shall not be unreasonably withheld or delayed. All
alterations shall remain upon the Premises and shall become Landlord's property
upon the expiration or other termination of this Lease; provided, however, that
Landlord may require any alteration or improvement made by Tenant without
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<PAGE> 7
5.3 Improvements: Landlord and Tenant acknowledge that Tenant may make
certain improvements to the Buildings from time to time ("Tenant's
Improvements"), as provided or required pursuant to the terms of this Lease.
Tenant's Improvements shall be subject to all of the terms of this Lease and
must first be approved by Landlord in writing, which approval shall not be
unreasonably withheld or delayed. All such Tenant's Improvements which are
fixtures shall become the property of Landlord upon the installation thereof.
5.4 As-Is Lease: Tenant acknowledges that Tenant is leasing the Premises "as
is" without any warranty or representation and that Landlord has not made, and
is not hereby making, any warranties or representations pertaining to the
physical condition of the Premises, any part thereof or any improvements
thereon.
ARTICLE VI
ACCESS TO PREMISES
6.1 Access to Premises: Tenant agrees that Landlord, its agents, employees,
or servants or any person authorized by Landlord may enter the Premises to
inspect the condition of same, to cure defaults of Tenant as provided for
herein, and to exhibit the same to prospective tenants, purchasers, mortgagees
or others interested in the Premises. Such entry, cure or exhibition shall not
constitute an eviction of Tenant in whole or in part, Landlord agreeing to
employ its reasonable efforts in attempting to minimize any interruption to the
business operations of Tenant resulting from Landlord's (or its designated
representatives') entry to the Premises. Nothing herein contained, however,
shall be deemed or construed to impose upon Landlord any obligation or liability
whatsoever for the inspection, care, supervision, repair, improvement, addition,
change, or alteration of the Premises.
ARTICLE VII
INSURANCE AND INDEMNIFICATION
7.1 Tenant Liability Insurance: Tenant shall maintain as its sole expense
during the Term hereof, General Commercial Liability or General Garage Liability
insurance insuring both Tenant and Landlord covering the Premises with single
limit coverage of a least $1,000,000.00 per occurrence and not less than
$2,000,000 in the aggregate in companies licensed and in good standing in the
State of Georgia in the joint names of Landlord and Tenant. Tenant shall
further maintain at its sole expense a commercial umbrella policy with single
limit coverage of at least $5,000,000 per occurrence and not less than
$5,000,000 in the aggregate in companies licensed and in good standing in the
State of Georgia in the joint names of Landlord and Tenant. Tenant shall keep
in force all-risk (Special Form) coverage insurance for the full replacement
value of all of Tenant's personal property within the Premises and on the
Property, including but not limited to, fixtures, inventory, trade fixtures,
furnishings and other personal property. In addition, Tenant shall keep in
force workers compensation or similar insurance to the extent required by law.
Finally, Tenant shall maintain, at its sole cost and expense, Special Form
("all-risk") property insurance covering the Buildings for the full replacement
cost thereof (excluding footings and foundations), providing protection against
perils included in the Special Form ("all-risk") insurance policy. All
insurance required under this Section
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<PAGE> 8
Landlord's written consent to be removed by Tenant by written notice thereof
given to Tenant no later than sixty (60) days after the expiration or earlier
termination of the Term. There shall be no signs or any other equipment on the
roof any of the Buildings or of any other structure now or hereafter existing
on the Property. Notwithstanding the foregoing, Tenant shall be permitted,
without the requirement of Landlord's prior consent, to make interior,
cosmetic, non-structural alterations to the Premises provided that: (i) the
value and structural integrity of the Premises are not decreased or diminished
hereby; (ii) all such work is expeditiously completed in a good and workmanlike
fashion and in compliance with all applicable laws, ordinances and regulations
and in conformity with all provisions of this Lease; and (iii) Tenant obtains
lien waivers consistent with the provisions of Section 4.4 hereof.
4.4 Liens: Tenant will not create or permit to be created or to remain,
and will discharge, any lien (including, but not limited to, the liens of
mechanics, laborers or materialmen for work or materials alleged to be done or
furnished in connection with the Premises), encumbrance or other charge upon
the Premises or any part thereof. Landlord reserves the right to enter the
Premises to post and keep posted notices of non-responsibility for any such
lien.
ARTICLE V
REPAIRS AND MAINTENANCE
5.1 No Maintenance or Repair by Landlord: Landlord shall have no
obligation to improve, alter, replace, maintain and/or repair the Premises or
any part thereof. Landlord may inspect the Premises at all reasonable times to
determine whether Tenant has fulfilled its maintenance and repair obligations
under this Lease and to otherwise inspect or exhibit the Premises; provided,
however, that Landlord shall never be obligated to inspect the Premises for any
reason.
5.2 Maintenance, Repair and Replacement Obligations of Tenant: Tenant
shall, at Tenant's expense, at all times keep and maintain the entire Premises
in good repair and condition, including without limitation the diligent and
prompt repair of the roof and all exterior supporting walls, foundations, HVAC,
plumbing, electrical and other systems, rain gutters and spouting and all
esthetic aspects of the Premises and shall also keep the non-structural portions
of the Premises (specifically including the storefront, windows and automatic or
other doors of the Premises) in good order, condition, and repair, clean,
sanitary and safe, including the replacement of equipment, fixtures and all
broken glass (with glass of the same size and quality). Tenant shall also,
during the Term hereof, maintain in good condition and repair the non-building
areas of the Property including the sidewalks, driveways, landscaped areas and
parking areas, and including patching, striping, cleaning, sweeping and other
maintenance. In the event Tenant fails to perform any of its obligations as
required hereunder, Landlord may (but shall not be required to) perform and
satisfy same, and Tenant hereby agrees to reimburse Landlord, as additional
rent, for the cost thereof, together with interest at the Default Rate, promptly
upon demand. The parties agree that it shall be Tenant's sole responsibility at
all times during the Term of this Lease to maintain the Premises in structurally
sound, leak-free condition so that the Premises shall be maintained at all times
as if operations therein were to continue beyond the expiration of the Term and
so that all normal maintenance and repair during the Term shall be completed
when the Premises are surrendered to Landlord.
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7.1 shall be written by companies rated A or better in the most current
edition of Best's Insurance Reports. Tenant will cause such insurance policies
to name Landlord and its agents (and, at Landlord's election, any lender whose
loan is secured by the Premises (a "mortgagee")) as a named insured thereunder
with respect to liability policies and to be written so as to provide that the
insurer waives all right of recovery by way of subrogation against Landlord
(and, at Landlord's election, any mortgagees) in connection with any loss or
damage covered by the all-risk (Special Form) policy in accordance with the
provisions of Section 7.2 hereof. Tenant shall deliver said policies of
liability, workers compensation and all-risk insurance or certificates thereof
to Landlord at or prior to its execution of this Lease, and thereafter from time
to time at the reasonable request of Landlord. Should Tenant fail to effect the
insurance called for in this Lease, Landlord may, but shall not be obligated to,
procure said insurance and pay the requisite premiums, in which event, Tenant
shall promptly pay all sums so expended by Landlord as additional rent following
invoice. Each insurer under the policies required hereunder shall agree by
endorsement on the policy issued by it or by independent instrument furnished to
Landlord that it will give Landlord at least thirty (30) days prior written
notice before the policy or policies in question shall be altered or canceled.
Tenant's property insurance policy shall insure Landlord and any mortgagee, as
their interests may appear.
7.2 Waiver of Subrogation: Tenant hereby releases Landlord and anyone
claiming through or under Landlord by way of subrogation from any and all
liability for any loss of or damage to property, whether or not caused by the
negligence or fault of the Landlord, to the extent same is required to be
insured pursuant to the requirements of this Lease. In addition, Tenant shall
cause each such insurance policy carried by it insuring the Buildings or
Tenant's personal property therein (and including the insurance coverages
required in Section 7.1 hereinabove) to be written to provide that the insurer
waives all rights of recovery by way of subrogation against the Landlord in
connection with any loss or damage covered by the policy.
7.3 Indemnification and Release: Tenant hereby agrees to indemnify,
protect, defend and hold Landlord harmless from any and all claims, damages,
liabilities or expenses (including without limitation attorney's fees and other
costs of legal representation) (collectively "Claims") arising out of (i) any
and all claims by third parties arising from any breach or default in the
performance of any obligation of Tenant hereunder and (ii) any act, omission or
negligence of Tenant, its agents or employees, representatives or contractors
on or about the Premises or otherwise in connection with this Lease. Tenant
further releases Landlord from liability for any damages sustained by Tenant,
or any other person claiming by, through or under Tenant, due to the Premises
or any part thereof or any appurtenances thereto being or becoming out of
repair or due to the happening of any accident, including, but not limited to,
any damage caused by water, snow, ice, windstorm, tornado, gas, steam,
electrical wiring, sprinkler system, plumbing, heating and air conditioning
apparatus. Notwithstanding the foregoing, Tenant's indemnification pursuant to
this Section 7.3 shall not apply to any Claims arising solely as a result of
the willful acts or negligence of Landlord or its agents, employees,
representatives, or contractors. Landlord shall not be liable for any damage
to, or loss of, Tenant's personal property, inventory fixtures or improvements
from any cause whatsoever. The provisions of this Section 7.3 shall survive the
expiration or earlier termination of this Lease.
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ARTICLE VIII
CASUALTY AND CONDEMNATION
8.1 Fire, Explosion or Other Casualty: In the event the Premises are
damaged by fire, explosion or any other casualty, then except as provided in
Section 8.2 or below in this Section 8.1, the damage shall be repaired by
Tenant, said repairs to be substantially completed within 270 days after the
casualty causing damage has occurred, subject to force majeure events beyond
Tenant's reasonable control.
In the event the Premises shall be damaged or destroyed to the extent of
seventy-five percent (75%) or more of the total square footage of all Buildings
and other improvements on the Premises (hereinafter, a "Casualty") and such
Casualty shall occur after the first five (5) Lease Years of the Term of the
Lease, then and in such event Tenant may elect by written notice to Landlord
delivered within thirty (30) days after such Casualty either to repair or
rebuild the Premises, as aforesaid, or to terminate this Lease, effective as of
the date Tenant's notice is delivered to Landlord. If Tenant elects to
terminate the Lease pursuant to this Section 8.1, then Tenant shall direct its
insurance company(s) to deliver directly to Landlord all insurance proceeds to
be paid for or in connection with said Casualty; provided, in no event shall the
amount of such insurance proceeds payable to Landlord be less than the full
replacement value of all such improvements which have been so damaged or
destroyed, as reasonably determined by Landlord's insurance adjuster. If the
insurance proceeds are less than the full replacement value as aforesaid, Tenant
shall pay such deficiency to Landlord upon demand. If Tenant fails to deliver
notice of its election to Landlord within the 30-day period reference above.
Tenant shall be deemed to have elected to repair or rebuild the Premises and the
Lease shall remain in full force and effect.
If this Lease is not terminated pursuant to the preceding paragraph, then
Tenant shall restore and repair the Buildings and other improvements in an
expeditious manner. If Tenant purchases, at its sole option, rent insurance to
compensate Landlord for any lost rents as a result of damage or destruction to
the Premises, then Basic Rent (and other Rent) shall abate during any period
following damage to the Premises in a fair and equitable fashion according to
the proportion of the Premises that cannot reasonably be utilized by tenant,
provided that the amount of such abatement shall not exceed the rent insurance
proceeds actually received by Landlord with respect thereto. Notwithstanding
the provisions of the Section 8.1, tenant shall be the owner of its trade
fixtures and shall be entitled to any insurance proceeds attributable to said
trade fixtures.
8.2 Condemnation: If the whole of the Premises, or so much thereof as to
render the balance unusable by Tenant, shall be taken under power of eminent
domain, or otherwise transferred in lieu thereof, this lease shall
automatically terminate as of the date possession is taken by the condemning
authority. No award for any total or partial taking of any real property
interest in or to the premises shall be apportioned, and Tenant hereby
unconditionally assigns to Landlord any award which may be made for real
property interests in such taking or condemnation. In the event of a partial
taking which does not result in the termination of this lease, Basis Rent shall
be apportioned according to the part of the Buildings remaining usable by
Tenant.
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8.3 Condemnation Award: All compensation awarded or paid for any taking
or acquiring under the power or threat of eminent domain, whether for the whole
or a part of the Premises, shall be the property of Landlord, and Tenant hereby
assigns to Landlord all of the Tenant's right, title and interest in and to any
such award. Notwithstanding the foregoing, Tenant shall be entitled to claim,
prove and receive in the condemnation proceeding or by separate action, such
awards as may be allowed for loss of lease, moving expense, fixtures and other
equipment installed by it, but only if such awards shall be made by the
condemnation court in addition to the award made by it for the land and the
buildings or part thereof so taken.
ARTICLE IX
ASSIGNMENT AND SUBLETTING
9.1 Assignment and Subletting: Tenant's interest in the premises shall
be limited to the use and occupancy thereof in accordance with the provisions
hereof and shall be non-transferable without Landlord's prior written consent,
which consent shall not be unreasonably withheld, conditioned or delayed. Any
attempts by Tenant to assign its interest in the lease, or to sublet the
Premises in whole or in part, or to sell, assign, lien, encumber or in any
manner transfer this lease or any interest therein without Landlord's prior
written consent shall constitute a default hereunder, as shall any attempt by
Tenant to assign or delegate the management or to permit the use or occupancy
of the property or the Premises or any part thereof by anyone other than Tenant.
Landlord and Tenant acknowledge and agree that the foregoing provisions have
been freely negotiated by the parties hereto and that landlord would not have
entered into this Lease without Tenant's consent to the terms of this Section
9.1. Any attempt by Tenant to assign this lease or to sublet all or any
portion of the Premises, to encumber same, or to in any manner transfer, convey,
or assign Tenant's interest therein without Landlord's prior written consent
shall be void ab initio.
Notwithstanding anything contained herein to the contrary. Tenant may
without the prior consent of Landlord, (i) assign this lease or sublease the
premises to any wholly-owned subsidiary of Tenant, to the parent corporation of
Tenant, or to a wholly-owned subsidiary of the parent corporation of Tenant, or
(ii) transfer its capital stock to the parent corporation of Tenant, or to a
wholly-owned subsidiary of the Tenant or of Tenant's parent corporation;
provided that, in the case of any such transfer, all of the assets held by
Tenant prior to such Transfer remain or become assets of the continuing
corporation. If Tenant survives as an entity after such assignment or
sublease, Tenant shall remain fully and primarily liable for performance of all
obligations of the tenant under the Lease and shall not be released as a result
thereof.
9.2 Change of Control: In furtherance of the provisions of Section 9.1
hereof, if Tenant is a partnership, limited liability company, corporation or
banking association and if the person or persons who own a majority of its
voting shares or interests at the time of the execution hereof cease to own a
majority of such shares or interests at any time hereafter (except as a result
of transfers by gift, bequest, or inheritance by or among immediate family
members), Tenant shall so notify Landlord. In the event of such change of
ownership, whether or not Tenant has notified Landlord thereof, landlord may
terminate this Lease by notice to Tenant effective sixty (60) days from the
date of such
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notice from Tenant, or the date on which Landlord first has knowledge of such
transfer, whichever shall first occur.
ARTICLE X
SUCCESSION TO LANDLORD'S INTEREST
10.1 ATTORNMENT: Tenant shall attorn and be bound to any of Landlord's
successors under all the terms, covenants and conditions of this Lease for the
balance of the remaining term.
10.2 SUBORDINATION: (a) This Lease shall be subordinate to the lien of any
mortgage or security deed or the lien resulting from any other method of
financing or refinancing now or hereafter in force against the Premises or any
portion thereof, and to any and all advances to be made under such security
instruments, and all renewals, modifications, extensions, consolidations and
replacements thereof. The aforesaid provisions shall be self-operative and no
further instrument of subordination shall be required to evidence such
subordination. Tenant covenants and agrees to execute and deliver, upon demand,
such further instrument or instruments subordinating this Lease on the foregoing
basis to the lien of any such security instruments as shall be desired by
Landlord and any mortgagees or proposed mortgagees.
(b) Notwithstanding anything to the contrary set forth in subsection (a)
above, any mortgagee may at any time subordinate its mortgage to this Lease,
without Tenant's consent, by execution of a written document subordinating such
mortgage to this Lease to the extent set forth therein, and thereupon this Lease
shall be deemed prior to such mortgage to the extent set forth in such written
document, without regard to their respective dates of execution, delivery and/or
recording. In that event, to the extent set forth in such written document, such
mortgagee shall have the same rights with respect to this Lease as though this
Lease had been executed and a memorandum thereof recorded prior to the
execution, delivery and recording of the mortgage and as though this Lease had
been assigned to such mortgagee.
10.3 ESTOPPEL CERTIFICATE: Within ten (10) days after request therefor by
Landlord, or in the event that upon any sale, assignment or hypothecation of
the Premises and/or the land thereunder by Landlord an estoppel certificate
shall be required from Tenant, Tenant agrees to deliver in recordable form, a
certificate to any proposed mortgagee or purchaser, or to Landlord, certifying
that this Lease is unmodified and in full force and effect (or, if there have
been modifications, that the same is in full force and effect as modified, and
stating the modifications), that there are no defenses or offsets thereto (or
stating those claimed by Tenant) and the dates to which Basic Rent and other
charges have been paid, and such matters as Landlord may reasonably require.
ARTICLE XI
DEFAULT REMEDIES AND BANKRUPTCY
11.1 DEFAULT OF TENANT: In the event that Tenant (a) fails to pay all or
any portion of any sum due from Tenant hereunder or pursuant to any exhibit
hereto when due and such failure to pay continues for more than five (5)
business days after receipt of written notice from Landlord (provided
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that such 5-day grace period shall not be available more than three (3) times in
any twelve (12) month period); (b) fails to perform any other terms, covenants
and conditions hereof or is otherwise in breach of any of Tenant's obligations
hereunder or commits any other act or omission in violation of this Lease and
such failure to perform or violation continues for more than thirty (30) days
after receipt of written notice from Landlord (provided that such 30-day grace
period shall not be available more than three (3) times in any twelve (12) month
period); (c) becomes bankrupt, insolvent or files any debtor proceeding, takes
or has taken against Tenant any petition of bankruptcy; takes action or has
action taken against Tenant for the appointment of a receiver for all or a
portion of Tenant's assets, files a petition for a corporate reorganization;
makes an assignment for the benefit of creditors, or if in any other manner
Tenant's interest hereunder shall pass to another operation of law (any or all
of the occurrences of this Subsection 11.1(c) shall be deemed a default on
account of bankruptcy for the purposes hereof and such default on account of
bankruptcy shall apply to and include any guarantor of this Lease); or (d)
commits waste to the Premises or removes any betterments or improvements
thereof; then Tenant shall be in default hereunder and Landlord may, at its
option and without further notice to Tenant, terminate Tenant's right to
possession of the Premises and without terminating this Lease re-enter and
resume possession of the Premises and/or declare this Lease terminated, and may
thereupon in either event remove all persons and property from the Premises,
with or without resort to process of any court, either by force or otherwise.
Notwithstanding such re-entry by Landlord, Tenant hereby indemnifies, protects,
defends and holds Landlord harmless from any and all loss or damage which Tenant
may incur by reason of the termination of this Lease and/or Tenant's right to
possession hereunder. In no event shall Landlord's temination of this Lease
and/or Tenant's right to possession of the Premises abrogate Tenant's agreement
to pay Rent and additional charges due hereunder for the full term hereof.
Following re-entry of the Premises by Landlord, Tenant shall promptly pay all
arrearages then due and overdue and shall continue to pay all such rent and
additional charges as same become due under the terms of this Lease, together
with all other expenses incurred by Landlord in regaining possession until such
time, if any, as Landlord relets same and the Premises are occupied by such
successor, it being understood that Landlord shall have no obligation to
mitigate Tenant's damages by reletting the Premises. Upon reletting, sums
received from such new lessee by Landlord shall be applied first to payment of
costs incident to reletting; any excess shall then be applied to any
indebtedness to Landlord from Tenant other than for Basic Rent; and any excess
shall then be applied to the payment of Basic Rent due and unpaid. The balance,
if any, shall be applied against the deficiency between all amounts received
hereunder and sums to be received by Landlord or reletting, which deficiency
Tenant shall pay to Landlord in full, within five (5) days of notice of same
from Landlord. Tenant shall have no right to any proceeds of reletting that
remain following application of same in the manner set forth herein.
11.2. RIGHTS AND REMEDIES: The various rights and remedies herein
granted to Landlord shall be cumulative and in addition to any others Landlord
may be entitled to by law or in equity, and the exercise of one or more rights
or remedies shall not impair Landlord's right to exercise any other right or
remedy. All such rights and remedies may be exercised and enforced concurrently
or consecutively and whenever and as often as Landlord shall deem desirable.
The failure of Landlord to insist upon strict performance by Tenant of any of
the covenants, conditions, and agreements of this Lease shall not be deemed a
waiver of any of said rights and remedies concerning any subsequent or
continuing breach or default by Tenant of any of the covenants, conditions, or
agreements of this Lease. No surrender of the Premises shall be effected by
Landlord's acceptance of Rent or by any
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other means whatsoever unless the same be evidenced by Landlord's written
acceptance of such as a surrender. In all events, Landlord shall have the
right upon notice to Tenant to cure any breach by Tenant at Tenant's sole cost
and expense, and Tenant shall reimburse Landlord for such expense upon demand.
Tenant shall reimburse Landlord for attorneys' fees and other expenses incurred
by Landlord under this Article XI.
11.3 Landlord's Default: If Tenant alleges a breach or default by
Landlord hereunder, Tenant shall provide Landlord (and any mortgagee of
Landlord of whom Tenant has notice) with written notice thereof and provide
thirty (30) days thereafter for Landlord or its mortgagee to cure same prior to
exercising any right or remedy Tenant may have for said breach or default.
11.4 Bankruptcy: If Landlord shall not be permitted to terminate this
Lease as hereinabove provided because of the provisions of Title 11 of the
United States Code relating to Bankruptcy, as amended ("Bankruptcy Code"), then
Tenant as a debtor in possession or any trustee for Tenant agrees promptly,
within no more than fifteen (15) days upon request by Landlord to the Bankruptcy
Court, to assume or reject this Lease and Tenant on behalf of itself, and any
trustee agrees not to seek or request any extension or adjournment of any
application to assume or reject this Lease by Landlord with such Court. In such
event, Tenant or any trustee for Tenant may only assume this Lease if (A) it
cures or provides adequate assurance that the trustees will promptly cure any
default hereunder (B) compensates or provides adequate assurance that Tenant
will promptly compensate Landlord for any actual pecuniary loss to Landlord
resulting from Tenant's defaults and (C) provides adequate assurance of
performance during the fully stated term hereof of all of the terms, covenants,
and provisions of this Lease to be performed by Tenant. In no event after the
assumption of this Lease shall any then-existing default remain uncured for a
period in excess of the earlier of ten (10) days or the time period set forth
herein. Adequate assurance of performance of this Lease as set forth hereinabove
shall include, without limitation, adequate assurance (1) of the source of Rent
reserved hereunder, and (2) the assumption of this Lease will not breach any
provision hereunder.
ARTICLE XII
SURRENDER OF PREMISES
12.1 Surrender of Premises: At the expiration or earlier termination
of this Lease, Tenant shall surrender the Premises to Landlord broom clean and
good condition, and in a condition which complies with all applicable laws
reasonable wear and tear and insured casualty (for which Landlord receives the
proceeds) expected. Tenant shall promptly remove Tenant's sign, personal
property and trade fixtures upon such expiration or termination and repair any
damage or disturbance to the Premises caused by the removal of any furniture,
trade fixtures or other personal property placed in the Premises. Tenant's
failure to remove all or part of Tenant's sign, personal property and trade
fixtures within ten (10) days after such expiration or termination shall be
deemed an abandonment to Landlord of such sign, personal property and trade
fixtures and, if Landlord elects to remove all or any part of said same, such
removal, including the cost of repairing any damage to the Premises caused by
or resulting from such removal, shall be paid by Tenant.
12.2 Holding Over: Should Tenant, with Landlord's written consent,
hold over at the end of the Term of the Lease (including the Extension Term, if
applicable), Tenant shall become a Tenant
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at will and any such holding over shall not constitute an extension of this
Lease. During such holding over, Tenant shall pay Rent and other charges at the
highest monthly rate provided for herein, plus an additional fifty percent
(50%) of the Basic Rent in effect at the expiration of the Term hereof. If
Tenant holds over at the end of the Term of the Lease without Landlord's
written consent, Tenant shall be a tenant at sufferance.
ARTICLE XIII
MISCELLANEOUS
13.1 Notices: Notices and demands required or permitted to be given
hereunder may be given by personal delivery to the addresses designated in
Section 1.1 hereinabove (including courier and expedited delivery services) to
either party or any officer or other representative of the party to be
notified, or may be sent by certified mail, return receipt requested,
addressed, postage prepaid, to said addresses. Mailed notices and demands shall
be deemed to have been given upon the date of the executed return receipt
(provided that (i) if any party shall refuse delivery or (ii) if delivery fails
because of an address change that has not been received as required by this
Section 13.1, then, in either of such events, notices shall be deemed given
when mailed), or, if made by personal, courier or other expedited delivery to
the addresses designated in Section 1.1 hereinabove, then upon the delivery.
Notice of change of address for notices shall not be deemed made until received
or rejected. Unless otherwise specified by Landlord, the payment of Rent shall
be to the first address of Landlord as set forth in Section 1.1 herein.
13.2 Successors and Assigns: All covenants, promises, conditions,
representations, and agreements herein contained shall be binding upon, apply,
and inure to the parties hereto and their respective heirs, executors,
administrators, successors, and permitted assigns.
13.3 Entire Agreement: This Lease, the Environmental Addendum and the
Exhibits attached hereto constitute the sole and exclusive agreement between
the parties with respect to the Premises. No amendments, modifications of or
supplements of this Lease shall be effective unless in writing and executed by
Landlord and tenant.
13.4 Time is of the Essence: The time of the performance of all of the
covenants, conditions, and agreements of this Lease is of the essence of this
Lease.
13.5 Relationship of Parties; Usufruct: The parties hereto shall always be
as Landlord and Tenant, and nothing herein shall be construed so as to
constitute a joint venture or partnership between Landlord and Tenant. This
Lease creates a usufruct not subject to levy and sale and no estate in or with
respect to the Premises or any portion thereof is granted or conveyed hereby.
13.6 Litigation: It is mutually agreed that in the event Landlord
commences any summary proceeding for non-payment of any Rent, Tenant will not
interpose any non-compulsory counterclaim of whatever nature or description in
any such proceeding. Landlord and Tenant hereby waive the right to a trial by
jury in connection with any dispute arising out of this Lease or the use or
possession of the Premises by Tenant.
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13.7 Governing Law: This Lease shall be construed under the laws of the
State of Georgia.
13.8 Partial Invalidity: If any provision of this Lease or the application
thereof to any person or circumstance shall to any extent be held invalid, then
the remainder of this Lease or the application of such provision to persons or
circumstances other than those as to which it is held invalid shall not be
affected thereby, and each provision of this Lease shall be valid and enforced
to the fullest extent permitted by law.
13.9 Submission of Lease: The submission of this Lease for examination
does not constitute an offer to lease, or a reservation of or option for the
Property, and this Lease shall be effective only upon execution and delivery
thereof by Landlord and Tenant.
13.10 Interpretation: In interpreting this Lease in its entirety, the
printed provisions of this Lease and any additions written or typed thereon
shall be given equal weight, and there shall be no inference, by operation of
law or otherwise, that any provision of this Lease shall be construed against
either party hereto.
13.11 Broker: Landlord and Tenant hereby agree that in connection with
this Lease that neither have dealt with any broker or other person or entity
entitled to any brokerage commission, fee, or other compensation. Each party
shall indemnify, defend, and hold harmless the other, their agents and legal
representatives against any fee, commission, or other compensation due to any
person, firm, or corporation claiming to have acted in said party's behalf.
13.12 Limitation of Liability: Landlord's liability to Tenant for damages
or otherwise with respect to the Lease shall be limited solely to and
recovered, if at all, solely from landlord's interest in the Property.
Landlord shall, at any time and from time to time, have the absolute right to
sell, assign, pledge or otherwise transfer its interest in the Premises or this
Lease. Landlord shall be relieved of all obligation and liability hereunder
after Landlord has conveyed the Premises and assigned this Lease to a successor
Landlord. Landlord may assign this Lease to an entity in connection with the
acquisition of the Premises, in which case Landlord will be released from all
liability hereunder.
13.13 Survival of Obligations: The provisions of this Lease with respect
to any obligation of Tenant to pay any sum in order to perform any act required
by this Lease after the expiration or other termination of this Lease shall
survive the expiration or other termination of this Lease.
13.14 Headings, Captions and References: The section captions contained in
this Lease are for convenience only and do not in any way limit or amplify any
term or provision hereof. The use of the terms "hereof," "hereunder" and
"herein" shall refer to this Lease as a whole, inclusive of the Exhibits,
except when noted otherwise. The use of the masculine or neuter genders herein
shall include the masculine, feminine and neuter genders and the singular form
shall include the plural when the context so requires.
13.15 Attorneys' Fees: The unsucceessful party in any action or proceeding
shall pay for all costs, expenses and reasonable attorney's fees incurred by
the prevailing party or its agents or both in enforcing the covenants and
agreements of this Lease. The term "prevailing party" as used herein
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shall include without limitation a party who obtains legal counsel and brings
an action against the other party by reason of the other party's breach or
default and obtains substantially the relief sought, whether by compromise,
settlement or judgment.
13.16 Hazardous Substances: SEE ENVIRONMENTAL ADDENDUM ATTACHED TO THIS
LEASE.
13.17 Waiver: The waiver by Landlord of any breach of any term, covenant
or condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition or any subsequent breach of the same or any other term,
covenant or condition herein contained. The subsequent acceptance of Rent
hereunder by Landlord shall not be deemed to be a waiver of any proceeding
breach by Tenant of any term, covenant or condition of this Lease, other than
the failure of Tenant to pay the particular rental so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent. No covenant, term or conditions of this Lease shall be deemed to have
been waived by Landlord, unless such waiver be in writing by Landlord and
delivered to Tenant.
13.18 Accord and Satisfaction: No payment by Tenant or receipt by Landlord
of a lesser amount than the Rent herein stipulated shall be deemed to be other
than an account of the earliest, stipulated Rent, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment as Rent
be deemed an accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
Rent or pursue any other remedy in this Lease provided.
13.19 Tenant defined, Use of Pronoun: The word "Tenant" shall be deemed
and taken to mean each and every person or party mentioned as a Tenant herein,
be the same one or more; and if there shall be more than one Tenant, any
notice required or permitted by the terms of this Lease may be given by or to
any one thereof, and shall have the same force and effect as if given by or to
all thereof. The use of the neuter singular pronoun to refer to Landlord or
Tenant shall be deemed a proper reference even though Landlord or Tenant may be
an individual, a corporation, or a group of two or more individuals or
corporations. The necessary grammatical changes required to make the provisions
of this Lease apply in the plural sense where there is more than one Landlord
or Tenant and to either corporations, associations, partnerships, or
individuals, males or females, shall in all instances be assumed as though in
each case fully expressed.
13.20 Covenant to Operate: Commencing on the Commencement Date and
thereafter for the balance of the Term, Tenant hereby covenants that it shall
continuously occupy and use the Premises solely for conducting the Permitted
Use, as defined herein.
13.21 Use of Demonstration Vehicle: The parties have agreed that, as
additional consideration for Landlord to enter into this Lease, Tenant shall
make available for Landlord's use, at no charge to Landlord, any one (1) new
vehicle which Tenant maintains on the Premises for sale to its customers.
Landlord shall have the right from time to time to designate (and change) in
his sole discretion the vehicle to be provided by Tenant to Landlord in
accordance with this Section. Tenant shall supply any such vehicle to Landlord
within fifteen (15) days after written request of Landlord.
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Landlord shall be responsible for maintaining any vehicle utilized by
Landlord pursuant to this Section 13.21 in good condition (ordinary wear and
tear excepted); provided, however, Tenant shall assign or otherwise make
available to Landlord the benefit of all warranties and guarantees of every
kind in connection with such vehicle (including, but not necessarily limited
to, any manufacturer's warranty). Tenant shall maintain all insurance on the
vehicle as shall be reasonably required by Landlord.
This Section 13.21 shall apply during the term of the Lease, as same may be
extended. Upon the last day of the Term, Landlord shall redeliver possession
of any such vehicle to Tenant.
IN WITNESS WHEREOF this Lease has been executed under seal as of the day
and year first above written.
LANDLORD:
E. MOSS ROBERTSON, JR., an individual
-------------------------------------
E. Moss Robertson, Jr.
TENANT:
ROBERTSON OLDSMOBILE-CADILLAC,
INC., a Georgia corporation
By:
--------------------------------
Its:
--------------------------------
[CORPORATE SEAL]
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EXHIBIT "A"
DESCRIPTION OF PREMISES
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APPENDIX I
ENVIRONMENTAL ADDENDUM
This is an Addendum to the Lease dated _______________________ ("Lease"),
between E. MOSS ROBERTSON, JR., as Landlord, and ROBERTSON OLDSMOBILE-CADILLAC,
INC., a Georgia corporation, as Tenant. Each capitalized term which is not
defined in this Addendum shall have the meaning ascribed to such term in the
Lease. In the event of any conflict between the provisions of the Lease and
provisions of this Addendum, this Addendum shall control.
1. CONDITION OF THE PREMISES.
Tenant has had the opportunity to examine the Premises and hereby agrees
to accept them in the "as is" condition existing on the Commencement Date.
Tenant further acknowledges that Landlord has not made any representations as to
the present or future condition of the Premises, or the presence or absence of
hazardous substances (as hereinafter defined) therein. If the Premises, the
Buildings, or any equipment, trade fixtures or other mechanical apparatus
therein contains any hazardous substance, Landlord, at its election, shall have
the right to (i) cause Tenant to remove and properly dispose of same, all at
Tenant's sole cost and expense and in compliance with the provisions hereof, or
(ii) perform the removal and disposal thereof itself, in which event Tenant
shall reimburse Landlord, on demand, for the cost incurred by Landlord in doing
so and securing the certifications referred to below.
2. USE.
Landlord acknowledges that Tenant's intended use of the Premises is for
the operation of an automobile dealership and that said use may, as part of
Tenant's normal business operations, include the handling, storage, production,
disposal, sale or transportation of hazardous substances as hereinafter
defined. Except in connection with its normal business operations or as
otherwise sepcifically permitted herein, Tenant shall not cause or permit any
hazardous substances to be brought upon generated, treated, kept or used in or
about the Premises by Tenant, its agents, employee, contractors or invitees.
3. COMPLIANCE WITH LAWS.
With respect to Tenant's use of the Premises, Tenant shall at all times,
at its own cost and expense, comply with all federal, state and local laws,
ordinances, regulations and standards relating to the use, analysis,
production, storage, sale, disposal or transportation of any hazardous
materials ("Hazardous Substance Laws"), including or petroleum products or
their derivatives, solvents, PCB's, explosive substances, asbestos, radioactive
materials or waste, and any other toxic, ignitable, reactive, corrosive,
contaminating or pollution materials ("hazardous substances") which are now or
in the future subject to any governmental regulations.
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4. NOTICE TO LANDLORD.
Tenant shall give written notice to Landlord within three (3) business
days after the date on which Tenant learns or first has reason to believe that:
4.1 There has or will come to be located on or about the Premises any
hazardous substance, the production, transportation, storage, use or
handling of which requires a permit or license from any federal, state or
local governmental agency. The notice provisions of this Addendum shall not
apply to, and Landlord shall not have any right to terminate the Lease on
account of any use by Tenant in the course of a trade or business conducted
on the Premises of a substance which (a) is classified as a hazardous
substance under the Hazardous Substance Laws; (b) is of a type which, under
current industry practice, is commonly used as an integral part of Tenant's
approved business use of the Premises; (c) is so used by Tenant in full
compliance with applicable provisions of all Hazardous Substance Laws; and
(d) Tenant has given Landlord complete prior notice of its use at the
Premises.
4.2 Any release, discharge or emission of any hazardous substance has
occurred on or about the Premises.
4.3 Any (a) enforcement, cleanup, removal or other governmental or
regulatory action has been threatened or commenced against Tenant or with
respect to the Premises pursuant to any Hazardous Substances Laws; or (b)
any claim has been made or threatened by any person or entity against
Tenant or the Premises on account of any alleged loss or injury claimed to
result from the alleged presence or release on the Premises of any
hazardous substances; or (c) any report, notice, or complaint has been made
to or filed with any governmental agency concerning the presence, use or
disposal of any hazardous substances on the Premises. Any such notice shall
be accompanied by copies of any such claim, report, complaint, notice,
warning or other communication that is in the possession of or is
reasonably available to the Tenant.
Any notice required under this Section 4.3 shall be accompanied by (i)
a copy of all permits, licenses, proofs of disclosures to governmental
agencies pertaining to hazardous substances that have not previously been
furnished to Landlord; and (ii) copies of any Material Safety Data Sheets
pertaining to such substances that are required by applicable law.
5. DISPOSAL.
Except for materials that are (a) lawfully discharged from the Premises,
or (b) lawfully maintained on the Premises and/or sold in the ordinary course
of Tenant's business, Tenant shall cause any hazardous substances to be removed
from the Premises for disposal and to be transported solely by duly licensed
hazardous substances transporters to duly licensed facilities for final
disposal to the extent required by and in accordance with applicable Hazardous
Substances Laws, and shall upon request deliver to Landlord copies of any
hazardous waste manifest reflecting the proper disposal of such substances.
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6. ACTIONS AND PROCEEDINGS.
Except in emergencies or as otherwise required by law, Tenant shall not
take any remedial action in response to the presence or release of any
hazardous substances on or about the Premises without first giving written
notice of the same to Landlord. Tenant shall not enter into any settlement
agreement, consent decree or other compromises with respect to any claims
relating to any hazardous substances in any way connected with the Premises
without first notifying Landlord of Tenant's intention to do so and affording
Landlord the opportunity to participate in any such proceedings.
7. ENVIRONMENTAL AUDITS.
Landlord may, but shall not be required to, engage such independent
contractors as Landlord determines to be appropriate to perform from time to
time an audit, including environmental sampling and testing, of (a) the
Premises, the surrounding soil and any adjacent areas, and any groundwater
located under or adjacent to the Premises and/or any adjoining property, (b)
Tenant's compliance with all Hazardous Substances Laws and the provisions of
this Addendum, and (c) the provisions made by Tenant for carrying out any
remedial action that may be required by reason for the nature of Tenant's
business and its operations on the Premises (collectively an "Environmental
Audit").
7.1 COSTS AND EXPENSES.
All costs and expenses incurred by Landlord in connection with any
such Environmental Audit shall be paid by Landlord, except that if any such
Environmental Audit shows that Tenant has failed to comply with the
provisions of this Addendum, or that the Premises (including surrounding
soil and any underlying or adjacent property or groundwater) have become
contaminated due to the operations or activities at the Premises, then all
of the costs and expense of such Environmental Audit shall be paid by
Tenant. Notwithstanding the foregoing, if Landlord elects to have an
Environmental Audit performed upon the expiration or earlier termination of
the Lease (the "Final Environmental Audit"), then Landlord and Tenant shall
each pay one-half (1/2) of the cost of such Final Environmental Audit
(provided that if such Final Environmental Audit shows that Tenant has
failed to comply with the provisions of this Addendum, or that the Premises
(including surrounding soil and any underlying or adjacent property or
groundwater) have become contaminated due to the operations or activities
of Tenant at the Premises, then all of the costs and expense of such Final
Environmental Audit shall be paid by Tenant).
7.2 CONDUCT OF AUDIT.
Each Environmental Audit (excepting only the Final Environmental
Audit, which shall not require any notice to Tenant) shall be conducted (a)
only after advance notice thereof has been provided to Tenant at least
twenty-four (24) hours prior to the date of such audit, and (b) in a manner
reasonably designed to minimize the interruption of Tenant's operations and
use of the Premises. Any damages to the Premises or to
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Tenant's property which is caused by the independent contractor conducting
the Environmental audit shall be paid for by the party responsible for
paying for the Environmental Audit, as determined pursuant to Section 7.1
above.
8. TERMINATION OF LEASE.
Upon the expiration or earlier termination of the term of the Lease,
Tenant shall (a) cause all hazardous substances previously owned, stored or
used by Tenant to be removed from the Premises and disposed of in accordance
with applicable provisions of law; (b) remove any aboveground or underground
storage tanks or other containers installed or used by Tenant to store any
hazardous substances on the Premises, and repair any damage to the Premises
caused by such removal; (c) cause any soil, groundwater or other portion of the
Premises which is contaminated, to be decontaminated, detoxified or otherwise
cleaned up in accordance with the requirements of any governmental authority
with control over the Premises; (d) cause any property adjacent to the Premises
which is owned or controlled by Landlord which has become contaminated by any
hazardous substances brought on to, stored or used by Tenant on the Premises;
to be decontaminated, detoxified or otherwise cleaned up in accordance with the
requirements of any governmental authority with control over such property; and
(e) surrender possession of the Premises to Landlord free of hazardous
substances.
9. INDEMNIFICATION BY TENANT.
Tenant shall indemnify, defend with counsel reasonably acceptable to
Landlord, and hold Landlord free and harmless from any and all liabilities,
damages, claims, penalties, fines, settlements, causes of action, costs or
expense, including reasonable attorneys' fees, environmental consultant and
laboratory fees and the costs and expense of investigating and defending any
claims or proceedings, resulting from or attributable to (a) the presence,
disposal, release or threatened release of any hazardous substance that is on,
from or affecting the Premises including the soil, water, vegetation,
buildings, personal property, persons, animals, or otherwise; (b) any personal
injury (including wrongful death) or property damage (real or personal) arising
out of or relating to the hazardous substance; (c) any lawsuit or
administrative order relating to the hazardous substance; and (d) any violation
of any laws applicable to the hazardous substance.
10. SURVIVAL.
Tenant's indemnification obligations as set forth herein shall survive the
expiration or earlier termination of the term of the Lease.
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EXHIBIT 10.62
THIS SUBLEASE AGREEMENT, made and entered into as of the date set forth
herein by between JAY LEASING, INC., a Georgia corporation, (herein called the
"Landlord") and JAY AUTOMOTIVE GROUP, INC., a Georgia corporation (herein called
the "Tenant");
WITNESSETH THAT:
WHEREAS, Landlord entered into a certain Lease Agreement between the
Development Authority of Columbus, Georgia and Landlord dated as of July 1, 1997
(the "Authority Lease"), a copy of which is attached hereto and made a part
hereof as Exhibit A;
WHEREAS, Landlord has agreed to sublease to Tenant the Subleased
Premises described herein upon the terms and conditions stated herein; and
WHEREAS, Sunbelt Automotive Group, Inc., has agreed to guarantee the
obligations of Tenant hereunder,
NOW, THEREFORE, for and in consideration of the respective
representations, warranties and agreements herein contained, and for other good
and valuable consideration, receipt whereof is hereby acknowledged, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS AND USE OF PHRASES
Section 1.1 DEFINITIONS. Unless the context clearly indicates a
different meaning, the following words and phrases, as used herein, shall have
the following respective meanings:
"ADDITIONAL BONDS" shall have the meaning set forth in Section 1.1 of
the Authority Lease.
"AFFILIATE" of any designated Person means any Person that directly or
indirectly controls or is controlled by or is under common control with
such designated Person. For the purposes of this definition, "control"
(including,
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with correlative meanings, the terms "controlled by" and "under common
control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person whether through
the ownership of voting securities or by contract or otherwise.
"AUTHORITY" means the Development Authority of Columbus, Georgia, which
is the party of the first part in the Authority Lease.
"AUTHORITY LEASE," a copy of which is attached hereto as Exhibit A,
means the Lease Agreement between the Authority, party of the first
part, and Jay Leasing, Inc., party of the second part, for the Leased
Premises.
"AUTHORIZED LANDLORD REPRESENTATIVE" means the person or persons
designated at the time as such by written certificate furnished to the
Tenant containing the specimen signature or signatures of such person
or persons and signed on behalf of the Landlord by the Chairman or the
Vice Chairman of its Board of Directors.
"AUTHORIZED TENANT REPRESENTATIVE" means the person or persons
designated at the time as such by written certificate furnished to the
Landlord containing the specimen signature or signatures of such person
or persons and signed by the Tenant.
"BANK" shall have the meaning set forth in Section 1.1 of the
Authority Lease.
"BASIC RENT" shall have the meaning set forth in Section 1.1 of the
Authority Lease.
"CONVERSION DATE" shall have the meaning set forth in Section 1.1 of
the Authority Lease.
"COUNSEL" means any attorney duly admitted to practice before the
highest court of any state of the United States of America or the
District of Columbia, it being understood that "Counsel" may also mean
a firm of attorneys all of whose members are so admitted to practice.
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"EMINENT DOMAIN" shall have the meaning set forth in Section 1.1 of
the Authority Lease.
"EVENT OF DEFAULT" means an "Event of Default" as specified in Section
9.1 hereof.
"GUARANTOR" means Sunbelt Automotive Group, Inc., a corporation
organized and existing under the laws of the State of Georgia. Said
corporation has unconditionally guaranteed the performance by the
Tenant of its obligations under the Sublease pursuant to Section 12.12
hereunder.
"HOLDER" shall have the meaning set forth in Section 1.1 of the
Authority Lease.
"INTEREST PAYMENT DATE" shall have the meaning set forth in Section 1.1
of the Authority Lease.
"LANDLORD" means Jay Leasing, Inc., a corporation organized and
existing under the laws of the State of Georgia with its principal
place of business in Columbus, Muscogee County, Georgia, or its
assignee, as the case may be. Jay Leasing, Inc., or its assignee, as
the case may be, is the Landlord in this Sublease, and is referred to
throughout as "Landlord."
"NET CONDEMNATION AWARD" means the total amount received as
compensation for any part of the Project taken under the exercise of
the power of Eminent Domain, plus damages to any part of the Project
not taken (including any compensation referable to the interest of the
Landlord in the part of the Project taken and as damages to the
interest of the Landlord in any part thereof not taken, but not
including any compensation belonging to the Landlord pursuant to the
provisions of Section 7.4 hereof), which compensation shall consist of
(i) all awards received pursuant to administrative or judicial
proceedings conducted in connection with the exercise of the power of
Eminent Domain, plus (ii) all amounts received as the result of any
settlement of compensation claims (whether in whole or in part)
negotiated with the condemning authority, less (iii) all attorneys'
fees and other expenses incurred in connection with the receipt of such
compensation, including attorneys' fees and expenses relating to such
administrative or
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judicial proceedings and to such settlement negotiations (other than
any that may be paid directly by the Landlord).
"OUTSTANDING" shall have the meaning set forth in Section 1.1 of the
Authority Lease.
"PERMITTED ENCUMBRANCES" shall have the meaning set forth in Section
1.1 of the Authority Lease.
"PERSON" means any natural person, corporation, partnership, trust,
government or governmental body, political subdivision, or other legal
entity as in the context may be possible or appropriate.
"PREMIUM" shall have the meaning set forth in Section 1.1 of the
Authority Lease.
"PROJECT" shall have the meaning set forth in Section 1.1 of the
Authority Lease.
"PROJECT BUILDINGS" shall have the meaning set forth in Section 1.1 of
the Authority Lease. Said buildings are part of the Subleased Premises
hereunder.
"PROJECT DEVELOPMENT COSTS" shall have the meaning set forth in Section
1.1 of the Authority Lease.
"PROJECT DEVELOPMENT WORK" shall have the meaning set forth in Section
1.1 of the Authority Lease.
"PROJECT EQUIPMENT" shall have the meaning set forth in Section 1.1 of
the Authority Lease, and it shall also include all additions,
replacements and substitutions thereto. Project Equipment is subleased
hereunder.
"REDEMPTION FUND" shall have the meaning set forth in Section 1.1 of
the Authority Lease.
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"REIMBURSEMENT AGREEMENT" shall have the meaning set forth in Section
1.1 of the Authority Lease.
"SERIES 1997 BONDS" shall have the meaning set forth in Section 1.1 of
the Authority Lease.
"SERIES 1997 LETTER OF CREDIT" shall have the meaning set forth in
Section 1.1 of the Authority Lease.
"SERIES 1997 SECURITY DEED" shall have the meaning set forth in Section
1.1 of the Authority Lease.
"SUBLEASE" OR "SUBLEASE AGREEMENT" means the Agreement or Lease between
Landlord and Tenant as it now exists or may be modified, supplemented
or amended as provided herein from time to time.
"SUBLEASED PREMISES" or "PREMISES" means the real property, buildings,
and all other property and property rights of every kind that are or
become subject to the demise of the Sublease, which said premises or
subleased premises are described on Exhibit B attached hereto and as
supplemented hereunder. Unless the context clearly indicates otherwise,
the term "Subleased Premises" or "Premises" shall generally have the
same meaning as the term "Project" in the Authority Lease. Said terms
include the Project Site, Project Equipment, and other property as
defined in the Authority Lease.
"SUBLEASE TERM" means the period described in Section 5.1 hereof.
"SUNBELT IPO" means the initial public offering of Sunbelt common
stock, which must close no later than August 15, 1998.
"TRUSTEE" shall have the meaning set forth in Section 1.1 of the
Authority Lease.
Section 1.2 DEFINITIONS CONTAINED IN THE INDENTURE. Unless the context
clearly indicates a different meaning, any words, terms or phrases that are used
in the Sublease as defined terms without being herein defined and that are
defined in
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the Indenture shall have the meanings respectively given them in the Authority
Lease and the documents referenced therein including the Indenture.
Section 1.3 USE OF PHRASES. "Herein", "hereby", "hereunder", "hereof",
"hereinbefore", "hereinafter" and other equivalent words refer to the Sublease
as an entirety and not solely to the particular portion in which any such word
is used. The definitions set forth in Section 1.1 hereof include both singular
and plural. Whenever used herein, any pronoun shall be deemed to include both
singular and plural and to cover all genders.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 REPRESENTATIONS AND WARRANTIES BY THE LANDLORD. The Landlord
makes the following representations and warranties as the basis for the
undertakings on its part herein contained:
(a) Organization. Landlord is a corporation organized under the laws of
the State of Georgia, in good standing with all governmental authorities, and
its execution of this Sublease does not contravene or violate any law,
regulation or corporate bylaw.
(b) Litigation. There are no actions, suits or proceedings pending
(nor, to the knowledge of the Landlord, are any actions, suits or proceedings
threatened) against or affecting the Landlord or any property of the Landlord in
any court, or before an arbitrator of any kind, or before or by any governmental
body, which might materially and adversely affect the transactions contemplated
by this Sublease or which might adversely affect the validity or enforceability
of this Sublease or any other agreement or instrument to which the Tenant is or
is to be a party relating to the transactions contemplated by this Sublease.
(c) No Default. No event has occurred and no condition exists which
would constitute an "Event of Default" under the Authority Lease, as "Event of
Default" is therein defined, or which would become such an "Event of Default"
with the passage of time or with the giving of notice or both.
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Section 2.2 REPRESENTATIONS AND WARRANTIES BY THE TENANT. The Tenant
makes the following representations and warranties as the basis for the
undertakings on its part herein contained:
(a) Conflicting Agreements and Provisions. The Tenant is not a party to
any instrument or agreement or subject to any restriction or, to the best of the
Tenant's knowledge, to any judgment, order, rule or regulation of any court or
governmental body which materially and adversely affects the business,
prospects, operations, properties, assets or condition (financial or otherwise)
of the Tenant. Neither the execution and delivery of this Sublease Agreement,
nor the consummation of the transactions herein contemplated, conflicts with, or
results in a breach of, or constitutes a default under, or requires any consent,
approval or other action by, or any notice to, any Person (other than those
already obtained or made and which continue in full force and effect) under any
applicable law, regulation, agreement, instrument or order by which the Tenant
is bound or to which the Tenant is subject.
(b) Governmental Consents. All consents of any court, regulatory agency
or other governmental body necessary for the Tenant's execution and delivery of
this Sublease Agreement have been obtained and are in full force and effect.
(c) Litigation. Tenant has received no notice of any inquiry,
investigation or proceeding pending or threatened against or affecting the
Tenant before or by any court or governmental body which might result in any
material adverse change in the business, prospects, properties or assets or in
the condition (financial or otherwise) of the Tenant, or which might materially
and adversely affect the transactions contemplated by this Sublease Agreement,
or which might impair the ability of the Tenant to comply with its obligations
hereunder.
(d) No Defaults. The Tenant is not in material default in any respect
under any charter instrument or bylaw or, to the best of the knowledge of the
Tenant, any agreement or other instrument to which it is a party or by which it
is bound, or any judgment, order, rule or regulation of any court or other
governmental body applicable to it, to the extent in any such case that the
default in question would materially and adversely affect the transactions
contemplated by this Sublease Agreement or would impair the ability of the
Tenant to comply with its
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obligations hereunder. The Tenant is not in material default under the payment
of the principal of or the interest on any of its indebtedness and is not in
material default under any instrument or agreement under and subject to which
any indebtedness of the Tenant has been incurred, and no event has occurred or
is continuing under the provisions of any such instrument or agreement which
constitutes or will constitute an event of default thereunder.
ARTICLE III
DEMISING CLAUSES
Section 3.1 DEMISING CLAUSES. For and during the Sublease Term, the
Landlord hereby demises and subleases to the Tenant, subject to Permitted
Encumbrances, and the Tenant hereby rents from the Landlord, subject to
Permitted Encumbrances, the following described properties and related rights:
I
The real property in Muscogee County, Georgia, described on Exhibit C
attached hereto and made a part hereof
II
The Project Buildings and all other buildings, structures and other
improvements constructed in connection therewith and all fixtures now or
hereafter installed in the Project Buildings or in any of such other buildings,
structures and improvements constructed in connection therewith.
III
All items (whether or not fixtures) of machinery, equipment and other
personal property that at any time, under the provisions of the Sublease,
constitute the Project Equipment, including replacements, additions and
substitutions thereto that constitute Project Equipment as defined herein. All
of said real and personal property shall constitute the Subleased Premises.
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ARTICLE IV
CONCERNING THE PROJECT DEVELOPMENT WORK
Section 4.1 This Sublease is subject to the provisions of Article IV of
the Authority Lease. Unless otherwise noted by addendum hereto, Landlord has
completed performance of the Project work as provided therein. Tenant has
examined the premises, buildings, equipment and all other property that
constitutes the Subleased Premises, accepts the same in its present condition,
and acknowledges that all such real and personal property and property rights
are suitable and adequate for Tenant's purposes.
ARTICLE V
DURATION OF SUBLEASE TERM AND RENTAL PROVISIONS
Section 5.1 DURATION OF SUBLEASE TERM. The Sublease Term shall begin on
August 1, 1998, and subject to the provisions hereof, shall continue until 11:59
o'clock, P.M., on July 31, 2018. Landlord will deliver to the Tenant sole and
exclusive possession of the Subleased Premises (or such portion or portions
thereof as are then in existence) on the date the Sunbelt IPO closes, subject to
the inspection and other rights reserved in Section 8.3 of the Authority Lease,
and the Tenant will accept possession thereof at such time; provided, however,
that the Landlord and/or the Authority will be permitted such possession of the
Subleased Premises as shall be necessary and convenient to make any repairs,
restorations, additions or improvements required or permitted to be made by the
Authority and/or the Tenant pursuant to the provisions of the Authority Lease
and/or hereunder.
Section 5.2 BASIC RENT. For the use and occupancy of the Subleased
Premises during the Sublease Term, Tenant shall pay to Landlord, as Basic Rent,
two hundred forty (240) equal monthly payments of $90,966.46. Said amount shall
be adjusted to the actual cost of the project that exceeds or is less than
$11,091,706.04. The first payment shall be due and payable on August 1, 1998,
and one additional payment shall be due and payable on the first day of each
month thereafter until the total of two hundred forty (240) monthly payments are
paid.
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Section 5.2A PAYMENT OF BASIC RENT. Tenant shall pay Basic Rent to the
Trustee upon such terms and conditions as the parties hereto and the Trustee may
agree. If the parties and the Trustee cannot agree, Basic Rent shall be paid
directly to the Landlord.
Section 5.3 ADDITIONAL RENT. In addition to the basic rent described
above in Section 5.2 and all additional obligations described herein, Tenant
shall pay as additional rent the following:
(a) Any amount by which any interest payment that becomes due
on any Interest Payment Date, as described in Section 5.2(a) of the
Authority Lease, exceeds the interest payment that would have been due
had the interest rate been 6.25 percent during the period for which the
interest payment is made, which said amount shall be paid by the Tenant
within two (2) business days of written demand by Landlord, which
demand may be made at any time after Landlord pays the same; and,
(b) All additional rent as defined herein and in Section 5.3
and 5.4 of the Authority Lease, which the Landlord hereunder may be
required to pay to the Trustee, the Authority or any other authorized
party, all of which shall be paid by the Tenant within two (2) business
days of written demand by Landlord, which demand may be made at any
time after such additional rent comes due; and,
(c) Additional rent shall also include but not be limited to
letters of credit fees, marketing fees, taxes, other fees and all other
assessments and/or charges authorized by law or the Bond Documents,
assessed against the Landlord by the Authority, the Trustee or any
other party authorized to assess or demand any such fees or charges.
Section 5.4 OBLIGATIONS OF TENANT UNCONDITIONAL. The obligation of the
Tenant to pay all rent as and when it becomes due, to make all other payments
provided for herein and to perform and observe the other agreements and
covenants on its part herein contained shall be absolute and unconditional,
irrespective of any rights of set-off, recoupment or counterclaim it might
otherwise have against the Landlord. The Tenant will not suspend, discontinue,
reduce or defer any such payment or fail to perform and observe any of its other
agreements and
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covenants contained herein or (except as expressly authorized herein) terminate
the Sublease for any cause, including, without limiting the generality of the
foregoing, any acts or circumstances that may deprive the Tenant of the use and
enjoyment of the Subleased Premises, failure of consideration or commercial
frustration of purpose, or any damage to or destruction of the Subleased
Premises or any part thereof, or the taking by Eminent Domain of title to or the
right to temporary use of all or any part of the Subleased Premises, or any
change in the tax or other laws, rules and regulations of the United States of
America, the State of Georgia or any political or taxing subdivision or any
department or agency of either thereof, or any change in the cost or
availability of labor or energy adversely affecting the profitable operation of
the Subleased Premises by the Tenant, or any failure of the Landlord or
Authority to perform and observe any agreement or covenant, whether express or
implied, or any duty, liability or obligation arising out of or connected with
the Sublease.
Subject to the obligations of the Tenant to indemnify the Landlord and
the Authority provided herein, nothing contained in this section shall be
construed to prevent the Tenant, at its own cost and expense and in its own
name, from prosecuting or defending any action or proceeding or taking any other
action involving third persons which the Tenant deems reasonably necessary in
order to secure or protect its rights hereunder, and in such event the Landlord
will cooperate fully with the Tenant in any such action or proceeding. Such
action may include the right to pursue contractors and suppliers for default in
the performance of their contracts with respect to the Auto Mall, and Landlord
does hereby assign to Tenant such contractual rights as may be necessary to
enable Tenant to pursue such defaults.
Section 5.5 TERM RATE ON SERIES 1997 BONDS. If requested by Tenant,
Landlord shall cooperate with Tenant in establishing a Term Rate for the Series
1997 Bonds pursuant to the Indenture, provided that Tenant shall be responsible
for payment of any letter of credit fees or other fees and expenses incurred in
connection with establishing such Term Rate.
For purposes of this Agreement, the term "Term Rate" shall have the
meaning given in the Indenture.
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ARTICLE VI
PROVISIONS CONCERNING MAINTENANCE,
ADDITIONS, REMOVAL OF SUBLEASED PREMISES
EQUIPMENT, INSURANCE AND TAXES
Section 6.1 MAINTENANCE, ADDITIONS, ALTERATIONS, IMPROVEMENTS AND
MODIFICATIONS. The Tenant will, at its own expense, keep the Subleased Premises
in reasonably safe condition and keep all buildings, improvements to the real
property and other facilities at any time forming part of the Subleased Premises
in good repair and operating condition, making from time to time all necessary
and proper repairs thereto (including, without limitation, exterior and
structural repairs, decorations, finishes, repairs to glass, pavement, signs,
roof, plumbing, systems, electrical, all fixtures and structural components of
every kind and nature), and upon termination of the Sublease shall return the
Subleased Premises and improvements thereto in substantially the same condition
as received. Tenant shall repair and maintain in good repair all Project
Equipment, replace all such equipment that becomes obsolete or worn out from
use, and shall return said equipment to the Landlord upon termination of the
Sublease or any renewal thereof in substantially the same condition as received.
At any time and from time to time, the Tenant may, at its own cost and
expense, install any equipment or other personal property which does not
constitute part of the Leased Equipment and which in the Tenant's judgment is
necessary or convenient for its use and operation of Tenant's business on the
Subleased Premises, provided that the installation of such equipment or other
personal property does not significantly impair the value or utility of the
Subleased Premises or cause damage thereto or to any part thereof, or risk of
damage including risk of contamination from pollutants. Any such equipment or
personal property owned (or leased pursuant to any lease contract other than the
Sublease) by the Tenant may be removed by the Tenant at any time and from time
to time without responsibility or accountability to the Landlord, so provided
Tenant is not in default or anticipating a default at the time of removal, but
the Tenant shall promptly repair at, its own expense, any damage to the
Subleased Premises caused by the removal of any such equipment or other personal
property, and shall restore the Subleased Premises and all parts thereof that
are affected to its condition prior to the installation of said personal
property. Tenant shall hold harmless and defend Landlord from any and all claims
relating to or arising out of Tenant's activities under this subparagraph.
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Section 6.2 REMOVAL OF LEASED EQUIPMENT. Tenant shall not remove any
leased equipment from the Subleased Premises without the express written consent
of the Landlord, Trustee and Authority.
Section 6.3 TAXES, OTHER GOVERNMENTAL CHARGES AND UTILITY CHARGES. The
Tenant will pay all taxes, assessments, charges, claims and judgments including
but not necessarily limited to those that are specified and/or described in
Section 6.3 of the Authority Lease when and as they become due as stated
therein, and all other taxes, assessments, charges, claims, judgments of
whatever nature or kind as may become due during the term of this Sublease,
excluding judgments that are entered against the Landlord, which are unrelated
to the Subleased Premises but constitute a lien thereon.
The Landlord will forward to the Tenant any bills, statements,
assessments, notices or other instruments asserting or otherwise relating to any
such taxes, assessments or charges. Failure of Landlord to forward such bills
shall not relieve the Tenant from the obligation to pay the same, and the Tenant
shall pay the same immediately upon demand of the Landlord.
Upon request, Landlord shall consent to and assist Tenant with
facilitating the submission of such bills, assessments or charges directly to
Tenant, in which case Landlord shall have no further obligation with respect to
submitting such bills to the Tenant.
Tenant shall have the right to contest any taxes, assessments and/or
other charges that may be assessed against the Subleased Premises to the same
extent that the Landlord has such rights pursuant to the provisions of Section
6.3 of the Authority Lease.
The Tenant will also pay, as the same respectively become due, all utility
and other similar charges incurred in the operation, maintenance, use and upkeep
of the Subleased Premises.
Taxes, assessments, charges, claims and judgments that are required to
be paid hereunder shall include all of those that are charged directly against
the Landlord as well as those charged to the Authority or Trustee.
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Section 6.4 INSURANCE WITH RESPECT TO SUBLEASED PREMISES. The Tenant
will maintain such insurance as is required by Section 6.4 of the Authority
Lease and shall comply with said sections in all respects as if it were the
Lessee in the Authority Lease. Tenant will cause the policies of insurance to
name Landlord as an additional insured, and Tenant shall maintain such
additional insured coverage as may reasonably be required to fully protect the
insurable interests of the Landlord.
ARTICLE VII
PROVISIONS RESPECTING DAMAGE,
DESTRUCTION AND CONDEMNATION
Section 7.1 DAMAGE AND DESTRUCTION PROVISIONS. If, during the term of
the Sublease and any renewal thereof, the Subleased Premises is destroyed, in
whole or in part, or is damaged, by fire or other casualty, the Tenant will
continue to pay the rent required to be paid hereunder and will promptly repair,
replace or restore the property destroyed or damaged to substantially the same
condition as prior to the event causing such damage or destruction.
All property acquired in connection with the repair, replacement or
restoration of any part of the Subleased Premises pursuant to the provisions of
this Section 7.1 shall be and become part of the Subleased Premises and shall be
held by the Tenant on the same terms and conditions as the property originally
constituting the Subleased Premises.
Section 7.2 CONDEMNATION PROVISIONS. If title to the Subleased Premises
or any part thereof is taken under the exercise of the power of Eminent Domain,
the entire condemnation award in respect of such taking [including, without
limitation, (i) all amounts received as the result of any settlement of
compensation claims negotiated with the condemning authority, and (ii) any
amount awarded as compensation for the interest of the Tenant in the part of the
Subleased Premises taken and as damages to the interest of the Tenant in any
part thereof not taken, but not including any condemnation award belonging to
the Tenant pursuant to the provisions of Section 7.4 hereof] shall be applied
and certain related actions shall be taken in accordance with the succeeding
provisions of this Section 7.2:
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(a) Taking of All or Substantially All the Subleased Premises During
the Term of the Sublease or Any Renewal Thereof. If all or substantially all the
Subleased Premises is so taken by such exercise of the power of Eminent Domain
during the term of the Sublease or any renewal thereof, the entire condemnation
award in respect of such taking shall be paid to the Landlord and the Sublease
shall terminate [except as to the provisions of this subsection (a) and any
other provisions hereof which are expressly stated herein to survive the
termination of the Lease] as of the forty-fifth (45th) day after the receipt by
the Landlord of the final installment of the entire condemnation award in
respect of such taking.
(b) Taking of Less than Substantially All the Subleased Premises During
the Term of the Sublease or Any Renewal Thereof. If less than substantially all
the Subleased Premises is taken by such exercise of the power of Eminent Domain
during the term of the Sublease or any renewal thereof, all obligations of the
Tenant under the Sublease which are still capable of performance (including,
without limitation, the obligation of the Tenant to pay the Basic Rent and all
other amounts payable hereunder) shall continue in full force and effect.
Subject to the provisions of the Reimbursement Agreement and the Series 1997
Security Deed, the Tenant shall be entitled to collect, hold and apply all of
the Net Condemnation Award in respect of any such taking, regardless of the
amount thereof, and any part of such award initially paid to the Landlord shall
be paid over to the Tenant or applied as the Tenant may direct in accordance
with the provisions hereof, and the Landlord will cause the Authority and/or the
Trustee to pay any such proceeds to Tenant pursuant to the provisions of the
Authority Lease. The Net Condemnation Award in respect of any such taking shall
be applied by the Tenant, or at its direction, for one or more of the following
purposes:
(1) payment of the costs of repairing, restoring, modifying, relocating
or rearranging any portions of the Project not taken but damaged or adversely
affected by such taking, all under such circumstances and upon such terms as
shall be specified by the Lessee and as shall not change the character of the
Project to such extent that it will not constitute facilities eligible for
financing by the Authority within the meaning of the Enabling Law; or,
(2) payment of the costs of acquiring (by construction, purchase or
otherwise) such additional facilities and equipment as the Lessee may direct,
which facilities and equipment (i) shall be of such nature as to constitute
facilities
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eligible for financing by the Authority within the meaning of the Enabling Law,
(ii) shall be acquired by the Authority and made subject to the demise of the
Lease free of liens and encumbrance other than Permitted Encumbrances, and (iii)
shall be deemed a part of the Project and made available for use by the Lessee,
without the payment of additional rent hereunder, to the same extent as if such
facilities and equipment had originally constituted part of the Project and had
been specifically demised hereby.
In the event that the Tenant determines to apply the Net Condemnation
Award (or any specified portion thereof), pursuant to the provisions of
subparagraphs (1) or (2) of this subsection, for payment of the costs of
repairing, restoring, modifying, relocating or rearranging any part of the
Project or for payment of the costs of acquiring additional property to become
part of the Project, as the case may be, the Landlord shall cause the Authority,
at the request of the Tenant, to undertake in its own name such repair,
restoration, modification, relocation or rearrangement or such acquisition of
additional property, and in such case the Tenant shall pay such award (or
specified portion thereof) to the Trustee for the account of the Authority,
pursuant to the provisions of Section 7.2(b) of the Authority Lease. The
Landlord shall cause the Trustee to create a trust fund to apply the Net
Condemnation Award (or specified portion thereof) for the payment of the costs
of repairing, restoring, modifying, relocating or rearranging any part of the
Project or for payment of the costs of acquiring additional property, as the
case may be, pursuant to the provisions of Section 7.2(b) of the Authority
Lease, and such award (or specified portion thereof) shall be deposited in such
fund and held therein, invested to the extent not immediately required for the
payment of such costs, and disbursed pursuant to requisitions submitted by the
Tenant, all on the same terms and conditions (with the necessary changes in
detail) as provided in the Indenture with respect to the proceeds of the Series
1997 Bonds deposited in such fund.
Any balance of the Net Condemnation Award (or any balance of the
portion thereof specified for the payment of such costs) remaining after payment
of all such costs, whether at the time held by the Tenant or the Trustee, shall
be paid to the Landlord who shall cause them to be used pursuant to the
provisions of Section 7.2 of the Authority Lease, shall be paid into the Bond
Fund or, if the Indenture Indebtedness has been paid in full and no Event of
Default shall have occurred and be continuing, such moneys shall be applied to
the payment of any
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obligations then owed to the Bank under the Reimbursement Agreement, and any
such moneys remaining after the payment of all such obligations then owed to the
Bank shall be paid to the Tenant. In the event that the Net Condemnation Award
(or the portion thereof specified for the payment of such costs) is not
sufficient to pay in full the costs of such repair, restoration, modification,
relocation or rearrangement, or the costs of acquiring such additional property,
as the case may be, the Tenant (i) will nonetheless complete such repair,
restoration, modification, relocation or rearrangement or the acquisition of
such additional property, as the case may be, and will pay that portion of the
costs thereof in excess of the amount of the Net Condemnation Award (or
specified portion thereof) available for the payment of such costs, or (ii) will
pay to the Trustee, for the account of the Authority, the moneys necessary to
complete such repair, restoration, modification, relocation or rearrangement or
the acquisition of such additional property, as the case may be, in which case
the Authority will cause such undertakings to be so completed, and the Trustee
will, upon completion of such undertakings and Payment in Full of the costs
thereof, return to the Tenant any portion of such payment by the Tenant that is
not needed therefor. The Tenant shall not, by reason of the payment of such
excess costs (whether by direct payment thereof or payments to Trustee
therefor), be entitled to any reimbursement from the Authority or to any
reduction or abatement of the rentals and other payments due from the Tenant
hereunder.
Section 7.3 CONDEMNATION OF RIGHT TO USE OF THE SUBLEASED PREMISES FOR
LIMITED PERIOD. If the use, for a limited period, of all or part of the
Subleased Premises is taken under the exercise of the power of Eminent Domain,
the Sublease (including, without limitation, the provisions hereof relating to
the payment of Basic Rent) shall, continue in full force and effect, but with
the consequences specified in the succeeding provisions of this section. If the
period of such taking expires on or before the expiration of the Sublease Term
or any renewal thereof, the Tenant shall be entitled to receive the entire
condemnation award made therefor, whether by way of damages, rent or otherwise,
and shall upon being restored to possession restore the Subleased Premises to
substantially the same condition as prior to such taking, with such changes,
alterations and modifications as will not significantly impair the operating
utility of the Subleased Premises, or change the character thereof to such
extent that it will not constitute facilities eligible for financing by the
Authority within the meaning of the Enabling Law. If such taking occurs during
the Sublease Term or any renewal
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thereof, but the period of such taking expires after the expiration of the
Sublease Term, the Tenant shall be entitled to receive that portion of the award
allocable to the period from the date of such taking to the end of the Sublease
Term, and the Landlord shall be entitled to the remainder thereof.
Section 7.4 CONDEMNATION OF TENANT-OWNED PROPERTY. The Tenant shall be
entitled to any condemnation award or portion thereof made for damages to or the
taking of its own property not included in the Subleased Premises, but any
condemnation award resulting from damages to or the taking of all or any part of
the Subleased Premises shall be applied in accordance with the provisions of
Section 7.2 or 7.3 hereof, whichever may be applicable. In the event of any
taking which involves both the Subleased Premises and property of the Tenant,
the Tenant shall be responsible for all attorney's fees and other expenses
properly allocable to the taking of its own property.
Section 7.5 CONDUCT OF CONDEMNATION PROCEEDINGS. Landlord is authorized
to handle and conduct any prospective or pending condemnation proceeding with
respect to the Subleased Premises or any part thereof and take such actions as
it deems appropriate in its sole judgment to carry out the provisions hereof,
and Tenant will cooperate in connection with such proceeding. In no event will
the Landlord settle, or consent to the settlement of, any prospective or pending
condemnation proceeding with respect to the Subleased Premises or any part
thereof that affects the Tenant's interest in the Subleased Premises without
conferring with the Tenant and obtaining Tenant's consent, which shall not be
unreasonably withheld. Landlord may also consent for the Tenant to handle and
conduct any such proceeding or any part thereof upon such reasonable conditions
as the Landlord may impose.
Section 7.6 COOPERATION OF THE LANDLORD WITH RESPECT TO RESTORATION OF
THE PROJECT IN THE EVENT OF CASUALTY OR CONDEMNATION. If, as a result of the
taking of title to less than substantially all the Subleased Premises or the
taking of the temporary use of all or any part of the Subleased Premises through
the exercise of the power of Eminent Domain, or if, as a result of any event
causing destruction or damage to the Subleased Premises or any part thereof, the
Tenant determines, in accordance with any applicable provision of this article,
to acquire (by purchase, construction or otherwise) any additional property to
replace any part of the Subleased Premises so taken, or to have the Subleased
Premises repaired, re-
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placed, restored, modified, relocated or rearranged in order to correct or
ameliorate any condition caused by such taking, damage or destruction, as the
case may be, then the Landlord will cause the Authority to execute and deliver,
or cause to be executed and delivered, all contracts, orders, requisitions,
instructions and other written instruments and do, or cause to be done, all
other acts that may be necessary or proper in carrying out all such undertakings
with respect to the Subleased Premises, in accordance with and pursuant to the
provisions of Section 7.6 of the Authority Lease.
ARTICLE VIII
PARTICULAR COVENANTS OF THE TENANT
Section 8.1 GENERAL COVENANTS. The Tenant will, in the use of the
Subleased Premises, comply in all material respects with all valid and
applicable laws, ordinances, rules, regulations and orders of all governmental
authorities or agencies.
Section 8.2 RELEASE AND INDEMNIFICATION COVENANTS. The Tenant releases
the Landlord, Authority, Trustee and the Bank (and each director, officer,
employee and agent thereof) from, and hereby indemnifies and holds said parties
(and each director, officer, employee or agent thereof) harmless and agrees to
defend the same against, any and all claims, damages, losses, costs, expenses
(including reasonable attorneys' fees for counsel of the indemnified party's
choice) and liabilities of any character or nature whatsoever, regardless of by
whom asserted or imposed, and losses of every conceivable kind, character and
nature whatsoever claimed by or on behalf of any person, firm, corporation or
governmental authority, arising out of, resulting from, or in any way connected
with the leasing of the Subleased Premises to the Tenant and the condition, use,
possession or management of the Subleased Premises during the Lease Term;
provided, however, that the Tenant shall not be obligated to indemnify any
director, officer, employee or agent of the Authority against any claim,
liability or loss in any way connected with the Subleased Premises unless such
claim, liability or loss arises out of or results from official action taken in
the name and behalf of the Authority by such director, officer, employee or
agent.
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The Tenant hereby further indemnifies, holds harmless and agrees to
defend the Landlord, the Authority and the Trustee (and each director, officer,
employee and agent thereof) against
(a) any claims, damages, losses, costs, expenses (including reasonable
attorneys' fees for counsel of the indemnified party's choice) or liabilities
whatsoever arising out of or based upon any untrue or misleading statement or
alleged untrue or misleading statement of any material fact contained in any of
the aforesaid information furnished, or caused to be furnished, by the Tenant to
any prospective purchaser of the Series 1997 Bonds or the Bank, or the omission
or alleged omission to state in any such information any material fact necessary
to make the statements contained therein not misleading in the light of the
circumstances under which such statements were made, and
(b) any claims, damages, losses, costs, expenses (including reasonable
attorneys' fees for counsel of the indemnified party's choice) or liabilities
arising out of any action taken by the Landlord at the request of the Tenant (or
any other person authorized to act on behalf of the Tenant) in connection with
the offering and sale of the Series 1997 Bonds or in connection with the
Subleased Premises.
The Tenant will pay or reimburse all legal or other expenses reasonably
incurred by the Landlord, the Authority or the Trustee, as the case may be (and
each director, officer, employee and agent thereof), in connection with the
investigation or defense of any action or proceeding, whether or not resulting
in liability, with respect to any claim, liability or loss in respect of which
indemnity may be sought against the Tenant under the provisions of this section.
In the event that any action or proceeding is brought against any
indemnifiable party (whether the Landlord, or any of the Landlord's directors,
officers, employees or agents, the Authority, or any of the Landlord's
directors, officers, employees or agents, or the Trustee or its officers,
directors, employees or agents), in respect of which indemnity may be sought
against the Tenant under the provisions of this section, such indemnifiable
party shall, as a condition of the Tenant's liability under the provisions of
this section, be obligated to notify the Tenant promptly in writing of the
commencement of such action or proceeding and shall thereafter forward to the
Tenant a copy of every summons, complaint, pleading, motion or other process
received with respect to such action or proceeding. The
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Tenant may with the express written consent of Landlord, which shall not be
unreasonably withheld, and if so requested by such indemnifiable party, shall at
any time assume the defense of such indemnifiable party in connection with any
such action or proceeding, and in such case the Tenant shall pay all expenses of
such defense and shall have full and complete control of the conduct on the part
of such party of any such action or proceeding, including, without limitation,
the right to settle or compromise any claim giving rise to such action or
proceeding upon such terms and conditions as the Tenant, in its sole discretion,
shall determine, provided that the Landlord, the Authority, and the Trustee
shall have the right to select their own respective Counsel in any such matter.
Nothing contained in this section shall be construed to indemnify the
Landlord, the Authority, or any of their directors, officers, employees or
agents, or the Trustee, against, or to release any of such parties from
liability for, any claim, liability or loss that may result (i) from willful
misconduct or gross negligence on the part of such parties or (ii) from the
failure of such parties to perform their obligations under any applicable
agreement or (iii) from the sole negligence of such party.
Anything to the contrary herein contained notwithstanding, the
covenants of the Tenant contained in this section shall, with respect to any
claim, liability or loss for which the Tenant is obligated to provide indemnity,
remain in full force and effect after the termination of the Lease until (i) any
cause of action brought in respect of such claim, liability or loss shall be
barred by the applicable statute of limitation or (ii) the Payment in Full or
the satisfaction of such claim, liability or loss, including all reasonable
expenses incurred by the indemnifiable party or parties in defending against
such claim, liability or loss; provided, however, that in the event any action
or proceeding arguably barred by the applicable statute of limitation is brought
against any indemnifiable party hereunder, the Tenant shall be obligated to
defend such indemnifiable party with respect to such action or proceeding, all
to the end that the bar of the statute of limitation may be asserted by the
tenant against the party bringing such action or proceeding but may not be
asserted by the Tenant against the indemnifiable party in order to avoid
performing any of its obligations under this section. The right of the Tenant to
raise the bar of any such statute against any indemnified party is hereby
expressly waived.
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Section 8.3 INSPECTION OF THE SUBLEASED PREMISES. During the term of
the Sublease and any renewal thereof, the Tenant will permit the Landlord, the
Authority, the Trustee, the Bank and their duly authorized representatives at
all reasonable times to examine and inspect the Subleased Premises or any part
thereof.
Section 8.4 CORPORATE EXISTENCE OF TENANT. The Tenant will (a) do or
cause to be done all things necessary to preserve and keep in full force and
effect the corporate existence, rights and franchises of the Tenant, (b) comply
with all laws, rules and regulations of any governmental body or regulatory
authority (federal, state or local) applicable to the Tenant, (c) qualify and
remain qualified as a foreign corporation in each jurisdiction in which such
qualification is necessary in view of the Tenant's business or operations, and
(d) at all times maintain, preserve and protect all franchises and trade names.
Section 8.5 FURTHER ASSURANCES. The Tenant will, at its own cost and
expense, take all actions that may at the time and from time to time be
necessary to perfect, preserve, protect and secure the interests of the
Landlord, the Authority, and the Trustee, or any of them, in and to the
Subleased Premises and the revenues therefrom pledged and assigned in the
Indenture, including, without limitation, the filing of all financing and
continuation statements that may at the time be required under the Georgia
Uniform Commercial Code.
ARTICLE IX
CERTAIN PROVISIONS RELATING TO
THE SUBLEASED PREMISES
Section 9.1 PROVISIONS RELATING TO ASSIGNMENT AND SUBLEASING BY TENANT.
Tenant may not assign this Sublease, any right or obligation thereto, and/or
substitute any party in its place to perform any duty hereunder or receive any
benefit, without the express written consent of the Landlord, which consent
shall not be unreasonably withheld. No such assignment shall relieve the Tenant
of any obligation under the Sublease or modify any right of the Landlord against
the Tenant, all of which shall remain in full force and effect.
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ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
Section 10.1 EVENTS OF DEFAULT DEFINED. The following shall be "Events
of Default" under the Sublease, and the term "Event of Default" shall mean,
whenever it is used in the Sublease, any one or more of the following events:
(a) Failure by the Tenant to pay any installment of Basic Rent or to
make any other payment required under the terms hereof [other than any payment
referred to in clause (b) of this section] on the date that such installment or
such payment shall become due and payable by the terms of the Sublease;
(b) Failure by the Tenant to pay any amount due the Trustee, Authority,
Landlord or any other party, as the case may be, assessed for reasonable
charges, charges and disbursements, and other charges and fees Tenant is
obligated to pay hereunder within ten (10) days after written demand for such
payment by the Landlord, which demand may be made on or after the date on which
such amount is due and payable;
(c) Failure by the Tenant to perform or observe any agreement, covenant
or condition required by the Sublease to be performed or observed by it [other
than the agreements and covenants referred to in the preceding clauses (a) and
(b) of this section], which failure shall have continued for a period of twenty
(20) days after written notice specifying, in reasonable detail, the nature of
such failure and requiring the Tenant to perform or observe the agreement,
covenant or condition with respect to which it is delinquent shall have been
given to the Tenant by the Landlord;
(d) Any warranty, representation or other statement by or on behalf of
the Tenant contained in the Sublease, being false or misleading in any material
respect at the time made, but only if the inaccuracy of such warranty,
representation or other statement is not remedied in a manner satisfactory to
the Landlord;
(e) Institution by the Tenant of proceedings to be adjudicated a
bankrupt or insolvent, or consent by the Tenant to the filing of a bankruptcy or
insolvency proceeding against it, or the filing by the Tenant of a petition or
answer or consent seeking relief under Title 11 of the United States Bankruptcy
Code, as now
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constituted or as amended, or any other applicable federal or state bankruptcy
or other similar law, or consent by the Tenant to the institution of proceedings
thereunder or to the filing of any such petition, or consent by the Tenant to
the appointment of, or the taking of possession of any of its property by, a
receiver, liquidator, trustee, custodian or assignee in bankruptcy or insolvency
of the Tenant or for all or a major part of its property, or an assignment by
the Tenant for the benefit of its creditors, or a written admission by the
Tenant of its inability to pay its debts generally as they become due, or the
taking of any corporate action by the Tenant in furtherance of any of the
foregoing events or actions;
(f) The entry of a decree or order by a court of competent jurisdiction
for relief in respect of the Tenant or adjudging the Tenant to be a bankrupt or
insolvent or approving as properly filed a petition seeking reorganization of
the Tenant or the arrangement, adjustment or composition of its obligations
under Title 11 of the United States Bankruptcy Code, as now constituted or as
amended, or any other applicable federal or state bankruptcy or other similar
law, which decree or order shall have continued undischarged or unstayed for a
period of sixty (60) days; or the entry of a decree or order of a court of
competent jurisdiction for the appointment of a receiver, liquidator, trustee,
custodian or assignee in bankruptcy or insolvency for the Tenant or for all or a
major part of its property, or for the winding up or liquidation of its affairs,
which decree or order shall have remained in force undischarged or unstayed for
a period of sixty (60) days;
(g) The failure of the Tenant to perform any other obligation of the
Authority Lease, which it has assumed pursuant to the terms hereof;
(h) The loss of its Toyota, Buick, Pontiac, Mitsubishi, GMC, Mazda or
Saturn franchises purchased from Landlord, or the failure of Tenant to operate
any of said franchises on the Subleased Premises, unless Tenant replaces any
such lost or non-operated franchise with another franchise to which Landlord
consents, which consent shall not be unreasonably withheld; or
(i) Any breach by Tenant of that certain "Exclusive Use Agreement"
between Jay Pontiac-GMC Truck, Inc., and General Motors Corporation relating to
the Buick franchise signed by James G. Stelzenmuller, III, on or about 12/11/96.
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Section 10.2 REMEDIES ON DEFAULT. Whenever any Event of Default shall
have happened, the Landlord may take any one or more of the following remedial
actions:
(a) take possession of the Subleased Premises, exclude the Tenant from
possession thereof and rent the same for the account of the Tenant, holding the
Tenant liable for the balance of all rent and other amounts due under the
Sublease;
(b) terminate the Sublease, take possession of the Subleased Premises,
exclude the Tenant from possession thereof and lease the same for the account of
the Landlord, holding the Tenant liable for all rent and other amounts due under
the Sublease until the date such other lease is made for the account of the
Landlord;
(c) declare immediately due and payable all Basic Rent that may become
due under the term of the Sublease or any renewal term then in effect;
(d) have access to, and inspect, examine and make copies of, the books,
records and accounts of the Tenant; and
(e) institute whatever legal proceedings may appear necessary or
desirable to collect the rent then due, whether by declaration or otherwise, or
to enforce any obligation, covenant or agreement of the Tenant under the
Sublease or any obligation of the Tenant imposed by any applicable law.
Section 10.3 NO REMEDY EXCLUSIVE. No remedy herein conferred upon or
reserved to the Landlord is intended to be exclusive of any other available
remedy or remedies, but each and every such remedy shall be cumulative and shall
be in addition to every other remedy given under the Sublease or now or
hereafter existing at law or in equity or by statute. No delay or omission to
exercise any right or power accruing upon any Event of Default shall impair any
such right or power or shall be construed to be a waiver thereof but any such
right or power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the Landlord or the Trustee to exercise any
remedy reserved to it in this article, it shall not be necessary to give any
notice, other than such notice as is herein expressly required. Any remedy
available, conferred upon or reserved to the Landlord hereunder may be exercised
from time to time or at any time in the Landlord's sole discretion or as may be
required by the Trustee or the Authority.
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Section 10.4 AGREEMENT TO PAY ATTORNEYS' FEES. In the event that, as a
result of an Event of Default or a threatened Event of Default by the Tenant,
the Landlord should employ attorneys at law or incur other expenses in or about
the collection of rent or the enforcement of any other obligation, covenant,
agreement, term or condition of the Sublease, the Tenant will pay to the
Landlord reasonable attorneys' fees and other reasonable expenses so incurred by
the Landlord.
Section 10.5 NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In the event
any agreement contained in the Sublease should be breached by either party and
thereafter waived by the other party, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder. Further, neither the receipt nor the acceptance of any rent hereunder
by the Landlord shall be deemed to be a waiver of any breach of any covenant,
condition or obligation herein contained or a waiver of any Event of Default
even though at the time of such receipt or acceptance there has been a breach of
one or more covenants, conditions or obligations on the part of the Tenant
herein contained or an Event of Default (or both) and the Landlord has knowledge
thereof.
ARTICLE XI
OPTIONS
Section 11.1 OPTION TO RENEW THE SUBLEASE. Provided that Tenant is not
in default hereunder at the time of renewal, and the Sublease is in full force
and effect, Landlord does hereby grant and give to the Tenant an option to renew
this Sublease Agreement at the end of the original term, or at the end of a
prior renewal term, as the case may be, for two (2) additional sixty (60) month
periods by giving Landlord at least a one hundred eighty (180) day written
notice of its intention to renew prior to the expiration of the existing term or
renewal term, as the case may be.
All terms and conditions of the Sublease upon any renewal shall remain
in full force and effect upon any renewal except that Basic Rent shall be
adjusted upward by the percentage difference between the Consumer Price Index as
defined below on the date of execution on this Sublease or first renewal, as the
case may be, and the Consumer Price Index on the date of renewal or second
renewal, as the case may be. The Consumer Price Index, for the purposes hereof,
shall be defined as the unadjusted average of "all items" shown on the "United
States city average
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for urban wage earners and clerical workers, all items, groups, sub-groups and
special groups of items as promulgated by the Bureau of Labor Statistics of the
United States Department of Labor". In the event that such index is not
available, then the parties hereto shall ascertain and utilize some similar
criteria to establish such index for use in accordance herewith and pursuant
hereto.
ARTICLE XII
MISCELLANEOUS
Section 12.1 COVENANT OF QUIET ENJOYMENT. SURRENDER. So long as the
Tenant performs and observes all the covenants and agreements on its part herein
contained, it shall peaceably and quietly have, hold and enjoy the Subleased
Premises during the Sublease Term subject to all the terms and provisions
hereof. At the end of the Sublease Term or any renewal thereof, as the case may
be, or upon any prior termination of the Sublease for reasons stated herein, the
Tenant will surrender to the Landlord possession of all property then subject to
the demise of the Sublease in the same condition as originally received by the
Tenant.
Section 12.2 SUBLEASE SUBORDINATE TO AUTHORITY LEASE AND OTHER RIGHTS.
Anything contained herein to the contrary notwithstanding, the rights of the
Tenant hereunder are subject and subordinate to the Authority Lease and
subordinate to the rights of other parties to whom Landlord's rights are
subordinate under the Authority Lease. Tenant shall perform all other
obligations of the Landlord in the Authority Lease not specifically addressed
herein and shall comply with all covenants and conditions required of the
Landlord thereunder. Tenant, however, shall not have the rights of the Landlord
under said Sublease.
Section 12.3 REAFFIRMATION OF AUTHORITY LEASE AND RIGHTS OF AUTHORITY.
Nothing contained herein shall change, modify or amend the rights of the
Authority under the Authority Lease, or arising out of the Authority Lease of
relating thereto. Nothing contained herein shall create or impose any obligation
or duty on the Authority that is not set forth in the Authority Lease, and
nothing contained herein shall provide to the Tenant any rights of the Landlord
under the Authority Lease or arising out of the Authority Lease or relating
thereto, except by written consent of the Authority.
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Section 12.4 THIS SUBLEASE A NET SUBLEASE. The Tenant recognizes and
understands that it is the intention hereof that the Sublease herein made shall
be a net Sublease, but said Sublease shall confer no rights of title or
ownership to any leased property, no option to acquire any ownership rights
and/or no rights of any kind to acquire any such rights. The Sublease shall be
construed to effectuate such intent.
Section 12.5 NOTICES. All notices, demands, requests and other
communications hereunder shall be in writing and delivered by one of the
following methods: (i) by personal delivery at the hand delivery address
specified below, (ii) by first-class, registered or certified mail, postage
prepaid, addressed as specified below or (iii) if facsimile transmission
facilities for such party are identified below or pursuant to a separate notice
from such party, sent by facsimile transmission to the number specified below or
in such notice. The hand delivery address, mailing address and (if applicable)
facsimile transmission number for receipt of notice or other documents by such
parties are as follows:
(a) If to the Landlord:
By Mail: Jay Leasing, Inc.
Post Office Box 1978
Columbus, Georgia 31902
Attention: James G. Stelzenmuller, III
By Hand: Jay Leasing, Inc.
2420 Downing Drive
Columbus, Georgia 31906
Attention: James G. Stelzenmuller, III
By Facsimile: (706) 324-3984
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<PAGE> 29
(b) If to the Tenant:
By Mail: Jay Automotive Group, Inc.
By Hand:
By Facsimile:
(c) If to Guarantor:
By Mail: Sunbelt Automotive Group, Inc.
By Hand:
By Facsimile:
The above-mentioned parties may, by like notice, designate any further
or different addresses to which subsequent notices shall be sent. Any notice
hereunder signed on behalf of the notifying party by a duly authorized attorney
at law shall be valid and effective to the same extent as if signed on behalf of
such party by a duly authorized officer or employee. Any notice or other
document shall be deemed delivered when actually received by the party to whom
directed at the address or number specified pursuant to this section, or, if
sent by mail, three (3) days after such notice or document is deposited in the
United States mail, as provided above.
Whenever, under the provisions hereof, any request, consent or approval
of a party hereto is required or authorized, such request, consent or approval
shall (unless otherwise expressly provided herein) be signed on behalf of the
party by an Authorized Representative; and each of the parties are authorized to
act and rely upon any such requests, consents or approvals so signed.
Section 12.6 CONCERNING CERTAIN PRIOR AND CONTEMPORANEOUS AGREEMENTS.
The Sublease shall completely and fully supersede all other prior or
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contemporaneous agreements, both written and oral, between the Landlord and the
Tenant relating to the leasing of the Subleased Premises, except for the
provisions of the promissory note from Sunbelt to James G. Stelzenmuller, III,
relating to a default thereunder.
Section 12.7 AMENDMENT OF SUBLEASE. Anything contained herein to the
contrary notwithstanding, this Sublease Agreement may be amended only by written
agreement, signed by both parties hereto.
Section 12.8 BINDING EFFECT. The Sublease shall inure to the benefit
of, and shall be binding upon the parties, and their respective successors and
assigns. The Tenant shall not have the right to assign this Agreement, any part
hereof, any right or obligation hereunder, to any other person without the
express written consent of the Landlord. Tenant shall not have the right to
substitute or subcontract the performance of any obligation hereunder without
the express written permission of the Landlord. Any such assignment,
substitution or subcontract that is approved shall not release Tenant from its
obligations hereunder, which shall remain in full force and effect. Landlord
shall have the unrestricted right to assign this Sublease.
Section 12.9 ARTICLE AND SECTION CAPTIONS. The article and section
headings and captions contained herein are included for convenience only and
shall not be considered a part hereof or affect in any manner the construction
or interpretation hereof.
Section 12.10 GOVERNING LAW. The Sublease shall in all respects be
governed by and construed in accordance with the laws of the State of Georgia.
Section 12.11 ACKNOWLEDGMENT OF BOND DOCUMENTS. Tenant acknowledges
that it has read the Authority Lease, which is attached hereto, all of the Bond
Documents and other documents referenced therein, that it accepts the terms
hereof, and accepts the Subleased Premises subject to the provisions of all of
said documents, and that it will execute such acknowledgments, consents and/or
other documents that the Authority, the Trustee and/or the Bank may reasonably
request to acknowledge such acceptance and compliance with the provisions
thereunder.
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Section 12.12 GUARANTY. The Guarantor does unconditionally guarantee
the obligations of the Tenant hereunder, and Guarantor shall be jointly,
severally, primarily and individually liable for all such obligations. Landlord
shall have all rights and remedies against the Guarantor that it has against the
Tenant, that rights of the Guarantor shall be no greater than the rights of the
Tenant thereunder, and Guarantor hereby waives protest, demand, notice and any
and all other rights to the contrary.
Guarantor's liability is direct, immediate, absolute, continuing,
unconditional and unlimited. Landlord shall not be required to pursue any
remedies against Tenant or against any collateral as a condition to enforcement
of this guaranty. Guarantor shall not be discharged or released by reason of the
discharge or release of Tenant for any reason, including a discharge in
bankruptcy, receivership or other proceedings, a disaffirmation or rejection of
the Sublease by a trustee, custodian or other representative in bankruptcy, a
stay or other enforcement restriction, or any other reduction, modification,
impairment or limitation of Tenant's liability or any remedy of Landlord.
Landlord and Tenant may modify this Sublease, and Landlord may waive
any right or remedy against the Tenant without discharging, waiving or otherwise
affecting the liability of the Guarantor hereunder. Guarantor subordinates any
rights that it may have against the Tenant or that may arise hereunder by reason
of this Guaranty until all obligations of the Tenant to the Landlord hereunder
are fully paid and/or satisfied.
Section 12.13 PROMISSORY NOTE. This Sublease is executed as a part of
the sale of the shares of Jay Automotive Group, Inc., by James G. Stelzenmuller,
III to Sunbelt Automotive Group, Inc. Sunbelt delivered to James G.
Stelzenmuller, III at closing a promissory note in the principal amount of
$4,000,000.00 which contains cross-default provisions with the Sublease. Tenant
hereby consents to and approves the promissory note and agrees that a default by
Sunbelt thereunder shall constitute a default under the Sublease as provided
herein.
Section 12.14 AUTOMATIC TERMINATION. Should the Sunbelt IPO not close
by September 4, 1998, this Sublease shall be automatically canceled, shall be
null and void, and the Tenant shall have no other rights hereunder.
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<PAGE> 32
IN WITNESS WHEREOF, the Landlord has caused this Sublease Agreement to
be executed in its corporate name, has caused its corporate seal to be hereunder
affixed, and has caused this Sublease Agreement to be attested, all by its duly
authorized officers, and the Tenant and the Guarantor have caused this Sublease
Agreement to be executed in their respective corporate names, have caused their
respective corporate seals to be hereunder affixed, and have caused this
Sublease Agreement to be attested, all by their respective duly authorized
officers, in three (3) counterparts, each of which shall be deemed an original,
and the parties hereto have caused this Sublease Agreement to be effective as of
August 1, 1998.
JAY LEASING, INC.
"Landlord"
By:
------------------------------
Attest:
--------------------------
- --------------------------------------
Witness
- --------------------------------------
Notary Public, State of Georgia
JAY AUTOMOTIVE GROUP, INC.
"Tenant"
By:
------------------------------
Attest:
--------------------------
- --------------------------------------
Witness
- --------------------------------------
Notary Public, State of Georgia
[Signatures Continued on Next Page]
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<PAGE> 33
SUNBELT AUTOMOTIVE GROUP, INC.
"Guarantor"
By:
------------------------------
Attest:
--------------------------
- --------------------------------------
Witness
- --------------------------------------
Notary Public, State of Georgia
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<PAGE> 1
EXHIBIT 10.63
LEASE AGREEMENT
THIS LEASE AGREEMENT (hereinafter sometimes referred to as this
"Lease") is made and entered into as of the _ day of __________, 1998, by and
between JAY LEASING, INC., a Georgia corporation (herein sometimes referred to
as to "Landlord") and JAY AUTOMOTIVE GROUP, INC., a Georgia corporation (herein
sometimes referred to as "Tenant").
WITNESSETH THAT:
For valuable consideration, Landlord and Tenant, intending to be
legally bound, hereby agree with each other as follows:
ARTICLE I - DEFINITIONS AND FUNDAMENTAL PROVISIONS
The following terms shall have the meanings set forth below when used
in this Lease, except as may otherwise be specifically provided:
1.1 Addresses:
Landlord: 1424 Veterans Parkway, Columbus, Georgia 31901
Tenant: c/o Sunbelt Automotive Group, Inc., 5901
Peachtree-Dunwoody Road, Suite 250-B, Atlanta,
Georgia 30328
or such other address or addresses as a party may designate by written notice to
the other party.
1.2 Property: That certain tract or parcel of land with a street
address of __________ Veterans Parkway, Columbus, Muscogee County, Georgia,
which is more particularly described and/or depicted on Exhibit A, attached
hereto and by this reference made a part hereof (the "Property").
1.3 Premises: The Property and the improvements now or hereafter
thereon, which Premises include a used vehicle sales facility presently
comprised of ______ main structures (the "Buildings").
1.4 Lease Year: Each Lease Year shall be a period of twelve (12)
consecutive calendar months, beginning on the expiration of the prior Lease
Year. The first Lease Year shall commence ____________________, 1998 (the
"Commencement Date"), and end at the end of the twelfth (12th) full calendar
month thereafter. At the request of either party, the parties shall execute a
stipulation stating the Commencement Date, the expiration of the first Lease
Year and of the Initial Term after Landlord has delivered the Premises to
Tenant.
<PAGE> 2
1.5 Basic Rent: Tenant shall pay to Landlord the sum of $4,000.00 per
calendar month as "Basic Rent," which shall be paid in accordance with the terms
and provisions of Article III hereof.
1.6 Permitted Use. The Premises shall be used for the operation of, at
Tenants option, a used vehicle sales facility or an automobile dealership
selling primarily new automobiles, together, at Tenant's election, with such
operations and services as are ancillary and integrally related to the operation
of a used vehicle sales facility or an automobile dealership (for example, car
leasing operations and/or automobile repair shop), and for no other purpose,
whatsoever.
1.7 Rent. "Rent" shall mean and include Basic Rent and all other
amounts and charges payable by Tenant under any provision of this Lease. Sums
other than Basic Rent that are designated as "Rent" or "Additional Rent" (or any
similar term indicating rent or rental) are so designated solely for the purpose
of enabling Landlord to enforce its rights hereunder, and Landlord shall have
the same remedies for Tenant's failure to pay same as for non-payment of Basic
Rent. Such sums shall not be deemed rent for purposes of computing taxes or for
governmental regulations thereon.
1.8. Term. Five (5) Lease Years (being sometimes herein referred to as
the "Initial Term") to commence on the Commencement Date. Provided that Tenant
is not in default hereunder at the time of renewal, and the Lease is in full
force and effect, Landlord does hereby grant and give the Tenant an option to
renew this Lease at the end of the Initial Term, or at the end of a prior
renewal term, as the case may be, for two (2) additional sixty (60) month
periods upon all of the same terms and conditions as herein stated by giving
Landlord at least sixty (60) days prior written notice of its intention to renew
prior to the expiration of the existing term or renewal term, as the case may
be.
1.9 Memorandum of Lease. Neither party shall record or permit the
recording of this Lease without the other party's written consent. At either
party's request, the other party shall execute and deliver a written statement
in recordable form, identifying the parties hereto and the Property, specifying
the Commencement Date and termination date of the Lease Term and the Permitted
Use, and incorporating this Lease by reference.
1.10 Net Lease. This Lease is to be absolutely net to Landlord. Tenant
shall pay for all expenses, costs, impositions, taxes and other charges imposed
upon or affecting the Premises during the Term, and Landlord shall have no
obligation to pay for any matter affecting the Premises during the Term, except
as may be explicitly set forth herein.
ARTICLE II - DEMISED PREMISES
2.1 Demise of Premises. Landlord hereby leases and demises to Tenant
for the Term and Permitted Use specified herein, and Tenant rents from Landlord
the Premises, subject to the terms and conditions herein contained, and all
encumbrances, easements, restrictions, mortgages, zoning laws and governmental
or other regulations affecting the Premises (such other encumbrances and other
matters sometimes collectively referred to herein as the "Encumbrances").
Landlord hereby
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<PAGE> 3
warrants and represents that, as of the Commencement Date, the Property is
properly zoned for the Permitted Use and the Property and the Buildings comply
with all applicable federal, state and local governmental statutes, laws,
ordinances, rules and regulations, and that the Buildings are free from any
structural defects. Furthermore, Landlord expressly acknowledges and agrees that
Tenant shall not be responsible in any manner for, and Landlord shall indemnify
and hold Tenant harmless from, any violations of applicable federal, state and
local governmental statutes, laws, ordinances, rules and regulations affecting
the Buildings or the Property which occurred prior to the Commencement Date or
which are the result of any action or omission of any previous tenant of the
Premises or of Landlord or Landlord's agents, representatives, employees or
assigns.
2.2 Quiet Enjoyment. Tenant upon timely paying the Rent specified
herein, and performing and observing all of the other terms, covenants and
conditions of this Lease, shall peaceably and quietly have, hold and enjoy sole
and exclusive use of the Property during the Term, without interference by
Landlord or any other person or entity, subject to the terms of this Lease and
the Encumbrances.
ARTICLE III - RENT AND OTHER CHARGES
3.1 Payment of Rent. During the Term, Tenant covenants and agrees to
pay to Landlord, at the place designated in Section 1.1 hereof, all Rent as
defined in Section 1.7 hereof.
3.2 Payment of Basic Rent. On the Commencement Date, and thereafter,
monthly Basic Rent shall be due and payable in advance on or before the first
(1st) day of each and every calendar month during the Term, in advance, as set
forth in Section 1.5 hereinabove. If the term of this Lease begins on a date
other than the first day of a calendar month or expires on a date other than the
last day of a calendar month, Basic Rent for that calendar month shall be
prorated equitably.
3.3 Past Due Rent and Additional Rent. If Tenant shall fail to pay,
when the same is due and payable, any Rent or any Additional Rent, or amounts or
charges of any character whatsoever owed to Landlord, such unpaid amounts shall
bear interest from the due date thereof to the date of payment at the rate which
is the lesser of (i) ten percent (10%) per annum, or (ii) the maximum interest
rate permitted by law (the "Default Rate").
3.4 Payments on Behalf of Tenant. In case of any default by Tenant in
the payment of any amounts herein provided to be paid by Tenant, including,
without limitation, the procuring of insurance as hereinafter provided for, or
in any other payment required to be made by Tenant hereunder, Landlord, on
behalf of Tenant, may make such payment or payments, or procure any such
insurance, and Tenant covenants to reimburse and pay Landlord any amount paid or
expended immediately upon demand, with interest from the date of disbursement by
Landlord at the Default Rate.
3.5 Utilities. Tenant shall make application for, obtain, pay for, and
be solely responsible for all utilities required, used or consumed in the
Premises, including, but not limited to, gas, water
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<PAGE> 4
(including water for domestic uses and for fire protection), telephone,
electricity, sewer service, garbage collection services, or any similar service
(herein sometimes collectively referred to as the "Utility Services"). In the
event that any charge or assessment for any Utility Service supplied to the
Premises, that has or could become a lien on the Premises or any portion thereof
or interest therein, is not paid by Tenant to the utility supplier when due,
then, twenty (20) days after written notice to Tenant, Landlord may, but shall
not be required to, pay such charge for and on behalf of Tenant, with any such
amount paid by Landlord being repaid by Tenant to Landlord with interest at the
Default Rate, as Additional Rent, within twenty (20) days after demand by
Landlord, Landlord shall have absolutely no obligation with respect to any
Utility Service to the Premises and shall not be liable for any interruptions or
curtailment in Utility Services whatsoever.
3.6 Taxes. Tenant shall be responsible for the timely payment of all
taxes, public charges and assessments, of whatsoever nature, directly or
indirectly assessed or imposed upon the land, buildings, equipment and
improvements constituting the Premises and the rents therefrom, including, but
not limited to, all real property taxes, rates, duties and assessments, local
improvement taxes, import charges or levies, whether general or special, that
are levied, charged or assessed against the Premises by any lawful taxing
authority, whether federal, state, county, municipal, school or otherwise (other
than income, inheritance and franchise taxes thereon) (the "Taxes"). Taxes for
any partial tax period shall be prorated. If Landlord initially pays the Taxes,
Tenant shall reimburse Landlord therefor upon demand. Landlord promptly upon
receipt will forward to Tenant any bills, statements, assessments, notices or
other instruments asserting or otherwise relating to any such taxes, assessments
or charges. Tenant shall have the right to contest any taxes, assessments and/or
other charges assessed against the Premises.
Tenant shall also promptly pay, when due, all taxes on its trade
fixtures and other personal property in or on the Premises.
ARTICLE IV - USE OF PREMISES
4.1 Tenant's Use. Tenant shall use the Premises solely for the
Permitted Use specified in Section 1.6, and for no other purpose whatsoever.
Except as specifically permitted hereunder, Tenant shall not vacate or abandon
the Premises during the Term.
4.2 Legal Operation of Premises. Tenant shall not use, or suffer or
permit the Premises, or any part thereof, to be used for any purpose or use in
violation of any law, ordinance or regulation of any governmental authority, or
in any manner that will constitute a nuisance or an annoyance, or for any
hazardous purpose. Nothing contained in this Section 4.2 shall be construed to
interfere with Tenant's right to operate in the Premises for the uses and in the
manner set forth in Section 1.6 hereof, so long as they are lawful. In the
event, at any time during the Term of this Lease, any addition, alteration,
change or repair or other work of any nature, with respect to the Premises,
structural or otherwise, shall be required or ordered or become necessary or
account of any law, ordinance or regulation of any governmental authority now in
effect or hereafter adopted, passed or promulgated, the entire expense thereof,
regardless of when the same shall be incurred or become
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<PAGE> 5
due, shall be the liability of Tenant and in no event shall Landlord be called
upon to contribute thereto or do or pay for any work of any nature whatsoever on
or relating to the Premises. Tenant takes the Property subject to all zoning
regulations and ordinances now or hereafter in force.
4.3 Alterations to Premises. Except as described in Section 5.3
hereinbelow, Tenant shall not alter the exterior of the Premises, or make
interior structural changes or make any other changes or alterations to the
Premises without first obtaining Landlord's written approval for such
alterations, which approval shall not be unreasonably withheld or delayed. All
alterations which are in the nature of fixtures to real property shall remain
upon the Premises and shall become Landlord's property upon the expiration or
other termination of this Lease; provided, however, that Landlord may require
any alteration or improvement made by Tenant without Landlord's written consent
to be removed by Tenant by written notice thereof given to Tenant no later than
sixty (60) days after the expiration or earlier termination of the Term.
Notwithstanding the foregoing, Tenant shall be permitted, without the
requirement of Landlord's prior consent, to make interior, cosmetic,
non-structural alterations to the Premises; provided that: (i) the value and
structural integrity of the Premises are not decreased or diminished thereby;
(ii) all such work is expeditiously completed in a good and workmanlike fashion
and in compliance with all applicable laws, ordinances and regulations and in
conformity with all provisions of this Lease; and (iii) Tenant obtains lien
waivers consistent with the provisions of Section 4.4 hereof.
4.4 Liens. Tenant will not create or permit to be created or to remain,
and will discharge, any lien (including, but not limited to, the liens of
mechanics, laborers or materialmen for work or materials alleged to be done or
furnished in connection with the Premises), encumbrance or other charge upon the
Premises or any part thereof for work performed or materials provided during the
Term. Landlord reserves the right to enter the Premises during non-business
hours to post and keep posted notice of non-responsibility for any such lien.
ARTICLE V - REPAIRS AND MAINTENANCE
5.1 No Maintenance or Repair by Landlord. Landlord shall have no
obligation to improve, alter, replace, maintain and/or repair the Premises, or
any part thereof. Landlord may inspect the Premises as all reasonable times to
determine whether Tenant has fulfilled its maintenance and repair obligations
under this Lease and to otherwise inspect or exhibit the Premises; provided,
however, that Landlord shall never be obligated to inspect the Premises for any
reason.
5.2 Maintenance, Repair and Replacement Obligations of Tenant. Tenant
shall, at Tenant's expense, at all times keep and maintain the entire Premises
in good repair and condition, including without limitation, the diligent and
prompt repair of the roof and all exterior supporting walls, foundations, HVAC,
plumbing, electrical and other systems, rain gutters and spouting and all
esthetic aspects of the Premises and shall also keep the non-structural portions
of the Premises (specifically including the storefront, windows and automatic or
other doors of the Premises) in good order, condition (subject to reasonable
wear and tear and technological obsolence), and repair, clean, sanitary and
safe, including the replacement of equipment, fixtures and all broken glass
(with glass
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<PAGE> 6
of the same size and quality). Tenant shall also, during the Term hereof,
maintain in good condition and repair the non-building areas of the Property,
including the sidewalks, driveways, landscaped areas and parking areas, and
including patching, striping, cleaning, sweeping and other maintenance. In the
event Tenant fails to perform any of it obligations as required hereunder,
Landlord may (but shall not be required to) perform and satisfy same, and Tenant
hereby agrees to reimburse Landlord, as Additional Rent, for the reasonable cost
thereof, together with interest at the Default Rate, promptly upon demand. The
parties agree that it shall be Tenant's sole responsibility at all times during
the Term of this Lease to maintain the Premises in structurally sound, leak-free
condition so that the Premises shall be maintained at all times as if operations
therein were to continue beyond the expiration of the Term, and so that all
normal maintenance and repair during the Term shall be completed when the
Premises are surrendered to Landlord.
5.3 Improvements. Landlord and Tenant acknowledge that Tenant may make
certain improvements to the Buildings, from time to time ("Tenant's
Improvements"), as provided or required pursuant to the terms of this Lease.
Tenant's Improvements shall be subject to all of the terms of this Lease and
must first be approved by Landlord in writing, which approval shall not be
unreasonably withheld or delayed. All such Tenant's Improvements which are
fixtures shall become the property of Landlord upon the installation thereof.
ARTICLE VI - ACCESS TO PREMISES
Tenant agrees that during non-business hours Landlord, its agents,
employees or servants or any person authorized by Landlord may enter the
Premises to inspect the condition of same, to cure defaults of Tenant as
provided for herein, and to exhibit the same to prospective tenants, purchasers,
mortgagees or others interested in the Premises. Such entry, cure or exhibition
shall not constitute an eviction of Tenant, in whole or in part, Landlord
agreeing to employ its best efforts in attempting to minimize any interruption
to the business operations of Tenant resulting from Landlord's (or its
designated representatives') entry to the Premises.
ARTICLE VII - INSURANCE AND INDEMNIFICATION
7.1 Tenant Liability Insurance. Tenant shall maintain, at its sole
expense, during the Term hereof, General Commercial Liability or General Garage
Liability insurance, insuring both Tenant and Landlord covering the Premises
with single limit coverage of at least One Million Dollars ($1,000,000) per
occurrence and not less than Two Million Dollars ($2,000,000) in the aggregate
in companies licensed and in good standing in the State of Georgia in the joint
names of Landlord and Tenant. Tenant shall further maintain at its sole expense
a commercial umbrella policy with single limit coverage of at least One Million
Dollars ($1,000,000) per occurrence and not less than Two Million Dollars
($2,000,000) in the aggregate in companies licensed and in good standing in the
State of Georgia in the joint names of Landlord and Tenant. Tenant shall keep in
force all-risk (Special Form) coverage insurance for the full replacement value
of all of Tenant's personal property within the Premises and on the Property,
including, but not limited to, fixtures, inventory, trade fixtures, furnishings
and other personal property. In addition, Tenant shall keep in force workers
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compensation or similar insurance to the extent required by law. Finally, Tenant
shall maintain, at its sole cost and expense, Special Form ("all-risk") property
insurance covering the Buildings for the full replacement cost thereof
(excluding footings and foundations), providing protection against perils
included in the Special Form ("all-risk") insurance policy. Tenant will cause
such insurance policies to name Landlord as a named insured thereunder with
respect to liability policies and to be written so as to provide that the
insurer waives all right of recovery by way of subrogation against Landlord in
connection with any loss or damage covered by the all-risk (Special Form) policy
in accordance with the provisions of Section 7.2 hereof. Tenant shall deliver
said policies of liability, workers compensation and all-risk insurance or
certificates thereof to Landlord at or prior to its execution of this Lease, and
thereafter from time to time at the reasonable request of Landlord. Should
Tenant fail to effect the insurance called for in this Lease, Landlord may, but
shall not be obligated to, procure said insurance and pay the requisite
premiums, in which event, Tenant shall promptly pay all sums so expended by
Landlord as Additional Rent following invoice. Each insurer under the policies
required hereunder shall agree by endorsement on the policy issued by it, or by
independent instrument furnished to Landlord that it will give Landlord at least
thirty (30) days prior written notice before the policy or policies in question
shall be altered or canceled.
7.2 Waiver of Subrogation. To the full extent permitted by applicable
law, Landlord and Tenant each waives all right of recovery against the other
for, and agrees to release the other from liability for, loss or damage to the
extent such loss or damage is covered by valid and collectible insurance in
effect at the time of such loss or damage. In addition, Tenant shall cause each
such insurance policy carried by it insuring the Buildings or Tenant's personal
property therein (and including the insurance coverages required in Section 7.1
hereinabove) to be written to provide that the insurer waives all rights of
recovery by way of subrogation against Landlord in connection with any loss or
damage covered by the policy.
7.3 Indemnification and Release. Tenant and Landlord (as the case may
be, the "Indemnitor") hereby indemnifies and holds the other party to this Lease
(Landlord or Tenant, as the case may be, the "Indemnitee") harmless from and
against any injury, expense, damage, liability or claim, imposed on Indemnitee
by any person whomsoever (except to the extent caused by the gross negligence or
willful misconduct of Indemnitee or Indemnitee's agents, employees,
representatives or contractors), whether due to damage to the Premises, claims
for injuries to the person or property of any other person in or about the
Premises for any purpose whatsoever, or administrative or criminal action by a
governmental authority, where such injury, expense, damage, liability or claim
results either directly or indirectly from the act (other than any act required
by the terms of this Lease), omission, negligence, misconduct or breach of any
provisions of this Lease by Indemnitor or employees of Indemnitor. Indemnitor
further agrees to reimburse Indemnitee for any reasonable costs or expenses,
including, but not limited to, court costs and reasonable attorney's fees
actually incurred, which Indemnitee actually incurs in investigating, handling
or litigating any such claim or any action by a governmental authority. This
provision shall survive the expiration or earlier termination of this Lease.
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ARTICLE VIII - CASUALTY AND CONDEMNATION
8.1 Fire, Explosion or Other Casualty. In the event the Premises are
damaged by fire, explosion or any other casualty, except as otherwise provided
herein, the damage shall be repaired by Tenant, said repairs to be substantially
completed within two hundred seventy (270) days after the casualty causing
damage has occurred, subject to force majeure events beyond Tenant's reasonable
control.
In the event the Premises shall be damaged or destroyed to the extent
of fifty percent (50%) or more of the total square footage of all Buildings and
other improvements on the Premises (hereinafter, a "Casualty"), then and in such
event, Tenant may elect by written notice to Landlord delivered within thirty
(30) days after such a Casualty either to repair or rebuild the Premises, as
aforesaid, or to terminate this Lease, effective as of the date specified in
Tenant's notice. If Tenant elects to terminate the Lease pursuant to this
Section 8.1, then Tenant shall direct its insurance company(s) to deliver
directly to Landlord all insurance proceeds to be paid for or in connection with
said Casualty; provided, in no event shall the amount of such insurance proceeds
payable to Landlord be less than the full replacement value of all such
improvements which have been so damaged or destroyed, as reasonably determined
by Landlord's insurance adjuster. If the insurance proceeds are less than the
full replacement value as aforesaid, Tenant shall pay such deficiency to
Landlord upon demand. If Tenant fails to deliver notice of its election to
Landlord within the thirty (30) day period referenced above, Tenant shall be
deemed to have elected to repair or rebuild the Premises and the Lease shall
remain in full force and effect.
If this Lease is not terminated pursuant to the preceding paragraph,
then Tenant shall restore and repair the Buildings and other improvements in an
expeditious manner. If Tenant purchases, at its sole option, rent insurance to
compensate Landlord for any lost rents as a result of damage or destruction to
the Premises, then Basic Rent (and other Rent) shall abate during any period
following damage to the Premises in a fair and equitable fashion according to
the proportion of the Premises that cannot reasonably be utilized by Tenant,
provided that the amount of such abatement shall not exceed the rent insurance
proceeds actually received by Landlord with respect thereto. Notwithstanding the
provisions of this Section 8.1, Tenant shall be the owner of its trade fixtures
and shall be entitled to any insurance proceeds attributable to said trade
fixtures.
8.2 Condemnation. If the whole of the Premises, or so much thereof as
to render the balance unusable by Tenant, shall be taken under power of eminent
domain, or otherwise transferred in lieu thereof, this Lease shall automatically
terminate as of the date possession is taken by the condemning authority and all
Rent and other charges shall be prorated on a daily basis and adjusted between
Landlord and Tenant as of the date of such termination. No award for any total
or partial taking of any real property interest in or to the Premises shall be
apportioned, and Tenant hereby unconditionally assigns to Landlord any award
which may be made for real property interests in such taking or condemnation. In
the event of a partial taking, which does not result in the termination of this
Lease, then, for the remainder of the Initial Term and any renewal term, Basic
Rent shall be apportioned according to the part of the Buildings and the
Property remaining usable by tenant.
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8.3 Condemnation Award. All compensation awarded or paid for any taking
or acquiring under the power or threat of eminent domain, whether for the whole
or part of the Premises, shall be the property of Landlord, and Tenant hereby
assigns to Landlord all of Tenant's right, title and interest in and to any such
award. Notwithstanding the foregoing, Tenant shall be entitled to claim, prove
and receive in the condemnation proceeding or by separate action, such awards as
may be allowed for loss of lease, moving expense, fixtures and other equipment
installed by it, provided no such claim shall diminish or adversely affect
Landlord's award.
ARTICLE IX - ASSIGNMENT AND SUBLETTING
9.1 Assignment and Subletting. Tenant's interest in the Premises shall
be limited to the use and occupancy thereof in accordance with the provisions
hereof and shall be non-transferable without Landlord's prior written consent,
which consent shall not be unreasonably withheld conditioned or delayed. Any
attempts by Tenant to assign its interest in the Lease, or to sublet the
Premises in whole or in part, or to sell, assign, lien, encumber or in any
manner transfer this Lease or any interest therein, without Landlord's prior
written consent shall constitute a default hereunder, as shall any attempt by
Tenant to assign or delegate the management or to permit the use or occupancy of
the Property or the Premises or any part thereof by anyone other than Tenant,
Landlord and Tenant acknowledge and agree that the foregoing provisions have
been freely negotiated by the parties hereto and that Landlord would not have
entered into this Lease without Tenant's consent to the terms of this Section
9.1. Any attempt by Tenant to assign this Lease or to sublet all or any portion
of the Premises, to encumber same, or to in any manner transfer, convey or
assign Tenant's interest therein without Landlord's prior written consent shall
be void ab initio.
Notwithstanding anything contained herein to the contrary, Tenant may,
without the prior consent of Landlord, assign this Lease or sublet the Premises
to any wholly-owed subsidiary of Tenant, to the parent corporation of Tenant, or
to a wholly-owned subsidiary of the parent corporation of Tenant.
ARTICLE X - SUBORDINATION AND ATTORNMENT
10.1 Subordination. This Lease shall be subject and subordinate to any
first priority deeds to secure debt which may now or hereafter affect this
Lease, the Building or the Property and also to all renewals, modifications,
extensions, consolidations, and replacements of such deeds to secure debt. In
confirmation of the subordination set forth in this paragraph, Tenant shall, at
Landlord's request, execute and deliver such further instruments as may be
desired by any holder of a first priority deed to secure debt (a "Mortgagee").
Tenant shall also deliver to any such Mortgagee within ten (10) days of written
request an attornment agreement, providing that Tenant shall continue to abide
by and comply with the terms and conditions of this Lease in the event such
Mortgagee takes title to the Property, so long as the Mortgagee delivers to
Tenant a nondisturbance agreement (which nondisturbance agreement may be a part
of the above-mentioned attornment agreement), which nondisturbance agreement
shall provide that so long as Tenant continues to abide by the terms and
conditions of this Lease, Mortgagee will permit Tenant to continue to occupy the
Premises.
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<PAGE> 10
10.2 Attornment. In the event any proceedings are brought for the
foreclosure of, or in the event of exercise of the power of sale or conveyance
in lieu of foreclosure under any deed to secure debt, this Lease shall continue
in full force and effect, Tenant shall at the option of the purchaser at such
foreclosure or other sale, attorn to such purchaser and recognize such person as
Landlord under this Lease, and Tenant's quiet possession shall not be disturbed
so long Tenant is not in default hereunder. In the event that such purchaser
requests and accepts such attornment, from and after the time of such
attornment, Tenant shall have the same remedies against such purchaser for the
breach of an agreement contained in this Lease that Tenant might have had
against Landlord if the deed to secure debt had not been terminated or
foreclosed.
ARTICLE XI - DEFAULT. REMEDIES AND BANKRUPTCY
11.1 Default of Tenant. In the event that Tenant (a) fails to pay all
or any portion of any sum due from Tenant hereunder when due and such failure to
pay continues for more than ten (10) business days after receipt of written
notice from Landlord (provided that such ten (10) day grace period shall not be
available more than three (3) times in any twelve (12) month period); (b) fails
to perform any other terms, covenants and conditions hereof, or is otherwise in
breach of any of Tenant's obligations hereunder or commits any other act or
omission in violation of this Lease and such failure to perform or violation
continues for more than thirty (30) days after receipt of written notice from
Landlord (provided such thirty (30) day grace period shall not be available more
than three (3) times in any twelve (12) month period); or (c) becomes bankrupt,
insolvent or files any debtor proceeding or takes or has taken against Tenant
any petition of bankruptcy; takes action or has action taken against Tenant for
the appointment of a receiver for all or a portion of Tenant's assets, files a
petition for a corporate reorganization; or makes an assignment for the benefit
of creditors, (any or all of the occurrences in this subsection 11.1 (c) shall
be deemed a default on account of bankruptcy for the purposes hereof); then
Tenant shall be in default hereunder and Landlord may, at its option and without
further notice to Tenant, terminate Tenant's right to possession of the Premises
and without terminating this Lease re-enter and resume possession of the
Premises and/or declare this Lease terminated, and may, thereupon, in either
event remove all persons and property from the Premises with or without resort
to process of any court, either by force or otherwise. Notwithstanding such
re-entry by Landlord, Tenant hereby indemnifies, protects, defends and holds
Landlord harmless from any and all loss or damage which Tenant may incur by
reason of the termination of this Lease and/or Tenant's right to possession
hereunder due to Tenant's default. In no event shall Landlord's termination of
this Lease and/or Tenant's right of possession of the Premises abrogate Tenant's
agreement to pay Rent and additional charges due hereunder for the full term
hereof. Following re-entry of the Premises by Landlord, Tenant shall promptly
pay all arrearages then due and overdue and shall continue to pay all such Rent
and additional charges as same become due under the terms of this Lease,
together with all other expenses incurred by Landlord in regaining possession
until such time, if any, as Landlord relets same and the Premises are occupied
by such successor, it being understood that Landlord shall have no obligation to
mitigate Tenant's damages by reletting the Premises. Upon reletting, sums
received from such new lessee by Landlord shall be applied first to payment of
costs incident to reletting; any excess shall then be applied to any
indebtedness to Landlord from Tenant other than for Basic Rent; and any excess
shall then be applied to the payment of Basic Rent due and unpaid. The balance,
if any, shall
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be applied against the deficiency between all amounts received hereunder and
sums to be received by Landlord on reletting, which deficiency Tenant shall pay
to Landlord in full, within five (5) days of notice of same from Landlord.
Tenant shall have no right to any proceeds of reletting that remain following
application of same in the manner set forth herein.
11.2 Landlord Default: Tenant's Remedies. If Landlord fails to observe
and perform any of the covenants, agreements, provisions and conditions herein
contained which are to be observed or performed by Landlord and persists in such
failure for more than thirty (30) days after written notice from Tenant of such
failure (provided such thirty (30) day grace period shall not be available more
than three (3) times in any twelve (12) month period) then, in addition to any
and all other remedies available to Tenant hereunder or in equity or at law, (a)
if Landlord's default hereunder materially and adversely affects Tenant's use
and enjoyment of the Premises as intended herein, Tenant may terminate this
Lease upon five (5) days' written notice to Landlord; or (b) Tenant may perform,
on behalf of and at the expense of Landlord, any obligation of Landlord under
this Lease which Landlord has failed to perform, and the cost of such
performance by Tenant together with interest thereon at the rate of ten percent
(10%) per annum from the date of such expenditure shall be payable by Landlord
to Tenant upon demand.
11.3 Rights and Remedies. The various rights and remedies herein
granted to Landlord or Tenant shall be cumulative and in addition to any others
Landlord or Tenant may be entitled to by law or in equity, and the exercise of
one or more rights or remedies shall not impair Landlord's or Tenant's right to
exercise any other right or remedy. All such rights and remedies may be
exercised and enforced concurrently or consecutively, and whenever and as often
as Landlord or Tenant shall deem desirable. The failure of Landlord or Tenant to
insist upon strict performance by the other party of any of the covenants,
conditions and agreements of this Lease shall not be deemed a waiver of any of
said rights and remedies concerning any subsequent or continuing breach or
default by the other party of any of the covenants, conditions, or agreements of
this Lease. No surrender of the Premises shall be effected by Landlord's or
Tenant's acceptance of Rent or any other sums or by any other means whatsoever
unless the same be evidenced by Landlord's or Tenant's written acceptance of
such as a surrender. In all events, Landlord or Tenant shall have the right upon
notice to the other party to cure any breach by the other party at the other
party's sole cost and expense, and the breaching party shall reimburse the
non-breaching party for such expense upon demand. The breaching party shall
reimburse the non-breaching party for attorney's fees and other expenses
incurred by the non-breaching party under this Article XI.
11.4 Bankruptcy. If Landlord shall not be permitted to terminate this
Lease as hereinabove provided because of the provisions of Title 11 of the
United States Code relating to Bankruptcy, as amended ("Bankruptcy Code"), then
Tenant as a debtor in possession or any trustee for Tenant agrees promptly,
within no more than fifteen (15) days upon request by Landlord to the Bankruptcy
Court, to assume or reject this Lease and Tenant on behalf of itself, and any
trustee agrees not to seek or request any extension or adjournment of any
application to assume or reject this Lease by Landlord with such Court. In such
event, Tenant or any trustee for Tenant may only assume this Lease if (a) it
cures or provides adequate assurance that the trustees will promptly cure any
default hereunder, (b) it compensates or provides adequate assurance that Tenant
will promptly compensate
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<PAGE> 12
Landlord for any actual pecuniary loss to Landlord resulting from Tenant's
defaults, and (c) it provides adequate assurance of performance during the fully
stated Term hereof of all of the terms, covenants and provisions of this Lease
to be performed by Tenant. In no event after the assumption of this Lease shall
any then-existing default remain uncured for a period in excess of the earlier
of ten (10) days or the time period set forth herein. Adequate assurance of
performance of this Lease as set forth hereinabove shall include, without
limitation, adequate assurance (1) of the source of Rent reserved hereunder and
(2) the assumption of this Lease will not breach any provision hereunder.
ARTICLE XII - SURRENDER OF PREMISES
12.1 Surrender of Premises. At the expiration or earlier termination of
this Lease, Tenant shall surrender the Premises to Landlord broom clean and in
good condition, and in a condition which complies with all applicable laws,
reasonable wear and tear and insured casualty (for which Landlord receives the
proceeds) excepted. Tenant shall promptly remove Tenant's sign, personal
property and trade fixtures upon such expiration or termination and repair any
damage or disturbance to the Premises caused by the removal of any furniture,
trade fixtures or other personal property placed in the Premises. Tenant's
failure to remove all or part of Tenant's sign, personal property and trade
fixtures within ten (10) days after such expiration or termination shall be
deemed an abandonment to Landlord of such sign, personal property and trade
fixtures and, if Landlord elects to remove all or any part of said same, such
removal, including the cost of repairing any damage to the Premises caused by or
resulting from such removal, shall be paid by Tenant.
12.2 Holding Over. Should Tenant, with Landlord's written consent, hold
over at the end of the Term of the Lease, Tenant shall become a tenant-at-will
and any such holding over shall not constitute an extension of this Lease.
During such holding over, Tenant shall pay Rent and other charges at the highest
monthly rate provided for herein, plus an additional fifty percent (50%) of the
Basic Rent in effect at the expiration of the Term hereof. If Tenant holds over
at the end of the Term of the Lease without Landlord's written consent, Tenant
shall be a tenant-at-sufferance.
ARTICLE XIII - MISCELLANEOUS
13.1 Notices. Notices and demands required or permitted to be given
hereunder may be given by personal delivery to the addresses designated in
Section 1.1 hereinabove (including courier and expedited delivery services) to
either party or any officer or other representative of the party to be notified,
or may be sent by certified mail, return receipt requested, addressed, postage
prepaid, to said addresses. Mailed notices and demands shall be deemed to have
been given upon the date of the executed return receipt (provided that (i) if
any party shall refuse delivery or (ii) if delivery fails because of an address
change that has not been received as required by this Section 13.1, then, in
either of such events, notices shall be deemed given when mailed), or, if made
by personal, courier or other expedited delivery to the addresses designated in
Section 1.1. hereinabove, then upon the delivery. Notice of change of address
for notices shall not be deemed made until received or rejected. Unless
otherwise specified by Landlord, the payment of Rent shall be to the first
address of Landlord as set forth in Section 1.1 herein.
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13.2 Successors and Assigns. All covenants, promises, conditions,
representations and agreements herein contained shall be binding upon, apply and
inure to the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns.
13.3 Entire Agreement. This Lease and the Exhibits attached hereto
constitute the sole and exclusive agreement between the parties with respect to
the Premises. No amendments, modifications of or supplements to this Lease shall
be effective unless in writing and executed by Landlord and Tenant.
13.4 Time is of the Essence. The time of the performance of all of the
covenants, conditions and agreements of this Lease is of the essence of this
Lease.
13.5 Relationship of Parties: Usufruct. The parties hereto shall
always be as Landlord and Tenant and nothing herein shall be construed so as to
constitute a joint venture or partnership between Landlord and Tenant. This
Lease creates a usufruct not subject to levy and sale and no estate in or with
respect to the Premises, or any portion thereof, is granted or conveyed hereby.
13.6 Litigation. Landlord and Tenant hereby waive the right to a trial
by jury in connection with any dispute arising out of this Lease or the use or
possession of the Premises by Tenant.
13.7 Governing Law. This Lease shall be construed under the laws of
the State of Georgia.
13.8 Partial Invalidity. If any provision of this Lease or the
application thereof to any person or circumstance shall to any extent be held
invalid, then the remainder of this Lease or the application of such provision
to persons or circumstances other than those as to which it is held invalid
shall not be affected thereby, and each provision of this Lease shall be valid
and enforced to the fullest extent permitted by law.
13.9 Submission of Lease. The submission of this Lease for examination
does not constitute an offer to lease, or a reservation of or option for the
Property, and this Lease shall be effective only upon execution and delivery
thereof by Landlord and Tenant.
13.10 Interpretation. In interpreting this Lease in its entirety, the
printed provisions of this Lease and any additions written or typed thereon
shall be given equal weight, and there shall be no inference, by operation of
law or otherwise, that any provision of this Lease shall be construed against
either party hereto.
13.11 Broker. Landlord and Tenant hereby agree that, in connection
with this Lease, neither have dealt with any broker or other person or entity
entitled to any brokerage commission, fee or other compensation. Each party
shall indemnify, defend and hold harmless the other, their agents and legal
representatives against any fee, commission or other compensation due to any
person, firm or corporation claiming to have acted in said party's behalf.
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13.12 Survival of Obligations. The provisions of this Lease with
respect to any obligation of Tenant to pay any sum in order to perform any act
required by this Lease after the expiration or other termination of this Lease
shall survive the expiration or other termination of this Lease.
13.13 Headings. Captions and References. The section captions contained
in this Lease are for convenience only and do not in any way limit or amplify
any term of provision hereof. The use of the terms "hereof," "hereunder" and
"herein" shall refer to this Lease as a whole, inclusive of the Exhibits, except
when noted otherwise. The use of the masculine or neuter genders herein shall
include the masculine, feminine and neuter genders and the singular form shall
include the plural when the context so requires.
13.14 Attorneys' Fees. The unsuccessful party in any action or
proceeding shall pay for all costs, expenses and reasonable attorneys' fees
incurred by the prevailing party or its agents or both in enforcing the
covenants and agreements of this Lease. The term "prevailing party," as used
herein, shall include, without limitation, a party who obtains legal counsel and
brings an action against the other party by reason of the other party's breach
or default and obtains substantially the relief sought, whether by compromise,
settlement or judgment.
13.15 Hazardous Substances. (a) Tenant hereby covenants that Tenant and
its agents, employees and contractors will not generate, store, use, treat or
dispose of any "Hazardous Substances" (as hereinafter defined) in, on or at the
Premises, except for Hazardous Substances as are commonly legally used or stored
(and in such amounts as are commonly legally used or stored) as a consequence of
using the Premises for the Permitted Use, but only so long as Tenant complies in
all material respects with all laws, statutes, rules, orders, regulations,
ordinances and decrees concerning the use, storage and disposal of such
Hazardous Substances.
(b) Tenant hereby agrees to indemnify Landlord and hold Landlord
harmless from and against any and all losses, liabilities, including strict
liability, damages, injuries, expenses, including reasonable attorneys' fees
actually incurred by Landlord, costs of any settlement or judgment and claims of
any and every kind whatsoever paid, incurred or suffered by, or asserted
against, Landlord by any person or entity or governmental agency for, with
respect to, or as a direct or indirect result of, the presence on or under, or
the escape, seepage, leakage, spillage, discharge, emission, discharging or
release on or from, the Premises of any Hazardous Substance (including, without
limitation, any losses, liabilities, including without limitation strict
liability, damages, injuries, expenses, including without limitation reasonable
attorneys' fees actually incurred by Landlord, costs of any settlement or
judgment or claims asserted or arising under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), any so-called federal,
state or local "Superfund" or "Superlien" laws, or any federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability, including strict liability, or standards of
conduct concerning any Hazardous Substance); provided, however, that the
foregoing indemnity is limited to matters arising solely from the violation of
the covenants and agreements of Tenant contained in the preceding paragraph and
excludes matters caused by Landlord or Landlord's agents, employees, and
representatives and does not extend to Hazardous Substances on the Premises as
of the Commencement Date.
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(c) For purposes of this Lease, "Hazardous Substances" shall mean and
include those elements or compounds which are contained in the lists of
hazardous substances or wastes now or hereafter adopted by the United States
Environmental Protection Agency ("EPA") or the lists of toxic pollutants
designated now or hereafter by EPA or which are defined as hazardous, toxic,
pollutant, infectious or radioactive by CERCLA or any Superfund law or any
Superlien law or any other federal, state or local statute, law, ordinance,
code, rule, regulation, order or decree regulating, relating to, or imposing
liability or standards of conduct concerning, any hazardous, toxic or dangerous
waste, substance or material, as now or at any time hereafter in effect. In
addition, for purposes of this Lease, the term "Hazardous Substances" also shall
include petroleum and related by-products and their constituents.
(d) Landlord shall have the right but not the obligation, and without
limitation of Landlord's rights under this Lease, to enter onto the Premises or
to take such other actions as it deems necessary or advisable to clean up,
remove, resolve or minimize the impact of, or otherwise deal with, any Hazardous
Substance following receipt of any notice from any person or entity (including,
without limitation, EPA) asserting the existence of any Hazardous Substance in,
on or at the Premises or any part thereof which, if true, could result in an
order, suit or other action against Tenant and/or Landlord; provided, however,
Landlord agrees that, except in the case of an emergency, Landlord will take
such action only after written notice to Tenant of the alleged existence of
Hazardous Substances and the failure by Tenant within a reasonable period of
time following receipt of such notice to commence, or the failure by Tenant to
thereafter diligently pursue to completion, the appropriate action to clean-up,
remove, resolve or minimize the impact of such Hazardous Substances. All
reasonable costs and expenses incurred by Landlord in the exercise of any such
rights, which costs and expenses result from the violation of the covenants and
agreements of Tenant contained in this Paragraph 13.15, shall be deemed
Additional Rent under this Lease and shall be payable by Tenant upon demand. The
indemnity set forth in this Paragraph 13.15 shall survive the expiration or
earlier termination of this Lease; provided, however, if within fifteen (15)
days after such expiration or termination Tenant requests that an environmental
audit of the Premises be conducted at Tenant's expense by a mutually acceptable
engineer or other consultant then the foregoing indemnity shall survive only
with respect to (i) items revealed by such audit (or any subsequent audit
conducted as a result of such initial audit within ninety (90) days of
Landlord's receipt of the report of the initial audit), and (ii) any items
actively concealed by Tenant.
(e) Landlord hereby warrants and represents to Tenant that, to the best
knowledge and belief of Landlord, no portion of the Property has been affected
by any Hazardous Substance in violation of applicable laws. Landlord hereby
covenants that Landlord and its agents, employees and contractors will not
generate, store, use, treat or dispose of any Hazardous Substances in, on or
about the Property.
(f) Landlord covenants and agrees that if any Hazardous Substances are
found on the Property in such amounts and locations as would require Landlord to
remove such Hazardous Substances as a matter of law, then Landlord shall remove
or cause to be removed such Hazardous Substances. Landlord shall indemnify and
hold Tenant harmless from any and all claims, damages, penalties, costs,
liabilities or losses and any and all costs incurred due to the investigation,
clean-up,
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removal or restoration of the Property, Building or Premises, if such claims,
damages, penalties, costs, liabilities or losses are incurred by the actions of
Landlord, Landlord's employees, agents, representatives or contractors and which
involve Hazardous Substances. This provision shall survive the expiration or
sooner termination of this Lease.
13.16 Waiver. The waiver by either party of any breach of any term,
covenant or condition herein contained shall not be deemed to be a waiver of
such term, covenant or condition or any subsequent breach of the same or any
other term, covenant or condition herein contained. The subsequent acceptance of
Rent hereunder by Landlord shall not be deemed to be a waiver of any proceeding
breach by Tenant of any term, covenant or condition of this Lease, other than
the failure of Tenant to pay the particular Rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
Rent. No covenant, term or condition of this Lease shall be deemed to have been
waived by either party, unless such waiver be in writing by the waiving party
and delivered to the other party.
13.17 Accord and Satisfaction. No payment by Tenant or receipt by
Landlord of a lesser amount than the Rent herein stipulated shall be deemed to
be other than on account of the earliest stipulated Rent, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as Rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such Rent or pursue any other remedy provided in this Lease.
13.18 Tenant Defined. Use of Pronoun. The word "Tenant" shall be deemed
and taken to mean each and every person or party mentioned as a Tenant herein,
be the same one or more; and if there shall be more than one Tenant, any notice
required or permitted by the terms of this Lease may be given by or to anyone
thereof, and shall have the same force and effect as if given by or to all
thereof. The use of the neuter singular pronoun to refer to Landlord or Tenant
shall be deemed a proper reference even though Landlord or Tenant may be an
individual, a corporation, or a group of two or more individuals or
corporations. The necessary grammatical changes required to make the provisions
of this Lease apply in the plural sense where this is more than one Landlord or
Tenant and to either corporations, associations, partnerships or individuals,
males or females, shall, in all instances, be assumed as though in each case
fully expressed.
IN WITNESS WHEREOF, this Lease has been executed under seal as of the
day and year first above written.
LANDLORD:
JAY LEASING, INC.
By:
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Witness James G. Stelzenmuller, III, President
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TENANT:
JAY AUTOMOTIVE GROUP, INC.
By:
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Witness Its:
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EXHIBIT A
DESCRIPTION OF PREMISES
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Exhibit 10.64
LEASE AGREEMENT
THIS AGREEMENT OF LEASE (herein called Lease), made this 6th day of
October, 1989, between JOYCE M. MALOOF, a resident of the State of Georgia,
(hereinafter called "Landlord") and SOUTHEAST TOYOTA DISTRIBUTORS, INC., a
Delaware corporation, or its assigns, (hereinafter called "Tenant").
WITNESSETH:
WHEREAS, Landlord is the owner of the real property described in Exhibit
"A" attached hereto and made a part hereof.
WHEREAS, Landlord desires to lease said real property to Tenant and Tenant
desires to rent and hire said property from Landlord upon the terms and
conditions hereof.
NOW, THEREFORE, for and in consideration of the mutual covenants
undertakings and conditions hereinafter set forth, the parties hereof agree as
follows:
1. Description, Authorized Use, Term and Rent: Landlord, in consideration
of the rents to be paid and the covenants and agreements to be performed by
Tenant, hereby lets and Tenant hereby hires from Landlord the following property
(hereinafter collectively called the premises), described as follows:
a) the land described in Exhibit A, and
b) all buildings, structures and improvements now or hereafter erected
on such land either prior to the commencement of or during the term of
this Lease and all fixtures, equipment and other property (other than
Tenant Equipment, as hereinafter defined in Section 11) either prior
to the commencement of or during the term (all of the foregoing being
herein collectively called the Improvements).
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The premises may be used for an automobile sales and service
establishment, including, but not limited to, the sales and service of all
types of motor vehicles, the sale of such merchandise as is sold ordinarily by
an automobile dealer, and other purposes incidental to an automobile sales and
service establishment, or for any other lawful purposes. The term of this
lease shall be 120 months beginning on the 1st day of October, 1989, and ending
on the 30th day of September, 1999, at a monthly rental of $14,000 per month
(the "Rent") payable in advance on the first business day of each month during
the term.
2. Right to Let and Conditions of Premises: Landlord warrants and
represents that it has the right to let the premises for the aforesaid term and
that the buildings and improvements, including, without limitation, the
electrical, plumbing, air conditioning, heating equipment, air compressors,
vehicle lifting equipment and elevators, if any, and other equipment and
fixtures in the premises are in good order and repair. Landlord further
represents that the roof including all facia and soffits are watertight and
leak-free and without need of repair and that all structural components of the
building are in good repair and in compliance with all applicable building codes
and other laws and regulations affecting the premises.
3. Possession: Landlord shall deliver the premises free from all tenancies
and occupancies and free from all complaints, reports, notices or orders with
respect to violations of any federal, state, municipal or other governmental
laws and regulations, including without limiting the generality of the
foregoing environmental laws and regulations.
4. Covenants to Repair and Take Care of Premises: Tenant shall make all
such nonstructural repairs as are required in order to maintain any building or
buildings on the premises in the condition in which the same existed at the date
of the delivery of possession, ordinary wear and tear excepted. Landlord shall
make all such structural repairs and replacements as are required in order to
maintain the premises and the
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Improvements in good order and repair. The parties agree that structural repairs
and replacements shall include without limitation all repairs and replacements
to the building roofs, exterior walls, and foundations. Landlord shall also be
responsible for all repairs and replacements to all electrical, plumbing and
mechanical mains and lines of the buildings both interior and exterior that may
be required because of Landlord's duties to make structural repairs and
replacements. Landlord further agrees to maintain the parking areas of premises
as needed and to perform any other major repairs of same. Tenant agrees to
maintain the parking areas in a clean and safe condition and to make any minor
repairs thereto as needed and to maintain all heating, air conditioning and
ventilation elements of the building. Should Landlord fail to perform any of its
obligations under this paragraph, Tenant shall have the option (i) to perform
same on Landlord's behalf and deduct all costs incurred from the rent due under
this Lease or (ii) to terminate this Lease after thirty (30) days prior written
notice to Landlord.
5. Assumption of Lease: If, during the original term of this lease, or any
renewal term thereof:
(i) Tenant's dealer agreement with Southeast Toyota Distributors,
Inc., (or such dealer agreement of any successor of Tenant) should be
terminated or otherwise expire (it being understood that such
termination or expiration shall not terminate this Lease) or, (ii) if
this Lease should terminate for any reason,
The Dealer Development Group, Inc. (herein referred to as D.D.G.) without
taking any action whatsoever, may permit it to terminate, or, in either case, at
its sole discretion and option, (hereinafter, "Option") within a reasonable
period of time after receiving notice of the events named in (i) or (ii) above,
may assume the rights and liabilities of Tenant (or any successor Tenant),
including the right to exercise any option for a renewal term that Tenant may
have failed to exercise under this Lease for the balance of the term and any
renewal
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periods thereafter and further including the right to exercise any option to
purchase the premises pursuant to the terms of this Lease, or may nominate
another corporation or entity holding a regularly authorized dealer agreement
from Southeast Toyota Distributors, Inc. to assume said rights and liabilities,
an upon D.D.G. exercising, said Option or making said nomination, this Lease
shall not terminate (as would otherwise occur in the second case) but shall
continue, and in either case, without any further consent being required
hereunder. Tenant (including any successor of Tenant) shall be deemed to have
assigned this Lease to the D.D.G. or said nominee as the case may be, and
Landlord shall be deemed to have consented thereto and to have recognized D.D.G.
or its nominee as the Tenant hereunder. This assignment shall not relieve
Southeast Toyota Distributors, Inc. of its obligations to Landlord hereunder.
In the event D.D.G. shall assume the rights and liabilities of Tenant under
this Lease, as aforesaid, it may assign and sublet the same on the same basis
and conditions as it may nominate another corporation or entity as aforesaid.
D.D.G.'s exercise of said Option on behalf of such a nominee shall not
create any obligation on the part of D.D.G., and if D.D.G. exercises said Option
on its own behalf, and thereafter assigns this Lease to another corporation or
other entity holding a regularly authorized dealer agreement from Southeast
Toyota Distributors, Inc. and such assignee assumes this Lease, D.D.G. shall
have no obligation for any default occurring subsequent to the date of such
assignment and assumption and D.D.G. shall be fully released by Landlord of any
obligation or liability under the Lease.
Further, D.D.G. my exercise the foregoing rights any number of times,
successively, upon the occasion arising, during the term of this Lease, or any
extension thereof, and without regard to whether or not it did so at the time of
any previous opportunity.
Such nomination or assumption by D.D.G. shall not be effective unless
stated in a notice signed by an officer of D.D.G. notwithstanding
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occupation of the premises by employees of D.D.G.
6. Assignment and Subletting: Tenant shall have the right to assign or
sublet the premises or any portion thereof.
7. Landlord's Representation Lawful Use: Landlord represents that the
premises lawfully may be used for an automobile sales and service establishment,
including sales and service of any motor vehicles, the sale of such merchandise
as is sold ordinarily by an automobile dealer, and incidental purposes. If any
law, ordinance, ruling, order or regulation now exists or is hereafter enacted
prohibiting the use of the premises for any one or more of the foregoing
purposes, then Tenant, at its option, may terminate this Lease and all of its
liability hereunder shall cease from and after the date when such law,
ordinance, ruling regulation or prohibition becomes effective, and any advance
rental shall be apportioned and refunded to Tenant.
8. Fire and Other Casualty: If the premises shall be totally destroyed by
fire, casualty, or other cause or happening, or if any lawful authority shall
order demolition or removal of any structure covered by this Lease, so as to
render them unfit for Tenant's proposed use, as determined by Tenant in its sole
discretion, then this Lease shall terminate and Tenant's obligation to pay rent
shall cease, and any unearned rent paid in advance shall be refunded to Tenant.
If the premises shall be partially destroyed by fire, casualty, demolition,
removal or other cause or happening, or be declared unsafe by any lawful
authority, then they shall be promptly restored or made safe by Landlord and a
percentage of the rent based on the ratio of the area of the premises affected
to the total area of the Improvements shall abate until they shall have been
restored and put in proper condition for Tenant's use and occupancy. If the
premises shall not be restored or made safe within ninety (90) days after
partial destruction or declaration of unsafe condition, then Tenant, at its
option, may cancel and terminate this Lease in its entirety, and if Tenant
exercises the option to cancel, then any unearned rent paid in advance shall be
refunded to it.
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9. Condemnation: If all or any portion of the premises shall be condemned
or taken by lawful authority, so as to render them unfit for Tenant's proposed
use, as determined by Tenant in Tenant's sole discretion, Tenant, at its option,
may cancel or terminate this Lease at any time after final order of
condemnation or possession has been taken, whichever occurs first, and any
unearned rent paid in advance shall be apportioned and refunded to Tenant upon
such termination. If Tenant shall not exercise the foregoing option, this Lease
shall continue and a just proportion of the rent shall abate, such just
proportion to be in the same proportion to the total rent as the value of the
premises taken bears to the aggregate total value of the entire premises as
finally determined in the condemnation proceedings, but if there be no
determination of total value, then the just proportion of the rent to abate
shall be determined on some other reasonable basis agreed upon by Landlord and
Tenant.
10. Right of Entry by Landlord: Landlord, during the term of this Lease,
after prior notice, as reasonable times and during usual business hours, may
enter the premises to view them, and, except in case of renewal or extension, at
any time within two (2) months next preceding the expiration of the specified
term, may show the premises to others for the purpose of rental or sale.
11. Alterations or Improvements by Tenant, Trade Fixtures, etc.: If any
alterations or improvements, except painting or wall papering, are made at
Tenant's expense, or if Tenant shall install shelving, lighting fixtures,
removable partitions, trade fixtures, machinery and equipment, or advertising
signs, "Tenant Equipment," they shall remain Tenant's property and may be
removed prior to termination of Tenant's occupancy; provided, however, that
Tenant shall repair any damage occasioned by removal thereof and, at Landlord's
option, shall restore or replace any structural parts or improvements which may
have been removed previously by Tenant.
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12. Landlord's Remedies in Event of Default: If Tenant shall fail to
observe or perform any of its obligation under this Lease and shall fail to cure
its default within thirty (30) days after written notice from Landlord to do so,
then in any of said cases, Landlord, after appropriate legal proceedings in
accordance with the laws of the State of Georgia, nay enter into and upon the
premises or any part thereof and repossess the same and expel the Tenant and
persons claiming under and through it, and remove any effects without prejudice
to any remedies which may be available for arrears of rent or for Tenant's
breach of covenant, and upon entry as aforesaid, this Lease shall terminate and
wholly expire.
13. Holding Over: Any holding over by Tenant or any assignee or subtenant
beyond the expiration of the specified term shall give rise to a tenancy from
month to month under the same terms and conditions of this Lease.
14. Notices: All notices to be given hereunder by either party shall be in
writing and given by personal delivery or registered or certified mail, return
receipt requested, to Landlord at such address as Landlord may from time to time
supply to Tenant, to an officer of Tenant, at the premises, with required copies
to the Director of D.D.G. 100 N.W. 12th Avenue, Deerfield Beach, Florida 33443,
and Wayne Reece, Esquire, Suite 1800, 2 Peachtree Street, Atlanta, Georgia
30303, and the date of any notice by registered or certified mail shall be
deemed to be the date of registration or certification thereof.
15. Claims for Injuries: Tenant agrees to indemnify Landlord against any
actions or claims that may be asserted or brought against Landlord and that are
based upon Tenant's acts or omissions in connection with its use and occupancy
of the premises. Tenant shall at all times during the term maintain liability
insurance with an insurance company licensed to do business in the State of
Georgia and having a Best rating of at least "A", with a combined single limit
of at least one million
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($1,000,000.00) dollars and will from time to time at Landlord's reasonable
request, provide Landlord with evidence thereof.
Landlord agrees to indemnify Tenant against any actions or claims that may
be asserted or brought against Tenant and that are based upon Landlord's acts or
omissions in connection with its use, occupancy and ownership of the premises.
Landlord shall at all times during the term maintain liability insurance with an
insurance company licensed to do business in the State of Georgia and having a
Best rating of at least "A", with a combined single limit of at least one
million ($1,000,000.00) dollars and will from time to time at Tenant's
reasonable request, provide Tenant with evidence thereof.
16. Landlord's Consent: Landlord covenants that any consent or approval
required of Landlord herein shall not be withheld unreasonably.
17. Codes: If during the term of this Lease, complaint is made or filed by
any governmental authority having jurisdiction, based upon or making complaint
of the condition of the premises which arises out of or is attributable to the
condition of the premises at the time they were delivered to Tenant or the
failure of the Landlord to comply with his obligations to maintain, as
expressed herein, as being in violation of any federal, state, municipal or
other governmental laws and regulations, then Landlord agrees (i) to indemnify
and hold Tenant harmless from and with respect to all liability of any kind
which results from such violations or complaints, (ii) to cause the condition or
violation complained of to be corrected and removed as soon as practicable and
in the exercise of diligence, and (iii) in the event Landlord fails or refuses
to correct and remove the violation or condition complained of as just stated,
Tenants shall have the right, but not the obligation, to correct and remove the
same and to offset against the rentals to became due and owing under this Lease,
all such costs, expenses and sums of money expended by Tenant to correct and
remove the violation or condition complained of.
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18. Recourse Limited to Tenant Corporation: No recourse shall be had for
payment of the rent, or performance of any other obligations of the Tenant, or
for any claim based on, or otherwise in respect of, this Lease, or by the
enforcement of any assessment or penalty or otherwise, against any incorporator,
stockholder, officer, director or employee, as such, past, present or future, of
the Tenant or of any predecessor, successor, parent, or subsidiary corporation,
whether by virtue of any constitution, statute or rule of law, all such
liability or claim of liability being, by the execution of this Lease, and as
part of the consideration for the execution hereof by Tenant, expressly waived
and released.
19. Insurance: To secure the obligation of Landlord to rebuild
and restore the premises, Tenant shall obtain and maintain throughout the Lease
Term, and any extension or renewal thereof, insurance against fire and the risks
generally known as extended coverage and in such amounts (not to exceed the full
replacement value or the insurable value of the Improvements included within the
premises) and with such insurance companies as Tenant may, from time to time
select. All policies shall insure Landlord and Tenant as their respective
interest may appear. Landlord will have the right, if a mortgage is secured upon
the premises, to require a mortgage endorsement on the policies in the customary
form under which the proceeds will be payable to such mortgagee, but the right
of Landlord to require such endorsement and the right of the mortgagee to
receive the proceeds shall be conditioned upon the prior agreement by the
mortgagee to permit the insurance proceeds to be used in payment of the cost of
rebuilding and restoring the premises.
20. Taxes: During the term, Tenant shall pay real estate taxes (herein
called "applicable taxes") levied against the premises, subject to the
following:
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(a) "applicable taxes" shall mean only those real estate taxes or other taxes,
levies or governmental charges, foreseen or unforeseen, which are assessed,
levied against, imposed upon or attributable to the premises, but shall not
include any other taxes levied against Landlord, or Landlord's business,
including without limitation federal, state, or local income taxes of Landlord
or franchise taxes assessed against Landlord.
(b) "The Term of the Lease" shall include the initial term of the Lease and all
extensions or renewals thereof unless the Lease be terminated or cancelled
earlier as provided in this Lease, in which case the "term" shall include only
the abbreviated period.
Landlord shall make all arrangements necessary to have the collecting
authority send all pertinent tax bills directly to Tenant. All pertinent tax
bills received by Landlord shall be immediately forwarded directly to Tenant to
permit remittance in time to take advantage of any discounts. Landlord shall be
fully liable for all taxes and assessments in excess of the discounted amount
and all interest and penalties reasonably chargeable to its failure to perform
as aforesaid.
Subject to the limitations hereinafter set forth, Tenant shall remit to the
collecting authority applicable taxes becoming due and payable during the term.
Tenant shall bear the expense of applicable taxes for full fiscal years within
the term and, additionally, the expense thereof for the fiscal years in which
the term begins or terminates in the proportion that the number of days in the
term within each of such fiscal years bears to the total number of days in such
year. Applicable taxes remitted by Tenant but properly the expense of Landlord,
as set forth herein, shall be paid to Tenant by Landlord promptly upon receipt
of Tenant's written request accompanied by supporting documents. Should Landlord
fall to pay the amount requested, Tenant may offset such amount against rent.
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Special assessments applicable to the premises which are confirmed and
become due and payable, either in full or in part, prior to the commencement of
the Lease term shall be remitted by, and be the sole expense of, Landlord.
Tenant shall remit and bear as additional rent the expense of special
assessments confirmed during the term but only to the extent such assessments
become due and payable in full or in installments during the term. Those
installments becoming due and payable beyond the term shall be the sole
responsibility and expense of Landlord. For purposes of this clause, 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 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.
Landlord agrees to arrange with proper tax officials, upon written request
of Tenant, meetings thereafter throughout the term for the purposes of
negotiating any subsequently increased real estate tax assessment against the
premises, and that it will extend to Tenant a timely opportunity to participate
in all such negotiations. Landlord agrees that it will not negotiate any
assessment, nor occur therein, unless Tenant has participated as aforesaid, or
has declined in writing to do so. Tenant 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, any pay under protest, any billing of real estate taxes
or 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. Benefits and expenses resulting from any contest shall be
borne ratably by Tenant and
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Landlord in proportion to the amount of the contested tax required to be borne
by each pursuant to the terms of this Lease in the absence of a contest thereof.
Personal property taxes shall be paid by the owner of the personal property
being taxed.
21. Notice of Lease: Landlord agrees to execute and deliver promptly upon
Tenant's request a notice of Lease in form and substance satisfactory to Tenant,
and Tenant may record such notice of Lease at its expense.
22. Rights of Recovery: Landlord and Tenant each hereby waive all liability
of and all rights of recovery and subrogation against the other, and agrees that
neither it nor any of its officers, agents or employees, or its or their
insurers will sue the other, or any of the officers, agents or employees of the
other, for any loss of or damage to property arising out of fire or casualty,
and each agrees that all insurance policies maintained by it will contain
waivers by the insurer of such liability, recovery, subrogation and suit.
23. Utilities: Tenant will pay all charges for heat, water, gas,
electricity and other utilities used by Tenant after commencement of the Lease
term.
24. Third Party Benefits: Landlord hereby acknowledges that certain
provisions of this Lease have been made for the benefit of D.D.G. and/or its
nominees, each of which shall be entitled to enforce such provisions in any
Court of Law or equity having jurisdiction.
25. Section and Other Headinqs: The Section and Other Headings as to
contents of Particular paragraphs herein are inserted only for convenience, and
are in no way to be construed as a part of this Lease or as a limitation on the
scope of the particular paragraphs to which they refer.
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26. Rights of Successors and Assigns: The terms and conditions of this
Lease shall inure to the benefits of and be binding upon the parties hereto and
their respective heirs, representative, successors or assigns, without recourse.
No assignment hereunder shall relieve SET's and Maloof's obligations to either
party hereunder.
27. Environmental Warranties: Landlord hereby warrants and represents the
following to Tenant:
(a) Landlord (to its knowledge) has not caused or allowed the
generation, treatment, storage, or disposal of hazardous substances at
the site except in accordance with any applicable local, state, and
federal statutes and regulations. "Hazardous substances," for purposes
of this Lease, shall include but not be limited to hazardous
substances as defined and understood under the Comprehensive
Environmental Response, Compensation and Liability Act. 42 U.S.C.
Section 9601-75 (1986, and as amended).
(b) Landlord represents that, to the best of its knowledge, it is in
compliance with all applicable laws, rules, and regulations regarding
the handling of hazardous substances, including petroleum products.
(c) Landlord represents that, to the best of its knowledge, it has
secured all necessary permits, licenses, and approvals necessary to
its operations of the premises, that such permits are currently valid
and that it is in compliance with such permits.
(d) Landlord represents that no warning notice of violation,
administrative complaint, judicial complaint or other formal or
informal notice has been issued by a public agency alleging that
conditions on the premises are in violation of environmental laws,
regulations, ordinances or rules.
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(e) Landlord represents that, to the best of its knowledge, there has
been no treatment, storage, disposal, discharge or other type of
release on land adjacent or near to the premises which constitutes a
risk of contamination of the premises or surface or ground water
flowing to the premises.
(f) Landlord represents that all underground storage tanks and
ancillary piping have been tested and will be removed. Landlord
further represents that all water quality monitoring required by
federal, state and local regulatory agencies has been conducted and
that no violations of applicable water quality standards have
occurred.
(g) Landlord represents that all above ground and underground storage
tanks at the premises have been registered or licensed as required by
applicable federal, state or local laws or regulations.
Landlord hereby indemnifies and holds the Tenant and Tenant's successors
and assigns harmless from and against all liability, including all foreseeable
and unforeseeable consequential damages, directly or indirectly arising out of
the use, generation, storage or disposal of hazardous materials including
without limitation, the cost of any required or necessary inspection, audit,
clean-up or detoxification and the preparation of any closure or other required
plans, consent orders, license applications, or the like, whether such action is
required or necessary prior to or following the term of this Lease to the full
extent that such action is attributable, directly or indirectly, to the use,
generation, storage or disposal of hazardous materials on the property prior to
the commencement of this Lease. The foregoing warranties and representations and
this indemnification shall survive the termination of this Lease.
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Tenant hereby indemnifies and holds the Landlord and Landlord's successors
and assigns harmless from and against all liability, including all foreseeable
and unforeseeable consequential damages, directly or indirectly arising out of
the use, generation, storage or disposal of hazardous materials including
without limitation, the cost of any required or necessary inspection, audit,
clean-up or detoxification and the preparation of any closure or other required
plans, consent orders, license applications, or the like, whether such action is
required or necessary prior to or following the term of this Lease to the full
extent that such action is attributable, directly or indirectly, to the use,
generation, storage or disposal of hazardous materials on the property by Tenant
during the term of this Lease. The foregoing warranties and representations and
this indemnification shall survive the termination of this Lease.
28. Signage: Tenant shall have the right at Tenant's cost and expense to
place and install one or more signs on the premises in accordance with
applicable governmental codes or regulations affecting the premises.
29. Enforcement: The laws of the State of Georgia shall govern the
interpretation, validity, performance and enforcement of this Lease. If any
provision of this Lease should be held to be invalid or unenforceable, the
validity and enforceability of the remaining provisions of this Lease shall not
be affected thereby.
30. Cross Default: A default by Landlord under that certain Agreement dated
August 25, 1989 by and among Maloof Motor Company Inc., Landlord, and Tenant,
pertaining to the purchase of assets of Maloof Motor Company, Inc. shall
constitute a default under this Lease by Landlord to the same extent and in the
same manner as a default under the specific terms hereof.
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31. Mortgages and Mortgagees: The following provides for the effect of
mortgages on this Lease:
(a) this Lease shall be subordinate to that certain Deed to Secure
Debt from Landlord, as "grantor", to E.D. Martin, as "grantee", dated
May 1, 1983, and recorded in Deed Book 2192, Page 226, in the office
of the Clerk of the Superior Court of Muscogee County, Georgia,
hereinafter referred to as the "Mortgage"; provided, however, this
subordination herein contained shall not be effective unless: (i) the
Mortgagee thereunder shall execute and deliver a non-disturbance
agreement, in favor of Tenant, providing that, in the event the
Mortgage shall be foreclosed, so long as no event of default shall
have occurred and be subsisting hereunder, and so long as Tenant shall
attorn to the purchaser upon such foreclosure, and so long as Tenant
continues to pay the rent and to fully and completely keep, observe,
satisfy, perform and comply with all agreements, terms, covenants,
conditions, requirements, provisions and restrictions of this Lease,
this Lease shall not terminate by reason of such foreclosure and
Tenant's possession of the Premises shall not be disturbed; (ii) the
Mortgagee thereunder shall execute and deliver an agreement providing
that, so long as no event of default shall have occurred and be
subsisting hereunder, the proceeds of any insurance on the Premises
payable by reason of insured damage or casualty, and any award for a
partial taking not resulting in a termination of this Lease, shall
first be applied in payment of the cost of restoring the Premises
after such injury or taking, before any part of such proceeds or award
shall be applied on account of the debt of such Mortgagee; and (iii)
the Mortgagee thereunder shall, in the event of default or other
failure to comply with any provision of the Mortgage exists at any
time, notify Tenant of the same
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and allow Tenant, at Tenant's election any time thereafter, to take
any such action, advance or pay any money or perform any act which
Tenant considers necessary or appropriate to relieve or cure any such
default or failure, and all money so advanced or paid and all expenses
incurred by Tenant in connection with any such action or performance
shall be credited in Tenant's favor, and at Tenant's election either
(A) toward the purchase and sale of the Premises by and between Tenant
and Landlord as provided in that certain Option Agreement of even date
herewith, or (B) toward the Rent due hereunder. (Further, any and all
money so advanced or paid and all expenses so incurred by Tenant shall
bear interest from the date advanced, paid or incurred at the highest
rate per annum then being charge with respect to the Mortgage, and
said interest shall be due and payable to Tenant by Landlord at the
closing of the purchase and sale of the Premises, as provided in the
aforesaid Option Agreement.) The terms of this subparagraph (a) shall
be self-operative, and no further instrument of subordination shall
be required.
(b) Landlord shall not hereafter borrow, incur or permit to be
incurred in any manner any indebtedness which would be secured by the
Premises other than a refinance of the Mortgage, provided the
indebtedness secured by said refinance is in an amount equal to or
less than eighty percent (80%) of the purchase price for the Premises
as provided in the aforesaid Option Agreement, and provided further
that the principal and interest payments due and payable in accordance
with such a refinance are in an amount equal to or less than eighty
percent (80%) of the monthly lease payment under this Lease.
Notwithstanding
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the foregoing provisions of subparagraph (a) and this subparagraph
(b), if any Mortgagee elects to have this Lease superior to its
Mortgage and states its election in its Mortgage or by separate
recorded instrument then this Lease shall be superior to such
Mortgage.
IN WITNESS WHEREOF, parties hereto have executed this Agreement in person
or by a duly authorized officer on the day and year stated in the commencement.
LANDLORD:
Signed, Sealed, and Delivered
in the Presence of
Witness:
(SEAL)
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JOYCE M. MALOOF
Notary:
10-6-89
- ------------------------------
My Commission Expires 10-18-90
TENANT:
(CORPORATE SEAL) SOUTHEAST TOYOTA DISTRIBUTORS, INC.
Witness:
By:
--------------------------------
- -------------------------------
Notary:
10-6-89
- -------------------------------
My Commission Expires 10-18-90
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<PAGE> 19
EXHIBIT "D"
STATE OF GEORGIA
COUNTY OF MUSCOGEE
OPTION AGREEMENT
THIS AGREEMENT is made and entered into as of the 6th day of October, 1989,
by and between Joyce M. Maloof, hereinafter referred to as "Seller"; and
Southeast Toyota Distributors, Inc. and Assigns hereinafter referred to as
"Purchaser".
WITNESSETH
WHEREAS, Purchaser desires to acquire such real property from Seller upon
the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, all of which each party respectively agrees constitutes
sufficient consideration received at or before the execution hereof , the
parties hereby agree as follows:
1. Definitions and Meanings. For purposes of this agreement, the following
terms shall have the following meanings, unless the context requires otherwise:
(a) "Agreement" shall mean this option agreement, together with all
exhibits attached hereto.
(b) "Closing" shall mean the act of consummating the transaction
contemplated by this Agreement, and Closing Date shall mean the time
and date when such transaction is consummated, as established pursuant
to the provisions hereof.
(c) "Good and marketable fee simple title" shall mean fee simple
ownership which, when acquired by Purchaser, will be insurable by a
nationally recognized title insurance company under its standard form
of owner's title insurance policy, without exception for any matter
other than the Permitted Exceptions and such other matters as may be
acceptable to Purchaser.
(d) "Property" shall mean all that tract or parcel of land more
particularly described in Exhibit "A", together with all buildings,
structures and other improvements thereon,
<PAGE> 20
all easements, rights and interests appurtenant thereto, and all
right, title and interest of Seller in and to all public and private
ways abutting, adjoining or traversing the Property.
(e) "Permitted Exceptions" shall mean those items affecting title to
the Property set forth in Exhibit "B".
2. Asset Purchase Agreement. Purchaser, Seller, and Maloof Motor Company,
Inc. have entered into that certain Agreement, dated August 25, 1989 providing
for the sale of certain other assets to Purchaser (the "Asset Purchase
Agreement").
3. Grant of Option. Seller does hereby give, grant and convey unto
Purchaser the sole and exclusive right, privilege and option of purchasing the
Property for the purchase price and on the terms and conditions hereinafter set
forth, hereinafter called the "Option".
4. Term and Exercise of Option. The Option shall remain open and in full
force and effect until 9 o'clock p.m. on the date which is ten years from the
anniversary date of the Closing Date as defined in the Asset Purchase Agreement.
The Option may only be exercised provided that the Lease Agreement (as defined
in the Asset Purchase Agreement) has run and that Purchaser, no less than sixty
days nor more than one hundred eighty days prior to the expiration of the Lease
Agreement, gives notice to Seller of Purchaser's intent to exercise this option.
It is the intent that the Lease Agreement run its ten year term prior to this
Option being exercised. In the event Purchaser or Purchaser's Assign or Assigns
do not exercise the option prior to the expiration, this Agreement shall be null
and void and neither party shall have any further rights, duties, obligations or
liabilities hereunder. In the event Purchaser shall exercise the Option,
Purchaser shall deposit with Seller the sum of twenty thousand ($20,000.00)
dollars, at the time of giving notice as provided for hereunder, which shall be
held by Seller as an earnest money deposit by Purchaser, and the transaction
contemplated by this Agreement shall be consummated in accordance with the
following terms and conditions of this Agreement.
5. Sale and Purchase. Seller shall sell the Property to Purchaser and
Purchaser shall buy the Property from Seller in accordance with the terms and
conditions of this Agreement.
6. Purchase Price. The purchase price for the Property shall be one million
dollars ($1,000,000.00) which shall be paid by Purchaser to Seller at Closing.
7. Closing. The purchase and sale shall be consummated in Columbus, Georgia
on the Closing Date, which shall be a date designated by notice from Purchaser
to Seller not less than ten (10) days prior thereto. Notwithstanding anything in
this Agreement to the contrary, the Closing Date shall be on or before December
31, 1999, unless the Closing Date is extended as provided in this Agreement. On
the Closing Date, the Closing shall take place as follows, subject to all the
terms and conditions of this Agreement:
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<PAGE> 21
(a) Seller shall convey to Purchaser, by execution and delivery of a
general warranty deed to Purchaser, good and marketable fee simple
title to the Property.
(b) Seller shall make, execute and deliver, or obtain and deliver, all
such affidavits, deeds, certificates and other instruments and
documents, and shall do or cause to be done all such acts or things,
which Purchaser may reasonably request and require to vest marketable
fee simple title in Purchaser.
(c) Purchaser shall pay all costs of title insurance, examination and
certification; the fees and expenses of the Purchaser's attorneys; and
all other costs incurred by the Purchaser or required to be paid by
Purchaser pursuant to any other provision of this Agreement. Seller
shall pay the Georgia realty transfer tax on the warranty deed
conveying the Property to the Purchaser; the fees and expenses of the
Seller's attorneys; and all other costs and expenses incurred by the
Seller or required to be paid by Seller pursuant to any other
provision of this Agreement.
(d) Subject to the terms of the Lease Agreement, Purchaser and Seller
shall prorate and apportion, as of the Closing Date, real property ad
valorem taxes and all other taxes and assessments levied or imposed
upon, or assessed against, the Property for the year in which the
Closing occurs. If the amount of such taxes is undetermined on the
Closing Date, the proration shall be based upon estimated taxes
computed by multiplying the most recent applicable assessment by the
most recent applicable tax rate. In the event the actual amount of
such taxes differs from any estimated amounts upon which the proration
is based pursuant to this paragraph, Seller and Purchaser shall adjust
the proration based upon the actual amount of such taxes promptly upon
receipt of the tax bills.
8. Representations and Warranties of Seller. Seller warrants and represents
the following to Purchaser:
(a) Seller shall perform Seller's duties and obligations under this
Agreement in accordance with the terms and conditions of this
Agreement.
(b) Seller has the full and complete right, power and authority to
enter into this Agreement and the full and complete right, power and
authority to convey the Property to Purchaser in accordance with
the terms and conditions of this Agreement.
(c) There are no actions, suits or proceedings pending or
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<PAGE> 22
threatened against, by or affecting Seller, which question the
validity of this Agreement or of any action to be taken by Seller,
pursuant to or in connection with this Agreement, in any court or
before any governmental agency, domestic or foreign.
(d) Seller shall not take any action, omit to take any action, or
permit the taking of any action which would make any of the foregoing
representations or warranties untrue in any respect on and as of the
Closing Date.
9. Representations and Warranties of Purchaser. Purchaser warrants and
represents the following to Seller:
(a) Purchaser shall perform Purchaser's duties and obligations under
this Agreement in accordance with the terms and conditions of this
Agreement.
(b) Purchaser has the full and complete right, power and authority to
purchase the Property in accordance with the terms and conditions of
this Agreement.
(c) There are no actions, suits or proceedings pending or threatened
against, by or affecting Purchaser, which question the validity of
this Agreement or of any action to be taken by Purchaser, pursuant to
or in connection with this Agreement, in any court or before any
governmental agency, domestic or foreign.
(d) Purchaser shall not take any action, omit to take any action or
permit the taking of any action which would make any of the foregoing
representations or warranties of Purchaser contained in this Agreement
untrue in any respect on and as of the Option Closing Date.
10. Title Examination and Clearance. On or before fifteen days from the
date Purchaser exercises Purchaser's option hereunder, Purchaser shall examine
title to the Property and furnish Seller notice of objections affecting Seller's
ability to convey good and marketable fee simple title to the Property.
Purchaser shall have until Closing to notify Seller of any such objections which
arise subsequent to the date of this Agreement. At or prior to Closing, Seller
shall cure all such objections, and if such objections are not cured by Seller,
then Purchaser may either: (i) satisfy the objections and then close; or (ii)
waive the objections and then close; or (iii) terminate this Agreement by giving
notice to Seller, this Agreement shall become null and void and the parties
shall be relieved of and released from any and all further rights, duties,
obligations and liabilities hereunder; or (iv) extend the Closing Date for a
period of not more than ninety (90) days until such
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<PAGE> 23
objections are satisfied by giving notice of such extension to Seller, in which
case the Closing Date shall be extended to the date specified by Purchaser. In
the event of an extension of the Closing Date under subparagraph (iv) above and
the subsequent inability of Seller to satisfy the objections, then Purchaser,
without waiving any rights and remedies provided for, or available, at a law or
in equity, may elect again between the options set forth in subparagraphs (i),
(ii) and (iii) above.
11. Survey. On or before the Closing, Purchaser may, at Purchaser's option
and expense, procure a boundary survey of the Property by a surveyor registered
under the laws of Georgia and approved by Seller, which approval shall not be
unreasonably withheld. The survey shall contain a certification that it is
prepared in conformity with the standards and requirements of law, and shall
show thereon such matters as are required under the laws of Georgia and would be
customarily shown on a plat of boundary survey of real property in Columbus,
Georgia. The survey which Purchaser so procures shall establish the boundaries
and determine the legal description of the Property to be used in the warranty
deed and other documents and instruments which Seller shall deliver at Closing.
12. Damage and Condemnation. In the event of any material damage to or
destruction of the Property, or any portion thereof, or in the event of any
taking or threat of taking the Property, or any portion thereof, by exercise of
the power of eminent domain, Purchaser may elect to: (i) terminate this
Agreement by giving notice to Seller, whereupon this Agreement shall become
null and void and the parties shall be relieved of and released from any and all
further rights, duties, obligations and liabilities hereunder; or (ii)
consummate the purchase of the Property, whereupon at Closing, Seller shall pay
to Purchaser all insurance proceeds then received by Seller and all condemnation
awards and other payments in connection with the exercise of the power of
eminent domain, then received by Seller, and in addition Seller shall transfer
and assign to Purchaser all rights of Seller with respect to payment by or from
and with respect to recovery against any party whomsoever for damages or
compensation on account of such damage, destruction, taking or threat of taking.
Seller shall notify purchaser promptly upon the occurrence of any damage,
destruction, taking or threat thereof and, at the same time, shall provide
Purchaser with all information regarding the same available to Seller and
necessary or useful to Purchaser in making, on a fully informed basis, the
election between such alternatives.
13. Access, Inspection, and Cooperation. During the period from the date of
this Agreement through the Closing Date, Purchaser and Purchaser's agents,
employees, independent contractors, engineers, surveyors and other
representatives shall have the right to enter the Property at any time for the
purposes of inspecting the Property; making surveys, soil tests and engineering
studies; planning for land use, utilities and other improvements; performing all
activities relating to
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<PAGE> 24
any of the foregoing in any respect, and for any other reasonable purposes
related to the purchase of the Property or the development of the Property.
Purchaser agrees that the entry permitted by this paragraph shall not interfere
with the operation of any business conducted on the Property or with the
possession and occupancy of any tenants on the Property, injure or damage the
Property so as to decrease its value or reduce its saleability, result in injury
or damage to real property adjoining the Property, or cause injury or damage to
persons or personal property lawfully upon the Property, and Purchaser
indemnifies Seller against, and agrees to hold Seller harmless from, any such
injury or damage caused by reason of Purchaser's entry.
14. No Broker or Commission. All negotiations relative to this Agreement
and the matters contemplated by this Agreement have been carried on by and
between Seller and Purchaser without the intervention of any person as agent or
broker. Purchaser and Seller each represent and warrant to the other that there
are and there will be no agent's, broker's or other intermediary's fees or
commissions payable as a consequence of this transaction, and that they have not
dealt with any broker, agent or intermediary who might by reason of such dealing
have any claim for a fee, commission or other compensation with respect to the
purchase and sale of the Property. Seller and Purchaser agree to indemnify, hold
harmless, defend and protect the other from and against any and all claims,
demands, damages, losses and costs with respect to claims for commissions,
compensation, expense or charge of whatever nature on the part of any broker,
agent or other intermediary claiming by reason of any dealing with them.
15. Assignment. Purchaser may assign or transfer this Agreement, or any
interest of Purchaser hereunder, without the consent of Seller, and without
recourse.
16. Successors and Assigns. This Agreement shall be binding upon and
enforceable against, and shall inure to the benefit of, the parties and their
respective heirs, legal representatives, successors and assigns.
17. Further Assurances and Survival. From time to time on and after the
Closing Date, Seller and Purchaser shall at the request of the other make,
execute and deliver or obtain and deliver all such affidavits, deeds,
certificates, and other instruments and documents, and shall do or cause to be
done all such acts or things which either party may reasonably require in order
to effectuate the provisions and the intention of this Agreement. This Agreement
shall survive the consummation of the purchase and sale of the Property and
shall survive the delivery of all deeds and other documents and instruments
delivered at Closing. The provisions of this Agreement shall not merge into any
deed or other documents and instruments delivered at Closing, and all of the
terms and conditions of this Agreement shall be and shall remain in full force
and effect between Seller and Purchaser.
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<PAGE> 25
18. Notices. All notices, requests, demands, and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given,
if mailed, when deposited in the United States mail, certified mail with a
return receipt requested, addressed as set forth below, or, if delivered
personally, when delivered to the addresses set forth below. Either party may,
by giving written notice to the other, designate a different address for
receiving notices under this Agreement.
19. Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia.
20. Time of Essence. Time shall be of the essence in the performance of the
terms and conditions of this Agreement.
21. Entire Agreement. This Agreement supersedes all prior discussions and
agreements between Seller and Purchaser with respect to the purchase and sale of
the Property. This Agreement contains the sole and entire understanding between
Seller and Purchaser with respect to the transactions contemplated by this
Agreement, and all promises, inducements, offers, solicitations, agreements,
representations and warranties heretofore made between the parties are merged
into this Agreement. This Agreement shall not be modified or amended in any
respect except by a written agreement executed by or on behalf of the parties to
this Agreement in the same manner as this Agreement is executed.
22. Exhibits. Each and every exhibit referred to or otherwise mentioned in
this Agreement is attached to this Agreement and is and shall be construed to be
made a part of this Agreement by such reference or other mention at each point
at which such reference or other mention occurs, in the same manner and with the
same effect as if each exhibit were set forth in full and at length every time
it is referred to or otherwise mentioned.
23. Captions. All captions, headings, paragraph and subparagraph numbers
and letters and other reference numbers or letters are solely for the purpose of
facilitating reference to this Agreement and shall not supplement, limit or
otherwise vary in any respect the text of this Agreement. All references to
particular paragraphs and subparagraphs by number refer to the paragraph or
subparagraph so numbered in this Agreement.
24. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, an all of such counterparts together
shall constitute one and the same Agreement.
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<PAGE> 26
25. Right of First Refusal. Any provision in this Agreement
notwithstanding, in the event that Seller desires to sell Seller's interest in
the Property, subject to the option granted herein, Purchaser shall have the
right of first refusal to purchase the Property subject to the same terms and
conditions Seller has been offered in a bonafide offer by a third party in an
arms length transaction (the "Bonafide Offer"). Purchaser shall have thirty
days to exercise this right of first refusal from the time Purchaser receives
notice from Seller of the existence of a Bonafide Offer by certified mail,
return receipt requested. To exercise this right of first refusal purchaser
shall give notice to Seller in writing by certified mail, return receipt
requested, within the prescribed time period. Notwithstanding any provision in
the Bonafide Offer, Purchaser shall have a minimum of sixty days in which to
consummate the transaction from the date Purchaser notifies Seller of
Purchaser's desire to exercise this right of first refusal granted hereunder.
WHEREFORE, the parties have executed and sealed this Agreement, as of
the day and year first above written.
SELLER:
WITNESS:
(SEAL)
- ------------------------------ ----------------------------------------
JOYCE M. MALOOF
NOTARIZE:
10-6-89
- ------------------------------
My Commission Expires 10-18-90
PURCHASER:
SOUTHEAST TOYOTA DISTRIBUTORS, INC.
WITNESS:
By:
--------------------------------
- -------------------------------
NOTARIZE:
10-6-89
- -------------------------------
My Commission Expires 10-18-90
<PAGE> 27
STATE OF GEORGIA
COUNTY OF MUSCOGEE
SECOND ASSIGNMENT OF LEASE AND OPTION
THIS SECOND ASSIGNMENT OF LEASE AND OPTION is made and entered into as of
the 12th day of July, 1990, by and between COLUMBUS AUTO SALES, INC.,
hereinafter called "Assignor"; and JAY AUTOMOTIVE GROUP II, INC. hereinafter
called "Assignee".
WITNESSETH:
WHEREAS, Assignor has leased certain property (the "Premises") from Joyce
M. Maloof, a resident of the State of Georgia (hereinafter called "Landlord"),
being the real property described in Exhibit "A" attached hereto and made a part
hereof pursuant to an Assignment of Lease and Option (the "First Assignment"),
dated October 6, 1989, by and between Assignor and Southeast Toyota
Distributors, Inc. ("SET"), pursuant to which SET granted, bargained, sold,
assigned, transferred, conveyed and set over to Assignor all of SET's rights,
privileges, benefits, obligations and responsibilities in, to and under that
certain lease Agreement (the "Lease"), dated October 6, 1989, by and between SET
and Landlord and that certain Option Agreement (the "Option Agreement") and
Amendment to Option Agreement (the "Amendment to Option Agreement"), both dated
October 6, 1989 and by and between SET and Landlord (collectively, the
"Leasehold Documents");
WHEREAS, Assignee desires to obtain by sale, transfer and assignment all
rights, privileges, obligations and responsibilities of Assignor in, to and
under the Lease, the Option Agreement and the Amendment to Option Agreement
upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and of the mutual covenants
herein set forth and for Ten Dollars ($10.00) in hand
<PAGE> 28
paid and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Assignor and Assignee hereby agree as follows:
1. Assignment. Assignor hereby grants, bargains, sells, assigns, transfers,
conveys and sets over unto Assignee, subject to the terms and conditions
hereinafter set forth in this Assignment: (i) all of the rights, privileges,
benefits, obligations and responsibilities of Assignor in, to and under the
Lease, (ii) all of the right, title, interests, privileges, benefits,
obligations, and responsibilities of Assignor in, to and under the Option
Agreement and the Amendment to Option Agreement, and (iii) all of the rights,
privileges, benefits, obligations and responsibilities of Assignor under the
Lease, Option Agreement, and the Amendment to Option Agreement in and to the
Premises and all buildings, structures, fixtures and other improvements located
thereon; all of the foregoing being hereinafter collectively called the
"Leasehold"; TO HAVE AND TO HOLD the same unto Assignee from the day and year
first written above, for and during the remainder of the term of the Lease, the
Option Agreement, and the Amendment to Option Agreement as set forth therein,
subject to the covenants and conditions therein described.
2. Acceptance. Assignee hereby accepts the foregoing transfer and
assignment, and undertakes and assumes all of the duties, responsibilities and
obligations of the "Tenant" under the lease, and all of the duties and
obligations of the "Purchaser" under the Option Agreement and the Amendment to
Option Agreement subject to the terms and conditions provided herein. Assignee
hereby agrees to indemnify and hold harmless Assignor, SET and all entities
controlled by, under common control with or controlling either of them, and all
of their successors and assigns (collectively "Southeast") from any claims,
demands or liability with regard to any matters related to the Leasehold and/or
the Leasehold Documents limited to any issue raised after the date hereof.
3. No Representations and Warranties. It is hereby expressly agreed to by
the parties hereto that neither Assignor nor SET or any
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<PAGE> 29
entity or individual related to either of them makes any representations or
warranties to the Assignee whatsoever as to the condition of the Premises or the
Leasehold including their fitness or fitness for a particular purpose.
4. Miscellaneous. This assignment shall be binding upon and enforceable
against, and shall inure to the benefit of, the parties hereto and their
respective, legal representatives, successors and assigns. This assignment shall
be governed by, construed under and interpreted and enforced in accordance with
the laws of the State of Georgia.
5. Amendments. Neither the Leasehold documents nor any of them shall be
amended without the prior written consent of Assignor, SET or Assignee.
6. Further Assignment and Subletting. Assignee shall neither assign nor
sublet the Leasehold or any portion thereof without the prior written consent
of Assignor or SET, which consent shall not be unreasonably withheld.
7. Remedies in Event of Default. If Assignee shall fail to observe or
perform any of its obligations under the Lease and shall fail to cure any
default within twenty (20) days after written notice from Landlord (as defined
in the Lease), Assignee, SET or any of their successors in interest to do so,
then in any of said cases, Assignor or SET may:
(i) cure the default on behalf of Assignee and be reimbursed by
Assignee for the cost thereof together with interest accruing from the
date thereof at the prime rate (as defined in the Wall Street Journal
or any similar successor publication) plus four (4%) percent per
annum, together with reasonable attorneys' fees; and/or
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<PAGE> 30
(ii) enter into and upon the premises or any part thereof and
repossess the same and expel Assignee and persons claiming under and
through it, and remove any effects without prejudice to any remedies
which may be available for arrears of rent or for Assignee's breach of
covenant, or for items previously advanced pursuant to subparagraph
(i) above.
8. Right of Entry by Assignor: Assignor, during the term of the Lease,
after prior notice, at reasonable times and during usual business hours, may
enter the premises to view them, and, except in case of renewal or extension,
at any time within two (2) months next preceding the expiration of the specified
term, may show the premises to others for the purpose of rental or sale.
9. Insurance. Assignee agrees to maintain insurance as required in the
Lease and to have Southeast named as a loss payee on such policies and will from
time to time at Southeast's reasonable request, provide Southeast with evidence
thereof.
10. Section and Other Headings. The Section and Other Headings as to
contents of particular paragraphs herein are inserted only for convenience, and
are in no way to be construed as a part of this Assignment or as a limitation on
the scope of the particular paragraphs to which they refer.
11. Notices: Any notices, to be given hereunder by either party, must be in
writing and may, unless otherwise in this Agreement expressly provided, be given
or be served by registered or certified mail and addressed to the party to be
notified, with the return receipt requested, or by delivering the same in person
to an officer of such party, or by prepaid telegram, when appropriate,
addressed to the party to be notified. Notice deposited in the mail in the
manner hereinabove described shall be effective, unless otherwise stated in this
Agreement,
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<PAGE> 31
from and after the date it is so deposited. Notice given in any other manner
shall be effective only if and when received by the party to be notified. For
purposes of notice, the addresses of the parties shall be as follows:
If to Assignor, to:
Columbus Auto Sales, Inc.
100 N.W. 12th Avenue
P.O. Box 1160
Deerfield Beach, Florida 33442
ATTENTION: Don Pollock
With a Copy to:
Wayne Reece, Esquire
REECE & ASSOCIATES
Suite 1800
2 Peachtree Street, N.W.
Atlanta, Georgia 30383
If to Assignee, to:
James Grey Stelzenmuller, III
2420 Downing Drive
Columbus, Georgia 31906
With a Copy to:
Richard A. Childs, Esquire
1214 Third Avenue
Columbus, Georgia 31902
12. Separation: If any provision of this Assignment should be held to be
invalid or unenforceable, the validity and enforceability of the remaining
provisions of this Assignment shall not be affected thereby.
IN WITNESS WHEREOF, Assignor and Assignee have caused their duly authorized
Corporate officers to execute this Assignment and to affix their corporate seals
hereto as of the day and year first above written.
(SIGNATURES ON THE FOLLOWING PAGE)
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<PAGE> 32
(SIGNATURES FROM THE PREVIOUS PAGE)
ASSIGNOR:
COLUMBUS AUTO SALES, INC.
By:
-------------------------------
President
Signed, sealed and delivered
in the presence of:
Attest:
- ------------------------------ --------------------------
Unofficial Witness Title:
(CORPORATE SEAL)
- ------------------------------
Notary Public
My Commission Expires:
November 13, 1993
- ------------------------------
(NOTARIAL SEAL)
ASSIGNEE:
JAY AUTOMOTIVE GROUP II, INC.
By:
-------------------------------
President
Signed, sealed and delivered
in the presence of:
Attest:
- ------------------------------ ----------------------------
Unofficial Witness Title: Asst. Corp. Secretary
- ------------------------------ (CORPORATE SEAL)
Notary Public
My Commission Expires:
November 13, 1993
- ------------------------------
(NOTARIAL SEAL)
- 6 -
<PAGE> 1
EXHIBIT 10.65
(FORD LOGO) FORD MOTOR COMPANY
FORD SALES AND SERVICE AGREEMENT
STANDARD PROVISIONS
DEFINITIONS
1. As used herein, the following terms shall have the following meanings,
respectively:
1. (a) "COMPANY PRODUCTS" shall mean such
(1) new passenger cars,
(2) new trucks and chassis, excluding all diesel trucks and
chassis and all trucks and chassis of series 850 or higher
designations, and
(3) parts and accessories therefor,
as from time to time are offered for sale by the Company to all authorized Ford
dealers as such for resale, plus such other products as may be offered for sale
by the Company to the Dealer from time to time. The Company reserves the right
to offer any new, different and differently designated passenger car, truck or
chassis, and any other product, bearing any trademarks or brand names used or
claimed by the Company or any of its subsidiaries, including the name "Ford",
to selected authorized Ford dealers or others under existing or separate new
agreements; provided, however, that the Company shall not franchise any such
new passenger car bearing the name "Ford" (other than the Ford script-in-oval
corporate form of trademark) to anyone who is not an authorized Ford dealer.
1. (b) "CAR" shall mean any passenger car, and "TRUCK" shall mean any
truck or chassis, included in this agreement pursuant to paragraph 1(a) above.
"VEHICLE" shall mean any CAR or TRUCK and "VEHICLES" shall mean CARS and TRUCKS.
1. (c) "COMPETITIVE CARS" and "COMPETITIVE TRUCKS" shall mean those new
cars and new trucks, respectively, not marketed by the Company which are
selected by the Company as generally comparable with CARS and TRUCKS,
respectively, in price and product characteristics.
1. (d) "INDUSTRY CARS" and "INDUSTRY TRUCKS" shall mean all new cars
and all new trucks, respectively, of all manufacturers to the extent data
therefor are reasonably available.
1. (e) "GENUINE PARTS" shall mean such parts, accessories and
equipment for VEHICLES as are offered for sale by the Company from time to
time to the Dealer.
1. (f) "DEALER PRICE" shall mean, with respect to each COMPANY PRODUCT
to which it refers, the price to the Dealer for such product, as from time to
time established by the Company, before deduction of any cash or other discount
applicable thereto. It shall not include any amount in the nature of a
predelivery or other holdback deposit or charge, any dealer association
collection, any charge by the Company for distribution, delivery or taxes, or
any other charge for special items or services.
1
<PAGE> 2
1. DEFINITIONS (CONTINUED)
1. (g) "VEHICLE TERMS OF SALE BULLETIN" shall mean the latest VEHICLE
TERMS OF SALE BULLETIN and amendments thereto furnished to the Dealer from time
to time by the Company setting forth the terms of sale and ordering procedures
applicable to sales of VEHICLES to authorized Ford dealers.
1. (h) "PARTS AND ACCESSORIES TERMS OF SALE BULLETIN" shall mean the
latest PARTS AND ACCESSORIES TERMS OF SALE BULLETIN and amendments thereto
furnished to the Dealer from time to time by the Company setting forth the
terms of sale and ordering procedures applicable to sales of GENUINE PARTS to
authorized Ford dealers.
1. (i) "CUSTOMER SERVICE BULLETIN" shall mean the latest CUSTOMER
SERVICE BULLETIN and amendments thereto furnished to the Dealer from time to
time by the Company establishing standards for authorized Ford dealers with
respect to service personnel, training, tools and equipment, for customer
handling procedures and for evaluating the Dealer's service performance.
1. (j) "DEALER'S LOCALITY" shall mean the locality designated in
writing to the Dealer by the Company from time to time as the area of the
Dealer's sales and service responsibility for COMPANY PRODUCTS.
1. (k) "DEALERSHIP LOCATION" shall mean the place or places of business
of the Dealer for carrying out this agreement which are approved by the Company
as provided in paragraph 5 of this agreement.
1. (l) "DEALERSHIP FACILITIES" shall mean the land areas, buildings and
improvements established at the DEALERSHIP LOCATION in accordance with the
provisions of paragraph 5 of this agreement.
1. (m) "DEALERSHIP OPERATIONS" shall mean the sale of COMPANY PRODUCTS
and used vehicles, service operations and (if the Dealer so elects) rental or
leasing of VEHICLES, conducted by the Dealer at or from the DEALERSHIP
FACILITIES.
1. (n) "CAR PLANNING VOLUME" and "TRUCK PLANNING VOLUME" shall mean the
average annual estimated sales base for CARS and TRUCKS, respectively,
established by the Company for the Dealer from time to time for planning
purposes under its standard procedures for authorized Ford dealers in single or
multiple DEALERS' LOCALITIES, as the case may be, based on historical sales and
registrations, and current trends, in CARS, TRUCKS, COMPETITIVE CARS and TRUCKS
and INDUSTRY CARS and TRUCKS in the DEALER'S LOCALITY. Consideration shall
also be given to the environs of the DEALERSHIP LOCATION and market trends
therein, consumer shopping habits, demographic factors and other appropriate
data to the extent available and pertinent. Such terms shall not represent the
actual sales volumes to be achieved by the Dealer to meet his responsibilities
under paragraph 2 of this agreement.
1. (o) "PERCENT RESPONSIBILITY" shall mean the ratio of the Dealer's
CAR PLANNING VOLUME, and of the Dealer's TRUCK PLANNING VOLUME, to the total
CAR PLANNING VOLUMES and to the total TRUCK PLANNING VOLUMES, respectively, for
all authorized Ford dealers in the DEALER'S LOCALITY.
1. (p) "UIO" (units in operation) shall mean the CARS and TRUCKS of the
next preceding three or more model years (as determined by the Company from
time to time) licensed within the DEALER'S LOCALITY at a given time multiplied
by the Dealer's PERCENT RESPONSIBILITY therefor.
2
<PAGE> 3
1. DEFINITIONS (CONTINUED)
1.(Q) "GUIDES" shall mean such reasonable standards as may be established
by the Company for the Dealer from time to time under its standard procedures
for authorized Ford dealers (i) for DEALERSHIP FACILITIES and equipment,
capitalization and net working capital based on such factors as CAR and TRUCK
PLANNING VOLUMES, UIO, the DEALER'S LOCALITY and (ii) for inventories,
personnel, demonstrators and other elements of DEALERSHIP OPERATIONS based on
such factors as sales and service volumes.
RESPONSIBILITIES WITH RESPECT TO VEHICLES
2.(a)SALES. The Dealer shall promote vigorously and aggressively the sale
at retail (and, if the Dealer elects, the leasing and rental) of CARS and
TRUCKS to private and fleet customers within the DEALER'S LOCALITY, and shall
develop energetically and satisfactorily the potentials for such sales and
obtain a reasonable share thereof; but the Dealer shall not be limited to the
DEALER'S LOCALITY in making sales. To this end, the Dealer shall develop,
maintain and direct a trained, quality vehicle sales organization and shall
conduct throughout each model year aggressive advertising and sales promotion
activities, making use to the greatest feasible extent of the Company's
advertising and sales promotion programs relating to VEHICLES.
The Dealer's performance of his sales responsibility for CARS shall be
measured by such reasonable criteria as the Company may develop from time to
time, including:
(1) Dealer's sales of CARS to private and fleet users located in the
DEALER'S LOCALITY as a percentage of:
(i) all private and all fleet registrations of CARS in the DEALER'S
LOCALITY,
(ii) all private and all fleet registrations of COMPETITIVE CARS in
the DEALER'S LOCALITY,
(iii) all private and all fleet registrations of INDUSTRY CARS in the
DEALER'S LOCALITY, and
(iv) the private and fleet sales objectives for CARS established by
the Company for the Dealer from time to time.
(2) If the Dealer is not the only authorized dealer in CARS in the
DEALER'S LOCALITY, the following factors shall be used in computing
percentages pursuant to 2(a)(1) above:
(i) The Dealer's sales of CARS to users located in the DEALER'S
LOCALITY shall be deemed to be the total registrations thereof
in the DEALER's LOCALITY multiplied by the Dealer's percent of
sales of all CARS made by all authorized Ford dealers located in
the DEALER'S LOCALITY unless the Dealer or the Company shows
that the Dealer actually has made a different number of such
sales,
(ii) The registrations of CARS and COMPETITIVE and INDUSTRY CARS in
the DEALER'S LOCALITY against which the Dealer shall be measured
shall be the total thereof multiplied by the Dealer's PERCENT
RESPONSIBILITY, and
(iii) The Dealer's objectives for CARS shall be the total objectives
therefor of all authorized Ford dealers in the DEALER'S LOCALITY
multiplied by the Dealer's PERCENT RESPONSIBILITY.
(3) A comparison of each such percentage with percentages similarly
obtained for all other authorized Ford dealers combined in the
Company's sales zone and district in which the Dealer is located, and
where subparagraph 2(a)(2) applies, for all other authorized Ford
dealers combined in the DEALER'S LOCALITY.
3
<PAGE> 4
2. RESPONSIBILITIES WITH RESPECT TO VEHICLES (Continued)
(4) In evaluating any comparisons provided for in subparagraph 2(a)(3)
above, the Company shall give consideration to the availability of CARS
to the Dealer and other authorized Ford dealers and any special local
marketing conditions that might affect the Dealer's sales performance
differently from the sales performance of COMPETITIVE or INDUSTRY CAR
dealers or other authorized Ford dealers.
(5) The sales and registration data referred to in this subparagraph 2(a)
shall include sales to and registrations in the name of leasing and
daily rental operations and shall be those utilized in the Company's
records or in reports furnished to the Company by independent sources
selected by it and generally available for such purpose in the
automotive industry. In the event such reports of the registrations
and or sales of INDUSTRY or COMPETITIVE CARS in the DEALER'S
LOCALITY are not generally available, the evaluation of the Dealer's
sales performance shall be based on such registrations and/or
sales or purchase data as can be reasonably obtained by the Company.
The Dealer's performance of his sales responsibility for TRUCKS shall be
determined in the same manner as for CARS.
The Company will provide to the Dealer an evaluation of his performance
under this subparagraph (2)(a) from time to time as initiated by the Company, or
not more than once a month upon the written request of the Dealer.
2.(b) Orders.
(1) To enable the Company to plan for and establish, and its manufacturing
sources to carry out, production schedules, the Dealer shall, on the
dates and forms provided by the Company, furnish the Company basic
orders for types of VEHICLES and specific orders for individual
VEHICLES against the applicable basic order as specified in the
applicable VEHICLE TERMS OF SALE BULLETIN.
(2) The Company is authorized to have installed on any VEHICLE ordered by
the Dealer any equipment or accessory required by any applicable
federal, state or local law, rule, or regulation.
(3) Any order for a VEHICLE not shipped during the month for which delivery
was scheduled will remain in effect unless cancelled by the Dealer or
the Company by written notice to the other. An order for an "off
standard" VEHICLE may be cancelled only by or with the consent of the
Company. Any VEHICLE which differs from the Company's standard
specifications, or which incorporates special equipment, shall be
considered an "off standard" VEHICLE.
(4) The Dealer shall not be liable to the Company for any failure to accept
shipments of VEHICLES ordered from the Company where such failure is
due to any labor difficulty at the DEALERSHIP LOCATION or to any cause
beyond the Dealer's control or without the Dealer's fault or
negligence.
2.(c) Consideration of Orders.
(1) The Company may reject orders not submitted in accordance with
subparagraph 2(b)(1) above. The Company shall make reasonable efforts
to fill each order of the Dealer that is accepted by the Company.
During any period of shortage of any VEHICLE, the Company shall be
entitled to give priority to accepted orders for such VEHICLES for
resale to users residing within the DEALER'S LOCALITY of the ordering
dealer.
4
<PAGE> 5
2. RESPONSIBILITIES WITH RESPECT TO VEHICLES (CONTINUED)
(2) The Company shall not be liable to the Dealer in any respect for failure
to ship or for delay in shipment of accepted orders for VEHICLES where
such failure or delay is due wholly or in part to (i) shortage or
curtailment of material, labor, transportation, or utility services, (ii)
any labor or production difficulty in any of its own or any of its
suppliers' locations, (iii) any governmental action, or (iv) any cause
beyond the Company's control or without its fault or negligence.
2. (D) STOCKS. The Dealer shall maintain stocks of current models of such
lines or series of VEHICLES, of an assortment and in quantities as are in
accordance with Company GUIDES therefor, or adequate to meet the Dealer's share
of current and anticipated demand for VEHICLES in the DEALER'S LOCALITY. The
Dealer's maintenance of VEHICLE stocks shall be subject to the Company's filling
the Dealer's orders therefor.
2. (E) DEMONSTRATORS. The Dealer shall maintain at all times in good
condition and running order for demonstration and loan to prospective
purchasers, such numbers of the latest model of such lines or series of VEHICLES
as are in accordance with Company GUIDES therefor.
2. (F) FACTORY SUGGESTED PRICE LABELS. If any CAR is delivered by the Company
to the Dealer with an incorrect label, or without a completed label, affixed
thereto pursuant to the Federal Automobile Information Disclosure Act, the
Dealer shall promptly complete and affix to such CAR a correct label on the form
and in accordance with the directions furnished by the Company.
2. (G) OWNER LITERATURE. The Dealer shall, in accordance with the Company's
instructions, complete, execute and deliver to each retail purchaser of a
VEHICLE from him the Company's then current publications for owners with respect
to the operation, maintenance and warranty of that VEHICLE (hereinafter called
"Owner's Literature"). The Dealer shall fulfill promptly all dealer
responsibilities under each piece of the Owner's Literature delivered by him.
The Company may specify in the Owner's Literature that the Dealer will perform
certain inspections of the VEHICLE. The Dealer authorizes the Company to charge
his account for work done by another Company authorized CAR or TRUCK dealer
under the Owner's Literature delivered by the Dealer, and to credit his account
for work done by him under Owner's Literature delivered by another Company
authorized CAR or TRUCK dealer. The charge or credit shall be in the amount
specified by the Company from time to time.
2. (H) REBATES AND ALLOWANCES. The Dealer shall be entitled to such rebates
and allowances from the Company on VEHICLES and factory-installed options,
subject to such conditions and procedures, as may be specified in the applicable
VEHICLE TERMS OF SALE BULLETIN or other notice pertaining thereto sent to the
Dealer by the Company, provided that any change in the model close-out allowance
shall be announced to the Dealer prior to the Company's solicitation of the
build-out order.
2. (I) WARRANTY. The Company shall from time to time establish, by notice to
the Dealer, the warranty to the owner applicable to each VEHICLE. There shall be
NO OTHER WARRANTY, express or implied, including any warranty of MERCHANTABILITY
OR FITNESS, or any other obligation of the Company to the Dealer or the owner
with respect to the VEHICLE or any part thereof except the warranty established
pursuant to this subparagraph. The Dealer shall expressly incorporate such
warranty as a part of each buyer's order form or other contract for the sale of
a VEHICLE and shall deliver a copy of the warranty, in the form furnished by the
Company, to the owner at the time the VEHICLE is delivered to the owner, all in
accordance with instructions set forth in the Company's then current Warranty
and Policy Manual and supplements thereto (hereinafter called "Warranty
Manual").
5
<PAGE> 6
RESPONSIBILITIES WITH RESPECT TO GENUINE PARTS
3. (A) SALES. The Dealer shall promote vigorously and aggressively the
sale of GENUINE PARTS to service, wholesale and other customers within the
DEALER'S LOCALITY, and shall develop energetically and satisfactorily the
potentials for such sale and obtain a reasonable share thereof; but the Dealer
shall not be limited to the DEALER'S LOCALITY in making sales. To this end, the
Dealer shall develop, maintain and direct a trained quality parts sales
organization and shall conduct aggressive advertising and sales promotion
activities, making use to the greatest feasible extent of the Company's
advertising and sales promotion programs relating to GENUINE PARTS. The Dealer
shall not sell or offer for sale or use in the repair of any COMPANY PRODUCT, as
a GENUINE PART, any part or accessory that is not in fact a GENUINE PART.
The Dealer's performance of his sales responsibility for GENUINE PARTS shall
be measured by such reasonable criteria as the Company may develop from time to
time including:
(1) His sales as a percentage of the sales objectives established for
him by the Company from time to time, and his sales per UIO, and
(2) A comparison of such percentage and sales per UIO with the percentage
similarly obtained and sales per UIO of all other authorized Ford
dealers combined in one or more of the following: (i) the DEALER'S
LOCALITY, (ii) the Company's sales or service zone, and (iii) the
district in which the Dealer is located, as the Company may
determine.
3.(B) ORDERS.
(1) Stock orders for the Dealer's requirements of GENUINE PARTS shall
be furnished to the Company by the Dealer in accordance with the
applicable PARTS AND ACCESSORIES TERMS OF SALE BULLETIN.
(2) Any order for a GENUINE PART not shipped in accordance with normal
shipping schedules will remain in effect unless cancelled by the
Dealer or the Company by written notice to the other.
(3) The Dealer shall not be liable to the Company for any failure to
accept shipment of GENUINE PARTS ordered from the Company where such
failure is due to any labor difficulty in the Dealer's place of
business or to any cause beyond the Dealer's control or without the
Dealer's fault or negligence.
3. (C) CONSIDERATION OF ORDERS.
(1) The Company shall make reasonable efforts to fill each order of the
Dealer that is accepted by the Company.
(2) The Company shall not be liable to the Dealer in any respect for
failure to ship or for delay in shipment of accepted orders for
GENUINE PARTS where such failure or delay is due wholly or in part to
(i) shortage or curtailment of material, labor, transportation or
utility services, (ii) any labor or production difficulty in any of
its own or any of its suppliers' locations, (iii) any governmental
action or (iv) any cause beyond the Company's control or without its
fault or negligence.
3.(D) STOCKS. The Dealer shall maintain a stock of parts, including
GENUINE PARTS, in accordance with Company GUIDES therefor, and of an
assortment in quantities adequate to meet the current and anticipated
demand therefor. The Dealer's maintenance of stocks of GENUINE PARTS
shall be subject to the Company's filling the Dealer's orders
therefor.
3.(E) RETURNS AND ALLOWANCES. The Dealer shall be entitled to such
allowances, discounts, incentives and return privileges from the
Company on GENUINE PARTS subject to such conditions and procedures as
may be specified in the applicable PARTS AND ACCESSORIES
6
<PAGE> 7
3. RESPONSIBILITIES WITH RESPECT TO GENUINE PARTS (CONTINUED)
TERMS OF SALE BULLETIN or other notice pertaining thereto sent to the
Dealer by the Company.
3. (F) WARRANTY. The Company shall from time to time establish, by notice
to the Dealer, the warranty applicable to each GENUINE PART. There shall be NO
OTHER WARRANTY, express or implied, including any warranty of MERCHANTABILITY
OR FITNESS, or any other obligation of the Company to the Dealer or the
customer with respect to any GENUINE PART or any part thereof except the
warranty established pursuant to this subparagraph. The Dealer shall expressly
incorporate such warranty as a part of each sale of a GENUINE PART, in
accordance with instructions set forth in the Warranty Manual.
RESPONSIBILITIES WITH RESPECT TO SERVICE
4. The Dealer shall develop, maintain and direct a trained, quality
service organization and render at the DEALERSHIP FACILITIES prompt,
workmanlike, courteous and willing service to owners and users of COMPANY
PRODUCTS, in accordance with the standards and procedures set forth in the
applicable CUSTOMER SERVICE BULLETIN, including without limitation all service
to which a purchaser of a COMPANY PRODUCT from any authorized Ford dealer may
be entitled.
4. (A) PREDELIVERY SERVICE. The Dealer shall perform or be responsible
for the performance of such inspection, conditioning and repair of each VEHICLE
before delivery as may be prescribed for such VEHICLE in the Company's
applicable predelivery inspection and conditioning schedules furnished by the
Company to the Dealer. The Dealer shall maintain or be responsible for the
maintenance of adequate records of all predelivery inspection, conditioning and
repair work performed by or for the Dealer.
4. (B) WARRANTY AND POLICY AND CAMPAIGN SERVICE.
(1) The Dealer shall perform all warranty and policy service on each
COMPANY PRODUCT sold by the Dealer, or presented by "visiting
owners" (those whose selling dealer has ceased to do business, or who
are travelling, or have moved a long distance from their selling
dealer or need emergency repairs), in accordance with the warranty and
policy applicable thereto and the applicable provisions of the
Warranty Manual and CUSTOMER SERVICE BULLETIN.
(2) The Dealer shall perform campaign inspections and/or corrections for
owners and users of all VEHICLES, subject to the campaign instructions
issued by the Company from time to time and the applicable provisions
of the Warranty Manual. The Company may ship parts in quantity to the
Dealer to effect such campaign work and if such parts are in excess of
the Dealer's requirements, the Dealer may return unused parts to the
Company for credit after completion of the campaign.
(3) The Dealer shall use only GENUINE PARTS in performing warranty, policy
and campaign work, except as otherwise provided in the Warranty
Manual, CUSTOMER SERVICE BULLETIN or campaign instructions, and shall
give precedence to all such work over other service work if the use of
the vehicle is impaired. The Dealer shall promptly report to the
Company, and seek the Company's assistance with respect to, any
warranty or policy or campaign work which cannot be performed to the
owner's or the Dealer's satisfaction. The Company shall give
precedence to such requests over other service assistance. The Dealer
shall provide the owner with a copy of the repair order for such work
itemizing the work performed. The Dealer shall have such repair
7
<PAGE> 8
4. RESPONSIBILITIES WITH RESPECT TO SERVICE (CONTINUED)
order signed by the owner except in unusual circumstances where it is
not feasible to obtain such signature.
(4) The Dealer shall submit claims to the Company for reimbursement for
the parts and labor used in performing warranty, policy and campaign
work and the Company shall reimburse the Dealer therefor, in
accordance with the provisions of the Warranty Manual or campaign
instructions and the Dealer's approved warranty labor rate. The Dealer
shall maintain adequate records and documents supporting such claims
in accordance with the provisions of the Warranty Manual.
4. (C) MAINTENANCE AND REPAIR SERVICE. The Dealer shall perform all
other maintenance and repair services, including, where feasible, body repair
services, reasonably required by owners and users of VEHICLES and shall provide
each customer a copy of the repair order itemizing the work performed and the
charges therefor. The Dealer shall have the customer sign such repair order
except in unusual circumstances where it is not feasible to obtain such
signature.
4. (D) SERVICE TOOLS AND EQUIPMENT. The ?????? ????? ????? ???? maintain
for use in DEALERSHIP OPERATIONS such diagnostic equipment and other tools,
equipment and machinery, comparable to the type and quality recommended by the
Company from time to time, as are necessary to meet the Dealer's service
responsibilities hereunder and substantially in accordance with Company GUIDES
therefor and the applicable CUSTOMER SERVICE BULLETIN.
RESPONSIBILITIES WITH RESPECT TO DEALERSHIP FACILITIES
5. (A) LOCATIONS AND FACILITIES. The Dealer shall establish and maintain
at the DEALERSHIP LOCATION approved by the Company DEALERSHIP FACILITIES of
satisfactory appearance and condition and adequate to meet the Dealer's
responsibilities under this agreement. The DEALERSHIP FACILITIES shall be
substantially in accordance with the GUIDES therefor established by the Company
from time to time.
5. (B) DEALERSHIP FACILITIES SUPPLEMENT. The Dealer and the Company have
executed, as a part of and simultaneously with this agreement, a Dealership
Facilities Supplement which includes a description of all of the DEALERSHIP
LOCATION and FACILITIES, the GUIDES therefor as of the date of this agreement
and the purpose for which each shall be used.
5. (C) CHANGES AND ADDITIONS. The Dealer shall not move or substantially
modify or change the usage of any of the DEALERSHIP LOCATION or FACILITIES for
COMPANY PRODUCTS, nor shall the Dealer or any person named in subparagraph F(i)
or F(ii) hereof directly or indirectly establish or operate in whole or in part
any other locations or facilities for the sale or service of COMPANY PRODUCTS or
the sale of used vehicles without the prior written consent of the Company. Any
such change shall be evidenced by a new Dealership Facilities Supplement
executed by the Dealer and the Company. To ensure that all data included on the
Dealership Facilities Supplement are reasonably accurate, the Company and the
Dealer shall execute a new Dealership Facilities Supplement at least once every
five (5) years.
5. (D) COMPANY ASSISTANCE. To assist the Dealer in planning,
establishing and maintaining DEALERSHIP LOCATION and FACILITIES in accordance
with his responsibilities under this agreement, the Company will make
available, at the request of the Dealer, and at a mutually convenient time and
place, personnel to provide counsel and advice regarding location and facility
planning, including layout and design.
8
<PAGE> 9
5. RESPONSIBILITIES WITH RESPECT TO DEALERSHIP FACILITIES (CONTINUED)
5. (E) FULFILLMENT OF RESPONSIBILITY. The Dealer shall be deemed to be
fulfilling his responsibilities under this paragraph 5 when and as long as the
DEALERSHIP LOCATION is approved by the Company and the DEALERSHIP FACILITIES are
substantially in accordance with the current GUIDES therefor. The execution of
this agreement or of any Dealership Facilities Supplement shall not of itself be
construed as evidence of the fulfillment by the Dealer of his responsibilities
to provide adequate DEALERSHIP LOCATION and FACILITIES.
OTHER DEALER AND COMPANY RESPONSIBILITIES
6. (A) SIGNS. The Dealer shall install and maintain at the DEALERSHIP
LOCATION signs of good appearance and adequate to identify such locations as
(1) authorized sales and service establishments for VEHICLES and other COMPANY
PRODUCTS identifying such products as products of the Company, (2) authorized
sales locations for used vehicles and (3) authorized locations for the leasing
or rental of vehicles, as the case may be. Each sign shall be compatible with
the design standards established by the Company from time to time and shall be
subject to the Company's approval with respect to any display of any trademark
or trade name used or claimed by the Company or any of its subsidiaries.
Fulfillment of any separate Dealership Identification Agreement between the
Dealer and the Company shall be deemed fulfillment of this subparagraph 6(a).
The Company will make available, at the request of the Dealer, and at a
mutually convenient time and place, personnel to provide counsel and advice
regarding dealership signs and identification.
6. (B) PERSONNEL. The Dealer shall employ and train such numbers and
classifications of competent personnel of good character, including, without
limitation, sales, parts, service, owner relations and other department
managers, salesmen and service technicians, as will enable the Dealer to fulfill
all his responsibilities under this agreement. The Company shall provide
assistance to the Dealer in determining personnel requirements. In response to
the training needs of the Dealer's personnel, the Dealer at his expense shall
cause his personnel to attend training schools or courses conducted by the
Company from time to time.
6. (C) DEALER RESIDENCE. Effective operation of the Dealer's business is
dependent in large part on the Dealer's management becoming a part of and
accepted within his local community. Accordingly, each person named in
subparagraph F(ii) hereof shall (unless otherwise approved in writing by the
Company because of individual circumstances) reside within the DEALER'S
LOCALITY.
6. (D) CAPITAL. The Dealer shall at all times maintain and employ in
connection with his DEALERSHIP OPERATIONS separately from any other business of
the Dealer, such total investment, net working capital, adequate lines of
wholesale credit and competitive retail financing plans for VEHICLES as are in
accordance with Company GUIDES therefor and will enable the Dealer to fulfill
all his responsibilities under this agreement. The Dealer's net working capital
shall not be less than the amounts specified in the Net Working Capital
Agreement executed by the Dealer and the Company, as a part of and
simultaneously with this agreement, as modified or superseded from time to
time.
6. (E) ACCOUNTING SYSTEM. It is in the mutual interests of the Dealer
and the Company that uniform accounting systems and practices be maintained by
the Company's authorized dealers in order that the Company may develop and
disseminate helpful information, evaluate the relative
9
<PAGE> 10
6. OTHER DEALER AND COMPANY RESPONSIBILITIES (Continued)
other performance of each dealer and develop criteria that will enable the
Company to formulate plans and policies in the interests of its dealers and the
Company and that will assist each dealer to obtain satisfactory results from his
dealership operations. Accordingly, the Dealer shall install and use in his
DEALERSHIP OPERATIONS, whether conducted as one or several business entities, an
accounting system, not exclusive of any other system, not exclusive of any other
system the Dealer may wish to use, in accordance with the Company's Manual of
Dealer Accounting Procedures as amended from time to time.
6. (f) Financial Reports. In furtherance of the mutual interests set forth
in paragraph 6(e) hereof, the Dealer shall furnish to the Company each month, at
the time and on the forms prescribed by the Company, a complete statement
reflecting the true financial condition and the month and year-to-date operating
results of his DEALERSHIP OPERATIONS as of the end of the preceding month. The
Dealer also shall promptly furnish to the Company a copy of any adjusted annual
statement that may be prepared by or for the Dealer. All such statements,
reports and data shall be based whenever applicable upon the accounting system
installed and used by the Dealer in accordance with subparagraph 6(e). Financial
information furnished by the Dealer shall be handled on a confidential basis by
the Company and, unless authorized by the Dealer or required by law, or offered
in evidence in judicial or arbitration proceedings, shall not be furnished,
except as an unidentified part of a composite or coded report, to any party
outside of the Company.
6. (g) Delivery and Sales Reports. To assist the Company in evaluating
current sales and market trends, in advising its manufacturing sources of
adjustments desired in production and distribution schedules, and in providing
the type of information necessary to provide assistance and counsel to the
Dealer, the Dealer shall (1) accordingly complete the information prescribed on
the vehicle delivery card and forward such card to the Company at or as soon as
reasonably possible after the end of the day on which the new VEHICLE is
delivered or sold, whichever shall occur first, to the private or fleet customer
or to rental or leasing operations, if any, conducted or controlled by the
Dealer, and (2) furnish the Company with accurate and complete delivery or sales
reports and data relating to the Dealer and his DEALERSHIP OPERATIONS at the
times and on such forms as the Company may specify from time to time.
6. (h) Customer Handling. The Dealer shall cooperate with Company programs,
and develop and maintain his own programs, designed to develop good
relationships between the Dealer and the public. The Dealer shall promptly
investigate and handle all matters brought to his attention by the Company or
the public relating to the sale or servicing of COMPANY PRODUCTS in the DEALER'S
LOCALITY, in accordance with procedures set forth in the applicable CUSTOMER
SERVICE BULLETIN, so as to develop public confidence in the Dealer, the Company
and COMPANY PRODUCTS. The Dealer shall report promptly to the Company the
details of each inquiry or complaint received by the Dealer relating to any
COMPANY PRODUCT which the Dealer cannot handle satisfactorily. The Dealer shall
not make, directly or indirectly, any false or misleading statement or
representation to any customer as to any VEHICLE, GENUINE PART or other COMPANY
PRODUCT as to the source, condition or capabilities thereof, or the Dealer's or
the Company's prices or charges therefor or for distribution, delivery, taxes or
other items.
6. (i) Business Practices, Advertising and Programs. The Dealer shall
conduct DEALERSHIP OPERATIONS in a manner that will reflect favorably at all
times on the reputation of the Dealer, other Company authorized dealers, the
Company, COMPANY PRODUCTS and
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<PAGE> 11
6. OTHER DEALER AND COMPANY RESPONSIBILITIES (CONTINUED)
operating performance of each dealer and develop criteria that will enable the
Company to formulate plans and policies in the interests of its dealers and the
Company and that will assist each dealer to obtain satisfactory results from
his dealership operations. Accordingly, the Dealer shall install and use in
his DEALERSHIP OPERATIONS, whether conducted as one or several business
entities, an accounting system, not exclusive of any other system the Dealer
may wish to use, in accordance with the Company's Manual of Dealer Accounting
Procedures as amended from time to time.
6. (F) FINANCIAL REPORTS. In furtherance of the mutual interests set forth
in paragraph 6(e) hereof, the Dealer shall furnish to the Company each month,
at the time and on the forms prescribed by the Company, a complete statement
reflecting the true financial condition and the month and year-to-date
operating results of his DEALERSHIP OPERATIONS as of the end of the preceding
month. The Dealer also shall promptly furnish to the Company a copy of any
adjusted annual statement that may be prepared by or for the Dealer. All such
statements, reports and data shall be based whenever applicable upon the
accounting system installed and used by the Dealer in accordance with
subparagraph 6(e). Financial information furnished by the Dealer shall be
handled on a confidential basis by the Company and, unless authorized by the
Dealer or required by law, or offered in evidence in judicial or arbitration
proceedings, shall not be furnished, except as an unidentified part of a
composite or coded report, to any party outside of the Company.
6. (G) DELIVERY AND SALES REPORTS. To assist the Company in evaluating
current sales and market trends, in advising its manufacturing sources of
adjustments desired in production and distribution schedules, and in providing
the type of information necessary to provide assistance and counsel to the
Dealer, the Dealer shall (1) accurately complete the information prescribed on
the vehicle delivery card and forward such card to the Company at or as soon as
reasonably possible after the end of the day on which the new VEHICLE is
delivered or sold, whichever shall occur first, to the private or fleet
customer or to rental or leasing operations, if any, conducted or controlled by
the Dealer, and (2) furnish the Company with accurate and complete delivery of
sales reports and data relating to the Dealer and his DEALERSHIP OPERATIONS at
the times and on such forms as the Company may specify from time to time.
6. (H) CUSTOMER HANDLING. The Dealer shall cooperate with Company programs,
and develop and maintain his own programs, designed to develop good
relationships between the Dealer and the public. The Dealer shall promptly
investigate and handle all matters brought to his attention by the Company or
the public relating to the sale or servicing of COMPANY PRODUCTS in the DEALER'S
LOCALITY, in accordance with procedures set forth in the applicable CUSTOMER
SERVICE BULLETIN, so as to develop public confidence in the Dealer, the Company
and COMPANY PRODUCTS. The Dealer shall report promptly to the Company the
details of each inquiry or complaint received by the Dealer relating to any
COMPANY PRODUCT which the Dealer cannot handle satisfactorily. The Dealer shall
not make, directly or indirectly, any false or misleading statement or
representation to any customer as to any VEHICLE, GENUINE PART or other COMPANY
PRODUCT as to the source, condition or capabilities thereof, or the Dealer's or
the Company's prices or charges therefor or for distribution, delivery, taxes or
other items.
6. (I) BUSINESS PRACTICES, ADVERTISING AND PROGRAMS. The Dealer shall
conduct DEALERSHIP OPERATIONS in a manner that will reflect favorably at all
times on the reputation of the Dealer, other Company authorized dealers, the
Company, COMPANY PRODUCTS and
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6. OTHER DEALER AND COMPANY RESPONSIBILITIES (Continued)
trademarks and trade names used or claimed by the Company or any of its
subsidiaries. The Dealer shall avoid in every way any "bait", deceptive,
misleading, confusing or illegal advertising or business practice. The Company
shall not publish or employ any such advertising or practice or encourage any
dealer or group of dealers to do so.
6. (j) COMPLIANCE WITH LAWS, RULES AND REGULATIONS. The Dealer shall comply
with all applicable federal, state, and local laws, rules and regulations in
the ordering, sale and service of COMPANY PRODUCTS and the sale and service of
used vehicles, including without limitation those related to motor vehicle
safety, emissions control and customer service. The Company shall provide the
Dealer, and the Dealer shall provide the Company, such information and
assistance as may be reasonably requested by the other in connection with the
performance of obligations under such laws, rules and regulations.
DEALER'S RESPONSIBILITIES WITH RESPECT TO HOURS OF BUSINESS
7. To the end that the needs of customers and owners served by the Dealer
are fulfilled properly, the Dealer shall maintain DEALERSHIP OPERATIONS open
for business during all hours and days which are customary in the trade and
lawful for such operations in the DEALER'S LOCALITY.
PURCHASES FROM OTHERS AND SALES TO OTHERS
8. The Dealer reserves the right to make purchases from others without
obligation or liability of any kind to the Company, provided that the Dealer
shall not be relieved of any responsibility assumed by the Dealer under this
agreement; and, except as otherwise expressly provided herein, the Company
reserves the right to make sales to others (including without limitation to
other dealers) without obligation or liability of any kind to the Dealer.
DETERMINATION OF DEALER REPRESENTATION
9. (a) REPRESENTATION PLANNING. The Company reserves the right to
determine, from time to time, in its best judgment, the numbers, locations and
sizes of authorized dealers necessary for proper and satisfactory sales and
service representation for COMPANY PRODUCTS within and without the DEALER'S
LOCALITY. In making such determinations, the Company form time to time
conducts, to the extent deemed adequate by the Company and subject to the
ready availability of information, studies of the locality, including such
factors as its geographic characteristics, consumer shopping habits,
competitive representation patterns, sales and service requirements,
convenience of customers or potential customers and past and future growth and
other trends in marketing conditions, population, income, UIO, VEHICLE sales
and registrations and COMPETITIVE and INDUSTRY CAR and TRUCK registrations.
9. (b) INFORMATION TO DEALER. The Company will inform the Dealer of any
proposed change in the Company's market representation plans for the DEALER'S
LOCALITY, provided that if the Company's market representation plans do not
provide for the continuation of representation of COMPANY PRODUCTS from the
Dealer's DEALERSHIP FACILITIES (except for a relocation thereof), the Company
shall not be obligated to inform other dealers thereof, but shall give the
Dealer written notice thereof. If, in the Company's opinion, such changes
should be disclosed to other dealers in connection with the Company's market
representation plans for their respective DEALERSHIP OPERATIONS, the Company
may inform such other dealers thereof, without liability to the Dealer, no
earlier than thirty (30) days after such notice to the Dealer and shall inform
such other dealers that the Dealer may maintain his DEALERSHIP OPERATIONS for
so long as the Dealer desires and fulfills his responsibilities under this
agreement.
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<PAGE> 13
DETERMINATION OF DEALER REPRESENTATION (Continued)
9. (c) ADDITIONAL DEALERS. The Company shall have the right to appoint
additional dealers in VEHICLES within or without the DEALER'S LOCALITY except
that, if an additional dealer will be within the DEALER'S LOCALITY and within
ten (10) miles driving distance of the Dealer's principal place of business,
the Company shall not appoint the additional dealer unless a study made
pursuant to subparagraph 9(a) reasonably demonstrates, in the Company's
opinion, that such appointment is necessary to provide VEHICLES with proper
sales and service representation in such locality with due regard to the
factors referred to above in subparagraph 9(a). The Company by written notice
to the Dealer will give the Dealer thirty (30) days in which to review the
applicable study (excluding information regarding other dealers considered
confidential by the Company), to discuss such additional dealer with
representatives of the Company and to give the Company written notice of
objection to the proposed addition. If the Dealer fails to give such written
notice by such time, he shall be deemed to have consented to the proposed
addition. The Company will give consideration to any such written objection and
advise the Dealer in writing of its decision before any commitment is made or
negotiations conducted with any dealer prospect. If the Dealer appeals to the
Dealer Policy Board within fifteen (15) days of such decision, no action will
be taken by the Company until the Dealer Policy Board has rendered a decision
on the matter.
9. (d) ESTABLISHED DEALER POINTS.
Nothing in this paragraph 9 shall restrict the right of the Company to
appoint a dealer in VEHICLES as a replacement for a dealer in VEHICLES, or to
fill an established open point for a dealer in VEHICLES, at or near a location
previously approved by the Company.
PRICES AND CHARGES
10. Sales of COMPANY PRODUCTS by the Company to the Dealer hereunder will
be made in accordance with the prices, charges, discounts and other terms of
sale set forth in price schedules or other notices published by the Company to
the Dealer form time to time in accordance with the applicable VEHICLE TERMS OF
SALE BULLETIN or PARTS AND ACCESSORIES TERMS OF SALE BULLETIN. Except as
otherwise specified in writing by the Company, such prices, charges, discounts
and terms of sale shall be those in effect, and delivery to the Dealer shall be
deemed to have been made and the order deemed to have been filled on the date of
delivery to the carrier or the Dealer, whichever occurs first. The Company has
the right at any time and from time to time to change or eliminate prices,
charges, discounts, allowances, rebates, refunds or other terms of sale
affecting COMPANY PRODUCTS by issuing a new VEHICLE or PARTS AND ACCESSORIES
TERMS OF SALE BULLETIN, new price schedules or other notices. In the event the
Company shall increase the DEALER PRICE for any COMPANY PRODUCT, the Dealer
shall have the right to cancel, by notice to the Company within ten (10) days
after receipt by the Dealer of notice of such increase, any orders for such
product placed by the Dealer with the Company prior to receipt by the Dealer of
notice of such increase and unfilled at the time of receipt by the Company of
such notice of cancellation.
TERMS AND TITLE
11. (a) PAYMENT. Payment by the Dealer for each COMPANY PRODUCT shall be in
accordance with the terms and conditions set forth in the applicable VEHICLE or
PARTS AND ACCESSORIES TERMS OF SALE BULLETIN.
11. (b) TITLE. Title to each COMPANY PRODUCT purchased by the Dealer shall
(unless otherwise provided in the applicable VEHICLE or PARTS AND ACCESSORIES
TERMS OF SALE BULLETIN) pass to the Dealer, or to such financing institution or
other party as may have been designated to the Company by the Dealer, upon
delivery thereof to the carrier or to the
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<PAGE> 14
11. TERMS AND TITLE (CONTINUED)
Dealer, whichever occurs first, but the Company shall retain a security interest
in and right to repossess any product until paid therefor.
11. (c) RISK OF LOSS AND CLAIMS. The Company shall assume all risk of loss
or damage to any VEHICLE purchased by the Dealer from the Company which is not
borne by the carrier while the VEHICLE is in the possession of the carrier
provided the Dealer properly inspects and records any loss or damage of the
VEHICLE upon receipt thereof. The Dealer shall cooperate with the Company in
processing all claims for loss or damage of the VEHICLE in accordance with the
Company's then current procedures.
11. (d) DEMURRAGE AND DIVERSION LIABILITY. The Dealer shall be responsible
for and pay any and all demurrage, storage and other charges accruing after
arrival of any shipment at its destination. In the event the Dealer shall fail
or refuse for any reason (other than labor difficulty in the Dealer's place of
business or any cause beyond the Dealer's control or without the Dealer's fault
or negligence) to accept delivery of any COMPANY PRODUCT ordered by the Dealer,
the Dealer shall also pay the Company the amount of all expenses incurred by the
Company in shipping such product to the Dealer and in returning such product to
the original shipping point or diverting it to another destination but in no
event shall the Dealer pay the Company more for any such decision than the
expense of returning the product to its original shipping point.
11. (e) STATE AND LOCAL TAXES. The Dealer hereby represents and warrants
that all COMPANY PRODUCTS purchased from the Company are purchased for resale in
the ordinary course of the Dealer's business. The Dealer further represents and
warrants that the Dealer has complied with all requirements for his collection
and/or payment of applicable sales, use and like taxes, and has furnished or
will furnish evidence thereof to the Company. These representations and
warranties shall be deemed a part of each order given by the Dealer to the
Company.
The Dealer agrees that, as to any COMPANY PRODUCT put to a taxable use by
the Dealer, or in fact purchased by the Dealer other than for resale, the Dealer
shall make timely and proper return and payment of all applicable sales, use and
like taxes, and shall hold the Company harmless from all claims and demands
therefor.
RECORDS, INSPECTIONS AND TESTS
12. (a) RECORD RETENTION. The Dealer shall retain for at least two (2)
years all records and documents, including journals and ledgers, which relate in
any way,in whole or in part, to DEALERSHIP OPERATIONS, except for records used
as a basis for submission of warranty and policy claims, which shall be retained
for at least one (1) year.
12. (b) INSPECTION AND TESTS. The Dealer shall allow persons designed by
the Company, at reasonable times and intervals and during normal business hours,
to examine the DEALERSHIP FACILITIES and OPERATIONS, the Dealer's stocks of
COMPANY PRODUCTS and used vehicles and vehicles at the DEALERSHIP FACILITIES for
service or repair, to test the Dealer's equipment, to check and instruct the
Dealer and his employees in the proper handling of warranty and other repairs
and claims based thereon, and to examine, copy and audit any and all of the
Dealer's records and documents. The Company may charge back to the Dealer all
payments or credits made by the Company to the Dealer pursuant to such claims or
otherwise which were improperly claimed or paid.
CHANGES IN COMPANY PRODUCTS
13. The Company may change the design of any COMPANY PRODUCT, or add any
new or different COMPANY PRODUCT or line, series or body style of VEHICLES, at
any time and from
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CHANGES IN COMPANY PRODUCTS (CONTINUED)
time to time, without notice or obligation to the Dealer, including any
obligation with respect to any COMPANY PRODUCT theretofore ordered or purchased
by or delivered to the Dealer. Such changes shall not be considered model year
changes as contemplated by the provisions of any VEHICLE TERMS OF SALE
BULLETIN. The Company may discontinue any VEHICLE or other COMPANY PRODUCT at
any time without liability to the Dealer.
DEALER NOT AGENT OF THE COMPANY
14. This agreement does not in any way create the relationship of
principal and agent between the Company and the Dealer and under no
circumstances shall the Dealer be considered to be an agent of the Company. The
Dealer shall not act or attempt to act, or represent himself, directly or by
implication, as agent of the Company or in any manner assume or create any
obligation on behalf of or in the name of the Company.
TRADEMARKS AND TRADE NAMES
15. (a) USE IN FIRM NAME. The Dealer may not use any trademark or trade
name used or claimed by the Company or any of its subsidiaries in the Dealer's
firm name or trade name except with the Company's prior written approval. If,
after such approval, the Company should at any time so request, the Dealer
shall promptly discontinue such use and take all steps necessary or appropriate
in the opinion of the Company to eliminate such trademark or trade name from
the Dealer's firm name or trade name.
15. (b) LIMITATIONS ON USE. The Dealer shall not use any trademark or
trade name used or claimed by the Company or any of its subsidiaries, or coined
words or combinations containing the same or parts thereof, in connection with
any business conducted by the Dealer other than in dealing in COMPANY PRODUCTS
to which such trademark or trade name refers, and then only in the manner and
form approved by the Company; provided that the word "Ford" may be used in
connection with a business operated by or affiliated with the Dealer as the
Dealer's used vehicle outlet if the Dealer obtains the Company's prior written
approval, which may be revoked at any time, and if the Dealer retains the right
to require any such affiliated business to discontinue such use at any time the
Dealer may direct. The Dealer shall direct such discontinuance on request of
the Company at any time.
The Dealer shall not contest the right of the Company to exclusive use of
any trademark or trade name used or claimed by the Company or any of its
subsidiaries.
REPORTS TO FORD MOTOR COMPANY'S DEALER POLICY BOARD
16. In the interest of maintaining harmonious relationships between the
parties to this agreement, the Dealer shall report promptly in writing to the
Company's Dealer Policy Board (hereafter called "Policy Board") any act or
failure to act on the part of the Company or any of its representatives which
the Dealer believes was not in accordance with this agreement or was not
reasonable, fair, for good cause or provocation or in good faith as to the
Dealer. For the purposes of this agreement, the term "good faith" shall mean
the Company and its representatives acting in a fair and equitable manner
toward the Dealer so as to guarantee the Dealer freedom from coercion or
intimidation from the Company. It is the purpose of the Policy Board to
receive, carefully, evaluate and, to the extent possible, resolve any such
claim to the mutual satisfaction of the parties. Any decision of the Policy
Board shall be binding on the Company but shall not be binding on the Dealer.
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<PAGE> 16
TERMINATION OR NONRENEWAL OF AGREEMENT
17. (A) BY DEALER. The Dealer may terminate or not renew this agreement
at any time at will be giving the Company at least thirty (30) days prior
written notice thereof.
17. (B) BY COMPANY DUE TO EVENTS CONTROLLED BY DEALER. The following
represent events which are substantially within the control of the Dealer and
over which the Company has no control, and which are so contrary to the intent
and purpose of this agreement as to warrant its termination or nonrenewal:
(1) Any transfer or attempted transfer by the Dealer of any interest in,
or right, privilege or obligation under this agreement; or transfer by
operation of law or otherwise, of the principal assets of the Dealer
that are required for the conduct of DEALERSHIP OPERATIONS; or any
change, however accomplished, without the Company's prior written
consent, which consent shall not be unreasonably withheld, in the
direct or indirect ownership or operating management of the Dealer as
set forth in paragraph F.
(2) Any misrepresentation in applying for this agreement by the Dealer or
any person named in paragraph F; or submission by the Dealer to the
Company of any false or fraudulent application or claim, or statement
in support thereof, for warranty, policy or campaign adjustments, for
wholesale parts or VEHICLE sales incentives or for any other refund,
credit, rebate, incentive, allowance, discount, reimbursement or
payment under any Company program; or acceptance by the Dealer of any
payment for any work not performed by the Dealer in accordance with
the provisions of this agreement, the Warranty Manual or any
applicable CUSTOMER SERVICE BULLETIN.
(3) Insolvency of the Dealer, inability of the Dealer to meet debts as
they mature, filing by the Dealer of a voluntary petition under any
bankruptcy or receivership law, adjudication of the Dealer as a
bankrupt or insolvent pursuant to an involuntary petition under any
such law, appointment by a court of a temporary or permanent receiver,
trustee or custodian for the Dealer or the Dealer's assets, or
execution of an assignment by the Dealer for the benefit of creditors;
dissolution of the Dealer; or failure of the Dealer for any reason to
function in the ordinary course of business, or to maintain the
DEALERSHIP OPERATIONS open for business during and for not less than
the hours customary in the trade and lawful in the DEALER'S LOCALITY
as set forth in paragraph 7.
(4) Conviction in a court of original jurisdiction of the Dealer or any
person named in paragraph F for any violation of law, or any conduct
by any such person unbecoming a reputable businessman, or disagreement
between or among any persons named in paragraph F, which in the
Company's opinion tends to affect adversely the operation or business
of the Dealer or the good name, goodwill or reputation of the Dealer,
other authorized dealers of the Company, the Company, or COMPANY
PRODUCTS.
(5) The Dealer shall have engaged, after written warning by the Company,
in any advertising or business practice contrary to the provisions of
subparagraph 6(i) of this agreement.
(6) Failure of the Dealer to fulfill any provision of paragraph 10 (as to
prices or charges), or paragraph 11 (as to terms and title, including
payment for COMPANY PRODUCTS), or paragraph 15 (as to trademarks or
trade names), or to pay the Company any sum due pursuant to any
agreement, including any purchase or lease agreement, between the
Company and the Dealer.
Upon occurrence of any of the foregoing events, the Company may terminate
this agreement by giving the Dealer at least fifteen (15) days prior written
notice thereof.
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<PAGE> 17
TERMINATION OR NONRENEWAL OF AGREEMENT (CONTINUED)
17. (C) BY COMPANY FOR NONPERFORMANCE BY DEALER OF SALES, SERVICE,
FACILITIES OR OTHER RESPONSIBILITIES. If the Dealer shall fail to fulfill any
of his responsibilities with respect to:
(1) CARS or TRUCKS under the provisions of paragraph 2 of this agreement,
(2) GENUINE PARTS under the provisions of paragraph 3 of this agreement,
(3) Service under the provisions of paragraph 4 of this agreement,
(4) DEALERSHIP LOCATION or FACILITIES under the provisions of paragraph 5
of this agreement, or
(5) Other responsibilities under the provisions of subparagraphs 6(a)
through 6(h) (as to signs, personnel, residence, capital, accounting system,
financial reports, delivery or sales reports or customer handling),
subparagraph 6(j) (as to laws, rules or regulations), paragraph 12 (as to
records, inspections and tests) or paragraph 14 (as to the Dealer not being an
agent of the Company) of this agreement,
the Company shall notify the Dealer in writing of such failure or failures,
will offer to review promptly with the Dealer the reasons which, in the
Company's or Dealer's opinion, account for such failure or failures and will
provide the Dealer with a reasonable opportunity to cure the same. If the
Dealer fails or refuses to cure the same within a reasonable time after such
notice, the Company may terminate or not renew this agreement by giving the
Dealer at least ninety (90) days prior written notice thereof.
17. (D) BY COMPANY OR DEALER BECAUSE OF DEATH OR PHYSICAL OR MENTAL
INCAPACITY OF ANY PRINCIPAL OWNER. Since this agreement has been entered into
by the Company in reliance upon the continued participation in the ownership of
the Dealer by the persons named in subparagraph F(i) hereof, the Company or the
Dealer may (subject to the provisions of paragraph 20 hereof) terminate or not
renew this agreement, by giving the other at least fifteen (15) days prior
written notice thereof, in the event of the death or physical or mental
incapacity of any owner of the Dealer named in subparagraph F(i); provided,
however, that in order to facilitate orderly termination and liquidation of the
dealership, the Company shall defer for a period of three (3) months to one (1)
year, as the Company may determine, the exercise of its right to terminate in
such event if the executor or representative of such deceased or incapacitated
owner shall so request and shall demonstrate the ability to carry out the terms
and conditions of this agreement.
17. (E) BY COMPANY OR DEALER FOR FAILURE OF DEALER OR COMPANY TO BE
LICENSED. If the Company or the Dealer requires a license for the performance
of any responsibility under this agreement in any jurisdiction where this
agreement is to be performed and if either party shall fail to secure and
maintain such license, or if such license is suspended or revoked, irrespective
of the cause or reason, either party may terminate or not renew this agreement
by giving the other at least fifteen (15) days prior written notice thereof.
17. (F) BY COMPANY AT WILL. If this agreement is not for a stated term
specified in paragraph G of this agreement, the Company may terminate this
agreement at will at any time by giving the Dealer at least one hundred and
twenty (120) days prior written notice thereof.
17. (G) BY COMPANY UPON THE OFFER OF A NEW AGREEMENT. The Company may
terminate this agreement at any time by giving the Dealer at least thirty (30)
days prior written
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<PAGE> 18
17. TERMINATION OR NONRENEWAL OF AGREEMENT (CONTINUED)
notice thereof in the event the Company offers a new or amended form of
agreement to its authorized dealers in COMPANY PRODUCTS.
17.(H) ACTS IN GOOD FAITH.
(1) The Dealer acknowledges that each of his responsibilities under this
agreement is reasonable, proper and fundamental to the purpose of this
agreement and that (i) his failure to fulfill any of them would
constitute a material breach of this agreement, (ii) the occurrence of
any of the events set forth in subparagraph 17(b), 17(c), or 17(e)
would seriously impair fundamental considerations upon which this
agreement is based, and (iii) the rights of termination or nonrenewal
reserved in the events specified in subparagraph 17(g) are necessary
to permit the Company to remain competitive at all times. The Dealer
acknowledges that any such failure, occurrence or event constitutes a
reasonable, fair, good, due and just cause and provocation for
termination or nonrenewal of this agreement by the Company.
(2) The Dealer agrees that if the Company or any of its representatives
(i) requests the Dealer to fulfill any of such responsibilities, (ii)
believes that any such failure, occurrence or event is occurring or
has occurred and advises the Dealer that, unless remedied, such
failure, occurrence or event may result in Company termination or
nonrenewal of this agreement, (iii) gives the Dealer notice of
termination or nonrenewal, or terminates or fails to renew this
agreement, because of any such failure, occurrence or event, then such
request, advice, notice, termination or nonrenewal shall not be
considered to constitute or be evidence of coercion or intimidation,
or threat thereof, or to be unreasonable, unfair, undue or unjust, or
to be not in good faith.
REQUIRED APPEAL TO POLICY BOARD--TERMINATIONS OR NONRENEWALS--OPTIONAL
ARBITRATION PLAN
18. (A) ARBITRATION PLAN. The Company has adopted the Ford Motor Company
Plan and Rules of Arbitration ("Arbitration Plan") effective June 1, 1972, a
copy of which was delivered to the Dealer with this agreement. The Company
reserves the right to terminate, change or modify the Arbitration Plan at any
time upon notice to the Dealer. Any arbitration pursuant to the Arbitration
Plan shall be governed by the terms of the Arbitration Plan in effect on the
date such arbitration is commenced.
18. (B) APPEAL TO POLICY BOARD. Any protest, controversy or claim by the
Dealer (whether for damages, stay of action or otherwise) with respect to any
termination or nonrenewal of this agreement by the Company or the settlement of
the accounts of the Dealer with the Company after any termination or nonrenewal
of this agreement by the Company or the Dealer has become effective, shall be
appealed by the Dealer to the Policy Board within fifteen (15) days after the
Dealer's receipt of notice of termination or nonrenewal, or, as to settlement
of accounts after termination or nonrenewal, within one year after the
termination or nonrenewal has become effective. Appeal to the Policy Board
shall be a condition precedent to the Dealer's right to pursue any other remedy
available under this agreement or otherwise available under law. The Company,
but not the Dealer, shall be bound by the decision of the Policy Board.
18. (C) OPTIONAL ARBITRATION. If the Dealer is dissatisfied with the
decision of the Policy Board in a case referred to in subparagraph 18(b), the
Dealer may, at his option, elect to arbitrate
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<PAGE> 19
18. REQUIRED APPEAL TO POLICY BOARD--TERMINATIONS OR NONRENEWALS--OPTIONAL
ARBITRATION PLAN (CONTINUED)
in accordance with the Arbitration Plan or elect not to arbitrate and retain
the right to pursue whatever other remedies may be available, provided that:
(1) The Dealer's election to arbitrate shall be made by filing an
Arbitration Demand with the Secretary appointed under the Arbitration
Plan within thirty (30) days after receipt by the Dealer of a decision
by the Policy Board. The Arbitration Demand shall set forth a clear
and complete statement of the nature of the Dealer's claim and the
basis thereof, the amount involved, if any, and the remedy sought. The
Arbitration Demand shall be in writing and shall be given by personal
delivery or sent by registered or certified mail, postage prepaid, to
the Secretary, Arbitration Panel, Ford Motor Company, The American
Road, Dearborn, Michigan 48121.
(2) If the Dealer, by filing a timely Arbitration Demand, elects to
arbitrate, arbitration shall be the sole and exclusive remedy of the
Dealer in such cases, and the decision and award of the Arbitration
Panel provided for in the Arbitration Plan shall be final and bonding
on both parties.
(3) If the Dealer elects to arbitrate, either party may enjoin the other
from pursuing any other remedy in such cases, except that either party
may sue to enforce any order or award of the Arbitration Panel and
judgment upon such order or award may be entered by any court having
jurisdiction.
18.(D) LIMITATION OF ACTIONS. If the Dealer elects not to arbitrate by
failing to file a timely Arbitration Demand, all causes of action at law or in
equity and all rights and remedies before federal, state, or local
administrative agencies, departments or boards shall be forever barred unless
commenced or instituted within one year after the date of the decision of the
Policy Board.
18.(E) EXPENSES OF ARBITRATION. During the first quarter of each calendar
year, the Company and the Chairmen of the Ford and Lincold-Mercury National
Dealer Councils ("Dealer Council Chairmen") shall jointly establish a budget
for that calendar year for the retainer fees, daily fees, clerical costs,
travel expenses and living allowances ("Compensation") of the Arbitrator
selected by the Dealer Council Chairmen, for one-half of the Compensation of
the Arbitrator selected as Chairman of the Arbitration Panel, and for one-half
of the cost of outside services employed by the Arbitration Panel, pursuant to
the Arbitration Plan.
(1) The amount of such budget shall be advanced by the Company to a Trustee
selected by the Company and the Dealer Council Chairmen. The Trustee
shall pay the Compensation of the Arbitrator selected by the Dealer
Council Chairmen, one-half of the Compensation of the Chairman of the
Arbitration Panel, and one-half of the cost of outside services
employed by the Arbitration Panel, as statements are rendered therefor,
from and to the extent of such advance. All other costs of the
Arbitration Panel for that calendar year shall be borne by the Company
except as hereinafter provided. Any unexpended portion of such budget
shall be carried forward to the next calendar year.
(2) The amount of such bedget shall be spread in equal amounts among all
dealerships then having valid and outstanding Ford, Mercury or Lincoln
Sales and Service Agreements with the Company ("Authorized Dealers").
Such equal amount shall be charged to each Authorized Dealer. The
Dealer shall promptly pay the amount so charged.
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<PAGE> 20
18. REQUIRED APPEAL TO POLICY BOARD -- TERMINATION OR NONRENEWALS --
OPTIONAL ARBITRATION PLAN (CONTINUED)
(3) Each party shall pay and bear all costs of any witness called or other
evidence adduced by that party, of any attorney, accountant or other
person retained by that party and of any transcript ordered by that
party in connection with any arbitration under the Arbitration Plan.
(4) The Arbitration Panel, as a part of any award, may assess, against any
party or parties to an arbitration under the Arbitration Plan, all or
any part of the costs of any witness called, any other evidence
adduced, or any outside service employed, at the direct request of any
Arbitrator.
OBLIGATIONS UPON TERMINATION OR NONRENEWAL
19. Upon termination or nonrenewal of this agreement by either party, the
Dealer shall cease to be an authorized Ford dealer; and:
19.(A) SUMS OWING THE COMPANY. The Dealer shall pay to the Company all
sums owing to the Company by the Dealer.
19.(B) DISCONTINUANCE OF USE OF TRADEMARKS AND TRADE NAMES. The Dealer
shall at his own expense (1) remove all signs erected or used by the Dealer, or
by any business associated or affiliated with the Dealer, and bearing the name
"Ford" or any other trademark or trade name used or claimed by the Company or
any of its subsidiaries (except signs owned by the Company and except as such
use may be permitted under other agreements relating to products of the Company
other than COMPANY PRODUCTS) or any word indicating that the Dealer is an
authorized dealer with respect to any COMPANY PRODUCT, (2) erase or obliterate
all such trademarks, trade names and words from stationery, forms and other
papers used by the Dealer, or any business affiliated with the Dealer, (3)
discontinue all advertising of the Dealer as an authorized dealer in COMPANY
PRODUCTS, (4) discontinue any use of any such trademark, trade name or word in
the Dealer's firm or trade name and take all steps necessary or appropriate in
the opinion of the Company to change such firm or trade name to eliminate any
such trademark, trade name or word therefrom, and (5) refrain from doing
anything whether or not specified above that would indicate that the Dealer is
or was an authorized Dealer in COMPANY PRODUCTS.
If the Dealer fails to comply with any of the requirements of this
subparagraph 19(b), the Dealer shall reimburse the Company for all costs and
expenses, including reasonable attorney's fees, incurred by the Company in
effecting or enforcing compliance.
19.(C) WARRANTY WORK. The Dealer shall cease to be eligible to receive
reimbursement from the Company with respect to any work thereafter performed or
part thereafter supplied under any warranty or policy applicable to any COMPANY
PRODUCT, unless specifically authorized by the Company in writing to perform
such work and then only in the manner and for the period of time set forth in
such authorization.
19.(D) SERVICE RECORDS. The Dealer shall deliver to the Company or its
nominee all of the Dealer's records with respect to predelivery, warranty,
policy, campaign and other service work of the Dealer.
19.(E) ORDERS AND CUSTOMER DEPOSITS. The Dealer shall assign to the
Company or its nominee all customer orders for COMPANY PRODUCTS which the
Dealer has not filled and
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19. OBLIGATIONS UPON TERMINATION OR NONRENEWAL (CONT.)
which the Company is not obligated by subparagraph 19(f) to supply to the
Dealer, and all customer deposits made thereon; and deliver to the Company or
its nominee the names and addresses of the Dealer's existing and prospective
customers for COMPANY PRODUCTS.
19.(F) DELIVERIES AFTER TERMINATION OR NONRENEWAL. If this agreement
shall be terminated or not renewed by the Company (1) because of the death or
physical or mental incapacity of any principal owner of Dealer pursuant to
subparagraph 17(d) hereof, or (2) at will pursuant to subparagraph 17(f)
hereof, the Company shall use its best efforts to fill the Dealer's bona fide
orders for COMPANY PRODUCTS outstanding on the effective date of termination or
nonrenewal. The Company's fulfillment of such orders for VEHICLES, however, may
be limited to the number and type of VEHICLES delivered to the Dealer by the
COMPANY during the ninety (90) days immediately preceding such date, or the
number and type of bona fide retail orders for VEHICLES accepted by the Dealer
and unfilled on such date, whichever is smaller. Deliveries under this
subparagraph shall be made in substantial accord with the Company's normal
delivery schedules for the area, unless the Company elects to make all such
deliveries within thirty (30) days after the effective date of termination. The
Dealer shall inspect, condition and repair such VEHICLES in the manner
specified in this agreement and in accordance with procedures outlined by the
Company from time to time.
Except for deliveries required by this subparagraph 19(f), each order for
a COMPANY PRODUCT received by the Company from the Dealer and unfilled on the
effective date of termination or expiration of this agreement shall be deemed
cancelled.
SUCCESSOR TO THE DEALER IN THE EVENT OF DEATH OR INCAPACITY
20. In the event of termination or nonrenewal of this agreement by the
Company pursuant to subparagraph 17(d) because of the death or physical or
mental incapacity of a principal owner of the Dealer named in subparagraph F(i)
hereof:
20.(A) INTERIM AGREEMENT. The Company, subject to the other provisions
of this paragraph, shall offer an Interim Ford Sales and Service Agreement for
COMPANY PRODUCTS:
(1) To a successor dealership composed of the last person nominated by
such principal owner as his successor, together with any other
principal and remaining owners named in subparagraphs F(i) and F(iii)
(hereafter called "Other Owners") hereof, provided that:
(i) The nomination had been submitted to the Company in writing on
the form supplied by the Company with the consent of the Other
Owners prior to such death or the occurrence of such incapacity,
and
(ii) The Company, upon receipt of the nomination had accepted the
nominee as then being qualified (or as capable of becoming
qualified in five (5) years), and at the time the notice of
termination or nonrenewal is given approves the nominee as then
being qualified, to assume full managerial authority for the
DEALERSHIP OPERATIONS, which acceptance or approval shall not be
unreasonably withheld, and
(iii) The nominee has been named as a manager of, and has been
actively participating in the general management of, the Dealer
or a satisfactorily performing automotive or comparable retail
business for a reasonable period of time prior to the time of
the notice of termination or nonrenewal, and
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20. SUCCESSOR TO THE DEALER IN THE EVENT OF DEATH OR INCAPACITY
(CONTINUED)
(iv) The successor dealership, at the time the Interim Agreement is to
be offered, has capital and facilities substantially in
accordance with Company GUIDES therefor, and
(v) In the event more than one nominee fulfills the above conditions,
the Company, in its discretion, shall determine which nominee or
nominees, together with the Other Owners, shall compose the
successor dealership to which such Interim Agreement shall be
offered;
(2) To a successor dealership, in the event that such principal owner has
notified the Company in writing that the spouse or another relative
or heir of such principal owner shall retain or acquire a financial
interest in the successor dealership and the Company has approved
such spouse, relative or heir for such financial interest which
approval shall not be unreasonably withheld. Such successor dealership
shall be composed of such spouse, relative or heir, together with the
Other Owners and any nominee or nominees approved and qualified
pursuant to subparagraph 20(a) (1) hereof, provided that:
(i) The Other Owners and any nominees and such spouse, relative
or heir agree in writing how each of them shall participate in
the ownership and management of the successor dealership, and
(ii) Managerial authority and responsibility of the successor
dealership shall be vested in a nominee approved and qualified
pursuant to subparagraph 20(a) (1) hereof, or in a person or
persons who have been named in subparagraph F (ii) to this
agreement and have been actually participating in the general
management of the Dealer for a reasonable period of time prior
to the notice of termination or nonrenewal or in another person
or persons qualified to assume managerial authority and
responsibility and approved by the Company to be so named, which
approval shall not be unreasonbly withheld, and
(iii) The successor dealership, at the time the Interim Agreement is
to be offered, has capital and facilities substantially in
accordance with Company GUIDES therefor;
(3) To a successor dealership, in the event that the decreased or
incapacitated principal owner has neither nominated a successor
pursuant to subparagraph 20(a) (1) hereof, nor notified the Company
of a retained or acquired financial interest pursuant to subparagraph
20(a) (2) hereof, which successor dealership shall be composed of the
Other Owners; provided that the Other Owners agree in writing how
each of them shall participate in the ownership and management of the
successor dealership and the successor dealership fulfills the
conditions set forth in subparagraphs 20(a) (2)(ii) and (iii) of this
agreement.
20. (B) BUY-OUT. The successor dealership named in such Interim
Agreement shall arrange in writing, subject to the approval of the Company which
shall not be unreasonably withheld, for one or more persons named in
subparagraph F(ii) of the Interim Agreement to have the right to acquire during
its term at least a 20% ownership interest in the successor dealership and, if
the successor dealership is offered a standard Sales and Service Agreement for
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20. SUCCESSOR TO THE DEALER IN THE EVENT OF DEATH OR INCAPACITY
(CONTINUED)
COMPANY PRODUCTS at the expiration of the Interim Agreement, to have the right
to acquire additional ownership interests therein during the first five (5)
years of such standard agreement and, at the end of such five (5) years, to
acquire the entire ownership interest therein.
20. (C) TERM/CONTINUATION. Any Interim Agreement offered pursuant to this
paragraph 20 shall be in the form in effect between the Company and its
authorized dealers in COMPANY PRODUCTS at the time of such offer, and the term
of such Interim Agreement shall be for twenty-four (24) months, or such longer
term as the Company shall determine to be reasonable to permit the person or
persons named in subparagraph F(ii) thereof to acquire a 20% ownership interest
in the successor dealership pursuant to subparagraph 20(b) of this agreement,
subject to termination during such term as provided in such Interim Agreement.
At lease ninety (90) days prior to the end of the term of such Interim
Agreement, the Company shall determine whether or not the person or persons
composing the successor dealership with which such Interim Agreement shall have
been executed possess the qualifications with respect to management, capital and
facilities necessary to fulfill the responsibilities of an authorized dealer in
COMPANY PRODUCTS and, if the Company shall determine that they do possess the
same, which determination shall not be unreasonably made, the Company shall
offer to such successor dealership, upon the expiration of the term of the
Interim Agreement, a standard Sales and Service Agreement for COMPANY PRODUCTS
in the form then in effect.
20. (D) LIMITATION OF OFFER. Notwithstanding anything stated or implied
to the contrary in this paragraph 20, the Company shall not be obligated to
offer an Interim Agreement to any successor dealership if the Company has
notified the Dealer in writing prior to such death or physical or mental
incapacity that the Company's market representation plans do not provide for
continuation of representation from the DEALERSHIP FACILITIES as determined by
the Company under paragraph 9 of this agreement. If such market representation
plans provide for the relocation of the Dealer to another location, however,
the Company shall offer an Interim Agreement subject to the condition that the
successor dealership relocate within a reasonable time to such other location
in facilities approved by the Company.
20. (E) LIMITATION FOR ACCEPTANCE. In the event that the person or
persons composing a proposed successor dealership to which any offer of an
Interim Agreement or Standard Sales and Service Agreement for COMPANY PRODUCTS
shall have been made pursuant to this paragraph 20 shall not accept the same
within thirty (30) days after notification to them of such offer, such offer
shall automatically expire.
REACQUISITION OF COMPANY PRODUCTS AND ACQUISITION OF THE DEALER'S SIGNS,
SPECIAL TOOLS AND EQUIPMENT, AND MAINTENANCE ITEMS
21. Upon termination or nonrenewal of this agreement by the Company, the
Dealer may elect as provided in paragraph 23 or, upon termination or nonrenewal
of this agreement by the Dealer, the Dealer may demand in his notice of
termination or nonrenewal, to have the Company purchase or accept upon return
from the Dealer, in return for his general release specified in paragraph 23:
21. (A) VEHICLES. Each unused, undamaged and unsold VEHICLE (together
with all factory-installed options thereon) in the Dealer's stock on the
effective date of such termination or
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<PAGE> 24
21. REACQUISITION OF COMPANY PRODUCTS AND ACQUISITION OF THE DEALER'S
SIGNS, SPECIAL TOOLS AND EQUIPMENT, AND MAINTENANCE ITEMS
(CONTINUED)
nonrenewal, provided such VEHICLE is in first-class salable condition, is of a
then current model has not been altered outside the Company's factory, and was
purchased by the Dealer from the Company or another authorized dealer in
VEHICLES prior to giving or receiving notice of such termination or nonrenewal.
The price for such VEHICLE shall be its DEALER PRICE, plus the Company's charges
for distribution, delivery and taxes, at the time it was purchased from the
Company, less all allowances paid or applicable allowances offered thereon by
the Company.
21. (B) GENUINE PARTS. Each unused, undamaged and unsold GENUINE PART, and
each unopened item of appearance and maintenance materials and paints
(hereinafter called "maintenance items") in the Dealer's stock on the effective
date of such termination or non-renewal, provided such GENUINE PART or
maintenance item is offered for sale by the Company to authorized dealers in
VEHICLES in the Company's then current Parts and Accessories Price Schedules,
is in first-class salable condition including reasonably legible and usable
packaging and was purchased by the Dealer from the Company or another Company
authorized dealer in normal volume prior to giving or receiving notice of such
termination or nonrenewal. Notwithstanding the foregoing, the repurchase of such
GENUINE PARTS identified by the Company as accessories shall be limited to
those so purchased by the Dealer within twelve (12) months preceding such
date, or those sold to the Dealer by the Company for use in a VEHICLE that is a
current model on such effective date. The price for each such GENUINE PART or
maintenance item shall be its DEALER PRICE in effect on the effective date of
termination or non-renewal, less all allowance paid or applicable allowances
offered thereon by the Company. The Dealer, at his own expense, shall carefully
pack and box such of the eligible GENUINE PARTS and maintenance items as the
Company may direct, and the Company shall pay the Dealer an additional five
percent (5%) of the DEALER PRICE of the eligible GENUINE PARTS and maintenance
items so packaged and boxed.
21. (C) DEALER'S SIGNS. Each sign at DEALERSHIP LOCATION which bears a
trademark or trade name used or claimed by the Company or any of its
subsidiaries, is owned by the Dealer on the effective date of termination or
nonrenewal, was approved by the Company pursuant to subparagraph 6(a) and, if
requested by the Company, is removed by the Dealer at his expenses. The price
for each such sign shall be its fair market value on such effective date as
agreed by the Company and the Dealer, or, if they cannot agree, as determined
by a qualified independent appraiser selected by the Company and the Dealer.
21. (D) SPECIAL TOOLS AND EQUIPMENT. All special tools and automotive
service equipment owned by the Dealer on the effective date of termination or
nonrenewal which were designed especially for servicing VEHICLES, which are of
the type recommended in writing by the Company and designated as "special"
tools and equipment in the applicable CUSTOMER SERVICE BULLETIN or other notice
pertaining thereto sent to the Dealer by the Company, which are in usable and
good condition except for reasonable wear and tear, and which were purchased by
the Dealer within the three (3) year period preceding the effective date of
termination or nonrenewal. The price for each special tool and item of
automotive service equipment shall be its fair market value on such effective
date as agreed by the Company and the Dealer, or, if they cannot agree, as
determined by a qualified independent appraiser selected by the Company and the
Dealer.
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21. REACQUISITION OF COMPANY PRODUCTS AND ACQUISITION OF THE DEALER'S
SIGNS, SPECIAL TOOLS AND EQUIPMENT, AND MAINTENANCE ITEMS (CONTINUED)
21. (E) PROCEDURES, DELIVERY AND TITLE. The Dealer shall return all
property to be purchased or acquired by the Company pursuant to this paragraph
21 in accordance with the procedures and timetables then established by the
Company, shall deliver such property at the DEALERSHIP FACILITIES unless the
Company directs otherwise (in which event the Company shall pay transportation
costs to the place of delivery), shall and hereby does warrant good clear title
to all such property, and shall furnish to the Company evidence satisfactory to
the Company that the Dealer has complied with all applicable bulk sales laws
and that such property is free and clear of all claims, liens and encumbrances.
21. (F) PAYMENT. The Company shall pay the Dealer for the property
purchased or acquired by it pursuant to this paragraph 21 within a reasonable
time following the Dealer's fulfillment of all of the Dealer's obligations under
paragraph 19 and this paragraph 21 subject to the Dealer's tender of a general
release as specified in paragraph 23, and further subject to offset of any
obligations owing by the Dealer to the Company. If the Company has not paid the
Dealer the net amount due the Dealer for such property within a period of two
(2) months after the Dealer has fulfilled his obligations under this paragraph
21 and provided the Dealer has fully complied with paragraphs 19 and 23, the
Company will, at the Dealer's request, advance the Dealer seventy-five percent
(75%) of the estimated amount due the Dealer net of any monies owed to the
Company by the Dealer. The Company will pay the balance of such amount as soon
as practical thereafter.
21. (G) ASSIGNMENT OF BENEFITS. As an assist to the Dealer in effecting an
orderly transfer of his assets to a replacement dealer and to minimize possible
interruptions in customer convenience and service, in the event of termination
or nonrenewal by either party, any rights or benefits with respect to
subparagraphs 21(a), 21(b), 21(c) and 21(d), herein may be assigned by the
Dealer to anyone to whom the Dealer has agreed to sell the respective property
and whom the Company has approved as a replacement for the Dealer. Such
assignments will be subject to Dealer's fulfillment of his obligations under
paragraph 19 and this paragraph 21 and subject to the Dealer's tender of a
general release as specified in paragraph 23.
DEALERSHIP FACILITIES ASSISTANCE UPON NONRENEWAL OR CERTAIN TERMINATIONS
BY THE COMPANY
22. (A) DEALER ELIGIBILITY. The Dealer may elect, as provided in paragraph
23, to have the Company assist the Dealer with respect to the Dealer's Eligible
Facilities (as herein defined), in return for the Dealer's general release as
specified in paragraph 23, upon nonrenewal of this agreement by the Company, or
upon termination of this agreement by the Company, for the following reasons:
(1) Because of disagreement among persons named in paragraph F pursuant
to subparagraph 17(b) (4) or because of the Dealer's failure with
respect to prices or charges, terms or title or trademarks or trade
names, or other sums due the Company pursuant to subparagraph
17(b) (6);
(2) Because of the Dealer's nonperformance of his responsibilities set
forth in paragraphs 2, 3, 4 or 6 pursuant to subparagraph 17(c);
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<PAGE> 26
22. DEALERSHIP FACILITIES ASSISTANCE UPON NONRENEWAL OR CERTAIN
TERMINATION BY THE COMPANY (CONTINUED)
(3) Because of the death or physical or mental incapacity of a principal
owner named in subparagraph F(i) pursuant to subparagraph 17(d)
providing that a successor dealership is not appointed as provided
under paragraph 20;
(4) Because of failure of the Dealer or the Company to be licensed
pursuant to subparagraph 17(e); or
(5) At will pursuant to subparagraph 17(f) if this agreement is not for a
stated term specified in paragraph G of this agreement.
22. (B) ELIGIBLE FACILITIES. "Eligible Facilities" are hereby defined as
only those DEALERSHIP FACILITIES which are listed in the Dealership Facilities
Supplement in effect at the time of such nonrenewal or termination, are
approved by the Company pursuant to paragraph 5, are owned or leased by the
Dealer and are being used by the Dealer solely for fulfilling his
responsibilities under this agreement (or under this agreement and one or more
other vehicle sales agreements with the Company which are not renewed or are
terminated by the Company at the same time as this agreement) at the time the
Dealer received notice of such nonrenewal or termination.
22. (C) COMPANY'S OBLIGATION. Subject to the provisions of subparagraph
22(d) hereof, if neither the Dealer nor the Company can arrange with a third
party within ninety (90) days after the effective date of such termination or
nonrenewal:
(1) In the case of Eligible Facilities which are owned by the Dealer,
either a lease for one year commencing within such ninety (90) days at
fair rental value or a sale within such ninety (90) days at fair
market value; or
(2) In the case of Eligible Facilities which are leased by the Dealer,
either an assignment of lease, or a sublease for one year (or for the
balance of the term of the Dealer's lease if that is shorter)
commencing within such ninety (90) days at the Dealer's rental rate
(or, if the facilities are owned by an affiliate of the Dealer at fair
rental value, if that is different);
the Company shall offer either to make monthly payments to the Dealer,
commencing with the ninety-first day, pursuant to subparagraph 22(e) hereof, or
to make a lump sum payment to the Dealer pursuant to said subparagraph 22(e),
or to accept for itself on the ninety-first day such a lease or sale from the
Dealer-owner or such an assignment or sublease from the Dealer-lessee.
For the purpose of this subparagraph 22(c), fair market or fair rental
value shall mean value based on the use of the facilities in the conduct of
DEALERSHIP OPERATIONS. In the event the Dealer and the Company are unable
to agree on the fair market or rental value of any Eligible Facilities, such
value shall be determined by an independent real estate appraiser selected by
the Dealer and the Company.
22. (D) LIMITATIONS ON COMPANY'S OBLIGATION. The Company's obligation
with respect to any Eligible Facilities shall be limited to those expressly set
forth in this paragraph 22. The Company shall be released from all obligations
with respect to any Eligible Facilities if (1) the Dealer fails to give the
Company, within thirty (30) days after the Company shall have sent him a tender
of benefits as provided in paragraph 23, a written request for assistance
pursuant to this paragraph 22, accompanied by a written representation by the
Dealer that the Dealer
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<PAGE> 27
22. DEALERSHIP FACILITIES ASSISTANCE UPON NONRENEWAL OR CERTAIN
TERMINATIONS BY THE COMPANY (CONTINUED)
and each owner named in subparagraph F(i) is, for a period of at least one (1)
year, retiring from the business of selling new and used passenger cars and
trucks in the general area of the DEALER'S LOCALITY, (2) the Dealer fails to
make diligent efforts to obtain from third parties an offer to purchase, lease,
sublease or take an assignment of lease described in subparagraph 22(c), or
refuses, or within a reasonable time fails to accept, such an offer from a
third party; (3) the Dealer does not accept any offer with respect to Eligible
Facilities made by the Company in accordance with subparagraph 22(c) within
thirty (30) days after receiving it, (4) the Dealer or anyone else occupies
such facilities for any purpose for a period of more than ninety (90) days
following the effective date of such termination or nonrenewal, or (5) the
Company arranges a cancellation of the lease of any leased facilities without
cost to the Dealer or the Dealer fails or refuses to execute an agreement
covering such cancellation.
22. (E) SATISFACTION OF COMPANY'S OBLIGATION. The Company may satisfy
all of its obligations under this paragraph 22 with respect to any Eligible
Facilities by paying to the Dealer (1) if the facilities are owned by the
Dealer, the difference, each month for twelve months (or until facilities are
sold if that is earlier), between any lesser rentals received by the Dealer for
such facilities for such month and the fair rental value of such facilities for
such month, or (2) if the facilities are leased by the Dealer, the difference,
each month for twelve months (or until the expiration of the lease if that is
earlier) between any lesser rentals received by the Dealer for such facilities
for such month and the rental paid by the Dealer (or, if the facilities are
owned by an affiliate of the Dealer, the fair rental value if that is
different) for such facilities for such month, or (3) at the election of the
Company, a lump sum equal to the total payments contemplated in items (1) or
(2) of this subparagraph 22(e), or such lesser sum as may be agreed upon
between the Dealer and the Company, or by paying any lease cancellation cost
negotiated by the Dealer or the Company not to exceed the total of the Company's
obligations under subparagraphs 22(c) and 22(e).
TERMINATION BENEFITS FULL COMPENSATION; GENERAL RELEASE
23. In the event of termination or nonrenewal of this agreement by the
Company, the Company, within thirty (30) days after the effective date thereof,
shall submit to the Dealer (1) a written tender of the benefits provided for in
paragraph 21 (and in paragraph 22 where applicable) and (2) a form for the
Dealer to use to elect either to reject all of such benefits or to accept one
or more of them as full and complete compensation for such nonrenewal or
termination. The Dealer shall have thirty (30) days after receipt of such form
to return the same to the Company evidencing his election. If the Dealer fails
to return the form stating such election within such thirty (30) days, the
Dealer shall be deemed to have elected to accept such benefits. Upon the
Dealer's election to accept any of such benefits, or upon the Dealer's demand
of any such benefits upon any termination or nonrenewal by the Dealer, the
Company shall be released from any and all other liability to the Dealer with
respect to all relationships and actions between the Dealer and the Company,
however claimed to arise, except any liability that the Company may have under
subparagraph 19(f) and said paragraphs 21 and 22, and except for such amounts
as the Company may have agreed in writing to pay to the Dealer. Simultaneously
with the receipt of any benefits so elected or demanded, the Dealer shall
execute and deliver to the Company a general release with exceptions, as above
described, satisfactory to the Company.
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<PAGE> 28
DISPOSITION OF THE DEALER'S ASSETS
24. In view of the nature, purposes and objectives of the Company's
Dealer Sales and Service Agreements, and the differences in operating
requirements among dealerships of differing sizes and types of markets, the
Company expressly reserves the right to select the dealers with whom it will
enter into such agreements so as to maintain as high quality a dealer
organization as possible.
In the event this agreement is terminated or not renewed by either party
or if the Dealer plans to terminate or not renew this agreement, the Company
acknowledges that the Dealer has the right to negotiate for hte sale of the
assets of the Dealer at such price as may be agreed upon by the Dealer and the
prospective purchaser. In turn, the Dealer acknowledges that the Company has
the right to approve or decline to approve any prospective purchaser as to his
character, automotive experience, management, capital and other qualifications
for appointment as an authorized dealer in COMPANY PRODUCTS for the DEALERSHIP
OPERATIONS involved. Approval by the Company of the prospective purchaser shall
not, however, be unreasonably withheld. If, in the opinion of the Company, the
price to be paid for such assets appears, on the basis of the average operating
results of other dealers, to result in an unsatisfactory return on investment
so that such prospective purchaser (1) may not remain as a dealer, or (2) may
be impelled to sell COMPANY PRODUCTS at high noncompetitive prices with a
probable reduction in sales volume, the Company may, without liability to the
Dealer, counsel with such prospective purchaser regarding such opinions.
NEW AGREEMENT
25. The termination or nonrenewal of this agreement by the Company in
connection with the offer by the Company of a new sales and service agreement
for one or more COMPANY PRODUCTS to the Dealer or Dealer's successor in
interest shall not give rise to the rights and obligations provided in
paragraphs 19, 21 and 22 with respect to the COMPANY PRODUCTS included in such
new agreement, unless otherwise specified by the Company in writing.
ACKNOWLEDGEMENTS
26. This agreement terminates and supersedes all other agreements
concerning the DEALERSHIP OPERATIONS and constitutes the entire agreement
between the parties with respect to the subject matter hereof. Each party
acknowledges that, except as expressly set forth herein, no representation,
understanding or presumption of law or fact has been made or relied upon (1)
which has induced the execution of this agreement or would in any way modify
any of its provisions, or (2) with respect to the effectiveness or duration of
this agreement or the sales or profit expectancy of the DEALERSHIP OPERATIONS.
The Dealer further acknowledges that he has voluntarily entered into this
agreement without coercion or intimidation or threats thereof from the Company,
and that each of its provisions is reasonable, fair and equitable.
NO IMPLIED WAIVERS
27. Except as expressly provided in this agreement, the waiver by either
party, or the failure by either party to claim a breach, of any provision of
this agreement shall not constitute a waiver of any subsequent breach, or
affect in any way the effectiveness, of such provision.
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<PAGE> 29
RELATIONS AFTER TERMINATION NOT A RENEWAL
28. In the event that, after termination or nonrenewal of this agreement,
either party has any business relations with the other party with respect to
any COMPANY PRODUCT, such relations shall not constitute either a renewal of
this agreement or a waiver of such termination or nonrenewal, but all such
relations shall be governed by terms identical with the provisions of this
agreement unless the parties execute a new and different agreement.
LIMITATION OF THE COMPANY'S LIABILITY
29. This agreement contemplates that all investments by or in the Dealer
shall be made, and the Dealer shall purchase and resell COMPANY PRODUCTS, in
conformity with the provisions hereof, but otherwise in the discretion of the
Dealer and the Dealer's owners. Except as herein specified, nothing herein
contained shall impose any liability on the Company in connection with the
DEALERSHIP OPERATIONS or otherwise or for any expenditure made or incurred by
the Dealer in preparation for performance or in performance of the Dealer's
responsibilities under this agreement.
NOTICES
30. Any notice required or permitted by this agreement, or given in
connection herewith, shall be in writing and shall be given by personal
delivery or by first-class or certified or registered mail, postage prepaid.
Notices to the Company shall be delivered to or addressed to the District Sales
Manager of the area in which the Dealer is located except notices given by the
Dealer either to the Policy Board or pursuant to the Arbitration Plan. Notices
to the Dealer shall be delivered to any person designated in paragraph F(ii) of
this agreement or directed to the Dealer at the Dealer's principal place of
business as described herein.
AMENDMENT
31. Notwithstanding anything in this agreement to the contrary, the
Company shall have the right to amend, modify or change this agreement in case
of legislation, government regulation or changes in circumstances beyond the
control of the Company that might affect materially the relationship between
the Company and the Dealer.
MICHIGAN AGREEMENT
32. This agreement has been signed by the Dealer and sent to the Company
in Michigan for final approval and execution and has there been signed and
delivered on behalf of the Company. The parties intend this agreement to be
executed as a Michigan Agreement and to be construed in accordance with the
laws of the State of Michigan.
SEPARATELY OR TERMINATION
33. If any provision of this agreement is invalid or unenforceable under
the law of the place where it is to be performed, the Company may elect either
to terminate this agreement in its entirety, or to consider this agreement
divisible as to such provision and such provision inoperative, and to continue
the remainder of this agreement in full force and effect as if such provision
had not been included herein.
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<PAGE> 1
EXHIBIT 10.66
NISSAN PUBLIC OWNERSHIP ADDENDUM
This Nissan Public Ownership Addendum (the "Addendum") is entered into effective
the date last set forth below by Nissan Motor Corporation in U.S.A. ("Nissan" or
"Seller") and [Dealer Name] ("Dealer Common Name" or "Dealer"]. In consideration
of the agreements and mutual covenants set forth herein, and other good and
valuable consideration, the receipt and sufficiency which is hereby
acknowledged, the parties hereto agree as follows:
1. THE PUBLIC OWNERSHIP ADDENDUM
The Public Ownership Addendum is an Addendum to, supplements and modifies the
Nissan Dealer Sales and Service Agreement between Nissan and Dealer (the "Dealer
Agreement"), including the Standard Provisions thereto (the "Standard
Provisions"). To the extent that this Addendum conflicts with the Dealer
Agreement, the Addendum controls and shall govern the relationship between the
parties. The Dealer Agreement, to the extent not modified or amended, remains in
full force and effect.
2. DEFINITIONS
The parties agree that the following terms, as used in the Addendum and the
Dealer Agreement shall be defined exclusively as set forth below.
"NISSAN PRODUCTS" shall mean Nissan Vehicles, Genuine Parts and Accessories,
Nissan Security+Plus and such other products and services offered by Nissan to
Dealer and designated in writing by Nissan as a Nissan Product.
"DEALER PRINCIPAL" shall mean the person named in the Final Article of the
Dealer Agreement as "Principal Owner" upon whose personal qualifications,
expertise, integrity, experience, ability and representations Nissan has relied
in entering into this Addendum, and any successor approved in writing by Nissan.
For purposes of this Addendum, the terms "Dealer Principal" and "Principal
Owner" are used interchangeably.
"BUSINESS PLAN" shall mean the written plan meeting Nissan's approval that is
prepared and executed by the Dealer and that contains Dealer's plan and
commitment to develop its business throughout the PMA, including but not limited
to its plan and commitment with respect to organizational, operational,
financial, succession and other issues as well as certain standards on which its
performance hereunder will be evaluated.
3. OWNERSHIP
This Agreement has been entered into by Nissan in reliance upon the commitment,
representation, and agreement of Dealer to provide the personal services of
Dealer Principal and Executive Manager; and in reliance upon the representations
and agreements of Dealer as follows: i) Dealer represents that PUBLIC COMPANY
owns 100% of HOLDING COMPANY, (if applicable) and PUBLIC COMPANY will, at all
times during the term of this Addendum, exercise full management and control of
HOLDING COMPANY; ii) Dealer represents that
<PAGE> 2
HOLDING COMPANY owns 100% of Dealer and will, at all times during the term of
this Addendum, exercise full management and control of Dealer.
In view of the fact that the Dealer Agreement and this Addendum is a personal
services agreement, and in view of its objectives and purposes, this Addendum
and the rights and privileges conferred on Dealer hereunder are not assignable,
transferable or salable; and no property right or interest herein is or shall be
deemed to be sold, conveyed or transferred. Dealer agrees, on behalf of itself,
PUBLIC COMPANY, and HOLDING COMPANY, that any change in the ownership of Dealer
other than specified herein requires the prior written consent of Nissan, if
Dealer desires to remain an Authorized Nissan Dealer. Dealer agrees that,
without the prior written consent of Nissan: i) No sale, pledge, hypothecation
or other transfer of any of the capital stock or ownership interest of Dealer or
HOLDING COMPANY will be made. ii) Dealer or HOLDING COMPANY will not be merged
with or into, or consolidated with, any other entity without Nissan's prior
written consent, nor will the principal assets necessary for the performance of
Dealer's obligations under this Addendum or the Dealer Agreement be sold,
transferred or assigned without Nissan's prior, written consent. Dealer and
HOLDING COMPANY represent that no capital stock, or securities convertible into
capital stock, of Dealer or HOLDING COMPANY will be issued, sold or otherwise
transferred by Dealer and HOLDING COMPANY directly or indirectly to any
automobile manufacturer, automobile distributor, or potential competitor of
Seller, or any affiliate of any of the foregoing.
If any person or entity acquires more than 20% of PUBLIC COMPANY's common stock
issued and outstanding at any time, and Nissan determines that such person or
entity does not have interests compatible with those of Nissan, or is otherwise
not qualified to have an ownership interest in a Nissan dealership (an "Adverse
Person"), Dealer must terminate the Dealer Agreement or transfer Dealer's
principal assets or 100% of the outstanding stock of Dealer to a third party
acceptable to Nissan unless, within 90 days after notification of Nissan's
determination, the Adverse Person's ownership interest is reduced to less than
20%.
The parties to this Addendum expressly agree that, while changes in the
ownership of PUBLIC COMPANY and HOLDING COMPANY may not be entirely within the
control of Dealer, in light of the personal services nature of the Dealer
Agreement and Nissan's substantial interest in the owners of its dealers and
distribution network, and in consideration of Nissan's willingness to enter into
this Public Ownership Addendum with dealer, any transaction involving the
ownership and stock of PUBLIC COMPANY and HOLDING COMPANY which violates the
provisions of this Section 3 of this Addendum shall constitute a substantial and
material breach of the Dealer Agreement and this Addendum and grounds for
termination of the Dealer Agreement and this Addendum.
4. MANAGEMENT
The Dealer Agreement and this Addendum have been entered into in reliance on the
following representations and agreements of Dealer that: i). The Dealer
Principal of Dealer will, subject to any other obligations set forth in the
Dealer Agreement and this Addendum, devote his/her professional efforts to the
business operations of Dealer and the entity for which he/she is
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<PAGE> 3
responsible. ii) Executive Manger will devote his full time and professional
efforts to the affairs of Dealer. iii) The Officers and Directors of Dealer are
set forth in Schedule "A".
Nissan and Dealer agree that the retention by Dealer of qualified management is
of critical importance to the successful operation of Dealer and to the
achievement of their mutual the purposes and objectives. The Dealer Agreement
and Addendum have been entered into by Nissan in reliance upon, and in
consideration of, among other things, the following representations and
agreements of PUBLIC COMPANY, HOLDING COMPANY and Dealer, that: i) The Dealer
Principal and the Executive Manager shall have full and complete control over
the Dealership Operations, subject to the powers of the Board of Directors of
Dealer, to manage the business and affairs of Dealer, and at all times the
Dealer Principal shall be a member of the Board of Directors of Dealer and the
Executive Manager shall be an officer of Dealer. ii) The Board of Directors of
Dealer shall delegate the day to day management of the Dealership Operations to
the Executive Manager. The Board of Directors of Dealer will not exercise any
extraordinary powers or interfere unduly in the day-to-day Dealership
Operations. iii) Executive Manager, subject to any other obligations set forth
in the Dealer Agreement, shall be physically present at the Dealership
Facilities on a full-time basis. iv) Dealer acknowledges and agrees that, in
view of the increased responsibilities of the Dealer Principal of Dealer, Nissan
has and will apply heightened standards with respect to the personal, business
and financial qualifications, expertise, reputation, integrity, experience and
ability of a proposed Dealer Principal.. v) Nissan may from time to time develop
standards and/or procedures for evaluating the performance of Dealer. Nissan
may, from time to time, evaluate the performance of the Dealer and will advise
Dealer, the Dealer Principal and the Executive Manager of the results of such
evaluations.
5. TERM
This Addendum and the Dealer Agreement shall have a term commencing on its
effective date and continuing for a term of five years unless sooner terminated
in accordance with the provisions of the Dealer Agreement and this Addendum. .
Should Dealer be in full compliance with its obligations under the Dealer
Agreement and this Addendum at the end of this term, Dealer will be offered a
new Dealer Agreement and Public Ownership Addendum, in the form then in use by
Nissan.
6. BUSINESS PLAN
Dealer and Nissan shall periodically execute a Business Plan in the form
specified in Nissan's Business Planning Process Workbook that describes how
Dealer will fulfill its sales, service, customer relations, marketing and other
commitments hereunder. The Business Plan is subject to Nissan's approval, is an
essential part of the Dealer Agreement and Public Ownership addendum and is
hereby incorporated in and made a part of this Addendum and the Dealer
Agreement.
The Business Plan shall include the following elements: i) a statement of
Dealer's legal and financial structure, including capitalization, line of credit
and equity ownership; ii) the sales, service, customer relations, marketing and
other standards on which Dealer's performance will
3
<PAGE> 4
be evaluated; iii.) a detailed organizational structure and staffing plans for
the dealer; iv) specific plans for maximizing owner loyalty and customer
satisfaction; v) advertising, merchandising, and marketing plans; vi)
successorship, including the identity of the proposed successors to Dealer,
Dealer Principal (Principal Owner) and/or Executive Manager; and vii) other
standards or plans as agreed by Nissan and dealer. The standards on which
dealer's sales performance will be evaluated will include (i) market share
objectives for Nissan products set by the parties, and (ii) sales penetration
achieved by dealer in each of the various segments in which Nissan vehicles
compete.
Dealer shall review and update its Business Plan annually, or more often if
needed, and submit it to Nissan for review and approval. If Nissan determines
that changes to the proposed Business Plan are necessary, Dealer will make such
changes and resubmit the proposed Business Plan to Nissan. The updated business
plan shall (i) analyze Dealer's performance relative to the objectives,
standards, and plans set forth in the business plan for the preceding year or
other period, (ii) identify any deficiencies in Dealer's performance, and (iii)
specify the steps that Dealer will take to remedy such deficiencies.
If, based on the evaluation thereof made by Nissan, Dealer shall fail to
substantially fulfill its responsibilities with respect to: i) the
implementation of the plans set forth in the Business Plan, including but not
limited to any deviation therefrom; ii) the performance of its sales, service,
customer relations or other obligations based on the standards established
therefor in the Business Plan; or iii) any other material responsibilities
assumed by Dealer, Nissan will notify Dealer of such failure and will review
with Dealer the nature and extent of such failure and the reasons which, in
Nissan's opinion, account for such failure. Thereafter, Nissan will provide
Dealer with a reasonable opportunity to correct the failure. If Dealer fails to
make substantial progress towards remedying such failure before the expiration
of such period, Nissan may terminate the Dealer Agreement, such termination to
be effective at least sixty (60) days after notice is given
7. OTHER DEALER RESPONSIBILITIES
A. BRANDING AND BUSINESS NAME: Dealer shall actively and effectively promote
the "Nissan" name. Under no circumstances shall the name "Nissan" be
subordinated to or promoted less aggressively than any other name (e.g., "PUBLIC
COMPANY") by Dealer.
B. FINANCIAL AND OPERATIONAL REPORTING: Dealer shall furnish to Nissan annual
reviewed financial statements and, upon demand, shall furnish annual certified
financial statements, and otherwise disclose to Nissan in a format satisfactory
to Nissan the financial and operational results of Dealer's Nissan business.
C. EXAMINATION AND AUDIT: Nissan shall be entitled, at all reasonable times
during regular business hours and upon advance notice, to examine, audit and
make and take copies of all records, accounts and supporting data of Dealer,
HOLDING COMPANY AND PUBLIC COMPANY relating to the business, ownership or
operations of Dealer.
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<PAGE> 5
D. DISCLOSURE OF FINANCIAL INFORMATION TO AFFILIATED COMPANIES: Nissan shall
be entitled to disclose to and receive from affiliated companies, including but
not limited to Nissan Motor Acceptance Corporation, all financial statements and
reports provided by Dealer, HOLDING COMPANY and/or PUBLIC COMPANY
8. DISPUTE RESOLUTION PROCESS
A. EXCLUSIVE REMEDY: The parties acknowledge that, at the state and federal
levels, various courts and agencies would, in the absence of this Paragraph 8,
be available to them to resolve claims or controversies which might arise
between them. The parties agree that it is inconsistent with their relationship
for either to use courts or governmental agencies to resolve such claims or
controversies.
THEREFORE, CONSISTENT WITH THE PROVISIONS OF THE UNITED STATES ARBITRATION ACT
(9 U.S.C. ss.ss. 1 et seq.), NISSAN, ON THE ONE HAND, AND DEALER, HOLDING
COMPANY AND PUBLIC COMPANY, ON THE OTHER HAND, AGREE THAT THE DISPUTE RESOLUTION
PROCESS OUTLINED IN THIS PARAGRAPH 12, WHICH INCLUDES BINDING ARBITRATION, SHALL
BE THE EXCLUSIVE MECHANISM FOR RESOLVING ANY DISPUTE, CONTROVERSY OR CLAIM
ARISING OUT OF OR RELATING IN ANY WAY TO THIS PUBLIC OWNERSHIP ADDENDUM, THE
DEALER AGREEMENT OR THE RELATIONSHIP BETWEEN THE PARTIES, INCLUDING BUT NOT
LIMITED TO CLAIMS UNDER ANY STATE OR FEDERAL STATUTES (hereinafter "Disputes").
There are two steps in the Dispute Resolution Process: Mediation and Binding
Arbitration. All Disputes must first be submitted to Mediation, unless that step
is waived by written agreement of the parties. If Mediation does not resolve the
Dispute to their mutual satisfaction, the Dealer or Nissan can submit the
Dispute to Binding Arbitration. Section 16 of the Standard Provisions is deleted
in its entirety.
B. MEDIATION Dealer or Nissan can submit a Dispute to Mediation. Mediation is
conducted by a panel consisting of a Nissan representative designated by Nissan,
a Dealer representative designated by Dealer, and an independent professional
mediator chosen by the parties' representatives. The Mediation Panel will
evaluate each position and recommend a solution. This recommended solution is
not binding.
C. BINDING ARBITRATION: if a Dispute has not been resolved after mediation, or
if dealer and Nissan have agreed in writing to waive mediation, the dispute will
be settled by binding arbitration, with the prevailing party to recover its
costs and attorneys fees from the other party. all awards of the arbitration are
binding and non-appealable except as otherwise provided in the United States
Arbitration Act. Judgment upon any award rendered by the arbitrator(s) may be
entered and enforced in any court having jurisdiction.
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<PAGE> 6
9. RELEASE
Dealer hereby releases Nissan from any and all claims and causes of action that
they or any of them may have against Nissan for money damages or other relief
relating to or arising out of any event occurring prior to the execution of the
Addendum, except for any accounts payable by Nissan to Dealer in connection with
the provision of any services under the Dealer Agreement and any claim described
in Section 11.A.1 of the Standard Provisions. In connection with this release,
Dealer expressly acknowledges and waive their respective rights under California
Civil Code, Section 1542, which provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN ITS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
10. EXCLUSIVITY AND RIGHT OF FIRST REFUSAL
A. EXCLUSIVITY: The additional provisions set forth in Attachment "A" --
"Exclusivity Provisions" -- are hereby incorporated in and made a part of this
Addendum and Dealer Agreement.
B. RIGHT OF FIRST REFUSAL: The additional provisions set forth in Attachment
"B" -- "Right of First Refusal" -- are hereby incorporated in and made a part of
this Addendum and Dealer Agreement.
11. SPECIAL CONDITIONS
WITNESS WHEREOF, the parties have executed this Nissan Addendum in triplicate as
of _______________________________, _______________, at Carson, California.
[DEALER]: NISSAN:
By: By:
---------------------------------- -------------------------------------
Title: Title:
------------------------------- ----------------------------------
6
<PAGE> 7
ATTACHMENT A
TO
NISSAN PUBLIC OWNERSHIP ADDENDUM
EXCLUSIVITY PROVISIONS
In order for Dealer to maintain competitive dealership facilities
to effectively market Nissan Products, Dealer hereby agrees to comply at all
times hereunder with the following provisions (hereinafter "Exclusivity
Provisions").
a) The only line-make of new, unused motor vehicles which Dealer
shall display and sell at the Dealership Facilities shall be the
Nissan line and make of motor vehicles. Dealer shall not conduct
any dealership operations for any other make or line of new,
unused vehicles from the Dealership Facilities throughout the term
of this Agreement.
b) Dealer shall sell and maintain a full line of Genuine Nissan Parts
and Accessories at the Dealership Facilities and shall provide a
full range of automotive servicing for Nissan vehicles at the
Dealership Facilities pursuant to Section 5 of the Standard
Provisions. Nothing contained herein, however, shall preclude
Dealer from offering parts, accessories or servicing for vehicles
of other lines or makes so long as such products or services are
incident to Dealer's Nissan Dealership Operations.
c) Dealer shall not advertise or promote any make or line of new,
unused vehicles from the Dealership Facilities other than the
Nissan line.
d) Dealer shall not install or maintain any sign at or near the
Dealership Facilities which would tend to lead the public into
believing that any line or make of vehicles other than the Nissan
line is sold at the Dealership Facilities.
e) Dealer agrees that under Article Third of the Agreement and
Section 15 of the Standard Provisions Seller may reasonably
require any proposed buyer of Dealer's assets to agree to
identical Exclusivity Provisions as a condition of Seller's
consent to the change of ownership.
f) Any failure by Dealer to abide by the foregoing subparts (a)
through (e) shall constitute a material breach of this Agreement
warranting its termination, and shall constitute "good cause" for
termination.
<PAGE> 8
ATTACHMENT B
TO
NISSAN PUBLIC OWNERSHIP ADDENDUM
RIGHTS OF FIRST REFUSAL
DEALERSHIP ASSETS OR OWNERSHIP INTERESTS
Whenever Dealer proposes to sell its principal assets or the
owners of Dealer propose to sell a majority ownership interest in
Dealer, in addition to its rights under Articles Third and Fourth
of the Dealer Agreement and Section 15.B of the Standard
Provisions, Nissan shall have the right and option to purchase the
dealership assets or ownership interests pursuant to this
Paragraph 10.
i. If Nissan chooses to exercise its option, it must do so in
its written refusal to consent to the proposed sale or
transfer pursuant to Section 15.B. Dealer agrees not to
complete any proposed change or sale prior to the
expiration of the period for exercise of Nissan's option
and without Nissan's prior written consent. Such exercise
shall be null and void if Dealer withdraws its proposal
within thirty (30) days following Dealer's receipt of
Nissan's notice exercising its option.
ii. After being exercised, Nissan's option may be assigned to
any party, and Nissan hereby agrees to guarantee the full
payment of the purchase price by such assignee. Nissan's
rights under this Paragraph 10 shall be binding on and
enforceable against any assignee or successor in interest
of Dealer or purchaser of Dealer's assets. Nissan shall
have no obligation to exercise its rights hereunder.
iii. If Dealer has entered into a bona fide written buy/sell
agreement respecting its Nissan dealership, Nissan's right
under this Paragraph 10 shall be a right of first refusal,
enabling Nissan to assume the prospective purchaser's
rights and obligations under such buy/sell agreement. The
purchase price and other terms of sale shall be those set
forth in such agreement and any related documents. Nissan
may request and Dealer agrees to provide all other
documents relating to Dealer and to the proposed transfer,
including, but not limited to, those reflecting any other
agreements or understandings between the parties to the
buy/sell agreement. Nissan shall have ninety (90) days from
its receipt of all such documents in which to exercise its
right of first refusal hereunder. If Dealer refuses either
to provide such documentation or to state in writing that
no such documents exist, it shall be presumed that the
agreement is not bona fide.
iv. In the absence of a bona fide written buy/sell agreement,
Nissan shall have the option, but no obligation, under this
Paragraph 10 to purchase the
<PAGE> 9
principal assets of Dealer utilized in the Dealership
Operations, including real property and leasehold interest,
and to terminate this Addendum and all rights granted
Dealer hereunder. If the Dealership Facilities are leased
by Dealer from an affiliated company, the right to purchase
the principal assets of Dealer shall include the right to
lease the Dealership Facilities. The purchase price of
Dealer's assets shall be at their fair market value as a
going concern as negotiated by the parties and the other
terms of sale shall be those agreed by Dealer and Nissan.
If Dealer and Nissan are unable to reach a negotiated
settlement in a reasonable time, the price and other terms
of sale shall be established by arbitration pursuant to the
Dispute Resolution Process established in Paragraph 12
hereof. If Nissan determines that the buy/sell agreement is
not bona fide, Nissan will so notify Dealer. Dealer shall
have ten (10) days from its receipt of such notice within
which to withdraw its proposal. Nissan's exercise of its
rights hereunder shall be null and void if Dealer withdraws
its proposal within such time period.
v. Dealer shall transfer the affected property by Warranty
Deed conveying marketable title free and clear of liens,
claims, mortgages, encumbrances, tenancies and occupancies.
The Warranty Deed shall be in proper form for recording and
Dealer shall deliver complete possession of the property at
the time of delivery of the Deed. Dealer shall also furnish
to Nissan copies of any easements, licenses, or other
documents affecting the property and shall assign any
permits or licenses which are necessary for the conduct of
the Dealership Operations.
REAL PROPERTY
Whenever Dealer proposes to sell or lease any of its Dealership
Facilities and/or Dealership Locations, in addition to its rights
under Article Third and Fourth of the Dealer Agreement and Section
15.B of the Standard Provisions, Nissan shall have the right and
option to purchase or lease said Dealership Facilities and/or
Dealership Locations pursuant to this Paragraph 10.B.
i) If Nissan chooses to exercise its right of first refusal,
it must do so by written notice delivered to Dealer within
ninety (90) days of Nissan's receipt of notice of the
proposed sale or lease by Dealer. Dealer agrees not to
complete any proposed sale or lease prior to the expiration
of the period for exercise of Nissan's right of first
refusal and without Nissan's prior written consent, and
agrees to allow Nissan to perform an environmental study of
the property. Dealer also agrees to furnish to Nissan
copies of any easements, licenses, environmental studies or
other documents affecting the property Such exercise shall
be null and void if Dealer withdraws its sale or lease
proposal within thirty (30) days following Dealer's receipt
of Nissan's notice exercising its right of first refusal.
<PAGE> 10
ii) After being exercised, Nissan's right to purchase or lease
may be assigned to any party, and Nissan hereby agrees to
guarantee the full payment of the purchase price or the
rental payment by such assignee. Nissan's rights under this
Paragraph 10.B shall be binding on and enforceable against
any assignee or successor in interest of Dealer or
purchaser of Dealer's assets. Nissan shall have no
obligation to exercise its rights hereunder, and Seller may
rescind its offer if the property is determined to be
contaminated pursuant to an environmental study. Such
contamination shall be deemed a breach of this CMO Addendum
by Dealer.
iii) Dealer shall transfer the affected property by Warranty
Deed conveying marketable title free and clear of liens,
claims, mortgages, encumbrances, tenancies and occupancies,
or, if applicable, by an assignment of any existing lease.
The Warranty Deed shall be in proper form for recording.
Dealer shall deliver complete possession of the property at
the time of delivery of the Deed or lease assignment.
Dealer shall also assign any permit or licenses which are
necessary for the conduct of the Dealership Operations.
iv) In addition to any other rights Nissan may have at law, in
equity or hereunder, any sale or lease of the Dealership
Facilities and/or the Dealership Locations in violation of
this right of first refusal shall be voidable by Nissan.
<PAGE> 1
EXHIBIT 10.67
AMERICAN HONDA MOTOR CO., INC.
POLICY ON THE PUBLIC OWNERSHIP
OF HONDA AND ACURA DEALERSHIPS
I. OBJECTIVES
In this Policy on the Public Ownership of Honda and Acura Dealerships (the
"Policy"), American Honda Motor Co., Inc. ("American Honda") addresses several
issues raised by the recent announcement by certain entities which own
automobile dealerships that they intend to offer stock for sale to the public.
Proposals for the public ownership of automobile dealerships have been widely
publicized in the press. American Honda has been asked by several dealers and
the National Automobile Dealers Association to state its position on the public
ownership of Honda and Acura dealerships. This Policy is an effort to address
these inquiries by providing guidelines for the ownership of Honda and Acura
dealerships that assist Dealer Owners and potential Dealer Owners in assessing
whether a particular form of ownership is consistent with American Honda's
standards for its dealerships.
II. BACKGROUND
A. THE PERSONAL NATURE OF THE DEALER OWNER RELATIONSHIP
There is no simple "yes" or "no" answer to the question, "Will American
Honda permit transfer of a dealership to a publicly-owned corporation?" The
answer depends on whether the proposed form of ownership preserves the
individualized relationship between the Dealer Owner and the local community, on
the one hand, and American Honda and the Dealer Owner, on the other hand.
Despite the recent increase of mass marketing (including the advent over
the last twenty years of so-called "category killers" such as the toy store
giants that have replaced neighborhood toy stores and the hardware giants that
have replaced local hardware stores), American Honda continues to believe that
automobile sales and service are most effectively done through dedicated, local
dealerships with strong ties to the community. For most automobile purchasers,
the decision to buy a new car is a major financial commitment and is only made
after extensive deliberation. Although competitive price is undoubtedly a major
factor in the buying decision, American Honda believes strongly that the
building of a relationship between the dealer and the buyer, particularly the
development of trust in the quality of the product and the service provided by
Honda dealers has, over the years, been a major selling point that has
distinguished Honda and Acura vehicles from the competition. When a first-time
new car buyer purchases a Honda vehicle, American Honda believes that we have a
great opportunity to make that customer a life-
<PAGE> 2
AMERICAN HONDA "PUBLIC OWNERSHIP POLICY"
time Honda and Acura buyer -- because we provide the best products and the best
service through the most dedicated and committed dealers.
In order to ensure that Honda and Acura dealers provide the advice and
service required by new car buyers, American Honda attempts to select the best
people to be its dealers and requires that these people maintain personal
control over Dealership Operations. Because individual Dealer Owners have
considerable autonomy as to how they run their dealerships, American Honda's
influence over the quality of its dealerships depends in large part on how
wisely it selects its dealers. Although no process is perfect, American Honda
believes that over the years it has done an excellent job of selecting Dealer
Owners and is extremely proud of the quality of its dealerships.
B. THE DEALER AGREEMENT
The Honda or Acura Automobile Dealer Sales and Service Agreement (the
"Dealer Agreement") between American Honda and its dealers includes a number of
provisions that ensure that the relationship between American Honda and its
dealers will remain personal. Section C of the Dealer Agreement states: "Dealer
covenants and agrees that this Agreement is personal to Dealer, to the Dealer
Owner, and to the Dealer Manager, and American Honda has entered into this
Agreement based upon their particular qualifications and attributes and their
continued ownership or participation in Dealership Operations." Sections C and D
of the Dealer Agreement name the specific individuals who own the dealership,
their percentage of ownership, the individual who will function as the Dealer
operator and the individual who will function as the Dealer Manager. Section J
states: "Neither this Agreement, nor any part thereof or interest therein, may
be transferred or assigned by Dealer, directly or indirectly, voluntarily or by
operation of law, without the prior written consent of American Honda." In
Section 8.1 of the Dealer Agreement, "Dealer agrees that American Honda has the
right to select each successor and replacement dealer and to approve its owners
and principal management." Dealers must inform American Honda in writing of any
potential change in the ownership or management listed in Sections C and D.
Prior to taking effect, such changes must be approved in writing by American
Honda. American Honda's approval will not be unreasonably withheld.
C. THE POTENTIAL BENEFITS OF PUBLIC INVESTMENT IN DEALERSHIPS
Public investment in dealerships offers potential benefits to both
American Honda and its dealers. American Honda needs exclusive Honda or
Acura dealerships with separate, freestanding, state-of-the-art facilities
at prime locations to meet its long term business objectives. American
Honda dealers need to compete vigorously and such competition may include
expanded and improved showrooms, upgraded computerization, the introduction
of various customer amenities, etc. The ability to raise capital through
public offerings of stock provides an additional means of financing
improvement in dealership facilities and operations.
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AMERICAN HONDA "PUBLIC OWNERSHIP POLICY"
D. THE TENSION BETWEEN PERSONAL RELATIONSHIP AND PUBLIC OWNERSHIP
American Honda believes that the quality of the individuals who serve as
Honda or Acura dealers and Dealer Managers is essential to the success of
American Honda and the dealerships. Therefore, American Honda is determined to
maintain its personal relationship with its Dealer Owners and Dealer Managers
and to continue to exercise the right of approval of changes in dealer ownership
and management as set forth in the Dealer Agreement. To the extent that public
ownership of a Honda or Acura dealership means that the Dealer Manager will be
appointed by a board of directors selected by owners of publicly-traded stock,
such an arrangement is inconsistent with American Honda's needs and the Dealer
Agreement. On the other hand, public ownership of a portion of the shares of a
dealership may be consistent with American Honda's objectives in cases in which
a controlling interest in the dealership is maintained by a specified Dealer
Owner and the dealership is managed by a specified Dealer Manager. The following
guidelines are an attempt to reconcile the tension between American Honda's need
for a personal relationship with each dealer and dealer proposals for public
ownership of an interest in dealerships.
III. PUBLIC OWNERSHIP GUIDELINES
A. CASE-BY-CASE DETERMINATION.
As in the past, American Honda will evaluate requests to transfer ownership
of Honda and Acura dealerships on a case-by-case basis. Proposals to transfer
ownership to entities with publicly-traded shares will be reviewed based on the
standards set forth in this Policy. AMERICAN HONDA RESERVES THE RIGHT, IN ITS
SOLE BUSINESS JUDGMENT, TO APPROVE OR REJECT SUCH TRANSFERS.
B. PROPOSALS TO BE SUBMITTED IN WRITING.
All proposals to transfer ownership of Honda and Acura dealerships must be
submitted in writing to American Honda and must include:
1. A list of the individuals and entities that will own PRIVATELY-
HELD SHARES of the dealership, including the amount of shares owned by such
individual or entity and information and documentation about each such
individual or entity; in the case of entities owning or controlling such
privately-held shares, a list of the individuals owning such entities and
information and documentation about such individuals;
2. With respect to ownership interests not listed in accordance with
subsection 1, immediately above, a list of the individuals and entities
that will own or control 5% or more of the dealership (either through
ownership of publicly-held stock or any combination of privately-held stock
and publicly-held stock or any other
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AMERICAN HONDA "PUBLIC OWNERSHIP POLICY"
arrangement), including information and documentation about each such
individual or entity;
3. The number and percentage (if any) of the shares of the entity
that owns the dealership that will be publicly traded;
4. A detailed description, including flow charts, of the proposed
structure of the entity that will own and/or control the dealership and the
relationship of the Dealer Owner to these entities, including, with respect
to entities with a significant interest in the Dealer Owner, a description
of the individuals holding such interest;
5. The name and a brief biography of the individual who will
function as Dealer Manager and a detailed description of the functions and
responsibilities of the Dealer Manager,
6. Complete financial documents (including but not limited to the
most recent and the prior year end audited financial statements of any
entity proposing to obtain any interest equal to or greater than 5% of a
dealership or 5% of an entity that owns a dealership), indicating, among
other things, the amount of capitalization of the dealership and the
verifiable sources of such capitalization;
7. A detailed description of the proposed use of the funds to be
raised from the public investment;
8. The articles and bylaws of the entity or entities that will own
and/or control the dealership;
9. Copies of the proposed transactional documents that will be used
to effectuate the transaction, including, without limitation, copies of any
government filings and contracts pertaining thereto; and
10. Copies of any additional documents that the transferees,
transferors and other parties having a substantial interest in the
transaction have that American Honda would reasonably need to evaluate the
proposal.
After receipt of complete documentation for the proposal, as outlined
above, and due consideration thereof, American Honda will provide the party
submitting the proposal with a preliminary assessment of the proposed
transaction. NO FINAL DECISION ON THE PROPOSAL WILL BE MADE UNTIL SUBMISSION OF
FINAL VERSIONS OF ITEMS 1 THROUGH 10 WITH ANY OTHER DOCUMENTATION REQUESTED BY
AMERICAN HONDA AND AMERICAN HONDA AND THE NEW OWNERSHIP ENTITY AGREE ON AND
ENTER INTO A DEALER AGREEMENT.
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AMERICAN HONDA "PUBLIC OWNERSHIP POLICY"
It is not advisable to make any expenditures or commitments, or to enter
into any contracts or incur any obligations on the assumption that authorization
of a proposal will be granted. Any such expenditures, commitments or
obligations, financial or otherwise, made or entered into by a dealer in
anticipation of authorization of a proposal, and prior to: (1) receipt of final
written approval by American Honda and (2) execution of the necessary documents
as described above (including a new Dealer Agreement) are made entirely at the
dealer's own risk and without any liability on the part of American Honda.
C. GUIDES TO PREPARATION OF AN ACCEPTABLE PROPOSAL
In preparing the documents listed immediately above, the dealer should keep
in mind the following list of standards (which is intended to provide guidance,
not to be a complete list) to which American Honda will require adherence:
1. All dealerships must have a qualified Dealer Manager acceptable
to American Honda. American Honda's right of prior written approval of any
change of Dealer Manager must be incorporated into the transactional
documents. The Dealer Manager should be a well-respected, civicly-active
member of the community. As discussed above, personal involvement by Dealer
Managers in Dealership Operations is an important means of ensuring that
Honda and Acura dealerships are run with a high level of attention, care
and commitment. The Dealer Manager must maintain control over the
day-to-day operations of the dealership and the transactional documents
should set forth in detail the level of autonomy that the Dealer Manager
will exercise, including, for example, the amount of money that the Dealer
Manager will be empowered to transfer. Dealerships must abide by American
Honda's commitment to encourage diversity of persons in dealer management
positions.
2. The Dealer Owner's Executive Manager (that is, the person who has
operational control of the entity that owns and/or controls the dealership)
should be an experienced, well-respected executive with final authority to
decide any dealership matters not within the authority of the Dealer
Manager.
3. Dealerships are non-transferable without the prior written
consent of American Honda. Because the shares of publicly-owned
corporations are freely transferable, the percentage of public ownership
must be restricted so that a controlling interest of the dealership remains
in the hands of approved individuals. It follows that the controlling
interest in the entity that controls the dealership cannot be transferred
without the prior written consent of American Honda. In no event may the
percentage of public ownership of a dealership be greater than or equal to
the percentage of private ownership by American Honda-approved individuals
and privately-held entities. To the extent that an entity not approved by
American Honda attempts to acquire control and/or ownership of a
dealership, the Dealer Agreement with American Honda must provide for
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AMERICAN HONDA "PUBLIC OWNERSHIP POLICY"
termination of the Dealer Agreement and/or American Honda's right to
acquire the dealership at its fair market value.
4. The controlling interest in Honda or Acura dealerships must
remain in the hands of a person or entity engaged predominantly in the sale
and service of new automobiles. For example, American Honda will not
approve transfer of dealerships or entities that control dealerships to
general retailers or retailers that deal primarily in non-automotive
products.
5. American Honda will not approve the transfer of Honda or Acura
dealerships to entities that are known to have significant investments in
companies that compete with American Honda or its parent, subsidiaries or
Affiliates in manufacturing, marketing, or selling automotive products or
services.
6. Public corporations having an ownership interest in the
dealership and the individuals and entities that control such public
corporations (but not persons whose ownership interest is limited to
passive ownership of 5% or less of the shares of public corporations) must
agree to obtain American Honda's approval before acquiring an interest in
any other Honda or Acura dealership. American Honda reserves the right to
limit the number and/or location of Honda and Acura dealerships that can be
owned or controlled by any one individual or corporation. In the future,
except where a specific finding is made by American Honda that such
acquisition would further a business interest of American Honda,
individuals and/or entities will be limited to acquiring interests in
dealerships as follows:
a. HONDA
No one shall be allowed to acquire an ownership interest,
directly or through an Affiliate, in a multiple number of Honda
dealerships as provided below:
(a) in a "Metro" market (a "Metro" market is a metropolitan
market area represented by two or more Honda dealer points) with
two (2) to ten (10) Honda dealership points (inclusive), no
Dealer Owner may own, operate or have an interest in more than
one (1) Honda dealership;
(b) in a Metro market with eleven (11) to twenty (20) Honda
dealership points (inclusive), no Dealer Owner may own, operate
or have an interest in more than two (2) Honda dealerships;
(c) in a Metro market with twenty-one (21) or more Honda
dealership points, no Dealer Owner may own, operate or have an
interest in more than three (3) Honda dealerships.
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AMERICAN HONDA "PUBLIC OWNERSHIP POLICY"
(d) in more than 4% of the Honda dealerships in any one of the
ten Honda Zones; and
(e) in more than seven (7) Honda dealerships nationally.
No one shall acquire contiguous Honda dealerships.
b. ACURA
No one shall be allowed to acquired an ownership interest,
directly or through an Affiliate, in a multiple number of Acura
dealerships as provided below:
(a) in "Metro" market (a "Metro" market is metropolitan market
area represented by two or more Acura dealer points), no Dealer
Owner may own, operate or have an interest in more than one (1)
Acura dealership;
(b) in more than two (2) Acura dealerships in any one of the six
Acura Zones; and
(c) in more than three (3) Acura dealerships nationally.
No one shall acquire contiguous Acura dealerships.
"Affiliate" of, a or person or entity "affiliated" with, a
specified person or entity, means a person or entity that
directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the
person or entity specified. For the purpose of this definition,
the term "control" (including the terms "controlling,"
"controlled by" and "under common control with") means the
possession, directly or indirectly, or the power to direct or
cause the direction of the management and policies of a person or
entity, whether through the ownership of securities, by contract
or otherwise.
7. The dealership would continue to have the same reporting
requirements as all other Honda and Acura dealerships, including
dealership-specific financial information on the same basis that the
dealership has provided such information in the past. In the case of
corporations that, with American Honda's approval, own multiple Honda and
Acura dealerships, each such dealership must be separately incorporated and
financial information must be broken down by individual dealership and must
meet capitalization requirements, etc., by individual dealership. The
corporate bylaws of the individual corporation that actually owns a Honda
or Acura dealership must restrict it
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AMERICAN HONDA "PUBLIC OWNERSHIP POLICY"
from engaging in any activity other than the ownership and maintenance of
an Honda or Acura dealership.
8. The dealership must agree to provide American Honda with all
information and documents, including but not limited to SEC filings, that
evidence a substantial change of ownership or control of such dealership or
any entity with a controlling interest in such dealership. Individuals or
entities that acquire, own or control more than 5% of any entity that owns
or controls a Honda or Acura dealership must provide American Honda with
copies of all filings made to the SEC, all comparable filings made to state
agencies, and, at least once annually, the most recent calendar year's
fully audited financial statements. Nothing in this subsection 8 should be
construed to limit the requirement that any proposed change in the
ownership or control of privately-held shares of a dealership or an entity
that owns a dealership must be reported to American Honda and is subject to
American Honda's prior written approval.
9. For allocation and other purposes, transfer of Honda or Acura
Automobiles from one dealership to another dealership owned and/or
controlled by the same entity will be treated the same as a transfer
between separately-owned dealerships.
10. The dealership should be committed to providing separate,
freestanding Dealership Operations that exclusively offer a full range of
Honda Products and services or Acura Products and services and do not offer
competing products or services from its Dealership Premises.
11. The controlling individual or entity must be liable for the
operation of the dealership, and must agree to indemnify American Honda for
any claims made by shareholders of publicly-held shares against American
Honda to the full extent permitted by law. American Honda must have the
right (but not the obligation) to review all documentation and other
representations to the public about any offering of stock in the dealership
or the entity owning the dealership. Whether or not American Honda reviews
them, such documentation and representations must include an affirmative
statement that American Honda is completely independent of the entity
offering the stock and that, although American Honda's acts or omissions
may have an impact on the value of the stock, American Honda bears no
responsibility for such impact and has no liability to any investor under
any legal or equitable theory.
12. The entity that owns or controls the dealership may not commingle
its trademarks with dealer trademarks other than those used exclusively in
connection with the dealership. For example, a dealer could use its own
"dealership" trademark in conjunction with the Honda or Acura Trademarks as
in "John Smith HONDA" but it could not use a trademark in conjunction with
the Honda or Acura Trademarks that it also uses in conjunction with
non-Honda or non-Acura goods or services. The entity must
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AMERICAN HONDA "PUBLIC OWNERSHIP POLICY"
agree to maintain the Honda or Acura brand image, as that image is
developed by American Honda.
13. The entity that owns the dealership must agree to have all
dealership sales and service personnel certified by American Honda pursuant
to its usual certification programs; to use and sell genuine Honda and
Acura parts and accessories; and to participate in good faith in applicable
Honda or Acura sales, marketing, service, parts, facility image and
upgrade, training, customer satisfaction, and diversity programs.
14. The Dealer Agreement will also provide that breaches of the
Dealer Agreement or failure to adhere to American Honda requirements by any
individual dealership owned by an entity shall be treated as breaches of
the Dealer Agreement between American Honda and such entity and shall
constitute reasonable grounds for rejection by American Honda of
acquisition by the entity of additional Honda or Acura dealerships.
15. American Honda will not approve any transfer of a dealership that
is not in full compliance with the Dealer Agreement between American Honda
and such dealership prior to such transfer.
16. The Dealer Agreement with the entity that owns the dealership
will include provisions that incorporate the provisions of this Policy and,
without limiting the foregoing, permit American Honda to terminate the
Dealer Agreement for a breaches of the above-listed requirement and to
reacquire the dealership as set forth in subsection III.C.3. above.
Inquiries about the Policy should be made to Honda Dealer Placement and/or Acura
Dealer Development, as applicable.
Inquiries about the transfer of a dealership should be made to Zone Sales
Office.
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EXHIBIT 10.68
SUNBELT INITIALS
GM
SUPPLEMENTAL AGREEMENT TO
GENERAL MOTORS CORPORATION
DEALER SALES AND SERVICE AGREEMENT
This Supplemental Agreement to General Motors Corporation Dealer Sales and
Service Agreement is entered into between Sunbelt Automotive Group, Inc. and
General Motors Corporation.
WHEREAS Sunbelt Automotive Group, Inc. is interested in acquiring ownership of
one or more GM Dealerships in selected areas of the United States;
WHEREAS, the parties desire to enter into a positive and productive business
relationship which will accomplish our mutual goals and promote sales of GM
products consistent with GM's brand strategy for its products and focus on total
customer enthusiasm;
WHEREAS, the organization and ownership structure of Sunbelt Automotive Group,
Inc. and its retail operating systems are such that the terms of the Dealer
Agreement are not wholly adequate to address the legitimate business needs and
concerns of Sunbelt Automotive Group, Inc. and GM;
NOW, THEREFORE, the parties agree as follows:
1. Purpose of Agreement
1.1 Purpose of Agreement
The parties acknowledge that Sunbelt Automotive Group,
Inc. desires to purchase the stock or assets of one or
more current GM Dealerships and to be appointed as the
replacement Dealer by the appropriate Divisions. The
parties further acknowledge that the ownership
arrangements of Sunbelt Automotive Group, Inc. and the
operating processes and procedures of Sunbelt Automotive
Group, Inc. require that the parties supplement the
standard terms and provisions of the Dealer Agreement to
assure that the legitimate business needs of GM in regard
to the representation of its products are satisfied. The
parties have agreed to enter into this Agreement for that
purpose. This agreement shall not apply in any respect to
Saturn Dealers or dealerships, and Sunbelt Automotive
Group, Inc. agrees that it will not acquire or attempt to
acquire any Saturn Dealers or dealerships.
1.2 Definitions.
For purposes of this Agreement, the following terms shall
have the meaning indicated:
1.2.1 "Agreement" means this Supplemental Agreement to
General Motors Corporation Dealer Sales and
Service Agreement.
1.2.2 "Sunbelt Automotive Group, Inc." or "Sunbelt"
means Sunbelt
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GM
Automotive Group, Inc. and its subsidiary Dealer
Companies.
1.2.3 "Dealer Agreement" means a General Motors
Corporation Dealer Sales and Service Agreement,
a copy of which is attached hereto as Exhibit A
and is incorporated herein by reference. It also
includes my superseding Dealer Agreements.
1.2.4 "Dealer Company" or "Dealer" means the business
entity owned or controlled by Sunbelt Automotive
Group, Inc. that is a party to a Dealer
Agreement and is defined as the "Dealer" for
purposes of the Dealer Agreement.
1.2.5 "Division" or "Divisions" means one or more of
the marketing divisions of GM; Chevrolet,
Pontiac-GMC, Oldsmobile, Buick, Cadillac.
1.2.6 "GM" means General Motors Corporation.
1.2.7 "GM Dealerships" means a specific, physical
location from which Dealership Operations are
conducted by a Dealer pursuant to the terms of
one or more Dealer Agreements. It does not
include Saturn Dealerships.
1.2.8 "Voting stock" means any stock of Sunbelt
Automotive Group, Inc. that has voting rights as
well as any debt or equity security of Sunbelt
Automotive Group, Inc. that is convertible into
stock of Sunbelt Automotive Group, Inc. that has
voting rights.
2. Sunbelt Automotive Group. Inc. Ownership
2.1 Ownership Structure.
Each Dealer will be a separate company, distinct from Sunbelt
Automotive Group, Inc. in the form of either a corporation,
partnership or other business enterprise form acceptable to GM, which
is capitalized in accordance with the "GM Owned Working Capital
Agreement". Each of the Dealer Companies will be owned by Sunbelt
Automotive Group, Inc. or may have minority interests held by
employees of that Dealer Company subject to GM approval.
2.2 Sunbelt Automotive Group, Inc. hereby warrants that the
representations and assurances contained in this Agreement are within
its authority to make and do not contravene any directive, policy or
procedure of Sunbelt Automotive Group, Inc. Sunbelt Automotive
Group, Inc. represents and warrants that this Agreement constitutes a
valid and binding agreement of Sunbelt Automotive Group, Inc. in
accordance with its terms.
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GM
2.3 Change in Ownership. Any material change in ownership of
any Dealer company and any material change in Sunbelt
Automotive Group, Inc. or any event described in section
2.4.2(b) shall be considered a change in ownership of the
Dealer Company under the terms of the dealer agreements
and all applicable terms of the Dealer Agreement as
supplemented by this Agreement will apply to any such
change.
2.4 Acquisition of Ownership Interest by Third Party. Given
the ultimate control Sunbelt Automotive Group, Inc. will
have over the Dealer Companies, and the Divisions' strong
interest in assuring that those who own and control their
Dealers have interests consistent with those of the
Divisions, Sunbelt Automotive Group, Inc. agrees to the
following:
2.4.1 Sunbelt Automotive Group, Inc. will deliver to GM
copies of all Schedules 13D and 13G, and all amendments
thereto and termination's thereof, received by Sunbelt
Automotive Group, Inc., within five (5) days of receipt of
such Schedules. If Sunbelt Automotive Group, Inc. 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 Sunbelt Automotive Group, Inc. possesses.
2.4.2 If Sunbelt Automotive Group, Inc. through its Board
of Directors or through shareholder action proposes or if
any person, entity or group sends Sunbelt Automotive
Group, Inc. a schedule 13D, or any amendment thereto,
disclosing (a) a binding agreement to acquire or the
acquisition of aggregate ownership of more than twenty
percent (20%) of the voting stock of Sunbelt Automotive
Group, Inc. and (b) Sunbelt Automotive Group, Inc. 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 Sunbelt
Automotive Group, Inc. other than for the purposes of
ordinary passive investment (ii) an extraordinary
corporate transaction, such as a material merger,
reorganization or liquidation, involving Sunbelt
Automotive Group, Inc. or a sale or transfer of a material
amount of assets of Sunbelt Automotive Group, Inc. and its
subsidiaries; or (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 directors of Sunbelt Automotive
Group, Inc. or (iv) in the case of an entity that produces
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
Sunbelt Automotive Group, Inc. and any
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proposal by any such person, entity or group through the
Sunbelt Automotive Group, Inc. Board of Directors or
shareholders action to change the board of directors of
Sunbelt Automotive Group, Inc., 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 or
be materially incompatible with GM's interests (and upon
notice of GM's reasons for such judgment), Sunbelt
Automotive Group, Inc. agree that it will take one of the
remedial actions set forth in Section 2.4.3 below within
ninety (90) days of receiving such Schedule 13D or such
amendment.
2.4.3 If Sunbelt Automotive Group, Inc. is obligated under
Section 2.4.2 above to take remedial action, it will (a)
transfer to GM or its designee, and GM or its designee
will acquire the assets, properties or business associated
with any Dealer Company at fair market value as determined
in accordance with Section 8 below, or (b) provide
evidence to the Divisions (reasonably acceptable to GM)
that such person entity or group no longer has such
threshold level of ownership interest in Sunbelt
Automotive Group, Inc. or that the actions described in
Section 2.4.2(b) will not occur.
2.4.4 Should Sunbelt Automotive Group, Inc. or Dealer
Company enter into an agreement to transfer the assets of
a Dealer Company to a third party, the right of first
refusal described in Article 12.3 of the Dealer Agreement
shall apply to any such transfer.
2.4.5 Sunbelt Automotive Group, Inc. will describe such
provisions of this Section in any prospectus it delivers
in connection with the offer or sale of its stock or any
other securities filing as may be required by any
applicable laws or regulations.
2.5 Officers and Key Management. Sunbelt Automotive Group, Inc. agrees
to provide to GM a list of the key management of Sunbelt Automotive
Group, Inc. responsibilities in regard to the control and management
of Sunbelt Automotive Group, Inc. and each GM Dealer Company. Each
Dealer Company shall agree to propose to GM any material changes in
the key management of the Dealer Company or their responsibilities.
Such proposal should be provided to GM in writing prior to such
change to the extent practicable and shall include sufficient
information to permit GM to evaluate the proposed change consistent
with normal policies and procedures. Sunbelt Automotive Group, Inc.
will notify GM in writing of any material change in the key
management of Sunbelt Automotive Group, Inc. or their
responsibilities. For purposes of this Agreement, the term "key
management" shall mean CEO, President and Vice Presidents or their
funcional equivalents with respect to each dealer company and
executive officers with respect to Sunbelt Automotive Group, Inc.
3. Sunbelt Automotive Group, Inc. Operating Policies and Procedures
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GM
3.1 GM Brand Strategy. Sunbelt Automotive Group, Inc. acknowledges that
GM has a Brand Strategy and has invested significant capital in the
development of corporate, divisional and brand image. Relevant
information regarding this strategy has been shared with Sunbelt
Automotive Group, Inc. Sunbelt Automotive Group, Inc. agrees to
accommodate GM's Brand Strategy in its Sunbelt Automotive Group, Inc.
GM dealership Operations. Sunbelt Automotive Group, Inc. will
incorporate in each of its GM Dealerships the following as a minimum
in support of the GM Brand Strategy:
3.1.1 GM has developed retail and service operating standards for
each of its Divisions. At each of its GM Dealerships,
Sunbelt Automotive Group, Inc. will implement and use those
divisional standards, or higher standards which it may
develop, subject to GM's approval.
3.1.2 Dealer marketing associations for each of the Divisions are
an integral part of GM's Brand Strategy. Sunbelt Automotive
Group, Inc. agrees that its GM advertising and marketing
practices will support and enhance GM and Divisional brand
and marketing practices and goals. Sunbelt Automotive Group,
Inc. agrees and each GM Dealer Company shall agree that the
Dealer Company will participate in the appropriate dealer
marketing association or group as provided in Section 11.
3.1.3 Sunbelt Automotive Group, Inc. will not, and will not permit
any Dealer Company to jointly advertise or market any of
their non-GM automotive operations in conjunction with its
approved GM Dealership Operations (it being understood that
the advertising example attached hereto as Exhibit C will be
permissible).
4. Acquisition of GM Dealerships
4.1 In consideration for the representations, covenants and commitments
contained herein, and assuming compliance with the normal
requirements of General Motors regarding transfer of assets and
appointment as a dealer, General Motors will permit the acquisition
of up to five (5) General Motors Dealerships during the period
commencing from the date of this Agreement and ending 24 months
thereafter. If GM requests Sunbelt Automotive Group, Inc. to consider
purchasing certain GM dealerships, such dealerships are to be
included in the number of acquisitions. If there is a material
dispute between any GM affiliate and Sunbelt Automotive Group, Inc.,
then GM may elect not to approve any public companies dealerships
until the dispute is resolved (even if the pre-approved number has
not been met).
4.2 Following the 24 month period, each Dealer company in which Sunbelt
Automotive Group, Inc. has an investment must be in compliance
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GM
will terms of the General Motors Policies for Changes in GM
Dealership Ownership/Management bulletin of September 19, 1994 (a
copy of which has already been provided) including any revisions
or replacements of that bulletin, in order to be approved for
additional acquisitions of General Motors Dealerships.
4.3 Multiple Dealer Policy. Sunbelt Automotive Group, Inc. recognizes
that customers benefit from competition in the marketplace and
agree that any proposal to acquire additional GM dealerships shall
be subject to the terms of General Motors Multiple Dealer
Investor/Multiple Dealer Operator policies as set forth in NAO
Bulletin 94-11, including any revisions of replacements to the
bulletin.
4.4 GM and Sunbelt Automotive Group, Inc. agree that Sunbelt
Automotive Group, Inc. will not attempt to acquire more than 50%
of the GM dealerships, by franchise line in a GM defined Multiple
Dealer Area. GM will provide upon Sunbelt Automotive Group, Inc.
request, the number of GM dealerships, by line, in the Multiple
Dealer Area and the maximum number of dealerships Sunbelt
Automotive Group, Inc. may acquire in that Multiple Dealer Area.
4.5 Evaluation of Operations. GM will conduct semi annual evaluation
meetings with the management of Sunbelt Automotive Group, Inc. and
the Dealer Operators of each GM Dealer Company to review the
performance of each GM Dealer Company. In the event GM advises
Sunbelt Automotive Group, Inc. for any two consecutive evaluation
periods that the performance of a GM dealership is not meeting the
sales volume, Customer Satisfaction or Branding requirements of
GM, in addition to other available remedies, GM will have the
right to demand a change in the management of the dealer company
not meeting those requirements. Sunbelt Automotive Group, Inc.
will make the management changes at any deficient dealership
within not more than six (6) months after notice of the
deficiencies.
5. Dealership Operations
5.1 Dealership Operations. Each Dealer Company shall be a distinct and
complete business entity which shall include complete Dealership
Operations as that term is defined in the Dealer Agreement
including, but not limited to, sales, service, parts, and used car
operations. This requirement will not preclude certain centralized
functions provided that they are consistent with GM's Channel
Strategy, and that such centralized functions are reviewed with
and approved by GM, which approval shall not be unreasonably
withheld. However, no sales, service or parts operations may be
combined with any non-GM representation and all GM Dealerships
will have reasonable used car operations.
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GM
5.2 GM Channel Strategy. Sunbelt Automotive Group, Inc. further
stipulates and agrees that if Sunbelt Automotive Group, Inc., GM,
and the public are to realize the potential benefits that Sunbelt
Automotive Group, Inc. represents to be the result of the
acquisitions proposed by Sunbelt Automotive Group, Inc., then an
integral component of the participation by Sunbelt Automotive
Group, Inc. and Dealer Company is their agreement that all GM
Dealerships shall fully comply with General Motors Channel
Strategy including proper divisional representation alignment and
facilities that are properly located and that are in compliance
with appropriate divisional image programs. The Channel Strategy
is set forth in a memorandum dated October 5, 1995, from Ronald L.
Zarrella to all GM dealers, and in the written statement of the
strategy as it relates to each of Dealer Company, copies of which
will be provided to Sunbelt Automotive Group, Inc. and each Dealer
Company. Sunbelt Automotive Group, Inc. agrees and each Dealer
Company shall agree that within 12 months of the acquisition of
any GM Dealership that is not consistent with the Channel
Strategy, Sunbelt Automotive Group, Inc. and Dealer Company will
have complied with the Channel Strategy for that location.
Notwithstanding the above, GM will consider reasonable requests
from Sunbelt Automotive Group, Inc. for an extension if Sunbelt
Automotive Group, Inc. is making reasonable progress and is unable
to comply with the Channel Strategy for reasons beyond Sunbelt
Automotive Group, Inc. control. If Sunbelt Automotive Group, Inc.
and Dealer Company fail to do so within the time provided, then
Sunbelt Automotive Group, Inc. will cause Dealer Company and
Dealer Company will agree to terminate the representation of such
products as reasonably required by GM to comply with the Channel
Strategy. If such termination is required, GM will compensate
Sunbelt Automotive Group, Inc. the of sum $1,000 for each unit of
GM retail planning guide for each Dealer Agreement so terminated.
5.3 Exclusive Representation. Sunbelt Automotive Group, Inc. agrees
and each Dealer Company shall agree that all GM Dealerships shall
be used solely for the exclusive representation of GM products and
related services and in no event shall be used for the display,
sale or promotion or warranty service of any new vehicle other
than those of General Motors Corporation (provided that if Sunbelt
Automotive Group, Inc. acquires a GM Dealership having a sales and
service agreement with a competitive automobile manufacturer or
importer and related sales and service operations at the same
facility, at GM's request Sunbelt Automotive Group, Inc. shall
cause the competitive sales and service operations to be relocated
within one year of acquisition). Sunbelt Automotive Group, Inc.
agrees and each Dealer Company shall agree that should a Dealer
Company cease to provide exclusive representation of GM products,
based on the proper franchise alignment as determined by the
Channel Strategy, then that shall constitute good cause in and of
itself for the termination of the Dealer Agreement then in effect
with such Dealer Company and Sunbelt Automotive Group, Inc. shall
cause Dealer Company to and Dealer Company shall voluntarily
terminate the Dealer Agreements then in effect.
7
<PAGE> 8
INITIALS
SUNBELT
GM
5.4 Image Compliance. Any Dealer Company acquired by Sunbelt
Automotive Group, Inc. shall be brought into compliance with
applicable Divisional facility image requirements. Any new
construction or significant interior or exterior remodeling of any
GM Dealerships shall incorporate the appropriate divisional image
program and shall be subject to approval by the appropriate
Division before such construction is undertaken.
5.5 Corporate Name and Tradenames. Both the corporate name and any
tradename or d/b/a of each Dealer Company must include the names
of those GM Divisions represented by such Dealer Company.
5.6 Dealer Company Advertising. Sunbelt Automotive Group, Inc. agrees
that the advertising of each of the Dealer companies will maintain
and support the GM brand strategy. Newspaper, radio, television
and any other form of advertising will not combine GM brands or
non GM brands, unless GM has approved combined operations and will
clearly identify each GM dealership as a separate entity at its
approved location (it being understood that the advertising
example attached hereto as Exhibit C will be permissible).
6. Dealer Operator
6.1 Appointment of Dealer Operator. For purposes of the Dealer
Agreement, including Paragraph Third and Article 2 and for each GM
Dealership, Sunbelt Automotive Group, Inc. shall appoint an
individual who shall act as Executive Manager of that GM
Dealership and who shall be considered as Dealer Operator for
purposes of the Dealer Agreement. The Divisions will rely upon the
personal qualifications and management skills of Dealer Operator.
Sunbelt Automotive Group, Inc. hereby represents that Dealer
Operator will have complete managerial authority to make all
decisions, and enter into any and all necessary business
commitments required in the normal course of conducting Dealership
Operations on behalf of Dealer Company and may take all actions
normally required of a Dealer Operator pursuant to Paragraph Third
and Article 2 of the Dealer Agreement. Sunbelt Automotive Group,
Inc. will not revoke, modify or amend such authority without the
prior written approval of the applicable Division (except as
provided in Section 6.3 below). Because of the unique structure of
Sunbelt Automotive Group, Inc., the 15% ownership requirement
contained in Article 2 shall not apply to Dealer Operator.
6.2 Removal of Dealer Operator. Except as provided in Section 6.3
below, the removal or withdrawal of Dealer Operator without
Divisions' prior written consent shall constitute grounds for
termination of the Dealer Agreements. However, the Divisions
recognize that employment responsibilities of the
8
<PAGE> 9
INITIALS
SUNBELT
GM
Dealer Operator with Dealer Company may change, making it
impractical for the Dealer Operator to continue to fulfill his/her
responsibilities as Dealer Operator. In that case, or in the event
Dealer Operator leaves the employ of the Dealer Company, Dealer
Company shall have the opportunity to propose a replacement Dealer
Operator. The Divisions will not unreasonably withhold approval of
any such proposal, provided the proposed replacement has the
skills and qualifications to act as Dealer Operator pursuant to
the standard policies and procedures of GM.
6.3 Replacement Dealer Operator. Dealer Company shall make every
effort to obtain the consent of the Divisions to a proposed
replacement Dealer Operator prior to the removal or withdrawal of
the approved Dealer Operator. If that is not practical, Dealer
Company shall notify Division in writing within 10 days following
the removal or withdrawal of the approved Dealer Operator. Within
30 days of that removal or withdrawal, Dealer Company will submit
to Division a plan and appropriate applications to replace Dealer
Operator with a qualified replacement acceptable to Division. The
replacement Dealer Operator must assume his/her responsibilities
no later than 90 days following the withdrawal of the approved
Dealer Operator. Sunbelt Automotive Group, Inc. shall be permitted
to appoint a temporary general manager to manage the GM Dealership
during the interim period while the Dealer Operator is being
replaced.
7. Dispute Resolution. Sunbelt Automotive Group, Inc. agrees not to join any
legal or administrative action a seller of a General Motors dealership
may take against General Motors in the event General Motors declines to
approve a proposed transfer to Sunbelt Automotive Group, Inc. Sunbelt
Automotive Group, Inc. and GM stipulate and agree and each Dealer Company
shall stipulate and agree that the dispute resolution process attached
hereto as Exhibit D, or any replacement process offered to all GM
Dealers, shall be the exclusive source of resolution of any dispute
regarding the Dealer Agreements and this Agreement including, but not
limited to, involuntary termination of the Dealer Agreements and/or
approval of Sunbelt Automotive Group, Inc. for additional investment in
or ownership of GM Dealerships. The parties further agree that the
Chevrolet dealer dispute resolution process will be used for the
resolution of the maker, regardless of the GM Division involved.
8. Right to Purchase or Lease. In the event of any termination of the
Dealer Agreement or any transaction or event that would, in effect,
discontinue Dealership Operations from that GM Dealership, or a transfer
of assets, properties or business to GM or a GM designee pursuant to
Section 2.4.3, Sunbelt Automotive Group, Inc. agrees and each Dealer
Company shall agree to provide GM with: (a) the right to purchase the
dealership assets, properties or business for fair market value based on
automotive use, and (b) an assignment of any existing lease or lease
options
9
<PAGE> 10
INITIALS
SUNBELT
GM
that are available, subject in each case to any legal or
contractual obligations existing at such time through the process
attached hereto as Exhibit B, that Sunbelt Automotive Group, Inc.
shall assure GM or its delegate of quiet possession of the
dealership facilities for a period of not less than five years if
the right to have any existing lease or lease option assigned as
set forth above is exercised with respect to such facilities
within ten years of the execution of this Agreement. If, however,
Sunbelt Automotive Group, Inc. enters into a financing arrangement
with respect to GM's option as described in this Section 8 would
be subordinated to the interests of any lender in connection with
any default by Sunbelt Automotive Group, Inc. under the terms of
the financing arrangement other than a default due to the
discontinuance of dealership operations from such facilities. The
Parties agree that GM may exercise its rights under this Section 8
with respect to some or all of the dealership facilities to which
it may apply at any given time, and that failure to exercise such
rights as to one facility shall not affect GM's rights as to other
facilities.
9. Electronic Funds Transfer. Sunbelt Automotive Group, Inc. agrees
that each Dealer Company will use Electronic Funds Transfer (EFT)
for settlement of the dealership obligations to GM and that GM
will have a right of offset for any unpaid debit balances for any
Dealer Company at the time the indebtedness is due and will have
the right to collect those amounts from the account of the Dealer
Company that owes the debt or the account of any other Dealer
Company.
10. Compliance with Policies and Procedures. Each Dealer Company must
comply with all terms of the Dealer Agreement and all GM policies
applicable to Dealer company's Dealership Operations. Those
procedures include policies precluding joint advertising and
prohibiting sales of GM auction vehicles from other than the
purchasing GM Dealership. Except as specifically provided herein,
all Dealership Operations shall be conducted consistent with
requirements for other GM dealerships.
l1. Membership in Dealer Marketing Group. Each Dealer Company will
join its respective dealer marketing group and area marketing
group including membership financial support and will participate
as a regular member in meetings and marketing activities.
12. Capital Standards. Sunbelt Automotive Group, Inc. agrees and
Dealer Company shall agree that Dealer Company shall maintain, at
all times, sufficient working capital to meet or exceed the
minimum net working capital standards for the Dealer Company as
determined from time to time by GM consistent with its normal
practices and procedures. Sunbelt Automotive Group, Inc. and
Dealer Company shall provide such documentation as reasonably
requested by GM to assure compliance with that requirement.
Sunbelt Automotive Group, Inc. shall submit an annual consolidated
balance sheet for the combined GM Dealership operations of Sunbelt
Automotive Group, Inc.
10
<PAGE> 11
INITIALS
SUNBELT
GM
13. Discontinuance of Representation. In the event that Sunbelt
Automotive Group, Inc. determines, voluntarily or otherwise to
discontinue representation in any given Multiple Dealer Area,
Sunbelt Automotive Group, Inc. shall grant the right to GM to
acquire at fair market value as determined in accordance with
Exhibit B the right to representation of the Divisions previously
represented by any Dealer Company in that Multiple Dealer Area. GM
shall also have the option to acquire the fixed assets and/or the
Dealership Facilities in that Multiple Dealer Area in accordance
with section 8. The terms and conditions for the exercise of such
rights shall be set forth in appropriate and customary documents.
Sunbelt Automotive Group, Inc. has received GM's standard option
agreements modified for this Agreement.
14. Supplement to Dealer Agreement. The parties agree that each Dealer
Company shall be required to execute an addendum to the Dealer
Agreements binding the Dealer Company to the applicable portions
of this Agreement. For each Dealer Company, this Agreement shall
supplement the terms of the Dealer Agreements in accordance with
Article 17.11 of the Dealer Agreements.
15. Further Modifications. In the event that the policies of GM with
regard to Dealerships owned or controlled in whole or in part by
public shareholders should be modified, the parties agree to
review such modifications to determine whether modification to
this Agreement is appropriate.
16. No Third Party Rights. Nothing in this Agreement or the Dealer
Agreement shall be construed to confer any rights upon any person
not a party hereto or thereto, nor shall it create in any party an
interest as a third party beneficiary of this Agreement or the
Dealer Agreement. Sunbelt Automotive Group, Inc. and Dealer
Company hereby agree to indemnify and hold harmless GM, its
directors, officers, employees, subsidiaries, agents and
representatives from and against all claims, actions, damages,
expenses, costs and liability, including attorneys fees, arising
from or in connection with any action by a third-party in its
capacity as a stockholder of Sunbelt Automotive Group, Inc.
relating to this Agreement other than through a derivative
stockholder suit authorized by the Board of Sunbelt Automotive
Group, Inc., provided that Sunbelt Automotive Group, Inc. shall
have the right to assume the defense and control any such actions
or suits and that GM shall not settle any such actions or suits
without Sunbelt Automotive Group, Inc. consent (such consent not
to be unreasonably withheld). Notwithstanding the above, GM may
choose, at its own expense, to manage and control its own defense
in any such action.
17. Modification of Dealer Agreement. This Agreement is intended to
modify and adapt certain provisions of the Dealer Agreement and is
intended to be incorporated as part of the Dealer Agreement for
each Dealer Company. In the event that any provisions of this
Agreement are in conflict with other provisions of the standard
Dealer Agreement, the provisions contained in this Agreement shall
govern. Except as expressly provided in this Agreement the terms
of the Dealer Agreements remain unchanged and apply herein.
11
<PAGE> 12
INITIALS
SUNBELT
GM
18. Confidentiality. Each party agrees not to disclose the content of
this Agreement to non-affiliated entities and to treat the
Agreement with the same degree of confidentiality as it treats its
own confidential documents of the same nature, except as expressly
provided by Article 2.3.5 of this Agreement or unless authorized
by the other party, required by law, pertinent to judicial or
administrative proceedings or to proceedings under the Dispute
Resolution Process.
19. Duration of Agreement. This Agreement remains in effect so long as
Sunbelt Automotive Group, Inc. or any successor thereto, directly
or indirectly holds or has an agreement to hold an ownership
interest in any GM Dealer Company.
IN WITNESS WHEREOF, the parties have executed this Agreement this _______ day of
________________,1998.
- ------------------------------- GENERAL MOTORS CORPORATION
By: By:
- ------------------------------- -----------------------------
- ------------------------------- E. K. Roggenkamp, III
- ------------------------------- General Manager
- ------------------------------- North American Operations
- ------------------------------- Dealer Network Investment and Development
12
<PAGE> 1
EXHIBIT 10.69
GMMS 1012-5 [CHEVROLET GEO LOGO]
USA 11-95
CHEV 05/31/94 CHEVROLET-GEO
DEALER SALES AND SERVICE AGREEMENT
In reliance upon the Agreement by the parties to fulfill their respective
commitments, this Agreement, effective NOVEMBER 01, 1995, is entered into by
General Motors Corporation, Chevrolet Motor Division ("Chevrolet"), a
Delaware Corporation and
GRINDSTAFF CHEVROLET, INC.
- --------------------------------------------------------------------------, a
Dealer Firm Name
/X/ TENNESSEE corporation, incorporated on JULY 07, 1987;
/ / proprietorship;
/ / partnership;
/ / other - specify
--------------------------------------------------------
doing business at 2256 W ELK AVE
-----------------------------------------------------------
ELIZABETHTON, TENNESSEE 3-7643-3828 ("Dealer").
--------------------------------------------------
OVERVIEW AND PURPOSE OF THE
CHEVROLET-GEO DEALER SALES AND SERVICE AGREEMENT
The principle purposes of this Agreement are to:
A. Authorize the Dealer to sell and service Chevrolet and Geo products and to
represent itself as a Chevrolet-Geo Dealer.
B. Provide a framework within which Dealer and Chevrolet may accomplish their
mutual objectives.
C. Provide a means whereby Chevrolet and Dealer may identify specific sales,
CSI, facility and other requirements by which Dealer's performance under
this Agreement may be evaluated.
D. Identify other commitments, rights and responsibilities of Chevrolet and
Dealer.
Achieving Chevrolet's vision of market leadership while exceeding customer
expectations in selling and serving Chevrolet and Geo products is dependent
in a large part upon the maintenance of a quality network of authorized Dealers.
Since Dealer represents Chevrolet and Geo to the public, it is fundamental to
the success of Chevrolet that Dealer maintain its operations facilities and
business methods in a manner which will support the Chevrolet-Geo Dealer
Agreement. Chevrolet will conduct its operations and provide assistance, as
practicable within the scope and terms of this Agreement, to assist Dealer to
accomplish the requirements of this Agreement and the Chevrolet vision.
Chevrolet will from time to time provide instructions, programs, requirements
and suggestions developed in accordance with this Agreement to both supplement
the Agreement and assist Dealer and Dealer network.
Chevrolet's vision is to be . . . America's automotive leader . . . providing
Total Customer Enthusiasm through:
- Empowered people,
- Exceptional products,
- Excellent purchase and ownership experience,
providing outstanding value and a superior return on investment for all
stakeholders.
<PAGE> 2
TERM OF AGREEMENT
First
This agreement shall expire on OCTOBER 31, 2000 or ninety days after the death
----------------
or incapacity of a Dealer operator or Dealer owner, whichever occurs first,
unless earlier terminated. Dealer is assured the opportunity to enter into a new
Dealer Agreement with Chevrolet at the expiration date if Chevrolet determines
Dealer has fulfilled its obligations under this agreement. Dealer will be
provided notice of possible nonrenewal of the agreement in accordance with
Article 13.2 of the standard provisions in order that Dealer may correct any
failure or breach of the Dealer Agreement prior to its expiration or nonrenewal.
If the breach of the agreement or failure to perform the conditions of the
agreement is corrected to the satisfaction of Chevrolet, a replacement agreement
will be offered at the appropriate time.
STANDARD PROVISIONS
Second
The "Standard Provisions" (Form GMMS-1013) are incorporated as part of this
agreement.
DEALER OPERATOR
Third
Dealer agrees that the following Dealer operator will provide personal services
in accordance with Article Two of the Standard Provisions:
STEVEN E. GRINDSTAFF
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 3
Fourth
Chevrolet and dealers recognize that the decisions made by Chevrolet Motor
Division directly impact the business and livelihood of its Dealer Body as well
as the ultimate satisfaction of its customers. Chevrolet, in accord with
members representing the Chevrolet dealer body, seek to enhance its decision
making process by establishing certain methods for the inclusion of the
collective Dealer Body input in all areas directly affecting our mutual
business concerns. The forum for this is generally provided through three
principle processes: The National Dealer Council, The National Dealer Council
Work Teams, and The Partnership Council.
A. NATIONAL DEALER COUNCIL
The purpose of the National Dealer Council is to establish a forum for
Chevrolet and its dealers to partner in determining Chevrolet's future
direction and strategies. Council members will participate in work teams and
other joint policy-making groups affecting our business. Much progress has been
made as a result of the National Dealer Council involvement, and Chevrolet is
committed to ensuring that this avenue continues.
- - The National Dealer Council will consist of elected Chevrolet dealer
representatives from each Zone and serve a three year term. A dealer
operator must have at least three years experience as a Chevrolet dealer
and be involved in the day to day operations of the dealership business in
order to qualify for election.
- - Council representatives will communicate with the dealer body in the Zone
they are representing by providing feedback on dealer council activities
and informing the Dealer Council and Chevrolet of dealer body concerns.
- - Dealer Council formally convenes up to three times a year. Individual
Council members may be asked to attend additional meeting throughout the
year in connection with their team assignments. Dealer Council members will
serve on work teams and participate in the decision making process with
Chevrolet Motor Division.
- - Any training deemed necessary by the National Dealer Council to assist in
fulfilling their responsibilities will be provided by Chevrolet.
B. NATIONAL DEALER COUNCIL WORK TEAMS
National Dealer Council representatives, Chevrolet/GM management, and
Chevrolet Dealers will serve jointly on work teams which are created to focus on
issues of mutual concern to dealers and Chevrolet. The work teams will utilize
the consensus decision making process to achieve a best value decision
depending on the defined role of each group and the requirements of each issue
under consideration.
- - Work teams will cover areas such as: Dealer Organization, Education and
Training, Product, Service/Parts, Distribution, Sales/Financial, Marketing,
and Total Customer Enthusiasm. The National Dealer Council and Chevrolet
may establish, change or discontinue teams as deemed necessary.
- - Dealers may serve on a work team for up to a three year term. Meetings will
take place on an as needed basis through phone conversations, fax system,
or in person.
C. PARTNERSHIP COUNCIL
The responsibility of the Partnership Council is to coordinate work team
structures and activities of the National Dealer Council. The Partnership
Council is comprised of an equal number of Chevrolet Dealer Council members and
Chevrolet representatives which operate as a policy making body. The
Partnership Council will also address issues from the National Dealer Council
and inform the necessary work teams as needed.
<PAGE> 4
SALES REVIEW
Fifth
The decision by Chevrolet to enter this agreement is based, in part, on
Dealer's commitment to effectively sell and promote the purchase, lease and use
of Chevrolet and Geo vehicles by consumers in Dealer's area of primary
responsibility. At least once each year, Chevrolet will provide Dealer a
written report on Dealer sales performance. The report will compare the
Dealer's retail sales to available retail market opportunity, by segment in the
Dealer's area of primary responsibility or area of geographic sales and service
advantage, whichever is applicable to determine the Dealer's sales performances.
Chevrolet will provide a written explanation of the sales review process to
Dealer, in order that Dealer may make business and marketing plans to take full
advantage of the market opportunity in Dealer's area of primary responsibility
and that Dealer may meet the requirements of Article 5 of the Standard
Provisions.
Any material change to the process will be determined in accordance with
Paragraph Fourth of the agreement.
SERVICE AND CUSTOMER SATISFACTION PERFORMANCE REVIEW
Sixth
Chevrolet at least once annually will review the service and customer
satisfaction performance of Dealer in a written report or reports. The reports
will be based primarily on customer responses to owner survey questions.
Chevrolet will periodically provide this information so that Dealer may make
business plans to correct any deficiencies and fulfill its obligations under
this agreement. The service and customer satisfaction review process is
currently under review. Any material change to the process will be determined
in accordance with Paragraph Fourth of this agreement.
DEALERSHIP EQUIPMENT, TOOLS AND SOFTWARE
Seventh
a) Communication Equipment:
To improve Dealer and Chevrolet communications and customer satisfaction,
Dealer will install, maintain and use such communications equipment as is
designated by Chevrolet in accordance with Article 4.4.5 of the additional
provisions. Currently the following items are among those required by the terms
of the Dealer Agreement:
- GM Dealer Communication System (DCS)
- GM PULSAT Network
b) Tools and Equipment:
Dealer and Chevrolet acknowledge that a properly equipped dealership promotes
customer satisfaction and the sale of Chevrolet and Geo products. Chevrolet
agrees to provide Dealer with lists of those tools and equipment that Chevrolet
regards as essential in accordance with Article 7.2.4 of the Standard
Provisions. Dealer agrees that it will acquire and use essential tools and
equipment identified by Chevrolet.
c) New Tool Requirements:
Decisions on additional equipment, tool and communication requirements will be
determined in accordance with Paragraph Fourth of the agreement.
<PAGE> 5
GMMS 1012-5
USA 11-95
CHEV 05/31/94
Seventh
d) Software:
From time to time during the term of this Agreement, GM will make available to
Dealer certain information, data, software or firmware ("software")
electronically, incorporated into tools or other products or by other means.
This Software may be owned outright by GM, or jointly with, or wholly by, a GM
affiliated company or authorized supplier. Dealer agrees to limit its use of
the Software to Dealership Operations and comply with any other restrictions on
its use.
TRAINING
Eighth
Chevrolet will from time to time provide training which Chevrolet believes will
enhance Dealers ability to meet the requirements of the Dealer Agreement. Dealer
will, to the extent practicable, participate in that training. Further,
Chevrolet will on occasion designate certain training that will be required in
accordance with Article 8 of the additional provisions. Dealer agrees that it
will participate in any training so designated. Decisions on training
requirements will be determined in accordance with Paragraph Fourth of this
agreement.
DEALER IDENTIFICATION, IMAGE AND FACILITIES
Ninth
Dealer and Chevrolet recognize that the appearance, signs, environment and
quality of Dealer's facility have significant impact on both Chevrolet and Geo
products and Dealer. Dealer, therefore, agrees that its dealership premises
will be properly equipped and maintained, and that the interior and exterior
retail environment and signs will comply with reasonable requirements Chevrolet
will establish to promote and preserve the image of Chevrolet and its Dealers.
Decisions on any material changes to the image, sign and/or dealership
facility requirements will be determined in accordance with Paragraph Fourth of
this agreement.
DISPUTE RESOLUTION
Tenth
Chevrolet recognizes that the mutual respect, trust and confidence which have
been the cornerstones of Chevrolet-Dealer relations are essential to
accomplishing the objectives of this Agreement. While the relationship between
Chevrolet and Dealer is a very positive one, Chevrolet recognizes that from
time to time there may be disagreements between Chevrolet and Dealer concerning
rights and obligations arising under this Dealer Agreement. It is contemplated
that most disagreements that may arise between Dealer and Chevrolet will be
resolved through discussion between Dealer and Chevrolet field management. In
fact, Dealer is strongly encouraged to discuss and to resolve any differences
through the local field office, the Chevrolet entity most familiar with Dealer
and its operations. However, in those instances where a disagreement between
Dealer and Chevrolet cannot be resolved, Dealer may choose to seek review
through the Dispute Resolution Process, which provides for senior sales
management review and Binding Arbitration. This process is always voluntary on
the part of Dealer and is voluntary on the part of Chevrolet except as provided
in the details of the Dispute Resolution Process as set forth in a separate
booklet (GMMS-1019).
BUSINESS MANAGEMENT RESPONSIBILITY
Eleventh
If Dealer is an authorized Dealer for more than one division of General Motors,
Chevrolet will be primarily responsible for administering the provisions of the
Dealer Agreements relating to the Dealer Statement of Ownership, dealership
location and premises addendum and capital standard addendum. Chevrolet will
execute or extend those documents for all divisions.
<PAGE> 6
EXECUTION OF AGREEMENT AND RELATED DOCUMENTS
Twelfth
- -------
This agreement and related agreements are valid only if signed:
(a) on behalf of Dealer by its duly authorized representative and, in the
case of this agreement, by its Dealer operator; and
(b) this Agreement as set forth below, on behalf of Chevrolet by its
General Sales and Service Manager and his authorized representative.
All related agreements will be executed by the General Sales and
Service Manager or his authorized representative.
Thirteenth
- ----------
The following agreements and understandings are hereby incorporated into this
agreement:
EXCESSIVE FACILITY/RENT FACTOR
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
And all existing addenda (other than Successor Addendum) relating to Dealer
Statement of Ownership, Dealer Location and Premises Addendum, Capital Standard
Addendum, Areas of Primary Responsibility, Motor Vehicle Addendum and Multiple
Dealer Operator Addendum, if applicable, which have not been re-executed at the
time of this agreement.
GRINDSTAFF CHEVROLET, INC.
- -------------------------------------------------------------------------------
Dealer Firm Name
Chevrolet Motor Division
GENERAL MOTORS CORPORATION
By /s/ Steven E. Grindstaff 7/2/95 By /s/ [Illegible Signature]
--------------------------------- ------------------------------------
Dealer Operator Date General Sales and Service Manager
Steven E. Grindstaff
By By /s/ D. S. Graham 11/1/95
--------------------------------- ------------------------------------
Dealer Operator Date Authorized Representative Date
D. S. Graham
<PAGE> 1
EXHIBIT 10.70
KIMCO AUTOFUND, LP
Landlord
TO
GRINDSTAFF, INC.
Tenant
AGREEMENT OF LEASE
<PAGE> 2
INDEX
Article Caption Page
------- ------- ----
1. Demise; Term ........................................... 1
2. Fixed Net Rent; Additional Rent; CPI Rent .............. 2
3. Impositions and Charges ................................ 4
4. Subordination .......................................... 8
5. Use of the Leased Premises ............................. 11
6. No Representations by Landlord ......................... 12
7. Landlord Not Liable for Failure of Water
Supply, Etc. ........................................... 12
8. Tenant to Repair ....................................... 13
9. Tenant to Comply with Laws; Environmental Matters ...... 16
10 Omitted
11. Net Lease; Non-Terminability ........................... 20
12. Insurance .............................................. 21
13. Fire or Casualty ....................................... 25
14. Landlord May Cure Defaults ............................. 27
15. Bankruptcy, Insolvency, Reorganization,
Liquidation or Dissolution of Tenant ................... 28
16. Default Clauses ........................................ 29
17. Landlord's Remedies .................................... 31
18. Tenant to Indemnify Landlord ........................... 34
<PAGE> 3
Article Caption Page
------- ------- ----
19. Mechanics' Liens ....................................... 35
20. Condemnation ........................................... 35
21. Arbitration ............................................ 38
22. Shoring ................................................ 39
23. Waiver of Redemption ................................... 40
24. Intentionally Omitted
25. Covenant of Quiet Enjoyment ............................ 40
26. Non-Merger ............................................. 41
27. Waiver of Counterclaim and Jury Trial .................. 41
28. Assignment and Subletting .............................. 41
29. Notices ................................................ 45
30. Broker ................................................. 47
31. Waivers and Surrenders to be in Writing ................ 47
32. Landlord's Rights and Remedies Cumulative .............. 47
33. Removal of Personal Property ........................... 48
34. Sale or Conveyance of Leased Premises
Limits of Liability of Landlord ........................ 49
35. Alterations ............................................ 49
36. Tenant and Landlord to Furnish Statements .............. 51
37. Inspections by Landlord ................................ 52
38. Surrender at the End of the Term ....................... 52
ii
<PAGE> 4
Article Caption Page
------- ------- ----
39. Covenants Binding on Successor and Assigns ............. 53
40. Entire Agreement ....................................... 53
41. Miscellaneous .......................................... 53
42. Certain Definitions .................................... 54
Testimonium and Signatures ......................... 56
Exhibit A - Description of Leased Premises ......... 57
iii
<PAGE> 5
LEASE AGREEMENT
LEASE AGREEMENT ("AGREEMENT" or "LEASE") dated the 31st day of July,
1998 made by and between KIMCO AUTOFUND, LP, a Delaware Limited Partnership,
having an office at 3333 New Hyde Park Road, New Hyde Park, New York
(hereinafter called "LANDLORD") and GRINDSTAFF, INC., a Tennessee corporation
having an office at Suite 250, Bldg. B, 5901 Peachtree Dunwoody Road, Atlanta,
GA 30328 (hereinafter called "TENANT").
STATEMENT OF FACTS
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Landlord is the fee owner of that certain real property situated in the
City of Elizabethton, Sixth Civil District of Carter County, State of Tennessee,
more fully described in Exhibit A annexed hereto and by this reference made a
part hereof, Landlord desires to lease to Tenant, and Tenant desires to hire
from Landlord, those certain plots, pieces and parcels of land described on
Exhibit A (hereinafter called the "LAND"), together with the building and other
structures located thereon thereinafter called the "IMPROVEMENTS") (the Land and
Improvements are hereinafter called the "LEASED PREMISES").
All capitalized terms used in this Lease, not otherwise defined, shall
have the meanings ascribed to them in Article 42.
NOW, THEREFORE, in consideration of Ten ($10.00) Dollars, each to the
other in hand paid, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, Landlord and Tenant hereby
agree as follows:
ARTICLE 1
DEMISE; TERM
1.1 Landlord hereby leases the Leased Premises to Tenant, and Tenant
hereby hires the Leased Premises from Landlord, upon, and subject to, the terms,
covenants and conditions contained in this Lease.
1.2 The initial Term of Tenant's leasehold estate in and to the Leased
Premises shall be for a period of approximately eighteen (18) years, commencing
upon the date hereof (hereinafter called the "COMMENCEMENT DATE") and expiring
on the eighteenth anniversary of the last day of the month in which the
Commencement Date occurs (hereinafter called the "EXPIRATION DATE"), unless
this Lease shall sooner terminate or expire as hereinafter provided.
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1.3 Landlord grants to Tenant the options (the "EXTENSION OPTIONS") to
extend the Term of this Lease for five (5) additional terms of five (5) years
each (the "OPTION TERMS") upon and subject to the terms and conditions set forth
in this Section 1.3. Each Extension Option shall be exercised, if at all, by
written notice given to Landlord at least twelve (12) months prior to the then
scheduled Expiration Date of the Term of this Lease, in which case the
expiration date for the applicable Option Term shall become the Expiration Date
for the Term of this Lease. Anything contained herein to the contrary, an
Extension Option may not be exercised if an Event of Default (as hereafter
defined) exists and is continuing at the time Tenant exercises such Extension
Option or at the commencement date of the additional Term resulting from the
exercise of such Option.
ARTICLE 2
FIXED NET RENT; ADDITIONAL RENT; CPI RENT
2.1 Tenant covenants and agrees to pay to Landlord a "FIXED NET RENT"
under this Lease for each Lease Year during the Term equal to the sum of:
(a) For the first five (5) Lease Years, Fixed Net Rent for the
Leased Premises shall be at the rate of Three Hundred Eighty-Three Thousand
Eight Hundred Dollars ($383,800) per annum; after the fifth Lease Year Fixed Net
Rent shall be the sum of the Fixed Net Rent for the first Lease Year; plus
(b) The amount of any CPI Rent (as such term is defined in Section
2.4) payable by Tenant to Landlord with respect to such Lease Year pursuant to
the terms of Section 2.6 below. The Fixed Net Rent shall be paid by Tenant to
Landlord in equal monthly installments in advance on the Commencement Date and
on the first day of each and every month thereafter during the Term of this
Lease at Landlord's office, or at such other place and/or to such agent as
Landlord may designate by notice to Tenant, in lawful money of the United States
of America. The first and last installments of Fixed Net Rent payable under this
Lease shall be suitably prorated, if applicable.
2.2 All such sums, charges, costs, expenses and other sums of money
(other than the Fixed Net Rent) as Tenant shall agree to pay under, or pursuant
to, this Lease shall be deemed to be "ADDITIONAL RENT" hereunder, for default in
the payment of which (which default remains uncured after any applicable notice
or grace period) Landlord shall have the same remedies as for a default in the
payment of Fixed Net Rent.
2.3 Tenant shall pay the Fixed Net Rent reserved herein, as well as
the items of additional rent assumed or payable by Tenant pursuant hereto or
hereunder, promptly, without demand therefor, and without any abatement, setoff,
or deduction of any kind whatsoever.
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2.4 For purposes of this Article 2, the following terms shall have the
respective meanings ascribed to them below:
(a) "PRICE INDEX" shall mean, subject to the terms of Section
2.7, "The Consumer Price Index" for All Urban Consumers (CPI-U)-U.S. City
Average, All Items (1982-84 = 100), issued by the Bureau of Labor Statistics of
the United States Department of Labor;
(b) "CPI COMPUTATION PERIOD" shall mean the period commencing on
the Commencement Date and expiring on the last day of the month in which shall
occur the day preceding the fifth anniversary of the Commencement Date, and each
consecutive five year period thereafter occurring during the balance of the
Term;
(c) "BASE PRICE INDEX" shall mean the Price Index as it exists on
the Commencement Date;
(d) "PERCENTAGE OF CPI INCREASE" shall mean, with respect to each
CPI Computation Period occurring during the Term after the expiration of the
first CPI Computation Period, the percentage, if any, by which the Price Index
existing as of the last day of the prior CPI Computation Period exceeds the Base
Price Index; and
(e) "CPI RENT" shall mean, with respect to each year occurring
during the Term after the expiration of the first CPI Computation Period, an
amount computed by multiplying:
(i) the then aggregate rent for all properties comprising
the Leased Premises with respect to the immediately preceding CPI Computation
Period; by
(ii) the Percentage of CPI Increase with respect to the last
day of the CPI Computation Period in which such year occurs, provided however
that the Percentage of CPI Increase shall not exceed the rate of 3% per annum
for the applicable CPI Computation Period.
2.5 After the expiration of each CPI Computation Period occurring
during the Term and the publication of the appropriate Index, Landlord shall
send a written notice (hereinafter called a "CPI NOTICE") to Tenant, setting
forth the Base Price Index, the Price Index existing as of the last day of the
expired CPI Computation Period, the Percentage of CPI Increase with respect to
the then current CPI Computation Period and the CPI Rent payable by Tenant to
Landlord for each year during the then current CPI Computation Period. Every CPI
Notice given by Landlord shall be conclusive and binding upon Tenant, unless
Tenant shall:
(a) notify Landlord within thirty (30) days after its receipt of
such notice that it disputes the correctness of the computations made thereon,
specifying the particular respects in which such computations are claimed to be
incorrect; and
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(b) submit its dispute to arbitration, in the manner provided in
Article 21, within ninety (90) days after its receipt of the disputed CPI
Notice, if such dispute shall not theretofore be settled by agreement.
Pending the resolution of such dispute by agreement or arbitration as aforesaid,
Tenant shall commence to pay the CPI Rent set forth in such CPI Notice, but such
payment shall be without prejudice to Tenant's position.
2.6 In consideration of the length of the Term of this Lease, Tenant
shall pay to Landlord as a part of the Fixed Net Rent reserved in this Lease,
with respect to each year occurring after the expiration of the first CPI
Computation Period, the annual CPI Rent applicable during the CPI Computation
Period in which such year occurs, which applicable annual CPI Rent shall be
payable in equal monthly installments in advance. In the event that, following
the commencement of any CPI Computation Period (other than the first CPI
Computation Period), the CPI Rent payable by Tenant during such CPI Computation
Period shall not have been fixed in a CPI Notice given by Landlord to Tenant,
Tenant shall continue to pay the monthly installments on account of the CPI
Rent, if any, applicable during the preceding CPI Computation Period and, within
ten (10) days after the receipt of a CPI Notice, Tenant shall pay the CPI Rent
for each month prior to the month following the giving of such notice.
2.7 In the event that the Price Index ceases to use the 1982-84
average of 100 as the basis of calculation, or if a substantial change is made
in the term of, or items contained in, the Price Index, the Price Index shall be
adjusted to the figure that would have been arrived at had the change in the
manner of computing the Price Index in effect as of the Commencement Date not
occurred. In the event that such Price Index (or a successor or substitute
index) is not available, a reliable governmental or other non-partisan
publication evaluating the information theretofore used in determining the Price
Index shall be used.
2.8 Landlord's failure to prepare and deliver a CPI Notice with
respect to any period, or Landlord's failure to make a demand, shall not in any
way cause Landlord to forfeit or surrender its rights to collect the CPI Rent
payable hereunder, provided no adjustment in CPI rent shall be made more than 24
months after the year in question.
ARTICLE 3
IMPOSITIONS AND CHARGES
3.1 Tenant shall, as additional rent, pay and discharge:
(a) all real estate taxes, assessments, water charges, water
meter charges (including, without limitation, any expenses incident to the
installation, repair or replacement of any water meter), sewer rents, sewer
charges and all other charges, taxes, rents, levies and sums of every kind or
nature whatsoever, extraordinary as well as ordinary, whether
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or not now within the contemplation of the parties, as shall, during the Term,
be imposed by any governmental or public authority upon, or become a lien in
respect of, the Leased Premises, any Improvement situated on the Leased
Premises, or any part thereof, or upon any sidewalk or street in front of or
adjacent to the Leased Premises, or that may become due and payable with respect
thereto, and any and all taxes, assessments and charges levied, assessed, or
imposed upon the Leased Premises in lieu of, or in addition to, the foregoing,
under or by virtue of any present or future laws, rules, requirements, orders,
directives, ordinances, or regulations of the United States of America, or of
the State, County, Town, Village, or City government, or of any municipal
bureau, department, or other lawful authority whatsoever;
(b) all charges for fire alarm service, gas, electricity, steam
and all other public utility or similar service or services furnished during the
Term to the Leased Premises, any Improvement situated on the Leased Premises, or
any part thereof, all fees and charges of the Federal, State, County, Town,
Village, or City government, or of any municipal bureau, department, or other
lawful authority whatsoever, for the construction, maintenance or use of any
street or sidewalk adjacent to the Leased Premises and all fees and charges for
the construction, maintenance, use, or occupancy, during the Term, of the Leased
Premises, any Improvement now or hereafter situated on the Leased Premises, or
any put thereof; and
(c) all taxes and assessments that shall or may, during the Term,
be charged, levied, assessed, or imposed upon, or become a lien upon, the
personal property of Tenant used in connection with the operation of the Leased
Premises, any Improvement situated on the Leased Premises, or any part thereof,
or in connection with Tenant's business conducted thereon or therein.
Nothing herein contained shall be construed so as to require Tenant to pay, or
be liable for any gift, inheritance, estate, franchise, income, profits,
capital, or similar tax imposed upon Landlord, unless such tax shall be imposed
or levied upon, or with respect to, the rents payable to Landlord hereunder in
lieu of one or more of the charges or impositions described in subsection (a),
(b) and/or (c) above, in which event Tenant covenants and agrees to pay such tax
as if the Leased Premises were the only property owned by Landlord.
3.2 Tenant shall be deemed to have complied with the requirements of
Section 3.1 if Tenant shall:
(a) pay each such imposition or charge prior to the expiration of
the period within which payment is permitted without penalty or interest;
(b) promptly procure an official receipt from the appropriate
taxing authority, if available, or other evidence of payment, evidencing each
such payment; and
(c) within forty-five (45) days after the expiration of the
payment period described in subsection (a) above, and upon Landlord's request
therefor, exhibit to
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Landlord such official receipt, or such other evidence of payment as Landlord
shall reasonably request.
In the event that, at any time during the Term of this Lease, either:
(i) Tenant shall fail to pay any such imposition or charge
as and when provided in subsection (a) above;
(ii) Tenant shall fail to deliver to Landlord any receipt or
other evidence of payment required to be delivered to Landlord pursuant to the
term of subsection (c) above on or before the date when the same is required to
be delivered pursuant to the terms thereof;
(iii) any of the events set forth in subsections (a) through
(e) of Section 15.1 shall occur; and/or
(iv) an Event of Default (as such term is defined in
Section 16.1) shall occur,
then, notwithstanding anything to the contrary provided in this Section 3.2,
Landlord shall have the right, at Landlord's option and in addition to all other
rights and remedies that shall be available to Landlord as a result thereof, to
require Tenant to;
(x) promptly deposit with Landlord funds for the payment of
all then current impositions and charges of the nature described in Section 3.1
required to be paid by Tenant hereunder; and
(y) also, to the extent Landlord is required to do so by an
institutional lender or lenders holding a mortgage on any portion of the Leased
Premises, deposit one-twelfth (1/12) of the current impositions and charges
(with respect to such portion), as estimated by Landlord but in no event less
than those of the preceding year(s) if the current amount(s) thereof have not
been fixed, on the first day of each month in advance, except that all
additional funds required for any payments thereof shall also be deposited as
aforesaid on the first day of the final month during which, or at the end of
which, a payment is due and payable without interest or penalty.
3.3 In any action or proceeding involving any question arising under
the provisions of this Article 3, a search, certificate, or receipt made or
given by any person or entity legally authorized to make or give the same,
certifying or showing, or purporting to certify or show, that any charge or
imposition referred to in this Article 3 is due and payable on the date of said
search or certificate, or has been paid as of the date of such receipt, shall be
prima facie evidence that such charge or imposition was due and payable, a lien
upon, or a charge against, the Leased Premises or the Improvements, or paid, as
the case may be. Landlord or Tenant shall
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be protected in any action that it may take in reliance upon any such
certificate, search, or receipt.
3.4 Tenant may, at its own expense, contest in good faith and by
appropriate proceedings, any tax, assessment, imposition or charge referred to
in this Article 3, and to appeal any adverse determination, provided that Tenant
shall have deposited with the fee mortgagee with respect to the Leased Premises
(or, if the Leased Premises are not subject to a fee mortgage, with a national
title insurance company designated by Landlord), if Landlord so requires, the
amount of the item so contested (or, where permitted by law, paid the same under
protest), together with such additional sums as may reasonably be required to
cover interest or penalties accrued and to accrue on any such item or items, and
provided, further, that no Event of Default shall have occurred and be
continuing under the terms of this Lease. Any refund obtained by Tenant or
Landlord (net of recovery costs) on account of taxes paid by Tenant shall be
Tenant's sole property. If such contest involves real estate taxes, any
additional taxes, interest, court costs, penalties and/or other charges directed
to be paid as a result of such contest shall be forthwith deposited by Tenant
with the fee mortgagee or title company (as the case may be), if Landlord so
requires, to enable Landlord to comply with the adjudication of said contest.
Nothing herein contained, however, shall relieve Tenant of the obligation and
duty to pay and discharge such contested items, as finally adjudicated, with
interest and penalties, and all other charges directed to be paid in or by any
such adjudication, less such sums as shall have been deposited as aforesaid. Any
such contest or legal proceeding shall be begun by Tenant as soon as reasonably
possible after the imposition of any contested item and shall be prosecuted to
final adjudication with all reasonable promptness and dispatch except, however,
that Tenant may, in its discretion, consolidate any proceeding to obtain a
reduction in the assessed valuation of the Leased Premises and the Improvements
for real estate tax purposes relating to any tax year with any similar
proceeding or proceedings relating to one or more other tax years. Anything to
the contrary herein notwithstanding, Tenant shall pay all such contested items
before the time when the Leased Premises or any part thereof might be forfeited
as a result of nonpayment.
3.5 At the commencement and expiration of the Term, all impositions
and charges referred to in this Article 3 for the period or periods in which the
Commencement Date or the Expiration Date (as the case may be) shall occur,
whether accrued or prepaid (as the case may be), shall be apportioned between
Landlord and Tenant in accordance with the usual practice and custom then in
effect in the City, County and State where each property comprising the Leased
Premises is located.
3.6 If, by law, any assessment for a public improvement with respect
to the Leased Premises or any Improvements situated thereon is payable, at the
option of the taxpayer, in installments, Tenant may, whether or not interest
shall accrue on the unpaid balance thereof, pay the same, and any accrued
interest or any unpaid balance thereof, in installments, as each installment
becomes due and payable, but in any event before any fine, penalty, interest, or
cost may be added thereto for non-timely payment of any installment or interest.
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ARTICLE 4
SUBORDINATION
4.1 Subject to the terms and conditions contained herein, this Lease
is subject and subordinate to all ground, overriding, or underlying leases, as
well as, at the election of the holder of any such lease or mortgage, to all
mortgages that may now or, subject to the provisions of Sections 4.2 and 4.3
below, hereafter affect such leases or the Leased Premises, and to all renewals,
modifications, consolidations, replacements and extensions of any such leases
and/or mortgages. This Section 4.1 shall be self-operative, and no further
instrument of subordination shall be required by any such ground or underlying
lessor or mortgagee who so elects. In confirmation of such subordination, Tenant
shall execute promptly any reasonable certificate that Landlord, or any such
lessor or mortgagee, may request.
4.2 Landlord shall use diligent, good faith efforts to obtain a
non-disturbance agreement substantially in the form hereinafter described from
any existing mortgagees, but the failure to obtain the same shall not be a
Landlord default, so long as Landlord uses good faith, diligent efforts.
Landlord represents to Tenant that as of the date of this Lease there are no
ground, overriding or underlying leases affecting the Leased Premises which are
superior to this Lease. The subordination of this Lease to ground, overriding,
or underlying leases entered into after the date of this Lease is subject to the
express conditions that, so long as this Lease shall be in full force and effect
in the event of termination of the term of any such ground, overriding, or
underlying lease by reentry, notice, summary proceedings, or other action or
proceeding, or if the term of such ground, overriding, or underlying lease shall
otherwise terminate or expire before the termination or expiration of the Term
of this Lease:
(a) Tenant shall not be made a party to any action or proceeding
to remove or evict Tenant or the tenant under such ground, overriding, or
underlying lease, or to disturb its possession by reason of, or based upon, such
termination or expiration of the term of such ground, overriding, or underlying
lease; and
(b) this Lease shall continue in full force and effect as a
direct lease between Tenant and the then owner of the fee or the lessor of such
ground, overriding, or underlying lease, as the case may be, upon all of the
obligations of this Lease, except that said owner or lessor shall not;
(i) be liable for any previous act or omission of any
prior landlord (including Landlord) under this Lease;
(ii) be subject to any offset that shall have theretofore
accrued to Tenant against Landlord; or
(iii) be bound by:
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(x) any previous modification of this Lease, not
expressly provided for in this Lease, where Tenant shall have, prior to such
modification, received notice of such ground, overriding, or underlying lease;
or
(y) any previous prepayment of more than one month's
fixed rent or any additional rent then due,
unless such modification or prepayment shall have been expressly approved in
writing by the owner of the fee or lessor of the superior lease.
4.3 The subordination of this Lease to the liens of mortgages granted
or modified by Landlord after the date of this Lease is subject to the express
conditions that, so long as this Lease shall be in full force and effect:
(a) Tenant shall not be named or joined in any action or
proceeding to foreclose any such mortgage;
(b) such action or proceeding shall not result in a cancellation
or termination of the Term of this Lease;
(c) if the holder of any such mortgage becomes the owner of
the fee or the assignee of any ground or underlying lease referred to in Section
4.1, or the lessee of any other lease given in substitution therefor, or if the
Land or the Improvements shall be sold as a result of any action or proceeding
to foreclose such mortgage, this Lease shall continue in full force and effect
as a direct lease between Tenant and the then owner of the fee, the then lessee
of such ground, overriding, or underlying lease, the lessee of any other lease
given in substitution therefor, or such purchaser of the Land or Building, as
the case may be, upon all of the obligations of this Lease, except that such
owner, lessee, or purchaser shall not:
(i) be liable for any previous act or omission of any
prior landlord (including Landlord) under this Lease;
(ii) be subject to any offset, not expressly provided for
in this Lease, that shall have theretofore accrued to Tenant against Landlord;
or
(iii) be bound by:
(x) any previous modification of this Lease where
Tenant shall have, prior to such modification, either received notice of such
mortgage; or
(y) any previous prepayment of more than one month's
fixed rent or any additional rent then due,
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unless such modification or prepayment shall have been expressly approved in
writing by the holder of the superior mortgage through, or by reason of which,
such owner, lessee, or purchaser shall have succeeded to the rights of Landlord
under this Lease.
4.4 If Tenant shall give Landlord any notice of a claimed default or
breach by Landlord, Tenant agrees to give a similar written notice to the
holder(s) of record of any fee mortgage(s) with respect to the Leased Premises,
provided that Tenant has received written notice of the existence of such fee
mortgage(s), including the name and address of the then holder(s) of such
mortgage(s). Such notice(s) to be given by Tenant to the holder(s) of record of
any fee mortgage(s) shall be sent by registered or certified mail to such
holder(s) at their respective addresses specified in the mortgage instruments,
or to any different address that they may designate for the purpose by written
notice given to Tenant in the manner provided in this Lease for notices to be
given to Tenant. Such mortgagee(s) shall be permitted to correct or remedy
Landlord's breach or default within thirty (30) days after the last day on which
Landlord may do so, and with like effect as if Landlord had done so. In the
event, however, that such breach or default is of a nature that the same cannot
be corrected or remedied by such mortgagee(s) without first obtaining possession
of the Leased Premises from Landlord, and such mortgagee(s) inform Tenant that
it (they) intend to cure following the obtaining of possession, the time
hereinbefore allowed to such mortgagee(s) to cure shall be extended for the
period necessary to obtain possession of the Leased Premises from Landlord.
Tenant's failure to give any holder of a fee mortgage the notice provided in
this paragraph shall not be deemed a default by Tenant under this Lease, but no
notice given by Tenant to Landlord of any claim, default, or breach by Landlord
shall be deemed legally effective until Tenant shall have given such notice to
any and all such holders of fee mortgages with respect to the Leased Premises.
4.5 In the event that any mortgagee comes into possession or ownership
of the fee title to the Leased Premises, or acquires the leasehold interest of
Landlord, by foreclosure of its mortgage, by proceedings on the underlying bond
or debt, or otherwise, Tenant agrees to attorn to such mortgagee as its new
lessor. In no event, however, shall Tenant be entitled to credit against such
mortgagee in possession of the Leased Premises, or against any mortgagee or
other party that otherwise becomes the new lessor of Tenant as provided in this
Section 4.5, for any Fixed Net Rent paid by Tenant to the predecessor of such
mortgagee or other party for more than one (1) month in advance or any
additional rent then due. The provisions for attornment hereinbefore set forth
in this Article 4 shall not require the execution of any further instrument.
However, if the holder of any fee mortgage and/or any party to whom Tenant
agrees to attorn as aforesaid reasonably requests a further instrument
expressing such attornment, Tenant agrees to execute the same in form reasonably
acceptable to such mortgagee and/or party within fifteen (15) days after a
request made do so in accordance with the provisions of this Lease, provided
such instrument does not increase Tenant's obligations or adversely affect
Tenant's rights.
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ARTICLE 5
USE OF THE LEASED PREMISES
5.1 Except as otherwise provided in this Article 5, Tenant shall be
permitted to use the Leased Premises as an automobile dealership, subject,
however to:
(a) the laws, ordinances, orders, rules and regulations
(including, without limitation, zoning ordinances) now in effect or hereafter
adopted by all governmental and quasi-governmental authorities having or
asserting jurisdiction; and
(b) such conditions, restrictions and other encumbrance, if any,
to which the Leased Premises are subject at the date of this Lease.
5.2 Notwithstanding anything to the contrary provided in Section 5.1,
Tenant shall not use or occupy the Leased Premises, permit or suffer the same to
be used or occupied and/or do, or permit or suffer anything to be done, in or on
the Leased Premises or any part thereof, that would, in any manner or respect;
(a) violate any certificate of occupancy in force relating to
any Improvement situated on the Leased Premises (unless Tenant obtains an
amendment to the certificate of occupancy in order to avoid such violation);
(b) make void or voidable any insurance then in force with
respect to the Leased Premises, or render it impossible to obtain fire or other
insurance thereon required to be furnished by Tenant under this Lease;
(c) cause structural or other injury to any of the Improvements,
or constitute a private or public nuisance or waste; and/or
(d) render the Leased Premises incapable of being used or
occupied after the expiration or sooner termination of the Term of this Lease
for the purposes for which the same were used and occupied on the Commencement
Date (such use being automotive sales, servicing, leasing financing and
automotive insurance).
5.3 If Tenant proposes to change the use (including discontinuing any
use) at a particular location as an automobile dealership, Tenant shall provide
Landlord with written notice, including a description of the proposed use, the
name and credit information of any user, the date when the use is proposed to
change, and the basic business terms of the proposed transaction. Within 30 days
after receipt of Tenant's notice, (i) Landlord shall inform Tenant whether or
not Landlord consents to the change in use or (ii) Landlord may, at its option,
notify Tenant that it has elected to recapture such portion of the Leased
Premises, in which event this Lease shall terminate as to such portion at the
end of such 30 day period, or such later date as Tenant proposed to change the
use. If Landlord does not elect the option in clause (ii) of the
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preceding sentence, Landlord's consent shall not be unreasonably withheld. Among
the factors Landlord may consider are whether the change may cause the loss of
certain "grandfathered" zoning or use rights to use such location as an
automobile dealership.
5.4 Nothing contained in this Lease, and no action or inaction by
Landlord, shall be deemed or construed to mean that Landlord has granted to
Tenant any right, power, or authority to do any act, or to make any agreement,
that may create, give rise to, or be the foundation to any right, title,
interest, lien, charge, or other encumbrance upon the estate of Landlord in the
Leased Premises.
ARTICLE 6
NO REPRESENTATIONS BY LANDLORD
6.1 (a) Tenant acknowledges to Landlord that Tenant has examined
Landlord's title to, as well as the physical condition of, the Leased Premises
prior to the execution and delivery of this Lease and has found the same to be
satisfactory to it for all purposes hereof. In view thereof, Tenant has accepted
the Leased Premises "AS IS" and "WHERE IS" without any representation or
warranty by Landlord of any kind or nature, including, without limitation as to
Landlord's title to the Leased Premises, the physical and environmental
condition of the Leased Promises or the use or occupancy that may be made of the
Leased Premises.
(b) Tenant assumes the sole responsibility for the condition,
operation, maintenance and management of the Leased Premises, and Landlord shall
not be required to furnish any facilities or services or make any repairs or
alterations thereto. Without limiting the foregoing, Tenant shall have no claims
or recourse against Landlord with respect to the condition (including
environmental conditions) or permitted uses of the Leased Premises as of the
date of this Lease, and Tenant hereby waives any such claims against Landlord.
ARTICLE 7
LANDLORD NOT LIABLE FOR FAILURE OF WATER SUPPLY, ETC.
7.1 Landlord shall not be liable for:
(a) any failure of water supply, gas, or electric current, nor
for any injury or damage to person or property for any reason whatsoever,
including, without limitation, that caused by or resulting from:
(i) hurricane, tornado, flood, wind, or similar storms or
disturbances; or
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(ii) the leakage or flow of gasoline, oil, gas, electricity,
steam, water, rain, or snow from the street, sewer, gas mains, tanks, wires,
lines, any subsurface area, any part of the Improvements, pipes, appliances,
plumbing works, or any other place; or
(b) any interference with light or other incorporeal
hereditaments by anybody, or caused by operations by or of any public or
quasi-public work.
ARTICLE 8
TENANT TO REPAIR
8.1 Tenant shall take good care of the Leased Premises and of the
improvements now or hereafter situated thereon, both inside and outside, and
keep the same and all parts thereof (including, without limitation the
generality thereof, the roofs, foundations and appurtenances thereto, together
with any and all alterations, additions and improvements therein or thereto) in
good order and condition, suffering no waste or injury. Subject to the terms of
Section 8.3 and Articles 13 and 20 below, Tenant shall, at Tenant's expense,
promptly make all needed repairs and replacements, structural or otherwise,
ordinary and extraordinary, in and to the Improvements now or hereafter erected
upon the Leased Premises, including, but not limited to sidewalks, curbs, water,
electric lines, and gas connections, pipes and mains, and all other fixtures,
machinery and equipment now or hereafter belonging to or used in connection with
the Leased Premises (whether or not located thereon) or used in the operation of
the Improvements. All such repairs and replacements shall be of good quality
sufficient for the proper maintenance and operation of the Leased Premises and
the Improvements thereon, and shall be constructed and, subject to Section 9.2
below, installed in compliance with all requirements of all governmental
authorities having jurisdiction thereof, and of the Board of Fire Underwriters
or any successor thereof. Tenant shall not permit the accumulation of waste or
refuse matter, nor permit anything to be done upon the Leased Premises or the
Improvements that would invalidate or prevent the procurement of any insurance
policies that may at any time be required pursuant to the provisions of Article
12. Tenant shall not obstruct, or permit the obstruction of, any street, road,
walk, or sidewalk located on or adjoining the Leased Premises, except as may be
permitted by all governmental authorities having jurisdiction thereof, and shall
keep any sidewalks adjoining the Leased Premises clean and free of snow and ice.
8.2 Landlord shall not, under any circumstance, be required to build
on the Leased Premises, or to make any repairs, restorations, replacements,
alterations, or renewals of any nature or description to the Leased Premises or
to any of the Improvements, whether interior or exterior, ordinary or
extraordinary, structural or nonstructural, foreseen or unforeseen, to make any
expenditure whatsoever in connection with this Lease, or to inspect or maintain
the Leased Premises in any way. Tenant hereby waives the right to make repairs,
restorations, replacements, alterations, or renewals at the expense of Landlord
pursuant to any law. Additionally, Tenant shall not make any claim or demand
upon, or bring any action against, Landlord for any loss, cost, injury, damage,
or other expense caused by any failure or defect, structural or non-structural,
of the Leased Premises or any part thereof.
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8.3 Notwithstanding anything to the contrary contained in Section 8.1
above, but subject in all respects to the provisions of Section 8.2 above, and
further provided that Tenant is not in default under this Lease beyond any
applicable notice and/or grace period, Tenant shall have the right to elect not
to make any structural repair or structural repairs in or to the Leased Premises
(however, Tenant shall continue to be obligated with respect to non-structural
repair or repairs) during the last two (2) years of the Term, provided, and upon
the conditions, that:
(a) Tenant shall give to Landlord written notice of such
election, which notice shall describe the repair or repairs to which such notice
relates with reasonable detail and set forth Tenant's good faith estimate of the
cost and expense of performing the same;
(b) if the need for such repair or repairs shall result from
condemnation, then, notwithstanding anything to the contrary provided in this
Lease, Tenant shall have no right to assert any claim against the condemning
authority, or to receive any award or damages therefrom, for consequential
damage to the portion of the Leased Premises not taken or for restoration costs
and/or expenses (all such claims and rights to claim, as well as all such awards
and/or damages, in such circumstances being hereby irrevocably and
unconditionally assigned by Tenant to Landlord), which awards and/or damages
shall be payable to Landlord in addition to the amounts described in subsections
(a) and (b) of Section 20.3 below and in reduction of any amount payable to
Tenant pursuant to subsection (c) of Section 20.3, and the terms of Section 20.3
shall not apply thereto;
(c) if the need for such repair or repairs shall result from the
happening of an event as to which insurance is, or is required to be, maintained
by Tenant pursuant to the terms of this Lease, then, notwithstanding anything to
the contrary provided in this Lease:
(i) Landlord shall be entitled to adjust the loss with
Tenant's insurance carrier and to settle the same (in Tenant's name, if
required), without obtaining Tenant's consent thereto;
(ii) Landlord shall be entitled to receive and retain for
its own account any and all insurance proceeds becoming available in connection
therewith (Tenant hereby irrevocably and unconditionally assigning to Landlord
all of Tenant's right, title and interest in and to such proceeds), and any such
proceeds received by Tenant shall be received as trust funds for Landlord's
account and shall be promptly remitted by Tenant to Landlord; and
(iii) in the event that the proceeds of insurance provided
by Tenant actually received by Landlord shall be insufficient to compensate
Landlord for the entire loss, whether due to an insufficiency in coverage or
otherwise, Tenant shall pay to Landlord, as additional rent hereunder within ten
(10) days after Landlord's demand therefor, the amount of the shortfall;
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(d) neither the failure of such repair or repairs to be made nor
Landlord's election to make the same pursuant to subsection (f) below shall:
(i) entitle Tenant to terminate this Lease;
(ii) permit Tenant to a reduction or abatement of, or a
credit or off-set against, the full Fixed Net Rent and/or additional rent
otherwise thereafter becoming due hereunder; nor
(iii) otherwise affect or diminish, in any manner or respect
whatsoever, any of Landlord's rights and/or Tenant's other obligations under
this Lease;
(e) notwithstanding the foregoing, Tenant shall make such repair
or repairs at its sole cost and expense, as set forth in Section 8.1, if (x) the
need for such repair or repairs shall result other than from condemnation and
other than from the happening of an event as to which insurance is, or is
required to be, maintained by Tenant pursuant to this Lease and (y) the failure
to make such repair or repairs shall or could:
(i) create or lead to an unsafe condition of any nature
whatsoever;
(ii) result in the invalidation of any policy or policies of
insurance maintained, or required to be maintained, by Tenant pursuant to the
terms of this Lease, or result in the reduction of the coverage provided, or to
be provided, thereunder; or
(iii) constitute a crime or an offense punishable by fine or
imprisonment (including, without limitation, result in the filing of a violation
against the Leased Premises or the issuance of any other order or directive to
make such repair or repairs by any governmental agency or authority having
jurisdiction); and
(f) if the failure to make such repair or repairs shall or could
constitute a default under any fee mortgage or if the nature of such repair or
repairs is such that Tenant would be required to make the same pursuant to
subsection (e) above but for the provisions of sub-subsection (x) of such
subsection (e), Tenant shall, if Landlord so elects in its sole discretion,
afford Landlord with all necessary and/or desirable access to the Leased
Premises so as to enable Landlord to perform such repair or repairs for its own
account, and Tenant shall otherwise cooperate with Landlord in connection with
the same in all reasonable respects.
In the event that Landlord shall make a demand upon Tenant pursuant to
sub-subsection (iii) of subsection (c) above and Tenant shall dispute the amount
claimed by Landlord, the dispute shall be resolved, upon the petition of either
party, by an arbitration conducted by the parties in accordance with the
provisions of Article 21 below. Tenant's obligations under subsections (b) and
(c) and, if applicable, subsection (e) of this Section 8.3 shall survive the
expiration or sooner termination of the Term.
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ARTICLE 9
TENANT TO COMPLY WITH LAWS; ENVIRONMENTAL MATTERS
9.1 Tenant shall, at Tenant's expense, promptly comply with:
(a) the requirements of every applicable statute, law, ordinance,
regulation, or order now or hereafter made by any Federal, State, County,
municipal, or other public body, department, bureau, officer or authority, with
respect to:
(i) the Leased Premises, the Improvements and appurtenances
thereto;
(ii) the use or occupation of the Leased Premises and the
Improvements, including the making of any alteration or addition in or to any
structure upon, connected with, or appurtenant to, the Leased Premises; and
(iii) the removal of any encroachment, but only if required
to do so by order of any court, department, or bureau having jurisdiction;
(b) the requirements of all easements, restrictions and other
documents existing of record as of the date of this Agreement of Lease and/or
hereafter granted by Landlord with the prior written consent or joinder of
Tenant, which consent or joinder shall not be unreasonably withheld or delayed
by Tenant; and
(c) any applicable regulation or order of the Board of Fire
Underwriters, Fire Insurance Rating Organization, or other body having similar
functions, whether or not such compliance involves structural repairs or
changes, whether or not such compliance is required on account of any particular
use to which the Leased Premises, the Improvements, or any part thereof may be
put, whether or not any such statute, law, ordinance, requirement, regulation,
or order is of a kind now within the contemplation of the parties hereto and
regardless of the cost thereof
9.2 Provided that non-compliance therewith shall not constitute a
crime or an offense punishable by fine or imprisonment, and provided, further,
that no Event of Default shall have occurred and be continuing under the terms
of this Lease, Tenant may, at Tenant's expense, contest the validity of any such
law, ordinance, regulation, order, or requirement, and such non-compliance by
Tenant during such contest, provided that such contest shall be diligently
prosecuted, shall not be deemed a breach of this covenant, provided that, before
the commencement of such contest, Tenant shall furnish to Landlord, if Landlord
so requires, either:
(a) the bond of a surety company reasonably satisfactory to
Landlord, which bond shall:
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(i) be, as to its provisions and form, reasonably
satisfactory to Landlord, but in any event such as will cause the discharge of
any lien on Landlord's fee title to the Leased Premises;
(ii) be in an amount at least equal to one hundred and ten
per centum (110%) of the estimated cost of such compliance but not less than
required to discharge any such lien; and
(iii) indemnify Landlord against the cost of such compliance,
as well as against all liability for any damages, interests, penalties and
expense (including reasonable fees of attorneys or counsel), resulting from or
incurred in connection with such contest or non-compliance; or
(b) other security, in lieu of such bond that is reasonably
satisfactory to Landlord as to form and amount.
9.3 (a) Subject to Section 9.2 above, Tenant shall conduct, and cause
to be conducted, all operations and activity at the Leased Premises in
compliance with, and shall in all other respects applicable to the Leased
Premises comply with, all applicable present and future federal, state,
municipal and other governmental statutes, ordinances, regulations, orders,
directives, guidelines and other requirements, and all present and future
requirements of common law, concerning the environment (hereinafter called
"ENVIRONMENTAL STATUTES") including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Sections 9601
et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Sections 9601 et
seq., the Clean Air Act, 42 U.S.C. Sections 7401 et seq., and the Toxic
Substances Control Act, 15 U.S.C. Sections 2601 et seq., those relating to the
generation, use, handling, treatment, storage, transportation, release,
emission, disposal, remediation or presence of any material, substance, liquid,
effluent or product, including, without limitation, hazardous substances,
hazardous waste or hazardous materials, those concerning conditions at, above or
below the surface of the ground and those concerning conditions in, at or
outside of buildings.
(b) Tenant, in a timely manner, shall obtain and maintain in full
force and effect all permits, licenses and approvals, and shall make and file
all notifications and registrations, as required by Environmental Statutes.
Tenant (subject to Tenant's right to contest as elsewhere provided) shall at all
times comply with the terms and conditions of any such permits, licenses,
approvals, notifications and registrations.
(c) Tenant shall provide to Landlord copies of the following,
forthwith after each shall have been submitted, prepared or received by Tenant
or any affiliate of Tenant: (i) all applications and associated materials
submitted to any governmental agency relating to any Environmental Statute; (ii)
all permits, licenses, approvals, and amendments or modifications thereof,
obtained under any Environmental Statute; and (iii) any notice of violation,
summons, order, or complaint, received by Tenant or any occupant of the Leased
Premises pertaining to compliance with any Environmental Statute.
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(d) Tenant, without the prior written consent of Landlord,
shall not install or cause, suffer or permit the installation of, any above or
underground storage tank at the Leased Premises. If Tenant does install or
cause, suffer or permit the installation of any such tank, Tenant shall comply
with all applicable laws as to its installation, maintenance, operation and
closure, including any requirement for the maintenance of liability insurance
with respect to risks associated with any such tank. If such liability insurance
is required to be maintained, Landlord shall be named as an additional insured
thereunder. Upon termination of this Lease, Landlord shall have the option of
requiring that Tenant, at Tenant's sole cost and expense, remove any tank
installed by Tenant and any associated contaminated material and other
contamination and perform all tests required by Landlord and any required by
Environmental Statutes and any other applicable governmental requirements and
provide Landlord and all required government agencies with the results of such
tests in such form as reasonably required by Landlord or as required by law.
(e) Tenant shall not cause or suffer or permit to occur at,
in, on or under the Leased Premises any generation, use, manufacturing,
refining, transportation, emission, release, treatment, storage, disposal,
presence or handling of hazardous substances, hazardous wastes or hazardous
materials (as such terms are now or hereafter defined under any Environmental
Statute) (herein called "HAZARDOUS SUBSTANCES"), except that construction
materials (other than asbestos or polychlorinated biphenyls), office equipment,
fuel and similar products and cleaning solutions, and other maintenance
materials that are or contain Hazardous Substances, and other Hazardous
Substances which are contained in a suitable and safe manner, may be used,
generated, handled or stored on the Leased Premises, provided such is incident
to and reasonably necessary for the operation and maintenance of the Leased
Premises as an automobile dealership and service center or other uses permitted
hereunder and is in compliance with all Environmental Statutes and all other
applicable governmental requirements. Should any release of any Hazardous
Substance occur at the Leased Premises, Tenant shall promptly contain, remove
and dispose of off the Leased Premises, such Hazardous Substances, and any
material that was contaminated by the release and remedy and mitigate all
threats to human health or the environment relating to such release as and to
the extent required by applicable Environmental Law. When conducting any such
measures, Tenant shall comply with Environmental Statutes.
(f) If the use of the Leased Premises by Tenant, or any
operation or activity conducted at the Leased Premises during the Term of this
Lease, shall be such as requires, under any present or future Environmental
Statute, the obtaining of an approval (herein called an "ENVIRONMENTAL APPROVAL
OF TRANSFER OR CHANGE") by any governmental agency, or an acknowledgment by such
agency that such approval is not required, (i) in order to change or transfer
ownership of the Leased Premises, (ii) in order to change or transfer Tenant's
interest in this Lease or any interest in Tenant or in any entity which directly
or indirectly controls Tenant or (iii) in connection with: (A) cessation of all
or any operations or activity at the Leased Premises for any reason or (B) a
change in or transfer of any operations or activity at the Leased Premises or
(C) the expiration or termination of this Lease (each of the transactions and
occurrences referred to in the foregoing clauses (i), (ii) or (iii) being
hereinafter called a
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"CHANGE"), Tenant, at Tenant's sole cost and expense, shall, in compliance with
all Environmental Statutes, apply for, and prior to the Change deliver to
Landlord, a copy of the required approval or acknowledgment and Tenant shall
perform or cause to be performed all remedial actions required by such
governmental agency for the issuance of the approval, in whole or in part by
reason of Tenant's use of the Leased Premises or operations or activities at the
Leased Premises during the Term of this Lease; provided that as to any Change
which is a change or transfer of ownership of the Leased Premises or of an
interest in Landlord or in any entity which directly or indirectly controls
Landlord, Tenant shall instead (x) promptly comply with any request of Landlord
to provide such information, statements or affidavits as to operations and
activities at the Leased Premises during the Term of this Lease, and as to the
use of the Leased Premises by Tenant, as may be determined by Landlord to be
necessary, (y) either promptly perform or, at the option of Landlord, reimburse
Landlord within 15 days after demand for Landlord's costs of, all remedial
actions required by any governmental agency for issuance of the Environmental
Approval of Transfer or Change and (z) pay, or reimburse Landlord for, all other
costs and expenses which are attributable to the existence of Tenant's tenancy
or to Tenant's use of the Leased Premises or to any operation or activity at the
Leased Premises during the Term of this Lease and were incurred to obtain such
required approval or acknowledgment, Tenant covenants, represents and warrants
that any application, statement or information made or provided by or through
Tenant pursuant to this subsection shall be true and complete. If there should
be an Environmental Statute which requires an Environmental Approval of Transfer
or Change, but such requirement shall not have been made applicable by Tenant's
use of the Leased Premises or operations or activities conducted at the Leased
Premises during the Term of this Lease, and if an official statement of such
non-applicability shall be obtainable from the applicable governmental agency,
then, whether or not the obtaining of such statement is required by law, Tenant,
at Tenant's sole cost and expense, shall obtain and deliver such statement to
Landlord before the change occurs (in the case of a change described in clause
(ii) or clause (iii) above) or promptly upon request of Landlord (in the case of
a change described in clause (i) above).
(g) Tenant agrees to permit Landlord and its authorized
representatives to enter, inspect and assess the Leased Premises at reasonable
times for the purpose of determining Tenant's compliance with the provisions of
this Section 9.3.
(h) Tenant hereby agrees to indemnify and to hold harmless
Landlord of, from and against any and all expense, loss or liability suffered by
Landlord by reason of Tenant's breach of any of the provisions of this Section
9.3, including, but not limited to, (i) any and all expenses that Landlord may
incur in complying with any Environmental Statutes, (ii) any and all costs that
Landlord may incur in studying, assessing, containing, removing, remedying,
mitigating, or otherwise responding to, the release of any Hazardous Substance
or waste at or from the Leased Premises, (iii) any and all costs for which
Landlord may be liable to any governmental agency for studying, assessing,
containing, removing, remedying, mitigating, or otherwise responding to, the
release of a Hazardous Substance or waste at or from the Leased Premises, (iv)
any and all fines or penalties assessed, or threatened to be assessed, upon
Landlord by reason of a failure of Tenant to comply with any obligations,
covenants or conditions set forth
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in this Section 9.3 and (v) any and all legal fees and costs incurred by
Landlord in connection with any of the foregoing.
(i) No subsequent modification or termination of this Lease by
agreement of the parties, or otherwise shall be construed to waive, or to
modify, any provisions of this Section 9.3, unless the termination or
modification agreement or other document so states in writing and makes specific
reference to this Section 9.3.
ARTICLE 10
INTENTIONALLY OMITTED
10.1 Intentionally omitted.
ARTICLE 11
NET LEASE; NON-TERMINABILITY
11.1 This Lease is a net lease, and the Fixed Net Rent, additional rent
and all other sums payable hereunder to, or on behalf of, Landlord shall be paid
without notice or demand and without setoff, counterclaim, abatement,
suspension, deduction, or defense. Landlord and Tenant each hereby further agree
and confirm that, notwithstanding anything to the contrary contained in this
Lease, it is the purpose and intent of both Landlord and Tenant that the rents
payable under this Lease shall be absolutely net to Landlord, so that this Lease
shall yield, net to Landlord, the Fixed Net Rent specified herein in each year
during the Term.
11.2 Except as otherwise expressly provided herein, this Lease shall
not terminate, nor shall Tenant have any right to terminate this Lease or be
entitled to the abatement of any rent or any reduction thereof, nor shall the
obligations hereunder of Tenant be otherwise affected, any present or future law
to the contrary notwithstanding, by reason of:
(a) any damage to, or the destruction of, the Leased Premises,
the Improvements, or any portion thereof, from whatever cause;
(b) the taking of the Leased Premises, the Improvements, or
any portion thereof by condemnation or otherwise, except as, and to the extent,
provided to the contrary in Article 20 below;
(c) the prohibition, limitation, or restriction of Tenant's
use of the Leased Premises, the Improvements, or any portion thereof (including,
without limitation, any diminution in the amount of space usable by Tenant at
the Leased Premises caused by legally required changes in the construction,
equipment, fixture, motors, machinery, operation or use of the Leased Premises),
or the interference with such use by any private person or entity;
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(d) Tenant's acquisition of the fee ownership of the Leased
Premises or the Improvements; or
(e) any other cause whatsoever, whether similar or dissimilar
to the foregoing,
it being the intention of the parties hereto that the Fixed Net Rent and
additional rent reserved hereunder shall continue to be payable in all events,
and the obligations of Tenant hereunder shall continue unaffected, unless the
requirement to pay or perform the same shall be terminated pursuant to an
express provision of this Lease.
11.3 Except as provided in Article 20 below, Tenant waives all rights
now or hereafter conferred by law to:
(a) quit, terminate, or surrender this Lease or the Leased
Premises, the Improvements or any part thereof; or
(b) any abatement, suspension, deferment, or reduction of the
Fixed Net Rent, additional rent, or any other sums payable under this Lease,
regardless of whether such rights shall arise from any present or future
constitution, statute, or rule of law.
ARTICLE 12
INSURANCE
12.1 Throughout the Term, Tenant shall, at its own cost and expense:
(a) keep the Improvements insured against loss or damage by
fire, windstorm, and other perils included in so-called "All Risk" or Special
Form Insurance policies and also including coverage for floods, earthquakes, and
sinkholes. Insurance amounts shall be provided for 100% of the full replacement
cost value of buildings and other land improvements. Coverage extensions shall
include: Replacement Cost Value with a Coinsurance Waiver or Agreed amount
Endorsement, and Demolition and Increased Cost of Construction (Law and
Ordinance). Such insurance shall:
(i) be issued by insurance companies authorized to do
business in the State where the Leased Premises are located and be rated in the
latest publication of A.M. Best rating guide or equivalent rating guide at A:IX
or A:VIII or greater, under insurance policies in form and content reasonably
satisfactory to Landlord;
(ii) be carried in the name, and in favor, of
Landlord, Tenant and any fee mortgagee(s), as their respective interests may
appear;
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(iii) effectively provide that the respective
interests of Landlord and any fee mortgagee(s) shall not be subject to
cancellation by reason of any act or omission of Tenant without sixty (60) days'
prior written notice of such cancellation, however, when cancellation is for
nonpayment of premium the insurance company may cancel the policy by giving at
least ten (10) days prior written notice of such cancellation;
(iv) subject to the requirements of any fee
mortgagee, provide that the loss, if any, under any such policies shall be
adjusted by Tenant, that Landlord may participate in the loss adjustment, and
Landlord may adjust the loss if Tenant fails to do so, and provide that the loss
shall be paid by the insurance company or companies as provided in Section 12.7;
and
(v) provide Business Interruption or Rental Value
insurance including coverage for the continuing rental obligations under this
Lease on an Actual Loss Sustained basis in amounts not less than 12 months
insurable value with loss payable endorsement thereunder in favor of the
Landlord; and
(vi) provide Comprehensive Boiler & Machinery
insurance covering all pressure vessels, boilers, mechanical and electrical
equipment at the Leased Premises. This coverage shall include Extra Expense and
insurance for the continuing rental obligations under this Lease. Insurance
amounts shall be as reasonably required by Landlord, but not less than $5
million per accident; and
(vii) provide such other insurance as may from time
to time be reasonably required by the Landlord as insurance against insurable
hazards that are customarily and generally required to be insured with respect
to similar promises, with due regard for the height, depth and type of the
Improvements, their construction and their use and occupancy.
(b) provide Landlord and any fee mortgagee(s) with public
liability insurance policies which insurance shall comply with the requirements
of subsections 12.1 (a)(i) and (iii) and shall provide at least the following:
(i) Commercial General Liability covering the Leased
Premises and operations of the Tenant in amounts not less than $1 million per
occurrence and $2 million in the annual aggregate per location and including
coverage for Products and Completed Operations Liability;
(ii) Commercial Automobile Liability, including
Garage Liability, covering all Owned, Hired, Non Owned Automobiles including
customer and demonstrator vehicles, any other vehicle usual to the Tenant's
business in amounts not less than $1 million per accident;
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(iii) Garagekeepers Legal Liability providing
coverage for vehicles of others in the possession of the automobile dealer for
physical damage to those vehicles;
(iv) Workers Compensation and Employers Liability,
which coverage shall meet the statutory requirements of the state in which the
Leased Premises is located;
(v) Umbrella Liability in excess of the Commercial
General, Automobile, Garage, and Employers Liability in amounts not less than
$10,000,000 per occurrence and in the annual aggregate;
(vi) all Third Party liability policies shall name
the Landlord and any fee mortgagee(s) as an "Additional Insured" and be
evidenced by a certificate of insurance policy endorsement specifically
indicating the Landlord's and any fee mortgagee(s) Additional Insured status;
(vii) other insurance as is customary to the
operations of the Tenant or as may reasonably be required by the Landlord as
good commercial practice would dictate,
In the event of any dispute between Landlord and Tenant with respect to the
amount of general liability coverage to be maintained by Tenant and/or the types
and amounts of such other insurance as Landlord may reasonably require Tenant to
carry from time to time, as above provided, such dispute shall be arbitrated
pursuant to the provisions of Article 21 of this Lease.
12.2 Tenant shall procure policies for the insurance required
to be carried pursuant to Section 12.1 for periods of from one (1) to five (5)
years, as Tenant shall elect, and shall deliver to Landlord original
certificates thereof with evidence, by stamping or otherwise, of the payment of
the premiums thereon. Any such policies shall contain a loss payable endorsement
which shall provide that (i) the loss, if any, under such policies shall be paid
by the insurance companies as provided in Section 12.7 below, (ii) the insurer
will not cancel or modify such policy except after sixty (60) days prior written
notice to Landlord, however, if the cancellation is for nonpayment of premium,
the insurance company may cancel the policy after ten (10) days' prior written
notice to Landlord, and (iii) any loss payable thereunder shall not be
invalidated by any act or neglect of the Tenant, nor by any foreclosure or other
proceedings or notice of sale relating to the Leased Premises nor by any change
in the title or ownership of said property, nor by the occupation of the
locations for purposes more hazardous than are permitted by the Policy.
12.3 All premiums and charges for Tenant's insurance policies
(including, without limitation, for the insurance policies required to be
carried pursuant to Section 12.1) shall be paid by Tenant. If Tenant shall fail
to make any such payment when due, or shall fail to carry any such policy, the
provisions of Article 14 shall apply.
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12.4 Tenant shall pay the premiums for Tenant's initial
policies of insurance required hereunder and all renewals thereof not later than
the due date thereof so as to prevent a lapse of coverage. Prior to the
expiration of each policy of insurance, Tenant shall deliver to Landlord a
certificate of such renewal policy with evidence, by stamping or otherwise, of
the payment of the premiums thereon. If any such premiums shall not be paid when
due or if such a certificate of any renewal policy required to be delivered
hereunder shall not be so delivered, the provisions of Article 14 shall apply.
12.5 Tenant shall not violate, or permit to be violated, any
of the conditions or Provisions of any such policy, and Tenant shall so perform
and satisfy the reasonable requirements of the companies writing such policies.
12.6 Tenant shall not carry separate insurance, concurrent in
coverage or contributing in the event of loss with any insurance required to be
furnished by Tenant under the provisions of this Article 12, if the effect of
such separate insurance would be to reduce the protection or the payment to be
made under said insurance required to be furnished by Tenant, unless Landlord
and any fee mortgagee(s) (where the insurance required to be carried requires
the inclusion of the fee mortgagee(s)) are included as additional insureds, with
loss payable as hereinabove provided. Tenant shall promptly notify Landlord of
the issuance of any such separate insurance and shall cause such policies or
certificates of insurance to be delivered to Landlord and any fee mortgagee(s)
as provided in this Article 12.
12.7 The loss proceeds of any fire and extended coverage
insurance shall be:
(a) if less than Five Hundred Thousand ($500,000.00)
Dollars, paid to Tenant as a trust fund, to be deposited in a separate bank
account maintained by Tenant and used, applied and paid to the repair and
restoration of the damage of the Improvements on the Leased Premises (such
$500,000 figure shall be increased every five years by the corresponding
increase in the CPI); or
(b) if in excess of Five Hundred Thousand
($500,000.00) Dollars (such $500,000 figure shall be increased every five years
by the corresponding increase in the CPI), paid to, and deposited with, the
Depositary, which shall hold, apply, and make available the proceeds of such
insurance to pay the cost of repair of the damage and replacement or
rebuilding of the Improvements as more particularly provided in Article 13.
12.8 In the event that Landlord receives any rent insurance
proceeds, Tenant shall be credited therefor as payments made to Landlord on
account of Fixed Net Rent and additional rent payable by Tenant.
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ARTICLE 13
FIRE OR CASUALTY
13.1 If, during the Term of this Lease, the Improvements now
or hereafter erected upon the Leased Premises shall be destroyed or damaged, in
whole or in part, by fire, as a result, directly or indirectly, of war, by act
of God, or by reason of any other cause or causes whatsoever (whether or not
insurable), Tenant shall give prompt notice thereof to Landlord and file prompt
proof of loss with the appropriate insurance company or companies (if insured).
At Tenant's own cost and expense, Tenant shall thereafter promptly repair,
replace and rebuild the Improvements, at least to the extent of the value and as
nearly as practicable to the character of the Improvements existing immediately
prior to such occurrence. Such repairs, replacements, or rebuilding shall be
made by Tenant in accordance with the following terms and conditions:
(a) the same shall be made in accordance with plans
and specifications therefor, if required by law;
(b) at least ten (10) days before commencing such
work, Tenant shall notify Landlord of Tenant's intention to commence the same,
and Tenant shall pay the increased premiums, if any, charged by the insurance
companies carrying insurance on the Improvements in order to cover the
additional risk during the course of such work;
(c) before commencing any such work:
(i) plans and specifications therefor shall
be filed and approved by all governmental departments and other authorities
having jurisdiction thereof;
(ii) a firm estimate for the cost of such
work shall be obtained;
(iii) Tenant shall, at its own cost and
expense, deliver to Landlord appropriate endorsements to be attached to, and
made part of, the fire and liability policies more particularly described in
Article 12, which endorsements shall cover all of the risks concerned during the
course of such work and shall be in form and content reasonably satisfactory to
Landlord;
(d) such work shall be commenced within one hundred
twenty (120) days after settlement shall have been made with the insurance
companies and the insurance monies shall have been turned over to Tenant or the
Depositary as provided in Article 12 hereof and all necessary governmental
approvals shall have been obtained; and
(e) such work shall be completed:
(i) within a reasonable time after the
commencement of the same, due regard being had to conditions;
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(ii) free and clear of all lines and
encumbrances; and
(iii) in accordance with the plans and
specifications therefor,
Any dispute with respect to any of the insurance endorsements referred to in
subsection (c)(iii) above shall be determined by arbitration as hereinafter
provided.
13.2 The Depositary shall, provided that this Lease shall then
be in full force and effect, apply the net proceeds of any insurance deposited
with it to the payment of the cost of such repairing or rebuilding as the same
progresses, payments to be made against properly certified vouchers of a
competent architect in charge of the work selected by Tenant. The Depositary
shall advance out of such insurance proceeds, toward each payment to be made by
or on behalf of Tenant, the amount that shall bear the same portion to such
payment as the whole amount received by the Depositary shall bear to the total
estimated cost of the repairing or rebuilding, except, however, if the contract
provides for a retainage, the Depositary shall withhold from each amount so to
be paid by it ten percent (10%) as a retainage until:
(a) the work of repairing or rebuilding shall have
been completed; and
(b) reasonable proof is furnished to the Depositary
and Landlord that no lien or liability has attached, or will attach, to the
Leased Premises, to the Improvements, or to Landlord in connection with such
repairing or rebuilding.
If at any time the total estimated cost of the repairs or rebuilding shall
exceed the amount of the net proceeds of such insurance received by the
Depositary, the Depositary shall require of Tenant that, before such repairing
or rebuilding be commenced or continued, the Depositary be secured by a surety
bond or cash equal to the amount of the excess of such estimated cost over the
net insurance proceeds as security for the due completion, within a reasonable
time, of such repairs or rebuilding. The total cost of all such rebuilding
shall, at all events, be borne by Tenant without any contribution thereto by
Landlord. If the insurance proceeds shall exceed the cost of repairs or
rebuilding, the balance remaining after payment of the cost of repairs or
rebuilding shall be paid over and belong to Tenant.
13.3 If:
(a) the work of repairing, replacing, or rebuilding
such damage or destroyed Improvements shall not have been commenced within the
one hundred twenty (120) day period (subject to force majeure causes) provided
for in subdivision (d) of Section 13.1; or
(b) such work, after commencement, shall not be
expeditiously proceeded with, unless such work is delayed by strikes, lockouts,
labor disputes, or other causes unavoidable or reasonably beyond the control of
Tenant,
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Landlord shall have the right to terminate this Lease and the Term by giving
Tenant not less than thirty (30) days written notice of Landlord's intention so
to do, and, upon the expiration of the date fixed in such notice, this Lease and
the Term shall wholly cease and expire, and the insurance proceeds received and
receivable under any and all policies of insurance shall be retained by
Landlord, or by any mortgagee of the fee to whom the same day be payable, as
their interests may appear, without claim thereon by Tenant, but Tenant shall
continue liable as provided in Article 17 hereof. Any dispute under this Section
13.3 shall be determined by arbitration as hereinafter provided.
13.4 Except as provided in Section 13.3, this Lease shall not
terminate or be affected in any manner by reason of the destruction or damage,
in whole or in part, of the Improvements, or by reason of the untenantability of
the Improvements or the Leased Premises, and the Fixed Net Rent reserved in this
Lease, as well as all other charges payable hereunder to the extent that the
same are not actually paid pursuant to rent insurance, shall be paid by Tenant
in accordance with the terms, covenants and conditions of this Lease, without
abatement, diminution, or reduction.
ARTICLE 14
LANDLORD MAY CURE DEFAULTS
14.1 If Tenant shall default in:
(a) making any payment required to be made by Tenant
under this Lease and such default is not cured within any applicable notice
and/or grace period pursuant to Section 16.1 hereof after written notice has
been given under Article 29 below; or
(b) performing any term, covenant, or condition of
this Lease on the part of Tenant to be performed and such default is not cured
within the applicable grace period pursuant to Section 16.1(b) hereof,
Landlord may, at its option (but shall not be obligated to do so) and for the
account of Tenant, make such payment or expend such sum as may be necessary or
desirable to perform and fulfill such term, covenant, or condition. However, no
such payment or expenditure by Landlord shall be deemed a waiver of Tenant's
default, nor shall the same affect any other remedy of Landlord by reason of
such default.
14.2 Any and all sums paid or expended by Landlord pursuant to
Section 14.1, as well as any other out of pocket cost or expense (including,
without limitation, reasonable attorneys fees, disbursements and court costs)
incurred by Landlord in instituting, prosecuting, or defending any action or
proceeding instituted by reason of, or relating to, any default by Tenant under
this Lease (provided, however, that, as to such costs and expenses related to an
action or proceeding, Landlord prevails therein), shall:
(a) be repaid by Tenant to Landlord as additional
rent under this Lease within 30 days after Landlord's written demand therefor;
and
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(b) bear interest from the date of Landlord's payment
or expenditure thereof to the date of Tenant's repayment of the same to
Landlord, both dates inclusive, at the rate of two (2%) percent per annum plus
the so-called prime, base, index, or reference interest rate publicly announced
by The Chase Manhattan Bank, N.A., from time to time in effect (but in no event
in excess of any then lawful maximum interest rate then applicable to Tenant).
ARTICLE 15
BANKRUPTCY, INSOLVENCY, REORGANIZATION, LIQUIDATION OR DISSOLUTION OF TENANT
15.1 The occurrence of any of the following events at any time
during the Term shall constitute and be deemed a material breach of this Lease
and a default by Tenant, entitling Landlord, at its option to exercise such
remedies as may be available to it at law or in equity, including, to the extent
permitted by applicable law, to cancel and terminate this Lease upon giving
Tenant a thirty (30) day notice in writing of Landlord's intention so to do,
whereupon this Lease shall terminate and come to an end at the expiration of
said thirty (30) days as if said expiration date were the time originally fixed
for the termination of this Lease, and Tenant shall quit and surrender the
Leased Premises and the Improvements to Landlord:
(a) the filing of a petition by or against Tenant
under this Lease and/or by or against any guarantor of the obligations of Tenant
under this Lease (herein called a "GUARANTOR") under the provisions of the
United States Bankruptcy Act, or under the provisions of any other federal or
state law of similar import now or hereafter in effect, for an arrangement,
reorganization, adjudication of bankruptcy and/or any other relief thereunder;
(b) the dissolution or liquidation of Tenant under
this Lease and/or any Guarantor, or the commencement of any action or proceeding
by or against Tenant under this Lease and/or any Guarantor for its dissolution
or liquidation, that shall be other than a voluntary dissolution, liquidation,
spinoff, split-off, or other similar proceeding pursuant to the United States
Internal Revenue Code whereby the assets of Tenant and/or such Guarantor are
distributed to its stockholders or to a partnership comprised of any such
stockholders;
(c) the appointment of a permanent receiver or a
permanent trustee of all or substantially all of the property of Tenant under
this Lease and/or any Guarantor or the commencement of any action or proceeding
by or against Tenant and/or such Guarantor for such appointment;
(d) the seizure of the property of Tenant under this
Lease and/or any Guarantor by any governmental officer or agency pursuant to
statutory authority for the dissolution, rehabilitation, reorganization or
liquidation of Tenant and/or such Guarantor; or
(e) the assignment by Tenant under this Lease and/or
any Guarantor of its property for the benefit of creditors,
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However, if any event described in subsection (a), (b), (c), or (d) occurs and
is not voluntarily initiated or commenced by Tenant and/or such Guarantor, or on
behalf of Tenant and/or such Guarantor, the event in question shall not
constitute or be deemed a default hereunder provided that the same is removed or
remedied by appropriate discharge or dismissal of the action or proceeding
concerned, and the discharge or any receiver, trustee, or other judicial
custodian appointed for the property of Tenant and/or such Guarantor within one
hundred twenty (120) days from the commencement date of such action,
proceeding, or appointment.
15.2 It is stipulated and agreed that, in the event of the
termination of this Lease pursuant to Section 15.1 hereof, Landlord, at its
election, shall forthwith be entitled to recover from Tenant, as and for
liquidated damages an amount computed pursuant to Section 17.2 hereof.
If the Leased Premises, or any part thereof, is
re-let by Landlord for the unexpired portion of the Term, or any part thereof,
before presentation of proof of such liquidated damages to any court,
commission, or tribunal, the amount of rent reserved upon such reletting shall
be prima facie evidence that it is the fair and reasonable rental value for such
part or the whole of the Leased Premises so re-let during the term of the
re-letting. Nothing herein contained shall limit or prejudice the right of
Landlord to prove for and obtain, as liquidated damages by reason of such
termination, an amount equal to the maximum allowed by any statute or rule of
law in effect at the time when, and governing the proceedings in which, such
damages are to be proved, whether or not such amount is greater or less than, or
equal to, the amount of the difference referred to above.
ARTICLE 16
DEFAULT CLAUSES
16.1 Upon the occurrence of any of the following events
(hereinafter called "EVENTS OF DEFAULT"), Landlord shall have the right, at
Landlord's option, in addition to exercising its remedies under Section 16.4
and/or Articles 14 or 17, to terminate this Lease and the Term, as well as all
of the right, title and interest of Tenant in and to the Leased Premises
hereunder, by giving Tenant ten (10) days' notice in writing of such
termination, whereupon this Lease and the Term, as well as all of the right,
title and interest of Tenant in and to the Leased Premises, shall wholly cease
and expire in the same manner, and with the same force and effect (except as to
Tenant's liability), as if the date fixed by such notice were the expiration
date of the Term:
(a) if Tenant shall fail to pay any installment of
Fixed Net Rent, any other item of additional rent, or any part thereof as and
when the same shall become due and payable, and such default shall continue for
a period of five (5) business days after written notice from Landlord, provided
no such notice shall be required more than three times in any 12 month period;
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(b) subject to Section 16.2 below, if Tenant shall
violate, fail to comply with, or fail to perform any other covenant, term or
condition of this Lease, other than requiring payment of a sum of money, and
such default shall continue for a period of thirty (30) days after written
notice from Landlord;
(c) if any execution or attachment shall be issued
against Tenant or any of Tenant's property, whereby the Leased Premises or the
Improvements shall be taken or occupied, or attempted to be taken or occupied by
someone other than Tenant, and such condition shall continue for a period of
thirty (30) days after written notice from Landlord; or
(d) if Tenant's right, title and interest in this
Lease, or the estate of Tenant hereunder, shall be transferred or passed to, or
devolve upon, any other person, firm, or corporation, except in the manner
provided in this Lease.
On or before the expiration of the ten (10) days' termination notice referred
to above, Tenant shall immediately quit and surrender the Leased Premises, the
Improvements and each and every part thereof to Landlord, and Landlord may enter
into or repossess the Leased Premises and the Improvements by summary or other
suitable proceedings.
16.2 If any of the events described in subsection (b) of
Section 16.1 occurs and is of such a nature that it cannot practicably be cured
and remedied within the applicable notice period, an Event of Default shall not
be deemed to exist with respect thereto if Tenant shall:
(a) commence the work, or initiate the action,
required to cure and remedy such event promptly within the applicable notice
period; and
(b) thereafter prosecute such work or action in good
faith diligently to completion.
16.3 No default shall be deemed waived by Landlord unless such
waiver is confirmed in a writing signed by Landlord.
16.4 In the event that Tenant shall fail to make any payment
of Fixed Net Rent or additional rent required to be paid pursuant to this Lease
on or before the due date for the payment thereof (without regard to the notice
and grace provisions provided for in Section 16.1), the same shall accrue
interest from and after such due date and until Tenant's payment thereof at a
rate equal to two (2%) per annum plus the so-called prime, base, index, or
reference interest rate publicly announced by The Chase Manhattan Bank, N.A.,
from time to time in effect (but in no event in excess of any then lawful
maximum interest rate then applicable to Tenant). In addition to the foregoing
interest, as well as in addition to the other remedies available to Landlord for
a default by Tenant under this Lease and otherwise at law and in equity, in the
event that Tenant shall fail to make any payment of Fixed Net Rent or additional
rent required to be paid pursuant to this Lease on or before the due date for
the payment thereof (without regard to notice and grace provisions provided in
Section 16.1), Tenant shall pay to Landlord, as
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additional rent, in addition to such payment and interest, a charge equal to
five (5%) percent of such late payment in reimbursement for Landlord's
administrative and other expenses in connection with handling and processing
such late payment. Neither this Section 16.4 nor any other provision of this
Lease shall require the payment of interest in excess of the maximum amount
permitted by law. If any excess of interest in such respect is provided for, or
shall be adjudicated to be so provided for, Tenant shall not be obligated to pay
such interest in excess of the maximum amount permitted by law, the right to
demand the payment of any such excess shall be, and hereby is, waived and any
such excess interest nonetheless paid to Landlord shall be promptly returned to
Tenant.
ARTICLE 17
LANDLORD'S REMEDIES
17.1 Upon the occurrence of any Event of Default,
(a) Landlord or its agents or representatives may
with or without terminating the Lease re-enter and resume possession of the
Leased Premises and the Improvements, either by summary proceedings or by a
suitable action or proceeding at law or otherwise, without being liable for any
damages therefor, and no such reentry by Landlord shall be deemed an acceptance
of a surrender of this Lease;
(b) the rent (the aggregate of all Fixed Net Rent,
CPI Rent and additional rent) shall become due thereupon and be paid up to the
time of such reentry, dispossess and/or termination, together with such counsel
fees and expenses as Landlord may incur in connection therewith;
(c) Landlord may, in its own name, but as agent for
Tenant (if this Lease is not terminated) or on its own behalf (if this Lease is
terminated):
(i) relet the whole or any portion of the
Leased Premises and/or the Improvements for any period equal to, or greater or
less than, the remainder of the Term, for any sum that it deems reasonable
(including, without limitation, free rent concessions), to any tenant that it
may deem suitable and satisfactory and for any use and purpose that it may deem
appropriate; and
(ii) in connection with any such reletting,
make such changes in the character of the Improvements as Landlord may determine
to be appropriate or helpful in effecting such lease, provided, however, that
Landlord shall, in no event, be:
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(d) Notwithstanding anything in this Article 17,
(i) Landlord shall not be under any
obligation to relet the Leased Premises or the Improvements other than to
undertake commercially reasonable efforts to do so; and
(ii) Landlord shall not be required to pay
to Tenant any surplus of any sums received by Landlord on a reletting of the
Leased Premises or the Improvements in excess of the Fixed Net Rent and
additional rent reserved in this Lease;
(e) Tenant shall pay to Landlord an amount equal to
any out-of-pocket costs and expenses (including, without limitation, attorneys'
fees, disbursements and court costs) incurred by Landlord in re-entering,
repairing and reletting of the Leased Premises and the Improvements, as well as
all costs and expenses incurred by Landlord for the care of the Leased Promises
and the Improvements while vacant, which amounts shall be due and payable by
Tenant to Landlord at such time or times as such costs and expenses shall have
been incurred by Landlord; and
(f) Unless this Lease has terminated, Tenant shall
also pay to Landlord, at the same time as its other rent obligations are
payable, as damages for the failure of Tenant to observe and perform Tenant's
covenants herein contained, any deficiency for each month of the period that
would have otherwise constituted the balance of the Term between:
(i) Fixed Net Rent and additional rent
hereby reserved and/or covenanted to be paid for such month; and
(ii) the net amount, if any, of the rents
collected for such month on account of any re-letting of the Leased Premises,
and, in computing such damages, there shall be added to the deficiency such
out-of-pocket expenses as Landlord may incur in connection with re-letting,
including, without limitation, legal expenses, attorneys' fees, disbursements
and court costs, brokerage and the costs and expenses of keeping the Leased
Premises in good order and preparing the same for reletting,
The damages described in subsection (f) shall be paid in installments by Tenant
on the rent day specified in this Lease, and any suit brought by Landlord to
collect the amount of the deficiency for any period shall not prejudice in any
way the right of Landlord to collect the deficiency for any subsequent period by
a similar action or proceedings. Nothing contained herein shall be deemed to
require Landlord to postpone suit until the date when the Term of this Lease
would have expired if it had not been so terminated by reason of Tenant's
default.
17.2 Upon the termination of this Lease by Landlord, Landlord
shall, at its sole discretion, in lieu of the damages described in subsection
(f) of Section 17.1, be entitled to receive, as liquidated damages, an amount
equal to the difference between:
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(a) the aggregate of all Fixed Net Rent and CPI Rent
and additional rent reserved hereunder for the then unexpired portion of the
Term (conclusively presuming that the CPI Rent and the additional rent for each
year included in such unexpired portion of the Term will escalate at the rate of
three (3%) per annum), discounted to present value at a rate equal to the prime,
base, index or refinance interest rate publicly announced by The Chase Manhattan
Bank, N.A., in effect as of the date of default minus 2% per annum; and
(b) the then fair and reasonable rental value of the
Leased Premises for the same period, likewise discounted.
If the Leased Premises, or any part thereof, is re-let by Landlord for the
unexpired portion of the Term, or any part thereof, before presentation of proof
of such liquidated damages to any court, commission, or tribunal, the amount of
rent reserved upon such reletting shall be prima facie evidence that it is the
fair and reasonable rental value for such part or the whole of the Leased
Premises so re-let during the term of the re-letting.
17.3 Landlord, at its option, may make such alterations,
replacements and/or decorations in and to the Leased Premises and/or the
Improvements as Landlord, in Landlord's sole judgment, considers advisable and
necessary for the purpose of re-letting the Leased Premises and/or the
Improvements for similar uses, and the making of such alterations, replacements
and/or decorations shall not operate, or be construed, to release Tenant from
liability hereunder as aforesaid.
17.4 Landlord shall not be liable to Tenant in any respect
whatsoever for Landlord's failure to re-let the Leased Premises and/or the
Improvements provided that it has undertaken commercially reasonable efforts to
do so or, in the event that the Leased Premises and/or the Improvements are
re-let, for Landlord's failure to collect the rent thereof under such
re-letting. No such failure shall relieve Tenant's liability for, and obligation
to pay, all of the amounts which Landlord shall be entitled under this Article
17 or otherwise at law or in equity.
17.5 In the event of a breach by Tenant or Landlord of any of
the covenants or provisions of this Lease, the non-breaching party shall have
the right of injunction, as well as to invoke any remedy allowed at law or in
equity, as if re-entry, summary proceedings and other remedies were not herein
provided for.
17.6 Nothing contained in this Article 17 shall be construed
to limit or preclude recovery by Landlord against Tenant of any sums or damages
to which, in addition to the damages particularly provided above, Landlord may
lawfully be entitled by reason of any default hereunder on the part of Tenant.
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ARTICLE 18
TENANT TO INDEMNIFY LANDLORD
18.1 Tenant shall not do any act or thing upon the Leased
Premises or the Improvements, or permit any such act or thing to be done, that
may subject Landlord to any liability by reason of any illegal business or
conduct upon the Leased Premises or the Improvements or by reason of any
violation of law or of any legal requirement of public authority, or by reason
of any other cause whatsoever. In addition to the provisions of Section 9.3(h)
above, Tenant agrees to defend and shall indemnify and hold Landlord harmless
for, from and against and from any and all liability, fines, suits, claims,
demands, actions, costs and expenses of each and every kind or nature whatsoever
to the fullest extent permitted by law (including, without limitation,
reasonable attorneys' fees, disbursements and court costs) due to or arising out
of any:
(a) breach, violation, or non-performance of any term,
covenant, or condition of this Lease on the part of Tenant to be fulfilled,
kept, observed, or performed; and/or
(b) injury to any person or persons (including, without
limitation, the death of any person or persons) or damage to any property
occurring in or about the Leased Premises and/or the Improvements at any time
during the Term, whether or not such injury or damage is occasioned by Tenant's
use and occupancy of the Leased Premises and/or the Improvements, by any use or
occupancy that Tenant may permit or suffer to be made thereof.
If Tenant is required to defend any action or proceeding pursuant to this
Article 18 to which Landlord is made a party, Tenant shall do so through counsel
reasonably acceptable to Landlord (provided, however, that counsel selected by
Tenant's insurance carrier shall be deemed to be acceptable to Landlord),
Landlord shall reasonably cooperate with Tenant's counsel in connection with
resolving the action or proceeding, provided, however, that Landlord shall not
be required to expend any money with respect thereto or to undertake any action
not consistent with its own best interests. Landlord shall be entitled to
participate in such defense, at its election, by counsel of its own choosing and
at Tenant's expense, and Tenant and its counsel shall consult and otherwise
cooperate with Landlord's counsel in all reasonable respects in connection with
such participation provided that neither Tenant nor its counsel shall be
required to expend any money with respect thereto and such participation by
Landlord does not limit or render void any liability of any insurer of Landlord
or Tenant hereunder in respect to the claim or matter in question. Tenant's
liability under this Article 18 shall be reduced by the net proceeds actually
collected on any insurance effected by Tenant on the risks in question for
Landlord's benefit, recovered by Landlord under Tenant's policies. However,
nothing contained in this Article 18 shall vary the insurance requirements
contained in Article 12.
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ARTICLE 19
MECHANICS' LIENS
19.1 Notice is hereby given that Landlord shall not be liable
for any labor or materials furnished, or to be furnished, to Tenant, and that no
mechanic's or other lien for any such labor or materials shall attach to, or
otherwise affect, the reversion or other estate or interest of Landlord in and
to the Leased Premises or the Improvements.
19.2 Tenant covenants that, whenever and as often as any
mechanic's lien shall have been filed against the Leased Premises or the
Improvements, other than any mechanic's lien that shall have been filed based
upon any act or omission of Landlord or anyone acting on behalf of Landlord,
Tenant shall forthwith (and in any event, within thirty (30) days) take such
action, by bonding, deposit, or payment, as will remove or satisfy the lien.
ARTICLE 20
CONDEMNATION
20.1 If, at any time during the Term, any person or
corporation, municipal, public, private or otherwise, shall lawfully condemn and
acquire title to all or substantially all of the Leased Premises in or by
condemnation proceedings in pursuance of any law, general, special, or
otherwise, or by agreement between Landlord, Tenant and those authorized to
exercise such right:
(a) this Lease and the Term shall terminate and expire on
the date of such taking; and
(b) the Fixed Net Rent and additional rent herein
reserved and provided to be paid by Tenant shall be apportioned and paid to the
date of such taking.
20.2 If less than all or substantially all of the Leased
Premises shall be taken as aforesaid, (i) if it is economically infeasible for
Tenant to operate its business in the manner so operated immediately prior to
the taking (any disputes as to such infeasibility shall be subject to
arbitration in the manner provided in Article 21), Tenant may terminate this
Lease as to the location so taken, and in all other cases (ii) this Lease and
the Term shall continue notwithstanding such taking, but the Fixed Net Rent
thereafter payable by Tenant shall be equitably apportioned and reduced, as and
from the date of such partial taking, which apportionment and reduction shall be
made only as and when the particular award shall ultimately be received by
Landlord. If Landlord and Tenant cannot mutually agree upon such equitable
apportionment and reduction, it shall be determined by arbitration in the manner
provided in Article 21.
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20.3 In the event of a partial condemnation where Tenant is
obligated to restore, the net proceeds of the award shall be made available to
Tenant for such purpose. The rights of Landlord and Tenant in and to the award
and/or damages which are not used for restoration upon any taking of all or a
portion of the Leased Premises (including, without limitation, the value of the
fee estate of Landlord, the value of the leasehold estate of Tenant, the
consequential damages to the part of the Leased Premises not taken and the cost
of reconstruction) shall be determined as follows:
(a) first, Landlord shall be entitled to receive the
aggregate amount, with interest thereon, that shall represent compensation for:
(i) the value of Landlord's reversionary estate and
interest in and to the entire Leased Premises or the portion of the Leased
Premises taken, as the case may be; and
(ii) if the entire Leased Premises shall not be
taken, the amount of any consequential damages to Landlord's reversionary estate
and interest in and to the portion of the Leased Premises not taken;
(b) second, to the extent that the award and/or damages
upon such taking shall be sufficient therefor, Landlord shall be entitled to
receive an amount, with interest thereon, equal to the "Lost Rental
Compensation" (as such term is defined below); and
(c) third, Tenant shall be entitled to receive any
balance of the award and/or damages remaining after Landlord shall be paid the
amounts described in subsections (a) and (b) above,
In the event that the total amount of the award and/or damages upon any taking
of all or a portion of the Leased Premises shall be insufficient to pay Landlord
all of the amounts described in subsections (a) and (b) above, Tenant shall pay
to Landlord, within thirty (30) days after Landlord's written demand therefor as
additional rent under this Lease, the amount of the deficiency with interest
thereon, it being the intent and understanding of the parties that Landlord
shall receive from Tenant and/or the condemning authority, as the case may be,
and retain for its own account, in an events whatsoever, a net payment to the
sum of the amounts described in subsections (a) and (b) above, with interest
thereon. Tenant's obligation to pay any deficiency and/or interest to Landlord
hereunder shall survive the termination and/or expiration of this Lease and/or
the Term. As such term is used in this Section 20.3, the term "LOST RENTAL
COMPENSATION" shall mean, either:
(a) as to a taking that shall result in the termination
Of this Lease and the Term pursuant to Section 20.1 above, an amount equal to
the aggregate of the Fixed Net Rent reserved hereunder for the then unexpired
portion of the Term (conclusively presuming that the CPI Rent for each year
included in such unexpired portion of the Term will be the same as was
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payable for the year immediately preceding the termination of this Lease),
discounted to present value at a rate equal to two (2%) percent below the
so-called prime, base, index, or reference interest rate publicly announced by
The Chase Manhattan Bank, N.A., in effect as of the date of the taking; or
(b) as to a taking that shall not result in the
termination of this Lease and the Term pursuant to Section 20.1 above, an amount
equal to the aggregate of the reductions in the Fixed Net Rent reserved
hereunder pursuant to Section 20.2 above for the then unexpired portion of the
Term (conclusively presuming that the CPI Rent for each year included in such
unexpired portion of the Term will be the same as was payable for the year
immediately preceding the termination of this Lease), discounted to present
value at a rate equal to two (2%) percent per annum less than the so-called
prime, base, index, or reference interest rate publicly announced by The Chase
Manhattan Bank, N.A., in effect as of the date of the taking.
20.4 If any or all of the amounts due to Landlord pursuant to
Section 20.3 above shall not be fixed in the proceedings for such taking in
accordance with the agreement of the parties set forth in Section 20.3, and if
the parties shall not agree in writing as to the unfixed amount or amounts to be
paid to Landlord thereunder within ninety (90) days after the date of the final
determination in such proceedings, such unfixed amount or amounts shall be
determined by arbitration in the manner provided in Article 21.
20.5 Except as otherwise provided elsewhere herein, if the
Improvements shall be damaged or partially destroyed by any taking of less than
all or substantially all of the Leased Premises, Tenant shall proceed, with
reasonable diligence and at Tenant's own cost and expense, to conduct any
necessary demolition and to repair, replace, or rebuild any remaining part of
the Improvements not so taken, so as to constitute such remaining part thereof a
complete and rentable building, in good condition and repair, having a
configuration, design and suitability for nature of use as similar as is
practicable under the circumstances to the configuration, design and suitability
for nature of use of the Leased Premises immediately prior to the taking. Tenant
shall cause to be paid to an independent Depositary reasonably satisfactory to
Landlord in trust, any portion of the award and/or damages upon such
condemnation to be received and retained by Tenant pursuant to the terms in
Section 20.3 above, to apply the same to cost and expense of such demolition,
repair, replacement and rebuilding by whatsoever incurred, If such amount
received and retained by Tenant is insufficient to pay for the cost of such
demolition, repair, replacement and/or rebuilding, Tenant shall make up the
deficiency at its own cost and expense. Conversely, if such amount received and
retained by Tenant is more than sufficient to pay the cost of such demolition,
repair, replacement and/or rebuilding, the amount of any excess remaining after
such demolition, repair, replacement and/or rebuilding is completed and the cost
thereof is fully paid shall belong to Tenant. The provisions of Articles 5, 8,
9, 13, 18 and 19 shall apply to the work required to be done under this Section
20.5 and to the disbursement of the condemnation proceeds.
20.6 If, at any time during the Term, any person or
corporation, municipal, public, private, or otherwise, shall lawfully condemn
and acquire the temporary use of the
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Leased Premises in or by condemnation proceedings in pursuance of any law,
general, special, or otherwise, or by agreement with Landlord, Tenant and those
authorized to exercise such right:
(a) the Term shall not be reduced or affected in any way;
(b) Tenant shall continue to pay the full Fixed Net Rent
and additional rent herein reserved and provided to be paid by Tenant; and
(c) Tenant shall be entitled to make claim for, recover
and retain any award or awards, whether in the form of rental or otherwise,
recovered in respect of such possession or occupancy, provided, however, that,
if such possession or occupancy shall extend beyond the date fixed as the
Expiration Date, the award shall be apportioned between Landlord and Tenant as
of such date.
ARTICLE 21
ARBITRATION
21.1 In the event of a dispute between Landlord and Tenant
with respect to any issue of fact (other than one determined by a condemnation
court) arising out of a taking referred to in Article 20, or specifically
mentioned and provided for elsewhere in this Lease as a matter to be decided by
arbitration, such dispute shall be determined by arbitration as provided in this
Article 21.
21.2 Landlord and Tenant shall each appoint as an arbitrator a
fit and impartial person from a panel proposed by the American Arbitration
Association who shall have had at least ten (10) years' experience in the City,
County and State where the property is located in a calling connected with the
subject matter of the dispute. Such appointment shall be signified in writing by
each party to the other. If either Landlord or Tenant shall fail to appoint an
arbitrator as set forth in this Section 21.2 for a period of twenty (20) days
after written notice from the other party to make such an appointment, then the
arbitrator appointed by the party who shall have made such an appointment shall
appoint the second arbitrator.
2 1.3 The arbitrators, after being duly sworn to perform their
duties with impartiality and fidelity, shall proceed with all reasonable
dispatch to determine the question submitted, by first appointing an umpire,
whose determination shall be conclusive in the event that the arbitrators and
the umpire shall fail to render their decision within thirty (30) days after
their appointment. The arbitration shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and the
award of the arbitrators and/or umpire shall be binding, final and conclusive
and non-appealable by the parties. The decision of the arbitrators and/or umpire
shall be rendered within thirty (30) days after their appointment, and such
decision shall be in writing and in duplicate, one counterpart thereof to be
delivered to each of the parties. If within ten (10) days after their
appointment, the arbitrators fail to agree upon the identity of the person to
act as umpire, such umpire shall be appointed by
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the American Arbitration Association from its qualified panel of arbitrators,
and shall be a person having at least ten (10) years' recent experience as to
the subject matter in question.
21.4 If an umpire is appointed as provided in Section 21.3,
the arbitrators and the umpire, after the umpire is duly sworn to perform his or
her duties with impartiality and fidelity, shall proceed with all reasonable
dispatch to determine the question submitted.
21.5 The fees of the arbitrators and any umpire, as well as
the expenses incident to the proceedings, shall be borne by the party whose
written position stated before the commencement of the arbitration, is furthest
from the determination of the arbitrator (or, if neither party's position is
upheld, such fees and expenses shall be borne by the parties equally). The fees
of respective counsel engaged by the parties, and the fees of expert witnesses
and other witnesses called or engaged by the parties, shall be paid by the
respective party engaging such counsel or calling or engaging such witnesses.
21.6 Wherever in this Lease it is provided that Landlord's
consent or approval shall not be unreasonably withheld (or word of like import),
if Landlord shall withhold its consent or approval such adverse determination by
Landlord shall be an arbitrable dispute as provided in this Article 21. Ten (10)
days after Tenant's receipt of Landlord's adverse determination, Landlord's
determination shall be conclusive, unless prior to the end of such 10 day
period Tenant shall give notice of demand for arbitration under this Article 21,
in which event Landlord, within 10 days after receipt of Tenant's demand,
shall (if Landlord has not already done so) specify in writing Landlord's
reasons for the adverse determination. Anything in this Article 21 to the
contrary notwithstanding, (i) the proceeding referred to in this Section 21.6
shall occur on an expeditious basis, with all time periods for performance at
any stage of the arbitration proceeding to be 10 days, rather than 20 or 30
days as provided above, and (ii) the losing party shall pay all costs of such
arbitration, including the legal fees and witness or expert fees of the
prevailing party. The submission to arbitration in accordance with this Lease
shall be the sole remedy of Tenant as respect to any consent or approval which
may not be unreasonably withheld. If a determination is made by the arbitrators
that the withholding of consent or approval was unreasonable the arbitrators
shall annul such withholding of consent or approval. Except for the costs and
expenses referred to above, no damages of any kind, and no other monetary or
other remedy may be awarded in such circumstances, it being agreed that such
annulment shall be Tenant's sole remedy.
ARTICLE 22
SHORING
22.1 To the extent required by law, Tenant shall allow an
adjoining owner desiring to excavate on its promises, or a municipality desiring
to excavate a nearby street, to enter onto the Leased Premises and the
Improvements and shore up a perimeter wall during such excavation. Tenant shall,
at Tenant's own expense, repair, or cause to be repaired, any damage caused to
any part of the Leased Premises and/or the Improvements because of any
excavation,
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construction work, or other work of a similar nature that may be done on any
property adjoining or adjacent to the Leased Premises, and Landlord hereby
releases to Tenant any and all rights to sue for and/or recover against such
adjoining owners, or the parties causing such damages, the amounts expended or
injuries sustained by Tenant because of the provisions of this Article 22
requiring Tenant to repair any damages sustained by such excavations,
construction work, or other work.
ARTICLE 23
WAIVER OF REDEMPTION
23.1 Tenant, for itself and for all persons claiming through
or under it, hereby expressly waives any and all rights which are or may be
conferred upon Tenant by any present or future law to redeem the Leased
Premises, or to any new trial in any action of ejectment under any provision of
law, after re-entry thereupon, or upon any part thereof, by Landlord, or after
any warrant to dispossess or judgment in ejectment. If Landlord shall have
acquired possession of the Leased Premises by summary proceedings, or in any
other lawful manner without judicial proceedings, it shall be deemed a re-entry
within the meaning of that word as used in this Lease.
ARTICLE 24
[INTENTIONALLY OMITTED.]
ARTICLE 25
COVENANT OF QUIET ENJOYMENT
25.1 If, and for so long as, Tenant shall pay the Fixed Net
Rent and additional rent reserved by or payable pursuant to this Lease, and
shall perform and observe all of the other terms, covenants ad conditions herein
contained on the part of Tenant to be performed and observed, Tenant shall
quietly enjoy the Leased Premises, subject, however, to the terms, covenants and
conditions of this (including, without limitation, the terms of Article 34), to
the ground leases, underlying leases, overriding leases and mortgages referred
to in Article 4 and to the matters relating to title. However, no failure by
Landlord to comply with the foregoing covenant shall give Tenant any right to
cancel or terminate this Lease, to abate, reduce, or make any deduction from, or
offset against, the Fixed Net Rent or additional rent payable under this Lease,
or to fail to perform any other obligation of Tenant hereunder.
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ARTICLE 26
NON-MERGER
26.1 There shall not be a merger of:
(a) Tenant's interest in this Lease or the leasehold
estate created hereby;
(b) Tenant's interest in the improvements; or
(c) the fee estate in the Leased Premises or any part
thereof,
by reason of the fact that the same person may acquire, own, or hold, directly
or indirectly, all or part of the interests or estates described in subsections
(a), (b) and/or (c) above and no such merger shall occur unless and until all
persons (including, without limitation, Landlord, Tenant and all mortgagees)
having an interest in all of such interests and estates shall join in a written
instrument effecting such merger and shall duly record the same.
ARTICLE 27
WAIVER OF COUNTERCLAIM AND JURY TRIAL
27.1 In the event that Landlord shall commence any summary
proceeding or action for non-payment of rent or of additional rent hereunder,
Tenant shall not interpose any counterclaim of any nature or description in such
proceeding or action. The parties hereto waive a trial by jury on any or all
issues arising in any action or proceeding between them or their successors
under or connected with this Lease or any of its provisions, any negotiations in
connection therewith, or Tenant's use or occupation of the Leased Premises.
ARTICLE 28
ASSIGNMENT AND SUBLETTING
28.1 Provided that no Event of Default shall have occurred and
be continuing under this Lease and except as hereinafter provided in this
Article 28, Tenant shall have the right to assign this Lease and Tenant's rights
hereunder, whether in whole or in part, or to sublet the entire, or portions of,
the Leased Premises only with Landlord's prior written consent, which shall not
be unreasonably withheld. As to any assignment or subletting in which the use
shall be and remain a new car automobile dealership and activities incidental
thereto, Landlord's prior consent shall not be required, so long as all of the
following conditions are met: (i) such assignment or subletting is made
concurrently with the sale of, or move by Tenant of, substantially all of the
business and assets of an automobile dealership franchise being operated at
such property by Tenant or its subsidiary immediately prior to such assignment
or subletting
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(however, in the case of a move from such location by Tenant or its subsidiary,
another automobile dealership franchise is to be operated thereon) to the
assignee or subtenant, and such operation is and shall remain a new car
automobile dealership and activities incidental thereto, (ii) such assignee or
subtenant has been qualified and approved by the automobile manufacturer, and
(iii) a security deposit equivalent to one month's rent shall be deposited with
Landlord, and (iv) Tenant's liability hereunder and the Guaranty of Tenant's
performance hereunder by Sunbelt Automotive Group, Inc., its successors and
assigns, ("Guarantor") following such subletting shall remain in full force and
effect and Tenant and said Guarantor shall confirm the same in writing at the
request of Landlord.
28.2 In connection with any assignment or subletting (whether
or not approved or required to be approved by Landlord) Tenant and the assignee
or subtenant shall each comply with the following terms, covenants and
conditions, which shall be conditions precedent thereto:
(a) Tenant shall give Landlord written notice of each
such assignment or subletting, as well as of the effective date thereof, not
less than ten (10) days prior to the execution of such assignment or sublease;
(b) such assignment or subletting shall be in writing,
duly executed and acknowledged by Tenant and the assignee (and by the sublessee,
in the case of a subletting) in proper form for recording, and in form prepared
by or reasonably approved by Landlord;
(c) a duplicate original of such assignment or sublease
shall be delivered to Landlord not more than ten (10) days after the execution
of such assignment or sublease;
(d) the business to be conducted on the Leased Premises
by such assignee or subtenant shall:
(i) be permitted pursuant to the then existing
Certificate of Occupancy for the Leased Premises or pursuant to any revised or
amended Certificate of Occupancy obtained by Tenant or by the assignee or
subtenant; and
(ii) not render the Leased Premises incapable of
being used or occupied after the expiration or sooner termination of the Term of
this Lease for the purposes for which the same were use and occupied on the
Commencement Date.
(e) such assignment or sublease shall be consistent with,
and subordinate and subject to, all of the terms, covenants and conditions of
this Lease;
(f) if the transaction in question is an assignment,
Landlord shall receive, prior to the effective date thereof, an original
counterpart of an instrument, signed by the assignee in recordable form,
pursuant to which the assignee agrees to unconditionally assume all
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of the obligations of this Lease on the part of the tenant hereunder to perform
from and after the effective date thereof;
(g) if the transaction in question is a sublease, the
expiration date of the Term thereof shall not be later than one (1) day prior
to the Expiration Date hereunder;
(h) if the transaction in question is a sublease, the
sublease shall contain a provision to the effect that (i) such sublease is
subject and subordinate to all of the terms and provisions of this Lease and to
the rights of Landlord hereunder, (ii) in the event this Lease shall terminate
or be rejected before the expiration of such sublease, the sublessee either will
at Landlord's option, attorn to Landlord or waive any right the sublessee may
have to terminate the sublease or surrender possession thereunder, as a result
of the termination of this Lease and (iii) in the event the subleasee thereunder
receives a written notice from Landlord stating that Tenant is under default
under this Lease beyond any applicable notice or cure period, that the sublessee
shall then and after be obligated to pay all rentals accruing under said
sublease directly to Landlord such notice, or as Landlord may otherwise direct,
unless and until notified otherwise by Landlord;
(i) notwithstanding anything herein to the contrary, no
proposed assignment of this Lease by Tenant or subletting of all or a portion of
the Leased Premises shall be permitted if such assignment or subletting would
provide for a rental or other payment for the leasing, use, occupancy or
utilization of all or any portion of the Leased Premises based, in whole or in
part, on the income or profits derived by any person from the property so
leased, used, occupied or utilized other than an amount based on a fixed
percentage or percentages of gross receipts or sales.
No such assignment or sublease shall release, or otherwise affect or reduce, the
obligations of Tenant under this Lease or of any guarantors of this Lease.
28.3 (a) Tenant shall have the right, without the consent of
Landlord, to assign this Lease or sublet the Leased Premises or portions thereof
to any "Related Entity" or "Successor Entity" (as hereinafter defined),
provided, however, that Tenant and such Related Entity or Successor Entity shall
by jointly and severally liable for all of the covenants and obligations of
Tenant in this Lease. As used herein, the term "RELATED ENTITY" means any entity
controlled by Tenant, but only if such assignee or sublessee entity continues to
remain at all times controlled by Tenant while such entity is a tenant or
sublessee with respect to all or any portion of the Leased Premises, and the
term "SUCCESSOR ENTITY" means any entity resulting from the merger,
consolidation or acquisition of all or substantially all of the assets and
business or a majority of the voting stock or voting control of Tenant.
Notwithstanding the foregoing, an assignment or subletting to a Successor Entity
may be made without Landlord's consent on any two occasions and thereafter shall
be subject to Landlord's consent under this Article 28.
(b) For the purposes of this Lease, the sale or issuance
of stock or other interests of Tenant (other than a public offering or the sale
of Tenant's stock on a publicly
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traded stock exchange) or a merger or consolidation or other transaction whereby
control of Tenant's interest in this Lease and/or all or any portion of this
Leased Premises is transferred shall be an "assignment" subject to the
provisions of this Article 28, unless made with or to a Related Entity or
Successor Entity, in which event Section 28.3(a) shall be applicable.
28.4 In determining whether to consent to Tenant's proposed
assignment or subletting, the Landlord my consider all factors which in
Landlord's reasonable business judgment, are pertinent to such decision, and the
parties agree that the following, without limitation, are examples of such
factors:
a. Whether the financial strength of the proposed
assignee (including net worth and working capital)
are sufficient to assure the future performance by
such assignee of its obligation under this Lease;
b. The character, business reputation, and managerial
skills of the assignee or subtenant;
C. Whether the assignee or subtenant, has substantial
experience in the sale, service and leasing of
motor vehicles or other uses permitted by this
Lease; and
d. Whether the use of the Leased Premises by the
proposed assignee or subtenant is identical to the
use conducted prior to such assignment or
subletting.
In the event a dispute should arise between Landlord and
Tenant as to whether Landlord has acted reasonably in failing to give its
consent to any proposed assignment or sublease, Tenant's sole remedy shall be an
action for an arbitration on such issue pursuant to Article 21 above, and in no
event shall Landlord be liable to Tenant for any damages (direct or
consequential) allegedly suffered by Tenant or any such assignee or subtenant as
a result of such failure to consent.
28.5 (a) Any consent by Landlord to an assignment or
subletting or use or occupancy by others shall be held to apply only to the
specific transaction thereby authorized and shall not constitute a waiver of the
necessity for such consent to any subsequent assignment or subletting or use or
occupancy by others, including, but not limited to, a subsequent assignment or
subletting by any trustee, receiver, liquidator, or personal representative of
Tenant, nor shall the references anywhere in this Lease to subtenants, licensees
and concessionaires be construed as a consent by Landlord to an assignment. If
this Lease or any interest herein be assigned or if the Leased Premises be
sublet or used or occupied in whole or in part by anyone other than Tenant, with
or without Landlord's prior written consent having been obtained thereto,
Landlord may nevertheless collect rent (including, but not limited to, Fixed Net
Rent, CPI Rent and additional leased rent) from the assignee, sublessee, user or
occupant and apply the net amount collected to the rents herein reserved. No
such assignment, subletting, use,
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occupancy or collection shall be deemed a waiver of the covenant herein against
assignment, subletting or use or occupancy by others, or the acceptance of the
assignee, subtenant, user or occupant as Tenant hereunder, or constitute a
release of Tenant from the further performance by Tenant of the terms and
provisions of this Lease, or a cure of Tenant's default. Any assignment or
subletting without the consent of Landlord as required shall be null and void.
(b) In the event of a sublease, in no event will Landlord be
obligated to give any notice to or join such subleases in any proceeding
Landlord institutes against Tenant, or recognize the continued existence of such
sublessee as Landlord's tenant in the event Tenant defaults under this Lease,
and the agreement, sublease and/or other agreement relating to the portion of
the Leased Premises in question between Tenant and the sublessee will by their
own terms automatically end upon the expiration or sooner termination of this
Lease unless Landlord, at its option, requests such sublessee to attorn to
Landlord.
(c) In all cases in which Tenant desires to assign or sublet
this Lease, Tenant shall send Landlord an assignment notice not less than sixty
(60) days prior to the proposed date of such assignment and subletting
("ASSIGNMENT NOTICE"), which Assignment Notice shall include, inter alia (i) the
name of the proposed assignee or subtenant; (ii) the current financial statement
showing the net worth working capital and liabilities of Tenant; (iii) a
"resume" or other description setting forth the managerial experience of such
assignee or subtenant; (iv) a list of other locations (and trade names if
different from the trade name to be utilized in the proposed location) then
operated by such assignee or subtenant; (v) a complete description of the use of
the Leased Premises intended by such assignee or subtenant; and (vi) if then
available, a copy of the proposed assignment and assumption agreement or
sublease, as the case may be, which must be in form and substance reasonably
acceptable to Landlord. In addition, Tenant will supply such other information
as Landlord may reasonably require to make its decision as to whether or not to
consent to the proposed assignment or subletting. If the proposed assignment and
assumption agreement or sublease is not available at the time Tenant submits its
Assignment Notice to Landlord, such assignment or sublease shall not be deemed
to be effective unless and until Landlord approves the applicable agreement.
(d) Upon the occurrence of any assignment or subletting,
whether voluntary, involuntary, by operation of law, or otherwise, without the
prior written consent of Landlord where required (whether or not Tenant shall
have given notice thereof to Landlord), Landlord may treat any such occurrence
as an immediate Event of Default.
ARTICLE 29
NOTICES
29.1 Any notice, demand, election, or other communication
(hereinafter called a "NOTICE") that, under the terms of this Lease or under any
statute, must or may be given by the
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parties hereto shall be in writing and shall be given in the manner hereinafter
set forth in this Article 29, addressed:
(a) in the case of notices to Landlord, to Landlord at:
c/o Kimco Realty Corporation
3333 New Hyde Park Road - Suite 100
P.O. Box 5020
New Hyde Park, NY 11042-0020
Attention: General Counsel
Fax: (516) 869-7117
with a copy at the same time to:
Wolf, Block, Schorr & Solis-Cohen, LLP
Twelfth Floor Packard Building
111 South 15th Street
Philadelphia, PA 19102
Attention: Alvin H. Dorsky, Esquire
Fax: (215) 977-2727
(b) in the case of notices to Tenant, to Tenant at:
2224 West Elk Avenue
Elizabethton, TN 37664
Fax:
with copies to:
Sunbelt Automotive Group, Inc.
5901 Peachtree Dunwoody Road
Atlanta, GA 30328
Attn: General Counsel
Fax: (678) 443-8124
Either Landlord or Tenant may designate, by notice in writing, a new or other
address to which notices shall thereafter be given. Any notice given hereunder
shall be deemed given three (3) business days after the same is deposited in a
United States general or branch post office, or in an official United States
mail depositary, by prepaid certified mail wrapper, return receipt requested,
the later of one day after sent by a nationally recognized overnight courier
service, charges prepaid for next day delivery or the date upon which delivery
shall be made or tendered, addressed as hereinabove provided or upon delivery,
if hand delivered.
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No notice from Tenant to Landlord, the effect of which would
be that Landlord's approval, consent or other response would be deemed given in
the absence of a response thereto from Landlord, shall be deemed to have been
given to Landlord, and Landlord shall not be bound thereby, unless such notice
expressly refers to the provision of this Lease pursuant to which the notice is
given and sets forth that if Landlord fails to respond within the applicable
time period (which shall be stated in the notice), its approval or consent will
be deemed to have been given.
ARTICLE 30
BROKER
30.1 Landlord and Tenant covenant, warrant and represent
that there was no broker or finder instrumental in consummating this Lease and
that no conversations or negotiations were had with any broker or finder
concerning the leasing of the Leased Premises.
ARTICLE 31
WAIVERS AND SURRENDERS TO BE IN WRITING
31.1 The receipt of rent by Landlord, with knowledge of
any breach of this Lease by Tenant or of any default on the part of Tenant in
the observance or performance of any of the conditions or covenants of this
Lease, shall not be deemed to be a waiver of any provision of this Lease. No
failure on the part of Landlord or Tenant to enforce any covenant or provision
herein contained, nor any waiver of any right hereunder by Landlord or Tenant
(unless such waiver is in a writing signed by the party to be charged), shall
discharge or invalidate such covenant or provision, or affect the right of
Landlord or Tenant to enforce the same in the event of any subsequent breach or
default. The receipt by Landlord of any rent, or other sum of money, or any
other consideration paid by Tenant after the expiration or termination, in any
manner, of the Term shall not reinstate, continue, or extend the Term, unless so
agreed to in writing and signed by Landlord. Neither acceptance of the keys to
any Improvement, nor any other act or thing done by Landlord or any agent or
employee during the Term, shall be deemed to be an acceptance of a surrender of
the Leased Premises excepting only an agreement in writing signed by Landlord
accepting or agreeing to accept such a surrender.
ARTICLE 32
RIGHTS AND REMEDIES CUMULATIVE
32.1 The rights given to Landlord herein are in addition
to any rights that may be given to Landlord by any statute or otherwise. All of
the rights and remedies of Landlord under this Lease or pursuant to present or
future law shall be deemed to be separate, distinct and cumulative, and no one
or more of them, whether exercised or not, nor any mention of, or
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reference to, any one or more of them in this Lease shall be deemed to be in
exclusion of, or a waiver of, any of the others, or of any of the other rights
or remedies that Landlord may have, whether by present or future law or pursuant
to this Lease. Landlord shall have, to the fullest extent permitted by law, the
right to enforce any rights or remedies separately, and to take any lawful
action or proceedings to exercise or enforce any right or remedy, without
thereby waiving, or being barred or estopped from exercising and enforcing, any
other rights and remedies by appropriate action or proceedings.
32.2 Except where Tenant's rights or remedies are
expressly limited by this Lease: the rights given to Tenant herein are in
addition to any rights that may be given to Tenant by any statute or otherwise;
all of the rights and remedies of Tenant under this Lease or pursuant to present
or future law shall be deemed to be separate, distinct and cumulative; no one or
more of them, whether exercised or not, nor any mention of, or reference to, any
one or more of them in this Lease, shall be deemed to be in exclusion of, or a
waiver of, any of the others Tenant may have, whether by present or future law
or pursuant to this Lease; and Tenant shall have, to the fullest extent
permitted by law, the right to enforce any such rights or remedies separately,
and to take any lawful action or proceedings to exercise or enforce any such
right or remedy, without thereby waiving, or being barred or estopped from
exercising and enforcing, any other rights and remedies by appropriate action or
proceedings.
ARTICLE 33
REMOVAL OF PERSONAL PROPERTY AND FIXTURES
33.1 Tenant shall, on or before the last day of the Term,
or on the sooner termination thereof, peaceably and quietly leave, surrender and
yield up unto Landlord all and singular the Leased Premises and the
Improvements, free of all subtenancies (except to the extent that Landlord shall
have consented to the continuation of such subtenancies), broom-clean, together
with all alterations, additions and improvements that may have been made upon
the Leased Premises (except movable furniture, movable personal property, or
movable trade fixtures put in at the expense of Tenant, or at the expense of any
subtenant, subject, however, to the subsequent provisions hereof). All
furniture, personal property and trade fixtures properly removable pursuant to
the provisions of this Article 33 shall be removed by Tenant on or before the
last day of the Term, or on the sooner termination thereof, and all property not
so removed shall be deemed abandoned by Tenant. If the Leased Premises and the
Improvements are not so surrendered at the end of the term, Tenant shall make
good to Landlord all damage that Landlord shall suffer by reason thereof, and
shall indemnify Landlord against all claims made by any succeeding tenant
against Landlord founded upon delay by Tenant in delivering possession of the
Leased Premises to such succeeding tenant, so far as such delay is occasioned by
the failure of Tenant to so surrender the Leased Premises. For purposes of this
Lease "TRADE FIXTURES" shall be deemed to include hydraulic lifts and other
moveable machinery and equipment used in connection with the operation of the
business of an automobile dealership, all of which shall be removed upon
Landlord's demand. If Tenant fails to remove any of the furniture, personal
property and trade fixtures which are to be removed by Tenant at or prior to the
expiration or
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termination of this Lease, then Landlord may, at its sole option (a) deem any or
all of such items abandoned and the sole property of Landlord or (b) remove any
and all such items and dispose of the same in any manner.
33.2 Should Landlord incur any expense in removing any
subtenant, or any other Person holding by, through, or under Tenant who has
failed to so surrender the Leased Premises, the Improvements, or any part
thereof, Tenant shall reimburse Landlord for the reasonable cost and expense
(including, without limitation, reasonable attorneys' fees, disbursements and
court costs) of removing such subtenant or such person, provided that Tenant
shall have failed to have effected such removal after written demand.
ARTICLE 34
SALE OR CONVEYANCE OF LEASED PREMISES;
LIMITS OF LIABILITY OF LANDLORD
34.1 The term "LANDLORD", as used in this Lease, means
only the owner at any time of fee title to the Leased Premises, so that, in the
event of any sale of the Leased Premises, the seller shall be, and hereby is,
entirely freed and relieved of all covenants and obligations of Landlord
hereunder thereafter arising, and it shall be deemed and construed, without
further agreement between the parties or between the parties and the purchaser
of the Leased Premises, that such purchaser has assumed and agreed to carry out
any and all covenants and obligations of Landlord hereunder thereafter arising.
If Landlord and/or any successor in interest of Landlord shall be an individual
or individuals who are joint venturers, tenants in common, members of a firm, a
general or limited partnership, or a corporation, it is specifically understood
and agreed that the monetary liability of such individual, or of the members or
other principals of such firm, partnership, or joint venture, or of the
officers, directors and/or shareholders of such corporation, whether disclosed
or undisclosed, in relation to any covenants or conditions under this Lease,
shall be unconditionally and completely limited to the equity of Landlord in the
Leased Premises, in the event of a breach by Landlord of any of the terms,
covenants and conditions of this Lease to be performed by Landlord. Except as
expressly otherwise provided in this Lease, there shall be no personal liability
with respect to any of the foregoing persons and/or entities.
ARTICLE 35
ALTERATIONS
35.1 (a) Provided that no Event of Default shall have
occurred and be continuing under this Lease, Tenant shall have the right:
(i) with Landlord's consent, which
shall not be unreasonably withheld or delayed, to make non-structural interior
changes in, or non-structural additions to, the Improvements; and
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(ii) with Landlord's prior written
consent, which may be given or withheld in Landlord's sole and absolute
discretion, to make structural interior changes in, or additions to, the
Improvements.
(b) In determining whether to consent to
Tenant's proposed non-structural interior changes in, or non-structural
additions to the Improvements, Landlord may consider all factors which in
Landlord's reasonable business judgment, are pertinent to such decision, and the
parties agree" that the following are examples of such factors:
(i) whether the work will convert any
Improvement that is, prior to such alterations, a complete, self-contained
operating unit into a structure that is not a complete, self-contained operating
unit or impair the structural integrity of any Improvement;
(ii) whether the work will decrease the
value of any location which is part of the Leased Premises below the value of
the same as of the date of commencement of such alterations or materially
decrease the size of the rentable space contained therein;
(iii) whether the work will convert the
use of any location which is part of the Leased Premises from the use thereof as
of the date of this Lease, unless (x) prior to making any such alterations,
Landlord shall notify Tenant that Tenant shall be obligated to restore the
Leased Premises to the use thereof existing as of the date of this Lease at the
sole cost and expense of Tenant, on or before the last day of the Term, or the
sooner expiration or termination thereof, and Tenant shall agree in writing to
so restore and (y) such alterations shall be of such a nature as to reasonably
permit such restoration to be made without excessive cost or expense; or
(iv) whether the work will constitute
the demolition of all or a substantial portion of the structure of any
Improvement.
35.2 No alterations shall be commenced until Tenant shall
have submitted to Landlord for approval by Landlord, plans and specifications
for the proposed work in sufficient detail to permit Landlord to evaluate the
impact of the work on the Leased Premises and Tenant shall have procured all
necessary permits and authorizations of all public authorities having
jurisdiction. All alterations shall be made promptly, in good and workmanlike
manner, and so as not to permit Landlord's fee title to the Leased Premises to
be subjected to a mechanics or other lien, and in compliance with all applicable
permits, authorizations, laws, ordinances, regulations and requirements of all
public authorities having jurisdiction and in accordance with the orders, rules
and regulations of the applicable Board of Fire Underwriters having jurisdiction
over the Leased Premises, the Insurance Services Office and any other body
exercising similar functions to either of the foregoing.
35.3 Prior to commencing any construction, alterations, or
additions to the Leased Premises or the Improvements estimated to cost in excess
of Two Hundred Fifty
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Thousand ($250,000.00) Dollars, increased every five years by the corresponding
increase in the CPI, Tenant shall, if Landlord so elects, deliver to Landlord,
at Tenant's expense, payment and performance bonds, which bonds shall be issued
by a company or companies and in form and content, reasonably satisfactory to
Landlord and in an amount not less than the estimated cost of such construction,
alterations, or additions.
35.4 Any and all alterations, additions and improvements
made with respect to, or placed upon, the Leased Premises or the Improvements by
Tenant, as well as all fixtures and articles of personal property attached to,
or used in connection with, the Leased Premises or the Improvements, shall
become, be and remain the property of Tenant for the Term of this Lease, but
shall become the property of, and surrendered to, Landlord at the end or other
termination of this Lease, provided, however, that the furniture and other
movable personal property and movable trade fixtures put in at the expense of
Tenant or any subtenant that, pursuant to the provisions of Article 33 hereof
may be or shall be removed by Tenant, or by any subtenant upon Landlord's
demand, at or before the expiration or sooner termination of this Lease, shall
not be deemed to be attached to the freehold nor the property of, nor
surrendered to, Landlord.
ARTICLE 36
TENANT AND LANDLORD TO FURNISH STATEMENTS
36.1 Each party shall, within twenty (20) days after the
actual receipt of a written request of the other party or of any holder or
potential holder of a fee mortgage or leasehold mortgage on the Leased Premises
or any portion thereof, furnish a written statement, duly acknowledged, of the
following items:
(a) the amount of Fixed Net Rent and additional
rent due, if any;
(b) whether this Lease is unmodified and in full
force and effect (or, if there have been modifications, whether this Lease is in
full force and effect as modified and stating the modifications);
(c) whether, to the best knowledge and belief of
the requested party, the requesting party is in default;
(d) whether Tenant has given Landlord or
Landlord has given Tenant any notice of default under this Lease, and if given,
whether the default set forth therein remains uncured; and
(e) such other items as may be reasonably
requested by the requesting party.
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Any such statement shall be for the sole benefit of Landlord or its assigns, or
such holder or prospective holder requesting the same or its assigns, and shall
have no effect, as an estoppel or otherwise, with respect to any third party.
36.2 Upon the failure of Tenant to furnish any such
statement within the said twenty (20) day period, it shall be conclusively
presumed that this Lease is in full force and effect and that there are no
defaults by Landlord hereunder.
ARTICLE 37
INSPECTIONS BY LANDLORD
37.1 Upon reasonable prior notice from Landlord (except in
an emergency, in which event no notice shall be necessary), and with Landlord
undertaking reasonable efforts not to cause an unreasonable interference with
Tenant's use, Tenant shall permit an inspection of the Leased Premises and the
Improvements by Landlord, by Landlord's agents or representatives, and by, or on
behalf of, prospective purchasers and/or mortgagees of the fee interest in the
Leased Premises at any time and from time to time during the Term. During the
three (3) year period next preceding the Expiration Date, Tenant shall permit
inspection thereof by or on behalf of prospective tenants. If admission to the
Leased Promises or any Improvement for the foregoing purposes cannot be
obtained, or if at any time by reason of an emergency condition an entry shall
be deemed necessary for the protection of the Leased Premises or the
Improvements, whether for the benefit of Tenant or not, Landlord, or Landlord's
agents or representatives, may enter the Leased Premises or the Improvements and
accomplish such purposes. The provisions contained in this Article 37 are not
intended to create or increase, and are not to be construed as creating or
increasing, any obligations on Landlord's part hereunder.
ARTICLE 38
SURRENDER AT THE END OF THE TERM
38.1 On the last day of the Term, or on the earlier
termination of the Term, Tenant shall peaceably and quietly leave, surrender and
deliver the Leased Premises and the Improvements to Landlord (together with any
instrument necessary to transfer title to Landlord or to confirm that Landlord
shall succeed to such title upon the expiration or sooner termination of the
term, with respect to alterations or improvements made by Tenant, with any
transfer tax, recording fees, or documentary stamp taxes or fees to be the sole
cost and expense of Tenant), together with any machinery, equipment, or other
personal property of any kind or nature that Tenant may have installed or
affixed on, in, or to the Leased Premises or the Improvements for use in
connection with the operation and maintenance of the Leased Premises and/or the
Improvements for the purposes for which they are intended (whether or not such
property is deemed to be fixtures), in good repair, order and condition (subject
to the terms of Section 8.3 hereof), reasonable use, wear and tear and insured
casualty excepted. If the Leased Premises and the Improvements are not so
surrendered, Tenant shall make good to Landlord all expenses that
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Landlord shall incur by reason thereof, and, in addition, Tenant shall indemnify
Landlord from and against all claims made by any succeeding lessee against
Landlord, founded upon delay by Landlord in delivering possession of the Leased
Premises and the Improvements to such succeeding lessee, so far as such delay is
occasioned by the failure of Tenant to surrender the Leased Premises and the
Improvements.
If Tenant holds over after the expiration of this Lease,
without Landlord's written consent Tenant shall be holding merely as a
tenant-at-will, and Landlord shall have no obligation to notify Tenant of any
termination of Tenant's possession other than as required by applicable law. If
Tenant so holds over, Tenant shall pay to Landlord upon demand rent for each day
of Tenant's possession of the Leased Premises after termination of this Lease in
an amount equal to the monthly Rent applicable upon termination divided by
thirty (30) and multiplied by two hundred percent (200%). Tenant shall indemnify
and hold Landlord harmless from all loss or liability, including any claim made
by any successor tenant founded upon Tenant's failure to surrender the Leased
Premises on a timely basis.
ARTICLE 39
COVENANTS BINDING ON SUCCESSORS AND ASSIGNS
39.1 The covenants, agreements, terms, provisions and
conditions contained in this Lease shall apply to, inure to the benefit of and
be binding upon Landlord, Tenant and their respective successors and assigns,
except as expressly otherwise hereinbefore provided, but shall not inure to any
third party beneficiaries.
ARTICLE 40
ENTIRE AGREEMENT
40.1 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 or their respective successors in interest.
ARTICLE 41
MISCELLANEOUS
41.1 Except as otherwise herein specifically provided to
the contrary, where the consent or approval of either party hereto shall be
required, the parties hereto agree that such consent shall not be unreasonably
withheld or delayed.
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41.2 The captions of this Lease and the index preceding
this Lease an for convenience and reference only and in no way define, limit or
describe the scope or intent of this Lease, nor in any way affect this Lease.
41.3 All the provisions of this Lease 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 provision hereof.
41.4 Words of any gender in this Lease shall be held to
include any other gender and words in the singular number shall be held to
include the plural when the sense requires.
41.5 If and to the extent that a provision of this Lease
shall be unlawful or contrary to public policy, the same shall not be deemed to
invalidate the other provisions of this Lease.
41.6 This Lease shall be governed by, and construed and
interpreted in accordance with the laws of the State where the Leased Premises
are located, applicable to agreements made and to be performed entirely therein.
41.7 Landlord represents to Tenant that Landlord has the
right to enter into this Lease with Tenant.
41.8 This Lease shall not be recorded. Upon written
request by Landlord or Tenant, the other party shall execute a memorandum of
this Lease, which the requesting party may record at its own expense.
41.9 Any provisions of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provisions hereof and such other provisions shall remain in full force and
effect.
ARTICLE 42
CERTAIN DEFINITIONS
42.1 As the same are used in this Lease, the following
terms shall have the following meanings:
(a) "COMMENCEMENT DATE" shall have the meaning
set forth in Section 2.1;
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(b) "DEPOSITORY" shall mean a bank or trust
company having offices in the City, County and State of New York or the City of
Atlanta, Fulton county and state of Georgia and a net worth of not less than
Twenty-Five Million ($25,000,000.00) Dollars, to be selected by Tenant, subject
to the written approval of Landlord, to act as insurance Trustee;
(c) "EVENT OF DEFAULT" shall have the meaning
set forth in Section 16.1
(d) "EXPIRATION DATE" shall mean the ending,
termination, or expiration date of the Term of this Lease;
(e) "FIXED NET RENT" shall have the meaning set
forth in Section 2.1;
(f) "IMPROVEMENTS" shall mean the structures or
buildings, and replacements thereof, now on the Leased Premises or hereafter
erected on the Leased Premises, including all building equipment, apparatus,
machinery and fixtures of every kind and nature forming part of such structures
or buildings, or of any structures or buildings hereafter standing on the Leased
premises or on any part thereof and articles of personal property owned by the
Tenant now or at any time hereafter affixed to, attached to, placed upon, or
used in any way in connection with the complete and comfortable use, enjoyment,
occupancy or operation of, any such structures or buildings (provided, however,
that nothing in the foregoing definition shall be construed to be in limitation
of Tenant's rights and obligations pursuant to the terms of Section 33.1 to
remove certain personal property and trade fixtures (including hydraulic lifts)
from the Leased Premises on or before the Expiration Date);
(g) "LANDLORD" shall mean the then holder of the
fee title to the Leased Premises at the time in question;
(h) "LEASED PREMISES" shall have the meaning set
forth in the Statement of Facts to this Lease; and
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(i) "NOTICE" shall have the meaning set forth in
Section 29.1.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement of Lease as of the day and year first above written.
TENANT: LANDLORD:
GRINDSTAFF, INC. KIMCO AUTOFUND, LP
By:/s/ Charles K. Yancey By: KIMCO AUTOVENTURE, INC.
------------------------------ General Partner
Name: Charles K. Yancey
---------------------
Title: CEO
---------------------
Attest:/s/ Nicholas S. Gibson By: /s/ [ILLEGIBLE]
----------------------- ------------------------------
Name: Nicholas S. Gibson Name:
------------------------ ---------------------------
Title: Asst Sec Title: [ILLEGIBLE]
------------------------ ---------------------------
Attest: /s/ Linda Protitch
---------------------------
Name: Linda Protitch
---------------------------
Title: Asst. Secy.
---------------------------
56
<PAGE> 1
EXHIBIT 10.71
AGREEMENT BETWEEN
NISSAN MOTOR CORPORATION IN U.S.A.
AND
SUNBELT AUTOMOTIVE GROUP, INC.
This agreement dated April ___, 1998, is entered into by and between
Sunbelt Automotive Group, ("Sunbelt"), a Georgia corporation, with its principal
place of business at 5901 Peachtree Dunwoody Road, Suite 250 B, Atlanta, Georgia
30328, and Nissan Motor Corporation in U.S.A. ("NMC"), a California corporation,
with its principal place of business at 18501 South Figueroa Street, Gardena,
California 90248-4500 (the "Agreement").
RECITALS
WHEREAS, NMC distributes Nissan and Infiniti brand automobile products
in the continental United States through a network of authorized independent
dealers; and
WHEREAS, Sunbelt is in the automobile businesses of retailing and
servicing automobile products, and has acquired or may acquire, through its
wholly owned affiliates or subsidiaries, several Nissan and Infiniti automobile
dealerships;
WHEREAS NMC's and Sunbelt's interests could conflict, and it is the
intent of the parties to develop a mutually beneficial business relationship;
NOW THEREFORE, Sunbelt and NMC agree as follows:
AGREEMENT
1. ADHERENCE TO THE POLICY
The Nissan and Infiniti dealerships owned by Sunbelt, or its wholly owned
affiliates or subsidiaries, have already agreed to comply with NMC's dealer
agreements and policies and, by this Agreement, Sunbelt agrees to not interfere
with such compliance by its NMC authorized dealerships and to itself comply with
and be bound by the terms of NMC's policies, including, but not limited to,
NMC's policy limiting the number of dealers owned or controlled, directly or
indirectly, by a single entity (the "Ownership Policy"), which is summarized as
follows: i) No individual or entity may have an ownership or management
interest, direct or indirect, in Dealers whose Primary Marketing Area's (PMA's)
competitive segment registration count comprises more than 5% of Nissan's or
Infiniti's (as applicable) total, national competitive segment registrations
based on the sum of the retail competitive segment registrations contained
in all PMAs associated with the dealers; ii) No individual or entity may hold
ownership or management, direct or indirect, in Dealers whose PMA's competitive
segment registration count comprises more than 20% of any Nissan or Infiniti (as
applicable) region's total competitive segment registrations contained in all
PMA's associated with
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<PAGE> 2
dealers in that region; iii) In order for any entity to acquire additional
Nissan or Infiniti dealerships, within the limits of this Agreement, the Nissan
or Infiniti dealerships which it owns or controls, directly or indirectly, must:
(a) be in full compliance with all of the terms of its respective Dealer
Agreements; (b) meet, in all material respects, all of the applicable Nissan or
Infiniti market representation and other standards and policies; and (c) with
respect to the NMC Division and Region at issue, the Nissan or Infiniti
dealerships which the entity owns or controls must, in the aggregate and with
respect to at least 50% of those individual dealerships, have performed at or
above all performance levels set forth in the Business Plans for those
dealerships over the proceeding 12 month period; and iv) If the proposed
acquisition of any Nissan or Infiniti dealership would cause an individual or
entity to exceed the Ownership Policy, NMC will reject a dealer's application
for approval of such ownership transfer until such time as the purchasing
individual or entity shall be able to complete the acquisition within the
requirements of this Policy. Notwithstanding the foregoing, NMC may withhold
consent to a proposed acquisition, even if that acquisition satisfies the
parameters of the Ownership Policy, based on the grounds set forth in the Nissan
Dealer Agreement and applicable state law.
2. IDENTIFICATION OF OWNERS OF SUNBELT
Sunbelt represents and warrants that Schedule A hereto identifies each
individual or entity that owns, controls or has a beneficial interest in 5% or
more of Sunbelt and/or of its affiliates or subsidiaries. In the event Sunbelt
becomes aware of any change of ownership, control or interest that results in an
individual or entity not listed on Schedule A obtaining such ownership, control
or beneficial interest, Sunbelt shall provide NMC with the documentation and
information required by Schedule A with respect to such individual or entity.
Sunbelt will provide NMC with copies of all filings that Sunbelt becomes aware
of that are made with the SEC and comparable filings made with state agencies by
persons or entities that own, control or have a beneficial interest in 5% or
more of Sunbelt and/or any of its affiliates or subsidiaries. Without limiting
the foregoing, Sunbelt will use its best efforts to provide such information
regarding individuals that own, control or have a beneficial interest in 5% or
more of Sunbelt as NMC may from time to time reasonably request.
3. CHANGE IN OWNERSHIP OF SUNBELT
If any person or entity acquires more than 20% of Sunbelt's common stock issued
and outstanding at any time and Nissan determines that such person or entity
does not have interests compatible with those of Nissan, or is otherwise not
qualified to have an ownership interest in a Nissan dealership (an "Adverse
Person"), Sunbelt must terminate its dealer agreements with Nissan or transfer
the Nissan dealerships to a third party acceptable to Nissan unless, within 90
days after Nissan's determination, the Adverse Person's ownership interest is
reduced to less than 20%.
4. SEPARATE LEGAL ENTITIES FOR EACH NISSAN AND INFINITI DEALERSHIP
Sunbelt shall (i) create or maintain separate legal entities for each Nissan and
Infiniti
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dealership that it owns, directly or indirectly, shall obtain a separate motor
vehicle license for each such dealership, and shall maintain separate financial
statements for each such dealership; and (ii) where such Nissan or Infiniti
dealerships are part of a Contiguous Market Ownership Area pursuant to a
Contiguous Market Ownership Addendum, maintain a single corporate entity for the
dealerships in that Area and shall otherwise comply with the licensing and
reporting requirements set forth in that Addendum; provided, however, that if at
the time of acquisition of any Nissan or Infiniti dealership by Sunbelt such
dealership is not in compliance with the requirements of clauses (i) or (ii) of
this paragraph, as applicable, Sunbelt will use its reasonable efforts to cause
the dealership to comply with such requirements of clauses (i) or (ii) as soon
as practicable.
5. BRANDING/BUSINESS NAME
Consistent with NMC policy, the name "Nissan" or "Infiniti," as applicable,
shall prominently appear in the d/b/a and marketing of each dealership. Sunbelt
agrees that each Nissan and Infiniti dealership owned or controlled by Sunbelt,
directly or indirectly, shall include in its promotional, marketing and
advertising efforts the approved name of the Dealership or another name approved
by Nissan that includes the Nissan or Infiniti name and, that said dealerships
shall actively and effectively promote primarily the "Nissan" or "Infiniti"
name. Under no circumstances shall the name "Nissan" or "Infiniti" be
subordinated to or promoted less aggressively than any other name (e.g. "Sunbelt
Automotive Group" or "Sunbelt").
6. AUTHORITY OF THE DEALER PRINCIPAL
Each Nissan and Infiniti dealership owned or controlled by Sunbelt, directly or
indirectly, shall have a Dealer Principal who is delegated full authority to
perform the obligations of Dealer Principal under the terms and conditions set
forth in the applicable Nissan or Infiniti Dealer Sales and Service agreement
("Agreement"), to determine, approve, and implement the terms and provisions of
the Agreement, to make, sign, and execute any documents or further agreements,
both oral and written, between the dealer and NMC, to commit himself to the
achievement of the purposes and objectives of the Agreement, to take any and all
actions which the Dealer Principal may deem prudent, necessary, or appropriate
to effect the foregoing Agreement and to resolve all matters of the terms and
implementation as he shall deem necessary in connection therewith. Sunbelt shall
not authorize or permit the Dealer Principal to take any action inconsistent
with the terms, purposes, and objectives of the Agreement.
Whenever Sunbelt nominates a new Dealer Principal candidate for a Nissan or
Infiniti dealership, NMC shall have the right to withhold a decision concerning
approval or rejection of the candidate for a period of up to one year, at its
sole discretion; provided, however, that the candidate may operate in the
probationary capacity of Dealer Principal until NMC has approved or rejected
him/her. Such delay or exercise of this evaluation period does not imply
approval of the Dealer Principal candidate.
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Should Sunbelt reduce or modify the authority of the Dealer Principal, contrary
to the requirements of this and the Dealer Agreement, it must notify Nissan
immediately as to the specific changes in authority. Upon such notice, Nissan
will evaluate the modification of authority and notify Sunbelt of its response.
Should Nissan, in its reasonable discretion, object to the changes, Sunbelt must
resolve the situation to Nissan's satisfaction or restore the authority to that
which existed prior to the modification.
NMC shall be entitled to and shall, in fact, rely upon the personal
qualifications, experience, reputation, integrity, ability, and representations
of the individual named as Dealer Principal.
Any successor Dealer Principal or Executive Manager must meet the following
minimum requirements in order to be submitted to Seller for approval:
(i) At least three years of experience as a general manager of
an automobile dealer in a major metropolitan area or similar position
involving all aspects of the day-to-day operations of such an
automobile dealership (including, without limitation, new and used
vehicle sales, service, parts and administration); and
(ii) A demonstrated track record of success in his/her prior
automobile dealership activities as measured by the dealerships'
performance under his/her management. The dealership(s) shall have
consistently demonstrated at least the following:
1. An above average level of sales performance when
measured against regional or zone averages and as measured against sales
performance objectives established by the manufacturer; and
2. An above average level of customer satisfaction
when measured against regional or zone averages for the make; and
3. A history of cooperation and good relations with
manufacturer(s) and/or distributor(s).
(d) Evaluation of Management. Sunbelt and NMC understand and
acknowledge that the personal qualifications, expertise, reputation, integrity,
experience and ability of the Dealer Principal and Executive Manager and their
ability to effectively manage a dealership's day-to-day operations is critical
to the success of such dealership in performing its obligations under the
respective Agreement. NMC may from time to time develop standards and/or
procedures for evaluating the performance of the Dealer Principal and Executive
Manager and of Sunbelt's Nissan and Infiniti dealership personnel generally.
NMC may, from time to time, evaluate the performance of the Dealer Principal and
Executive Manager, based on the standards established in the
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dealership's business plan, and will advise Sunbelt, the respective Dealer
Principal and the Executive Manager of the results of such evaluations and the
way in which any deficiencies affect such dealership's performance of its
obligations under the applicable Agreement.
7. DESIGNATED SUNBELT CONTACT OFFICIAL
Sunbelt shall designate a Sunbelt executive (other than the Dealer Principal of
the dealership) who will respond directly to any questions or concerns of NMC
regarding the relationship with NMC, the operation or performance of the
dealership(s) generally as a group, or other issues that may arise. That
executive will have full authority, in accordance with Sunbelt's management
policies, to discuss, address, negotiate and resolve all such issues. Matters
pertaining to a specific dealership will be addressed by Nissan with that
dealership's Dealer Principal.
8. FINANCIAL DISCLOSURES
Sunbelt shall provide NMC with copies of all information and materials filed by
Sunbelt with the Securities Exchange Commission under the Securities Exchange
Act of 1934, as amended, including, but not limited to, quarterly and annual
financial statement filings, prospectuses and other materials related to Sunbelt
and/or its automotive affiliates and subsidiaries.
9. SOLE AGREEMENT OF THE PARTIES
There are no prior agreements or understandings, either oral or written, between
the parties affecting this Agreement, except as otherwise specified or referred
to in this Agreement. No change or addition to, or deletion of any portion of
this Agreement shall be valid or binding upon the parties hereto unless approved
in a writing signed by an officer of each of the parties hereto.
10. SEVERABILITY
If any provision of this Agreement should be held invalid or unenforceable for
any reason whatsoever, or conflicts with any applicable law, this Agreement will
be considered divisible as to such provision(s), and such provision(s) will be
deemed amended to comply with such law, or if it (they) cannot be so amended
without materially affecting the tenor of the Agreement, then it (they) will be
deemed deleted from this Agreement in such jurisdiction, and in either case, the
remainder of the Agreement will be valid and binding.
11. NO IMPLIED WAIVERS
The failure of either party at any time to require performance by the other
party of any provision herein shall in no way affect the right of such party to
require such
5
<PAGE> 6
performance at any time thereafter, nor shall any waiver by any party of a
breach of any provision herein constitute a waiver of any succeeding breach of
the same or any other provision, nor constitute a waiver of the provision
itself.
12. CONCURRENCE AND ACKNOWLEDGMENT
Sunbelt acknowledges that NMC's policies and standards are prepared by NMC based
upon NMC's evaluation of the marketplace and other factors, and that NMC may
amend its policies and standards from time to time. Sunbelt further agrees that
it will not interfere in the day-to-day operations of Dealer, and will neither
take, nor permit Dealer to take actions inconsistent with NMC's policies or
Dealer's or Dealer Principal's obligations as set forth in the applicable Sales
and Service Agreement or other executed agreements.
13. APPLICABLE LAW
This Agreement shall be governed by and construed according to the laws of the
State of California. The parties to this Agreement acknowledge that it is not
a "Dealer" or "Franchise" Agreement, is not governed by State or Federal
Manufacturer/Dealer laws, and that it does not need to be filed with any
Governmental or Administrative agencies under these laws.
14. BENEFIT
This Agreement is entered into by and between NMC and Sunbelt for their sole and
mutual benefit. Neither this Agreement nor any specific provision contained in
it is intended or shall be construed to be for the benefit of any third party.
15. NOTICE TO THE PARTIES
Any notices permitted or required under the terms of this Agreement shall be
directed to the following respective addresses of the parties, or if either of
the parties shall have specified another address by notice in writing to the
other party, then to the address last specified:
NISSAN MOTOR CORPORATION IN U.S.A.
18501 South Figueroa Street
Gardena, California 90248-4504
Attention: Whitfield Ramonat
Manager, Multiple Market and Public Ownership
Sunbelt Automotive Group, Inc.
5901 Peachtree Dunwoody Road
Suite 250 B
Atlanta, GA 30328
Attention: Stephen Whicker
Chief Financial Officer
6
<PAGE> 7
16. DISPUTE RESOLUTION
The parties acknowledge that, at the state and federal level, various courts and
agencies would, in the absence of this Section 16, be available to them to
resolve claims or controversies which might arise between them. The parties
agree that it is inconsistent with their relationship for either to use courts
or governmental agencies to resolve such claims or controversies.
THEREFORE, CONSISTENT WITH THE PROVISIONS OF THE UNITED STATES ARBITRATION ACT
(9 U.S.C. SEC. l ET SEQ.), THE PARTIES TO THIS AGREEMENT AGREE THAT THE DISPUTE
RESOLUTION PROCESS OUTLINED IN THIS SECTION, WHICH INCLUDES BINDING ARBITRATION,
SHALL BE THE EXCLUSIVE MECHANISM FOR RESOLVING ANY DISPUTE, CONTROVERSY OR CLAIM
ARISING OUT OF OR RELATING IN ANY WAY TO THIS AGREEMENT OR TO THE RELATIONSHIP
BETWEEN THE PARTIES, INCLUDING BUT NOT LIMITED TO CLAIMS UNDER ANY STATE OR
FEDERAL STATUTES (HEREINAFTER "DISPUTES").
There are two steps in the Dispute Resolution Process: Mediation and Binding
Arbitration. All Disputes must first be submitted to Mediation, unless that step
is waived by written agreement of the parties. Mediation is conducted by a panel
consisting of an equal number of representatives of the parties designated by
Nissan and selected by Sunbelt. The Mediation Panel will evaluate each position
and recommend a solution. This recommended solution is not binding.
If a dispute has not been resolved after Mediation, or if Sunbelt and Nissan
have agreed in writing to waive Mediation, the Dispute will be settled by
Binding Arbitration. SPECIFICALLY, THE PARTIES AGREE TO RESOLVE ALL SUCH
DISPUTES BY BINDING ARBITRATION CONDUCTED IN ACCORDANCE WITH THE COMMERCIAL
ARBITRATION PROCEDURES OF THE AMERICAN ARBITRATION ASSOCIATION, OR ANOTHER
PROGRAM AGREED TO BY THE PARTIES, WITH THE PREVAILING PARTY TO RECOVER ITS COSTS
AND ATTORNEY'S FEES FROM THE OTHER PARTY. ALL ARBITRATION AWARDS ARE BINDING AND
NON-APPEALABLE, EXCEPT AS OTHERWISE PROVIDED IN THE UNITED STATES ARBITRATION
ACT. JUDGMENT UPON ANY SUCH AWARD MAY BE ENTERED AND ENFORCED IN ANY COURT
HAVING JURISDICTION.
17. INDEMNITY
Sunbelt hereby agrees to indemnify and hold harmless, NMC, its officers,
directors, affiliates and agents, and each person who controls NMC within the
meaning of the Securities Act of 1933, as amended (the "Act"), from and against
any and all losses, claims, damages or liabilities, to which they or any of them
may become subject under
7
<PAGE> 8
the Act, the Securities Exchange Act of 1934, as amended, or any other federal
or state securities law, rule or regulation, at common law or otherwise, insofar
as such losses, claims, damages or liabilities arise out of the sale by Sunbelt
of any securities.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SUNBELT AUTOMOTIVE GROUP, INC. NISSAN MOTOR CORPORATION INC.
U.S.A.
By: By:
---------------------------- --------------------------------------
Its: Its:
--------------------------- -------------------------------------
8
<PAGE> 1
EXHIBIT 10.72
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER THE STATE OF GEORGIA SECURITIES LAWS OR ANY OTHER STATE'S SECURITIES
LAWS BASED UPON APPLICABLE EXEMPTIONS AVAILABLE UNDER SUCH LAWS. NO SALE OR
OTHER TRANSFER OF THIS NOTE MAY BE MADE IN THE ABSENCE OF A REGISTRATION OR AN
AVAILABLE EXEMPTION THEREFROM.
NONRECOURSE PROMISSORY NOTE
AND STOCK PLEDGE AGREEMENT
$509,120 May 1, 1998
FOR VALUE RECEIVED, and in consideration for the 63,640 shares of Common
Stock (the "Stock") of Sunbelt (as defined below) granted to the Maker pursuant
to that certain Executive Employment Agreement by and between the Maker and
Sunbelt dated April 22, 1998, subject to the terms and provisions set forth
below the undersigned, Robert W. Gundeck (hereinafter "Maker"), promises to pay
in legal tender of the United States to the order of Sunbelt Automotive Group,
Inc. (hereinafter "Holder" or "Sunbelt"), at Atlanta, Georgia, or at such other
place as Holder may from time to time designate to Maker in writing, the
principal sum of $509,120, together with interest on the outstanding principal
balance, from the date hereof (the "Note"). Interest shall be at the rate equal
to eight percent (8%) per annum until paid in full. Interest shall be computed
on the basis of a 360-day year for the actual number of days elapsed and shall
be computed on the daily outstanding balance of this Note as of the close of
business each day. All payments shall be applied first to accrued and unpaid
interest and then to the outstanding principal balance.
1.0 Replacement of Prior Promissory Note. This Nonrecourse Promissory
Stock and Stock Pledge Agreement supersedes in its entirety that certain
Promissory Note dated May 1, 1998 (the "Prior Note") in the principal amount of
$509,120 executed by Maker in favor of Holder in connection with Maker's
purchase of the Stock from Holder on such date. Holder acknowledges and agrees
that Holder has no further rights, and Maker has no further obligations, under
the Prior Note.
2.0 Nonrecourse Provisions. Notwithstanding any term or provisions
contained herein to the contrary, this Nonrecourse Promissory Note and Stock
Pledge Agreements is, as to payment of any principal or interest hereunder, a
nonrecourse obligation for which Maker is not personally liable to Holder if
Maker defaults hereunder. Holder's sold recourse hereunder upon an Event of
Default (as defined below) is to foreclose upon the Collateral (as defined
below) pledged hereunder in full satisfaction and accord of the indebtedness of
Maker to Holder hereunder. The terms and provisions of this Section 2.0 shall
apply regardless of the fair market value of the Collateral at the time of the
Event of Default.
3.0 Pledge of Stock. To secure all of Maker's obligations hereunder,
Maker hereby pledges and grants a security interest to Holder in the Stock and
all stock dividends and stock splits hereafter declared or distributed (the
Stock and the stock splits or stock dividends being hereinafter referred to
as the "collateral"). Simultaneously with the execution of this Nonrecourse
Promissory Note and Stock Pledge Agreement, Maker is delivering to Holder, and
Holder hereby acknowledges receipt of, the certificates evidencing the 63,640
shares of Common
Page 1 of 3
<PAGE> 2
Stock of Sunbelt issued in the name of Maker. Upon the occurrence of an Event of
Default hereunder, Holder may, in its sole discretion foreclose upon and take
title to the Collateral in full satisfaction and accord of all obligations of
Maker hereunder. Maker shall have no further obligation and shall have no
personal liability to Holder hereunder. Unless and until the occurrence of an
Event of Default hereunder, Maker shall be entitled to receive any and all cash
dividends or other cash distributions on the Collateral and exercise any and all
voting powers pertaining to any of the Collateral (or give written consents in
lieu of voting thereon) as a stockholder of record of Sunbelt with respect to
the Collateral. Upon full payment of all principal and interest owed hereunder
by Maker, Holder shall immediately release and deliver to Maker the certificates
evidencing the Collateral.
4.0 Payment. Payment of principal and interest hereunder shall be made
by maker as follows:
(a) Interest shall be paid annually each year with the first
interest payment being due and payable on July 31, 1999 and each year
thereafter until the principal amount hereunder is paid in full.
(b) Payment of the principal sum of $509,120 together with accrued
and unpaid interest as of the date thereof shall be made on the 31st day of
July, 2003 and shall be paid by the Maker at its principal place of business.
5.0 Lawful Interest. In no event shall the amount of interest due or
payable hereunder exceed the maximum rate of interest allowed by law. In the
event any such payment is inadvertently paid by Maker or received by Holder,
then such excess sum shall be credited as payment of principal, unless the
Maker shall notify the Holder in writing that the Maker elects to have such
excess sum returned to him. The parties intend that Maker shall not pay and
Holder shall not receive directly, or indirectly, in any manner whatsoever,
interest in excess of that which may be legally paid by the Maker under
applicable law.
6.0 Default. If any of the following events ("Events of Default") occur,
then the entire unpaid principal sum evidenced by this Note, together with all
accrued interest thereon, shall, upon giving of notice and the expiration of
Maker's right to cure such default, at the option of the Holder become due:
(a) should Maker be duly terminated "for cause" in accordance with
the provisions of the Maker's Executive Employment Agreement with Sunbelt; or
(b) if the Maker fails to pay when due any amount payable hereunder,
and should the Maker fail to cure any such default within a fifteen (15) day
period following written notice of default delivered by the Holder to the Maker.
7.0 Transferability of Note. This Note may not be sold, negotiated,
assigned, or transferred by the Holder. Further, this Note has been acquired
for investment and has not been registered under the Securities Act of 1933
(the "1933 Act") in reliance on exemptions contained in Sections 3 and 4 of the
1933 Act. This Note may not be sold or transferred except in transactions (a)
registered thereunder, and (b) registered under or otherwise in compliance with
the laws of the State in which the sale or transfer is to occur. The sale,
transfer or other
Page 2 of 3
<PAGE> 3
disposition of this Note is restricted pursuant to the provisions of a
Subscription Agreement from the registered holder to the Company, a copy of
which may be examined at the office of the Company.
8.0 Prepayment Option. The Maker herein shall have the privilege, at any
time, and from time to time, of prepaying the outstanding Note herein, either
in whole or in part, by prepayment of the principal amount of the Note, or
portion thereof to be prepaid, and accrued interest thereon to the date of such
prepayment, without charge or penalty.
9.0 Waiver. No omission to act or waiver by Holder shall act as a waiver
of any other default or of the same default at future time, and no single or
partial exercise by Holder of any right or remedy shall preclude any other or
future exercise of that or any other right or remedy.
10.0 Notice, Presentment, Protest. Except as otherwise specifically set
out herein, the Maker waives notice, presentment for payment, demand, protest,
and notice of demand, protest and nonpayment.
11.0 Governing Law. This Note shall be governed by, enforced and
interpreted in accordance with the laws of the State of Georgia.
12.0 Binding Agreement. This Nonrecourse Promissory Note and Stock Pledge
Agreement shall be binding upon and inured to the benefit of Maker and his
heirs, beneficiaries, estate and legal representatives and Holder and its
successors and assigns.
IN WITNESS WHEREOF, the undersigned have executed this agreement on the
day and year first above written.
"Maker":
/s/ Robert W. Gundeck
-----------------------------------
Robert W. Gundeck
"Holder":
SUNBELT AUTOMOTIVE GROUP, INC.
By: /s/ Stephen C. Whicker
---------------------------------
Title: Secretary
------------------------------
Page 3 of 3
<PAGE> 1
EXHIBIT 10.73
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER THE STATE OF GEORGIA SECURITIES LAWS OR ANY OTHER STATE'S SECURITIES
LAWS BASED UPON APPLICABLE EXEMPTIONS AVAILABLE UNDER SUCH LAWS. NO SALE OR
OTHER TRANSFER OF THIS NOTE MAY BE MADE IN THE ABSENCE OF A REGISTRATION OR AN
AVAILABLE EXEMPTION THEREFROM.
NONRECOURSE PROMISSORY NOTE
AND STOCK PLEDGE AGREEMENT
$515,720 May 1, 1998
FOR VALUE RECEIVED, and in consideration for the 64,465 shares of Common
Stock (the "Stock") of Sunbelt (as defined below) granted to the Maker pursuant
to that certain Executive Employment Agreement by and between the Maker and
Sunbelt dated April 22, 1998, subject to the terms and provisions set forth
below the undersigned, Stephen C. Whicker (hereinafter "Maker"), promises to pay
in legal tender of the United States to the order of Sunbelt Automotive Group,
Inc. (hereinafter "Holder" or "Sunbelt"), at Atlanta, Georgia, or at such other
place as Holder may from time to time designate to Maker in writing, the
principal sum of $515,720, together with interest on the outstanding principal
balance, from the date hereof (the "Note"). Interest shall be at the rate equal
to eight percent (8%) per annum until paid in full. Interest shall be computed
on the basis of a 360-day year for the actual number of days elapsed and shall
be computed on the daily outstanding balance of this Note as of the close of
business each day. All payments shall be applied first to accrued and unpaid
interest and then to the outstanding principal balance.
1.0 Replacement of Prior Promissory Note. This Nonrecourse Promissory
Stock and Stock Pledge Agreement supersedes in its entirety that certain
Promissory Note dated May 1, 1998 (the "Prior Note") in the principal amount of
$515,720 executed by Maker in favor of Holder in connection with Maker's
purchase of the Stock from Holder on such date. Holder acknowledges and agrees
that Holder has no further rights, and Maker has no further obligations, under
the Prior Note.
2.0 Nonrecourse Provisions. Notwithstanding any term or provisions
contained herein to the contrary, this Nonrecourse Promissory Note and Stock
Pledge Agreements is, as to payment of any principal or interest hereunder, a
nonrecourse obligation for which Maker is not personally liable to Holder if
Maker defaults hereunder. Holder's sold recourse hereunder upon an Event of
Default (as defined below) is to foreclose upon the Collateral (as defined
below) pledged hereunder in full satisfaction and accord of the indebtedness of
Maker to Holder hereunder. The terms and provisions of this Section 2.0 shall
apply regardless of the fair market value of the Collateral at the time of the
Event of Default.
3.0 Pledge of Stock. To secure all of Maker's obligations hereunder, Maker
hereby pledges and grants a security interest to Holder in the Stock and all
stock dividends and stock splits hereafter declared or distributed (the Stock
and the stock splits or stock dividends being hereinafter referred to as the
"collateral"). Simultaneously with the execution of this Nonrecourse Promissory
Note and Stock Pledge Agreement, Maker is delivering to Holder, and Holder
hereby acknowledges receipt of, the certificates evidencing the 64,465 shares of
Common
Page 1 of 3
<PAGE> 2
Stock of Sunbelt issued in the name of Maker. Upon the occurrence of an Event
of Default hereunder, Holder may, in its sole discretion foreclose upon and
take title to the Collateral in full satisfaction and accord of all obligations
of Maker hereunder. Maker shall have no further obligation and shall have no
personal liability to Holder hereunder. Unless and until the occurrence of an
Event of Default hereunder, Maker shall be entitled to receive any and all
cash dividends or other cash distributions on the Collateral and exercise any
and all voting powers pertaining to any of the Collateral (or give written
consents in lieu of voting thereon) as a stockholder of record of Sunbelt with
respect to the Collateral. Upon full payment of all principal and interest owed
hereunder by Maker, Holder shall immediately release and deliver to Maker the
certificates evidencing the Collateral.
4.0 Payment. Payment of principal and interest hereunder shall be made by
maker as follows:
(a) Interest shall be paid annually each year with the first
interest payment being due and payable on July 31, 1999 and each year
thereafter until the principal amount hereunder is paid in full.
(b) Payment of the principal sum of $515,720 together with accrued
and unpaid interest as of the date thereof shall be made on the 31st day of
July, 2003 and shall be paid by the Maker at its principal place of business.
5.0 Lawful Interest. In no event shall the amount of interest due or
payable hereunder exceed the maximum rate of interest allowed by law. In the
event any such payment is inadvertently paid by Maker or received by Holder,
then such excess sum shall be credited as payment of principal, unless the
Maker shall notify the Holder in writing that the Maker elects to have such
excess sum returned to him. The parties intend that Maker shall not pay and
Holder shall not receive directly, or indirectly, in any manner whatsoever,
interest in excess of that which may be legally paid by the Maker under
applicable law.
6.0 Default. If any of the following events ("Events of Default") occur,
then the entire unpaid principal sum evidenced by this Note, together with all
accrued interest thereon, shall, upon giving of notice and the expiration of
Maker's right to cure such default, at the option of the Holder become due:
(a) should Maker be duly terminated "for cause" in accordance with
the provisions of the Maker's Executive Employment Agreement with Sunbelt; or
(b) if the Maker fails to pay when due any amount payable hereunder,
and should the Maker fail to cure any such default within a fifteen (15) day
period following written notice of default delivered by the Holder to the Maker.
7.0 Transferability of Note. This Note may not be sold, negotiated,
assigned, or transferred by the Holder. Further, this Note has been acquired
for investment and has not been registered under the Securities Act of 1933
(the "1933 Act") in reliance on exemptions contained in Section 3 and 4 of the
1933 Act. This Note may not be sold or transferred except in transactions (a)
registered thereunder, and (b) registered under or otherwise in compliance with
the laws of the State in which the sale or transfer is to occur. The sale,
transfer or other
Page 2 of 3
<PAGE> 3
disposition of this Note is restricted pursuant to the provisions of a
Subscription Agreement from the registered holder to the Company, a copy of
which may be examined at the office of the Company.
8.0 PREPAYMENT OPTION. The Maker herein shall have the privilege, at any
time, and from time to time, of prepaying the outstanding Note herein, either
in whole or in part, by prepayment of the principal amount of the Note, or
portion thereof to be prepaid, and accrued interest thereon to the date of such
prepayment, without charge or penalty.
9.0 WAIVER. No omission to act or waiver by Holder shall act as a waiver
of any other default or of the same default at future time, and no single or
partial exercise by Holder of any right or remedy shall preclude any other or
future exercise of that or any other right or remedy.
10.0 NOTICE, PRESENTMENT, PROTEST. Except as otherwise specifically set
out herein, the Maker waives notice, presentment for payment, demand, protest,
and notice of demand, protest and nonpayment.
11.0 GOVERNING LAW. This Note shall be governed by, enforced and
interpreted in accordance with the laws of the State of Georgia.
12.0 BINDING AGREEMENT. This Nonrecourse Promissory Note and Stock Pledge
Agreement shall be binding upon and inured to the benefit of Maker and his
heirs, beneficiaries, estate and legal representatives and Holder and its
successors and assigns.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
day and year first above written.
"Maker":
/s/ Stephen C. Whicker
--------------------------------------
Stephen C. Whicker
"Holder":
SUNBELT AUTOMOTIVE GROUP, INC.
By: /s/ Robert W. Gundeck
-----------------------------------
Title: Chief Executive Officer
--------------------------------
Page 3 of 3
<PAGE> 1
EXHIBIT 10.74
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES OF 1933, AS AMENDED, OR
UNDER THE STATE OF GEORGIA SECURITIES LAWS OR ANY OTHER STATE'S SECURITIES LAWS
BASED UPON APPLICABLE EXEMPTIONS AVAILABLE UNDER SUCH LAWS. NO SALE OR OTHER
TRANSFER OF THIS NOTE MAY BE MADE IN THE ABSENCE OF A REGISTRATION OR AN
AVAILABLE EXEMPTION THEREFROM.
NONRECOURSE PROMISSORY NOTE
AND STOCK PLEDGE AGREEMENT
$80,128 May 1, 1998
FOR VALUE RECEIVED, and in consideration for the 10,016 shares of Common
Stock (the "Stock") of Sunbelt (as defined below) granted to the Maker pursuant
to that certain Executive Employment Agreement by and between the Maker an
Sunbelt dated April 22, 1998, subject to the terms and provisions set forth
below the undersigned, Ricky L. Brown (hereinafter "Maker"), promises to pay in
legal tender of the United States to the order of Sunbelt Automotive Group,
Inc. (hereinafter "Holder" or "Sunbelt"), at Atlanta, Georgia, or at such other
place as Holder may from time to time designate to Maker in writing, the
principal sum of $80,128, together with interest on the outstanding principal
balance, from the date hereof (the "Note"). Interest shall be at the rate
equal to eight percent (8%) per annum until paid in full. Interest shall be
computed on the basis of a 360-day year for the actual number of days elapsed
and shall be computed on the daily outstanding balance of this Note as of the
close of business each day. All payments shall be applied first to accrued and
unpaid interest and then to the outstanding principal balance.
1.0 Replacement of Prior Promissory Note. This Nonrecourse Promissory
Stock and Stock Pledge Agreement supersedes in its entirety that certain
Promissory Note date May 1, 1998 (the "Prior Note") in the principal amount of
$80,128 executed by Maker in favor of Holder in connection with Maker's
purchase of the Stock from Holder on such date. Holder acknowledges and agrees
that Holder has no further rights, and Maker has no further obligations, under
the Prior Note.
2.0 Nonrecourse Provisions. Notwithstanding any term or provisions
contained herein to the contrary, this Nonrecourse Promissory Note and Stock
Pledge Agreements is, as to payment of any principal or interest hereunder, a
nonrecourse obligation for which Maker is not personally liable to Holder if
Maker defaults hereunder. Holder's sold recourse hereunder upon an Event of
Default (as defined below) is to foreclose upon the Collateral (as defined
below) pledged hereunder in full satisfaction and accord of the indebtedness of
Maker to Holder hereunder. The terms and provisions of this Section 2.0 shall
apply regardless of the fair market value of the Collateral at the time of the
Event of Default.
3.0 Pledge of Stock. To secure all of Maker's obligations hereunder,
Maker hereby pledges and grants a security interest to Holder in the Stock and
all stock dividends and stock splits hereafter declared or distributed (the
Stock and the stock splits or stock dividends being hereinafter referred to as
the "collateral"). Simultaneously with the execution of this Nonrecourse
Promissory Note and Stock Pledge Agreement, Maker is delivering to Holder, and
Holder hereby acknowledges receipt of, the certificates evidencing the 10,016
shares of Common
Page 1 of 3
<PAGE> 2
Stock of Sunbelt issued in the name of Maker. Upon the occurrence of an Event
of Default hereunder, Holder may, in its sole discretion foreclose upon and
take title to the Collateral in full satisfaction and accord of all
obligations of Maker hereunder. Maker shall have no further obligation and
shall have no personal liability to Holder hereunder. Unless and until the
occurrence of an Event of Default hereunder, Maker shall be entitled to receive
any and all cash dividends or other cash distributions on the Collateral and
exercise any and all voting powers pertaining to any of the Collateral (or give
written consents in lieu of voting thereon) as a stockholder of record of
Sunbelt with respect to the Collateral. Upon full payment of all principal and
interest owed hereunder by Maker, Holder shall immediately release and deliver
to Maker the certificates evidencing the Collateral.
4.0 Payment. Payment of principal and interest hereunder shall be made
by maker as follows:
(a) Interest shall be paid annually each year with the first
interest payment being due and payable on July 31, 1999 and each year
thereafter until the principal amount hereunder is paid in full.
(b) Payment of the principal sum of $80,128 together with accrued
and unpaid interest as of the date thereof shall be made on the 31st day of
July, 2003 and shall be paid by the Maker at its principal place of business.
5.0 Lawful Interest. In no event shall the amount of interest due or
payable hereunder exceed the maximum rate of interest allowed by law. In the
event any such payment is inadvertently paid by Maker or received by Holder,
then such excess sum shall be credited as payment of principal, unless the
Maker shall notify the Holder in writing that the Maker elects to have such
excess sum returned to him. The parties intend that Maker shall not pay and
Holder shall not receive directly, or indirectly, in any manner whatsoever,
interest in excess of that which may be legally paid by the Maker under
applicable law.
6.0 Default. If any of the following events ("Events of Default")
occur, then the entire unpaid sum evidenced by this Note, together with all
accrued interest thereon, shall, upon giving of notice and the expiration of
Maker's right to cure such default, at the option of the Holder become due:
(a) should Maker be duly terminated "for cause" in accordance with
the provisions of the Maker's Executive Employment Agreement with Sunbelt; or
(b) if the Maker fails to pay when due any amount payable
hereunder, and should the Maker fail to cure any such default within a fifteen
(15) day period following written notice of default delivered by the Holder to
the Maker.
7.0 Transferability of Note. This Note may not be sold, negotiated,
assigned, or transferred by the Holder. Further, this Note has been acquired
for investment and has not been registered under the Securities Act of 1933
(the "1933 Act") in reliance on exemptions contained in Sections 3 and 4 of the
1933 Act. This Note may not be sold or transferred except in transactions (a)
registered thereunder, and (b) registered under or otherwise in compliance with
the laws of the State in which the sale or transfer is to occur. The sale,
transfer or other
Page 2 of 3
<PAGE> 3
disposition of this Note is restricted pursuant to the provisions of a
Subscription Agreement from the registered holder to the Company, a copy of
which may be examined at the office of the Company.
8.0 Prepayment Option. The Maker herein shall have the privilege, at
any time, and from time to time, of prepaying the outstanding Note herein,
either in whole or in part, by prepayment of the principal amount of the Note,
or portion thereof to be prepaid, and accrued interest thereon to the date of
such prepayment, without charge or penalty.
9.0 Waiver. No omission to act or waiver by Holder shall act as a
waiver of any other default or of the same default at future time, and no
single or partial exercise by Holder of any right or remedy shall preclude any
other or future exercise of that or any other right or remedy.
10.0 Notice, Presentment, Protest. Except as otherwise specifically set
out herein, the Maker waives notice, presentment for payment, demand, protest,
and notice of demand, protest and nonpayment.
11.0 Governing Law. This Note shall be governed by, enforced and
interpreted in accordance with the laws of the State of Georgia.
12.0 Binding Agreement. This Nonrecourse Promissory Note and Stock
Pledge Agreement shall be binding upon and inured to the benefit of Maker and
his heirs, beneficiaries, estate and legal representatives and Holder and its
successors and assigns.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
day and year first above written.
"Maker":
/s/ Ricky L. Brown
-------------------------------------------
Ricky L. Brown
"Holder":
SUNBELT AUTOMOTIVE GROUP, INC.
By: /s/ Stephen C. Whicker
----------------------------------------
Title: Secretary
-------------------------------------
Page 3 of 3
<PAGE> 1
EXHIBIT 10.75
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER THE STATE OF GEORGIA SECURITIES LAWS OF ANY OTHER STATE'S SECURITIES
LAWS BASED UPON APPLICABLE EXEMPTIONS AVAILABLE UNDER SUCH LAWS. NO SALE OR
OTHER TRANSFER OF THIS NOTE MAY BE MADE IN THE ABSENCE OF A REGISTRATION OR AN
AVAILABLE EXEMPTION THEREFROM.
NONRECOURSE PROMISSORY NOTE
AND STOCK PLEDGE AGREEMENT
$888,648 May 1, 1998
FOR VALUE RECEIVED, and in consideration for the 111,081 shares of Common
Stock (the "Stock") of Sunbelt (as defined below) granted to the Maker pursuant
to that certain Executive Employment Agreement by and between the Maker and
Sunbelt dated April 22, 1998, subject to the terms and provisions set forth
below the undersigned, Charles K. Yancey (hereinafter "Maker"), promises to pay
in legal tender of the United States to the order of Sunbelt Automotive Group,
Inc. (hereinafter "Holder" or "Sunbelt"), at Atlanta, Georgia, or at such other
place as Holder may from time to time designate to Maker in writing, the
principal sum of $888,648, together with interest on the outstanding principal
balance, from the date hereof (the "Note"). Interest shall be at the rate equal
to eight percent (8%) per annum until paid in full. Interest shall be computed
on the basis of a 360-day year for the actual number of days elapsed and shall
be computed on the daily outstanding balance of this Note as of the close of
business each day. All payments shall be applied first to accrued and unpaid
interest and then to the outstanding principal balance.
1.0 Replacement of Prior Promissory Note. This Nonrecourse Promissory
Stock and Stock Pledge Agreement supersedes in its entirety that certain
Promissory Note dated May 1, 1998 (the "Prior Note") in the principal amount of
$888,648 executed by Maker in favor of Holder in connection with Maker's
purchase of the Stock from Holder on such date. Holder acknowledges and agrees
that Holder has no further rights, and Maker has no further obligations, under
the Prior Note.
2.0 Nonrecourse Provisions. Notwithstanding any term or provisions
contained herein to the contrary, this Nonrecourse Promissory Note and Stock
Pledge Agreements is, as to payment of any principal or interest hereunder, a
nonrecourse obligation for which Maker is not personally liable to Holder if
Maker defaults hereunder. Holder's sold recourse hereunder upon an Event of
Default (as defined below) is to foreclose upon the Collateral (as defined
below) pledged hereunder in full satisfaction and accord of the indebtedness of
Maker to Holder hereunder. The terms and provisions of this Section 2.0 shall
apply regardless of the fair market value of the Collateral at the time of the
Event of Default.
3.0 Pledge of Stock. To secure all of Maker's obligations hereunder,
Maker hereby pledges and grants a security interest to Holder in the Stock and
all stock dividends and stock splits hereafter declared or distributed (the
Stock and the stock splits or stock dividends being hereinafter referred to as
the "collateral"). Simultaneously with the execution of this Nonrecourse
Promissory Note and Stock Pledge Agreement, Maker is delivering to Holder, and
Holder hereby acknowledges receipt of, the certificates evidencing the 111,081
shares of
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Common Stock of Sunbelt issued in the name of Maker. Upon the occurrence of an
Event of Default hereunder, Holder may, in its sole discretion foreclose upon
and take title to the Collateral in full satisfaction and accord of all
obligations of Maker hereunder. Maker shall have no further obligation and shall
have no personal liability to Holder hereunder. Unless and until the occurrence
of an Event of Default hereunder, Maker shall be entitled to receive any and all
cash dividends or other cash distributions on the Collateral and exercise any
and all voting powers pertaining to any of the Collateral (or give written
consents in lieu of voting thereon) as a stockholder of record of Sunbelt with
respect to the Collateral. Upon full payment of all principal and interest owed
hereunder by Maker, Holder shall immediately release and deliver to Maker the
certificates evidencing the Collateral.
4.0 PAYMENT. Payment of principal and interest hereunder shall be made by
maker as follows:
(a) Interest shall be paid annually each year with the first
interest payment being due and payable on July 31, 1999 and each year
thereafter until the principal amount hereunder is paid in full.
(b) Payment of the principal sum of $888,648 together with accrued
and unpaid interest as of the date thereof shall be made on the 31st day of
July, 2003 and shall be paid by the Maker at its principal place of business.
5.0 LAWFUL INTEREST. In no event shall the amount of interest due or
payable hereunder exceed the maximum rate of interest allowed by law. In the
event any such payment is inadvertently paid by Maker or received by Holder,
then such excess sum shall be credited as payment of principal, unless the
Maker shall notify the Holder in writing that the Maker elects to have such
excess sum returned to him. The parties intend that Maker shall not pay and
Holder shall not receive directly, or indirectly, in any manner whatsoever,
interest in excess of that which may be legally paid by the Maker under
applicable law.
6.0 DEFAULT. If any of the following events ("Events of Default") occur,
then the entire unpaid principal sum evidenced by this Note, together with all
accrued interest thereon, shall, upon giving notice and the expiration of
Maker's right to cure such default, at the option of the Holder become due:
(a) should Maker be duly terminated "for cause" in accordance with
the provisions of the Maker's Executive Employment Agreement with Sunbelt; or
(b) if the Maker fails to pay when due any amount payable hereunder,
and should the Maker fail to cure any such default within a fifteen (15) day
period following written notice of default delivered by the Holder to the
Maker.
7.0 TRANSFERABILITY OF NOTE. This Note may not be sold, negotiated,
assigned, or transferred by the Holder. Further, this Note has been acquired
for investment and has not been registered under the Securities Act of 1933
(the "1933 Act") in reliance on exemptions contained in Sections 3 and 4 of the
1933 Act. This Note may not be sold or transferred except in transactions (a)
registered thereunder, and (b) registered under or otherwise in compliance with
the laws of the State in which the sale or transfer is to occur. The sale,
transfer or other
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disposition of this Note is restricted pursuant to the provisions of a
Subscription Agreement from the registered holder to the Company, a copy of
which may be examined at the office of the Company.
8.0 Prepayment Option. The Maker herein shall have the privilege, at any
time, and from time to time, of prepaying the outstanding Note herein, either
in whole or in part, by prepayment of the principal amount of the Note, or
portion thereof to be prepaid, and accrued interest thereon to the date of such
prepayment, without charge or penalty.
9.0 Waiver. No omission to act or waiver by Holder shall act as a waiver
of any other default or of the same default at future time, and no single or
partial exercise by Holder of any right or remedy shall preclude any other or
future exercise of that or any other right or remedy.
10.0 Notice, Presentment, Protest. Except as otherwise specifically set
out herein, the Maker waives notice, presentment for payment, demand, protest,
and notice of demand, protest and nonpayment.
11.0 Governing Law. This Note shall be governed by, enforced and
interpreted in accordance with the laws of the State of Georgia.
12.0 Binding Agreement. This Nonrecourse Promissory Note and Stock Pledge
Agreement shall be binding upon and inured to the benefit of Maker and his
heirs, beneficiaries, estate and legal representatives and Holder and its
successors and assigns.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
day and year first above written.
"Maker":
/s/ Charles K. Yancey
--------------------------------------
Charles K. Yancey
"Holder":
SUNBELT AUTOMOTIVE GROUP, INC.
By: /s/ Stephen C. Whicker
----------------------------------
Title: Secretary
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EXHIBIT 10.76
STATE OF GEORGIA
COUNTY OF COBB
COMMERCIAL LEASE AGREEMENT
THIS LEASE, made this 7th day of August, 1998, by and between CLD
Properties, a Georgia limited partnership, and ALD Properties, a Georgia
limited partnership, first party, (hereinafter referred to as "Landlord") BAG
of Georgia IV, Inc., second party, (hereinafter referred to as "Tenant").
W I T N E S S E T H
WHEREAS, Landlord owns certain commercial property in Cobb County,
Georgia, which it desires to lease to Tenant and which Tenant desires to lease
from Landlord.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, obligations, rents and other agreements contained herein and set
forth hereafter, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant do hereby
agree as follows:
ARTICLE I
GRANT AND TERM
1.01 Grant of Premises. Landlord leases and grants to the Tenant a Lease
upon the terms and conditions hereinafter set forth and Tenant does hereby
agree to lease the real property and the improvements thereon more particularly
described on the attached Exhibit "A" (the "Premises").
1.02 Term. This Lease shall be effective and binding between the parties
hereto from the date of execution. The term of this Lease (the "Term") shall
commence on the earlier of the date the Landlord delivers possession of the
Premises to Tenant or the day after the closing contemplated by that certain
agreement and Plan of Merger and Reorganization (the "Agreement") dated
February 26, 1996, between Sunbelt Automotive Group, Inc., BAG of Georgia IV,
Inc., and Day's Chevrolet, Inc. and Landlord (the "Rental Commencement Date"),
and terminate ten (10) Lease Years thereafter unless extended pursuant to the
terms hereof.
1.03 Lease Year Defined. "Lease Year" as used herein shall mean (i) each
and every twelve month period during the Term of this Lease, or (ii) in the
event of lease expiration or termination, the period between the last twelve
month period and said expiration or termination. The first such twelve month
period shall commence on the first day of the month following the Rental
Commencement Date.
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1.04 Extension Option. Provided Tenant is not in default hereunder,
Tenant shall have the right and option to extend the Term for up to two (2)
additional five (5) year terms (the "Extension Terms"). All of the terms and
conditions of this Lease shall continue to apply during any such Extension Term
and Base Rent shall continue to increase as set forth in Section 2.02. If
Tenant desires to exercise any extension option it must give Landlord written
notice of such exercise not less than 180 days prior to the commencement of the
Extension Term in question.
ARTICLE II
RENT
2.01 Base Rent. Tenant shall pay to Landlord, without setoff or
deduction, and without prior demand therefor, the following amounts,
(hereinafter referred to as the "Base Rent"):
(a) For the initial Lease Year of this Lease, the Base Rent shall be
Three Hundred Sixty Thousand Dollars and no/100 ($360,000.00) annually, due and
payable in advance on the first day of each calendar month, in equal monthly
installments of $30,000.00.
(b) For Lease Years 2 and 3 of this Lease, the Base Rent shall be
Three Hundred Ninety Thousand Dollars and no/100 ($390,000.00) annually, due
and payable in advance on the first day of each calendar month, in equal
monthly installments of $32,500.00.
(c) For Lease Year 4 of this Lease, the Base Rent shall be Four
Hundred Twenty Thousand Dollars and no/100 ($420,000.00) annually, due and
payable in advance on the first day of each calendar month, in equal monthly
installments of $35,000.00.
2.02 Adjustments to Base Rent in Subsequent Lease Years. The Base Rent
payable hereunder shall be increased at the end of the Fourth Lease Year, and
at the end of every Lease Year thereafter during the Term hereof, including any
Extension Term, in an amount equal to the percentage increase in the U.S.
Department of Labor, Bureau of Labor Statistics, Consumer Price Index which
percentage increase is equal to a number the numerator of which shall be the
Consumer Price Index as of the date two (2) months prior to the date of such
adjustment (the "Comparison Date"), and the denominator of which shall be the
Consumer Price Index as of the date and twelve (12) months preceding the
Comparison Date (but in no such event shall the Base Rent be reduced as a
result of any such adjustment below the Base Rent in effect immediately prior
to such adjustment) and the increased Base Rent shall continue in effect as the
Base Rent until again adjusted as herein provided. If the Consumer Price Index
shall be discontinued or altered, then any successor index which the U.S.
Department of Labor, Bureau of Labor Statistics creates shall be used; and if
there is no such comparable successor substitute index, Landlord and Tenant
shall agree upon such substitute index or formula, and if said parties are not
able to agree upon such substitute, the matter shall be referred to binding
arbitration in accordance with the rules of the American Arbitration
Association in the State of Georgia then prevailing.
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2.03 Additional Rent. All other sums payable hereunder by Tenant shall be
considered Rent.
2.04 Payment of Base Rent. Tenant agrees that it shall pay fifty percent
(50%) of the monthly Base Rent payments to each Landlord by mailing a check for
50% of such Base Rent to CLD Properties, L.P. at 4949 Giles Road, Acworth,
Georgia 30101 and a check for 50% of such Base Rent to ALD Properties, L.P. at
4625 Giles Road, Acworth, Georgia 30101. All other payments due under the Lease
for reimbursements of taxes, insurance or other charges shall be mailed to CLD
Properties, L.P. at the address provided above unless otherwise directed by
Landlord.
2.05 Rent Commencement. If the Rent Commencement Date does not occur on
the first day of the calendar month, rent for the period commencing thereon
until the first day of the following calendar month (the commencement of the
first Lease Year) shall prorated based on the number of days remaining in such
fractional month and paid to Landlords as provided above.
ARTICLE III
UTILITIES
3.01 Utility Bills. Tenant shall pay all utility bills, including but not
limited to, electricity, water, sewer, gas, fuel, and heat bills, for the
leased Premises, and Tenant shall pay all charges for garbage collection
services or other sanitary services rendered to the leased Premises or used by
Tenant in connection therewith. Landlord shall not be liable for any
interruption or failure in the supply of any such utility to the Premises.
ARTICLE IV
CONDUCT OF BUSINESS BY TENANT
4.01 Use of Premises. Premises shall be used for an automobile dealership
or for any other legal purpose. The Premises shall not be used for any illegal
purposes, nor in any manner to create any nuisance or trespass; nor in any
manner to vitiate the insurance or increase the rate of insurance on the
Premises. Tenant agrees to conduct its business in the manner and according to
the generally accepted business principles of the business in which Tenant is
engaged.
4.02 Governmental Orders. Tenant agrees, at its own expense, to promptly
comply with all codes, laws, ordinances, or requirements of any legally
constituted public authority made necessary by reason of Tenant's occupancy of
said Premises. Landlord agrees to promptly comply with any such requirements if
not made necessary by reason of Tenant's specific use and occupancy.
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ARTICLE V
CONDITION OF PREMISES, ALTERATION TO PREMISES
5.01 Acceptance of Premises. Tenant accepts the Premises in its present
condition and as suited for the use intended by Tenant. The taking of
possession of the Premises by Tenant shall be conclusive evidence that Tenant
accepts the same "as is" and that said Premises are in good and satisfactory
condition for the use intended at the time such possession was taken. Tenant
has inspected the Premises prior to execution.
5.02 Alterations to Premises. Tenant shall not alter any structural
elements of any building of the Premises or make other material changes to the
Premises, without the prior approval of the Landlord which shall not be
unreasonably withheld. All construction work done by the Tenant within the
Premises shall be performed in a good and workmanlike manner, in compliance
with all safety codes and other governmental requirements. Whenever Tenant
proposes to do any construction work within the Premises, Tenant shall first
furnish to Landlord plans and specifications in such detail as Landlord may
reasonably request covering such work. To the extent any alterations to the
Premises are made by Tenant without obtaining Landlord's approval, Landlord
shall have the right to require Tenant to remove such alterations and restore
the Premises to its previous condition. Tenant hereby agrees to indemnify
Landlord against, and keep the Premises free from, all mechanics' liens or such
other liens arising from any work performed, material furnished or obligations
incurred by Tenant in connection with the Premises and shall bond off any such
lien within 30 days from notice of such lien's existence.
ARTICLE VI
MAINTENANCE AND REPAIR OF PREMISES
6.01 No Maintenance and Repairs by Landlord. Landlord gives to Tenant
exclusive control of the Premises and shall be under no obligation whatsoever
to inspect, maintain or repair the Premises except for structural repairs
necessary to the roof, foundations and exterior walls of buildings on the
Premises.
6.02 Maintenance and Repairs by Tenant. Tenant shall at Tenant's sole cost
and expense keep and maintain the Premises and any common areas including
parking lots (excluding only the roof, foundations and exterior walls of the
buildings on the Premises), and the fixtures of all buildings including air
conditioning and heating, plumbing, electrical and all other appurtenances
therein in good condition and repair, normal wear and tear excepted, and will
neither commit nor suffer active or permissive waste or injury thereof. Tenant
is to repair any damage caused by any neglect on Tenant's part. All damage or
injury to the Premises caused by the act of negligence of Tenant, its agents,
employees, licensees, invitees or visitors shall be promptly repaired by
Tenant, at its sole cost and expense, and to the reasonable satisfaction of the
Landlord. Landlord may make any repairs or cleaning not promptly made by Tenant
and charge Tenant for the cost thereof, and Tenant hereby agrees to pay such
amounts on demand as additional rent hereunder. Tenant will at its own cost and
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expense replace with glass of the same quality any cracked or broken
glass, including plate glass or any other breakable material used in
the Premises or any interior and exterior windows and doors in the
Premises. Tenant shall keep the Premises in a clean and neat
condition.
6.03 Surrender of Premises. At the expiration or earlier termination of
the Term, Tenant shall surrender the Premises to Landlord in full compliance
with the Tenant's obligations hereunder. Tenant shall surrender the Premises
and fixtures therein in the same condition as the Premises were in upon the
delivery of possession under this Lease, reasonable wear and tear, casualty and
condemnation excepted. All personal property left in the Premises after the
expiration of the Term shall be deemed abandoned and Landlord may remove and
dispose of the same at Tenant's expense.
ARTICLE VII
DESTRUCTION OF PREMISES
7.01 Destruction of, or Damage to the Premises. If fire or any other
casualty damages or destroys the Premises, in whole or in part, Landlord shall,
using only insurance proceeds payable to it, restore the Premises to the
condition existing immediately prior to the commencement of the Term with
Tenant replacing or repairing all Tenant improvements or personalty, and this
Lease shall continue in full force and effect. Landlord shall use reasonable
good faith efforts to expedite such restoration and rebuilding. Rent shall not
abate during any such reconstruction or rebuilding, and Tenant shall maintain
business interruption insurance for such risks.
In the event the Premises should be damaged or destroyed to the
extent of seventy-five percent (75%) or more of the total square footage of all
Buildings and other improvements on the Premises (hereinafter a "Casualty") and
such Casualty shall occur after the first eight (8) Lease Years of the Term of
the Lease, or during the last two (2) Lease Years of any renewal, then and in
such event, Tenant may elect by written notice to Landlord, delivered within
thirty (30) days after such Casualty, either to repair or rebuild the Premises,
as aforesaid, or to terminate this Lease, effective as of the date Tenant's
notice is delivered to Landlord. If Tenant elects to terminate the Lease
pursuant to this Section 7.01, then Tenant shall direct its insurance company
to deliver directly to Landlord all insurance proceeds to be paid for, or in
connection with, said Casualty; provided, in no event, shall the amount of such
insurance proceeds payable to Landlord be less than the full replacement value
of all such improvements which have been so damaged or destroyed, as reasonably
determined by Landlord's insurance adjuster. If the insurance proceeds are less
than the replacement value as aforesaid, Tenant shall pay such deficiency to
Landlord upon demand. If Tenant fails to deliver notice of its election to
Landlord within thirty (30) day period referenced above, Tenant shall be deemed
to have elected to repair or rebuild the Premises and the Lease shall remain in
full force and effect.
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If this Lease is not terminated pursuant to the preceding paragraph, then
Tenant shall restore and repair the Buildings and other improvements in an
expeditious manner. If Tenant purchases, at its sole option, rent insurance to
compensate Landlord for any lost rents as a result of damage or destruction to
the Premises, then Basic Rent (and other Rent) shall abate during any period
following damage to the Premises in a fair and equitable fashion according to
the proportion of the Premises that cannot reasonably be utilized by Tenant,
provided that the amount of such abatement shall not exceed the rent insurance
proceeds actually received by Landlord with respect thereto. Notwithstanding
the provisions of this Section 7.01, Tenant shall be the owner of its trade
fixtures and shall be entitled to any insurance proceeds attributable to said
trade fixtures.
ARTICLE VIII
DEFAULT OF TENANT
8.01 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 extension hereof,
shall constitute a breach of this Lease on the part of the Tenant: (1) Tenant
fails to pay any rent as provided for herein and fails to cure such default
within ten (10) days of notice from Landlord; (2) Tenant fails to comply with or
abide by and perform any other obligation imposed upon Tenant under this Lease
and fails to cure such default within thirty (30) days of notice from Landlord
or if such default cannot be cured within 30 days if Tenant shall not have
commenced and be continuing a good faith effort to cure such default; (3) Tenant
is adjudicated bankrupt; (4) A permanent receiver is appointed for Tenant's
property and such receiver is not removed within sixty (60) days after
appointment; (5) Tenant, either voluntarily or involuntarily, takes advantage of
any debtor relief proceedings which proceeding is not dismissed within sixty
(60) days under any present or future law, whereby the rent or any part thereof
is, or is proposed to be, reduced or payment thereof deferred; (6) Tenant makes
an assignment for benefit of creditors; or (7) Tenant's effects are levied upon
or attached under process against Tenant, which is not satisfied or dissolved
within Sixty (60) days.
8.02 REMEDIES UPON DEFAULT. Upon the occurrence of any Event of Default,
Landlord may pursue any one or more of the following remedies, separately or
concurrently, without any notice (except as specifically provided above) and
without prejudice to any other remedy herein provided or provided by law:
(a) Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord. If Tenant shall fail to surrender the
Premises, Landlord may, without further notice, enter upon the Premises and
expel or remove Tenant and Tenant's effects without being liable for
prosecution or any claim for damages therefor. Tenant indemnifies Landlord and
holds Landlord harmless from and against any loss, cost, damage or expense
including, but not limited to attorney's fees which Landlord may suffer by
reason of such termination whether through inability to relet the Premises,
decrease in rent or otherwise;
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(b) Dispossess and evict the Tenant from the Premises under O.C.G.A.
ss.44-7-50 et seq., or otherwise occupy the Premises in which case Tenant's
rent obligations shall continue in full force and effect, whether or not Tenant
shall have abandoned the Premises or the Landlord has obtained a Writ of
Possession for the Premises, and in such event Landlord shall be entitled to
enforce all of Landlord's rights and remedies under this Lease, including the
right to recover rent from the Tenant as it becomes due hereunder. In such
event Landlord may alter or improve and relet the Premises as the agent of
Tenant without advertisement and by private negotiations to any party and for
any reasonable term and receive the rent therefor. Tenant shall pay Landlord
any deficiency that may arise by reason of such reletting on demand, but Tenant
shall not be entitled to any surplus so arising.
(c) Refuse to accept a surrender of the Premises in which event
Landlord may allow the Premises to remain idle and sue Tenant for Rent and
breach of contract.
(d) As agent of Tenant, do whatever Tenant is obligated to do by the
provisions of this Lease, including but not limited to repairing the Premises,
without being liable to prosecution of any claim for damages therefor, in order
to accomplish the purpose of this Lease. Tenant agrees to reimburse Landlord
immediately upon demand for expenses which Landlord may occur in effecting
compliance with this Lease on behalf of Tenant.
(e) Notwithstanding the fact that Landlord has no affirmative duty
to mitigate its damages, Landlord does agree to cooperate with Tenants efforts
to find a replacement tenant and Landlord will not unreasonably prevent Tenant
from taking any reasonable act to mitigate Landlord's damages.
8.03 Non-Waiver. Pursuit by Landlord of any of the foregoing remedies
shall not preclude the pursuit of general or special damages incurred by
Landlord, or of any of the other remedies provided herein or by law. No delay
or omission of Landlord to exercise any right or power arising from any event of
default on the part of the Tenant shall impair any such right or power to be
construed to be a waiver of any such default and acquiescence therein.
8.04 Remedies Cumulative. No act or thing done by Landlord or Landlord's
employees or agents during the Term shall be deemed an acceptance of a
surrender of the Premises. Neither the mention in this Lease of any particular
remedy hereunder, or the exercise of any remedy hereunder by the Landlord,
shall preclude Landlord from any other remedy Landlord may have under this
Lease, at law or in equity. Any waiver of or redress for any violation of any
covenant or condition contained in this Lease or any of the rules now or
hereafter adopted by the Landlord shall not prevent a subsequent act, which
would have originally constituted a violation, from having all the force and
effect of an original violation. The receipt by the Landlord of rent with
knowledge of the breach of any covenant in this Lease shall not be deemed a
waiver of such breach.
8.05 Attorney's Fees for Tenant Default. If any rent owing under this
Lease is collected by or through an attorney at law, Tenant agrees to pay
Fifteen percent (15%) thereof
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as attorney's fees.
8.06 Interest. All past due sums of any description owned by Tenant
under this lease shall bear interest at the rate of Eighteen Percent (18%) per
annum.
8.07 Multiple Defaults. Anything to the contrary notwithstanding, Tenant
expressly agrees that if there should be more than two events of monetary
default or four events of non-monetary default during any one Lease Year
hereunder, Landlord may proceed with any of Landlord's remedies under this
paragraph, and there shall exist an event of default which Tenant shall have no
right to cure.
ARTICLE IX
INSURANCE AND INDEMNITY
9.01 Insurance Obtained by Tenant.
(a) Tenant shall maintain workmen's compensation insurance as
required by law.
(b) Tenant shall, at all times during the term hereof and at its own
cost and expense, procure and continue in force comprehensive general liability
insurance for bodily injury and property damage, adequate to protect Landlord
against liability for injury to or death of any person, arising in connection
with the construction of improvements on the Premises; Tenant's use or operation
of the Premises; or the condition of the Premises. The limits of such policy or
policies are to be in amounts not less than One Million Dollars ($1,000,000.00)
with respect to injuries or death of any one person, Three Million Dollars
($3,000,000.00) with respect to any casualty or occurrence, and Five Hundred
Thousand Dollars ($500,000.00) with respect to property damage. The liability
policies described above shall insure performance by Tenant of the indemnity
provisions of this Lease. The limits of said insurance shall not, however,
limit the liability of Tenant hereunder.
(c) All insurance required to be carried by Tenant hereunder shall
be issued by responsible insurance companies, qualified to do business in the
State of Georgia, and holding a general policy holder's rating reasonably
acceptable to Landlord. Each policy shall name Landlord, and at Landlord's
request any mortgagee of Landlord, as an additional insured, as their respective
interests may appear, and copies of all policies or certificates evidencing the
existence and amounts of such insurance shall be delivered to Landlord by
Tenant prior to Tenant's occupancy of the Premises. Landlord and Landlord's
lender, if any, shall be added as parties to be notified by said insurance
company of any notice of termination of coverage. Tenant shall furnish Landlord
with copies of renewals or "binders" of any such policy upon request. Tenant
agrees that if Tenant does not take out and maintain such insurance, Landlord
may (but shall not be required to) procure said insurance on Tenant's behalf
and charge the Tenant the premiums, plus interest pursuant to Article VIII
payable upon demand. Tenant shall have the right to provide such insurance
coverage pursuant to
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blanket policies obtained by the Tenant provided such blanket policies
expressly afford coverage to the Premises and to Tenant as required by this
Lease. Tenant shall not do or permit to be done anything which shall
invalidate the insurance policies referred to above.
(d) Tenant shall obtain and maintain in force and effect during the
Term of this Lease an insurance policy or policies of all risk, fire, extended
coverage, theft, vandalism, malicious mischief, and other casualty, covering
loss or damages to any and all of Tenant's personalty and trade fixtures in the
Premises, including but not limited to furnishings, equipment, HVAC systems,
inventory and stock; as well as business interruption insurance in such an
amount as will reimburse Tenant for direct or indirect loss of earnings
attributable to any peril insured against under this provision.
9.02 Landlord's Casualty Insurance. Landlord shall maintain in effect
policies of property damage insurance covering all the improvements on the
Premises in an amount not less than one hundred percent (100%) of their actual
replacement cost from time to time during the Term of this Lease. Tenant shall
reimburse Landlord on demand for all costs, expenses and premiums incurred by
Landlord in obtaining and maintaining these insurance policies as additional
rent.
9.03 Indemnity. Tenant agrees to indemnify and hold harmless Landlord
against any injury, expense, damage, liability or claim imposed on Landlord by
any person whomsoever in any way arising out of the Tenant's use and occupancy
of the Premises or breach of this Lease, including any reasonable attorney's
fees or court costs incurred defending against any said claim, except those
damages and claims arising out of the negligence or any willful act of the
Landlord. Tenant also hereby releases Landlord from any and all damages to both
person and property arising out of Tenant's use of the Premises except damages
caused to Tenant by the negligence or any willful act of the Landlord. Tenant
further agrees to reimburse Landlord for any costs or expenses including, but
not limited to, court costs and reasonable attorney's fees, which Landlord may
incur in investigating, handling or litigating any claim or action brought by a
governmental authority against Landlord as a result of Tenant's use or
occupancy of the Premises.
9.04 Waiver of Subrogation. Tenant and Landlord hereby release and
relieve the other, and waive their entire right of recovery against the other
for loss or damage arising out of or incident to the perils insured against
under this paragraph, which perils occur in, on or about the Premises, whether
due to the negligence of Landlord or Tenant or their agents, employees,
contractors and/or invitees, to the extent to any recovery by the injured party
under such insurance. Tenant and Landlord shall upon obtaining the policies of
insurance required hereunder, give notice to the insurance carrier or carriers
that the foregoing mutual waiver of subrogation is contained in this Lease.
ARTICLE X
EMINENT DOMAIN
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<PAGE> 10
10.01 Condemnation. If the whole of the Premises or such substantial
portion of the Premises as will make the Premises entirely unuseable for the
purposes herein Leased, be condemned by a legally constituted authority for any
public use or purpose, then and in such an event, the Term hereby granted shall
cease from the date that possession thereof is taken by public authorities, and
all Rent shall be accounted for as between Landlord and Tenant as of such
date. Each party shall have the independent right to pursue such claims for
damages as are allowed under Georgia law.
ARTICLE XI
ASSIGNMENT AND SUBORDINATION OF TENANT'S INTEREST
11.01 Assignment and Subletting. Tenant shall not, without the prior
written consent of Landlord, which will not be unreasonably withheld based on
the financial condition and business experience of the proposed Assignee or
Subtenant, assign this Lease or any interest hereunder, or sublet Premises or
any part thereof, or permit the use of Premises by any party other than Tenant
or its affiliates. If Tenant desires to assign this Lease or sublease the
Premises, the Tenant will provide notice of its request for approval to the
Landlord at least thirty (30) days prior to the commencement of the proposed
sublease term. Tenant's written request for such approval shall be accompanied
by full financial information on the proposed assignee or subtenant. Tenant
agrees to provide all further information concerning the proposed assignee or
subtenant as reasonably required by Landlord. Consent to any assignment or
sublease shall not destroy this provision, and all later assignments or
subleases shall be made likewise only on the prior written consent of Landlord.
Any Assignee or Subtenant, at the option of Landlord, shall become directly
liable to Landlord for all obligations of Tenant hereunder, but no sublease or
assignment by Tenant shall relieve Tenant or any guarantor of any liability
hereunder.
11.02 Subordination. Tenant agrees that this Lease and Tenant's rights
hereunder are and shall be subordinate to any deed to secure debt now or
hereafter encumbering the Premises or any part thereof. The terms of this
provision shall be self-executing, and no further instrument of subordination
shall be required. Tenant, however, upon the request of Landlord, shall
promptly execute and deliver, within Ten (10) days of the receipt thereof, in
recordable form, any documents or certificates as may be required by Landlord
or Landlord's financing agent to confirm such subordination.
11.03 Estoppel Certificate. Tenant shall at any time and from time to
time, upon not less than Ten (10) days prior written notice from Landlord,
execute, acknowledge and deliver to Landlord's Lender certifying certain facts,
if true, including without limitation, that this Lease is unmodified and in
full force and effect, that the Lease if modified is in full force and effect
as modified, the dates to which rental sums due and other sums due hereunder
are paid in full, and acknowledging that there are not any uncured defaults on
the part of the Landlord hereunder. Tenant's failure to deliver such statement
within such time shall constitute an event of default hereunder.
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<PAGE> 11
ARTICLE XII
TAXES
12.01 Taxes. Tenant will promptly pay upon demand all tax bills for all
City and County real property taxes or other ad valorem taxes attributable to
the Premises, including its pro rata share of such taxes for any partial Lease
Year during the term. Tenant shall be liable for and shall pay before
delinquency, all personal property taxes of any kind whatsoever assessed against
Tenant's personalty or Tenant improvements on the Premises.
ARTICLE XIII
NOTICE
13.01 Service of Notice. Tenant hereby appoints as his agent to receive
service of all dispossessory or distraint proceedings and notices hereunder,
and all notices required under this Lease, the person in charge of Premises at
the time, or occupying said Premises. A copy of all notices under this Lease
shall also be mailed certified mail, return receipt requested, and first class
mail, and notice shall be considered given on the date of such mailing to the
following addresses or the date of hand delivery of such notice to the party
receiving such notice:
Notice to Landlord shall be sent to both: ALD Properties, L.P.
c/o Alvin L. Diemer
4625 Giles Road
Acworth, Georgia 30101
CLD Properties, L.P.
c/o Calvin L. Diemer
4949 Giles Road
Acworth, Georgia 30101
With copy to: G. Phillip Beggs
MOORE INGRAM JOHNSON & STEELE, LLP
192 Anderson Street
Marietta, Georgia 30060.
Tenant: BAG of Georgia IV, Inc.
Suite 250-B
5901 Peachtree Dunwoody Road
Atlanta, Georgia 30328
Attn: General Counsel
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<PAGE> 12
ARTICLE XIV
LIMITATIONS OF LANDLORD'S RESPONSIBILITY
14.01 Waiver of Liability. Anything in this Lease Agreement to the
contrary notwithstanding, Tenant agrees that it shall look solely to the estate
and property of the Landlord in the Premises for the collection of any judgment
(or other judicial process) requiring the payment of any money by landlord in
the event of any default or breach by Landlord with respect to the terms,
covenants and conditions of this Lease Agreement to be observed and/or
performed by Landlord; and no other assets of Landlord or any individuals
comprising Landlord shall be subject to levy, execution or other proceedings
for the satisfaction of Tenant's remedies. In the event that Landlord transfers
this Lease, upon such transfer, Landlord shall be released from all future
liability and obligations hereunder, provided that the transferee of this Lease
assumes the obligations of Landlord hereunder.
14.02 Sale by Landlord. In the event of a sale or conveyance by Landlord
of the Premises, the same shall operate to release Landlord from any future
liability upon any of the covenants or conditions expressed or implied herein
contained in favor of Tenant and in such event Tenant agrees to look solely to
the responsibility of the successor in interest of Landlord in and to this
Lease. Except as set forth in this article, this Lease shall not be affected
by any such sale and Tenant agrees to attorn to the purchaser or assignee. If
any security has been given by Tenant to secure the faithful performance of
any of the covenants of this Lease, Landlord may transfer or deliver said
security as such, to Landlord's successor in interest and thereupon Landlord
shall be discharged from any further liability with regard to said security,
provided that any successor shall not be liable for such security unless such
successor receives same.
14.03 Tenant's Personal Property. Tenant agrees that all of Tenant's
personalty located in or upon the Premises shall be insured by Tenant and shall
be maintained by Tenant on the Premises at Tenant's sole risk.
ARTICLE XV
QUIET ENJOYMENT
Landlord covenants that for so long as there shall not exist an event of
default, if Tenant shall perform all of its covenants hereunder, Tenant shall,
subject to the terms hereof, have the peaceable and quiet enjoyment and
possession of the Premises during the term or any renewal thereof.
ARTICLE XVI
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<PAGE> 13
ENVIRONMENTAL COMPLIANCE
(a) Hazardous Substances.
Tenant shall:
(i) Comply with all federal, state, and local Environmental
Laws, as hereinafter defined, and any other codes, ordinances, regulations,
permits and licensing conditions that (i) govern the discharge, emission, or
disposal of any Hazardous Substance or pollutant, as thereinafter defined, or
(ii) prescribe methods for or place limitations on storing, handling or
otherwise managing Hazardous Substances.
(ii) Provide notice to Landlord of the instigation of any
environmentally-based suit or claim regarding the Premises and of any
correspondence received by Tenant concerning or involving the Premises from any
environmental regulatory agency. Tenant will also provide notice to Landlord of
any "release" as that term is defined under the Environmental Laws, of any
Hazardous Substance on or about the Premises.
(iii) Provide Landlord with a copy of any environmental
assessment or audit concerning the Premises obtained by Tenant.
(iv) Upon expiration or termination of this Lease, render the
Premises to Landlord free from the presence of or contamination by any
Hazardous Substance that did not predate the Execution Date or that were not a
result of Tenant's use and occupancy of the Premises.
(v) For purposes of this provision: (i) "Hazardous Substance"
or "Hazardous Substances" means and includes petroleum products, flammable
explosives, radioactive materials, asbestos or any material containing asbestos,
polychlorinated biphenyls, and/or any hazardous, toxic or dangerous waste,
substance or material defined as such, or any similar term, by, in or for the
purposes of the Environmental Laws (as hereinafter defined), including,
without limitation Section 104(13) of CERCLA (as hereinafter defined); and (ii)
"Environmental Law" or "Environmental Laws" shall mean any "Super Fund" or
"Super Lien" law, or any other federal, state or local statute, or law,
ordinance, code, rule, regulation, order or decree, regulating, relating to, or
imposing liability or standards of conduct concerning any Hazardous Substances
or the environmental condition of the Premises as may now or at any time
hereafter be in effect, including, without limitation the following, as the
same may be amended or replaced from time to time, and all regulations
promulgated thereunder or in connection therewith; the Super Fund Amendments
and Reauthorization Act of 1986; the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"); the Clean Air Act; the Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act;
the Hazardous Waste management System; and the Occupational Safety and Health
Act of 1970 and the Georgia Underground Storage Tank Act.
(b) Indemnity by Tenant. Tenant shall indemnify, hold harmless and
(at
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<PAGE> 14
Landlord's option) defend Landlord, its agents, servants and employees, from
and against all claims, actions, losses, costs and expenses (including
attorneys' and other professional fees), judgments, settlement payments, and,
whether or not reduced to final judgment, all liabilities, damages, or fines
paid, incurred or suffered by Landlord in connection with loss of life,
personal injury and/or contamination of or damage to property or the
environment arising, from any conduct, activity, act, omission, or operation of
Tenant involving the management or release of any Hazardous Substance in, from
or to the Premises during the term of the Lease or any violation of any
Environmental Law, whether or not Tenant has acted negligently with respect to
such Hazardous Substance or Environmental Law. Tenant's obligations under this
paragraph shall survive the expiration or other termination of this Lease.
Tenant's obligation under this paragraph does not apply to any claims, actions,
losses, costs and expenses (including attorney's fees and other professional
fees), judgments, settlement payments, liabilities, damages or fines paid by or
suffered by Landlord in connection with loss of life, personal injury and/or
contamination of or damage to property or the environment arising from the
presence of, or contamination by, any hazardous substance that predates the
Execution Date, (ii) any such management or release of any hazardous substance
from off Premises; (iii) not the result of Tenant's use and occupancy.
(c) Landlord's Right of Inspection. Landlord reserves the right to
enter the Premises after reasonable notice and at agreed upon times and in a
reasonable manner to inspect the Premises and not more than once per Lease Year
to test for environmental contamination.
ARTICLE XVII
MISCELLANEOUS
17.01 Landlord's Access. Except as otherwise limited in this Lease
Agreement, Landlord may enter the Premises at all reasonable times to inspect
or exhibit the same or to comply with Landlord's obligations under this Lease
Agreement. Landlord may card Premises "For Rent" or "For Sale" ninety (90) days
before termination of this Lease. Landlord may enter the Premises at reasonable
hours to exhibit same to prospective purchasers or tenants and to make repairs
required of Landlord under the terms hereof, or to make repairs to Landlord's
adjoining property, if any. Landlord agrees to give Tenant a minimum of
forty-eight (48) hours advance oral notice prior to entering Premises to make
repairs (except in case of emergency). Landlord agrees not to interfere with
the operation of Tenant's business, except to the extent necessary to make
repairs.
17.02 Effect of Termination of Lease. No termination of this Lease prior
to the normal ending thereof, by lapse of time or otherwise, shall affect
Landlord's right to collect rent for the period prior to termination thereof.
17.03 No Estate in Land. This contract shall create the relationship of
Landlord and Tenant between the parties hereto; no estate shall pass out of
Landlord. Tenant has only a usufruct, not subject to levy and sale, and not
assignable by Tenant except as provided
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<PAGE> 15
herein.
17.04 Rights Cumulative. All rights, powers and privileges conferred
hereunder upon parties hereto shall be cumulative but not restrictive to those
given by law.
17.05 Time of Essence. Time is of the essence of this agreement.
17.06 Definitions. "Landlord" as used in this Lease shall include first
parties, their heirs, representatives, assigns and successors in title to
Premises. "Tenant" shall include second parties, their successors and assigns
and representatives; and if this Lease shall be validly assigned or sublet,
shall include also Tenant's assignees or sublessees as to Premises covered by
such assignment or sublease. "Landlord" and "Tenant" include male and female,
singular and plural, corporation, partnership or individual, as may fit the
particular parties.
17.07 Governing Law. This Lease shall be construed and enforced in
accordance with the laws of the State of Georgia.
17.08 Successors. This Lease Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns unless otherwise provided in this Lease
Agreement.
17.09 Headings. The headings under this Lease are included for convenience
only and shall not be taken into consideration in any construction or
interpretation of any part of this Lease.
17.10 Force Majeure. Except as otherwise specified herein, either party
hereto shall be excused from performance or any delay and shall not be deemed
in default with respect to the performance of any of the terms, covenants, and
conditions of this Lease when prevented from doing so by causes beyond its
control, which shall include, but not be limited to, all labor disputes,
governmental regulations and controls, fire or other casualty or inability to
obtain any material or services, or act of God.
17.11 Severability. Should any portion hereof be deemed void or
unenforceable through any court order or judicial proceedings, the remaining
portions hereof shall continue in full force and effect.
17.12 Entire Agreement. This Lease constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof, and no
prior agreement or understanding with regard to any subject matter will be
effective for any purposes. No provision of this Lease may be amended or added
except by agreement in writing signed by the parties hereto or their respective
successors in interest.
17.13 Attorney's Fees. The prevailing party in any litigation between
Landlord and
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<PAGE> 16
Tenant arising out of this Lease shall be entitled to recover reasonable
attorney's fees and court costs. No third-party shall be construed as a
beneficiary of this provision.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals the
date and year first above written.
"Landlord"
OLD PROPERTIES, L.P. AND
ALD PROPERTIES, L.P.
CLD Properties, L.P.
By: (SEAL)
-------------------------
Calvin L. Diemer
General Partner
ALD Properties, L.P.
By: (SEAL)
-------------------------
Alvin L. Diemer
General Partner
"Tenant"
BAG OF GEORGIA IV, INC.
By: (SEAL)
-------------------------
Name:
-------------------------
Title:
------------------------
[ATTACH CORPORATE SEAL]
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<PAGE> 1
EXHIBIT 10.77
[HUMMER LETTERHEAD]
July 8, 1998
Mr. Walter M. Boomershine
c/o Nick Gibson
Sunbelt Automotive Group
Suite 250, Building B
5901 Peach Tree Dunwoody Road
Atlanta, Ga. 30328
Dear Walter:
It is our understanding that Boomershine Automotive Group, parent company of
Boomershine Hummer, Inc., will be merging with Sunbelt Automotive Group, Inc.
We also understand that upon this merger, Sunbelt Automotive Group will become
the parent company of Boomershine Hummer, Inc.
AM General hereby grants approval of this merger and that the Hummer Dealer
Agreement dated July 22, 1992 between AM General Sales Corp. and Boomershine
Hummer, Inc. is unchanged and remains in force.
We all wish you the very best.
Sincerely,
/s/John J. Stockman
- --------------------------
Manager, Dealer Operations
<PAGE> 1
EXHIBIT 21.1
The subsidiaries of the Company following the consummation of the
Offering, the Merger and the Acquisitions will be:
- - Boomershine Ford, Inc., a Georgia corporation
- Boomershine Collision Center of Gwinnett, Inc., a Georgia corporation
- - Boomershine Pontiac-Buick-GMC, Inc. d/b/a Boomershine Pontiac-Buick-GMC
and d/b/a Boomershine Nissan, a Georgia corporation
- - Boomershine Hummer, Inc., a Georgia corporation
- - Boomershine Isuzu, Inc., a Georgia corporation
- - Boomershine North Cobb, Inc. d/b/a Boomershine Mitsubishi, a Georgia
corporation
- - Boomershine Nissan, Inc., a Georgia corporation,
- - Thompson Automotive Group, Inc. d/b/a Boomershine Honda, a Georgia
corporation
- - Collision Centers USA, a Georgia corporation
- Southlake Collision Center, Inc., a Georgia corporation
- Southlake Collision Cobb Parkway, Inc., a Georgia corporation
- Southlake Collision Henry County, Inc., a Georgia corporation
- - South Financial Corporation, a Florida Corporation
- - BAG Georgia IV, Inc., a Georgia corporation
- - Robertson Oldsmobile-Cadillac, Inc., a Georgia corporation
- - Wade Ford, Inc., a Georgia corporation
- - Wade Ford Buford, Inc., a Georgia corporation
- - Grindstaff, Inc. d/b/a Grindstaff Chrysler, Plymouth, Dodge and d/b/a
Grindstaff Chevrolet, a Tennessee corporation
- Mountain Empire Kia, Inc., a Tennessee corporation
- - Franklin Ford Mercury, Inc., a Georgia corporation
- - Jay Automotive Group, Inc., a Georgia corporation
- Jay Automotive Group II, Inc. d/b/a Jay Toyota, a Georgia corporation
- Jay Automotive Group IV, Inc. d/b/a Saturn of Columbus, a Georgia
corporation
- Jay Automotive Group V, Inc. d/b/a Jay Mazda, a Georgia corporation
- Jay Pontiac-Buick-GMC, Inc. d/b/a Jay Pontiac-Buick GMC and d/b/a Jay
Mitsubishi, a Georgia corporation
- - Sunbelt Financial Corporation, a Georgia corporation,
- - Sunbelt Automotive Group of Tennessee, Inc., a Georgia corporation
<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. 4 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
August 7, 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. 4 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
August 7, 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. 4 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
Gainesville, Florida
August 7, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> DEC-17-1997
<PERIOD-END> MAR-31-1998
<CASH> 3,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,000
<CURRENT-LIABILITIES> 611,236
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> (608,242)
<TOTAL-LIABILITY-AND-EQUITY> 3,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 611,236
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (611,236)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (611,236)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
Exhibit 99.4
CONSENT OF ALAN K. ARNOLD
I, Alan K. Arnold, hereby consent to be named as a person about to
become a director of Sunbelt Automotive Group, Inc. in the Registration
Statement on Form S-1 to which this consent is attached as an exhibit.
/s/ Alan K. Arnold
------------------------------------------
Alan K. Arnold
Date: July 28, 1998
