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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 24, 1998.
REGISTRATION NO. 333-51451
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
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)
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<S> <C> <C>
GEORGIA 5511 58-2378292
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Classification Code Number) Identification No.)
Organization)
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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:
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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
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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. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 24, 1998.
PROSPECTUS
5,500,000 SHARES
(SUNBELT AUTOMOTIVE GROUP LOGO)
COMMON STOCK
(PAR VALUE $0.001 PER SHARE)
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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.
Application has been made to have the shares of common stock approved for
quotation on the Nasdaq National Market under the symbol "SBLT."
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SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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Per Share......................... $ $ $
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Total(3).......................... $ $ $
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses estimated at $ , which are payable by the
Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
additional shares of common stock on the same terms and conditions as
the common stock offered hereby solely to cover over-allotments, if any. If
the option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
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The shares of common stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by them, and subject to
other conditions, including the right of the Underwriters to withdraw, cancel,
modify or reject any order in whole or in part. It is expected that delivery of
the shares will be made on or about , 1998 at the offices of Raymond
James & Associates, Inc., 880 Carillon Parkway, St. Petersburg, Florida.
RAYMOND JAMES & ASSOCIATES, INC.
The date of this Prospectus is , 1998.
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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."
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[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.
It's consolidating . . . with fewer franchised dealership groups.
Sunbelt Automotive Group, Inc. believes that the opportunity exists
for industry leaders to create operating efficiencies,
and to improve customer service.]
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[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 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%)]
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[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.
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[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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PROSPECTUS SUMMARY
Sunbelt Automotive Group, Inc. was formed in December 1997 to acquire
automobile dealerships and related operations and has conducted limited
operations to date. Sunbelt's current operations are limited to activities
involved in identifying potential target companies, negotiating the related
acquisition agreements and preparing for the proposed Merger and Acquisitions.
Although certain members of Sunbelt's management have significant automotive
retailing industry experience, Sunbelt has not managed the combined businesses
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
Company's dealerships won many awards from various manufacturers measuring
quality and customer satisfaction. These awards include: the Five Star Award
from Chrysler, which is given to the top 25% of Chrysler dealers in the nation;
the NACE (North American Customer Excellence) Award, Ford Motor Company's
highest overall award for customer service; the Top 100 Club, which is awarded
to Ford's top 100 retailers or 2% of Ford dealers in the nation based on retail
volume and consumer satisfaction; the Cadillac Master Dealer award, a status
achieved by 1% of Cadillac dealers nationwide; the Oldsmobile Elite Award, which
is given by Oldsmobile Motor Division to the top 10% of Oldsmobile dealers in
the nation; and the
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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."
THE AUTOMOTIVE RETAILING INDUSTRY
The automotive retailing industry, with aggregate revenues of approximately
$491.1 billion in 1996 for franchised dealers alone, is the largest retail
market in the United States. Aggregate revenues for the southeastern United
States, which is the Company's primary area of operations and is comprised of
the states of Alabama, Florida, Georgia, North Carolina, South Carolina and
Tennessee, amounted to approximately $89.8 billion through franchised dealers in
1996 and accounted for approximately 18% of total franchised dealer revenues in
the United States. Since 1990, the industry has experienced growth in total
revenues, total gross profits and income before taxes. From 1990 to 1996, for
franchised dealers alone, total revenues increased 53.5% from $320.0 billion in
1990 to $491.1 billion in 1996, total gross profits increased 33.3% from $46.9
billion in 1990 to $62.5 billion in 1996, and income before taxes increased
131.3% from $3.2 billion in 1990 to $7.4 billion in 1996. The industry has been
experiencing a consolidation trend which has seen the number of franchised
dealerships in the United States decline from approximately 36,000 in 1960 to
22,750 in 1996. Despite this consolidation, fragmentation is still a defining
characteristic of the industry, with the largest 100 franchised dealership
groups generating less than 10% of 1996 total franchised dealer revenue and
controlling less than 5% of all franchised automotive dealerships. However, as a
result of the increasing capital requirements necessary to operate an automotive
dealership, the management succession planning concerns of many current dealers,
and other economic and industry factors, the Company expects a further
consolidation of the automotive retailing industry.
BUSINESS STRATEGY
Sunbelt intends to establish itself as the leading operator of automotive
dealerships in small and medium-sized markets in the southeastern United States
through acquisitions of additional dealerships in these markets. The Company
believes that its diverse portfolio of brands and dealerships in several of
these markets and its experienced management team will give it a competitive
advantage in achieving this goal.
OPERATING STRATEGY
The Company intends to pursue an operating strategy based on the following
key elements:
- Offer a Diverse Range of Automotive Products and Services. The
Company will offer a diverse range of automotive products and
services, including a wide selection of new and used vehicles, vehicle
financing and insurance programs, replacement parts, maintenance and
repair programs. The Company believes that its brand and product
diversity will enable the Company to satisfy a variety of customers,
reduce dependence on any one manufacturer and reduce exposure to
supply problems and product cycles. The Company believes that its
variety of complementary products and services will allow the Company
to generate incremental revenue that will result in higher
profitability and less cyclicality for the Company than if it 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
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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.
Nevertheless, the Company has communicated or intends to communicate,
where appropriate, with each manufacturer regarding its contemplated
organizational structure. 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.
- 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 continue to grow its business using a strategy
comprised of the following principal elements:
- Acquire Dealerships. The Company's goal is to become the leading
operator of automotive dealerships in small and medium-sized markets
in the southeastern United States through acquisitions of additional
dealerships in these markets. The Company plans to pursue acquisitions
in markets where it does not currently own dealerships, as well as in
areas which are contiguous to its existing dealership markets. The
Company intends to focus on acquiring both dealer groups
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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 offers its customers a wide
range of financing and leasing alternatives for the purchase of
vehicles, as well as credit life, accident and health and
disability insurance and extended service contracts. The
Company has recently entered into an agreement with a leading
insurance carrier to share in certain revenues generated by the
sale of extended warranty contracts. In addition, in January
1998, the Company acquired South Financial Corporation ("South
Financial"), which has been primarily engaged in the sub-prime
automotive lending business for the past eight years. The
Company expects its dealer network to provide additional loan
business opportunities to South Financial.
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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 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 approximately $761,000;
- The acquisition of South Financial Corporation, which is involved in the
sub-prime automotive finance business. This acquisition was consummated on
January 6, 1998 for consideration of approximately $4.65 million;
- The acquisition of Hones, Inc. d/b/a Bill Holt Ford Mercury, which is
involved in the automotive retailing business. This acquisition was
consummated on June 15, 1998 for consideration of approximately $750,000;
- The acquisition of Jay Automotive Group, Inc., which is involved in the
automotive retailing business. The Company anticipates consummating this
acquisition upon the consummation of this Offering for consideration of
approximately $12.0 million in cash, the Company's 90-day promissory note
in the amount of $4 million, plus or minus consideration to be determined
by closing and post-closing adjustments;
- The acquisition of Wade Ford, Inc. and Wade Ford Buford, Inc., both of
which are involved in the automotive retailing business. The Company
anticipates consummating these acquisitions upon the consummation of this
Offering for consideration of approximately $10.65 million in cash and
approximately $3.465 million in the form of the Company's unregistered
common stock, plus or minus consideration to be determined by closing and
post-closing adjustments;
- 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
$4.725 million in cash and approximately $5.198 million in the form of the
Company's unregistered common stock plus or minus additional consideration
to be determined by post-closing adjustments to the net worth, the
accounts receivable and the floorplan of Day's Chevrolet;
- The acquisition of Grindstaff, Inc., which is involved in the automotive
retailing business. The Company anticipates consummating this acquisition
upon the consummation of this Offering for cash consideration of
approximately $9.1 million, less shareholder receivables plus or minus
consideration to be determined by closing and post-closing adjustments;
and
- The acquisition of Robertson Oldsmobile-Cadillac, Inc., which is involved
in the automotive retailing business. The Company anticipates consummating
this acquisition upon the consummation of this Offering for consideration
of approximately $4.3 million in cash, approximately $360,000 in the form
of the Company's unregistered common stock, plus or minus consideration to
be determined by closing and post-closing adjustments.
Each acquisition is hereinafter individually referred to as an
"Acquisition" and collectively referred to as the "Acquisitions." See "The
Acquisitions."
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PRICE PROTECTION PROVISIONS
In addition to the consideration described above, the Company may also 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 (unregistered shares in the case of the Wade Ford Acquisition and
registered shares in the case of the Day's Chevrolet Acquisition). See "Risk
Factors -- Price Protection Provisions" and "Description of Capital
Stock -- Registration Rights and Stock Price Protection."
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. See "The Merger."
CONSIDERATION RECEIVED BY RELATED PARTIES
In connection with the Merger and the Acquisitions, the following
directors, officers and shareholders owning more than five percent of the
Company's common stock, together with their spouses and affiliates, will receive
shares of the Company's common stock as follows: Walter M. Boomershine,
Jr. -- 570,024 shares (excluding 2,000 shares of common stock that Mr.
Boomershine currently owns); Walter M. Boomershine, III -- 696,696 shares; Renee
B. Jochum -- 633,360 shares; Jacquelyn B. Thompson -- 633,360 shares; Patrice B.
Mitchell -- 633,360 shares; Lindsey B. Robertson -- 673,360 shares; and Alan K.
Arnold -- 385,000 shares. In addition, Mr. Arnold will receive $10.65 million in
cash, plus or minus consideration based on closing or post-closing adjustments,
in connection with the Wade Ford Acquisition.
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 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.
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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."
RISK FACTORS
As of the date of this Prospectus, the Company has not received the final
approval of any manufacturer with respect to the Merger or the Acquisitions 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 one or more of the Merger or 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 an
adverse impact on the Company's strategic plan. The failure to obtain such
approvals may have a materially adverse effect on the Company's business,
financial condition and results of operations.
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 (where Pontiac-Buick-GMC dealerships
count as a single dealership); and the lesser of 15 Ford and 15 Lincoln
dealerships or that number of Ford and Lincoln Mercury dealerships
accounting for two percent of the preceding year's retail sales of those
brands in the United States. The Company is not aware of any limitations
on the number of dealerships it may own under the following
manufacturers' restrictions: Hummer, Isuzu, Kia, Mazda, Mitsubishi and
Nissan.
9
<PAGE> 12
- 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; 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;
and one Acura dealership in a metropolitan market area which has two or
more Acura points and two Acura points in any one of six Acura geographic
points.
- A maximum additional number of the following dealerships in the Company's
existing markets: 26 additional Ford/Mercury dealerships; no additional GM
dealerships 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 and an unknown number of additional dealerships of the
following manufacturers: Hummer, Isuzu, Kia, Mazda, Mitsubishi and Nissan.
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 or remove such restrictions in
the future, either generally or on a case-by-case basis. The Company, however,
expects that the manufacturers (i) will impose initially on the Company the
restrictions set forth above; (ii) may impose further restrictions and
limitations on the Company which are at this time unknown to the Company; and/or
(iii) may lessen the restrictions and limitations set forth above in the future.
See "Business -- Relationships with Manufacturers" and "Risk
Factors -- Manufacturers' Restrictions on the Merger, the Acquisitions and
Future Acquisitions."
See "Risk Factors" beginning on page 13 for certain additional information
that should be considered by prospective investors.
10
<PAGE> 13
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>
11
<PAGE> 14
- ---------------
(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."
12
<PAGE> 15
RISK FACTORS
Prospective investors should carefully consider and evaluate all of the
information set forth in this Prospectus, including the risk factors set forth
below, prior to making an investment in the common stock offered hereby.
DEPENDENCE ON AUTOMOBILE MANUFACTURERS
Each of the Company's dealerships operates pursuant to a dealer sales and
service agreement, or a similar named agreement, between the applicable
automobile manufacturer (or authorized distributor thereof) and the subsidiary
of the Company that operates the automotive dealership ("Franchise Agreement").
The Company is dependent to a significant extent on its relationship with such
manufacturers and the terms and conditions of these Franchise Agreements.
The following table sets forth for the year ended June 30, 1997, and the
nine months ended March 31, 1998, certain pro forma combined information
relating to the brands of new vehicles sold by the Company:
<TABLE>
<CAPTION>
NEW VEHICLE SALES BY MANUFACTURER
- ---------------------------------------------------------------------------------------------
YEAR ENDED NINE MONTHS ENDED
JUNE 30, 1997 MARCH 31, 1998
--------------------- ---------------------
MANUFACTURER SALES % OF SALES SALES % OF SALES
- ------------ -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Ford(1)....................................... $201,508 48.0% $159,741 50.6%
General Motors(2)............................. 97,973 23.3 77,834 24.7
Nissan........................................ 44,261 10.5 21,043 6.7
Toyota........................................ 17,473 4.2 12,384 3.9
Mitsubishi.................................... 11,013 2.6 8,386 2.6
Mazda......................................... 10,469 2.5 7,628 2.4
Isuzu......................................... 9,434 2.2 7,362 2.3
Chrysler/Dodge/Plymouth....................... 8,717 2.1 6,246 2.0
Kia........................................... 7,040 1.7 5,045 1.6
Honda......................................... 6,105 1.5 4,728 1.5
Jeep/Eagle.................................... 3,353 0.8 2,402 0.8
Hummer........................................ 2,673 0.6 2,898 0.9
-------- ----- -------- -----
$420,019 100.0% $315,697 100.0%
======== ===== ======== =====
</TABLE>
- ---------------
(1) Ford includes both the Ford division and the Mercury division.
(2) General Motors includes the divisions of Buick, Cadillac, Chevrolet, GMC,
Oldsmobile and Pontiac.
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 Company during such periods. See
"Business -- New Vehicle Sales," and "Business -- Relationships with
Manufacturers." Accordingly, a significant decline in the sale of Ford, GM, or
Nissan new cars could have a material adverse effect on the Company's business,
financial condition and results of operations.
Manufacturers exercise a great degree of control over the operations of the
Company's dealerships. Each of the Franchise Agreements generally provides for
termination or non-renewal for a variety of causes, including any unapproved
change in ownership or management and other material breaches of the Franchise
Agreements. The Company is currently seeking the approval of all manufacturers
of the Company's franchised dealers to the Acquisitions, the Merger and this
Offering. However, as of the date hereof, the Company has not obtained the final
approval of any such manufacturers, and there can be no assurance that the
Company will be able to obtain such approval prior to the closing date of this
Offering.
The Company has no reason to believe that it will not be able to 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
13
<PAGE> 16
the Company's significant Franchise Agreements are less favorable than the
Company's current agreements, such actions or events could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Relationships with Manufacturers."
The Company also depends on the manufacturers to provide it with a
desirable mix of the most popular new vehicles that produce the highest profit
margins and which may be the most difficult to obtain from the manufacturers.
For a discussion on how the manufacturers allocate the mix of vehicle models,
see "Business -- New Vehicle Sales." If the Company is unable to obtain a
sufficient allocation of the most popular vehicles, such event could have a
material adverse effect on the Company's business, financial condition and
results of operations. In some instances, in order to obtain additional
allocations of these vehicles, the Company may be required to purchase a larger
number of less desirable models than it would otherwise purchase, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company's dealerships depend on the manufacturers
for certain sales incentives and other programs that are intended to promote
dealership sales or support dealership profitability. Manufacturers have
historically made many changes to their incentive programs during each year. A
reduction or discontinuation of, or other material change in, a manufacturer's
incentive programs may have a material adverse effect on the Company's business,
financial condition and results of operations.
The success of each of the Company's dealerships depends to a great extent
on the financial condition, marketing, vehicle design, production capabilities
and management of the manufacturers which the Company represents. 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 has attempted to lessen its
dependence on any one manufacturer by establishing dealer relationships with a
number of different domestic and foreign automobile manufacturers, adverse
conditions affecting Ford, GM or Nissan, in particular, could have a material
adverse affect on the Company's business, financial condition and results of
operations. See "Business -- New Vehicle Sales" and "Business -- Relationships
with Manufacturers."
MANUFACTURERS' RESTRICTIONS ON THE MERGER, THE ACQUISITIONS AND FUTURE
ACQUISITIONS
The Company is required to obtain the consent of the applicable
manufacturer prior to any transfer or change in ownership of the dealership
franchises. Consequently, the Merger, the Acquisitions, the Offering and all
future acquisitions will require approval by the applicable manufacturers. There
can be no assurance that manufacturers will grant such approvals. Obtaining the
consent of the manufacturers for acquisitions of dealerships could also take a
significant amount of time. Obtaining the approvals of the manufacturers for the
Merger, the Acquisitions and the Offering is an ongoing process and will
continue through the date of the Offering. The Company is currently seeking the
approval of all manufacturers of the Company's franchised dealers to the
Acquisitions, the Merger and this Offering. As of the date of this Prospectus,
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 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. Chrysler, GM, Hummer and Nissan have
verbally informed the Company that they anticipate approving the Merger, the
Acquisitions and this Offering and the proposed acquisitions of Chrysler, GM,
Hummer and Nissan dealerships, as applicable, pursuant to the Acquisitions and
the Merger. The final approvals of Chrysler, GM, Hummer and Nissan are subject
to the execution of certain documents and the completion of this Offering. As of
the date hereof, the Company has not obtained the approval of any other
manufacturers, and no manufacturer will give its final approval prior to the
consummation date of this Offering. If the Company fails to obtain any
manufacturer's approval, the Company may be required to discontinue its
Franchise Agreement with such manufacturer and sell the franchise back to the
manufacturer or to some other third party. To date, Saturn Corporation
("Saturn") has not generally approved the public ownership of its dealership
franchises. For this reason, the financial results of the Company's Saturn
dealership in Columbus, Georgia have not been included in this Prospectus. The
Company will use its best efforts to obtain Saturn approval; however, if Saturn
does not approve the Company's ownership of the Saturn dealership in Columbus,
Georgia, the Company will sell the Saturn dealership.
14
<PAGE> 17
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 Company's knowledge of each applicable
manufacturer's policies existing on the date of this Prospectus. To the extent
the applicable manufacturers have not indicated that they will impose specific
ownership limitations on the Company, the Company expects to be governed by
ownership limitations that are similar to those discussed below for public
companies in general. However, there can be no assurance that the manufacturers
will not modify or remove 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.
The following table sets forth (i) the manufacturers' general policies on
public company ownership to the extent known by the Company to be effective as
of the date of this Prospectus or as the Company believes will be required by
the manufacturers in connection with their approval of the Acquisitions and the
Merger; (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; (iv) the number of additional
dealerships the Company believes it may own/acquire nationally pursuant to the
manufacturers' restrictions; and (v) the number of additional dealerships the
Company believes it may own/acquire in the Atlanta market and the applicable
region/zone as indicated pursuant to the manufacturers' restrictions:
<TABLE>
<CAPTION>
(I) (II) (III) (IV) (V)
------------------- ------------------------------------ --------------- ------------ ------------
RESTRICTIONS ON THE
NUMBER OF
DEALERSHIPS MAXIMUM NUMBER OF
COMPANY MAY NUMBER OF NUMBER OF ADDITIONAL
OWN/ACQUIRE DEALERSHIPS ADDITIONAL DEALERSHIPS
PURSUANT TO OWNED FOR DEALERSHIPS COMPANY MAY
PRESENT PURPOSES OF COMPANY MAY OWN/ ACQUIRE
MANUFACTURERS' ADDITIONAL RESTRICTIONS ON NUMBER OF MANUFACTURERS' OWN/ ACQUIRE IN ATLANTA
MANUFACTURER RESTRICTIONS DEALERSHIPS IN A REGION/ZONE/MARKET RESTRICTIONS(6) NATIONALLY MARKET
- --------------------- ------------------- ------------------------------------ --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Chrysler(1).......... No more than 10 No more than maximum of 6 Chrysler 1 9 nationally 2 in Atlanta
dealerships dealerships in the same sales zone (Chrysler- or in Market; 6 in
(as defined by Chrysler) and 2 Dodge-Jeep- Southeast same sales
Chrysler dealerships in the same Plymouth; zone
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 No more than
15 Ford and 15 any market area (as defined by Ford) (2 Ford/ 25% of the
Lincoln Mercury that has 3 or fewer Ford dealerships Mercury, Ford
dealerships or (ii) and no more than 25% of the Ford Buford, GA and dealerships
that number of Ford dealerships in a market area having Franklin, NC; 2 in Atlanta
and Lincoln Mercury 4 or more Ford dealerships Ford, Smyrna area
dealerships and Duluth, GA) (approximately
accounting for 2% 1-2
of the preceding additional
year's retail sales dealerships)
of those brands in
the United States
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
(I) (II) (III) (IV) (V)
------------------- ------------------------------------ --------------- ------------ ------------
RESTRICTIONS ON THE
NUMBER OF
DEALERSHIPS MAXIMUM NUMBER OF
COMPANY MAY NUMBER OF NUMBER OF ADDITIONAL
OWN/ACQUIRE DEALERSHIPS ADDITIONAL DEALERSHIPS
PURSUANT TO OWNED FOR DEALERSHIPS COMPANY MAY
PRESENT PURPOSES OF COMPANY MAY OWN/ ACQUIRE
MANUFACTURERS' ADDITIONAL RESTRICTIONS ON NUMBER OF MANUFACTURERS' OWN/ ACQUIRE IN ATLANTA
MANUFACTURER RESTRICTIONS DEALERSHIPS IN A REGION/ZONE/MARKET RESTRICTIONS(6) NATIONALLY MARKET
- --------------------- ------------------- ------------------------------------ --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
General Motors(3).... Acquisitions of no May acquire no more than 50% of the 5 No more than No more than
more than 5 GM dealerships (by franchise line) (2 Pontiac- 50% of the 50% of the
dealerships during in a GM-defined geographic market Buick-GMC, GM GM
a two-year period; area having multiple GM dealerships, Smyrna and dealerships dealerships
no additional and GM may further limit Columbus, GA; 2 (by (by
dealerships for at acquisitions of GM dealerships by a Chevrolet, franchise franchise
least 12-24 months single public company until all Acworth, GA and line) in a line) in a
existing GM dealerships of that Elizabethton, GM-defined GM-defined
public company meet certain GM TN; 1 geographic geographic
criteria for sales, market Oldsmobile- market area market area
penetration, CSI and other GM- Cadillac, having having
established standards Gainesville, multiple GM multiple GM
GA) dealerships; dealerships;
none for at none for at
least 12-24 least 12-24
months months
following following
Offering; GM Offering; GM
may allow may allow
additional additional
acquisitions acquisitions
American Honda Co., 7 Honda dealerships Public companies restricted to (i) 1 1 (Honda, 6 Honda and 1 Honda and
Inc. ("Honda")(4).. and 3 Acura Honda dealership in a "Metro" market Cartersville, 3 Acura 1 Acura
dealerships (defined by Honda as a metropolitan GA)
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
unknown to the
Company
Isuzu................ Restrictions Restrictions unknown to the Company 2 (Duluth and Unknown Unknown
unknown to the Gainesville,
Company GA)
Kia.................. Restrictions Restrictions unknown to the Company 1 Unknown Unknown
unknown to the (Elizabethton,
Company TN)
Mazda................ Restrictions Restrictions unknown to the Company 2 (Gainesville Unknown Unknown
unknown to the and Columbus,
Company GA)
Mitsubishi........... Restrictions Restrictions unknown to the Company 2 (Kennesaw, Unknown Unknown
unknown to the and Columbus,
Company GA)
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
(I) (II) (III) (IV) (V)
------------------- ------------------------------------ --------------- ------------ ------------
RESTRICTIONS ON THE
NUMBER OF
DEALERSHIPS MAXIMUM NUMBER OF
COMPANY MAY NUMBER OF NUMBER OF ADDITIONAL
OWN/ACQUIRE DEALERSHIPS ADDITIONAL DEALERSHIPS
PURSUANT TO OWNED FOR DEALERSHIPS COMPANY MAY
PRESENT PURPOSES OF COMPANY MAY OWN/ ACQUIRE
MANUFACTURERS' ADDITIONAL RESTRICTIONS ON NUMBER OF MANUFACTURERS' OWN/ ACQUIRE IN ATLANTA
MANUFACTURER RESTRICTIONS DEALERSHIPS IN A REGION/ZONE/MARKET RESTRICTIONS(6) NATIONALLY MARKET
- --------------------- ------------------- ------------------------------------ --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Nissan............... Restrictions Restrictions unknown to the Company 1 (Duluth, GA) Unknown Unknown
unknown to the
Company
Toyota Motor......... 7 Toyota Number of Toyota dealerships that 1 (Toyota, 6 Toyota and Toyota: 4 in
Corporation dealerships and 3 may be owned by a single public Columbus, GA) 3 Lexus region, 2 in
("Toyota")(5) Lexus dealerships company are limited to (i) the Atlanta
greater of 1 dealership or 20% of market;
the number of Toyota dealer counts Lexus: 2
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 and GM's current proposal to
the Company 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.
Other automobile manufacturers, including Nissan, which accounted for 10.5%
of the Company's pro forma sales of new vehicles for the year ended June 30,
1997, are still developing their policies regarding public ownership of
dealerships. The Company believes that these policies will continue to change as
more dealership groups sell their stock to the public, and as the established,
publicly-owned dealership groups acquire more franchises. To the extent that new
or amended manufacturer policies restrict the number of dealerships which may be
owned by a dealership group, or the transferability of the Company's common
stock, such policies could have a material adverse effect on the Company.
17
<PAGE> 20
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.
Based on the manufacturers' restrictions known to the Company as of the
date of this Offering, the Company believes that it has significant
opportunities to acquire additional dealerships without exceeding the
manufacturers' policies and restrictions on acquisitions outlined above.
RISKS ASSOCIATED WITH ACQUISITIONS
The automotive retailing industry is considered a mature industry in which
minimal growth is expected in unit sales of new vehicles. Accordingly, the
Company's future growth will depend in large part on its ability to acquire
additional dealerships, profitably expand its complementary businesses, manage
its expansion, control costs in its operations and consolidate acquisitions,
including the Acquisitions, into existing operations. For each acquisition, the
Company will have to review the acquired entity's operations, management
infrastructure and systems and financial controls, and make appropriate
adjustments or complete reorganizations as appropriate. Unforeseen capital and
operating expenses, or other difficulties, complications and delays frequently
encountered in connection with the expansion and integration of acquired
operations could inhibit the Company's growth. The full benefits of a
significant acquisition, including the Acquisitions, will require the
integration of operational, administrative, finance, sales and marketing
organizations, as well as the implementation of appropriate operational,
financial and management systems and controls. There can be no assurance that
the management group will be able to effectively and profitably integrate in a
timely manner each of the businesses included in the Acquisitions or any future
acquisitions, or to manage the combined entity without substantial costs, delays
or other operational or financial problems. The inability of the Company to do
so could have a material adverse effect on the Company's business, financial
condition and results of operations. Additionally, any acquisition, including
the Acquisitions, and the integration of such acquisitions will require
substantial attention from the Company's senior management team. The diversion
of management attention required by the acquisition and integration of multiple
companies, including the Acquisitions, as well as other difficulties that may be
encountered in the transition and integration process, could have an adverse
effect on the revenue and operating results of the Company. There can be no
assurance that the Company will identify suitable acquisition candidates, that
acquisitions will be consummated on acceptable terms or that the Company will be
able to successfully integrate the operations of any acquisitions, including the
Acquisitions.
Acquisitions may also result in significant goodwill and other intangible
assets that are amortized in future years and reduce future stated earnings.
With respect to the Acquisitions and any future acquisitions, if future facts
and circumstances suggest that some or all of the goodwill has been impaired, a
write-off of the applicable goodwill and corresponding charge to earnings would
be recognized in the quarter in which the impairment is identified. Upon
consummation of the Acquisitions and the Merger, an aggregate of $43 million of
goodwill will be recorded, consisting of $37.1 million from the six dealerships
or dealership groups being acquired in the Acquisitions, $1.9 million from the
Collision Centers USA Acquisition and $4.0 million from the South Financial
Acquisition. See "The Acquisitions," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Growth
Strategy."
In addition, the Company's future growth as a result of its acquisition of
automobile dealerships will depend on its ability to obtain the requisite
manufacturer approvals. There can be no assurance that it will be
18
<PAGE> 21
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 all of the manufacturers of which Company subsidiaries are
franchisees agree to permit the Offering and trading in the common stock, a
number of manufacturers may continue to impose restrictions upon the
transferability of the common stock. For example, Ford may cause the Company to
sell or resign from one or more of its Ford franchises if any person or entity
acquires 50% or more of the Company's voting securities without Ford's approval.
Likewise, GM and Toyota may force the sale of their respective franchises if 20%
or more of the Company's voting securities are so acquired by any one person or
entity without their approval. Honda may force the sale of the Company's Honda
franchise if any person or entity acquires 5% or more of the common stock (10%
if such entity is an institutional investor), and Honda deems such person or
entity to be unsatisfactory. See "Business -- Relationships with Manufacturers."
Any transfer of shares of the common stock, including a transfer by any of
the shareholders of the target companies of the Acquisitions who received the
common stock pursuant to the Acquisitions and shareholders of Boomershine
Automotive who received the Company's common stock pursuant to the Merger, will
be outside the control of the Company. If one or more of such transfers cause a
change in control of the Company, the manufacturers may have the right to
terminate or not renew one or more of the Franchise Agreements. Moreover, these
issuance limitations are likely to impede the Company's ability to raise capital
through additional equity offerings or to issue common stock as consideration
for, and therefore, to consummate, future acquisitions. Such restrictions also
may prevent or deter prospective acquirors from gaining control of the Company
and, therefore, may adversely impact the Company's equity value.
STRIKES AND LABOR ACTIONS; GM STRIKE
Events such as strikes and other labor actions by unions could have a
materially 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 commenced a labor action in the form of a strike against GM,
which may have a materially adverse effect on the production of GM vehicles.
Although the Company believes that the strike has not had a materially adverse
effect on the operations of the Company as of the date of this Prospectus,
because approximately 24.7% of the Company's gross revenues for the nine month
period ended March 31, 1998 are derived from GM new vehicles, the continuation
of this strike for an extended period of time could have a materially adverse
effect on the Company's business, financial condition and results of operations.
COMPETITION
The automotive retailing industry is highly competitive with respect to
price, service, location and selection. The Company's competition includes
franchised automotive dealerships selling the same or similar makes of new and
used vehicles offered by the Company in the same markets as the Company and
sometimes at lower prices than those of the Company. These dealer competitors
may be larger and have greater financial and marketing resources than the
Company. The Company does not have any cost advantage in purchasing new vehicles
from manufacturers. Additional competitors include other franchised dealers,
private market buyers and sellers of used vehicles, used vehicle dealers
(including regional and national rental car companies which sell their used
rental cars), service center chains and independent service and repair shops.
The used car market faces increasing competition from non-traditional outlets
such as the Internet and used car "superstores," which use sales techniques such
as one-price shopping. Several groups have begun to establish nationwide
networks of used vehicle superstores, and car superstores operate in several of
the Company's
19
<PAGE> 22
existing markets. "No negotiation" sales methods are also being tried for new
cars by at least one of these superstores and by Saturn and other dealerships.
Some of the Company's competitors may have greater financial, marketing and
personnel resources than the Company. In addition, certain manufacturers, such
as Ford, have publicly announced that they may directly enter the retail market
in the future, and certain other manufacturers, such as GM, have publicly
announced that they may consolidate many of their dealerships in a given market
area into a single large dealership to serve that particular market. Such
actions by the manufacturers could have a material adverse effect on the
Company. The increased popularity of vehicle leasing also has resulted, as these
leases expire, in a large increase in the number of late model vehicles
available in the market, which puts added pressure on new vehicle prices. As the
Company seeks to acquire dealerships in new markets, it may face increasingly
significant competition (including from other large dealer groups and dealer
groups that have publicly-traded equity) as it strives to gain market share
through acquisitions or otherwise.
The Company's Franchise Agreements do not give the Company the exclusive
right to sell a manufacturer's product within a given geographic area. The
Company could be materially adversely affected if any of its manufacturers award
franchises to others in the same markets where the Company is operating. A
similar adverse effect could occur if existing competing franchised dealers
increase their market share in the Company's markets. The Company's gross
margins may decline over time if it expands into markets where it does not have
a leading position. These and other competitive pressures could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Competition."
REGIONAL CONCENTRATION
Local economic, competitive and other conditions may affect the performance
of automotive dealerships. As such, the Company's results of operations may be
substantially dependent upon general economic conditions and consumer spending
habits and preferences in the southeastern United States, as well as various
factors specific to that area, such as tax rates and state and local regulation.
Additionally, since the Company's growth strategy contemplates acquisitions in
small and medium-sized markets, any adverse business developments experienced by
businesses which have a disproportionately large presence in, and influence on,
such small and medium-sized markets could have a material adverse effect on the
Company's business, financial condition and results of operations.
ACQUISITION FINANCING; FUTURE CAPITAL REQUIREMENTS; POSSIBLE DILUTION THROUGH
ISSUANCE OF STOCK
The Company currently intends to finance future acquisitions in part by
issuing shares of its common stock as full or partial consideration for acquired
dealerships. The extent to which the Company will be able or willing to issue
common stock for acquisitions will depend on the market value of the common
stock from time to time, the willingness of potential acquisition candidates to
accept common stock as part of the consideration for the sale of their
businesses, and the ability of the Company to obtain any necessary
manufacturers' consents. It is possible that the Company will issue, in the
aggregate, a significant number of additional shares of common stock in
connection with such acquisitions in the future, and the number of shares of
common stock could be as much as, or more than, the number of outstanding shares
of common stock following the Offering. Using stock to consummate acquisitions
may result in significant dilution of shareholders' percentage interest in the
Company. To the extent the Company is unable or unwilling to issue common stock
as consideration for future acquisitions, the Company may be required to use
available cash or other sources of debt or equity financings to finance future
acquisitions. The Company is negotiating a credit facility with various lenders
and anticipates that such a credit facility will provide the Company with a line
of credit of up to $50 million which may be used for future acquisitions.
However, there can be no assurance that other sources of debt or equity
financing, including this credit facility, would be available to the Company on
acceptable terms, or at all, or that the Company's available cash or other
sources of financing will be sufficient to finance such acquisitions. If the
Company is unable or unwilling to issue shares of common stock as consideration
for future acquisitions, or is unable to obtain additional financing in a timely
manner on satisfactory terms, it may be required to postpone or reduce its
acquisition plans, which may have a material adverse effect on the Company's
business, financial condition and results of operation.
20
<PAGE> 23
FLOORPLAN FINANCING
The Company depends to a significant extent on its ability to finance the
purchase of inventory, which in the automotive retailing industry involves
significant sums of money in the form of floorplan financing. The Company 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 size and market presence, will provide it with an opportunity to
negotiate more favorable terms for its floorplan financing. However, there can
be no assurance that the Company will be able to obtain more favorable floorplan
financing, or that such financing will be implemented in a timely manner. Even
if such more favorable floorplan financing is obtained, there can be no
assurance that such financing will not subsequently be adversely modified, or
that other sources of floorplan financing will be available to the Company in
the future. Additionally, substantially all the assets of the Company's
dealerships are pledged to secure floorplan indebtedness, which may impede the
Company's ability to borrow from other sources, and the Company must obtain new
floorplan financing or 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 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
21
<PAGE> 24
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.
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.
22
<PAGE> 25
DEPENDENCE ON KEY PERSONNEL AND LIMITED MANAGEMENT AND PERSONNEL RESOURCES
The Company's success depends to a significant degree upon the continued
contributions of its its senior management, particularly Walter M. Boomershine,
Jr., the Company's Chairman, Robert W. Gundeck, the Company's Chief Executive
Officer, Charles K. Yancey, the Company's Chief Operating Officer and President,
Stephen C. Whicker, the Company's Executive Vice President of Corporate
Development, Ricky L. Brown, the Company's Chief Financial Officer, Alan K.
Arnold, the Company's Vice President of Ford Division, and R. Glynn Wimberly,
the Chief Executive Officer of South Financial Corporation. The Company has
employment agreements with each of 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 operates, particularly for
general managers and sales and service personnel, is highly competitive and may
subject the Company to increased labor costs in periods of low unemployment. The
loss of the services of key employees or the inability to attract additional
qualified managers could have a material adverse effect on the Company. In
addition, the lack of qualified management or employees of potential acquisition
candidates may limit the Company's ability to consummate future acquisitions.
See "Business -- Growth Strategy," "Business -- Competition" and "Management."
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
Company's dealerships is not in compliance with the applicable manufacturer's
CSI requirements. During the five-year period preceding the date of this
Prospectus, the Company believes that its dealerships have been in
non-compliance with manufacturers' CSI requirements 13 times, although the
Company has not been adversely affected by such non-compliance. There can be no
assurance that the Company will be able to comply with such standards in the
future. Failure of the Company's dealerships to comply with the standards
imposed by manufacturers at any given time may have a material adverse effect on
the growth and operating strategies of the Company.
HOLDING COMPANY STRUCTURE; RELIANCE ON DIVIDENDS AND OTHER PAYMENTS FROM
OPERATING SUBSIDIARIES
The Company is a holding company, the principal assets of which are the
shares of the capital stock of its subsidiaries. As a holding company without
independent means of generating operating revenue, the Company depends on
dividends and other payments, including payments of management fees and pursuant
to tax sharing arrangements, from its subsidiaries to fund its obligations and
meet its cash needs.
YEAR 2000 COMPLIANCE
The Company has taken steps to evaluate the extent of its potential year
2000 problems. Some older, or "legacy" computer programs still in use today use
two-digit fields to represent the year in computer records. Such programs may
not properly recognize date-sensitive information when the year changes to 2000
and the systems' two-digit year code changes to "00." Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail. The Company uses financial reporting software that is
23
<PAGE> 26
standard to the automotive retailing industry and the Company is not certain of
the total exposure it may have as a result of the year 2000 problem. The
Company's software vendors have indicated to the Company that their software is
year 2000 compliant. Accordingly, the Company currently does not expect that it
will incur significant operating expenses or be required to invest heavily in
computer system improvements to be year 2000 compliant. However, there can be no
assurance that such software will operate properly once the year 2000 arrives,
and significant uncertainty exists concerning the potential costs and effects
associated with any year 2000 compliance. Any year 2000 compliance problem of
either the Company or its outside vendors, third-party payors or customers could
have a material adverse effect on the Company's business, financial condition
and results of operations.
CYCLICALITY
Sales of automotive vehicles, particularly new vehicles, historically have
been subject to substantial cyclical variation. The Company believes that the
industry is affected by many factors, including general economic conditions,
consumer confidence, the level of personal discretionary spending, prevailing
interest rates and credit availability. There can be no assurance that the
industry will not experience sustained periods of decline in vehicle sales,
particularly new vehicle sales, in the future. Any such decline could have a
material adverse effect on the Company's growth strategy and financial
condition.
IMPORTED PRODUCT RESTRICTIONS AND FOREIGN TRADE RISKS
Certain motor vehicles sold by the Company, as well as certain major
components of vehicles retailed by the Company, are of foreign origin.
Accordingly, the Company is subject to the import and export restrictions of
various jurisdictions and is dependent to some extent upon general economic
conditions in and political relations with a number of foreign countries,
particularly Japan. Additionally, fluctuations in currency exchange rates may
adversely affect the Company's sales of vehicles produced by foreign
manufacturers. Imports into the United States may also be adversely affected by
increased transportation costs and tariffs, quotas or duties.
ADVERSE EFFECT OF GOVERNMENTAL REGULATION; ENVIRONMENTAL REGULATION COMPLIANCE
COSTS
The Company is subject to a wide range of federal, state and local laws and
regulations, such as local licensing requirements and consumer protection laws.
See "-- Sub-Prime Automobile Finance Subsidiary" for a discussion of some of the
laws and regulations which impact the operations of South Financial. The
violation of these laws and regulations can result in civil and criminal
penalties being levied against the Company or in a cease and desist order
against Company operations that are not in compliance. Future acquisitions by
the Company may also be subject to regulation, including antitrust reviews. The
Company believes that it complies in all material respects with all laws and
regulations applicable to its business, but future regulations may be more
stringent and require the Company to incur significant additional costs to
achieve compliance.
The Company's facilities and operations are also subject to federal, state
and local laws and regulations relating to environmental protection and human
health and safety, including those governing wastewater discharges, air
emissions, the operation and removal of underground storage tanks, the use,
storage, treatment, transportation and disposal of solid and hazardous materials
and the remediation of contamination associated with such disposal. Certain of
these laws and regulations may impose joint and several liability on certain
statutory classes of persons for the costs of investigation or remediation of
contaminated properties, regardless of fault or the legality of the original
disposal. These persons include the present or former owner or operator of a
contaminated property and companies that generated, disposed of or arranged for
the disposal of hazardous substances found at the property. Past and present
business operations of the Company subject to such laws and regulations include
the use, storage, handling and contracting for recycling or disposal of
hazardous or toxic substances or wastes, including environmentally sensitive
materials such as motor oil, waste motor oil and filters, transmission fluid,
antifreeze, Freon, waste paint and lacquer thinner, batteries, solvents,
lubricants, degreasing agents, gasoline and diesel fuels. The Company is subject
to other laws and regulations as a result of the past or present existence of
underground storage tanks at many of the Company's properties. The
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Company, like many of its competitors, has incurred, and will continue to incur,
capital and operating expenditures and other costs in complying with such laws
and regulations.
Certain laws and regulations, including those governing air emissions and
underground storage tanks, have been amended so as to require compliance with
new or more stringent standards as of future dates. The Company cannot predict
what other environmental legislation or regulations will be enacted in the
future, how existing or future laws or regulations will be administered or
interpreted or what environmental conditions may be found to exist in the
future. Compliance with new or more stringent laws or regulations, stricter
interpretation of existing laws or the future discovery of environmental
conditions may require additional expenditures by the Company, some of which may
be material. See "Business -- Governmental Regulations and Environmental
Matters."
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Articles of Incorporation ("Articles")
and Bylaws may make it more difficult for shareholders of the Company to effect
certain corporate actions. For example, the Company's Articles and Bylaws
provide that special meetings of the shareholders may only be called by the
Chairman or Chief Executive Officer of the Company, or by a majority vote of the
Board of Directors, and the Company's Bylaws provide that shareholders seeking
to bring business before an annual meeting of shareholders, or to nominate
candidates for election as directors at annual or special meetings of
shareholders, must provide timely notice thereof in writing. Additionally, the
Company's Bylaws incorporate the fair-price protections promulgated by Sections
14-2-1110 through 14-2-1113 and 14-2-1131 through 14-2-1133 of the Georgia
Business Corporation Code (the "GBCC"), which provide certain protections to
minority shareholders by imposing certain requirements on business combinations
of the Company with any interested shareholders of the Company beneficially
holding more than 10% of the Company's voting shares. See "Description of
Capital Stock -- Georgia Law, Certain Articles and Bylaw Provisions and Certain
Franchise Agreement Provisions." The agreements, corporate documents and laws
described above, as well as provisions of the Franchise Agreements described in
"-- Dependence on Automobile Manufacturers" and "-- Stock Ownership/Issuance
Limits; Limitation on Ability to Issue Additional Equity" above (permitting
manufacturers to terminate such agreements upon a change of control) and
provisions of the Company's lending arrangements described in "-- Stock
Ownership/Issuance Limits; Limitation on Ability to Issue Additional Equity"
above (creating an event of default thereunder upon a change in control), may
have the effect of delaying or preventing a change in control of the Company or
preventing shareholders from realizing a premium on the sale of their shares of
common stock upon an acquisition of the Company.
The Articles authorize the Board of Directors of the Company to issue,
without shareholder approval, up to 50 million shares of "blank check" preferred
stock with such designations, rights and preferences as may be determined from
time to time by the Board of Directors. The issuance of such preferred stock
could adversely affect the voting power or other rights of the holders of the
common stock. Under certain circumstances, the Company could also issue such
preferred stock as a method of discouraging, delaying or preventing a change in
control of the Company. The issuance of preferred stock could also prevent
shareholders from realizing a premium upon the sale of their shares of common
stock upon an acquisition of the Company. Although the Company has no present
intention to issue any shares of its preferred stock, there can be no assurance
that the Company will not do so in the future. See "Description of Capital
Stock -- Preferred Stock." Additionally, the Company's Articles and Bylaws
provide that the Board of Directors is divided into three classes serving
staggered terms. These and other provisions may impair the shareholders' ability
to influence or control the Company or to effect a change in control of the
Company, and may prevent shareholders from realizing a premium on the sale of
their shares of common stock upon an acquisition of the Company. See
"Description of Capital Stock."
POTENTIAL CONFLICTS OF INTEREST
The Company has in the past and will likely in the future enter into
transactions with entities controlled by affiliates of the Company. The Company
believes that the Acquisitions were entered into on terms that reflect
arm's-length negotiations and are on terms that are no less favorable than those
that could be obtained
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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. 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
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
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payment of any future dividends will be subject to the discretion of the Board
of Directors of the Company and will depend upon the Company's results of
operations, financial position and capital requirements, general business
conditions, restrictions imposed by financing arrangements, if any, legal
restrictions on the payment of dividends, and other factors the Board of
Directors deems relevant. The Company's Franchise Agreements with vehicle
manufacturers generally require the Company, or its subsidiary operating a
particular dealership, to maintain adequate levels of capitalization, which also
could restrict the Company's ability to pay dividends. See "Dividend Policy."
POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK
Sales of substantial amounts of common stock into the public market
subsequent to the Offering could have a material adverse effect on the market
price of the common stock. Upon consummation of the Merger, the Acquisitions and
the Offering, the Company will have 10,557,862 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 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 Securities and Exchange
Commission (the "Commission") following completion of the Offering to register
the shares of common stock issuable under the Incentive Stock Plan.
No prediction can be made as to the effect that resale of shares of common
stock, or the availability of shares of common stock for resale, will have on
the market price of the common stock prevailing from time to time. The resale of
substantial amounts of common stock, or the perception that such resales may
occur, could materially and adversely affect prevailing market prices for the
common stock and the ability of the Company to raise equity capital in the
future. The Company, 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
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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.
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 Executive 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.
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THE ACQUISITIONS
Since November 1997, the Company or Boomershine Automotive, as the
Company's predecessor in interest, has consummated or signed definitive
agreements to purchase six additional dealerships or dealership groups, three
collision repair centers and one automotive sub-prime finance company for an
aggregate purchase price of approximately $67 million. These Acquisitions
consist of the Collision Centers USA Acquisition (consummated December 18,
1997), the South Financial Acquisition (consummated January 6, 1998), the Bill
Holt Acquisition (consummated June 15, 1998), the Grindstaff Acquisition, the
Robertson Acquisition, the Wade Ford Acquisition, the Jay Automotive Group
Acquisition, and the Day's Chevrolet Acquisition (the "Acquisitions"). The
closing of the Offering is contingent upon the Company consummating the
Grindstaff, Robertson, Wade Ford, Jay Automotive and Day's Chevrolet
Acquisitions, and the Company intends to use a portion of the proceeds from the
Offering to pay the cash purchase prices of these remaining Acquisitions. See
"Use of Proceeds." 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 approximately $16.0 million in
consideration for the Jay Automotive Group Acquisition. At the closing, the
Company will pay approximately $12.0 million in cash, and approximately $4.0
million in the form of a 90-day promissory note (the "Jay Note") with an
interest rate equal to 8% per annum, plus or minus consideration to be
determined by closing and post-closing adjustments. Jay Automotive Group, Inc.
will continue to lease the real properties on which its facilities are located
from the respective landlords of each property. See "Business -- Facilities."
The Wade Ford Acquisition. On November 21, 1997, the Company entered into
a definitive agreement to acquire from Alan K. Arnold, Gary R. Billings and
certain other shareholders all of the outstanding common stock of Wade Ford,
Inc. and Wade Ford Buford, Inc. (the "Wade Ford Dealerships"), located in Smyrna
and Buford, Georgia, respectively (the "Wade Ford Acquisition"). The Wade Ford
Acquisition is expected to be consummated simultaneously with the closing of
this Offering. The Company will pay approximately $14.12 million in
consideration for the Wade Ford Acquisition. At the closing, the Company will
pay to the selling shareholders approximately $10.65 million in cash and
approximately $3.465 million in the form of unregistered common stock of the
Company, plus or minus consideration to be determined by closing and
post-closing adjustments. 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
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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 million in consideration
for the Day's Chevrolet Acquisition. At the closing, the Company will pay to the
selling shareholders approximately $4.725 million in cash and approximately
$5.198 million in the form of unregistered common stock of the Company, plus or
minus additional consideration to be determined by post-closing adjustments to
the net worth, the accounts receivable and the floorplan of Day's Chevrolet. The
Company will also provide certain stock price protection to the selling
shareholders of Day's Chevrolet pursuant to which the Company will compensate
the selling shareholders for any deficiencies in the price of the stock
consideration on the second anniversary of the Offering. See "Description of
Capital Stock -- Registration Rights and Stock Price Protection." In connection
with the Day's Chevrolet Acquisition, Mr. Calvin Diemer, who has over 20 years
of experience in the automotive retailing industry, will execute a
non-competition and confidentiality agreement and will continue to serve as the
Executive Manager of Day's Chevrolet pursuant to an employment agreement. Day's
Chevrolet will continue to lease the real property on which its facilities are
located from the landlord of said property. See "Business -- Facilities."
The Grindstaff Acquisition. On December 27, 1997, the Company entered into
a definitive agreement to acquire from Steve E. Grindstaff, Wes Hambrick and
trusts for the benefit of Amie Pearson and Renee Mullins all of the outstanding
common stock of Grindstaff, Inc., a Tennessee corporation, which operates
Chevrolet, Chrysler, Plymouth, Dodge, Jeep and Kia dealerships in Elizabethton,
Tennessee (the "Grindstaff Acquisition"). The Grindstaff Acquisition is expected
to be consummated simultaneously with the closing of this Offering. The Company
will pay approximately $9.1 million in consideration for the Grindstaff
Acquisition, less an adjustment for shareholder receivables and plus or minus
consideration to be determined by closing and post-closing adjustments. In
connection with the Grindstaff Acquisition, Mr. Grindstaff will execute a
non-competition and confidentiality agreement. Mr. Wes Hambrick, who has over 15
years of experience in the automotive retailing industry, will continue to serve
as the Executive Manager of Grindstaff, Inc. pursuant to an employment
agreement. Grindstaff, Inc. will continue to lease the real property on which
its facilities are located from the landlord of said property. See
"Business -- Facilities."
The Robertson Acquisition. On March 1, 1998, the Company entered into a
definitive agreement to acquire from E. Moss Robertson, Jr. all of the
outstanding common stock of Robertson Oldsmobile-Cadillac, Inc. ("ROC"), which
operates Oldsmobile, Cadillac, Isuzu and Mazda dealerships in Gainesville,
Georgia (the "Robertson Acquisition"). The Robertson Acquisition is expected to
be consummated simultaneously with the closing of this Offering. The Company
will pay approximately $4.7 million in consideration for the Robertson
Acquisition. At the closing, the Company will pay to Mr. Robertson approximately
$360,000 in the form of unregistered common stock of the Company and
approximately $4.3 million in cash plus or minus consideration to be determined
by closing and post-closing adjustments. 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
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approximately $750,000 in cash and assumed the outstanding balance of the
floorplan liability for new vehicles of Hones, Inc. actually acquired by the
Company, as determined in accordance with the terms of the definitive agreement.
In connection with the Bill Holt Acquisition, Mr. Bill Holt, who was the sole
shareholder of Hones, Inc. prior to this Offering, executed a non-competition
and confidentiality agreement. An unrelated third party acquired the real
property on which its facilities are located, and the Company will continue to
lease said real property from such landlord. See "Business -- Facilities."
The South Financial Acquisition. On January 6, 1998, the Company acquired
from Thomas F. Murphy, Jr. all of the outstanding capital stock of South
Financial Corporation, a Florida corporation that owns and operates five
standalone sub-prime automotive finance offices located in Florida, Tennessee
and North Carolina (the "South Financial Acquisition"). The purchase price of
South Financial Corporation was approximately $4.65 million, which was paid in
cash at the time of closing. In connection with the South Financial Acquisition,
Mr. Murphy executed a non-competition and confidentiality agreement. Upon the
consummation of this transaction, R. Glynn Wimberly became chief executive
officer of South Financial Corporation pursuant to an employment agreement
between Mr. Wimberly and South Financial Corporation. Mr. Wimberly has 24 years
of experience in the consumer finance industry and has served as the president
and general manager of an automotive sub-prime finance company for the past five
years. The Company anticipates that future sites for South Financial
Corporation's outlets will be located in or near existing and future
Company-owned dealerships. The South Financial Acquisition further implements
the Company's growth strategy by adding a higher-margin complementary business
to its core automotive retailing operations.
The Collision Centers USA Acquisition. On December 18, 1997, the Company
acquired from James L. Peters all of the outstanding capital stock of Southlake
Collision Center, Inc., Southlake Collision Henry County, Inc. and Southlake
Collision Cobb Parkway, Inc. (collectively, the "Collision Centers"), which own
and operate stand-alone automobile collision repair centers located in Clayton
County, Henry County and Cobb County, Georgia, respectively (the "Collision
Centers USA Acquisition"). The purchase price for the Collision Centers, in the
aggregate, was approximately $1.7 million, one-half of which was paid in cash,
and the balance of which was paid in the form of promissory notes (each, the
"Collision Note," and collectively, the "Collision Notes") with an interest rate
equal to 18% per annum. 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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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."
32
<PAGE> 35
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 1,597,000 shares of common stock.
See "Management -- Incentive Stock Plan." Also does not reflect the possible
issuance of 50,000 shares of common stock reserved for issuance upon the
exercise of warrants granted to a consulting firm for services rendered in
connection with this Offering.
33
<PAGE> 36
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 5.8% $ 1.05
Acquisition shareholders(2)......... 1,002,500 9.7 10,025,000 14.5 10.00
New investors(3).................... 5,500,000 53.4 55,000,000 79.7 10.00
---------- ----- ----------- -----
10,308,660 100.0% $69,007,704 100.0% $ 6.69
========== ===== =========== =====
</TABLE>
- ---------------
(1) Includes 3,800,160 shares issued in connection with the Merger and 6,000
shares of common stock issued to the founders of the Company. Does not
reflect the 249,202 shares of common stock issued to executive officers of
the Company subsequent to March 31, 1998 or possible exercise of options to
purchase 2,250,000 shares of common stock reserved for issuance under the
Company's Incentive Stock Plan, including options to purchase 1,280,000
shares of common stock that were granted subsequent to December 31, 1997 and
options to purchase 317,000 shares of common stock that will be granted
immediately before the completion of the Offering with an exercise price
equal to the initial public offering price. See "Management -- Incentive
Stock Plan" and "The Merger." Also excludes 50,000 shares of common stock
reserved for issuance upon exercise of warrants granted to a consulting firm
for services rendered in connection with this Offering. See "Description of
Capital Stock -- Warrants."
(2) Includes shares issued in connection with the Acquisitions. See "The
Acquisitions."
(3) Assumes that the Underwriters' over-allotment option is not exercised. Sales
pursuant to the full exercise by the Underwriters of the over-allotment
option will cause the total number of shares purchased by new investors,
total consideration paid by new investors and percent of total consideration
paid by new investors to increase to 6,325,000, $63,250,000 and 81.9%,
respectively.
34
<PAGE> 37
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>
35
<PAGE> 38
<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."
36
<PAGE> 39
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; 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.
37
<PAGE> 40
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>
38
<PAGE> 41
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) F###
<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>
39
<PAGE> 42
- ---------------
(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.
40
<PAGE> 43
(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.
41
<PAGE> 44
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>
42
<PAGE> 45
- ---------------
(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."
43
<PAGE> 46
(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.
44
<PAGE> 47
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 $507 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 has diverse sources of revenues, including: new car sales, new
truck sales, used car sales, used truck sales, manufacturer remarketed vehicles
sales, parts sales, service sales, collision repair services, finance fees,
insurance commissions, extended service contract sales, and documentary fees.
Sales revenues include sales to retail customers, other dealers and wholesalers.
Other dealership revenue includes revenue from the sale of financing, insurance
and extended service contracts, net of a provision for anticipated chargebacks
and documentary fees charged to customers.
45
<PAGE> 48
The Company's leasing expenses, salary expense, employee benefits costs and
advertising expenses comprise the majority of its selling, general and
administrative expenses. The Company's interest expense primarily results from
the Company's floorplan financing of its new and used vehicle inventory.
The Company has historically accounted for all of its dealership
acquisitions using the purchase method of accounting and, as a result, does not
include in its financial statements the results of operations of these
dealerships prior to the date they were acquired by the Company. The financial
statements of the Company discussed below reflect the combined and consolidated
results of operations, financial position and cash flows of the Company's
dealerships. As a result of the effects of the Merger, the Acquisitions and the
Offering, the historical financial information described herein is not
necessarily indicative of the results of operations, financial position and cash
flows of the Company in the future or the results of operations, financial
position and cash flows which would have resulted had the Merger and the
Acquisitions and the Offering occurred at the beginning of the periods presented
in the historical financial statements.
Contemporaneously with the effective date hereof, the Company will effect
the Merger pursuant to which (i) Boomershine Automotive will be merged with and
into the Company and (ii) the Boomershine Automotive shareholders will receive
unregistered common stock of the Company in exchange for the capital stock in
Boomershine Automotive. From November 1997 through March 1998, the Company
consummated or signed definitive agreements to purchase six additional
dealerships or dealership groups, three collision repair businesses, and a
sub-prime automotive finance company for an aggregate consideration of
approximately $67 million. See "The Acquisitions." In connection with the
Acquisitions, the Company will book approximately $43.5 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,
before giving effect to the Offering, had approximately $116 million of
floorplan debt outstanding. Currently, the Combined Companies' (as defined
below) floorplan financing is provided by six different sources. The Company
anticipates that 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-Mercury and Collision Centers USA
have not been separately included within this Prospectus because said
46
<PAGE> 49
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 $ 15,658
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>
47
<PAGE> 50
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.
48
<PAGE> 51
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
49
<PAGE> 52
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.
50
<PAGE> 53
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 increased by the effect of having the Boomershine
Mitsubishi dealership for an entire year in the year ended June 30, 1997.
Overall, the percentage gross margin improved from 10.3% 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.
51
<PAGE> 54
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.
52
<PAGE> 55
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.
53
<PAGE> 56
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.
54
<PAGE> 57
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
55
<PAGE> 58
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.
56
<PAGE> 59
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.
57
<PAGE> 60
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.
58
<PAGE> 61
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.
59
<PAGE> 62
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> 63
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> 64
$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> 65
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> 66
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> 67
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
65
<PAGE> 68
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
66
<PAGE> 69
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> 70
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> 71
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> 72
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> 73
The following table sets forth selected financial data and such data as a
percentage of total revenues for South Financial for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1995 1996 1997
---------------- ---------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
New vehicle sales............................ $ -- --% $ -- --% $ -- --%
Used vehicle sales........................... -- -- -- -- -- --
Parts and service sales...................... -- -- -- -- -- --
Other revenues, net.......................... 3,187 100.0 5,723 100.0 4,743 100.0
------ ----- ------ ----- ------- -----
Total revenues....................... 3,187 100.0 5,723 100.0 4,743 100.0
Cost of sales.................................. -- -- -- -- -- --
------ ----- ------ ----- ------- -----
Gross profit................................... 3,187 100.0 5,723 100.0 4,743 100.0
Selling, general and administrative expenses... 1,780 55.9 3,566 62.3 3,704 78.1
------ ----- ------ ----- ------- -----
Income from operations......................... 1,407 44.1 2,157 37.7 1,039 21.9
Other income and expense:
Interest expense............................. 978 30.6 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
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<PAGE> 74
ended December 31, 1996. This increase was primarily due to added field offices,
establishing a centralized underwriting function and additional rent charges
associated with an expanded data and accounting system.
Interest Expense. Interest expense increased $438,000, or 44.8%, from $1.0
million for the year ended December 31, 1995 to $1.4 million for the year ended
December 31, 1996. This increase was attributable to an increase in the
principal amount outstanding under the revolving credit agreement from $8.2
million at December 31, 1995 to $11.6 million at December 31, 1996.
Liquidity and Capital Resources
The Company considers liquidity to be its ability to meet its long- and
short-term cash requirements. South Financial's principal sources of liquidity
are cash on hand, cash from operations and a revolving credit facility with
General Electric Credit Corporation (the "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.
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<PAGE> 75
Credit Losses
South Financial maintains a reserve for potential credit losses ($2.0
million at December 31, 1997, or 20.7% of the outstanding principal balance as
of that date) based on pertinent factors including past experience, underlying
collateral, recourse provisions and economic conditions. South Financial staff
members and agents follow up on delinquent accounts with appropriate actions
including correspondence and repossession of the applicable collateral. South
Financial charges potential credit losses back to the originating used auto
dealership if the contracts were purchased on a recourse basis and sells
repossessed collateral at auction. Proceeds from the sale of collateral are
credited to the loss reserve.
Leases
South Financial leases its operating facilities and equipment under various
operating leases, including leases with related parties. Certain of the leases
may be renewed at the option of the lessee. All of South Financial's leases were
negotiated at arm's-length, and the Company's management believes that the terms
and conditions of all of South Financial's leases are comparable to those that
result from negotiations with unrelated third parties.
CYCLICALITY
The Company's operations, like the automotive retailing industry in
general, can be affected by a number of factors relating to general economic
conditions, including consumer business cycles, consumer confidence, economic
conditions, availability of consumer credit and interest rates. Although the
above factors, among others, can impact the Company's business, the Company
believes the impact of cyclicality on its operations will be mitigated as the
Company continues to expand its product offerings, its geographic diversity and
the number of its vehicle brands.
As of the date of this Prospectus, the United Auto Workers union has
commenced a labor action against GM which may have a materially adverse effect
on the production of GM vehicles. As a result, this strike may have a materially
adverse effect on the Company's business, financial condition and results of
operations.
EFFECTS OF INFLATION
Due to the relatively low levels of inflation in 1995, 1996 and 1997 and
the first three months of 1998, inflation did not have a significant effect on
the Company's results of operations for those periods.
NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share." This Statement
specifies the computation, presentation and disclosure requirements for earnings
per share. The Company believes that the adoption of such Statement would not
result in earnings per share materially different from pro forma earnings per
share presented in the accompanying statements of income.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
standard establishes standards of reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements. This
Statement will be effective for the Company's fiscal year ending June 30, 1998,
and the Company does not intend to adopt this statement prior to said effective
date.
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<PAGE> 76
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
Company's dealerships won many awards from various manufacturers measuring
quality and customer satisfaction. These awards include: the Five Star Award
from Chrysler, which is given to the top 25% of Chrysler dealers in the nation;
the NACE (North American Customer Excellence) Award, Ford Motor Company's
highest overall award for customer service; the Top 100 Club, which is awarded
to Ford's top 100 retailers or 2% of Ford dealers in the nation based on retail
volume and consumer satisfaction; the Cadillac Master Dealer award, a status
achieved by 1% of Cadillac dealers nationwide; the Oldsmobile Elite Award, which
is given by Oldsmobile Motor Division to the top 10% of Oldsmobile dealers in
the nation; and the President's Circle Award for performance, which is given by
Nissan Motor Corporation to the top 10% of Nissan dealers in the nation.
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 is the Company's primary area of operations and is comprised of
the states of Alabama, Florida, Georgia, North Carolina, South Carolina and
Tennessee amounted to approximately $89.8 billion through franchised dealers in
1996 and accounted for approximately 18% of total franchised dealer revenues in
the United States. Nationally, between 1990 and 1996, the industry has
experienced growth in total revenues, total gross profits and income before
taxes. From 1990 to 1996, for franchised dealers alone,
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<PAGE> 77
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. Nevertheless, the Company has
communicated or intends to communicate, where appropriate, with each
manufacturer regarding its contemplated organizational structure. The
Company believes that organizing its dealerships by manufacturer and
having each division headed by a senior manager who is experienced with
that particular manufacturer -- and has established and maintained
long-standing business relationships with the regional and corporate
managers of that manufacturer -- will yield numerous benefits to the
Company. For example, the Company's relationships with each manufacturer
will be enhanced; management training within each division will be more
efficient and consistent; and managers within each division will benefit
from a shared experience base. The Company believes that these benefits
will provide a competitive advantage to the Company.
- Decentralize Marketing Strategies; Achieve High Levels of Customer
Satisfaction; Utilize Incentive-Based Compensation Programs. The Company
believes that many customers purchase automotive vehicles based on an
established long-term business relationship with a particular dealership.
There-
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<PAGE> 78
fore, 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 continue to grow its business using a strategy
comprised of the following principal elements:
- Acquire Dealerships. The Company's goal is to become the leading
operator of automotive dealerships in small and medium-sized markets in
the southeastern United States through acquisitions of additional
dealerships in these markets. The Company plans to pursue acquisitions in
markets where it does not currently own dealerships, as well as in areas
which are contiguous to its existing dealership markets. The Company
intends to focus on acquiring both dealer groups with multiple franchises
in a given market area and dealers with a single franchise which possess
significant market shares. Generally, the Company will seek to retain the
acquired dealerships' operational and financial management, and thereby
benefit from their market knowledge, name recognition and local
reputation.
- Expand Complementary Products and Services. The Company intends to
pursue opportunities that it expects will result in additional revenue
and higher profitability through the sale of products and services which
complement its dealership operations. Examples of such opportunities
include the following:
Collision Repair Centers. The Company owns four collision repair
facilities operated under the name Collision Centers USA, which serve
the Jonesboro, Duluth, Stockbridge and Marietta, Georgia markets. The
Company expects to expand this business by increasing volumes at
these four centers, developing new centers and acquiring existing
centers. The Company's collision repair business provides higher
margins than its core automotive retailing operations and is
generally not significantly affected by economic cycles or consumer
spending habits.
Finance and Insurance. The Company offers its customers a wide range
of financing and leasing alternatives for the purchase of vehicles,
as well as credit life, accident and health and disability insurance
and extended service contracts. The Company has entered into an
agreement with a leading insurance carrier to share in certain
revenues generated by the sale of extended warranty contracts. In
addition, in January 1998, the Company acquired South Financial,
which has been primarily engaged in the sub-prime automotive lending
business for the past eight years. The Company expects its dealer
network to provide additional loan business opportunities to South
Financial.
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<PAGE> 79
DEALERSHIP OPERATIONS
The Company has established a management structure that promotes and
rewards entrepreneurial spirit, individual pride and responsibility and the
achievement of team goals. Each dealership's general manager is ultimately
responsible for the operation, personnel and financial performance of the
dealership. The general manager ("Executive Manager") is typically complemented
with a management team consisting of a new vehicle sales manager, used vehicle
sales manager, service and parts manager and finance manager. Each dealership is
operated as a distinct profit center in which the Executive Manager is given a
high degree of operating autonomy. A controller who is dedicated to each
dealership provides financial oversight and control. The Company believes that
the Executive Manager and the other members of the dealership management team,
who in many cases are long-time members of their local communities, are best
able to judge how to conduct day-to-day operations based on the team's
experience in and familiarity with its local market.
The Vice Presidents of each manufacturer Division of the Company (the
"Division VP"), who report to the Company's Chief Operating Officer, support and
oversee the Executive Managers. All Executive Managers will report to the
Company's Division VP on a regular basis and prepare a comprehensive monthly
financial and operating statement of their dealership. In addition, the Division
VPs will meet on a monthly basis with their Executive Managers to address
changing customer preferences and operational concerns and to share best
practices. The Company initially intends to implement this organizational
structure only for its Ford and Mercury dealerships. Once the Company owns an
appropriate number of dealerships affiliated with 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.
NEW VEHICLE SALES
The Company sells 20 domestic and foreign brands of economy, family, sports
and luxury cars and light trucks and sport utility vehicles. The Company intends
to pursue an acquisition strategy that will continue to enhance its brand
diversity. The following table sets forth for the year ended June 30, 1997 and
the nine months ended March 31, 1998, certain pro forma combined information
relating to the brands of new vehicles sold by the Company:
<TABLE>
<CAPTION>
NEW VEHICLE SALES BY MANUFACTURER
- ---------------------------------------------------------------------------------------------
YEAR ENDED NINE MONTHS ENDED
JUNE 30, 1997 MARCH 31, 1998
--------------------- ---------------------
MANUFACTURER SALES % OF SALES SALES % OF SALES
- ------------ -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Ford(1)....................................... $201,508 48.0% $159,741 50.6%
General Motors(2)............................. 97,973 23.3 77,834 24.7
Nissan........................................ 44,261 10.5 21,043 6.7
Toyota........................................ 17,473 4.2 12,384 3.9
Mitsubishi.................................... 11,013 2.6 8,386 2.6
Mazda......................................... 10,469 2.5 7,628 2.4
Isuzu......................................... 9,434 2.2 7,362 2.3
Chrysler/Dodge/Plymouth....................... 8,717 2.1 6,246 2.0
Kia........................................... 7,040 1.7 5,045 1.6
Honda......................................... 6,105 1.5 4,728 1.5
Jeep/Eagle.................................... 3,353 0.8 2,402 0.8
Hummer........................................ 2,673 0.6 2,898 0.9
-------- ----- -------- -----
$420,019 100.0% $315,697 100.0%
======== ===== ======== =====
</TABLE>
- ---------------
(1) Ford includes both the Ford division and the Mercury division.
(2) General Motors includes the divisions of Buick, Cadillac, Chevrolet, GMC,
Oldsmobile and Pontiac.
The Company's new vehicle sales include traditional new vehicle retail
sales and retail lease transactions which are arranged by the Company. New
vehicle leases generally have short terms, which bring the consumers back to the
market sooner than if the vehicles were purchased. In addition, leases can
provide the Company with a steady source of late-model, off-lease vehicles for
its used vehicle inventory. Generally, leased vehicles remain under factory
warranty for the term of the lease, which allows the Company to provide repair
service to the lessee throughout the lease term.
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<PAGE> 80
The Company seeks to provide customer-oriented service designed to
establish lasting relationships that will result in repeat and referral
business. For example, the Company's dealerships strive to: (i) employ more
efficient selling approaches; (ii) utilize computer technology that decreases
the time necessary to purchase a vehicle; (iii) engage in extensive follow-up
after a sale in order to develop long-term relationships with customers; and
(iv) train their sales staffs to be able to meet the needs of the customers. The
Company continually evaluates ways to improve the buying experience for its
customers and believes that its ability to share best practices among its
dealerships gives it an advantage over smaller dealership group.
The Company acquires substantially all its new vehicle inventory from
manufacturers. Manufacturers' allocations of new vehicle units are based upon
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
finances its inventory purchases through revolving credit arrangements known in
the industry as floorplan facilities.
The following table presents combined pro forma information with respect to
the Company's new vehicle sales for the years ended June 30, 1995, 1996 and
1997, and the nine months ended March 31, 1997 and 1998, respectively.
<TABLE>
<CAPTION>
PRO FORMA COMPANY'S 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 sells used vehicles at each of its dealerships. Consumer demand
for used vehicles has increased as prices of new vehicles have risen and as more
high quality used vehicles have become available. Furthermore, used vehicles
typically generate higher gross margins than new vehicles because of their
limited comparability and the somewhat subjective nature of their valuation. The
Company intends to continue growing its used vehicle sales operations by
maintaining a high quality inventory, providing competitive prices and extended
service contracts for its used vehicles and continuing to promote used vehicle
sales.
Profits from sales of used vehicles are dependent primarily on the ability
of the Company's dealerships to obtain a high quality supply of used vehicles
and effectively manage that inventory. The Company's new vehicle operations
provide the Company's used vehicle operations with a large supply of high
quality trade-ins and off-lease vehicles, which are the best sources of high
quality used vehicles. The Company supplements its used vehicle inventory with
used vehicles purchased at auctions.
The Company generally maintains a 60- to 90-day supply of used vehicles and
disposes of used vehicles that the Company does not retail to customers by
selling them at auctions or offering them to wholesalers. Trade-ins may be
transferred among dealerships to provide balanced inventories of used vehicles
at each of the Company's dealerships. The Company does not need manufacturers'
approvals to transfer its used vehicles 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
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<PAGE> 81
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 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 and higher
quality relative to trade-ins on used car purchases, (ii) access to late-model,
low mileage off-lease vehicles, and (iii) the availability of manufacturer
certification and extended manufacturer warranties for the Company's higher
quality used vehicles. This supply of high quality trade-ins and off-lease
vehicles reduces the Company's dependence on auction vehicles, which are
typically a higher cost source of used vehicles.
The following table represents pro forma information with respect to the
Company's used vehicle sales for the years ended June 30, 1995, 1996 and 1997,
and the nine months ended March 31, 1997 and 1998, respectively:
<TABLE>
<CAPTION>
PRO FORMA COMPANY'S USED VEHICLE DATA
------------------------------------------------------
NINE MONTHS
YEAR ENDED JUNE 30, ENDED MARCH 31,
Used Vehicle Data -------------------------------- ------------------
1995 1996 1997 1997 1998
-------- -------- -------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Retail unit sales..................... 9,073 10,205 9,913 7,392 7,134
Retail sales.......................... $100,563 $122,464 $120,534 $89,217 $92,148
Gross profit.......................... $ 8,858 $ 11,281 $ 11,635 $ 8,246 $ 8,061
Gross margin.......................... 8.8% 9.2% 9.7% 9.2% 8.7%
Average gross profit per retail unit
sold................................ $ 976 $ 1,105 $ 1,174 $ 1,115 $ 1,130
Wholesale unit sales.................. 8,033 8,665 9,442 7,117 5,642
Wholesale sales....................... $ 42,238 $ 44,512 $ 57,391 $42,881 $34,978
Gross profit.......................... $ 1,638 $ 1,057 $ 1,554 $ 690 $ 590
Gross margin.......................... 3.9% 2.4% 2.7% 1.6% 1.7%
</TABLE>
PARTS AND SERVICE SALES
The Company provides parts and service at each of its dealerships primarily
for the vehicle makes sold by its dealerships. The Company also provides
maintenance and repair services at each of its dealerships and collision repair
centers, and performs both warranty and customer-paid service work.
Historically, the automotive repair industry has been highly fragmented.
However, the Company believes that the increased use of advanced technology in
vehicles has made it more difficult for independent repair shops to retain the
expertise to perform major or technical repairs. Additionally, manufacturers
permit warranty work to be performed only at dealerships. Therefore, unlike
independent service stations, or independent and superstore used car dealerships
with service operations, the Company's dealerships are qualified to perform work
covered by manufacturer warranties. Given the increasing technological
complexity of motor vehicles and the trend toward extended manufacturer and
dealer warranty periods for new vehicles, the Company believes that an
increasing percentage of repair work will be performed at dealerships.
The Company seeks to retain each purchaser of a vehicle as a customer of
the Company's service and parts departments. The Company's dealerships have
systems in place that track their customers' maintenance records and notify
owners of vehicles purchased at the dealerships when their vehicles are due for
periodic services. The Company regards its service and repair activities as an
integral part of its overall approach to customer service, providing an
opportunity to foster ongoing relationships with its customers and deepen
customer loyalty.
The dealerships' parts departments support their respective sales and
service divisions. Each of the Company's dealerships sells factory-approved
parts for vehicle makes and models sold by that dealership. These parts are
either used in repairs made by the dealerships or sold at retail to its
customers or at wholesale
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<PAGE> 82
to independent repair shops and/or other franchised dealerships. Currently, each
of the Company's dealerships employs its own parts manager and independently
controls its parts inventory and sales.
The following table sets forth information regarding the Company's parts
and service sales for the years ended June 30, 1995, 1996 and 1997, and the nine
months ended March 31, 1997 and 1998, respectively:
<TABLE>
<CAPTION>
PRO FORMA COMPANY'S PARTS AND SERVICE DATA
---------------------------------------------------
NINE MONTHS
YEAR ENDED JUNE 30, ENDED MARCH 31,
Parts and Service Data ----------------------------- ------------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales.................................... $53,625 $61,682 $66,602 $48,884 $50,159
Gross profit............................. $21,310 $26,786 $25,297 $19,213 $19,781
Gross margin............................. 39.7% 43.4% 38.0% 39.3% 39.4%
</TABLE>
COLLISION REPAIR
The Company operates four standalone collision repair centers under the
service mark "Collision Centers USA." The Company began operating the first of
these centers in September 1996 and acquired three additional centers in
November 1997 as part of the Collision Centers USA Acquisition. The Company
believes that the primary source of Collision Centers USA's customers will be
the automobile insurance companies which have entered into direct repair
programs with Collision Centers USA. As of March 31, 1998, Collision Centers USA
had entered into arrangements with seven insurance companies to participate in
their various direct repair programs. In general, these arrangements provide
procedures and guidelines for handling claims, providing estimates and
completing certain paperwork for the individual insurance company, as well as
hourly labor rates for mechanical, body repair, refinishing and painting, and
markups and discounts for used and new parts. The Company believes that these
insurance companies -- by virtue of the customers they refer to Collision
Centers USA -- will be the primary source of the Company's collision repair
center business, and that its ongoing relationship with these insurance
companies will help ensure a continuous and increasing source of customers for
Collision Centers USA. The Company believes that its collision repair business
will provide favorable margins and will not be significantly affected by
business cycles or consumer preferences. The Company also believes that its
development and operation of collision repair centers will provide incremental
parts business to its dealerships. For the three-year period ended June 30,
1997, and the nine months ended March 31, 1998, Collision Centers USA's revenues
have accounted for less than one percent of the total combined pro forma
revenues of the Company.
FINANCE AND INSURANCE
The Company will offer its customers a wide range of financing and leasing
alternatives for the purchase of vehicles. In addition, as part of each sale,
the Company offers customers credit life, accident and health and disability
insurance to cover the financing cost of their vehicles, as well as warranty or
extended service contracts. The Company's pro forma revenue from financing,
insurance and extended warranty transactions was $17.4 million for the year
ended June 30, 1997 and $13.5 million for the nine months ended March 31, 1998.
The Company believes that its customers' ability to obtain financing at its
dealerships significantly enhances the Company's ability to sell new and used
vehicles. The Company provides a variety of financing and leasing alternatives
in order to meet the specific needs of each potential customer. The Company
believes its ability to obtain customer-tailored financing on a "same day" basis
provides it with an advantage over many of its competitors, particularly smaller
competitors which do not generate sufficient volume to attract the diversity of
financing sources that are available to the Company. Each dealership will then
be able to provide a 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
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<PAGE> 83
loans for the purchase of vehicles and also purchases and services installment
loans from select automotive 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)........ 9.8% 8.7% 5.7%
======= ======= =======
</TABLE>
- ---------------
(1) The portfolio balance in 1996 was on a full recourse basis. Starting in
February 1997 all loans were purchased on a non-recourse basis.
<TABLE>
<CAPTION>
FOR THE THREE
FOR THE YEAR ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------- ---------------
1996 1997 1997 1998
-------- -------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Number of loans purchased................................ 3,982 4,122 636 761
Principal balance of loans purchased..................... $19,910 $22,671 $3,218 $5,212
Average principal balance of loans purchased............. $ 5.0 $ 5.5 $ 5.1 $ 5.5
Average portfolio yield.................................. 29.9% 28.1% 27.5% 27.9%
Average cost of funds.................................... 11.5% 10.7% 10.6% 11.0%
</TABLE>
In addition to its financing activities, the Company offers extended
service contracts in connection with the sale of new and used vehicles. Extended
service contracts on new vehicles supplement the warranties offered by the
vehicle manufacturers, and on used vehicles, such contracts supplement any
remaining manufacturer warranty or serve as the primary service contract on the
vehicle. The Company has recently entered into an agreement with a leading
insurance carrier to share in certain revenues generated by the sale of extended
warranty contracts. The extended service contracts sold by the Company, in the
aggregate, accounted for less than one percent of the Company's total pro forma
combined revenues for the three-year period ended June 30, 1997 and for the nine
months ended March 31, 1998. The Company also offers its customers credit life,
health and accident insurance when they finance an automobile purchase, and
receives a commission on each policy sold.
SALES AND MARKETING
The Company's marketing and advertising activities vary among its
dealerships and among its markets. The Company advertises primarily through
newspapers, radio, television and direct mail and regularly conducts special
promotions designed to focus vehicle buyers on its product offerings. The
Company intends to continue tailoring its marketing efforts to the relevant
marketplace in order to reach the Company's targeted customer base. The Company
also employs computer technology to aid salespeople in identifying potential new
customers. Under arrangements with each of the manufacturers, the Company
receives a subsidy for a portion of its advertising expenses incurred in
connection with a manufacturer's vehicles. Because of the Company's leading
market presence in certain markets, the Company believes it has been able to
realize cost 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.
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<PAGE> 84
RELATIONSHIPS WITH MANUFACTURERS
Each of the Company's dealerships operates under a separate Franchise
Agreement which governs the relationship between the dealership and the
manufacturer. In general, each Franchise Agreement specifies the location of the
dealership for the sale of vehicles and for the performance of certain approved
services in a specified market area. The designation of such areas generally
does not guarantee exclusivity within a specified territory. In addition, most
manufacturers allocate vehicles on a "turn and earn" basis which rewards high
volume. A Franchise Agreement typically requires the dealer to meet specified
standards regarding showrooms, the facilities and equipment for servicing
vehicles, inventories, minimum net working capital, personnel training, and
other aspects of the business. The Franchise Agreement with each dealership also
gives each manufacturer the right to approve the dealership's general manager
and any material change in management or ownership of the dealership. Each
manufacturer may terminate a Franchise Agreement under certain circumstances,
such as a change in control of the dealership without manufacturer approval, the
impairment of the reputation or financial condition of the dealership, the
death, removal or withdrawal of the dealership's general manager, the conviction
of the dealership or the dealership's owner or general manager of certain
crimes, a failure to adequately operate the dealership or maintain wholesale
financing arrangements, insolvency or bankruptcy of the dealership or a material
breach of other provisions of the Franchise Agreement. In connection with the
Offering, the Company is 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 Company's knowledge of each applicable
manufacturer's policies existing on the date of this Prospectus. To the extent
the applicable manufacturers have not indicated that they will impose specific
ownership limitations on the Company, the Company expects to be governed by
ownership limitations that are similar to those discussed below for public
companies in general. However, there can be no assurance that the manufacturers
will not modify or remove 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, Chrysler, GM, Hummer and Nissan have
verbally informed the Company that they anticipate approving the Merger, the
Acquisitions and this Offering and the proposed acquisitions of Chrysler, GM,
Hummer and Nissan dealerships, as applicable, pursuant to the Acquisitions and
the Merger. The final approvals of Chrysler, GM, Hummer and Nissan are subject
to the execution of certain documents and the completion of this Offering. 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
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<PAGE> 85
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 the authority to operate the dealership on a day-to-day basis; (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 Ford authorized
dealership in those market areas having three or less such dealerships or with
the parent company owning or controlling more than 25% of the Ford authorized
dealerships in market areas have four or more such dealerships; (i) the
preceding limitations shall apply separately to Ford and Lincoln Mercury
dealerships; (j) should the preceding limits be reached, Ford will consider
extending the limitations; and (k) each dealership shall operate as an exclusive
fully-dedicated Ford and/or Mercury and/or Lincoln dealership.
In addition to these general policies, Ford has specifically indicated to
the Company that as a condition to Ford's approval of the Offering, the Merger
and the Acquisitions, Ford will require the Company to relocate
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<PAGE> 86
its existing Duluth, Georgia Ford dealership and potentially construct a new
Ford dealership facility at the new Duluth location. The Company is currently
evaluating the costs of such relocation and new facility and expects to fund
such costs out of the Company's working capital. 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.
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
84
<PAGE> 87
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. The Company
is not aware of any general policy restrictions that have been announced by
Honda other than the ownership limitations described herein.
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.
Until recently, Saturn had not approved any public ownership of its
dealership franchises, and the Company is not aware of what Saturn's current
policy is on public ownership of its dealerships. For this reason, the financial
results of the Company's Saturn dealership in Columbus, Georgia have not been
included in this
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<PAGE> 88
Prospectus. The Company will use its best efforts to obtain Saturn approval;
however, if Saturn does not approve the Company's ownership of the Saturn
dealership in Columbus, Georgia, the Company will sell the Saturn dealership.
The Company's acquisition program may be limited by the automobile
manufacturers with which the Company has a Franchise Agreement.
The following table sets forth (i) the manufacturers' general policies on
public company ownership to the extent known by the Company to be effective as
of the date of this Prospectus or as the Company believes will be required by
the manufacturers in connection with their approval of the Acquisitions and the
Merger; (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; (iv) the number of additional
dealerships the Company believes it may own/acquire nationally pursuant to the
manufacturers' restrictions; and (v) the number of additional dealerships the
Company believes it may own/acquire in the Atlanta market and the applicable
region/zone as indicated pursuant to the manufacturers' restrictions:
<TABLE>
<CAPTION>
(I) (II) (III) (IV) (V)
------------------- ------------------------------------ --------------- ------------ ------------
RESTRICTIONS ON THE
NUMBER OF
DEALERSHIPS MAXIMUM NUMBER OF
COMPANY MAY NUMBER OF NUMBER OF ADDITIONAL
OWN/ACQUIRE DEALERSHIPS ADDITIONAL DEALERSHIPS
PURSUANT TO OWNED FOR DEALERSHIPS COMPANY MAY
PRESENT PURPOSES OF COMPANY MAY OWN/ ACQUIRE
MANUFACTURERS' ADDITIONAL RESTRICTIONS ON NUMBER OF MANUFACTURERS' OWN/ ACQUIRE IN ATLANTA
MANUFACTURER RESTRICTIONS DEALERSHIPS IN A REGION/ZONE/MARKET RESTRICTIONS(6) NATIONALLY MARKET
- --------------------- ------------------- ------------------------------------ --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Chrysler(1).......... No more than 10 No more than maximum of 6 Chrysler 1 9 nationally 2 in Atlanta
dealerships dealerships in the same sales zone (Chrysler- or in Market; 6 in
(as defined by Chrysler) and 2 Dodge-Jeep- Southeast same sales
Chrysler dealerships in the same Plymouth; zone
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 No more than
15 Ford and 15 any market area (as defined by Ford) (2 Ford/ 25% of the
Lincoln Mercury that has 3 or fewer Ford dealerships Mercury, Ford
dealerships or (ii) and no more than 25% of the Ford Buford, GA and dealerships
that number of Ford dealerships in a market area having Franklin, NC; 2 in Atlanta
and Lincoln Mercury 4 or more Ford dealerships Ford, Smyrna area
dealerships and Duluth, GA) (approximately
accounting for 2% 1-2
of the preceding additional
year's retail sales dealerships)
of those brands in
the United States
</TABLE>
86
<PAGE> 89
<TABLE>
<CAPTION>
(I) (II) (III) (IV) (V)
------------------- ------------------------------------ --------------- ------------ ------------
RESTRICTIONS ON THE
NUMBER OF
DEALERSHIPS MAXIMUM NUMBER OF
COMPANY MAY NUMBER OF NUMBER OF ADDITIONAL
OWN/ACQUIRE DEALERSHIPS ADDITIONAL DEALERSHIPS
PURSUANT TO OWNED FOR DEALERSHIPS COMPANY MAY
PRESENT PURPOSES OF COMPANY MAY OWN/ ACQUIRE
MANUFACTURERS' ADDITIONAL RESTRICTIONS ON NUMBER OF MANUFACTURERS' OWN/ ACQUIRE IN ATLANTA
MANUFACTURER RESTRICTIONS DEALERSHIPS IN A REGION/ZONE/MARKET RESTRICTIONS(6) NATIONALLY MARKET
- --------------------- ------------------- ------------------------------------ --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
General Motors(3).... Acquisitions of no May acquire no more than 50% of the 5 No more than No more than
more than 5 GM dealerships (by franchise line) (2 Pontiac- 50% of the 50% of the
dealerships during in a GM-defined geographic market Buick-GMC, GM GM
a two-year period; area having multiple GM dealerships, Smyrna and dealerships dealerships
no additional and GM may further limit Columbus, GA; 2 (by (by
dealerships for at acquisitions of GM dealerships by a Chevrolet, franchise franchise
least 12-24 months single public company until all Acworth, GA and line) in a line) in a
existing GM dealerships of that Elizabethton, GM-defined GM-defined
public company meet certain GM TN; 1 geographic geographic
criteria for sales, market Oldsmobile- market area market area
penetration, CSI and other GM- Cadillac, having having
established standards Gainesville, multiple GM multiple GM
GA) dealerships; dealerships;
none for at none for at
least 12-24 least 12-24
months months
following following
Offering; GM Offering; GM
may allow may allow
additional additional
acquisitions acquisitions
American Honda Co.,
Inc. ("Honda")(4).. 7 Honda dealerships Public companies restricted to (i) 1 1 (Honda, 6 Honda and 1 Honda and
and 3 Acura Honda dealership in a "Metro" market Cartersville, 3 Acura 1 Acura
dealerships (defined by Honda as a metropolitan GA)
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
unknown to the
Company
Isuzu................ Restrictions Restrictions unknown to the Company 2 (Duluth and Unknown Unknown
unknown to the Gainesville,
Company GA)
Kia.................. Restrictions Restrictions unknown to the Company 1 Unknown Unknown
unknown to the (Elizabethton,
Company TN)
Mazda................ Restrictions Restrictions unknown to the Company 2 (Gainesville Unknown Unknown
unknown to the and Columbus,
Company GA)
Mitsubishi........... Restrictions Restrictions unknown to the Company 2 (Kennesaw, Unknown Unknown
unknown to the and Columbus,
Company GA)
</TABLE>
87
<PAGE> 90
<TABLE>
<CAPTION>
(I) (II) (III) (IV) (V)
------------------- ------------------------------------ --------------- ------------ ------------
RESTRICTIONS ON THE
NUMBER OF
DEALERSHIPS MAXIMUM NUMBER OF
COMPANY MAY NUMBER OF NUMBER OF ADDITIONAL
OWN/ACQUIRE DEALERSHIPS ADDITIONAL DEALERSHIPS
PURSUANT TO OWNED FOR DEALERSHIPS COMPANY MAY
PRESENT PURPOSES OF COMPANY MAY OWN/ ACQUIRE
MANUFACTURERS' ADDITIONAL RESTRICTIONS ON NUMBER OF MANUFACTURERS' OWN/ ACQUIRE IN ATLANTA
MANUFACTURER RESTRICTIONS DEALERSHIPS IN A REGION/ZONE/MARKET RESTRICTIONS(6) NATIONALLY MARKET
- --------------------- ------------------- ------------------------------------ --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Nissan............... Restrictions Restrictions unknown to the Company 1 (Duluth, GA) Unknown Unknown
unknown to the
Company
Toyota Motor......... 7 Toyota Number of Toyota dealerships that 1 (Toyota, 6 Toyota and Toyota: 4 in
Corporation dealerships and 3 may be owned by a single public Columbus, GA) 3 Lexus region, 2 in
("Toyota")(5) Lexus dealerships company are limited to (i) the Atlanta
greater of 1 dealership or 20% of market;
the number of Toyota dealer counts Lexus: 2
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 and GM's current proposal to
the Company 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.
In addition to the ownership limitations described herein, manufacturers
generally require that the Executive Manager of each of the Company's
dealerships 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 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
88
<PAGE> 91
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 operates is highly
competitive. The industry is fragmented and characterized by a large number of
independent operators, many of whom are individuals, families and small groups.
In the sale of new vehicles, the Company principally competes with other new
automotive dealers in the same general vicinity of the Company's dealership
locations. Such competing dealerships may offer the same or different models and
makes of vehicles that the Company sells. In the sale of used vehicles, the
Company principally competes with other used automobile dealers and with new
automobile dealers that operate used automobile lots in the same general
vicinity of the Company's dealership locations. In each of its markets, the
Company competes with numerous other new automobile dealers selling other brands
and a large number of other used automobile stores. In addition, certain
regional and national car rental companies operate retail used car lots to
dispose of their used rental cars. See "Risk Factors -- Competition."
The Company also may face increased competition from certain used
automobile "superstores," such as CarMax, AutoNation USA and Driver's Mart
Worldwide Inc. Such used automobile superstores have emerged recently in various
areas of the United States and are beginning to expand nationally. Such
"superstores" have recently opened in certain markets in which the Company
competes. In addition, the Company competes with independent leasing companies,
and, to a lesser extent, with an increasing number of automobile dealers that
sell vehicles through nontraditional methods, such as through direct mail, the
Internet or warehouse clubs.
The Company believes that the principal competitive factors in vehicle
sales are the marketing campaigns conducted by manufacturers, the ability of
dealerships to offer a wide selection of the most popular vehicles, the location
of dealerships and the quality of customer service. In the Company's "main
street" markets, competition tends to be interbrand rather than intrabrand. This
has the effect of eliminating brand saturation within a given market. Other
competitive factors include customer preference for particular brands of
automobiles, pricing (including manufacturer rebates and other special offers)
and warranties. The Company believes that its dealerships are competitive in all
of these areas. However, as it enters other markets, the Company may face
competitors that are more established or have access to greater financial
resources. The
89
<PAGE> 92
Company, however, does not have any cost advantage in purchasing new vehicles
from manufacturers and typically relies on advertising and merchandising, sales
expertise, service reputation and location of its dealerships to sell new
vehicles.
The Company competes against other franchised dealers to perform warranty
repairs and against other automobile dealers, franchised and independent service
center chains and independent garages for customer-paid repair and routine
maintenance business. The Company competes with other automobile dealers,
service stores and auto parts retailers in its parts operations. The Company
believes that the principal competitive factors in parts and service sales are
price, the use of factory-approved replacement parts, the familiarity with a
manufacturer's brands and models and the quality of customer service. A number
of regional or national chains offer selected parts and services at prices that
may be lower than the Company's prices.
GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL MATTERS
A number of regulations affect the Company's business of marketing,
selling, financing and servicing automobiles. The Company also is subject to
laws and regulations relating to business corporations generally. Under North
Carolina, Tennessee, and Georgia law, as well as the laws of other states into
which the Company may expand, the Company must obtain a license in order to
establish, operate or relocate a dealership or operate an automotive repair
service. Under Florida law, the Company must also obtain applicable insurance
and financing-related licenses in order to operate its sub-prime finance
business. These laws also regulate the Company's conduct of business, including
its advertising and sales practices. Other states may have similar requirements.
The Company's operations are also subject to laws governing consumer
protection. Automobile dealers and manufacturers are subject to so-called "Lemon
Laws" that require a manufacturer or the dealer to replace a new vehicle or
accept it for a full refund within one year after initial purchase if the
vehicle does not conform to the manufacturer's express warranties and the dealer
or manufacturer, after a reasonable number of attempts, is unable to correct or
repair the defect. Federal laws require certain written disclosures to be
provided on new vehicles, including mileage and pricing information.
The Company's financing activities with its customers are subject to
federal truth-in-lending, consumer leasing and equal credit opportunity
regulations as well as state and local motor vehicle finance laws, installment
finance laws, usury laws and other installment sales laws. Some states regulate
finance fees that may be paid as a result of vehicle sales. State and federal
environmental regulations, including regulations governing air and water quality
and the storage and disposal of gasoline, oil and other materials, also apply to
the Company.
The Company believes that it complies in all material respects with the
laws affecting its business. Possible penalties for violation of any of these
laws include revocation of the Company's licenses and fines. In addition, many
laws may give customers a private cause of action.
As with automotive dealerships generally, and service, parts and body shop
operations in particular, the Company's business involves the use, storage,
handling and contracting for recycling or disposal of hazardous or toxic
substances or wastes, including environmentally sensitive materials such as
motor oil, waste motor oil and filters, transmission fluid, antifreeze, Freon,
waste paint and lacquer thinner, batteries, solvents, lubricants, degreasing
agents, gasoline and diesel fuels. The Company's business also involves the past
and current operation and/or removal of aboveground and underground storage
tanks containing such substances or wastes. Accordingly, the Company is subject
to regulation by federal, state and local authorities establishing health and
environmental quality standards, and liability related thereto, and providing
penalties for violations of those standards. The Company is also subject to
laws, ordinances and regulations governing remediation of contamination at
facilities it operates or to which it sends hazardous or toxic substances or
wastes for treatment, recycling or disposal. The Company believes that it does
not have any material environmental liabilities and that compliance with
environmental laws and regulations will not, individually or in the aggregate,
have a material adverse effect on the Company's results of operations or
financial condition. Furthermore, environmental laws and regulations are complex
and subject to frequent change. There can be no assurance that compliance with
amended, new or more stringent laws or regulations, stricter interpretations of
existing laws or the future discovery of environmental conditions will not
require additional expenditures by
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<PAGE> 93
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, 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,
Inc......................... Lease 2355 Browns Bridge Road New and used vehicle 2005
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
Ford Mercury................ Lease 4910 Sylva Highway New and used vehicle 2016
Franklin, NC sales; service; F&I
Day's Chevrolet, Inc.......... Lease 4461 S. Main St. New and used vehicle 2008
Acworth, GA sales; service; F&I
Wade Ford, Inc................ Lease 3860 South Cobb Drive New and used vehicle 2008
Smyrna, GA sale; service; F&I
Lease 3860 South Cobb Drive Fleet sales; vehicle 2005
Smyrna, GA storage
Wade Ford Buford, Inc......... Lease 4525 Highway 20 New and used vehicle Month-to-Month
Buford, GA sales; service; F&I
South Financial Corporation... Lease 3500 Blanding Blvd. Consumer Lending 2003
Jacksonville, FL Administration
Jay Automotive Group, Inc..... Lease 1661 Whittlesey Road New and used vehicle 2017
Columbus, GA sales; service; F&I
Lease Veterans Parkway New and used vehicle Month-to-Month
Columbus, GA sales; service; F&I
Lease Victory Drive Used vehicle sales; Month-to-Month
Columbus, GA F&I
Lease 1801 Box Road Used vehicle sales; 1999
Columbus, GA F&I
Boomershine Automotive Group,
Inc......................... Lease 2150 Cobb Parkway New and used vehicle 1999
Smyrna, GA sales; service; F&I
Lease 3280 Commerce Ave. New and used vehicle 2003
Duluth, GA sales; service; F&I
Lease 3230 Satellite Blvd. New and used vehicle 2017
Duluth, GA sales; service; F&I
Lease 595 East Main St. New and used vehicle 2006
Cartersville, GA sales; service; F&I
Lease 964 Barrett Parkway New and used vehicle 2000
Kennesaw, GA sales; service; F&I
Lease 2970 Old Norcross Rd. Collision Center 2016
Duluth, GA
Collision Centers USA......... Lease 5548 Old Dixie Highway Collision Center 2009
Forest Park, GA
Lease 1715 Cobb Parkway Collision Center 2013
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 are leased as
set forth in the foregoing table. The Company believes that its facilities are
adequate for its current needs. In connection with its acquisition strategy, the
Company intends to lease the real estate associated with a particular business
unit whenever practicable. Under the terms of its Franchise Agreements, the
Company must maintain an appropriate appearance and design of its facilities and
is restricted in its ability to relocate its dealerships. See "-- Relationships
with Manufacturers."
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<PAGE> 94
EMPLOYEES
As of March 31, 1998, pro forma for the Merger and the Acquisitions, the
Company employed 1,148 people, of whom approximately 177 were employed in
managerial positions, 347 were employed in non-managerial sales positions, 386
were employed in non-managerial parts and service positions and 238 were
employed in administrative support positions.
The following table sets forth information regarding the number of
employees employed by Sunbelt and its subsidiaries, pro forma for the Merger and
the Acquisition, as of March 31, 1998:
<TABLE>
<CAPTION>
PERCENT
BUSINESS UNIT EMPLOYEES OF SUNBELT
- ------------- --------- ----------
<S> <C> <C>
Boomershine Automotive Group, Inc........................... 478 41.6%
Day's Chevrolet, Inc........................................ 89 7.8
Grindstaff, Inc............................................. 135 11.8
Hones, Inc.................................................. 36 3.1
Jay Automotive Group, Inc................................... 178 15.5
Robertson Oldsmobile-Cadillac, Inc.......................... 35 3.0
Sunbelt Automotive Group, Inc. (Corporate).................. 11 1.0
Wade Ford, Inc. and Wade Ford Buford, Inc................... 186 16.2
----- ------
1,148 100.0%
===== ======
</TABLE>
The Company believes that many dealerships in the automotive retailing
industry have had difficulty in attracting and retaining qualified personnel for
a number of reasons, including the historical inability of dealerships to
provide employees with a liquid equity interest in the profitability of the
dealerships. The Company intends, upon completion of the Offering, to provide
certain executive officers, managers and other employees with stock options and
all employees with a stock purchase plan and believes those types of equity
incentives will be attractive to existing and prospective employees of the
Company. See "Management -- Incentive Stock Plan" and "Risk
Factors -- Dependence on Key Personnel and Limited Management and Personnel
Resources."
The Company believes that its relationship with its employees is good. None
of the Company's employees is represented by a labor union. Because of its
dependence on the manufacturers, however, the Company may be affected by labor
strikes, work slowdowns and walkouts at the manufacturers' manufacturing
facilities. See "Risk Factors -- Dependence on Automobile Manufacturers," "Risk
Factors -- Strikes and Labor Actions; GM Strike" and "Business -- Cyclicality."
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<PAGE> 95
LEGAL PROCEEDINGS AND INSURANCE
From time to time, the Company is named in claims involving the
manufacture, servicing and/or repair of automobiles, contractual disputes and
other matters arising in the ordinary course of the Company's business.
Currently, no legal proceedings are pending against or involve the Company that,
in the opinion of management, could reasonably be expected to have a material
adverse effect on the business, financial condition or results of operations of
the Company. Because of their vehicle inventory and nature of business,
automotive dealerships generally require significant levels of insurance
covering a broad variety of risks. The Company's insurance includes an umbrella
policy as well as insurance on its buildings, comprehensive coverage for its
vehicle inventory, general liability insurance, employee dishonesty coverage and
errors and omissions insurance in connection with its vehicle sales and
financing activities.
93
<PAGE> 96
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
94
<PAGE> 97
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.
95
<PAGE> 98
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.
96
<PAGE> 99
EXECUTIVE COMPENSATION
The Company was incorporated on December 17, 1997 and did not conduct any
operations prior to that time. Neither the Chief Executive Officer, nor any
other executive officer of the Company, received any compensation in 1997 from
the Company.
Set forth below is information for the years ended June 30, 1997, 1996 and
1995 with respect to the executive officers of Boomershine Automotive, as the
predecessor of the Company.
SUMMARY ANNUAL COMPENSATION
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS
- ---------------------------- ---- -------- --------
<S> <C> <C> <C>
Walter M. Boomershine, Jr.,................................. 1997 $ 49,200 $ --
Chairman and Senior Vice 1996 49,200 680,400
President 1995 49,200 766,931
Charles K. Yancey,.......................................... 1997 $102,033 $ --
President, Chief Operating 1996 102,033 403,297
Officer and Director 1995 102,033 398,466
Ricky L. Brown,............................................. 1997 $ 62,000 $ --
Chief Financial Officer and Controller 1996 -- --
1995 -- --
</TABLE>
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company has entered or will enter into employment agreements with
Messrs. Walter M. Boomershine, Jr., Robert W. Gundeck, Charles K. Yancey,
Stephen C. Whicker and Ricky L. Brown (the "Employment Agreements"), each of
which will be effective upon the effective date of this Offering. The Employment
Agreements provide for an annual base salary, potential fiscal year end bonuses
and certain other benefits. Each Employment Agreement generally provides for a
level annual increase of the base salary throughout the term of the agreement
and provides that any annual bonuses will be based upon certain
performance-related objectives of the Company that will be ultimately
established by the Compensation Committee. Certain terms of the Employment
Agreements are summarized in the table below:
<TABLE>
<CAPTION>
FIRST YEAR
TERM BASE STOCK
EMPLOYEE POSITION/TITLE (YEARS) COMPENSATION OPTIONS(1)
- -------- -------------- ------- ------------ ----------
<S> <C> <C> <C> <C>
Walter M. Boomershine,
Jr........................ Chairman and Senior Vice President 3 $200,000 25,000
Robert W. Gundeck........... Chief Executive Officer 5 300,000 350,000
Charles K. Yancey........... Chief Operating Officer and President 5 250,000 540,000
Stephen C. Whicker.......... Executive V.P. of Corporate Development, 5 200,000 540,000
General Counsel and Secretary
Ricky L. Brown.............. Chief Financial Officer, Vice President 5 135,000 120,000
of Finance and Treasurer
</TABLE>
- ---------------
(1) As of the effective date of this Offering, pursuant to employee's
participation in the Company's Incentive Stock Plan. See
"Management -- Incentive Stock Plan."
Each of the Employment Agreements of Messrs. Gundeck, Whicker and Brown are
for a term of generally five years and may be renewed for terms of one to three
years thereafter. Mr. Boomershine's Employment Agreement provides that he will
serve as Senior Vice President for a term ending December 31, 2000 and as a
consultant to the Company for a term of 10 years thereafter. Mr. Boomershine's
base salary during the consultation period will be $200,000 for the first two
years and $100,000 each year thereafter. Mr. Yancey's Employment Agreement
provides that he will serve as Chief Operating Officer and President of the
Company for a term of five years and as a consultant to the Company for a term
of generally five years thereafter. Mr. Yancey's base salary during said
consultation period will be $50,000 per year.
97
<PAGE> 100
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."
98
<PAGE> 101
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.
99
<PAGE> 102
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
100
<PAGE> 103
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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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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(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 Company's dealership subsidiaries
are owned by officers, directors or holders of 5% or more of the common stock of
the Company or their affiliates (the "Related Party Leases"). The Company
believes that the terms and conditions of each of these leases are no less
favorable than those that could be obtained from non-affiliated parties. Each of
the Related Party Leases and the rent payable thereunder are described below.
For a more complete description of the location, use and expiration date of each
lease, see "Business -- Facilities."
During 1995, 1996 and 1997, and continuing after the Offering, the entities
listed below have leased and will continue to lease the real properties on which
their dealerships or operations are located from limited partnerships (WINCO I,
L.P., WINCO II, L.P. and WINCO III, L.P.) controlled by Walter M. Boomershine,
Jr., who is the Chairman of the Board and Senior Vice President of the Company,
and owned by Walter M. Boomershine, Jr. and his family:
<TABLE>
<CAPTION>
ANNUAL
FRANCHISE/SUBSIDIARY RENTAL PAYMENT
- -------------------- --------------
<S> <C>
Boomershine Ford and Boomershine Isuzu...................... $480,000
Collision Centers USA (Duluth center)....................... 240,000
Boomershine Pontiac-Buick-GMC, Inc.......................... 281,388
Boomershine Hummer.......................................... 130,800
Boomershine Nissan.......................................... 210,000
Boomershine Mitsubishi...................................... 180,000
</TABLE>
Each of these leases requires the respective lessees to pay the taxes,
insurance and maintenance expenses related to the applicable leased property.
Wade Ford, Inc. leases one of the two parcels of real property on which its
dealership is located (the "Wade Lease"), and Wade Ford Buford, Inc. leases the
parcel on which its dealership is located (the "Wade Buford Lease"), from Mr.
Alan K. Arnold, who is a director of the Company. The other parcel on which Wade
Ford, Inc.'s dealership is located is owned by an unaffiliated third party. The
Wade Lease annual rental payments during Wade Ford, Inc.'s last fiscal year were
$420,000, and the Wade Buford Lease annual rental payments during Wade Ford
Buford, Inc.'s last fiscal year were $240,000. Both leases require the
respective subsidiaries to pay the taxes, insurance and maintenance expenses
related to the leased property.
Robertson Oldsmobile-Cadillac, Inc. leases the real property on which its
dealerships are located from Mr. E. Moss Robertson, Jr., who is the son-in-law
of Mr. Walter M. Boomershine, Jr., the Chairman of the Board and Senior Vice
President of the Company. Prior to the Offering, the annual rental payments
under the lease were $180,000 for 1997 and $149,600 for 1996. As part of the
Acquisition, Mr. Robertson and the Company have agreed to replace the existing
lease with a new lease agreement, pursuant to which the annual
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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, the Company borrowed
the sum of $4.5 million from WINCO I, L.P., a limited partnership controlled by
Walter M. Boomershine, Jr. and owned by Walter M. Boomershine, Jr. and his
family. This loan was made pursuant to a promissory note which 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. The Company 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.
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
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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.
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
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<PAGE> 108
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 (unregistered shares in the case of the
Wade Ford Acquisition and registered shares in the case of the Day's Chevrolet
Acquisition).
GEORGIA LAW, CERTAIN ARTICLES AND BYLAW PROVISIONS AND CERTAIN FRANCHISE
AGREEMENT PROVISIONS
Certain provisions of Georgia law and of the Company's Articles and Bylaws,
summarized in the following paragraphs, may be considered to have an
anti-takeover effect and may delay, deter or prevent a tender offer, proxy
contest or other takeover attempt that a shareholder might consider to be in
such shareholder's best interest, including such an attempt as might result in
payment of a premium over the market price for shares held by shareholders
unless the takeover or change of control is approved by the Company's Board of
Directors. Such provisions may also make the removal of directors and management
more difficult.
Georgia Anti-takeover Law. The GBCC restricts certain business
combinations with "interested shareholders" (as defined below) (the "Business
Combination Statute"), and contains fair price requirements applicable to
certain mergers with certain interested shareholders (the "Fair Price Statute").
In accordance with the provisions of these statutes, the Company must elect in
its Bylaws to be covered by the restrictions imposed by these statutes. The
Company has elected to be covered by such restrictions in its Bylaws, and such
bylaw provisions may only be repealed upon a vote of at least two-thirds of
continuing directors and a majority of the voting shares of the Company.
Furthermore, shareholders may amend or repeal the Company's Bylaws or adopt new
Bylaws (even though these Bylaws may also be amended or repealed by the Board of
Directors).
The Business Combination Statute regulates business combinations such as
mergers, consolidations, share exchanges and asset purchases where the acquired
business has at least 100 shareholders residing in Georgia and has its principal
office in Georgia, as the Company does, and where the acquiror became an
interested shareholder of the corporation, unless either: (i) the transaction
resulting in such acquiror becoming an interested shareholder or the business
combination received the approval of the corporation's board of directors prior
to the date on which the acquiror became an interested shareholder; or (ii) the
acquiror became the owner of at least 90% of the outstanding voting shares of
the corporation (excluding any shares held by certain other persons) in the same
transaction in which the acquiror became an interested shareholder. For purposes
of the Business Combination Statute and the Fair Price Statute, an "interested
shareholder" generally is any person who directly or indirectly, alone or in
concert with others, beneficially owns or controls 10% or more of the voting
power of the outstanding voting shares of the corporation. The Business
Combination Statute prohibits business combinations with an unapproved
interested shareholder for a period of five years after the date on which such
person became an interested shareholder.
The Fair Price Statute prohibits certain business combinations between a
Georgia business corporation and an interested shareholder. The Fair Price
Statute would permit the business combination to be effected if: (i) certain
"fair price" criteria are satisfied; (ii) the business combination is
unanimously approved by the continuing directors; (iii) the business combination
is recommended by at least two-thirds of the continuing
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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 the Chairman
or Chief Executive Officer of the Company, or by a majority vote of the Board of
Directors of the Company. These provisions may make it more difficult for
shareholders to take action opposed by the Board of Directors.
Advance Notice Requirements for Shareholder Proposals and Director
Nominations. The Company's Bylaws provide that shareholders seeking to bring
business before an annual meeting of shareholders, or to nominate candidates for
election as directors at an annual or a special meeting of shareholders, must
provide timely notice thereof in writing. To be timely, a shareholder's notice
must be delivered to, or mailed and received at, the principal executive office
of the Company at least sixty (60) days prior to the date of such annual or
special meeting. The Bylaws also specify certain requirements for a
shareholder's notice to be in proper written form. These provisions may preclude
some shareholders from bringing matters before the shareholders at an annual or
special meeting or from making nominations for directors at an annual or special
meeting.
Restrictions under Franchise Agreements. The manufacturers' agreements
relating to public companies impose various restrictions on the transfer of the
common stock. A number of manufacturers prohibit transactions which affect
changes in management control of the Company. For instance, Ford may cause the
Company to sell or resign from its Ford franchises if any person or entity
acquires 15% or more of the Company's voting securities. Likewise, GM, Toyota
and Nissan may force the sale of their respective franchises if 20% or more of
the Company's voting securities are so acquired. Chrysler also generally
approves of the public sale of only 50% of the common stock of a public company
and requires prior approval of any future sales that would result in a change in
voting or managerial control of such a public company. All or some of the
restrictions may apply to the Company once the Company reaches an agreement with
each respective manufacturer. Such restrictions may prevent or deter prospective
acquirors from obtaining control of the Company. See "Risk Factors -- Stock
Ownership/Issuance Limits; Limitation on Ability to Issue Additional Equity" and
"Business -- Relationships with Manufacturers."
LISTING
The Company has applied for quotation of the common stock on the Nasdaq
National Market under the symbol "SBLT."
TRANSFER AGENT AND REGISTRAR
The Company has appointed SunTrust Bank, Atlanta as the transfer agent and
registrar for the common stock.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have outstanding
10,557,862 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
109
<PAGE> 112
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
110
<PAGE> 113
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.
111
<PAGE> 114
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
112
<PAGE> 115
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.
113
<PAGE> 116
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.
114
<PAGE> 117
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................................................ 7
Articles.................................................... 25
Bill Holt Acquisition....................................... 30
Boomershine Automotive...................................... 7
Business Combination Statute................................ 106
Code........................................................ 99
Collision Centers........................................... 31
Collision Note(s)........................................... 31
Collision Centers USA Acquisition........................... 31
Combined Companies.......................................... 46
Commission.................................................. 27
common stock................................................ 3
Company..................................................... Front Cover
CSI......................................................... 5
Day's Chevrolet............................................. 30
Day's Chevrolet Acquisition................................. 30
Disqualifying Disposition................................... 100
Division VP................................................. 77
Employment Agreements....................................... 97
Exchange Act................................................ 27
Executive Manager........................................... 77
Executive Notes............................................. 104
Executive Shares............................................ 104
Fair Price Statute.......................................... 106
FIFO Conversion............................................. 12
Ford........................................................ 13
Franchise Agreement......................................... 13
GBCC........................................................ 25
G.E. Credit Facility........................................ 72
GM.......................................................... 13
GMAC........................................................ 57
Grindstaff Acquisition...................................... 30
Honda....................................................... 16
Incentive Stock Plan........................................ 99
IPO Date.................................................... 100
IPO Price................................................... 100
ISOs........................................................ 99
Jay Note.................................................... 29
Jay Automotive Group Acquisition............................ 29
LIFO Method................................................. 12
Merger...................................................... 28
NADA........................................................ Inside Front Cover
New Floorplan Facility...................................... 46
Nissan...................................................... 13
Non-United States Holder.................................... 109
NSOs........................................................ 99
Offering.................................................... 3
Price Protection Stock...................................... 106
</TABLE>
<PAGE> 118
<TABLE>
<CAPTION>
PAGE
<S> <C>
Registration Statement...................................... 113
Registration Rights Agreement(s)............................ 105
Related Party Leases........................................ 103
Representative.............................................. 112
Robertson Acquisition....................................... 30
ROC......................................................... 30
Saturn...................................................... 14
Securities Act.............................................. 27
South Financial............................................. 6
South Financial Acquisition................................. 31
Sunbelt..................................................... Front Cover
Toyota...................................................... 17
U.S......................................................... 109
U.S. Person................................................. 109
Underwriters................................................ 112
Wade Lease.................................................. 103
Wade Buford Lease........................................... 103
Wade Ford Acquisition....................................... 29
Wade Ford Dealerships....................................... 29
WINCO Partnerships.......................................... 104
</TABLE>
<PAGE> 119
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> 120
<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> 121
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> 122
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> 123
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> 124
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> 125
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> 126
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> 127
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 -- 12,504,000 15,969,000
--------- ---------- ---------- ----------- -----------
4,802,660 $9,022,500 $4,932,000 $53,107,000 $67,061,500
========= ========== ========== =========== ===========
</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%. The note to be
issued in connection with the Jay Group acquisition will have a 90 day maturity
and bear an interest rate of 8%. The restricted shares have been valued using
the discounted
F-9
<PAGE> 128
SUNBELT AUTOMOTIVE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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> 129
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> 130
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> 131
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> 132
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> 133
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> 134
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> 135
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> 136
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> 137
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> 138
BOOMERSHINE AUTOMOTIVE GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. FLOOR PLAN NOTES PAYABLE, SENIOR DEBT, AND NOTES PAYABLE -- AFFILIATES
A summary of notes payable is as follows:
<TABLE>
<CAPTION>
JUNE 30,
------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Floor plan notes payable........................ $49,439,711 $36,798,078 $49,917,664
Senior debt, secured, bearing interest at LIBOR
plus 5.6% matures September 1998.............. -- -- 11,470,680
Notes payable -- stockholders; bearing interest
at prime rate; due on demand; unsecured....... 2,242,825 2,161,103 1,584,238
Notes payable -- employees; bearing interest at
prime rate; due on demand; unsecured.......... 630,336 458,384 338,404
Notes payable -- WINCO Partnerships; bearing
interest at prime rate; due on demand;
unsecured..................................... 584,054 680,439 832,306
Notes payable -- WINCO Partnerships; bearing
interest at prime; due on July 1998;
unsecured..................................... -- -- 4,500,000
----------- ----------- -----------
3,457,215 3,299,926 7,254,948
----------- ----------- -----------
$52,896,926 $40,098,004 $68,643,292
=========== =========== ===========
</TABLE>
Floor plan notes payable consists of notes with financial institutions. The
floor plan notes are secured by certain new and used vehicles. The floor plan
arrangements permit the Company to borrow up to approximately $49,500,000 and
$43,250,000 in 1996 and 1997, respectively, restricted by new and used vehicle
levels. The notes are generally due within ten days of the vehicle being sold or
after the vehicle has been in inventory for one year for new vehicles and after
three months for used vehicles. The notes bear interest based on contractual
rates, which ranged from approximately 7.5% to 8.3% and 7.1% to 8.0% at June 30,
1996 and 1997, respectively.
Senior debt at March 31, 1998, is comprised of a secured revolving note
payable to General Electric Capital Corporation (G.E. Capital) assumed in
connection with the purchase of South Financial Corporation (SFC). The G.E.
Capital revolving note is secured by finance contracts assigned to G.E. Capital
as well as all other assets. All contract collections are remitted directly to
G.E. Capital and applied towards the outstanding balance. Under the loan and
security agreement, SFC may borrow up to $15,000,000 by obtaining advances of
90% on SFC's net investment in all eligible contracts. The loan matures
September 1998, with provisions for automatic annual renewals unless terminated
by either party. The loan bears interest at LIBOR plus 5.6%. As of March 31,
1998, SFC was not in compliance with its credit agreement with G.E. Capital
Corporation, however; certain financial ratio covenants have been waived by G.E.
Capital for the period December 31, 1997 through September 30, 1998, which
allows SFC to be in compliance with its credit agreement.
WINCO I, L.P., WINCO II, L.P. and WINCO III, L.P. (collectively, the "WINCO
Partnerships") are partnerships controlled by Walter M. Boomershine, Jr. and
owned by Walter M. Boomershine, Jr. and his family. Walter M. Boomershine, Jr.
and his family own 100% of the Company. This note payable, which matures on July
1998, was made in connection with the acquisition of South Financial Corporation
and carries an interest at prime as announced by NationsBank, N.A. from time to
time. The Company has the option to refinance the loan for an additional term of
five years subsequent to said maturity date, at an interest rate of 8% per
annum, using a 20-year amortization.
F-20
<PAGE> 139
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> 140
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> 141
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> 142
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> 143
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> 144
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> 145
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> 146
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> 147
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> 148
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> 149
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> 150
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> 151
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> 152
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> 153
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> 154
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> 155
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> 156
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> 157
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> 158
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> 159
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> 160
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> 161
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> 162
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> 163
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> 164
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> 165
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> 166
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> 167
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> 168
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> 169
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> 170
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> 171
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> 172
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> 173
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> 174
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> 175
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> 176
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> 177
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> 178
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> 179
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> 180
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> 181
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> 182
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> 183
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> 184
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> 185
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> 186
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> 187
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> 188
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> 189
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> 190
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> 191
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> 192
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> 193
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> 194
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> 195
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> 196
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> 197
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> 198
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> 199
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> 200
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> 201
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> 202
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> 203
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> 204
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. INCOME TAXES
The following reconciliation displays the relationship between income
(loss) before income taxes and operating tax income (loss).
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- ---------
<S> <C> <C> <C>
Income (loss) before income taxes................ $ (381,589) $ 740,769 $ 429,747
Permanent differences............................ 10,231 11,485 8,748
Temporary differences............................ (812,697) (1,430,443) (349,373)
----------- ----------- ---------
Operating tax income (loss)...................... $(1,184,055) $ (678,189) $ 89,122
=========== =========== =========
</TABLE>
The operating tax loss may be offset against future taxable income. If not
used, the carryforward will expire in the year 2012.
The temporary differences consist primarily of losses recognized on
individual finance contracts which are permitted as deductions from taxable
income. Other differences include the deferral amounts associated with
non-refundable loan origination fees and commissions received on credit life
policies over the life of the contract in accordance with generally accepted
accounting principles.
The net deferred tax liability is comprised of the following:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Deferred tax liability...................................... $ 959,374 $ 654,613
Deferred tax asset.......................................... (692,888) (248,867)
--------- ---------
Deferred tax liability, net....................... $ 266,486 $ 405,746
========= =========
</TABLE>
Measurement of the provision for income taxes is based on the statutory
rate of 34% for federal taxes and approximately 5.5% for state taxes.
F-86
<PAGE> 205
SOUTH FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. TRANSACTIONS WITH RELATED PARTIES
The following schedule displays transactions with related parties during
the years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
SOUTH
SOUTH FINANCIAL
SUPER STAFF, FINANCIAL FLOORPLAN,
EQUILEASE INC. SERVICES INC. TOTAL
--------- ------------ --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Due from related parties,
December 31, 1995........... $ -- $ -- $ -- $ 414,861 $ 414,861
Advances...................... 23,292 1,817,821 28,587 30,525 1,900,225
Payments and other reductions
in amounts due.............. (23,292) (1,817,821) (28,587) (95,386) (1,965,086)
-------- ----------- -------- --------- -----------
Due from related parties,
December 31, 1996........... -- -- -- 350,000 350,000
Obligations accrued........... -- (1,852,767) -- -- (1,852,767)
Cash payments (receipts)...... -- 1,762,999 -- (350,000) 1,412,999
-------- ----------- -------- --------- -----------
Due to related parties,
December 31, 1997........... $ -- $ (89,768) $ -- $ -- $ (89,768)
======== =========== ======== ========= ===========
</TABLE>
SFC leases certain computer equipment from Equilease, another company
wholly-owned by the Stockholder.
SFC leases all its employees, except for the Stockholder, from Super Staff,
Inc., another company wholly-owned by the Stockholder. The amount due to Super
Staff, Inc. is included in Accounts payable and accrued expenses.
Included in transactions with South Financial Services is $24,375 for rent
of SFC's branch office in Gainesville, Florida.
South Financial Floorplan, Inc. finances floorplans for automobile dealers.
8. OPERATING LEASES
Certain office space is rented under operating leases. Certain leases
include options for renewal. Total rent expense for 1997, 1996 and 1995, was
$143,450, $147,131 and $118,598, respectively. Future minimum lease payments
under operating leases with an initial or remaining noncancelable term in excess
of one year at December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 97,428
1999........................................................ 78,373
2000........................................................ 67,013
2001........................................................ 55,434
2002........................................................ 55,434
--------
Total............................................. $353,682
========
</TABLE>
9. PRIOR PERIOD ADJUSTMENT
Retained earnings at the beginning of 1995 has been restated by $85,761.
SFC has corrected its method of computing interest income under the interest
(actuarial) method. The correction increased interest revenue for the years
prior to 1995 by $136,780, net of Federal and State taxes of $51,019.
F-87
<PAGE> 206
- ------------------------------------------------------
- ------------------------------------------------------
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.......................... 13
The Merger............................ 28
The Acquisitions...................... 29
Use of Proceeds....................... 32
Dividend Policy....................... 32
Capitalization........................ 33
Dilution.............................. 34
Selected Financial Data............... 35
Pro Forma Combined and Condensed
Financial Data...................... 37
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 45
Business.............................. 74
Management............................ 94
Principal Shareholders................ 102
Certain Transactions.................. 103
Description of Capital Stock.......... 104
Shares Eligible for Future Sale....... 108
Certain United States Federal Tax
Considerations for Non-United States
Holders............................. 109
Underwriting.......................... 112
Legal Matters......................... 114
Experts............................... 114
Additional Information................ 114
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> 207
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an estimate (except for the SEC, NASD and
Nasdaq fees) of the fees and expenses, all of which will be borne by the
Registrant, in connection with the sale and distribution of the securities being
registered, other than underwriting discounts and commissions.
<TABLE>
<CAPTION>
AMOUNT
-------
<S> <C>
SEC Registration Fee........................................ $20,525
NASD Filing Fee............................................. $ 7,457
Legal fees and expenses..................................... $ *
Nasdaq National Market Listing Fee.......................... $63,725
Accounting fees and expenses................................ $ *
Blue Sky fees and expenses.................................. $ *
Printing expenses........................................... $ *
Transfer Agent Fees......................................... $ *
Miscellaneous............................................... $ *
-------
Total............................................. $
=======
</TABLE>
- ---------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation of the Registrant provide that the Registrant
shall indemnify any person to the extent prescribed by the Georgia Business
Corporation Code (the "GBCC").
Section 14-2-851 of the GBCC authorizes, inter alia, a corporation to
indemnify any person ("Indemnitee") who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was an officer or director of such corporation or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided that
he acted in good faith and in a manner he reasonably believed to be in (in the
case of conduct in his official capacity) or not opposed to (in all other
instances) the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Section 14-2-851 further provides that a corporation may not
indemnify a director (1) in connection with a proceeding by or in the right of
the corporation, except for reasonable expenses incurred in connection with the
proceeding if it is determined that the director has met the relevant standard
of conduct under the GBCC; or (2) in connection with any proceeding with respect
to conduct for which he or she was adjudged liable on the basis that personal
benefit was improperly received by him or her, whether or not involving action
in his or her official capacity. In addition to the indemnifications set forth
above, Section 14-2-857 of the GBCC states that a corporation may also indemnify
and advance expenses to an officer, employee or agent of the corporation who is
a party to a proceeding because he or she is an officer, employee or agent of
the corporation to the extent as may be provided by the articles of
incorporation, the bylaws, a resolution of the board of directors, or contract
except for liability arising out of conduct that constitutes: (1) appropriation,
in violation of his or her duties, of any business opportunity of the
corporation; (2) acts or omissions which involve intentional misconduct or a
knowing violation of law; (3) liability for unlawful distribution; or (4)
receipt of an improper personal benefit. Where an officer or director is
successful on the merits or otherwise in defense of any action referred to
above, or in defense of any claim, issue or matter therein, the corporation must
indemnify him against the expenses (including attorneys' fees) which he
II-1
<PAGE> 208
actually and reasonably incurred in connection therewith. Section 14-7-855 of
the GBCC provides that any indemnification shall be made by the corporation only
as authorized in each specific case upon a determination by the (i)
shareholders, (ii) Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to such action, suit or proceeding or by a
majority of the members of a committee of two or more disinterested directors
appointed by vote, or (iii) special legal counsel if a quorum of disinterested
directors so directs or, if there are fewer than two disinterested directors,
selected by the Board of Directors. Section 14-2-859 of the GBCC provides that
indemnification pursuant to its provision is not exclusive of other rights of
indemnification to which a person may be entitled under any bylaw, agreement,
vote of shareholders or disinterested directors or otherwise.
Section 14-2-858 of the GBCC also empowers the Company to purchase and
maintain insurance on behalf of any person who is or was an officer, director,
employee or agent of the Company against liability asserted against or incurred
by him in any such capacity, whether or not the Company would have the power to
indemnify such officer or director against such liability under the provisions
of Part 5 of Article 8 of the GBCC. The Company intends to purchase and maintain
a directors' and officers' liability policy for such purposes.
In accordance with Section 14-2-202 of the GBCC, the Articles of
Incorporation of the Registrant set forth a provision which eliminates the
personal liability of directors to the Registrant or its shareholders for
monetary damages for any action taken, or any failure to take any action, as a
director, provided, however, that no provision eliminates or limits the
liability of a director; (1) for any appropriation, in violation of his duties,
of any business opportunity of the corporation; (2) for acts or omissions which
involve intentional misconduct or a knowing violation of law; (3) for liability
in connection with unlawful distributions; or (4) for any transaction from which
the director received an improper personal benefit; provided that no such
provision shall eliminate or limit the liability of a director for any act or
omission occurring prior to the date when such provision becomes effective.
Reference is made to Section of the Underwriting Agreement (Exhibit
1.1) 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> 209
- 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, and as assigned on March 31, 1998.
2.2** -- Agreement and Plan of Merger and Reorganization among
Boomershine Automotive Group, Inc., BAG Georgia I, Inc., BAG
Georgia II, Inc., Wade Ford, Inc., Wade Ford Buford, Inc.
and the shareholders of Wade Ford, Inc. and Wade Ford
Buford, Inc., dated November 21, 1997, as amended on January
19, 1998, as further amended on March 31, 1998, and as
further amended on April 28, 1998.
2.3** -- Stock Purchase Agreement among Sunbelt Automotive Group,
Inc., Boomershine Automotive Group, Inc., Robertson
Oldsmobile-Cadillac, Inc. and the shareholders of Robertson
Oldsmobile-Cadillac, Inc., dated March 1, 1998.
2.4** -- Agreement and Plan of Merger and Reorganization among
Sunbelt Automotive Group, Inc., BAG Georgia IV, Inc., Day's
Chevrolet, Inc. and the shareholders of Day's Chevrolet,
Inc., dated March 3, 1998.
2.5** -- Stock Purchase Agreement among Sunbelt Automotive Group,
Inc., BAG Tennessee II, Inc., Grindstaff, Inc. and the
shareholders of Grindstaff, Inc., dated December 27, 1997,
as amended on February 24, 1998.
</TABLE>
II-3
<PAGE> 210
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
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.
3.1** -- Articles of Incorporation of the Company.
3.2** -- Bylaws of the Company.
4.1 -- Specimen common stock certificate.
5.1* -- Opinion of Schnader Harrison Segal & Lewis LLP.
10.1** -- Form of Employment Agreement between the Company and Walter
M. Boomershine, Jr.
10.2** -- Form of Employment Agreement between the Company and Charles
K. Yancey.
10.3 -- Form of Employment Agreement between the Company and Robert
W. Gundeck.
10.4** -- Form of Employment Agreement between the Company and Stephen
C. Whicker.
10.5** -- Form of Employment Agreement between the Company and Ricky
L. Brown.
10.6 -- Form of Employment Agreement between the Company and Alan K.
Arnold.
10.7 -- Form of Employment Agreement between the Company and R.
Glynn Wimberly.
10.8 -- 1997 and 1998 Incentive Stock Plan of Company.
10.9** -- Twenty-Year Net Lease Agreement by and between Winco Ltd.,
as Lessor, and Boomershine Pontiac, Inc., and Lessee, dated
as of September 16, 1978; as amended on July 13, 1984.
10.10** -- Ten-Year Net Lease Agreement by and between Winco Ltd., as
Lessor, and Boomershine Pontiac-GMC Truck, Inc. d/b/a
Boomershine Nissan, as Lessee, dated as of January 28, 1995.
10.11** -- Lease Agreement by and between Winco, L.P., as Landlord, and
Ford Leasing Development Company, as Tenant, dated August
11, 1992.
10.12** -- Dealership Sublease by and between Ford Lease Development
Company, as Sublandlord, and Boomershine Ford, Inc., as
Subtenant, dated August 11, 1992.
10.13** -- Lease Agreement by and between Winco, L.P., as Lessor, and
Boomershine North Cobb, Inc. d/b/a Boomershine Mitsubishi,
as Lessee, dated January 16, 1996.
10.14** -- Lease Agreement by and between Winco, L.P., as Lessor, and
Thompson Automotive Group, Inc. d/b/a Boomershine Honda, as
Lessee, dated August 1, 1995.
10.15** -- Sub-Lease Agreement by and between Winco, L.P., as Lessor,
and Boomershine Ford, Inc., as Lessee, dated as of February
23, 1996.
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
</TABLE>
II-4
<PAGE> 211
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
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 6, 1996
10.22* -- Pontiac Division Dealer Sales and Service Agreement by and
between General Motors Corporation, Pontiac Division and
Boomershine Pontiac-Buick-GMC, Inc., dated February 16, 1996
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 1, 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
</TABLE>
II-5
<PAGE> 212
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
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)
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Pyke & Pierce, CPA's
23.3 -- Consent of Davis, Monk & Company
23.4* -- Consent of Schnader Harrison Segal & Lewis LLP (included in
the opinion filed as Exhibit 5.1)
24.1** -- Powers of Attorney (included on the signature page to this
Registration Statement)
27.1* -- Financial Data Schedule (for SEC use only)
99.1** -- Consent of George D. Busbee
99.2** -- Consent of Lee M. Sessions, Jr.
99.3** -- Consent of Jack R. Altherr
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
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)
II-6
<PAGE> 213
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(4) The undersigned Registrant hereby undertakes to provide to the
Underwriter at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required
by the Underwriter to permit prompt delivery to each purchaser.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described in Item 14
hereof, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person thereof in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-7
<PAGE> 214
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 24th day of July, 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 Senior July 24, 1998
- ----------------------------------------------------- Vice President
Walter M. Boomershine, Jr.
* Chief Operating Officer, July 24, 1998
- ----------------------------------------------------- President and Director
Charles K. Yancey
* Chief Executive Officer and July 24, 1998
- ----------------------------------------------------- Director (Principal Executive
Robert W. Gundeck Officer)
* Chief Financial Officer, Vice July 24, 1998
- ----------------------------------------------------- President of Finance and
Ricky L. Brown Treasurer (Principal Accounting
and Financial Officer)
/s/ STEPHEN C. WHICKER Executive Vice President of July 24, 1998
- ----------------------------------------------------- Corporate Development, General
Stephen C. Whicker Counsel, Secretary and Director
*By: /s/ STEPHEN C. WHICKER
-------------------------------------------------
Stephen C. Whicker
Attorney-in-fact
</TABLE>
II-8
<PAGE> 215
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, and as assigned on March 31, 1998.
2.2** -- Agreement and Plan of Merger and Reorganization among
Boomershine Automotive Group, Inc., BAG Georgia I, Inc., BAG
Georgia II, Inc., Wade Ford, Inc., Wade Ford Buford, Inc.
and the shareholders of Wade Ford, Inc. and Wade Ford
Buford, Inc., dated November 21, 1997, as amended on January
19, 1998, as further amended on March 31, 1998, and as
further amended on April 28, 1998.
2.3** -- Stock Purchase Agreement among Sunbelt Automotive Group,
Inc., Boomershine Automotive Group, Inc., Robertson
Oldsmobile-Cadillac, Inc. and the shareholders of Robertson
Oldsmobile-Cadillac, Inc., dated March 1, 1998.
2.4** -- Agreement and Plan of Merger and Reorganization among
Sunbelt Automotive Group, Inc., BAG Georgia IV, Inc., Day's
Chevrolet, Inc. and the shareholders of Day's Chevrolet,
Inc., dated March 3, 1998.
2.5** -- Stock Purchase Agreement among Sunbelt Automotive Group,
Inc., BAG Tennessee II, Inc., Grindstaff, Inc. and the
shareholders of Grindstaff, Inc., dated December 27, 1997,
as amended on February 24, 1998.
2.6** -- Asset Purchase Agreement among Boomershine Automotive Group,
Inc., BAG North Carolina I, Inc., Hones, Inc. and the
shareholders of Hones, Inc., dated December 11, 1997, as
assigned on January 8, 1998, as amended on January 31, 1998,
and as further amended on March 27, 1998.
2.7** -- Stock Purchase Agreement among BAG Florida II, Inc. and the
shareholder of South Financial Corporation, dated December
23, 1997.
2.8** -- Stock Purchase Agreement among Boomershine Collision
Centers, Inc. and the shareholder of Southlake Collision
Centers, Inc., Southlake Collision Henry County, Inc. and
Southlake Collision Cobb Parkway, Inc., dated November 6,
1997.
3.1** -- Articles of Incorporation of the Company.
3.2** -- Bylaws of the Company.
4.1 -- Specimen common stock certificate.
5.1* -- Opinion of Schnader Harrison Segal & Lewis LLP.
10.1** -- Form of Employment Agreement between the Company and Walter
M. Boomershine, Jr.
10.2** -- Form of Employment Agreement between the Company and Charles
K. Yancey.
10.3 -- Form of Employment Agreement between the Company and Robert
W. Gundeck.
10.4** -- Form of Employment Agreement between the Company and Stephen
C. Whicker.
10.5** -- Form of Employment Agreement between the Company and Ricky
L. Brown.
10.6 -- Form of Employment Agreement between the Company and Alan K.
Arnold.
10.7 -- Form of Employment Agreement between the Company and R.
Glynn Wimberly.
10.8 -- 1997 and 1998 Incentive Stock Plan of Company.
10.9** -- Twenty-Year Net Lease Agreement by and between Winco Ltd.,
as Lessor, and Boomershine Pontiac, Inc., and Lessee, dated
as of September 16, 1978; as amended on July 13, 1984.
10.10** -- Ten-Year Net Lease Agreement by and between Winco Ltd., as
Lessor, and Boomershine Pontiac-GMC Truck, Inc. d/b/a
Boomershine Nissan, as Lessee, dated as of January 28, 1995.
10.11** -- Lease Agreement by and between Winco, L.P., as Landlord, and
Ford Leasing Development Company, as Tenant, dated August
11, 1992.
10.12** -- Dealership Sublease by and between Ford Lease Development
Company, as Sublandlord, and Boomershine Ford, Inc., as
Subtenant, dated August 11, 1992.
10.13** -- Lease Agreement by and between Winco, L.P., as Lessor, and
Boomershine North Cobb, Inc. d/b/a Boomershine Mitsubishi,
as Lessee, dated January 16, 1996.
10.14** -- Lease Agreement by and between Winco, L.P., as Lessor, and
Thompson Automotive Group, Inc. d/b/a Boomershine Honda, as
Lessee, dated August 1, 1995.
</TABLE>
<PAGE> 216
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
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-Buick-GMC, Inc., dated February 16, 1996
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
</TABLE>
<PAGE> 217
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
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)
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Pyke & Pierce, CPA's.
23.3 -- Consent of Davis, Monk & Company.
23.4* -- Consent of Schnader Harrison Segal & Lewis LLP (included in
the opinion filed as Exhibit 5.1).
24.1** -- Powers of Attorney (included on the signature page to this
Registration Statement).
27.1* -- Financial Data Schedule (for SEC use only).
99.1** -- Consent of George D. Busbee.
99.2** -- Consent of Lee M. Sessions, Jr.
99.3** -- Consent of Jack R. Altherr.
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
<PAGE> 1
EXHIBIT 1.1
5,500,000 Shares
SUNBELT AUTOMOTIVE GROUP
Common Stock
($0.001 Par Value)
UNDERWRITING AGREEMENT
RAYMOND JAMES & ASSOCIATES, INC.
As Representative of the
Several Underwriters
c/o Raymond James & Associates, Inc.
880 Carillon Parkway
St. Petersburg, Florida 33716
Ladies and Gentlemen:
August [ ], 1998
Sunbelt Automotive Group, Inc., a Georgia corporation (the "Company"),
subject to the terms and conditions stated herein, proposes to issue and sell to
the several underwriters (the "Underwriters") named in Schedule I hereto for
whom you are acting as representative (the "Representative") an aggregate of
5,500,000 shares of the Company's Common Stock, $0.001 par value per share (the
"Firm Shares"). The respective amounts of the Firm Shares to be so purchased by
the several Underwriters are set forth opposite their names in Schedule I
hereto. In addition, the Company has agreed to sell, at the Underwriters' option
and subject to the terms and conditions stated herein, an aggregate of 825,000
additional shares of the Company's Common Stock (the "Additional Shares") to
cover over-allotments by the Underwriters, if any. The Firm Shares and the
Additional Shares (to the extent the aforementioned option is exercised) are
herein collectively referred to as the "Shares."
- 1 -
<PAGE> 2
As the Representative, you have advised the Company (i) that you are
authorized to enter into this Underwriting Agreement (the "Agreement") on behalf
of the several Underwriters; and (ii) that the several Underwriters are willing,
acting severally and not jointly, to purchase the number of Firm Shares set
forth opposite their respective names in Schedule I, plus their pro rata portion
of the Additional Shares if you elect to exercise the over-allotment option in
whole or in part for the accounts of the several Underwriters.
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company represents and warrants to each of the Underwriters as
follows:
(i) A registration statement on Form S-1 (File No. 333-51451)
with respect to the Shares has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933 (the
"Act"), and the Rules and Regulations (the "Rules and Regulations") of
the Securities and Exchange Commission (the "Commission") thereunder
and has been filed with the Commission under the Act. Copies of such
registration statement, including any amendments thereto, the
preliminary prospectuses (meeting the requirements of Rule 430A under
the Act) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been
delivered by the Company to you. Such registration statement, together
with any registration statement filed by the Company pursuant to Rule
462(b) the Act, herein referred to as the "Registration Statement,"
which shall be deemed to include all information omitted therefrom in
reliance upon Rule 430A and contained in the Prospectus referred to
below, has become effective under the Act and no post-effective
amendment to the Registration Statement has been filed as of the date
of this Agreement. "Prospectus" means (A) the form of prospectus first
filed with the Commission pursuant to Rule 424(b) or (B) if the Company
elects to rely on Rule 434 under the Act, the last preliminary
prospectus included in the Registration Statement filed prior to the
time it becomes effective or filed pursuant to Rule 424(a) under the
Act that is delivered by the Company to the Underwriters for delivery
to purchasers of the Shares, together with the term sheet or
abbreviated term sheet filed with the Commission pursuant to Rule
424(b)(7) under the Act (the "Rule 434 Prospectus"). Each preliminary
prospectus included in the Registration Statement prior to the time it
becomes effective is herein
- 2 -
<PAGE> 3
referred to as a "Preliminary Prospectus."
(ii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Georgia, with full power and authority (corporate and other) to own
or lease its properties and conduct its business (including, upon
closing of the Merger and the Acquisitions (each as defined in the
Registration Statement), the properties and businesses to be acquired
pursuant to the Merger and the Acquisitions) as described in the
Registration Statement. Each of the subsidiaries of the Company as
listed in Exhibit 21.1 to Item 16(a) of the Registration Statement,
including, but not limited to, the entities to be acquired by the
Company pursuant to the Merger and the Acquisitions (collectively, the
"Subsidiaries") has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with full power and authority (corporate and other) to
own or lease its properties and conduct its business as described in
the Registration Statement. The Subsidiaries are the only subsidiaries,
direct or indirect, of the Company. The Company and each of the
Subsidiaries are duly qualified to transact business and are in good
standing in all jurisdictions in which each conducts any business or
owns or leases properties so as to require such qualification, except
as would not result in any material adverse event or any development
involving a prospective material adverse change in or affecting the
capital stock, earnings, business, management, properties, assets,
rights, operations, condition (financial or otherwise), or prospects of
the Company and its Subsidiaries, individually or taken as a whole,
whether or not occurring in the ordinary course of business (a
"Material Adverse Event"). The Company and each of its Subsidiaries has
good and marketable title in fee simple to all the properties and
assets owned by them, in each case free and clear of all liens,
mortgages, pledges, charges, encumbrances and defects of any kind
except such as are described or referred to in the Registration
Statement, and any real properties and buildings held under lease by
the Company or any of its Subsidiaries are held by them under valid,
existing and enforceable leases, except as would not result in a
Material Adverse Event.
(iii) All of the outstanding shares of capital stock of each
of the Subsidiaries have been duly authorized and validly issued, are
fully paid and non-assessable and are owned by the Company or another
Subsidiary free and clear of all liens, encumbrances and equities and
claims; provided, however, that with respect to the entities to be
acquired pursuant to the Jay Automotive Group Acquisition, the Wade
Ford Acquisition, the Day's Chevrolet Acquisition, the Grindstaff
Acquisition and the Robertson Acquisition (each as
- 3 -
<PAGE> 4
defined in the Registration Statement and hereinafter collectively
referred to as the "Closing Date Subsidiaries"), the representation of
ownership is made only as of the Closing Date and any Additional
Closing Date under this Agreement. No options, warrants, preemptive
rights or other rights to purchase, agreements or other obligations to
issue or other rights to convert any obligations into shares of capital
stock or ownership interests in the Subsidiaries are outstanding,
except pursuant to the Acquisition Agreements (as hereinafter defined)
with respect to the Closing Date Subsidiaries.
(iv) Each of the agreements (the "Acquisition Agreements")
governing the Acquisitions and the agreement governing the Merger (the
"Merger Agreement") has been duly authorized, executed and delivered by
the Company, and, assuming due authorization, execution and delivery by
the other parties thereto, constitutes a legally valid and binding
obligation of each such party and is enforceable against each such
party in accordance with its terms; to the best of the Company's
knowledge, each of the representations and warranties of the
Subsidiaries and of each of the other parties set forth in the
Acquisition Agreements and the Merger Agreement, was true and correct
at the time such representations and warranties were made and will be
true and correct at and as of the Closing Date (as defined herein) or
the Effective Date (as defined herein) as may be the case, as if made
at and as of such date (other than to the extent any such
representation and warranty is expressly made as to only a certain
other date). The term "Effective Date" shall mean the date upon which
the Registration Statement is declared effective under the Act.
(v) This Agreement has been duly authorized, executed and
delivered by the Company.
(vi) The statistical and market related data included in the
Registration Statement are based on or derived from sources that the
Company reasonably believes to be reliable and accurate.
(vii) The outstanding shares of Common Stock of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable; the Shares to be issued and sold by the Company have
been duly authorized and when issued and paid for as contemplated
herein will be validly issued, fully paid and non-assessable; and no
preemptive rights of shareholders exist with respect to any of the
Shares or the issuance and sale thereof; and all corporate action
required to be taken for the authorization,
- 4 -
<PAGE> 5
issuance and sale of such Shares has been validly taken. Neither the
filing of the Registration Statement nor the offering or sale of the
Shares as contemplated by this Agreement gives rise to any rights,
other than those which have been waived or satisfied, for or relating
to the registration of any shares of Common Stock, except as described
in the Registration Statement.
(viii) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct. All of the
Shares conform in all material respects to the description thereof
contained in the Registration Statement. The form of certificates for
the Shares conforms to the corporate law of the jurisdiction of the
Company's incorporation.
(ix) The Commission has not issued or, to the best of the
Company's knowledge, threatened to issue an order preventing or
suspending the use of any Prospectus relating to the proposed offering
of the Shares nor instituted proceedings for that purpose. The
Registration Statement contains, and the Prospectus and any amendments
or supplements thereto will contain, all material information which is
required to be included therein by, and will conform in all material
respects to the requirements of the Act and the Rules and Regulations.
The Registration Statement and any amendment thereto do not contain,
and will not contain, any untrue statement of a material fact and do
not omit, and will not omit, to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading. The Prospectus and any amendments and supplements thereto
do not contain, and will not contain, any untrue statement of material
fact, and do not omit, and will not omit, to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted
from the Registration Statement or the Prospectus, or any such
amendment or supplement, in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of any
Underwriter through the Representative, specifically for use in the
preparation thereof. There are no statutes, regulations, contracts or
other documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
(x) The consolidated financial statements of the Company and
the Subsidiaries,
- 5 -
<PAGE> 6
together with related notes and schedules as set forth in the
Registration Statement, present fairly the financial position and the
results of operations and cash flows of the Company and the
Subsidiaries, at the indicated dates and for the indicated periods.
Such financial statements and related schedules have been prepared in
accordance with generally accepted principles of accounting,
consistently applied throughout the periods involved, except as
disclosed therein, and all adjustments necessary for a fair
presentation of results for such periods have been made. The summary
and selected financial data included in the Registration Statement
presents fairly the information shown therein and such data has been
compiled on a basis consistent with the financial statements presented
therein and the books and records of the Company. The pro forma
financial information included in the Registration Statement and the
Prospectus presents fairly the information shown therein, has been
prepared in accordance with the Commission's rules and guidelines with
respect to pro forma financial information, has been properly compiled
on the pro forma bases described therein, and, in the opinion of the
Company, the assumptions used in the preparation thereof are reasonable
and the adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein.
(xi) Ernst & Young LLP, Pyke & Pierce, CPAs and Davis, Monk &
Company, who have certified certain of the financial statements filed
with the Commission as part of the Registration Statement, are
independent public accountants as required by the Act and the Rules and
Regulations.
(xii) There is no action, suit, claim, investigation or
proceeding pending or, to the best of the Company's knowledge,
threatened against or affecting the Company or any of the Subsidiaries
or any of their respective properties or to which the Company or any of
the Subsidiaries or any of their respective properties is or may be a
party or to which any property of the Company or the Subsidiaries is or
may be the subject, before any court or administrative agency or
otherwise which, singly or in the aggregate, if determined adversely to
the Company or any of its Subsidiaries could reasonably be expected to
result in a Material Adverse Event or might prevent the consummation of
the transactions contemplated hereby, except as set forth in the
Registration Statement; the disclosure in the Registration Statement
regarding legal proceedings complies in all material respects with Item
103 of Regulation S-K under the Act.
(xiii) The Company and the Subsidiaries have good and marketable
title in fee
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<PAGE> 7
simple to all of the properties and assets reflected in the financial
statements (or as described in the Registration Statement) hereinabove
described, in each case free and clear of all liens, mortgages,
pledges, charges, encumbrances or defects of any kind except those
reflected in such financial statements (or as described in the
Registration Statement) or except as would not result in a Material
Adverse Event. The Company and the Subsidiaries occupy their leased
properties under valid and binding leases conforming in all material
respects to the descriptions thereof set forth in the Registration
Statement. Any such property utilized by the Company or its
Subsidiaries as an automotive dealership or repair center is currently
zoned in a classification such as will permit the operation of such
property as an automotive dealership or repair center with related
parking and the conditions, if any, to the granting of zoning of such
property have been satisfied and the Company has no knowledge of any
pending or threatened application for changes in such zoning applicable
to such property or any portions thereof.
(xiv) Since the respective dates as of which information is
given in the Registration Statement, there has not been any Material
Adverse Event. There has not been any material transaction entered into
or any material transaction that is probable of being entered into by
the Company or the Subsidiaries, other than transactions entered into
in the ordinary course of business and changes and transactions
described in the Registration Statement. The Company and the
Subsidiaries have no material contingent obligations which are not
disclosed in the Company's financial statements which are included in
the Registration Statement.
(xv) The Company and the Subsidiaries have filed all federal,
state, local and foreign income tax returns which have been required to
be filed and have paid all taxes indicated by said returns and all
assessments received by them or any of them to the extent that such
taxes have become due and are not being contested in good faith. All
tax liabilities have been adequately provided for in the financial
statements of the Company.
(xvi) Neither the Company nor any of the Subsidiaries is or with
the giving of notice or lapse of time or both, will be, in violation of
or in default under its Articles or Certificate of Incorporation or
Bylaws, or under any agreement, lease, contract, indenture, mortgage,
deed of trust or other instrument or obligation, including (except as
disclosed in the Registration Statement) all Franchise Agreements (as
defined in the Registration Statement) with any automobile manufacturer
(a "Manufacturer"), or any other agreement with Manufacturers, to which
it is a party or by which it, or any of its properties, is
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<PAGE> 8
bound, other than any such violation or default the occurrence of which
would not result in a Material Adverse Event. Except as disclosed in
the Registration Statement, the execution and delivery of this
Agreement and each of the Merger Agreement and the Acquisition
Agreements and the consummation of the transactions contemplated herein
and therein and the fulfillment of the terms hereof and thereof will
not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, any agreement, lease,
contract, indenture, mortgage, deed of trust or other instrument or
obligation, including all agreements with Manufacturers, to which the
Company or any Subsidiary is a party, or of the Articles or Certificate
of Incorporation or Bylaws of the Company or any of its Subsidiaries,
or any Order, rule or regulation applicable to the Company or any of
its Subsidiaries of any United States federal, state, local or
municipal court or of any United States regulatory body or
administrative agency or other governmental body having jurisdiction
over the Company or its Subsidiaries.
(xvii) Each of the Company and the Subsidiaries owns, possesses
or has obtained all licenses, approvals, consents, orders, permits,
designations, declarations or other filings or authorizations by or
with any United States federal, state, local or municipal, regulatory,
administrative or other governmental body necessary in connection with
the execution and delivery by the Company of this Agreement and the
consummation of the transactions herein contemplated (except such
additional steps as may be required by the Commission, the National
Association of Securities Dealers, Inc. (the "NASD") or such additional
steps as may be necessary to qualify the Shares for public offering by
the Underwriters under state securities or Blue Sky laws) has been
obtained or made and such licenses, approvals, consents, orders,
permits, designations, declarations, or other filings or authorizations
are in full force and effect.
(xviii) Each of the Company and the Subsidiaries owns, possesses
or has obtained all licenses, approvals, consents, orders, permits,
designations, declarations or other filings or authorizations
(collectively, "Permits") by or with any United States federal, state,
local or municipal, regulatory, administrative or other governmental
body, which are necessary to own or lease, as the case may be, and to
operate its properties and to conduct its businesses as conducted as of
the date hereof and as proposed to be conducted, except where the
failure to own, possess or obtain such Permits would not result in a
Material Adverse Event, and neither has the Company or any of its
Subsidiaries received any notice of any proceeding relating to any
revocation or modification of any such Permit.
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<PAGE> 9
(xix) No consent, approval or other authorization of any
automobile Manufacturer is required for the issuance and sale of the
Shares to be sold by the Company or the consummation of the transactions
contemplated herein or in the Acquisition Agreements or the Merger
Agreement, except (i) the consent of each of the automobile
Manufacturers named in Schedule II hereto and (ii) as described in the
Prospectus.
(xx) Each agreement to which the Company or any of its
Subsidiaries is a party and pursuant to which the Company or any of its
Subsidiaries acts as a franchisee or dealer, whereby it sells products,
including, without limitation, the Franchise Agreements listed on
Schedule III hereto, each such Franchise Agreement or other agreement
being listed as an exhibit to the Registration Statement, assuming due
authorization, execution and delivery by the other party or parties
thereto, is a valid and binding agreement and, except as disclosed in
the Registration Statement or on Schedule III hereto, no default has
occurred or is continuing thereunder, except such a default which would
not result in a Material Adverse Event.
(xxi) Neither the Company, nor to the best of the Company's
knowledge, any of its affiliates, has taken or may take, directly or
indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common
Stock to facilitate the sale or resale of the Shares. The Company
acknowledges that the Underwriters may engage in passive market making
transactions in the Shares on the Nasdaq National Market in accordance
with Regulation M under the Securities Exchange Act of 1934 (the
"Exchange Act").
(xxii) Neither the Company nor any Subsidiary is an "investment
company" within the meaning of such term under the Investment Company
Act of 1940, as amended (the "1940 Act"), and the rules and regulations
of the Commission thereunder.
(xxiii) Each of the Company and its Subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (A) transactions are executed in accordance with
management's general or specific authorization, (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets, (C) access to assets is permitted
only in accordance with management's general or specific authorization,
and (D) the recorded accountability for assets is
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<PAGE> 10
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(xxiv) The Company and each of its Subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as the
Company believes are adequate for the conduct of their respective
businesses and the value of their respective properties.
(xxv) The Company and its Subsidiaries are in compliance in all
material respects with all presently applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended, including
the regulations and published interpretations thereunder ("ERISA"), no
"reportable event" (as defined in ERISA) has occurred with respect to
any "pension plan" (as defined in ERISA) for which the Company or any
of its Subsidiaries would have any liability; the Company and its
Subsidiaries have not incurred and do not expect to incur liability
under (A) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (B) Sections 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company or any of its Subsidiaries would
have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing
has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
(xxvi) The Company's application to list the Shares on the
Nasdaq National Market has been approved, subject to the notice of
issuance.
(xxvii) To the best of the Company's knowledge, there are no
affiliations or associations between any member of the NASD and any of
the Company's officers, directors or 5% or greater security holders,
except as otherwise disclosed in writing to the Representative.
(xxviii) To the best of the Company's knowledge, any Year 2000
problem relating to the Company's or any of its Subsidiaries'
management information systems, computer hardware or software or the
management information systems, computer hardware or software of any of
the Manufacturers, distributors or other vendors to the Company or any
of its Subsidiaries will not result in a material liability to the
Company and will not otherwise result in a Material Adverse Event.
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<PAGE> 11
(xix) To the best of the Company's knowledge, no labor problem
exists with its employees or with employees of any of the Subsidiaries
that could adversely affect the Company and its Subsidiaries,
individually or in the aggregate, and the Company is not aware of any
existing or imminent labor disturbance by the employees of the
Company's or its Subsidiaries' principal suppliers (other than General
Motors Corporation), contractors or customers that could be expected to
result in a Material Adverse Event.
(xxxi) Except as disclosed in the Registration Statement and
except as would not individually or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, result in a Material
Adverse Event, (A) the Company and each of its Subsidiaries are each in
compliance with all applicable Environmental Laws, (B) the Company and
each of its Subsidiaries have all permits, authorizations and approvals
required under any applicable Environmental Laws and are each in
compliance with their requirements, (C) there are no pending or, to the
Company's knowledge, threatened Environmental Claims against the
Company or its Subsidiaries, and (D) there are no circumstances known
to the Company with respect to any property or operations of the
Company or its Subsidiaries that could reasonably be anticipated to
form the basis of an Environmental Claim against the Company or its
Subsidiaries.
For purposes of this Agreement, the following terms shall have
the following meanings: "Environmental Law" means any United States
federal state, local or municipal law, rule, regulation, ordinance,
code, policy or rule of common law and any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent decree or judgment applicable to the business of the Company
and the Subsidiaries, relating to the environment, health, safety or
any chemical, material or substance, exposure to which is prohibited,
limited or regulated by any governmental authority. "Environmental
Claims" means any and all administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notice of
noncompliance or violation, investigations or proceedings relating to
any Environmental Law.
(xxxii) No relationship, direct or indirect, exists between or
among the Company or any of the Subsidiaries on the one hand, and the
directors, officers, stockholders, customers or suppliers of the
Company or any of the Subsidiaries on the other hand, which is required
by the Securities Act to be described in the Registration Statement
which is not so described.
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<PAGE> 12
(xxxiii) No Subsidiary of the Company is currently prohibited,
directly or indirectly, from paying any dividends to the Company, from
making any other distribution on such Subsidiary's capital stock, from
repaying to the Company any loans or advances to such Subsidiary from
the Company or from transferring of any of such Subsidiary's property
or assets to the Company or any other Subsidiary of the Company, except
as described in or contemplated by the Prospectus.
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
agrees to sell to the Underwriters and each Underwriter agrees, severally and
not jointly, to purchase, at a price of [$ ] per share, the number of Firm
Shares set forth opposite the name of each Underwriter in Schedule I hereof,
subject to adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Shares to be sold hereunder is to be made by
official bank check or checks to the order of, or by wire transfer to the
account of, the Company, in immediately available funds against delivery of
certificates therefor to the Representative for the several accounts of the
Underwriters. Such payment and delivery are to be made at the offices of Raymond
James & Associates, Inc., 880 Carillon Parkway, St. Petersburg, Florida 33716,
at 10.00 a.m., eastern daylight time, on the third (or if the Shares are priced,
as contemplated by Rule 15c6-1(c) under the Exchange Act, after 4:30 p.m.,
Washington, D.C. time, the fourth) full business day after the date of this
Agreement or at such other time and date as you and the Company shall agree upon
in writing, such time and date being herein referred to as the "Closing Date."
(As used herein, "business day" means a day on which the New York Stock Exchange
is open for trading and on which banks in New York are open for business and not
permitted by law or executive order to be closed.) The certificates for the Firm
Shares will be delivered in such denominations and in such registrations as the
Representative requests in writing not later than the second full business day
prior to the Closing Date, and will be made available for inspection by the
Representative at least one business day prior to the Closing Date.
(c) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company hereby grants an option to the several Underwriters to
purchase the Additional Shares at the price per share as set forth in paragraph
(a) of this Section 2. The option granted hereby may be exercised in whole or
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<PAGE> 13
in part by giving written notice (i) at any time on or before the Closing Date
and (ii) only once thereafter within 30 days after the date of this Agreement,
by you, as Representative of the several Underwriters, to the Company, setting
forth the number of Additional Shares as to which the several Underwriters are
exercising the option, the names and denominations in which the Additional
Shares are to be registered and the time and date at which such certificates are
to be delivered. The time and date at which certificates for Additional Shares
are to be delivered shall be determined by the Representative but shall not be
earlier than three nor later than 10 full business days after the exercise of
such option, nor in any event prior to the Closing Date (such time and date
being herein referred to as the "Additional Shares Closing Date"). If the date
of exercise of the option is three or more days before the Closing Date, the
notice of exercise shall set the Closing Date as the Additional Shares Closing
Date. The number of Additional Shares to be purchased by each Underwriter shall
be in the same proportion to the total number of Additional Shares being
purchased as the number of Firm Shares being purchased by such Underwriter bears
to the total number of Firm Shares, adjusted by you in such manner as to avoid
fractional shares, and subject to adjustments in accordance with Section 9
hereof. The option with respect to the Additional Shares granted hereunder may
be exercised only to cover over-allotments in the sale of the Firm Shares by the
Underwriters. So long as such option to purchase Additional Shares has not been
exercised in whole, you, as Representative of the several Underwriters, may
cancel such option at any time prior to its expiration by giving written notice
of such cancellation to the Company. To the extent, if any, that the option is
exercised, payment for any Additional Shares to be purchased shall be made by
official bank check or checks to the order of, or by wire transfer to the
account of, the Company, in immediately available funds against delivery of
certificates therefor to the Representative for the several accounts of the
Underwriters on the Additional Shares Closing Date at the offices of Raymond
James & Associates, Inc., 880 Carillon Parkway, St. Petersburg, Florida 33716.
The certificates for any Additional Shares will be delivered in such
denominations and in such registrations as the Representative requests in
writing not later than the second full business day prior to the Additional
Shares Closing Date, and will be made available for inspection by the
Representative at least one business day prior to the Additional Shares Closing
Date.
3. OFFERING BY THE UNDERWRITERS.
Upon the authorization by you of the release of the Shares, the several
Underwriters propose to offer the Shares for sale upon the terms and conditions
disclosed in the Prospectus.
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<PAGE> 14
It is further understood that you will act as the Representative for
the Underwriters in the offering and sale of the Shares in accordance with a
Master Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. COVENANTS OF THE COMPANY.
(a) The Company covenants and agrees with the several Underwriters
that:
(i) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule
430A of the Rules and Regulations is followed, to prepare and timely
file with the Commission under Rule 424(b) of the Rules and Regulations
a Prospectus in a form approved by the Representative containing
information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Rules and
Regulations, and (B) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representative
shall not previously have been advised and furnished with a copy or to
which the Representative shall have reasonably objected in writing or
which is not in compliance in all material respects with the Rules and
Regulations. If the Company elects to rely on Rule 434 under the Act,
the Company will provide the Underwriters with copies of the form of
Rule 434 Prospectus (including copies of a term sheet that complies
with the requirements of Rule 434 under the Act), in such number as the
Underwriters may reasonably request, and file with the Commission in
accordance with Rule 424(b) of the Act the form of Prospectus complying
with Rule 434 (b)(2) of the Act before the close of business on the
second business day immediately following the date hereof. If the
Company elects not to rely on Rule 434 under the Act, the Company will
provide the Underwriters with copies of the form of Prospectus, in such
number as the Underwriters may reasonably request, and file with the
Commission such Prospectus in accordance with Rule 424(b) of the Act
before the close of business on the second business day immediately
following the date hereof.
(ii) The Company will advise the Representative promptly (A)
after it shall have received notice thereof of the time when the
Registration Statement or any post-effective amendment thereto shall
have become effective, (B) of receipt of any comments from the
Commission, (C) of any request of the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any
additional information, (D) of the issuance by the Commission of any
stop order suspending the
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<PAGE> 15
effectiveness of the Registration Statement or the use of the
Prospectus or of the institution of any proceedings for that purpose
and (E) of any change in the Company's condition (financial or
otherwise), business, prospects, properties, net worth or results of
operations, or of any other event that comes to the attention of the
Company, that results in the Registration Statement or the Prospectus
(as then amended or supplemented) containing an untrue statement of a
material fact or omitting to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in any material respect, or of the necessity to amend or
supplement the Prospectus (as then amended or supplemented) to comply
with the Act or any other law. The Company will use its best efforts to
prevent the issuance of any stop order preventing or suspending the use
of the Prospectus and to obtain as soon as possible the lifting
thereof, if issued.
(iii) The Company will cooperate with the Representative in
endeavoring to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as the Representative may
reasonably have designated in writing and will make such applications,
file such documents, and furnish such information as may be reasonably
required for that purpose, provided the Company shall not be required
to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction where it is not now so qualified
or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports and other documents, as
are or may be required to continue such qualifications in effect for so
long a period as the Representative may reasonably request for
distribution of the Shares. In the event that the qualification of the
Shares in any jurisdiction is suspended, the Company shall so advise
the Representative promptly in writing.
(iv) The Company will deliver to, or upon the order of, the
Representative, from time to time, as many copies of any Preliminary
Prospectus as the Representative may reasonably request. The Company
will deliver to, or upon the order of, the Representative during the
period when delivery of a Prospectus is required under the Act, as many
copies of the Prospectus in final form, or as thereafter amended or
supplemented, as the Representative may reasonably request. The Company
will deliver to the Representative at or before the Closing Date, four
signed copies of the Registration Statement and all amendments thereto
including all exhibits filed therewith, and will deliver to the
Representative such number of copies of the Registration Statement
(including such number of copies of the exhibits filed therewith that
may be reasonably requested), and of all amendments thereto, as the
Representative may reasonably request.
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<PAGE> 16
(v) The Company will comply with the Act and the Rules and
Regulations, and the Exchange Act and the rules and regulations of the
Commission thereunder, so as to permit the completion of the
distribution of the Shares as contemplated in this Agreement and the
Prospectus. If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer, any event shall occur
as a result of which, in the judgment of the Company or in the
reasonable opinion of the Underwriters, it becomes necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances existing at the time the Prospectus
is delivered to a purchaser, not misleading, or, if it is necessary at
any time to amend or supplement the Prospectus to comply with any law,
the Company promptly will prepare and file with the Commission an
appropriate amendment to the Registration Statement or supplement to
the Prospectus so that the Prospectus as so amended or supplemented
will not, in the light of the circumstances when it is so delivered, be
misleading, or so that the Prospectus will comply with the law.
(vi) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not
later than 15 months after the effective date of the Registration
Statement, an earnings statement (which need not be audited) in
reasonable detail, covering a period of at least 12 consecutive months
beginning after the effective date of the Registration Statement, which
earnings statement shall satisfy the requirements of Section 11(a) of
the Act and Rule 158 of the Rules and Regulations and will advise you in
writing when such statement has been so made available.
(vii) The Company will, for a period of five years from the
Closing Date, deliver to the Representative copies of annual reports
and copies of all other documents, reports and information furnished by
the Company to its shareholders or filed with the NASD or any
securities exchange pursuant to the requirements of such exchange or
with the Commission pursuant to the Act or the Exchange Act. The
Company will deliver to the Representative similar reports with respect
to significant subsidiaries, as that term is defined in the Rules and
Regulations, which are not consolidated in the Company's financial
statements.
(viii) No offering, sale, short sale or other disposition of any
shares of Common Stock of the Company, any Shares issuable upon
exercise of stock options and any other securities convertible,
exchangeable or exercisable for Common Stock or derivative of
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<PAGE> 17
Common Stock (or agreement for such) will be made for a period of 180
days after the date of this Agreement, directly or indirectly, by the
Company otherwise than hereunder or with the prior written consent of
Raymond James & Associates, Inc., except for (i) shares of Common Stock
issuable at the closing of each of the Merger and the Acquisitions,
(ii) shares of Common Stock issuable pursuant to option plans, warrants
and other rights to acquire shares that are described in the
Registration Statement and (iii) shares of Common Stock issuable in
connection with acquisitions to be made by the Company of automobile
dealerships, repair shops or collision centers or related automotive
businesses and assets, provided that each recipient of such shares in
any such acquisition agrees in writing to be subject to the transfer
restrictions imposed pursuant to this Section 4 (viii) to the extent
the 180-day period following the date of this Agreement has not expired
(ix) The Company will use its best efforts to list, subject to
notice of issuance, the Shares on the Nasdaq National Market.
(x) The Company has caused each officer and director and certain
shareholders of the Company to furnish to you, on or prior to the date
of this Agreement, a letter or letters, in form and substance
satisfactory to the Underwriters, pursuant to which each such person
shall agree not to offer, sell, sell short or otherwise dispose of any
shares of Common Stock of the Company, any shares issuable upon
exercise of stock options and any other securities convertible,
exchangeable or exercisable for Common Shares or derivative of Common
Stock owned by such person or request the registration for the offer or
sale of any of the foregoing (or as to which such person has the right
to direct the disposition of) for a period of 180 days after the date
of this Agreement, directly or indirectly, except with the prior
written consent of you and the Company.
(xi) The Company shall apply the net proceeds received by it
from the sale of the Shares in the manner specified in the Prospectus
and shall file such reports with the Commission with respect to the
sale of the Shares and the application of the proceeds therefrom as may
be required in accordance with Rule 463 under the Act.
(xii) The Company shall not invest, or otherwise use the
proceeds received by the Company from its sale of the Shares in such a
manner as would require the Company or any of the Subsidiaries to
register as an investment company under the 1940 Act.
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<PAGE> 18
(xiii) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a
registrar (which may be the same person or entity) for the Common Stock.
(xiv) The Company will not take, directly or indirectly, any
action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the Company.
(xv) The Company will use its best efforts to qualify or
register its Common Stock for sale in non-issuer transactions (or obtain
exemptions) from the application of the blue sky laws of each state
where necessary to permit market making transactions and secondary
trading, and will comply with such blue sky laws and will continue such
qualifications, registrations and exemptions in effect for a period of
five years after the date hereof.
(xvi) The Company will comply with all provisions of any
undertakings contained in the Registration Statement.
5. COSTS AND EXPENSES.
The Company will pay all costs, expenses and fees incident to the
performance of its obligations under this Agreement, including, without limiting
the generality of the foregoing, the following: accounting fees of the Company;
the fees and disbursements of counsel for the Company; the cost of printing and
delivering to, or as requested by, the Underwriters copies of the Registration
Statement, Preliminary Prospectuses, the Prospectus, this Agreement, the Master
Agreement Among Underwriters, the Underwriters' Selling Memorandum, the
Underwriters' Questionnaire, the Underwriters' Invitation Letter, the Listing
Application, the Blue Sky Survey and any supplements or amendments thereto; the
filing fees of the Commission; the filing fees and expenses (including legal
fees and disbursements) incident to securing any required review by the NASD of
the terms of the sale of the Shares; the listing fee of the Nasdaq National
Market; the expenses for travel, lodging and meals incurred by the Company and
any of its officers, directors and employees in connection with meetings with
prospective investors in the Shares and the expenses, including the fees and
disbursements of counsel for the Underwriters, incurred in connection with the
qualification of the Shares under state securities or Blue Sky laws. Any
transfer taxes imposed on the sale of the Shares to the several Underwriters
will be paid by the Company. The Company shall not, however, be required to pay
for any of the
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<PAGE> 19
Underwriters' other expenses (other than those related to qualification under
NASD regulation and state securities or Blue Sky laws) except that, if this
Agreement shall not be consummated because the conditions in Section 6 hereof
are not satisfied, or because this Agreement is terminated by the Representative
pursuant to Section 11(a)(i) hereof, or by reason of any failure, refusal or
inability on the part of the Company to perform any undertaking or satisfy any
condition of this Agreement or to comply with any of the terms hereof on their
part to be performed, unless such failure to satisfy said condition or to comply
with said terms be due to the default or omission of any Underwriter, then the
Company shall reimburse the several Underwriters for reasonable out-of-pocket
expenses, including fees and disbursements of counsel, reasonably incurred in
connection with investigating, marketing and proposing to market the Shares or
in contemplation of performing their obligations hereunder; but the Company
shall not in any event be liable to any of the several Underwriters for damages
on account of loss of anticipated profits from the sale by them of the Shares.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
The several obligations of the Underwriters to purchase the Firm Shares
on the Closing Date and the Additional Shares, if any, on the Additional Shares
Closing Date are subject to the accuracy, as of the Closing Date or the
Additional Shares Closing Date, as the case may be, of the representations and
warranties of the Company contained herein, and to the performance by the
Company of their covenants and obligations hereunder and to the following
additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and Regulations shall have been made, and any request
of the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the Representative and
complied with to their reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time, shall
have been issued and no proceedings for that purpose shall have been taken or,
to the knowledge of the Company, shall be contemplated by the Commission and no
injunction, restraining order, or order of any nature by a federal or state
court of competent jurisdiction shall have been issued as of the Closing Date
which would prevent the issuance of the Shares.
(b) The Representative shall have received on the Closing Date or the
Additional Shares Closing Date, as the case may be, the opinions of Stephen C.
Whicker, P.C. and
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<PAGE> 20
Schnader, Harrison, Segal and Lewis LLP, counsel for the Company, dated the
Closing Date or the Additional Shares Closing Date, as the case may be,
addressed to the Underwriters (and stating that it may be relied upon by counsel
to the Underwriters) to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Georgia, with corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement; and the Company is duly qualified to transact business in
all jurisdictions in which the conduct of its business requires such
qualification, except jurisdictions in which the failure to qualify
would not result in a Material Adverse Event.
(ii) The Company has authorized and outstanding capital stock
as set forth under the caption "Capitalization" in the Prospectus; the
authorized shares of the Company's Common Stock have been duly
authorized; the outstanding shares of the Company's Common Stock have
been duly authorized and validly issued and are fully paid and
non-assessable; all of the Shares conform in all material respects to
the description thereof contained in the Prospectus; and the form of
certificate evidencing the Common Stock complies with Georgia law in
all material respects.
(iii) Each of the Subsidiaries has been duly incorporated and
is validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, with corporate power and
authority to own or lease its properties and conduct its business as
described in the Registration Statement; each of the Subsidiaries is
duly qualified to transact business in all jurisdictions in which the
conduct of their business requires such qualification and in which the
failure to qualify would result in a Material Adverse Event; and the
outstanding shares of capital stock of each of the Subsidiaries have
been duly authorized and validly issued and are fully paid and
non-assessable and are owned by the Company or a Subsidiary and, to the
best of such counsel's knowledge, the outstanding shares of capital
stock of each of the Subsidiaries are owned free and clear of all
liens, encumbrances and equities and claims, and no options, warrants,
preemptive rights or other rights to purchase, agreements or other
obligations to issue or other rights to convert any obligations into
any shares of capital stock or of ownership interests in the
Subsidiaries are outstanding.
(iv) The Shares of Common Stock, including the Additional
Shares, if any, to be sold by the Company pursuant to this Agreement
have been duly authorized and will
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<PAGE> 21
be validly issued, fully paid and non-assessable when issued and paid
for as contemplated by this Agreement; and no preemptive rights of
shareholders exist with respect to any of the Shares or the issue or
sale thereof.
(v) The Shares have been approved for listing on the Nasdaq
National Market, subject to notice of issuance.
(vi) Except as described in or contemplated by the Prospectus,
to the best knowledge of such counsel, there are no outstanding
securities of the Company convertible or exchangeable into or
evidencing the right to purchase or subscribe for any shares of capital
stock of the Company and there are no outstanding or authorized
options, warrants or rights of any character obligating the Company to
issue any shares of its capital stock or any securities convertible or
exchangeable into or evidencing the right to purchase or subscribe for
any shares of such stock; and except as described in the Prospectus, to
the best of such counsel's knowledge, no holder of any securities of
the Company or any other person has the right, contractual or
otherwise, which has not been satisfied or effectively waived, to cause
the Company to sell or otherwise issue to them, or to permit them to
underwrite the sale of, any of the Shares or the right to have any
Common Stock or other securities of the Company included in the
Registration Statement or the right, as a result of the filing of the
Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.
(vii) All offers and sales of the Company's capital stock prior
to the date hereof and in connection with the Merger and the
Acquisitions, were or will be, as the case may be, at all relevant
times duly registered under the Act or exempt from the registration
requirements of the Act and were duly registered or exempt from the
registration requirements of applicable state securities or blue sky
laws.
(viii) Each of the Acquisition Agreements and the Merger
Agreement has been duly authorized, executed and delivered by the
Company and each of the parties thereto and constitutes a legally
binding obligation of each such party and is enforceable against each
such party in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights generally, by
general principles of equity whether such enforceability is considered
in a proceeding in law or equity and by the discretion of the court
before which any proceeding therefor may be brought.
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<PAGE> 22
(ix) Except as disclosed in the Registration Statement, each of
the Company and its Subsidiaries owns, possesses or has obtained all
required consents and approvals from all Manufacturers and any other
automobile distributors with respect to the Acquisitions and the Merger
and the issuance and sale of the Shares hereunder. To the best of such
counsel's knowledge, the list attached as Schedule II hereto is a
complete and accurate list of all Manufacturers from which the Company
is required to obtain consent or approval with respect to the
transactions contemplated by the Acquisition Agreements and the Merger
Agreement and the issuance and sale of the Shares hereunder.
(x) The Registration Statement has become effective under the
Act; any required filing of the Preliminary Prospectus pursuant to Rule
424(a) or of the Prospectus pursuant to Rule 424(b) has been made in
the manner and within the time period required by such Rule; and to the
best of the knowledge of such counsel, no stop order proceedings with
respect thereto have been instituted or are pending or threatened under
the Act.
(xi) The Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form in all material
respects with the requirements of the Act and the applicable Rules and
Regulations thereunder (except that such counsel need express no
opinion as to the financial statements and related schedules contained
therein).
(xii) The descriptions in the Registration Statement and the
Prospectus of statutes, legal and governmental proceedings or contracts
and other documents and statements of law or legal conclusions are
accurate in all material respects and fairly present the information
required to be shown; and such counsel does not know of any statutes or
legal or governmental proceedings required to be described in the
Registration Statement or Prospectus that are not described as
required.
(xiii) The statements under the captions "The Merger," "The
Acquisitions," "Management-Executive Officers, Directors; Key
Personnel," "Management-Incentive Stock Plan," "Management-Executive
Employment Agreements," "Certain Transactions," "Description of Capital
Stock" and "Shares Eligible for Future Sale" in the Prospectus, insofar
as such statements constitute a summary of documents referred to
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<PAGE> 23
therein or matters of law, fairly summarize in all material respects
the information called for with respect to such documents and matters.
(xiv) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or
described in the Registration Statement or the Prospectus which are not
so filed or described as required, and such contracts and documents as
are summarized in the Registration Statement or the Prospectus are
fairly summarized in all material respects.
(xv) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any of the
Subsidiaries except as set forth in the Prospectus; and, to such
counsel's knowledge, neither the Company nor any of its Subsidiaries is
in violation of, or in default with respect to, any statute,
regulation, rule, order, judgment or decree, except as described in the
Prospectus, nor is the Company or any Subsidiary required to take any
action in order to avoid any such violation or default.
(xvi) This Agreement has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution and
delivery by the Representative, constitutes the valid and binding
agreement of the Company enforceable against the Company in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
affecting creditors' rights generally, by general principles of equity
whether such enforceability is considered in a proceeding in law or
equity and by the discretion of the court before which any proceeding
therefor may be brought, and except to the extent that rights to
indemnity and contribution hereunder may be limited by federal or state
securities laws or the public policy underlying such laws.
(xvii) The execution and delivery of this Agreement and the
agreements governing the Merger and the Acquisitions, and the
performance by the Company and each of the Subsidiaries of its
obligations hereunder and thereunder and the consummation of the
transactions contemplated herein and therein do not and will not
conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, the Articles or Certificate of
Incorporation or Bylaws of the Company or any of its Subsidiaries, or
any agreement or instrument, including (except as disclosed in the
Registration Statement) all agreements with Manufacturers filed as
exhibits to the Registration Statement.
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<PAGE> 24
(xviii) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or
other governmental body is necessary in connection with the execution
and delivery of this Agreement and the consummation of the transactions
herein contemplated (other than the registration under the Act of the
Shares and as may be required by the NASD or as required by state
securities and Blue Sky laws as to which such counsel need express no
opinion) except such as have been obtained or made under the Act or the
Exchange Act.
(xix) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement,
and application of the net proceeds therefrom as described in the
Prospectus, required to register as an investment company under the
1940 Act.
(xx) The Underwriters (assuming that they are bona fide
purchasers within the meaning of the Uniform Commercial Code) will
acquire good and marketable title to the Shares being sold by the
Company on the Closing Date, and the Additional Shares Closing Date, as
the case may be, free and clear of all liens, encumbrances, equities
and claims.
In rendering such opinion, Stephen C. Whicker, P.C. and
Schnader, Harrison, Segal and Lewis LLP may rely as to matters governed
by the laws of states other than Georgia or federal laws on local
counsel in such jurisdictions. In addition, in rendering their opinions
with respect to the Closing Date Subsidiaries, Stephen C. Whicker,
P.C., and Schnader, Harrison, Segal and Lewis LLP may rely on opinions
of counsel to those entities and certificates of officers, directors
and shareholders of those entities. In addition to the matters set
forth above, such opinion shall also include a statement to the effect
that nothing has come to the attention of such counsel which leads them
to believe that (i) the Registration Statement, at the time it became
effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) and as of the
Closing Date or the Additional Shares Closing Date, as the case may be,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Prospectus, or any
supplement thereto, on the date it was filed pursuant to the Rules and
Regulations and as of the Closing Date or the Additional Shares Closing
Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a
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<PAGE> 25
material fact necessary in order to make the statements, in the light
of the circumstances under which they are made, not misleading (except
that such counsel need express no view as to financial statements,
schedules and statistical information therein).
(c) The Representative shall have received from Troutman Sanders LLP,
counsel for the Underwriters, an opinion dated the Closing Date or the
Additional Shares Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (i), (iv), (x) and (xi) of Paragraph (b) of this
Section 6. In rendering such opinion Troutman Sanders LLP may rely as to all
matters governed other than by the laws of the State of Georgia or federal laws
on the opinion of counsel referred to in Paragraph (b) of this Section 6. In
addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
which leads them to believe that (i) the Registration Statement, or any
amendment thereto, as of the time it became effective under the Act (but after
giving effect to any modifications incorporated therein pursuant to Rule 430A
under the Act) as of the Closing Date or the Additional Shares Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Prospectus, or any supplement
thereto, on the date it was filed pursuant to the Rules and Regulations and as
of the Closing Date or the Additional Shares Closing Date, as the case may be,
contained an untrue statement of a material fact or omitted to state a material
fact, necessary in order to make the statements, in the light of the
circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, schedules and
statistical information therein).
(d) The Representative shall have received at or prior to the Closing
Date from Troutman Sanders LLP a memorandum or summary, in form and substance
satisfactory to the Representative, with respect to the qualification for
offering and sale by the Underwriters of the Shares under the state securities
or Blue Sky laws of such jurisdictions as the Representative may reasonably have
designated to the Company.
(e) You shall have received, on each of the dates hereof (or, if the
Registration Statement has been declared effective prior to the execution and
delivery of this Agreement, dated such effective date and the date of this
Agreement), the Closing Date and the Additional Shares Closing Date, as the case
may be, a letter dated the date hereof, the Closing Date or the Additional
Shares Closing Date, in form and substance satisfactory to you, of Ernst & Young
LLP, confirming that they are independent public accountants within the meaning
of the Act and the applicable published Rules and Regulations thereunder and
stating that in their opinion the
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<PAGE> 26
financial statements and schedules examined by them and included in the
Registration Statement comply in form in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations; and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus. In the event
that the letters referred to in this Section 6(e) set forth any changes,
decreases or increases in the items specified in said letters, it shall be a
further condition to the obligations of the Underwriters that (i) such letters
shall be accompanied by a written explanation by the Company as to the
significance thereof, unless the Representative deems such explanation
unnecessary, and (ii) such changes, decreases or increases do not, in your sole
judgment, make it impracticable or inadvisable to proceed with the purchase,
sale and delivery of the Shares being delivered at such Closing Date or
Additional Shares Closing Date, as the case may be, as contemplated by the
Registration Statement, as amended as of the date of such letter.
(f) The Representative shall have received on the Closing Date or the
Additional Shares Closing Date, as the case may be, a certificate or
certificates of the Chief Executive Officer and the Chief Financial Officer and
the Secretary of the Company to the effect that, as of the Closing Date or the
Additional Shares Closing Date, as the case may be, each of them severally
represents as follows:
(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for such purpose have
been taken or are, to his knowledge, contemplated by the Commission;
(ii) He or she does not know of any litigation instituted or
threatened against the Company of a character required to be disclosed
in the Registration Statement which is not so disclosed; he or she does
not know of any material contract required to be filed as an exhibit to
the Registration Statement which is not so filed; and the
representations and warranties of the Company contained in Section 1
hereof are true and correct as of the Closing Date or the Additional
Shares Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;
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<PAGE> 27
(iv) He or she has carefully examined the Registration Statement
and the Prospectus and, in his or her opinion, as of the effective date
of the Registration Statement the Registration Statement does not
include any untrue statement of a material fact or omit to state any
material fact necessary to make statements contained therein not
misleading, and the Prospectus does not include any untrue statement of
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading
and since the effective date of the Registration Statement, no event
has occurred which is required to have been set forth in a supplement
to or an amendment of the Prospectus which has not been so set forth in
such supplement or amendment; and
(v) Since the respective dates as of which information is given
in the Registration Statement and Prospectus and except as disclosed in
or contemplated by the Registration Statement, there has not been any
Material Adverse Event.
(g) The Company shall have furnished to the Representative such further
certificates and documents confirming the representations and warranties,
covenants and conditions contained herein and related matters as the
Representative may reasonably have requested.
(h) Subsequent to the date hereof there shall not have occurred any of
the following: (i) any suspension or limitation in trading in securities
generally on the New York Stock Exchange, or any setting of minimum prices for
trading on such exchange, or in the Common Stock by the Commission or the Nasdaq
National Market; (ii) a moratorium on commercial banking activities in New York
declared by either federal or state authorities; or (iii) any outbreak or
escalation of hostilities involving the United States, declaration by the United
States of a national emergency or war or any other national or international
calamity or emergency if the effect of any such event specified in this clause
(iii) in your judgment makes it impracticable or inadvisable to proceed with the
purchase, sale and delivery of the Shares being delivered at such Closing Date
or Additional Shares Closing Date, as the case may be, as contemplated by the
Registration Statement, as amended as of the date hereof.
(i) The Firm Shares and Additional Shares, if any, have been approved
for listing upon notice of issuance on the Nasdaq National Market.
(k) The Lockup Agreements described in Section 4(a)(x) shall be in full
force and effect.
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<PAGE> 28
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representative and to Troutman Sanders
LLP, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representative by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Additional Shares Closing Date,
as the case may be.
In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.
The obligations of the Company to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Additional Shares
Closing Date, as the case may be, no stop order suspending the effectiveness of
the Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of the
Act, against any losses, claims, damages or liabilities to which such
Underwriter or any such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; and will reimburse each Underwriter and
each such controlling person upon demand for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage or liability,
action or proceeding or in
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<PAGE> 29
responding to a subpoena or governmental inquiry related to the offering of the
Shares, whether or not such Underwriter or controlling person is a party to any
action or proceeding; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement,
or omission or alleged omission made in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by or through the Representative specifically for use in the preparation
thereof. This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Company or any such director, officer, or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (ii) the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made; and
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representative
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
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<PAGE> 30
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of the provisions of Section 8(a) or (b). In case any
such proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof with counsel satisfactory to such indemnified party and
shall pay as incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel at its own expense. Notwithstanding the foregoing, the
indemnifying party shall pay as incurred (or within 30 days of presentation) the
fees and expenses of the counsel retained by the indemnified party in the event
(i) the indemnifying party and the indemnified party shall have mutually agreed
to the retention of such counsel, (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them or
(iii) the indemnifying party shall have failed to assume the defense and employ
counsel acceptable to the indemnified party within a reasonable period of time
after notice of commencement of the action. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such indemnified parties. Such
firm shall be designated in writing by you in the case of parties indemnified
pursuant to Section 8(a) and by the Company in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if settled
with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding and does not include any admission or other statement of wrongdoing,
negligence or improper activity of any kind of such indemnified party as a part
of such settlement.
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<PAGE> 31
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the on the one hand and the Underwriters on the other
in connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(d). The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 8(d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), (i) no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter and (ii) no person guilty of fraudulent
misrepresentation (within the meaning
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<PAGE> 32
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this Section 8(d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. DEFAULT BY UNDERWRITERS.
If on the Closing Date or the Additional Shares Closing Date as the
case may be, any Underwriter shall fail to purchase and pay for the portion of
the Shares which such Underwriter has agreed to purchase and pay for on such
date (otherwise than by reason of any default on the part of the Company), you,
as Representative of the Underwriters, shall use your reasonable efforts to
procure within 48 hours thereafter one or more of the other Underwriters, or any
others, to purchase from the Company such amounts as may be agreed upon and upon
the terms set forth herein, the Firm Shares or Additional Shares, as the case
may be, which the defaulting Underwriter or Underwriters failed to purchase. If
during such 48 hours you, as such Representative, shall not have procured such
other Underwriters, or any others, to purchase the
- 32 -
<PAGE> 33
Firm Shares or Additional Shares, as the case may be, agreed to be purchased by
the defaulting Underwriter or Underwriters, then (i) if the aggregate number of
shares with respect to which such default shall occur does not exceed 10% of the
Firm Shares or Additional Shares, as the case may be, covered hereby, the other
Underwriters shall be obligated, severally, in proportion to the respective
numbers of Firm Shares or Additional Shares, as the case may be, which they are
obligated to purchase hereunder, to purchase the Firm Shares or Additional
Shares, as the case may be, which such defaulting Underwriter or Underwriters
failed to purchase, or (ii) if the aggregate number of shares of Firm Shares or
Additional Shares, as the case may be, with respect to which such default shall
occur exceeds 10% of the Firm Shares or Additional Shares, as the case may be,
covered hereby, the Company or you as the Representative of the Underwriters
will have the right, by written notice given within the next 48-hour period to
the parties to this Agreement, to terminate this Agreement without liability on
the part of the non-defaulting Underwriters or of the Company except to the
extent provided in Section 8 hereof. In the event of a default by any
Underwriter or Underwriters, as set forth in this Section 9, the Closing Date or
Additional Shares Closing Date, as the case may be, may be postponed for such
period, not exceeding seven days, as you, as Representative, may determine in
order that the required changes in the Registration Statement or in the
Prospectus or in any other documents or arrangements may be effected. The term
"Underwriter" includes any person substituted for a defaulting Underwriter. Any
action taken under this Section 9 shall not relieve any defaulting Underwriter
from liability in respect of any default of such Underwriter under this
Agreement.
10. NOTICES.
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or telegraphed
and confirmed as follows: if to the Underwriters, to Raymond James & Associates,
Inc., 880 Carillon Parkway, St. Petersburg, Florida 33716, Attention: General
Counsel; if to the Company to
Sunbelt Automotive Group, Inc.
5901 Peachtree-Dunwoody Road
Suite 250B
Atlanta, Georgia 30328
Attn.: Stephen C. Whicker,
General Counsel
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<PAGE> 34
11. TERMINATION
This Agreement may be terminated by you by notice to the Company as
follows:
(a) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any Material Adverse Event has
occurred, (ii) any outbreak or escalation of hostilities or declaration of war
or national emergency or other national or international calamity or crisis or
change in economic or political conditions if the effect of such outbreak,
escalation, declaration, emergency, calamity, crisis or change on the financial
markets of the United States would, in your reasonable judgment, make it
impracticable to market the Shares or to enforce contracts for the sale of the
Shares, (iii) suspension of trading in securities generally on the New York
Stock Exchange or the American Stock Exchange or limitation on prices (other
than limitations on hours or numbers of days of trading) for securities on
either such Exchange, (iv) the enactment, publication, decree or other
promulgation of any statute, regulation, rule or order of any court or other
governmental authority which in your opinion materially and adversely affects or
may materially and adversely affects the business or operations of the Company,
(v) declaration of a banking moratorium by United States or New York State
authorities, or (vi) the taking of any action by any governmental body or agency
in respect of its monetary or fiscal affairs which in your reasonable opinion
has a material adverse effect on the securities markets in the United States;
(b) as provided in Sections 6 and 9 of this Agreement; or
(c) any termination pursuant to any of subparagraphs (ii) through (vi)
of Section 11(b) shall be without liability of any party to any other party
(except to the extent provided in Sections 5 and 8 hereof).
12. SUCCESSORS.
This Agreement has been and is made solely for the benefit of the
Underwriters and, the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any right or
obligation hereunder. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign merely because of such purchase.
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<PAGE> 35
13. INFORMATION PROVIDED BY UNDERWRITERS.
The Company and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page of the
Prospectus (insofar as such information relates to the Underwriters); legends
required by Item 502(d) of Regulation S-K under the Act, Regulation M under the
Exchange Act; and the information in the first, third, sixth and ninth
paragraphs under the caption "Underwriting" in the Prospectus.
14. MISCELLANEOUS
Subject to the foregoing, the reimbursement, indemnification and
contribution agreements contained in this Agreement and the representations,
warranties and covenants in this Agreement shall remain in full force and effect
regardless of (a) any termination of this Agreement, (b) any investigation made
by or on behalf of any Underwriter or controlling person thereof, or by or on
behalf of the Company or its directors or officers and (c) delivery of and
payment for the Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Florida.
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<PAGE> 36
The Company and the Underwriters each hereby irrevocably waive
any right they may have to trial by jury in respect to any claim based upon or
arising out of this Agreement and the transactions contemplated hereby.
* * *
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement between the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
SUNBELT AUTOMOTIVE GROUP, INC.
By:
Robert W. Gundeck
Chief Executive Officer
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
RAYMOND JAMES & ASSOCIATES, INC.
By:
Its:
As Representative of the several
Underwriters listed on Schedule I
By: Raymond James & Associates, Inc.
By:
Its: Authorized Officer
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<PAGE> 37
SCHEDULE I
SCHEDULE OF UNDERWRITERS
Number of Firm Shares
Underwriter to be Purchased
----------- ---------------------
Raymond James & Associates, Inc.
Total
----------------------
----------------------
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<PAGE> 38
SCHEDULE II - Manufacturers' Consents
Buick
Cadillac
Chevrolet
Chrysler
Dodge
Ford
GMC
Honda
Hummer
Isuzu
Jeep
Kia
Mazda
Mercury
Mitsubishi
Nissan
Oldsmobile
Plymouth
Pontiac
Saturn
Toyota
- 38 -
<PAGE> 39
SCHEDULE III - Franchise Agreements
Buick
Cadillac
Chevrolet
Chrysler
Dodge
Ford
GMC
Honda
Hummer
Isuzu
Jeep
Kia
Mazda
Mercury
Mitsubishi
Nissan
Oldsmobile
Plymouth
Pontiac
Saturn
Toyota
- 39 -
<PAGE> 1
EXHIBIT 4.1
[NUMBER] [SUNBELT AUTOMOTIVE GROUP, INC. LOGO] [SHARES]
COMMON STOCK [CUSIP 86707P 10 9]
INCORPORATED UNDER THE LAWS OF THE STATE OF GEORGIA SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
is the registered holder of
FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $.001 PAR VALUE OF
Sunbelt Automotive Group, Inc., transferable on the books of the Corporation by
the holder hereof in person or by duly authorized attorney on surrender of
this certificate properly endorsed. This certificate is not valid until
countersigned and registered by the Transfer Agent and Registrar.
WITNESS the seal of the Corporation and the facsimile signatures of its
duly authorized officers.
Dated:
/s/ /s/
Secretary President
COUNTERSIGNED AND REGISTERED [SEAL] TRANSFER AGENT
AND REGISTRAR,
BY AUTHORIZED OFFICER
<PAGE> 1
EXHIBIT 10.3
ROBERT W. GUNDECK
SUNBELT EXECUTIVE EMPLOYMENT AGREEMENT
This SUNBELT EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is dated as
of April 21, 1998 (the "Effective Date"), and is entered into between SUNBELT
AUTOMOTIVE GROUP, INC., a Georgia Corporation (hereinafter the "Company" or
"Sunbelt"), and ROBERT W. GUNDECK, a resident of Atlanta, Fulton County, Georgia
("Executive").
WHEREAS, the Company wishes to employ Executive as its Chief Executive
Officer ("CEO") and Executive wishes to perform services for the Company as its
CEO; and
WHEREAS, the Executive and the Company desire to enter into this Executive
Employment Agreement to govern the terms and conditions of Executive's
employment by and with the Company.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
and agreements of the parties hereto, the parties hereby covenant and agree as
follows:
ARTICLE I.
EMPLOYMENT, DUTIES AND RESPONSIBILITIES
1.1 EMPLOYMENT. The Company, through its Board of Directors (the
"Board"), hereby agrees to employ Executive in the office of Chief Executive
Officer ("CEO") of the Company, or such other senior level management position
as agreed to by the parties, for the Term (defined in Section 2.1 below), and
Executive hereby agrees to accept such employment on the terms and conditions
set forth herein. Executive agrees to devote substantially all of his business
time and efforts to the business of the Company. Anything herein to the
contrary notwithstanding, nothing shall preclude Executive from (a) serving on
the boards of directors of a reasonable number of other corporations or trade
associations and/or charitable organizations, (b) engaging in charitable
activities and community affairs, and (c) managing his and his immediate
family's personal investments and affairs, provided that such activities do not
materially interfere with the proper performance of his duties and
responsibilities following the Effective Date.
1.2 DUTIES AND RESPONSIBILITIES. Commencing as of April 30, 1998,
Executive shall assume the responsibilities, perform the duties and exercise
the powers as CEO. Executive shall be responsible for the general management of
the operating affairs of the Company (subject to the day-to-day operating
control of certain of the Company's subsidiaries which the Board or the
Executive committee thereof (the "Executive Committee") may specifically
allocate to other senior officers of the Company or to the extent required by
agreements to which the Company or any of its subsidiaries are subject (other
than agreements with such senior officers), including franchise agreements with
automobile manufacturers or authorized distributors thereof and shall be
required to perform such duties and responsibilities as are consistent with his
position and as the Board or the Executive Committee may from time to time
prescribe.
1.3 BOARD AND EXECUTIVE COMMITTEE MEMBERSHIP. During the Term, the
Company will nominate Executive for election to the Board and will use its best
efforts to secure Executive's election to the Board and his appointment as a
member of the Executive Committee of the Board, if such a committee is
appointed by the Board.
1.4 REPORTING. Executive, in his capacity as CEO, shall report in the
performance of his duties directly to the Board of Directors of the Company.
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<PAGE> 2
ARTICLE II.
TERM
2.1 TERM. The term of Executive's employment as the CEO, or such other
acceptable senior level management position, under this Agreement (the "Term")
shall commence on May 1, 1998 and shall continue until the earlier of (a) June
30, 2003 or (b) the occurrence of a Change in Control (as defined in Section 6.1
below); provided that (i) the Term shall be renewed for an additional one-year
period on the expiration of the original Term of this Agreement ("Renewal Term")
and on each succeeding anniversary thereof (each, a "Renewal Date"), unless the
Company or Executive gives written notice, at least ninety (90) days prior to a
Renewal Date, of its or his intention not to so renew the Term or any Renewal
Term. Any Term or Renewal Term may be terminated earlier as provided in Article
V hereof.
ARTICLE III.
COMPENSATION AND EXPENSES
3.1 SALARY, BONUSES AND BENEFITS. As compensation and consideration for
the services to be rendered hereunder during the Term (or any Renewal Term) by
Executive, the Company shall pay, and Executive shall accept, the following
(subject, in each case, to the provisions of Article V hereof):
(a) BASE SALARY. Commencing May 1, 1998 and through June 30, 1999, the
Company shall pay Executive an annual base salary (on an annualized basis)(the
"First Year Base Salary") of Three Hundred Thousand Dollars ($300,000).
Commencing July 1, 1999 and through June 30, 2000, the Company shall pay
Executive an annual base salary (the "Second Year Base Salary") of Three Hundred
Seventy-Five Thousand Dollars ($375,000). Commencing July 1, 2000 and through
June 30, 2001, the Company shall pay Executive an annual base salary (the "Third
Year Base Salary") of Four Hundred Fifty Thousand Dollars ($450,000). Commencing
July 1, 2001 and through June 30, 2002, the Company shall pay Executive an
annual base salary (the "Fourth Year Base Salary") of Five Hundred Fifty
Thousand Dollars ($550,000). After the Fourth Year Base Salary, the Executive
shall be paid an annual Base Salary commensurate with industry competitive data
on comparable companies and as shall be set forth by the Compensation Committee;
provided, however, the base salary shall in no event be less than the Fourth
Year Base Salary. All base salary shall be payable in accordance with the normal
payment procedures of the Company.
(b) ANNUAL CASH BONUS. Commencing July 1, 1998, for each fiscal year of
the Company during the Term (or any Renewal Term), the Company shall pay
Executive an annual cash bonus (the "Annual Cash Bonus") as determined by the
Compensation Committee (or in the absence of such a committee, by either the
Executive Committee or the Board), based on satisfaction of certain performance
criteria to be established by agreement between the Compensation Committee and
Executive. If the Company meets certain financial and other performance targets
to be agreed upon by the Compensation Committee (or in the absence of such
committee, by the Executive Committee or the Board) and Executive, the annual
Cash Bonus shall be targeted at an amount at least equal to fifty percent (50%)
of Executive's Annual Base Salary for the applicable fiscal year but in no event
shall the Annual Cash Bonus exceed the Executive's annual Base Salary for the
applicable fiscal year. The Annual Cash Bonus shall be determined (prorated for
the final year of employment) and paid within ninety (90) days after the end of
each fiscal year of the Company during the Term (and any Renewal Term) with the
first Annual Case Bonus (the "First Year Bonus") due as of June 30, 1999 and
payable by July 31, 1999.
2
<PAGE> 3
(c) STOCK GRANT. The Company agrees to grant to the Executive the right
to purchase 63,640 shares of voting common stock (the "Shares") in the Company
at the price of $8.00 per share.
(d) STOCK OPTIONS.
(i) FIRST OPTION. In addition to the right to purchase the
Shares granted above, effective as of the effective date of the resignation
statement filed in connection with the IPO of the Company, the Company shall
grant to the Executive, under its Incentive Stock Plan, an option ("First
Option") to purchase up to 300,000 SHARES of the Company's Common Stock ("Common
Stock") at the pre-IPO exercise price adopted under the Company's Incentive
Stock Plan and as set forth on the Option Grant, attached hereto as Exhibit "B"
and incorporated herein. The First Option shall vest and become exercisable in
three (3) installments as follows: (i) 100,000 shares covered under the First
Option shall vest on January 1, 1999; (ii) 100,000 shares shall vest on January
1, 2000; and (iii) 100,000 shares shall vest on January 1, 2001. The First
Option shall terminate ten (10) years from the date of the grant subject to the
terms and conditions of this Agreement and the Option Grant.
(ii) SECOND OPTION. In addition to the First Option above,
effective as of the effective date of the registration statement filed in
connection with the Company's IPO, the Company shall grant to the Executive,
under the Company's Incentive Stock Plan and the Option Grant attached hereto
as Exhibit "C", an option ("Second Option") to purchase up to 50,000 SHARES of
the Company's Common Stock at an exercise price equal to the price per share to
the public set forth on the cover of the prospectus relating to the IPO. The
Second Option will vest and become exercisable in four equal (4) installments
as follows: One-fourth (1/4) of the number of shares covered under the Second
Option will vest on each of the first, second, third and fourth anniversaries of
the IPO Date. The Second Option shall terminate on the tenth anniversary of the
IPO Date, subject to earlier termination as may be set forth in this Agreement.
The Second Option is in addition to any other option award or grant which may be
made to the Executive during his employment.
(e) BENEFIT PROGRAMS. Executive shall be eligible to participate
in or receive benefits under all of the Company's employee and executive benefit
plans or arrangements including, without limitation, plans or arrangements
providing for health and disability insurance coverage, life insurance for the
benefit of Executive's beneficiaries, deferred compensation and pension
benefits, and personal financial, investment, legal or tax advice, all at the
highest level that is available through the Company and/or any of its
Subsidiaries to their senior executive management (together, the "Benefit
Programs"). In addition, Executive shall be entitled to such perquisites of
employment, including, but not limited to, two (2) demo automobiles, together
with insurance, etc., as are made available to the senior executive management
of the Company and/or its Subsidiaries. If this Agreement is assigned to any
Subsidiaries of the Company or any other party, Executive shall be granted
credit for all service with the Company and/or its Subsidiaries prior to the
date of such assignment for all purposes of the Benefit Programs, including, but
not limited to, eligibility, vesting and benefits. To the extent permissible
under applicable law, the Company agrees to take or to cause to be taken all
actions necessary so that Executive will be deemed to have met such requirement.
The Company agrees that whenever Executive is required to pay for coverage or
benefits under a Benefit Program from his own wages, the Company shall reimburse
him for the sum of the amount of such payments plus federal, state income and
social security and medicare taxes on the entire reimbursement amount (including
the tax on such taxes) so that Executive will not have incurred any cost in
obtaining such coverage or benefit except as otherwise may be specifically set
forth herein.
3
<PAGE> 4
(f) VACATION. Executive shall be entitled to paid vacation
during each year of the Term in an amount equal to four (4) weeks per year.
Executive shall have the right to determine the time and duration of any
vacation so taken, in his sole discretion. Unused vacation days may be
accumulated from year to year, up to a maximum carryover of eight (8) weeks.
3.2. EXPENSES. The Company shall reimburse Executive for reasonable
business-related expenses incurred by him in connection with the performance of
services hereunder during the Term, subject to the Company's policies relating
to business-related expenses as in effect from time to time during the Term. The
reimbursable expenses shall include a minimum of Two Hundred and Fifty Dollars
($250.00) per month.
ARTICLE IV.
EXCLUSIVITY, ETC.
4.1 EXCLUSIVITY. Executive agrees that during the Term (and any
Renewal Term) he will not engage in any other business activities, pursued for
gain, profit or other pecuniary advantage, that are competitive with the
activities of the Company or any of its Subsidiaries, except as permitted in
Section 1.1 above and Section 4.2 below. Executive agrees that all of his
activities as an employee of the Company shall be in conformity in all material
respects with all policies, rules and regulations and directions of the Company
not inconsistent with this Agreement and which have been expressly communicated
to him, whether orally or in writing.
4.2 OTHER BUSINESS VENTURES. Executive agrees that, so long as he
is employed by the Company, he will not have any financial or other beneficial
interest in any business enterprise which is competitive with any business
engaged in by the Company or any of its Subsidiaries. Notwithstanding the
foregoing or anything contained in Section 4.1 hereof, Executive may own,
directly or indirectly, up to two per cent (2%) of the outstanding capital stock
of any such business having a class of capital stock which is traded on any U.S.
or foreign stock exchange or in the over-the-counter market.
4.3 CONFIDENTIALITY; NON-COMPETITION. (a) Executive agrees that he
will not, at any time during the Term (or any Renewal Term), and for a period of
three (3) years following the termination of his employment, directly or
indirectly, use or divulge to any other person, firm or corporation any trade or
business secret, process, method or means, or any other confidential information
concerning the business or policies of the Company or any of its Subsidiaries or
Affiliates (as Affiliates is defined in Section 6.2), except (i) as such
disclosure or use may be required or appropriate in connection with his work as
an employee of the Company or (ii) when required to do so by a court of law, by
any governmental agency having supervisory authority over the business of the
Company or by any administrative or legislative body (including a committee
thereof) with apparent jurisdiction to order him to divulge, disclose or make
accessible such information. For purposes of this Agreement, a "trade or
business secret, process, method or means, or any other confidential
information" shall mean and include information treated as confidential or as a
trade secret by the Company or any of its Subsidiaries or Affiliates, that is or
has been disclosed or otherwise becomes or has become known to the Executive as
a result of his employment with the Company, including but not limited to,
information regarding contemplated products, models, compilations, business and
financial methods or practices, marketing, merchandising and selling techniques,
customers, vendors, suppliers, trade secrets, training programs, manuals or
materials, technical information, contracts, systems, procedures, mailing lists,
know-how, trade names, improvements, pricing, price lists, financial or other
data (including
4
<PAGE> 5
the revenues, costs or profits associated with any of the Company's products or
services), business plans, strategy, code books, invoices and other financial
statements, computer programs, software systems, databases, discs and
printouts, other plans (technical or otherwise), customer and industry lists,
supplier lists, correspondence, internal reports, personnel files, sales and
advertising material, telephone numbers, names, addresses or any other
compilation of information, written or unwritten, which is or was used in the
business of the Company or any of its Subsidiaries or Affiliates. Executive's
obligation under this Section 4.3 (a) shall not apply to any information which
is generally known to the public or hereafter becomes generally known to the
public without the fault of Executive. Executive further agrees that upon
termination of his employment, he will not take with him, or retain without
written authorization from the Company, and will promptly deliver to the
Company, all confidential information of the Company and any copies thereof,
together with all notes, extracts, compilations, and other documents, records,
and media that contain or are based upon a trade or business secret, process,
method or means, or any other confidential information. Upon termination of
his employment, Executive also shall deliver to the Company all other files,
correspondence, and other communications received, maintained, and/or
originated by Executive during the course of his employment and any copies
thereof.
(b)(i) Executive acknowledges that the agreements and covenants contained
in this section 4.3(b) are essential to protect the value of the Company's
business and assets and by virtue of his employment with the Company, Executive
has obtained and will obtain knowledge, contracts, know-how, training,
experience and other information relating to the Company's business operations,
and there is a substantial probability that such knowledge, know-how, contacts,
training, experience and information could be used to the substantial advantage
of a competitor of the Company and to the Company's substantial detriment.
Accordingly, for a period commencing on the date of termination of Executive's
employment with the Company and ending one (1) year from and after such date
(the "Non-Compete Period"), Executive shall not, directly or indirectly, for
himself or on behalf of or in conjunction with any person, partnership,
corporation or other entity, compete, own, operate, control, or participate or
engage in the ownership, management, operation or control of, or be connected
with as an officer, employee, partner, director, shareholder, representative,
consultant, independent contractor, guarantor, advisor or in any other manner or
otherwise have a financial interest in, a proprietorship, partnership, joint
venture, association, firm, corporation or other business organization or
enterprise that competes with the Company (which for this purpose shall mean any
business or enterprise that operates dealerships for the retail sales of new and
used automobiles or trucks and businesses ancillary thereto), provided that such
business or enterprise (A) is or becomes located or otherwise engaged within a
100 mile radius of the City of Atlanta, Georgia or within a 100 mile radius of
any automobile or truck dealerships (and all businesses ancillary thereto) whose
aggregate gross sales during the 12-month period immediately preceding the date
of Executive's termination exceeded $50,000,000, and provided further that it
shall not be a violation of this Section 4.3 (b) if (x) Executive owns up to one
percent (1%) of the outstanding capital stock of any such business having a
class of capital stock which is traded on any U.S. or foreign stock exchange or
in the over-the-counter market, (y) Executive owns, operates, is employed by or
is otherwise connected with an advertising agency that serves automobile
dealerships, provided Executive does not personally perform any work for, or
otherwise provide any advice with respect to, any account that is engaged in
competitive activity with the Company, or (z) Executive is employed by or is a
consultant or independent contractor for an entity that competes with the
Company but Executive is employed by or is a consultant or independent
contractor for a division or subsidiary of such entity that does not engage in
such competitive activity. During the Non-Compete Period, Executive shall not
interfere with or disrupt, or attempt to interfere with or disrupt, the
relationship, contractual or otherwise, between the Company and any customer,
client, supplier, manufacturer, distributor, consultant, independent contractor
or employee of the Company.
5
<PAGE> 6
(c) Executive agrees that, at any time and from time to time during and
after the Term (or any Renewal Term) he will execute and all documents
which the Company may reasonable request to effectuate the provisions of this
Section 4.3.
ARTICLE V.
TERMINATION
5.1 TERMINATION BY THE COMPANY. The Company shall have the right to
terminate Executive's employment at any time, with or without "Cause."
(a) TERMINATION FOR CAUSE. For purposes of this Agreement, "Cause"
shall mean:
(i) Executive is convicted of or enters a plea of guilty to any
felony under federal or state law (except under any state's laws regulating the
enforcement of motor vehicles involved in accidents);
(ii) Executive engages in conduct that constitutes gross neglect
or willful misconduct in carrying out his duties under this Agreement,
resulting, in either case, in material harm to the Company;
(iii) Executive refuses to follow the instructions, orders or
directives of the Board or the Executive Committee with respect to his duties
and responsibilities as set forth in this Agreement, provided that such refusal
shall constitute Cause only if the instruction, order or directive in question
has been furnished to Executive in writing and provided further that such
refusal shall not constitute Cause if Executive has a good faith and reasonable
belief, based on advice of counsel, that to follow such instruction, order or
directive would be unlawful;
(iv) Executive engages in any of the following acts which have
a material adverse impact on the financial condition of the Company:
(A) actual fraud or other material acts of dishonesty in
fulfulling his assigned responsibilities hereunder; or
(B) the willful or grossly negligent destruction of any
material amount of the company's tangible property.
The Board shall notify Executive of its intent to terminate him with
Cause by providing written notice ("Notice of Cause") stating in as much detail
as possible the particular event, act or acts, or failure or failures to act,
that constitute the grounds on which the proposed termination for Cause is
based; such Notice of Cause must be given within fifteen (15) days of the date
any of the members of the Board (exclusive of Executive) learns of the
circumstances giving rise to the Notice of Cause. Executive shall have fifteen
(15) days after receipt of the Notice of Cause in which to cure or otherwise
correct the circumstances detailed, provided that in the event any such cure or
correction is incapable upon reasonable diligence of being completed within
such fifteen (15) day period, Executive shall be entitled to commence a cure or
correction within said fifteen (15) day period and thereafter diligently and
continuously pursue such cure or correction to completion. Executive may also,
within such fifteen (15) day period, request by written notice that the Board
hold a hearing at which Executive may contest the proposed termination with
Cause. The hearing shall be held on a date set by the Board within fifteen
(15) days of the date the Board receives Executive's notice requesting a
hearing regarding the proposed termination with Cause. If Executive does not
request a hearing and the circumstances described in the Notice of Cause have
not been cured within the fifteen (15) day period following the date of the
Notice of Cause,
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Executive shall be deemed terminated for Cause, effective as of the day the
Notice of Cause was given by the Company.
(b) TERMINATION WITHOUT CAUSE. The Company may terminate Executive
without Cause upon sixty (60) days advance written notice to Executive and such
termination shall not constitute a breach of this Agreement.
5.2 TERMINATION BY EXECUTIVE.
(a) TERMINATION FOR GOOD REASON. Termination for "Good Reason"
shall mean a termination of Executive's employment at the Executive's
initiative following the occurrence, without Executive's written consent, of
one or more of the following events:
(i) A material reduction in Executive's then current annual
Base Salary or his Annual Cash Bonus;
(ii) The failure to elect or re-elect Executive to the
Board, or his removal, as CEO of the Company or such other senior level
executive management position acceptable to Executive or his removal as a full
voting member of the Board of Directors, without the Executive's consent except
as otherwise contemplated by Executive's nomination and election pursuant to
Section 1.3;
(iii) Any (A) diminution in Executive's duties other than
changes which neither individually nor in the aggregate will or will likely
cause any actual or perceived material reduction in his powers, duties and
responsibilities as enumerated in this Agreement, or (B) assignment to
Executive of duties which are either fundamentally or materially inconsistent
with his position as CEO of the Company;
(iv) As a result of a breach by the Company or the Chairman
of the Board or the Chairman of the Executive Committee, Executive determines
that he cannot carry out his duties and responsibilities as CEO or such other
senior level management position in the manner contemplated by this Agreement;
(v) The occurrence of a Change in Control (as defined in
Section 6.1 hereof);
(vi) The failure of the Company to obtain the absolute and
unqualified assumption in writing of its obligation to perform this Agreement
by any successor to all or substantially all of the assets or stock of the
Company within 15 days after a merger, consolidation, sale or similar
transaction.
(vii) The modification of any of the responsibilities,
duties and authority of the Company's senior executive management without
Executive's prior written consent.
(viii) The Company fails to make any payments due to the
Executive hereunder or otherwise materially breaks its obligations under this
Agreement.
Prior to his termination for Good Reason, Executive shall give
written notice ("Notice of Good Reason") to the Board of his intention to
terminate this Agreement for Good Reason, such Notice of Good Reason (A) to
state in detail the particular event, act or acts or failure or failures to
act that constitute the grounds on which the proposed termination for Good
Reason is based, and (B) to be given within fifteen (15) days of his learning
of such event, act or acts or failures to act. The Company shall have fifteen
(15) days after the date that the Notice of Good Reason has been received by
the Board in which to cure or correct the circumstances giving rise to
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the Notice of Good Reason. If the Company fails to cure such conduct within
such fifteen (15) day cure period, Executive's employment shall be terminated
for Good Reason as of the expiration of the fifteen (15) day cure period.
(B) VOLUNTARY TERMINATION. Executive shall have the right to
terminate his employment at any time without cause (a "Voluntary Termination").
A Voluntary Termination that is not a Termination for Good Reason or the result
of Disability (as hereafter defined) shall be effective upon sixty (60) days
advance written notice to the Company and shall not constitute a breach of this
Agreement.
5.3 DEATH. In the event Executive dies during the Term (or any Renewal
Term), Executive's employment under this Agreement shall automatically terminate
effective upon the date of Executive's death.
5.4 DISABILITY. In the event that Executive shall suffer a Disability which
shall prevent him from performing services hereunder for a period of at least
one hundred and twenty (120) consecutive days, the Company shall have the right
to terminate the Agreement, which shall be effective upon written notice to
Executive. "Disability" means a physical or mental condition which renders
Executive incapable of performing Executive's regular duties hereunder. In the
event of any disagreement between Executive and the Company as to whether
Executive is suffering from a Disability, the determination of Executive's
Disability shall be made by one or more board certified licensed physicians
practicing the specialty of medicine applicable to Executive's disorder in the
Atlanta metropolitan area in accordance with the provisions of this Section. If
either the Company or Executive desires to initiate the procedure provided in
this Section, such party (the "Initiating Party") shall deliver written notice
to the other party (the "Responding Party") in accordance with the provisions of
this Agreement specifying that the Initiating Party desires to proceed with a
medical examination and the procedures specified in this Section. Such notice
shall include the name, address and telephone number of the physician selected
by the Initiating Party (the "Disability Examination Notice"). If the Responding
Party fails within ten (10) days after the receipt of the Disability Examination
Notice to designate a physician meeting the standards specified herein, the
physician designated by the Initiating Party in the Disability Examination
Notice shall make the determination of Disability as provided in this Section.
If the Responding Party by written notice notifies the Initiating Party within
ten (10) days of the receipt by the Responding Party of the Disability
Examination Notice by notice specifying the physician selected by the Responding
Party for purposes of this Section, then each of the two physicians as so
designated by the respective parties shall each examine Executive. Examinations
shall be made by each such physician within ten (10) days of such physician's
respective designation. Each physician shall render a written report as to
whether in such physician's opinion Executive is suffering a Disability. If the
two physicians agree on the status of Executive for purposes of this Section,
such determination shall be conclusive and dispositive for all purposes of this
Section. If the two physicians cannot so agree, the two physicians shall jointly
select a third physician meeting the standards specified in this Section within
ten (10) days after the later report of the two physicians is submitted. The
third physician shall render a written report on the status of Executive within
ten (10) days of selection and such report shall be dispositive for purposes of
this Section. For purposes of this Section, Executive agrees that he shall
promptly submit to such examinations and tests as such physicians shall
reasonably request for purposes of making a determination of Disability as
provided herein. Failure of Executive to submit to the examination as required
by this Section shall constitute a conclusive admission by the Executive that
Executive is suffering from a Disability as provided herein.
5.5 SEVERANCE PAY UPON TERMINATION. Amounts due under this Section 5.5 are
in the nature of severance payments considered to be reasonable by the Company
and are not in the nature of a penalty, provided that such payments shall be
Executive's exclusive remedy relating to the termination of his employment
hereunder.
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(a) FOR CAUSE/VOLUNTARY TERMINATION/END OF TERM. In the event of
termination of Executive's employment (i) by the Company for Cause, (ii) by
Executive other than for Good Reason, or (iii) by reason of either party's
election not to extend the Term as provided in Section 2.1 hereof, the Company
shall pay to Executive any annual Base Salary and any Annual Cash Bonus earned
(for a full fiscal year or prorated for a partial fiscal year) but not paid to
Executive prior to the effective date of such termination, and Executive shall
be entitled to other additional benefits in accordance with the benefit plans
of the Company. In addition, Executive and his spouse shall be entitled to
continued participation in all medical, dental and hospitalization coverage as
set forth in Section 5.5(e) hereof.
(b) GOOD REASON/WITHOUT CAUSE/CHANGE IN CONTROL. In the event of
termination of Executive's employment (i) by the Company other than for Cause,
(ii) by Executive for Good Reason or (iii) as a result of a Change in Control,
then the Executive shall receive the following:
(i) Base Salary. The Executive shall be paid all earned
but unpaid annual Base Salary and will continue to receive his current annual
Base Salary (subject to withholding of all applicable taxes) for the remainder
of the Term (or any Renewal Term) of this Agreement. For purposes hereof, the
Executive's "current base annual salary" shall be the highest rate in effect
during the six-month period prior to the termination of Executive's employment.
The amounts due hereunder for the annual Base Salary shall be paid in a single
lump payment which shall be paid within ninety (90) days of the effective date
of termination.
(ii) Bonuses and Incentives. The Executive shall receive
any Annual Cash Bonus then earned (for a full fiscal year or prorated for a
partial fiscal year) plus bonus payments from the Company for the thirty-six
(36) months following the month in which his employment is terminated in an
amount for each such month equal to one-twelfth of the average of the Annual
Cash Bonuses paid to him for the two calendar years immediately preceding the
calendar year in which such termination occurs (provided that calendar years
prior to 1998 shall not be considered). Any Annual Cash Bonus that the
Executive had previously earned but which may not yet have been paid as of the
date of termination shall be due and payable. All such bonus amounts shall be
paid in a single lump sum payment which shall be paid not later than ninety
days after his termination.
(iii) Health and Life Insurance Coverage. The Executive
shall receive post-termination medical, dental, and hospitalization insurance
coverage as provided in Section 5.5(e).
(iv) Employee Retirement Plans. In addition to the
benefits provided herein, to the extent permitted by the applicable plan, the
Executive will be entitled to continue to participate, consistent with past
practices, in all employee retirement plans, maintained by the Company in
effect as of the effective date of the termination of his employment. The
Executive's participation in such retirement plans shall continue for a period
of thirty-six (36) months from the effective date of the termination of his
employment (at which point he will be considered to have terminated employment
within the meaning of the plans) and the compensation payable to the Executive
under (i) and (ii) above shall be treated (unless otherwise excluded) as
compensation under such plans. If continued participation in any plan is not
permitted or if any such plan does not continue to exist, the Company shall pay
to the Executive and, if applicable, his designated beneficiary, a supplemental
benefit equal to the present value on the effective date of termination of
employment (calculated as provided in the plan) of the excess of (A) the
benefit the Executive would have been paid under such plan if he had continued
to be covered for the 36-month period (less any amounts he would have been
required to contribute) with assumed earnings calculated at
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eight percent (8%) per annum, over (B) the benefit actually payable under such
plan. The Company shall pay such additional benefits (if any) in a lump sum.
(v) Effect of Lump Sum Payment. The lump sum payments under
subparagraphs (i) or (ii) above shall not alter the amounts Executive is
entitled to receive under the benefit plans described in subparagraph (iv)
above. Benefits under such plans shall be determined as if Executive had
remained employed and received such payments over a period of thirty-six (36)
months.
(vi) Effect of Death. The benefits payable or to be provided under
this Agreement shall not cease in the event of the Executive's death and such
benefits shall be payable to his designated beneficiary (in accordance with
Section 7.2 hereof) or, if none, the legal representative of Executive's estate.
(vii) Restricted Stock; Options. Any restricted stock and/or options
awarded to and granted to the Executive but not yet vested shall immediately
vest and become exercisable by the Executive as provided in Section 5.6(b).
(c) DISABILITY. In the event of termination of Executive's employment for
Disability as described in Section 5.4 hereof, Executive shall be entitled to
receive any annual Base Salary and any annual Cash Bonus then earned (for a full
fiscal year or prorated for a partial fiscal year) plus Executive's annual Base
Salary for the remainder of the Term (or any Renewal Term). Executive and his
spouse shall be entitled to continued participation in medical, dental and
hospitalization coverage as set forth in Section 5.5(e) hereof and, if not
prohibited by law, in all other employee plans and programs in which they were
participating on the date of termination of Executive's employment due to
Disability until the date, or dates, Executive and his spouse receive similar
coverage and benefits under the plans and programs of a subsequent employer
(such coverages and benefits to be determined on a coverage-by-coverage, or
benefit-by-benefit, basis).
(d) DEATH. In the event of termination of Executive's employment due to
death, then, in addition to the amounts and other benefits described in this
Agreement, the Company shall pay to the legal representative of Executive's
estate his annual Base Salary plus his average Annual Cash Bonus for a period of
one (1) year following the death of the Executive.
(e) POST-TERMINATION MEDICAL, DENTAL AND HOSPITALIZATION INSURANCE
COVERAGE. In the event of termination of Executive's employment for any reason
whatsoever, Executive and his spouse shall be entitled to continued
participation in all of the Company's medical, dental and hospitalization
insurance plans at the Company's expense until the date on which Executive is
employed by any Person other than the Company, or any Affiliate or Subsidiary of
the Company, and Executive becomes eligible for medical, dental and
hospitalization insurance coverage through such other Person's plan.
(f) GOLDEN PARACHUTE PAYMENTS. If the aggregate present value (determined
as of the effective date of termination of employment of Executive in accordance
with the provisions of Section 280G of the Internal Revenue Code of 1986, as
amended (the ''Code'') (or any successor section thereof) and the regulations
and rulings thereunder (''Section 280G'')) of the sum of (i) severance payments
made to Executive due to his termination for Good Reason as a result of a Change
in Control under this Section, and (ii) all other payments to Executive in the
nature of compensation which are contingent on a change in ownership or
effective control of the Company or in the ownership of a substantial portion of
the assets of the Company would result in an excess parachute payment (as
determined under Section 280G), then the Company shall pay to Executive an
additional severance amount under this Subsection (f) equal to the sum of (A)
the amount of tax imposed by Code Section 4999 upon excess parachute payments
received by Executive, and (B) federal and state income and social
security/medicare taxes (including interest
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and penalties) payable on both the tax amount in (A) and the entire
amount paid under (B), such that Executive is reimbursed for, and has
no out-of-pocket expenses with respect to, the cost of all income
taxes and social security/medicare taxes (including interest and
penalties) payable upon amounts paid to Executive under this
Subsection (f).
5.6 TREATMENT OF RESTRICTED STOCK AND OPTIONS UPON TERMINATION
(A) FOR CAUSE/VOLUNTARY TERMINATION. In the event of termination of
Executive's employment (i) by the Company for Cause, or (ii) voluntarily by
Executive other than for Good Reason, the Restricted Stock and/or Options, to
the extent not then vested and exercisable on the date of such termination,
shall be immediately canceled. To the extent the Restricted Stock and/or
Options are then vested and exercisable on the date of such termination, they
may be exercised (A) in the event of termination by the Company for Cause, for
a period of ninety (90) days after the date of such termination, or (B) in the
event of Voluntary Termination by Executive for a period of one (1) year after
the date of such termination.
(B) WITHOUT CAUSE, FOR GOOD REASON, CHANGE IN CONTROL OR DUE TO
RETIREMENT, DEATH, OR DISABILITY. In the event of the termination of
Executive's employment by the Company without Cause, by Executive for Good
Reason, as a result of a Change in Control, or due to the Retirement, Death, or
Disability of Executive, all grants of restricted stock and all stock options
granted to Executive pursuant to the Restricted Stock Agreement and the
Company's Incentive Stock Plan, respectively, shall, to the extent not then
vested and exercisable on the date of such termination, become immediately
vested and exercisable for a period of ninety (90) days after the date of such
termination, or such longer period of time as is permitted under the applicable
plan or grant.
5.7 NO MITIGATION; NO OFFSET. In the event of any termination of
employment under this Article V, Executive shall be under no obligation to seek
other employment and there shall be no offset against amounts due Executive
under this Agreement on account of any remuneration attributable to any
subsequent employment that he may obtain, except as specifically provided for
fringe benefits in this Article V.
ARTICLE VI
CHANGE IN CONTROL
6.1 CHANGE IN CONTROL. A "Change in Control" shall mean the
occurrence of any one of the following events:
(a) Prior to an IPO, the shareholders of the Company or any of its
Affiliates (as defined in Section 6.2 below, individually or collectively, sell
or otherwise transfer to persons or entities who are not Affiliates of the
Company, in one transaction or a series of related transactions, 75% or more of
the Voting Stock (as defined below) of the Company or any of its Affiliates;
(b) Any "person," as such term is used in Section 3(a)(9) and 13(d) of
the Securities Exchange Act of 1934, becomes a "beneficial owner," as such term
is used in Rule 13s-3 promulgated under that act (other than an Affiliate of
the Company or any "person" who was a "beneficial owner" of 10% or more of the
Voting Stock of the Company on the date hereof or who has received Voting
Stock from Executive), of 50% or more of the Voting Stock of the Company
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or any of its Affiliates prior to any IPO and 40% or more of the Voting Stock
of the Company or any of its Affiliates after an IPO;
(c) The majority of the Board consists of individuals other than
"Incumbent Directors," which term means the members of the Board on the date of
this Agreement (excluding Executive) or otherwise designated pursuant to
various agreements among the Company's stockholders in effect on the date
hereof; provided, that any person becoming a director subsequent to such date
whose election or nomination for election was supported by a majority of the
directors who then comprised the Incumbent Directors shall be considered to be
an Incumbent Director;
(d) All or substantially all of the assets or business of the Company or
any of its Affiliates is disposed of pursuant to a merger, consolidation or
other transaction other than to an Affiliate of the Company (unless the
shareholders of the Company immediately prior to such merger, consolidation or
other transaction beneficially own, directly or indirectly, 50% or more of the
Voting Stock or other ownership interests of the entity or entities, if any,
that succeed to the business of the Company); or
(e) The consummation of (i) a merger, consolidation or other business
combination of the Company with any other "person" (as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) or
Affiliate thereof, other than a merger, consolidation or business combination
which would result in the outstanding Common Stock of the Company immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into common stock of the surviving entity or a parent or
Affiliate thereof) (at least fifty percent (50%) of the outstanding Common
Stock of the Company or such surviving entity or parent or Affiliate thereof
outstanding immediately after such merger, consolidation or business
combination, or (ii) a plan of complete liquidation of the Company; or
(f) The occurrence of any other event or circumstances which is not
covered by (a) through (e), above, which the Board determines affects control
of the Company and, in order to implement the purposes of this Agreement as
set forth above, the Board adopts a resolution that such event or circumstance
constitutes a Change in Control for the purposes of this Agreement.
6.2 OTHER TERMS. For the purposes of this Agreement, (i) "Affiliate" of
a specified person or other entity shall mean a person or other entity that
directly or indirectly controls, is controlled by, or is under common control
with the person or other entity specified, and in the case of a specified
person who is a natural person, his spouse, his issue, his parents, his estate
and any trust entirely for the benefit of his spouse and/or issue; (ii)
"Voting Stock" shall mean capital stock of any class or classes having voting
power under ordinary circumstances, in the absence of contingencies, to elect
the directors of a corporation; and (iii) "IPO" shall mean the completion of an
underwritten sale of Common Stock or securities convertible into Common Stock of
the Company (or an entity formed by the Company for the purpose of issuing
Common Stock (or securities convertible into Common Stock) in connection with
the IPO) pursuant to a registration statement which has become effective under
the Securities Act of 1933, as amended.
ARTICLE VII.
MISCELLANEOUS
7.1 INDEMNIFICATION.
(a) The Company agrees that if Executive is made a party, or is
threatened to be made a party, to any action, suit or preceding, whether civil,
criminal, administrative or
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investigative (a "Proceeding"), by reason of the fact that he is or was a
director, officer or employee of the Company or is or was serving at the
written request of the Company as a director, officer, member, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of such Proceeding is Executive's alleged action in an
official capacity while serving as a director, officer, member, employee,
trustee, or agent, Executive shall be indemnified and held harmless by the
Company to the fullest extent legally permitted or authorized by the Company's
articles of incorporation or bylaws or resolutions of the Company's Board of
Directors and the Georgia Business Corporation Code against all cost, expense,
liability and loss (including, without limitation, reasonable attorney's fees,
judgments, fines or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by Executive in connection therewith, and such
indemnification shall continue as to Executive in the event he has ceased to be
a director, officer, member, employee, trustee, or agent of the Company or other
entity and shall inure to the benefit of Executive's heirs, executors and
administrators. The Company shall advance to Executive all reasonable costs and
expenses incurred by him in connection with a Proceeding within twenty (20) days
after receipt by the Company of a written request for such advance. Executive
shall not be required to repay the amount of such advance unless it shall
ultimately be determined in the proceeding that he has acted willfully and was
grossly negligent in conduct giving rise to the Proceeding.
(b) The failure of the Company (including the Board, independent
legal counsel or stockholders) to have made a determination prior to the
commencement of any Proceeding concerning payments of amounts claimed by
Executive under Section 7.1(a) above that indemnification of Executive is
proper because he has met the applicable standard of conduct, shall create a
presumption that Executive has met the applicable standard of conduct.
(c) The Company agrees to maintain appropriate insurance coverage
for directors' and officers' liability, errors and omissions and/or blanket
liability protecting against any cost arising from a Proceeding which may be
assessed against Executive. Such coverage shall be provided at the highest
level provided for any employee, director or officer of the Company.
7.2 BENEFIT OF AGREEMENT; ASSIGNMENT; BENEFICIARY. This Agreement shall
inure to the benefit of and be binding upon the Company and its successors and
assigns. No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation in which
the Company is not the continuing entity, or sale of all or substantially all of
the assets of the Company, provided that the assignee or transferee is the
successor to all or substantially all of the assets of the Company and such
assignee or transferee assumes the liabilities, obligations and duties of the
Company, as contained in this Agreement, either contractually or as a matter of
law. This Agreement shall also inure to the benefit of, and be enforceable by,
Executive and his personal or legal representatives, executors, administrators,
successor, heirs, distributes, devises and legatees. If Executive should die
while any amount would still be payable to the Executive hereunder if he had
continued to live, all such amounts shall be paid in accordance with the terms
of this Agreement to Executive's beneficiary, devisee, legatee or other
designee, or if there is no such designee, to Executive's estate. Without
limiting the foregoing, Executive shall be entitled, to the extent permitted
under any applicable law, to select and change a beneficiary or beneficiaries
to receive any compensation or benefit payable hereunder following Executive's
death by giving the Company written notice thereof. In the event of Executive's
death or a judicial determination of his incompetence, reference in this
Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative.
7.3 NOTICES. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent by
telephone or telex or by registered or
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certified mail, postage prepaid, with return receipt requested, addressed: (a)
in the case of the Company of 5901 Peachtree Dunwoody Road, Building B, Suite
250, Atlanta, Georgia 30328, Attention: General Counsel, or to such other
address and/or to the attention of such other person as the Company shall
designate by written notice to Executive; and (b) in the case of Executive, to
2660 WEST WESLEY ROAD, ATLANTA, GEORGIA 30327 or to such other address as
Executive shall designate by written notice to the Company. Any notice given
hereunder shall be deemed to have been given at the time of receipt thereof by
the person to whom such notice is given.
7.4 AMENDMENT. This Agreement may not be changed or modified except by an
instrument in writing signed by both of the parties hereto.
7.5 WAIVER. The waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a continuing waiver or as a
consent to or waiver of any subsequent breach hereof. Any waiver must be in
writing and signed by Executive or an authorized officer of the Company, as the
case may be.
7.6 HEADINGS. The Article and Section headings herein are for convenience
of reference only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof.
7.7 GOVERNING LAW. This Agreement shall be governed by, and construed and
interpreted in accordance with, the internal laws of the State of Georgia
without reference to the principles of conflict laws.
7.8 AGREEMENT TO TAKE ACTIONS. Each party hereto shall execute and deliver
such documents, certificates, agreements and other instruments, and shall take
such other actions, as may be reasonably necessary or desirable in order to
perform his or its obligations under this Agreement or to effectuate the
purposes hereof.
7.9 SURVIVORSHIP. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
7.10 INVALIDITY AND SEVERABILITY. The invalidity or unenforceability of any
one or more of the particular provisions of this Agreement shall not affect the
enforceability of the other provisions hereof, all of which are inserted
conditionally on their being valid in law, and in the event one or more
provisions contained herein shall be invalid, this Agreement shall be construed
as if such invalid provision had not been inserted, and if such invalidity shall
be caused by any value, any price, the length of any period of time, the size of
any area, or the scope of activities set forth in any provision hereof, such
value, price, period of time, area, or scope shall be considered to be adjusted
to a value, price, period of time, area or scope which would cure such
invalidity. The parties hereto agree that the covenants and obligations
contained in this Agreement are severable and divisible, that none of such
covenants or obligations depends on any other covenant or obligation for its
enforceability, that each such covenant and obligation constitutes an
enforceable obligation between the Company and Executive, that each such
covenant and obligation shall be construed as an agreement independent of any
other provision of this Agreement, and that the existence of any claim or cause
of action by one party to this Agreement against another party to this
Agreement, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by any party to this Agreement of any
such covenants or obligations.
7.11 ENTIRE AGREEMENT. This Agreement, the exhibits attached hereto and the
Agreements and documents referred to herein, contain the entire understanding
and agreement between the parties concerning the subject matter hereof and
supersedes all prior agreements,
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understanding, discussions, negotiations and undertakings, whether written or
oral, between the parties with respect thereto.
7.12 RESOLUTION OF DISPUTES. Any disputes arising under or in connection
with this Agreement shall, at the election of either Executive or the Company,
be resolved by binding arbitration, to be held in Atlanta, Georgia in
accordance with the rules and procedures of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof. Each party shall bear his or
its own costs of the arbitration or litigation, provided, however, in the event
the Executive incurs legal fees and other expenses in seeking to obtain any
benefits provided by this Agreement or to enforce any rights or provisions of
this Agreement and is successful, in whole or in part, in obtaining or
enforcing any such rights or benefits through settlement, arbitration or
otherwise, the Company shall promptly pay the Executive's reasonable legal fees
and expenses incurred in obtaining such benefits or enforcing this Agreement.
Pending the resolution of any arbitration or court proceeding, the Company
shall continue payment of all amounts due Executive under this Agreement and
all benefits to which Executive is entitled at the time the dispute arises.
7.13 REPRESENTATIONS. The Company represents that it is fully authorized
and empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement to which it is
a party or by which it is bound. Executive represents that there is no
agreement to which he is a party or by which he is bound that would be violated
by the performance of his obligations under this Agreement.
7.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement effective as of the date first above written.
SUNBELT AUTOMOTIVE Executive:
GROUP, INC.
By: Charles /s/ ROBERT W. GUNDECK
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Title: COO ROBERT W. GUNDECK
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EXHIBIT 10.6
ALAN K. ARNOLD
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Employment Agreement") is dated as of this
23rd day of June, 1998, and is entered into between SUNBELT AUTOMOTIVE GROUP,
INC ("SAG"), WADE FORD, INC. ("Wade Ford"), WADE FORD BUFORD, INC. ("Wade Ford
Buford"), BOOMERSHINE FORD, INC. ("Boomershine Ford"), FRANKLIN FORD MERCURY,
INC. ("Franklin Ford") (Wade Ford, Wade Ford Buford, Boomershine Ford and
Franklin Ford, collectively, sometimes referred to as the "Company" or the
"Ford Dealerships") and Alan K. Arnold, an individual resident of the State of
Georgia ("Executive").
WHEREAS, BAG, the Subs, Wade Ford, Wade Ford Buford and the stockholders
of Wade Ford and Wade Ford Buford, including the Executive, entered into that
certain Agreement and Plan of Merger and Reorganization dated November 21,
1997, which was amended by the 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 (collectively, the
"Stock Purchase Agreement"), pursuant to which Second Amendment and an
Assignment Instrument dated March 31, 1998, BAG and the Subs assigned to SAG
all of BAG's and the Subs' right, title and interest in and to and all of their
obligations under the Stock Purchase Agreement, and SAG agreed to purchase 100%
of the stock of Wade Ford and Wade Ford Buford such that these two entities
will each become a wholly-owned subsidiary of SAG, as amended by the Third
Amendment to the Agreement and Plan of Merger dated April 28, 1998 by and among
the Parties and Sunbelt;
WHEREAS, BAG and SAG have entered into that certain Agreement and Plan of
Merger dated April 6, 1998, pursuant to which BAG will merge into SAG and
Boomershine Ford, which is now a wholly-owned subsidiary of BAG, will become a
wholly-owned subsidiary of SAG;
WHEREAS, Franklin Ford (a wholly-owned subsidiary of SAG), Hones, Inc.
d/b/a Bill Holt Ford Mercury ("Holt"), BAG, the stockholders of Holt entered
into that certain Asset Purchase Agreement dated as of December 11, 1997, as
amended, pursuant to which Franklin Ford will purchase substantially all of the
assets of Holt, and BAG and SAG have entered into that certain Assignment
Instrument dated as of January 8, 1998, pursuant to which BAG assigned all of
its right, title and interest in and to and all of its obligations under the
Asset Purchase Agreement, as amended;
WHEREAS, following the contemplated purchase of the assets of Holt,
Franklin Ford will continue the operations of the Ford dealership as a
wholly-owned subsidiary of SAG;
WHEREAS, upon completion of the above-referenced acquisitions and mergers,
Boomershine Ford, Wade Ford, Wade Ford Buford, and Franklin Ford will operate
the Ford Dealerships as wholly-owned subsidiaries of SAG;
WHEREAS, as a result, among other things, of the above-referenced
re-structured merger and acquisitions, Executive, Wade Ford, Wade Ford Buford,
Boomershine Ford, Franklin Ford and SAG desire to enter an Employment Agreement
to account for the revised organizational structure and Executive's duties
related thereto.
WHEREAS, this Employment Agreement is subject to and contingent upon the
completion of the merger and acquisitions contemplated by the above-referenced
agreements and transactions, as well as the closing of the initial public
offering of SAG.
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WHEREAS, Executive, SAG, Wade Ford, Wade Ford Buford, Boomershine Ford and
Franklin Ford desire to embody in this Employment Agreement the terms and
conditions of Executive's employment;
NOW, THEREFORE, the parties hereby agree:
ARTICLE 1
EMPLOYMENT, DUTIES AND RESPONSIBILITIES
1.1 EMPLOYMENT. Executive shall be employed as President of Wade Ford, Wade
Ford Buford, Boomershine Ford and Franklin Ford and Vice President of Ford
Dealer Development of SAG. Executive hereby accepts such employment. Executive
agrees to devote his full business time and efforts to promote the interests of
the Company and SAG.
1.2 DUTIES AND RESPONSIBILITIES. Executive shall be required to perform such
duties and responsibilities as are consistent with his position and as the
Board of Directors of SAG (the "Board") and/or the Chief Operating Officer of
SAG may from time to time prescribe. These duties shall include but not be
limited to the following:
1) To oversee the operations of SAG's Ford Automotive dealerships;
2) To aid SAG in all of SAG's future acquisitions of Ford
automotive dealerships;
3) To aid SAG in the integration of the acquired Ford automotive
dealerships into SAG's public company;
4) To do such other duties and responsibilities as SAG, Wade Ford,
Wade Ford Buford, Boomershine Ford and Franklin Ford may require.
1.3 REPORTING. Executive shall report, in the performance of his duties,
directly to the Chief Operating Officer of SAG.
ARTICLE 2
TERM
2.1 TERM. The term of Executive's employment under this Agreement (the
"Term") shall commence the first day following the completion of SAG's Initial
Public Offering ("IPO") and shall continue for a period of three (3) years;
provided that this Agreement may be terminated earlier as provided in Article 6.
2.2 NO VIOLATION. Executive represents and warrants to the Company and SAG
that neither the execution and delivery of this Agreement nor the performance
of his duties hereunder violates or will violate the provisions of any other
agreement to which he is a party or by which he is bound.
ARTICLE 3
COMPENSATION AND BENEFITS
3.1 SALARY AND BENEFITS. As compensation and consideration for the
performance by Executive of his obligations under this Agreement, Executive
shall be entitled to the following (subject, in each case, to the provisions of
Article 5 hereof):
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(a) BASE SALARY. The Company or SAG shall pay Executive a salary,
payable in accordance with the normal payment procedures of the Company and
subject to such withholdings and other normal employee deductions as may be
required by law, at the rate of One Hundred Seventy Thousand and No/100ths
Dollars ($170,000.00) per annum (or such pro rata amount thereof for any period
of less than one year). At the end of the first year of the Term, and annually
thereafter, SAG shall review Executive's salary, and at the time of such review,
Executive's salary may be increased (but not decreased) by mutual agreement of
Executive and the Company and SAG.
(b) EXPENSES. The Company or SAG will reimburse Executive for
reasonable business-related expenses incurred by him in connection with the
performance of his duties hereunder during the Term, including travel,
facsimile, telephone and other direct expenses incurred, subject, however, to
the Company's reasonable policies relating to expense reimbursement.
(c) VACATION. Executive shall be entitled to no less than four (4)
weeks paid vacation (or such additional vacation as the Chief Executive Officer
of SAG shall determine) in accordance with Company's policies during the Term.
(d) VEHICLES. Executive shall be entitled to the use of two (2)
vehicles selected by Executive including insurance, maintenance and registration
expenses. Executive shall pay for his own gasoline for the vehicles.
(e) STOCK OPTIONS. Executive shall be entitled to receive, from time
to time, stock options on terms and conditions comparable to the stock options,
if any, that SAG grants to employees of SAG or any of its subsidiaries with
responsibilities and duties and compensation similar to the responsibilities and
duties and compensation of Executive under this Agreement; PROVIDED, HOWEVER,
that the decision to grant stock options to Executive and to others similarly
situated shall be made by SAG in its sole discretion.
(f) TAXES. The Company shall not be responsible for the Payment of
Executive's tax liabilities (if any) relating to the compensation and benefits
the Company provides to the Executive pursuant to this Agreement, except that
the Company shall pay Executive an additional amount equal to the amount of
Executive's tax liability directly related to (i) the benefits set forth in
subparagraph (e) hereof, and (ii) the payment of Executive's medical insurance
premiums.
(g) ADDITIONAL BENEFITS. Executive shall receive benefits comparable
to those provided to other executives of the Company or SAG with similar
responsibilities, duties and compensation which benefits shall include life
insurance in amounts similar to those held by Executive as a dealer operator
(currently $800,000 in death benefits) and disability insurance to cover
two-thirds (2/3) of Executive's Base Salary.
3.2 INCENTIVE BONUS. In addition to paying Executive's Base Salary, and
the other benefits set forth in Article 3.1, the Company shall pay to Executive
an incentive bonus (the "Incentive Bonus"), which shall be earned monthly and
paid annually to the Executive. The Incentive Bonus shall be equal to the sum of
two and one-half percent (2.5%) of the net earnings before taxes over and above
the sum of FOUR MILLION DOLLARS in net earnings before taxes of the cumulative
Ford dealerships now owned, hereinafter acquired, controlled or managed by the
Company or SAG during the Term. The computation of the Incentive Bonus shall
commence the first full month after the commencement of Executive's employment
and shall be based on the Ford Factory Monthly Statements. The Incentive Bonus
shall be paid within 45 days after the company's fiscal year end. The initial
Incentive Bonus period shall be a partial year ending with the end of the
Company's current fiscal year end. Bonus calculation for this period shall be
pro rated. All future Incentive Bonus years shall coincide with the Company's
fiscal year.
ARTICLE 4
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CONFIDENTIALITY; NON-COMPETE
4.1 CONFIDENTIALITY. Executive agrees that he will not, at any time
during, or for six (6) months after the termination of Executive's employment,
make use of or divulge to any other person, firm or corporation any
confidential or proprietary information concerning the business or policies of
the Company or SAG, any of its subsidiaries or their affiliates. Executive
agrees and acknowledges that all of such information, in any form, and copies
and extracts thereof, are and shall remain the sole and exclusive property of
the Company or SAG, and upon termination of his employment with the Company or
SAG (except as provided in the Broker's Agreement or Stock Purchase Agreement),
Executive shall return to the Company or SAG the originals and all copies of
any such information provided to or acquired by Executive in connection with
the performance of his duties or the Company or SAG, and shall return to the
Company or SAG all files, correspondence and/or other communications received,
maintained and/or originated by Executive during the course of his employment,
and no copy of any such materials shall be retained by him. As used herein,
confidential information shall mean all information concerning SAG, the Company
or any of their subsidiaries or affiliates except information (i) ascertainable
or obtained from public information, (ii) received from a third party not
employed by or otherwise affiliated with the Company or any of their
subsidiaries or affiliates, or (iii) which is or becomes known to the public,
other than through breach by Executive of the terms of this Agreement.
4.2 NON-COMPETE. Executive has entered into a Non-Compete Agreement as a
part of and ancillary to the Agreement and Plan of Merger and Reorganization
dated the 21st day of November, 1997 (the ''Non-Compete''). The Non-Compete is
incorporated herein and made a part of this Amended Employment Agreement.
ARTICLE 5
TERMINATION
5.1 TERMINATION BY THE COMPANY FOR CAUSE. The Company shall have the
right to terminate Executive's employment at any time for Cause. For purposes
of this Agreement, ''Cause'' shall mean: (i) Executive's material failure,
neglect or refusal to perform his duties hereunder, which material failure,
neglect or refusal shall not be remedied by Executive within thirty (30) days
of receipt by Executive of written notice from the Company of such neglect,
(ii) Executive's refusal to follow the reasonable and lawful instructions,
orders or directives of the Chief Operating Officer of SAG with respect to his
material duties and responsibilities hereunder, which refusal is not remedied
promptly after receipt by Executive of written notice from the Chief Operating
Officer of SAG of such refusal, (iii) Executive's conviction for, or the entry
of a plea (including nolo contendere or its equivalent) by Executive with
respect to any act of fraud, misappropriation or embezzlement or any felony
under federal or state law, or (iv) any willful or intentional act of Executive
that has the effect of causing injury to the reputation or business of BAG, the
Company or their subsidiaries or affiliates in any material respect.
5.2 DEATH. In the event Executive dies during the Term, this Agreement
shall automatically terminate (subject to Section 5.4 hereof), such termination
to be effective on the date of Executive's death.
5.3 DISABILITY. In the event that Executive shall suffer a disability
which shall have prevented him from performing satisfactorily his obligations
hereunder for a period of at least ninety (90) consecutive days, or one hundred
eighty (180) non-consecutive days within any three hundred sixty-five (365) day
period, the Company shall have the right to terminate this Agreement (subject
to Section 5.4 hereof).
5.4 EFFECT OF TERMINATION.
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(a) In the event of termination of Executive's employment for cause or
death, the Company shall pay to Executive (or his beneficiary in the event of
his death) and Base Salary or Incentive Bonuses earned but not paid to
Executive prior to the effective date of such termination, plus, in the event
of death, any life insurance benefits as provided under Section 3.1(g) above
plus an amount equal to one (1) year's Base Salary.
(b) In the event that the Company terminates Executive's employment
without Cause prior to the expiration of the Term herein or any extension
thereof, the Company shall, for a period equal to the remainder of the term or
any extension thereof, continue to (i) pay to Executive (or his beneficiary in
the event of death following termination without Cause) his Base Salary and
Incentive Bonus for the Term or any extension thereof and reimburse him (or his
estate) for all business-related expenses incurred through the date of
termination, (ii) provide Executive with the benefits on the terms set forth in
Section 3.1(g), and (iii) vest in full all stock options granted to him, the
term (exercise period) of which shall remain in full force and effect
notwithstanding Executive's termination.
(c) In the event of the Executive's termination arising out of his
Disability, the Company shall pay to the Executive any earned but not paid
Base Salary or Incentive Bonuses prior to the effective dates of such
termination and Executive shall be entitled to any disability insurance
benefits. For purposes of this Agreement, "Disability" shall mean a physical or
mental condition which renders Executive incapable of performing his regular
duties hereunder for a period of one hundred twenty (120) consecutive days.
ARTICLE 6
MISCELLANEOUS
6.1 SAG GUARANTY. SAG guarantees the due and punctual performance of the
obligations of the Company hereunder.
6.2 NO VIOLATION. Executive represents and warrants to the Company that
neither the execution and delivery of this Agreement nor the performance of his
duties hereunder violates or will violate the provisions of any agreement to
which he is a party or by which he is bound. The Company represents and warrants
to Executive that neither the execution and delivery of this Agreement nor the
performance of its duties hereunder violates or will violate the provisions of
any other agreement to which it is a party or by which it is bound.
6.3 BENEFIT OF AGREEMENT; ASSIGNMENT; BENEFICIARY. This Agreement shall inure
to the benefit of and be binding upon the company and its successors and
assigns, including, without limitations, and corporation or person which may
acquire all or substantially all of the Company's assets or business, or with or
into which the Company may be consolidated or merged. This Agreement shall also
inure to the benefit of, and be enforced by, Executive and his personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amount would still be
payable to Executive hereunder if he had continued to live, all such amounts
shall be paid in accordance with the terms of this Agreement to Executive's
beneficiary, devisee, legatee or other designee, or if there is no such
designee, to Executive's estate.
6.4 NOTICES. Any notice required or permitted hereunder shall be in writing
or by facsimile and shall be sufficiently given if personally delivered or if
sent by telegram, overnight delivery or telex or by registered mail, addressed:
(a) in case of the Company to: 5901 Peachtree Dunwoody Road, Suite 250,
Building B, Atlanta, Georgia 30328, Attn: General Counsel, or to such other
address and/or to the attention of such other person as the Company shall
designate by written notice to Executive; and (b) in the case of Executive, to
Alan K. Arnold, 9340 Colonnade Trail, Alpharetta, Georgia 30022, facsimile no.
770/664-4757, or to such other address as
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Executive shall designate by written notice of the Company. Any notice given
hereunder shall be effective and deemed to have been given as of the date
received.
6.5 AMENDMENT. This Agreement may not be changed or modified except by an
instrument in writing signed by the parties hereto.
6.6 WAIVER. The waiver by any party of a breach of any provision of this
Agreement shall not operate or be construed as a continuing waiver or as a
consent to or waiver of any subsequent breach hereof. Any waiver must be in
writing and signed by Executive or the Company, as the case may be.
6.7 HEADINGS. The Article and Section headings herein are for convenience of
reference only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof.
6.8 AGREEMENT TO TAKE ACTION. Each party hereto shall execute and deliver such
documents, certificates, agreements and other instruments, and shall take such
other actions, as may be reasonably necessary or desirable in order to perform
his or its obligations under this Agreement or to effectuate the purposes
hereof.
6.9 SURVIVORSHIP. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
6.10 VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision or provisions of this Agreement, which shall remain in full
force and effect.
6.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
6.12 GOVERNING LAW. This Agreement shall be governed by the laws of the State
of Georgia, without regard to conflict of law principles.
6.13 INDEMNIFICATION. SAG and the Company (a) shall indemnify and hold
Executive harmless to the full extent permitted by law, if Executive is made or
is threatened to be made a party or is otherwise involved in any action, suit or
proceeding (other than an action, suit or proceeding commenced by Executive
without approval of the Company's Board of Directors) by reason of the fact
that he is or was an officer or employee of the Company or its subsidiaries
after the date hereof against all liability and loss suffered and expenses
reasonably incurred by Executive, (b) shall maintain (or cause to be
maintained) in the certificate of incorporation of the Company and the articles
of incorporation of its subsidiaries, provisions limiting the liability of
officers and directors from stockholders to the full extent permitted by law
and (c) shall maintain directors and officers liability insurance with terms,
deductibles and coverages customary for companies of similar size and nature.
Nothing herein shall be interpreted as requiring SAG, the Company or its
subsidiaries to indemnify executive for any claim arising out of a breach by
Executive of the terms of this Agreement or of the terms of that certain Stock
Purchase Agreement, dated November 21, 1997, between Executive, SAG, the
Company and certain other parties, as amended.
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement, effective as of the date first above written.
WADE FORD, INC.
By: /s/ Stephen C. Whicker
---------------------------------
Title: Secretary
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WADE FORD BUFORD, INC.
By: /s/ Stephen C. Whicker
---------------------------------
Title: Secretary
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BOOMERSHINE FORD, INC.
By: /s/ Stephen C. Whicker
---------------------------------
Title: Secretary
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FRANKLIN FORD MERCURY, INC.
By: /s/ Stephen C. Whicker
---------------------------------
Title: Secretary
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SUNBELT AUTOMOTIVE GROUP, INC.
By: /s/ Charles K.
---------------------------------
Title: COO
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EXECUTIVE
/s/ Alan K. Arnold
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ALAN K. ARNOLD
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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement is dated as of January 19, 1998, and is entered
into between SUNBELT AUTOMOTIVE GROUP, INC., a Georgia corporation ("SUNBELT"),
BAG FLORIDA II, INC., a Georgia corporation ("BAG"), (SUNBELT and BAG are
sometimes referred to collectively herein as the "Company"), SOUTH FINANCIAL
CORPORATION, a Florida corporation ("SFC"), and R. Glynn Wimberly, an individual
resident of the State of Florida ("Executive").
WHEREAS, Executive, the Company and SFC desire to embody in this Agreement
the terms and conditions of Executive's employment by SFC;
WHEREAS, SFC is to become a wholly owned subsidiary of BAG, and BAG is to
become a wholly owned subsidiary of SUNBELT.
NOW, THEREFORE, the parties hereby agree:
ARTICLE I
EMPLOYMENT, DUTIES AND RESPONSIBILITIES
1.1 EMPLOYMENT. Executive shall be employed as CEO of SFC. Executive hereby
accepts such employment. Executive agrees to devote his full business time and
efforts to promote the interests of the Company and SFC.
1.2 DUTIES AND RESPONSIBILITIES. Executive shall be required to perform such
duties and responsibilities as are consistent with his position as CEO of SFC
and as the Board of Directors of SFC and the Company (the "Board") may from time
to time prescribe. These duties shall include but not be limited to the
following:
1) To oversee the operations of SFC's operations in Florida, Georgia,
Tennessee, North Carolina and elsewhere;
2) To aid the Company and SFC in the integration of the acquired new Sub
prime operations in the southeast for SUNBELT;
3) To aid SUNBELT and BAG in SUNBELT'S Initial Public Offering; and
4) To do such other duties and responsibilities as BAG, SUNBELT, and SFC
may require.
1.3 REPORTING. Executive shall report, in the performance of his duties,
directly to the Vice President of Finance of SUNBELT and any other such
executive officer as the Company may direct.
ARTICLE 2
TERM
2.1 TERM. The term of Executive's employment under this Agreement (the "Term")
shall commence on the first day after the consummation of the acquisition of SFC
by the Company and
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shall continue for a period of three (3) years; provided that this Agreement
may be terminated earlier as provided in Article 5 hereof.
2.2 NO VIOLATION. Executive represents and warrants to the Company and SFC
that neither the execution and delivery of this Agreement nor the performance
of his duties hereunder violates or will violate the provision of any other
agreement to which he is a party or by which he is bound.
ARTICLE 3
COMPENSATION AND BENEFITS
3.1 SALARY AND BENEFITS. As compensation and consideration for the
performance by Executive of his obligations under this Agreement, Executive
shall be entitled to the following (subject, in each case, to the provisions of
Article 5 hereof):
(a) SALARY. SFC shall pay Executive a salary, payable in
accordance with the normal payment procedures of SFC and subject to such
withholdings and other normal employee deductions as may be required by law, at
the rate of One Hundred Thousand and no/100ths Dollars ($100,000.00) for the
first year, plus ten percent (10%) of the "Net Profits" before taxes of the
combined operations of all of the SFC divisions, but in any event the Executive
shall be guaranteed the total compensation of One Hundred Fifty Thousand and
no/100ths ($150,000) during the first year of his employment. The Executive
shall be paid the sum of One Hundred Thousand and no/100ths Dollars
($100,000.00) per annum for each year thereafter (or such pro rata amount
thereof for any period of less than one year) plus ten percent (10%) of the
"Net Profits" as defined herein before taxes of the combined operations of all
of the SFC divisions. At the end of the first year of the Term, and annually
thereafter, the Company shall review Executive's salary, and at the time of
such review, Executive's salary may be increased (but not decreased) by mutual
agreement of Executive and the Company.
(b) EXPENSES. The Company will reimburse Executive for reasonable
business-related expenses incurred by him in connection with the performance of
his duties hereunder during the Term, including travel, facsimile, telephone
and other direct expenses incurred, subject, however, to the Company's
reasonable policies relating to expense reimbursement.
(c) VACATION. Executive shall be entitled to no less than three
(3) weeks paid vacation (or such additional vacation as the Chief Executive
Officer of SUNBELT shall determine) in accordance with the Company's policies
during the Term.
(d) VEHICLES. Executive shall be entitled to the use of one (1)
vehicle selected by Executive including insurance, maintenance and registration
expenses. Executive shall pay for his own gasoline for the vehicle.
(e) STOCK OPTIONS. Executive shall be entitled to receive, from
time to time, stock options on terms and conditions comparable to the stock
options, if any, that the Company grants to employees of the Company or any of
its subsidiaries with responsibilities and duties similar to the
responsibilities and duties of Executive under this Agreement; PROVIDED,
HOWEVER, that the decision to grant stock options to Executive and to others
similarly situated shall be made by SUNBELT and BAG in their sole discretion.
2
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(f) TAXES. The Company shall not be responsible for the payment of
Executive's tax liabilities (if any) relating to the compensation and benefits
the Company provides to the Executive pursuant to this Agreement.
(g) DEATH BENEFIT. Upon the Executive's death while still employed at SFC,
his spouse shall receive six (6) months salary as a survival death benefit.
This sum may be funded by the company's procurement of acceptable "Key Man"
Insurance or such other type of insurance to cover this benefit.
3.2 MANAGEMENT BONUS. In addition to paying Executive's base salary, the
Company or SFC may pay to Executive a bonus (the "Management Bonus"), as the
Company, SFC and their Board of Directors may decide from time to time;
provided, however, that the decision to grant any bonuses to Executive shall be
at the sole discretion of the Company and nothing herein shall be implied as
giving the Executive any right to any bonus.
ARTICLE 4
CONFIDENTIALITY; NON-COMPETE
4.1 CONFIDENTIALITY. Executive agrees that he will not, at any time during, or
for one (1) year after, the termination of Executive's employment, or
Executive's resignation from employment, make use of or divulge to any other
person, firm or corporation any confidential or proprietary information
concerning the business or policies of the Company or SFC, any of its
subsidiaries or their affiliates. Executive agrees and acknowledges that all of
such information, in any form, and copies and extracts thereof, are and shall
remain the sole and exclusive property of the Company or SFC, and upon
termination of his employment with the Company or SFC (except as provided in the
Broker's Agreement or Stock Purchase Agreement), Executive shall return to the
Company or SFC the originals and all copies of any such information provided to
or acquired by Executive in connection with the performance of his duties or the
Company or SFC, and shall return to the Company or SFC all files, correspondence
and/or other communications received, maintained and/or originated by Executive
during the course of his employment, and no copy of any such materials shall be
retained by him. As used herein, confidential information shall mean all
information concerning SFC, the Company or any of their subsidiaries or
affiliates except information (i) ascertainable or obtained from public
information, (ii) received from a third party not employed by or otherwise
affiliated with SFC, the Company or any of their subsidiaries or affiliates, or
(iii) which is or becomes known to the public, other than through breach by
Executive of the terms of this Agreement.
ARTICLE 5
TERMINATION
5.1 TERMINATION BY THE COMPANY FOR CAUSE. Subject to Sections 5.2, the Company
shall have the right to terminate Executive's employment at any time for Cause.
For purposes of this Agreement, "Cause" shall mean: (i) Executive's material
failure, neglect or refusal to perform his duties hereunder, which material
failure, neglect or refusal shall not be remedied by Executive within sixty (60)
days of receipt by Executive of written notice from the Company of such neglect,
(ii) Executive's refusal to follow the reasonable and lawful instructions,
orders or directives of the Chief Executive Officer of the Company with respect
to his material duties and responsibilities hereunder, which refusal is not
remedied promptly after receipt by Executive of written notice from the Chief
Executive Officer of the Company of such refusal, (iii)
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Executive's conviction for, or the entry of a plea (including nolo contendere
or its equivalent) by Executive with respect to any act of fraud,
misappropriation or embezzlement or any felony under federal or state law, or
(iv) any willful or intentional act of Executive that has the effect of causing
injury to the reputation or business of SFC, the Company or their subsidiaries
or affiliates in any material respect.
5.2 DEATH. In the event Executive dies during the Term, this Agreement shall
automatically terminate (subject to Sections 5.4 and 3.1(g) hereof), such
termination to be effective on the date of Executive's death.
5.3 DISABILITY. In the event that Executive shall suffer a disability which
shall have prevented him from performing satisfactorily his obligations
hereunder for a period of at least ninety (90) consecutive days, or one hundred
eighty (180) non-consecutive days within any three hundred sixty-five (365) day
period, the Company shall have the right to terminate this Agreement (subject to
Section 5.4 hereof).
5.4 EFFECT OF TERMINATION.
(a) In the event of termination of Executive's employment for any reason,
the Company shall pay to Executive (or his beneficiary in the event of his
death) any salary or bonuses earned but not paid to Executive prior to the
effective date of such termination, plus the benefits set forth in Section
3.1(g) herein.
(b) In the event that the Company terminates Executive's employment
without Cause prior to the expiration of the three (3) year term, the Company
shall, for a period equal to the remainder of the term, continue to (i) pay to
Executive his salary and Management Bonus and reimburse him for all
business-related expenses incurred through the date of termination, (ii)
provide Executive with benefits on the terms set forth in Section 3.1(b), and
(iii) vest in full all stock options granted to him, the term (exercise period)
of which shall remain in full force and effect notwithstanding Executive's
termination.
ARTICLE 6
MISCELLANEOUS
6.1 COMPANY GUARANTY. The Company guarantees the due and punctual performance
of the obligations of SFC hereunder.
6.2 NO VIOLATION. Executive represents and warrants to the Company and SFC
that neither the execution and delivery of this Agreement nor the performance
of his duties hereunder violates or will violate the provisions of any agreement
to which he is a party or by which he is bound. The Company represents and
warrants to Executive that neither the execution and delivery of this Agreement
nor the performance of its duties hereunder violates or will violate the
provisions of any other agreement to which it is a party or by which it is
bound.
6.3 BENEFIT OF AGREEMENT; ASSIGNMENT; BENEFICIARY. This Agreement shall inure
to the benefit of and be binding upon the Company and its successors and
assigns, including, without limitations, any corporation or person which may
acquire all or substantially all of the Company's assets or business, or with or
into which the Company may be consolidated or merged. This Agreement shall also
inure to the benefit of, and be enforced by, Executive and his personal or legal
representatives, executors, administrators, successors, heirs,
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distributees, devisees and legatees. If Executive should die while any amount
would still be payable to Executive hereunder if he had continued to live, all
such amounts shall be paid in accordance with the terms of this Agreement to
Executive's beneficiary, devisee, legatee or other designee, or if there is no
such designee, to Executive's estate.
6.4 NOTICES. Any notice required or permitted hereunder shall be in writing
and shall be sufficiently given if personally delivered or if sent by telegram,
overnight delivery or telex or by registered mail, addressed:
In the case of the Company to: Stephen C. Whicker
1103 Foxcroft Court
Woodstock, Georgia 30189
Facsimile No.: 770/592-6347
or to such other address and/or to the attention of such other person as the
Company shall designate by written notice to Executive; and
In the case of Executive to: R. Glynn Wimberly
603 Thornwood Lane
Orange Park, Florida 32073
or such other address and Executive shall designate by written notice of the
Company. Any notice given hereunder shall be effective and deemed to have been
given as of the date received.
6.5 AMENDMENT. This Agreement may not be changed or modified except by an
instrument in writing signed by both of the parties hereto.
6.6 WAIVER. The waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a continuing waiver or as a
consent to or waiver of any subsequent breach hereof. Any waiver must be in
writing and signed by Executive or the Company, as the case may be.
6.7 HEADINGS. The Article and Section headings herein are for convenience of
reference only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof.
6.8 AGREEMENT TO TAKE ACTION. Each party hereto shall execute and deliver
such documents, certificates, agreements and other instruments, and shall take
such other actions, as may be reasonably necessary or desirable in order to
perform his or its obligations under this Agreement or to effectuate the
purposes hereof.
6.9 SURVIVORSHIP. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
6.10 VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision or provisions of this Agreement, which shall remain in full
force and effect.
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6.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
6.12 GOVERNING LAW. This Agreement shall be governed by the laws of the State
of Georgia, without regard to conflict of law principles.
6.13 INDEMNIFICATION. SFC, the Company and the Company's subsidiaries (a) shall
indemnify and hold Executive harmless to the full extent permitted by law, if
Executive is made or is threatened to be made a party or is otherwise involved
in any action, suit or proceeding (other than an action, suit or proceeding
commenced by Executive without approval of the Company's Board of Directors) by
reason of the fact that he is or was an officer or employee of SFC, the Company
or its subsidiaries after the date hereof against all liability and loss
suffered and expenses reasonably incurred by Executive, (b) shall maintain (or
cause to be maintained) in the certificate of incorporation of the Company and
the articles of incorporation of its subsidiaries, provisions limiting the
liability of officers and directors from stockholders to the full extent
permitted by law and (c) shall maintain directors and officers liability
insurance with terms, deductibles and coverages customary for companies of
similar size and nature. Nothing herein shall be interpreted as requiring SFC,
the Company or its subsidiaries to indemnify executive for any claim arising out
of a breach by Executive of the terms of this Agreement.
6.14 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.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement, effective as of the date first above written.
SUNBELT AUTOMOTIVE GROUP, INC., A
GEORGIA CORPORATION
/s/ By: (SEAL)
- -------------------------------- -----------------------------------
BAG FLORIDA II, INC., A GEORGIA CORPORATION
/s/ By: (SEAL)
- -------------------------------- -----------------------------------
(SIGNATURES CONTINUED ON NEXT PAGE)
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SOUTH FINANCIAL CORPORATION, A
FLORIDA CORPORATION
/s/ By: (SEAL)
- ----------------------- -------------------------
WITNESS
EXECUTIVE: R. GLYNN WIMBERLY
/s/ Tracy A. Maxwell By: /s/ R. Glynn Wimberly (SEAL)
- ----------------------- -------------------------
WITNESS R. GLYNN WIMBERLY
7
<PAGE> 1
EXHIBIT 10.8
SUNBELT AUTOMOTIVE GROUP, INC.
1997 & 1998 INCENTIVE STOCK PLAN
1. PURPOSE OF PLAN. The Sunbelt Automotive Group, Inc. 1997 & 1998
Incentive Stock Plan (the "Plan") is designed to retain directors, executives
and selected employees and consultants and reward them for making major
contributions to the success of the Company. These objectives are accomplished
by making long-term incentive awards under the Plan, thereby providing
Participants with a proprietary interest in the growth and performance of the
company.
2. DEFINITIONS:
(a) "Board" - the Board of Directors of the Company.
(b) "Georgia Securities Laws" - the corporate securities laws of the
State of Georgia as amended from time to time.
(c) "Code" - The Internal Revenue Code of 1986, as amended from time to
time.
(d) "Committee" - The Executive Compensation Committee of the Company's
Board, or such other committee of the Board that is designated by the Board to
administer the Plan, composed of not less than two (2) members of the Board, all
of whom are Non Employee Directors, as contemplated by Rule 16b-3 ("Rule
16b-3") promulgated under the Exchange Act. The foregoing requirement for Non
Employee Directors shall not apply prior to the date of the first registration
of any of the securities of the Company under the Exchange Act.
(e) "Company" - Sunbelt Automotive Group, Inc. and its subsidiaries
including subsidiaries of subsidiaries.
(f) "Exchange Act" - The Securities Exchange Act of 1934, as amended from
time to time.
(g) "Fair Market Value" - The fair market value of the Company's issued
and outstanding Stock as determined in good faith by the Board or Committee.
(h) "Grant" - The grant of any form of stock option, stock award, or
stock purchase offer, whether granted singly, in combination or in tandem, to a
Participant pursuant to such terms conditions and limitations as the Committee
may establish in order to fulfill the objectives of the Plan.
(i) "Grant Agreement" - An agreement between the Company and a
Participant that sets forth the terms, conditions and limitations applicable to
a Grant.
(j) "Option" - Either an Incentive Stock Option, in accordance with
Section 422 of the Code, or a Non-Qualified Stock Option, to purchase the
Company's Stock that may be awarded to a Participant under the Plan. A
Participant who receives an award of an Option shall be referred to as an
"Optionee."
(k) "Participant" - A director, officer, employee or consultant of the
Company or its subsidiaries to whom an Award has been made under the Plan.
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(l) "Restricted Stock" - A Grant of Stock or a Grant of the right to
purchase a specified number of shares of Stock pursuant to a written agreement
issued under the Plan.
(m) "Securities Act" - The Securities Act of 1933, as amended from time
to time.
(n) "Stock" - Authorized and issued or unissued shares of common stock of
the Company.
(o) "Stock Award" - A Grant made under the Plan in stock or denominated
in units of stock for which the Participant is not obligated to pay additional
consideration.
3. ADMINISTRATION OF PLAN.
(a) This Plan shall be administered by a committee (the "Committee") of
the Board of Directors of the Company (the "Board") consisting of two or more
directors, each of whom: (i) is a Non Employee Director (as such term is
defined in Rule 16b-3 promulgated under the Exchange Act, as such Rule may be
amended from time to time, and (ii) with respect to any Award that is intended
to give rise to "performance based compensation" within the meaning of Section
162(m)(4)(C)(i) of the Code, is an "outside director" within the meaning of
Section 162(m)(4)(c)(i) of the Code. Notwithstanding the foregoing, however,
prior to the registration of Stock under Section 12 of the Exchange Act, this
Plan may, in the absence of action by the Committee, be administered by the
entire Board (subject to any limitations contained in Rule 16b-3 or otherwise).
(b) Subject to the provisions of this Plan, the Committee shall be
authorized and empowered to do all things necessary or desirable in connection
with the administration of this Plan, including, without limitation, the
following:
(i) adopt, amend and rescind rules and regulations relating to this
Plan;
(ii) determine which persons are Participants and to which of such
Participants, if any, Awards shall be granted hereunder;
(iii) grant Awards to Participants and determine the terms and
conditions thereof, including the number of shares of stock issuable pursuant
thereto;
(iv) accelerate the exercisability of an Award or extend the period
during which an owner of an Award may exercise his or her rights under such
Award;
(v) determine whether, and the extent to which adjustments are
required pursuant to Sections 8 and 15 hereof; and
(vi) interpret and construe this Plan and the terms and conditions of
any Award granted hereunder.
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4. ELIGIBILITY.
(a) General. The persons who shall be eligible to receive Grants shall be
directors, officers, employees or consultants to the Company or any of its
subsidiaries. The term "consultant" shall mean any person, other than an
employee, who is engaged by the Company to render services and is compensated
for such service. An Optionee may hold more than one Option. Any issuance of a
Grant to an officer or director of the Company subsequent to the first
registration of any of the securities of the Company under the Exchange Act
shall comply with the requirements of Rule 16b-3.
(b) Incentive Stock Options.
(i) Incentive Stock Options may only be issued to employees of the
Company. Incentive Stock Options may be granted to officers or directors,
provided they are also employees of the Company. Payment of a director's fee
shall not be sufficient to constitute employment by the Company.
(ii) The Company shall not grant an Incentive Stock Option under the
Plan to any employee if such Grant would result in such employee holding the
right to exercise for the first time in any one calendar year, under all
Incentive Stock Options granted under the Plan or any other plan maintained by
the Company, with respect to shares of Stock having an aggregate fair market
value, determined as of the date of the Option is granted, in excess of
$100,000.00. Should it be determined that an Incentive Stock Option granted
under the Plan exceeds such maximum for any reason other than a failure in good
faith to value the Stock subject to such option, the excess portion of such
option shall be considered a Non-Qualified Stock Option. To the extent the
employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such Option as Incentive Stock Options under the Federal tax
laws shall be applied on the basis of the order in which such Options are
granted. If for any reason an entire Option does not qualify as an Incentive
Stock Option by reason of exceeding such maximum, such Option shall be
considered a Non-Qualified Stock Option.
(c) Non-Qualified Stock Option. The provisions of the foregoing Section
4(b) shall not apply to any Option designated as a "Non-Qualified Stock Option"
or which sets forth the intention of the parties that the Option be a
Non-Qualified Stock Option.
(d) Stock Awards and Restricted Stock. The provisions of this Section 4
shall not apply to any Non-Qualified Stock Option or Restricted Stock under the
Plan.
5. AWARDS.
(a) The Committee, on behalf of the Company, is authorized under this Plan
to enter into any type of arrangement with a Participant that is not
inconsistent with the provisions of this Plan and that, by its terms, involves
or might involve the issuance of (i) shares of Stock, $.001 par value, of the
Company; or (ii) a derivative security (as such terms is defined in Rule 16a-1
promulgated under the Exchange Act with an exercise or conversion privilege at a
price related to the Stock or with a value derived from the value of the Stock.
The entering into of any such arrangement is referred to herein as the "Grant"
of an "Award."
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(b) Awards are not restricted to any specific form or structure and may
include, without limitation, sales or bonuses of stock, restricted stock,
stock options, reload stock options, stock purchase warrants, other rights to
acquire stock, securities convertible to or redeemable for stock; stock
appreciation rights, phantom stock, dividend equivalents, performance units or
performance shares, and an Award may consist of one such security or benefit,
or two or more of them in tandem or in the alternative.
(c) Awards may be issued, and Stock may be issued, pursuant to an Award,
for any lawful consideration as determined by the Committee, including, without
limitation, services rendered by the recipient of such Award.
(d) Subject to the provisions of this Plan, the Committee, in its sole
and absolute discretion, shall determine all of the terms and conditions of
each Award granted under this Plan, which terms and conditions may include,
among other things:
(i) a provision permitting the recipient of such Award, including any
recipient who is a director or officer of the Company, to pay the purchase
price of the Stock or other property issuable pursuant to such Award, or such
recipient's tax withholding obligation with respect to such issuance, in whole
or in part, by any one or more of the following:
(A) the delivery of cash;
(B) the delivery of other property deemed acceptable by the
Committee;
(C) the delivery of previously owned shares of capital stock of
the Company (including "pyramiding") or other property; or
(D) a reduction in the amount of Stock or other property
otherwise issuable pursuant to such Award.
(ii) a provision conditioning or accelerating the receipt of benefits
pursuant to such Award, either automatically or in the discretion of the
Committee, upon the occurrence of specified events, including, without
limitation, continued employment by the Company, a change of control of the
Company (as defined by the Committee), an acquisition of a specified percentage
of the voting power of the Company, the dissolution or liquidation of the
Company, a sale of substantially all of the property and assets of the Company
or an event of the type described in Section 8 hereof; or
(iii) a provision required in order for such Award to qualify as an
incentive stock option (an "Incentive Stock Option") under Section 422 of the
Code; PROVIDED HOWEVER, that no Award issued to any consultant may qualify as
an Incentive Stock Option.
6. STOCK SUBJECT TO PLAN.
(a) The stock to be issued upon the exercise of Options shall be shares of
authorized but unissued Stock or previously issued shares of Stock reacquired
by the Company. The aggregate number of shares of Stock as to which Options may
be granted under the Plan at any time shall not exceed 2,250,000 shares,
subject to adjustment from time to time in accordance with the provisions of
Sections 8 and 15 hereof.
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(b) The number of shares of Stock available for grant of Options at any
time under the Plan shall be decreased by the sum of (i) the number of shares
with respect to which Options have been issued and have not lapsed or been
canceled, in each case, prior to such time and (ii) the number of shares issued
prior to such time upon exercise of Options.
7. DURATION OF PLAN. No Awards shall be made under this Plan after
January 1, 2008. Although Stock may be issued after January 1, 2008 pursuant
to Awards made on or prior to such date, but in no event shall any Stock be
issued after December 31, 2017.
8. ADJUSTMENTS.
If the outstanding securities of the class then subject to the Plan are
increased, decreased or exchanged for or converted into cash, property or a
different number or kind of securities, of if cash, property and/or securities
are distributed in respect of such outstanding securities, in either case as a
result of a reorganization, merger, consolidation, recapitalization,
restructuring, reclassification, dividend (other than a regular, quarterly cash
dividend) or other distribution, stock split, reverse stock split or the like,
or if substantially all of the property and assets of the Company are sold,
then, unless the terms of such transaction shall provide otherwise, the
Committee shall make appropriate and proportionate adjustments in (a) the
number and type of shares or other securities or cash or other property that
may be acquired pursuant to Incentive Stock Options and other Awards heretofore
granted under this Plan, (b) the maximum number and type of shares or other
securities that may be issued pursuant to Incentive Stock Options and other
Awards heretofore granted under this Plan, and (c) the maximum number of shares
of Stock for which Awards may be granted during any one calendar year;
PROVIDED, HOWEVER, that no adjustment shall be made to the number of shares of
Stock that may be acquired pursuant to outstanding Incentive Stock Options or
the maximum number of shares of Stock with respect to which Incentive Stock
Options may be granted under this Plan to the extent such adjustment would
result in such options being treated as other than Incentive Stock Options;
PROVIDED, further, that no such adjustment shall be made to the extent the
Committee determines that such adjustment would result in the disallowance of a
federal income tax deduction for compensation attributable to Awards hereunder
by causing such compensation to be other than "performance-based compensation"
within the meaning of Section 162(m)(4)(C) of the Code.
9. AMENDMENT AND TERMINATION OF PLAN.
The Board may amend or terminate this Plan at any time and in any manner
subject to the following limitations:
(a) No such amendment or termination shall deprive the recipient of any
Award heretofore granted under this Plan, without the consent of such
recipient, of any of his or her rights thereunder or with respect thereto; and
(b) If an amendment to this Plan would (a) increase the maximum number
of shares of Stock that may be issued pursuant to (i) all Awards granted under
this Plan, (ii) all Incentive Stock Options granted under this Plan, or (iii)
Awards granted under this Plan during any calendar year to any one Participant,
(b) change the class of persons eligible to receive Awards under this Plan, (c)
otherwise materially increase the benefits hereunder accruing to Participants
who are subject to Section 16 of the Exchange Act in a manner not specifically
contemplated herein, or (d) affect this Plan's compliance with Rule 16b-3 or
applicable provisions of the Code, as amended from time to time, the amendment
shall be subject to approval by the Company's shareholders to the extent
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required to comply with Rule 16b-3, Sections 422 and 162(m) of the Code, and
other applicable provisions of or rules under the Code, as amended from time to
time.
10. EFFECTIVE DATE OF THE PLAN. This Plan shall be effective as of
January 2, 1998, the date upon which it was approved by the Board; PROVIDED,
HOWEVER, that no shares of Stock may be issued under this Plan until it has
been approved, directly or indirectly, by the affirmative votes of the holders
of a majority of the securities of the Company present, or represented, and
entitled to vote at a meeting duly held or, in lieu thereof, by action by
written consent, in accordance with the laws of the State of Georgia.
11. EXERCISE PRICE. The Exercise Price per share of Stock covered by
Options granted under the Plan shall be established on or prior to the date of
grant by the Committee and shall be set forth in the Optionee's Option
Agreement. Payment shall be made in full upon exercise of the Option by
delivering to the Company at its principal executive offices cash or a
certified check, bank draft or money order payable to the order of the Company
in the aggregate amount of the Exercise Price, or in accordance with any
cashless exercise procedures adopted by the Committee from time to time.
12. VESTING OF OPTIONS. All Options granted under the Plan shall vest
and become exercisable in accordance with vesting schedules established by the
Committee at the time of grant.
13. TERMINATION OF EMPLOYMENT. Each Option will have a ten-year term
from the date of grant, subject to earlier termination upon termination of the
Optionee's employment, as determined by the Committee in its Grant(s). The
Committee may also provide that the Company shall have the right prior to any
Initial Public Offering ("IPO") to repurchase any shares of Stock held by an
Optionee whose employment has terminated, at such price as shall be established
by the Committee at the time of Grant.
14. TRANSFERABILITY. Options shall not be transferable, except by will
or the laws of descent and distribution. During the lifetime of the Optionee,
Options shall be exercisable only by the Optionee.
15. ADJUSTMENT FOR RECAPITALIZATION; MERGER; ETC.
The aggregate and maximum number of shares of Stock which may be purchased
or acquired pursuant to Options granted hereunder, the number of shares of
Stock to which each Option relates and the Exercise Price in respect of such
Option shall be appropriately adjusted for any increase or decrease in the
number of outstanding shares of Stock resulting from a stock split or other
subdivision or consolidation of shares of Stock or for other capital
adjustments or payments of stock dividends or stock distributions or other
increases or decreases in the outstanding shares of Stock effected without
receipt of consideration in any form permitted under Georgia law. Any
adjustment shall be conclusively determined by the Committee.
Except as otherwise provided in the Optionee's Option Agreement:
(i) If the Company is the surviving corporation of any merger,
reorganization or other business combination with any person or entity (such
merger, reorganization or other business combination referred to as a "Merger
Event"), the Optionee shall be entitled to receive, with respect to Options,
substitute stock options to purchase shares of the surviving corporation on
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such terms and conditions, both as to the number of shares and otherwise, which
shall substantially preserve the value, rights and benefits of any Option
granted hereunder, as of the date of the execution of the agreement evidencing
the Merger Event.
(ii) If the Company is not the surviving corporation in a Merger
Event, the Committee may at its election cause payment to be made to each
Optionee, in cash, an amount equal to the excess of the fair market value, on
the date of the Merger Event, of the Stock subject to such Optionee's Options
(whether vested or unvested, as determined by the Committee) over the Exercise
Price of such Options on such date, and all such Options shall be canceled upon
receipt by the Optionee of such cash payment, without the need for obtaining the
consent of the Optionee. If, upon such a Merger Event, the Committee declines
to make such cash payment, the surviving or resulting corporation, as the case
may be, or any parent or acquiring corporation thereof, shall, as a condition to
the occurrence of the Merger Event, be obligated by the Company to grant
substitute options to purchase its shares on such terms and conditions, both as
to the number of shares and otherwise, which shall substantially preserve (in
the discretion of the Committee) the value, rights and benefits of any Option
granted hereunder, as of the date of the execution of the agreement evidencing
the Merger event.
Upon receipt by the Optionee of any substituted options in the surviving
corporation in any Merger Event, all Options for which substituted options were
received shall be canceled.
The foregoing adjustments and the manner of application of the foregoing
provisions, including, without limitation, the issuance of any substitute
Options and any determination of the fair market value of the Stock, shall be
determined in good faith by the Committee in its sole discretion. Any such
adjustment may provide for the elimination of any fractional share which might
otherwise become subject to an Option.
16. RIGHTS AS A STOCKHOLDER. An Optionee or a transferee of an Option
shall have no rights as a stockholder with respect to any shares covered by his
Option until he shall have become the holder of record of such shares, and he
shall not be entitled to any dividends or distributions or other rights in
respect of such shares for which the record date is prior to the date on which
he shall have become the holder of record thereof.
17. EMPLOYMENT RIGHTS. Nothing in the Plan or in any Option Agreement
entered into hereunder shall confer on any Optionee who is an employee of the
Company any right to continue in the employ of the Company or to interfere in
any way with the right of the Company to terminate the Optionee's employment at
any time.
18. TRANSFER RESTRICTIONS. Appropriate legends shall be placed on the
stock certificates evidencing shares issued upon exercise of Options to reflect
any relevant transfer restrictions.
19. MISCELLANEOUS.
(a) The Company may, in its discretion, require that an Optionee pay to
the Company, at the time of exercise, such amount as the Company deems
necessary under law to satisfy its obligations to withhold Federal, state, or
local income or other taxes incurred by reason of the exercise or the transfer
of shares thereupon.
(b) Anything in the Plan or any Option Agreement entered into pursuant to
the Plan to the contrary notwithstanding, if, at any time specified herein or
therein for the making of any issue of
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shares of Stock, any law, regulation or requirement of any governmental
authority having jurisdiction in the premises shall require either the Company
or the Optionee (or the Optionee's personal legal representative or transferee)
to take any action in connection with any such shares to be issued, the issue
of such shares shall be deferred until such action shall have been taken,
provided, however, that the Company shall not be required to take such action.
(c) The Plan shall be governed by and construed in accordance with the
laws of the State of Georgia without reference to the principles of conflicts of
law thereof.
(d) No provision of the Plan shall require the Company, for the purpose of
satisfying any obligations under the Plan, to purchase assets or place any
assets in a trust or other entity to which contributions are made or otherwise
to segregate any assets, nor shall the Company maintain separate bank accounts,
books, records or other evidence of the existence of a segregated or separately
maintained or administered fund for such purposes.
(e) Except as otherwise specifically provided for in the relevant plan
document, no payment under the Plan or other amount required to be reported as
income for Federal income tax purposes shall be taken into account in
determining any benefits under any pension, retirement, profit sharing, group
insurance or other benefit plan of the Company.
(f) The expenses of administering the Plan shall be borne by the Company.
The proceeds received by the Company from the exercise of any Options pursuant
to the Plan will be used for general corporate purposes.
(g) Masculine pronouns and other words of masculine gender shall refer to
both men and women.
(h) The titles and headings of the sections in the Plan are for
convenience of reference only, and in the event of any conflict, the text of
the Plan, rather than such titles or headings, shall control.
20. SPECIAL PROVISIONS FOR INCENTIVE STOCK OPTIONS.
(a) Incentive Stock Options must be granted within ten (10) years from
the date the Plan is adopted, or the date the Plan is approved by the
shareholders of the Company, whichever is earlier.
(b) Incentive Stock Options may not be exercised after the expiration of
ten (10) years from the date such Incentive Stock Options are granted.
(c) The Exercise Price of Incentive Stock Options may not be less than
the Fair Market Value of a share of Stock at the time such Incentive Stock
Options are granted, as determined by the Committee, or in the case of
Optionees who are owners or more than ten percent (10%) of the outstanding
Stock, not less than one hundred ten percent (110%) of the Fair Market Value of
a share of Stock. In such case, Fair Market Value shall be determined in a
manner consistent with the rules and regulations under Section 422 of the Code.
(d) To the extent the aggregate fair market value of the Stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionee during a calendar year (under all plans of the Company) exceeds
$100,000, such Incentive Stock Options shall be treated
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as Non-Qualified Options. For purposes of the preceding sentence, the fair
market value of the Stock shall be determined by the Committee at the time the
Incentive Stock Options covering such stock are granted.
(e) No Incentive Stock Options may be granted under the Plan unless the
Plan has been approved by the shareholders of the Company within 12 months
before or after the date of the Plan's adoption by the Board.
2.1 INVESTMENT INTENT. All Grants under the Plan are intended to be exempt
from registration under the Securities Act provided by Rule 701 thereunder.
Unless and until the granting of Options or sale and issuance of Stock subject
to the Plan are registered under the Securities Act or shall be exempt pursuant
to the rules promulgated thereunder, each Grant under the Plan shall provide
that the purchase or other acquisition of Stock thereunder shall be for
investment purposes and not with a view to, for the resale in connection with,
any distribution thereof. Further, unless the issuance and sale of the Stock
have been registered under the Securities Act, each Grant shall provide that no
shares shall be purchased upon exercise of the rights under such Grant unless
and until (i) all then applicable requirements of state and federal laws and
regulatory agencies shall have been fully complied with to the satisfaction of
the Company and its counsel, and (ii) if requested to do so by the Company the
person exercising the rights under the Grant shall (a) give written assurances
as to knowledge and experience of such person (or a representative employed by
such person) in financial and business matters and the ability of such person
(or representative) to evaluate the merits and risks of exercising the Option,
and (b) execute and deliver to the Company a letter of investment intent and/or
such other form related to applicable exemptions from registration, all in such
form and substance as the Company may require. If shares are issued upon
exercise of any rights under a Grant without registration under the Securities
Act, subsequent registration of such shares shall relieve the purchaser thereof
of any investment restrictions or representations made upon the exercise of such
rights.
22. TAX WITHHOLDING. The Company shall have the right to deduct applicable
taxes from any Grant payment and withhold, at the time of delivery or exercise
of Options, Stock Awards or Restricted Stock Purchase Offers or vesting of
shares under such Grants, an appropriate number of shares for payment for taxes
required by law or to take such other action as may be necessary in the opinion
of the company to satisfy all obligations for withholding of such taxes. If
Stock is issued to satisfy tax withholding, such stock shall be valued based on
the Fair Market Value when the tax withholding is required to be made.
23. AVAILABILITY OF INFORMATION. During the term of the Plan and any
additional period during which a Grant, made pursuant to the Plan, shall be
exercisable, the Company shall make available, not later than one hundred and
twenty (120) days following the close of each of its fiscal years, such
financial and other information regarding the Company as is required by the
bylaws of the Company and applicable law to be furnished in an annual report to
the shareholders of the Company.
24. NOTICE. Any written notice to the Company required by any of the
provisions of the Plan shall be addressed to the chief personnel officer or to
the chief executive officer of the Company, and shall become effective when it
is received by the office of the chief personnel officer or the chief executive
officer.
25. INDEMNIFICATION OF BOARD. In addition to such other rights or
indemnifications as they may have as directors or otherwise, and to the extent
allowed by applicable law, the members of the Board and the Committee shall be
indemnified by the Company
9
<PAGE> 10
against the reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any claim, action, suit
or proceeding, or in connection with any appeal thereof, to which they or any of
them may be a part by reason of any action taken, or failure to act, under or in
connection with the Plan or any Grant granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such claim, action, suit or proceeding, except
in any case in relation to matters as to which it shall be adjudged in such
claim, action, suit or proceeding that such Board or Committee member is liable
for negligence or misconduct in the performance of his or her duties; provided
that within sixty (60) days after institution of any such action, suit or Board
proceeding the member involved shall offer the Company, in writing, the
opportunity, at his own expense, to handle and defend the same.
2.6 GOVERNING LAW. The Plan and all determinations made and actions taken
pursuant thereto, to the extent not otherwise governed by the Code or the
securities law of the United States, shall be governed by the law of the State
of Georgia and construed accordingly.
The foregoing 1997 & 1998 Incentive Stock Plan (consisting of 10 pages,
including this page) was duly adopted and approved by the Board of Directors on
December 18, 1997, and approved by the Shareholders of the Corporation January
8, 1998.
SUNBELT AUTOMOTIVE GROUP, INC.
By:
----------------------------------
STEPHEN C. WHICKER, SECRETARY
10
<PAGE> 1
EXHIBIT 10.16
HUMMER(R) DEALER AGREEMENT Dealer # 825302
------
This Agreement is between AM General Sales Corporation ("Company"), and
BOOMERSHINE HUMMER INC. ("Dealer"), a [Georgia corporation] [ partnership]
[sole proprietorship] and doing business as BOOMERSHINE HUMMER, and located at
2150 Cobb Parkway, Smyrna, GA. 30080.
SECTION 1: PURPOSE AND OBJECTIVES OF THIS AGREEMENT.
Company sells HUMMER(R) Products to Dealers for resale to Customers in the
retail automotive and light truck marketplace. It is of vital importance to
Company that HUMMER(R) Products are sold and serviced in a manner which promotes
Customer satisfaction and confidence and leads to increased product acceptance.
Accordingly, Company has established a network of authorized HUMMER(R) Dealers,
operating at approved locations and in compliance with certain standards, to
sell and service HUMMER(R) Products. Based upon the representations and promises
of Dealer as set forth in this Dealer Agreement, Company agrees to appoint
Dealer as an authorized HUMMER(R) dealer.
This Dealer Agreement sets forth the rights and responsibilities of Company as
seller and Dealer as buyer of HUMMER(R) Products. Company enters into this
Dealer Agreement in reliance upon Dealer's integrity, ability, expressed
intention to deal fairly with the consuming public and with Company, and
Dealer's promise to adhere to the terms and provisions of this Dealer Agreement.
Likewise, Dealer enters into this Dealer Agreement in reliance upon the
Company's integrity, ability, expressed intention to deal fairly with Dealer and
the consuming public, and promise to adhere to the terms and provisions of this
Dealer Agreement. Company and Dealer will not engage in conduct which may be
detrimental to or adversely reflect upon the reputation of Company, Dealer, or
HUMMER(R) Products in general.
SECTION 2: RIGHTS GRANTED TO DEALER.
Subject to the terms of this Dealer Agreement, Company hereby grants Dealer the
non-exclusive right:
A. To buy from Company and resell to Customers HUMMER(R) Products;
B. To identify itself as an authorized HUMMER(R) Dealer utilizing approved
signs at the location(s) specified in this Dealer Agreement; and,
C. To use the name HUMMER(R) and the HUMMER(R) Marks in the advertising,
promotion, sale, and servicing of HUMMER(R) Products.
Company reserves the unrestricted right to sell HUMMER(R) Products and to grant
the privilege of using the HUMMER(R) name or the HUMMER(R) Marks to other
Dealers or entities, wherever they may be located.
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SECTION 3: RESPONSIBILITIES ACCEPTED BY DEALER.
Dealer accepts its appointment as an authorized HUMMER(R) Dealer and shall:
A. Vigorously and aggressively promote, solicit, and sell HUMMER(R) Products
in the Dealer's Marketing Area in volumes sufficient to comply with
Dealer's Business Plan;
B. Satisfactorily render prompt, workmanlike, courteous, and willing
warranty, policy and retail service on all HUMMER(R) Products, regardless
of where sold and by whom, pursuant to Company's then-current Service
Policies and Procedures Manual;
C. Establish and maintain satisfactory dealership facilities at the
location(s) specified in this Dealer Agreement, which shall contain
sufficient space for the storage, display, sales and service of HUMMER(R)
Products, used HUMMER(R) and non-HUMMER(R) vehicles, customer parking and
waiting, and office functions;
D. Maintain and employ in connection with Dealer's operations sufficient
investment, net working capital, net worth, lines of credit and retail
finance plans as may be required to enable Dealer to fulfill all of the
Dealer's responsibilities under this Dealer Agreement.
SECTION 4: TERM.
This Dealer Agreement is effective as of the date executed by the Company and
shall continue in force until 90 days following the death or incapacity of
Dealer Operator, unless earlier terminated. Upon request, Company may, in its
discretion, defer the effective date of termination for a limited period of
time to enable Dealer to conclude the winding up of the dealership business or
the transfer of its assets or ownership previously approved under Section 22 of
this Dealer Agreement. Any request for deferral must be made at least 30 days
prior to the effective date of termination and no deferral is effective unless
in writing and signed by an authorized Company representative.
SECTION 5: OWNERSHIP OF DEALER.
Company enters into this Dealer Agreement in reliance upon Dealer's
representation that the following person(s), and only the following person(s),
will be the Dealer Owner(s) and that they are committed to the achievement of
the purposes and objectives of this Dealer Agreement:
PERCENT
NAME ADDRESS OWNERSHIP
Walter M. Boomershine, Jr. 2150 Cobb Parkway 100%
Smyrna, GA 30080
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
2
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Any change in ownership must be approved by Company as provided in Section 22
of this Dealer Agreement. Any change in ownership not approved by Company is a
material breach of this Dealer Agreement.
SECTION 6: MANAGEMENT OF THE DEALERSHIP.
Company and Dealer agree that the retention of qualified management is
critically important to the successful operation of Dealer's HUMMER(R)
Dealership. Company, therefore, enters into this Dealer Agreement upon Dealer's
representation that WALTER M. BOOMERSHINE, JR., President, and no other person,
will exercise the function of HUMMER(R) Dealer Operator and is in complete
charge of the Dealer with respect to Dealer's HUMMER(R) Operations. Dealer
further agrees that the Dealer Operator shall devote his or her substantial
efforts to Dealer's HUMMER(R) Operations. Any change in Dealer Operator must be
approved by Company as provided in Section 22 of this Dealer Agreement. Any
change in Dealer Operator that is not approved by Company is a material breach
of this Dealer Agreement.
SECTION 7: APPROVED DEALER LOCATION(S).
Dealer may not sell to Customers outside the United States; otherwise, Dealer
has no restrictions as to the Customers to whom it can sell HUMMER(R) Products.
So that Company may establish and maintain an effective network of authorized
HUMMER(R) Dealers, Company has approved the following facilities as the
exclusive location(s) for Dealer's sale and servicing of HUMMER(R) Products and
display of HUMMER(R) Marks:
2150 COBB PARKWAY
- -----------------------------------------------------------------------------
SMYRNA, GA 30080
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Dealer may not, either directly or indirectly, display HUMMER(R) Marks or
establish or conduct any dealership operations of the type contemplated in this
Dealer Agreement, including the display, sale, or servicing of HUMMER(R)
Products, at any location or facility other than those approved in this Dealer
Agreement, or any amendment to this Dealer Agreement. Dealer may not modify or
change the usage or function of nor add any additional franchises to any
facility approved in this Dealer Agreement without Company's prior written
consent, which will not be unreasonably withheld.
SECTION 8: STANDARD TERMS.
All of the terms and provisions of the "HUMMER(R) Dealer Agreement Standard
Terms" are hereby incorporated into this Dealer Agreement by reference.
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SECTION 9: ADDITIONAL PROVISIONS.
In consideration of Company's agreement to appoint Dealer as an authorized
HUMMER(R) Dealer, Dealer further agrees:
[ADDITIONAL PROVISIONS WILL BE SET FORTH ON ADDITIONAL PAGES]
SECTION 10: EXECUTION OF AGREEMENT.
Notwithstanding any other provision herein, this Dealer Agreement shall only be
valid and binding if it is signed:
A. On behalf of Dealer by a duly authorized person;
B. On behalf of Company, solely in connection with its limited
undertaking herein, by the President or a Vice-President of
Company.
Dealer Company
BOOMERSHINE HUMMER AM GENERAL SALES CORPORATION
- ---------------------------------
By: /s/Walter M. Boomershine, Jr. By: /s/ Gregory B. Daniel
------------------------------ --------------------------------
Its: President Its: Sr. Mgr. Contract Management
------------------------------ -------------------------------
Date: 7/22/92
------------------------
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HUMMER(R) DEALER AGREEMENT
STANDARD TERMS
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 11: DEFINITIONS............................................... 1
SECTION 12: THE SALE OF HUMMER(R) PRODUCTS TO DEALER ................. 2
A. ORDERS ................................................... 2
B. ORDER FULFILLMENT ........................................ 2
C. TRANSFER OF TITLE ........................................ 2
D. DELIVERY ................................................. 2
E. DELAY OR FAILURE OF DELIVERY ............................. 2
F. DIVERSION CHARGES ........................................ 3
G. DAMAGE CLAIMS AGAINST CARRIERS ........................... 3
H. CHANGES IN SPECIFICATIONS, OPTIONS OR DESIGN ............. 3
I. DISCONTINUANCE OF MANUFACTURE ............................ 3
SECTION 13: SERVICE OF HUMMER(R) PRODUCTS ............................ 3
A. NEW MOTOR VEHICLE PRE-DELIVERY INSPECTION AND
ADJUSTMENTS .............................................. 3
B. WARRANTY REPAIRS AND SPECIAL POLICY ADJUSTMENTS .......... 3
C. CAMPAIGN INSPECTIONS AND CORRECTIONS ..................... 3
D. BODY WORK ................................................ 4
E. OTHER SERVICE ............................................ 4
F. USE OF GENUINE PARTS ..................................... 4
G. USE OF NON-GENUINE PARTS ................................. 4
H. PAYMENT FOR PRE-DELIVERY ADJUSTMENTS, WARRANTY
AND CAMPAIGN WORK ........................................ 4
SECTION 14: PRICES AND TERMS OF SALE ................................. 5
A. MOTOR VEHICLES ........................................... 5
B. PARTS AND ACCESSORIES .................................... 5
SECTION 15: WARRANTIES ON HUMMER(R) PRODUCTS ......................... 5
SECTION 16: SALES TO OTHERS AND PURCHASES FROM OTHERS ................ 6
SECTION 17: BUSINESS PLANNING ........................................ 6
A. BUSINESS PLAN ............................................ 6
B. ANNUAL PLAN REVIEW ....................................... 6
C. ANNUAL PERFORMANCE REVIEW ................................ 7
D. FACILITIES REVIEW ........................................ 7
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SECTION 18: BUSINESS OPERATIONS ....................................................................................7
A. TOOLS .......................................................................................................7
B. HOURS OF OPERATION ..........................................................................................7
C. SIGNS .......................................................................................................7
D. PERSONNEL....................................................................................................7
E. CUSTOMER EDUCATION ..........................................................................................7
F. REPORTS......................................................................................................7
G. DEALER'S STOCKS .............................................................................................8
H. DEMONSTRATORS ...............................................................................................8
I. CUSTOMER SATISFACTION .......................................................................................8
J. TRADE PRACTICES AND ADVERTISING .............................................................................8
K. COMPLIANCE WITH APPLICABLE LAWS .............................................................................8
L. CUSTOMER DEPOSITS ...........................................................................................8
M. SUGGESTED PRICE LABELS ......................................................................................8
SECTION 19: SYSTEMS ................................................................................................9
A. SALES AND SERVICE SYSTEMS....................................................................................9
B. DEALER COMMUNICATION SYSTEM .................................................................................9
C. ADDITIONAL SYSTEMS ..........................................................................................9
SECTION 20: RECORDKEEPING, AUDITS, INSPECTIONS AND TESTS............................................................9
A. RECORDS .....................................................................................................9
B. INSPECTIONS AND TESTS .......................................................................................9
C. AUDITS ......................................................................................................9
SECTION 21: INDEMNIFICATION........................................................................................10
A. BY COMPANY .................................................................................................10
B. CLAIMS .....................................................................................................10
C. COOPERATION AND CHOICE OF COUNSEL ..........................................................................11
SECTION 22: CHANGE IN MANAGEMENT OR OWNERSHIP......................................................................11
A. CHANGE IN MANAGEMENT .......................................................................................11
B. NOMINAL CHANGE IN OWNERSHIP ................................................................................11
C. MINORITY CHANGE IN OWNERSHIP................................................................................11
D. MAJORITY CHANGE IN OWNERSHIP OR CONTROL ....................................................................12
E. NON-ASSIGNABILITY OF DEALER AGREEMENT ......................................................................12
F. RIGHT OF FIRST REFUSAL OR OPTION TO PURCHASE ...............................................................12
G. EXERCISE OF RIGHT ..........................................................................................12
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SECTION 23: SUCCESSION RIGHTS UPON DEATH OR INCAPACITY.........................................13
A. SUCCESSOR ADDENDUM .....................................................................13
B. RIGHTS OF REMAINING OWNERS .............................................................13
C. LIMITATION ON OFFERS ...................................................................13
D. CANCELLATION OF SUCCESSOR ADDENDUM .....................................................13
SECTION 24: TERMINATION........................................................................13
A. BY DEALER ..............................................................................13
B. FAILURE TO BE LICENSED .................................................................13
C. MISREPRESENTATION.......................................................................14
D. FAILURE TO CONDUCT OPERATIONS ..........................................................14
E. DISQUALIFICATION OR CHANGE OF DEALER OPERATOR OR OWNER..................................14
F. CONVICTION OF CRIME ....................................................................14
G. FAILURE OF PERFORMANCE .................................................................14
H. RELIANCE ON ANY APPLICABLE TERMINATION PROVISION .......................................14
SECTION 25: TRANSACTIONS AFTER TERMINATION.....................................................15
A. ORDERS .................................................................................15
B. DELIVERIES..............................................................................15
C. EFFECT OF TRANSACTIONS AFTER TERMINATION ...............................................15
SECTION 26: TERMINATION ASSISTANCE.............................................................15
A. REACQUISITION OF HUMMER(R) PRODUCTS ....................................................15
1. MOTOR VEHICLES .................................................................15
2. PARTS AND ACCESSORIES ..........................................................15
3. TOOLS ..........................................................................15
B. REACQUISITION PRICES ...................................................................16
1. MOTOR VEHICLES .................................................................16
2. PARTS AND ACCESSORIES ..........................................................16
3. TOOLS ..........................................................................16
C. ELECTION OF BENEFITS AND GENERAL RELEASE ...............................................16
SECTION 27: DEALER APPEAL BOARD ...............................................................16
SECTION 28: TRADEMARKS AND SERVICE MARKS.......................................................17
A. OWNERSHIP...............................................................................17
B. USE ....................................................................................17
C. LITIGATION..............................................................................17
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SECTION 29: GENERAL PROVISIONS...........................................................................17
A. NO AGENT OR LEGAL REPRESENTATIVE STATUS ..........................................................17
B. DEALER'S RESPONSIBILITY FOR ITS OPERATIONS .......................................................17
C. TAXES ............................................................................................17
D. NO IMPLIED WAIVERS ...............................................................................17
E. ASSIGNMENT OF RIGHTS OR DELEGATION OF DUTIES .....................................................17
F. ACCOUNTS PAYABLE .................................................................................18
G. REVIEW AND MODIFICATIONS OF DEALER AGREEMENT TERMS ...............................................18
H. APPLICABLE LAW ...................................................................................18
I. NOTICES ..........................................................................................18
J. SEPARABILITY OR TERMINATION ......................................................................18
K. SOLE AGREEMENT OF PARTIES ........................................................................18
</TABLE>
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SECTION 11: DEFINITIONS
As used in this Dealer Agreement, the following terms, when capitalized, shall
have the following meanings:
A. Business Plan - Dealer's detailed plan which describes how Dealer will
develop its Marketing Area and fulfill its sales and service
commitments pursuant to the Dealer Agreement.
B. Company - AM General Sales Corporation, distributor of HUMMER(R)
vehicles, parts and accessories.
C. Customers - Prospective or actual purchasers of HUMMER(R) Products,
other than Dealers.
D. Dealer - The corporation, partnership or proprietorship that signs the
Dealer Agreement.
E. Dealer Agreement - The Dealer Agreement that is executed including
other related Addenda, the Terms of Sales Bulletins and the Service
Policies and Procedures Manuals.
F. Dealer Operator - Principal manager of the Dealership upon whose
personal qualifications, skill, and commitment Company relies in
entering into this Dealer Agreement.
G. Dealer Owner - Owner of five percent or more equity ownership or
beneficial interest of Dealer.
H. Dealer Premises - Approved facilities provided by Dealer for
dealership operations.
I. Dealer Selection Criteria - The qualifications and standards which
prospective Dealer Operators and Dealer Owners must satisfy to be
approved by Company.
J. Dealer Selection Process - The process which an applicant must
successfully complete prior to becoming a Dealer or Dealer Operator.
This process includes: the application, questionnaires, assessment at
the applicant's place of business, an orientation and interview,
agreement upon a Business Plan and payment of a marketing/launch fee.
K. HUMMER(R) Products - Motor Vehicles, Parts and Accessories.
L. Marketing Area - The geographic area assigned to Dealer by Company and
identified in a Notice of Dealer's Marketing Area. The scope of the
Marketing Area will be reviewed and may be adjusted on a yearly basis
as part of the business planning process.
M. HUMMER(R) Marks - The various trademarks, service marks, names and
designs used by Company, and its affiliates, in connection with
HUMMER(R) Products.
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N. Motor Vehicles - All current model types or series of new HUMMER(R)
motor vehicles and all past HUMMER(R) motor vehicles marketed through
Dealers.
O. Parts and Accessories - New or remanufactured parts and accessories
marketed or approved by Company and listed in current Dealer Parts
Manuals and Bulletins.
SECTION 12: THE SALE OF HUMMER(R) PRODUCTS TO DEALER.
A. ORDERS - Dealer shall submit to Company on the dates and in the manner
specified by Company, (1) orders for the quantities and models of
HUMMER(R) Motor Vehicles that Dealer will purchase during such
succeeding month(s) as Company may designate from time to time, (2)
estimates of the Dealer's requirements of HUMMER(R) Motor Vehicles for
such further succeeding month(s) as Company may from time to time
request, and (3) orders for Dealer's requirements for HUMMER(R) Parts
and Accessories. All orders placed by Dealer are subject to acceptance
by Company, which acceptance may be in whole or in part. Company is
not obligated to accept any order from Dealer for any reason,
including, but not limited to the default of Dealer on any obligation
to Company.
B. ORDER FULFILLMENT - Company will provide HUMMER(R) Products to Dealer
in such quantities and types as may be ordered by Dealer, subject to
(1) available supply from the manufacturing facilities, (2) Company's
marketing requirements and (3) any change or discontinuance with
respect to any particular HUMMER(R) PRODUCT. If, at any time, Company
determines that the demand for certain HUMMER(R) Products exceeds the
supply, then Company has the right to allocate the supply in a fair
and equitable manner, which Company shall determine in its sole
discretion. Company will provide Dealer with an explanation of its
allocation system.
C. TRANSFER OF TITLE - Title to all HUMMER(R) Products sold by Company to
Dealer will pass to Dealer (or any other entity designated in writing
by Dealer), and payment shall be due, upon delivery to the carrier or
to Dealer, whichever occurs first, but Company shall retain a security
interest in and the right to repossess any HUMMER(R) Product for which
it has not received payment.
D. DELIVERY - Company shall select the distribution points and the mode
of transportation for delivery of HUMMER(R) Products to Dealer. Dealer
shall reimburse Company for Destination Freight Charges or some
functional equivalent as Company may in its discretion establish.
E. DELAY OR FAILURE OF DELIVERY - Company shall not be liable for delay
or failure to deliver HUMMER(R) Products if the delay or failure to
deliver is the result of any event beyond Company's control, including
but not limited to any law or regulation of any governmental entity,
acts of God, foreign or civil wars, riots, interruptions of
transportation, fires, floods, storms, strikes, lockouts, or other
labor troubles, embargoes, blockades, or delay or failure of Company's
suppliers to deliver necessary components of HUMMER(R) Products.
2
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F. DIVERSION CHARGES - If Dealer requests diversion of any HUMMER(R)
Products shipped to Dealer, or if Company is required to divert any
HUMMER(R) Product which Dealer has ordered and not canceled prior to
shipment by Company, because of Dealer's failure or refusal to accept
such product, Dealer will reimburse Company for any charges incurred
as a result of the diversion. Dealer's liability for diversion charges
shall not exceed the charge of returning the product to Company's
original shipment point, plus all demurrage, storage or other charges
related to the diversion. Dealer also is liable for and shall pay all
charges accruing after arrival of the shipment at the distribution
point established by Company.
G. DAMAGE CLAIMS AGAINST CARRIERS - Upon Dealer's request, Company will
provide reasonable assistance to Dealer in its efforts to recover
against any carrier for loss or damage to HUMMER(R) Products.
H. CHANGES IN SPECIFICATIONS, OPTIONS OR DESIGN - Company may, in its
discretion and at any time, change the design or specifications of any
HUMMER(R) Product or the availability of any options on any Motor
Vehicle. Company need not provide change notices or make similar
changes to any product previously purchased by or shipped to Dealer.
No change shall be a model year change unless so specified by Company.
I. DISCONTINUANCE OF MANUFACTURE - Company may discontinue the
distribution of all or part of any HUMMER(R) Product, including any
model, series, or body style of any Motor Vehicle, at any time without
any obligation or liability to Dealer.
SECTION 13: SERVICE OF HUMMER(R) PRODUCTS.
A. NEW MOTOR VEHICLE PRE-DELIVERY INSPECTION AND ADJUSTMENTS - Dealer
will perform pre-delivery inspections and adjustments on each new
HUMMER(R) Motor Vehicle and verify completion according to the
procedures in the Service Policies and Procedures Manual.
B. WARRANTY REPAIRS AND SPECIAL POLICY ADJUSTMENTS - Dealer will perform
required warranty repairs on each qualified HUMMER(R) Motor Vehicle
at the time of pre-delivery service and when requested by an owner,
and specified policy adjustments approved by Company. When the vehicle
is returned to its owner, Dealer will provide the owner with an
explanation and copy of the repair document reflecting all services
performed.
C. CAMPAIGN INSPECTIONS AND CORRECTIONS - Dealer will find and correct
suspected unsatisfactory conditions on HUMMER(R) Products identified
by Company. Dealer will also determine that campaign inspections and
corrections have been made on new and used HUMMER(R) Motor Vehicles in
its inventory prior to sale and follow-up on HUMMER(R) Motor Vehicles
on which campaigns are outstanding.
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13. BODY WORK - Dealer will provide body repair service for HUMMER(R)
Motor Vehicles. Dealer can provide this service through its own body
shop, or if Company agrees that unusual circumstances make it
impractical for Dealer to own and operate its own body shop, by
arrangement with an independent repair establishment approved by
Company.
E. OTHER SERVICE - Dealer shall vigorously and aggressively develop and
solicit business for the repair and service of HUMMER(R) and
non-HUMMER(R) motor vehicles at Dealer's Premises.
F. USE OF GENUINE PARTS - Dealer will use only genuine HUMMER(R) or
Company approved parts in performing pre-delivery adjustments
(including transport damage), warranty repairs, special policy
adjustments, campaign corrections or any other service for which
Dealer expects reimbursement from Company and Dealer will purchase all
such parts from Company unless another source is approved by Company
in writing.
G. USE OF NON-GENUINE PARTS - Owners and users of HUMMER(R) Motor
Vehicles reasonably expect that the vehicles sold by Dealer and the
parts and accessories sold or used by Dealer in servicing Motor
Vehicles are marketed by Company. If in the performance of service
work other than work to be paid for by Company, Dealer sells or uses
parts and accessories not marketed by Company, it will give Customers
written notice, prior to the sale or service, that the parts and
accessories are not marketed or warranted by Company. Dealer also will
not represent that vehicle modifications not specifically authorized
by Company are warranted or approved by Company.
H. PAYMENT FOR PRE-DELIVERY ADJUSTMENTS, WARRANTY AND CAMPAIGN WORK -
Company will reimburse Dealer at a reasonable rate for parts and labor
used in the performance of services, pre-delivery adjustments
(including transport damage), warranty repairs, special policy
adjustments, and campaign inspections and corrections in accordance
with the policies set forth in the Service Policies and Procedures
Manual. Dealer will not seek to be reimbursed at a rate for labor or
parts that exceeds the rates generally charged by other automotive and
light duty truck dealers in Dealer's Marketing Area. Dealer will not
seek to be reimbursed for time spent in performing services,
pre-delivery adjustments (including transport damage), warranty
repairs, special policy adjustments and campaign inspections and
corrections in amounts that exceed those shown in Company's Service
Labor Time Standards Manual, except to the extent Dealer can establish
that the time shown in the Manual for which it seeks reimbursement is
unreasonable. Dealer will not charge Customers for pre-delivery
adjustments (including transport damage), warranty repairs, special
policy adjustments and campaign inspections and corrections except
where a deductible or pro-rata charge applies. Company reserves the
right to require Dealer to return to Company any or all parts for
which Dealer receives reimbursement from Company.
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SECTION 14: PRICES AND TERMS OF SALE.
A. MOTOR VEHICLES - From time to time Company will furnish to Dealer a
Dealer Price List and Vehicle Terms of Sale Bulletin setting forth the
then current prices, destination charges and other terms of sale
applicable to purchases of new HUMMER(R) Motor Vehicles. Company may
issue a revised Dealer Price List or Vehicle Terms of Sale Bulletin at
any time. Any increase in the price charged to Dealer for HUMMER(R)
Motor Vehicles or optional equipment during a model year will not
apply to bona fide sold orders submitted prior to the effective date
of the price increase except to the extent the orders submitted by
Dealer following notice of the price increase but prior to its
effective date exceed the number of orders submitted by Dealer in the
ninety (90) day period preceding notice of the price increase. Company
will provide Dealer with written notice of any price increase before
any Motor Vehicle to which the increase applies is shipped except for
initial prices for a new model year or for any new model or body type.
Any other change reflected in a revised Vehicle Terms of Sale Bulletin
will apply to Motor Vehicles not shipped at the time the changes
become effective.
B. PARTS AND ACCESSORIES - From time to time Company will furnish to
Dealer a Parts and Accessories Terms of Sale Bulletin setting forth
the then current prices and other terms of sale applicable to
HUMMER(R) Parts and Accessories. Company may issue a revised Parts and
Accessories Terms of Sale Bulletin at any time. Any changes reflected
in the revised Bulletin will apply to all Parts and Accessories not
shipped at the time the changes become effective.
SECTION 15: WARRANTIES ON HUMMER(R) PRODUCTS.
Company warrants the HUMMER(R) Products it produces as set forth in the
documents provided with the HUMMER(R) Products or as explained in the HUMMER(R)
Manuals. Except as otherwise provided by law, the written HUMMER(R) warranties
are the only warranties applicable to HUMMER(R) Products.
WITH RESPECT TO DEALERS, THE WRITTEN HUMMER(R) WARRANTIES ARE IN LIEU OF ALL
OTHER WARRANTIES OR LIABILITIES, EXPRESSED OR IMPLIED, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY LIABILITY
FOR COMMERCIAL LOSSES BASED UPON NEGLIGENCE OR MANUFACTURER'S STRICT LIABILITY.
Company neither assumes nor authorizes anyone to assume for it any other
obligation or liability in connection with HUMMER(R) Products, and Company's
maximum liability for breach of warranty is to repair or replace the affected
product. Company does not warrant any motor vehicle, option, part or accessory
acquired from any source other than Company. Dealer shall expressly incorporate
into all sales contracts for HUMMER(R) Products the applicable Company
warranties and provide a copy of all warranties to the purchaser.
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SECTION 16: SALES TO OTHERS AND PURCHASES FROM OTHERS.
Dealer may purchase products from third parties without liability of any kind to
Company except as provided in this Dealer Agreement. Company may sell HUMMER(R)
Products to third parties (including without limitation to other Dealers)
without liability of any kind to Dealer. Company may appoint other or additional
HUMMER(R) Dealers near Dealer's Marketing Area when Company has determined that
new or additional Dealer(s) are warranted based upon reasonable criteria
established by Company.
SECTION 17: BUSINESS PLANNING.
A. BUSINESS PLAN - Dealer and Company have discussed and agreed on
Dealer's Business Plan which describes how Dealer will develop its
Marketing Area and otherwise fulfill its sales and service commitments
pursuant to this Dealer Agreement. Dealer will develop its assigned
Marketing Area according to its Business Plan.
B. ANNUAL PLAN REVIEW - Dealer will update its Business Plan annually, or
more often if needed, and submit it to Company for joint review.
Updated Business Plans will include any proposed modifications to the
prior year's Business Plan and shall also include:
1. A statement of Dealer's legal and financial structure, including
capitalization, line of credit and equity ownership;
2. A detailed description of the location, type and size of
facilities utilized in the Dealer's operations;
3. A statement of performance standards;
4. A detailed organizational structure and staffing plan;
5. A plan for personnel development;
6. Specific plans for maximizing customer satisfaction, including
hours of operation and customer convenience systems;
7. Advertising, merchandising, and community relations plans; and
8. Other items as agreed to by Company and Dealer.
If Company believes that changes to the Business Plan are necessary, Dealer
will make the changes and resubmit its Business Plan. Failure to submit an
acceptable Business Plan is a breach of this Dealer Agreement and is
grounds for termination. Company will act in good faith in evaluating the
Business Plan.
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C. ANNUAL PERFORMANCE REVIEW - Upon submission of Dealer's updated
Business Plan, Dealer and Company shall jointly review Dealer's
performance. Factors considered in evaluating Dealer's
performance will include its attainment of the prior year's
Business Plan objectives, Dealer's performance trends, Dealer's
financial performance and the manner in which Dealer has
conducted its operations.
D. FACILITIES REVIEW - Company shall conduct periodic facility
evaluations, including an evaluation of Dealer's compliance with
Dealer's Business Plan. Modifications to facility plans will
occur only if Company believes that a material change in
marketing conditions warrants a modification.
SECTION 18: BUSINESS OPERATIONS.
A. TOOLS - Dealer shall acquire from Company the tools, diagnostic
and other equipment necessary to meet the facility, tool and
equipment standards as Company may establish from time to time
for all HUMMER(R) Dealers.
B. HOURS OF OPERATION - Dealer shall be open for business for not
less than the business hours customary in the trade in its
Marketing Area.
C. SIGNS - Dealer shall identify the Dealer Premises as an
authorized sales and service establishment for HUMMER(R) Products
with signs leased from Company pursuant to Company's standard
sign lease program. The lease program may include multiple signs,
but Dealer will obtain the largest single sign allowed by local
ordinance.
D. PERSONNEL - Dealer shall employ and train a sufficient number of
competent personnel of good character, including a Product
Manager and other managers, sales persons, parts personnel and
service technicians, to fulfill all of Dealer's responsibilities
under this Dealer Agreement, and shall cause the personnel to
attend training schools as Company may establish for them from
time to time.
E. CUSTOMER EDUCATION - Dealer shall, in accordance with Company's
instructions, provide to purchasers of HUMMER(R) Products the
appropriate forms, documents, owner's manuals and educational
materials developed by Company to educate and familiarize
Customers and other users of HUMMER(R) Products with the various
features and capabilities of the HUMMER(R) Products.
F. REPORTS - Dealer shall furnish to the Company, at the times, on
the forms and in the manner prescribed by the Company, complete,
accurate and true statements of the financial condition and
operating results of the Dealer's business in HUMMER(R) Products,
and such sales and other reports as the Company from time to time
may require. Company shall treat financial information furnished
by Dealer in a confidential manner and, unless authorized by
Dealer or required by law, or offered in evidence in judicial or
arbitration proceedings, the information shall not be furnished,
except as an unidentified part of a composite or coded report, to
any third party.
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G. DEALER'S STOCKS - Subject to availability, Dealer shall maintain
stocks of HUMMER(R) Products of an assortment and quantity
sufficient to meet Dealer's share of current demand therefore in
the Dealer's Marketing Area and to enable Dealer to meet its
sales and service responsibilities pursuant to this Dealer
Agreement.
H. DEMONSTRATORS - Dealer shall keep available at all times in good
appearance and running order at least one current model year
demonstrator from Dealer inventory.
I. CUSTOMER SATISFACTION - Dealer shall cooperate with Company
programs and develop and maintain its own programs designed to
develop good relationships among Dealer, Company, and the
consuming public. Dealer shall make every effort to handle
satisfactorily all matters brought to its attention relating to
the sale and servicing of HUMMER(R) Products, and shall make
regular contact with owners and users of HUMMER(R) Products in
Dealer's Marketing Area, and shall report promptly to Company the
details of each inquiry or complaint received by Dealer relating
to any HUMMER(R) Product which the Dealer cannot handle
satisfactorily.
J. TRADE PRACTICES AND ADVERTISING - Dealer shall at all times
conduct business in a manner that will reflect favorably on the
good name of Company, HUMMER(R) Products, other HUMMER(R)
Dealers, and Dealer. Dealer shall not engage in any "bait and
switch," deceptive, misleading, confusing, or illegal advertising
or business practices. Dealer shall not display, offer for sale,
or promote as a HUMMER(R) Product any product which is not a
HUMMER(R) Product. Dealer shall not make any false or misleading
statement or representation to a Customer as to any HUMMER(R)
Product or any other item of purchase, or the source, condition,
warranty capabilities thereof, prices or charges therefore, or
the charges made by Company for distribution, delivery, taxes or
other items.
K. COMPLIANCE WITH APPLICABLE LAWS - Dealer shall comply with all
applicable federal, state and local laws, rules and regulations,
including without limitation those related to motor vehicle
safety, environmental concerns and customer service. Company
shall provide Dealer and Dealer shall provide Company with any
reasonably requested information or assistance necessary to
enable the other to comply with any federal, state or local laws,
rules or regulations.
L. CUSTOMER DEPOSITS - Dealer shall use all reasonable efforts to
safeguard each deposit of cash or property (and any proceeds
therefrom) received from a Customer in anticipation of a future
delivery of any HUMMER(R) Product.
M. SUGGESTED PRICE LABELS - If any HUMMER(R) Motor Vehicle required
to bear a label pursuant to the Federal Automobile Information
Disclosure Act is ever delivered by Company to Dealer with an
incorrect label, or without a completed label, as required by the
Act, Dealer shall promptly complete and affix to such vehicle a
label on the form and per directions furnished by the Company.
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SECTION 19: SYSTEMS.
A. SALES AND SERVICE SYSTEMS - Dealer will purchase, implement and
maintain the Company designated materials and programs to promote
the proper, consistent and competitive display, sales and service
of HUMMER(R) Products. Dealer can obtain the foregoing materials
from Company or a Company approved third-party supplier.
Periodically, Company may determine that new or updated
materials, information or programs are necessary. Dealer will
purchase, implement and maintain any new or updated materials as
they become available.
B. DEALER COMMUNICATION SYSTEM - Dealer will acquire from Company a
communications system which permits direct communication between
Dealer, other HUMMER(R) Dealers and Company, and which gives
Company ready access to Dealer's accounts and records. To
maintain the necessary integration among Company and its Dealers,
Dealer will update its communications system as required by
Company from time to time. Dealer will pay to Company a monthly
maintenance fee for the communications system and will provide
and pay the cost for one local phone line for the system's use.
C. ADDITIONAL SYSTEMS - Dealer can use additional systems that are
compatible with Company's systems, but will discontinue use of
systems that Company deems incompatible.
SECTION 20: RECORDKEEPING, AUDITS, INSPECTIONS AND TESTS.
A. RECORDS - Dealer shall maintain accurate and complete records of
its HUMMER(R) business operations in conformance with prudent
business practices.
B. INSPECTIONS AND TESTS - At reasonable times and intervals, Dealer
shall allow Company designated persons to examine Dealer's
facilities, stocks of HUMMER(R) Products, used vehicles and
vehicles in for service, to test Dealer's equipment and to
examine, copy and audit any or all of Dealer's records and
documents relating in any way to Dealer's HUMMER(R) business
operations. Dealer shall maintain all HUMMER(R) business records
and documents for two years from the date of creation or, for
documents relating to any claims made upon or paid by Company,
for two years from the date of payment, or for such longer period
as may be required by law.
C. AUDITS - Company may, upon reasonable notice and at reasonable
times, audit Dealer's records, including all records relating to
claims made upon or paid by Company. Company may audit records
relating to claims made upon or paid by Company at any time
within two years of the date the claim is paid. Company has the
right to charge back to Dealer any claim found to have been paid
in error by Company or any other claim paid on the basis of
false, fraudulent or incomplete information.
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SECTION 21: INDEMNIFICATION.
A. BY COMPANY - Company shall defend, indemnify, hold harmless and
protect Dealer from any losses, damages or expense, including costs
and attorney's fees, resulting from or related to lawsuits, complaints
or claims commenced against Dealer by third parties concerning:
1. Property damage to a HUMMER(R) Product or bodily injury or
property damage arising out of an occurrence caused solely by a
"production defect" in that product (i.e., due to defective
materials or workmanship utilized or performed at the factory),
except for any "production defect" in tires not manufactured by
Company or AM General Corporation; provided that the production
defect could not have been discovered by the Dealer in the
reasonable pre-delivery inspection of the HUMMER(R) Product as
recommended by Company.
2. Property damage to a HUMMER(R) Product or bodily injury or
property damage arising out of an occurrence caused solely by a
defect in design of that product, except for a defect in the
design of tires not manufactured by Company or AM General
Corporation.
3. Any damage occurring to a new HUMMER(R) Motor Vehicle and
repaired by Company or AM General Corporation (excluding removal
and replacement of an entire component with a like component
where no welding, riveting or painting is involved) from the time
the HUMMER(R) Motor Vehicle leaves the assembly plant or
warehouse to the time it is delivered to the designated location,
provided Company failed to notify Dealer in writing of the damage
and repair in transit prior to delivery of the HUMMER(R) Motor
Vehicle to the first retail customer.
4. Personal injury or property damage arising out of a negligent or
improper act by a Company employee.
5. Claims that Dealer's use of the HUMMER(R) Marks is an
infringement of the third-party's intellectual property rights.
B. CLAIMS - Any claim for indemnification must by submitted to Company
within five business days after service of the complaint. Dealer shall
promptly provide Company with copies of all pleadings along with all
information then available regarding the circumstances giving rise to
the underlying claim. All indemnification claims shall be submitted to
Company's general counsel at 105 N. Niles Avenue, Post Office Box
7025, South Bend, Indiana, 46634-7025, or such other address as
Company may designate.
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C. COOPERATION CHOICE OF COUNSEL - If Dealer requests indemnification
from Company, Company shall have the option, upon notice to Dealer, to
retain counsel and assume full control over the defense of the
lawsuit. Dealer shall cooperate fully in the defense of the lawsuit.
If Dealer does not cooperate in the defense of the lawsuit or
otherwise interferes in Company's control over the defense of the
lawsuit, Company's obligation to indemnify Dealer shall cease.
SECTION 22: CHANGE IN MANAGEMENT OR OWNERSHIP.
A. CHANGE IN MANAGEMENT - Any change in the Dealer Operator identified in
Section 6 of this Dealer Agreement must have Company's prior written
approval. Company will approve a change in Dealer Operator if (1)
Dealer submits copies of all agreements between or among it, the
proposed Dealer Operator and all Dealer Owners, (2) the proposed
Dealer Operator successfully completes the Dealer Selection Process
then used by Company to evaluate proposed new dealer operators, (3)
the proposed Dealer Operator is ready, willing and able to comply with
the requirements of this Dealer Agreement, (4) the proposed Dealer
Operator demonstrates an ability to and agrees to adhere to and
implement the Dealer's Business Plan, (5) the proposed Dealer Operator
satisfies Company's capital requirements, and (6) all outstanding
monetary obligations of Dealer to Company have been paid. At the time
Dealer applies for a change in Dealer Operator, Dealer will pay
Company a non-refundable fee to defray costs associated with review of
the proposal. Company has no obligation to consider the proposal until
it has received this non-refundable payment.
B. NOMINAL CHANGE IN OWNERSHIP - Company hereby consents to any change in
ownership of Dealer in which an existing Dealer Owner transfers to
another Dealer Owner or a third party any equity ownership or
beneficial interest in Dealer provided that the transfer does not
cause the transferee to own or control fifteen percent (15%) or more
of the equity ownership, beneficial interest or voting control of
Dealer and provided that Dealer gives Company notice of the change
within 30 days of the transfer.
C. MINORITY CHANGE IN OWNERSHIP - Any change in the ownership of Dealer
that first results in the transferee owning or controlling fifteen
percent (15%) or more of the equity ownership, beneficial interest or
voting control of Dealer, but less than a majority interest or voting
control must have prior written approval by Company. Company will
approve a minority change in Dealer ownership if (1) Dealer submits
copies of all agreements between or among it, and all Dealer Owners,
(2) any new Dealer Owner satisfies the applicable Dealer Selection
Criteria, (3) the change does not adversely affect Dealer's capital
structure, (4) the change does not adversely affect Dealer's ability
and commitment to adhere to and implement the Dealer's Business Plan,
(5) the proposed Dealer Operator satisfies Company's capital
requirements, and (6) all outstanding monetary obligations of Dealer
to Company have been paid. At the time Dealer applies for a change in
ownership, Dealer will pay Company a non-refundable fee to defray
costs associated with review of the proposal. Company has no
obligation to consider the proposal until it has received this
non-refundable payment.
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D. MAJORITY CHANGE IN OWNERSHIP OR CONTROL - Any change in the majority
ownership or control of Dealer must have Company's prior written
approval which Company will not unreasonably withhold. At the time
Dealer applies for a change in majority ownership, Dealer will pay
Company a non-refundable fee to defray costs associated with review of
the proposal and submit copies of all agreements between or among it,
the proposed new Dealer, the proposed new Dealer Operator, the
proposed Dealer Owners and all Dealer Owners. Company has no
obligation to consider the proposal until it has received the
non-refundable payment and all relevant agreements. Any request for
approval of a change in the majority ownership or control is
considered a request by Dealer to terminate this Dealer Agreement and
a request by the prospective majority owner for the issuance of a new
dealer agreement.
E. NON-ASSIGNABILITY OF DEALER AGREEMENT - Dealer may not transfer or
assign this Dealer Agreement to any third party.
F. RIGHT OF FIRST REFUSAL OR OPTION TO PURCHASE - Dealer hereby grants to
Company the right to acquire all or substantially all of Dealer's
assets used in the operation of its HUMMER(R) dealership. This right
will become effective upon (1) Dealer submitting to Company a proposal
for a change in Dealer Operator or (2) an unauthorized change in
Dealer Operator or (3) Dealer submitting to Company a proposal for
change in majority ownership or control or (4) an unauthorized change
in ownership or (5) any attempt by Dealer to transfer or assign this
Dealer Agreement or (6) Dealer's agreement to transfer all or
substantially all of the assets used in its HUMMER(R) operations or
(7) the issuance of either party to this Dealer Agreement of a
termination notice pursuant to Section 24. Company may transfer or
assign its rights pursuant to this Section 22.F to any party, provided
that Company guarantees the full payment of the purchase price by the
assignee.
G. EXERCISE OF RIGHT - By written notice to Dealer, Company may, in its
discretion, exercise its right pursuant to Section 22.F at any time
within 60 days after first being given notice by Dealer of an event
listed in Section 22.F. Any change in the terms of a proposal to
change the Dealer Operator or ownership or a proposal to transfer the
dealership assets shall extend the period in which Company may
exercise its right pursuant to Section 22.F until 60 days following
notice to Company of the change. If Dealer has entered into an
agreement to sell all or substantially all of its assets used in
connection with its HUMMER(R) operations, then Company, upon exercise
of its right pursuant to Section 22.F, will acquire the assets that
are the subject of the agreement for substantially the same price and
on substantially the same terms. If Dealer has submitted a proposal
for a change in Dealer Operator, or a majority change in ownership, or
if Dealer has attempted to transfer or assign this Dealer Agreement,
or if an unauthorized change in Dealer Operator or ownership has
occurred, or if a notice of termination has been issued, then Company,
upon exercise of its right pursuant to Section 22.F, will acquire the
principal assets used by Dealer in its HUMMER(R) operations, as
determined by Company, at their fair market value, as determined by an
independent appraiser selected and paid for by Company.
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SECTION 23: SUCCESSION RIGHTS UPON DEATH OR INCAPACITY.
A. SUCCESSOR ADDENDUM - Dealer can apply for a Successor Addendum
designating a proposed Dealer Operator or Owners of a successor Dealer
to be established if this Dealer Agreement terminates because of death
or incapacity. Company will execute the Successor Addendum if (1) the
proposed Dealer Operator successfully completes the Dealer Selection
Process then used by Company to evaluate proposed new dealer
operators, (2) any proposed Dealer Owners satisfy applicable Dealer
Selection Criteria, (3) the proposed successor Dealer and the proposed
Dealer Operator are ready, willing and able to comply with the
requirements of a new Dealer Agreement and agree to adhere to and
implement the Dealer's Business Plan and (5) all outstanding monetary
obligations of Dealer to Company have been paid. The proposed Dealer
Operator or owners will not be required to meet the usual capital
requirements nor demonstrate an ability to implement Dealer's Business
Plan until the Successor Addendum is implemented. At the time of
application, Dealer will pay Company a non-refundable fee to defray
costs associated with review of the proposal.
B. RIGHTS OF REMAINING OWNERS - If this Dealer Agreement terminates
because of the Dealer Operator's death or incapacity, and Dealer and
Company have not executed a Successor Addendum, the remaining Dealer
OWNERS may propose a successor Dealer to obtain a new Dealer
Agreement. The proposal must be made in writing to Company at least 30
days prior to the termination of this Dealer Agreement. At the time of
application, Dealer will pay Company a non-refundable fee to defray
costs associated with review of the proposal.
C. LIMITATION ON OFFERS - Company's offer of a Dealer Agreement to a
successor Dealer, Dealer Operator or Owner will automatically expire
if not accepted within 60 days after the offer is made.
D. CANCELLATION OF SUCCESSOR ADDENDUM - Dealer may cancel an executed
Successor Addendum at any time prior to the death or incapacity of the
Dealer Operator. Company may cancel an executed Successor Addendum
only if the proposed Dealer Operator or proposed Owner(s) no longer
meets the Dealer Selection Criteria applicable to each.
SECTION 24: TERMINATION.
A. BY DEALER - Dealer may terminate this Dealer Agreement by written
notice to Company. Termination will be effective 60 days after
Company's receipt of the notice, unless otherwise agreed in writing.
B. FAILURE TO BE LICENSED - If Company or Dealer fails to secure or
maintain any license required for the performance of obligations under
this Dealer Agreement or the license is suspended or revoked, either
party may immediately terminate this Dealer Agreement by written
notice to the other party.
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C. MISREPRESENTATION - Company may terminate this Dealer Agreement upon
seven days notice if Dealer, any Dealer Owner or Dealer Operator
submits any false information to or makes any misrepresentations to
Company, including, without limitation, the submission of any false
information in connection with a claim made to or upon Company,
whether or not Dealer offers or makes or Company seeks or obtains
restitution of any payments made to Dealer on the basis of the false
information.
D. FAILURE TO CONDUCT OPERATIONS - Company may terminate this Dealer
Agreement upon 15 days notice if Dealer fails to conduct customary
business operations for seven consecutive days and fails to reopen for
continuous operations during the notice period or if Dealer files a
voluntary petition under any bankruptcy or receivership law, is
declared bankrupt, insolvent or otherwise demonstrates an inability to
meet its financial obligations as they mature or if a court appoints a
temporary or permanent receiver, trustee or custodian for the Dealer
or its assets.
E. DISQUALIFICATION OR CHANGE OF DEALER OPERATOR OR OWNER - Company may
terminate this Dealer Agreement upon 30 days notice if Dealer Operator
or any Dealer Owner fails to continue to meet the Dealer Selection
Criteria applicable to each; or Dealer Operator is changed or
withdraws without Company's prior written approval; or if a minority
or majority change in ownership or control occurs without Company's
prior written approval; or if Dealer otherwise breaches this Dealer
Agreement, and the basis for termination is not eliminated during the
notice period.
F. CONVICTION OF CRIME - Company may terminate this Dealer Agreement upon
15 days notice if Dealer, Dealer Operator or any Dealer Owner is
convicted of any crime. Dealer must report to Company if Dealer or any
Dealer Owner is convicted of a crime within seven days following the
conviction.
G. FAILURE OF PERFORMANCE - If Dealer fails to perform its obligations
pursuant to its Business Plan, Company will review that failure with
Dealer. If Company determines that corrective action by Dealer is not
forthcoming, it will notify Dealer of the failure in writing and of
the period of time during which Dealer is expected to remedy the
failure. If the failure is not remedied within that period, Company
may terminate this Agreement by giving Dealer 90 days advance written
notice.
H. RELIANCE ON ANY APPLICABLE TERMINATION PROVISION - The terminating
party may select the termination provision under which it elects to
terminate without reference in its termination notice to any other
provision that may also be applicable. The terminating party also may
subsequently assert other grounds for termination.
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SECTION 25: TRANSACTIONS AFTER TERMINATION.
A. ORDERS - If Dealer and Company do not enter into a new Dealer
Agreement when this Dealer Agreement terminates, all unfilled orders
for HUMMER(R) Products will be canceled as of the date of termination,
except as provided in this Section. Termination of this Dealer
Agreement will not release Dealer or Company from the obligation to
pay any amounts owing the other when due.
B. DELIVERIES - If Dealer voluntarily terminates this Dealer Agreement,
or if it terminates because of the Dealer Operator's death or
incapacity, Company will use its best efforts, consistent with
distribution procedures, to furnish Dealer with HUMMER(R) Motor
Vehicles sufficient to fill Dealer's bona fide retail orders on hand
on the effective date of termination, not to exceed, however, the
total number of HUMMER(R) Motor Vehicles invoiced to Dealer for retail
sale during 90 days preceding the effective date of termination.
C. EFFECT OF TRANSACTIONS AFTER TERMINATION - Neither the sale of
HUMMER(R) Products to Dealer nor any other act by Company or Dealer
after termination of this Dealer Agreement will be a waiver of the
termination.
SECTION 26: TERMINATION ASSISTANCE.
A. REACQUISITION OF HUMMER(R) PRODUCTS - Upon termination of this Dealer
Agreement, Dealer may elect to return to Company for credit the
following HUMMER(R) Products:
1. MOTOR VEHICLES - Each unused, undamaged, unsold and salable
current model year Motor Vehicle in stock on the effective date
of termination with less than 50 miles on the odometer, provided
that the vehicle has not been altered outside the factory and
provided further that the vehicle was purchased from Company or
another HUMMER(R) Dealer prior to Dealer receiving its
termination notice.
2. PARTS AND ACCESSORIES - All unused, undamaged, unsold and salable
Parts and Accessories in stock on the effective date of
termination, provided that the Parts and Accessories were
purchased from Company or another HUMMER(R) Dealer within the
twelve month period preceding the effective date of termination.
3. TOOLS - All special tools acquired by Dealer to perform its
obligations pursuant to this Dealer Agreement and which cannot
reasonably be used in connection with the operation of any other
business.
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B. REACQUISITION PRICES - Company shall pay Dealer for all HUMMER(R)
Products reacquired following termination by first applying any
amounts due Dealer as an offset to any amounts owed by Dealer to
Company. Following the settlement of all accounts between the parties,
and upon tender by Dealer to Company of a general release, Company
will remit to Dealer the balance, if any, of any amounts due Dealer
within ninety (90) days. The prices to be paid by Company for the
reacquisition of HUMMER(R) Products following termination are as
follows:
1. MOTOR VEHICLES - The price paid by Dealer, less all rebates,
discounts, allowances and transportation costs from Dealer
Premises to Company's place of manufacture.
2. PARTS AND ACCESSORIES - The current price for the Parts and
Accessories as shown on Company's price list, less a ten percent
(10%) restocking charge.
3. TOOLS - Acquisition price less ten percent (10%) for each year or
partial year of use since the date of acquisition.
C. ELECTION OF BENEFITS AND GENERAL RELEASE - Prior to the effective date
of termination, Company shall provide Dealer with a form pursuant to
which Dealer will elect to accept or reject the termination benefits
offered in this Section. If Dealer fails to return the form within 30
days of receipt, Dealer shall be deemed to have elected to accept the
benefits. Upon Dealer's election to accept the termination benefits
offered in this Section, Company shall be released from any and all
other liability to Dealer with respect to all relationships and
actions between Company and Dealer, however claimed to arise, except
for any liabilities Company has agreed to assume in a separate
writing.
SECTION 27: DEALER APPEAL BOARD.
In an effort to avoid unnecessary confrontations and adversarial relationships,
Company has established a Dealer Appeal Board. The Board will be comprised of
three members selected by the Company, two of whom will be Company
representatives and the third may be a dealer representative selected by
Company. Any protest, controversy or claim by Dealer with respect to any action
by Company in connection with the parties' obligations under this Dealer
Agreement shall first be submitted to the Dealer Appeal Board for evaluation,
mediation and, to the extent possible, resolution to the satisfaction of both
parties. With respect to a claim arising out of a termination notice, Dealer
must submit any appeal to the Dealer Appeal Board within fifteen (15) days of
receiving the termination notice. With respect to all other claims, Dealer must
submit any appeal to the Dealer Appeal Board within one year of the conduct
which gave rise to the claim. Any Dealer Appeal Board decision shall be binding
on Company, but shall not be binding on Dealer. Appeal to the Dealer Appeal
Board is a condition precedent to Dealer's right to pursue any other remedy
available under this Dealer Agreement, or otherwise available at law or in
equity, including any claim arising under any state or federal statute. All of
Dealer's 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 Dealer Appeal Board's decision.
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SECTION 28: TRADEMARKS AND SERVICE MARKS.
A. OWNERSHIP - Dealer acknowledges that Company, or one of its
affiliates, is the exclusive owner of the HUMMER(R) Marks. Dealer will
not contest Company's ownership or right to exclusive use of any
HUMMER(R) Mark. Dealer acknowledges that its use of any HUMMER(R)
Marks, either alone or in connection with some other trademark,
service mark or trade name, gives it no rights or ownership interest
in the HUMMER(R) Marks.
B. USE - Dealer shall use HUMMER(R) in its trade name only as approved by
Company. Dealer shall discontinue use of HUMMER(R) in its trade name
or any other use of HUMMER(R) Marks as and when requested by Company.
C. LITIGATION - Dealer will report to Company any suspected infringements
of Company's rights with respect to the HUMMER(R) Marks and will
cooperate in any litigation brought by Company to enforce its rights.
Company will reimburse Dealer for all costs, including reasonable
legal fees, incurred by Dealer as the result of such cooperation.
SECTION 29: GENERAL PROVISIONS.
A. NO AGENT OR LEGAL REPRESENTATIVE STATUS - This Dealer Agreement does
not make either party the agent or legal representative of the other
for any purpose, nor does it grant either party authority to assume or
create any obligation on behalf of or in the name of the other. No
fiduciary obligations are created by this Dealer Agreement.
B. DEALER'S RESPONSIBILITY FOR ITS OPERATIONS - Except as provided in
this Dealer Agreement, Dealer is solely responsible for all
expenditures, liabilities and obligations incurred or assumed by
Dealer for the establishment and conduct of its operations.
C. TAXES - Dealer is responsible for all local, state, federal, or other
applicable taxes and tax returns related to its business and will hold
Company harmless from any related claims or demands made by any taxing
authority.
D. NO IMPLIED WAIVERS - The delay or failure of Company or Dealer to
require performance by the other party or the waiver by Company or
Dealer of a breach of any provision of this Dealer Agreement will not
affect the right to subsequently require performance.
E. ASSIGNMENT OF RIGHTS OR DELEGATION OF DUTIES - Company may assign this
Dealer Agreement and any rights or delegate any obligations to any
affiliated or successor company, and will provide Dealer written
notice of the assignment or delegation. Any assignment or delegation
by Company will not relieve Company of liability for the performance
of its obligations.
17
<PAGE> 27
F. ACCOUNTS PAYABLE - All monies or accounts due Dealer will be
considered net of Dealer's indebtedness to Company. Company may deduct
any amounts due or to become due from Dealer to Company, or any
amounts held by Company from any sums or accounts due or to become due
from Company to Dealer.
G. REVIEW AND MODIFICATIONS OF DEALER AGREEMENT TERMS - In the event
Company decides to uniformly modify the provisions of all Dealer
Agreements to which it is a party, Dealer will accept termination of
this Dealer Agreement and execute the new Dealer Agreement. The rights
and obligations of Dealer that may otherwise become applicable upon
termination of this Dealer Agreement will not be applicable.
H. APPLICABLE LAW - This Dealer Agreement is governed by and shall be
construed and interpreted according to the laws of the State of
Indiana.
I. NOTICES - Any notices required or permitted to be given by either
Company or Dealer to the other shall be in writing and delivered in
person or by use of First Class Mail, postage prepaid. Notices to
Company shall be addressed to the President or a Vice President of
Company, at 105 N. Niles Avenue, Post Office Box 7025, South Bend,
Indiana, 46634-7025. Notices to Dealer shall be delivered or mailed to
Dealer at Dealer's principal place of business as identified in the
Dealer Agreement. Notices shall be effective the date of mailing.
J. SEPARABILITY OR TERMINATION - If any provision of this Dealer
Agreement is declared invalid or unenforceable under the law of any
place where it is to be performed, Company may either terminate this
Dealer Agreement in its entirety or continue with the remainder of
this Dealer Agreement in full force and effect as if the invalid or
unenforceable provision had not been included in this Dealer
Agreement.
K. SOLE AGREEMENT OF PARTIES - Except as provided in this Dealer
Agreement, Company has made no promises to Dealer, Dealer Operator or
Dealer Owner and there are no other agreements or understandings,
either oral or written, between the parties affecting this Dealer
Agreement or relating to any of the subject matters covered by this
Dealer Agreement. Except as otherwise provided herein, this Dealer
Agreement cancels and supersedes all previous agreements between the
parties that relate to any matters covered by this Dealer Agreement.
No agreement between Company and Dealer which relates to matters
covered herein, and no change in, addition to (except the filling in
of blank lines), or erasure of any printed portion of this Dealer
Agreement, will be binding unless it is approved in a written
agreement.
18
<PAGE> 1
EXHIBIT 10.17
DEALERSHIP STANDARDS ADDENDUM
FOR
BOOMERSHINE ISUZU, INC.
DBA BOOMERSHINE ISUZU
EFFECTIVE FROM AND AFTER ______________ UNTIL AMENDED
In accordance with Section 5 of our Isuzu Dealer Sales and Service Agreement
with you dated ___________, and Article III of the Isuzu Dealer Sales and
Service Agreement Additional Provisions thereto, you agree to.
1. Furnish to us, on or before the tenth day of each month, on such forms
or by such means as we may designate, complete and accurate financial
and operating statements reflecting your true financial condition as
of the end of the preceding month and for that portion of the fiscal
year then ended.
2. Maintain flooring arrangements with an approved bank or financial
institution providing a wholesale flooring line according to Isuzu
dealership standards exclusively for the purchase of Isuzu vehicles.
Dealer acknowledges that Dealer is deficient regarding Isuzu
Dealership Standard wholesales flooring line amount. Dealer agrees
to provide an increased flooring line in the amount of $2,625,000 for
the purchase of Isuzu vehicles within the next 90 days.
3. Providing and maintaining a new vehicle sales showroom located at
3230 Satellite Boulevard, Duluth, GA 30136, for the exclusive display
and sale of Isuzu vehicles said showroom to be a minimum 1500 square
feet and sufficient for the display of four (4) Isuzu vehicles.
4. Install and maintain standard signs as required by us for an Isuzu
dealership, including brand, frascia, exterior service and parts, and
interior parts signs where allowable under the then current local sign
ordinance.
5. Having your service management and technicians attend specified Isuzu
sponsored service training programs.
6. Having your sales and management personnel attend Isuzu sponsored
product training sessions.
7. Maintain a designated area in the Service Department located at 3230
Satellite Boulevard, Duluth, GA 30136, for servicing Isuzu vehicles.
this shall be coordinated with our designated representative and
subject to our approval.
8. Maintain a specified area in the Parts Department located at 3230
Satellite Boulevard, Duluth, GA 30136, for storage of Isuzu parts.
This shall be coordinated with our designated representative and
subject to our approval.
<PAGE> 2
BOOMERSHINE ISUZU, INC.
dba Boomershine Isuzu
Page 2
9. Dealer agrees that as of the date of this Agreement, Dealer is
substantially deficient in Net Working Capital. Dealer agrees to
correct the Net Working Capital deficiency within the term of this
Agreement.
10. Maintain and utilize the Isuzu Communication System for the submission
of required monthly financial statements, parts orders, warranty
claims, retail sales reporting, and all other functions which from
time to time American Isuzu Motors Inc. may deem necessary.
American Isuzu Motors Inc. reserves the right to amend the foregoing
dealership standards at any time upon written notice to you.
BOOMERSHINE ISUZU, INC.
DBA BOOMERSHINE ISUZU
3230 Satellite Boulevard
Duluth, GA 30136
BY
-----------------------------
ITS:
---------------------------
AMERICAN ISUZU MOTORS, INC.
BY
-----------------------------
ITS: Sr. Vice President &
General Manager,
Light Vehicles
---------------------------
<PAGE> 3
[ISUZU LOGO]
December 5, 1997
Mr. Walter M. Boomershine, Jr.
Boomershine Isuzu, Inc.
dba Boomershine Isuzu
3230 Satellite Blvd.
Duluth, GA 30136
Dear Mr. Boomershine:
On July 30, 1992, we extended an offer to enter into an Isuzu Dealer Sales and
Service Agreement with you. That offer was to remain open until December 8,
1997 and could be accepted only by your accomplishing the items listed in
Exhibit B thereto prior to that date. We understand you have been unable to
complete items four, sixteen and twenty-one in said Exhibit B, but will complete
said items on or before December 8, 1998. That offer may be accepted on that
date by your having accomplished all of the items listed in Exhibit B hereto.
We will, so long as this offer remains in effect, continue to sell you Isuzu
products for resale from said facilities and honor claims for P.D.I.,
maintenance, warranty, policy and campaign work performed by you, all upon
terms and conditions identical to those contained in Exhibit A to said offer.
Should you fail to accomplish all of the items referred to in Exhibit B to said
offer on or before December 8, 1998, this offer shall be automatically revoked
on that date.
Except as hereinabove indicated, all of the provisions of said offer shall
remain in full force and effect, including our right, at any time, on 90 days'
written notice to you, to revoke this offer. Our granting of this extension of
the time within which said offer may be accepted does not obligate us to grant
any further extensions thereof.
Please sign this letter and all copies indicating your receipt hereof and your
agreement to continue to purchase, resell and service Isuzu products upon terms
and conditions identical to those contained in Exhibit A to said offer during
such times as we may be selling such products to you and honoring claims for
work performed by you pursuant thereto.
Very truly yours,
AMERICAN ISUZU MOTORS INC.
/s/ R.W. Reilly
---------------------------------------
R.W. Reilly
Sr. Vice President and General Manager,
Light Vehicles
AGREED:
BOOMERSHINE ISUZU, INC.
DBA BOOMERSHINE ISUZU
BY /s/ C. YANCEY DATE 12-19-97
----------------------------- -----------------------------------
ITS: President
[AMERICAN ISUZU LETTERHEAD]
<PAGE> 1
EXHIBIT 10.18
[FORD MOTOR COMPANY LOGO]
Atlanta District
FORD SALES AND SERVICE AGREEMENT
<TABLE>
<S> <C>
AGREEMENT made as of the 12th day of August , 19 92 ,
------------------------------ ------------------------------------ ----------------------
by and between BOOMERSHINE FORD, INC.
--------------------------------------------------------------------------------------------------------------
(Name of Entity)
A CORPORATION IN GEORGIA
- -----------------------------------------------------------------------------------------------------------------------------
(State whether an individual, partnership or corporation) (If the latter, show name of the state in which incorporated)
doing business as BOOMERSHINE FORD
-----------------------------------------------------------------------------------------------------------
(Trade Name)
and with a principal place of business at 3230 SATELLITE BOULEVARD,
-----------------------------------------------------------------------------------
(Street Address)
DULUTH GWINNETT GEORGIA 30136
- -----------------------------------------------------------------------------------------------------------------------------
(CITY) (COUNTY) (STATE) (ZIP CODE)
(hereafter called the "Dealer") and Ford Motor Company, a Delaware corporation with its principal place of business at
Dearborn, Michigan (hereinafter called the "Company").
</TABLE>
PREAMBLE
The purpose of this agreement is to (i) establish the Dealer as an
authorized dealer in COMPANY PRODUCTS including VEHICLES (as herein defined),
(ii) set forth the respective responsibilities of the Company in producing and
selling those products to the Dealer and of the Dealer in reselling and
providing service for them and (iii) recognize the interdependence of both
parties in achieving their mutual objectives of satisfactory sales, service and
profits by continuing to develop and retain a broad base of satisfied owners of
COMPANY PRODUCTS.
In entering into this agreement, the Company and the Dealer recognize
that the success of the Company and each of its authorized dealers depends
largely on the reputation and competitiveness of COMPANY PRODUCTS and dealer's
services, and on how well each fulfills its responsibilities under this
agreement.
It is the opinion of the Company that sales and service of COMPANY
PRODUCTS usually can best be provided to the public through a system of
independent franchised dealers, with each dealer fulfilling its
responsibilities in a given locality from properly located, adequate,
well-equipped and attractive dealerships, which are staffed by competent
personnel and provided with the necessary working capital. The Dealer
recognizes that, in such a franchise system, the Company must plan for the
establishment and maintenance of the numbers, locations and sizes of dealers
necessary for satisfactory and proper sales and service representation in each
market area as it exists and as it develops and changes. At the same time, the
Company endeavors to provide each of its dealers with a reasonable profit
opportunity based on the potential for sales and service of COMPANY PRODUCTS
within its locality.
The Company endeavors to make available to its dealers a variety of
quality products, responsive to broad wants and needs of the buying public,
which are attractively styled, of sound engineering
i
<PAGE> 2
design and produced on a timely basis at competitive prices. The development,
production and sale of such products require that the Company and its
manufacturing sources make large continuing investments in plants, equipment,
tools and other facilities, engineering and styling research and development,
quality control procedures, trained personnel and marketing programs. Heavy
commitments must also be made in advance for raw materials and finished parts.
For purposes of making these investments and commitments, planning production
and estimating costs for setting prices, the Company assumes in advance an
estimated volume of sales for each of it products. Within each year, it
develops production schedules from orders submitted by its franchised dealers
and its and their estimates of the market demand for COMPANY PRODUCTS.
In turn, each of the Company's franchised dealers makes important
investments or commitments in retail sales and service facilities and equipment,
in working capital, in inventories of vehicles, parts and accessories, and
trained sales and service personnel based on annual planning volumes for their
markets.
If satisfactory volumes for either the Company or a dealer are not
realized, each may suffer because of commitments already made and the cost of
manufacturing and of selling each product may be increased. Each dealer must
give the Company orders for the products needed to serve its market. The
Company seeks to adjust production schedules, to the extent feasible, to fill
dealer orders, and to allocate fairly any product in short supply, but
inevitably both the Company and its dealers suffer loss of profits to the
extent they cannot meet market demands. Thus, the automotive business is a
high risk business in which the Company, its manufacturing sources and its
dealers can succeed only through cooperative and competitive effort in their
respective areas of manufacturing, sales, service and customer satisfaction.
Because it is the dealer who deals directly with, and develops the sale of
COMPANY PRODUCTS to the consuming public, the Company substantially relies on
its dealers to provide successful sales and merchandising programs, competent
service operations and effective owner relations programs. To do this, dealers
must carry out their responsibilities of establishing and maintaining adequate
wholesale and retail finance plans, new and used vehicle sales program, parts
and service sales programs, personnel training and supportive capitalization
and working capital. To assist its dealers in these responsibilities, the
Company establishes and periodically updates standards of operation and
planning guides based on its experience and current conditions. It also offers
sales and service training courses, advice as to facilities, counseling in the
various phases of new and used vehicle merchandising, parts and service
merchandising, easing, daily rentals and facilities development. It also
conducts national advertising, promotional and other marketing programs and
assists dealers in developing complementary group and individual programs.
To enable the Company to provide such assistance, it requires dealers to
submit uniform and accurate sales, operating and financial reports from which
it can derive and disseminate analytical and comparative operating data and
advice to dealers. The Company also solicits dealers to bring to its attention
through their National Dealer Council organization any mutual dealer problems
or complaints as they arise.
Because the Company relies heavily on its dealers for success, it reserves
the right to cease doing business with any dealer who is not contributing
sufficiently to such success. Similarly, the Company recognizes that its
dealers look to it to provide competitive products and programs and that, if it
does not do so, any dealer may elect to cease doing business with the Company.
The Company has elected to enter into this agreement with the Dealer with
confidence in the Dealer's integrity and ability, its intention to carry out
its responsibilities set forth in this agreement, and its desire to provide
courteous, competent and satisfying sales and service representation to
consumers for COMPANY PRODUCTS, and in reliance upon its representations as to
the person who will participate in the ownership and management of the
dealership.
The Dealer has elected to enter into this agreement with the Company with
confidence in its
ii
<PAGE> 3
integrity and ability, its intention to provide competitive products and assist
the Dealer to market them successfully, and its desire to maintain high quality
dealers.
Both parties recognize the rights of the Dealer and the Company under this
agreement are defined and limited by the terms of this agreement and applicable
law. The Company and the Dealer further acknowledge that their methods of
operation and business practices have an important effect on the reputation of
the Dealer, the Company, COMPANY PRODUCTS and other franchised dealers of the
Company. The Company and the Dealer also acknowledge that certain practices
are detrimental to their interests, such as deceptive, misleading or confusing
advertising, pricing, merchandising or business practices, or misrepresenting
the characteristics, quality, condition or origin of any item of sale.
It is the expectation of each of the parties that by entering into this
agreement, and by the full and faithful observance and performance of its
duties, a mutually satisfactory relationship will be established and maintained.
IN CONSIDERATION of the mutual agreements and acknowledgments hereinafter
made, the parties hereto agree as follows:
A. The Company hereby appoints the Dealer as an authorized dealer at
retail in VEHICLES and at retail and wholesale in other COMPANY PRODUCTS and
grants the Dealer the privilege of buying COMPANY PRODUCTS from the Company for
sale in its DEALERSHIP OPERATIONS (as herein defined). The Company also grants
to the Dealer the privilege of displaying, at approved location(s), the
Company's trademarks and trade names applicable to COMPANY PRODUCTS. The
Dealer hereby accepts such appointment.
B. Subject to and in accordance with the terms and conditions of this
agreement, the Company shall sell COMPANY PRODUCTS to the Dealer and the Dealer
shall purchase COMPANY PRODUCTS from the Company.
C. The Ford Motor Company Ford Sales and Service Agreement Standard
Provisions (Form "FD925-A"), a duplicate original of which is attached to the
Dealer's duplicate original of this agreement, have been read and agreed to by
the Company and by the Dealer, and such Standard Provisions and any duly
executed and delivered supplement or amendment thereto, are hereby made a part
of this agreement with the same force and effect as if set forth herein in full.
D. This agreement shall bind the Company when it bears the facsimile
signature of the General Manager, and the manual countersignature of the
General Sales Manager, Market Representation Manager, or a Regional or District
Sales Manager, of the Ford Division of the Company and a duplicate original
thereof is delivered personally or by mail to the Dealer or the Dealer's
principal place of business.
E. The Dealer acknowledges that (i) this agreement may be executed only
in the manner provided in paragraph D hereof, (ii) no one except the General
Manager, The General Sales Manager, or Market Representation Manager of the
Ford Division of the Company, or the Secretary or an Assistant Secretary of the
Company, is authorized to make or execute any other agreement relating to the
subject matter hereof on behalf of the Company, or in any manner to enlarge,
vary or modify the terms of this agreement, and then only by an instrument in
writing, and (iii) no one except the General Manager of the Ford Division of
the Company, or the Secretary or an Assistant Secretary of the Company, is
authorized to terminate this agreement on behalf of the Company, and then only
by an instrument in writing.
F. In view of the personal nature of this agreement and its objectives
and purposes, the Company expressly reserves to itself the right to execute a
Ford Sales and Service Agreement with individuals or other entities
specifically selected and approved by the Company. Accordingly, this agreement
and the rights and privileges conferred on the Dealer hereunder are not
transferable, assignable or salable by the Dealer and no property right or
interest, direct or indirect, is sold, conveyed or transferred to the Dealer
under this agreement. This agreement has been entered into by the
iii
<PAGE> 4
Company with the Dealer in reliance (i) upon the representation and agreement
that the following person(s), and only the following person(s) shall be the
principal owners of the Dealer:
<TABLE>
<CAPTION>
NAME HOME PERCENTAGE
ADDRESS OF INTEREST
<S> <C> <C>
Walter M. Boomershine 4636 Powers Rd., Marietta, GA 30067 100
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
</TABLE>
(ii) upon the representation and agreement that the following person(s), and
only the following person(s), shall have full managerial authority for the
operating management of the Dealer in the performance of this agreement.
<TABLE>
<CAPTION>
NAME HOME TITLE
ADDRESS
<S> <C> <C>
Walter M. Boomershine 4636 Powers Rd., Marietta, GA 30067 President
- ----------------------------------------------------------------------------
Charles Yancy 2150 Cobb Pkwy, Smyrna, GA 30080 Sec/Tres.
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
</TABLE>
and (iii) upon representation and agreement that the following person(s), and
only the following person(s), shall be the remaining owners of the Dealer
<TABLE>
<CAPTION>
NAME HOME PERCENTAGE
ADDRESS OF INTEREST
<S> <C> <C>
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
</TABLE>
The Dealer shall give the Company prior notice of any proposed change in the
said ownership or managerial authority, and immediate notice of the death or
incapacity of any such person. No such change or notice, an no assignment of
this agreement or of any right or interest herein, shall be effective against
the Company unless and until embodied in an appropriate amendment to or
assignment of this agreement, as the case may be, duly executed and delivered
by the Company and by the Dealer. The Company shall not unreasonably withhold
its consent to any such change.
G. (Strike out either subparagraph (1) or (2) whichever is not applicable.)
(1) This agreement shall continue in force and effect from the date of its
execution until terminated by either party under the provisions of paragraph 17
hereof.
H. Both the Company and the Dealer assume and agree to carry out and
perform their respective responsibilities under this agreement.
The parties hereto have duly executed this agreement in duplicate as of
the day and year first above written.
[Ford Motor Company LOGO] Boomershine Ford
----------------------------------
(Dealer's Trade Name)
/s/
By /s/ Walter M. Boomershine, Jr.
General Manager, Ford Division ----------------------------------
Countersigned by (Title) President
----------------------------------
- ---------------------------------
- ---------------------------------
iv
<PAGE> 1
EXHIBIT 10.19
[NISSAN LOGO]
NISSAN
DEALER SALES & SERVICE AGREEMENT
THIS AGREEMENT is entered into effective the day last set forth below by
and between the Nissan Division of NISSAN MOTOR CORPORATION IN U.S.A., a
California corporation, hereinafter called Seller, and the natural person or
entity identified as "Dealer" in the Final Article of this Agreement.
INTRODUCTION
The purpose of this Agreement is to establish Dealer as an authorized
dealer of Nissan Products and to provide for the sale and servicing of Nissan
Products in a manner that will best serve the interests of Seller, Dealer,
other Authorized Nissan Dealers and owners and purchasers of Nissan Products.
This Agreement sets forth: the rights which Dealer will enjoy as an Authorized
Nissan Dealer; the responsibilities which Dealer assumes in consideration of
its receipt of these rights; and the respective conditions, rights and
obligations of Seller and Dealer that apply to Seller's grant to Dealer of such
rights and Dealer's assumption of such responsibilities.
This is a personal services Agreement. In entering into this Agreement and
appointing Dealer as provided below, Seller is relying upon the personal
qualifications, expertise, reputation, integrity, experience, ability and
representations of the individual(s) named herein as Principal Owner(s) and
Executive Manager.
Achievement of the purposes of this Agreement is premised upon mutual
understanding and cooperation between Seller and Dealer. Dealer has entered
into this Agreement in reliance upon Seller's integrity and expressed intention
to deal fairly with Dealer and the consuming public.
It is the responsibility of Seller to market Nissan Products throughout
the Territory. It is the responsibility to Dealer to actively promote the
retail sale of Nissan Products and to provide courteous and efficient service
of Nissan Products. The success of Seller and Dealer will depend on how well
they each fulfill their respective responsibilities under this Agreement. It is
recognized that: Nissan Motor Co., Ltd. (hereinafter called "Manufacturer")
will endeavor to provide motor vehicles that offer outstanding value to the
consuming public; Seller will endeavor to establish a national network of
Authorized Nissan Dealers that can provide effective sales and service effort
at the retail level; and Dealer will endeavor to fulfill its responsibilities
through aggressive, sound, ethical selling practices and through conscientious
regard for customer service.
Seller and Dealer shall refrain from engaging in conduct or activities
which might be detrimental to or reflect adversely upon the reputation of
Seller, Manufacturer, Dealer or Nissan Products and shall engage in no
discourteous, deceptive, misleading or unethical practices or activities.
For consistency and clarity, terms which are used frequently in this
Agreement have been defined in Section 1 of the Standard Provisions. All terms
used herein which are defined in the Standard Provisions shall have the meaning
stated in said Standard Provisions. These definitions should be read carefully
for a proper understanding of the provisions in which they appear.
To achieve the purposes referred to above, Seller and Dealer agree as
follows:
ARTICLE FIRST: Appointment of Dealer
Subject to the conditions and provisions of this Agreement, Seller:
(a) appoints Dealer as an Authorized Nissan Dealer and grants Dealer the
non-exclusive right to buy from Seller those Nissan Products specified in
Dealer's current Product Addendum hereto, for resale, rental or lease at or
from the Dealership Locations established and described in accordance with
Section 2 of the Standard Provisions; and
(b) grants Dealer a non-exclusive right, subject to and in accordance with
Section 6.K of the Standard Provisions, to identify itself as an Authorized
Nissan Dealer, to display the Nissan Marks in the conduct of its Dealership
Operations and to use the Nissan Marks in the advertising, promotion and sale
of Nissan Products in the manner provided in this Agreement.
ARTICLE SECOND: Assumption of Responsibilities by Dealer
Dealer hereby accepts from Seller its appointment as an Authorized Nissan
Dealer and, in consideration of its appointment and subject to the other
conditions and provisions of this Agreement, hereby assumes the responsibility
for:
(a) establishing and maintaining at the Dealership Locations the
Dealership Facilities in accordance with Section 2 of the Standard Provisions;
(b) actively and effectively promoting the sale at retail (and, if Dealer
elects, the leasing and rental) of Nissan Vehicles within Dealer's Primary
Market Area in accordance with Section 3 of the Standard Provisions;
(c) servicing Nissan Vehicles and for selling and servicing Genuine Nissan
Parts and Accessories in accordance with Section 5 of the Standard Provisions;
(d) building and maintaining consumer confidence in Dealer and in Nissan
Products in accordance with Section 5 of the Standard Provisions; and
(e) performance of the additional responsibilities set forth in this
Agreement, including those specified in Section 6 of the Standard Provisions.
<PAGE> 2
ARTICLE THIRD: Ownership
(a) OWNERS. This Agreement has been entered into by Seller in reliance upon,
and in consideration of, the personal qualifications, expertise, reputation,
integrity, experience, ability and representations with respect thereto of the
Principal Owner(s) named in the Final Article of this Agreement and in reliance
upon Dealer's representations concerning the ownership of Dealer as follows:
(i) Dealer represents and agrees that the person(s) named as
Principal Owner(s) in the Final Article of this Agreement, and only those
person(s), shall be the Principal Owner(s) of Dealer;
(ii) Dealer represents and agrees that the person(s) named as Other
Owner(s) in the Final Article of this Agreement, and only those person(s),
shall be the Other Owner(s) of Dealer.
(b) HOLDING COMPANY. Seller requires that a natural person be named as the
Principal Owner(s) of Dealer because Seller relies on the personal
qualifications, expertise, reputation, integrity, experience, ability and
representations of such individuals. If one or more of the owner(s) of Dealer
is a corporation, partnership or other entity and not a natural person
(hereinafter called "Holding Company"), Dealer and Seller agree that the
natural persons listed in the Holding Company Addendum of this Agreement as
owners of the Holding Company shall be deemed to be the Principal Owner(s) and
Other Owner(s) of Dealer, as the case may be and that the terms and conditions
of this Agreement, including without limitation the provisions of this Article
Third and Sections 12, 14 and 15 of the Standard Provisions, shall apply to
the owner(s) of the Holding Company as well as to Dealer. Dealer represents to
Seller and agrees that the Holding Company is owned as indicated in the Holding
Company Addendum to this Agreement.
(c) CHANGES IN OWNERSHIP. In view of the fact that this is a personal
services agreement and in view of its objectives and purposes, this Agreement
and the rights and privileges conferred on Dealer hereunder are not assignable,
transferable or salable by Dealer, and no property right or interest is or
shall be deemed to be sold, conveyed or transferred to Dealer under this
Agreement. Dealer agrees that any change in the ownership of Dealer specified
herein requires the prior written consent of Seller, except only changes in the
record or beneficial ownership interests of Other Owner(s) not effecting a
change in majority control or interest. Dealer shall give Seller prior notice
of any proposed change in said ownership requiring the consent of Seller and
immediate notice of the death or incapacity of any Principal Owner. No such
change, and no assignment of this Agreement or of any right or interest herein,
shall be effective against Seller unless and until embodied in an appropriate
amendment to or assignment of this Agreement, as the case may be, duly executed
and delivered by Seller and by Dealer. Seller shall not, however, unreasonably
withhold its consent to any such change. Seller shall have no obligation to
transact business with any person who is not named either as a Principal Owner
or Executive Manager of Dealer hereunder or otherwise to give effect to any
proposed sale or transfer of the ownership or management of Dealer prior to
having concluded the evaluation of such a proposal as provided in Section 15 of
the Standard Provisions.
ARTICLE FOURTH: Management
(a) EXECUTIVE MANAGER. Seller 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 the purposes and objectives of this
Agreement. This Agreement has been entered into by Seller in reliance upon, and
in consideration of, the personal qualifications, expertise, reputation,
integrity, experience, ability and representations with respect thereto of the
person named as Executive Manager in the Final Article of this Agreement and on
Dealer's representation to Seller and agreement that the person identified as
Executive Manager shall be Dealer's executive manager, shall have full
managerial authority for the Dealership Operations, and shall continually
provide his or her personal services in operating the dealership and will be
physically present at the Dealership Facilities.
(b) CHANGES IN MANAGEMENT. In view of the fact that this is a personal
services Agreement and in view of its objectives and purposes, Dealer agrees
that any change in the Executive Manager from that specified in the Final
Article of this Agreement requires the prior written consent of Seller. Dealer
shall give Seller prior notice of any proposed change in Executive Manager and
immediate notice of the death or incapacity of any appropriate amendment to
this Agreement duly executed and delivered by Seller and by Dealer. Subject to
the foregoing, Dealer shall make its own, independent decisions concerning the
hiring and firing of its employees including without limitation, its Executive
Manager.
To enable Seller to evaluate and respond to Dealer concerning any proposed
change in Executive manager, Dealer agrees to provide, in the form requested by
Seller and in a timely manner, all applications and information customarily
requested by Seller to evaluate the proposed change. While Seller shall not
unreasonably withhold its consent to any such change, it is agreed that any
successor Executive Manager must possess personal qualifications, expertise,
reputation, integrity, experience and ability which are, in the opinion of
Seller, satisfactory. Seller will determine whether, in its opinion, the
proposed change is likely to result in a successful dealership operation with
capable management that will satisfactorily perform Dealer's obligations under
this Agreement. Seller shall have no obligation to transact business with any
person who is not named as an Executive Manager of Dealer hereunder prior to
having concluded its evaluation of such person.
(c) EVALUATION OF MANAGEMENT. Dealer and Seller understand and acknowledge
that the personal qualifications, expertise, reputation, ability, integrity,
experience and ability of the Executive Manager and his or her ability to
effectively manage Dealer's day-to-day Dealership Operations is critical to the
success of Dealer in performing its obligations under this Agreement. Seller
may from time to time develop standards and/or procedures for evaluating the
performance of the Executive Manager and will advise Dealer and the Executive
Manager of the results of such evaluations, and Dealer shall promptly take such
action as may be required to correct any deficiencies in the Executive
Manager's performance to the reasonable satisfaction of Seller.
<PAGE> 3
ARTICLE FIFTH: Additional Provisions
The additional provisions set forth in the attached "Nissan Dealer Sales and
Service Agreement Standard Provisions," bearing form number NDA-4S/9-88 are
hereby incorporated in and made a part of this Agreement. The Notice of Primary
Market Area, Dealership Facilities Addendum, Product Addendum, Dealer
Identification Addendum, Holding Company Addendum, if applicable, and all Guides
referred to in this Agreement (including references contained in the Standard
Provisions referred to above) are hereby incorporated in and made a part of this
Agreement. Dealer further agrees to be bound by and comply with: the Warranty
Manual; Seller's Manuals or Instructions heretofore or hereafter issued by
Seller to Dealer; any amendment, revision or supplement to any of the
foregoing; and any other manuals heretofore or hereafter issued by Seller to
Dealer.
ARTICLE SIXTH: Termination of Prior Agreements
This Agreement cancels, supersedes and annuls all prior contracts, agreements
and understandings except as stated herein, all negotiations, representations
and understandings being merged herein. No waiver, modification or change of
any of the terms of this Agreement or change or erasure of any printed part of
this Agreement or addition to it (except filing of blank spaces and lines) will
be valid or binding on Seller unless approved in writing by the President or an
authorized Vice-President of Seller.
ARTICLE SEVENTH: Term
This Agreement shall have a term commencing on the effective date hereof and
continuing until terminated by either party in accordance with Section 12 of
the Standard Provisions.
ARTICLE EIGHTH: License of Dealer
If Dealer is required to secure or maintain a license for the conduct of its
business as contemplated by this Agreement in any state or jurisdiction where
any of its Dealership Operations are to be conducted or any of its Dealership
Facilities are located, this Agreement shall not be valid until and unless
Dealer shall have furnished Seller with written notice specifying the date and
number, if any, of such license or licenses issued to Dealer, Dealer shall
notify Seller immediately in writing if Dealer shall fail to secure or maintain
any and all such licenses or renewal thereof or, if such license or licenses
are suspended or revoked, specifying the effective date of any such suspension
or revocation.
ARTICLE NINTH: Execution of Agreement
This Agreement, and any Addendum or amendment or notice with respect thereto,
shall be valid and binding on Seller only when it bears the signature of either
the President or an authorized Vice-President of Seller and, when such
signature is a facsimile, the manual countersignature of an authorized employee
of Seller and a duplicate original thereof is delivered personally or by mail
to the main Dealership Location. This Agreement shall bind Dealer only when it
is signed by: a duly authorized officer or executive of Dealer if a corporation;
one of the general partners of Dealer if a partnership; or Dealer if an
individual.
ARTICLE TENTH: Special Conditions.
<PAGE> 4
FINAL ARTICLE
Dealer BOOMERSHINE PONTIAC-GMC TRUCK, INC. , is
-----------------------------------------------------------------
a(an) (SELECT ONE) [ ] individual [ ] partnership [X] corporation,
incorporated or formed under the laws of the State of GA doing business
---------
as BOOMERSHINE NISSAN ("Dealer"). Dealer is located in Duluth GA .
------------------ -------- -------
City State
The Principal Owner(s) of Dealer are as follows:
<TABLE>
<CAPTION>
PERCENTAGE
NAME RESIDENCE INTEREST
- ---- --------- ----------
<S> <C> <C>
BOOMERSHINE, WALTER M., JR 4636 POWERS RD. 100.00
MARIETTA GA 30060
</TABLE>
The Other Owner(s) of Dealer are as follows:
<TABLE>
<CAPTION>
PERCENTAGE
NAME RESIDENCE INTEREST
- ---- --------- ----------
<S> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME RESIDENCE INTEREST
- ---- --------- ----------
<S> <C> <C>
BOOMERSHINE, WALTER M., JR 4636 POWERS RD. 100.00
MARIETTA GA 30060
</TABLE>
IN WITNESS THEREOF, the parties hereto have executed this Agreement in
triplicate as of May 22, 1989 at Carson, California.
-------------
DEALER:
BOOMERSHINE PONTIAC-GMC TRUCK, INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
By: /s/ Walter M. Boomershine, Jr. SELLER:
-------------------------------- NISSAN DIVISION
NISSAN MOTOR CORPORATION IN U.S.A.
Title President
---------------------- By:
----------------------------------------
Vice President
Title General Manager, Nissan Division
----------------------------------
By:
--------------------------------------
National Market
Title Representation Manager
-----------------------------------
</TABLE>
<PAGE> 5
AMENDMENT NO. 1
TO
NISSAN DEALER
SALES AND SERVICE AGREEMENT
This Agreement of Amendment is entered into effective
September 6, 1995 by and between the Nissan Division of NISSAN MOTOR
CORPORATION IN U.S.A., a California corporation (hereinafter "Seller"), and
BOOMERSHINE PONTIAC-GMC TRUCK, INC. DBA BOOMERSHINE NISSAN a Georgia
corporation (hereinafter "Dealer").
RECITALS
Effective May 22, 1989, Seller and Dealer entered
into a Nissan Dealer Sales and Service Agreement (hereinafter
"the Agreement"). Seller and Dealer desire to amend the
Agreement to reflect an Executive Manager change.
The identification of Owner(s) and Executive Manager in the Final
Article is hereby amended to read as follows:
"The Principal Owner(s) of Dealer are as follows:
<TABLE>
<CAPTION>
PERCENTAGE
NAME RESIDENCE INTEREST
---- --------- --------
<S> <C> <C>
Boomershine, Walter M., Jr. 4959 Habersham Walk 100.00
Gainesville, GA 30504
</TABLE>
The Other Owner(s) of Dealer are as follows:
<TABLE>
<CAPTION>
PERCENTAGE
NAME RESIDENCE INTEREST
---- --------- --------
<S> <C> <C>
</TABLE>
The Executive Manager of Dealer is as follows:
<TABLE>
<CAPTION>
PERCENTAGE
NAME RESIDENCE INTEREST
---- --------- --------
<S> <C> <C>
Williams, Richard B., Jr. 1523 Creek Mill Ct. 0.00
Lawrenceville, GA 30244
</TABLE>
2. The terms and conditions of the Agreement, to the extent not
modified herein, shall remain in full force and effect and
shall continue to bind the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate
as of the day and year first above written.
DEALER SELLER
BOOMERSHINE PONTIAC-GMC TRUCK, INC. NISSAN DIVISION
dba BOOMERSHINE NISSAN NISSAN MOTOR CORPORATION IN U.S.A.
By /s/ Walter M. Boomershine, Jr. By /s/ Earl J. Hesterberg
------------------------------------ ----------------------------------
Walter M. Boomershine, Jr. Earl J. Hesterberg
President Vice President
General Manager, Division
By /s/ Thomas P. Hushek
----------------------------------
Thomas P. Hushek
Regional General Manager
Southeast Region
Page 1 of 1
<PAGE> 6
SIGN SCHEDULE
TO NISSAN DEALERSHIP IDENTIFICATION ADDENDUM
MAIN BRAND SIGNS
- --------------------------------------------------------------------------------
(Description & Serial Number)
ID 160-39 020001
ID 30-MNT 060297
DEALER SIGNS
- --------------------------------------------------------------------------------
(Description)
DIR 3-PT-WF DIR 3-SV-WF
SL 16-PT-WF-B-N SL 16-SV-WF-B-N
NL 24-11-WF-B-I NL 30-17-WF-B-I
UC 30-MNT
This Sign Schedule is effective as of May 7, 1991
-------------------------------------------
This Sign Schedule is incorporated by reference in and is a part of the Nissan
Dealership Identification Addendum between the Dealer and Seller identified
below.
DEALER:
BOOMERSHINE PONTIAC-GMC TRUCK, INC.
- --------------------------------------------------------------------------------
Name
BOOMERSHINE NISSAN
- --------------------------------------------------------------------------------
Doing Business As
By /s/ Walter M. Boomershine, Jr. SELLER:
------------------------------
NISSAN DIVISION
Title President NISSAN MOTOR CORPORATION IN U.S.A.
-------------------------
DULUTH GA By /s/ ?
- ------------------------------ -------------------------------------------
City State Vice President
Title General Manager, Nissan Division
17028 --------------------------------------
- ------------------------------
Dealer Code By /s/ D. E. ?
-------------------------------------------
Title Manager, Dealer Market Representation
-------------------------------------
(File this Sign Schedule with current Sales & Service Agreement)
Form #NDA-4 (el) / 9-88
<PAGE> 7
[NISSAN LOGO]
MAINTENANCE FEE SCHEDULE
TO NISSAN DEALERSHIP IDENTIFICATION ADDENDUM
<TABLE>
<CAPTION>
MONTHLY
SIGN DESCRIPTION MAINTENANCE FEE
----------------------------------------- ---------------
<S> <C>
ID 200 $ 71.99
ID 160 $ 26.80
ID 130 $ 23.65
ID 100 $ 21.02
ID 60 $ 17.87
ID 30 $ 11.04
ID 20 $ 11.04
TK 60 $ 15.24
TK 30 $ 11.04
UC 60 $ 15.24
UC 30 $ 11.04
NL-ILLUMINATED $ 2.63
NL-NON ILLUMINATED $ .00
DIRECTIONALS $ 2.63
SL $ .00
</TABLE>
This Maintenance Fee Schedule is incorporated by reference in and is a part of
the Nissan Dealer Identification Addendum between Dealer and Seller. This
Maintenance Fee Schedule is effective as of May 7, 1991 and cancels and
supersedes any previous Maintenance Fee Schedule issued to Dealer by Seller.
(File this Maintenance Fee Schedule with Current Sales & Service Agreement)
Form #NDA-4 (e2)/9-88
<PAGE> 8
[NISSAN LOGO]
NOTICE OF PRIMARY MARKET AREA
The area described by 1990 census tracts in Exhibit A to this Notice,
including the underlying levels of geography encompassed in the same area as
required for full data collection, shall be deemed to be the Primary Market
Area of the Dealer identified below and as defined in Section 1.N of the Nissan
Dealer Sales & Service Agreement (the "Agreement") in effect between the
Authorized Dealer named below and Nissan Motor Corporation in U.S.A.
("Seller"). Exhibit A is incorporated by reference into this Notice.
Such Primary Market Area will be employed by seller, to the extent
applicable, in the establishment of vehicle sales responsibilities of Dealer
under Section 3 of the Agreement.
To the extent deemed relevant thereto, such Primary Market Area will
also be employed in the establishment or amendment of Guides for the Dealership
Facilities and other matters relating to Dealer's Dealership Operations.
The Primary Market Area described in Exhibit A hereto will be employed
by Seller for the foregoing purposes until superseded by a new Notice of
Primary Market Area issued to Dealer by Seller. This Notice of Primary Market
Area cancels and supersedes any previous Notice of Primary Market Area
furnished to Dealer by Seller.
This Notice of Primary Market Area is effective as of April 1, 1997 or
such later date, as may be required by any applicable statute.
DEALER: SELLER:
Name: NISSAN DIVISION
BOOMERSHINE PONTIAC-GMC TRUCK, NISSAN MOTOR CORPORATION IN U.S.A.
INC.
Doing Business As:
BOOMERSHINE NISSAN
City: By
DULUTH -----------------------------------------
Vice President, Nissan Division
State:
GA
Dealer Code: By /s/ Thomas P. Hushek
17028 -----------------------------------------
Regional Vice President, Southeast Region
(File this Notice of Primary Market Area with current Sales & Service Agreement)
<PAGE> 9
[NISSAN LOGO]
NOTICE OF PRIMARY MARKET AREA
- --------------------------------------------------------------------------------
The area described by 1990 census tracts in Exhibit A to this Notice,
including the underlying levels of geography encompassed in the same area as
required for full data collection, shall be deemed to be the Primary Market
Area of the Dealer identified below and as defined in Section 1.N of the Nissan
Dealer Sales & Service Agreement (the "Agreement") in effect between the
Authorized Dealer named below and Nissan Motor Corporation in U.S.A.
("Seller"). Exhibit A is incorporated by reference into this Notice.
Such Primary Market Area will be employed by seller, to the extent
applicable, in the establishment of vehicle sales responsibilities of Dealer
under Section 3 of the Agreement.
To the extent deemed relevant thereto, such Primary Market Area will also
be employed in the establishment or amendment of Guides for the Dealership
Facilities and other matters relating to Dealer's Dealership Operations.
The Primary Market Area described in Exhibit A hereto will be employed by
Seller for the foregoing purposes until superseded by a new Notice of Primary
Market Area issued to Dealer by Seller. This Notice of Primary Market Area
cancels and supersedes any previous Notice of Primary Market Area furnished to
Dealer by Seller.
This Notice of Primary Market Area is effective as of April 1, 1997 or
such later date, as may be required by any applicable statute.
<TABLE>
<CAPTION>
DEALER: SELLER:
------- -------
<S> <C>
Name: NISSAN DIVISION
BOMMERSHINE PONTIAC-GMC TRUCK, NISSAN MOTOR CORPORATION IN U.S.A.
INC.
Doing Business As:
BOMMERSHINE NISSAN
City: By /s/
DULUTH --------------------------------
Vice President, Nissan Division
State:
GA
Dealer Code: By /s/ Thomas P. Hushek
17028 --------------------------------
Regional Vice President,
Southeast Region
</TABLE>
(File this Notice of Primary Market Area with current Sales & Service Agreement)
<PAGE> 10
EXHIBIT A
TO
NOTICE OF PRIMARY MARKET AREA
DEALER NAME AND CODE: BOOMERSHINE NISSAN 17028
This Exhibit A is incorporated by reference in and is a part of the Notice of
Primary Market Area issued to the above named Dealer effective April 1, 1997
-------------
GEOG REF:H/ATL97SSA01
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
COUNTY:13013 - BARROW GEORGIA
1801.00
COUNTY:13135 - GWINNETT GEORGIA
<S> <C> <C> <C> <C> <C> <C>
501.01 501.02 502.02 502.03 502.04 503.04 503.05
503.06 503.07 503.08 503.09 503.10 503.11 503.12
503.13 503.14 504.03 504.06 504.07 504.08 504.09
504.10 504.11 504.12 504.13 504.14 504.15 505.02
505.03 505.05 505.06 505.07 505.08 505.09 506.01
506.02 507.04 507.05 507.06 507.07 507.08 507.10
507.11 508.98
</TABLE>
COUNTY:13297 - WALTON
1101.00 1105.00
- -------------------------------------------------------------------------
* TOTAL TRACTS FOR THIS PMA: 47
- -------------------------------------------------------------------------
This Exhibit shows the 1990 Census Tracts that compose the Dealer's Primary
Market Area. Each full or partial County and the individual 1990 Census Tracts
within those full or partial Counties that are included in the Dealer's
assigned market are included for reference. Data on the Dealer's market is
collected by Nissan based on this geography including the related levels of
geography as required for full data collection.
The PMA (Primary Market Area) Map is attached for reference and shows by the
area in the yellow tone the Dealer's assigned market as described by 1990
Census Tracts.
- ------------------------------------------------------------------------------
SOURCE: USAI USING R.L. POLK & CO.
AND NMC DATA 70508 Page: 1
<PAGE> 11
[MAP]
NISSAN MOTOR CORP. IN USA
<PAGE> 12
<TABLE>
<CAPTION>
[NISSAN LOGO] NISSAN DEALERSHIP FACILITIES ADDENDUM
- -----------------------------------------------------------------------------------------------------------------------------------
FACILITIES & LOCATION SIZE REQUIREMENTS BASED ON TOTAL PLANNING VOLUME REQUIREMENTS BASED ON TOTAL UNITS IN
(Square feet) OPERATION
- ------------------------------------------------------------------------------------------------------------------------------------
New Vehicle New Vehicle Used Vehicle Used Vehicle
Site Address Sales Sales Sales Sales Service Service Service Parts Parts
Building Land Building Land Bars Building Land Building Land
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A. Main Location:
3280 COMMERCE AVE. 4,379 60,159 1,865 29,519 26 17,818 23,446 5,581 3,133
B. Additional Location:
C. Additional Location:
D. Additional Location:
BUILDING
TOTALS BUILDING LAND & LAND
Actual 26,643 116,257 145,900 4,379 60,159 1,865 29,519 26 17,818 23,446 5,581 3,135
Guide 25,798 116,951 142,749 6,323 55,033 451 33,350 28 12,730 25,733 6,294 2,835
Actual
% Guide 114 99 102 69 109 413 88 92 139 91 88 110
</TABLE>
<TABLE>
<CAPTION>
NISSAN MOTOR CORPORATION IN U.S.A.
FACILITIES & LOCATION SIZE Body Body
(Square feet) Shop Shop
Building Land
-------- ----
Street Address
<S> <C> <C>
A. Main Location:
3280 COMMERCE AVE.
B. Additional Location:
C. Additional Location:
D. Additional Location:
Actual
Guide N/A N/A
Actual
% Guide N/A N/A
</TABLE>
<TABLE>
<CAPTION>
Makes Planning Units In
Sold Volume Operation
---- ------ ---------
<S> <C> <C>
1. NISSAN 1,797 6,748
2.
3.
4.
5.
TOTALS 1,797 6,748
Guide
Figures Utilized 1,800 6,500
</TABLE>
This Dealership Facilities Addendum is executed by Dealer and Seller pursuant to
Section 2.A of the Nissan Dealer Sales and Service Agreement in effect between
said parties and is effective as of the date set forth below. Dealer and Seller
agree that as of the effective date the information above accurately describes
the Dealership Location and Dealership Facilities, the purposes for which each
location is based and the current Guides for such facilities based on the
Planning Volume stated herein. The execution of this Facilities Addendum shall
not be considered as evidence of Dealer's fulfillment of his responsibilities
under Section 2 of the Agreement. Changes in the Dealership Location, the
Dealership Facilities or their _________ from the locations and specific ______
stated herein cannot be made by Dealer without the prior written consent of
Seller. Such changes and any changes in Seller's Guides will be reflected in a
new Dealership Facilities Addendum when deemed necessary by Seller. This
Dealership Facilities Addendum exceeds and supersedes any prior Dealership
Facilities Addenda executed by Seller and Dealer.
(FILE THIS ADDENDUM WITH CURRENT SALES AND SERVICE AGREEMENT)
DEALER:
- -------
BOOMERSHINE PONTIAC-GMC TRUCK, INC.
- --------------------------------------------------------------------------------
Dealer Name
BOOMERSHINE NISSAN
- --------------------------------------------------------------------------------
Doing Business As
By: DULUTH
---------------------------------- --------------------------------------
Signature City
Title: PRESIDENT GA 30136 17028
------------------------------- ---------- --------- ------------
State Zip Dealer Code
Accuracy of information verified for SELLER:
Seller
By: /s/ Tom Holland
---------------------------------- NISSAN DIVISION
TOM HOLLAND NISSAN MOTOR CORPORATION IN ______
Title: ASSISTANT REGIONAL MANAGER By: /s/ Thomas H. Eastwood
------------------------------- ----------------------------------
THOMAS H. EASTWOOD
10/28/96 Title: VICE PRESIDENT NISSAN DIVISION
- ------------------------------------- ------------------------------
Date Verified
THIS ADDENDUM IS EFFECTIVE AS OF By: /s/ Thomas P. Hushek
---------------------------------
THOMAS P. HUSHEK
10/28/96 Title: REGIONAL VICE PRESIDENT
- ------------------------------------- -------------------------------
<PAGE> 1
EXHIBIT 10.23
A
This is an agreement between the Honda Automobile Division, American Honda
Motor Co., Inc. (American Honda) and Thompson Automotive Group, Inc. (Dealer),
a(n) Georgia corporation doing business as BOOMERSHINE HONDA. By this
agreement, which is made and entered into at Torrance, California, effective
the 9th day of April, 1996, American Honda gives to Dealer the nonexclusive
right to sell and service Honda Products at the Dealership Location. It is the
purpose of this Agreement, including the Honda Automobile Dealer Sales and
Service Agreement Standard Provisions (Standard Provisions), which are
incorporated herein by reference, to set forth the rights and obligations which
Dealer will have as a retail seller of Honda Products. Achievement of the
purposes of this Agreement is premised upon the mutual understanding and
cooperation between American Honda and Dealer. American Honda and Dealer have
each entered into this Agreement in reliance on the integrity and ability and
expressed intention of each to deal fairly with the consuming public and with
each other.
For consistency and clarity, terms which are used frequently in this
Agreement have been defined in Article 12 of the Standard Provisions.
B
American Honda grants to Dealer the nonexclusive right to buy Honda
Products and to identify itself as a Honda dealer at the Dealership Location.
Dealer assumes the obligations specified in this Agreement and agrees to sell
and service effectively Honda Products within Dealer's Primary Market Area and
to maintain premises satisfactory to American Honda.
C
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. The
parties therefore recognize that the ability of Dealer to perform this
Agreement satisfactorily and the Agreement itself are both conditioned upon the
continued active involvement in or ownership of Dealer by either:
(1.) the following person(s) in the percentage(s) shown:
<TABLE>
<CAPTION>
PERCENT OF
NAME ADDRESS TITLE OWNERSHIP
<S> <C> <C> <C>
Harris R. Thompson, Jr. 3486 Mill Bridge Drive President 14.3%
Marietta, Georgia
Boomershine Automotive Group 2150 Cobb Parkway Holding Co. 85.7%
Smyrna, Georgia
</TABLE>
<PAGE> 2
(2.)
-----------------------------------------------------------------------
an individual personally owning an interest in Dealer of at least 25%
and who has presented to American Honda a firm and binding contract
giving to him the right and obligation of acquiring an ownership
interest in Dealer in excess of 50% within five years of the
commencement of Dealership Operations and being designated in that
contract as Dealer operator.
D
Dealer represents, and American Honda enters into this Agreement in
reliance upon the representation, that Harris R. (Randy) Thompson, Jr. exercises
the functions of Dealer Manager and is in complete charge of Dealership
Operations with authority to make all decisions on behalf of Dealer with respect
to Dealership Operations. Dealer agrees that there will be no change in Dealer
Manager without the prior written approval of American Honda.
E
American Honda has approved the following premise as the location(s)
for the display of Honda Trademarks and for Dealership Operations.
HONDA NEW VEHICLE PARTS AND SERVICE FACILITY
SALES SHOWROOM
595 East Main Street 595 East Main Street
Cartersville, Georgia Cartersville, Georgia
SALES AND GENERAL OFFICES USED VEHICLE DISPLAY
AND SALES FACILITIES
595 East Main Street 595 East Main Street
Cartersville, Georgia Cartersville, Georgia
F
There shall be no voluntary or involuntary change, direct or indirect,
in the legal or beneficial ownership or executive power or responsibility of
Dealer for the Dealership Operations, specified in Paragraphs C and D hereof,
without the prior written approval of American Honda.
<PAGE> 3
G
Dealer agrees to maintain, solely with respect to the Dealership
Operations, minimum net working capital of $340,670.00, minimum owner's equity
of $*, and flooring and a line or lines of credit in the aggregate amount of
$1,060,000.00 with banks or financial institutions approved by American Honda
for use in connection with Dealer's purchases of and carrying of inventory of
Honda Products, all of which American Honda and Dealer agree are required to
enable Dealer to perform its obligations pursuant to this Agreement. If Dealer
also carries on another business or sells other products, Dealer's total net
working capital, owner's equity and lines of credit shall be increased by an
appropriate amount.
* Long Term Debt, less Real Estate Mortgages, shall not exceed a ratio of 1:1
when compared to Effective Net Worth which is defined as Total Net Worth less
Total Other Assets.
H
This Agreement is made for the period beginning April 9, 1996 and
ending April 30, 2001, unless sooner terminated. Continued dealings between
American Honda and Dealer after the expiration of this Agreement shall not
constitute a renewal of this Agreement for a term, but rather shall be on a
day-to-day basis, unless a new agreement or a renewal of this Agreement is
fully executed by both parties.
I
This Agreement may not be varied, modified or amended except by an
instrument in writing, signed by duly authorized officers of the parties,
referring specifically to this Agreement and the provision being modified,
varied or amended.
J
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.
Thompson Automotive Group, Inc. dba
BOOMERSHINE HONDA #208063 By:
- ----------------------------------- -----------------------------------
[Corporate or Firm name] (Dealer)
AMERICAN HONDA MOTOR CO., INC. [Corporate Seal]
HONDA AUTOMOBILE DIVISION
By:/s/ Richard Colliver
--------------------------------
Richard Colliver
Senior Vice President
<PAGE> 4
HONDA
AUTOMOBILE DEALER
SALES AND SERVICE
AGREEMENT
STANDARD PROVISIONS
<PAGE> 5
HONDA AUTOMOBILE DEALER SALES AND SERVICE AGREEMENT
STANDARD PROVISIONS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. THE OBLIGATIONS OF AMERICAN HONDA ................................. 1
2. SALE OF HONDA PRODUCTS TO DEALER .................................. 3
3. THE OBLIGATIONS OF DEALER ......................................... 4
4. WARRANTY .......................................................... 6
5. ADVERTISING AND PROMOTIONAL PROGRAMS .............................. 6
6. TRADEMARKS AND SERVICE MARKS ...................................... 7
7. GENERAL BUSINESS REQUIREMENTS ..................................... 7
8. APPOINTMENT OF SUCCESSOR AND REPLACEMENT DEALERS .................. 8
9. TERMINATION OF AGREEMENT .......................................... 9
10. RIGHTS, OBLIGATIONS AND DEALINGS UPON TERMINATION ................. 12
11. GENERAL PROVISIONS ................................................ 15
12. DEFINITIONS ....................................................... 17
</TABLE>
<PAGE> 6
HONDA AUTOMOBILE DEALER SALES AND SERVICE AGREEMENT
STANDARD PROVISIONS
The following Standard Provisions are, by reference, incorporated in
and made a part of the Honda Automobile Dealer's Sales and Service Agreement.
These Standard Provisions accompany the Honda Dealer's Sales and Service
Agreement which has been executed on behalf of both American Honda and Dealer.
1. THE OBLIGATIONS OF AMERICAN HONDA
1.1. It is the obligation of American Honda to supply to Dealer,
and to all authorized dealers, Honda Products in a fair and
reasonable manner in order that Dealer may conduct Dealership
Operations in a businesslike manner. In fulfilling this
obligation, Honda Products may be supplied either on the basis
of dealer order or on the basis of allocation, depending on
market conditions and availability. There are numerous factors
which affect the availability of Honda Products. Among those
factors are component availability and production capacity,
consumer demand, strikes and other labor troubles, weather and
transportation conditions, and government regulations. Because
such factors affect individual dealer supply, American Honda
necessarily reserves discretion in accepting orders and
allocating and distributing Honda Products, and its judgment
and decision in such matters will be final.
1.2. To assist Dealer in the fulfillment of its obligations under
the Agreement, which it has as a retail seller of Honda
Products, American Honda agrees to provide Dealer sales,
service and parts support.
1.2.A. To assist Dealer in fulfilling its sales
responsibility, American Honda agrees to offer
general and specialized product information and to
provide field sales personnel to advise and counsel
Dealer's sales organization on sales-related subjects
such as merchandising, training and sales management.
1.2.B. To assist Dealer in fulfilling its service and parts
responsibilities, American Honda agrees to offer, or
cause to be offered, general and specialized service
and parts training courses. Based on the service
training needs of Dealer's service personnel, to be
determined by American Honda with the assistance of
Dealer, Dealer agrees to have members of Dealer's
service organization attend such courses. Further,
American Honda agrees to make available to Dealer
field service personnel capable of advising and
counseling Dealer's service personnel on
service-related subjects, including product quality,
technical adjustments, repairs and replacement of
product components, recall, product improvement or
product update campaigns which American Honda may
conduct, owner complaints, warranty administration,
service and parts merchandising, and training and
service management.
1.3. To assist Dealer in planning, establishing and maintaining the
Dealership Premises, American Honda will, at its sole option,
make available to Dealer, upon request, sample copies of
building layout plans or facility planning recommendations,
including sales, service and parts space and the placement,
installation and maintenance of recommended signs. In
addition, representatives of American Honda will be available
to Dealer from time to time to counsel and advise Dealer and
its personnel in connection with Dealer's planning and
equipping the Dealership Premises.
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1.4. American Honda agrees to make available to Dealer, at
reasonable cost, such sales, service and parts manuals,
brochures, special service tools and equipment and other data
for Honda Products as American Honda deems necessary for
Dealership Operations.
1.5. American Honda agrees to maintain a nationwide system of
authorized dealers of Honda Products. In order that those
authorized dealers may be assured of the benefits of
comprehensive advertising of Honda Products, American Honda
agrees to establish and maintain general advertising programs
in such manner and amount as it may deem appropriate and will
make sales promotion and campaign materials available to
Dealer.
1.6. American Honda agrees to compensate Dealer for the labor and
parts used by Dealer in performing its obligations under any
American Honda warranty and in connection with any recall,
product improvement or product update campaign which American
Honda may undertake and require Dealer to perform. Such
compensation will be in such reasonable amounts, and pursuant
to such requirements and instructions, as American Honda shall
establish from time to time, and such compensation shall
constitute full and complete payment by American Honda to
Dealer for such work.
1.7. American Honda agrees to assume the defense of Dealer and to
indemnify Dealer against any money judgment, less any offset
recovered by Dealer, in any lawsuit naming Dealer as a
defendant, where such lawsuit relates to: (a) an alleged
breach of any Honda warranty relating to Honda Products; (b)
bodily injury or property damage claimed to have been caused
by a defect in the design, manufacture or assembly of a Honda
Product prior to delivery thereof to Dealer (other than a
defect which could have been detected by Dealer in a
reasonable inspection); or (c) a misrepresentation or
misleading statement of American Honda; provided, however,
that if any information discloses the possibility of Dealer
error or omission in servicing or otherwise (including but not
limited to Dealer not having performed all recalls of which
Dealer has notice on the Honda Product involved in the lawsuit
if the defect subject to the recall is alleged or contended to
be a contributing cause of the breach of warranty, injury or
damage which is the subject matter of the lawsuit), or should
it appear that the Honda Product involved in such lawsuit had
been altered by or for Dealer, or if Dealer has violated any
of the provisions of this Paragraph 1.7, then Dealer will
immediately obtain its own counsel and defend itself, and
American Honda will not be obligated to defend or indemnify
Dealer further. Dealer will promptly notify American Honda of
any claim which Dealer will assert American Honda might be
obligated to defend under this Paragraph 1.7. American Honda
will have not less than thirty (30) days to conduct a
reasonable investigation to initially determine whether or not
American Honda is obligated to defend under this Paragraph
1.7. Dealer will take the steps necessary to protect its own
interests involved in the lawsuit until American Honda assumes
the active defense of Dealer. American Honda will, upon
assuming the defense of Dealer, reimburse Dealer for all
attorneys' fees or court costs incurred by Dealer from the
date of the tender. American Honda, upon assuming Dealer's
defense, will have the right to retain and direct counsel of
its own choosing, and Dealer will cooperate in all matters
during the course of defending the lawsuit. If, upon final
judgment in a lawsuit, it is determined that American Honda
wrongfully failed or refused to defend Dealer, American Honda
will reimburse Dealer for all costs and attorneys' fees
incurred by Dealer from the date of the tender of defense.
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2. SALE OF HONDA PRODUCTS TO DEALER.
2.1. To the extent that Honda Products are the subject of dealer
order, such orders will be submitted and processed in
accordance with procedures established by American Honda. No
order will be binding on American Honda, as evidenced by
either the issuance of an invoice or shipment of the ordered
Honda Products, and any such order may be accepted in whole or
in part. All orders by Dealer will be deemed firm orders and
binding upon the Dealer, except that at any time prior to
acceptance, an order may be canceled by Dealer by giving
actual notice to American Honda in writing of the desire by
Dealer to cancel such order.
2.2. While it is the intent of American Honda to provide Honda
Automobiles to Dealer in such quantities and types as are
ordered by Dealer, American Honda and Dealer recognize that
Honda Automobiles may not always be available in desired
quantities. It is therefore understood and agreed that
American Honda, at its sole election, will have the right to
allocate Honda Automobiles among authorized dealers of Honda
Products in a fair and reasonable manner. American Honda will
provide to Dealer an explanation, in writing, of any
allocation system it may adopt.
2.3. American Honda will have the right at any time and from time
to time to establish and revise prices and other terms,
including payment by Dealer, for its sales of Honda Products
to Dealer. Revised prices, terms or provisions will apply to
the sale of any Honda Products as of the effective date of the
revised prices, terms or provisions, even though a different
price or different terms may have been in effect at the time
such Honda Products were allocated to or ordered by Dealer.
2.4. American Honda will have the right to select the distribution
points and the mode of transportation and may pay carriers for
all charges in effecting delivery of Honda Products to Dealer.
Dealer agrees to pay to American Honda such charges for
delivery as American Honda may assess. Subject to the terms of
sale which may be established from time to time by American
Honda, risk of loss to Honda Products will pass to Dealer upon
tender of the Honda Products to Dealer or its authorized
agent, and title will pass to Dealer upon receipt by American
Honda of payment.
2.5. If Dealer should fail or refuse or for any reason be unable to
accept delivery of any Honda Products ordered by Dealer, or if
Dealer should request diversion of a shipment from American
Honda, Dealer will be responsible for and pay to American
Honda, promptly on demand, all costs and expenses incurred by
American Honda in filling and shipping Dealer's order and by
reason of such diversion, including costs of demurrage and
storage, plus restocking charges as determined by American
Honda. American Honda may direct that such returned Honda
Products be delivered to another destination, but the amount
charged Dealer for return to such other destination will not
be greater than the costs and expenses of returning such Honda
Products to their original place of shipment plus any
demurrage, storage and restocking charges.
2.6. As between American Honda and Dealer, American Honda assumes
responsibility for damage to Honda Products caused prior to
delivery to Dealer or its authorized agent.
2.7. American Honda will not be liable in any manner for delay or
failure in supplying any Honda Products where such delay or
failure is the result of any event beyond the control of
American Honda. Such event may include, but is not limited to,
any law or regulation or any acts of God, foreign or civil
wars, riots, interruptions of navigation, shipwrecks, fires,
strikes, lockouts, or other labor
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troubles, embargoes, blockades, demand for, or delay or
failure of any supplier to deliver or in making delivery, of
Honda Products.
2.8. American Honda reserves the right at any time to change or
modify, without notice, any specification, design or model of
Honda Products. In the event of any change or modification
with respect to any Honda Products, Dealer will not be
entitled to have such or similar change or modification made
with respect to any other Honda Products, except as may be
required by applicable law. American Honda may, however, in
its sole discretion, make such changes or modifications to all
Honda Products in its inventory or control whether or not
invoiced to Dealer. No such change will be considered a model
year change unless specified by American Honda.
2.9. American Honda may at any time discontinue, without obligation
to Dealer or Dealer's customers, the sale of any Honda
Products, or models or lines thereof or any other items, goods
or services. Further, American Honda will have no obligation,
under any circumstances, to accept orders for any Honda
Products which are not in current inventory.
3. THE OBLIGATIONS OF DEALER.
3.1. It is the obligation of Dealer to promote and sell, at retail,
Honda Products, and to promote and render service, whether or
not under warranty, for those products within the Dealer's
Primary Market Area.
3.2. Dealer's performance of its sales obligations for Honda
Products will be evaluated by American Honda on the basis of
such reasonable criteria as American Honda may develop from
time to time, including, but not limited to, such reasonable
sales objectives as American Honda may establish and a
comparison of Dealer's sales performance with other authorized
dealers of Honda Products.
3.3. To enable Dealer to fulfill its obligations satisfactorily,
Dealer agrees to establish and maintain an adequate and
trained sales and customer relations organization. Dealer
further agrees to establish and maintain a complete service
and parts organization, including a qualified service manager
and a qualified parts manager and a number of competent
service and parts personnel adequate to care for the service
obligations to be performed by Dealer under the Agreement.
3.4. Dealer agrees to acknowledge, investigate and resolve
satisfactorily all complaints received from owners of Honda
Products in a businesslike manner in order to secure and
maintain the goodwill of the public. Any complaint received by
Dealer which, in the opinion of Dealer, cannot be readily
remedied, shall be promptly reported to American Honda by
Dealer.
3.5. Dealer agrees that it will not make any misrepresentations or
misleading statements regarding the items making up the total
selling price of Honda Products or as to the prices or charges
relating to such items. With the understanding that Dealer is
the sole judge of the price at which it sells Honda Products,
dealer recognizes that a retail customer has the right to
purchase Honda Automobiles without being required to purchase
any optional equipment or accessories which the purchaser does
not want or order unless such equipment or accessories are
required under applicable laws or regulations.
3.6. Dealer agrees to make certain that all Honda Products sold by
it have received predelivery services and inspection in
accordance with applicable procedures
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and directives issued by American Honda. Dealer further agrees
that all Honda Products sold by it will be in proper operating
condition prior to delivery to any customer. To enable Dealer
to fulfill its obligations in this regard, Dealer agrees that
an appropriate number of its service personnel will be fully
qualified to perform all necessary predelivery service and
inspection.
3.7. Dealer agrees to comply with, and operate consistent with, all
applicable provisions of the National Traffic and Motor
Vehicle Safety Act of 1966 and the Federal Clean Air Act, as
amended, including such applicable rules and regulations as
may be issued thereunder, and all other applicable federal,
state and local motor vehicle safety and emission control
requirements. In the interests of motor vehicle safety and
emission control, American Honda agrees to provide to Dealer,
and Dealer to American Honda, such information and assistance
as may reasonably be requested by the other in connection with
the performance of obligations imposed on either party by the
National Traffic and Motor Vehicle Safety Act of 1966 and the
Federal Clean Air Act, as amended, and the rules and
regulations issued thereunder, and all other applicable
federal, state and local motor vehicle safety and emission
control requirements.
3.8. Dealer agrees to conduct a used vehicle operation at or in
connection with the Dealership Premises, to the extent
reasonably required to enhance the opportunity for sales of
Honda Automobiles.
3.9. American Honda and Dealer recognize that it may be necessary
for American Honda to formulate new or different policies or
directives to meet new or changing technology, laws or
circumstances. In the operation of Dealer's business and in
the sale and promotion of Honda Products, in rendering service
and in all other activities of the Dealership Operations,
Dealer will follow all reasonable directives, suggestions and
policies of American Honda. All written directives,
suggestions and policies of American Honda contained in any of
its bulletins or manuals, which are in effect as of the date
of the Agreement or are issued thereafter, will be deemed a
part of the Agreement.
3.10. Dealer agrees that it will, at all times, maintain in effect
all licenses required for Dealership Operations and for the
Dealership Premises.
3.11. Dealer agrees that it will comply with all laws, rules,
regulations and guides relating to the conduct of its
business.
3.12. Dealer agrees that it will perform any and all warranty,
recall, product improvement or product update service in
compliance with instructions and directives issued by American
Honda, regardless of where the Honda Product involved was
purchased. To protect and maintain the goodwill and reputation
of Honda Products and the Honda Trademarks, Dealer agrees that
it will not charge any customer for warranty service or any
work done in connection with such warranty, recall, product
improvement or update or any other service as to which Dealer
is reimbursed by American Honda.
3.13. Dealer fully understands that the success of its Dealership
Operations depends to a great extent upon the amount of net
working capital, owner's equity, flooring and lines of credit
which Dealer maintains. Accordingly, for the benefit of both
American Honda and Dealer, Dealer agrees that it will, at all
times, pay for Honda Products promptly and, to do so, maintain
its minimum net working capital, owner's equity, flooring and
lines of credit in the amounts specified in Paragraph G of the
Agreement. American Honda will have the right, reasonably, to
specify an increased amount of minimum net working capital,
owner's equity, flooring, or lines of credit to be used in
Dealership Operations and Dealer agrees promptly to establish
and maintain the increased amount. Dealer and
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American Honda agree to execute such new documents as American
Honda may reasonably require to evidence revised capital
requirements.
3.14. Dealer agrees to assume the defense of American Honda and to
indemnify American Honda against any money judgment, less any
offset recovered by American Honda, in any lawsuit naming
American Honda as a defendant where such lawsuit relates to:
(a) an alleged failure by Dealer to comply, in whole or in
part, with any obligation assumed by Dealer pursuant to the
Agreement, (b) Dealer's alleged negligent or improper
repairing or servicing of Honda Products, or such other motor
vehicles or equipment as may be sold or serviced by Dealer,
(c) Dealer's alleged breach of any contract between Dealer and
Dealer's customer, or (d) Dealer's alleged misrepresentation
or misleading statement, either direct or indirect, to any
customer of Dealer. American Honda may, at its sole option and
at its expense, participate in defending any such lawsuit.
4. WARRANTY.
4.1. Dealer understands and agrees that the only warranties that
will be applicable to Honda Products will be such written
warranty or warranties as may be furnished by American Honda.
Except for its express liability under such written
warranties, American Honda neither assumes nor authorizes any
other person or party to assume for it any other obligation or
liability in connection with any Honda Product or component
thereof.
4.2. Dealer agrees that it will expressly incorporate any warranty
furnished by American Honda with a Honda Automobile as a part
of each order form or other contract for the sale of such
Honda Automobile by Dealer to any buyer. Dealer further agrees
that it will deliver to the buyer of all Honda Products, at
the time of delivery of such Honda Products, copies of such
applicable warranties as may be furnished by American Honda.
Dealer agrees to abide by and implement in all other respects
American Honda's warranty procedures in effect at the time of
Dealer's sale.
5. ADVERTISING AND PROMOTIONAL PROGRAMS.
5.1. Dealer agrees to develop and actively utilize programs for the
advertisement and promotion of Honda Products and its servicing of such
products. Such programs will include the prominent display and use or
demonstration of Honda Automobiles. Dealer further agrees to cooperate
with all reasonable promotional programs developed by American Honda
5.2. Dealer agrees that it will not advertise, promote or trade in Honda
Products or the servicing thereof in such a manner as to injure or be
detrimental to the goodwill and reputation of American Honda and the
Honda Trademarks. Dealer further agrees that it will not publish or
otherwise disseminate any advertisement or announcement or use any
form or media of advertising which is objectionable to American Honda.
Dealer agrees to discontinue immediately any advertisement or form of
advertising deemed objectionable upon request of American Honda.
5.3. Subject to applicable federal, state or local ordinances, regulations
and statutes, Dealer agrees to erect and maintain, at the Dealership
Location, at Dealer's expense, authorized product and service signs of
types required by American Honda, as well as such other authorized
signs as are necessary to advertise the Dealership Operations
effectively and as are required by American Honda.
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6. TRADEMARKS AND SERVICE MARKS.
6.1. Dealer agrees that American Honda has the exclusive right to
use and to control the use of the Honda Trademarks and but for
the right and license granted by Paragraph 6.2 hereof to use
and display the Honda Trademarks, Dealer would have no right
to use the same.
6.2. Dealer is hereby granted the nonexclusive right and license to
use and display the Honda Trademarks at the Dealership
Premises. Such use or display is limited to that which is
necessary in connection with the sale, offering for sale and
servicing of Honda Products at retail at the Dealership
Location. Dealer agrees that it will promptly discontinue the
use of any of the Honda Trademarks or change the manner in
which any of the Honda Trademarks is used when requested to do
so by American Honda.
6.3. American Honda and Dealer recognize that Dealer is free to
sell Honda Products to customers wherever they may be located.
However, in order that American Honda may establish and
maintain an effective network of authorized dealers for the
sale and service of Honda Products, Dealer specifically agrees
that it will not display Honda Trademarks, or, either directly
or indirectly, establish any place or places of business for
the conduct of any of its Dealership Operations except at the
locations and for the purpose described in Paragraph E of the
Agreement without the prior written approval of American
Honda. Dealer further agrees that the rights and license
granted by Paragraph 6.2 hereof will be automatically canceled
upon a change in the location of the Dealership Location
unless such change in location was previously approved in
writing by American Honda. Dealer further agrees that such
right and license terminates with the termination of the
Agreement.
6.4. If Dealer refuses or neglects to keep and perform its
obligations assumed under this Article 6 or under paragraph
10.3 hereof, Dealer will reimburse American Honda for all
costs, attorneys' fees and other expenses incurred by American
Honda in connection with any action to require Dealer to
comply therewith.
7. GENERAL BUSINESS REQUIREMENTS.
7.1. It is to the mutual benefit of Dealer and American Honda that
uniform accounting systems and practices be maintained by
authorized dealers. Accordingly, Dealer agrees to maintain
such systems and practices as are required by American Honda.
In the event Dealer engages in the sale of any other product,
Dealer agrees to maintain and keep separate records and books
relating to the sale and servicing of Honda Products.
7.2. Dealer agrees to furnish monthly to American Honda, on or
before the times designated by American Honda, on forms
prescribed by American Honda, a complete and accurate
financial and operating statement covering the preceding month
and calendar-year-to-date operations and showing the true and
accurate condition of Dealership Operations. Financial
statements and other business information furnished to
American Honda will not be submitted to any third party unless
authorized by Dealer or required by law, or the information is
pertinent to a proceeding in which American Honda and Dealer
are parties.
7.3. Dealer agrees to keep complete and current records regarding
the sale and servicing of Honda Products and to prepare for
American Honda such reports, based on those records, as
American Honda may reasonably request. In order that policies
and procedures relating to the applications for reimbursement
for
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warranty and other applicable work and for other credits or
reimbursements may be applied uniformly to all authorized
dealers, Dealer agrees to prepare, keep current and retain
records in support of requests for reimbursement or credit in
accordance with policies and procedures designated by American
Honda.
7.4. Dealer agrees to permit, during reasonable business hours,
American Honda, or its designee, to examine, audit, reproduce
and take copies of all reports, accounts and records
pertaining to the sale, servicing and inventorying of Honda
Products, including, but not limited to, records in support of
claims for reimbursement or credit from American Honda, and
with the prior approval of Dealer, which approval will not be
unreasonably withheld, to interview Dealer employees with
respect thereto.
7.5. Dealer agrees that Dealership Operations will be conducted in
the normal course of business during and for not less than the
days of the week and hours of the day customary for automobile
dealerships in the Primary Market Area.
7.6. Dealer agrees and understands that any retail price which may
be suggested by American Honda is merely a suggested price,
and Dealer has no obligation to sell any Honda Products at
such price. Dealer further understands and agrees that it is
the sole judge of the price at which it sells Honda Products
and the price it charges others for service, subject only to
applicable local, state and federal laws, rules and
regulations.
*7.7. Dealer understands and agrees that it will be responsible for
and will pay any and all taxes, whether sales, use or excise,
and all other governmental or municipal charges imposed upon
the sale of Honda Products by American Honda to Dealer and
will maintain accurate records of the same, which records will
be available to American Honda, or its designee, during
regular business hours for inspection.
7.8. Dealer understands and agrees that, while it has
responsibility for the promotion and retail sale and servicing
of Honda Products within the Primary Market Area, it has no
territorial exclusivity. Further, American Honda reserves the
right, based upon reasonable criteria, to appoint other
authorized dealers of Honda Products in the Primary Market
Area.
8. APPOINTMENT OF SUCCESSOR AND REPLACEMENT DEALERS.
8.1. The parties recognize that Honda Products are marketed through
a system of authorized dealers developed by American Honda and
that customers and American Honda have a vital interest in the
preservation and efficient operation of the system. American
Honda has the responsibility of continuing to administer the
system and of selecting the most suitable dealer candidate in
each circumstance. Accordingly, Dealer agrees that American
Honda has the right to select each successor and replacement
dealer and to approve its owners and principal management and
the location of dealership facilities. Further, Dealer agrees
to provide written notice to American Honda of any potential
change in the involvement, ownership or management specified
in Paragraphs C and D of the Agreement. No change affecting
such involvement, ownership or management will be made
without the prior written approval of American Honda, which
approval will not be unreasonably withheld.
8.2. Upon Dealer's request, American Honda will execute with Dealer
a Successor Addendum designating proposed Dealer operators or
owners of a successor
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dealer to be established if the Agreement expires or is
terminated because of death or incapacity. The request must be
executed by all persons identified in Paragraph C of the
Agreement and all proposed dealer operators or owners and be
submitted to American Honda prior to such death or incapacity;
provided that such proposed dealer operators or owners must be
acceptable to American Honda.
8.3. Dealer, but not American Honda, may cancel any executed
Successor Addendum. If American Honda notifies Dealer that it
does not plan to permit Dealership Operations to continue at
the Dealership Location, American Honda shall have no
obligation to execute a new Successor Addendum.
8.4. If the Agreement expires or is terminated because of death or
incapacity and Dealer and American Honda have not executed a
Successor Addendum, the remaining owners, successors or heirs
may propose a successor dealer entity to continue Dealership
Operations at the Dealership Location. Such proposal must be
made within thirty days of the event causing expiration or
termination by submitting a written proposal to American
Honda. Such proposal will be accepted by American Honda if it
does not introduce new owners or if the proposed new owners
are acceptable to American Honda.
8.5. Any successor dealer entity approved by American Honda
pursuant to this Article 8 must establish that it can conduct
Dealership Operations in an efficient and businesslike manner.
Such successor dealer entity will have one year to meet
reasonable performance criteria established from time to time
by American Honda. In the event such successor dealer entity
fails to meet those criteria, such failure will be separate
grounds for termination of the Agreement.
9. TERMINATION OF AGREEMENT.
9.1. The Agreement may be terminated, at any time, by mutual
agreement of American Honda and Dealer.
9.2. Dealer may terminate the Agreement, at any time, by giving
American Honda notice of such termination. Such termination
shall be effective upon the date specified by Dealer, or if no
date is specified, then upon receipt by American Honda of such
notice.
9.3. American Honda may terminate the Agreement, at any time, by
serving on Dealer a written notice of such termination by
certified or registered mail to Dealer at the Dealership
Premises. Subject to other provisions of the Agreement,
termination will be effective ninety (90) days after mailing
of such notice to dealer or such longer period as American
Honda may specify; provided, however, that termination will be
effective ten (10) days after mailing if for an occurrence of
any circumstance referred to in Paragraphs 9.4.A, 9.4.B, 9.4.J
or 9.4.M hereof.
9.4. It is recognized that each of the following grounds is within
control of Dealer or originates from action taken by Dealer or
its employee(s) and is contrary to the spirit and objectives
of the Agreement. Therefore, American Honda may terminate the
Agreement upon the occurrence of any of the following:
9.4.A Failure by Dealer to secure and continuously maintain
any license necessary for the conduct by Dealer of
its business pursuant to the Agreement or the
termination or expiration without renewal, or
suspension or revocation of any such license for any
reason whatsoever, whether or not license is
reinstated.
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9.4.B. Any change, transfer or attempted transfer by Dealer
or any Dealer Owner, voluntarily or by operation of
law, of the whole or any part of the Agreement or any
interest or legal or beneficial ownership therein or
any right or obligation thereunder, directly or
indirectly, such as, for example only, by way of a
sale of an underlying ownership interest in Dealer or
the Dealership Premises or a change in the persons
having control or managerial authority, without prior
written consent of American Honda. Any purported
change, transfer or assignment shall be null and void
and not binding on American Honda.
9.4.C. Any dispute, disagreement, controversy or personal
difficulty between or among Dealer Owners or in the
management of Dealer which, in American Honda's
opinion, may adversely affect the conduct of Dealer's
business, or the presence in the management of Dealer
of any person who, in American Honda's opinion, does
not have or no longer has requisite qualifications
for his position.
9.4.D. Impairment of the reputation or the financial
standing of Dealer or of any Dealer Owner subsequent
to the execution of the Agreement; or the
ascertainment by American Honda of any facts existing
at or prior to execution of the Agreement which tend
to impair such reputation or financial standings; or
the failure of Dealer continuously to meet American
Honda's minimum requirements of net working capital,
owner's equity or line(s) of credit.
9.4.E. Failure by Dealer to pay, within ten (10) days after
written demand from American Honda, any delinquent
accounts or other monies due to American Honda from
Dealer.
9.4.F. Submission or participation in the submission to
American Honda of any false or fraudulent statement,
application, report, request for issuance of
reimbursement, compensation, refund or credit,
including but not limited to any false or fraudulent
claim for warranty work, labor rate, set-up
reimbursement or warranty coverage.
9.4.G. Use by Dealer of any deceptive or fraudulent
practice, whether willful, negligent or otherwise, in
the sale of any Honda Product.
9.4.H. Any conviction in any court of original jurisdiction
of Dealer or any Dealer Owner or any employee of the
Dealership Operations for any crime or violation of
any law if, in the opinion of American Honda, such
conviction or violation may adversely affect the
conduct of the Dealership Operations or tend to be
harmful to the goodwill of American Honda or to the
reputation of Honda Products or the Honda Trademarks,
or the violation or refusal or neglect of Dealer to
comply with the provisions of the National Traffic
and Motor Vehicle Safety Act of 1966, as amended, or
the Clean Air Act, or any rules, regulations or
standards under either of said Acts, including but
not limited to performance of any product update or
recall operation as directed by American Honda.
9.4.I. Dealer's entering into any agreement, combination,
understanding or contract, oral or written, with any
other corporation, person, firm or other legal entity
for the purpose of fixing prices of Honda Products or
otherwise violating any law.
9.4.J. Dealers abandonment of Dealership Premises or failure
to maintain Dealership Operations as a going
business, open during customary
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business hours for the days and hours as are
customary for automobile dealerships in the Primary
Market Area, provided such failure is not due to
causes beyond Dealer's control. Failure of the
Dealership Premises to remain open for seven (7)
consecutive days will constitute, without more, such
abandonment.
9.4.K. Death or incapacity of any Dealer Owner or Dealer
Manager, subject to the provisions of Article 8.
9.4.L. Failure of Dealer to make improvements, alterations
or modifications of its Dealership Premises which are
required to meet reasonable facility requirements of
American Honda or which Dealer has agreed or
represented to American Honda that Dealer will make
or do.
9.4.M. The movement of Dealership Premises to a new location
or the establishment of an additional location for
the sale or service of any Honda Products without the
prior written approval of American Honda.
9.4.N. The failure of Dealer to provide adequate
representation, promotion, sales or service,
including warranty work, of any Honda Products.
9.4.O. Dealer's breach of any provision of the Agreement or
Dealer's failure to comply with any contained in the
Agreement.
9.5. The Agreement will also be terminated upon written notice by
American Honda in the event:
9.5.A. Of termination of American Honda's distribution
agreement as a Honda Automobile distributor.
9.5.B. Of withdrawal by American Honda from the market in
which Dealer is located.
9.5.C. American Honda will, for any reason, discontinue the
distribution of Honda Automobiles.
9.6. Upon the occurrence of any of the following facts or
circumstances, the Agreement will terminate automatically,
without notice or other action by American Honda or Dealer;
and upon such termination, any dealings between American Honda
and dealer will be on a day-to-day basis at the sole option of
American Honda and may be discontinued at any time by American
Honda:
9.6.A. Insolvency by any definition of Dealer; or
9.6.B. The existence of facts or circumstances which would
allow the voluntary commencement by Dealer, or the
involuntary commencement against Dealer, of any
proceedings under any bankruptcy act or law or under
any state insolvency law; or
9.6.C. The appointment of a receiver or other officer having
similar powers for Dealer or the Dealership Premises;
or
9.6.D. Any levy against Dealer under attachment, garnishment
or execution or similar process which is not within
ten (10) days vacated or removed by payment or
bonding.
9.7. American Honda may select any applicable provision under which
it elects to terminate the Agreement and give notice
thereunder, notwithstanding the
11
<PAGE> 17
existence of any other grounds for termination or the failure
to refer to such other grounds in the notice of termination.
The failure by American Honda to specify additional ground(s)
for cancellation in its notice will not preclude American
Honda from later establishing that termination is also
supported by such additional ground(s).
9.8. The acceptance by American Honda of orders from Dealer or the
continued sale of Honda Products to Dealer or any other act or
course of dealing of American Honda after termination of the
Agreement will not be construed as or deemed to be a renewal
of the Agreement for any further term or a waiver of such
termination. Any dealings after termination will be on a
day-to-day basis.
9.9. In all cases, Dealer agrees to conduct itself and Dealership
Operations until the effective date of termination and after
termination or expiration of the Agreement, so as not to
injure the reputation or goodwill of the Honda Trademarks or
American Honda.
10. RIGHTS, OBLIGATIONS AND DEALINGS UPON TERMINATION.
10.1. Upon the mailing of a written notice of termination or after
date of the expiration of the Agreement without renewal,
American Honda will have the right to cancel all pending
orders of Dealer for Honda Products, special tools and
equipment, whether previously accepted by American Honda or
not, except as specifically otherwise provided in this Section
10. Notwithstanding the foregoing, if American Honda chooses
to fill any orders, it will not be obligated to fill any other
orders and will not be precluded from changing the terms of
any sale.
10.2 Not later than the effective date of the termination or
expiration of the Agreement, Dealer will cease to hold itself
out as being authorized to sell Honda Products and will
discontinue selling Honda Products or performing service as an
authorized dealer.
10.3. In addition to the requirements of Section 10.2, not later
than the effective date of the termination or expiration of
the Agreement, Dealer will, at its sole expense, discontinue
any and all uses of any Honda Trademarks and any words,
symbols and marks which are confusingly similar thereto; will
remove all signs bearing any Honda Trademark and will destroy
all stationery, repair orders, advertising and solicitation
materials, and all other printed matter bearing any Honda
Trademark or referring directly or indirectly to American
Honda or Honda Products in any way which might make it appear
to members of the public that Dealer is still an authorized
dealer. The foregoing will include, but not be limited to,
discontinuing the use of a Honda Trademark as part of Dealer's
business and corporate name. Dealer will also deliver to
American Honda, at American Honda's place of business, or to a
person designated by American Honda, or will destroy the same
upon request by American Honda, any and all technical or
service literature, advertising and other printed material
then in Dealer's possession which relates to Honda Products
and which was acquired or obtained by Dealer from American
Honda. Dealer will destroy any sign bearing a Honda Trademark
which has not been repurchased by American Honda.
10.4. In the event the Agreement is terminated pursuant to the
provisions of paragraph 9.3 hereof, upon request of American
Honda for copying Dealer's records of predelivery service,
warranty service, recall or update service or other service of
Honda Products. In the event the Agreement is terminated
pursuant to the provisions of paragraphs 9.1 or 9.2 hereof,
upon the request of
12
<PAGE> 18
American Honda, Dealer will deliver to American Honda copies
of such Dealer records.
10.5. Dealer may, at any time within five (5) days after the
effective date of termination or expiration of the Agreement,
notify American Honda in writing of Dealer's desire to have
American Honda repurchase from Dealer Honda Products in
Dealer's inventory which were purchased from American Honda
and which, when American Honda accepts sole possession:
10.5.A. In the case of Honda Automobiles, are new and of the
then current model year, as designated by American
Honda, unused, undamaged and in first class resalable
condition, regardless of whether or not American
Honda has exercised its right of inspection; and
10.5.B. In the case of Honda Parts are new, listed as current
in the Parts Price Book, unused, undamaged, in their
original package and in first-class resalable
condition.
10.6. Upon termination or expiration without renewal, upon request
of Dealer given no later than five (5) days after the
effective date of termination or expiration, American Honda
will repurchase all signs which use a Honda Trademark as were
authorized in advance by American Honda and all service
information and materials, special tools and equipment
designed specifically for service of Honda Automobiles and
which were purchased from American Honda and are usable on
current Honda Products, provided that such signs, information,
materials, tools and equipment are less than five (5) years
old and are in good working order.
10.7. American Honda will repurchase from Dealer Honda Products and
signs, information, materials, tools and equipment as
aforesaid on the condition that Dealer furnishes an inventory
to American Honda within thirty (30) day after the termination
or expiration without renewal of the Agreement and complies
strictly with all procedures and conditions of repurchase
issued by American Honda at the time of repurchase. American
Honda will have the right and option to assign to another
person or entity the right to purchase such Honda Products.
10.7.A. The price for Honda Products, other than tools,
equipment, information, materials and signs, will be
the price at which they were originally purchased by
Dealer from American Honda or the price last
established by American Honda for the sale of
identical Honda Products, whichever may be lower, and
in either case will be less all prior refunds and
allowances made by American Honda with respect
thereto, if any. The price for tools, equipment,
information, materials and signs will be the price
paid by Dealer reduced by straight-line depreciation
on the basis of a useful life of five (5) years. In
all cases, the price will be reduced by any
applicable restocking charge which may be in effect
at the time American Honda's receipt of goods to be
repurchased.
10.7.B. Dealer agrees to store Honda Products and other items
which American Honda desires or is obligated to
repurchase until receipt from American Honda of
rejection of repurchase or instructions for shipping
and return to American Honda. Dealer agrees to
strictly follow and abide by all instructions for
return as may be issued from time to time by American
Honda. All Honda Products will be properly and
suitably packaged and containered for safe
transportation to American Honda. All damage,
regardless of nature or cause, will be the
responsibility of Dealer until the Honda Products are
inspected and accepted by
13
<PAGE> 19
American Honda for repurchase. Storage of such Honda
Products and other items will be at Dealer's expense
for a period of ninety (90) days after Dealer
requests repurchase and provides an inventory as
provided by paragraphs 10.6 and 10.7 hereof.
Thereafter, Dealer will be entitled to charge
American Honda a reasonable storage charge.
10.7.C. American Honda, or its designee, at such reasonable
time and for such a reasonable period of time as
American Honda may determine, will have the right to
enter the premises where items for repurchase are
being held for the purpose of checking the inventory
submitted by Dealer or examining, inspecting and
inventorying any and all Honda Products. If American
Honda agrees to repurchase and Dealer fails to
furnish an inventory, Dealer will reimburse American
Honda for all costs of American Honda taking an
inventory.
10.7.D. Only those Honda Products meeting the requirements of
Paragraphs 10.5 and 10.6 hereof are or will be
eligible for return to American Honda. American Honda
will not be obligated to give Dealer credit for any
Honda Products which do not meet those requirements.
10.7.E. Dealer warrants and represents that all Honda
Products tendered to American Honda for repurchase
will be free of all liens, encumbrances, security
interests or attachments at the time repurchase is
requested by Dealer. Clear title will be vested in
American Honda upon receipt of goods. Dealer will
execute and deliver any documents necessary to vest
clear title in American Honda, and Dealer will be
responsible for complying with all applicable
procedures, including but not limited to those
relating to bulk transfers.
10.7.F. Dealer will pay all freight and insurance charges
from Dealer to the place of delivery designated by
American Honda, provided that Dealer will not be
liable for any amount greater than the freight and
insurance charges from Dealer to American Honda's
closest automobile warehouse or parts center as
American Honda may designate. Claims for damage or
allegedly caused by any carrier will be the sole
responsibility of Dealer, and in no event will
American Honda be obligated to make a claim against a
carrier or be liable to Dealer for damage.
10.7.G. As a condition of repurchase and notwithstanding any
other agreement or offer to repurchase, payment for
repurchase will first be applied against any
obligations or money owed by Dealer to American
Honda. All payment due from American Honda to Dealer
pursuant to any provisions of the Agreement or in
connection with the termination of the Agreement or
in connection with the termination of the Agreement
will be made by American Honda after receipt of the
goods to be repurchased and after all debits and
credits have been ascertained and applied to Dealer's
accounts, and Dealer has delivered to American Honda
the manufacturer's certificate of origin or other
document of title for Honda Automobiles tendered to
American Honda for repurchase. In the event it be
found that a balance is due from Dealer to American
Honda, Dealer will pay such sum to American Honda
within ten (10) days of written notice of such
balance.
14
<PAGE> 20
11. GENERAL PROVISIONS.
11.1. Dealer acknowledges that only the President or a designated
Vice President, Secretary or Assistant Secretary of American
Honda is authorized to execute the Agreement, agree to any
variation, modification or amendment of any of the provisions
thereof, including authorized location, or to make commitments
for or on behalf of American Honda. No other employee of
American Honda may make any promise or commitment on behalf of
American Honda or in any way bind American Honda. Dealer
agrees that it will not rely on any statements or purported
statements except from personnel as authorized hereinabove.
11.2. The Agreement contains the entire agreement between Dealer and
American Honda. Dealer acknowledges that no representations or
statements other than those expressly set forth therein were
made by American Honda or any officer, employee, agent or
representative thereof, or were relied upon by Dealer in
entering into the Agreement. The Agreement terminates and
supersedes, as of the execution thereof, all prior agreements
relating to Honda Products, if any.
11.3. Dealer hereby waives, abandons and relinquishes any and all
claims of any kind and nature whatsoever arising from or out
of or in connection with any prior agreement entered into
between Dealer and American Honda; provided, however, that
nothing herein contained shall be deemed a release or waiver
of any claim arising out of prior sales of Honda Products by
American Honda to Dealer.
11.4. The Agreement is personal to the individuals identified as
principals, owner(s), partners or shareholder(s) in Paragraph
C. Neither the Agreement, nor any part hereof or any interest
therein, may be transferred or assigned by Dealer, in whole or
in part, directly or indirectly, voluntarily or by operation
of law, without the prior written approval of American Honda.
Any attempted transfer or assignment will be void and not
binding upon American Honda
11.5. All notices, notifications or requests under or pursuant to
the provisions of the Agreement will be directed to the
address of the principal places of business of the respective
parties to the Agreement. If either party cannot effect notice
at the place of business of the other because a party has
abandoned its place of business or refuses to accept notice,
then, and only in such case, notice may be served on American
Honda through its designated agent for service of process and
upon Dealer through the Department of Motor Vehicles (or its
equivalent) in the state where the Dealership Location is
authorized by American Honda.
11.6. The waiver by either party of any breach or violation of or
default under any provision of the Agreement will not be a
waiver by such party of any other provision or of any
subsequent breach or violation thereof or default thereunder.
The failure or delay of either party to take prompt action
upon any breach or violation of the Agreement will not be
deemed a waiver of the right to take action for such breach,
default or violation at any time in the future.
11.7. Dealer agrees to keep confidential and not disclose, directly
or indirectly, any information which American Honda designates
as confidential.
11.8. The Agreement is and shall be deemed to have been entered into
in California and shall be governed by and construed in
accordance with the laws of the State of California.
15
<PAGE> 21
11.9. If any provision of this Agreement should be held invalid or
unenforceable for any reason whatsoever or to conflict with
any applicable law, the Agreement will be considered
divisible as to such provisions, and such provisions will be
deemed amended to comply with such law, or if it cannot be so
amended without materially altering the tenor of the
Agreement, then it will be deemed deleted from the Agreement
in such jurisdiction, and in either case, the remainder of
the Agreement will be valid and binding.
11.10. The terms of the Agreement may not be modified except in
writing signed by an authorized officer of the parties.
Without limiting the generality of the foregoing, no course of
dealing will serve to modify or alter the terms of the
Agreement.
11.11. Dealer is an independent business. The Agreement does not
constitute Dealer the agent or legal representative of
American Honda for any purpose whatsoever. Dealer is not
granted any expressed or implied right or authority to assume
or create any obligation on behalf of or in the name of
American Honda or to bind American Honda in any manner or
thing whatsoever. Dealer has paid no consideration for the
Agreement. Neither the Agreement nor any right granted under
it is a property right.
11.12. The expiration or termination of the Agreement will not
extinguish any claims American Honda may have for the
collection of money or the enforcement of any obligations
which may be in the nature of continuing obligations.
16
<PAGE> 22
12. DEFINITIONS.
12.1. American Honda means American Honda Motor Co., Inc. a
California corporation, and the Honda Automobile Division that
markets Honda Automobiles.
12.2. Dealer means the person, firm, corporation, partnership or
other legal entity that signs the Agreement and each of the
persons identified in Paragraph C.
12.3. Dealer Manager means the principal manager of Dealer
identified in Paragraph D upon whose personal service American
Honda relies in entering into the Agreement.
12.4. Dealer Owner means the owner(s) of Dealer identified in
Paragraph C upon whose personal service American Honda relies
in entering into the Agreement.
12.5. Dealership Location means the location approved by American
Honda for the purpose of conducting Dealership Operations.
12.6. Dealership Operations means all operations contemplated by the
Agreement. These operations include the sale and service of
Honda Products, and any other activities undertaken by Dealer
related to Honda Products, including rental and leasing
operations, used car sales and body shop operations, and
finance and insurance operations, whether conducted directly
or indirectly by Dealer.
12.7. Dealership Premises means the facilities provided by Dealer at
its Dealership Location for the conduct of Dealership
Operations as approved by American Honda.
12.8. Honda Automobiles means such new passenger cars as are from
time to time offered for sale by American Honda to Dealer for
resale as part of the Honda automobile line as defined by
American Honda.
12.9. Honda Parts means parts, accessories and optional equipment
marketed by American Honda for use with Honda Automobiles.
12.10. Honda Products means Honda Automobiles and Honda Parts.
12.11. Honda Trademarks means the various trademarks, service marks,
names and designs which American Honda uses or is authorized
to use in connection with Honda Products or services relating
thereto.
12.12. Primary Market Area means the geographical area designated for
Dealer by American Honda from time to time.
12.13. The Agreement means the Honda Automobile Dealer's Sales and
Service Agreement and these Standard Provisions which are
incorporated therein by reference.
17
<PAGE> 1
[MITSUBISHI LOGO]
- ------------------------------------------------------------------------------
DEALER SALES AND SERVICE AGREEMENT
- ------------------------------------------------------------------------------
THIS AGREEMENT is made and entered into by and between MITSUBISHI MOTOR SALES OF
AMERICA, INC. a California corporation, with headquarters at 6400 Katella
Avenue, Cypress, California 90630 (hereinafter referred to as "MMSA"), and
Boomershine North Cobb, Inc.
- ------------------------------------------------------------------------------
(Name of Dealer)
<TABLE>
<S> <C> <C> <C>
a Georgia Corporation X, Partnership , Individual ,
---------------- -------- --------- ----------
doing business as Boomershine Mitsubishi
------------------------------------------------------------------
(Name)
at 964 Ernest Barrett Parkway Kennesaw,
-------------------------------------------------- ---------------------------
(Number and Street) (City)
Cobb County, Georgia 30144
- -------------------------------------- -----------------------------------
(County) (State)
</TABLE>
(hereinafter referred to as "DEALER").
1. BASIS OF AGREEMENT
This Agreement provides for the nonexclusive right of DEALER to sell and
service motor vehicles which are listed on the most recent MMSA Product List as
issued by MMSA from time to time, and related parts, accessories and options
distributed in the United States by MMSA. DEALER acknowledges that Mitsubishi
Motors Corporation and other manufacturers supplying motor vehicles to MMSA
may now or in the future distribute motor vehicles or related products in the
United States through distributors other than MMSA, and that entering into this
Agreement confers no rights or benefits upon DEALER with respect to the sale or
servicing of such motor vehicles or products.
2. TERM
This Agreement shall continue in effect for a period of three (3) years
from its effective date, unless earlier terminated by DEALER pursuant to
Section X.A. of the accompanying MMSA Dealer Sales and Service Agreement
Standard Provisions (hereinafter referred to as the ("Standard Provisions") or
earlier terminated by MMSA pursuant to Section X.B. of the Standard
Provisions. Unless earlier terminated by MMSA or DEALER, MMSA shall, not less
than three (3) months prior to the expiration of this Agreement, conduct an
evaluation of DEALER'S performance to determine whether DEALER qualifies for
renewal of this Agreement for an additional three (3) year term. Criteria
considered in such evaluation shall be as set forth in the Dealer Development
Plan then in effect for DEALER. If MMSA determines that DEALER qualifies for
renewal of its MMSA dealership, DEALER and MMSA shall execute an MMSA Dealer
Sales and Service Agreement in the form then used by MMSA, which agreement will
include similar provisions for further re-qualification and renewal.
If, at any time, MMSA determines that a different or revised form of sales
and service agreement would better serve the interests of the parties, MMSA
may, upon a minimum of thirty (30) days' notice to DEALER, terminate this
Agreement and offer the new or amended form of agreement to DEALER in its
stead. DEALER must accept the new or amended form of agreement within thirty
(30) days of receipt thereof.
1
<PAGE> 2
3. OWNERSHIP OF DEALER
MMSA and DEALER recognize that the ability of DEALER to satisfactorily
perform this Agreement is conditioned upon the continued active involvement in
and/or ownership of DEALER by the following person(s) in the percentage(s)
shown (hereinafter referred to as the "Owners"):
<TABLE>
<CAPTION>
Involvement
Percentage in Management
Name Title of (Active or Inactive)
---- ----- Ownership --------------------
-----------
<S> <C> <C> <C>
Boomershine Automotive Group, Inc. Holding Company 100%
- -----------------------------------------------------------------------------------------------
Walter M. Boomershine, Jr. President Active
- -----------------------------------------------------------------------------------------------
Stephen C. Whicker Assistant Secretary Inactive
- -----------------------------------------------------------------------------------------------
Charles K. Yancey Secretary/Treasurer Active
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
This Agreement has been entered into by MMSA in reliance upon, and in
consideration of, the personal qualifications and representations of the
above-named Owners. Accordingly, except as otherwise provided herein, no
change in the active involvement in DEALER'S management by the Owners and no
change in the ownership of DEALER by the Owners which results in a change in
majority control or interest shall be permitted by DEALER or any Owner without
the prior written approval of MMSA, which approval shall not be unreasonably
withheld.
4. MANAGEMENT OF DEALER
DEALER represents that Charles K. Yancey exercises the functions of
general manager and Walter M. Boomershine, Jr. exercises the functions of
Dealer Principal (hereinafter referred to as the "Executive Managers") of its
MMSA dealership and that each has complete authority to make all decisions on
behalf of DEALER with respect to the dealership operations.
MMSA has entered into this Agreement in reliance upon, and in
consideration of, the personal qualifications and representations of the
above-named Executive Managers. Accordingly, DEALER agrees that there shall be
no change in the Executive Managers without MMSA's prior written consent.
DEALER shall give MMSA prior written notice of any proposed change in Executive
Managers (including the name and qualifications of the person proposed to be
appointed as a replacement Executive Manager) and MMSA shall have the right, in
its sole and reasonable discretion, to determine whether the proposed candidate
possesses the requisite qualifications and experience for this position.
5. SALES LOCALITY
Subject to and in accordance with the terms and conditions hereof, MMSA
has established the following Sales Locality as the non-exclusive, primary area
of responsibility for DEALER'S promotion and sale of MMSA Products.
City of: Kennesaw
-----------------------------------------------------------------------
County or Parish of Cobb State of Georgia
------------------------- --------------------------
Except as may be otherwise required by applicable law, MMSA reserves the
right to sell and/or lease MMSA Products to others (including, without
limitation, public or private fleet purchasers and employees of MMSA or its
affiliates) and to enter into MMSA Dealer Sales and Service Agreements with
others and without the Sales Locality. MMSA and DEALER agree that additional
MMSA Dealers may be appointed in or near the Sales Locality when MMSA
determines, in accordance with applicable law, that additional MMSA sales and
service facilities are warranted.
Agreement Date NOV 27 1995 [MITSUBISHI LOGO] 2
--------------
<PAGE> 3
6. DEALERSHIP PREMISES
MMSA has approved the following premises as the location of DEALER'S MMSA
sales and service operations (hereinafter referred to as the "Dealership
Premises").
MMSA NEW VEHICLE SALES FACILITIES
964 Ernest Barrett Parkway
- -------------------------------------------------------------------------------
Kennesaw, Georgia 30144
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PARTS AND SERVICE FACILITIES
964 Ernest Barrett Parkway
- -------------------------------------------------------------------------------
Kennesaw, Georgia 30144
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SALES AND GENERAL OFFICES
964 Ernest Barrett Parkway
- -------------------------------------------------------------------------------
Kennesaw, Georgia 30144
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
USED VEHICLE DISPLAY AND SALES FACILITIES
964 Ernest Barrett Parkway
- -------------------------------------------------------------------------------
Kennesaw, Georgia 30144
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
STORAGE FACILITIES
964 Ernest Barrett Parkway
- -------------------------------------------------------------------------------
Kennesaw, Georgia 30144
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[MITSUBISHI LOGO]
Agreement Date NOV 27, 1995 3
<PAGE> 4
BODY AND PAINT FACILITIES
N/A
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
OTHER
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
MMSA and DEALER recognize that DEALER may sell MMSA Products to customers
wherever they may be located. However, in order that MMSA may establish and
maintain an effective network of MMSA Dealers for the sale and servicing of
MMSA Products, DEALER specifically agrees that, without the prior written
approval of MMSA, it shall not display MMSA Trademarks or, either directly or
indirectly, establish any place or places of business for the conduct of any of
its MMSA dealership operations, except on the Dealership Premises in the manner
and for the purposes described above.
DEALER shall maintain all requirements and conditions of this MMSA Dealer
Sales and Service Agreement as outlined in DEALER'S most recent Dealer
Development Plan, including but not limited to exclusive facility, management
and capital requirements.
7. LICENSES
DEALER agrees to secure and maintain all licenses required for the
operation of its business as contemplated by this Agreement in any state or
jurisdiction where its MMSA dealership operations are to be conducted. If any
such license or licenses are required, this Agreement shall not become
effective, unless and until all such required licenses have been obtained and
DEALER furnishes MMSA with a copy of all such licenses together with written
notice specifying the date and number, if any, of all such licenses. DEALER
shall notify MMSA immediately in writing if DEALER fails to secure, maintain or
renew any such license. If any required license is suspended or revoked,
DEALER shall notify MMSA immediately in writing of the effective date of such
suspension or revocation.
8. SCOPE OF AGREEMENT
DEALER agrees to be bound by and comply with each and every term of this
MMSA Dealer Sales and Service Agreement, all schedules hereto, the Standard
Provisions, the Dealer Development Plan, the most recent Product List and all
Product Addenda, the Warranty Manual and all other manuals heretofore or
hereafter issued by MMSA, all modifications, extensions or renewals of any of
the foregoing, and each and every bulletin or directive heretofore or hereafter
issued to DEALER by MMSA. MMSA may from time to time deliver to DEALER a
Product Addendum setting forth special terms and conditions applicable to
particular MMSA Vehicles designated in the Product Addendum. Such special
terms and conditions shall supersede and control any inconsistent terms and
conditions in this Agreement with respect to the MMSA Vehicles designated in
the Product Addendum. Each Product Addendum shall be effective as of the date
specified in the Product Addendum and shall remain effective (1) until it is
amended or terminated by its own terms or by a new Product Addendum, (2) until
the MMSA Vehicles designated in the Product Addendum are no longer distributed
by MMSA, or (3) until termination of this Agreement.
9. DEFINITIONS
Italicized terms used herein shall have the meanings set forth in Section
II of the Standard Provisions.
10. GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California.
[MITSUBISHI LOGO]
Agreement Date Nov 27, 1995 4
<PAGE> 5
11. JURISDICTION
MMSA and DEALER agree that all litigation between MMSA and DEALER which
may arise out of or in connection with this Agreement or any transaction
between them shall be subject to the exclusive jurisdiction of the courts of
the State of California or of the federal courts sitting therein, and each
hereby consents to the jurisdiction of such courts. DEALER agrees that any and
all process directed to it in any such litigation may be served upon it outside
of California with the same force and effect as if such service had been made
within California.
12. LEGAL EFFECT
This Agreement terminates and supersedes all prior written or oral
agreements and understandings, if any, between MMSA and DEALER, except (1) any
agreements expressly referred to and incorporated herein, (2) any indebtedness
which may be owing by either MMSA or DEALER to the other, and (3) any DEALER'S
unfilled orders with MMSA for any MMSA Products placed with MMSA pursuant to
the provisions of any sales agreement terminated or superseded by this
Agreement. Except as herein otherwise provided, upon execution of this
Agreement by DEALER and in consideration of MMSA's entering into this
Agreement, DEALER releases MMSA from any and all claims, demands, contracts and
liabilities (including, but not limited to, statutory liabilities), known or
unknown, of any kind or nature whatsoever, arising from or out of or in
connection with any such prior agreements, business transactions, course of
dealing, discussions or negotiations between the parties prior to the effective
date hereof. DEALER expressly acknowledges and waives the application of
California Civil Code ss. 1542 which provides as follows: "A general release
does not extend to claims which the creditor does not know or suspect to exist
in his favor at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor."
13. NOTICES
Any notice to be given hereunder may be delivered to the party if a sole
proprietor, to a partner of the party if a partnership, or to an officer of the
party if a corporation, or may be given by sending such notice by registered or
certified mail or by telegram or tested telex addressed, if to DEALER, to its
principal office as above stated, and if to MMSA, to its headquarters as above
stated, marked "Attention President". Except as otherwise provided in this
Agreement, any notice so given shall be considered to have been given when
delivered or mailed as provided above.
14. AUTHORITY OF DEALER
If DEALER is a partnership or corporation, DEALER shall provide MMSA with
a certified copy of the partnership authorization, corporate resolution or
other document evidencing the authority of DEALER to enter into and adhere to
the terms of this Agreement.
15. VALIDITY
No representative of MMSA shall have authority, other than by a writing
signed by the President or an Executive Vice President or two Vice Presidents
of MMSA, to renew, extend or terminate this Agreement, or to amend, modify or
waive any provision of this Agreement or any performance required hereby, or to
make any agreement which imposes obligations on either MMSA or DEALER not
specifically imposed by this Agreement.
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Agreement Date Nov 27, 1995 5
<PAGE> 6
IN WITNESS OF THE FOREGOING, the parties hereto have executed this
Agreement in duplicate. THIS AGREEMENT SHALL NOT BECOME EFFECTIVE UNTIL IT HAS
BEEN SIGNED BY THE PRESIDENT OR AN EXECUTIVE VICE PRESIDENT OR TWO VICE
PRESIDENTS OF MMSA. DEALER WILL BE NOTIFIED IN WRITING BY MMSA WHEN THIS
AGREEMENT HAS BEEN SO SIGNED, WHICH NOTICE WILL SPECIFY THE EFFECTIVE DATE OF
THIS AGREEMENT.
Boomershine North Cobb, Inc.
dba Boomershine Mitsubishi
- ----------------------------------
(Dealer's Firm Name)
By /s/ Date 10/20/95
--------------------------- -------------------------
Title President
------------------------
By Date 10/20/95
--------------------------- -------------------------
Title
------------------------ /s/ C.K. Yancy
-----------------------------
MITSUBISHI MOTOR SALES OF AMERICA, INC.
By Date
--------------------------- --------------------------
(President)
OR
By Date
--------------------------- --------------------------
(Executive Vice President)
OR
By /s/ Date Nov 27 1995
--------------------------- --------------------------
(Vice President)
and
By /s/ Date Nov 27 1995
--------------------------- --------------------------
(Vice President)
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Agreement Date Nov 27 1995 6
<PAGE> 7
DEALER SALES AND SERVICE AGREEMENT
STANDARD PROVISIONS
- -------------------------------------------------------------------------------
The following Standard provisions have been made a part of and are incorporated
by reference in the Mitsubishi Motor Sales of America, Inc. Dealer Sales and
Service Agreement and shall apply to and govern the transactions, dealings, and
relations between MMSA and DEALER.
I. GENERAL OBLIGATIONS
The purpose of this Agreement is to provide for the sale and servicing of
MMSA Products in a manner that will best serve the interests of MMSA,
DEALER,other Authorized MMSA Dealers, and the owners and purchasers of
MMSA Products.
DEALER has entered into this Agreement with confidence in MMSA's integrity
and expressed intention to deal fairly with DEALER and the consuming
public of MMSA Products and services. MMSA has entered into this Agreement
with confidence in DEALER's integrity, ability and expressed intention to
deal fairly with MMSA, other Authorized MMSA Dealers and the consuming
public of MMSA Products and services and with reliance upon DEALER's
undertaking to perform and carry out the duties, obligations and
responsibilities of an Authorized MMSA Dealer as set forth in this
Agreement.
DEALER shall engage in no discourteous, deceptive, misleading or unethical
practices and shall actively promote the sale of MMSA Products. DEALER
shall give prompt, efficient and courteous service to all customers of
MMSA Products whether or not those customers purchased MMSA Products from
DEALER.
MMSA will actively assist DEALER in all aspects of DEALER'S MMSA
dealership operations. MMSA shall offer suggestions and provide materials
designed to assist DEALER and its personnel, conduct periodic annual
evaluations of DEALER'S premises, performance and facilities as described
in Section VII.B.1. hereof, and provide special training programs for the
active participation of DEALER and its sales, service and parts personnel.
II. DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
indicated:
A. MMSA shall mean Mitsubishi Motor Sales of America, Inc., a California
corporation which is the authorized distributor in the United States
of MMSA Products.
B. MMSA VEHICLE shall mean any new passenger car or truck with a
Gross Vehicle Weight Rating of under 7,000 pounds (whether or not
manufactured or supplied by MMC) distributed in the United States by
MMSA and set forth in the Product List.
C. MMSA PARTS AND/OR ACCESSORIES shall mean genuine new parts,
components and accessories, designed primarily for use on MMSA
Vehicles and distributed by MMSA
D. MMSA PRODUCTS shall mean MMSA vehicles, MMSA Parts and
Accessories, and other new products (whether or not manufactured or
supplied by MMC) which from time to time may be offered by MMSA to
DEALER under this Agreement.
E. MMSA TRADEMARKS shall mean the trademarks, service marks, design
marks and trade names which are used by MMSA in connection with MMSA
Products, including, without limitation, the names "Mitsubishi" and
"MMSA," and the Mitsubishi three-diamond logo.
F. MMC shall mean Mitsubishi Motors Corporation, a Japanese
corporation which manufactures or supplies to MMSA some or all of the
MMSA Vehicles.
G. AUTHORIZED MMSA DEALER OR MMSA DEALER shall mean any dealer
located in the United States authorized by MMSA to conduct dealership
operations in connections with the sale of MMSA Products pursuant to
an MMSA Dealer Sales and Service Agreement.
H. OWNERS shall mean the persons named in Section 3 of the MMSA
Dealer Sales and Service Agreement.
I. EXECUTIVE MANAGERS shall mean the persons named in Section 4 of
the MMSA Dealer Sales and Service Agreement.
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<PAGE> 8
J. DEALERSHIP PREMISES shall mean the place or places of business
established by DEALER and approved by MMSA in accordance with Section
6 of the MMSA DEALER Sales and Service Agreement.
K. DEALERSHIP FACILITIES shall mean the building and other
improvements on the Dealership Premises provided by DEALER in
accordance with requirements set forth in the Dealer Development Plan.
L. DEALER DEVELOPMENT PLAN shall mean the written development plan,
as amended from time to time by MMSA, setting forth the criteria
relied upon by MMSA to determine initially whether DEALER qualifies
for appointment as an MMSA DEALER and thereafter to evaluate whether
DEALER'S performance hereunder qualifies DEALER for renewal(s) of its
MMSA Dealership.
M. GROSS VEHICLE WEIGHT RATING shall mean the value specified by the
manufacturer of MMSA Vehicles as the loaded weight of a single
vehicle.
N. SALES LOCALITY shall mean the locality which is designated in
Section 5 of the MMSA DEALER Sales and Service Agreement as the
primary area of DEALER'S sales and service responsibility for MMSA
Products.
0. WARRANTY MANUAL shall mean the MMSA Warranty Policy and Procedure
Manual, as the same may be amended from time to time by MMSA, which
sets forth policies and procedures concerning warranties on MMSA
Products.
P. PRE-DELIVERY INSPECTION MANUAL shall mean the MMSA Pre-delivery
Inspection Procedures Manual, as the same may be amended from time to
time by MMSA, which sets forth MMSA policies and procedures concerning
the servicing of MMSA Vehicles prior to their delivery to purchasers
of MMSA Vehicles.
Q. INVOICE PRICE shall mean, with respect to each MMSA Product to
which it refers, the price to DEALER for such product as from time to
time established by MMSA.
R. PARTS DISCOUNT AND PURCHASE TERMS SCHEDULE shall mean a listing
of the terms, discounts and conditions relating to the purchase of
MMSA Parts and Accessories supplied by MMSA to DEALER, as amended form
time to time by MMSA.
S. MMSA MASTER PARTS PRICE LIST shall mean a listing of the
suggested list prices and the prices of MMSA Parts and Accessories
issued by MMSA from time to time.
T. POLICY REVIEW BOARD shall mean the MMSA Policy Review Board
described in Section XI hereof.
U. THIS AGREEMENT shall mean the Mitsubishi Motor Sales of America,
Inc. Dealer Sales and Service Agreement, all schedules thereto, these
Standard Provisions, the Warranty Manual and the Dealer Development
Plan, the most recent Product List and all Product Addenda, each as
amended from time to time, and all other guides, bulletins or
directives issued from time to time by MMSA to MMSA DEALERs.
V. PRODUCT LIST shall mean a list of MMSA Products distributed by
MMSA which shall be provided to DEALERS and amended or supplemented by
MMSA from time to time.
W. PRODUCT ADDENDUM or ADDENDA shall mean any addendum to this
Agreement which MMSA may issue to DEALERS from time to time setting
forth special terms and conditions governing the sale or servicing
only of the particular vehicles or products designated in the Product
Addendum.
III. SALES OF MMSA PRODUCTS TO DEALER
A. ORDERS
DEALER shall submit to MMSA firm orders for MMSA Products in such
quantity and variety as are necessary to fulfill Dealer's obligations
under this Agreement. DEALER agrees to submit current orders and
estimated projections of DEALER'S future requirements for MMSA
Products at such time and for such periods as MMSA may reasonably
request. DEALER will submit all orders and projections in the format
prescribed by MMSA.
All orders are subject to acceptance by MMSA. MMSA is under no
obligation to accept orders from DEALER and may accept any order in
whole or in part. Acceptance of any order may be by oral or written
notice to DEALER or by shipment of the MMSA Products ordered.
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<PAGE> 9
No order may be cancelled by DEALER and each order shall remain binding upon
DEALER unless rejected in writing by MMSA.
Except as otherwise provided herein, MMSA agrees to ship MMSA Products to
DEALER only on DEALER'S orders. MMSA will use its best efforts to fill any
orders which it has accepted, but nothing contained in this Agreement
shall obligate MMSA to deliver to DEALER any Particular number of MMSA
Vehicles or MMSA Parts and Accessories.
B. DELIVERIES
1. Mode and Place of Delivery
MMSA shall select the distribution points, carriers and modes of
transportation in effecting delivery of MMSA Products to DEALER.
DEALER agrees to reimburse MMSA for any delivery, freight, handling
and other charges which appear on MMSA's invoice to DEALER.
2. Diversion of Deliveries
If MMSA is required to deliver any MMSA Product ordered by DEALER
because of DEALER'S failure or refusal to accept such product, DEALER
agrees to assume responsibility for and pay any charges incurred by
MMSA as a result of such diversion including, without limitation,
charges incurred by MMSA in returning any such product to the point of
original shipment or other distribution point selected by MMSA, plus
all charges for demurrage or storage related to such division.
3. Delay or Failure to Deliver
MMSA shall not be liable for delay or failure to fill orders that have
been accepted, where such delay or failure is the result of any
domestic or foreign laws, regulations, ordinances, rules, orders or
other governmental requests, acts of God, foreign or civil wars,
riots, interruptions of navigation, shipwrecks, fires, strikes,
lockouts or other labor troubles, embargoes, blockades, delay or
failure of MMC, other suppliers of MMSA or any carrier to deliver MMSA
Products, or any other event whether similar or dissimilar to the
foregoing which is beyond the reasonable control of MMSA.
4. Damage Claims Against Carriers
Unless otherwise specified in the Warranty Manual, MMSA agrees, upon
request by DEALER, to assist DEALER in recovery against any carrier
for loss or damage to MMSA Products shipped hereunder.
C. PRICES AND OTHER TERMS OF SALES
1. Price Changes
MMSA reserves the right, without prior notice to DEALER, to change
prices, charges and terms of purchase of all MMSA Products sold under
this Agreement and except as provided in Section III.C.7. hereof,
DEALER or its customer shall have no right of cancellation or to any
refund or credit with respect thereto. MMSA will charge DEALER for
MMSA Products according to the prices, charges and terms of purchase
in effect on the date of shipment. Prices, charges and terms of
purchase for MMSA Parts and Accessories shall be established from
time to time by MMSA in the MMSA Master Parts Price List and in the
Parts Discount and Purchase Terms Schedule.
2. Payment for MMSA Vehicles
Unless otherwise permitted by MMSA in writing, payment for MMSA
Vehicles shall be by cash draft issued prior to shipment of each
MMSA Vehicle form its port of entry against DEALER'S then applicable
wholesale credit line, which line shall be approved by MMSA and
established in DEALER'S name with a financial institution acceptable
to MMSA. The minimum amount of such credit line must be expressly
approved by MMSA and must be sufficient to meet MMSA's estimate of
DEALER'S anticipated sale volume, as the same may be revised from
time to time in the Dealer Development Plan.
MMSA may find it necessary, from time to time, to advise DEALER that
the amount of available credit required of DEALER must be increased.
Such decisions will be based upon criteria reasonably established by
MMSA, including the sufficiency of the existing credit line and
anticipated increases in sales. DEALER agrees to cooperate fully with
MMSA and arrange promptly for all required changes in its financial
arrangements.
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<PAGE> 10
3. Payment for MMSA Products other than MMSA Vehicles
MMSA will invoice DEALER for all MMSA Products other than MMSA Vehicles
purchased by DEALER. Payment for invoices shall be due by the tenth (10th)
day of the month following the month in which the products covered by the
invoice are delivered. MMSA reserves the right, at any time with or
without notice to DEALER, to place any and all sales of MMSA Products
other than MMSA Vehicles on a C.O.D. basis, cash in advance basis or
otherwise alter the credit terms available to DEALER. DEALER's right to
return MMSA Products (other than MMSA Vehicles) shall be governed by the
terms and provisions set forth in the Parts Discount and Purchase Terms
Schedule.
4. Failure of Financing Arrangements
It is DEALER'S sole responsibility to institute appropriate controls to
ensure the uninterrupted availability of sufficient funds under its
approved credit line with DEALER'S financial institution. Should DEALER
fail to pay for, or should any applicable financing arrangement fail to
provide credit for the payment of, any MMSA Products ordered by DEALER
when payment is due therefor, MMSA may, with respect to any such MMSA
Products, (i) cause the same to be stored at the sole risk and expense of
DEALER, or (ii) cause such MMSA Products to be shipped elsewhere
(including returning the same to MMSA) and DEALER shall pay to MMSA
promptly upon demand all expenses sustained by MMSA in storing, handling
and shipping occasioned thereby; or (iii) without obligation to pay any
sum to DEALER, sell such MMSA Products directly to any other MMSA Dealer,
person, firm or corporation, all expenses or losses occasioned thereby to
be borne by DEALER.
In addition to the foregoing, in the event of an oral or written refusal
by DEALER'S financing institution to make payment against drafts for any
MMSA Vehicle ordered by DEALER, MMSA may impose a fixed administrative
charge for each MMSA Vehicle refused. The amount of such charge, which
shall be in addition to otherwise applicable delivery, storage and
demurrage charges, shall reflect a reasonable estimate of the average
administrative cost incurred by MMSA in arranging for alternative
disposition of the MMSA Vehicle so refused. Furthermore, any failure of
DEALER'S financial institution to maintain for a period of sixty (60)
or more days the unrestricted availability to MMSA of DEALER'S credit line
in an amount and in accordance with the terms approved by MMSA shall
constitute grounds for termination of this Agreement under Section
X.B.2.(f) hereof. "Unrestricted availability" as used in this section
shall mean that upon presentment of MMSA'S drafts to DEALER'S financial
institution as contemplated hereunder, no approval of DEALER, the financial
institution itself or any other party will be required before payment to
MMSA is made.
5. Title and Risk of Loss
Title and risk of loss or damage to any MMSA Product sold to DEALER shall
pass to DEALER upon (i) its delivery to DEALER, (ii) its delivery to a
common carrier for delivery to DEALER, or (iii) receipt by MMSA of payment
therefor, whichever shall first occur. MMSA shall retain, and DEALER
hereby grants to MMSA, a security interest in, and the right to retain or
repossess, all MMSA Products sold to DEALER by MMSA until MMSA is paid in
full therefor.
6. Collection of Indebtedness
DEALER agrees to execute and deliver and shall, where appropriate,
cooperate with MMSA in causing to be filed with the appropriate
authorities any and all statements and documents required or permitted by
the Uniform Commercial Code and any other local laws for the protection of
unpaid sellers.
DEALER agrees that MMSA may apply toward payment of any amount due MMSA
from DEALER any credit owed to DEALER by MMSA, and MMSA may, at its
option, collect any sums owed by DEALER to MMSA by making a separate draft
or by including any such sums in any draft issued for the sale of MMSA
Products sold under this Agreement. DEALER will pay the amount of each
draft and all exchange and collection charges. In addition, MMSA may
impose an interest charge for balances thirty (30) days or more overdue.
Such charge shall be assessed at the maximum rate permitted by law. The
foregoing rights of MMSA are in addition to, and not in lieu of, any rights
or remedies it may have by law as an unpaid seller.
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7. Refunds
Should MMSA reduce the Invoice Price of any MMSA Vehicle then in current
production, MMSA will give written notice of such reduction to DEALER and
will refund to DEALER an amount equal to the difference between any higher
price paid by DEALER for such MMSA Vehicles and the reduced price. Such
refunds will be payable only for MMSA Vehicles actually purchased by
DEALER at a price higher than the reduced price and which are new and
unsold by DEALER on the effective date of the price reduction set forth in
MMSA's notice thereof. To be entitled to such refund, DEALER must, within
thirty (30) days after receipt of notice of the price reduction, make
written claim therefor supported by evidence satisfactory to MMSA.
MMSA shall have no obligation to make refunds or give credits with respect
to:
a. Any MMSA Vehicle used as a demonstrator and not promptly registered
with MMSA by DEALER when assigned to demonstrator use;
b. Any reduction in the amount of MMSA charges for distribution and
delivery or taxes;
c. Any reduction in the amount of any contribution or any other sum for
advertising or sales promotion; or
d. Any reduction by MMSA in the suggested retail price or Invoice Price
established by MMSA by reason of any law, order, or regulation of any
government or any governmental agency.
MMSA reserves the right to pay refunds to any financial institution which
has financed the purchase of, and retains a lien or ownership interest in,
any MMSA Vehicle for which application for refund or credit is made by
DEALER.
D. PRODUCT WARRANTIES
Dealer understands and agrees that the only warranties applicable to each
new MMSA Product sold to Dealer by MMSA shall be the written warranty or
warranties expressly furnished by MMSA or by the manufacturer of the MMSA
Product and as stated in the Warranty Manual. Anything in this Agreement to
the contrary notwithstanding, all warranties made by MMSA as set forth in
the Warranty Manual shall survive and, in accordance with their
respective terms, continue in full force and effect, despite any
expiration or termination of this Agreement pursuant to Section X hereof.
E. CHANGE OF DESIGN, OPTIONS OR SPECIFICATIONS
MMSA reserves the right, at any time, to make changes in or discontinue
the supply of any design or specification of MMSA Products (regardless of
whether such products are MMSA Vehicles, MMSA Parts and Accessories or
options), without notice to DEALER and, unless required by law, without
obligation to make any changes with respect to MMSA Vehicles and MMSA
Parts and Accessories or options previously delivered to DEALER or being
imported, manufactured, or sold in accordance with Dealer's orders. No
change shall be considered a model year change unless so specified by
MMSA. Except as specifically provided in Section III.C.7. hereof, MMSA
shall be under no liability to DEALER on account of any discontinuance or
change and shall have no obligation to DEALER to make any refund on MMSA
Products previously purchased by DEALER, whether or not the price of MMSA
Products previously sold by MMSA is affected thereby. Unless directed in
writing by MMSA or required to do so by law, DEALER shall not alter any
MMSA Product or change or substitute any of its components as sold by
MMSA, except for minor or cosmetic changes which do not affect the
mechanical operation, safety or structural integrity of any MMSA Product.
F. VEHICLES EXCLUDED
DEALER acknowledges that this Agreement confers no rights or benefits with
respect to vehicles or products of any kind not distributed by MMSA, and
that DEALER'S right to purchase MMSA Vehicles from MMSA shall at all times
be limited to those MMSA Vehicles listed on the most recent Product List.
Without limiting the generality of the foregoing, DEALER acknowledges
that: (1) MMC distributes in the United States trucks with a Gross Vehicle
Weight Rating of 7,000 pounds or more, truck tractors, buses, other heavy
vehicles, and parts and accessories therefor through a distribution
company known as Mitsubishi Fuso Truck America, Inc.("MFTA"); (2) this
Agreement confers no right upon DEALER to purchase for resale or lease,
sell service or lease MFTA vehicles or products; (3) MFTA vehicles are of
a separate "line make" from MMSA
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Vehicles; and (4) this Agreement confers no right upon DEALERS to protest,
object or invoke any other administrative or judicial process to bar or delay
the establishment of any MFTA dealership within or without DEALER'S Sales
Locality.
IV. DEALERSHIP PREMISES
A. RESPONSIBILITIES OF DEALER
MMSA and DEALER recognize the importance of establishing an effective
network of qualified Authorized MMSA Dealers meeting MMSA's
established standards. Accordingly, Dealer agrees that it shall not,
under any circumstance, establish an associate dealer or subdealer for
MMSA Products or establish any MMSA dealership premises or operations
other than those expressly approved by MMSA. DEALER agrees to operate
its MMSA dealership only on the Dealership Premises, and to provide
and utilize the Dealership Facilities only in accordance with
standards established by MMSA set forth in the Dealer Development
Plan. DEALER recognizes that if it engages in other business
activities in the Dealership Facilities and/or on the Dealership
Premises, the physical facilities necessary for the sale and servicing
of MMSA Products may be adversely affected. Accordingly, DEALER agrees
that it shall not modify, relocate, change the usage of, reduce or
expand the Dealership Premises or the Dealership Facilities without
first consulting with MMSA and obtaining its written approval of such
changes.
B. AUTOMOBILE LEASING OR RENTAL BUSINESS
DEALER may, as part of its MMSA dealership operations, engage in the
leasing of MMSA Vehicles on the Dealership Premises so long as DEALER
complies fully with all standards and requirements established by MMSA
in connection therewith. DEALER, its Owners and Executive Managers
shall not, however, without the prior written consent of MMSA, form or
acquire, directly or indirectly, a separate legal entity for the
purpose of conducting such leasing operations, whether within or
without the Dealership Premises. Nor shall DEALER, its Owners and
Executive Managers acquire for themselves or for members of their
respective families any substantial interest in such separate business
without the prior written consent of MMSA. If MMSA consents to the
operation or substantial ownership of such separate leasing business
by DEALER, its Owners, Executive Managers or their respective
families, such business shall be subject to the provisions of Section
IV.C. hereof.
C. RELATED ACTIVITIES OF DEALER OR DEALER'S OWNERS OR EXECUTIVE MANAGERS
If DEALER or any of DEALER'S Owners or Executive Managers should have
or should acquire, directly or indirectly, for themselves or for
members of the respective families, any substantial interest in an
enterprise the business of which is in any way connected with new or
used MMSA Products (hereinafter referred to as "Related Business"), or
any property which is being used or will be used in connection with
new or used MMSA Products (hereinafter referred to as "Related
Property"), or any beneficial interest in any Related Property, DEALER
will:
1. At the time this Agreement is executed by DEALER, or immediately
upon such acquisition, whichever may be later, require such
Related Business or the holder of legal title or beneficial
interest in the Related Property to execute and deliver to MMSA a
written instrument in which such Related Business or holder shall
assume the following obligations:
a. To refrain from all conduct which might be harmful to the
goodwill of MMSA or to the reputation of MMSA Products or
which might be inconsistent with the public interest;
b. To grant to MMSA, until the expiration or prior termination
of this Agreement, the right, through MMSA's employees and
other designees, to inspect, at all reasonable times during
regular business hours, the premises, as well as the records
and accounts, of such Related Business or holder; and
c. To refrain from any use of any MMSA Trademark.
2. Furnish to MMSA, at the time this Agreement is executed by DEALER
or immediately upon such acquisition, whichever may be later, a
written report setting forth in detail:
a. The ownership of beneficial interests in such Related
Business or Related Property; and
<PAGE> 13
b. The business activities of such Related Business and the use of
such Related Property including, among other things, the names of
all Authorized MMSA Dealers with which such Related Business has
any dealings or who use or have any interest in such Related
Property, and the terms of such dealings, use and interests.
3. In the event of any change in the ownership, activities or use of the
Related Business or Related Property, furnish to MMSA a written report
setting forth the details of such change.
4. Furnish to MMSA such other reports concerning the Related Business or
Related Property as MMSA may from time to time require.
D. PERSONNEL
Dealer agrees that it will employ qualified personnel in such capacities
and in such number as may be specified in the Dealer Development Plan or
as otherwise required by MMSA.
E. INSURANCE
Dealer shall obtain fire and casualty insurance issued by an insurer or
recognized responsibility satisfactory to MMSA, with coverage for each
occurrence and in an aggregate amount acceptable to MMSA, and providing
coverage for, among other things, death, bodily injury and property damage
claims which may arise in connection with Dealer's operations. Such
insurance shall be maintained in full force and effect at Dealer's sole
cost throughout the term of this Agreement and all extensions or renewals
hereof.
F. MAINTAINING OPERATIONS OPEN FOR BUSINESS
Since the transportation and maintenance needs of customers served by
Dealer can be properly met only if Dealer keeps the Dealership Premises
open for business, Dealer agrees to maintain its dealership operations
open for business during all days and hours which are customary and lawful
for such operations in the community or locality in which the Dealership
Premises are located. Any unexcused failure to remain open for business
during such hours in excess of five (5) consecutive business days shall
constitute grounds for termination of this Agreement under Section
X.B.1.(a) hereof.
G. MINIMUM VEHICLE INVENTORIES
Subject to the ability of MMSA to supply MMSA Vehicles ordered by Dealer,
Dealer agrees that it shall, at all times, maintain the minimum inventory
of MMSA Vehicles for immediate sale as set forth in the Dealer Development
Plan from time to time by MMSA after consultation with Dealer. Dealer
also agrees that it shall have available at all times, for purposes of
showroom display and demonstration, the number of current models of MMSA
Vehicles required of Dealer as determined from time to time by MMSA after
consultation with DEALER. DEALER agrees to maintain all MMSA Vehicles in
excellent condition at all times. Failure of DEALER to maintain the
required minimum number of MMSA Vehicles shall constitute grounds for
termination of this Agreement under Section X.B.2.(n) hereof.
Dealer recognizes that it is the goal of all MMSA Dealers to meet
efficiently the needs of all customers of MMSA Products wherever located
and that, although an MMSA Dealer may attempt to continually maintain its
minimum inventory, occasionally its customers may request a specific MMSA
Vehicle or MMSA Part or Accessory which is not currently in stock.
Accordingly, Dealer agrees to use its best efforts to cooperate with other
MMSA Dealers by providing them with access to information regarding its
parts and MMSA Vehicle inventory and whenever possible, trading its MMSA
Products to satisfy the needs of a customer of another MMSA Dealer.
H. SIGNS
Subject to applicable governmental ordinances, regulations and statutes,
Dealer agrees to buy or rent from MMSA or from sources designated by MMSA
and to erect and maintain on the Dealership Premises, entirely at Dealer's
expense, authorized sales and service signs conforming to the requirements
established and approved for Dealer's use by MMSA. Dealer further agrees
to obtain and maintain any licenses or permits necessary to erect such
signs. Failure to obtain, erect, maintain, repair, illuminate and
prominently display such signs in a manner approved by MMSA shall
constitute grounds for termination of this Agreement under Section
X.B.2(j) hereof.
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I. ELECTRONIC COMMUNICATIONS SYSTEM
MMSA has elected to implement an electronic data processing system to
facilitate communications between MMSA and each MMSA Dealer. Such a system
is designed to enable each MMSA Dealer to electronically transmit current
information regarding its sales and service operations, including without
limitation, orders for MMSA Vehicles and MMSA Parts and Accessories, sales
reports, and warranty claims data. In recognition of the benefits of such
a system, DEALER agrees to acquire and install, at its sole expense, on
the Dealership Premises a dealer computer terminal approved by MMSA and to
utilize the system in accordance with MMSA's instructions.
J. PLANNING ASSISTANCE FOR DEALERSHIP PREMISES
To assist DEALER in planning, establishing and maintaining the Dealership
Premises, MMSA will, if feasible, make available to DEALER upon request,
copies of sample building layout plans, facility planning recommendations
and an identification program covering the placement, installation and
maintenance of recommended signs. In addition, representatives of MMSA
will be available to DEALER from time to time to advise DEALER and
dealership personnel in connection with DEALER'S planning of the Dealership
Facilities and Dealership Premises.
V. NET WORKING CAPITAL
DEALER agrees to establish and maintain net working capital in an amount
not less than the minimum net working capital agreed upon by DEALER and
MMSA and specified in the DEALER Development Plan. If, because of changed
conditions, MMSA deems it necessary to increase or decrease the minimum
amount of DEALER'S net working capital, the minimum net working capital
required of DEALER under the Dealer Development Plan may be revised by MMSA
after consultation with DEALER. If the amount thereof is increased, DEALER
agrees to meet the new minimum net working capital standard within the time
period reasonably prescribed by MMSA after consultation with DEALER.
VI. ACCOUNTS, RECORDS AND REPORTS
A. UNIFORM ACCOUNTING SYSTEM
It is for the mutual benefit of DEALER and MMSA that uniform accounting
systems and practices be maintained by all Authorized MMSA Dealers.
Accordingly, DEALER agrees to maintain such systems and practices as
designated by MMSA in accordance with the uniform accounting system and
practices established by MMSA for use by all MMSA Dealers. DEALER
agrees that it will furnish to MMSA by the tenth (10th) day of each
month, in the form prescribed by MMSA, true, complete and accurate
financial and operating statements covering the preceding month and
showing calendar-year-to-date operations.
B. SALES REPORTING
To assist in the evaluation of current market trends and other matters,
DEALER agrees to:
1. Immediately upon delivery of an MMSA Vehicle to the purchaser
thereof, complete and transmit to MMSA a report of the retail sale
called the "Retail Delivery Report"; and
2. Furnish MMSA with such other reports or records which may reasonably
be required by MMSA.
C. SALES AND SERVICE RECORDS
DEALER agrees to keep complete, accurate and current records regarding
the sale and servicing of MMSA Products. In order that policies and
procedures relating to applications for reimbursement for warranty and
policy work may be applied uniformly to all Authorized MMSA Dealers,
DEALER agrees to prepare, keep current and retain records in support of
requests for reimbursement for warranty and policy work performed by
DEALER in accordance with the policies and procedures prescribed in the
Warranty Manual and standards established by MMSA consistent with said
manual.
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D. EXAMINATION OF ACCOUNTS AND RECORDS
DEALER agrees that it will permit MMSA to make examinations and
audits of its accounts and records at any time during regular
business hours, and in connection therewith, to reproduce and take
for its own use copies of DEALER'S records including, without
limitation, records supporting requests for reimbursement for
warranty and policy work performed or to be performed by DEALER. A
report of any such examination will be furnished to DEALER. Failure
to allow authorized personnel of MMSA to examine, audit, reproduce and
take copies for MMSA's use of DEALER'S records, whether or not
located on the Dealership Premises, shall constitute grounds for
termination of this Agreement under Section X.B.2.(m) hereof.
VII. PROMOTING AND SELLING MMSA PRODUCTS
A. RESPONSIBILITIES OF DEALER
DEALER agrees to use its best efforts to promote, sell and service
MMSA Vehicles and MMSA Pars and Accessories in the Sales Locality.
DEALER recognizes that DEALER'S fundamental obligation under this
Agreement is to stock, sell and service all models and types of MMSA
Vehicles distributed in the Sales Locality by MMSA. Accordingly,
DEALER expressly assumes responsibility for fulfilling this
obligation, and in connection therewith, DEALER expressly agrees to
develop that sales volume necessary to meet DEALER'S Minimum Sales
Responsibility as outlined in this Agreement and as is more
particularly described in the Dealer Development Plan.
B. SALES AND PERFORMANCE CRITERIA
1. Dealer Development Plan
The parties hereto shall periodically, and in any event at least
annually, review DEALER'S performance under this Agreement.
DEALER'S performance will be evaluated on the basis of the
performance criteria set forth in the Dealer Development Plan,
which criteria shall include such factors as maintenance of
facilities, service and sale of MMSA Parts and Accessories and
sales performance.
During each such periodic review, MMSA shall note in writing any
deficiencies it finds in DEALER'S performance and operations, and
MMSA will offer suggestions for the improvement thereof. MMSA
shall give DEALER a reasonable opportunity to implement its
suggestions and take other steps necessary to cure deficiencies
in DEALER'S performance. DEALER agrees to cooperate with MMSA
during such evaluation and to furnish any data regarding the
DEALER'S operations which may reasonably be requested by MMSA.
DEALER agrees that it will use its best efforts to meet the
performance standards established from time to time by MMSA and
to cure any deficiencies set forth in its Dealer Development
Plan. Failure by DEALER to correct such deficiencies after
having had a reasonable opportunity to do so shall constitute
grounds for termination of this Agreement under Section X.B.3.(a)
hereof.
2. Determination of Minimum Sales Responsibility
If DEALER is the only MMSA Dealer located in the Sales Locality,
calculation of DEALER'S Minimum Sales Responsibility will be
based upon the ratio of sales and registrations of MMSA Vehicles
to sales and registrations of competitive vehicles and MMSA
Vehicles in the Sales Locality. In metropolitan market where
multiple MMSA Dealers are located, DEALER (together with all
other MMSA Dealers in the Sales Locality) will be assigned a
percentage share of responsibility for total sales performance in
the Sales Locality based upon DEALER'S trading area. MMSA may
from time to time change the size and/or boundaries of DEALER'S
trading area after appropriate analyses of new care purchasing
patterns in the Sales Locality. Such trading area will be used
solely for the purpose of determining the percentage of sales
responsibility assigned to DEALER and should not be interpreted
as a market area assigned to DEALER. In evaluating DEALER'S
performance, MMSA will consider recent trends in DEALER'S sale
performance and any special local conditions which would uniquely
affect DEALER'S performance.
To the extent that MMSA for any reason, other than DEALER'S
failure to submit orders or arrange payment, delivers to DEALER
less than the number of new MMSA Vehicles that represents
DEALER'S Minimum Sales Responsibility, DEALER'S Minimum Sales
Responsibility set forth in the Dealer Development will be
reduced accordingly.
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The term "competitive vehicles" as used in this section shall
mean those new vehicles which are from time to time
designated by MMSA as competitive with MMSA Vehicles. The
term "DEALER'S trading area" as used in this section shall
mean an area immediately surrounding the Dealership Premises
which is determined by MMSA from time to time based upon an
analysis of census tracts or other geographical boundaries.
C. Sales Operations
1. Sales Organization
To enable DEALER to fulfill satisfactorily its
responsibilities under this Agreement, DEALER agrees to
organize and maintain the minimum number of trained sales and
customer relations personnel required by MMSA in the Dealer
Development Plan.
2. Representations in the Sale of MMSA Vehicles
DEALER agrees that it will sell all MMSA Vehicles in
accordance with directives issued by MMSA designating model
and model year classifications and will not make any
misleading statements or misrepresentations regarding MMSA
Products, including without limitation, selling as new any
MMSA Vehicle which is not in fact new and unused,
misrepresenting the model year or year of manufacture, or the
items or prices of the items making up the total selling
price of any MMSA Vehicle. DEALER shall not make any
statements tending to lead any customer to believe that a
greater portion of the selling price of an MMSA Vehicle
represents destination charges and/or factory handling
charges than the amounts of such items actually charged to and
paid for by DEALER.
3. Customer Deposits
DEALER will hold in trust until completion of sale any down
payment and all other property it may receive from customers
in connection with their purchases of MMSA Products. DEALER
will not sell or place any lien on any property taken as a
trade-in unless at the same time it segregates and holds in
trust an amount equal to the trade-in allowance agreed upon
with the customer for such property until completion of the
sale for which such property was taken as a trade-in. DEALER
will ensure that all purchase order forms signed by its
customers contain provisions binding DEALER to hold all down
payments and other property in the manner specified in this
section.
D. Advertising
1. Misleading Advertising
Both MMSA and DEALER recognized the need for maintaining
standards of ethical advertising of a quality and dignity
consonant with the reputation and standing of MMSA Products
in order to maintain public confidence in, and respect for,
DEALER, MMSA and MMSA Products. Accordingly, neither MMSA nor
DEALER will publish or cause or permit to be published any
advertising relating to MMSA Products likely to mislead or
deceive the public or to impair the goodwill of MMSA or
DEALER or the reputation of MMSA Products. DEALER shall,
promptly upon written notice from MMSA, discontinue any
advertising which MMSA, in its sole judgment, considers may
be injurious to DEALER's or MMSA's business, or to the
reputation of MMSA Products, or likely to mislead or deceive
the public, or at variance with the business, advertising or
public relations policies of MMSA.
2. MMSA Dealer Advertising Association
MMSA and DEALER recognize the benefits which may be derived
from a comprehensive joint advertising effort by MMSA
Dealers. Accordingly, MMSA agrees to assist MMSA Dealers in
the formation and effective operation of such cooperative
dealer advertising association. DEALER agrees to cooperate
with MMSA in the establishment of such a group and, once it
is established, to participate actively and contribute to it
in accordance with the bylaws of the association.
The MMSA dealer advertising association will finance its
advertising programs through the assessment of a fixed charge
for each new MMSA Vehicle purchased by member MMSA Dealers.
As a service to the dealer association, MMSA will collect the
agreed upon charge, provided that the dealer association
maintains control over both the amount of the assessment and
the manner in which such funds will be expended.
<PAGE> 17
3. Dealer Cooperative Promotional Fund
MMSA will establish and maintain general advertising programs and will
make sales promotion and campaign materials available to DEALER to
promote the sale of MMSA Vehicles. DEALER recognizes that it will
benefit from the simultaneous use by all Authorized MMSA Dealers of
new model announcement literature, catalogs, banners and like
materials and from the economies attendant upon preparation and
purchase by MMSA of such basic sales promotion literature, parts and
service manuals and other materials for all dealers. Accordingly,
DEALER agrees to cooperate in MMSA'S advertising programs and to fully
utilize the materials offered DEALER by MMSA. MMSA'S sales promotion
services will include the supply, at no additional cost to DEALER, of
new model announcement and other sales promotion materials, and parts
and service materials as described from time to time in MMSA sales
letters. DEALER agrees to contribute to the cost of MMSA's sales
promotion services an amount established by MMSA from time to time
for each MMSA Vehicle sold by MMSA to DEALER. These amounts do not
include the cost of special campaigns or special literature not
described in MMSA sales letters.
E. ASSISTANCE PROVIDED BY MMSA
1. Sales Training Assistance
To assist DEALER in the fulfillment of its responsibilities
hereunder, MMSA shall offer general and specialized sales
management and sales training courses for the benefit and use of
DEALERS'S sales organization. DEALER understands the importance of
having a well trained and knowledgeable staff in the successful
operation of a dealership and, therefore, DEALER agrees to require
the attendance of all its sale personnel at any special courses,
meetings or training sessions offered for their benefit from time
to time by MMSA. Whenever possible, MMSA will give DEALER thirty
(30) days' advance notice of any such mandatory event so that all
sales personnel may make arrangements to be present. Repeated
failure by DEALER'S sales personnel (including but not limited to
management) to participate fully in such programs shall constitute
grounds for termination of this Agreement under Section X.B.2.(i)
hereof.
2. Field Sales Personnel
To assist DEALER in handling its sales responsibilities under this
Agreement, MMSA agrees to provide field sales personnel from time
to time to advise and counsel DEALER regarding merchandising,
training and sales management.
VIII. SERVICING MMSA VEHICLES
A. RESPONSIBILITIES OF DEALER
DEALER agrees to provide service and parts to all MMSA Vehicles
whether or not under warranty and whether or not the MMSA Vehicle to
be serviced was purchased from DEALER.
1. Warranty Service
Warranty and policy service shall be performed in accordance with
the Warranty Manual and any related bulletins and directives issued
from time to time by MMSA to DEALER. DEALER shall furnish to the
purchaser of each MMSA Product, at the time each product is
delivered, copies of any applicable warranties. DEALER shall be
responsible for the timely submission of warranty claims in the
format required by MMSA. MMSA agrees to compensate DEALER for all
warranty and policy work in accordance with procedures and rates
established from time to time by MMSA and in accordance with
applicable law; and DEALER agrees that such rates shall constitute
full and complete payment to DEALER for such work. DEALER agrees
that where MMSA reimburses DEALER for warranty or policy work, the
customer shall not be obligated to pay any charges for warranty or
policy work except as required by law.
2. New Motor Vehicle Pre-Delivery Service
DEALER agrees that prior to delivery of each new MMSA Vehicle to a
retail customer, DEALER will conduct pre-delivery service and
inspections in accordance with the Pre-delivery Inspection Manual.
Dealer shall be reimbursed by MMSA for such pre-delivery service
service and inspection in accordance with procedures and rates
established from time to time by MMSA and in accordance with
applicable law.
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3. Free Maintenance
In accordance with directives to be issued from time to time by MMSA,
certain maintenance services, excluding lubricant and oil filter costs,
may be free of charge to the customer; if Dealer delivers an MMSA Vehicle
to a customer pursuant to such directives, Dealer shall be reimbursed
according to the terms of such directives. In the event that such free
maintenance services are performed by another MMSA Dealer upon an MMSA
Vehicle sold by Dealer, DEALER shall pay to such other MMSA Dealer the
charge then in effect as established by MMSA for such maintenance
services. Conversely, in the event that DEALER performs such free
maintenance with respect to an MMSA Vehicle sold by another MMSA Dealer,
DEALER shall be entitled to receive from such other MMSA Dealer the amount
of such charge. All claims for payment for such charges by or against
DEALER shall be processed through MMSA. All such free maintenance services
shall be performed in conformity with current service policies and
practices as outlined in service manuals, the Pre-delivery Inspection
Manual, the Warranty Manual and warranty bulletins or technical service
bulletins and directives issued from time to time by MMSA.
4. USE OF PARTS
DEALER agrees not to use in the repair or servicing of MMSA Vehicles
parts other than MMSA Parts and Accessories or other parts (including
accessories) expressly approved by MMSA unless:
a. the replacement parts are equivalent in quality and design to MMSA
Parts and Accessories or parts expressly approved by MMSA; or
b. the parts to be replaced are not necessary to the mechanical operation
of the MMSA Vehicle and the replacement parts will not adversely affect
the mechanical operation of the MMSA Vehicle.
FAILURE BY DEALER TO USE MMSA Parts and Accessories or parts expressly
approved by MMSA (or other parts equivalent thereto in quality and design)
in accordance with the requirements of this section shall constitute
grounds for termination of this Agreement under Section X.B.2.(r) hereof.
In the event of any dispute or litigation between DEALER and MMSA
regarding the use by DEALER of parts other than MMSA Parts and Accessories
or parts expressly approved by MMSA, DEALER agrees that it shall have the
burden of establishing either:
a. that parts used by it are equivalent in quality and design to MMSA
Parts and Accessories or parts expressly approved by MMSA; or
b. that the parts replaced were not necessary to the mechanical operation
of the MMSA Vehicle and the replacement parts would not adversely affect
the mechanical operation of the MMSA Vehicle.
Dealer agrees that it will not represent or offer to sell as MMSA Parts
and Accessories, or parts expressly approved by MMSA, any parts used by it
in the repair or servicing of MMSA Vehicles which are not in fact genuine
MMSA Parts and Accessories, or parts expressly approved by MMSA.
IF DEALER uses parts for the service or repair of MMSA Vehicles which are
not MMSA Parts and Accessories and which have not otherwise been approved
in writing by MMSA for use in MMSA Vehicles, DEALER does so at its own
risk and neither MMSA nor any manufacturer of MMSA Products will be
responsible to DEALER or any third party for any products liability,
warranty or other claim which may arise as a result of the installation
and/or use of such parts and DEALER agrees to idemnify and hold MMSA and
any manufacturer of MMSA Products harmless from any such claim or
liability.
5. Campaign Inspections and Corrections DEALER agrees to perform campaign
inspections and/or corrections for owners and users of all MMSA Products
that qualify for such inspections and/or corrections, regardless of where
or from whom such products were purchased. DEALER further agrees to comply
with all procedures relating thereto set forth in the Warranty Manual and
applicable bulletins, manuals, directives and technical data issued from
time to time by MMSA to DEALER. MMSA agrees to reimburse DEALER for all
replacement parts and/or other materials
<PAGE> 19
required and used in connection therewith and for labor in accordance with
the applicable provisions of the Warranty Manual as supplemented by
bulletins and directives issued from time to time by MMSA to DEALERS. The
term "campaign inspection and/or correction" as used in this section shall
mean specially designated service operations initiated by MMSA to be
performed by DEALER on specified vehicles.
6. Compliance With Safety and Emission Control Requirements
DEALER agrees to comply with, and operate consistently with, all
applicable provisions of the National Traffic and Motor Vehicle Safety Act
of 1966, as amended, and the federal Clean Air Act, as amended, including
applicable rules and regulations issued from time to time thereunder, and
all other applicable federal, state and local motor vehicle safety and
emission control requirements.
In the event that the laws of the state in which DEALER is located require
motor vehicle dealers or distributors to install in new or used motor
vehicles, prior to the retail sale thereof, any safety devices or other
equipment not installed or supplied as standard equipment by MMSA, then
DEALER, prior to its sale of any MMSA Vehicles on which such installations
are so required, shall properly install such equipment on such MMSA
Vehicles. DEALER shall comply with all state and local laws pertaining to
the installation requirements of any such equipment including, without
limitation, the reporting of such installation. MMSA shall not be liable
for any failure of DEALER or its employees to comply with such state and
local laws.
In the interests of motor vehicle safety and emission control, MMSA agrees
to provide to DEALER, and DEALER agrees to provide to MMSA, such
information and assistance as may reasonably be requested by the other in
connection with the performance of obligations imposed on either party by
the National Traffic and Motor Vehicle Safety Act of 1966, as amended,
and the federal Clean Air Act, as amended, and the rules and regulations
issued thereunder, and all other applicable federal, state and local motor
vehicle safety and emission control requirements.
B. SERVICE OPERATIONS
1. Service and Parts Organization
DEALER agrees to organize and maintain a complete service and parts
organization, including a qualified service manager, a qualified parts
manager and the minimum number of competent service and parts personnel
established by MMSA in the Dealer Development Plan.
2. Paint and Body Facilities
If permissible under local governmental ordinances, regulations and
statutes, DEALER will use its best efforts to provide paint and body
facilities for MMSA Vehicles. Such facilities will be subject to MMSA'S
prior written approval and, once approved, shall become part of the
Dealership Premises and subject to the terms and conditions of this
Agreement. If local law does not permit the operation of such services on
the Dealership Premises, DEALER agrees to enter into a contract for the
services of an independent company in order to provide complete warranty
service for MMSA Vehicles. The company selected by DEALER for paint and
body services must be approved in writing by MMSA.
3. Workshop
In the installation and operation of DEALER'S workshop and body and paint
shop, if any, DEALER will comply with such standards and requirements as
MMSA may prescribe from time to time, particularly with respect to:
a. Procurement and maintenance of general tools and equipment, including
hydraulic hoists and lubricating equipment;
b. Procurement and maintenance of special tools from time to time
designated by MMSA as necessary to properly provide warranty and
repair services to MMSA customers;
c. Use of workshop forms which may be prescribed by MMSA and use of MMSA
customer service promotional material, as well as procurement and
maintenance of at least one complete set of MMSA service literature;
and
d. Proper execution of all service and repair work with respect to MMSA
Products.
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Failure by DEALER to procure and maintain necessary special tools, general
tools and equipment shall constitute grounds for termination of this
Agreement under Section X.B.2.(k) hereof.
4. Handling of Service Complaints
DEALER will receive, investigate and handle all complaints received from
MMSA customers with a view to securing and maintaining the goodwill of the
public toward DEALER, MMSA and MMSA Products. All complaints received by
DEALER which cannot be readily remedied shall be promptly reported in
detail to MMSA. DEALER recognizes that the repeated failure to properly
resolve customer complaints shall constitute grounds for termination of
this Agreement under Section X.B.2.(l) thereof.
5. Stock of Parts
DEALER agrees to carry in stock at all times during the term of this
Agreement an inventory of MMSA Parts and Accessories and MMSA approved
parts and accessories adequate at any given time to enable DEALER to
fulfill customer demands, warranty repairs and its other service
obligations under this Agreement. For this purpose, DEALER agrees to
purchase each year an initial supply of parts for the new models of MMSA
Vehicles. MMSA shall at least fifteen (15) days prior to the introduction
of new models provide a list of the parts which should be purchased by
DEALER. MMSA shall have the right to audit DEALER'S inventory from time to
time and may require changes in the volume and contents thereof. In
addition, DEALER agrees to provide adequate equipment for an effective
parts supply operation. Failure to maintain an adequate stock of parts in
accordance with standards and requirements established by MMSA shall
constitute grounds for termination of this Agreement under Section
X.B.2.(o) hereof.
6. Parts Inventory Control
MMSA has elected to implement an electronic data processing parts
inventory control system for the purpose of providing adequate records
regarding the availability of parts. In recognition of the benefits of
such a system. DEALER agrees to acquire and install, at its sole expense,
on the Dealership Premises a computer terminal for the purpose of
utilizing the parts inventory control system offered by MMSA in accordance
with MMSA'S instructions. Alternatively, at the dealer's own discretion
and to meet this requirement, DEALER may use at the Dealership Premises
another inventory control system provided that (1) it is fully integrated
with an automated accounting system; (2) the inventory control and
accounting system software are already operating and controlling the
operation of two or more other dealerships which are owned by the DEALER,
and (3) the inventory control and accounting software are operated on a
single mainframe computer for all such dealerships. This requirement shall
not apply to DEALER if DEALER began doing business as an authorized MMSA
Dealer prior to November 1, 1985, provided however, DEALER has already
installed on the Dealership Premises before said date a parts inventory
control system approved by MMSA.
7. Service Rentals
In accordance with standards established by MMSA, DEALER shall maintain or
have available for use by DEALER'S service customers a fleet of rental
vehicles adequate to serve the needs of customers who leave their MMSA
Vehicles with DEALER for repair or servicing.
C. ASSISTANCE PROVIDED BY MMSA
1. Service Training Assistance
DEALER and MMSA both recognize the importance of providing consistent,
dependable service of the highest quality to MMSA customers. Accordingly,
MMSA agrees to provide service training assistance to DEALER designed to
continually improve the level of service provided by DEALER'S service and
parts personnel. Since MMSA and DEALER recognize that the maximum benefit
from such training programs may only be derived if all service and parts
employees attend the programs, DEALER agrees to require the attendance of
all such personnel. MMSA will endeavor to provide at least thirty (30)
days' prior notice of all such mandatory programs to DEALER. Repeated
failure of DEALER'S service and parts personnel including, but not limited
to, management, to attend such sessions shall constitute grounds for
termination of this Agreement under Section X.B.2.(i) hereof.
2. Service Manuals and Materials
MMSA agrees to provide DEALER with one copy of each service manual or
other publication
<PAGE> 21
MMSA deems necessary for the operation of DEALER'S service
organization. Additional copies may be purchased by DEALER at its
option.
3. Field Service Personnel Assistance
To assist DEALER in handling its service responsibilities under this
Agreement, MMSA agrees to make available field service personnel who
from time to time will advise and counsel DEALER'S personnel on
service-related subjects, including product quality, technical
adjustment, repair and replacement of product components, owner
complains, warranty administration, service and parts merchandising,
training and service management.
IX. DISPLAY OF TRADEMARKS, SERVICE MARKS AND TRADE NAMES
DEALER acknowledges that MMSA is the exclusive owner of, or is authorized
to use and to permit DEALER and others to use, the MMSA Trademarks. During
the term of this Agreement, DEALER is granted a nonexclusive privilege of
displaying and otherwise using the MMSA Trademarks in connection with and
for the purpose of identifying, advertising and selling MMSA Products;
provided, however, that DEALER shall promptly discontinue the display and
use of any such MMSA Trademarks, and shall change the manner in which any
such MMSA Trademarks are displayed and used, whenever requested to do so
by MMSA. DEALER shall not use the MMSA Trademarks or the words
"Mitsubishi" or "MMSA" or any other word confusingly similar to
"Mitsubishi" in its corporate name if DEALER is a corporation, or in its
partnership name if DEALER is a partnership, or in its proprietorship name
if DEALER is a proprietorship; provided, however, that if MMSA gives its
prior written consent, DEALER may use the words "Mitsubishi Motors" as part
of the trade name under which it conducts its business. If DEALER uses
the words "Mitsubishi Motors" as part of its trade name, upon the request
of MMSA or upon the termination of this Agreement for any reason
whatsoever, DEALER shall cease to use the words "Mitsubishi Motors" in its
trade name and shall take or cause to be taken all steps to eliminate such
words therefrom.
DEALER will do nothing to impair the value of, or contest the right of
MMSA to the exclusive use of, any trademark, design mark, service mark, or
trade name at any time acquired, claimed, used or adopted by MMSA.
X. TERMINATION OF AGREEMENT.
A. DEALER MAY TERMINATE THIS AGREEMENT UPON THIRTY (30) DAYS PRIOR WRITTEN
NOTICE TO MMSA.
B. MMSA MAY TERMINATE THIS AGREEMENT FOR CAUSE:
1. Immediately--
a. Upon failure of DEALER to keep its MMSA dealership operations,
or any part thereof, open for business for a period in excess
of five (5) consecutive business days as required under Section
IV.F. hereof, except in the event such closure or cessation of
operation is caused by some physical event beyond the control
of DEALER, such as civil war, riots, fires, floods,
earthquakes, or other acts of God; or
b. Upon any change in location of the Dealership Premises or upon
any change in the amount or usage of the Dealership Facilities
or in the event DEALER directly or indirectly conducts any of
its MMSA dealership operations at any other location or in any
other facilities, without the prior written consent of MMSA; or
c. Upon the effective date of the expiration or earlier
termination of MMSA'S right to distribute MMSA Products.
2. By Giving Thirty (30) Days Prior Written Notice Upon--
a. Failure of DEALER to obtain or maintain any license, or the
suspension or revocation of any license, necessary for the
conduct by DEALER of its business pursuant to this Agreement; or
b. Failure of DEALER to pay MMSA for any MMSA Products in
accordance with the terms and conditions of this Agreement or
the terms and conditions governing the purchase of such
products; or
c. The death of any Owner or upon the death or incapacity of any
Executive Manager (provided that the terms and conditions of
Section X.D. hereof shall apply in any such case); or
d. Any sale, transfer, relinquishment or other change, voluntary
or involuntary, by operation of law or otherwise, of any
majority interest in the direct or indirect ownership or in the
management of DEALER as set forth in Sections 3 and 4,
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respectively, of the MMSA Dealer Sales and Service Agreement, without the
prior written consent of MMSA; or
e. The inability of DEALER to generally pay its debts as such debts become
due, or the filing of any voluntary or involuntary petition under any
bankruptcy law, or the execution by DEALER of an assignment for the
benefit of creditors, or the appointment for DEALER of a receiver or
trustee or other officer having similar powers for DEALER who is not
removed within thirty (30) days from his appointment thereto, or any levy
under attachment or execution or similar process which is not within ten
(10) days vacated or removed by payment or bonding, or the conviction of
DEALER, or any principal officer or manager of DEALER, of any crime
tending to affect adversely the ownership, operation, management, business
or interests of DEALER or MMSA; or
f. Failure of DEALER to establish or maintain the unrestricted availability
of lines of credit in the amount set forth in the Dealer Development Plan
and under terms approved by MMSA with financial institutions acceptable to
MMSA for use in connection with DEALER'S purchase and maintenance of its
inventory of MMSA Products as required under the provisions of this
Agreement, including, but not limited to, Sections III.C.2. and III.C.4.
hereof; or
g. Impairment of the reputation or financial standing of DEALER or any of its
management subsequent to the execution of this Agreement, or ascertainment
by MMSA subsequent to the execution of this Agreement or any fact existing
at or prior to the time of execution of this Agreement which tends to
impair the reputation or financial standing of DEALER or any of its
management and which would substantially impair the operation of the
dealership; or
h. Any submission by DEALER to MMSA of a false or fraudulent dealership
application report, statement or claim for reimbursement, refund, credit,
or financial information, or submission to a customer of a false or
fraudulent report or statement of any kind, including but not limited to
statements concerning pre-delivery preparation, testing, servicing, repair
or maintenance; or
i. Repeated failure of DEALER'S sales, service and parts personnel, including
but not limited to management, to fully participate in any training and/or
mandatory promotional programs offered by MMSA to DEALER as required under
Sections VII.E.1. and VIII.C.1. hereof; or
j. Failure of DEALER to property obtain, erect, maintain, repair and
illuminate signs and other displays in a manner approved by MMSA as
required under the provisions of this Agreement, including, but not
limited to, Section IV.H. hereof; or
k. Failure of DEALER to procure and maintain an adequate supply of general
and special tools and equipment designated by MMSA as required under the
provisions of this Agreement, including, but not limited to, Section
VIII.B.3. hereof; or
l. Failure of DEALER to maintain good relations with its customers,
including, but not limited to, failure to notify MMSA of complaints by
customers and repeated failure to properly resolve customer complaints as
required under Section VIII.B.4. hereof; or
m. Failure of DEALER to permit authorized MMSA representatives to examine,
audit, reproduce and take for MMSA's use copies of DEALER'S records,
whether or not located on the Dealership Premises, as required under
Section VI.D. hereof; or
n. Failure of DEALER to maintain the minimum inventory of MMSA Vehicles,
whether for showroom display, demonstration or immediate sale, as required
under Section IV.G. hereof; or
o. Failure of DEALER to maintain an adequate stock of parts as required under
section VIII.B.5. hereof; or
p. Failure of DEALER to accept an amended form of MMSA Dealer Sales and
Service Agreement or renewal thereof within thirty (30) days after its
presentation to DEALER, as required under Section 2 of the MMSA Dealer
Sales and Service Agreement; or
q. Failure of DEALER to promote effectively MMSA Products by using sales
promotional literature offered by MMSA; or
r. Failure of DEALER to use proper parts and accessories in the repair and
servicing of MMSA Vehicles as required under Section VIII.A.4. hereof.
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<PAGE> 23
3. By Giving Ninety (90) Days Prior Written Notice Upon--
a. Failure of DEALER to reach and maintain its Minimum Sales
Responsibility as defined in the Dealer Development Plan or to
correct deficiencies described in the Dealer Development Plan, as
required under Section VII.B.1 hereof, or failure of DEALER to
otherwise conduct its business in accordance with any of its
obligations or requirements set forth herein to the satisfaction of
MMSA; or
b. Any material or continuing breach or violation by DEALER of any
other term or provision of this Agreement; or
c. Any dispute, disagreement or controversy between or among partners,
managers, officers or stockholders of DEALER which in the good
faith of MMSA adversely affects the ownership, operation,
management, business or interests of DEALER or MMSA, or the
presence in the management of DEALER of any person who in MMSA's
good faith opinion no longer has the requisite qualifications to
discharge his or her responsibilities.
C. NOTICE AND EFFECT OF TERMINATION
The date of any notice of termination shall be the date such notice is
mailed. Any notice of termination by MMSA shall inform DEALER of the
grounds therefor, and any such notice may be withdrawn if during the
applicable notice period DEALER cures to MMSA's satisfaction the condition
or conditions upon which the notice is based. If any period of advance
notice of termination required hereunder is less than that required by
applicable law, such period of advance notice shall be deemed to be the
minimum period required by such laws.
MMSA's election to terminate this Agreement shall be without the prejudice
to any other right or remedy which may be available to MMSA hereunder or
under applicable law.
D. ESTABLISHMENT OF SUCCESSOR DEALER
1. Because of the Death of an Owner
In the event of termination of this Agreement by MMSA because of
the death of an Owner, pursuant to Section X.B.2.(c) hereof, the
following provisions shall apply:
a. Subject to the other provisions of this Agreement, MMSA shall
offer an MMSA Interim Sales and Service Agreement (a
conditional and temporary sales and service agreement the
term of which may not exceed one (1) year) in the form then
used by MMSA to a successor dealer ("Successor Dealer")
comprised of the person nominated by such deceased Owner as
his or her successor, together with the other Owner(s),
provided that:
(i) the nomination was submitted to MMSA in writing, was
consented to by all remaining Owners, and was approved
by MMSA prior to the death of such Owner;
(ii) either (a) there has been no change in the Executive
Managers of DEALER or (b) the provisions of Section
X.D.2. below have been complied with; and
(iii) the Successor Dealer has capital and facilities
substantially in accordance with MMSA's established
standards and requirements therefor at the time the
MMSA Interim Sales and Service Agreement is offered.
b. If the deceased Owner has not nominated a successor in
accordance with this section, but all of the beneficial
interest of the deceased Owner has passed by will or by the
laws of intestate succession directly to the deceased
Owner's spouse and/or children (the "Proposed New Owners"),
subject to the other provisions of this section, MMSA shall
offer an MMSA Interim Sale and Service Agreement in the form
then used by MMSA to a Successor Dealer comprised of th
Proposed New Owners, together with the other Owner(s),
provided that:
(i) Either (a) there has been no change in the Executive
Managers of DEALER or (b) the provisions of Section
X.D.2. below have been complied with; and
(ii) The Successor Dealer has capital and facilities
substantially in accordance with MMSA's established
standards and requirements therefor at the time the
MMSA Interim Sales and Service Agreement is offered.
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17
<PAGE> 24
2. Because of Death or Incapacity of Executive Manager
In the event of the termination of this Agreement by MMSA because of the
death, physical or mental incapacity of an Executive Manager, subject to
the other provisions of this section of this Agreement, MMSA shall offer
an MMSA Interim Sales and Service Agreement to a Successor Dealer
comprised of the Owners, provided that:
a. Either (i) the Owners have nominated in writing a person to succeed the
deceased or disabled Executive Manager which nomination was approved by
MMSA prior to the event causing the death, disability or incapacity of
such Executive Manager, or (ii) not later than one (1) month after the
occurrence of such death or disabling event a new Executive Manager is
proposed to MMSA by all of the owners and such person is approved by
MMSA; and
b. The Successor Dealer has capital and facilities substantially in
accordance with MMSA's established standards and requirements therefor
at the time the MMSA Interim Sales and Service Agreement is offered.
3. Evaluation of Successor Dealer
During the term of any MMSA Interim Sales and Service Agreement offered
pursuant to Sections X.D.1. or X.D.2. hereof, MMSA will periodically
review the performance of the Successor Dealer using the standards set
forth in the Successor Dealer's Dealer Development Plan. If such
Successor Dealer is able to satisfactorily meet such standards and desires
to continue the dealership operation, the Successor Dealer will be given
an opportunity to enter into an MMSA Dealer Sales and Service Agreement
and such Successor Dealer shall be thereafter treated in the same manner
as any Authorized MMSA Dealer.
4. Termination of Market Representation
Notwithstanding anything stated or implied to the contrary in this
Agreement, MMSA shall not be obligated to offer a dealership agreement to
any Successor Dealer if MMSA notifies DEALER in writing prior to the event
causing the termination of this Agreement that MMSA's market
representation plans do not provide for continuation of that dealership
operation in the Sales Locality.
5. Termination of Offer
Any offer of an MMSA Interim Sales and Service Agreement to a proposed
Successor Dealer made under this Section shall automatically expire if not
accepted within thirty (30) days after presentation by MMSA.
E. CONTINUANCE OF BUSINESS RELATIONS
If, after the effective date of termination or expiration, MMSA chooses to
accept orders from DEALER to fill customers' orders received prior to such
date by DEALER, or if MMSA otherwise transacts business with DEALER relating
to the sale of MMSA Products, all such transactions will be governed by the
terms of this Agreement, so far as those terms are applicable.
Nevertheless, no such acceptance of orders or other acts of MMSA shall waive
termination or constitute a renewal of this Agreement.
F. DISCONTINUANCE OF USE OF MARKS
Upon expiration or termination of this Agreement, DEALER agrees that it
shall immediately:
1. Discontinue the use of the words "Mitsubishi," "MMSA" and all other MMSA
Trademarks, or any semblance of any of the foregoing, including without
limitation, the use of all stationery and other printed material
referring in any way to Mitsubishi, MMSA or MMC, any other manufacturer
of MMSA Products, or bearing any MMSA Trademarks; and
2. Discontinue any use of the words "Mitsubishi," "MMSA" or other MMSA
Trademarks, or any semblance of any of the foregoing, as a part of its
trade name, and file a change or discontinuance of such name with
appropriate authorities; and
3. Remove all product signs bearing any MMSA Trademarks from the Dealership
Premises at DEALER'S sole cost and expenses; and
4. Not represent itself as an Authorized MMSA Dealer; and
5. Refrain from any action including, without limitation, any advertising
stating or implying that it is authorized to sell or distribute MMSA
Products.
<PAGE> 25
In the event Dealer fails to comply with the terms and conditions of this
Section X.F., MMSA shall have the right to enter upon the Dealership
Premises and remove all such signs bearing any MMSA Trademarks without
liability to Dealer; and Dealer agrees that it shall reimburse MMSA for any
costs and expenses incurred in connection therewith, including but not
limited to reasonable attorneys' fees.
G. REPURCHASE PROVISIONS
Upon the expiration or termination of the Agreement, MMSA may at its option
purchase from Dealer all or any part of the following:
1. New, unused, undamaged current model year MMSA Vehicles then unsold in
Dealer's inventory. The prices of such vehicles shall be the lower of
(i) the price at which they were originally purchased by Dealer from
MMSA, or (ii) the Invoice Price last established by MMSA for the sale
of identical vehicles to MMSA Dealers in the area in which Dealer is
located, less in either case all prior refunds or allowances, if any,
made by MMSA with respect thereto, and also less any costs and
expenses required to place the repurchased vehicles in new car
condition.
2. New, unused and undamaged MMSA Parts and Accessories then unsold in
Dealer's inventory which are in good and saleable condition, provided
that they are listed in the then current MMSA Master Parts Price List
and have not been superseded by another part or accessory. All such
parts and accessories must be in the original container bearing a
label with the appropriate part identification number. Should MMSA
elect to purchase parts, the repurchase price shall be the price last
established by MMSA for the sale of identical MMSA Parts or
Accessories to MMSA Dealers in the area in which Dealer is located,
less the maximum dealer's discount available under the most favorable
purchase terms available to Dealer and also less handling and packing
charges then in effect as established by MMSA.
If DEALER purchased MMSA Parts and Accessories from sources other
than MMSA, DEALER must present to MMSA evidence of the price which it
paid for such parts before MMSA will consider repurchasing such
parts. In no event shall MMSA pay a price which exceeds the price
for any part as calculated hereinabove.
3. Tools and equipment especially designed for servicing MMSA Vehicles.
The prices for such tools and equipment shall be as mutually agreed
upon by MMSA and Dealer.
4. Signs recommended by MMSA for identification of, Dealer. The prices
of such signs shall be as mutually agreed upon by MMSA and Dealer.
Within thirty (30) days after the date of expiration or termination of this
Agreement, Dealer shall deliver or mail to MMSA a detailed inventory of all
items referred to in subsections 1, 2, 3 and above and Dealer shall certify
the truth thereof. In the event Dealer fails to supply such a list to MMSA
within said period, MMSA shall have the right to enter the Dealership
Premises, without liability to Dealer, for the purpose of compiling such an
inventory list; and DEALER shall reimburse MMSA for any costs and expenses
incurred in connection therewith. If, upon review of the inventory list,
MMSA decides to purchase any of the items in subsections 1-4 hereinabove,
MMSA will, within a reasonable period of time, provide Dealer with a
written offer specifying the items MMSA wishes to purchase. Dealer shall
act promptly in arranging for the sale and delivery of such items to MMSA.
If Dealer fails to promptly cooperate in effectuating the sale, MMSA may,
at its option, withdraw its offer to repurchase.
Any purchase made hereunder shall be deemed to be only with respect to
those items which were purchased by Dealer from MMSA, unless MMSA by its
notice of such purchase states otherwise. Dealer agrees that products to be
purchased by MMSA from Dealer shall be delivered by Dealer to MMSA's place
of business at Dealer's expense; or, if Dealer fails to do so, MMSA may
transport such products and deduct the costs therefor from the repurchase
price. Dealer agrees to execute and deliver to MMSA instruments
satisfactory to MMSA conveying title to the aforesaid property to MMSA. If
such property is subject to any lien or charge of any kind, Dealer agrees
to procure the discharge and satisfaction thereof prior to the repurchase
of such property by MMSA.
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<PAGE> 26
XI. POLICY REVIEW BOARD
A. ESTABLISHMENT OF POLICY REVIEW BOARD
In the interest of maintaining harmonious relations between MMSA and
DEALER and to provide for the resolution of protests, controversies and
claims related to the transactions contemplated under this Agreement,
MMSA shall establish the Mitsubishi Motor Sales of America, Inc. Policy
Review Board (the "Policy Review Board") to be comprised of two
corporate officer and one MMSA Dealer representative. DEALER agrees to
abide by the procedures of the Policy Review Board, as they may be
revised from time to time by MMSA.
B. APPEAL OF DEALER APPOINTMENT TO POLICY REVIEW BOARD
If, as a result of a market analysis undertaken by MMSA, MMSA proposes
to appoint an additional MMSA Dealer in the Sales Locality, and if
DEALER objects to such proposed addition, DEALER may file a written
objection to such proposed addition with the Policy Review Board in
accordance with the procedures established therefor within fifteen (15)
days from the date of DEALER'S receipt of notice of MMSA's intent to
appoint such additional MMSA Dealer. MMSA will not appoint such
additional dealer until the Policy Review Board has rendered its
decision on the matter and any decision of the Policy Review Board
shall be binding on MMSA but not on DEALER.
C. APPEAL OF TERMINATION TO POLICY REVIEW BOARD
Any protests, controversies or claims by DEALER (whether for damages,
stays of action or otherwise) with respect to any termination of this
Agreement or the settlement of the accounts of DEALER with MMSA after
termination of this Agreement has become effective shall be appealed by
DEALER to the Policy Review Board within fifteen (15) days after
DEALER'S receipt of notice of termination or, as to settlement of
accounts after termination, within six (6) months after the termination
has become effective. Appeal to the Policy Review Board shall be a
condition precedent to DEALER'S right to pursue any other remedy
available under this Agreement or otherwise available under law. MMSA,
but not DEALER, shall be bound by the decision of the Policy Review
Board.
D. ARBITRATION OF CLAIMS BY DEALER
If DEALER is dissatisfied with a decision of the Policy Review Board in
a case arising under Section XI.C. hereof, DEALER may submit the matter
to binding arbitration as hereinafter provided.
1. Arbitration shall be initiated by DEALER by filing a written request
therefor within fifteen (15) days after DEALER'S receipt of notice
of the decision of the Policy Review Board issued under Section
XI.C. hereof. DEALER'S written request to arbitrate, together with
the appropriate filing fee, shall be filed by DEALER with the office
of the American Arbitration Association located nearest to the
Dealership Premises, which shall then become the site of arbitration
proceedings, unless otherwise agreed to by the parties. The
arbitration request shall set forth a clear and complete statement
of the nature of DEALER'S claim and its basis, the amount involved,
if any, and the remedy sought.
2. Arbitration shall be the sole and exclusive remedy of DEALER in such
cases, and the decision and award of the arbitrator shall be final
and binding on both parties.
3. The arbitration shall be conducted in accordance with the Commercial
Rules of the American Arbitration Association then in effect
(hereinafter referred to as the "Commercial Rules") and in
consonance with the United States Arbitration Act (9 U.S.C. Section
1, et seq.).
4. The arbitration shall be heard by a single, impartial arbitrator
mutually agreeable to the parties, who shall be an attorney at law
admitted to practice for at least five (5) years and selected from a
panel of American Arbitration Association arbitrators. If the
parties shall fail to reach such an agreement within fifteen (15)
days of the DEALER'S request to arbitrate, an arbitrator meeting
such qualifications shall be named by the American Arbitration
Association from such panel in accordance with the Commercial Rules.
5. If the arbitrator finds that termination of this Agreement by MMSA
would be in accord with the provisions hereof, the standards set
forth in the Automobile Dealer Suits Against Manufacturers Act, 15
U.S.C. Sections 1221-1225 (the "Dealer's Day in Court Act"), and any
applicable state or local law, the arbitrator shall render an award
in favor of MMSA,
[MITSUBISHI LOGO]
<PAGE> 27
the termination shall become effective on the date of such award,
and the termination shall be expressly recognized by Dealer as
having been made by MMSA without breach by MMSA of this Agreement,
the Dealer's Day in Court Act, or any applicable state or local
law. If the arbitrator shall render an award in favor of Dealer,
MMSA's notice of termination shall be void and shall not be deemed
to constitute a breach of this Agreement. The decision and award
of the arbitrator shall be conclusive as to all matters within the
arbitrator's jurisdiction in all other proceedings between the
parties, their successors or assigns, and judgment upon the award
may be entered in any Court of competent jurisdiction.
6. To facilitate the selection of a competent and experienced
arbitrator, the parties agree to make reasonable arrangements to
compensate the arbitrator for the time spent in the performance of
his or her duties. The compensation shall be commensurate with the
professional standing of the arbitrator and shall be arranged in
conformance with the Commercial Rules. The compensation of the
arbitrator, the administrative fees and charges of the American
Arbitration Association, and the other expenses of the arbitration
shall be borne by the parties as provided in the Commercial Rules.
The arbitrator shall, however, have discretion in the arbitrator's
award to assess such compensation, administrative fees and charges
and other expenses of the arbitration against either party in such
proportions (or in their entirety) as the arbitrator may determine
to be fair and equitable, provided that in all cases each party
shall pay the fees and disbursements of its own legal counsel.
7. Unless MMSA and Dealer specifically agree to the contrary, and
subject to the Commercial Rules and the procedures of the American
Arbitration Association, the arbitration hearing shall be
concluded not more than sixty (60) days after the date of Dealer's
written request to arbitrate.
XII. GENERAL PROVISIONS
A. Indemnification
1. Dealer shall defend and indemnify MMSA and any manufacturer of
MMSA Products and hold each of them harmless from any and all
liabilities that may be asserted or arise by reason or out of: (a)
Dealer's failure or alleged failure to comply, in whole or in
part, with any obligation assumed by Dealer pursuant to this
Agreement; (b) Dealer's negligent or improper, or alleged
negligent or improper, repairing or servicing of new or used MMSA
Vehicles or equipment, or such other motor vehicles or equipment
as may be sold or serviced by Dealer; (c) Dealer's breach, or
alleged breach, of any contract between Dealer and Dealer's
customer; or (d) Dealer's misleading statement or
misrepresentation, or alleged misleading statement or
misrepresentation, either direct or through advertisement, to any
customer of Dealer. This indemnification shall include all
attorneys' fees, court costs and expenses incurred by MMSA and/or
any manufacturer of MMSA Products in defending any claim or suit
asserted as a result of the foregoing.
In the event that any legal action arising out of any of the
foregoing causes or alleged causes is brought against MMSA, any
manufacturer of MMSA Products and/or any of their shareholders,
then Dealer shall undertake, at its sole expense, the defense of
said action on their behalf. Should any tender of such defense be
refused by Dealer, then MMSA, any manufacturer of MMSA Products
and/or any of their shareholders shall conduct such defense; and
Dealer shall be liable to MMSA, any manufacturer of MMSA Products
and/or any of their shareholders for costs of such defense,
including attorneys' fees, together with any judgement or
settlement paid by MMSA, any manufacturer of MMSA Products and/or
any of their shareholders.
Dealer shall have no obligation to indemnify MMSA and/or any
manufacturer of MMSA Products pursuant to this paragraph if the
injury or damage as to which indemnification is demanded is
alleged to have been caused or contributed to in any way by any
act or omission by MMSA and/or any manufacturer of MMSA Products.
2. MMSA and/or any manufacturer of MMSA Products shall indemnify
Dealer and hold it harmless from any and all claims for personal
injury or property damage resulting from the alleged
malfunctioning of an MMSA Product claimed to have been caused by a
factory defect or deficiency in design of such product. This
indemnification shall include all attorneys' fees, court costs and
expenses incurred by Dealer in defending any claim or suit
asserted as a result of the foregoing.
21
<PAGE> 28
In the event that any legal action arising out of any of the foregoing
causes or alleged causes is brought against Dealer and/or any of their
shareholders, than MMSA and/or any manufacturer or MMSA Products shall
undertake, at its sole expense, the defense of said action on their behalf.
Should any tender of such defense be refused by MMSA and/or any
manufacturer of MMSA Products, the Dealer, and/or any of their
shareholders, shall conduct such defense; and MMSA and/or any manufacturer
of MMSA Products shall be liable to Dealer, and/or any of their
shareholders for costs of such defense, including attorneys' fees, together
with any judgment or settlement paid by Dealer, and/or any of their
shareholders.
MMSA and/or any manufacturer of MMSA Products shall have no obligation to
indemnify Dealer pursuant to this paragraph if the injury or damage as to
which indemnification is demanded is alleged to have been caused or
contributed to in any way by any act or omission by Dealer, including, but
not limited to, improper or unsatisfactory service or repair,
misrepresentation or any claim of Dealer's unfair or deceptive trade
practice.
3. Any party seeking indemnification shall promptly give written notice to the
proposed indemnitor of any lawsuit and provide copies of any pleadings
which have been served, together with all information then available
regarding the circumstances giving rise to the suit. The proposed
indemnitee shall at all times take all reasonable steps to insure that the
defense of such lawsuit is not prejudiced by its action or inaction. The
parties shall cooperative fully in the defense of such lawsuit in such
manner and to such extent as the indemnitor may reasonably require.
B. NO IMPLIED WAIVERS
Any failure of either party at any time to require performance by the other
party of any provision hereof shall in no way affect the full right to
require such performance at any time thereafter, nor shall any waiver by
either party of a breach of any provision hereof constitute a waiver of any
succeeding breach of the same or any other provision, nor constitute a
waiver of the provision itself. The election by either party of a
particular remedy on default (including but not limited to termination of
this Agreement) will not be exclusive of any other remedy provided
hereunder or by applicable law, and all rights and remedies of the parties
hereto will be cumulative.
C. WAIVER OF TRIAL BY JURY
For all disputes, controversies or claims which may arise between MMSA and
Dealer out of, or in connection with, this Agreement, its construction,
interpretation, effect, performance or nonperformance, termination or the
consequences thereof, or in connection with any transaction between them
contemplated hereby, MMSA and Dealer hereby waive, to be the extent
permitted by law, the right to trial by jury.
D. DEALER NOT AGENT OR REPRESENTATIVE
This Agreement does not make Dealer the agent or legal representative of
MMSA or any other manufacturer of MMSA Products for any purpose whatsoever.
Dealer is not granted any express or implied right or authority to assume
or to created any obligation or responsibility on behalf of or in the name
of MMSA or nay other manufacturer of MMSA Products or to bind either in any
manner whatsoever.
E. ASSIGNMENT
Neither party may assign this Agreement or any of its interest herein
without the prior written consent of the other party, except that MMSA may
assign this Agreement without such consent to any person, firm or
corporation succeeding to its business and to any subsidiary or affiliated
company of MMSA.
F. EXPENSES
Except as provided in this Agreement, MMSA shall not be under any liability
whatsoever for any expenditure made or incurred by Dealer in connection
with Dealer's performance of its obligations pursuant to this Agreement.
<PAGE> 29
G. TAXES
DEALER agrees that it shall be responsible for and shall duly pay any
and all sales taxes, use taxes, excise taxes,and other governmental or
municipal charges, whenever imposed, levied or based upon the sale of
MMSA to DEALER and shall maintain accurate records of same for reporting
purposes. DEALER agrees to pay and to hold MMSA harmless from any sales
tax, use tax or similar tax, and any claims or demands (whether or not
lawful) made by tax authorities with respect to such taxes, applicable
with respect to the sale of MMSA Products from MMSA to DEALER and from
DEALER to its customers.
23
<PAGE> 1
EXHIBIT 10.25
[LOGO]
CHEVROLET-GEO CHEVROLET
DEALER SALES AND SERVICE AGREEMENT GEO
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
DAY'S CHEVROLET, INC. , a
- ---------------------------------------------------------------------------
Dealer Firm Name
[ ] GEORGIA corporation, incorporated on OCTOBER 28, 1959;
---------------- ----------------
[ ] proprietorship;
[ ] partnership;
[ ] other - specify
-----------------------------------------------------------
doing business at 4461 SOUTH MAIN STREET
------------------------------------------------------------
ACWORTH, GEORGIA 30101-5597 ("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,
provides 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:
ALVIN L. DIEMER
- -------------------------------------------------------------------------------
CALVIN L. DIEMER
- -------------------------------------------------------------------------------
<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.
1. 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.
2. 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.
3. Dealer Council formally convenes up to three times a year. Individual
Council members may be asked to attend additional meetings 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.
4. 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.
1. 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.
2. 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 performance.
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
(1) 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
(2) 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.
(3) New Tool Requirements:
Decisions on additional equipment, tool and communication requirements will be
determined in accordance with Paragraph Fourth of the agreement.
<PAGE> 5
SEVENTH
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 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
Terms 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, Area of Primary Responsibility, Motor Vehicle Addendum and Multiple
Dealer Operator Addendum, if applicable, which have not been executed at the
time of this agreement.
DAY'S CHEVROLET, INC.
- -------------------------------------------------------------------------------
Dealer Firm Name
Chevrolet Motor Division
GENERAL MOTORS CORPORATION
By By
---------------------------- ---------------------------------
Dealer Operator General Sales and Service Manager
By By 11/1/95
---------------------------- ---------------------------------
Dealer Operator Authorized Representative
<PAGE> 1
EXHIBIT 10.26
DEALER NUMBER TN010
KIA DEALER SALES AND SERVICE AGREEMENT
This is an Agreement between Kia Motors America, Inc. (COMPANY), and
Grindstaff, Inc. (DEALER), [ ] an individual, [ ] a partnership organized under
the laws of the state of __________, [X] a corporation duly incorporated in the
state of Tennessee, and doing business as Grindstaff Kia.
PURPOSES AND OBJECTIVES OF THIS AGREEMENT
COMPANY imports and distributes in the United States automotive products
("Kia Product" or "Kia Products") manufactured or approved by Kia Motors
Corporation ("KMC"). It is of vital importance to COMPANY that Kia Products are
sold and serviced in a manner which promotes customer satisfaction and
confidence and leads to increased product acceptance. Accordingly, COMPANY
seeks a network of authorized dealers, operating at approved locations and in
accordance with certain standards, to sell and service Kia Products. DEALER
desires to become one of COMPANY's authorized dealers. Based upon the
representations and promises of DEALER as set forth herein. COMPANY agrees to
appoint DEALER as an authorized Kia Dealer and welcomes DEALER to COMPANY's
network of authorized dealers of Kia Products.
This Agreement sets forth the rights and responsibilities of COMPANY and
DEALER with respect to the sale and service of Kia Products. COMPANY enters
into this Agreement expressly relying upon DEALER's integrity, ability,
assurance of personal services, expressed intention to deal fairly with the
consuming public and with COMPANY, and promise to adhere to the terms and
conditions herein. Likewise, DEALER enters into this Agreement in reliance upon
COMPANY's integrity, expressed intention to deal fairly with DEALER and the
consuming public, and promises to adhere to the terms and conditions herein.
The parties to this Agreement acknowledge that the success of the relationship
between COMPANY and DEALER depends upon mutual understanding, cooperation,
trust and confidence of both COMPANY and DEALER.
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<PAGE> 2
DEALER NUMBER TN010
--------
PART I
SPECIFIC TERMS
Part I contains specific terms which relate to specific referenced
paragraphs within the Standard Provisions set forth in Part II attached hereto
and incorporated herein by reference.
Paragraph I. DEALER is owned by the following persons and no others:
OWNERS
OWNERSHIP
NAME RESIDENCE PERCENTAGE
- ---- --------- ----------
Steve E. Grindstaff 1506 Crystal Springs Rd. 65%
- ------------------- ------------------------ ----------
Johnson City, TN 37601
Wesley D. Hambrick 743 Quail Hollow Drive 5%
- ------------------- ------------------------ ----------
Elizabethton, TN 37643
Qualified Subchapter S Trust Agreement for the benefit
of Amie Rebecca Grindstaff Pearson 15%
----------
Qualified Subchapter S Trust Agreement for the benefit
of Renee Michelle Grindstaff Mullins 15%
-----------
Paragraph II. DEALER is managed by the following persons:
OFFICERS
NAME RESIDENCE TITLE
- ---- --------- -----
Steve E. Grindstaff Same as above CEO/Secretary
- --------------------- ------------------------ --------------
Mary Ellen Williams N/A President
- --------------------- ------------------------ --------------
Wesley D. Hambrick Same as above Vice President
- --------------------- ------------------------ --------------
Candace K. Grindstaff N/A Treasurer
- --------------------- ------------------------ --------------
DEALER OPERATOR
NAME RESIDENCE
- ---- ---------
Steve E. Grindstaff Same as above
- ------------------- ------------------------
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<PAGE> 3
DEALER NUMBER TN010
-------
Paragraph III. DEALER is authorized to operate its Kia Dealers at the
following locations and no others:
New Vehicle Sales and Showroom 2224 West Elk Avenue
----------------------
(street address)
Elizabethton, TN 37643
----------------------
(city, state, zip)
Used Vehicle Display and Sales Same as above
----------------------
(street address)
----------------------
(city, state, zip)
Parts and Service Same as above
----------------------
(street address)
----------------------
(city, state, zip)
Body and Paint Same as above
----------------------
(street address)
----------------------
(city, state, zip)
Sales and General Office Same as above
----------------------
(street address)
----------------------
(city, state, zip)
Other Facilities
Purpose: N/A ----------------------
------------ (street address)
----------------------
(city, state, zip)
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<PAGE> 4
DEALER NUMBER TN010
----------
CERTIFICATION
By their signatures hereto, the parties certify that they have read
and understand this Agreement, including the Standard Provisions contained in
Part II and Exhibits A through E incorporated herein, and agree to abide and
be bound by all of its terms and conditions.
Grindstaff, Inc.,
dba Grindstaff Kia (DEALER)
--------------------
(Dealer Entity Name)
DATE: 5-13-96 By: /s/ STEVE E. GRINDSTAFF CEO/Secretary
------- ------------------------------ -------------
(Signature) (Title)
Steve E. Grindstaff
All Owners of DEALER
DATE: 5-13-96 By: /s/ STEVE E. GRINDSTAFF 65%
------- ------------------------------ -------------
(Signature) (Ownership
Steve E. Grindstaff Percentage)
DATE: 5-13-96 By: /s/ WESLEY D. HAMBRICK 5%
------- ------------------------------ -------------
(Signature) (Ownership
Wesley D. Hambrick Percentage)
DATE: 5-13-96 By: /s/ [ILLEGIBLE] Trust Officer 15%
------- ------------------------------ -------------
(Signature) (Ownership
Percentage)
On behalf of SunTrust Bank, Northeast Tennessee, N.A.,
Trustee Under the Qualified Subchapter S Trust Agreement for
the benefit of Amie Rebecca Grindstaff Pearson
DATE: 5-13-96 By: /s/ [ILLEGIBLE] Trust Officer 15%
------- ----------------------------- -------------
(Signature) (Ownership
Percentage)
On behalf of SunTrust Bank, Northeast Tennessee, N.A.,
Trustee Under the Qualified Subchapter S Trust Agreement for
the Benefit of Renee Michelle Grindstaff Mullins
Kia Motors America, Inc. (COMPANY)
DATE: 5/16/96 By: /s/ W.G. WARNER COO/EVP
------- ----------------------------- ------------
(Signature) (Title)
W.G. Warner
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<PAGE> 5
PART II
STANDARD PROVISIONS
I. OVERVIEW OF RIGHTS GRANTED TO DEALER
Subject to the terms of this Agreement, COMPANY hereby appoints DEALER
and grants DEALER the non-exclusive right (i) to buy and resell the Kia Products
identified in the Kia Product Addendum, attached hereto as Exhibit A, as such
addendum may be revised by COMPANY from time to time; (ii) to identify itself as
an authorized Kia Dealer at the location(s) specified in Part I and in the
manner specified in Part II; and (iii) to use the Kia Marks (as defined herein)
in the advertising, promotion, sale and servicing of Kia Products in accordance
with Part II. Paragraph IX.A.3. As provided herein, COMPANY expressly reserves
the unrestricted right to sell Kia Products itself and to grant others the right
to sell Kia Products, whether or not in competition with DEALER.
II. OVERVIEW OF RESPONSIBILITIES ACCEPTED BY DEALER
DEALER accepts its appointment as an authorized Kia Dealer and agrees
to (i) vigorously and aggressively sell and promote Kia Products; (ii)
satisfactorily service Kia Products, regardless of where sold and by whom and
whether or not under warranty; and (iii) establish and maintain satisfactory Kia
dealership facilities at, and only at, the location(s) specified in Part I, all
in strict accordance with the terms and conditions of this Agreement.
III. TERM OF THIS AGREEMENT
Unless otherwise agreed by the parties hereto in a written addendum to
this Agreement, the term of this Agreement shall commence as of the date COMPANY
signs it (at the end of Part I) and continue in effect until ended by mutual
agreement, superseded pursuant to Paragraph XVI.L below, or terminated in
accordance with Article XII below. The continuation of business relations
between the parties following termination of this Agreement shall be on a
day-to-day basis and subject to the provisions of this Agreement. Such a
continuation shall not be deemed a waiver of the right of termination nor shall
it imply that either party has committed to continue to do business with the
other at any time in the future.
IV. OWNERSHIP OF DEALER
COMPANY enters into this Agreement in reliance upon DEALER's
representation that the person(s), and only the person(s) identified in Part I
will
-5-
<PAGE> 6
be the owner(s) of DEALER ("Owner" or "Owners") and that such Owners are
committed to the achievement of the purposes and objectives of this Agreement
and agree to abide by its terms and conditions, as evidenced by their
signature(s) under the heading "CERTIFICATION" in Part I. There shall be no
direct or indirect change in the identity of any Owner or any Owner's relative
percentage interest in DEALER or in any entity which holds an ownership interest
in DEALER other than in strict compliance with Article XI of this Agreement,
including the payment of COMPANY's then current transfer fee.
V. MANAGEMENT OF THE DEALERSHIP
COMPANY and DEALER agree that active, day-to-day Owner involvement and
the retention of qualified management are critically important to the successful
operation of DEALER's Kia dealership. DEALER therefore agrees, and COMPANY
enters into this Agreement in reliance upon DEALER's agreement that the
individual identified in Part I as the Dealer Operator, and no other person,
will, at all times, be an Owner, be in complete charge of DEALER's Kia
dealership operations and will have total authority to make all decisions with
respect to DEALER's Kia dealership operations. DEALER further agrees that the
Dealer Operator shall devote his or her substantial efforts to DEALER's Kia
dealership operations. There shall be no change in the identity of the Dealer
Operator except with COMPANY's prior written consent and the payment to COMPANY
of its then current fee for processing such changes.
VI. APPROVED DEALER LOCATION(S)
In order that COMPANY may establish and maintain an effective network
of authorized Kia dealers, DEALER agrees that it shall conduct its Kia
dealership operations only in the facilities and at the locations identified in
Part I and approved by COMPANY for the conduct of DEALER's Kia dealership
operations and display of the Kia Marks.
DEALER may not, either directly or indirectly, establish or conduct any
Kia dealership operations of the type contemplated in this Agreement, including
without limitation the display, sale or servicing of Kia Products, or display
the Kia Marks at any facility or location other than those identified in Part I.
Also, DEALER may not modify or change the usage or function of any facility or
location or utilize any facility or location for any purpose other than the
function indicated in Part I without the prior written consent of COMPANY.
-6-
<PAGE> 7
VII. SALE, TERMS AND DELIVERY OF, AND CHANGES IN, KIA PRODUCTS
A. DEALER'S APPOINTMENT AND RIGHT TO PURCHASE KIA PRODUCTS.
DEALER accepts the appointment provided for in Article I above and
understands that by its appointment as a Kia Dealer, DEALER is not being granted
an exclusive right to sell Kia Products in any specified geographic area. DEALER
shall have the non-exclusive right to purchase Kia Products from COMPANY in
accordance with the provisions set forth in this Agreement and such other
requirements as may be established from time to time by COMPANY.
B. COMPANY'S WILLINGNESS TO SELL AND RIGHT TO ALLOCATE KIA PRODUCTS.
COMPANY shall endeavor to provide Kia Products to DEALER in such
quantities and types as may be required by DEALER to fulfill its obligations to
sell and service Kia Products under this Agreement (subject to available supply,
COMPANY's marketing requirements, and any change or discontinuance with respect
to any particular Kia Product). COMPANY and DEALER recognize that certain Kia
Products may be in short supply from time to time. Where COMPANY determines such
shortage exists, COMPANY will allocate the affected Kia Products among its
DEALERS in a fair and equitable manner. DEALER acknowledges and agrees that
COMPANY may consider, among other things, DEALER's sales performance, sales
potential, dealership facilities, service capacity, and customer satisfaction
performance, in determining the quantity of Kia Products to allocate to DEALER.
COMPANY agrees to provide DEALER with an explanation of the method used to
allocate such Kia Products upon request.
C. PRICES AND OTHER TERMS OF SALE
COMPANY shall have the right from time to time to establish and revise
prices and other terms of its sale of Kia Products to DEALER. Revised prices,
terms or provisions shall apply to any Kia Products not yet invoiced by COMPANY
at the time such notice of change is given to DEALER in the case of vehicles or
upon issuance of a new or modified price list or through appropriate change
notices, bulletins, letters, or revisions in the case of parts, options and
accessories or at such other times as may be designated by COMPANY in writing.
Any amounts owed by DEALER to COMPANY that are not paid when due shall be
subject to a late charge as established by COMPANY and permitted by law. The
payments by DEALER to COMPANY shall be made in such a manner as prescribed by
COMPANY and shall be applied against DEALER's indebtedness in accordance
with COMPANY's policies and practices.
-7-
<PAGE> 8
D. DELIVERY OF KIA PRODUCTS.
1. Mode And Place Of Delivery. COMPANY shall select the distribution
points, mode of transportation and shipment terms and shall pay carrier(s) for
all charges in effecting delivery of Kia Products to DEALER. COMPANY will
invoice DEALER for such charges as COMPANY may from time to time establish for
such transportation services, and DEALER agrees to pay COMPANY for such charges.
2. Diversion Charges. If COMPANY is required to divert any Kia Product
which DEALER has agreed to purchase and which is not canceled prior to shipment
by COMPANY, because of DEALER's failure or refusal to accept such Kia Product,
DEALER agrees to assume responsibility for and pay any charges incurred by
COMPANY as a result of such diversion. DEALER's responsibility for such charges
shall not exceed the charge of returning any such product to the original point
of shipment by COMPANY plus all charges for demurrage, storage and/or other
charges related to such diversion. DEALER also agrees to assume responsibility
for and shall pay any and all charges accruing after arrival of shipment at the
distribution point established by COMPANY, which result from DEALER'S failure or
refusal to accept any Kia Product which DEALER had agreed to purchase and did
not cancel prior to shipment.
3. Delay Or Failure Of Delivery. COMPANY shall not be liable for delay
or failure to deliver Kia Products which it has previously agreed to deliver,
where such delay or failure to deliver is the result of any event beyond the
control of COMPANY, including without limitation any law or regulation of any
governmental entity, acts of God, foreign or civil wars, riots, interruptions of
transportation, fires, floods, storms, strikes, lockouts, or other labor
troubles, embargoes, blockades, or delay or failure of KMC or other suppliers of
COMPANY to deliver Kia Products.
4. Damage Claims Against Carriers. DEALER shall promptly notify
COMPANY of any damage occurring during transit and shall, if so directed by
COMPANY, assist in filing claims against the transportation carrier for damages.
DEALER agrees to assist COMPANY in obtaining recovery against any transportation
carrier or insurer for loss or damage to Kia Products shipped hereunder. COMPANY
shall not be liable for loss or damage to Kia Products sold hereunder occurring
after their delivery to DEALER. To the extent required by law, DEALER shall
notify the purchaser of any damaged vehicle of the damage sustained by that
vehicle prior to sale. DEALER shall indemnify and hold COMPANY harmless from any
liability resulting from DEALER's failure to so notify such a purchaser.
-8-
<PAGE> 9
E. CHANGES IN DESIGN, SPECIFICATIONS OR AVAILABILITY.
DEALER understands and agrees that there may be changes in the design
or specifications of one or more Kia Products or in the availability of any Kia
Product and that COMPANY is under no obligation to provide change notices nor to
make similar changes upon any product previously purchased by or shipped to
DEALER. No change shall be a model year change unless so specified by COMPANY.
F. DISCONTINUANCE OF MANUFACTURE, IMPORTATION OR DISTRIBUTION.
The manufacture, production, importation and distribution of any or
all Kia Products, whether motor vehicles, parts, options or accessories,
including any model, series or body style of any Kia vehicle, may be
discontinued at any time without any obligation or liability to DEALER on the
part of either COMPANY or KMC by reason thereof.
-9-
<PAGE> 10
VIII. BUSINESS PLANNING AND PERFORMANCE REVIEW
A. BUSINESS AND OPERATING PLAN.
In consultation with COMPANY, DEALER has prepared a business and
operating plan ("Plan"), attached hereto as Exhibit B, which describes how
DEALER will (i) develop the Area of Primary Responsibility ("APR") assigned to
DEALER by COMPANY and set forth in the Plan and (ii) fulfill its sales and
service commitments under this Agreement. The Plan consists of a business
portion and an operating portion, containing the information set forth in
Exhibit C, attached hereto titled "Business and Operating Plan Contents." DEALER
hereby agrees to develop its APR and conduct its operations in accordance with
the Plan, as revised from time to time pursuant to Paragraph B below.
B. ANNUAL PLAN REVIEW.
DEALER agrees to update the Plan annually or more often as desired or
necessary and submit it to COMPANY for joint review. The process of updating
each Plan shall include a performance evaluation and review of proposed
modifications to the prior year's Plan as contemplated by Paragraph C below.
The Plan shall be subject to COMPANY'S final approval.
C. PERFORMANCE EVALUATION.
DEALER'S performance of its obligations is essential to the effective
representation of Kia Products and to the reputation and goodwill of COMPANY,
DEALER and other Kia Dealers. Therefore, DEALER agrees to review its performance
against the prior year's Plan in its updated Plan. COMPANY and DEALER will use
this analysis and any other factors COMPANY or DEALER deems appropriate as the
basis for jointly evaluating DEALER's performance so that any necessary
improvements can be made. Factors considered in evaluating DEALER's performance
will include, without limitation, the attainment of or failure to attain the
prior year's objectives. DEALER's performance trends, DEALER's financial
performance and the manner in which DEALER has conducted its operations.
Periodic facility evaluations will be conducted, including an evaluation of
DEALER's compliance with current requirements and standards for dealership
facilities under the Plan.
-10-
<PAGE> 11
IX. OPERATION OF BUSINESS AND BUSINESS PRACTICES
A. IN GENERAL.
1. Location, Facilities And Equipment. DEALER shall establish and
maintain a place of business at one or more locations mutually satisfactory to
DEALER and COMPANY and set forth in Part I. The location(s) shall contain space
for the attractive and orderly storage, display, sales and service of Kia
Products and the sale of used vehicles of any kind as well as customer parking,
and waiting and office functions and any other functions specified by COMPANY.
The location, size, configuration, layout and decor of such space shall conform
to whatever standards and specifications COMPANY may from time to time adopt,
including without limitation standards and specifications which may require
DEALER to upgrade and expand its Kia dealership facilities, and shall at all
times enable DEALER to perform fully its responsibilities under this Agreement.
DEALER shall acquire and maintain, at DEALER's sole cost and expense, each and
every item (in whatever quantity COMPANY reasonably specifies) of equipment
listed on the Required Equipment Addendum attached hereto as Exhibit D as such
Addendum may be revised by COMPANY from time to time, and such other equipment
as is approved by COMPANY and otherwise necessary to enable DEALER to perform
fully its responsibilities under this Agreement. Upon request, DEALER agrees to
provide COMPANY access to a secure area for after-hours vehicle or parts
delivery.
2. Hours Of Operation. DEALER shall be open for business during not
less than those days and hours that are customary and lawful for DEALER's
operations in the community in which DEALER's Kia dealership is located and in
accordance with industry standards.
3. Signs And Use Of Kia Marks And Related Rights.
a. Signs. DEALER shall identify DEALER's Kia dealership locations
as authorized sales and service establishments (as the case may be) for Kia
Products with such signs as are consistent with standards established by COMPANY
from time to time and approved by COMPANY with respect to any display of the Kia
Marks.
b. Grant Of Rights. COMPANY grants to DEALER the non-exclusive
privilege of displaying or otherwise using the Kia name and those trademarks,
service marks, logos, trade dress, and other intellectual property rights ("Kia
Marks") as are specified in the Kia Marks Addendum attached hereto as Exhibit E
(as such Addendum may be revised by COMPANY from time to time), in connection
with the selling and servicing of Kia Products. DEALER agrees that it will
promptly discontinue the display and use of any and all Kia Marks, and shall
change the manner in which any Kia Marks are displayed and used, when and for
any reason COMPANY requests that it do so. DEALER may use the Kia Marks only at
the location(s) identified in Part I and for the purposes stated in this
Agreement. DEALER agrees that none of the Kia Marks may be
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used as part of DEALER's name or the name under which DEALER's business is
conducted without the prior written consent of COMPANY.
c. Discontinuance Of Use. Upon the termination of this Agreement for
any reason, DEALER agrees that it shall immediately:
(i) Discontinue the use of the word "Kia" and the Kia Marks, or
any semblance thereof, including without limitation the use of all stationery,
telephone directory listings and other printed material referring in any way to
the word "Kia" or bearing any of the Kia Marks;
(ii) Discontinue the use of the word "Kia" and the Kia Marks, or
any semblance of the same, as part of DEALER's business or corporate name, and
file a change or discontinuance of such name with the appropriate authorities;
(iii) Remove and return to COMPANY all product signs bearing the
word "Kia" or any of the Kia Marks;
(iv) Cease representing itself as an authorized Kia Dealer; and
(v) Refrain from any action, including without limitation any
advertising, stating or implying that it is authorized to sell or distribute Kia
Products. If DEALER fails to comply with any of the terms of this Paragraph,
COMPANY shall have the right to enter upon DEALER's premises and remove without
liability all such product signs and identification bearing any of the Kia
Marks. DEALER agrees that it shall reimburse COMPANY for any costs and expenses
incurred in such removal, including without limitation reasonable attorneys'
fees.
4. Personnel. DEALER shall employ and train a sufficient number of
competent personnel of good character, including one or more persons who will
function as sales manager, service manager and parts manager, sales persons,
service technicians and parts personnel to fulfill all of DEALER's
responsibilities under this Agreement and as recommended by COMPANY, and shall
cause such personnel to attend such training schools as COMPANY may from time to
time require at DEALER's sole expense.
5. Capital And Credit. DEALER shall maintain at all times and employ
in connection with DEALER's business and operations under this Agreement
sufficient investment, working capital, net worth, lines of credit and retail
finance plans as may be required to enable DEALER to fulfill all of DEALER's
responsibilities under this Agreement. In no event shall DEALER's working
capital be less than the amount specified by COMPANY. COMPANY shall have the
right to increase the minimum amount of working capital required, and DEALER
agrees to promptly establish and maintain the increased amount.
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DEALER agrees to obtain and maintain at all times a confirmed and adequate
flooring line with a bank or financial institution satisfactory to COMPANY or
other method of financing acceptable to COMPANY to enable DEALER to perform its
obligations under this Agreement.
6. Accounting Practices And Procedures And Record Maintenance. DEALER
shall install and use such accounting practices as COMPANY may from time to time
require, including any said practices set forth in COMPANY's manuals of
accounting procedures for its authorized dealers. Any required accounting
practices shall not be exclusive of any other system DEALER may desire to use.
DEALER agrees to keep complete, accurate and current records regarding its sale,
lease and servicing of Kia Products or any claims made upon or paid by COMPANY
(whether warranty, policy or other claims) for at least five (5) years and in no
event less than the retention period required by applicable law. DEALER shall
prepare, keep current and retain records in support of requests for
reimbursement for warranty and other work performed by DEALER in the manner and
form required by COMPANY. COMPANY shall have the right at all reasonable times
and during regular business hours to inspect DEALER's facilities and to examine,
audit and reproduce all records, accounts and supporting data relating to the
Kia dealership operations of DEALER including without limitation, the sale,
sales reporting, service and repair of Kia Products by DEALER.
7. Reports. DEALER shall furnish to COMPANY at the times and in the
form prescribed by COMPANY, complete, accurate and true statements of the
financial condition and operating results of DEALER's Kia dealership operations
and such sales and other reports as COMPANY may from time to time require.
Financial information furnished by DEALER shall be handled in a confidential
manner by COMPANY and, unless authorized by DEALER, required by law, or utilized
in mediation, arbitration, administrative or judicial proceedings, shall not be
furnished except as an unidentified part of a composite or coded report to any
party outside of COMPANY.
8. Inspections And Tests. DEALER shall allow persons designated by
COMPANY, at all reasonable times and intervals, to examine DEALER's facilities,
stocks, Kia Products and used vehicles and vehicles in for service, and to test
DEALER's equipment.
9. Advertising. COMPANY and DEALER agree that a "three-tier"
advertising and merchandising effort is an effective way to establish and
maintain focus on (i) national and Product messages, (ii) regional Kia Dealer
group messages, and (iii) local and individual Kia Dealer messages. COMPANY
shall take full responsibility for, and fund, as COMPANY deems appropriate,
advertising for (i) and (ii) above. COMPANY will consider advertising and
merchandising input and advice from DEALER and the Customer Satisfaction Team
referred to in Article X below. DEALER shall take full responsibility for, and
fund advertising for (iii) above, bearing in mind sales and customer
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satisfaction needs and applicable laws and regulations in developing and
delivering its advertising and merchandising messages.
10. Trade Practices And Advertising. DEALER shall conduct business in
a manner that will reflect favorably at all times on the good name of COMPANY,
the Kia Marks, other Kia Dealers and DEALER. DEALER will refrain from conduct
which may be detrimental to or adversely reflect upon the reputation of COMPANY,
the Kia Marks, other Kia Dealers or DEALER. DEALER will avoid in every way any
"bait", or other deceptive, misleading, confusing or illegal advertising or
business practices. COMPANY shall not employ or encourage any dealer to employ
any such practice.
11. Safety And Emission Control Laws. DEALER agrees to comply and
operate consistently with all applicable provisions of federal, state and local
motor vehicle safety and emission control laws, rules and regulations. In
addition, COMPANY and DEALER will each provide the other with such information
and assistance as may reasonably be requested by, the other in connection with
the performance of obligations imposed on either party by any applicable
federal, state or local motor vehicle safety or emission control requirements.
In the event that the laws of the state in which DEALER is located require motor
vehicle dealers or distributors to install in new or used motor vehicles, prior
to the retail sale thereof, any safety devices or other equipment not installed
or supplied as standard equipment by COMPANY, DEALER, prior to its sale of any
Kia vehicle on which such installations are so required, will properly install
such devices or equipment on such Kia vehicles and be entitled to reimbursement
therefor by COMPANY at standard labor rates where DEALER uses any
COMPANY-furnished necessary parts. DEALER will comply with state and local laws
pertaining to installation of such equipment, including without limitation, the
reporting thereof.
12. Compliance With Consumer Protection Statutes, Rules And
Regulations. Because certain custom complaints may impose liability upon COMPANY
under various repair and replace laws or other consumer protection laws and
regulations, DEALER agrees to provide prompt notice to COMPANY of such
complaints and take such other steps as COMPANY may require. DEALER will do
nothing to affect adversely COMPANY's rights under such laws and regulations.
Subject to any law or any regulation to the contrary, DEALER shall be liable to
COMPANY for any refunds or vehicle replacements provided by COMPANY to any
customer if COMPANY reasonably determines that DEALER failed to carry out
vehicle repairs in accordance with COMPANY's written published policies and
procedures or its expressed oral instructions subsequently confirmed in writing.
DEALER also agrees to provide applicable required customer notifications and
disclosures as prescribed by repair or replacement laws or other applicable
consumer laws or regulations.
13. Insurance. At all times during the pendency of this Agreement,
DEALER will maintain in full force and effect comprehensive general
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liability insurance policies, excess insurance policies, workers' compensation
insurance policies and all other insurance policies needed to insure DEALER
against claims or lawsuits arising from the operation of the dealership, sale of
Kia Products and service of Kia Products. The aggregate limits of said policies
shall be no less than ___________ Dollars ($__________). Said policies shall be
underwritten by insurance companies with a Best rating of "A" or better. DEALER
shall provide proof of insurance to COMPANY at COMPANY's request. COMPANY
reserves the right, from time to time, to revise the above-stated amounts of
insurance required to be maintained by DEALER.
B. RETAIL SALES.
1. Area Of Primary Responsibility. DEALER shall vigorously and
aggressively promote, solicit and make sales of Kia Products within its APR.
DEALER's APR may be altered or adjusted by COMPANY at any time. The APR is a
tool used by COMPANY to evaluate DEALER's performance of its obligations. DEALER
agrees that it has no right or interest in any APR that COMPANY may designate.
As permitted by applicable law, COMPANY may add new dealers to, relocate dealers
into or remove dealers from the APR assigned to DEALER.
2. Stocks. Subject to COMPANY's filling DEALER's orders, DEALER shall
maintain in showroom-ready condition stocks of Kia vehicles and other Kia
Products of an assortment and quantity adequate to meet DEALER's share of
current demand in DEALER's APR and DEALER's sales and service responsibilities
under this Agreement.
3. Used Vehicles. DEALER agrees to display, sell and maintain for
resale an adequate inventory of used vehicles at the location specified in Part
I.
4. Demonstrators. From its inventory, DEALER shall keep available at
all times in good appearance and running order current model year demonstrators
of each model of Kia vehicles in such quantities as are sufficient to satisfy
customer test drive demands.
5. Orders. Each month, on the dates and forms specified by COMPANY,
DEALER shall furnish COMPANY with (i) orders for the numbers and models of Kia
vehicles that DEALER will purchase during the succeeding month or months as
COMPANY may designate from time to time; and (ii) estimates of DEALER's
requirements of Kia vehicles for such further succeeding months as COMPANY may
from time to time request. Orders for DEALER's requirements for other Kia
Products (parts, options or accessories) shall be placed weekly or more
frequently, as needed, including emergency orders for parts at any time.
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6. Suggested Price Labels, DEALER shall accurate represent to
customers the total selling price of Kia Products, including without limitation,
Kia vehicles. DEALER agrees to explain to customers of Kia Products the items
that make up the total selling price and give customers itemized invoices and
all other information required by law. DEALER understands and hereby
acknowledges that it may sell Kia Products at whatever price DEALER desires but
bearing in mind DEALER's customer satisfaction responsibilities and obligation
to penetrate effectively its APR. If any Kia vehicle is delivered by COMPANY to
DEALER with an incorrect suggested price label or without a completed suggested
price label affixed thereto in accordance with the federal Automobile
Information Disclosure Act, DEALER shall promptly affix to such vehicle a label
in the form and containing the information required by law and in accordance
with any directions furnished by COMPANY.
7. Customer Deposits. DEALER shall use all reasonable efforts to
safeguard each deposit of cash or property (or any proceeds therefrom) received
from a customer in anticipation of a future delivery of a Kia Product until such
delivery is consummated.
8. Product Modifications. DEALER agrees that it will not install
after-market accessories or make any modifications to Kia Products, including
without limitation Kia vehicles, that may impair or adversely affect a
vehicle's, safety, emissions, structural integrity or performance.
9. No Exports. DEALER is authorized to sell Kia Products, including
without limitation Kia vehicles, only to customers located in the fifty (50)
states of the United States and the District of Columbia. DEALER agrees that it
will not sell any new Kia Products for resale or use outside the fifty (50)
states of the United States or the District of Columbia. DEALER agrees to abide
by any export policy established by COMPANY.
C. SERVICE AND PARTS.
1. In General. DEALER shall render prompt, workmanlike, courteous and
willing service on all Kia Products presented to DEALER's place of business for
service, including without limitation by purchasers of Kia Products from other
Kia Dealers. DEALER shall also render warranty service on eligible Kia Products
to all purchasers of such products from any authorized DEALER in accordance with
COMPANY's then current warranty policies and procedures manual. DEALER shall
ensure that each service customer is advised of the necessary repairs and his or
her consent is obtained prior to the initiation of any repairs in accordance
with all applicable consumer protection statutes. DEALER shall ensure that
necessary repairs on Kia vehicles are accurately diagnosed and professionally
performed and that each customer is treated courteously and fairly at all times.
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2. Predelivery Service. DEALER agrees that prior to delivery of a new
Kia vehicle to a customer, it shall perform predelivery service on each Kia
vehicle in accordance with Kia standards and any applicable governmental
requirements. COMPANY shall reimburse DEALER for such predelivery service
according to such directives and the applicable provisions of the then current
Kia warranty policies and procedures manual and subject to COMPANY's claims
verification and other procedures.
3. Warranty Service. DEALER shall perform warranty service specified
by COMPANY, in accordance with COMPANY's then current warranty policies and
procedures manual. COMPANY agrees to compensate DEALER for all warranty work,
including labor, diagnosis and genuine Kia parts and accessories, in accordance
with procedures and at rates to be announced from time to time by COMPANY and in
accordance with applicable law. Unless otherwise approved in advance by COMPANY,
DEALER shall use only genuine Kia parts and accessories when performing Kia
warranty repairs. Warranty service is provided for the benefit of customers and
DEALER agrees that the customer shall not be obliged to pay any charges for
warranty work or any other service for which DEALER is reimbursed by COMPANY,
except as required by law. DEALER acknowledges and agrees that except as
otherwise provided by law, the written Kia warranties set forth in the warranty
policies and procedures manual, as that manual may be revised by COMPANY from
time to time, are the only warranties applicable to new Kia Products. With
respect to DEALERS, SUCH WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES OR
LIABILITIES, EXPRESSED OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY LIABILITY FOR
COMMERCIAL LOSSES BASED UPON NEGLIGENCE OR MANUFACTURER'S STRICT LIABILITY.
EXCEPT AS PROVIDED UNDER AN ESTABLISHED WRITTEN KIA PROGRAM OR PROCEDURE,
COMPANY NEITHER ASSUMES NOR AUTHORIZES DEALER TO ASSUME FOR IT ANY OTHER
OBLIGATION OR LIABILITY IN CONNECTION WITH PRODUCTS. AND BOTH COMPANY AND DEALER
ACKNOWLEDGE AND AGREE THAT COMPANY'S LIABILITY SHALL BE LIMITED TO THE REPAIR OR
REPLACEMENT OF NONCONFORMING PRODUCTS CONSISTENT WITH THE PROVISIONS OF KIA'S
WRITTEN WARRANTIES. COMPANY HEREBY EXPRESSLY DISCLAIMS LIABILITY FOR ANY
CONSEQUENTIAL DAMAGES SUFFERED BY DEALER OR DEALER'S OWNERS, DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, REPRESENTATIVES, CUSTOMERS, OR ANY OF THEM, ARISING
FROM OR RELATED TO ANY AND ALL CAUSES WHATSOEVER.
4. Campaign Inspections And Corrections. DEALER agrees to perform
service campaign inspections and/or corrections for owners or users of all Kia
Products that qualify for such inspections and/or corrections. DEALER further
agrees to comply with all of COMPANY's directives and with the applicable
procedures in COMPANY's warranty policies and procedures manual relating to
those inspections and/or corrections. DEALER will also determine
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that campaign inspections and corrections have been made on new and used Kia
vehicles in its inventory prior to the sale and follow-up on Kia Products on
which campaigns are pending. COMPANY agrees to reimburse DEALER for all
replacement parts and/or other materials required in use in connection with such
work and for labor according to such directives and the applicable provisions of
COMPANY's warranty policies and procedures manual and subject to COMPANY's
claims verification and other procedures.
5. Parts And Accessories In Non-Warranty Servicing. Subject to the
terms of this Agreement. DEALER has the right to sell, install or use for making
non-warranty repairs, products that are not genuine Kia parts or accessories.
DEALER acknowledges, however, that its customers expect that any parts or
accessories DEALER sells, installs or uses in the sale, repair or servicing of
Kia vehicles meet the high quality and standards of, genuine Kia parts or
accessories. Therefore, DEALER agrees that where DEALER does not use genuine Kia
parts or accessories, DEALER will only use such other parts or accessories as
(i) will not adversely affect the mechanical operation of the Kia vehicle being
sold or serviced and (ii) are equivalent in quality and design to genuine Kia
parts or accessories.
6. Representations And Disclosures As To Modifications, Parts,
Accessories And Service Contracts. DEALER and COMPANY recognize the owners and
users of Kia vehicles reasonably expect that the vehicle sold by DEALER and the
parts, accessories and service contracts sold or used by DEALER in servicing
vehicles are marketed by COMPANY. If DEALER sells or uses parts, accessories or
service contracts not marketed by COMPANY, it will give customers written
notice, prior to the sale or service, that such parts, accessories or service
contracts are not marketed or warranted by COMPANY. DEALER also agrees not to
represent that vehicle modifications not specifically authorized by COMPANY are
warranted or approved by COMPANY. If DEALER elects to sell non-Kia service
contracts to customers, DEALER will (i) conspicuously disclose in writing upon
the customer's purchase order the extent to which the independent warranty or
service contract protection purchased by the customer overlaps that provided by
COMPANY and (ii) whenever a customer purchases such independent warranty or
service contract protection and seeks warranty repairs on a Kia Product during
the period of time that such product is also covered by the limited warranty
provided by COMPANY, DEALER will not apply for and agrees that it will not be
entitled to, reimbursement under such limited COMPANY warranty unless DEALER has
advised the customer in writing, on all copies of the repair order, that the
service was provided pursuant to COMPANY's limited warranty and not the
independent warranty or service contract protection that the customer purchased.
7, Parts Inventory DEALER agrees to maintain its parts inventory at
any minimum stocking levels established by COMPANY from time to time and in no
event less than those levels required to satisfy customer demand and enable
DEALER to comply with the terms and conditions of this Agreement.
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D. BODY REPAIRS.
DEALER shall provide body repair service for Kia vehicles. DEALER can
provide this service through its own body shop, or in the cases where COMPANY
agrees that unusual circumstances make it impractical for DEALER to own and
operate its own body shop, by arrangement with an independent repair
establishment acceptable to COMPANY.
X. CUSTOMER SATISFACTION DUTIES AND SHARED RESPONSIBILITY
DEALER shall comply with COMPANY programs and develop and maintain its
own programs designed to develop good relationships among COMPANY, DEALER and
the consuming public. DEALER shall make every effort to handle satisfactorily
all matters brought to its attention relating to the sale and servicing of Kia
vehicles and other Kia Products and make regular contact with owners and users
of Kia vehicles and other Kia Products in DEALER's APR. In consideration of
DEALER's commitments and to ensure that the primary focus of DEALER's and
COMPANY's mutual marketing efforts shall continue to be customer satisfaction,
COMPANY intends to establish an organization for collective dealer input into
the decision-making process on matters significantly affecting Kia dealers and
COMPANY, namely, the Customer Satisfaction Team. The Customer Satisfaction Team
shall be comprised of an equal number of Kia dealer representatives and COMPANY
personnel, chaired on a rotating basis, and acting in consensus in accordance
with procedures developed by COMPANY and the team. This team will provide input
on matters affecting the company/dealer/customer relationship. Its scope will
include input on market research, product planning, promotional planning,
customer satisfaction systems and other factors affecting Kia customers and
dealers. COMPANY will take due consideration of but not be bound by Customer
Satisfaction Team recommendations.
XI. CHANGES IN OWNERSHIP
DEALER and COMPANY recognize that this is a personal services
agreement based upon the personal skills, service, qualifications and commitment
of DEALER's Owners. For this reason and because COMPANY has entered into this
Agreement in reliance upon the Owners' qualifications, DEALER agrees to notify
COMPANY in writing of any change in ownership and obtain COMPANY's prior written
consent to any proposed change in an interest amounting to five percent (5%) or
more of the ownership of DEALER'S Kia dealership or of DEALER itself, including
without limitation, a change in the identity of an Owner, a change in an Owner's
relative percentage interest or a change in the identity or control of any
entity that is an Owner, or any proposed disposition of DEALER's principal
assets (any five percent (5%) or more change of which is defined hereafter as an
"Ownership Change") and, if applicable, pay
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COMPANY its then current transfer fee. COMPANY shall not be obliged to consent
to such Ownership Change or to execute a new agreement to a proposed transferee
unless and until DEALER first makes arrangements acceptable to COMPANY to
satisfy any outstanding indebtedness and subject to the additional provisions of
this Article XI.
A. SALE OF OWNERSHIP INTEREST.
If DEALER proposes any Ownership Change, COMPANY will consider
DEALER's proposal in accordance with the considerations and subject to DEALER's
completion of the requirements set forth in Paragraphs 1 through 3 below.
1. Transfer Fee. DEALER shall pay COMPANY COMPANY's then current
transfer fee in the event that DEALER proposes any Ownership Change.
2. COMPANY's Response. COMPANY will notify DEALER in writing of
COMPANY's decision on whether or not to consent to DEALER's proposal within
sixty (60) days after DEALER has furnished COMPANY with all applications and
information COMPANY requests.
3. Changes To Proposal. Should DEALER make any significant change in
the proposal, including any change whatsoever in the price, participants, or
proposed ownership share, the proposal will be considered a new proposal and
will again be subject to COMPANY's prior written approval, and the sixty (60)
day time period in which COMPANY will consider the proposal will start anew.
B. RIGHT OF FIRST REFUSAL OR OPTION TO PURCHASE.
1. Concept And Application. If a proposal is submitted by DEALER under
Paragraph A above, COMPANY shall have a right of first refusal or option to
purchase the dealership assets under this Paragraph B. If COMPANY exercises its
right or option, it will do so in the written decision on DEALER's proposal.
COMPANY's right or option may be assigned to any party, and COMPANY has the
right to disclose the terms of the proposed buy/sell agreement and any other
relevant dealership performance information, notwithstanding any other
provisions in this Agreement.
2. Exercise Of COMPANY's Rights. COMPANY shall have thirty (30) days
from the following events within which to exercise its right of first refusal or
option to purchase: (i) COMPANY's receipt of all data and documentation
customarily required by it to evaluate a proposed Ownership Change or (ii)
COMPANY's receipt of notice of the death of DEALER (if an individual), or of an
Owner who owns or controls, directly or indirectly, a majority of DEALER
("Majority Owner") or of the Dealer Operator or COMPANY's
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disapproving of any application submitted by DEALER's or an Owner's heirs
pursuant to Paragraph C, below. COMPANY'S exercise of its right of first refusal
under this Paragraph neither shall be dependent upon nor require its prior
refusal to approve the proposed buyer or transferee.
3. Right Of First Refusal. If DEALER has entered into a bona fide
written buy/sell agreement for its dealership business or assets, COMPANY's
right under this Paragraph is a right of first refusal, enabling COMPANY to
assume the buyer's rights and obligations under such buy/sell agreement, and to
cancel this Agreement and all rights granted DEALER. Upon COMPANY's request,
DEALER agrees to provide other documents relating to the proposed transfer and
any other information which COMPANY deems appropriate, including without
limitation, those reflecting other agreements or understandings between the
parties to the buy/sell agreement. Refusal to provide such documentation or to
state that no such documents exist shall create the presumption that the
buy/sell agreement is not a bona fide agreement.
4. Option To Purchase. In the event of the death of DEALER (if an
individual), or of a Majority Owner, or of the Dealer Operator or if DEALER
submits a proposal which COMPANY determines is not bona fide or in good faith,
COMPANY has the option to purchase the principal assets of DEALER utilizing the
dealership business, including real estate and leasehold interests, and to
cancel this Agreement and the rights granted DEALER. The purchase price of the
dealership assets will be determined by good faith negotiations between the
parties. If an agreement cannot be reached, the purchase price will be
exclusively determined by arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association. The site of the
arbitration shall be the office of the American Arbitration Association in the
locality of COMPANY's principal place of business.
5. Dealer's Obligations. Upon COMPANY's exercise of its right or
option and tender of performance under the buy/sell agreement or upon whatever
terms may be expressed in the buy/sell agreement, DEALER shall forthwith
transfer the affected real property by warranty deed conveying marketable title
free and clear of all 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 and deed at the time of
closing. DEALER shall also furnish to COMPANY all copies of any easements,
licenses or other documents affecting the property or dealership operations and
shall assign any permits or licenses that are necessary or desirable for the use
of or appurtenant to the property or the conduct of such dealer operations.
DEALER also agrees to execute and deliver to COMPANY instruments satisfactory to
COMPANY conveying title to all personal property, including leasehold interests,
involved in the transfer or sale to COMPANY. If any personal property is subject
to any lien or charge of any kind, DEALER agrees to procure the discharge and
satisfaction thereof prior to the closing of sale of such property to COMPANY.
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C. SUCCESSION RIGHTS UPON DEATH OR INCAPACITY.
1. Succession To Ownership After Death Of DEALER or Owner. In the
event that DEALER (if an individual), a Majority Owner, or the Dealer Operator
dies and his or her interest in DEALER or DEALER's Kia dealership passes
directly to any person or persons ("Heirs") who wish to succeed to the
deceased's interest, then the deceased's legal, representative must notify
COMPANY, within sixty (60) days of the death, of such Heir's or Heirs' intent to
succeed the deceased. If the deceased was the Dealer Operator, then the DEALER,
Majority Owner and/or the deceased's legal representative also must then
designate a proposed Dealer Operator for COMPANY's approval. The effect of the
first such notice from the deceased's legal representative will be to suspend
any notice of termination issued under Paragraph XII.C.4 below.
Upon delivery of any such notice, the deceased's legal representative
shall immediately request any person(s) identified by it as intending to succeed
the deceased and the designated candidate for Dealer Operator to submit an
application and to provide all personal and financial information that COMPANY
may reasonably and customarily require in connection with its review of such
applications. All requested information must be provided promptly to COMPANY and
in no case later than thirty (30) days after receipt of such request from the
deceased's legal representative. Upon the submission of all requested
information, COMPANY agrees to review such application(s) pursuant to the then
current criteria generally applied by COMPANY in qualifying owners and/or Dealer
Operators. COMPANY shall either approve or disapprove the application(s) within
sixty (60) days of full compliance with all COMPANY's requests for information.
If COMPANY approves the application(s), it shall offer to enter into a new Kia
Dealer Agreement with successor DEALER in the form then currently in use,
subject to such additional conditions and for such term, if any, as COMPANY
deems appropriate.
If COMPANY does not approve the designated Heir(s) or designated
candidate for Dealer Operator, or if the deceased's legal representative
withdraws his or her notice of the Heir(s)' intent to succeed as Owner(s) or if
the legal representative or any proposed owner or Dealer Operator fails to
timely provide the required information, COMPANY may reinstate or issue a notice
of termination. Nothing in this Paragraph C shall waive or affect COMPANY's
right to exercise its Option to Purchase set forth in Paragraph B above.
2. Incapacity Of Owner. The parties agree that, as used herein,
incapacity shall refer to any physical or mental ailment that, in COMPANY's
opinion, adversely affects the ability of DEALER (if an individual), Dealer
Operator or a Majority Owner to meet his or her obligations under this
Agreement.
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3. Successor Addendum Issued Prior To Death Or Incapacity Of Owner.
DEALER (if an individual), or a Majority Owner, or the Dealer Operator may apply
for a Successor Addendum nominating a candidate to assume ownership and/or the
position of Dealer Operator of the dealership upon his or her death or
incapacity. As soon as practicable after such nomination, COMPANY will request
such personal financial information from the nominated owner and/or Dealer
Operator candidate as it reasonably and customarily may require in evaluating
such candidates. COMPANY shall apply criteria then currently used by COMPANY in
qualifying owners and/or Dealer Operators of authorized dealers. Upon receipt of
all requested information, COMPANY shall either approve or disapprove such
candidate. If COMPANY initially approves the candidate, said approval shall
remain in effect until there is any material change in the candidate's
qualifications, personal financial information, or other circumstances affecting
the candidate's ability to serve, but in no event longer than five (5) years. If
COMPANY does not qualify the candidate, COMPANY agrees to review the reason(s)
for its decision with the applicant. The applicant is free at any time to submit
another nomination. However, in such instances, the applicant's nominee must
again qualify pursuant to the then current criteria. The applicant may, by
written notice, withdraw a nomination at any time, even if COMPANY has
previously qualified the applicant's nominee.
XII. TERMINATION OF AGREEMENT
A. BY DEALER.
DEALER may terminate this Agreement by giving written notice to
COMPANY. Termination will be effective thirty (30) days after COMPANY's receipt
of notice, unless otherwise mutually agreed in writing.
B. BY AGREEMENT
This Agreement may be terminated at any time by written agreement
between COMPANY and DEALER. Termination assistance such as that described in
Paragraph F below will be applicable only as specified in the written
termination agreement.
C. FOR CAUSE BY COMPANY.
1. Immediate Termination. DEALER and COMPANY agree that the following
conduct is within DEALER's control and is so contrary to the goals, purposes and
objectives of this Agreement as to warrant its immediate termination.
Accordingly, DEALER agrees that if it engages in any of the following types of
conduct, COMPANY shall have the right to terminate this Agreement immediately.
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a. Failure To Be Licensed Or Other Disqualification. If DEALER
fails to secure or maintain any license, permit or authorization required for
the performance of obligations under this Agreement or such license, permit or
authorization is suspended or revoked, or DEALER otherwise fails to continue to
meet the dealer selection criteria applicable to each Kia Dealer, COMPANY may
immediately terminate this Agreement.
b. Misrepresentation. If DEALER, the Dealer Operator, or any
Owner or officer of DEALER submits any false information to COMPANY or otherwise
makes any material misrepresentation to COMPANY.
c. Failure To Conduct Operations. If DEALER fails to conduct
customary dealership operations for seven (7) consecutive business days, except
if such failure is caused by strikes, civil war, riots, fires, floods,
earthquakes, other acts of God or a similar physical event beyond DEALER's
control.
d. Insolvency Or Bankruptcy. If DEALER becomes insolvent, or
files any petition under bankruptcy law, or executes an assignment for the
benefit of creditors, or appoints a receiver or trustee or another officer
having similar powers is appointed for DEALER and is not removed within thirty
(30) days from his appointment thereto or there is any levy under attachment or
execution or similar process which is not vacated or removed by payment or
bonding within ten (10) days.
e. Felony. If DEALER, the Dealer Operator or any Owner or officer
of DEALER is convicted of any felony.
2. Termination Upon Thirty (30) Days' Notice. The following conduct
violates the terms and conditions of this Agreement and if DEALER engages in
such conduct, COMPANY shall have the right to terminate this Agreement upon
thirty (30) days' written notice.
a. Unauthorized Change Or Removal In Dealer Operator. If the
identity of the Dealer Operator is changed, or if the Dealer Operator is removed
but not replaced, without the prior written approval of COMPANY.
b. Unauthorized Change In Ownership. If, without notifying
COMPANY in writing and, if applicable, obtaining COMPANY's prior written
approval in compliance with Paragraph XI above, there is any Ownership Change
with respect to DEALER or DEALER's Kia dealership.
c. Unauthorized Delegation. If, without COMPANY's prior written
consent, there is an actual or attempted delegation by DEALER of any of its
responsibilities under this Agreement.
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d. Unauthorized Location. If DEALER directly or indirectly
conducts or attempts to conduct any Kia dealership operation other than at the
approved locations indicated in Part I.
3. Termination Upon Ninety (90) Days' Notice. If, upon evaluation of
DEALER's performance pursuant to this Agreement, COMPANY concludes that DEALER
has failed to perform adequately its sales, service or customer satisfaction
responsibilities or to provide adequate dealership facilities, or if DEALER
fails to comply with any other provision of this Agreement, COMPANY shall notify
DEALER in writing of such failure and will endeavor to review promptly with
DEALER the nature and extent of such failure, and will grant DEALER such period
of time as may be required by law to correct such failure. If DEALER fails or
refuses to correct such failure or has not made substantial progress toward
remedying the failure at the expiration of such period, COMPANY may terminate
this Agreement upon ninety (90) days' written notice or such other notice as may
be required by law. Conduct which would warrant DEALER's termination under this
Paragraph includes, without limitation:
(i) DEALER's failure to comply with the provisions of any laws or
regulations relating to the sale or service of Kia Products (unless a shorter or
no notice period is authorized above);
(ii) repeated failures by DEALER's sales, service or parts
personnel or management to participate fully in any training program offered by
COMPANY;
(iii) DEALER's failure to maintain good relations with its
customers, notify COMPANY of any customer complaints, and resolve all customer
complaints to customer's satisfaction;
(iv) Failure of DEALER to pay COMPANY for any Kia Products;
(v) Failure of DEALER to establish or maintain during the
existence of this Agreement the required working capital or adequate flooring
and lines of credit;
(vi) Any dispute, disagreement or controversy among managers,
officers or stockholders of DEALER that, in the reasonable opinion of COMPANY,
adversely affects the ownership, operation, management, business, reputation or
interests of DEALER or COMPANY;
(vii) Retention by DEALER of any Dealer Operator who, in
COMPANY's reasonable opinion, is not competent or, if previously approved by
COMPANY, no longer possesses the requisite qualifications for the position, or
who has acted in a manner contrary to the continued best interest of both DEALER
and COMPANY;
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(viii) Impairment of the reputation or financial standing of
DEALER subsequent to the execution of this Agreement;
(ix) Refusal to permit COMPANY to examine or audit DEALER's
accounting records as provided herein upon receipt by DEALER from COMPANY of
written notice requesting such permission or information;
(x) Failure of DEALER to timely furnish accurate sales or
financial information and related supporting data;
(xi) Failure of DEALER to submit a Plan acceptable to COMPANY
within the time prescribed by COMPANY, or failure of DEALER to conform to any
aspect of the Plan;
(xii) Breach or violation by DEALER of any other term or
provision of this Agreement; or
(xiii) Any civil or administrative liability found against DEALER
or any Owner or Officer of DEALER for any automotive-related matter which in
COMPANY's opinion tends to seriously and adversely affect the ownership,
operation, management, reputation, business or interests of DEALER, or to impair
the goodwill associated with the Kia Marks.
4. Termination Upon Death Or Incapacity. Subject to certain exceptions
identified in this Agreement, COMPANY may terminate this Agreement in the event
of the death of DEALER (if an individual), or a Majority Owner, or the Dealer
Operator or upon the incapacity of the Dealer Operator, upon ninety (90) days'
written notice to DEALER or the deceased's or incapacitated's legal
representative.
D. NOTICE OF TERMINATION.
Any notice of termination under this Agreement shall be in writing and
mailed to the person designated to receive such notice, certified mail, return
receipt requested or shall be delivered in person. Such notice shall be
effective upon the date of receipt. COMPANY shall state the grounds on which it
relies in its termination of DEALER and shall have the right to amend such
notice as appropriate. COMPANY may select the provision under which it elects to
terminate DEALER without reference in its notice to any other provision that may
also be applicable. COMPANY subsequently may also assert other or additional
grounds for termination.
E. TRANSACTIONS AFTER TERMINATION.
1. Orders. Upon termination, DEALER's supply of Kia Products will be
automatically cancelled. Termination of this Agreement for any
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<PAGE> 27
reason will not release DEALER or COMPANY from the obligation to pay any amounts
owing the other when due.
2. Deliveries. If this Agreement is voluntarily terminated by DEALER
or terminated as a result of death or incapacity, COMPANY will use its best
efforts to furnish DEALER with Kia vehicles to fill DEALER's bona fide retail
orders on hand on the effective date of termination. The number of vehicles,
however, shall not exceed the total number of Kia vehicles invoiced to DEALER
for retail sale during the average of any three (3) month period from the year
preceding the effective date of termination.
3. Continuance Of Business Relations. Upon receipt of any notice of
termination, DEALER agrees to conduct itself and its operation until the
effective date of termination in a manner that will not injure the reputation or
goodwill of the Kia Marks or COMPANY.
4. No Waiver. Neither the sale of products to DEALER nor any act by
COMPANY after termination of this Agreement will be a waiver of the termination.
5. Surviving Provisions. Following the termination of this Agreement,
the following provisions of this Agreement shall remain in full force and
effect: Paragraph IX.A.3.c (limitations on trademark usage), Paragraph XII.E
(transactions after termination), Article XIII (dispute resolution), Article XIV
(defense and indemnification), and Article XVI, Paragraphs A (notices), D
(taxes), E (offset), G (implied waivers), H (assignments) and K (severability),
and this Paragraph XII.E.5.
F. TERMINATION ASSISTANCE AND REPURCHASE OBLIGATIONS.
1. COMPANY's Obligations. Upon the termination of this Agreement,
COMPANY shall have the right to cancel any and all shipments of Kia Products
scheduled for delivery to DEALER, and COMPANY shall repurchase from DEALER the
following:
(i) New, unused, unmodified and undamaged Kia vehicles of
the then current model year then unsold in DEALER's inventory. The prices of
such vehicles shall be the same as those at which they were originally purchased
by DEALER, less all prior refunds or other allowances made by COMPANY to DEALER
with respect thereto.
(ii) New, unused, unmodified and undamaged Kia parts and
accessories then unsold in DEALER's inventory that are in good and saleable
condition. The prices for such parts and accessories shall be the price last
established by COMPANY for the sale of identical parts or accessories to dealers
in the area in which DEALER is located.
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<PAGE> 28
(iii) Special service tools recommended by COMPANY and then
owned by DEALER, that are especially designed for servicing Kia Motor vehicles.
The prices for such special service tools will be the price paid by DEALER less
appropriate depreciation, or such other price as the parties may negotiate.
2. DEALER's Obligations. DEALER is obligated to sell to COMPANY the
items described in Paragraph 1 above, and COMPANY's obligations to repurchase
the items set forth in Paragraph 1 above are contingent upon DEALER fulfilling
the following obligations:
(i) Within thirty (30) days after the date this Agreement
terminates, DEALER shall deliver or mail to COMPANY a detailed inventory of all
items referred to in this Paragraph which it requests COMPANY repurchase and
shall certify that such list is true and accurate.
(ii) DEALER shall be entitled to request repurchase of only
those items which it purchased from COMPANY, unless COMPANY agrees otherwise.
(iii) Unless COMPANY agrees otherwise in writing, products
and special service tools to be repurchased by COMPANY from DEALER shall be
delivered by DEALER to COMPANY's place of business at DEALER's expense. If
DEALER fails to do so, COMPANY may transfer such items and deduct the cost
therefor from the repurchase price.
(iv) DEALER will execute and deliver to COMPANY instruments
satisfactory to COMPANY conveying good and marketable title to the aforesaid
items to COMPANY. If such items are subject to any lien or charge of any kind,
DEALER will procure the discharge in satisfaction thereof prior to their
repurchase by COMPANY. DEALER will comply with the requirements of any state or
federal laws that relate to the repurchase including bulk sales or transfer
laws.
(v) DEALER will remove, at its own expense, all signage and
other trade dress from DEALER's approved locations including any Kia Marks
before it is eligible for payment hereunder.
3. Payment By COMPANY. COMPANY will pay DEALER for such items
repurchased hereunder as soon as practicable upon DEALER's compliance with the
obligations set forth herein and upon computation of any outstanding
indebtedness of DEALER to COMPANY. COMPANY shall have the right to offset from
any amounts due to DEALER hereunder the total sum of DEALER's outstanding
indebtedness to COMPANY. If DEALER disagrees with COMPANY's valuation of any
item herein, and DEALER and COMPANY have not resolved their disagreement within
sixty (60) days after the date this Agreement terminates, COMPANY shall pay to
DEALER the amount to which it
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reasonably believes DEALER is entitled. DEALER's exclusive remedy to recover any
additional sums that it believes is due under this Paragraph shall be by resort
to the dispute resolution process set forth in Article XIII below.
4. Delivery of Customer Lists. Upon termination of this Agreement,
DEALER shall promptly deliver to COMPANY a true and correct copy of any and all
customers lists setting forth the names and addresses of customers who, within
the prior five (5) years, purchased one or more Kia vehicles from DEALER or had
one or more Kia vehicles serviced by DEALER.
5. Specific Performance. DEALER acknowledges that a breach by DEALER
of DEALER's obligations set forth in Paragraphs 2 and 4 above would cause damage
to COMPANY in an amount that would be impossible to measure in money. In the
event that DEALER fails to perform one or more of the obligations set forth in
Paragraph 2 or 4 above, DEALER agrees that COMPANY will be entitled to maintain
an action, if COMPANY so chooses, to compel specific performance by DEALER of
each such obligation. Should COMPANY institute such an action, DEALER agrees
that it will not raise as a defense a claim that COMPANY has an adequate remedy
at law.
XIII. DISPUTE RESOLUTION PROCESS
COMPANY and DEALER believe that their mutual commitment to serving
customers and representing Kia Products in the best possible light, together
with the mechanisms for sharing responsibility described in this Agreement
should minimize the potential disputes between them. Nevertheless, should
disputes occur which cannot be resolved in the normal course of business, DEALER
and COMPANY agree that the dispute resolution process outlined below shall be
the exclusive mechanism for resolving any dispute, controversy or claim arising
out of or relating to this Agreement and arising under, without limitation, any
statute, regulation, rule, order or common law ("Covered Dispute") except that
COMPANY shall not be required to utilize the following dispute resolution
process prior to (1) obtaining injunctive relief in order to enforce those
provisions of this Agreement which relate to Kia Marks or (2) instituting an
action for specific performance pursuant to Paragraph XII.F.5 above.
A. MEDIATION.
Unless waived by both DEALER and COMPANY in writing, any Covered
Dispute which cannot be resolved in the normal course of business must first be
submitted to nonbinding mediation by a panel of mediators consisting of an equal
number of Kia Dealer representatives, who shall serve a one year term on a
rotating basis and be selected by COMPANY, and COMPANY representatives. The
mediation shall be conducted, in accordance with COMPANY's then prevailing
alternative dispute resolution procedures.
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<PAGE> 30
B. NON-BINDING ARBITRATION.
A Covered Dispute which is not resolved in the normal course of
business or through mediation shall be submitted to non-binding arbitration with
the arbitrators chosen, and the arbitration conducted, according to COMPANY's
then prevailing alternative dispute resolution procedures.
C. JUDICIAL OR ADMINISTRATIVE RELIEF.
Judicial or administrative relief for Covered Disputes (other than
COMPANY's attempts to enforce its rights with respect to Kia Marks as noted
above) shall be resorted to only after the parties have completed nonbinding
mediation and nonbinding arbitration pursuant to Paragraphs A and B above. The
parties' commitment to support and participate in COMPANY's alternative dispute
resolution program specifically is not a waiver of DEALER's or COMPANY's right
to resort later to litigation before any judicial or administrative forum.
D. VENUE.
All mediation and arbitration proceedings shall be conducted in Orange
County, California.
E. APPLICABLE LAW.
This Agreement shall be governed by and construed according to
California substantive law (and not California choice of law rules).
F. MUTUAL RELEASE.
Each party hereby releases the other from any and all claims and
causes of action that it may have against the other for money damages arising
from any event occurring prior to the date of execution of this Agreement,
except for any accounts payable by one party to the other as a result of the
purchase of any Kia products, audit adjustments or reimbursement for any
services. This release does not extend to claims which either party does not
know of or reasonably suspect to exist in its favor at the time of the execution
of this Agreement.
XIV. DEFENSE AND INDEMNIFICATION
A. DEFENSE AND INDEMNIFICATION BY COMPANY.
COMPANY agrees to assume the defense of DEALER and to indemnify and
hold DEALER harmless in any lawsuit naming DEALER as a defendant and involving
any Kia Product when the lawsuit also involves allegations of:
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<PAGE> 31
(i) Breach of warranty provided by COMPANY, bodily injury or
property damage arising out of an occurrence allegedly caused solely by a defect
or failure to warn of a defect in design, manufacture or assembly of a Kia
Product (except for tires not manufactured by KMC), provided that the defect
could not reasonably have been discovered by DEALER during the pre-delivery
service of the Kia Product; or
(ii) Any misrepresentation or misleading statement or unfair
or deceptive trade practice of COMPANY; and
Provided:
(iii) That DEALER delivers to COMPANY, in a manner to be
designated by COMPANY, within twenty (20) days of the service of any summons or
complaint, copies of such documents and requests in writing a defense and/or
indemnification therein (except as provided below);
(iv) That the complaint or lawsuit does not involve
allegations of DEALER error, omission or misconduct, including but not limited
to, improper or unsatisfactory service or repair, misrepresentation, or any
claim of DEALER's unfair or deceptive trade practice;
(v) That the Kia Product which is the subject of the lawsuit
was purchased by DEALER from Kia and was not altered by or for DEALER;
(vi) That DEALER agrees to cooperate fully in the defense of
such action as COMPANY may reasonably require; and,
(vii) That DEALER agrees that COMPANY may offset any
recovery on DEALER's behalf against any indemnification that may be required
hereunder.
B. DEFENSE AND INDEMNIFICATION BY DEALER.
DEALER agrees to assume the defense of COMPANY or KMC and to indemnify
and hold them harmless in any lawsuit naming COMPANY or KMC as a defendant when
the lawsuit involves allegations of:
(i) DEALER's alleged failure to comply, in whole or in part,
with any obligations assumed by DEALER pursuant to this Agreement;
(ii) DEALER's alleged negligent or improper repairing or
servicing of any new or used vehicle including any Kia vehicle or any equipment;
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<PAGE> 32
(iii) DEALER's alleged breach of any contract or warranty
other than that provided by COMPANY or KMC;
(iv) DEALER's alleged misleading statements,
misrepresentations, or deceptive or unfair trade practices;
(v) Any modification to or alteration of a Kia Product made
by or on behalf of DEALER, except those made pursuant to the express instruction
or with the express approval of COMPANY; and
Provided:
(vi) That COMPANY delivers to DEALER, within twenty (20)
days of the service of any summons or complaint, copies of such documents, and
requests in writing a defense and/or indemnification therein (except as provided
below);
(vii) That COMPANY agrees to cooperate fully in the defense
of such action as DEALER may reasonably require;
(viii) That the complaint does not involve allegations of
liability premised separately upon COMPANY's conduct or omissions; and
(ix) That COMPANY may, at its sole option and at its
expense, participate in defending any such lawsuit and, if COMPANY desires,
select its own counsel.
C. CONDITIONAL DEFENSE AND/OR INDEMNIFICATION.
The agreement between DEALER and COMPANY to defend and/or indemnify
each other is conditional on the continued existence of the state of facts as
then known to such party and may provide for the withdrawal of such defense
and/or indemnification at such time as facts arise which, if known at the time
of the original request for a defense and/or indemnification, would have caused
either DEALER or COMPANY to refuse such request. The party withdrawing from its
agreement to defend and/or indemnify shall give timely notice of its intent to
withdraw. Such notice shall be in writing and shall be effective upon receipt.
The withdrawing party shall be responsible for all costs and expenses of defense
only up to the date of receipt of its notice of withdrawal. Further, in the
event that both COMPANY and DEALER at any point are represented by the same
counsel but subsequent developments make it necessary or desirable for each
party to have separate counsel, then the party obtaining separate counsel shall
waive any right to disqualify the other party's counsel based on a conflict of
interest or similar ground.
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D. THE EFFECT OF SUBSEQUENT DEVELOPMENTS.
In the event that subsequent developments in a case make clear that
the allegations which initially preclude a request or an acceptance of a request
for a defense and/or indemnification are no longer at issue therein, any party
having a right to a defense and/or indemnification hereunder may tender such
request for a defense and indemnification to the other party. Neither DEALER nor
COMPANY shall be required to agree to such subsequent request for a defense
and/or indemnification where that party would be unduly prejudiced by such
delay.
E. TIME TO RESPOND AND RESPONSIBILITIES OF THE PARTIES.
DEALER and COMPANY shall have sixty (60) days from the receipt of a
request for a defense and/or indemnification to conduct an investigation to
determine whether or not, or under what conditions, it may agree to defend
and/or indemnify pursuant to this Paragraph. If local rules require a response
to the complaint in the lawsuit prior to the time provided hereunder for a
response to such request, the requesting party shall take all steps necessary,
including obtaining counsel, to protect its own interest in the lawsuit until
DEALER or COMPANY assumes the requested defense and/or indemnification. If
DEALER or COMPANY agrees to assume the defense and/or indemnification of a
lawsuit, it shall have the right to engage and direct counsel of its own
choosing.
XV. ACKNOWLEDGEMENTS
DEALER acknowledges that it has conducted an independent investigation
of acquiring, owning and operating a Kia dealership and recognizes that doing so
involves business risks. DEALER understands and acknowledges that its success is
dependent upon the ability of DEALER. COMPANY expressly disclaims the making of,
and DEALER hereby acknowledges that it has not received, any kind of warranty or
guaranty, expressed or implied, as to the potential profit or income to be
derived from the operation of a Kia dealership.
XVI. GENERAL PROVISIONS
A. NOTICES.
Except as otherwise specifically provided herein, any notice required
to be given by either party to the other shall be in writing and delivered
personally or by certified mail, return receipt requested, and shall be
effective from the date of mailing. Notices to DEALER shall be directed to
DEALER or its Dealer Operator at any of DEALER's approved locations. Notices to
COMPANY shall be directed to the General Manager of COMPANY's area office.
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<PAGE> 34
B. NO AGENT OR LEGAL REPRESENTATIVE STATUS.
This Agreement does not make either party to this Agreement the agent
or legal representative of the other party for any purpose, nor does it grant
either party authority to assume or create any obligation on behalf of or in the
name of others. No fiduciary obligations are created by this Agreement.
C. DEALER'S RESPONSIBILITY FOR ITS OPERATIONS.
Except as provided in this Agreement, DEALER is solely responsible for
all expenditures, liabilities and obligations incurred or assumed by DEALER for
the establishment and conduct of its operations.
D. TAXES.
DEALER is responsible for and shall duly pay all sales taxes, use
taxes, excise taxes and other government or municipal charges imposed, levied or
based upon the sale of Kia Products by DEALER, and shall maintain accurate
records of such payments.
E. RIGHT OF OFFSET.
All monies or accounts due DEALER from COMPANY will be considered net
of DEALER's indebtedness to COMPANY. COMPANY may deduct or offset any amounts
due or to become due from DEALER to COMPANY, or any amounts held by COMPANY from
or against any sums or accounts due or to become due from COMPANY to DEALER.
F. TRADEMARKS AND SERVICE MARKS.
COMPANY or affiliated companies are the exclusive owners of the Kia
Marks.
G. NO IMPLIED WAIVERS.
The delay or failure of COMPANY or DEALER to require performance by
the other party or the waiver by COMPANY or DEALER or the breach of any
provision of this Agreement will not affect the right to subsequently require
such performance.
H. ASSIGNMENTS OF RIGHTS OR DELEGATION OF DUTIES BY COMPANY.
COMPANY may assign this Agreement and any rights or delegate any
obligations to any affiliated or successor company, and will provide DEALER
written notice of such assignment or delegation
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<PAGE> 35
I. NO FRANCHISE FEE.
DEALER warrants that it has paid no fee nor has it provided any goods
or services in lieu of a fee to COMPANY in consideration of entering into this
Agreement. The sole consideration for COMPANY's entering into this Agreement is
DEALER's ability, integrity, assurance of personal services and expressed
intention to deal fairly and equitably with COMPANY and the public.
J. THIRD PARTY BENEFICIARIES.
This Agreement is entered into by and between COMPANY and DEALER 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.
K. 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 provisions, and such
provisions will be deemed amended to comply with such law, or if it cannot be so
amended without materially affecting the tenor of the Agreement, then it will be
deemed deleted from this Agreement in such jurisdiction, and in either case, the
remainder of the initial Agreement will be valid and binding.
L. NEW AND SUPERSEDING AGREEMENTS.
In addition to any of the above-contemplated changes, in the event
COMPANY adopts any new and superseding form of dealer agreement for use by its
dealers in one or more particular states or in the system generally, or in the
event of a material change in applicable law, COMPANY may, by written notice to
DEALER, replace this Agreement with a new agreement in a new and superseding
form. Upon adoption by COMPANY of any such new and superseding dealer agreement,
DEALER will promptly comply with all obligations provided for in such agreement.
M. SOLE AGREEMENT OF PARTIES.
Except as provided in this Agreement and the Exhibits hereto (as they
may be updated from time to time), COMPANY has made no promises to DEALER,
Dealer Operator, or any Owner or officer and there are no other agreements or
understandings either oral or written between the parties affecting this
Agreement or relating to any of the subject matters covered by this Agreement.
This Agreement cancels and supersedes all previous agreements between the
parties that relate to any matters covered herein, except as to any monies which
may be owing between the parties. No agreement between COMPANY and DEALER which
relates to matters covered herein, and no
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<PAGE> 1
EXHIBIT 10.27
CHRYSLER MOTORS CORPORATION
CHRYSLER
SALES AND SERVICE AGREEMENT
GRINDSTAFF CHEVROLET, INC. dba GRINDSTAFF CHRYSLER PLYMOUTH DODGE
- -------------------------------------------------------------------------------
(Dealer Name)
located at 2226 WEST ELK AVENUE ELIZABETHTON, TN
---------------------------------------------------------------------
(Street) (City) (State)
a(n) Corporation hereinafter called DEALER, and
-----------------------------------------
(Individual, Corporation, or Partnership)
Chrysler Motors Corporation, a Delaware corporation, hereinafter sometimes
referred to as "CMC," have entered into this Chrysler Motors Corporation
Chrysler Sales and Service Agreement, hereinafter referred to as "Agreement,"
the terms of which are as follows:
- --------------------------------------------------------------------------------
INTRODUCTION
The purpose of the relationship established by this Agreement is to provide a
means for the sale and service of specified Chrysler vehicles and the sale of
CMC vehicle parts and accessories in a manner that will maximize customer
satisfaction and be of benefit to DEALER and CMC.
While the following provisions, each of which is material, set forth the
undertakings of this relationship, the success of those undertakings rests on a
recognition of the mutuality of interests of DEALER and CMC, and a spirit of
understanding and cooperation by both parties in the day to day performance of
their respective functions. As a result of such considerations, CMC has
entered into this Agreement in reliance upon and has placed its trust in the
personal abilities, expertise, knowledge and integrity of DEALER'S principal
owners and management personnel, which CMC anticipates will enable DEALER to
perform the personal services contemplated by this Agreement.
It is the mutual goal of this relationship to promote the sale and service of
specified CMC products by maintaining and advancing their excellence and
reputation by earning, holding and furthering the public regard for CMC and all
CMC dealers.
- --------------------------------------------------------------------------------
1 PRODUCTS COVERED
DEALER has the right to order and purchase from CMC and to sell at retail only
those specific models of CMC vehicles, sometimes referred to as "specified CMC
vehicles," listed on the Motor Vehicle Addendum, attached hereto and
incorporated herein by reference. CMC may change the models of CMC vehicles
listed on the Motor Vehicle Addendum by furnishing DEALER a superseding Motor
Vehicle Addendum. Such a superseding Motor Vehicle Addendum will not be
deemed or construed to be an amendment to this Agreement.
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2 DEALER'S MANAGEMENT
CMC has entered into this Agreement relying on the active, substantial and
continuing personal participation in the management of DEALER'S organization by:
NAME POSITION
Steven E. Grindstaff President
- --------------------------------- --------------------------------
- --------------------------------- --------------------------------
<PAGE> 2
DEALER represents and warrants that at least one of the above named individuals
will be physically present at the DEALER'S facility (sometimes referred to as
"Dealership Facilities") during most of its operating hours and will manage all
of DEALER'S business relating to the sale and service of CMC products. DEALER
shall not change the personnel holding the above described position(s) or the
nature and extent of his/her/their management participation without the prior
written approval of CMC.
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3 DEALER'S CAPITAL STOCK OR PARTNERSHIP INTEREST
If DEALER is a corporation or partnership, DEALER represents and agrees that
the persons named below own beneficially the capital stock or partnership
interest of DEALER in the percentages indicated below. DEALER warrants there
will be no change affecting more than 50% of the ownership interest of DEALER,
nor will there be any other change in the ownership interest of DEALER which
may affect the managerial control of DEALER without CMC's prior written
approval.
Voting Non-Voting Partnership Active
Name Stock Stock Interest Yes/No
Steven E. Grindstaff 100% % % Yes
- -------------------- --- ------ ------ ----
% % %
- -------------------- --- ------ ------ ----
% % %
- -------------------- --- ------ ------ ----
% % %
- -------------------- --- ------ ------ ----
Total 100% % %
--- ------ ------ ----
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4 SALES LOCALITY
DEALER shall have the non-exclusive right, subject to the provisions of this
Agreement, to purchase from CMC those new specified CMC vehicles, vehicle
parts, accessories and other CMC products for resale at the DEALER'S facilities
and location described in the Dealership Facilities and Location Addendum,
attached hereto and incorporated herein by reference. DEALER will actively and
effectively sell and promote the retail sale of CMC vehicles, vehicle parts and
accessories in DEALER'S Sales Locality. As used herein, "Sales Locality" shall
mean the area designated in writing to DEALER by CMC from time to time as the
territory of DEALER'S responsibility for the sale of CMC vehicles, vehicle
parts and accessories, although DEALER is free to sell said products to
customers wherever they may be located. Said Sales Locality may be shared with
other CMC dealers as CMC determines to be appropriate.
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5 ADDITIONAL TERMS AND PROVISIONS
The additional terms and provisions set forth in the document entitled
"Chrysler Motors Corporation Sales and Service Agreement Additional Terms and
Provisions" marked "Form 88CMC," as may hereafter be amended from time to time,
constitute a part of this Agreement with the same force and effect as if set
forth at length herein, and the term "this Agreement" includes said additional
terms and provisions.
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6 FORMER AGREEMENTS, REPRESENTATIONS OR STATEMENTS
This Chrysler Motors Corporation Chrysler Sales and Service Agreement and other
documents, (or their successors as specifically provided for herein) which are
specifically incorporated herein by reference constitute the entire agreement
between the parties relating to the purchase by DEALER of those new specified
CMC vehicles, parts and accessories from CMC for resale; and it cancels and
supersedes all earlier agreements, written or oral, between CMC and DEALER
relating to the purchase by DEALER of Chrysler vehicles, parts and accessories,
<PAGE> 3
except for (a) amounts owing by CMC to DEALER, such as payments for warranty
service performed and incentive programs, or (b) amounts owing or which may be
determined to be owed, as a result of an audit or investigation, by DEALER TO
CMC due to DEALER'S purchase from CMC of vehicles, parts, accessories and other
goods or services, or (c) amounts DEALER owes to CMC as a result of other
extensions of credit by CMC to DEALER. No representations or statements, other
than those expressly set forth herein or those set forth in the applications for
this Agreement submitted to CMC by DEALER or DEALER's representatives, are made
or relied upon by any party hereto in entering into this Agreement.
- --------------------------------------------------------------------------------
7 WAIVER AND MODIFICATION
No waiver, modification or change of any of the terms of this Agreement or
change or erasure of any printed part of this Agreement or addition to it
(except the filling in of blank spaces and lines) will be valid or binding on
CMC unless approved in writing by the President or a Vice President or the
National Dealer Placement Manager of Chrysler Motors Corporation.
- --------------------------------------------------------------------------------
8 AMENDMENT
DEALER and CMC recognize that this Agreement does not have an expiration date
and will continue in effect unless terminated under the limited circumstances
set forth in Paragraph 28. DEALER and CMC further recognize that the passage of
time, changes in the industry, ways of doing business and other unforeseen
circumstances may cause CMC to determine that it should amend all Chrysler
Motors Corporation Chrysler Sales and Service Agreements. Therefore, CMC will
have the right to amend this Agreement to the extent that CMC deems advisable,
provided that CMC makes the same amendment in Chrysler Motors Corporation
Chrysler Sales and Service Agreements generally. Each such amendment will be
issued in a notice sent by certified mail or delivered in person to DEALER and
signed by the President or a Vice President or the National Dealer Placement
Manager of Chrysler Motors Corporation. Thirty-five (35) days after mailing or
delivery of such notice to DEALER, this Agreement will be deemed amended in the
manner and to the extent set forth in the notice.
- --------------------------------------------------------------------------------
9 ARBITRATION
Any and all disputes arising out of or in connection with the interpretation,
performance or nonperformance of this Agreement or any and all disputes arising
out of or in connection with transactions in any way related to this Agreement
(including, but not limited to, the validity, scope and enforceability of this
arbitration provision, or disputes under rights granted pursuant to the statutes
of the state in which DEALER is licensed) shall be finally and completely
resolved by arbitration pursuant to the arbitration laws of the United States of
America as codified in Title 9 of the United States Code, Sections 1-14, under
the Rules of Commercial Arbitration of the American Arbitration Association
(hereinafter referred to as the "Rules") by a majority vote of a panel of three
arbitrators. One arbitrator will be selected by DEALER (DEALER'S arbitrator).
One arbitrator will be selected by CMC (CMC'S arbitrator). These arbitrators
must be selected by the respective parties within ten (10) business days after
receipt by either DEALER or CMC of a written notification from the other party
of a decision to arbitrate a dispute pursuant to this Agreement. Should either
CMC or DEALER fail to select an arbitrator within said ten-day period, the party
who fails to select an arbitrator will have its arbitrator selected by the
American Arbitration Association upon the application of the other party. The
third arbitrator must be an individual who is familiar with business
transactions and be a licensed attorney admitted to the practice of law within
the United States of America, or a judge. The third arbitrator will be selected
by DEALER'S and CMC'S arbitrators. If said arbitrators cannot agree on a third
arbitrator within thirty (30) days from the date of the appointment of the last
selected arbitrator, then either DEALER'S or CMC'S arbitrator may apply to the
American Arbitration Association to appoint said third arbitrator pursuant to
the criteria set forth above. The arbitration panel shall conduct the
proceedings pursuant to the then existing Rules.
Notwithstanding the foregoing, to the extent any provision of the Rules conflict
with any provision of this Paragraph 9, the provisions of this Paragraph 9 will
be controlling.
CMC and DEALER agree to facilitate the arbitration by: (a) each party paying to
the American Arbitration Association one-half (1/2) of the required deposit
before the proceedings commence; (b) making available to one another and to the
arbitration panel, for inspection and photocopying all
<PAGE> 4
documents, books and records, if determined by the arbitration panel to be
relevant to the dispute; (c) making available to one another and to the
arbitration panel personnel directly or indirectly under their control, for
testimony during hearings and prehearing proceedings if determined by the
arbitration panel to be relevant to the dispute; (d) conducting arbitration
hearings to the greatest extent possible on consecutive business days; and (e)
strictly observing the time periods established by the Rules or by the
arbitration panel for the submission of evidence and of briefs.
Unless otherwise agreed to by CMC and DEALER, a stenographic record of the
arbitration shall be made and a transcript thereof shall be ordered for each
party, with each party paying one-half (1/2) of the total cost of such
recording and transcription. The stenographer shall be state-certified, if
certification is made by the state, and the party to whom it is most convenient
shall be responsible for securing and notifying such stenographer of the time
and place of the arbitration hearing(s).
If the arbitration provision is invoked when the dispute between the parties is
either the legality of terminating this Agreement or of adding a new CMC dealer
of the same line-make or relocating an existing CMC dealer of the same
line-make, CMC will stay the implementation of the decision to terminate this
Agreement or add such new CMC dealer or approve the relocation of an existing
CMC dealer of the same line-make until the decision of the arbitrator has been
announced, providing DEALER does not in any way attempt to avoid the
obligations of this Paragraph 9, in which case the decision at issue will be
immediately implemented.
Except as limited hereby, the arbitration panel shall have all powers of law
and equity, which it can lawfully assume, necessary to resolve the issues in
dispute including, without limiting the generality of the foregoing, making
awards of compensatory damages, issuing both prohibitory and mandatory orders
in the nature of injunctions and compelling the production of documents and
witnesses for pre-arbitration discovery and/or presentation at the arbitration
hearing on the merits of the case. The arbitration panel shall not have legal
or equitable authority to issue a mandatory or prohibitory order which: (a)
extends or has effect beyond the subject matter of this Agreement, or (b) will
govern the activities of either party for a period of more than two years; nor
shall the arbitration panel have authority to award punitive, consequential or
any damages whatsoever beyond or in addition to the compensatory damages
allowed to be awarded under this Agreement.
The decision of the arbitration panel shall be in written form and shall
include findings of fact and conclusions of law.
It is the intent and desire of DEALER and CMC to hereby and forever renounce and
reject any and all recourse to litigation before any judicial or administrative
forum and to accept the award of the arbitration panel as final and binding,
subject to no judicial or administrative review, except on those grounds set
forth in 9 USC Section 10 and Section 11. Judgement on the award and/or orders
may be entered in any court having jurisdiction over the parties or their
assets. In the final award and/or order, the arbitration panel shall divide all
costs (other than attorney fees, which shall be borne by the party incurring
such fees and other costs specifically provided for herein) incurred in
conducting the arbitration in accordance with what the arbitration panel deems
just and equitable under the circumstances. The fees of DEALER's arbitrator
shall be paid by DEALER. The fees of CMC's arbitrator shall be paid by CMC.
- --------------------------------------------------------------------------------
10 SIGNATURE
This Agreement becomes valid only when signed by the President or a Vice
President or the National Dealer Placement Manager of Chrysler Motors
Corporation and by duly authorized officer or executive of DEALER if a
corporation; or by one of the general partners of DEALER if a partnership; or
by DEALER if an individual.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement which is
finally executed at DETROIT, Michigan, in triplicate, on April 11, 1990.
GRINDSTAFF CHEVROLET, INC.
DBA GRINDSTAFF CHRYSLER PLYMOUTH DODGE
- -------------------------------------------
(DEALER - Firm Name)
By /s/ [ILLEGIBLE]
-----------------------------------------
(Individual Duly Authorized to Sign)
President
- -------------------------------------------
(Title)
CHRYSLER MOTORS CORPORATION
By /s/ [ILLEGIBLE]
-----------------------------------------
National Dealer Placement Manager
- -------------------------------------------
(Title)
<PAGE> 1
EXHIBIT 10.28
CHRYSLER MOTORS CORPORATION
PLYMOUTH
SALES AND SERVICE AGREEMENT
GRINDSTAFF CHEVROLET, INC. dba GRINDSTAFF CHRYSLER PLYMOUTH DODGE
- -------------------------------------------------------------------------------
(Dealer Name)
located at 2226 WEST ELK AVENUE ELIZABETHTON, TN
---------------------------------------------------------------------
(Street) (City) (State)
a(n) Corporation hereinafter called DEALER, and
-----------------------------------------
(Individual, Corporation, or Partnership)
Chrysler Motors Corporation, a Delaware corporation, hereinafter sometimes
referred to as "CMC," have entered into this Chrysler Motors Corporation
Plymouth Sales and Service Agreement, hereinafter referred to as "Agreement,"
the terms of which are as follows:
- --------------------------------------------------------------------------------
INTRODUCTION
The purpose of the relationship established by this Agreement is to provide a
means for the sale and service of specified Plymouth vehicles and the sale of
CMC vehicle parts and accessories in a manner that will maximize customer
satisfaction and be of benefit to DEALER and CMC.
While the following provisions, each of which is material, set forth the
undertakings of this relationship, the success of those undertakings rests on a
recognition of the mutuality of interests of DEALER and CMC, and a spirit of
understanding and cooperation by both parties in the day to day performance of
their respective functions. As a result of such considerations, CMC has
entered into this Agreement in reliance upon and has placed its trust in the
personal abilities, expertise, knowledge and integrity of DEALER'S principal
owners and management personnel, which CMC anticipates will enable DEALER to
perform the personal services contemplated by this Agreement.
It is the mutual goal of this relationship to promote the sale and service of
specified CMC products by maintaining and advancing their excellence and
reputation by earning, holding and furthering the public regard for CMC and all
CMC dealers.
- --------------------------------------------------------------------------------
1 PRODUCTS COVERED
DEALER has the right to order and purchase from CMC and to sell at retail only
those specific models of CMC vehicles, sometimes referred to as "specified CMC
vehicles," listed on the Motor Vehicle Addendum, attached hereto and
incorporated herein by reference. CMC may change the models of CMC vehicles
listed on the Motor Vehicle Addendum by furnishing DEALER a superseding Motor
Vehicle Addendum. Such a superseding Motor Vehicle Addendum will not be
deemed or construed to be an amendment to this Agreement.
- --------------------------------------------------------------------------------
2 DEALER'S MANAGEMENT
CMC has entered into this Agreement relying on the active, substantial and
continuing personal participation in the management of DEALER'S organization by:
NAME POSITION
Steven E. Grindstaff President
- --------------------------------- --------------------------------
- --------------------------------- --------------------------------
<PAGE> 2
DEALER represents and warrants that at least one of the above named individuals
will be physically present at the DEALER'S facility (sometimes referred to as
"Dealership Facilities") during most of its operating hours and will manage all
of DEALER'S business relating to the sale and service of CMC products. DEALER
shall not change the personnel holding the above described position(s) or the
nature and extent of his/her/their management participation without the prior
written approval of CMC.
- --------------------------------------------------------------------------------
3 DEALER'S CAPITAL STOCK OR PARTNERSHIP INTEREST
If DEALER is a corporation or partnership, DEALER represents and agrees that
the persons named below own beneficially the capital stock or partnership
interest of DEALER in the percentages indicated below. DEALER warrants there
will be no change affecting more than 50% of the ownership interest of DEALER,
nor will there be any other change in the ownership interest of DEALER which
may affect the managerial control of DEALER without CMC's prior written
approval.
Voting Non-Voting Partnership Active
Name Stock Stock Interest Yes/No
Steven E. Grindstaff 100% % % Yes
- -------------------- --- ------ ------ ----
% % %
- -------------------- --- ------ ------ ----
% % %
- -------------------- --- ------ ------ ----
% % %
- -------------------- --- ------ ------ ----
Total 100% % %
--- ------ ------ ----
- --------------------------------------------------------------------------------
4 SALES LOCALITY
DEALER shall have the non-exclusive right, subject to the provisions of this
Agreement, to purchase from CMC those new specified CMC vehicles, vehicle
parts, accessories and other CMC products for resale at the DEALER'S facilities
and location described in the Dealership Facilities and Location Addendum,
attached hereto and incorporated herein by reference. DEALER will actively and
effectively sell and promote the retail sale of CMC vehicles, vehicle parts and
accessories in DEALER'S Sales Locality. As used herein, "Sales Locality" shall
mean the area designated in writing to DEALER by CMC from time to time as the
territory of DEALER'S responsibility for the sale of CMC vehicles, vehicle
parts and accessories, although DEALER is free to sell said products to
customers wherever they may be located. Said Sales Locality may be shared with
other CMC dealers as CMC determines to be appropriate.
- --------------------------------------------------------------------------------
5 ADDITIONAL TERMS AND PROVISIONS
The additional terms and provisions set forth in the document entitled
"Chrysler Motors Corporation Sales and Service Agreement Additional Terms and
Provisions" marked "Form 88CMC," as may hereafter be amended from time to time,
constitute a part of this Agreement with the same force and effect as if set
forth at length herein, and the term "this Agreement" includes said additional
terms and provisions.
- --------------------------------------------------------------------------------
6 FORMER AGREEMENTS, REPRESENTATIONS OR STATEMENTS
This Chrysler Motors Corporation Plymouth Sales and Service Agreement and other
documents, (or their successors as specifically provided for herein) which are
specifically incorporated herein by reference constitute the entire agreement
between the parties relating to the purchase by DEALER of those new specified
CMC vehicles, parts and accessories from CMC for resale; and it cancels and
supersedes all earlier agreements, written or oral, between CMC and DEALER
relating to the purchase by DEALER of Plymouth vehicles, parts and accessories,
<PAGE> 3
ries, except for (a) amounts owing by CMC to DEALER, such as payments for
warranty service performed and incentive programs, or (b) amounts owing or which
may be determined to be owed, as a result of an audit or investigation, by
DEALER to CMC due to DEALER'S purchase from CMC of vehicles, parts, accessories
and other goods or services, or (c) amounts DEALER owes to CMC as a result of
other extensions of credit by CMC to DEALER. No representations or statements,
other than those expressly set forth herein or those set forth in the
applications for this Agreement submitted to CMC by DEALER or DEALER's
representatives, are made or relied upon by any party hereto in entering into
this Agreement.
- --------------------------------------------------------------------------------
7 WAIVER AND MODIFICATION
No waiver, modification or change of any of the terms of this Agreement or
change or erasure of any printed part of this Agreement or addition to it
(except the filing in of blank spaces and lines) will be valid or binding on CMC
unless approved in writing by the President or a Vice President or the National
Dealer Placement Manager of Chrysler Motors Corporation.
- --------------------------------------------------------------------------------
8 AMENDMENT
DEALER and CMC recognize that this Agreement does not have an expiration date
and will continue in effect unless terminated under the limited circumstances
set forth in Paragraph 28. DEALER and CMC further recognize that the passage of
time, changes in the industry, ways of doing business and other unforeseen
circumstances may cause CMC to determine that it should amend all Chrysler
Motors Corporation Plymouth Sales and Service Agreements. Therefore, CMC will
have the right to amend this Agreement to the extent that CMC deems advisable,
provided that CMC makes the same amendment in Chrysler Motors Corporation
Plymouth Sales and Service Agreements generally. Each such amendment will be
issued in a notice sent by certified mail or delivered in person to DEALER and
signed by the President or a Vice President or the National Dealer Placement
Manager of Chrysler Motors Corporation. Thirty-five (35) days after mailing or
delivery of such notice to DEALER, this Agreement will be deemed amended in the
manner and to the extent set forth in the notice.
- --------------------------------------------------------------------------------
9 ARBITRATION
Any and all disputes arising out of or in connection with the interpretation,
performance or non-performance of this Agreement or any and all disputes arising
out of or in connection with transactions in any way related to this Agreement
(including, but not limited to, the validity, scope and enforceability of this
arbitration provision, or disputes under rights granted pursuant to the statutes
of the state in which DEALER is licensed) shall be finally and completely
resolved by arbitration pursuant to the arbitration laws of the United States of
America as codified in Title 9 of the United States Code, Sections 1-14, under
the Rules of Commercial Arbitration of the American Arbitration Association
(hereinafter referred to as the "Rules") by a majority vote of a panel of three
arbitrators. One arbitrator will be selected by DEALER (DEALER'S arbitrator).
One arbitrator will be selected by CMC (CMC'S arbitrator). These arbitrators
must be selected by the respective parties within ten (10) business days after
receipt by either DEALER or CMC of a written notification from the other party
of a decision to arbitrate a dispute pursuant to this Agreement. Should either
CMC or DEALER fail to select an arbitrator within said ten-day period, the party
who fails to select an arbitrator will have its arbitrator selected by the
American Arbitration Association upon the application of the other party. The
third arbitrator must be an individual who is familiar with business
transactions and be a licensed attorney admitted to the practice of law within
the United States of America, or a judge. The third arbitrator will be selected
by DEALER'S and CMC'S arbitrators. If said arbitrators cannot agree on a third
arbitrator within thirty (30) days from the date of the appointment of the last
selected arbitrator, then either DEALER'S or CMC'S arbitrator may apply to the
American Arbitration Association to appoint said third arbitrator pursuant to
the criteria set forth above. The arbitration panel shall conduct the
proceedings pursuant to the then existing Rules.
Notwithstanding the foregoing, to the extent any provision of the Rules conflict
with any provision of this Paragraph 9, the provisions of this Paragraph 9 will
be controlling.
CMC and DEALER agree to facilitate the arbitration by: (a) each party paying to
the American Arbitration Association one-half (1/2) of the required deposit
before the proceedings commence; (b) making available to one another and to the
arbitration panel, for inspection and photocopying all documents, books and
records, if determined by the arbitrator to be relevant to the dispute; (c)
making available to one another and to the arbitration panel personnel directly
or indirectly under their control, for testimony during hearings and prehearing
proceedings if determined by the arbitration panel to be relevant to the
dispute; (d) conducting arbitration hearings to the greatest extent possible on
consecutive business days; and (e) strictly observing the time periods
established by the Rules or by the arbitration panel for the submission of
evidence and of briefs.
<PAGE> 4
documents, books and records, if determined by the arbitration panel to be
relevant to the dispute; (c) making available to one another and to the
arbitration panel personnel directly or indirectly under their control, for
testimony during hearings and prehearing proceedings if determined by the
arbitration panel to be relevant to the dispute; (d) conducting arbitration
hearings to the greatest extent possible on consecutive business days; and (e)
strictly observing the time periods established by the Rules or by the
arbitration panel for the submission of evidence and of briefs.
Unless otherwise agreed to by CMC and DEALER, a stenographic record of the
arbitration shall be made and a transcript thereof shall be ordered for each
party, with each party paying one-half (1/2) of the total cost of such
recording and transcription. The stenographer shall be state-certified, if
certification is made by the state, and the party to whom it is most convenient
shall be responsible for securing and notifying such stenographer of the time
and place of the arbitration hearing(s).
If the arbitration provision is invoked when the dispute between the parties is
either the legality of terminating this Agreement or of adding a new CMC dealer
of the same line-make or relocating an existing CMC dealer of the same
line-make, CMC will stay the implementation of the decision to terminate this
Agreement or add such new CMC dealer or approve the relocation of an existing
CMC dealer of the same line-make until the decision of the arbitrator has been
announced, providing DEALER does not in any way attempt to avoid the
obligations of this Paragraph 9, in which case the decision at issue will be
immediately implemented.
Except as limited hereby, the arbitration panel shall have all powers of law
and equity, which it can lawfully assume, necessary to resolve the issues in
dispute including, without limiting the generality of the foregoing, making
awards of compensatory damages, issuing both prohibitory and mandatory orders
in the nature of injunctions and compelling the production of documents and
witnesses for pre-arbitration discovery and/or presentation at the arbitration
hearing on the merits of the case. The arbitration panel shall not have legal
or equitable authority to issue a mandatory or prohibitory order which: (a)
extends or has effect beyond the subject matter of this Agreement, or (b) will
govern the activities of either party for a period of more than two years; nor
shall the arbitration panel have authority to award punitive, consequential or
any damages whatsoever beyond or in addition to the compensatory damages
allowed to be awarded under this Agreement.
The decision of the arbitration panel shall be in written form and shall
include findings of fact and conclusions of law.
It is the intent and desire of DEALER and CMC to hereby and forever renounce and
reject any and all recourse to litigation before any judicial or administrative
forum and to accept the award of the arbitration panel as final and binding,
subject to no judicial or administrative review, except on those grounds set
forth in 9 USC Section 10 and Section 11. Judgement on the award and/or orders
may be entered in any court having jurisdiction over the parties or their
assets. In the final award and/or order, the arbitration panel shall divide all
costs (other than attorney fees, which shall be borne by the party incurring
such fees and other costs specifically provided for herein) incurred in
conducting the arbitration in accordance with what the arbitration panel deems
just and equitable under the circumstances. The fees of DEALER's arbitrator
shall be paid by DEALER. The fees of CMC's arbitrator shall be paid by CMC.
- --------------------------------------------------------------------------------
10 SIGNATURE
This Agreement becomes valid only when signed by the President or a Vice
President or the National Dealer Placement Manager of Chrysler Motors
Corporation and by duly authorized officer or executive of DEALER if a
corporation; or by one of the general partners of DEALER if a partnership; or
by DEALER if an individual.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement which is
finally executed at DETROIT, Michigan, in triplicate, on April 11, 1990.
GRINDSTAFF CHEVROLET, INC.
DBA GRINDSTAFF CHRYSLER PLYMOUTH DODGE
- -----------------------------------------
(DEALER - Firm Name)
By /s/ [ILLEGIBLE]
---------------------------------------
(Individual Duly Authorized to Sign)
President
- -----------------------------------------
(Title)
CHRYSLER MOTORS CORPORATION
By /s/ [ILLEGIBLE]
---------------------------------------
National Dealer Placement Manager
- -----------------------------------------
(Title)
<PAGE> 1
EXHIBIT 10.29
CHRYSLER MOTORS CORPORATION
DODGE
SALES AND SERVICE AGREEMENT
GRINDSTAFF CHEVROLET, INC. dba GRINDSTAFF CHRYSLER PLYMOUTH DODGE
- -------------------------------------------------------------------------------
(Dealer Name)
located at 2226 WEST ELK AVENUE ELIZABETHTON, TN
---------------------------------------------------------------------
(Street) (City) (State)
a(n) Corporation hereinafter called DEALER, and
-----------------------------------------
(Individual, Corporation, or Partnership)
Chrysler Motors Corporation, a Delaware corporation, hereinafter sometimes
referred to as "CMC," have entered into this Chrysler Motors Corporation
Dodge Sales and Service Agreement, hereinafter referred to as "Agreement,"
the terms of which are as follows:
- --------------------------------------------------------------------------------
INTRODUCTION
The purpose of the relationship established by this Agreement is to provide a
means for the sale and service of specified Dodge vehicles and the sale of
CMC vehicle parts and accessories in a manner that will maximize customer
satisfaction and be of benefit to DEALER and CMC.
While the following provisions, each of which is material, set forth the
undertakings of this relationship, the success of those undertakings rests on a
recognition of the mutuality of interests of DEALER and CMC, and a spirit of
understanding and cooperation by both parties in the day to day performance of
their respective functions. As a result of such considerations, CMC has
entered into this Agreement in reliance upon and has placed its trust in the
personal abilities, expertise, knowledge and integrity of DEALER'S principal
owners and management personnel, which CMC anticipates will enable DEALER to
perform the personal services contemplated by this Agreement.
It is the mutual goal of this relationship to promote the sale and service of
specified CMC products by maintaining and advancing their excellence and
reputation by earning, holding and furthering the public regard for CMC and all
CMC dealers.
- --------------------------------------------------------------------------------
1 PRODUCTS COVERED
DEALER has the right to order and purchase from CMC and to sell at retail only
those specific models of CMC vehicles, sometimes referred to as "specified CMC
vehicles," listed on the Motor Vehicle Addendum, attached hereto and
incorporated herein by reference. CMC may change the models of CMC vehicles
listed on the Motor Vehicle Addendum by furnishing DEALER a superseding Motor
Vehicle Addendum. Such a superseding Motor Vehicle Addendum will not be
deemed or construed to be an amendment to this Agreement.
- --------------------------------------------------------------------------------
2 DEALER'S MANAGEMENT
CMC has entered into this Agreement relying on the active, substantial and
continuing personal participation in the management of DEALER'S organization by:
<TABLE>
<CAPTION>
NAME POSITION
<S> <C>
Steven E. Grindstaff President
- --------------------------------- --------------------------------
- --------------------------------- --------------------------------
</TABLE>
<PAGE> 2
DEALER represents and warrants that at least one of the above named individuals
will be physically present at the DEALER'S facility (sometimes referred to as
"Dealership Facilities") during most of its operating hours and will manage all
of DEALER'S business relating to the sale and service of CMC products. DEALER
shall not change the personnel holding the above described position(s) or the
nature and extent of his/her/their management participation without the prior
written approval of CMC.
- --------------------------------------------------------------------------------
3 DEALER'S CAPITAL STOCK OR PARTNERSHIP INTEREST
If DEALER is a corporation or partnership, DEALER represents and agrees that
the persons named below own beneficially the capital stock or partnership
interest of DEALER in the percentages indicated below. DEALER warrants there
will be no change affecting more than 50% of the ownership interest of DEALER,
nor will there be any other change in the ownership interest of DEALER which
may affect the managerial control of DEALER without CMC's prior written
approval.
Voting Non-Voting Partnership Active
Name Stock Stock Interest Yes/No
Steven E. Grindstaff 100% % % Yes
- -------------------- --- ------ ------ ----
% % %
- -------------------- --- ------% ------ ----
% % %
- -------------------- --- ------ ------ ----
% % %
- -------------------- --- ------ ------ ----
Total 100% % %
--- ------ ------ ----
- --------------------------------------------------------------------------------
4 SALES LOCALITY
DEALER shall have the non-exclusive right, subject to the provisions of this
Agreement, to purchase from CMC those new specified CMC vehicles, vehicle
parts, accessories and other CMC products for resale at the DEALER'S facilities
and location described in the Dealership Facilities and Location Addendum,
attached hereto and incorporated herein by reference. DEALER will actively and
effectively sell and promote the retail sale of CMC vehicles, vehicle parts and
accessories in DEALER'S Sales Locality. As used herein, "Sales Locality" shall
mean the area designated in writing to DEALER by CMC from time to time as the
territory of DEALER'S responsibility for the sale of CMC vehicles, vehicle
parts and accessories, although DEALER is free to sell said products to
customers wherever they may be located. Said Sales Locality may be shared with
other CMC dealers as CMC determines to be appropriate.
- --------------------------------------------------------------------------------
5 ADDITIONAL TERMS AND PROVISIONS
The additional terms and provisions set forth in the document entitled
"Chrysler Motors Corporation Sales and Service Agreement Additional Terms and
Provisions" marked "Form 88CMC," as may hereafter be amended from time to time,
constitute a part of this Agreement with the same force and effect as if set
forth at length herein, and the term "this Agreement" includes said additional
terms and provisions.
- --------------------------------------------------------------------------------
6 FORMER AGREEMENTS, REPRESENTATIONS OR STATEMENTS
This Chrysler Motors Corporation Dodge Sales and Service Agreement and other
documents, (or their successors as specifically provided for herein) which are
specifically incorporated herein by reference constitute the entire agreement
between the parties relating to the purchase by DEALER of those new specified
CMC vehicles, parts and accessories from CMC for resale; and it cancels and
supersedes all earlier agreements, written or oral, between CMC and DEALER
relating to the purchase by DEALER of Dodge vehicles, parts and accessories,
except for
<PAGE> 3
(a) amounts owing by CMC to DEALER, such as payments for warranty service
performed and incentive programs, or (b) amounts owing or which may be
determined to be owed, as a result of an audit or investigation, by DEALER TO
CMC due to DEALER'S purchase from CMC of vehicles, parts, accessories and other
goods or services, or (c) amounts DEALER owes to CMC as a result of other
extensions of credit by CMC to DEALER. No representations or statements, other
than those expressly set forth herein or those set forth in the applications for
this Agreement submitted to CMC by DEALER or DEALER's representatives, are made
or relied upon by any party hereto in entering into this Agreement.
- --------------------------------------------------------------------------------
7 WAIVER AND MODIFICATION
No waiver, modification or change of any of the terms of this Agreement or
change or erasure of any printed part of this Agreement or addition to it
(except the filling in of blank spaces and lines) will be valid or binding on
CMC unless approved in writing by the President or a Vice President or the
National Dealer Placement Manager of Chrysler Motors Corporation.
- --------------------------------------------------------------------------------
8 AMENDMENT
DEALER and CMC recognize that this Agreement does not have an expiration date
and will continue in effect unless terminated under the limited circumstances
set forth in Paragraph 28. DEALER and CMC further recognize that the passage of
time, changes in the industry, ways of doing business and other unforeseen
circumstances may cause CMC to determine that it should amend all Dodge
Motors Corporation Dodge Sales and Service Agreements. Therefore, CMC will
have the right to amend this Agreement to the extent that CMC deems advisable,
provided that CMC makes the same amendment in Chrysler Motors Corporation
Dodge Sales and Service Agreements generally. Each such amendment will be
issued in a notice sent by certified mail or delivered in person to DEALER and
signed by the President or a Vice President or the National Dealer Placement
Manager of Chrysler Motors Corporation. Thirty-five (35) days after mailing or
delivery of such notice to DEALER, this Agreement will be deemed amended in the
manner and to the extent set forth in the notice.
- --------------------------------------------------------------------------------
9 ARBITRATION
Any and all disputes arising out of or in connection with the interpretation,
performance or non-performance of this Agreement or any and all disputes arising
out of or in connection with transactions in any way related to this Agreement
(including, but not limited to, the validity, scope and enforceability of this
arbitration provision, or disputes under rights granted pursuant to the statutes
of the state in which DEALER is licensed) shall be finally and completely
resolved by arbitration pursuant to the arbitration laws of the United States of
America as codified in Title 9 of the United States Code, Sections 1-14, under
the Rules of Commercial Arbitration of the American Arbitration Association
(hereinafter referred to as the "Rules") by a majority vote of a panel of three
arbitrators. One arbitrator will be selected by DEALER (DEALER'S arbitrator).
One arbitrator will be selected by CMC (CMC'S arbitrator). These arbitrators
must be selected by the respective parties within ten (10) business days after
receipt by either DEALER or CMC of a written notification from the other party
of a decision to arbitrate a dispute pursuant to this Agreement. Should either
CMC or DEALER fail to select an arbitrator within said ten-day period, the party
who so fails to select an arbitrator will have its arbitrator selected by the
American Arbitration Association upon the application of the other party. The
third arbitrator must be an individual who is familiar with business
transactions and be a licensed attorney admitted to the practice of law within
the United States of America, or a judge. The third arbitrator will be selected
by DEALER'S and CMC'S arbitrators. If said arbitrators cannot agree on a third
arbitrator within thirty (30) days from the date of the appointment of the last
selected arbitrator, then either DEALER'S or CMC'S arbitrator may apply to the
American Arbitration Association to appoint said third arbitrator pursuant to
the criteria set forth above. The arbitration panel shall conduct the
proceedings pursuant to the then existing Rules.
Notwithstanding the foregoing, to the extent any provision of the Rules conflict
with any provision of this Paragraph 9, the provisions of this Paragraph 9 will
be controlling.
CMC and DEALER agree to facilitate the arbitration by: (a) each party paying to
the American Arbitration Association one-half (1/2) of the required deposit
before the proceedings commence; (b) making available to one another and to the
arbitration panel, for inspection and photocopying all
<PAGE> 4
documents, books and records, if determined by the arbitration panel to be
relevant to the dispute; (c) making available to one another and to the
arbitration panel personnel directly or indirectly under their control, for
testimony during hearings and prehearing proceedings if determined by the
arbitration panel to be relevant to the dispute; (d) conducting arbitration
hearings to the greatest extent possible on consecutive business days; and (e)
strictly observing the time periods established by the Rules or by the
arbitration panel for the submission of evidence and of briefs.
Unless otherwise agreed to by CMC and DEALER, a stenographic record of the
arbitration shall be made and a transcript thereof shall be ordered for each
party, with each party paying one-half (1/2) of the total cost of such
recording and transcription. The stenographer shall be state-certified, if
certification is made by the state, and the party to whom it is most convenient
shall be responsible for securing and notifying such stenographer of the time
and place of the arbitration hearing(s).
If the arbitration provision is invoked when the dispute between the parties is
either the legality of terminating this Agreement or of adding a new CMC dealer
of the same line-make or relocating an existing CMC dealer of the same
line-make, CMC will stay the implementation of the decision to terminate this
Agreement or add such new CMC dealer or approve the relocation of an existing
CMC dealer of the same line-make until the decision of the arbitrator has been
announced, providing DEALER does not in any way attempt to avoid the
obligations of this Paragraph 9, in which case the decision at issue will be
immediately implemented.
Except as limited hereby, the arbitration panel shall have all powers of law
and equity, which it can lawfully assume, necessary to resolve the issues in
dispute including, without limiting the generality of the foregoing, making
awards of compensatory damages, issuing both prohibitory and mandatory orders
in the nature of injunctions and compelling the production of documents and
witnesses for pre-arbitration discovery and/or presentation at the arbitration
hearing on the merits of the case. The arbitration panel shall not have legal
or equitable authority to issue a mandatory or prohibitory order which: (a)
extends or has effect beyond the subject matter of this Agreement, or (b) will
govern the activities of either party for a period of more than two years; nor
shall the arbitration panel have authority to award punitive, consequential or
any damages whatsoever beyond or in addition to the compensatory damages
allowed to be awarded under this Agreement.
The decision of the arbitration panel shall be in written form and shall
include findings of fact and conclusions of law.
It is the intent and desire of DEALER and CMC to hereby and forever renounce and
reject any and all recourse to litigation before any judicial or administrative
forum and to accept the award of the arbitration panel as final and binding,
subject to no judicial or administrative review, except on those grounds set
forth in 9 USC Section 10 and Section 11. Judgement on the award and/or orders
may be entered in any court having jurisdiction over the parties or their
assets. In the final award and/or order, the arbitration panel shall divide all
costs (other than attorney fees, which shall be borne by the party incurring
such fees and other costs specifically provided for herein) incurred in
conducting the arbitration in accordance with what the arbitration panel deems
just and equitable under the circumstances. The fees of DEALER's arbitrator
shall be paid by DEALER. The fees of CMC's arbitrator shall be paid by CMC.
- --------------------------------------------------------------------------------
10 SIGNATURE
This Agreement becomes valid only when signed by the President or a Vice
President or the National Dealer Placement Manager of Chrysler Motors
Corporation and by duly authorized officer or executive of DEALER if a
corporation; or by one of the general partners of DEALER if a partnership; or
by DEALER if an individual.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement which is
finally executed at DETROIT, Michigan, in triplicate, on April 11, 1990.
GRINDSTAFF CHEVROLET, INC.
DBA GRINDSTAFF CHRYSLER PLYMOUTH DODGE
- -----------------------------------------
(DEALER - Firm Name)
By /s/ [ILLEGIBLE]
---------------------------------------
(Individual Duly Authorized to Sign)
President
- -----------------------------------------
(Title)
CHRYSLER MOTORS CORPORATION
By /s/ [ILLEGIBLE]
---------------------------------------
National Dealer Placement Manager
- -----------------------------------------
(Title)
<PAGE> 1
EXHIBIT 10.30
CHRYSLER CORPORATION
JEEP
SALES AND SERVICE AGREEMENT
Grindstaff Chevrolet, Inc. dba Grindstaff Chrysler Plymouth Dodge
- --------------------------------------------------------------------------------
(DEALER Firm Name and D/B/A, if applicable)
located at 2226 West Elk Avenue Elizabethton, TN
---------------------------------------------------------------------
(STREET) (CITY) (STATE)
a(n) Corporation hereinafter called DEALER, and
--------------------------------------------
(INDIVIDUAL CORPORATION OR PARTNERSHIP)
Chrysler Corporation, a Delaware corporation, hereinafter sometimes referred to
as "CC", have entered into this Chrysler Corporation Jeep Sales and Service
Agreement, hereinafter referred to as "Agreement", the terms of which are as
follows:
- --------------------------------------------------------------------------------
INTRODUCTION
The purpose of the relationship established by this Agreement is to provide a
means for the sale and service of specified Jeep vehicles and the sale of CC
vehicle parts and accessories in a manner that will maximize customer
satisfaction and be of benefit to DEALER and CC.
While the following provisions, each of which is material, set forth the
undertakings of this relationship, the success of those undertakings rests on a
recognition of the mutuality of interests of DEALER and CC, and a spirit of
understanding and cooperation by both parties in the day to day performance of
their respective functions. As a result of such considerations, CC has entered
into this Agreement in reliance upon and has placed its trust in the personal
abilities, expertise, knowledge and integrity of DEALER's principal owners and
management personnel, which CC anticipates will enable DEALER to perform the
personal services contemplated by this Agreement.
It is the mutual goal of this relationship to promote the sale and service of
specified CC products by maintaining and advancing their excellence and
reputation by earning, holding and furthering the public regard for CC and all
CC dealers.
- --------------------------------------------------------------------------------
1 PRODUCTS COVERED
DEALER has the right to order and purchase from CC and to sell at retail only
those specific models of CC vehicles, sometimes referred to as "specified CC
vehicles," listed on the Motor Vehicle Addendum, attached hereto and
incorporated herein by reference. CC may change the models of CC vehicles
listed on the Motor Vehicle Addendum by furnishing DEALER a superseding Motor
Vehicle Addendum. Such a superseding Motor Vehicle Addendum will not be deemed
or construed to be an amendment to this Agreement.
- --------------------------------------------------------------------------------
2 DEALER'S MANAGEMENT
CC has entered into this Agreement relying on the active, substantial and
continuing personal participation in the management of DEALER's organization by:
<TABLE>
<CAPTION>
NAME POSITION
<S> <C>
Steven E. Grindstaff President
- -------------------------------------------------- --------------------------------------------------
- -------------------------------------------------- --------------------------------------------------
</TABLE>
<PAGE> 2
DEALER represents and warrants that at least one of the above named individuals
will be physically present at DEALER's facility (sometimes referred to as
"Dealership Facilities") during most of its operating hours and will manage all
of DEALER's business relating to the sale and service of CC products. DEALER
shall not change the personnel holding the above described position(s) or the
nature and extent of his/her/their management participation without the prior
written approval of CC.
- --------------------------------------------------------------------------------
3 DEALER'S CAPITAL STOCK OR PARTNERSHIP INTEREST
If DEALER is a corporation or partnership, DEALER represents and agrees that the
persons named below own beneficially the capital stock or partnership interest
of DEALER in the percentages indicated below. DEALER warrants there will be no
change affecting more than 50% of the ownership interest of DEALER, nor will
there be any other change in the ownership interest of DEALER which may affect
the managerial control of DEALER without CC's prior written approval.
<TABLE>
<CAPTION>
VOTING NON-VOTING PARTNERSHIP ACTIVE
NAME STOCK STOCK INTEREST YES/NO
<S> <C> <C> <C> <C>
STEVEN E. GRINDSTAFF 100 YES
- ----------------------------- -----------% ---------------% ---------------% ------------
- ----------------------------- -----------% ---------------% ---------------% ------------
- ----------------------------- -----------% ---------------% ---------------% ------------
- ----------------------------- -----------% ---------------% ---------------% ------------
- ----------------------------- -----------% ---------------% ---------------% ------------
TOTAL 100
-----------% ---------------% ---------------%
</TABLE>
- --------------------------------------------------------------------------------
4 SALES LOCALITY
DEALER shall have the non-exclusive right, subject to the provisions of this
Agreement, to purchase from CC those new specified CC vehicles, vehicle parts,
accessories and other CC products for resale at the DEALER's facilities and
location described in the Dealership Facilities and Location Addendum, attached
hereto and incorporated herein by reference. DEALER will actively and
effectively sell and promote the retail sale of CC vehicles, vehicle parts and
accessories in DEALER's Sales Locality. As used herein, "Sales Locality" shall
mean the area designated in writing to DEALER by CC from time to time as the
territory of DEALER's responsibility for the sale of CC vehicles, vehicle parts
and accessories, although Dealer is free to sell said products to customers
wherever they may be located. Said Sales Locality may be shared with other CC
dealers of the same line-make as CC determines to be appropriate.
- --------------------------------------------------------------------------------
5 ADDITIONAL TERMS
AND PROVISIONS
The additional terms and provisions set forth in the document entitled "Chrysler
Corporation Sales and Service Agreement Additional Terms and Provisions" marked
"Form 91(J-E)," as may hereafter be amended from time to time, constitute a
part of this Agreement with the same force and effects as if set forth at length
herein, and the term": this Agreement" includes said additional terms and
provisions.
- --------------------------------------------------------------------------------
6 FORMER AGREEMENTS, REPRESENTATIONS
OR STATEMENTS
This Chrysler Corporation Jeep Sales and Service Agreement and other documents,
(or their successors as specifically provided for herein) which are specifically
incorporated herein by reference constitute the entire agreement between the
parties relating to the purchase by DEALER of those new specified CC vehicles,
parts and accessories from CC for resale; and it cancels and supersedes all
earlier agreements, written or oral, between CC and DEALER relating to the
purchase by DEALER of Jeep vehicles, parts and accessories, except for (a)
amounts owing by CC DEALER, such as payments for warranty service _____ formed
and incentive programs, or (b) amounts owing which may be determined to be owed,
as a result of audit or investigation, by DEALER to CC due ____ DEALER's
purchase from CC of vehicles, parts, accessories and other goods or services, or
(c) amounts DEALER
<PAGE> 3
owes to CC as a result of other extensions of credit by CC to DEALER. No
representations or statements, other than those expressly set forth herein or
those set forth in the applications for this Agreement submitted to CC by DEALER
or DEALER's representatives, are made or relied upon by any party hereto in
entering into this Agreement.
- -----------------------------------------------------------------------------
7. WAIVER AND MODIFICATION
No waiver, modification or change of any of the terms of this Agreement or
change or erasure of any printed part of this Agreement or addition to it
(except the filling in of blank spaces and lines) will be valid or binding on CC
unless approved in writing by the President or a Vice President or the National
Dealer Placement Manager of Chrysler Corporation.
- -----------------------------------------------------------------------------
8 AMENDMENT
DEALER and CC recognize that this Agreement does not have an expiration date and
will continue in effect unless terminated under the limited circumstances set
forth in Paragraph 28. DEALER and CC further recognize that the passage of time,
changes in the industry, ways of doing business and other unforeseen
circumstances may cause CC to determine that it should amend all Chrysler
Corporation Jeep Sales and Service Agreements. Therefore, CC will have the right
to amend this Agreement to the extent that CC deems advisable, provided that CC
makes the same amendment in Chrysler Corporation Jeep Sales and Service
Agreements generally. Each such amendment will be issued in a notice sent by
certified mail or delivered in person to DEALER and signed by the President or a
Vice President or the National Dealer Placement Manager of Chrysler Corporation.
Thirty-five (35) days after mailing or delivery of such notice to DEALER, this
Agreement will be deemed amended in the manner and to the extent set forth in
the notice.
- -----------------------------------------------------------------------------
9 ARBITRATION
Any and all disputes arising out of or in connection with the interpretation,
performance or non-performance of this Agreement or any and all disputes arising
out of or in connection with transactions in any way related to this Agreement
(including, but not limited to, the validity, scope and enforceability of this
arbitration provision, or disputes under rights granted pursuant to the statutes
of the state in which DEALER is licensed) shall be finally and completely
resolved by arbitration pursuant to the arbitration laws of the United States of
America as codified in Title 9 of the United States Code, Sections 1-14, under
the Rules of Commercial Arbitration of the American Arbitration Association
(hereinafter referred to as the "Rules") by a majority vote of a panel of three
arbitrators. One arbitrator will be selected by DEALER (DEALER's arbitrator).
One arbitrator will be selected by CC (CC's arbitrator). These arbitrators must
be selected by the respective parties within ten (10) business days after
receipt by either DEALER or CC of a written notification from the other party of
a decision to arbitrate a dispute pursuant to this Agreement. Should either CC
or DEALER fail to select an arbitrator within said ten-day period, the party who
so fails to select an arbitrator will have its arbitrator selected by the
American Arbitration Association upon the application of the other party. The
third arbitrator must be an individual who is familiar with business
transactions and be a licensed attorney admitted to the practice of law within
the United States of America, or a judge. The third arbitrator will be selected
by DEALER's and CC's arbitrators. If said arbitrators cannot agree on a third
arbitrator within thirty (30) days from the date of the appointment of the last
selected arbitrator, then either DEALER's or CC's arbitrator may apply to the
American Arbitration Association to appoint said third arbitrator pursuant to
the criteria set forth above. The arbitration panel shall conduct the
proceedings pursuant to the then existing Rules.
Notwithstanding the foregoing, to the extent any provision of the Rules conflict
with any provision of this Paragraph 9, the provisions of this Paragraph 9 will
be controlling.
CC and DEALER agree to facilitate the arbitration by: (a) each party paying to
the American Arbitration Association one-half (1/2) of the required deposit
before the proceedings commence; (b) making available to one another and to the
arbitration panel, for inspection and photocopying all documents, books and
records, if determined by the arbitrator to be relevant to the dispute; (c)
making available to one another and to the arbitration panel personnel directly
or indirectly under their control, for testimony during hearings and prehearing
proceedings if determined by the arbitration panel to be relevant to the
dispute; (d) conducting arbitration hearings to the greatest extent possible on
consecutive business days; and (e) strictly observing the time periods
established by the Rules or by the arbitration panel for the submission of
evidence and of briefs.
<PAGE> 4
Unless otherwise agreed to by CC and DEALER, a stenographic record of the
arbitration shall be made and a transcript thereof shall be ordered for each
party, with each party paying one-half (1/2) of the total cost of such
recording and transcription. The stenographer shall be state-certified, if
certification is made by the state, and the party to whom it is most convenient
shall be responsible for securing and notifying such stenographer of the time
and place of the arbitration hearing(s).
If the arbitration provision is invoked when the dispute between the parties is
either the legality of terminating this Agreement or of adding a new CC dealer
of the same line-make or relocating an existing CC dealer of the same line-make,
CC will stay the implementation of the decision to terminate this Agreement or
add such new CC dealer or approve the relocation of an existing CC dealer of
the same line-make until the decision of the arbitrator has been announced,
providing DEALER does not in any way attempt to avoid the obligations of this
Paragraph 9, in which case the decision at issue will be immediately
implemented.
Except as limited hereby, the arbitration panel shall have all powers of law and
equity, which it can lawfully assume, necessary to resolve the issues in dispute
including, without limiting the generality of the foregoing, making awards of
compensatory damages, issuing both prohibitory and mandatory orders in the
nature of injunctions and compelling the production of documents and witnesses
for pre-arbitration discovery and/or presentation at the arbitration hearing on
the merits of the case. The arbitration panel shall not have legal or equitable
authority to issue a mandatory or prohibitory order which: (a) extends or has
effect beyond the subject matter of this Agreement, or (b) will govern the
activities of either party for a period of more than two years; nor shall the
arbitration panel have authority to award punitive, consequential or any damages
whatsoever beyond or in addition to the compensatory damages allowed to be
awarded under this Agreement.
The decision of the arbitration panel shall be in written form and shall
include findings of fact and conclusions of law.
It is the intent and desire of DEALER and CC to hereby and forever renounce and
reject any and all recourse to litigation before any judicial or administrative
forum and to accept the award of the arbitration panel as final and binding,
subject to no judicial or administrative review, except on those grounds set
forth in 9 USC ss.10 and ss.11. Judgment on the award and/or orders may be
entered in any court having jurisdiction over the parties or their assets. In
the final award and/or order, the arbitration panel shall divide all costs
(other than attorney fees, which shall be borne by the party incurring such
fees and other costs specifically provided for herein) incurred in conducting
the arbitration in accordance with what the arbitration panel deems just and
equitable under the circumstances. The fees of DEALER's arbitrator shall be
paid by DEALER. The fees of CC's arbitrator shall be paid by CC.
- --------------------------------------------------------------------------------
10 SIGNATURE
This Agreement becomes valid only when signed by the President or a Vice
President or the National Dealer Placement Manager of Chrysler Corporation and
by a duly authorized officer or executive of DEALER if a corporation; or by one
of the general partners of DEALER if a partnership; or by DEALER if an
individual.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement which is
finally executed at Detroit, Michigan, in triplicate, on December 13, 1991.
Grindstaff Chevrolet, Inc.
--------------------------------------------
(DEALER Firm Name and D/B/A, if applicable)
By /s/
------------------------------------------
(Individual Duly Authorized to Sign)
President
--------------------------------------------
(Title)
CHRYSLER CORPORATION
By /s/
------------------------------------------
National Dealer
Placement Manager
--------------------------------------------
(Title)
<PAGE> 1
EXHIBIT 10.31
CHRYSLER MOTORS CORPORATION
TERM SALES AND SERVICE AGREEMENT
Grindstaff Chevrolet, Inc. dba Grindstaff Chrysler Plymouth Dodge
------------------------------------------------------------------------------
(Dealer Name)
located at 2224 W. Elk Avenue Elizabethton, TN
--------------------------------------------------------------------
(Street) (City) (State)
a(n) Corporation hereinafter called DEALER, and
--------------------------------------
(individual, corporation, partnership)
Chrysler Motors Corporation, a Delaware Corporation, hereinafter sometimes
referred to as "CMC," agree as follows:
- ------------------------------------------------------------------------------
INTRODUCTION
The purpose of the relationship established by this Term Sales and Service
Agreement ("Term Agreement") is to provide a means for the sale and service of
specified CMC vehicles and the sale of CMC vehicle parts and accessories in a
manner that will maximize customer satisfaction and be of benefit to DEALER and
CMC.
While the following provisions, each of which is material, set forth the
undertakings of this relationship, the success of those undertakings rests on a
recognition of the mutuality of interests of DEALER and CMC, and a spirit of
understanding and cooperation by both parties in the day to day performance of
their respective functions. As a result of such considerations, CMC has entered
into this Term Agreement in reliance upon and has placed its trust in the
personal abilities, expertise, knowledge and integrity of DEALER'S principal
owners and management personnel, which CMC anticipates CMC will enable
DEALER to perform the personal services contemplated by this Term Agreement.
It is the mutual goal of this relationship to promote the sale and service of
specified CMC products by maintaining and advancing their excellence and
reputation by earning, holding and furthering the public regard for CMC and all
CMC dealers.
DEALER acknowledges that CMC is relying upon DEALER to provide representation
which conforms to the standards set forth herein and in the Additional Terms and
Provisions of the Chrysler Motors Corporation Sales and Service Agreement (Terms
and Provisions), which are incorporated herein by reference in Paragraph 5 of
this Term Agreement.
DEALER wishes an opportunity to qualify for the standard Chrysler Motors
Corporation Sales and Service Agreement for specified CMC vehicles and
understands that, for this purpose, DEALER must first fulfill all of DEALER'S
undertakings hereinafter described.
- --------------------------------------------------------------------------------
1. PRODUCTS COVERED
DEALER has the right to order and purchase from CMC and to sell at retail only
those specific models of CMC vehicles, sometimes referred to as "specified CMC
vehicles," listed on the Motor Vehicle Addendum,attached hereto and
incorporated herein sometimes referred to as "specified CMC vehicles," by
reference. CMC may change the models of CMC vehicles listed on the Motor
Vehicle Addendum by furnishing DEALER a superseding Motor Vehicle Addendum.
Such a superseding Motor Vehicle Addendum will not be deemed or construed to be
an amendment to this Term Agreement.
- -----------------------------------------------------------------------------
2. DEALER'S MANAGEMENT
CMC has entered into this Term Agreement relying on the active, substantial and
continuing personal participation in the management of DEALER'S organization by:
Name Position
Steven E. Grindstaff President
- ------------------------------- -------------------------------
- ------------------------------- -------------------------------
DEALER represents and warrants that at least one of the above named
individuals will be physically present at DEALER'S facility (sometimes
referred to as "Dealership Facility") during most of its operating hours and
will manage all of DEALER'S business relating to the sale and service of CMC
products. DEALER will not change the personnel holding the above described
position(s) or the nature and extent of his/her, their management
participation without the prior written approval of CMC.
- --------------------------------------------------------------------------------
3. DEALER'S CAPITAL STOCK OR PARTNERSHIP INTEREST
If DEALER is a corporation or partnership, DEALER warrants that the persons
named below own beneficially the capital stock or partnership interest of DEALER
in the percentages indicated below. DEALER warrants that there will be no change
affecting more than 50% of the ownership interest of DEALER, nor will there be
any other change in the ownership interest of DEALER, which may affect the
managerial control of DEALER without CMC'S prior written approval.
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Voting Non-Voting Partnership Active
Name Stock Stock Interest Yes/No
Steven E. Grindstaff 100 % % % Yes
- ------------------------------ ------------ ------------ ------------ ------------
% % %
- ------------------------------ ------------ ------------ ------------ ------------
% % %
- ------------------------------ ------------ ------------ ------------ ------------
% % %
- ------------------------------ ------------ ------------ ------------ ------------
100 % % %
TOTAL ------------ ------------ ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
4. SALES LOCALITY
DEALER shall have the non-exclusive right, subject to the provisions of this
Term Agreement, to purchase from CMC those new specified CMC vehicles, parts,
accessories and other CMC products for resale at the DEALER'S facilities and
location described in the Dealership Facilities and Location Addendum, attached
hereto and incorporated herein by reference. DEALER will actively and
effectively sell and promote the retail sale of specified CMC vehicles, vehicle
parts and accessories in DEALER'S Sales Locality. As used herein, "Sales
Locality" shall mean the area designated in writing to DEALER by CMC from time
to time as the territory of DEALER'S responsibility for the sale of specified
CMC vehicles, vehicle parts and accessories, although DEALER is free to sell
said products to customers wherever they may be located. Said Sales Locality may
be shared with other CMC dealers of the same line-make as CMC determines to be
appropriate.
- --------------------------------------------------------------------------------
5. ADDITIONAL TERMS AND PROVISIONS
The additional terms and provisions set forth in the document entitled "Chrysler
Motors Corporation Sales and Service Agreement Additional Terms and Provisions"
marked "Form 88CMC," as may hereafter be amended from time to time, insofar as
they are not inconsistent with the terms, provisions and conditions of this Term
Agreement, constitute a part of this Term Agreement with the same force and
effect as if set forth at length herein, and the term "this Term Agreement"
includes said Additional Terms and Provisions.
- --------------------------------------------------------------------------------
6. FORMER AGREEMENTS, REPRESENTATIONS, WAIVERS,
STATEMENTS, MODIFICATIONS OR AMENDMENT
This Chrysler Motors Corporation Term Agreement and other documents, (or their
successors as specifically provided for herein) which are specifically
incorporated herein by reference is the entire agreement between the parties
relating to the purchase by DEALER of those new specified CMC vehicles, parts
and accessories from CMC for resale; and it cancels and supersedes all earlier
agreements, written or oral, between CMC and DEALER relating to the purchase by
DEALER of specified CMC vehicles, parts and accessories, except for (a) amounts
owing by CMC to DEALER, such as payments for warranty service performed and
incentive programs, or (b) amounts owing by DEALER to CMC due to DEALER'S
purchase from CMC of vehicles, parts, accessories and other goods or services,
or (c) amounts DEALER owes to CMC as a result of other extensions of credit by
CMC to DEALER. No representations or statements other than those expressly set
forth herein or those set forth in the applications for this Term Agreement
submitted to CMC by DEALER or DEALER'S representatives, are made or relied
upon by any party hereto in entering into this Term Agreement.
No waiver, modification or change of any of the terms of this Term Agreement or
change or erasure of any printed part of this Term Agreement or addition to it
(except the filling in of blank spaces and lines) will be valid or binding on
CMC unless approved in writing by the President or a Vice President or the
National Dealer Placement Manager of Chrysler Motors Corporation.
DEALER and CMC recognize that the passage of time, changes in the industry, ways
of doing business and other unforeseen circumstances may cause CMC to determine
that it should amend all Chrysler Motors Corporation Sales and Service
Agreements pertaining to specified CMC vehicles. Therefore, CMC will have the
right to amend this Term Agreement to the extent that CMC deems advisable,
provided that CMC makes the same amendment in Chrysler Motors Corporation Sales
and Service Agreements pertaining to specified CMC vehicles generally. Each such
amendment will be issued in a notice sent by certified mail or delivered in
person to DEALER and signed by the President or a Vice President or the National
Dealer Placement Manager of Chrysler Motors Corporation. Thirty-five (35) days
after mailing or delivery of such notice to DEALER, this Term Agreement will be
deemed amended in the manner and to the extent set forth in the notice.
- --------------------------------------------------------------------------------
7. ARBITRATION
Any and all disputes arising out of or in connection with the interpretation,
performance or nonperformance of this Term Agreement or any and all disputes
arising out of or in connection with transactions in any way related to this
Term Agreement (including, but not limited to, the validity, scope and
enforceability of this arbitration provision, or disputes under rights granted
pursuant to the statutes of the state in which DEALER is licensed) shall be
finally and completely resolved by arbitration pursuant to the arbitra-
<PAGE> 3
laws of the United States of America as codified in Title 9 of the United States
Code, Sections 1-14, under the Rules of Commercial Arbitration of the American
Arbitration Association (hereinafter referred to as the "Rules") by majority
vote of a panel of three arbitrators. One arbitrator will be selected by DEALER
(DEALER'S arbitrator). One arbitrator will be selected by CMC (CMC'S
arbitrator). These arbitrators must be selected by the respective parties within
ten (10) business days of receipt by either DEALER or CMC of a written
notification from the other party of a decision to arbitrate a dispute pursuant
to this Term Agreement. Should either CMC or DEALER fail to select an arbitrator
within said ten-day period, the party who so fails to select an arbitrator will
have its arbitrator selected by the American Arbitration Association upon the
application of the other party. The third arbitrator must be an individual who
is familiar with business transactions and be a licensed attorney admitted to
the practice of law within the United States of America, or a judge. The third
arbitrator will be selected by DEALER'S and CMC'S arbitrators. If said
arbitrators cannot agree on a third arbitrator within thirty (30) days from the
date of the appointment of the last selected arbitrator, the either DEALER'S or
CMC'S arbitrator may apply to the American Arbitration Association to appoint
said third arbitrator pursuant to the criteria set forth above. The arbitration
panel shall conduct the proceedings pursuant to the then existing Rules.
Notwithstanding the foregoing, to the extent any provision of the Rules
conflict with any provision of this Paragraph 7, the provisions of this
Paragraph 7 will be controlling.
CMC and DEALER agree to facilitate the arbitration by: (a) each party paying to
the American Arbitration association one-half (1/2) of the required deposit
before the proceedings commence; (b) making available to one another and to the
arbitration panel, for inspection and photocopying all documents, books and
records, if determined by the arbitrator to be relevant to the dispute; (c)
making available to one another and to the arbitration panel personnel directly
or indirectly under their control, for testimony during hearings and prehearing
proceedings if determined by the arbitration panel to be relevant to the
dispute; (d) conducting arbitration hearings to the greatest extent possible on
consecutive business days; and (e) strictly observing the time periods
established by the Rules or by the arbitration panel for the submission of
evidence and of briefs.
Unless otherwise agreed to by CMC and DEALER, a stenographic record of the
arbitration shall be made and a transcript thereof shall be ordered for each
party, with each party paying one-half (1/2) of the total cost of such
recording and transcription. The stenographer shall be state-certified, if
certification is made by the state, and the party to whom it is most convenient
shall be responsible for securing and notifying such stenographer of the time
and place of the arbitration hearing(s).
If the arbitration provision is invoked when the dispute between the parties is
either the legality of terminating Term Agreement or of adding a new CMC dealer
of same line-make or relocating an existing CMC dealer or same line-make, CMC
will stay the implementation of decision to terminate this Term Agreement or add
such CMC dealer or approve the relocation of an existing CMC dealer of the same
line-make until the decision of arbitrator has been announced, providing DEALER
did not in any way attempt to avoid the obligations of Paragraph 7, in which
case the decision at issue will be immediately implemented.
Except as limited hereby, the arbitration panel shall [ILLEGIBLE] all powers of
law and equity, which it can lawfully assume necessary to resolve the issues in
dispute including, without limiting the generality of the foregoing, making
awards, compensatory damages, issuing both prohibitory and mandatory orders in
the nature of injunctions, and [ILLEGIBLE] the production of documents and
witnesses for arbitration discovery and/or presentation at the arbitration
hearing on the merits of the case. The arbitration panel shall not have legal or
equitable authority to issue a mandatory or prohibitory order which: (a) extends
or effect beyond the subject matter of this Term Agreement or (b) will govern
the activities of either party for a period of more than two years; nor shall
the arbitration panel have authority to award punitive, consequential or any
damages whatsoever beyond or in addition to the compensation damages allowed to
be awarded under this Term Agreement.
The decision of the arbitration panel shall be in written form and shall include
findings of fact and conclusions of [ILLEGIBLE]
It is the intent and desire of DEALER and CMC to [ILLEGIBLE] and forever
renounce and reject any and all recourse litigation before any judicial or
administrative forum and accept the award of the arbitration panel as final,
binding, subject to no judicial or administrative [ILLEGIBLE] except on those
grounds set forth in 9 USC Section 10 and judgement on the award and/or orders
may be [ILLEGIBLE] any court having jurisdiction over the parties or their
[ILLEGIBLE] In the final award and/or order, the arbitration panel [ILLEGIBLE]
divide all costs (other than attorney fees, which [ILLEGIBLE] borne by the
party incurring such fees and other than specifically provided for herein)
incurred in conducting arbitration in accordance with what the arbitration panel
deems just and equitable under the circumstances, [ILLEGIBLE] fees of DEALER'S
arbitrator shall be paid by DEALER [ILLEGIBLE] fees of CMC'S arbitrator shall
be paid by CMC.
- -------------------------------------------------------------------------------
8. EFFECTIVE DATE, NECESSARY CONDITIONS, TERMINATION
This Term Agreement will become effective on the [ILLEGIBLE] execution hereof
and, if not previously terminated provided herein or in Paragraph 28 of said
Terms [ILLEGIBLE] Provisions, will continue in effect until Jun 12 at which
time this Term Agreement will terminate automatically without notice to or by
either party.
<PAGE> 4
If this Term Agreement is not terminated as provided herein or in Paragraph 28
of said Terms and Provisions, and thus continues in effect for the period set
forth in the immediately foregoing Paragraph, CMC, at the expiration of such
period, will enter into the standard Chrysler Motors Corporation Sales and
Service Agreement current at the date of said expiration, for such specified
CMC vehicles with DEALER, provided that DEALER has fulfilled each and every
condition set forth in subparagraphs 8(A) through 8(H) set forth below, which
DEALER understands and agrees to be reasonable and necessary, and DEALER has
otherwise complied with all the provisions of this Term Agreement. Furthermore,
DEALER fully understands and agrees that the DEALER'S failure to meet any of
the conditions set forth in subparagraphs 8(A) through 8(H) including, without
limiting the generality of the foregoing, failure to meet those conditions
within the time period, if any, specifically set forth in each condition, is
grounds for termination of this Term Agreement upon sixty (60) days' written
notification to DEALER by CMC as if failure to meet said conditions were
specifically set forth under Paragraph 28 of said Terms and Provisions.
8(A) DEALER shall provide CMC regularly, on forms satisfactory to CMC, a
monthly financial statement of DEALER'S vehicle business by the tenth (10th) day
of the month following the month covered by each statement.
8(H) DEALER is otherwise qualified for such (a) standard CMC Sales and Service
Agreement(s).
- -------------------------------------------------------------------------------
9. NO OBLIGATIONS ON TERMINATION
If DEALER fails to carry out fully the terms, provisions, obligations and
conditions of this Term Agreement, then CMC, whether or not it has pursued other
remedies, shall have no obligation to DEALER to extend this Term Agreement in
whole or in part or to enter into any standard Chrysler Motors Corporation
Sales and Service Agreement with DEALER or any other obligation of any kind.
The termination or expiration of this Term Agreement in any manner shall not
impose upon CMC any liability or obligations under Paragraph 30 ("Disposition
of Dealer's Premises"), Paragraph 32 ("Successors to Dealer") and Paragraph 33
("Surviving Spouse's Financial Interest") of said Terms and Provisions or any
liability or obligation of any kind.
DEALER acknowledges that DEALER has read each and every term, provision and
condition of this Term Agreement and that DEALER understands and accepts all
such terms, provisions and conditions.
- -------------------------------------------------------------------------------
10. SIGNATURE
This Term Agreement becomes valid only when signed by the President or a Vice
President or the National Dealer Placement Manager of Chrysler Motors
Corporation and by a duly authorized officer or executive of DEALER if a
corporation; or by one of the general partners of DEALER if a partnership; or
by DEALER if an individual.
IN WITNESS WHEREOF, the parties hereto have signed this Term Agreement which is
finally executed at Detroit, Michigan, in triplicate, on Dec 12, 1988
GRINDSTAFF CHEVROLET, INC.
DBA GRINDSTAFF CHRYSLER PLYMOUTH DODGE
- -----------------------------------------
(DEALER - Firm Name)
By: /s/ [ILLEGIBLE]
--------------------------------------
(Individually Duly Authorized to Sign)
PRESIDENT
--------------------------------------
(Title)
CHRSYLER MOTORS CORPORATION
By: /s/ MARILOU JASWICK
--------------------------------------
National Dealer Placement Manager
- -----------------------------------------
(Title)
<PAGE> 1
EXHIBIT 10.32
OLDSMOBILE DIVISION
DEALER SALES AND SERVICE AGREEMENT
This Agreement, effective NOVEMBER 1, 1995, is entered into by General Motors
Corporation, Oldsmobile Division ("Oldsmobile"), a Delaware corporation, and
ROBERTSON OLDSMOBILE-CADILLAC, INC., a
[X] GEORGIA corporation, incorporated JULY 27, 1982;
[ ] Proprietorship;
[ ] partnership;
[ ] other - specify
doing business at 2355 BROWNS BRIDGE ROAD, GAINESVILLE, GEORGIA 30504-6064
("Dealer").
PREAMBLE
Oldsmobile has a long standing tradition Of providing quality vehicles of good
value. Building upon its heritage, Oldsmobile's mission is to work with
Oldsmobile dealers to earn and keep customers by providing internationally
focused vehicles and uncompromised satisfaction throughout the shopping, buying
and ownership experience.
The long term growth and mutual success of Oldsmobile and its dealers also
depends significantly upon the ability and efforts of its dealers. Oldsmobile
expects its dealers to effectively sell, service, and protect the reputation Of
Oldsmobile Products and to satisfy the customers of Oldsmobile Products in a
manner that demonstrates a caring attitude toward those customers.
CUSTOMER ENTHUSIASM
First
Exceeding customer expectation's is essential to the long term business success
of Oldsmobile and its dealers. Oldsmobile and Dealer are dedicated to continuous
improvement in customer enthusiasm by always striving to exceed customer
expectations.
Oldsmobile will advise Dealer no less than on a yearly basis of the results of
any dealer customer satisfaction index generated by Oldsmobile and relate such
index to local and national geography. In the event that customer satisfaction
surveys place Dealer in an unsatisfactory position relative to comparable
Oldsmobile dealers Dealer will, upon request of Oldsmobile, cooperate in a
review of Dealer's performance and participate in a Business Plan developed by
Dealer and Oldsmobile to improve Dealer's performance to an acceptable level.
To enhance customer enthusiasm, Oldsmobile has implemented the Oldsmobile Edge
program. Dealer participation is essential to the success of the program, and
Dealer agrees to participate in the program. Oldsmobile may modify the program
from time to time, and Oldsmobile will obtain input of the Board of Governance
before adopting such modifications.
<PAGE> 2
BOARD OF GOVERNANCE
Second
Oldsmobile has established (the Oldsmobile Board of Governance. Its purpose is
to foster and maintain a positive business relationship between Oldsmobile and
the Oldsmobile Dealer Body that recognizes the mutual interests and
interdependence of the parties. The Board is composed of all equal number of
Oldsmobile dealer members and Oldsmobile personnel and will provide input and
make recommendations to Oldsmobile on issues and subjects relating to their
common business interests.
The Board may establish advisory committees to investigate, review, and make
recommendations to the Board on various issues. Such advisory committees may
address issues such as retail network planning, retail and wholesale standards,
training, communications, product quality, facility size and image, long term
product planning, marketing and advertising, and other issues as may be
determined to be appropriate.
DEALER OPERATOR
Third
This Dealer Agreement is a personal service agreement entered into in reliance
on the qualifications of the Dealer Operator named below and on Dealer's
assurance that Dealer Operator will provide personal service by exercising full
managerial authority over Dealership Operations. Dealer Operator must also meet
all the other requirements set forth in Article 2 of (the Standard Provisions.
E. MOSS ROBERTSON, JR.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEALERSHIP IMAGE AND DESIGN
Fourth
As the point of customer contact with Oldsmobile Products, (the appearance and
quality of dealership premises affects customer perception of Oldsmobile
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 any reasonable requirements and
standards established by Oldsmobile to promote and preserve the image of
Oldsmobile and its dealers. Oldsmobile will consult with and consider
recommendations of the Board of Governance with respect to image requirements
and standards. To assist Dealer, Oldsmobile will counsel and advise Dealer
concerning facility appearance and design.
ADVERTISING AND PROMOTIONAL ACTIVITY
Fifth
Oldsmobile and Dealer agree to promote Oldsmobile Products in the conduct of
their business, refrain from any activity harmful to the reputation of
Oldsmobile Products and maintain uniformly high standards of ethical
advertising. Oldsmobile believes in and supports dealer marketing associations
and encourages Dealer to support and participate in Dealer's local marketing
association.
<PAGE> 3
DEALER SALES REVIEW
Sixth
Oldsmobile will provide to Dealer, at least annually, a written Dealer Sales and
Registration Report ("Report") advising Dealer of Dealer's retail sales index,
Dealer's state ranking, and Oldsmobile's retail registration index and fleet
registration performance in Dealer's Area of Primary Responsibility. Oldsmobile
may modify the sales review process from time to time and will obtain input of
the Board of Governance before adopting such modifications.
A Retail Sales Index of 100 (as referenced in the Report) 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
Oldsmobile Products. Oldsmobile also expects Dealer to pursue available sales
opportunities exceeding the minimum acceptable standard. Additionally,
Oldsmobile expectations for performance in an area may exceed the minimum
acceptable standard for individual dealer compliance. In the event the Dealer's
Retail Sales Index or Dealer's state ranking or Oldsmobile's retail registration
index place Dealer in an unsatisfactory position Dealer will, upon request of
Oldsmobile, cooperate in a review of Dealer's performance and participate in a
Business Plan developed by Dealer and Oldsmobile.
TRAINING
Seventh
Oldsmobile and Dealer agree that professional and knowledgeable personnel are
essential to customer enthusiasm and to the long term success of Oldsmobile and
Dealer. Accordingly, Oldsmobile agrees to make available or recommend product,
sales, service and parts, accounting and business management training for its
dealers. Dealer agrees that its personnel will attend training identified by
Oldsmobile as necessary. If Oldsmobile identifies Dealer deficiencies, Dealer
agrees that its personnel will complete courses specified by Oldsmobile.
Oldsmobile agrees to consult with the Board of Governance before adopting
additional required training and will consider the Board of Governance
recommendations as to content and frequency of additional required training.
Oldsmobile and Dealer acknowledge that competent training from other sources is
available and that Dealer may benefit from such training.
TOOLS AND EQUIPMENT
Eight
Oldsmobile and Dealer acknowledge that a properly equipped dealership promotes
customer enthusiasm and sale of Oldsmobile Products. Oldsmobile agrees to
provide Dealer with lists of those tools and equipment that Oldsmobile regards
as essential. Dealer agrees that it will acquire and use essential tools and
equipment identified by Oldsmobile. Oldsmobile agrees to consult with the Board
of Governance prior to requiring additional tools or equipment other than those
required to service new model Products.
SOFTWARE
Ninth
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.
BUSINESS MANAGEMENT RESPONSIBILITY
Tenth
If Dealer is an authorized Dealer for more than one division of General Motors,
OLDSMOBILE DIVISION will be primarily responsible for administering the
provisions of the Dealer Agreement relating to the Dealer Statement of
Ownership, Dealership Location and Premises Addendum, and Capital Standard
Addendum. OLDSMOBILE DIVISION will execute or extend the appropriate documents
for all Divisions.
<PAGE> 4
TERM OF AGREEMENT
Eleventh
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 Oldsmobile at the expiration date if Oldsmobile
determines Dealer has fulfilled its obligations under this Agreement.
DISPUTE RESOLUTION PROCESS
Twelfth
Oldsmobile has long recognized that mutual respect, trust, and confidence are
vital to the relationship between Oldsmobile and each authorized dealer. In
those instances where a dispute arises between Dealer and Oldsmobile, Dealer is
encouraged to present the matter to Oldsmobile management for review. If the
matter is not resolved through management review, the provisions of the Dispute
Resolution Process will apply. Oldsmobile will provide Dealer with a written
copy of (the Dispute Resolution Process. Oldsmobile may modify the Dispute
Resolution Process from time to time, and will obtain input from the Board of
Governance before adopting such modifications.
INCORPORATION OF STANDARD PROVISIONS
Thirteenth
The "Standard Provisions" (GMMS 1013) are incorporated as a part of this
Agreement.
ADDITIONAL AGREEMENTS AND UNDERSTANDINGS
Fourteenth
The following agreements and understandings are hereby incorporated into this
Agreement:
(List any special letters, facility agreements, etc.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Multiple
Dealer Operator Addendum, if applicable, which have not been re-executed at the
time of this Agreement.
<PAGE> 5
EXECUTION OF AGREEMENT
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) on behalf of Oldsmobile 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.
ROBERTSON OLDSMOBILE-CADILLAC, INC.
- --------------------------------------------------------------------------------
Dealership Name
OLDSMOBILE DIVISION
General Motors Corporation
By: /s/ C M ROBERTSON JR. 8/28/95 By: /s/ D. E. LAKTI
-------------------------------- --------------------------------------
Dealer Operator Date General Sales Service Manager
By:
--------------------------------------
Authorized Representative Date
<PAGE> 1
EXHIBIT 10.33
CADILLAC MOTOR CAR DIVISION
DEALER SALES AND SERVICE AGREEMENT
This Agreement, effective NOVEMBER 01, 1995, is between General Motors
Corporation (Cadillac Motor Car Division), a Delaware corporation, located at
30009 Van Dyke Road, Warren, Michigan 48090-9025 ("CADILLAC") and ROBERTSON
OLDSMOBILE-CADILLAC, INC., a
[X] GEORGIA corporation, incorporated JULY 27, 1982;
[ ] proprietorship;
[ ] partnership;
doing business at 2355 BROWNS BRIDGE ROAD,
GAINESVILLE, GEORGIA 30504-6054 ("Dealer")
PHILOSOPHY AND PREAMBLE
CADILLAC has a distinguished heritage of engineering, manufacturing, producing
and marketing prestige luxury vehicles.
The CADILLAC commitment is to capture the imagination of discriminating
customers and to compete aggressively, along with our strategic partners, to
make CADILLAC the industry leader in customer enthusiasm, owner loyalty, and
value.
CADILLAC can only fulfill these objectives with the assistance and cooperation
of competent dealers which effectively sell and service CADILLAC motor
vehicles, parts and accessories, and related products ("CADILLAC Products").
For CADILLAC and its dealers to obtain maximum benefit from their relationship,
they must develop a joint commitment to each other and to the CADILLAC
customer.
To support its objective, CADILLAC recognizes that it must:
(a) Strive to enhance the quality, competitiveness, and popular appeal of
CADILLAC Products;
(b) Endeavor to distribute CADILLAC vehicles among its dealers in a fair
and equitable manner;
(c) Provide each dealer the opportunity to achieve a reasonable return on
investment if it fulfills its obligations under this Agreement;
(d) Reasonably consider each dealer's request for warranty reimbursement;
(e) Assign competent personnel to provide support to Dealer;
(f) Maintain an open exchange of ideas with its dealers; and
(g) Respect interests of existing dealers in dealer network decisions.
<PAGE> 2
CADILLAC must rely on its dealers to provide the expertise to represent
CADILLAC Products effectively to the public. Dealer, to support the
CADILLAC objective, must fulfill its obligations under this Agreement by,
in part:
(a) Providing appropriate skill, capital, equipment, staff and
facilities;
(b) Conducting its dealership activities consistent with the
reputation, image and objective of CADILLAC in order to maintain
and improve customer confidence in CADILLAC, CADILLAC Products
and CADILLAC dealers;
(c) Exhibiting a caring attitude toward CADILLAC customers and the
public to assure complete satisfaction with the dealership,
purchase and ownership experience;
(d) Treating the public and CADILLAC customer with utmost courtesy,
sincerity and respect;
(e) Maximizing convenience to the public and CADILLAC customer;
(f) Conducting its business in a highly ethical manner, consistent
with all legal and sound business expectations; and
(g) Promoting, advertising, marketing, selling and servicing CADILLAC
Products to the public and to CADILLAC customers,
CADILLAC and Dealer acknowledge that the public expects, and customers of
CADILLAC Products demand, quality from CADILLAC, professionalism from Dealer,
and respect from both CADILLAC and Dealer.
CADILLAC and Dealer have entered into this Agreement in a spirit of trust and
respect, with mutual confidence in one another's integrity and ability, with a
strong desire to maintain an open exchange, and to act in an honest and
cooperative manner.
CADILLAC and Dealer agree to do business together under the following terms and
conditions:
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 CADILLAC at the expiration date if
CADILLAC determines Dealer has fulfilled its obligations under this
Agreement.
Second
The "Standard Provisions" (Form GMMS 1013) and the "CADILLAC Dealer
Operating Manual" ("MANUAL") are incorporated as a part of this Agreement.
The MANUAL will contain sales and service review methodology, requirements
for ownership, capital, facilities and training, identification of required
tools and equipment, among other operational requirements. The MANUAL may
be revised from time to time by consensus of a Joint Dealer Agreement
Committee comprising three dealer representatives and three CADILLAC
executives. Each revision will have an effective date, Dealer agrees to
comply with the then current version of the MANUAL.
<PAGE> 3
Third
- -----
Dealer agrees that the following Dealer Operator will provide personal
services in accordance with Article 2 of the "Standard Provisions:"
E. MOSS ROBERTSON, JR.
----------------------------------------------------------------------
----------------------------------------------------------------------
Fourth
- ------
Dealer agrees to assist CADILLAC in achieving its objectives and
dedicates itself to pursue complete customer satisfaction. Dealer also
agrees to uphold the CADILLAC image and comply with the provisions of
this Agreement.
Dealer acknowledges that to ensure success of the joint effort of CADILLAC
and its dealers, Dealer participation is required. Dealer hereby agrees
to allow its Dealer Operator to serve when requested on a Joint
CADILLAC/Dealer Committee established in accordance with the provisions of
the MANUAL. This participation may require travel or expenditures of
time. In turn, CADILLAC commits to have appropriate management
involvement in such committee.
Fifth
- -----
CADILLAC and Dealer believe their commitment to the CADILLAC customer and
their business goals and objectives, together with this Agreement, should
minimize disputes between them. Nevertheless, CADILLAC and Dealer
recognize that disputes may arise which cannot be resolved in the normal
course. To resolve such disputes, a Joint Mediation Committee ("JMC")
comprised of three dealer representatives and three CADILLAC
representatives shall administer a dispute resolution process which shall
be mandatory, but non-binding on either party. In the MANUAL, JMC shall
govern the accessibility of the process and define the eligibility of
disputes for mediation.
<PAGE> 4
Either Dealer or CADILLAC shall submit any eligible controversy which
arises out of or relates to this Agreement to JMC as outlined in the
MANUAL. JMC shall appoint a Mediation Panel to hear the dispute. The Panel
shall consist of an equal number of dealer and CADILLAC representatives and
an independent, professional mediator.
The Mediation Panel shall evaluate each party's position and propose a
recommended solution guided by this Agreement and the principles of
fairness and equity. The parties may accept the proposed solution, consult
with the Mediation Panel to develop an alternate solution, agree to a
binding resolution procedure or pursue any other remedies available to
them.
This provision will apply solely to disputes between Dealer and CADILLAC.
If Dealer is involved in identical disputes with CADILLAC and another
General Motors Division(s), then the dispute resolution process of the
Business Management Division, identified in Paragraph Seventh, will
control. If either party initiates any action in court or an administrative
agency in contravention of this Paragraph Fifth, that party will pay all
attorneys' fees and litigation expenses of the other party arising out of
the enforcement of this provision.
Sixth
Dealer shall safeguard and promote the image and reputation of CADILLAC
Products in the conduct of its business. CADILLAC and Dealer shall refrain
from any activity which may he harmful to that reputation or image. Dealer
and CADILLAC shall avoid all discourteous, deceptive, misleading or
unethical practices.
CADILLAC and Dealer recognize the need for maintaining uniformly high
standards of ethical advertising of a quality consonant with the reputation
of CADILLAC, its Products and its dealers.
Dealer agrees not to use any advertising or merchandising programs which
are likely to mislead the public or impair the image of Dealer, CADILLAC,
the reputation of CADILLAC Products, or the CADILLAC dealer network.
Seventh
If Dealer is an authorized dealer for more than one division of General
Motors, OLDSMOBILE 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. OLDSMOBILE DIVISION will execute or extend those documents for
all divisions.
<PAGE> 5
Eighth
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 CADILLAC 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.
The following agreements and understandings are hereby incorporated into this
Agreement:
(List any special letters, facility agreements, etc.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Multiple
Dealer Operator Addendum, if applicable, which have not been re-executed at the
time of this Agreement.
ROBERTSON OLDSMOBILE-CADILLAC, INC.
- --------------------------------------------------------------------------------
Dealer Firm Name
CADILLAC MOTOR CAR DIVISION
General Motors Corporation
By /s/ C M ROBERTSON JR 8/28/95 By /s/ [ILLEGIBLE]
-------------------------------- --------------------------------------
Dealer Operator Date General Sales and Service Manager
By
--------------------------------------
Authorized Representative Date
<PAGE> 1
EXHIBIT 10.34
ISUZU DEALER SALES
AND
SERVICE AGREEMENT
AGREEMENT effective the 23rd day of April, 1990.
by and between
AMERICAN ISUZU MOTORS INC.,
a California corporation (hereinafter called "Distributor")
and
<TABLE>
<S> <C>
(an individual) (partnership formed in the State of Robertson Oldsmobile Cadillac Inc. )
-------------------------------------
(corporation incorporated in the State of Georgia )
-----------------------------------------------
(doing business as Moss Robertson Isuzu )
----------------------------------------------------------------------
whose business location is 2355 Browns Bridge Rd.
Gainesville, GA 30501
------------------------------------------------------------
(hereinafter called "Dealer").
</TABLE>
PURPOSE
The purpose of this Agreement is to set forth the basic rights, duties and
procedures that apply to the relationship and business transactions between
Distributor and Dealer, and to provide for the sale and servicing of Isuzu
Products in a manner that will best serve the interests of Distributor, Dealer,
and owners and purchasers of Isuzu Products. This Agreement sets forth the
rights which Dealer will enjoy as an Authorized Isuzu Dealer; the
responsibilities which Dealer assumes in consideration of these rights; and the
respective rights and obligations of Distributor and Dealer to each other. The
parties recognize that the success of Distributor and Dealer depends upon
mutual understanding and cooperation between Distributor and Dealer and how well
they each fulfill their respective responsibilities.
Distributor's basic responsibility is to promote and market Isuzu Products in
the United States and to endeavor to establish a sales network of dealers that
can provide effective sales and service efforts at the retail level. Dealer's
basic responsibility is to actively and effectively promote the retail sale of
Isuzu Products and to provide courteous and efficient service of Isuzu
Products. Distributor and Dealer will endeavor to fulfill their respective
responsibilities through aggressive, sound, ethical selling practices and
through conscientious regard for customer service.
Distributor and Dealer shall refrain from engaging in conduct or activities
which might be detrimental to or reflect adversely upon the reputation of
Distributor, Manufacturer, Dealer or Isuzu Products and shall engage in no
discourteous, deceptive, misleading or unethical practices or activities.
NOW THEREFORE, in consideration of the foregoing and the promises and
agreements herein contained, it is hereby mutually agreed between the parties
hereto as follows:
Page 1
<PAGE> 2
SECTION 1. APPOINTMENT OF DEALER
Subject to the conditions and provisions set forth in this Agreement,
Distributor hereby:
(1) appoints Dealer as an Authorized Isuzu Dealer;
(2) grants Dealer the non-exclusive right to buy Isuzu Cars, Isuzu Trucks and
Isuzu Parts and Accessories from Distribution for resale at or from
Dealer's Dealership Location; and
(3) grants Dealer a non-exclusive right, subject to and in accordance with the
provisions of this Agreement, to identify itself as an Isuzu Dealer and to
use and to display, in the conduct of its dealership operations, the
various trademarks, tradenames, service marks and other word and design
marks that Distributor uses or will use in connection with the promotion or
sale of or are or will be applied to Isuzu Products.
SECTION 2. ACCEPTANCE BY DEALER
Dealer hereby accepts said appointment and grants and acknowledges that:
(1) Except as otherwise provided by applicable laws, Distributor shall have the
absolute right to appoint other persons to conduct dealership operations in
connection with Isuzu Products and to contract with such persons in
connection therewith;
(2) Except as expressly provided in this Agreement or with the prior written
consent of Distributor (which consent shall not be unreasonably withheld),
neither said appointment, said grants nor this Agreement may be
transferred, assigned or sold to any third party, whether separately or in
connection with any sale of the assets of or ownership interests in Dealer,
by Dealer or its management or owners;
(3) No fee or other monetary consideration has been paid by Dealer to
Distributor for said appointment or grants or as consideration for
Distributor's entering into this Agreement and no property right or
interest, direct or indirect, is sold, conveyed or transferred to Dealer by
this Agreement.
SECTION 3. ASSUMPTION OF RESPONSIBILITY BY DEALER
In consideration of said appointment and grants and subject to the conditions
and provisions of this Agreement, Dealer agrees to:
(1) establish and maintain at Dealer's Dealership Location the Dealership
Facilities described in this Agreement in the manner set forth in this
Agreement;
(2) actively and effectively promote the sale at retail (and, if Dealer elects,
the leasing and rental) of Isuzu Products at and from Dealer's Dealership
Location in accordance with the provisions of this Agreement;
(3) conduct quality service for Isuzu Vehicles in accordance with the
provisions of this Agreement;
(4) perform all additional responsibilities specified in this Agreement; and
(5) secure and maintain all licenses required for the conduct of an Isuzu
dealership at and from Dealer's Dealership Location and to furnish
Distributor with written notice of securing such licenses. This Agreement
will not be valid until and unless Dealer shall have furnished Distributor
with written notice specifying the date and the identifying number, if any,
of each such license secured by Dealer. Dealer shall notify Distributor
immediately in writing if Dealer shall fail to secure any such license or
if any such license shall expire and Dealer shall fail to obtain a renewal
thereof or if any such license is suspended or revoked, specifying the
effective date of any such expiration, suspension or revocation.
Page 2
<PAGE> 3
SECTION 4. OWNERSHIP AND MANAGEMENT
(a) This Agreement has been entered into by Distributor in reliance upon:
(i) Dealer's representation and agreement that the following named persons
are all of the persons who have an ownership interest in Dealer:
<TABLE>
<CAPTION>
Percentage Interest.
<S> <C>
1. (Name) E. MOSS ROBERTSON, JR
---------------------------------------------------------------------- 100 (%)
----------------
(Residence Address) 905 MEMORIAL DRIVE GAINESVILLE, GA 30501
----------------------------------------------------------------------
2. (Name)
---------------------------------------------------------------------- (%)
----------------
(Residence Address)
----------------------------------------------------------------------
3. (Name)
---------------------------------------------------------------------- (%)
----------------
(Residence Address)
----------------------------------------------------------------------
4. (Name)
---------------------------------------------------------------------- (%)
----------------
(Residence Address)
----------------------------------------------------------------------
5. (Name)
---------------------------------------------------------------------- (%)
----------------
(Residence Address)
----------------------------------------------------------------------
6. (Name)
---------------------------------------------------------------------- (%)
----------------
(Residence Address)
----------------------------------------------------------------------
</TABLE>
(ii) Dealer's representation and agreement that the following named person,
and only the following named person shall be Dealer's Executive
Manager and shall have full authority and responsibility for the
operating management of Dealer in performance pursuant to this
Agreement:
(Name) E. MOSS ROBERTSON, JR Title PRESIDENT
- ---------------------------------------------------------- --------------
(Residence Address) 905 MEMORIAL DRIVE GAINESVILLE, GA 30501
- --------------------------------------------------------------------------------
(b) This Agreement has been entered into by Distributor in reliance upon, and
in consideration of, the personal qualifications and representations with
respect thereto of the above-named persons. In view of the personal nature
of this Agreement and its objectives and purposes, this Agreement and the
rights and privileges conferred on Dealer hereunder are not assignable,
transferable or saleable by Dealer. Dealer agrees that any change in the
ownership or operating management of Dealer specified herein requires the
prior written consent of Distributor. Dealer shall give Distributor prior
notice of any proposed change in said ownership or management and immediate
notice of the death or incapacity of any Owner or Executive Manager. No
such change, and no assignment of this Agreement or of any right or
interest herein, shall be effective against Distributor unless and until
embodied in an appropriate amendment to or assignment of this Agreement, as
the case may be, duly executed and delivered by Distributor and by Dealer.
Distributor shall not unreasonably withhold its consent to any such change.
Page 3
<PAGE> 4
SECTION 5. PROVISIONS
The "ISUZU DEALER SALES AND SERVICE AGREEMENT ADDITIONAL PROVISIONS" bearing
form No. , are hereby incorporated herein and made a part of this Agreement
with the same force and effect as if set forth at length herein and the term
"this Agreement" as used herein, includes said "ISUZU DEALER SALES AND SERVICE
AGREEMENT ADDITIONAL PROVISIONS". Dealer agrees to be bound by and comply with
the provisions of the Service Policies and Procedures Manual, the Parts Policies
and Procedures Manual and all other manuals heretofore or hereafter issued by
Distributor to Dealer and all amendments, revisions and supplements thereto, and
all bulletins and instructions heretofore or hereafter issued by Distributor to
Dealer.
SECTION 6. ENTIRE AGREEMENT
Unless expressly referred to and incorporated herein, this Agreement cancels,
supersedes and annuls all prior agreements, contracts and understandings between
Distributor and Dealer, and there are no representations, promises, agreements
or understandings except as described herein, all negotiations, representations
and understandings being merged herein.
SECTION 7. WAIVER OR MODIFICATION OF THIS AGREEMENT
(a) The failure of either party at any time to require performance by the other
party of any provisions hereof shall in no way affect the full right to
require such performance at any time thereafter. Nor shall the waiver by
either party of a breach of any provision hereof constitute a waiver of any
succeeding breach of the same or any other such provisions nor constitute a
waiver of the provision itself.
(b) No waiver, modification or change of any of the terms of this Agreement or
change or erasure of any printed part of this Agreement or addition to it
(except filling of blank spaces and lines) will be valid or binding on
Distributor unless approved in writing by the President or the Senior Vice
President and General Manager of Distributor.
SECTION 8. TERM
This Agreement shall have a term commencing an the effective date hereof and
shall continue in effect until terminated in accordance with the provisions of
this Agreement.
SECTION 9. APPLICABLE LAW
This Agreement shall be deemed to have been made in and shall be governed by and
construed in accordance with the laws of the State of California; provided,
however:
(a) Unless Dealer's Dealership Location is situated in California, Dealer shall
have none of the rights or duties provided for in the California Statutes
regulating the relationship between motor vehicle manufacturers,
distributors and dealers, but shall have the rights and duties provided in
the like laws, if any, of the state in which Dealer's Dealership Location
is situated; and
(b) If performance by either Distributor or Dealer of any provision of this
Agreement contravenes a law of any state or jurisdiction where such
performance is to take place, the performance of such provision shall be in
accordance with the requirements of such law to the extent, and only to the
extent, that such performance contravenes such law and only to the extent
and while such law is deemed or held to be valid and applicable to such
performance.
Page 4
<PAGE> 5
SECTION 10. EXECUTION OF AGREEMENT
This Agreement, and any addendum or amendment, or notice with respect thereto,
shall be valid and binding an Distributor only when it bears the signature of
either the President or the Senior Vice President and General Manager of
Distributor. This Agreement shall bind Dealer only when signed by a duly
authorized officer of Dealer if a corporation; by one or more of the general
partners of Dealer it a partnership; or by Dealer if an individual.
IN WITNESS WHEREOF, the parties have executed this Agreement in triplicate as of
the day and year first above written at Whittier, California.
DEALER Robertson Oldsmobile Cadillac DISTRIBUTOR
DBA Moss Robertson Isuzu
AMERICAN ISUZU MOTORS INC.
- --------------------------------------
By /s/ C. MOSS ROBERTSON JR. By /s/ J.E. PULLY
------------------------------------ --------------------------------
Title President Title Sr. Vice President and
------------------------------- -------------------------
General Manager
Page 5
<PAGE> 1
EXHIBIT 10.36
[LOGO] FORD MOTOR COMPANY
Atlanta District
FORD SALES AND SERVICE AGREEMENT
<TABLE>
<S> <C>
AGREEMENT made as of the 14th day of October , 1993,
------------------ ------------------------------------------------ ----
by and between Hones, Inc.
-------------------------------------------------------------------------------------------
(Name of Entity)
Corporation North Carolina
- -----------------------------------------------------------------------------------------------------------
(State whether an individual, partnership or corporation) (If the latter, show name of the state
in which incorporated)
doing business as Jones-Holt Ford-Mecury, Inc.
-----------------------------------------------------------------------------------------
(Trade Name)
and with a principal place of business at 26 West Main Street
-----------------------------------------------------------------
(Street Address)
Franklin Macon NC 28734
- -----------------------------------------------------------------------------------------------------------
(city) (county) (state) (zip code)
</TABLE>
(hereafter called the "Dealer") and Ford Motor Company, a Delaware corporation
with its principal place of business at Dearborn, Michigan (hereinafter called
the "Company").
PREAMBLE
The purpose of this agreement is to (i) establish the Dealer as an
authorized dealer in COMPANY PRODUCTS including VEHICLES (as herein defined),
(ii) set forth the respective responsibilities of the Company in producing and
selling those products to the Dealer and of the Dealer in reselling and
providing service for them and (iii) recognize the interdependence of both
parties in achieving their mutual objectives of satisfactory sales, service and
profits by continuing to develop and retain a broad base of satisfied owners of
COMPANY PRODUCTS.
In entering into this agreement, the Company and the Dealer recognize that
the success of the Company and of each of its authorized dealers depends
largely on the reputation and competitiveness of COMPANY PRODUCTS and dealers'
services, and on how well each fulfills its responsibilities under this
agreement.
It is the opinion of the Company that sales and service of COMPANY
PRODUCTS usually can best be provided to the public through a system of
independent franchised dealers, with each dealer fulfilling his
responsibilities in a given locality from properly located, adequate, well-
equipped and attractive dealerships, which are staffed by competent personnel
and provided with the necessary working capital. The Dealer recognizes that, in
such a franchise system, the Company must plan for the establishment and
maintenance of the numbers, locations and sizes of dealers necessary for
satisfactory and proper sales and service representation in each market area as
it exists and as it develops and changes. At the same time, the Company
endeavors to provide each of its dealers with a reasonable profit opportunity
based on the potential for sales and service of COMPANY PRODUCTS within its
locality.
The Company endeavors to make available to its dealers a variety of quality
products, responsive to broad wants and needs of the buying public, which are
attractively styled, of sound engineering
i
<PAGE> 2
design and produced on a timely basis at competitive prices. The development,
production and sale of such products require that the Company and its
manufacturing sources make large continuing investments in plants, equipment,
tools and other facilities, engineering and styling research and
development, quality control procedures, trained personnel and marketing
programs. Heavy commitments must also be made in advance for raw materials and
finished parts. For purposes of making these investments and commitments,
planning production and estimating costs for setting prices, the Company
assumes in advance an estimated volume of sales for each of its products. Within
each year, it develops production schedules from orders submitted by its
franchised dealers and its and their best estimates of the market demand for
COMPANY PRODUCTS.
In turn, each of the Company's franchised dealers makes important
investments or commitments in retail sales and service facilities and
equipment, in working capital, in inventories of vehicles, parts and
accessories, and trained sales and service personnel based on annual planning
volumes for their markets.
If satisfactory volumes for either the Company or a dealer are not
realized, each may suffer because of commitments already made and the cost of
manufacturing and of selling each product may be increased. Each dealer must
give the Company orders for the products needed to serve its market. The Company
seeks to adjust production schedules, to the extent feasible, to fill dealer
orders, and to allocate fairly any product in short supply, but inevitably
both the Company and its dealers suffer loss of profits to the extent they
cannot meet market demands. Thus, the automotive business is a high risk
business in which the Company, its manufacturing sources and its dealers can
succeed only through cooperative and competitive effort in their respective
areas of manufacturing, sales, service and customer satisfaction.
Because it is the dealer who deals directly with, and develops the sale of
COMPANY PRODUCTS to the consuming public, the Company substantially relies on
its dealers to provide successful sales and merchandising programs, competent
service operations and effective owner relations programs. To do this, dealers
must carry out their responsibilities of establishing and maintaining adequate
wholesale and retail finance plans, new and used vehicle sales programs, parts
and service sales programs, personnel training and supportive capitalization
and working capital. To assist its dealers in these responsibilities, the
Company establishes and periodically updates standards of operation and
planning guides based on its experience and current conditions. It also offers
sales and service training courses, advice as to facilities, counseling in the
various phases of new and used vehicle merchandising, parts and service
merchandising, leasing, daily rentals and facilities development. It also
conducts national advertising, promotional and other marketing programs and
assists dealers in developing complementary group and individual programs.
To enable the Company to provide such assistance, it requires dealers to
submit uniform and accurate sales, operating and financial reports from which
it can derive and disseminate analytical and comparative operating data and
advice to dealers. The Company also solicits dealers to bring to its attention
through their National Dealer Council organization any mutual dealer problems
or complaints as they arise.
Because the Company relies heavily on its dealers for success, it reserves
the right to cease doing business with any dealer who is not contributing
sufficiently to such success. Similarly, the Company recognizes that its
dealers look to it to provide competitive products and programs and that, if it
does not do so, any dealer may elect to cease doing business with the Company.
The Company has elected to enter into this agreement with the Dealer with
confidence in the Dealer's integrity and ability, its intention to carry out
its responsibilities set forth in this agreement, and its desire to provide
courteous, competent and satisfying sales and service representation to
consumers for COMPANY PRODUCTS, and in reliance upon its representations as to
the persons who will participate in the ownership and management of the
dealership.
The Dealer has elected to enter into this agreement with the Company with
confidence in its
ii
<PAGE> 3
integrity and ability, its intention to provide competitive products and assist
the Dealer to market them successfully, and its desire to maintain high quality
dealers.
Both parties recognize the rights of the Dealer and the Company under this
agreement are defined and limited by the terms of this agreement and applicable
law. The Company and the Dealer further acknowledge that their methods of
operation and business practices have an important effect on the reputation of
the Dealer, the Company, COMPANY PRODUCTS and other franchised dealers of the
Company. The Company and the Dealer also acknowledge that certain practices
are detrimental to their interests, such as deceptive, misleading or confusing
advertising, pricing, merchandising or business practices, or misrepresenting
the characteristics, quality, condition or origin of any item of sale.
It is the expectation of each of the parties that by entering into this
agreement, and by the full and faithful observance and performance of its
duties, a mutually satisfactory relationship will be established and maintained.
IN CONSIDERATION of the mutual agreements and acknowledgements hereinafter
made, the parties hereto agree as follows:
A. The Company hereby appoints the Dealer as an authorized dealer at
retail in VEHICLES and at retail and wholesale in other COMPANY PRODUCTS and
grants the Dealer the privilege of buying COMPANY PRODUCTS from the Company for
sale in its DEALERSHIP OPERATIONS (as herein defined). The Company also grants
to the Dealer the privilege of displaying, at approved location(s), the
Company's trademarks and trade names applicable to COMPANY PRODUCTS. The
Dealer hereby accepts such appointment.
B. Subject to and in accordance with the terms and conditions of this
agreement, the Company shall sell COMPANY PRODUCTS to the Dealer and the Dealer
shall purchase COMPANY PRODUCTS from the Company.
C. The Ford Motor Company Ford Sales and Service Agreement Standard
Provisions (Form "FD925-A"), a duplicate original of which is attached to the
Dealer's duplicate original of this agreement, have been read and agreed to by
the Company and by the Dealer, and such Standard Provisions and any duly
executed and delivered supplement or amendment thereto, are hereby made a part
of this agreement with the same force and effect as if set forth herein in full.
D. This agreement shall bind the Company when it bears the facsimile
signature of the General Manager, and the manual countersignature of the
General Sales Manager, Market Representation Manager, or a Regional or District
Sales Manager, of the Ford Division of the Company and a duplicate original
thereof is delivered personally or by mail to the Dealer or the Dealer's
principal place of business.
E. The Dealer acknowledges that (i) this agreement may be executed only in
the manner provided in paragraph D hereof, (ii) no one except the General
Manager, The General Sales Manager, or Market Representation Manager of the Ford
Division of the Company, or the Secretary or an Assistant Secretary of the
Company, is authorized to make or execute any other agreement relating to the
subject matter hereof on behalf of the Company, or in any manner to enlarge,
vary or modify the terms of this agreement, and then only by an instrument in
writing, and (iii) no one except the General Manager of the Ford Division of the
Company, or the Secretary or an Assistant Secretary of the Company, is
authorized to terminate this agreement on behalf of the Company, and then only
by an instrument in writing.
F. In view of the personal nature of this agreement and its objectives and
purposes, the Company expressly reserves to itself the right to execute a Ford
Sales and Service Agreement with individuals or other entities specifically
selected and approved by the Company. Accordingly, this agreement and the
rights and privileges conferred on the Dealer hereunder are not transferable,
assignable or salable by the Dealer and no property right or interest, direct
or indirect, is sold, conveyed or transferred to the Dealer under this
agreement. This agreement has been entered into by the
iii
<PAGE> 4
Company with the Dealer in reliance (i) upon the representation and agreement
that the following person(s), and only the following person(s) shall be the
principal owners of the Dealer:
<TABLE>
<CAPTION>
NAME HOME PERCENTAGE
ADDRESS OF INTEREST
<S> <C> <C>
Jacky Jones P.O. Box 1187, Young Harris, GA 51
- -----------------------------------------------------------------------------------------
William Lee Holt, Jr. 389 Harrison Ave., Franklin, NC 28734 49
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
</TABLE>
(ii) upon the representation and agreement that the following person(s), and
only the following person(s), shall have full managerial authority for the
operating management of the Dealer in the performance of this agreement.
<TABLE>
<CAPTION>
NAME HOME TITLE
ADDRESS
<S> <C> <C>
Golden Barron P.O. Box 1192, Boca Hills, Cleveland, GA 30528 General Manager
- ------------------------------------------------------------------------------------------------------------
William Lee Holt, Jr. 389 Harrison Ave., Franklin, NC 28734 Sec./Treas.
- ------------------------------------------------------------------------------------------------------------
Jacky Jones P.O. Box 1187, Young Harris, GA President
- ------------------------------------------------------------------------------------------------------------
</TABLE>
and (iii) upon representation and agreement that the following person(s), and
only the following person(s), shall be the remaining owners of the Dealer
<TABLE>
<CAPTION>
NAME HOME PERCENTAGE
ADDRESS OF INTEREST
<S> <C> <C>
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
</TABLE>
The Dealer shall give the Company prior notice of any proposed change in the
said ownership or managerial authority, and immediate notice of the death or
incapacity of any such person. No such change or notice, and no assignment of
this agreement or of any right or interest herein, shall be effective against
the Company unless and until embodied in an appropriate amendment to or
assignment of this agreement, as the case may be, duly executed and delivered
by the Company and by the Dealer. The Company shall not unreasonably withhold
its consent to any such change.
G. (Strike out either subparagraph (1) or (2) whichever is not applicable.)
(1) This agreement shall continue in force and effect from the date of its
execution until terminated by either party under the provisions of paragraph 17
hereof.
[JJJ]XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
[JJJ]XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
[JJJ]XXXXXXXXXXXXXXXXXX
H. Both the Company and the Dealer assume and agree to carry out and
perform their respective responsibilities under this agreement.
The parties hereto have duly executed this agreement in duplicate as of
the day and year first above written.
[FORD MOTOR COMPANY LOGO] Jones-Holt Ford-Mercury, Inc.
--------------------------------------
/s/ [ILLEGIBLE] (Dealer's Trade Name)
General Manager, Ford Division By /s/ JACKY JONES
-----------------------------------
Countersigned by (Title) President
------------------------------
- -------------------------------
/s/ [ILLEGIBLE]
- -------------------------------
iv
<PAGE> 1
EXHIBIT 10.37
[LOGO] FORD MOTOR COMPANY
Atlanta District
FORD SALES AND SERVICE AGREEMENT
<TABLE>
<S> <C>
AGREEMENT made as of the 8 day of November , 1983,
------------------ ------------------------------------------------ ----
by and between WADE FORD, Inc.
-------------------------------------------------------------------------------------------
(Name of Entity)
A Corporation Georgia
- -----------------------------------------------------------------------------------------------------------
(State whether an individual, partnership or corporation) (If the latter, show name of the state
in which incorporated)
doing business as WADE FORD, INC.
-----------------------------------------------------------------------------------------
(Trade Name)
and with a principal place of business at 3860 South Cobb Drive
-----------------------------------------------------------------
(Street Address)
Smyrna Cobb Georgia 30080
- -----------------------------------------------------------------------------------------------------------
(city) (county) (state) (zip code)
</TABLE>
(hereafter called the "Dealer") and Ford Motor Company, a Delaware corporation
with its principal place of business at Dearborn, Michigan (hereinafter called
the "Company").
PREAMBLE
The purpose of this agreement is to (i) establish the Dealer as an
authorized dealer in COMPANY PRODUCTS including VEHICLES (as herein defined),
(ii) set forth the respective responsibilities of the Company in producing and
selling those products to the Dealer and of the Dealer in reselling and
providing service for them and (iii) recognize the interdependence of both
parties in achieving their mutual objectives of satisfactory sales, service and
profits by continuing to develop and retain a broad base of satisfied owners of
COMPANY PRODUCTS.
In entering into this agreement, the Company and the Dealer recognize that
the success of the Company and of each of its authorized dealers depends
largely on the reputation and competitiveness of COMPANY PRODUCTS and dealers'
services, and on how well each fulfills its responsibilities under this
agreement.
It is the opinion of the Company that sales and service of COMPANY PRODUCTS
usually can best be provided to the public through a system of independent
franchised dealers, with each dealer fulfilling his responsibilities in a given
locality from properly located, adequate, well-equipped and attractive
dealerships, which are staffed by competent personnel and provided with the
necessary working capital. The Dealer recognizes that, in such a franchise
system, the Company must plan for the establishment and maintenance of the
numbers, locations and sizes of dealers necessary for satisfactory and proper
sales and service representation
i
<PAGE> 2
tion in each market area as it exists and as it develops and changes. At the
same time, the Company endeavors to provide each of its dealers with a
reasonable profit opportunity based on the potential for sales and service of
COMPANY PRODUCTS within his locality.
The Company endeavors to make available to its dealers a variety of
quality products, responsive to broad wants and needs of the buying public,
which are attractively styled, of sound engineering design and produced on a
timely basis at competitive prices. The development, production and sale of
such products require that the Company and its manufacturing sources make large
continuing investments in plants, equipment, tools and other facilities,
engineering and styling research and development, quality control procedures,
trained personnel and marketing programs. Heavy commitments must also be made
in advance for raw materials and finished parts. For purposes of making these
investments and commitments, planning production and estimating costs for
setting prices, the Company assumes in advance an estimated volume of sales for
each of its products. Within each year, it develops monthly production schedules
from basic orders submitted by its franchised dealers for the following month
and its and their best estimates of the market for subsequent months.
In turn, each of the Company's franchised dealers makes important
investments or commitments in retail sales and service facilities and
equipment, in working capital, in inventories for vehicles, parts and
accessories, and trained sales and service personnel based on annual planning
volumes for their markets.
If satisfactory volumes for either the Company or a dealer are not
realized, each may suffer because of commitments already made and the cost of
manufacturing and of selling each product may be increased. Each month each
dealer must forecast and give the Company a basic order for the products needed
to serve his market. During the month each dealer should submit specific orders
for products covered by his basic order. If dealers' specific orders for any
product are greater than or different from their basic orders, the Company
seeks to revise production schedules to the extent feasible, and to allocate
fairly any product in short supply, but inevitably both the Company and its
dealers suffer loss of profits to the extent they cannot meet market demands.
Thus, the automotive business is a high risk business in which the Company, its
manufacturing sources and its dealers can succeed only through cooperative and
competitive effort in their respective areas of manufacturing, sales, service
and customer satisfaction.
Since it is the dealer who deals directly with, and develops the sale of
COMPANY PRODUCTS to, the consuming public, the Company substantially relies on
its dealers to provide successful sales and merchandising programs, competent
service operations and effective owner relations programs. To do this, dealers
must carry out their responsibilities of establishing and maintaining adequate
wholesale and retail finance plans, new and used vehicle sales programs, parts
and service sales programs, personnel training and supportive capitalization
and working capital. To assist its dealers in these responsibilities, the
Company establishes and periodically updates standards of operation and planning
guides based on its experience and current conditions. It also offers sales and
service training courses, advice as to facilities, counseling in the various
phases of dealership operations and, through other agreements and the activities
of its affiliates, assistance in financing, new and used vehicle merchandising,
parts and service merchandising, leasing, daily rentals and facilities
development. It also conducts national advertising, promotional and
other marketing programs and assists dealers in developing complementary group
and individual programs.
To enable the Company to provide such assistance, it requires dealers to
submit uniform and accurate sales, operating and financial reports from which
it can derive and disseminate analytical and comparative operating data and
advice to dealers. The Company also solicits dealers to bring to its attention
through their National Dealer Council organization any mutual dealer problems
or complaints as they arise.
Because the Company relies heavily on its dealers for success, it reserves
the right to cease doing business with any dealer who is not contributing
sufficiently to such success. Similarly, the Company recognizes that its
dealers look to it to provide competitive products and programs and that, if it
does not do so, any dealer may elect to cease doing business with the Company.
The Company has elected to enter into this agreement with the Dealer with
confidence in the Dealer's integrity and ability, his intention to carry out
his responsibilities set forth in this agreement, and his desire
<PAGE> 3
to provide courteous, competent and satisfying sales and service representation
to consumers for COMPANY PRODUCTS, and in reliance upon his representations as
to the persons who will participate in the ownership and management of the
dealership.
The Dealer has elected to enter into this agreement with the Company with
confidence in its integrity and ability, its intention to provide competitive
products and assist the Dealer to market them successfully, and its desire to
maintain high quality dealers.
Both parties recognize that the rights of the Dealer and the Company under
this agreement are defined and limited by the terms of this agreement and
applicable law.
The Company and the Dealer further acknowledge that their methods of
operation and business practices have an important effect on the reputation of
the Dealer, the Company, COMPANY PRODUCTS and other franchised dealers of the
Company. The Company and the Dealer also acknowledge that certain practices are
detrimental to their interests, such as deceptive, misleading or confusing
advertising, pricing, merchandising or business practices, or misrepresenting
the characteristics, quality, condition or origin of any item of sale.
It is the expectation of each of the parties that by entering into this
agreement, and by the full and faithful observance and performance of its
duties, a mutually satisfactory relationship will be established and maintained.
IN CONSIDERATION of the mutual agreements and acknowledgements hereinafter
made, the parties hereto as follows:
A. The company hereby appoints the Dealer as an authorized dealer at retail
in VEHICLES and at retail and wholesale in other COMPANY PRODUCTS and grants the
Dealer the privilege of buying COMPANY PRODUCTS from the Company for sale in its
DEALERSHIP OPERATIONS (as herein defined). The Company also grants to the Dealer
the privilege of displaying, at approved location(s), the Company's trademarks
and trade names applicable to COMPANY PRODUCTS. The Dealer hereby accepts such
appointment.
B. Subject to and in accordance with the terms and conditions of this
agreement, the Company shall sell COMPANY PRODUCTS to the Dealer and the Dealer
shall purchase COMPANY PRODUCTS from the Company.
C. The Ford Motor Company Ford Sales and Service Agreement Standard
Provisions (Form "FD925-A GEN. SALE 1-76"), a duplicate original of which is
attached to the Dealer's duplicate original of this agreement, have been read
and agreed to by the Company and by the Dealer, and such Standard Provisions and
any duly executed and delivered supplement or amendment thereto, and hereby made
a part of this agreement with the same force and effect as if set forth herein
in full.
D. This agreement shall bind the Company when it bears the facsimile
signature of the General Manager, and the manual countersignature of the General
Sales Manager, Market Representation Manager, or a Regional or District Sales
Manager, of the Ford Division of the Company and a duplicate original thereof is
delivered personally or by mail to the Dealer or the Dealer's principal place of
business.
E. The Dealer acknowledges that (i) this agreement may be executed only in
the manner provided in paragraph D hereof, (ii) no one except the General
Manager, the General Sales Manager, or Market Representation Manager of the Ford
Division of the Company, or the Secretary or an Assistant Secretary of the
Company, is authorized to make or execute any other agreement relating to the
subject matter hereof on behalf of the Company, or in any manner to enlarge,
vary or modify the terms of this agreement, and then only by an instrument in
writing, and (iii) no one except the General Manager of the Ford Division of the
Company, or the Secretary or an Assistant Secretary of the Company, is
authorized to terminate this agreement on behalf of the Company, and then only
by an instrument in writing.
F. In view of the personal nature of this agreement and its objectives and
purposes, the Company expressly reserves to itself the right to execute a Ford
Sales and Service Agreement with individuals or other entities specifically
selected and approved by the Company. Accordingly, this agreement and the
rights and privileges conferred on the Dealer hereunder are not transferable,
assignable or salable by the Dealer and no property right or interest, direct
or indirect, is sold, conveyed or transferred to the Dealer under this
agreement. This agreement has been entered into by the Company with Dealer in
reliance (i) upon the representation and
<PAGE> 4
agreement that the following person(s), and only the following person(s), shall
be the principal owners of the Dealer:
<TABLE>
<CAPTION>
NAME HOME PERCENTAGE
ADDRESS OF INTEREST
<S> <C> <C>
A.C. Arnold Co., Inc. 100.0
- ------------------------------------------------------------------------------
Ownership of A.C. Arnold &
- ------------------------------------------------------------------------------
Co., Inc.:
- ------------------------------------------------------------------------------
A.C. Arnold,Jr. Marietta, Ga. 75.0
- ------------------------------------------------------------------------------
Alan K. Arnold Marietta, Ga. 25.0
- ------------------------------------------------------------------------------
</TABLE>
(ii) upon the representation and agreement that the following person(s), and
only the following person(s), shall have full managerial authority for the
operating management of the Dealer in the performance of this agreement:
<TABLE>
<CAPTION>
NAME HOME TITLE
ADDRESS
<S> <C> <C>
A.C. Arnold, Jr. Marietta, Ga. President
- ------------------------------------------------------------------------------
Alan K. Arnold Marietta, Ga. Vice President
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
and (iii) upon representation and agreement that the following person(s), and
only the following person(s), shall be the remaining owners of the Dealer:
<TABLE>
<CAPTION>
NAME HOME PERCENTAGE
ADDRESS OF INTEREST
<C> <C> <C>
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- ------------------------------------------------------------------------------
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</TABLE>
The Dealer shall give the Company prior notice of any proposed change in the
said ownership or managerial authority, and immediate notice of the death or
incapacity of any such person. No such change or notice, and no assignment of
this agreement or of any right or interest herein, shall be effective against
the Company unless and until embodied in an appropriate amendment to or
assignment of this agreement, as the case may be, duly executed and delivered
by the Company and by the Dealer. The Company shall not unreasonably withhold
its consent to any such change.
G. (Strike out either subparagraph (1) or (2) whichever is not applicable.)
(1) This agreement shall continue in force and effect from the date of its
execution until terminated by either party under the provisions of paragraph 17
thereof.
[INITIALS] xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
H. Both the Company and the Dealer assume and agree to carry out and
perform their respective responsibilities under this agreement.
IN WITNESS WHEREOF the parties hereto have duly executed this agreement in
duplicate as of the day and year first above written.
[FORD MOTOR COMPANY LOGO] WADE FORD, INC.
--------------------------------------
[ILLEGIBLE] (Dealer's Trade Number)
General Manager, Ford Division By /s/ A.C. ARNOLD, JR.
-----------------------------------
A.C. Arnold, Jr., President
Countersigned by (Title)
----------------------------
/s/ D. F. LAYE
- -------------------------------
District Sales Manager
- -------------------------------
<PAGE> 5
TABLE OF CONTENTS FOR STANDARD PROVISIONS
<TABLE>
<CAPTION>
PARAGRAPH PAGE
<S> <C>
1. DEFINITIONS..................................................... 1
2. RESPONSIBILITIES WITH RESPECT TO VEHICLES
(a) Sales...................................................... 3
(b) Orders..................................................... 4
(c) Consideration of Orders.................................... 4
(d) Stocks..................................................... 5
(e) Demonstrators.............................................. 5
(f) Factory Suggested Price Labels............................. 5
(g) Owner Literature........................................... 5
(h) Rebates and Allowances..................................... 5
(i) Warranty................................................... 5
3. RESPONSIBILITIES WITH RESPECT TO GENUINE PARTS
(a) Sales...................................................... 6
(b) Orders..................................................... 6
(c) Consideration of Orders.................................... 6
(d) Stocks..................................................... 6
(e) Returns and Allowances..................................... 6
(f) Warranty................................................... 7
4. RESPONSIBILITIES WITH RESPECT TO SERVICE
(a) Predelivery Service........................................ 7
(b) Warranty and Policy and Campaign Service................... 7
(c) Maintenance and Repair Service............................. 8
(d) Service Tools and Equipment................................ 8
5. RESPONSIBILITIES WITH RESPECT TO DEALERSHIP FACILITIES
(a) Locations and Facilities................................... 8
(b) Dealership Facilities Supplement........................... 8
(c) Changes and Additions...................................... 8
(d) Company Assistance......................................... 8
(e) Fulfillment of Responsibility.............................. 9
6. OTHER DEALER AND COMPANY RESPONSIBILITIES
(a) Signs...................................................... 9
(b) Personnel.................................................. 9
(c) Dealer Residence........................................... 9
(d) Capital.................................................... 9
(e) Accounting System.......................................... 9
(f) Financial Reports.......................................... 10
(g) Delivery and Sales Reports................................. 10
(h) Customer Handling.......................................... 10
(i) Business Practices, Advertising and Programs............... 10
(j) Compliance with Laws, Rules and Regulations................ 11
7. DEALER'S RESPONSIBILITIES WITH RESPECT TO HOURS OF BUSINESS..... 11
8. PURCHASES FROM OTHERS AND SALES TO OTHERS....................... 11
9. DETERMINATION OF DEALER REPRESENTATION
(a) Representation Planning.................................... 11
(b) Information to Dealer...................................... 11
(c) Additional Dealers......................................... 12
(d) Established Dealer Points.................................. 12
10. PRICES AND CHARGES.............................................. 12
11. TERMS AND TITLE
(a) Payment.................................................... 12
(b) Title...................................................... 12
(c) Risk of Loss and Claims.................................... 13
(d) Demurrage and Diversion Liability.......................... 13
(e) State and Local Taxes...................................... 13
12. RECORDS, INSPECTIONS AND TESTS
(a) Record Retention........................................... 13
(b) Inspections and Tests...................................... 13
13. CHANGES IN COMPANY PRODUCTS..................................... 13
14. DEALER NOT AN AGENT OF COMPANY.................................. 14
15. TRADEMARKS AND TRADE NAMES
(a) Use in Firm Name........................................... 14
(b) Limitations on Use......................................... 14
16. REPORTS TO DEALER POLICY BOARD.................................. 14
17. TERMINATION OR NONRENEWAL OF AGREEMENT
(a) By Dealer.................................................. 15
(b) By Company Due to Events Controlled By Dealer.............. 15
(c) By Company For Nonperformance by Dealer of Sales, Service,
Facilities or Other Responsibilities....................... 16
(d) By Company or Dealer Because of Death or Physical or Mental
Incapacity of any Principal Owner.......................... 16
(e) By Company or Dealer for Failure to be Licensed............ 16
(f) By Company at Will......................................... 16
(g) By Company Upon the Offer of New Agreement................. 16
(h) Acts In Good Faith......................................... 17
18. REQUIRED APPEAL TO POLICY BOARD--TERMINATIONS OR NONRENEWALS--
OPTIONAL ARBITRATION PLAN
(a) Arbitration Plan........................................... 17
(b) Appeal to Policy Board..................................... 17
(c) Optional Arbitration....................................... 17
(d) Limitation of Actions...................................... 18
(e) Expenses of Arbitration.................................... 18
19. OBLIGATIONS UPON TERMINATION OR NONRENEWAL
(a) Sums Owing Company......................................... 19
(b) Discontinuance of Use of Trademarks and Trade Names........ 19
(c) Warranty Work.............................................. 19
(d) Service Records............................................ 19
(e) Orders and Customer Deposits............................... 19
(f) Deliveries After Termination or Nonrenewal................. 20
20. SUCCESSOR TO DEALER IN EVENT OF DEATH
(a) Interim Agreement.......................................... 20
(b) Buy-Out.................................................... 21
(c) Term/Continuation.......................................... 22
(d) Limitation of Offer........................................ 22
(e) Limitation of Acceptance................................... 22
21. REACQUISITION OF COMPANY PRODUCTS AND ACQUISITION OF OTHER
DEALER ASSETS
(a) Vehicles................................................... 22
(b) Genuine Parts.............................................. 23
(c) Dealer's Signs............................................. 23
(d) Special Tools and Equipment................................ 23
(e) Procedures, Delivery and Title............................. 24
(f) Payment.................................................... 24
(g) Assignment of Benefits..................................... 24
22. FACILITIES ASSISTANCE UPON NONRENEWAL OR CERTAIN TERMINATIONS
BY THE COMPANY
(a) Dealer Eligibility......................................... 24
(b) Eligible Facilities........................................ 25
(c) Company's Obligation....................................... 25
(d) Limitation on Company's Obligation......................... 25
(e) Satisfaction of Company's Obligation....................... 26
23. TERMINATION BENEFITS FULL COMPENSATION; GENERAL RELEASE......... 26
24. DISPOSITION OF DEALER'S ASSETS.................................. 27
25. NEW AGREEMENT................................................... 27
26. ACKNOWLEDGEMENTS................................................ 27
27. NO IMPLIED WAIVERS.............................................. 27
28. RELATIONS AFTER TERMINATION NOT A RENEWAL....................... 28
29. LIMITATION OF COMPANY'S LIABILITY............................... 28
30. NOTICES......................................................... 28
31. AMENDMENT....................................................... 28
32. MICHIGAN AGREEMENT.............................................. 28
33. SEPARABILITY OR TERMINATION..................................... 28
</TABLE>
<PAGE> 6
[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> 7
1. DEFINITIONS (CONTINUED)
1. (g) "VEHICLE TERMS OF SALE BULLETIN" shall mean 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 tile 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.
l. (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> 8
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 an 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> 9
3. RESPONSIBILITIES WITH RESPECT TO GENUINE PARTS (CONT.)
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> 10
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> 11
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 from 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.
11
<PAGE> 12
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 diversion 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) INSPECTIONS AND TESTS. The Dealer shall allow persons designated 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
13
<PAGE> 13
TERMINATION OR NONRENEWAL OF AGREEMENT
17. (a) BY DEALER. The Dealer may terminate or not renew this agreement at
any time at will by 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.
15
<PAGE> 14
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
17
<PAGE> 15
18. REQUIRED APPEAL TO POLICY BOARD -- TERMINATIONS 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
19
<PAGE> 16
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) of 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 unreasonably 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 deceased 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
21
<PAGE> 17
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 nonrenewal, 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 nonrenewal, less all allowances 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 expense. 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.
23
<PAGE> 18
22. DEALERSHIP FACILITIES ASSISTANCE UPON NONRENEWAL OR CERTAIN
TERMINATIONS 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
25
<PAGE> 19
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 the 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 the 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.
27
<PAGE> 20
RELATIONS AFTER TERMINATIONS 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.
SEPARABILITY 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.
28
<PAGE> 1
Exhibit 10.38
[FORD LOGO] FORD MOTOR COMPANY
ATLANTA District
FORD SALES AND SERVICE AGREEMENT
AGREEMENT made as of the 3rd day of July , 1991,
------------- --------------------------- --
by and between Wade Ford Buford, Inc.
-----------------------------------------------------------------
A Corporation in Georgia
- --------------------------------------------------------------------------------
(State whether an individual, (If the latter, show name of the
partnership or corporation) state in which incorporated)
doing business as Wade Ford of Buford
--------------------------------------------------------------
(Trade Name)
and with a principal place of business at 4525 Highway 20
--------------------------------------
(Street Address)
Buford Gwinnett Georgia 30518
- --------------------------------------------------------------------------------
(CITY) (COUNTY) (STATE) (ZIP CODE)
(hereafter called the "Dealer") and Ford Motor Company, a Delaware corporation
with its principal place of business at Dearborn, Michigan (hereinafter called
the "Company").
PREAMBLE
The purpose of this agreement is to (i) establish the Dealer as an
authorized dealer in COMPANY PRODUCTS including VEHICLES (as herein defined),
(ii) set forth the respective responsibilities of the Company in producing and
selling those products to the Dealer and of the Dealer in reselling and
providing service for them and (iii) recognize the interdependence of both
parties in achieving their mutual objectives of satisfactory sales, service and
profits by continuing to develop and retain a broad base of satisfied owners of
COMPANY PRODUCTS.
In entering into this agreement, the Company and the Dealer recognize that
the success of the Company and of each of its authorized dealers depends largely
on the reputation and competitiveness of COMPANY PRODUCTS and dealers'
services, and on how well each fulfills its responsibilities under this
agreement.
It is the opinion of the Company that sales and service of COMPANY PRODUCTS
usually can best be provided to the public through a system of independent
franchised dealers, with each dealer fulfilling its responsibilities in a given
locality from properly located, adequate, well-equipped and attractive
dealerships, which are staffed by competent personnel and provided with the
necessary working capital. The Dealer recognizes that, in such a franchise
system, the Company must plan for the establishment and maintenance of the
numbers, locations and sizes of dealers necessary for satisfactory and proper
sales and service representation in each market area as it exists and as it
develops and changes. At the same time, the Company endeavors to provide each of
its dealers with a reasonable profit opportunity based on the potential for
sales and service of COMPANY PRODUCTS within its locality.
The company endeavors to make available to its dealers a variety of quality
products, responsive to broad wants and needs of the buying public, which are
attractively styled, of sound engineering
<PAGE> 2
design and produced on a timely basis at competitive prices. The development,
production and sale of such products require that the Company and its
manufacturing sources make large continuing investments in plants, equipment,
tools and other facilities, engineering and styling research and development,
quality control procedures, trained personnel and marketing programs. Heavy
commitments must also be made in advance for raw materials and finished parts.
For purposes of making these investments and commitments, planning production
and estimating costs for setting prices, the Company assumes in advance an
estimated volume of sales for each of its products. Within each year, it
develops production schedules from orders submitted by its franchised dealers
and its and their best estimates of the market demand for COMPANY PRODUCTS.
In turn, each of the Company's franchised dealers makes important
investments or commitments in retail sales and service facilities and
equipment, in working capital, in inventories of vehicles, parts and
accessories, and trained sales and service personnel based on annual planning
volumes for their markets.
If satisfactory volumes for either the Company or a dealer are not
realized, each may suffer because of commitments already made and the cost of
manufacturing and of selling each product may be increased. Each dealer must
give the Company orders for the products needed to serve its market. The
Company seeks to adjust production schedules, to the extent feasible, to fill
dealer orders, and to allocate fairly any product in short supply, but
inevitably both the Company and its dealers suffer loss of profits to the
extent they cannot meet market demands. Thus, the automotive business is a
high risk business in which the Company, its manufacturing sources and its
dealers can succeed only through cooperative and competitive effort in their
respective areas of manufacturing, sales, service and customer satisfaction.
Because it is the dealer who deals directly with, and develops the sale of
COMPANY PRODUCTS to the consuming public, the Company substantially relies on
its dealers to provide successful sales and merchandising programs, competent
service operations and effective owner relations programs. To do this, dealers
must carry out their responsibilities of establishing and maintaining adequate
wholesale and retail finance plans, new and used vehicle sales programs, parts
and service sales programs, personnel training and supportive capitalization and
working capital. To assist its dealers in these responsibilities, the Company
establishes and periodically updates standards of operation and planning guides
based on its experience and current conditions. It also offers sales and service
training courses, advice as to facilities, counseling in the various phases of
new and used vehicle merchandising, parts and service merchandising, leasing,
daily rentals and facilities development. It also conducts national advertising,
promotional and other marketing programs and assists dealers in developing
complementary group and individual programs.
To enable the Company to provide such assistance, it requires dealers to
submit uniform and accurate sales, operating and financial reports from which
it can derive and disseminate analytical and comparative operating data and
advice to dealers. The Company also solicits dealers to bring to its attention
through their National Dealer Council organization any mutual dealer problems
or complaints as they arise.
Because the Company relies heavily on its dealers for success, it reserves
the right to cease doing business with any dealer who is not contributing
sufficiently to such success. Similarly, the Company recognizes that its
dealers look to it to provide competitive products and programs and that, if it
does not do so, any dealer may elect to cease doing business with the Company.
The Company has elected to enter into this agreement with the Dealer with
confidence in the Dealer's integrity and ability, its intention to carry out
its responsibilities set forth in this agreement, and its desire to provide
courteous, competent and satisfying sales and service representation to
consumers for COMPANY PRODUCTS, and in reliance upon its representations as to
the persons who will participate in the ownership and management of the
dealership.
The Dealer has elected to enter into this agreement with the Company with
confidence in its
ii
<PAGE> 3
integrity and ability, its intention to provide competitive products and assist
the Dealer to market them successfully, and its desire to maintain high quality
dealers.
Both parties recognize the rights of the Dealer and the Company under this
agreement are defined and limited by the terms of this agreement and applicable
law. The Company and the Dealer further acknowledge that their methods of
operation and business practices have an important effect on the reputation of
the Dealer, the Company, COMPANY PRODUCTS and other franchised dealers of the
Company. The Company and the Dealer also acknowledge that certain practices
are detrimental to their interests, such as deceptive, misleading or confusing
advertising, pricing, merchandising or business practices, or misrepresenting
the characteristics, quality, condition or origin of any item of sale.
It is the expectation of each of the parties that by entering into this
agreement, and by the full and faithful observance and performance of its
duties, a mutually satisfactory relationship will be established and
maintained.
IN CONSIDERATION of the mutual agreements and acknowledgements hereinafter
made, the parties hereto agree as follows:
A. The Company hereby appoints the Dealer as an authorized dealer at
retail in VEHICLES and at retail and wholesale in other COMPANY PRODUCTS and
grants the Dealer the privilege of buying COMPANY PRODUCTS from the Company for
sale in its DEALERSHIP OPERATIONS (as herein defined). The Company also grants
to the Dealer the privilege of displaying, at approved locations(s), the
Company's trademarks and trade names applicable to COMPANY PRODUCTS. The
Dealer hereby accepts such appointment.
B. Subject to and in accordance with the terms and conditions of this
agreement, the Company shall sell COMPANY PRODUCTS to the Dealer and the Dealer
shall purchase COMPANY PRODUCTS from the Company.
C. The Ford Motor Company Ford Sales and Service Agreement Standard
Provisions (Form "FD925-A"), a duplicate original of which is attached to the
Dealer's duplicate original of this agreement, have been read and agreed to by
the Company and by the Dealer, and such Standard Provisions and any duly
executed and delivered supplement or amendment thereto, are hereby made a part
of this agreement with the same force and effect as if set forth herein in full.
D. This agreement shall bind the Company when it bears the facsimile
signature of General Manager, and the manual countersignature of the General
Sales Manager, Market Representation Manager, or a Regional or District Sales
Manager, of the Ford Division of the Company and a duplicate original thereof
is delivered personally or by mail to the Dealer or the Dealer's principal
place of business.
E. The Dealer acknowledges the (i) this agreement may be executed only in
the manner provided in paragraph D hereof, (ii) no one except the General
Manager, The General Sales Manager, or Market Representation Manager of the
Ford Division of the Company, or the Secretary or an Assistant Secretary of
the Company, is authorized to make or execute any other agreement relating to
the subject matter hereof on behalf of the Company, or in any manner to
enlarge, vary or modify the terms of this agreement, and then only by an
instrument in writing, and (iii) no one except the General Manager of the Ford
Division of the Company, or the Secretary or an Assistant Secretary of the
Company, is authorized to terminate this agreement on behalf of the Company,
and then only by an instrument in writing.
F. In view of the personal nature of this agreement and its objectives and
purposes, the Company expressly reserves to itself the right to execute a Ford
Sales and Service Agreement with individuals or other entities specifically
selected and approved by the Company. Accordingly, this agreement and the
rights and privileges conferred on the Dealer hereunder are not transferable,
assignable or salable by the Dealer and no property right or interest, direct
or indirect, is sold, conveyed or transferred to the Dealer under this
agreement. This agreement has been entered into by the
<PAGE> 4
Company with the Dealer in reliance (i) upon the representation and agreement
that the following person(s), and only the following person(s) shall be the
principal owners of the Dealer:
NAME HOME PERCENTAGE
ADDRESS OF INTEREST
Alan K. Arnold Atlanta, GA 90%
- -------------------------------------------------------------------------------
A. C. Arnold Atlanta, GA 10%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(ii) upon the representation and agreement that the following person(s), and
only the following person(s), shall have full managerial authority for the
operating management of the Dealer in the performance of this agreement.
NAME HOME TITLE
ADDRESS
Alan K. Arnold Atlanta, GA President
- -------------------------------------------------------------------------------
A. C. Arnold Atlanta, GA Vice President
- -------------------------------------------------------------------------------
and (iii) upon representation and agreement that the following person(s), and
only the following person(s), shall be the remaining owners of the Dealer
NAME HOME PERCENTAGE
ADDRESS OF INTEREST
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The Dealer shall give the Company prior notice of any proposed change in the
said ownership or managerial authority, and immediate notice of the death or
incapacity of any such person. No such change or notice, and no assignment of
this agreement or of any right or interest herein, shall be effective against
the Company unless and until embodied in an appropriate amendment to or
assignment of this agreement, as the case may be, duly executed and delivered
by the Company and by the Dealer. The Company shall not unreasonably withhold
its consent to any such change.
G. (Strike out either subparagraph (1) or (2) whichever is not applicable.)
(1) This agreement shall continue in force and effect from the date of its
execution until terminated by either party under the provisions of
paragraph 17 hereof.
(2) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
H. Both the Company and the Dealer assume and agree to carry out and
perform their respective responsibilities under this agreement.
The parties hereto have duly executed this agreement in duplicate as of
the day and year first above written.
[Ford Logo] Ford Motor Company Wade Ford of Buford
-------------------------------------------
(Dealer's Trade Name)
/s/ Ross H. Roberts
General Manager, Ford Division By /s/ Alan K. Arnold
----------------------------------------
Alan K. Arnold
Countersigned by (Title) President
----------------------------------------
????
- -------------------------------
- -------------------------------
<PAGE> 5
[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> 6
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> 7
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> 8
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> 9
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 "Owners 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> 10
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> 11
3. RESPONSIBILITIES WITH RESPECT TO GENUINE PARTS (CONT.)
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
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<PAGE> 12
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 Dealer shall ????????? and 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 subparagraphs 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> 13
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> 14
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 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> 15
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 from 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> 16
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 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 appointed 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 from 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> 17
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 diversion
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) INSPECTIONS AND TESTS. The Dealer shall allow persons designated 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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<PAGE> 18
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> 19
TERMINATION OR NONRENEWAL OF AGREEMENT
17. (a) BY DEALER. The Dealer may terminate or not renew this agreement at any
time at will by 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 terminating 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> 20
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> 21
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> 22
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 binding
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 Chairman of the Ford and Lincoln-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 budget 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> 23
18. REQUIRED APPEAL TO POLICY BOARD--TERMINATIONS 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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<PAGE> 24
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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<PAGE> 25
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) of 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 unreasonably 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 deceased 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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<PAGE> 26
20. SUCCESS OR 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 least 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> 27
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 nonrenewal, 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 nonrenewal, less all allowances 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 expense. 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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<PAGE> 28
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> 29
22. DEALERSHIP FACILITIES ASSISTANCE UPON NONRENEWAL OR CERTAIN
TERMINATIONS 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> 30
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.
26
<PAGE> 31
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 the 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 the 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.
27
<PAGE> 32
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.
SEPARABILITY 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.
28
<PAGE> 1
Exhibit 10.39
==============================================================================
PONTIAC-GMC DIVISION
PONTIAC DEALER SALES AND SERVICE AGREEMENT
In reliance upon the agreement by the parties to fulfill their respective
commitments, this Agreement, effective DECEMBER 16, 1996, is entered into by
General Motors Corporation, Pontiac ("PONTIAC"), a Delaware corporation, and
JAY PONTIAC-BUICK-GMC, INC.
---------------------------------------------------------------------, a
/X/ GEORGIA corporation, incorporated on DECEMBER 27, 1983;
------------ -----------------
/ / proprietorship;
/ / partnership;
/ / other - specify
---------------------------------------------------------
doing business at 1661 WHITTLESEY ROAD
-------------------------------------------------
COLUMBUS, GEORGIA 31904 ("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:
JAMES G. STELZENMULLER, III
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Fourth BUSINESS MANAGEMENT RESPONSIBILITY
- ------ ----------------------------------
If Dealer is an authorized Dealer for more than one division of General Motors,
PONTIAC-GMC 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-GMC DIVISION will execute or extend these documents for all
divisions.
Fifth COMMUNICATION
- ----- -------------
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. PONTIAC 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:
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, 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 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 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.
JAY PONTIAC-BUICK-GMC, INC.
- ----------------------------------------------------------------------------
Dealer Firm Name
PONTIAC-GMC DIVISION
General Motors Corporation
By /s/ James G. Stelzenmuller, III 12/16/96 By /s/ ????
----------------------------------------- ---------------------------------
Dealer Operator Date General Sales and Service Manager
By /s/ ????
---------------------------------
Authorized Representative Date
<PAGE> 1
================================================================================
EXHIBIT 10.40
BUICK MOTOR DIVISION
DEALER SALES AND SERVICE AGREEMENT
This Agreement, effective DECEMBER 16, 1996, is between Buick Motor Division of
General Motors Corporation, a Delaware corporation, located at 902 East
Hamilton Avenue, Flint, Michigan 48550 ("Buick") and JAY PONTIAC-BUICK-GMC,
INC., a
[X] GEORGIA corporation, incorporated on DECEMBER 27, 1983;
[ ] proprietorship;
[ ] partnership;
[ ] other - specify ____________________________________________________________
doing business at 1408 VETERANS PKWY., COLUMBUS, GEORGIA 31901-2128 ("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 acknowledge 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 resolution,
thereby providing for continuous improvement in customer relationships.
Buick commits to advise selected dealers, at least quarterly, regarding the
results of customer 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:
JAMES G. STELZENMULLER, III
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
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 ??? 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 Dealer'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 advise 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 sales 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 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
geographical 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 Provisions" (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"
_____ Additional agreements affixed, consisting of
_____ 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 Services 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-GMC 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.
JAY PONTIAC-BUICK-GMC, INC.
- --------------------------------------------------------------------------------
Dealer Firm Name
BUICK MOTOR DIVISION
General Motors Corporation
By /s/ James G. Stelzenmuller, III 12/16/96 By /s/ ????
----------------------------------------- --------------------------------
Dealer Operator Date General Sales and Service Manager
By /s/ ???? 12/16/96
---------------------------------
Authorized Representative Date
<PAGE> 10
BUICK MOTOR DIVISION
MOTOR VEHICLE ADDENDUM
TO
GENERAL MOTORS CORPORATION
DEALER SALES AND SERVICE AGREEMENT
JAY PONTIAC-BUICK-GMC, INC.
- -------------------------------------------------------------------------------
Dealer Firm Name
COLUMBUS, GEORGIA
----------------------------------------------------------
City, State
Effective DECEMBER 16, 1996, Dealer, as an authorized Buick dealer, has a
non-exclusive right to buy the following new Motor Vehicles marketed by Buick
Motor Division of General Motors Corporation:
CENTURY, LESABRE, PARK AVENUE, REGAL, RIVIERA,
ROADMASTER ESTATE WAGON, ROADMASTER SEDAN, SKYLARK
This Motor Vehicle Addendum shall remain in effect unless and until superseded
by a new Motor Vehicle Addendum furnished Dealer by Buick. This Motor Vehicle
Addendum cancels and supersedes any previous Motor Vehicle Addendum furnished
Dealer by Buick.
BUICK MOTOR DIVISION
General Motors Corporation
By ??????????????????????? 12/16/96
----------------------------------
ZONE/BRANCH MANAGER Date
(Dealer should file this Motor Vehicle Addendum with Dealer's
current Dealer Agreement.)
<PAGE> 1
EXHIBIT 10.41
- --------------------------------------------------------------------------------
PONTIAC-GMC DIVISION
GMC DEALER SALES AND SERVICE AGREEMENT
This Agreement, effective DECEMBER 16, 1996, is entered into by General
Motors Corporation, GMC ("GMC"), a Delaware corporation, and
JAY PONTIAC-BUICK-GMC, INC._______________________________ ,a
/x/ GEORGIA corporation, incorporated on DECEMBER 27, 1983;
/ / proprietorship;
/ / partnership;
/ / other-specify ________________________________________
doing business at 1661 WHITTLESEY ROAD
COLUMBUS, GEORGIA 31904___________("Dealer").
PREAMBLE
GMC 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 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 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 is committed to building a business relationship of preference for
General Motors dealers.
In pursuit of total customer enthusiasm, it is essential that GMC 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
First
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 GMC at the expiration date if GMC 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, 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:
JAMES G. STELZENMULLER, III
_____________________________________________________________________
_____________________________________________________________________
Fourth
BUSINESS PLAN
To achieve our mutual commitments, GMC 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 will assist in
preparing the Dealer's Business Plan that is in keeping with the objectives of
GMC and Dealer.
GMC 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 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
Fifth
DEALER SALES AND SERVICE REPORTS
At least once a year GMC 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 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 Products. GMC also expects Dealer to
pursue available sales opportunities exceeding the minimum acceptable standard.
Dealers authorized to sell and service GMC medium duty product will be provided
specific information relating to the total medium truck business available in
the Dealer's APR. GMC 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 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 which Dealer attains continuous improvement. The Business Plan provides
the process by which Dealer continually improves.
GMC will provide periodic updates of marketing data that reflect market
conditions within Dealer's APR.
Sixth
CUSTOMER ENTHUSIASM
GMC and Dealer recognize that it is in our mutual interest to deliver products
and services that exceed customer expectations. GMC and Dealer will use the
procedures designated in GM's Service Policies and Procedures Manual to resolve
customer complaints. Periodically, GMC will survey customers of Dealers to
determine their overall satisfaction with their selling and servicing dealer.
GMC will review Dealer's performance of the Standards for customer enthusiasm.
At least annually GMC will inform Dealer in writing of its Customer
Satisfaction Information ("CSI") for overall satisfaction based upon both
purchase/delivery experience and service experience. GMC 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's request, participate in a
comprehensive review of Dealer's performance and plan for improvement. Before
making any changes to the CSI procedure, GMC will consult with the appropriate
Dealer Council committee.
Seventh
COMMUNICATIONS/DEALERSHIP EQUIPMENT
To improve Dealer and GMC 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. 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 PROSPECT
<PAGE> 4
Seventh
New or existing communications and dealership equipment systems and technology
that may become available will be reviewed with the National Dealer Council
before the decision is made to require their use by Dealer.
GMC acknowledges the importance of dealer input on matters that affect the
dealer's business. GMC 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 dealers. Dealer input will not
normally be solicited for matters involving specific dealers, dealer network
planning, and production and distribution of Product.
Eighth
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 as high priority for in-dealership
service training.
GMC 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 recognize the importance of representing GMC Products to the
fullest extent possible. Accordingly, Dealer agrees to prominently display GMC
vehicles in new vehicle display areas and new vehicle storage areas; to
conspicuously display GMC 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 supports the On-Going Merchandising Programs for Light, Medium Conventional,
and Medium Low Cab Forward as well as the Service Merchandising Program, and GMC
encourages Dealer to support and participate in the merchandising programs for
each product line Dealer is authorized to sell and service.
Dealer and GMC acknowledge the importance of providing one consistent facility
image nationwide for a single line GMC dealer. Accordingly, Dealer agrees to
totally implement the approved GMC 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 Image elements as specified by GMC.
<PAGE> 5
Ninth
Dealer will prominently use GMC's marks on all Dealer advertising,
merchandising and other literature. Dealer will also include GMC in its name
whenever Dealer name includes the name of other vehicle name plates or brands.
GMC will consult with the National Dealer Council before deciding to modify
facility requirements.
Tenth
DEALER ADVERTISING
GMC supports dealer advertising associations and encourages Dealer to support
and participate in an advertising association in its respective area.
Eleventh
DEALER COUNCIL REPRESENTATION
GMC will support two National Dealer Councils comprised of a representative
number of dealers, elected by GMC and Chevrolet Medium Duty Truck dealers as
appropriate, who will convey the concerns of dealers to GMC. A Light Duty
National Dealer Council will be comprised of GMC light truck dealers, and a
Medium Duty National Dealer Council comprised of GMC and Chevrolet Medium Truck
dealers. The National Dealer Council representatives, GMC management, and GMC
dealers will serve jointly on committees which are created to focus on issues
of mutual concern to dealers and GMC. Chevrolet Medium Truck dealers will serve
on Medium Duty Council committees. GMC will meet with its National Dealer
Council periodically to review those concerns and other mutual business issues.
The responsibility of the GMC National Dealer Council is to develop and
maintain a business relationship between GMC and the dealer body that fosters
the mutual interests of both Dealer and GMC. 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 of dealer body concerns.
Twelfth
BUSINESS MANAGEMENT RESPONSIBILITY
If Dealer is an authorized dealer for more than one division of General Motors,
PONTIAC-GMC 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-GMC DIVISION will execute or extend those documents for all
divisions.
Thirteenth
DISPUTE RESOLUTION
GMC and Dealer expect their differences will be few. If Dealer believes that a
decision by GMC is unfair, Dealer may have it reviewed by GMC management so
that it can be addressed and, if possible, resolved. Management review will
promote a better understanding of the positions of GMC 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
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 by its General
Sales and Service Manager and an authorized representative. All related
agreements will be executed by the General Sales and Service 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.
JAY PONTIAC-BUICK-GMC, INC.
- -------------------------------------------------------------------------------
Dealer Firm Name
PONTIAC-GMC DIVISION
General Motors Corporation
By /s/ James G. Stelzenmuller, III 12/16/96 By /s/ ?????
----------------------------------------- ---------------------------------
Dealer Operator Date General Sales and Service Manager
By By /s/ ????? 1-13-97
------------------------------- ---------------------------------
Signature and Title Date Authorized Representative Date
By
-------------------------------
Signature Date
<PAGE> 1
EXHIBIT 10.42
[MITSUBISHI LOGO]
- -------------------------------------------------------------------------------
DEALER SALES AND SERVICE AGREEMENT
- -------------------------------------------------------------------------------
THIS AGREEMENT is made and entered into by and between Mitsubishi Motor Sales
of America, Inc. a California corporation, with headquarters at 6400 Katella
Avenue, Cypress, California 90630 (hereinafter referred to as "MMSA"), and
Jay Pontiac-GMC Truck, Inc.
- -------------------------------------------------------------------------------
(Name of Dealer)
a Georgia Corporation X, Partnership , Individual ,
------------------ ---------- ------- -------
(State)
doing business as Jay Mitsubishi
--------------------------------------------------------------
(Name)
at 1412 Fourth Avenue, Columbus,
-------------------------------------------- ------------------------------
(Number and Street) (City)
Muscogee County, Georgia 31902
- ---------------------------------- ------------------------------------
(County) (State) (Zip)
(hereinafter referred to as "Dealer"),
1. BASIS OF AGREEMENT
This Agreement provides for the nonexclusive right of Dealer to sell and
service motor vehicles which are listed on the most recent MMSA Product List as
issued by MMSA from time to time, and related parts, accessories and options
distributed in the United States by MMSA. Dealer acknowledges that Mitsubishi
Motors Corporation and other manufacturers supplying motor vehicles to MMSA may
now or in the future distribute motor vehicles or related products in the
United States through distributors other than MMSA, and that entering into this
Agreement confers no rights or benefits upon Dealer with respect to the sale or
servicing of such motor vehicles or products.
2. TERM
This Agreement shall continue in effect for a period of three (3) years
from its effective date, unless earlier terminated by Dealer pursuant to
Section X.A. of the accompanying MMSA Dealer Sales and Service Agreement
Standard Provisions (hereinafter referred to as the "Standard Provisions") or
earlier terminated by MMSA pursuant to Section X.B. of the Standard Provisions.
Unless earlier terminated by MMSA or Dealer, MMSA shall, not less than three
(3) months prior to the expiration of this Agreement, conduct an evaluation of
Dealer's performance to determine whether Dealer qualifies for renewal of this
Agreement for an additional three (3) year term. Criteria considered in such
evaluation shall be as set forth in the Dealer Development Plan then in effect
for Dealer. If MMSA determines that Dealer qualifies for renewal of its MMSA
dealership, Dealer and MMSA shall execute an MMSA Dealer Sales and Service
Agreement in the form then used by MMSA, which agreement will include similar
provisions for further re-qualification and renewal.
If, at any time, MMSA determines that a different or revised form of
dealer sales and service agreement would better serve the interests of the
parties, MMSA may, upon a minimum of thirty (30) days' notice to Dealer,
terminate this Agreement and offer the new or amended form of agreement to
Dealer in its stead. Dealer must accept the new or amended form of agreement
within thirty (30) days of receipt thereof.
Agreement Date OCT 04 1996
----------- (rev. 7/89)
<PAGE> 2
3. OWNERSHIP OF DEALER
MMSA and Dealer recognize that the ability of Dealer to satisfactorily
perform this Agreement is conditioned upon the continued active involvement in
and/or ownership of Dealer by the following person(s) in the percentage(s)
shown (hereinafter referred to as the "Owners"):
<TABLE>
<CAPTION>
Involvement
Percentage in Management
Name Title of (Active or inactive)
---- ----- Ownership --------------------
---------
<S> <C> <C> <C>
Jay Automotive Group, Inc. Holding Company 100%
- ----------------------------------------------------------------------------------------------
James G. Stelzenmuller, III President/Treasurer Active
- ----------------------------------------------------------------------------------------------
James G. Stelzenmuller, IV Vice President Inactive
- ----------------------------------------------------------------------------------------------
Patsy D. Stelzenmuller Secretary Inactive
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
This Agreement has been entered into by MMSA in reliance upon, and in
consideration of, the personal qualifications and representations of the
above-named Owners. Accordingly, except as otherwise provided herein, no change
in the active involvement in Dealer's management by the Owners and no change in
the ownership of Dealer by the Owners which results in a change in majority
control or interest shall be permitted by Dealer or any Owner without the prior
written approval of MMSA, which approval shall not be unreasonably withheld.
4. MANAGEMENT OF DEALER
Dealer represents that Connie S. Phillips exercises the functions of
general manager and James G. Stelzenmuller, III exercises the functions of
Dealer Principal (hereinafter referred to as the "Executive Managers") of its
MMSA dealership and that each has complete authority to make all decisions on
behalf of Dealer with respect to the dealership operations.
MMSA has entered into this Agreement in reliance upon, and in
consideration of, the personal qualifications and representations of the
above-named Executive Managers. Accordingly, Dealer agrees that there shall be
no change in the Executive Managers without MMSA's prior written consent.
Dealer shall give MMSA prior written notice of any proposed change in Executive
Managers (including the name and qualifications of the person proposed to be
appointed as a replacement Executive Manager) and MMSA shall have the right, in
its sole and reasonable discretion, to determine whether the proposed candidate
possesses the requisite qualifications and experience for the position.
5. SALES LOCALITY
Subject to and in accordance with the terms and conditions hereof, MMSA
has established the following Sales Locality as the non-exclusive, primary area
of responsibility for Dealer's promotion and sale of MMSA Products:
City of: Columbus
----------------------------------------------------------------------
County or Parish of Muscogee State of Georgia
------------------------- --------------------------
Except as may be otherwise required by applicable law, MMSA reserves the
right to sell and/or lease MMSA Products to others (including, without
limitation, public or private fleet purchasers and employees of MMSA or its
affiliates) and to enter into MMSA Dealer Sales and Service Agreements with
others within and without the Sales Locality. MMSA and Dealer agree that
additional MMSA Dealers may be appointed in or near the Sales Locality when
MMSA determines, in accordance with applicable law, that additional MMSA sales
and service facilities are warranted.
Nothing contained in this Agreement shall require or be construed to
require Dealer's approval of MMSA entering into MMSA Dealer Sales and Service
Agreements or any other agreements with others within or without the Sales
Locality.
Agreement Date OCT 04 1996 [MITSUBISHI LOGO]
-----------
2
<PAGE> 3
6. DEALERSHIP PREMISES
MMSA has approved the following premises as the location of Dealer's MMSA
sales and service operations (hereinafter referred to as the "Dealership
Premises").
MMSA New Vehicle Sales Facilities
1412 Fourth Avenue
- -------------------------------------------------------------------------------
Columbus, Georgia 31902
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Parts and Services Facilities
1408 Fourth Avenue (Shared with Pontiac-GMC Truck)
- -------------------------------------------------------------------------------
Columbus, Georgia 31902
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Sales and General Offices
1412 Fourth Avenue
- -------------------------------------------------------------------------------
Columbus, Georgia 31902
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Used Vehicle Display and Sales Facilities
1412 Fourth Avenue
- -------------------------------------------------------------------------------
Columbus, Georgia 31902
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Storage Facilities
1412 Fourth Avenue
- -------------------------------------------------------------------------------
Columbus, Georgia 31902
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Agreement Date OCT 04 1996
[MITSUBISHI LOGO]
3
<PAGE> 4
BODY AND PAINT FACILITIES
N/A
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Other
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
MMSA and Dealer recognize that Dealer may sell MMSA Products to customers
wherever they may be located. However, in order that MMSA may establish and
maintain an effective network of MMSA Dealers for the sale and servicing of
MMSA Products, Dealer specifically agrees that, without the prior written
approval of MMSA, it shall not display MMSA Trademarks or, either directly or
indirectly, establish any place or places of business for the conduct of any of
its MMSA dealership operations, except on the Dealership Premises in the manner
and for the purposes described above.
Dealer shall maintain all requirements and conditions of this MMSA Dealer
Sales and Service Agreement as outlined in Dealer's most recent Dealer
Development Plan, including but not limited to exclusive facility, management
and capital requirements.
7. LICENSES
Dealer agrees to secure and maintain all licenses required for the
operation of its business as contemplated by this Agreement in any state or
jurisdiction where its MMSA dealership operations are to be conducted. If any
such license or licenses are required, this Agreement shall not become
effective, unless and until all such required licenses have been obtained and
Dealer furnishes MMSA with a copy of all such licenses together with written
notice specifying the date and number, if any, of all such licenses. Dealer
shall notify MMSA immediately in writing if Dealer fails to secure, maintain or
renew any such license. If any required license is suspended or revoked, Dealer
shall notify MMSA immediately in writing of the effective date of such
suspension or revocation.
8. SCOPE OF AGREEMENT
Dealer agrees to be bound by and comply with each and every term of this
MMSA Dealer Sales and Service Agreement, all schedules hereto, the Standard
Provisions, the Dealer Development Plan, the most recent Product List and all
Product Addenda, the Warranty Manual and all other manuals heretofore or
hereafter issued by MMSA, all modifications, extensions or renewals of any of
the foregoing, and each and every bulletin or directive heretofore or hereafter
issued to Dealer by MMSA. MMSA may from time to time deliver to Dealer a Product
Addendum setting forth special terms and conditions applicable to particular
MMSA Vehicles designated in the Product Addendum. Such special terms and
conditions shall supersede and control any inconsistent terms and conditions in
this Agreement with respect to the MMSA Vehicles designated in the Product
Addendum. Each Product Addendum shall be effective as of the date specified in
the Product Addendum and shall remain effective (1) until it is amended or
terminated by its own terms or by a new Product Addendum, (2) until the MMSA
Vehicles designated in the Product Addendum are no longer distributed by MMSA,
or (3) until termination of this Agreement.
9. DEFINITIONS
Italicized terms used herein shall have the meanings set forth in Section
II of the Standard Provisions.
10. GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California.
Agreement Date Oct 04 1996 [Mitsubishi LOGO]
4
<PAGE> 5
11. JURISDICTION
MMSA and Dealer agree that all litigation between MMSA and Dealer which may
arise out of or in connection with this Agreement or any transaction between
them shall be subject to the exclusive jurisdiction of the courts of the State
of California or of the federal courts sitting therein, and each hereby consents
to the jurisdiction of such courts. Dealer agrees that any and all process
directed to it in any such litigation may be served upon it outside of
California with the same force and effect as if such service had been made
within California.
12. LEGAL EFFECT
This Agreement terminates and supersedes all prior written or oral
agreements and undertakings, if any, between MMSA and Dealer, except (1) any
agreements expressly referred to and incorporated herein, (2) any indebtedness
which may be owing by either MMSA or Dealer to the other, and (3) any of
Dealer's unfilled orders with MMSA for any MMSA Products placed with MMSA
pursuant to the provisions of any sales agreement terminated or superseded by
this Agreement. Except as herein otherwise provided, upon execution of this
Agreement by Dealer and in consideration of MMSA's entering into this Agreement,
Dealer releases MMSA from any and all claims, demands, contracts and liabilities
(including, but not limited to, statutory liabilities), known or unknown, of any
kind or nature whatsoever, arising from or out of or in connection with any such
prior agreements, business transactions, course of dealing, discussions or
negotiations between the parties prior to the effective date hereof. Dealer
expressly acknowledges and waives the application of California Civil Code
Section 1642 which provides as follows: "A general release does not extend to
claims which the creditor does not know or suspect to exist in his favor at the
time of executing the release, which if known by him must have materially
affected his settlement with the debtor."
13. NOTICES
Any notice to be given hereunder may be delivered to the party if a sole
proprietor, to a partner of the party if a partnership, or to an officer of the
party if a corporation, or may be given by sending such notice by registered or
certified mail or by telegram or tested telex addressed, if to Dealer, to its
principal office as above stated, and if to MMSA, to its headquarters as above
stated, marked "Attention President". Except as otherwise provided in this
Agreement, any notice so given shall be considered to have been given when
delivered or mailed as provided above.
14. AUTHORITY OF DEALER
If Dealer is a partnership or corporation, Dealer shall provide MMSA with a
certified copy of the partnership authorization, corporate resolution or other
document evidencing the authority of Dealer to enter into and adhere to the
terms of this Agreement.
15. VALIDITY
No representative of MMSA shall have authority, other than by a writing
signed by the President or an Executive Vice President or two Vice Presidents of
MMSA, to renew, extend or terminate this Agreement, or to amend, modify or waive
any provision of this Agreement or any performance required hereby, or to make
any agreement which imposes obligations on either MMSA or Dealer not
specifically imposed by this Agreement.
Agreement Date OCT 04 1996 [Mitsubishi Logo]
5
<PAGE> 6
IN WITNESS OF THE FOREGOING, the parties hereto have executed this
Agreement in duplicate. THIS AGREEMENT SHALL NOT BECOME EFFECTIVE UNTIL IT HAS
BEEN SIGNED BY THE PRESIDENT OR AN EXECUTIVE VICE PRESIDENT OR TWO VICE
PRESIDENTS OF MMSA. DEALER WILL BE NOTIFIED IN WRITING BY MMSA WHEN THIS
AGREEMENT HAS BEEN SO SIGNED, WHICH NOTICE WILL SPECIFY THE EFFECTIVE DATE OF
THIS AGREEMENT.
Jay Pontiac-GMC Truck, Inc.
dba Jay Mitsubishi
- ---------------------------
(Dealer's Firm Name)
By /s/ James G. Stelzenmuller, III Date September 16, 1996
------------------------------- ---------------------------
Title President
----------------------------
By Date September 16, 1996
---------------------------- ---------------------------
Title
---------------------------- Dana Sasser
--------------------------------
(Witness)
Mitsubishi Motor Sales of America, Inc.
By Date
------------------------------- ---------------------------
(President)
OR
By /s/ ?????????????????? Date OCT 04 1996
------------------------------- ---------------------------
(Executive Vice President)
OR
By Date
------------------------------- ---------------------------
(Vice President)
and
By Date
------------------------------- ---------------------------
(Vice President)
Agreement Date OCT 4 1996 [MITSUBISHI LOGO]
6
<PAGE> 7
PREAMBLE CHANGE
AMENDMENT TO MITSUBISHI MOTOR SALES OF AMERICA, INC.
DEALER SALES AND SERVICE AGREEMENT
THIS AGREEMENT is made and entered into by and between Mitsubishi Motor
Sales of America, Inc., a California corporation, with headquarters at 6400
Katella Avenue, Cypress California 90630 (hereinafter referred to as "MMSA"),
and
Jay Pontiac-GMC Truck, Inc. a Georgia
- ---------------------------------------------------------- --------------------
(Dealer Firm Name) (State)
corporation [X], partnership [ ], individual [ ], doing business as
Jay Mitsubishi
- -------------------------------------------------------------------------------
(Name)
at 1412 Fourth Avenue , Columbus
-------------------------------------- --------------------------------------
(Number and Street) (City)
Muscogee County, Georgia , 31902
- ----------------------------- ----------------------- ------------------
(County) (State) (Zip)
(hereinafter referred to as "Dealer").
In consideration of the mutual covenants of the parties hereto, and other
good and valuable consideration, MMSA and Dealer hereby agree as follows:
1. The preamble paragraph of the MMSA Sales and Service Agreement entered into
by and between MMSA and Dealer on October 4 , 1996, (the
--------------------- ------
"Dealer Agreement") is hereby amended to read as follows:
THIS AGREEMENT is made and entered into by and between Mitsubishi
Motor Sales of America, Inc., a California corporation, with headquarters
at 6400 Katella Avenue, Cypress, California 90630 (hereinafter referred to
as MMSA"), and Jay Pontiac-GMC Truck, Inc.
-----------------------------------------------------------
(Dealer Firm Name)
a Georgia corporation [X], partnership [ ], individual [ ],
-------------------
(State)
doing business as Jay Mitsubishi
-------------------------------------------------------
(Name)
at 1412 Veterans Parkway , Columbus
-------------------------------------- ---------------------------------
(Number and Street) (City)
Muscogee County, Georgia , 31902
---------------------------- ------------------ -------------
(County) (State) (Zip)
(hereinafter referred to as "Dealer").
2. The terms and provisions of the Dealer Agreement, insofar as they are not
inconsistent with the terms and provisions of this Amendment, remain in full
force and effect and constitute a part of this Amendment as if set forth at
length herein.
<PAGE> 8
IN WITNESS OF THE FOREGOING, the parties hereto have executed this
Amendment in duplicate. THIS AMENDMENT SHALL NOT BECOME EFFECTIVE UNTIL IT HAS
BEEN SIGNED BY THE PRESIDENT OR AN EXECUTIVE VICE PRESIDENT OR TWO (2) VICE
PRESIDENTS OF MMSA. DEALER WILL BE NOTIFIED IN WRITING BY MMSA WHEN THIS
AMENDMENT HAS BEEN SO SIGNED, WHICH NOTICE WILL SPECIFY THE EFFECTIVE DATE OF
THIS AMENDMENT.
Jay Pontiac-GMC Truck, Inc.
dba Jay Mitsubishi
- -------------------------------
(Dealer's Firm Name)
By: /s/ James G. Stelzenmuller, III Date: October 22, 1996
------------------------------- -------------------------
Title: President
-------------------------------
By: Date: October 22, 1996
------------------------------- -------------------------
Title:
------------------------------- /s/ Dana Sasser
-------------------------
(Witness)
MITSUBISHI MOTOR SALES
OF AMERICA, INC.
By: Date:
------------------------------- -------------------------
(President)
OR
By: /s/ ??? Date: Nov 4 1996
------------------------------- -------------------------
(Executive Vice President)
OR
By: Date:
------------------------------- -------------------------
(Vice President)
and
By: Date:
------------------------------- -------------------------
(Vice President)
<PAGE> 1
EXHIBIT 10.43
=========================================
MAZDA DEALER AGREEMENT
=========================================
<PAGE> 2
[MAZDA LOGO]
SCHEDULE
OF
DOCUMENTS
TABLE OF CONTENTS
PAGE
BASIC AGREEMENT BASIC AGREEMENT ............................. 1
I. SALES AND SERVICE OBLIGATIONS
OF MAZDA AND DEALER ................... 1
1. MAZDA's Obligations ................ 1
2. DEALER's Obligations ............... 1
II. MAZDA IMAGE ........................... 2
III. CUSTOMER SATISFACTION ................. 2
1. Acknowledgement .................... 2
2. MAZDA's Obligations ................ 2
3. DEALER's Obligations ............... 3
IV. ESSENTIAL MAZDA PROGRAMS .............. 3
V. MAZDA INFORMATION SYSTEMS ............. 3
1. Establishment and Purpose .......... 3
2. DEALER Utilization ................. 3
3. Electronic Systems ................. 3
4. Accurate Information ............... 4
VI. REASONABLE EXPECTATIONS
OF DEALER AND MAZDA ................... 4
1. Business Expectations .............. 4
2. Acknowledgements ................... 4
3. DEALER's Representations ........... 5
VII. COMMUNICATIONS AND REVIEW PROCEDURES .. 5
1. Periodic Review .................... 5
2. Responsibility of MAZDA
Representatives .................... 5
3. DEALER's General Manager ........... 5
VIII. ADDITIONAL PROVISIONS ................. 5
1. Components of MAZDA Dealer
Agreement .......................... 5
2. Definition of Terms ................ 6
3. Amendments ......................... 6
IX. TERM .................................. 6
X. DEALER ACKNOWLEDGEMENT ................ 6
<PAGE> 3
[MAZDA LOGO]
TABLE OF CONTENTS
(continued)
ADDITIONAL PAGE
AGREEMENTS GENERAL TERMS AND CONDITIONS.........................7
I. DEFINITIONS......................................7
1. DEALER.......................................7
2. DEALER's Approved Location...................7
3. DEALER's Business............................7
4. Manufacturer.................................7
5. MAZDA........................................7
6. MAZDA Dealers................................7
7. MAZDA Dealer Representations.................7
8. MAZDA Parts and Accessories..................7
9. MAZDA Products...............................7
10. MAZDA Vehicles...............................7
11. MAZDA Trademarks.............................7
II. GENERAL PROVISIONS...............................7
1. Relationship Between DEALER and MAZDA........7
2. Good Faith...................................8
3. Inability to Perform.........................8
4. No Implied Waivers...........................8
5. Notices......................................8
6. Maintenance and Inspection of Records........8
7. Local Taxes..................................8
8. Compliance with Law..........................8
9. Assignment and Delegation....................9
10. Severability.................................9
11. Titles.......................................9
12. Interpretation...............................9
13. Entire Agreement.............................9
PURCHASE TERMS AND CONDITIONS.......................10
1. Orders......................................10
2. Changes in MAZDA Products...................10
3. Delivery....................................10
4. MAZDA Product Supply........................10
5. Prices......................................11
6. Taxes.......................................11
7. Reshipment and Diversion....................11
8. Payment.....................................11
9. Financial Resources.........................11
DEALERSHIP LOCATION.................................12
Dealer Review and Action Plan.......................13
1. Purpose.....................................13
2. Information From DEALER.....................13
3. Individualized Annual Action Plan...........13
4. Voluntary Nature of Compliance..............13
ii
<PAGE> 4
[MAZDA LOGO]
TABLE OF CONTENTS
(continued)
PAGE
MAZDA IMAGE.....................................................14
1. Use of MAZDA Trademarks...............................14
2. Ownership and Protection of MAZDA Trademarks..........14
3. DEALER Facilities.....................................14
4. Signs.................................................14
5. Advertising...........................................14
RENEWAL AND TERMINATION.........................................15
I. RENEWAL....................................................15
II. TERMINATION................................................15
1. Termination by Mutual Consent.........................15
2. New Form of Dealer Agreement..........................15
3. Termination by DEALER.................................15
4. Termination for Cause by MAZDA........................15
5. Notices...............................................16
III. EFFECT OF EXPIRATION OR TERMINATION........................17
1. General...............................................17
2. Further Transactions..................................17
3. Signs, Trademarks and Names...........................17
4. Repurchase by MAZDA...................................17
5. Inventory and Inspection..............................17
6. Delivery..............................................18
7. Payment...............................................18
8. Customer Records......................................18
IV. MUTUAL RELEASES............................................18
V. OTHER ACTIONS..............................................18
OWNERSHIP AND TRANSFER..........................................19
I. GENERAL....................................................19
II. RIGHTS OF SPOUSES AND CHILDREN.............................19
III. TRANSFER TO OTHER NOMINEES.................................19
DISPUTE RESOLUTION..............................................21
I. NON-JUDICIAL RESOLUTION....................................21
1. Acknowledgment........................................21
2. Management Review.....................................21
iii
<PAGE> 5
[MAZDA LOGO]
TABLE OF CONTENTS
(continued)
PAGE
II. THIRD PARTY NON-JUDICIAL RESOLUTION ....... 21
1. Stipulation as to Facts and
Issues in Dispute ...................... 21
2. Third Party Resolution ................. 21
3. Binding Arbitration .................... 22
4. Confidentiality of Proceedings ......... 22
5. Costs and Expenses ..................... 22
III. JUDICIAL RESOLUTION.........................22
1. Acknowledgement ........................ 22
2. Court Litigation ....................... 22
3. Costs and Expenses ..................... 22
iv
<PAGE> 6
- -------------------------------------------------------------------------------
[MAZDA LOGO]
BASIC AGREEMENT
The purpose of the MAZDA Dealer Agreement is to provide for the sale and
service of MAZDA Products in a manner 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 agreements offered 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 OBLIGATIONS OF MAZDA AND DEALER
1. MAZDA'S OBLIGATIONS.
MAZDA agrees to establish programs supporting an 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
Products 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's 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,
- -------------------------------------------------------------------------------
1
<PAGE> 7
[MAZDA LOGO]
BASIC AGREEMENT
(continued)
(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 ensuring 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, that 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 other
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.
2
<PAGE> 8
- --------------------------------------------------------------------------------
[MAZDA LOGO]
BASIC AGREEMENT (continued)
3. DEALER'S OBLIGATIONS.
DEALER shall:
(a) ensure proper training in customer satisfaction matters for sales, service,
parts and administrative personnel, and cause 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
customers and 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 involving DEALER, and use its best efforts to resolve
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 PROGRAMS
MAZDA shall develop and offer programs for 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 effective 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 SYSTEMS
1. ESTABLISHMENT AND PURPOSE.
MAZDA shall establish, from time to time, information systems for use by MAZDA
Dealers generally and MAZDA to maintain an effective 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 communication 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 months'
advance written notice to DEALER of such changes.
- --------------------------------------------------------------------------------
3
<PAGE> 9
- -------------------------------------------------------------------------------
[MAZDA LOGO]
BASIC AGREEMENT
(continued)
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 OF DEALER AND MAZDA
1. BUSINESS EXPECTATIONS.
The reasonable expectations of DEALER and MAZDA are to deal in good faith with
each other in pursuit of their respective interests and the intents 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 judgement 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 Vehicles, meet any specific sales objective
for 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. ACKNOWLEDGMENTS.
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, including those which may be competitive with MAZDA Products; or
(iii) if MAZDA determines it would be in the best interests of customers or
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 alternatives to the proposed action. To the
extent any consent is required from a party, such party will not unreasonably
withhold its consent to any of the foregoing actions by the other.
- -------------------------------------------------------------------------------
4
<PAGE> 10
- ----------------------------------------------------------------------------
[MAZDA LOGO]
BASIC AGREEMENT
(continued)
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 REVIEW PROCEDURES
1. PERIODIC REVIEW.
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 of policy
affecting the relationship of DEALER and MAZDA, including without
limitation matters involving: (i) methods of allocation for MAZDA Products;
(ii) the determination by MAZDA of essential MAZDA programs necessary for
DEALER to perform its obligations under the MAZDA 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.
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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 provisions, which are
incorporated by this reference into and made a part of the MAZDA Dealer
Agreement:
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MAZDA
Basic Agreement
(continued)
(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 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 ACKNOWLEDGEMENT
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 judgement and the counsel of their
advisors.
DEALER INITIALS: ______________________
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[MAZDA LOGO]
GENERAL TERMS AND CONDITIONS
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.
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I. 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 Location" 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 Corporation, a corporation, or any other
corporation which manufactures MAZDA Vehicles.
5. "MAZDA" means the business entity identified as Mazda on the signature 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 registrations 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.
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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 right to enter into
the MAZDA Dealer Agreement or engage in any of the business activities contem-
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[MAZDA LOGO]
GENERAL TERMS AND CONDITIONS
(continued)
plated 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 by 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 verifying 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 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.
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[MAZDA LOGO]
GENERAL TERMS AND CONDITIONS (continued)
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 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.
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[MAZDA LOGO]
PURCHASE TERMS AND CONDITIONS
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 CONDITIONS
1. ORDERS.
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 the 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
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[MAZDA LOGO]
PURCHASE TERMS AND CONDITIONS (continued)
DEALER can expect to receive a particular quantity or mix of MAZDA Products,
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, 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.
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[MAZDA LOGO]
DEALERSHIP LOCATION
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.
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[MAZDA LOGO]
DEALER REVIEW AND ACTION PLAN
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 AND ACTION PLAN
1. PURPOSE.
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: (i) 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 effective member of the nationwide distribution system for
MAZDA Products.
2. INFORMATION FROM DEALER.
DEALER acknowledges that MAZDA will require information on a continuing
basis from 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.
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[MAZDA LOGO]
MAZDA IMAGE
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.
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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 inure 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 or the requirements of this paragraph.
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[MAZDA LOGO]
RENEWAL AND TERMINATION
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.
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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.
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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 I, 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 than 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 to 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 incapacity of DEALER to perform the obligations of DEALER
hereunder, if an
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[MAZDA LOGO]
RENEWAL AND TERMINATION (continued)
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 DEALER'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.
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[MAZDA LOGO]
RENEWAL AND TERMINATION (continued)
(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.
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III. EFFECT OF EXPIRATION OR TERMINATION
1. GENERAL.
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 usable 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
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[MAZDA LOGO]
RENEWAL AND TERMINATION (continued)
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 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 owed 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
deliver 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.
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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.
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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.
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[MAZDA LOGO]
OWNERSHIP AND TRANSFER
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.
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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.
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II. RIGHTS OF SPOUSES AND CHILDREN
Upon the death or incapacity of DEALER to 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 of
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 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 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.
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III. TRANSFER TO OTHER NOMINEES
The MAZDA Dealer Agreement, any ownership 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 have
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 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
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_______________________________________________________________________________
[MAZDA LOGO]
OWNERSHIP AND TRANSFER (continued)
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.
_______________________________________________________________________________
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________________________________________________________________________________
[MAZDA LOGO]
DISPUTE RESOLUTION
This Dispute Resolution 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. NON-JUDICIAL RESOLUTION
1. ACKNOWLEDGMENT.
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 NON-JUDICIAL RESOLUTION
1. STIPULATION AS TO FACTS AND ISSUES IN DISPUTE.
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 as 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 it 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.
_______________________________________________________________________________
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[MAZDA LOGO]
DISPUTE RESOLUTION (continued)
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
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.
_______________________________________________________________________________
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[MAZDA LOGO]
MAZDA DEALER AGREEMENT SIGNATURE PAGE
TERM November 28, 1995 through December 31, 1996
----------------- -----------------
DEALER DEALER's LEGAL NAME Jay Automotive Group V, Inc.
----------------------------
d/b/a Jay Mazda
----------------------------
DEALER's APPROVED LOCATION 2027 Box Road
----------------------------
Columbus, Georgia
----------------------------
By /s/ James G. Stelzenmuller, III Title President
-------------------------------- ------------
James G. Stelzenmuller, III
MAZDA MAZDA MOTOR OF AMERICA, INC. 7755 IRVINE CENTER DRIVE
IRVINE, CALIFORNIA 92718-2906
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.
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<PAGE> 1
EXHIBIT 10.44
TOYOTA DEALER AGREEMENT
This is an Agreement between Southeast Toyota Distributors, Inc.
(DISTRIBUTOR), and Jay Automotive Group II, Inc. (DEALER), a(n) [ ] individual,
[ ] partnership, [X] corporation. If a corporation, DEALER is duly incorporated
in the State of Georgia and doing business as Jay Toyota.
PURPOSES AND OBJECTIVES OF THIS AGREEMENT
DISTRIBUTOR sells Toyota Products which are manufactured or approved by Toyota
Motor Corporation (FACTORY) and imported and/or sold to DISTRIBUTOR by Toyota
Motor Sales, U.S.A., Inc. (IMPORTER). It is of vital importance to DISTRIBUTOR
that Toyota Products are sold and serviced in a manner which promotes consumer
confidence and satisfaction and leads to increased product acceptance.
Accordingly, DISTRIBUTOR has established a network of authorized Toyota
dealers, operating at approved locations and pursuant to certain standards, to
sell and service Toyota Products. DEALER desires to become one of DISTRIBUTOR's
authorized dealers. Based upon the representations and promises of DEALER, set
forth herein, DISTRIBUTOR agrees to appoint DEALER as an authorized Toyota
dealer and welcomes DEALER to DISTRIBUTOR's network of authorized dealers of
Toyota Products.
This Agreement sets forth the rights and responsibilities of DISTRIBUTOR as
seller and DEALER as buyer of Toyota Products. DISTRIBUTOR enters into this
Agreement in reliance upon DEALER's integrity, ability, assurance of personal
services, expressed intention to deal fairly with the consuming public and with
DISTRIBUTOR, and promise to adhere to the terms and conditions herein.
Likewise, DEALER enters into this Agreement in reliance upon DISTRIBUTOR's
promise to adhere to the terms and conditions herein. DISTRIBUTOR and DEALER
shall refrain from conduct which may be detrimental to or adversely reflect
upon the reputation of the FACTORY, IMPORTER, DISTRIBUTOR, DEALER or Toyota
Products in general. The parties acknowledge that the success of the
relationship between DISTRIBUTOR and DEALER depends upon the mutual
understanding and cooperation of both DISTRIBUTOR and DEALER.
Dealer Code 10085
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I. RIGHTS GRANTED TO THE DEALER
Subject to the terms of this Agreement, DISTRIBUTOR hereby grants DEALER
the non-exclusive right:
A. To buy and resell the Toyota Products identified in the Toyota Product
Addendum hereto which may be periodically revised by IMPORTER;
B. To identify itself as an authorized Toyota dealer utilizing approved
signage at the location(s) approved herein;
C. To use the name Toyota and the Toyota Marks in the advertising,
promotion, sale and servicing of Toyota Products in the manner herein
provided.
DISTRIBUTOR reserves the unrestricted right to sell Toyota Products and to
grant the privilege of using the name Toyota or the Toyota Marks to other
dealers or entities, wherever they may be located.
II. RESPONSIBILITIES ACCEPTED BY THE DEALER
DEALER accepts its appointment as an authorized Toyota dealer and agrees
to:
A. Sell and promote Toyota Products subject to the terms and conditions of
this Agreement;
B. Service Toyota Products subject to the terms and conditions of this
Agreement;
C. Establish and maintain satisfactory dealership facilities at the
location(s) set forth herein; and
D. Make all payments to DISTRIBUTOR when due.
III. TERM OF AGREEMENT
This Agreement is effective this 13th day of December, 1995, and shall
continue for a period of (21) Months, and shall expire on September 12,
1997, unless ended earlier by mutual agreement or terminated as provided
herein. This Agreement may not be continued beyond its expiration date
except by written consent of DISTRIBUTOR and IMPORTER.
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<PAGE> 3
IV. OWNERSHIP OF DEALERSHIP
This Agreement is a personal service Agreement and has been entered into
by DISTRIBUTOR in reliance upon and in consideration of DEALER'S
representation that only the following named persons are the Owners of
DEALER, that such persons will serve in the capacities indicated, and that
such persons are committed to achieving the purposes, goals and commitments
of this Agreement:
OWNERS' PERCENT OF
NAMES TITLE OWNERSHIP
James G. Stelzenmuller, III PRES DLRPR 0.0%
T. Leroy Lynn GM 0.0%
Holding Company
Jay Automotive Group, Inc. 100.0%
V. MANAGEMENT OF DEALERSHIP
DISTRIBUTOR and DEALER agree that the retention of qualified management is
of critical importance to satisfy the commitments made by DEALER in this
Agreement. DISTRIBUTOR, therefore, enters into this Agreement in reliance
upon DEALER's representation that T. Leroy Lynn, and no other person, will
exercise the function of General Manager, be in complete charge of DEALER's
operations, and will have authority to make all decisions on behalf of
DEALER with respect to DEALER's operations. DEALER further agrees that the
General Manager shall devote his or her full efforts to DEALER's
operations.
VI. CHANGE IN MANAGEMENT OR OWNERSHIP
This is a personal service contract. DISTRIBUTOR has entered into this
Agreement because DEALER has represented to DISTRIBUTOR that the Owners and
General Manager of DEALER identified herein possess the personal
qualifications, skill and commitment necessary to ensure that DEALER will
promote, sell and service Toyota Products in the most effective manner,
enhance the Toyota image and increase market acceptance of Toyota Products.
Because DISTRIBUTOR has entered into this Agreement in reliance upon these
representations and DEALER's assurances of the active involvement of such
persons in DEALER operations, any change in ownership, no matter what the
share or relationship between parties, or any changes in General Manager
from the person specified herein, requires the prior written consent of
DISTRIBUTOR, which DISTRIBUTOR shall not unreasonably withhold.
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DEALER agrees that factors which would make DISTRIBUTOR's withholding of
consent reasonable would include, without limitation, the failure of a
new Owner or General Manager to meet DISTRIBUTOR's standards with regard
to financial capability, experience and success in the automobile
dealership business.
VII. APPROVED DEALER LOCATIONS
In order that DISTRIBUTOR may establish and maintain an effective
network of authorized Toyota dealers, DEALER agrees that it shall
conduct its Toyota operation only and exclusively in facilities and at
locations herein designated and approved by DISTRIBUTOR. DISTRIBUTOR
hereby designates and approves the following facilities as the exclusive
location(s) for the sale and servicing of Toyota Products and the display
of Toyota Marks:
New Vehicle Sales and Showroom Used Vehicle Display and Sales
1801 Box Road 1801 Box Road
Columbus, GA 31906 Columbus, GA 31906
Sales and General Office Body and Paint
Same as above Same as above
Parts Service
Same as above Same as above
Other Facilities
Storage
Same as above
DEALER may not, either directly or indirectly, display Toyota Marks or
establish or conduct any dealership operations contemplated by this
Agreement, including the display, sale and servicing of Toyota Products,
at any location or facility other than those approved herein without the
prior written consent of DISTRIBUTOR. DEALER may not modify or change
the usage or function of any location or facility approved herein or
otherwise utilize such locations or facilities for any functions other
than the approved function(s) without the prior written consent of
DISTRIBUTOR.
VIII. PRIMARY MARKET AREA
DISTRIBUTOR will assign DEALER a geographic area called a Primary Market
Area ("PMA"). The PMA is used by DISTRIBUTOR to evaluate DEALER's
performance of its obligations,
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<PAGE> 5
among other things. DEALER agrees that it has no exclusive right to any
such PMA. DISTRIBUTOR may add new dealers, relocate dealers, or adjust
DEALER's PMA as it reasonably determines is necessary. DEALER's PMA is set
forth on the PMA Addendum hereto.
Nothing contained in this Agreement, with the exception of Section XIV(B),
shall limit or be construed to limit the geographical area in which, or the
persons to whom, DEALER may sell or promote the sale of Toyota products.
IX. STANDARD PROVISIONS
The "Toyota Dealer Agreement Standard Provisions" are incorporated herein
and made part of this Agreement as if fully set forth herein.
X. ADDITIONAL PROVISIONS
In consideration of DISTRIBUTOR's agreement to appoint DEALER as an
authorized Toyota dealer, DEALER further agrees:
1) Holding Company
---------------
Dealer agrees:
a) That the current ownership of the outstanding stock of Jay
Automotive Group, Inc., Columbus, Georgia, is by the following
person(s) in the percentage(s) shown:
Name % Ownership
---- -----------
Jay Stelzenmuller, III 100.0%
b) That Jay Automotive Group, Inc. shall solely be engaged in
automotive-related endeavors.
c) That any changes in ownership of said corporation without the prior
written approval of Southeast Toyota Distributors, Inc. and Toyota
Motor Sales, U.S.A., Inc. will void this Toyota Dealer Agreement
entered into between Southeast Toyota Distributors, Inc. and Jay
Toyota.
d) That T. Leroy Lynn is currently exercising the functions of General
Manager of Jay Toyota and, that T. Leroy Lynn shall continue to
exercise the functions of General Manager of Jay Toyota and, that
no changes in General Manager shall be made without the prior
written approval of Southeast Toyota Distributors, Inc. and Toyota
Motor Sales, U.S.A., Inc.
e) That capital funds will not be transferred from this corporation to
other corporations owned or controlled by Jay Automotive Group,
Inc. that may be reasonably considered by Southeast Toyota
Distributors, Inc. to be detrimental to the capital structure of
the Toyota dealership.
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XI. EXECUTION OF AGREEMENT
Notwithstanding any other provision herein, the parties to this
Agreement, DISTRIBUTOR and DEALER, agree that this Agreement shall be
valid and binding only if it is signed:
A. On behalf of DEALER by a duly authorized person;
B. On behalf of DISTRIBUTOR by the President and/or an authorized
General Manager, if any, of DISTRIBUTOR; and
C. On behalf of IMPORTER, solely in connection with its limited
undertaking herein, by President of IMPORTER.
XII. CERTIFICATION
By their signatures hereto, the parties agree that they have read and
understand this Agreement, including the Standard Provisions incorporated
herein, are committed to its purposes and objectives and agree to abide
by all of its terms and conditions.
Jay Automotive Group, Inc. d/b/a Jay Toyota DEALER
---------------------------------------------------------------
(Dealer Entity Name)
Date: 7/19/95 By: /s/ James G. Stelzenmuller, III President
---------------------------------------------------------------------
Signature Title
Date: By:
---------------------------------------------------------------------
Signature Title
Date: By:
---------------------------------------------------------------------
Signature Title
Southeast Toyota Distributors, Inc. DISTRIBUTOR
----------------------------------------------------------
(Distributor Name)
Date: 11/22/95 By: /s/ John Williams, Jr. General Manager
---------------------------------------------------------------------
Signature Title
John Williams, Jr.
Date: By:
---------------------------------------------------------------------
Signature Title
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Undertaking by IMPORTER: In the event of termination of this Agreement by
virtue of termination or expiration of DISTRIBUTOR's contract with IMPORTER,
IMPORTER, through its designee, will offer DEALER a new agreement of no less
than one year's duration and containing the terms of the Toyota Dealer
Agreement then prescribed by IMPORTER.
TOYOTA MOTOR SALES, U.S.A., INC.
Date: Dec 13, 1995 By: /s/ Shinji Sakai President
------------ -----------------------------------
Signature Title
Shinji Sakai
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Exhibit 7-1A
EXTENSION OF TOYOTA DEALER AGREEMENT
Jay Automotive Group II, Inc. d/b/a
Agreement by and between Jay Toyota , located at
-----------------------------------
(Dealer)
1801 Box Road Columbus, Georgia
- --------------------------------------------------------------------------------
(Address) (City, State)
a (an) [ ] Individual [ ] Partnership [X] Corporation, hereinafter called
DEALER, and Southeast Toyota Distributors, Inc., hereinafter called DISTRIBUTOR.
-----------------------------------
(Distributor)
WHEREAS DEALER entered into a Toyota Dealer Agreement for the sale and service
of new Toyota vehicles and parts, options and accessories therefor, which
Agreement is dated December 13, 1995, which expires on January 12, 1998.
------------------ -------------------
NOW, THEREFORE, in consideration of the mutual covenants of the parties, and
other good and valuable consideration, DEALER and DISTRIBUTOR agree as follows:
(1) The Toyota Dealer Agreement entered into between DEALER and DISTRIBUTOR
for the sale and service of vehicles and parts and accessories therefor,
dated December 13, 1995, will continue in effect for an additional
---------------------
period of Six (6) months beyond the effective date of termination of
-----------
said Agreement set forth above, or until July 12, 1998, and on which
------------------
date said Agreement will terminate automatically without notice to or by
either party, unless required by law.
(2) All other terms and provisions of the aforesaid Toyota Dealer Agreement
remain in full force and effect and constitute a part of this Agreement as
it is set forth at length herein.
(3) This Agreement does not obligate DISTRIBUTOR to grant any further
extension of the aforesaid Toyota Dealer Agreement.
<PAGE> 9
Jay Automotive, Group II, Inc. d/b/a Jay Toyota , DEALER
- ------------------------------------------------------------------------
(Dealer Entity Name)
Date: 1/23/98 By: /s/ James G. Stelzenmuller, III President
----------- ----------------------------------------- ------------------
(Signature) (Title)
Date: By:
----------- ----------------------------------------- ------------------
(Signature) (Title)
Southeast Toyota Distributors, Inc. , DISTRIBUTOR
- -------------------------------------------------------------------
(Distributor Name)
Date: By: General Manager
----------- ----------------------------------------- ------------------
(Signature) (Title)
John Williams, Jr.
APPROVED: TOYOTA MOTOR SALES, U.S.A., INC.
Date: By: President
----------- ----------------------------------------- ------------------
(Signature) (Title)
Yoshio Ishizaka
<PAGE> 1
EXHIBIT 10.45
SATURN DISTRIBUTION CORPORATION RETAILER AGREEMENT
This Agreement, effective the 15th day of March, 1997, is entered into by
Saturn Distribution Corporation (the Franchisor), a wholly owned subsidiary of
Saturn Corporation (Saturn), and Jay Automotive Group II, Inc. d/b/a,
Saturn of Columbus
( ) a proprietorship;
( ) a partnership;
( ) a limited liability company;
( X ) a corporation, incorporated in the State of Georgia, on 4-3-91,
located in Columbus, Georgia (the Retailer).
PURPOSES OF THE AGREEMENT
The principal purposes of this Agreement are to:
A. affirm the commitment of the Retailer and the Franchisor to adhere to
the Saturn Philosophy and Values, and achieve the Saturn Mission;
B. identify the framework within which the Retailer and the Franchisor
will jointly act to fulfill their commitments to each other;
C. authorize the Retailer to sell and service Saturn Products and to
represent itself as a Saturn Retailer; and
D. identify other commitments, rights and responsibilities of the
Retailer and the Franchisor.
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1. RETAILER COMMITMENT TO THE SATURN MISSION, PHILOSOPHY AND VALUES
Retailers represent Saturn's products and brand to the public.
Therefore, it is essential to the success of Saturn, the Franchisor and the
Retailers that each Retailer understand, embrace and promote both the letter
and the spirit of the Saturn Mission, Philosophy and Values as set forth below.
The Retailer and the Franchisor can conduct their relationship with
trust and respect only if both the Retailer and the Franchisor work in an open,
fair and cooperative manner. Both the Retailer and the Franchisor are dependent
upon each other for maintaining this unique working relationship.
The Retailer therefore agrees to adhere to the Saturn Philosophy and
Values in conducting its franchised business, and to work jointly with the
Franchiser and Saturn, within the framework identified in this Agreement, to
accomplish the Saturn Mission. The Retailer acknowledges that the success of
the Saturn, the Franchisor, other Retailers and its suppliers is dependent on
the Retailer fulfilling this commitment. Consistent with the Saturn Philosophy,
the Retailer pledges to maintain the highest ethical standards in all
activities.
2. SATURN MISSION
Saturn's Mission is to market vehicles developed and manufactured in
the United States that are world leaders in quality, cost and customer
enthusiasm through the integration of people, technology and business systems
and to exchange knowledge, technology and experience throughout General Motors.
Achieving this Mission is dependent in part upon the development and
maintenance of a network of authorized Retailers working together with the
Franchisor to build and maintain customer confidence in the Retailer and Saturn.
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3. SATURN PHILOSOPHY
We, the Saturn team, in concert with the UAW and General Motors,
believe that meeting the needs of customers, Saturn members, suppliers,
Retailers and neighbors is fundamental to fulfilling our Mission. To meet the
needs of Retailers, the Franchisor will conduct business in an open and fair
manner, and will share responsibility and decision making with Retailers in the
manner specified in this Agreement to further the spirit of trust and respect
that is critical to the relationship.
4. SATURN VALUES
The Saturn Values direct the way the Retailer and the Franchisor can
reach their shared goals. The Saturn Values, as set forth below, focus on
exceeding customer expectations and on establishing a positive work environment
for Saturn team members.
A. Commitment to Customer Enthusiasm
We continually exceed the expectations of internal and external
customers for products and services that are world leaders in cost, quality
and customer enthusiasm. Our customers know that we really care about them.
B. Commitment to Excel
There is no place for mediocrity and halfhearted efforts at Saturn. We
accept responsibility, accountability and authority for overcoming
obstacles and reaching beyond the best. We choose to excel in every aspect
of our business, including return on investment.
C. Teamwork
We are dedicated to singleness of purpose through the effective
involvement of team members, suppliers, Retailers, neighbors and other
stakeholders. A fundamental tenet of our philosophy is the belief that
effective teams engage the talents of individual members while encouraging
team growth.
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D. Trust and Respect for the Individual
We have nothing of greater value than our people. We believe that
demonstrating respect for the uniqueness of every individual builds a team of
confident, creative members possessing a high degree of initiative,
self-respect and self-discipline.
E. Continuous Improvement
We know that sustained success depends on our ability to continually
improve the quality, cost and timeliness of our products and services. We are
providing opportunity for personal, professional, and organizational growth and
innovation for all Saturn stakeholders.
5. SHARED RESPONSIBILITY
In consideration of the Retailers' commitments, and to ensure that the
relationship between the Retailers and the Franchisor remains mutually
satisfactory, the Franchisor has put into place mechanisms that allow Retailers
to contribute collectively to decisions that significantly affect Retailers'
business. Retailer involvement is provided through two principal mechanisms:
the Franchise Operations Team and the Franchise Task Forces.
A. Franchise Operations Team
The Franchise Operations Team (FOT) is made up of an equal number of
Saturn Retailer Operators and Franchisor representatives. The FOT shall exercise
the responsibilities specified in this Agreement. The selection of FOT members,
their terms of service and the manner in which the FOT carries out its
responsibilities are pursuant to procedures adopted by the FOT.
The FOT uses a consensus decision-making process, described in the
FOT New Member Training Manual. The Retailer Operators serving on the FOT will
be trained in this process.
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B. FRANCHISE TASK FORCES
The FOT may establish Franchise Task Forces to assist in the performance
of its responsibilities if it concludes the input of additional Retailer
Operators, Retail team members and Saturn representatives would be helpful.
Franchise Task Forces make recommendations to the FOT unless the Franchise
Task Force is empowered by the FOT to make a decision. FOT shall retain
authority to modify or change Franchise Task Force decisions. The FOT will
determine the membership of each Franchise Task Force, as well as the scope and
duration of its assignment. A representative from the FOT will serve as a
cochampion of each Franchise Task Force.
6. DISPUTE RESOLUTION PROCESS
A. Exclusive Remedy
The Retailer and the Franchisor believe their mutual commitments to the
Saturn Mission, Philosophy and Values, together with the mechanisms for sharing
responsibility described in Article 5, should minimize the potential for
disputes. Nonetheless, some disputes may occur that cannot be resolved in the
normal course of business.
The Retailer and the Franchisor acknowledge that, at the state and federal
levels, various courts and agencies would, in the absence of this Article 6, be
available to them to resolve claims or controversies that might arise between
them. The Retailer and the Franchisor agree that it is inconsistent with the
Saturn Mission and Philosophy for either the Retailer or the Franchisor 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. Section 1 et seq.), THE RETAILER AND THE FRANCHISOR AGREE THAT
THE DISPUTE RESOLUTION PROCESS OUTLINED IN THIS ARTICLE, WHICH INCLUDES BINDING
ARBITRATION, SHALL BE THE EXCLUSIVE MECHANISM FOR RESOLVING ANY CONTROVERSY OR
CLAIM BETWEEN THEM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ITS CREATION
OR TERMINATION.
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There are two steps in the Dispute Resolution Process: Mediation and
Binding Arbitration. All controversies or claims 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, then the
Retailer or the Franchisor may submit the dispute to Binding Arbitration.
Mediation and Arbitration are each conducted by a panel consisting of two
Franchisor Representatives and two Retailer Operators selected from a pool of
volunteers approved by the FOT and trained to serve in the Dispute Resolution
Process. The Retailer and the Franchisor agree that the procedures contained in
the Retailer/Saturn Dispute Resolution Guide, as may be modified from time to
time by the FOT, shall govern Mediation and Arbitration under this Article.
B. Mediation
Either the Retailer or the Franchisor can submit to Mediation a claim or
controversy between them that arises out of or relates to the Retailer
Agreement. The Mediation Panel will evaluate each position and recommend a
solution. The recommended solution is not binding.
C. Binding Arbitration
If a claim or controversy arising out of or relating to this Agreement has
not been resolved after Mediation, or if the Retailer and the Franchisor have
agreed in writing to waive Mediation, then the claim or controversy will be
settled by Binding Arbitration in accordance with the procedures in the
Retailer/Saturn Dispute Resolution Guide. 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 arbitrators may be
entered and enforced in any court having jurisdiction.
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7. AUTHORIZED RETAILER
The Retailer has presented the Franchisor with information regarding its
qualifications to be appointed a Saturn Retailer. The Retailer, its Retailer
Operator and Investors have been evaluated and found to satisfy the Franchisor's
standards.
The Retailer has also presented to the Franchisor a Marketing Area Plan
("MAP"), stating the Retailer's proposal to develop and operate facilities in a
specified Marketing Area to promote, sell and service Saturn Products. The
Franchisor has accepted this MAP.
In reliance upon the Retailer's representations, and on its expressed
commitment to the Mission, Philosophy and Values, the Franchisor grants the
Retailer a nonexclusive right to:
a) buy new Motor Vehicles distributed for resale by Saturn and identified
in any Saturn Motor Vehicle Addendum and related Parts and
Accessories; and
b) identify itself as an authorized Saturn Retailer in the manner and at
the location(s) approved by the Franchisor.
The Retailer accepts the rights granted and agrees to fulfill its
obligations under this Agreement.
8. RETAILER OPERATOR
A. Personal Qualifications
The Franchisor is entering into this Agreement in reliance on the
qualifications and capabilities of the person identified in Article 25 as
"Retailer Operator," on that person's commitment to the Mission, Philosophy
and Values, and on the Retailer's assurance that the personal services of the
Retailer Operator will be provided in the overall management of the
franchised business.
B. Management Responsibility
Both the Retailer and the Franchisor agree that the Retailer Operator must
have the sole authority to exercise management control of the Retailer.
The Retailer's MAP describes the ownership of the Retailer and any
arrangements necessary to comply with this Article.
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C. Ownership Requirement
The Retailer Operator will have and maintain an unencumbered ownership
interest in the Retailer of at least 10 percent at all times.
9. RETAILER INVESTOR
The Franchisor is entering into this Agreement in reliance on the
qualifications of the person(s) identified in Article 25 as "Retailer
Investor(s)." Retailer investor candidates with previous retail automotive
operating or management experience must participate in a selection process to
demonstrate qualification under the Franchisor's Retailer Selection Criteria.
Retailer investor candidates without previous automotive or management
experience must complete an investor questionnaire for review and approval by
the Franchisor.
10. TERM
If the Retailer continues to meet all conditions and fulfill its
obligations and responsibilities under this Agreement, this Agreement will not
expire until the first to occur of the following:
a) a superseding form of Retailer Agreement, recommended by FOT
pursuant to Article 24L is executed;
b) 90 days after such superseding form of Retailer Agreement is
presented to the Retailer for execution; or
c) 90 days following the death or incapacity of the Retailer
Operator; whichever comes first.
If this Agreement is to expire because of the death or incapacity of the
Retailer Operator, the Retailer may request a deferral of the effective date of
expiration to assist in winding up its franchised business or to provide for a
transfer of assets or ownership previously approved under Article 20.
This request must be made at least 30 days prior to the effective date of
expiration, and the Franchisor will not unreasonably refuse to grant any
necessary extension.
<PAGE> 9
11. AUTHORIZED LOCATIONS AND MARKETING AREA RIGHTS
A. Retailer's Marketing Area
The Retailer has been furnished with a "Notice of Retailer's Marketing
Area." The Retailer is responsible for effectively selling, servicing and
otherwise representing Saturn Products in its Marketing Area. The Retailer
agrees to conduct Saturn Retail Facility Operations only from approved
locations within its Marketing Area. The Retailer's Marketing Area Plan as
described in Article 15 specifies Retailer's approved location(s) and
facility(ies). Where applicable, the Retailer will establish additional
facilities in the time and manner agreed to by the Retailer and the Franchisor
in the MAP.
1) Facility Design and Appearance
Saturn's Mission to exceed customers' expectations can be
furthered if Retailers' facilities are instantly identifiable and
share a consistent architectural design and environment. Accordingly,
the Retailer agrees to purchase Franchisor's Retail Environmental
Design Package and to provide retail facilities consistent with that
Package. The Retailer also agrees to review all proposed facility
plans with the Franchisor and to obtain the Franchisor's approval
before committing to any construction or purchase.
Additionally, the Retailer pledges to properly maintain its
facilities so that they promote and reinforce the unique Saturn image.
The Retailer agrees to make any facility modifications approved by the
FOT. The Retailer agrees not to make any facility modifications that
affect the appearance or function of its facilities without the
Franchisor's prior written authorization.
2) Exclusive Use
The Retailer agrees to use all Saturn facilities (including the
individual sites approved by Saturn) exclusively for conducting Saturn
Retail Facility Operations. The Retailer agrees to conduct from each
location only those Retail Facility Operations authorized in the MAP
for such location.
<PAGE> 10
B. Marketing Area Rights
The Retailer will devote its full efforts to developing its Marketing
Area. Consequently, the Retailer agrees not to engage, either directly or
indirectly, in any of the activities contemplated by the Agreement from any
locations outside of its Marketing Area.
If the Retailer meets its obligations under the MAP and this Agreement,
then the Franchisor will not authorize any other Retailer to establish a Saturn
retail facility in the Retailer's Marketing Area. If the Retailer fails to
develop its Marketing Area according to its MAP, then the Franchisor may
terminate this Agreement for failure of performance under Article 21 or
restructure the Retailer's Marketing Area and reassign any areas necessary to
achieve maximum potential development of the Marketing Area.
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12. RETAILER'S RESPONSIBILITY TO PROMOTE, SELL AND SERVICE SATURN PRODUCTS AND
ADHERE TO BRAND CRITICAL STANDARDS
A. Responsibility to Promote and Sell
1) The Retailer agrees to effectively promote and sell both the purchase
and the use (including rental and leasing) of Saturn Products to
customers located in its Marketing Area. The Franchisor will review
annually the Retailer's performance of this obligation, in conjunction
with the Marketing Area Plan as described in Article 15.
2) The Retailer is authorized to sell new and unused Motor Vehicles only
to:
a) customers who purchase for personal use or for a primary business
use other than resale,
b) other Saturn Retailers, and
c) Saturn.
3) The Retailer agrees to offer for sale Saturn Service Plan Products to
all customers who purchase or lease new Saturn vehicles, and used
Saturn vehicles if they are eligible for a Saturn Service Plan. The
Retailer may, in addition, offer customers the option of choosing a
non-Saturn service contract (or insurance coverage) provided:
a) the non-Saturn service contract or insurance meets or exceeds
quality standards adopted by FOT, and
b) the Retailer discloses to the customer in writing that the
non-Saturn service contract (or insurance) is not marketed or
warranted by Saturn, and the coverage is not provided by Saturn or
an affiliate and may not be honored by other Saturn Retailers. The
form of the disclosure will be approved by FOT.
4) The Retailer is authorized to sell Saturn Products only to customers
located in the United States. The Retailer agrees not to sell Saturn
Products for resale or use outside the continental United States,
Alaska and Hawaii.
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B. Responsiblity to Service
The manner in which Retailers service Saturn Motor Vehicles is important to
maintaining the Saturn brand image, and to securing and growing a loyal customer
base.
Therefore, the Retailer agrees to provide quality, courteous, convenient,
prompt, efficient, respectful and professional service to owners of Motor
Vehicles, regardless of where the vehicles were purchased.
All service will be performed in accordance with this Agreement and the
Saturn Service Policies and Procedures Manual, as modified from time to time,
which is incorporated into this Agreement by reference.
C. Responsibility to Adhere to Brand Critical Standards
Saturn's brand image has been achieved through a consistent, outstanding
customer experience. Protecting the Saturn brand and achieving Saturn's goal to
be the industry leader in customer enthusiasm requires that all Retailers adhere
to consistent standards in conducting their operations.
FOT may designate a particular standard as a Brand Critical Standard when
it pertains to matters deemed by FOT to be particularly vital to the strength of
the Saturn brand, or protecting the reputation and goodwill of the Franchisor,
Saturn and other Saturn Retailers.
The Retailer agrees to adhere to Brand Critical Standards approved by FOT.
The Retailer Standards Manual, which is incorporated into this Agreement by
reference, defines these Brand Critical Standards and will be reviewed annually,
or more often if deemed necessary by FOT, for potential modifications.
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13. SALE OF PRODUCTS TO RETAILER
A. Sale of Saturn Motor Vehicles to Retailers
The Franchisor has provided the Retailer with a Saturn Motor Vehicle
Addendum specifying the current model types or series of new Motor Vehicles
that the Retailer may purchase. The Franchisor may change the Saturn Motor
Vehicle Addendum at any time by furnishing the Retailer with a superseding
Saturn Motor Vehicle Addendum.
The Franchisor will make every effort to allocate new Motor Vehicles among
Retailers in a fair and equitable manner. The allocation method used will be
reviewed by the FOT and will provide the Franchisor discretion in exercising
business judgment to achieve fairness and equity.
B. Sale of Parts and Accessories to Retailers
Parts and Accessories are any new or remanufactured automotive parts and
accessories that are marketed by Saturn and listed either in the current
"Retailer Parts and Accessories Price Schedules" or in supplements furnished to
the Retailer.
Parts and Accessories will be sold to Retailers by the Franchisor, Saturn
or other suppliers designated by the Franchisor. All orders for Saturn Parts
and Accessories will be submitted and processed according to the written
procedures established by the Franchisor, Saturn or other designated suppliers.
To support the focus of marketing Parts and Accessories primarily within a
Retailer's Marketing Area, Saturn reserves the right to exercise its best
business judgment in allocating Parts and Accessories to Retailers.
C. Prices and Other Terms of Sale
1) For Motor Vehicles
a) Prices, destination charges and other terms of sale applicable to
purchase of new Motor Vehicles will be those established
according to the "Vehicle Terms of Sale Bulletin" furnished to
the Retailer.
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b) Prices, destination charges and other terms of sale may be changed at
any time. Changes will apply only to Motor Vehicles not shipped at the
time changes are effective.
c) If there is an increase in the price charged to the Retailer for a
Motor Vehicle or for any optional equipment or transportation charge
during a model year, such increase will not apply to bona fide sold
orders that were submitted before the Franchisor notifies the Retailer
of the price increase.
d) The Retailer will receive written notice of any price increase before
any Motor Vehicle to which such increase applies is shipped except for
initial prices for a new model year or for any new model or body type.
2) For Saturn Parts and Accessories:
a) Prices and other terms of sale applicable to Parts and Accessories
will be those established according to the "Parts and Accessories
Terms of Sale Bulletin" furnished to the Retailer.
b) These prices and other terms of sale may be changed at any time. Sales
to Retailers will be made at the Retailer price in effect at the order
commitment date.
c) Such changes apply to Parts and Accessories not shipped at the time
the changes are effective.
D. Inventory
1) Motor Vehicle Inventory:
The Retailer recognizes that customers expect to have a reasonable
quantity and variety of current model Motor Vehicles in inventory.
Accordingly, the Retailer agrees to stock and sell, subject to any supply
restrictions, all models and series of current Motor Vehicles identified
in the Motor Vehicle Addendum.
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2) Parts and Accessories:
The Retailer also agrees to stock sufficient Parts and Accessories to:
a) perform warranty repairs and policy adjustments,
b) meet the demands of its customers primarily within its Marketing
Area, and
c) meet the "same day" availability standards approved by the FOT.
E. Warranties on Products
Saturn warrants the new Motor Vehicles and Parts and Accessories
(Products) that it produces. The warranties are explained in documents provided
with these Products and in the Saturn Service Policies and Procedures Manual.
Franchisor (Saturn Distribution Corporation) does not warrant products.
EXCEPT AS OTHERWISE PROVIDED BY LAW, THE WRITTEN SATURN WARRANTIES ARE THE
ONLY WARRANTIES APPLICABLE TO NEW PRODUCTS. WITH RESPECT TO RETAILERS, SUCH
WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES OR LIABILITIES, EXPRESS OR
IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE OR ANY LIABILITY FOR COMMERCIAL LOSSES BASED UPON
NEGLIGENCE OR MANUFACTURER'S STRICT LIABILITY. EXCEPT AS MAY BE PROVIDED UNDER
AN ESTABLISHED SATURN PROGRAM OR PROCEDURE, SATURN NEITHER ASSUMES NOR
AUTHORIZES ANYONE TO ASSUME FOR IT ANY OTHER OBLIGATION OR LIABILITY IN
CONNECTION WITH PRODUCTS, AND SATURN'S MAXIMUM LIABILITY IS TO REPAIR OR
REPLACE THE PRODUCT.
Any Parts and Accessories sold directly to the Retailer by a designated
supplier are not warranted by Saturn or the Franchisor and are warranted only
as specified by the supplier.
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14. SERVICE OF PRODUCTS
A. Service for Which Franchisor Pays
1) New Saturn Vehicle Predelivery Inspections and Adjustments
The delivery condition of a new vehicle is important to
customer enthusiasm. Therefore, the Retailer agrees to perform
all predelivery inspections and adjustments on each new Motor
Vehicle and to verify the completion of these inspections and
adjustments according to the procedures established in the
Saturn Service Policies and Procedures Manual.
2) Warranty Repairs and Special Policy Adjustments
The Retailer agrees to:
a) perform all required warranty repairs on each qualified
Motor Vehicle both at the time of predelivery service and
when requested by owner;
b) perform any special policy adjustments approved by
Franchisor, and
c) give the owner a copy and explanation of the repair document
reflecting all services performed and an explanation of those
services when the vehicle is returned to the owner.
3) Campaign Inspections and Corrections
The Retailer agrees to find and correct suspected
unsatisfactory conditions on Products that the Franchisor has
identified. The Retailer will also ensure that, prior to sale,
all campaign inspections and corrections have been made on all
new and used Saturn Motor Vehicles in its inventory, and will
follow up on Products on which campaigns are outstanding.
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4) Payment for Predelivery Adjustments, Warranty and Campaign Work
For the Retailer's performance of services, predelivery adjustments,
warranty repairs, special policy adjustments, and campaign inspections
and corrections, the Franchisor will provide or pay the Retailer for the
Parts and other materials required and will pay the Retailer a fair
amount for labor. Payment will be made according to policies in the
Saturn Service Policies and Procedures Manual. The Retailer will not
impose any charge for such service on owners or users except where a
deductible or pro rata charge applies.
B. Parts, Accessories and Body Repairs
1) Warranty Repairs and Policy Adjustments
The Retailer agrees to use only genuine Saturn or Franchisor-
approved parts in performing all warranty repairs and policy
adjustments, including special policies.
2) Representations and Disclosures as to Modifications, Parts and
Accessories
Both the Retailer and the Franchisor recognize and appreciate that
people who drive and own Motor Vehicles reasonably expect that vehicles
sold by Retailers as well as parts and accessories sold or used by
Retailers in servicing vehicles are marketed by Saturn or the
Franchisor.
If the Retailer sells or uses parts or accessories that are not
marketed by Saturn or the Franchisor in lieu of Saturn Parts and
Accessories, the Retailer is required to give customers written notice
on the purchase order or bill of sale that such parts or accessories are
not marketed or warranted by Saturn or the Franchisor.
If the Retailer adds non-Saturn aftermarket items to customers'
vehicles, the Retailer agrees not to represent that these vehicle
modifications are warranted or approved by Saturn or the Franchisor.
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Furthermore, the Retailer agrees not to represent that any vehicle
modifications performed by the retail facility or authorized sublet shop
that are not specifically authorized by Saturn are warranted or
approved by Saturn or the Franchisor.
3) Body Repairs
The Retailer must provide body repair service for all Saturn
vehicles. The Retailer can provide this service through its own body
shop, or in cases where the Franchisor agrees, by arrangement with an
independent repair establishment that is acceptable to the Franchisor.
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15. BUSINESS PLANNING
A. Marketing Area Plan
The Retailer and the Franchisor have executed a Marketing Area Plan
(MAP), which is an essential part of this Agreement and which may be updated
annually. The MAP describes how the Retailer will develop its Marketing Area
and fulfill its sales and service commitments.
1) Initial Marketing Area Plan
The Retailer agrees to develop its assigned Marketing Area
according to the MAP. Its commitments for such development include:
a) a detailed description of the number, location, type, size and
opening date of the Saturn facilities to be provided,
b) a detailed implementation schedule for each facility, and
c) a statement of the Retailer's legal and financial structure,
including capitalization, line of credit and equity ownership. The
Retailer agrees to update this statement whenever necessary to
ensure it is accurate.
2) Annual Marketing Area Plan
The Retailer also agrees to fulfill the sales and service commitments
described in the MAP as updated annually. These operational commitments
include but are not limited to:
a) Customer enthusiasm
b) Team member enthusiasm
c) Training
d) Financial performance
e) Market development
f) Retail image
g) Partnership
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B. Annual Plan Review
In order to maintain an effective working relationship, the Retailer
agrees to update its MAP annually, or more often if requested by either party,
and submit it to the Franchisor for joint review. Updated MAPs will include a
performance evaluation and any proposed modifications to the prior year's MAP.
If the Retailer and the Franchisor agree that changes to the proposed MAP are
necessary, then the Retailer will make these changes and then resubmit the MAP.
The Retailer's performance of its obligations is essential to
effectively and consistently representing Saturn Products and to building and
maintaining the reputation of Saturn, the Franchisor and other Retailers.
Therefore, the Retailer agrees to review with the Franchisor its
performance against the prior year's MAP in its updated MAP. The Retailer's
performance will be evaluated based on a number of factors including its
attainment of applicable Performance Benchmarks in areas which may include but
are not limited to the following Critical Success Factors: Customer Enthusiasm,
Team Member Enthusiasm, Training, Financial Performance, Market Development,
Retail Image and Partnership. The Retainer and the Franchisor will use this
evaluation to identify areas in which improvements are necessary so that
Retailer can take prompt action to achieve acceptable performance, and to set
goals for continuous improvement. Performance Benchmarks are approved by FOT
and may be modified from time to time with FOT approval. Periodic facility
evaluations will also be conducted, including an evaluation of the Retailer's
compliance with current requirements and standards for the retail facility
under the Marketing Area Plan.
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16. SATURN SYSTEMS AND PROCESSES
A major element of the Saturn Mission is to lead the industry in
customer enthusiasm. Maintaining this level of enthusiasm requires consistent
application by all Retailers of all designated sales, service, marketing,
facilities and other systems. The Retailer agrees to purchase, implement and
maintain the required systems that are identified in this Agreement, set forth
in the Retail Facilities Guide, the Architects Guide, other Franchise Systems
Manuals, or approved by the Franchise Operations Team. Additionally, the
Retailer agrees to fully utilize Saturn processes in order to ensure that
customers experience the Saturn difference.
A. Systems for Which Retailer Pays
1) Sales and Service Systems
The Retailer agrees to pay Saturn, the Franchisor or approved
sources for the systems necessary to develop and implement Saturn
sales and service in the Retailer's Marketing Area. These systems
include materials and initiatives designed to promote the
consistent display, sales and service of Saturn Products.
Periodically, the FOT will determine that new or updated
information, materials or initiatives are necessary. The Retailer
agrees to accept and utilize such designated new or updated
information, materials or initiatives and pay any applicable
charges. Any such charges will be established by the FOT and will
be based on anticipated costs.
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2) Computer Systems
Saturn's Mission involves the integration of people, technology and
business systems. This integration is possible only if the Retailer has
computer systems that meet customers' needs and the retail facility's
internal business needs; permit direct communication between the Retailer,
the Franchisor and Saturn; and give the Franchisor and Saturn ready access
to the Retailer's accounts and records.
Accordingly, the Retailer agrees to purchase and use all FOT-approved
computer system hardware and software packages, and to diligently update
these hardware and software packages whenever changes are approved by the
Franchise Operations Team.
3) Signs
To promote a consistent image among Retailers, the Retailer agrees to
purchase, maintain and use only signs approved by the Franchisor as
designated in the Retail Facilities Guide and the Critical Image Element
Guide, and to make and pay for any changes in signage approved by the FOT.
4) Tools and Equipment
The Retailer also agrees to provide all the service tools and
equipment necessary to fulfill its service obligations, and to purchase
and maintain any specified special tools and equipment to service Saturn
Products.
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B. Other Systems
1) Accounts and Records
a) Uniform Accounting System
Both the Retailer and the Franchisor will benefit by using
Retailer operating information to develop composite operating
statistics, to analyze the Retailer's business management
practices, and to assess the impact of the Franchisor's policies
and practices.
To assure maximum benefit, the Retailer agrees to maintain
a uniform accounting system and to furnish reports and records
as provided in the GM Dealer's Standard Accounting Manual and the
FOT approved Saturn Retailer Systems business accounting
applications.
b) Examination of Accounts and Records
The Franchisor and Saturn will have access, through computer
systems, to the Retailer's accounts and records.
In addition, any designated representative of the Franchisor
is authorized to examine, audit, reproduce and take copies of
any of the accounts and records the Retailer maintains under this
Agreement. The Retailer agrees to make such accounts and records
readily available in an organized manner at its retail facilities
during business hours. The Franchisor agrees to furnish the
Retailer with a copy of any reproduced records.
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c) Confidentiality of Retailer Data
The Franchisor will not furnish to any
nonaffiliated entity any personal or financial data
submitted to it by the Retailer in a format that
permits identification of the Retailer, unless it is
either authorized by the Retailer, required by law,
pertinent to proceedings under the Dispute Resolution
Process or to court or administrative proceedings.
2) Additional Systems
The Retailer is free to use any additional systems to
help manage the business, so long as they are consistent
with all the required Saturn systems and with Saturn's
Mission, Philosophy and Values. The Retailer agrees to
discontinue use of any systems deemed inconsistent by the
Franchisor.
C. Consistent Processes
An integral part of the Franchisor's plan to develop industry
leading customer enthusiasm is to promote Saturn Retailers as the
unsurpassed leaders of convenient and consistent automotive sales and
service. The Retailer agrees it will conduct its Retail Facility
Operations to support this concept, including utilizing processes
approved by the FOT. These processes include but are not limited to
the Saturn Consultative Sales Process, the Saturn Consultative
Service Process, the Saturn Financial Services Consultative Process
and, if used vehicles are sold at any approved locations specified in
the Retailer's MAP, the Saturn Used Car Process.
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17. MARKETING ASSOCIATION
Both the Retailer and the Franchisor acknowledge the mutual benefits of
comprehensive joint Retailer advertising and merchandising to promote the sale
and service of Saturn Products.
Accordingly, the Regional Unincorporated Marketing Association
(Association) has been established through the joint effort of Retailers and
the Franchisor to produce such joint merchandising and advertising. The
Retailer agrees to participate in the Association. The Association is governed
by the Regional Marketing Council (RMC), which is self-governing according to
its bylaws. The Retailer and the Franchisor agree to support the merchandising
and advertising initiatives of the RMC.
The Association will, from time to time, assess a minimum amount for each
new Motor Vehicle purchased by Retailers to fund merchandising and advertising
initiatives. The FOT will review annually the minimum assessment, and may
recommend changes based on marketing conditions.
18. TRAINING
The training of all Retailer team members is critical to the success of
the Retailer and the Franchisor in conducting business based on the Saturn
Mission, Philosophy, Values and designated processes.
The Retailer therefore agrees that all team members will participate in
both the initial and ongoing training programs identified in the Saturn Retail
Training Catalogue of Programs and Services, and in any others approved by the
FOT, within the time frames specified. The MAP will measure the completion of
training required compared to FOT approved Performance Benchmarks. The Retailer
agrees to pay any specified training charges.
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19. CAPITALIZATION
To ensure that the Retailer is financially capable of fulfilling its
commitments, the Retailer will maintain the levels of capitalization mutually
agreed upon in the Marketing Area Plan. To avoid the erosion of Saturn's
goodwill, which could result if the Retailer is financially unable to fulfill
its commitments, the Retailer agrees to have and maintain a separate line of
credit from a financial institution available for the Retailer to draw upon to
finance the purchase of new vehicles. The amount of the line of credit and the
identity of the financial institution will be included in the Retailer's
Marketing Area Plan, which is reviewed annually.
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20. CHANGES IN OWNERSHIP
Both the Retailer and the Franchisor recognize it is essential to the
success of all associated with Saturn that each Saturn retail facility be owned
and operated by people who are committed to upholding and promoting the Saturn
Mission, Philosophy, Values and way of doing business.
It is equally important that the Retailer Operators are highly qualified
and consistently meet the same high personal standards as the original Retailer
Operators.
Because the Franchisor has entered into this Agreement based on the
personal qualifications of the Retailer Operator and the qualifications of any
Investor(s), the Retailer agrees that it cannot assign its rights under this
Agreement.
A. Succession Rights upon Death or Incapacity
1) Successor Addendum
The Retailer can apply for a Successor Addendum, which
designates a proposed retailer operator and/or investor(s) of a
successor retailer to be established if this Agreement expires
because of the death or incapacity of the Retailer Operator. The
Franchisor will execute the Successor Addendum if the proposed
retailer operator successfully completes the Retailer Selection
Process and if any proposed investors satisfy applicable Retailer
Selection Criteria.
However, the proposed retailer operator and investors will
not be required to meet the usual capital requirements, nor to
demonstrate an ability to implement the Retailer's Marketing Area
Plan until the Successor Addendum is implemented.
At the time of application, the Retailer will pay the
Franchisor a nonrefundable fee to defray costs associated with
review of the proposal.
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2) Rights of Remaining Investors
If this Agreement is due to expire because of the death or incapacity
of the Retailer Operator, and the Retailer and the Franchisor have not
executed a Successor Addendum, the remaining Investors may propose a
successor retailer to continue the operations identified in this Agreement.
The proposal must be made in writing to the Franchisor at least 30
days prior to the expiration of this Agreement, including any deferrals
granted under Article 10. At the time of application, the Retailer will
pay the Franchisor a nonrefundable fee to defray costs associated with
review of the proposal.
The proposal will be accepted if it meets the requirements of Article
20A(3), if the proposed retailer operator successfully completes the
Retailer Selection Process and if all proposed investors satisfy
applicable Retailer Selection Criteria.
If the proposed successor retailer includes a retailer operator
and/or investors who are not remaining Investors, and who will
collectively acquire a majority ownership or voting control in the
proposed retailer, then Franchisor's right of first refusal or option
to purchase under Article 20C shall apply.
3) Successor Retailer Requirements
The Franchisor will accept a proposal to establish a successor
retailer that is submitted by a proposed retailer operator under Article
20A if:
a) the proposed successor retailer and the proposed retailer operator
are ready, willing and able to comply with the requirements of a new
retailer agreement and agree to adhere to and implement the Marketing
Area Plan formally agreed to by the Retailer; and
b) all outstanding monetary obligations of the Retailer to Saturn and
the Franchisor have been paid.
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4) Limitation on Offers
The Retailer will be notified in writing of the Franchisor's
decision on a proposal under Article 20A(3) within 60 days after the
Retailer has submitted all applications and information reasonably
requested by the Franchisor and the proposed retailer operator has
successfully completed the Retailer Selection Process. The Franchisor's
offer of a new Retailer Agreement under Article 20A will automatically
expire if it is not accepted by the proposed successor retailer within
60 days after it receives the offer.
5) New Successor Addendum
The Retailer may cancel an executed Successor Addendum at any time
prior to the death or incapacity of the Retailer Operator. However, the
Franchisor may cancel an executed Successor Addendum only if the
proposed retailer operator or proposed inventor(s) no longer meet the
Retailer Selection Criteria applicable to each. The parties may execute
a superseding Successor Addendum by agreement.
B. Other Changes in Ownership or Management
If the Retailer proposes a change in Retailer Operator, a change in
ownership, or a transfer of its Saturn franchised business or principal assets
to any person, the Franchisor will consider the Retailer's proposal subject to
the following:
1) The Retailer agrees to give the Franchisor prior written notice of any
such proposed change or transfer. The Retailer understands that if any
such change is made prior to the Franchisor's approval of the proposal,
termination of this Agreement will be warranted and the Franchisor will
have no further obligation to consider the Retailer's proposal.
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2) To maintain the high standard and integrity of the Retailer network,
the Retailer agrees to give the Franchisor prior written notice of
any proposed disposition of its principal assets or of any proposed
change of ownership in which a party:
a) first acquires equity ownership or beneficial interest in the
franchised business, or
b) acquires a majority ownership or voting control in the franchised
business.
3) If the proposal involves a change of Retailer Operator, the Retailer
will pay the Franchisor a fee to defray the costs of reviewing the
proposal and completing the Retailer Selection Process. The
Franchisor has no obligation to consider the proposal until it has
received this nonrefundable payment.
4) The Retailer will be notified in writing of the decision on its
proposal within 60 days after the Retailer has furnished all
applications and information reasonably requested by the Franchisor
and after the proposed retailer operator has successfully completed
the Retailer Selection Process. If the Franchisor disagrees with the
proposal, it will specify its reasons.
5) Any material change in the Retailer's proposal, including a change in
price, proposed investors or proposed retailer operator, will be
considered a new proposal, and the time period for the Franchisor to
respond shall recommence. In the event a new proposal is submitted and
the proposal includes a new retailer operator or investor candidate,
an additional fee may be imposed.
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6) Prior written approval is not required where the
transfer of equity ownership or beneficial interest
to an individual in between existing Investors of the
Retailer previously approved by the Franchisor where
there is no change in majority ownership or voting
control. The Retailer agrees to notify the Franchisor
within 30 days of the date of the change and to
execute a new Form C Investor Summary to Retailer's
Marketing Area Plan.
7) The Franchisor is not obligated to execute a new
Retailer Agreement under this Article unless the
Retailer makes acceptable arrangements to the
Franchisor to satisfy any indebtedness to Saturn or
the Franchisor.
C. Right of First Refusal or Option to Purchase
1) Creation and Coverage
If a proposal is submitted by the Retailer under
Article 20B, then the Franchisor has a right of first
refusal or option to purchase as described under this
Article 20C.
If the Franchisor exercises its right or option,
it will do so in the written decision on the
Retailer's proposal. The Franchisor's right or option
may be assigned to any party and the Franchisor will
guarantee the full payment of the purchase price by
the assignee. The Franchisor has the right to
disclose the terms of the buy/sell agreement to any
potential assignee.
If the Retailer has entered into a bona fide
written buy/sell agreement for its franchised
business or principal assets, the Franchisor's right
under this Article 20 is a right of first refusal,
enabling the Franchisor to assume the buyer's rights
and obligations under such buy/sell agreement, and to
cancel this Agreement and all rights granted to the
Retailer.
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In the absence of a bona fide written buy/sell agreement, the
Franchisor has the option to purchase the Retail Facility Assets of the
Retailer and to cancel this Agreement and all rights granted to the
Retailer. Real property will be included only if the Retailer and the
Franchisor agree.
If the Franchisor exercises its right or option, the fee described in
Article 20B(3) will be refunded if the person proposed by the Retailer as a
replacement retailer operator or investor satisfies the Retailer Selection
Criteria.
The Franchisor's rights under Article 20C will be binding and
enforceable against any assignee or successor in interest of the Retailer
or purchaser of the Retailer's assets.
2) Purchase Price and Other Terms of Sale
a) Bona Fide Agreement
If the Retailer has entered into a bona fide written buy/sell
agreement, the purchase price and other terms of the sale will be
those set forth in such agreement and any related documents unless the
Retailer and the Franchisor agree to other terms.
Upon the Franchisor's request, the Retailer will provide all
other documents relating to the proposed transfer, including, but not
limited to, those reflecting any other agreements or understandings
between the parties to the buy/sell agreement. If the Retailer does
not provide such documentation or state in writing that such
documents do not exist, the agreement will be presumed not to be bona
fide.
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b) Absence of Bona Fide Agreement
In the absence of a bona fide written buy/sell agreement, the
purchase price of the Retail Facility Assets, excluding new and
undamaged Parts and Accessories, will be determined by good faith
negotiations between the parties.
If agreement cannot be reached, the purchase price will be
determined through the Dispute Resolution Process. Repurchase
prices for new and undamaged Parts and Accessories will be the
prices last indicated in the parts price listing established by
the Franchisor.
The Franchisor will not be responsible for the repurchase of
non-Saturn Parts or accessories in the Retailer's inventory, or
for Saturn Parts and Accessories that are not resaleable as new,
as specified in the Saturn Service Policies and Procedures Manual.
3) Consummation
The Retailer agrees to transfer the property by Warranty
Deed conveying marketable title free and clear. The Warranty Deed
will be in proper form for recording and the Retailer will
deliver complete possession of the property when the Deed is
delivered. The Retailer will also furnish the Franchisor with
copies of any easements, licenses or other documents affecting
the property, and will assign to the Franchisor any permits or
licenses necessary to conduct the franchised business.
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4) Transfers Involving Family Members
When the proposed change of ownership involves a transfer
by a Retailer Investor to a member or members of his or her
immediate family, the Franchisor's right of first refusal
will not apply. An "immediate family member" shall be the
spouse, child, grandchild, spouse of a child or grandchild,
brother, sister, or parent of the Retailer Investor. All
other requirements of Article 20B shall apply.
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21. TERMINATION
A. Termination of Agreement
1) By Retailer
The Retailer may terminate this Agreement by giving
written notice to the Franchisor. The Termination will be
effective 30 days after the Franchisor receives the notice,
unless otherwise mutually agreed upon in writing.
2) By Agreement
This Agreement may be terminated at any time by written
agreement between the Retailer and the Franchisor.
Termination assistance will be applicable only as specified
in the written termination agreement.
3) Failure to Be Licensed
If the Retailer or the Franchisor fails to secure or
maintain any license that is required to perform their
obligations under this Agreement, or if such license is
suspended or revoked, then either party may immediately
terminate this Agreement by giving the other party written
notice.
4) Misrepresentation, Failure to Conduct Operations, or
Disqualification or Change of Retailer Operator or Investor
If any of the following occurs, the Franchisor will
notify the Retailer and provide 30 days for the Retailer to
respond. Thereafter, the Franchisor may notify the Retailer
that the Agreement will be terminated not less than 30 days
after receipt of notice.
a) If the Retailer submits any false information to Saturn
or to the Franchisor,
b) The Retailer fails to conduct customary Saturn Retail
Facility Operations for seven consecutive business days,
c) The Retailer Operator or Investor(s) fail to continue
to meet the Retailer Selection Criteria applicable to
each,
d) The Retailer Operator is changed or withdraws without
prior written approval of the Franchisor, or
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e) If, without the prior written notice to and approval of the Franchisor,
a person:
i. first acquires an equity ownership or beneficial interest in the
Retailer, or
ii. acquires majority ownership or voting control.
If the Retailer chooses to use the Dispute Resolution Process, the
Agreement will continue pending a final resolution of the dispute.
5) Failure of Performance
If the Retailer fails to perform any other obligations specified in this
Agreement, including those listed as part of the Marketing Area Plan, the
Franchisor will review the failure with the Retailer.
If the Franchisor determines that corrective action is not forthcoming,
then the Franchisor will notify the Retailer in writing and designate a
period of time during which the Retailer is expected to remedy the failure.
If the failure is not remedied within that period, the Franchisor may
invoke the Dispute Resolution Process immediately or at any time, or
terminate this Agreement by giving the Retailer three months' advance
written notice.
6) Convictions of a Felony
a) The Franchisor may terminate this Agreement by giving written notice to
the Retailer if it learns that the Retailer, or a predecessor of the
Retailer owned or controlled by the same person, or the Retailer Operator
is convicted in a court of original jurisdiction of any felony.
Termination will be effective on the date specified in the notice.
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b) If a Retailer Investor is convicted in a court of original jurisdiction
of any felony, the Retailer Investor must divest its ownership
interest in the Retailer within 60 days after the Franchisor notifies
the Retailer or the Retailer becomes aware of the conviction, whichever
occurs first. If the Retailer Investor fails to divest its interest in
the Retailer within that period, the Franchisor may terminate this
Agreement. Termination will be effective on the date specified in the
notice.
7) Reliance on Any Applicable Termination Provision
The terminating party may select the termination provision under which
it elects to terminate without reference in its notice of termination to
any other provision that may also be applicable. Subsequently, the
terminating party may also assert other grounds for termination.
8) Option to Purchase
If this Retailer Agreement is set to expire or to terminate for any
reason, the Franchisor has the option to purchase the Retail Facility
Assets, and to cancel this Agreement and all rights granted to the
Retailer. Real property will be included only if the Retailer and the
Franchisor agree. The purchase price of the Retail Facility Assets and
other terms will be determined under Article 20C(2)b. The Franchisor must
advise the Retailer of its intent to exercise this option within 60 days
after it notifies the Retailer that an event has occurred that would cause
expiration or warrant termination.
B. Transactions after Termination
1) Orders
If, when this Agreement expires or is terminated, the Retailer and
the Franchisor do not enter into a new Retailer Agreement, the Retailer's
designated supply of Products will automatically be canceled except as
provided in this Article.
The termination or expiration of this Agreement will not release the
Retailer or the Franchisor from the obligation to pay any amounts owing
to the other when such amounts become due.
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2) Deliveries
If this Agreement is voluntarily terminated by the Retailer
or if it expires because of the death or incapacity of a Retailer
Operator, the Franchisor will make its best efforts consistent
with distribution procedures to furnish the Retailer with Motor
Vehicles to fill the Retailer's bona fide retail orders on hand
on the effective date of termination or expiration. Franchisor's
obligation under this Article 21B(2) shall not exceed the total
number of Motor Vehicles invoiced to the Retailer for retail sale
during the average of any three-month period during the year
preceding the effective date of termination.
3) Effect of Transactions after Termination
Neither the sale of Products to the Retailer, nor any other
act by Saturn, the Retailer or the Franchisor after the
termination or expiration of this Agreement, will waive the
termination or expiration.
22. TERMINATION ASSISTANCE
If this Agreement expires or is terminated and the Franchisor does not
offer either the Retailer or a replacement retailer with substantially the same
ownership (more than 50%, including total family ownership) a new Retailer
Agreement, then the Franchisor will provide assistance as specified in the
Termination Assistance Manual. The Franchisor's obligations under this Article
22 are subject to the Retailer fulfilling its responsibilities relating to
termination assistance, which are described in the Termination Assistance
Manual.
<PAGE> 39
23. ACKNOWLEDGMENT OF FRANCHISE LAW COMPLIANCE
A. Retailer's Investigation
The Retailer acknowledges that it has conducted an independent
investigation of the business venture contemplated by this Agreement, and
recognizes that it involves business risks and that its success will be
largely dependent upon the ability of the Retailer.
The Franchisor expressly disclaims the making of, and the Retailer
acknowledges that it has not received, a warranty or guarantee, express or
implied, as to the potential volume, profits or success of the business
venture contemplated by this Agreement.
B. Disclosure
The Retailer also acknowledges having received a copy of this Agreement
(together with attachments and related documents) at least five business
days prior to the date on which this Agreement was executed.
The Retailer further acknowledges having received the disclosure
document, which is required by the Trade Regulation Rule of the Federal
Trade Commission entitled the "Franchise Offering Circular," which
contains a copy of this Agreement, at least 10 business days prior to the
date on which this Agreement was executed.
C. Review
The Retailer acknowledges that it has read and understands this
Agreement (and its attachments and related agreements) and that the
Franchisor has afforded the Retailer ample time and opportunity to consult
with advisors of the Retailer's own choosing, about the potential benefits
and risks of its entering into this Agreement.
24. GENERAL PROVISIONS
A. No Agent or Legal Representative Status
This Agreement does not make either party or Saturn the agent or legal
representative of the others for any purpose, nor does it grant either
party or Saturn authority to assume or create any obligation on behalf of
or in the name of the others. No fiduciary obligations are created by this
Agreement.
39
<PAGE> 40
B. Retailer's Responsibility for Its Operations
Except as provided in this Agreement, the Retailer is solely responsible
for all expenditures, liabilities and obligations incurred or assumed by the
Retailer to establish and conduct its operations.
C. Taxes
The Retailer is responsible for all local, state, federal, or other
applicable taxes and tax returns related to its franchised business and agrees
to hold the Franchisor and Saturn harmless from any related claims or demands
made by any taxing authority.
D. Indemnification by Saturn
Saturn has agreed with the Franchisor that Saturn will assume the defense
of the Retailer and indemnify the Retailer against any judgment for monetary
damages or rescission of contract in any lawsuit that names the Retailer as a
defendant when the lawsuit concerns:
1) Breach of the Saturn warranty related to a product or bodily injury or
property damage that is claimed to be caused solely by a defect in the
design, manufacture or assembly of a Product by Saturn. Saturn may
withhold indemnification where a defect should have been detected
during the predelivery inspection of the Product;
2) Failure of a Product to conform to the description set forth in
advertisements or product brochures distributed by Saturn, because of
changes in either standard equipment or material component parts,
unless the Retailer received notice of the changes prior to retail
delivery of the affected Product by Retailer;
3) Any substantial damage to a Product purchased by Retailer from Saturn
that has been repaired by Saturn unless the Retailer accepted the
Product with knowledge of the repair. Saturn has no obligation under
its agreement with Franchisor if the product involved has been
altered. Any indemnification provided by Saturn will be net of any
offset recovered by the Retailer. Procedures for requesting
indemnification, administrative details and limitations are contained
in the Saturn Service Policies and Procedures Manual.
40
<PAGE> 41
E. Trademarks and Service Marks
Saturn, the Franchisor or affiliated companies are the exclusive owners of
the various trademarks, service marks, names and designs (Marks) used in
connection with any Products.
The Retailer is granted the nonexclusive right to display Marks in the
form and manner approved by the Franchisor in the conduct of its franchised
business. Marks may be used as part of the Retailer's name with the written
approval of the Franchisor. The Retailer agrees to change or discontinue the
use of any Marks upon the Franchisor's request.
The Retailer agrees that no company owned by or affiliated with the
Retailer or any of its Investors may use any Mark to identify a business
without the Franchisor's written permission.
Upon termination of this Agreement, the Retailer agrees to immediately
discontinue, at its expense, all use of Marks. Thereafter, the Retailer will
not use, either directly or indirectly, any Marks or any other confusingly
similar marks in a manner that the Franchisor determines is likely to cause
confusion or mistake or to deceive the public.
The Retailer will reimburse the Franchisor for all legal fees and other
expenses incurred in connection with any action that is taken to require the
Retailer to comply with this Article 24E.
F. Notices
Any notice that is required to be given by either party to the other in
connection with this Agreement will be in writing and delivered personally or
by mail. Notices to the Retailer will be directed to either the Retailer or its
representatives at the Retailer's principal place of business. Notices by the
Retailer will be directed to:
Retail Network Planning
Saturn Distribution Corporation
100 Saturn Parkway, P.O. Box 1500
Spring Hill, TN 37174-1500
Mailed notices will be deemed received on the date deposited in U.S. or express
mail.
41
<PAGE> 42
G. No Implied Waivers
The delay or failure of the Retailer or the Franchisor to require
performance by the other party or the waiver by Retailer or Franchisor of a
breach of any provision of this Agreement will not affect the right subsequently
to require such performance.
H. Assignment of Rights or Delegation of Duties
The Franchisor may assign this Agreement and any rights, or delegate any
obligations to any affiliated or successor company. The Franchisor will provide
the Retailer with written notice of such assignment or delegation. Such an
assignment or delegation will not relieve the Franchisor of liability for the
performance of its obligations.
I. Accounts Payable
All monies or accounts due to the Retailer will be considered net of the
Retailer's indebtedness to the Franchisor and Saturn. The Franchisor and Saturn
may deduct any amounts due, or to become due from the Retailer to the Franchisor
or Saturn, or any amounts held by the Franchisor or Saturn, from any sums or
accounts due, or to become due, from Saturn or the Franchisor to the Retailer.
J. Sole Agreement of Parties
Except as provided in this Agreement, the Franchisor has made no promises
to the Retailer, the Retailer Operator or the Retailer Investor(s). There are no
other agreements or understandings, either oral or written, between the parties
affecting this Agreement or relating to any of the subject matter covered by
this Agreement.
Except as otherwise provided in this Agreement, this Agreement cancels and
supersedes all previous agreements between the parties that relate to any
matters covered herein.
No agreement between the Retailer and the Franchisor that relates to
matters covered herein, and no change in, addition to (except the filling in of
blank lines) or erasure of any printed portion of this Agreement, will be
binding unless it is approved in a written agreement executed under Article 25.
42
<PAGE> 43
K. Severability
If any provision of this Agreement is determined to be unenforceable under
a valid and applicable law in effect as of the effective date of this
Agreement, then the Agreement will be modified to the minimum extent necessary
to comply with such law.
L. Review and Modification of Agreement Terms
To demonstrate its commitment to the Saturn Philosophy, Mission, Values
and way of doing business, the Franchisor has entered into this indefinite term
Agreement.
However, neither the Retailer nor the Franchisor want to prevent the
modification of their contractual relationship as necessary to respond to
changes in marketing conditions. Therefore, the Franchise Operations Team will
review this Agreement every five years or at such other time as the FOT decides
is appropriate.
In the event the FOT recommends a superseding form of Retailer Agreement,
the Retailer and the Franchisor agree to terminate this Agreement and execute
the new Agreement. Unless otherwise agreed in writing, the rights and
obligations of the Retailer that may otherwise become applicable upon
termination or expiration of this Agreement will not be applicable.
43
<PAGE> 44
25. EXECUTION ON BEHALF OF RETAILER AND FRANCHISOR
This Agreement and related agreements are valid only if signed:
A. On behalf of the Retailer by a duly authorized representative and, in
the case of this Agreement, by the Chief Executive Officer; Retailer
Operator and Retailer Investor(s); and
B. On behalf of the Franchisor by either its President or a Vice
President, Sales.
SATURN DISTRIBUTION
CORPORATION
Retailer Name: Jay Automotive Group IV, Inc.
d/b/a Saturn of Columbus
By /s/ James G. Stelzenmuller, III 3/17/97 By /s/ Joe Kennedy 2-19-97
---------------------------------------- ----------------------------
Retailer Operator Date President Date
James G. Stelzenmuller, III
By /s/ James G. Stelzenmuller, III 3/17/97 By /s/ ????????? 2-19-97
---------------------------------------- ----------------------------
Retailer Investor Date Vice President, Sales Date
By /s/ James G. Stelzenmuller, III
----------------------------------------
Retailer Investor Date
By:
----------------------------------------
Retailer Investor Date
By:
----------------------------------------
Retailer Investor Date
By:
----------------------------------------
Retailer Investor Date
44
<PAGE> 1
EXHIBIT 10.46
FORD PUBLIC COMPANY AGREEMENT
Supplemental Terms and Conditions
This Agreement is made this _______ day of ___________, 1998 by and between
Ford Motor the Company, a Delaware corporation with its principal place of
business at The American Road, Dearborn, Michigan (hereinafter called "Ford"),
and ________, a ____________ corporation with its principal place of business at
______________(hereinafter called the "the Company").
AGREEMENT
1. Definitions. For purposes hereof, the following definitions shall apply:
a. "Agreement" shall mean the Ford, Lincoln or Mercury Sales and Service
Agreement.
b. "General Manager" shall mean the person designated by the Company
pursuant to paragraph F (ii) of the Agreement with full day to day management
authority and approved by Ford in writing.
c. "Securities Act" shall mean the Securities Act of 1933, as amended.
d. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
e. "SEC" shall mean the Securities and Exchange Commission.
f. "Dealership" shall mean each Ford, Mercury or Lincoln authorized
Dealership owned or controlled directly or indirectly by the Company.
g. "Delegation Certificate" shall be the instrument executed by an
authorized officer of the Company granting full day to day operational and
management control of the Dealership to the General Manager.
h. "CSI" shall mean the Customer Satisfaction Index used by Ford to measure
customer satisfaction in terms of the selling process as well as after sales
service, as such may be modified from time to time by Ford.
i. "Supplemental Terms" shall mean these Supplemental Terms and Conditions.
2. Scope. The Company has indicated that it will seek to acquire or to
apply for Ford, Mercury and Lincoln authorized Dealerships. In order to simplify
future discussions and to avoid any misunderstanding, these Supplemental Terms
are intended to apply to those situations where Ford is willing to approve the
Company (or its designated wholly-owned or controlled direct or indirect
subsidiary) as the purchaser of the capital stock or assets of a Ford, Mercury
or Lincoln authorized Dealership or where it is willing to enter into an
Agreement with the Company with respect to a new Dealership location. In each
<PAGE> 2
2
situation where Ford is willing to enter into an Agreement, the Company will
cause the Dealership to execute an Agreement and will cause such Dealership to
be bound by these Supplemental Terms.
3. Sole Ownership. To maintain financial and operational autonomy and
accountability, each Dealership will be a separate corporation with the Ford,
Mercury and/or Lincoln Dealership operation being its sole business unless
otherwise agreed in writing by Ford; provided, however, that if, at the time of
acquisition of any Dealership, such Dealership is not a separate corporation,
the Company will use reasonable efforts to cause the Dealership to be held as a
separate corporation as soon as practicable. The Company shall furnish to Ford a
copy of the certificate of incorporation and bylaws of each Dealership. As is
required of all Ford authorized Dealerships, each Dealership shall submit
monthly, financial and operating performance data to Ford.
4. Capitalization. Each Dealership will be separately and fully capitalized
to ensure the maintenance of net cash, working capital and operating investment
in accordance with Ford guidelines. Other than through dividends permitted by
the law of the state of incorporation of each Dealership, the effect of which
shall not impair the ability of the Dealership to meet the above mentioned Ford
capitalization guidelines, or through arms-length transactions, all cash and
other assets generated by each Dealership will remain within the Dealership and
none of the assets of any Dealership owned or controlled by the Company shall be
used directly or indirectly to secure the debt or liability of the Company or
any other Dealership or other business owned or controlled by the Company.
5. General Manager. The Company shall delegate in writing the complete day
to day management control of each Dealership to the General Manager of such
Dealership whose appointment shall be subject to Ford's prior written approval
which shall not be unreasonably withheld. The General Manager shall be
designated in paragraph F (ii) of the Agreement and shall have full managerial
authority and accountability for operating the Dealership in accordance with the
terms of the Agreement and the Supplemental Terms. Each person nominated by the
Company as a General Manager must have substantial, successful retail automotive
experience and must meet Ford's high standards for moral and ethical behavior.
Upon the appointment of a General Manager, a copy of the Delegation Certificate
shall be submitted to Ford. All proposed changes to the Delegation Certificate
shall be in writing, submitted to Ford and subject to Ford's prior written
approval. The Company will notify Ford and obtain Ford's prior written
approval of any proposed change to the General Manager, such approval not to be
unreasonably withheld. The Company shall have the right to appoint an interim
General Manager as a temporary replacement for any General Manager who is
terminated for cause or who voluntarily resigns, in each case without the prior
written approval of Ford. In the event that an interim General Manager is
appointed, the Company shall work with Ford to appoint a permanent General
Manager within 90 days after the appointment of the interim General Manager. In
addition to meeting the criteria Ford customarily applies to new dealer
candidates, the General Manager will be assigned to the Dealership for a
sufficient time (being a minimum of 3 years unless otherwise agreed by Ford in
writing) to allow the General Manager to develop and maintain ties to the local
community evidenced by involvement in community civic and charitable
organizations. The General Manager must reside in the Dealer Locality as
required by the Agreement.
<PAGE> 3
3
6. Compensation Plans. The Company will cause each Dealership to provide to
its General Manager and other key employees of the Dealership, as deemed
appropriate, as part of their compensation, incentive programs that will provide
specific financial rewards to the General Manager and such other employees that
are payable to them at least annually and are based upon the achievement and
maintenance by the Dealership of the long term and short term operating
performance objectives described in paragraph 7 hereof.
7. Performance Criteria. Should any Dealership fail to meet reasonable
performance criteria established by Ford relating to such matters as sales
performance, CSI and such other performance criteria that Ford may reasonably
apply to all its authorized dealers, Ford will have the right to implement the
following procedure. Ford shall notify the Company and the General Manager in
writing of such failure and shall grant the Company and the General Manager 90
days to either cure the failure in total or, with respect to sales performance
and CSI only, to present to Ford evidence of progress to cure the failure
indicating in Ford's reasonable judgment that the failure will be cured within
one year of Ford's notice. Should the failure not be cured within the above
period, persons delegated with authority from the Company immediately shall meet
with authorized personnel from Ford to arrange for the orderly and expeditious
replacement of the General Manager. Should agreement not be reached upon the
identity of an appropriate replacement General Manager within 90 days of the end
of the cure period, Ford may terminate the Agreement with immediate effect.
Requirements that each Dealership consistently meet or exceed Ford's regional
average retail car and truck market share and comparable dealer group average
customer satisfaction ratings, as measured by CSI or other criteria established
by Ford, shall be considered reasonable performance requirements. Ford will not
unreasonably withhold its consent to the appointment of an appropriate
replacement General Manager.
8. Additional Appointments. The Company may not acquire more than two Ford
and two Lincoln Mercury Dealerships during the first twelve-month period after
execution of this agreement. Thereafter, the Company will not seek or apply for
additional Ford or Lincoln Mercury Dealerships unless and until the Company's
Dealerships are meeting Ford's performance criteria. Ford will provide each
Dealership a monthly report, summarizing its performance for the preceding month
and for the calendar year-to-date period. Ford's performance criteria include
retail car market share at or above regional average, retail truck market share
at or above regional average, satisfactory customer handling/customer
satisfaction performance as established by Ford, and capitalization meeting or
exceeding established guides.
The Company also shall not seek or apply for an additional Dealership if,
once owning such Dealership, the Company would own or control, directly or
indirectly, that number of authorized Dealerships with total retail sales of new
vehicles in the immediately preceding calendar year of more than 2% of the total
Ford or Lincoln Mercury retail sales volume sold in the United States. The
Company also shall not seek or apply for an additional Dealership if, once
owning such Dealership, the Company would own or control more than 2% of the
total Ford or Lincoln Mercury retail sales volume sold in any state.
<PAGE> 4
4
At its discretion, Ford will consider increasing the 2% limitations to
permit the acquisition of additional Dealerships provided the Company
demonstrates that its existing Dealerships are in compliance with Ford's
performance criteria and capitalization requirements. In no event, however, will
the Company seek or apply for additional Ford or Lincoln Mercury Dealerships if
the Company will own or control more than 5% of Ford or Lincoln Mercury's
national or state retail sales volumes. The national and state limitations are
intended to apply separately to Ford and Lincoln Mercury retail sales volumes.
The Company also shall not seek or apply for a Dealership in any market
area, as defined from time to time by Ford for its Dealership network that would
result in the Company owning or controlling, directly or indirectly, more than
one Ford authorized Dealership in those market areas having 3 or less Ford
authorized Dealerships in them, or in the Company owning or controlling,
directly or indirectly, more than 25% of the Ford authorized Dealerships in
market areas, as defined from time to time by Ford for its Dealership network,
having 4 or more authorized Ford Dealerships in them, it being understood that
this provision is intended to apply separately to Ford and to Lincoln Mercury
Dealerships. Should the above limitations be exceeded and, notwithstanding the
above limitations, if the Company seeks or applies for Ford's approval to
acquire additional Dealerships, Ford's refusal to approve such an acquisition
shall be deemed to be a reasonable action by Ford.
9. Major Changes. The Company shall submit to Ford copies of all effective
registration statements and periodic reports (including those on Form 10-K, 10-Q
and 8-K), proxy and information statements it files with the SEC pursuant to
the Securities Act or the Exchange Act within five (5) business days of filing
with the SEC. The Company shall submit to Ford all filings submitted to the SEC
by third parties that are required to disclose significant holdings or
substantial acquisitions of, or changes in, the ownership of the voting
securities (or other securities convertible into voting securities) of the
Company including, without limitation, Schedules 13D or 13G. Should any SEC
filing disclose that (a) a person, entity or group has a binding agreement to
acquire, or has acquired, voting securities (or other securities convertible
into voting securities) of the Company that would result in such person, entity
or group owning or controlling securities having 50% or more of the total voting
power of all the outstanding capital of the Company, or (b) a person or entity
that owns or controls securities (or other securities convertible into voting
securities) having 50% or more of the total voting power of all the outstanding
capital stock of the Company intends or may intend to acquire additional voting
securities (or other securities convertible into voting securities) of the
Company, or (c) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its subsidiaries
is planned or anticipated that after consummation thereof would require the
filing of a Current Report on Form 8-K with the SEC, or (d) a sale or transfer
of a material amount of assets of the Company, or any of its subsidiaries, is
planned or anticipated, or (e) a change has been made or is planned to be made
of more than 50% of the composition of the Board of Directors or management of
the Company or (f) any other material change in the Company's business or
corporate structure or (g) any action similar to those noted above, the Company
shall provide 30 days prior written notice to Ford describing the matter
disclosed in such filing in detail. If any such action is believed by Ford in
its reasonable judgment to have a material and adverse effect on its reputation
in
<PAGE> 5
5
the market place with respect to an action described in (e), (f), or (g) or with
respect to the other actions should Ford reasonably conclude that such action
will not be compatible with the interests of Ford, the Company agrees that
within 90 days of Ford's notice thereof, the Company shall sell or cause to be
sold one or more of the Dealerships, as specified in the notice, to Ford or its
designee at fair market value, determined in accordance with Attachment A or
resign the Agreements, or provide evidence to Ford that the proposed action
which gave rise to the issuance of Ford's notice will not take place. Should the
Company enter into an agreement to transfer the assets or capital stock of any
Dealership to a third party, Ford's right of first refusal provided in paragraph
24(b) of the Agreement shall apply.
10. Exclusive Dealership Facilities. Each Dealership shall operate as an
exclusive fully-dedicated Ford and/or Mercury and/or Lincoln Dealership, as the
case may be, and the Company will not accept a sales and service agreement with
any other automobile manufacturer or importer or allow the merchandising,
display, sale or service of new vehicles other than Ford, Mercury or Lincoln
vehicles at the facilities and locations approved by Ford and used by any
Dealership for the conduct of its business ("Ford Approved Facilities"). Unless
otherwise agreed in writing, should the Company acquire a Dealership having a
sales and service agreement with a competitive automobile manufacturer or
importer and related sales and service operations at the Ford Approved
Facilities, it shall cause the Dealership to relocate such competitive sales and
service operations from the Ford Approved Facilities within one year of
acquisition; provided, however, that Ford shall grant the Company additional
time to effect such relocation if Ford believes the Company is making reasonable
progress in so doing. No Dealership will merchandise, display or sell new Ford,
Mercury or Lincoln vehicles at any unauthorized location including those owned
or controlled by the Company. In conducting its advertising programs each
Dealership shall portray the products it is authorized to sell and service under
the Agreement in a distinctive manner taking care not to mingle such advertising
with advertising of competitive make new vehicles or used vehicles.
11. Advertising. The Company recognizes the benefit of local cooperative
advertising and has indicated that it will cause each Dealership to become a
fully participating member of the local Ford, Lincoln or Mercury dealer
advertising group (FDAF/LMDA).
12. Auctions. Used vehicle purchases from Ford sponsored auctions will be
governed by a separate "Sponsored Auction Agreement" which will be executed by
each Dealership.
13. Dealership Name. The trade name and corporate name of each Dealership
will be subject to Ford's approval and will not include any reference to any
non-Ford, Mercury or Lincoln make vehicle.
14. Site Control. Any existing agreement covering a Dealership or its
assets relating to site control will be assumed by the Company and shall remain
in full force and effect.
<PAGE> 6
6
15. Dispute Settlement. Any dispute concerning the Agreement or the
Supplemental Terms shall be resolved using the arbitration plan described in
paragraph 18 of the Agreement; provided, however, that notwithstanding anything
in the Agreement to the contrary, the use of such Plan shall be mandatory and
not optional and; provided, further, that no dispute need be brought before the
Ford Dealer Policy Board.
16. Agreement Supplemental Terms. The Company confirms
that the provisions of these Supplemental Terms are material to its relationship
with Ford and that a failure by the Company to fully comply with any material
term hereof, after having been given a reasonable opportunity to cure such
failure, will constitute good and just cause for Ford, in its discretion, to
terminate the Agreement and these Supplemental Terms with immediate effect.
17. Binding Effect. These Supplemental Terms are intended to modify certain
provisions of the Agreement and to be incorporated as a part of the Agreement.
Should there be an inconsistency between the terms of these Supplemental Terms
and any provision of the Agreement, the terms of these Supplemental Terms shall
apply.
18. Parent-Subsidiary. The Company shall cause each Dealership to carry
out the actions and to assume the responsibilities provided herein.
19. Confidentiality. Except as otherwise required by law, the Company shall
maintain the confidentiality of all provisions of the Supplemental Terms, and
will not disclose the Supplemental Terms or any provisions herein to any person,
corporation partnership on other entity of any kind without Ford's written
consent. In the event that disclosure of the Supplemental Terms may be required
in response to a subpoena, discovery request or court order, the Company shall
give Ford as much advance notice as possible to allow intervention and
protection of Ford's interests.
IN WITNESS WHEREOF, the Company and Ford, through their authorized officers,
have set there hands on the day and year above written.
Ford Motor Company The Company
By By:
---------------------- -------------------------
Its Its
--------------------- -------------------------
<PAGE> 7
7
ATTACHMENT A
The Fair Market Value shall be determined as follows:
(a) Within 10 days after Ford has given notice to the Company of its
intention to cause the Company to sell one or more Dealerships (herein called
the "Valuation Date"), Ford and the Company each shall designate a nationally
recognized investment banking firm ("Investment Banker"). If either Ford or the
Company shall fail to designate an Investment Banker within such 10-day period,
the Investment Banker designated by the other party shall determine the Fair
Market Value, and such determination shall be binding on the parties.
(b) Within 30 days after the Valuation Date, each Investment Banker shall
submit to Ford and the Company its written determination of the Fair Market
Value of the Dealership or group of Dealerships. If only one Investment Banker
submits a written determination within such 30-day period, the Fair Market Value
shall be deemed to be the value stated in such determination.
(c) If the two values established by the first two Investment Bankers are
within ten percent (10%) of one another (as measured from the lower valuer, the
average of the two values shall be deemed to be the Fair Market Value. If the
two values established by the Investment Bankers differ by more than ten percent
(10%) (measured from the lower value), the first two Investment Bankers shall,
within 10 days of the Valuation Date, jointly select a third Investment Banker
meeting the criteria specified in paragraph (a) who shall submit to Ford and the
Company a written determination of the Fair Market Value of the Dealership or
group of Dealerships within 30 days of its appointment. If the first two
Investment Bankers fail to appoint the third Investment Banker within the period
specified, such appointment shall be made by the American Arbitration
Association. The average of the two valuations that are closer in value shall be
deemed to be the Fair Market Value of the Dealership or group of Dealerships.
(d) Ford and the Company each shall bear the expense of the Investment
Banker hired by it and shall share equally in the expense of the third
Investment Banker.
<PAGE> 1
EXHIBIT 10.47
[FORD MOTOR COMPANY LOGO] Ford Motor Company
ATLANTA Region
------------------------------
FORD SALES AND SERVICE AGREEMENT
AGREEMENT made as of the day of
----------------------- -----------------------,
19 by and between FRANKLIN FORD MERCURY, INC.
---, ----------------------------------------------------------
(Name of Entity)
CORPORATION
- --------------------------------------------------------------------------------
(State whether an individual, partnership or corporation)
GEORGIA
- --------------------------------------------------------------------------------
(Show name of the State in which incorporated or registered)
doing business as FRANKLIN FORD MERCURY, INC.
---------------------------------------------------------------
(Trade Name)
and with a principal place of business at 4910 SYLVA HIGHWAY (P.O. BOX 1519)
---------------------------------------
(Street Address)
FRANKLIN MACON NC 28734
- --------------------------------------------------------------------------------
(City) (County) (State) (Zip Code)
(hereafter called the "Dealer") and Ford Motor Company, a Delaware corporation
with its principal place of business at Dearborn, Michigan (hereinafter called
the "Company").
- PREAMBLE -
The purpose of this agreement is to (i) establish the Dealer as an
authorized dealer in COMPANY PRODUCTS including VEHICLES (as herein defined),
(ii) set forth the respective responsibilities of the Company in producing and
selling those products to the Dealer and of the Dealer in reselling and
providing service for them and (iii) recognize the interdependence of both
parties in achieving their mutual objectives of satisfactory sales, service and
profits by continuing to develop and retain a broad base of satisfied owners of
COMPANY PRODUCTS.
In entering into this agreement, the Company and the Dealer recognize
that the success of the Company and of each of its authorized dealers depends
largely on the reputation and competitiveness of COMPANY PRODUCTS and dealers'
services, and on how well each fulfills its responsibilities under this
agreement.
It is the opinion of the Company that sales and service of COMPANY
PRODUCTS usually can best be provided to the public through a system of
independent franchised dealers, with each dealer fulfilling its responsibilities
in a given locality from properly located, adequate, well-equipped and
attractive dealerships, which are staffed by competent personnel and provided
with the necessary working capital. The Dealer recognizes that, in such a
franchise system, the Company must plan for the establishment and maintenance of
the numbers, locations and sizes of dealers necessary for satisfactory and
proper sales and service representation in each market area as it exists and as
it develops and changes. At the same time, the Company endeavors to provide each
of its dealers with a reasonable profit opportunity based on the potential for
sales and service of COMPANY PRODUCTS within its locality.
<PAGE> 2
The Company endeavors to make available to its dealers a variety of
quality products, responsive to broad wants and needs of the buying public,
which are attractively styled, of sound engineering design and produced on a
timely basis at competitive prices. The development, production and sale of such
products require that the Company and its manufacturing sources make large
continuing investments in plants, equipment, tools and other facilities,
engineering and styling research and development, quality control procedures,
trained personnel and marketing programs. Heavy commitments must also be made in
advance for raw materials and finished parts. For purposes of making these
investments and commitments, planning production and estimating costs for
setting prices, the Company assumes in advance an estimated volume of sales for
each of its products. Within each year, it develops production schedules from
orders submitted by its franchised dealers and its and their best estimates of
the market demand for COMPANY PRODUCTS.
In turn, each of the Company's franchised dealers makes important
investments or commitments in retail sales and service facilities and equipment,
in working capital, in inventories of vehicles, parts and accessories, and
trained sales and service personnel based on annual planning volumes for their
markets.
If satisfactory volumes for either the Company or a dealer are not
realized, each may suffer because of commitments already made and the cost of
manufacturing and of selling each product may be increased. Each dealer must
give the Company orders for the products needed to serve its market. The Company
seeks to adjust production schedules, to the extent feasible, to fill dealer
orders, and to allocate fairly any product in short supply, but inevitably both
the Company and its dealers suffer loss of profits to the extent they cannot
meet market demands. Thus, the automotive business is a high risk business in
which the Company, its manufacturing sources and its dealers can succeed only
though cooperative and competitive effort in their respective areas of
manufacturing, sales, service and customer satisfaction.
Because it is the dealer who deals directly with, and develops the sale
of COMPANY PRODUCTS to the consuming public, the Company substantially relies on
its dealers to provide successful sales and merchandising programs, competent
service operations and effective owner relations programs. To do this, dealers
must carry out their responsibilities of establishing and maintaining adequate
wholesale and retail finance plans, new and used vehicle sales programs, parts
and service sales programs, personnel training and supportive capitalization and
working capital. To assist its dealers in these responsibilities, the Company
establishes and periodically updates standards of operation and planning guides
based on its experience and current conditions. It also offers sales and service
training courses, advice as to facilities, counseling in the various phases of
new and used vehicle merchandising, parts and service merchandising, leasing,
daily rentals and facilities development. It also conducts national advertising,
promotional and other marketing programs and assists dealers in developing
complementary group and individual programs.
To enable the Company to provide such assistance, it requires dealers
to submit uniform and accurate sales, operating and financial reports from
which it can derive and disseminate analytical and comparative operating data
and advice to dealers. The Company also solicits dealers to bring to its
attention through their National Dealer Council organization any mutual dealer
problems or complaints as they arise.
Because the Company relies heavily on its dealers for success, it
reserves the right to cease doing business with any dealer who is not
contributing sufficiently to such success. Similarly, the Company recognizes
that its dealers look to it to provide competitive products and programs and
that, if it does not do so, any dealer may elect to cease doing business with
the Company.
The Company has elected to enter into this agreement with the Dealer
with confidence in the Dealer's integrity and ability, its intention to carry
out its responsibilities set forth in this agreement, and its desire to provide
courteous, competent and satisfying sales and service representation to
consumers for COMPANY PRODUCTS, and in reliance upon its representations as to
the persons who will participate in the ownership and management of the
dealership.
The dealer has elected to enter into this agreement with the Company
with confidence in its integrity and ability, its intention to provide
competitive products and assist the Dealer to market them successfully, and its
desire to maintain high quality dealers.
ii
<PAGE> 3
Both parties recognize the rights of the Dealer and the Company under
this agreement are defined and limited by the terms of this agreement and
applicable law. The Company and the Dealer further acknowledge that their
methods of operation and business practices have an important effect on the
reputation of the Dealer, the Company, COMPANY PRODUCTS and other franchised
dealers of the Company. The Company and the Dealer also acknowledge that certain
practices are detrimental to their interests, such as deceptive, misleading or
confusing advertising, pricing, merchandising or business practices, or
misrepresenting the characteristics, quality, condition or origin of any item of
sale.
It is the expectation of each of the parties that by entering into this
agreement, and by the full and faithful observance and performance of its
duties, a mutually satisfactory relationship will be established and maintained.
- TERMS OF THE AGREEMENT -
IN CONSIDERATION of the mutual agreements and acknowledgements
hereinafter made, the parties hereto agree as follows:
A. The Company hereby appoints the Dealer as an authorized dealer at
retail in VEHICLES and at retail and wholesale in other COMPANY PRODUCTS and
grants the Dealer the privilege of buying COMPANY PRODUCTS from the Company for
sale in its DEALERSHIP OPERATIONS (as herein defined). The Company also grants
to the Dealer the privilege of displaying, at approved location(s), the
Company's trademarks and trade names applicable to COMPANY PRODUCTS. The Dealer
hereby accepts such appointment.
B. Subject to and in accordance with the terms and conditions of this
agreement, the Company shall sell COMPANY PRODUCTS to the Dealer and the Dealer
shall purchase COMPANY PRODUCTS from the Company.
C. The Ford Motor Company Ford Sales and Service Agreement Standard
Provisions (Form "FD925-A"), a duplicate original of which is attached to the
Dealer's duplicate original of this agreement, have been read and agreed to by
the Company and by the Dealer, and such Standard Provisions and any duly
executed and delivered supplement or amendment thereto, are hereby made a part
of this agreement with the same force and effect as if set forth herein in full.
D. This agreement shall bind the Company when it bears the facsimile
signature of the General Manager, and the manual countersignature of the General
Sales Manager, Market Representation Manager, or a Regional Sales Manager, of
the Ford Division of the Company and a duplicate original thereof is delivered
personally or by mail to the Dealer or the Dealer's principal place of business.
E. The Dealer acknowledges that (i) this agreement may be executed only
in the manner provided in paragraph D hereof, (ii) no one except the General
Manager, The General Sales Manager, or Market Representation Manager of the
Ford Division of the Company, or the Secretary or an Assistant Secretary of the
Company, is authorized to make or execute any other agreement relating to the
subject matter hereof on behalf of the Company, or in any manner to enlarge,
vary or modify the terms of this agreement, and then only by an instrument in
writing, and (iii) no one except the General Manager of the Ford Division of the
Company, or the Secretary or an Assistant Secretary of the Company, is
authorized to terminate this agreement on behalf of the Company, and then only
by an instrument in writing.
F. In view of the personal nature of this agreement and its objectives
and purposes, the Company expressly reserves to itself the right to execute a
Ford Sales and Service Agreement with individuals or other entities specifically
selected and approved by the Company. Accordingly, this agreement and the rights
and privileges conferred on the Dealer hereunder are not transferable,
assignable or salable by the Dealer and no property right or interest, direct or
indirect, is sold, conveyed or transferred to the Dealer under this agreement.
This Agreement has been entered into by the Company with the Dealer in reliance
(i) upon the representation and agreement that the following person(s), and
only the following person(s), shall be the principal owners of the Dealer:
iii
<PAGE> 4
<TABLE>
<CAPTION>
HOME PERCENTAGE
NAME ADDRESS OF INTEREST
<S> <C> <C>
SUNBELT AUTOMOTIVE GROUP, INC. 5901 Peachtree Dunwoody Road, Suite 250B 100
- -----------------------------------------------------------------------------------------------------
Atlanta, GA 30328
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
(ii) upon the representation and agreement that the following person(s), and
only the following person(s), shall have full managerial authority for the
operating management of the Dealer in the performance of this agreement:
<TABLE>
<CAPTION>
HOME TITLE
NAME ADDRESS
<S> <C> <C>
ALAN K. ARNOLD 4415 PEMBERTON COVE, ALPHARETTA, GA 30201 PRESIDENT
- -----------------------------------------------------------------------------------------------------
MITCHELL C. SIMPSON 743 HOYT STREET, CORNELIA, GA 30531 GENERAL MANAGER
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
and (iii) upon representation and agreement that the following person(s), and
only the following person(s), shall be the remaining owners of the Dealer:
<TABLE>
<CAPTION>
HOME PERCENTAGE
NAME ADDRESS OF INTEREST
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
The Dealer shall give the Company prior notice of any proposed change in the
said ownership or managerial authority, and immediate notice of the death or
incapacity of any such person. No such change or notice, and no assignment of
this agreement or of any right or interest herein, shall be effective against
the Company unless and until embodied in an appropriate amendment to or
assignment of this agreement, as the case may be, duly executed and delivered by
the Company and by the Dealer. The Company shall not unreasonably withhold its
consent to any such change.
G. (Strike out either subparagraph (1) or (2) whichever is not
applicable.)
(1) This agreement shall continue in force and effect from the date of
its execution until terminated by either party under the provisions of
paragraph 17 hereof.
H. Both the Company and the Dealer assume and agree to carry out and
perform their respective responsibilities under this agreement.
The parties hereto have duly executed this agreement in duplicate as of the day
and year first above written.
FORD MOTOR COMPANY
[FORD LOGO] FRANKLIN FORD MERCURY, INC.
----------------------------------------
(Dealer's Trade Name)
General Manager, Ford Division By
--------------------------------------
Countersigned by (Title)
---------------------------------
- ------------------------------------
- ---------- ---------- ----------
iv
<PAGE> 5
[FORD LOGO] FORD MOTOR COMPANY
Atlanta Region
------------------------
ADDENDUM TO
<TABLE>
<CAPTION>
<S> <C>
FORD SALES AND SERVICE AGREEMENT Dated
---------------------
FOREIGN SALES AGREEMENT (Fiesta) Dated (the
--------------------- "Agreements:)
FOREIGN SALES AGREEMENT (Courier) Dated
---------------------
FORD TRUCK SALES AND SERVICE AGREEMENT DATED
---------------------
FORD HEAVY DUTY TRUCK SALES AND SERVICE AGREEMENT DATED
---------------------
by and between FRANKLIN FORD MERCURY, INC.
----------------------------------------------------------------------------------------------
(Dealership Trade Name)
CORPORATION, in the State of GEORGIA
- ---------------------------------------------- ----------------------------------------------
(State whether Partnership or Corporation) (Show name of State in which incorporated or
registered)
doing business as FRANKLIN FORD MERCURY, INC.
-------------------------------------------------------------------------------------------
(Dealership Trade Name)
</TABLE>
(the "Dealer") and Ford Motor Company, a Delaware corporation (the "Company").
THE PARTIES AGREE that the following addendum to Paragraph (F) containing clause
(i)(a) is annexed and made part of the Agreements:
F(i)(a) upon the representation and agreement that the following person(s)
and/or entity(ies), and only the following person(s) and/or entity(ies) shall
have ownership interests in the principal owner(s) referred to in clause (i) of
this Paragraph F:
<TABLE>
<CAPTION>
<S> <C> <C>
NAME OF PRINCIPAL OWNERS(S) WHICH NAME AND ADDRESS OF PERSON(S) OR ENTITY(IES) PERCENTAGE
ARE PARTNERSHIPS OR CORPORATIONS HAVING OWNERSHIP INTEREST(S) IN PRINCIPAL OWNERS(S) OF OWNERSHIP
(STATE OF INCORPORATIONS) (INDICATE STOCKHOLDER OR PARTNER) INTEREST
- --------------------------------- ---------------------------------------------------------------- ------------
SUNBELT AUTOMOTIVE GROUP, INC. WALTER M. BOOMERSHINE, JR., (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
GEORGIA 4636 POWERS ROAD, MARIETTA, GA 30067 5.9
- --------------------------------- ---------------------------------------------------------------- ------------
ALAN K. ARNOLD, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
4415 PEMBERTON COVE, ALPHARETTA, GA 30201 2.8
- --------------------------------- ---------------------------------------------------------------- ------------
WALTER M. BOOMERSHINE, III & WWB III FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
337 REDLAND ROAD, ATLANTA, GA 30309 7.1
- --------------------------------- ---------------------------------------------------------------- ------------
RENEE B. JOCHUM & RBJ FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
6 STARLIGHT COURT, POTOMAC, MD 20854 6.5
- --------------------------------- ---------------------------------------------------------------- ------------
JACQUELYN B. THOMPSON & JBT FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
219 BATES ROAD, CARTERSVILLE, GA 30120 6.5
- --------------------------------- ---------------------------------------------------------------- ------------
PATRICE B. MITCHELL & PBM FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
2074 SHILLINGWOOD DRIVE, KENNESAW, GA 30144 6.5
- --------------------------------- ---------------------------------------------------------------- ------------
LINDSEY B. ROBERTSON & LBR FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
2355 BROWNS BRIDGE ROAD, GAINESVILLE, GA 30504 6.8
- --------------------------------- ---------------------------------------------------------------- ------------
REMAINING STOCKHOLDERS, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
57.9
- --------------------------------- ---------------------------------------------------------------- ------------
</TABLE>
The provisions of this paragraph F requiring notice to and consent by the
Company to any changes in ownership shall apply to any change in the person(s)
or entity(ies) having an ownership interest in the principal owner(s) set forth
in this clause F(i)(a).
IN WITNESS WHEREOF, the Company and the Dealer have duly executed this addendum
in duplicate as of the__________day of_______________, 19___________.
FORD MOTOR COMPANY FRANKLIN FORD MERCURY, INC.
-----------------------------------------
(Dealer's Trade Name)
By By
------------------------------ ---------------------------------------
Assistant Secretary (Signature and Title)
- ----- ----- -----
<PAGE> 1
EXHIBIT 10.48
[FORD LOGO]
FORD MOTOR COMPANY
ATLANTA REGION
-------------------------------
SUPERSEDING
FORD SALES AND SERVICE AGREEMENT
AGREEMENT made as of the day of , 19 ,
--------------------- ------------------ --
by and between WADE FORD BUFORD, INC.
-----------------------------------------------------------------
(Name of Entity)
CORPORATION, GEORGIA
- --------------------------------------------------------------------------------
(State whether an individual, (Show name of the State in which
partnership or corporation) incorporated or registered)
doing business as WADE FORD OF BUFORD and with a
------------------------------------------------
(Trade Name)
principal place of business at 4525 NELSON BROGDON BOULEVARD (P.O. BOX 1059)
------------------------------------------------
(Street Address)
BUFORD GWINNETT GA 30518 (30515)
- --------------------------------------------------------------------------------
(City) (County) (State) (Zip Code)
(hereafter called the "Dealer") and Ford Motor Company, a Delaware corporation
with its principal place of business at Dearborn, Michigan (hereinafter called
the "Company").
- PREAMBLE -
The purpose of this agreement is to (i) establish the dealer as an
authorized dealer in COMPANY PRODUCTS including VEHICLES (as herein defined),
(ii) set forth the respective responsibilities of the Company in producing and
selling those products to the Dealer and of the Dealer in reselling and
providing service for them and (iii) recognize the interdependence of both
parties in achieving their mutual objectives of satisfactory sales, service and
profits by continuing to develop and retain a broad base of satisfied owners of
COMPANY PRODUCTS.
In entering into this agreement, the Company and the Dealer recognize that
the success of the Company and of each of its authorized dealers depends
largely on the reputation and competitiveness of COMPANY PRODUCTS and dealers'
services, and on how well each fulfills its responsibilities under this
agreement.
It is the opinion of the Company that sales and service of COMPANY
PRODUCTS usually can best be provided to the public though a system of
independent franchised dealers, with each dealer fulfilling its responsibilities
in a given locality from properly located, adequate, well-equipped and
attractive dealerships, which are staffed by competent personnel and provided
with the necessary working capital. The Dealer recognizes that, in such a
franchise system, the Company must plan for the establishment and maintenance of
the numbers, locations and sizes of dealers necessary for satisfactory and
proper sales and service representation in each market area as it exists and as
it develops and changes. At the same time, the Company endeavors to provide each
of its dealers with a reasonable profit opportunity based on the potential for
sales and service of COMPANY PRODUCTS within its locality.
<PAGE> 2
The Company endeavors to make available to its dealers a variety of
quality products, responsive to broad wants and needs of the buying public,
which are attractively styled, of sound engineering design and produced on a
timely basis at competitive prices. The development, production and sale of
such products require that the Company and its manufacturing sources make large
continuing investments in plants, equipment, tools and other facilities,
engineering and styling research and development, quality control procedures,
trained personnel and marketing programs. Heavy commitments must also be made
in advance for raw materials and finished parts. For purposes of making these
investments and commitments, planning production and estimating costs for
setting prices, the Company assumes in advance an estimated volume of sales for
each of its products. Within each year, it develops production schedules from
orders submitted by its franchised dealers and its and their best estimates of
the market demand for COMPANY PRODUCTS.
In turn, each of the Company's franchised dealers makes important
investments or commitments in retail sales and service facilities and
equipment, in working capital, in inventories of vehicles, parts and
accessories, and trained sales and service personnel based on annual planning
volumes for their markets.
If satisfactory volumes for either the Company or a dealer are not
realized, each may suffer because of commitments already made and the cost of
manufacturing and of selling each product may be increased. Each dealer must
give the Company orders for the products needed to serve its market. The
Company seeks to adjust production schedules, to the extent feasible, to fill
dealer orders, and to allocate fairly any product in short supply, but
inevitably both the Company and its dealers suffer loss of profits to the
extent they cannot meet market demands. Thus, the automotive business is a high
risk business in which the Company, its manufacturing sources and its dealers
can succeed only though cooperative and competitive effort in their respective
areas of manufacturing, sales, service and customer satisfaction.
Because it is the dealer who deals directly with, and develops the sale
of COMPANY PRODUCTS to the consuming public, the Company substantially relies
on its dealers to provide successful sales and merchandising programs, competent
service operations and effective owner relations programs. To do this, dealers
must carry out their responsibilities of establishing and maintaining adequate
wholesale and retail finance plans, new and used vehicle sales programs, parts
and service sales programs, personnel training and supportive capitalization
and working capital. To assist its dealers in these responsibilities, the
Company establishes and periodically updates standards of operation and
planning guides based on its experience and current conditions. It also offers
sales and service training courses, advice as to facilities, counseling in the
various phases of new and used vehicle merchandising, parts and service
merchandising, leasing, daily rentals and facilities development. It also
conducts national advertising, promotional and other marketing programs and
assists dealers in developing complementary group and individual programs.
To enable the Company to provide such assistance, it requires dealers to
submit uniform and accurate sales, operating and financial reports from which
it can derive and disseminate analytical and comparative operating data and
advice to dealers. The Company also solicits dealers to bring it to its
attention through their National Dealer Council organization any mutual dealer
problems or complaints as they arise.
Because the Company relies heavily on its dealers for success, it
reserves the right to cease doing business with any dealer who is not
contributing sufficiently to such success. Similarly, the Company recognizes
that its dealers look to it to provide competitive products and programs and
that, if it does not do so, any dealer may elect to cease doing business with
the Company.
The Company has elected to enter into this agreement with the Dealer with
confidence in the Dealer's integrity and ability, its intention to carry out
its responsibilities set forth in this agreement, and its desire to provide
courteous, competent and satisfying sales and service representation to
consumers for COMPANY PRODUCTS, and in reliance upon its representations as to
the persons who will participate in the ownership and management of the
dealership.
The dealer has elected to enter into this agreement with the Company with
confidence in its integrity and ability, its intention to provide competitive
products and assist the Dealer to market them successfully, and its desire to
maintain high quality dealers.
ii
<PAGE> 3
Both parties recognize the rights of the Dealer and the Company under
this agreement are defined and limited by the terms of this agreement and
applicable law. The Company and the Dealer further acknowledge that their
methods of operation and business practices have an important effect on the
reputation of the Dealer, the Company, COMPANY PRODUCTS and other franchised
dealers of the Company. The Company and the Dealer also acknowledge that
certain practices are detrimental to their interests, such as deceptive,
misleading or confusing advertising, pricing, merchandising or business
practices, or misrepresenting the characteristics, quality, condition or
origin of any item of sale.
It is the expectation of each of the parties that by entering into this
agreement, and by the full and faithful observance and performance of its
duties, a mutually satisfactory relationship will be established and maintained.
- TERMS OF THE AGREEMENT -
IN CONSIDERATION of the mutual agreements and acknowledgements
hereinafter made, the parties hereto agree as follows:
A. The Company hereby appoints the Dealer as an authorized dealer at
retail in VEHICLES and at retail and wholesale in other COMPANY PRODUCTS and
grants the Dealer the privilege of buying COMPANY PRODUCTS from the Company for
sale in its DEALERSHIP OPERATIONS (as herein defined). The Company also grants
to the Dealer the privilege of displaying, at approved location(s), the
Company's trademarks and trade names applicable to COMPANY PRODUCTS. The Dealer
hereby accepts such appointment.
B. Subject to and in accordance with the terms and conditions of this
agreement, the Company shall sell COMPANY PRODUCTS to the Dealer and the Dealer
shall purchase COMPANY PRODUCTS from the Company.
C. The Form Motor Company Ford Sales and Service Agreement Standard
Provisions (Form "FD925-A"), a duplicate original of which is attached to the
Dealer's duplicate original of this agreement, have been read and agreed to by
the Company and by the Dealer, and such Standard Provisions and any duly
executed and delivered supplement or amendment thereto, are hereby made a part
of this agreement with the same force and effect as if set forth herein in full.
D. This agreement shall bind the Company when it bears the facsimile
signature of the General Manager, and the manual countersignature of the
General Sales Manager, Market Representation Manager, or a Regional Sales
Manager, of the Ford Division of the Company and a duplicate original thereof
is delivered personally or by mail to the Dealer or the Dealer's principal
place of business.
E. The Dealer acknowledges that (i) this agreement may be executed
only in the manner provided in paragraph D hereof, (ii) no one except the
General Manager, The General Sales Manager, or Market Representation Manager of
the Ford Division of the Company, or the Secretary or an Assistant Secretary of
the Company, is authorized to make or execute any other agreement relating to
the subject matter hereof on behalf of the Company, or in any manner to
enlarge, vary or modify the terms of this agreement, and then only by an
instrument in writing, and (iii) no one except the General Manager of the Ford
Division of the Company, or the Secretary or an Assistant Secretary of the
Company, is authorized to terminate this agreement on behalf of the Company,
and then only by an instrument in writing.
F. In view of the personal nature of this agreement and its objectives
and purposes, the Company expressly reserves to itself the right to execute a
Ford Sales and Service Agreement with individuals or other entities
specifically selected and approved by the Company. Accordingly, this agreement
and the rights and privileges conferred on the Dealer hereunder are not
transferable, assignable or salable by the Dealer and no property right or
interest, direct or indirect, is sold, conveyed or transferred to the Dealer
under this agreement. This Agreement has been entered into by the Company with
the Dealer in reliance (i) upon the representation and agreement that the
following person(s), and only the following person(s), shall be the principal
owners of the Dealer:
iii
<PAGE> 4
<TABLE>
<CAPTION>
HOME PERCENTAGE
NAME ADDRESS OF INTEREST
<S> <C> <C>
SUNBELT AUTOMOTIVE GROUP, INC. 5901 Peachtree Dunwoody Road, Suite 250B 100
- -----------------------------------------------------------------------------------------------------
Atlanta, GA 30328
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
(ii) upon the representation and agreement that the following person(s), and
only the following person(s), shall have full managerial authority for the
operating management of the Dealer in the performance of this agreement:
<TABLE>
<CAPTION>
HOME TITLE
NAME ADDRESS
<S> <C> <C>
ALAN K. ARNOLD 4415 PEMBERTON COVE, ALPHARETTA, GA 30201 PRESIDENT
- -----------------------------------------------------------------------------------------------------
GARY R. BILLINGS 7735 ST. MARLO CC PARKWAY, DULUTH, GA 30136 GENERAL MANAGER
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
and (iii) upon representation and agreement that the following person(s), and
only the following person(s), shall be the remaining owners of the Dealer:
<TABLE>
<CAPTION>
HOME PERCENTAGE
NAME ADDRESS OF INTEREST
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
The Dealer shall give the Company prior notice of any proposed change in the
said ownership or managerial authority, and immediate notice of the death or
incapacity of any such person. No such change or notice, and no assignment of
this agreement or of any right or interest herein, shall be effective against
the Company unless and until embodied in an appropriate amendment to or
assignment of this agreement, as the case may be, duly executed and delivered by
the Company and by the Dealer. The Company shall not unreasonably withhold its
consent to any such change.
G. (Strike out either subparagraph (1) or (2) whichever is not
applicable.)
(1) This agreement shall continue in force and effect from the date of
its execution until terminated by either party under the provisions of
paragraph 17 hereof.
H. Both the Company and the Dealer assume and agree to carry out and
perform their respective responsibilities under this agreement.
The parties hereto have duly executed this agreement in duplicate as of the day
and year first above written.
FORD MOTOR COMPANY
[FORD LOGO] WADE FORD OF BUFORD
----------------------------------------
(Dealer's Trade Name)
General Manager, Ford Division By
--------------------------------------
Countersigned by (Title)
---------------------------------
- ------------------------------------
- ---------- ---------- ----------
iv
<PAGE> 5
[FORD LOGO] FORD MOTOR COMPANY
Atlanta Region
------------------------
ADDENDUM TO
<TABLE>
<CAPTION>
<S> <C>
FORD SALES AND SERVICE AGREEMENT Dated
---------------------
FOREIGN SALES AGREEMENT (Fiesta) Dated (the
--------------------- "Agreements:)
FOREIGN SALES AGREEMENT (Courier) Dated
---------------------
FORD TRUCK SALES AND SERVICE AGREEMENT DATED
---------------------
FORD HEAVY DUTY TRUCK SALES AND SERVICE AGREEMENT DATED
---------------------
by and between WADE FORD BUFORD, INC.
---------------------------------------------------------------------------------------------------------
(Dealership Trade Name)
CORPORATION, in the State of GEORGIA
- ---------------------------------------------- ---------------------------------------------------------
(State whether Partnership or Corporation) (Show name of State in which incorporated or
registered)
doing business as WADE FORD BUFORD, INC.
------------------------------------------------------------------------------------------------------
(Dealership Trade Name)
</TABLE>
(the "Dealer") and Ford Motor Company, a Delaware corporation (the "Company").
THE PARTIES AGREE that the following addendum to Paragraph (F) containing clause
(i)(a) is annexed and made part of the Agreements:
F(i)(a) upon the representation and agreement that the following person(s)
and/or entity(ies), and only the following person(s) and/or entity(ies) shall
have ownership interests in the principal owner(s) referred to in clause (i) of
this Paragraph F:
<TABLE>
<CAPTION>
<S> <C> <C>
NAME OF PRINCIPAL OWNERS(S) WHICH NAME AND ADDRESS OF PERSON(S) OR ENTITY(IES) PERCENTAGE
ARE PARTNERSHIPS OR CORPORATIONS HAVING OWNERSHIP INTEREST(S) IN PRINCIPAL OWNERS(S) OF OWNERSHIP
(STATE OF INCORPORATIONS) (INDICATE STOCKHOLDER OR PARTNER) INTEREST
- --------------------------------- ---------------------------------------------------------------- ------------
SUNBELT AUTOMOTIVE GROUP, INC. WALTER M. BOOMERSHINE, JR., (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
GEORGIA 4636 POWERS ROAD, MARIETTA, GA 30067 5.9
- --------------------------------- ---------------------------------------------------------------- ------------
ALAN K. ARNOLD, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
4415 PEMBERTON COVE, ALPHARETTA, GA 30201 2.8
- --------------------------------- ---------------------------------------------------------------- ------------
WALTER M. BOOMERSHINE, III & WNB III FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
337 REDLAND ROAD, ATLANTA, GA 30309 7.1
- --------------------------------- ---------------------------------------------------------------- ------------
RENEE B. JOCHUM & RBJ FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
6 STARLIGHT COURT, POTOMAC, MD 20854 6.5
- --------------------------------- ---------------------------------------------------------------- ------------
JACQUELYN B. THOMPSON & JBT FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
219 BATES ROAD, CARTERSVILLE, GA 30120 6.5
- --------------------------------- ---------------------------------------------------------------- ------------
PATRICE B. MITCHELL & PBM FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
2074 SHILLINGWOOD DRIVE, KENNESAW, GA 30144 6.5
- --------------------------------- ---------------------------------------------------------------- ------------
LINDSEY B. ROBERTSON & LBR FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
2355 BROWNS BRIDGE ROAD, GAINESVILLE, GA 30504 6.8
- --------------------------------- ---------------------------------------------------------------- ------------
REMAINING STOCKHOLDERS, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
57.9
- --------------------------------- ---------------------------------------------------------------- ------------
</TABLE>
The provisions of this paragraph F requiring notice to and consent by the
Company to any changes in ownership shall apply to any change in the person(s)
or entity(ies) having an ownership interest in the principal owner(s) set forth
in this clause F(i)(a).
IN WITNESS WHEREOF, the Company and the Dealer have duly executed this addendum
in duplicate as of the__________day of_______________, 19___________.
FORD MOTOR COMPANY WADE FORD BUFORD, INC.
-----------------------------------------
(Dealer's Trade Name)
By By
------------------------------ ---------------------------------------
Assistant Secretary (Signature and Title)
- ----- ----- -----
<PAGE> 1
EXHIBIT 10.49
(LOGO) FORD MOTOR COMPANY
Atlanta Region
--------------------------------
SUPERSEDING
FORD SALES AND SERVICE AGREEMENT
AGREEMENT made as of the day of , 19 ,
--------------------- ---------------- --------
by and between WADE FORD, INC.
-----------------------------------------------------------------
(Name of Entity)
CORPORATION, GEORGIA
- -------------------------------------------------------------------------------
(State whether an individual, partnership (Show name of the State in which
or corporation) incorporated or registered)
doing business as WADE FORD, INC.
-------------------------------------------------------------
(Trade Name)
and with a principal place of business at 3860 SOUTH COBB DRIVE
--------------------------------------
(Street Address)
SMYRNA COBB GA 30080
- -------------------------------------------------------------------------------
(City) (County) (State) (Zip Code)
(hereafter called the "Dealer") and Ford Motor Company, a Delaware corporation
with its principal place of business at Dearborn, Michigan (hereinafter called
the "Company").
- PREAMBLE -
The purpose of this agreement is to (i) establish the Dealer as an
authorized dealer in COMPANY PRODUCTS including VEHICLES (as herein defined),
(ii) set forth the respective responsibilities of the Company in producing and
selling those products to the Dealer and of the Dealer in reselling and
providing service for them and (iii) recognize the interdependence of both
parties in achieving their mutual objectives of satisfactory sales, service and
profits by continuing to develop and retain a broad base of satisfied owners of
COMPANY PRODUCTS.
In entering into this agreement, the Company and the Dealer recognize
that the success of the Company and of each of its authorized dealers depends
largely on the reputation and competitiveness of COMPANY PRODUCTS and dealers'
services, and on how well each fulfills its responsibilities under this
agreement.
It is the opinion of the Company that sales and service of COMPANY
PRODUCTS usually can best be provided to the public though a system of
independent franchised dealers, with each dealer fulfilling its responsibilities
in a given locality from properly located, adequate, well-equipped and
attractive dealerships, which are staffed by competent personnel and provided
with the necessary working capital. The Dealer recognizes that, in such a
franchise system, the Company must plan for the establishment and maintenance of
the numbers, locations and sizes of dealers necessary for satisfactory and
proper sales and service representation in each market area as it exists and as
it develops and changes. At the same time, the Company endeavors to provide each
of its dealers with a reasonable profit opportunity based on the potential for
sales and service of COMPANY PRODUCTS within its locality.
<PAGE> 2
The Company endeavors to make available to its dealers a variety of
quality products, responsive to broad wants and needs of the buying public,
which are attractively styled, of sound engineering design and produced on a
timely basis at competitive prices. The development, production and sale of such
products require that the Company and its manufacturing sources make large
continuing investments in plants, equipment, tools and other facilities,
engineering and styling research and development, quality control procedures,
trained personnel and marketing programs. Heavy commitments must also be made in
advance for raw materials and finished parts. For purposes of making these
investments and commitments, planning production and estimating costs for
setting prices, the Company assumes in advance an estimated volume of sales for
each of its products. Within each year, it develops production schedules from
orders submitted by its franchised dealers and its and their best estimates of
the market demand for COMPANY PRODUCTS.
In turn, each of the Company's franchised dealers makes important
investments or commitments in retail sales and service facilities and equipment,
in working capital, in inventories of vehicles, parts and accessories, and
trained sales and service personnel based on annual planning volumes for their
markets.
If satisfactory volumes for either the Company or a dealer are not
realized, each may suffer because of commitments already made and the cost of
manufacturing and of selling each product may be increased. Each dealer must
give the Company orders for the products needed to serve its market. The Company
seeks to adjust production schedules, to the extent feasible, to fill dealer
orders, and to allocate fairly any product in short supply, but inevitably both
the Company and its dealers suffer loss of profits to the extent they cannot
meet market demands. Thus, the automotive business is a high risk business in
which the Company, its manufacturing sources and its dealers can succeed only
though cooperative and competitive effort in their respective areas of
manufacturing, sales, service and customer satisfaction.
Because it is the dealer who deals directly with, and develops the sale
of COMPANY PRODUCTS to the consuming public, the Company substantially relies on
its dealers to provide successful sales and merchandising programs, competent
service operations and effective owner relations programs. To do this, dealers
must carry out their responsibilities of establishing and maintaining adequate
wholesale and retail finance plans, new and used vehicle sales programs, parts
and service sales programs, personnel training and supportive capitalization and
working capital. To assist its dealers in these responsibilities, the Company
establishes and periodically updates standards of operation and planning guides
based on its experience and current conditions. It also offers sales and service
training courses, advice as to facilities, counseling in the various phases of
new and used vehicle merchandising, parts and service merchandising, leasing,
daily rentals and facilities development. It also conducts national advertising,
promotional and other marketing programs and assists dealers in developing
complementary group and individual programs.
To enable the Company to provide such assistance, it requires dealers
to submit uniform and accurate sales, operating and financial reports from which
it can derive and disseminate analytical and comparative operating data and
advice to dealers. The Company also solicits dealers to bring to its attention
through their National Dealer Council organization any mutual dealer problems or
complaints as they arise.
Because the Company relies heavily on its dealers for success, it
reserves the right to cease doing business with any dealer who is not
contributing sufficiently to such success. Similarly, the Company recognizes
that its dealers look to it to provide competitive products and programs and
that, if it does not do so, any dealer may elect to cease doing business with
the Company.
The Company has elected to enter into this agreement with the Dealer
with confidence in the Dealer's integrity and ability, its intention to carry
out its responsibilities set forth in this agreement, and its desire to provide
courteous, competent and satisfying sales and service representation to
consumers for COMPANY PRODUCTS, and in reliance upon its representations as to
the persons who will participate in the ownership and management of the
dealership.
The dealer has elected to enter into this agreement with the Company
with confidence in its integrity and ability, its intention to provide
competitive products and assist the Dealer to market them successfully, and its
desire to maintain high quality dealers.
ii
<PAGE> 3
Both parties recognize the rights of the Dealer and the Company under
this agreement are defined and limited by the terms of this agreement and
applicable law. The Company and the Dealer further acknowledge that their
methods of operation and business practices have an important effect on the
reputation of the Dealer, the Company, COMPANY PRODUCTS and other franchised
dealers of the Company. The Company and the Dealer also acknowledge that certain
practices are detrimental to their interests, such as deceptive, misleading or
confusing advertising, pricing, merchandising or business practices, or
misrepresenting the characteristics, quality, condition or origin of any item of
sale.
It is the expectation of each of the parties that by entering into this
agreement, and by the full and faithful observance and performance of its
duties, a mutually satisfactory relationship will be established and maintained.
- TERMS OF THE AGREEMENT -
IN CONSIDERATION of the mutual agreements and acknowledgements
hereinafter made, the parties hereto agree as follows:
A. The Company hereby appoints the Dealer as an authorized dealer at
retail in VEHICLES and at retail and wholesale in other COMPANY PRODUCTS and
grants the Dealer the privilege of buying COMPANY PRODUCTS from the Company for
sale in its DEALERSHIP OPERATIONS (as herein defined). The Company also grants
to the Dealer the privilege of displaying, at approved location(s), the
Company's trademarks and trade names applicable to COMPANY PRODUCTS. The Dealer
hereby accepts such appointment.
B. Subject to and in accordance with the terms and conditions of this
agreement, the Company shall sell COMPANY PRODUCTS to the Dealer and the Dealer
shall purchase COMPANY PRODUCTS from the Company.
C. The Ford Motor Company Ford Sales and Service Agreement Standard
Provisions (Form "FD925-A"), a duplicate original of which is attached to the
Dealer's duplicate original of this agreement, have been read and agreed to by
the Company and by the Dealer, and such Standard Provisions and any duly
executed and delivered supplement or amendment thereto, are hereby made a part
of this agreement with the same force and effect as if set forth herein in full.
D. This agreement shall bind the Company when it bears the facsimile
signature of the General Manager, and the manual countersignature of the
General, Sales Manager, Market Representation Manager, or a Regional Sales
Manager, of the Ford Division of the Company and a duplicate original thereof is
delivered personally or by mail to the Dealer or the Dealer's principal place of
business.
E. The Dealer acknowledges that (i) this agreement may be executed only
in the manner provided in paragraph D hereof, (ii) no one except the General
Manager, The General Sales Manager, or Market Representation Manager of the Ford
Division of the Company, or the Secretary or an Assistant Secretary of the
Company, is authorized to make or execute any other agreement relating to the
subject matter hereof on behalf of the Company, or in any manner to enlarge,
vary or modify the terms of this agreement, and then only by an instrument in
writing, and (iii) no one except the General Manager of the Ford Division of the
Company, or the Secretary or an Assistant Secretary of the Company, is
authorized to terminate this agreement on behalf of the Company, and then only
by an instrument in writing.
F. In view of the personal nature of this agreement and its objectives
and purposes, the Company expressly reserves to itself the right to execute a
Ford Sales and Service Agreement with individuals or other entities specifically
selected and approved by the Company. Accordingly, this agreement and the rights
and privileges conferred on the Dealer hereunder are not transferable,
assignable or salable by the Dealer and no property right or interest, direct or
indirect, is sold, conveyed or transferred to the Dealer under this agreement.
This Agreement has been entered into by the Company with the Dealer in reliance
(i) upon the representation and agreement that the following person(s), and only
the following person(s), shall be the principal owners of the Dealer:
iii
<PAGE> 4
<TABLE>
<CAPTION>
HOME PERCENTAGE
NAME ADDRESS OF INTEREST
<S> <C> <C>
SUNBELT AUTOMOTIVE GROUP, INC. 5901 Peachtree Dunwoody Road, Suite 250B 100
- -----------------------------------------------------------------------------------------------------
Atlanta, GA 30328
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
(ii) upon the representation and agreement that the following person(s), and
only the following person(s), shall have full managerial authority for the
operating management of the Dealer in the performance of this agreement:
<TABLE>
<CAPTION>
HOME TITLE
NAME ADDRESS
<S> <C> <C>
ALAN K. ARNOLD 4415 PEMBERTON COVE, ALPHARETTA, GA 30201 PRESIDENT
- -----------------------------------------------------------------------------------------------------
K. LAMAR LESTER 3626 PLAYERS COURT, DOUGLASVILLE, GA 30135 GENERAL MANAGER
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
and (iii) upon representation and agreement that the following person(s), and
only the following person(s), shall be the remaining owners of the Dealer:
<TABLE>
<CAPTION>
HOME PERCENTAGE
NAME ADDRESS OF INTEREST
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
The Dealer shall give the Company prior notice of any proposed change in the
said ownership or managerial authority, and immediate notice of the death or
incapacity of any such person. No such change or notice, and no assignment of
this agreement or of any right or interest herein, shall be effective against
the Company unless and until embodied in an appropriate amendment to or
assignment of this agreement, as the case may be, duly executed and delivered by
the Company and by the Dealer. The Company shall not unreasonably withhold its
consent to any such change.
G. (Strike out either subparagraph (1) or (2) whichever is not
applicable.)
(1) This agreement shall continue in force and effect from the date of
its execution until terminated by either party under the provisions of
paragraph 17 hereof.
H. Both the Company and the Dealer assume and agree to carry out and
perform their respective responsibilities under this agreement.
The parties hereto have duly executed this agreement in duplicate as of the day
and year first above written.
FORD MOTOR COMPANY
[FORD LOGO] WADE FORD, INC.
----------------------------------------
(Dealer's Trade Name)
General Manager, Ford Division By
--------------------------------------
Countersigned by (Title)
---------------------------------
- ------------------------------------
- ---------- ---------- ----------
iv
<PAGE> 5
[FORD LOGO] FORD MOTOR COMPANY
Atlanta Region
------------------------
ADDENDUM TO
<TABLE>
<CAPTION>
<S> <C>
FORD SALES AND SERVICE AGREEMENT Dated
---------------------
FOREIGN SALES AGREEMENT (Fiesta) Dated (the
--------------------- "Agreements:)
FOREIGN SALES AGREEMENT (Courier) Dated
---------------------
FORD TRUCK SALES AND SERVICE AGREEMENT DATED
---------------------
FORD HEAVY DUTY TRUCK SALES AND SERVICE AGREEMENT DATED
---------------------
by and between WADE FORD INC.
---------------------------------------------------------------------------------------------------------
(Dealership Trade Name)
CORPORATION, in the State of GEORGIA
- ---------------------------------------------- ---------------------------------------------------------
(State whether Partnership or Corporation) (Show name of State in which incorporated or
registered)
doing business as WADE FORD INC.
------------------------------------------------------------------------------------------------------
(Dealership Trade Name)
</TABLE>
(the "Dealer") and Ford Motor Company, a Delaware corporation (the "Company").
THE PARTIES AGREE that the following addendum to Paragraph (F) containing clause
(i)(a) is annexed and made part of the Agreements:
F(i)(a) upon the representation and agreement that the following person(s)
and/or entity(ies), and only the following person(s) and/or entity(ies) shall
have ownership interests in the principal owner(s) referred to in clause (i) of
this Paragraph F:
<TABLE>
<CAPTION>
<S> <C> <C>
NAME OF PRINCIPAL OWNERS(S) WHICH NAME AND ADDRESS OF PERSON(S) OR ENTITY(IES) PERCENTAGE
ARE PARTNERSHIPS OR CORPORATIONS HAVING OWNERSHIP INTEREST(S) IN PRINCIPAL OWNERS(S) OF OWNERSHIP
(STATE OF INCORPORATIONS) (INDICATE STOCKHOLDER OR PARTNER) INTEREST
- --------------------------------- ---------------------------------------------------------------- ------------
SUNBELT AUTOMOTIVE GROUP, INC. WALTER M. BOOMERSHINE, JR., (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
GEORGIA 4636 POWERS ROAD, MARIETTA, GA 30067 5.9
- --------------------------------- ---------------------------------------------------------------- ------------
ALAN K. ARNOLD, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
4415 PEMBERTON COVE, ALPHARETTA, GA 30201 2.8
- --------------------------------- ---------------------------------------------------------------- ------------
WALTER M. BOOMERSHINE, III & WMB III FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
337 REDLAND ROAD, ATLANTA, GA 30309 7.1
- --------------------------------- ---------------------------------------------------------------- ------------
RENEE B. JOCHUM & RBJ FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
6 STARLIGHT COURT, POTOMAC, MD 20854 6.5
- --------------------------------- ---------------------------------------------------------------- ------------
JACQUELYN B. THOMPSON & JBT FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
219 BATES ROAD, CARTERSVILLE, GA 30120 6.5
- --------------------------------- ---------------------------------------------------------------- ------------
PATRICE B. MITCHELL & PBM FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
2074 SHILLINGWOOD DRIVE, KENNESAW, GA 30144 6.5
- --------------------------------- ---------------------------------------------------------------- ------------
LINDSEY B. ROBERTSON & LBR FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
2355 BROWNS BRIDGE ROAD, GAINESVILLE, GA 30504 6.8
- --------------------------------- ---------------------------------------------------------------- ------------
REMAINING STOCKHOLDERS, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
57.9
- --------------------------------- ---------------------------------------------------------------- ------------
</TABLE>
The provisions of this paragraph F requiring notice to and consent by the
Company to any changes in ownership shall apply to any change in the person(s)
or entity(ies) having an ownership interest in the principal owner(s) set forth
in this clause F(i)(a).
IN WITNESS WHEREOF, the Company and the Dealer have duly executed this addendum
in duplicate as of the__________day of_______________, 19___________.
FORD MOTOR COMPANY WADE FORD INC.
-----------------------------------------
(Dealer's Trade Name)
By By
------------------------------ ---------------------------------------
Assistant Secretary (Signature and Title)
- ----- ----- -----
<PAGE> 1
EXHIBIT 10.50
(FORD LOGO) FORD MOTOR COMPANY
ATLANTA REGION
------------------------------
SUPERSEDING
FORD SALES AND SERVICE AGREEMENT
<TABLE>
<S> <C>
AGREEMENT made as of the _______________________ day of ___________, 19 ______,
by and between Boomershine Ford, Inc. Boomershine Ford, Inc.
------------------------------------------
(Name of Entity)
Corporation, Georgia
- ---------------------------------------------------------------------------------------------------------------------------------
(State whether an individual, partnership or corporation) (Show name of the State in which incorporated or registered)
doing business as Boomershine Ford, Inc.
--------------------------------------------------------------
(Trade Name)
and with a principal place of business at 3230 Satellite Boulevard (P.O. Box 957057)
----------------------------------------------------------------------------------------
(Street Address)
Duluth Gwinnett GA 30096
- ---------------------------------------------------------------------------------------------------------------------------------
(City) (County) (State) (Zip Code)
</TABLE>
(hereafter called the "Dealer") and Ford Motor Company, a Delaware corporation
with its principal place of business at Dearborn, Michigan (hereinafter called
the "Company").
- PREAMBLE -
The purpose of this agreement is to (i) establish the Dealer as an
authorized dealer in COMPANY PRODUCTS including VEHICLES (as herein defined),
(ii) set forth the respective responsibilities of the Company in producing and
selling those products to the Dealer and of the Dealer in reselling and
providing service for them and (iii) recognize the interdependence of both
parties in achieving their mutual objectives of satisfactory sales, service and
profits by continuing to develop and retain a broad base of satisfied owners of
COMPANY PRODUCTS.
In entering into this agreement, the Company and the Dealer recognize that
the success of the Company and of each of its authorized dealers depends largely
on the reputation and competitiveness of COMPANY PRODUCTS and dealers' services,
and on how well each fulfills its responsibilities under this agreement.
It is the opinion of the Company that sales and service of COMPANY PRODUCTS
usually can best be provided to the public though a system of independent
franchised dealers, with each dealer fulfilling its responsibilities in a given
locality from properly located, adequate, well-equipped and attractive
dealerships, which are staffed by competent personnel and provided with the
necessary working capital. The Dealer recognizes that, in such a franchise
system, the Company must plan for the establishment and maintenance of the
numbers, locations and sizes of dealers necessary for satisfactory and proper
sales and service representation in each market area as it exists and as it
develops and changes. At the same time, the Company endeavors to provide each of
its dealers with a reasonable profit opportunity based on the potential for
sales and service of COMPANY PRODUCTS within its locality.
<PAGE> 2
The Company endeavors to make available to its dealers a variety of quality
products, responsive to broad wants and needs of the buying public, which are
attractively styled, of sound engineering design and produced on a timely basis
at competitive prices. The development, production and sale of such products
require that the Company and its manufacturing sources make large continuing
investments in plants, equipment, tools and other facilities, engineering and
styling research and development, quality control procedures, trained personnel
and marketing programs. Heavy commitments must also be made in advance for raw
materials and finished parts. For purposes of making these investments and
commitments, planning production and estimating costs for setting prices, the
Company assumes in advance an estimated volume of sales for each of its
products. Within each year, it develops production schedules from orders
submitted by its franchised dealers and its and their best estimates of the
market demand for COMPANY PRODUCTS.
In turn, each of the Company's franchised dealers makes important
investments or commitments in retail sales and service facilities and equipment,
in working capital, in inventories of vehicles, parts and accessories, and
trained sales and service personnel based on annual planning volumes for their
markets.
If satisfactory volumes for either the Company or a dealer are not
realized, each may suffer because of commitments already made and the cost of
manufacturing and of selling each product may be increased. Each dealer must
give the Company orders for the products needed to serve its market. The Company
seeks to adjust production schedules, to the extent feasible, to fill dealer
orders, and to allocate fairly any product in short supply, but inevitably both
the Company and its dealers suffer loss of profits to the extent they cannot
meet market demands. Thus, the automotive business is a high risk business in
which the Company, its manufacturing sources and its dealers can succeed only
though cooperative and competitive effort in their respective areas of
manufacturing, sales, service and customer satisfaction.
Because it is the dealer who deals directly with, and develops the sale of
COMPANY PRODUCTS to the consuming public, the Company substantially relies on
its dealers to provide successful sales and merchandising programs, competent
service operations and effective owner relations programs. To do this, dealers
must carry out their responsibilities of establishing and maintaining adequate
wholesale and retail finance plans, new and used vehicle sales programs, parts
and service sales programs, personnel training and supportive capitalization and
working capital. To assist its dealers in these responsibilities, the Company
establishes and periodically updates standards of operation and planning guides
based on its experience and current conditions. It also offers sales and service
training courses, advice as to facilities, counseling in the various phases of
new and used vehicle merchandising, parts and service merchandising, leasing,
daily rentals and facilities development. It also conducts national advertising,
promotional and other marketing programs and assists dealers in developing
complementary group and individual programs.
To enable the Company to provide such assistance, it requires dealers to
submit uniform and accurate sales, operating and financial reports from which it
can derive and disseminate analytical and comparative operating data and advice
to dealers. The Company also solicits dealers to bring to its attention through
their National Dealer Council organization any mutual dealer problems or
complaints as they arise.
Because the Company relies heavily on its dealers for success, it reserves
the right to cease doing business with any dealer who is not contributing
sufficiently to such success. Similarly, the Company recognizes that its dealers
look to it to provide competitive products and programs and that, if it does not
do so, any dealer may elect to cease doing business with the Company.
The Company has elected to enter into this agreement with the Dealer with
confidence in the Dealer's integrity and ability, its intention to carry out its
responsibilities set forth in this agreement, and its desire to provide
courteous, competent and satisfying sales and service representation to
consumers for COMPANY PRODUCTS, and in reliance upon its representations as to
the persons who will participate in the ownership and management of the
dealership.
The dealer has elected to enter into this agreement with the Company with
confidence in its integrity and ability, its intention to provide competitive
products and assist the Dealer to market them successfully, and its desire to
maintain high quality dealers.
ii
<PAGE> 3
Both parties recognize the rights of the Dealer and the Company under this
agreement are defined and limited by the terms of this agreement and applicable
law. The Company and the Dealer further acknowledge that their methods of
operation and business practices have an important effect on the reputation of
the Dealer, the Company, COMPANY PRODUCTS and other franchised dealers of the
Company. The Company and the Dealer also acknowledge that certain practices are
detrimental to their interests, such as deceptive, misleading or confusing
advertising, pricing, merchandising or business practices, or misrepresenting
the characteristics, quality, condition or origin of any item of sale.
It is the expectation of each of the parties that by entering into this
agreement, and by the full and faithful observance and performance of its
duties, a mutually satisfactory relationship will be established and maintained.
- TERMS OF THE AGREEMENT -
IN CONSIDERATION of the mutual agreements and acknowledgements hereinafter
made, the parties hereto agree as follows:
A. The Company hereby appoints the Dealer as an authorized dealer at retail
in VEHICLES and at retail and wholesale in other COMPANY PRODUCTS and grants the
Dealer the privilege of buying COMPANY PRODUCTS from the Company for sale in its
DEALERSHIP OPERATIONS (as herein defined). The Company also grants to the Dealer
the privilege of displaying, at approved location(s), the Company's trademarks
and trade names applicable to COMPANY PRODUCTS. The Dealer hereby accepts such
appointment.
B. Subject to and in accordance with the terms and conditions of this
agreement, the Company shall sell COMPANY PRODUCTS to the Dealer and the Dealer
shall purchase COMPANY PRODUCTS from the Company.
C. The Ford Motor Company Ford Sales and Service Agreement Standard
Provisions (Form "FD92S-A"), a duplicate original of which is attached to the
Dealer's duplicate original of this agreement, have been read and agreed to by
the Company and by the Dealer, and such Standard Provisions and any duly
executed and delivered supplement or amendment thereto, are hereby made a part
of this agreement with the same force and effect as if set forth herein in full.
D. This agreement shall bind the Company when it bears the facsimile
signature of the General Manager, and the manual countersignature of the General
Sales Manager, Market Representation Manager, or a Regional Sales Manager, of
the Ford Division of the Company and a duplicate original thereof is delivered
personally or by mail to the Dealer or the Dealer's principal place of business.
E. The Dealer acknowledges that (i) this agreement may be executed only in
the manner provided in paragraph D hereof, (ii) no one except the General
Manager, The General Sales Manager, or Market Representation Manager of the Ford
Division of the Company, or the Secretary or an Assistant Secretary of the
Company, is authorized to make or execute any other agreement relating to the
subject matter hereof on behalf of the Company, or in any manner to enlarge,
vary or modify the terms of this agreement, and then only by an instrument in
writing, and (iii) no one except the General Manager of the Ford Division of the
Company, or the Secretary or an Assistant Secretary of the Company, is
authorized to terminate this agreement on behalf of the Company, and then only
by an instrument in writing.
F. In view of the personal nature of this agreement and its objectives and
purposes, the Company expressly reserves to itself the right to execute a Ford
Sales and Service Agreement with individuals or other entities specifically
selected and approved by the Company. Accordingly, this agreement and the rights
and privileges conferred on the Dealer hereunder are not transferable,
assignable or salable by the Dealer and no property right or interest, direct or
indirect, is sold, conveyed or transferred to the Dealer under this agreement.
This Agreement has been entered into by the Company with the Dealer in reliance
(i) upon the representation and agreement that the following person(s), and only
the following person(s), shall be the principal owners of the Dealer:
iii
<PAGE> 4
<TABLE>
<CAPTION>
HOME PERCENTAGE
NAME ADDRESS OF INTEREST
<S> <C> <C>
SUNBELT AUTOMOTIVE GROUP, INC. 100
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
(ii) upon the representation and agreement that the following person(s), and
only the following person(s), shall have full managerial authority for the
operating management of the Dealer in the performance of this agreement:
<TABLE>
<CAPTION>
HOME TITLE
NAME ADDRESS
<S> <C> <C>
ALAN K. ARNOLD 4415 PEMBERTON COVE, ALPHARETTA, GA 30201 PRESIDENT
- -----------------------------------------------------------------------------------------------------
TIMOTHY A. BARNETT 4623 KENTUCKY SADDLER CT, KENNESAW, GA 30152 GENERAL MANAGER
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
and (iii) upon representation and agreement that the following person(s), and
only the following person(s), shall be the remaining owners of the Dealer:
<TABLE>
<CAPTION>
HOME PERCENTAGE
NAME ADDRESS OF INTEREST
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
The Dealer shall give the Company prior notice of any proposed change in the
said ownership or managerial authority, and immediate notice of the death or
incapacity of any such person. No such change or notice, and no assignment of
this agreement or of any right or interest herein, shall be effective against
the Company unless and until embodied in an appropriate amendment to or
assignment of this agreement, as the case may be, duly executed and delivered by
the Company and by the Dealer. The Company shall not unreasonably withhold its
consent to any such change.
G. (Strike out either subparagraph (1) or (2) whichever is not
applicable.)
(2) This agreement shall continue in force and effect for a term
commencing on the date of its execution and expiring DECEMBER 31, 2000 unless
sooner terminated under the provisions of paragraph 17 hereof.
H. Both the Company and the Dealer assume and agree to carry out and
perform their respective responsibilities under this agreement.
The parties hereto have duly executed this agreement in duplicate as of the day
and year first above written.
FORD MOTOR COMPANY
[FORD LOGO] BOOMERSHINE FORD
----------------------------------------
(Dealer's Trade Name)
General Manager, Ford Division By
--------------------------------------
Countersigned by (Title)
---------------------------------
- ------------------------------------
- ---------- ---------- ----------
iv
<PAGE> 5
[FORD LOGO] FORD MOTOR COMPANY
Atlanta Region
------------------------
ADDENDUM TO
<TABLE>
<CAPTION>
<S> <C>
FORD SALES AND SERVICE AGREEMENT Dated
---------------------
FOREIGN SALES AGREEMENT (Fiesta) Dated (the
--------------------- "Agreements:)
FOREIGN SALES AGREEMENT (Courier) Dated
---------------------
FORD TRUCK SALES AND SERVICE AGREEMENT DATED
---------------------
FORD HEAVY DUTY TRUCK SALES AND SERVICE AGREEMENT DATED
---------------------
by and between BOOMERSHINE FORD, INC.
---------------------------------------------------------------------------------------------------------
(Dealership Trade Name)
CORPORATION, in the State of GEORGIA
- ---------------------------------------------- ---------------------------------------------------------
(State whether Partnership or Corporation) (Show name of State in which incorporated or
registered)
doing business as BOOMERSHINE FORD, INC.
------------------------------------------------------------------------------------------------------
(Dealership Trade Name)
</TABLE>
(the "Dealer") and Ford Motor Company, a Delaware corporation (the "Company").
THE PARTIES AGREE that the following addendum to Paragraph (F) containing clause
(i)(a) is annexed and made part of the Agreements:
F(i)(a) upon the representation and agreement that the following person(s)
and/or entity(ies), and only the following person(s) and/or entity(ies) shall
have ownership interests in the principal owner(s) referred to in clause (i) of
this Paragraph F:
<TABLE>
<CAPTION>
<S> <C> <C>
NAME OF PRINCIPAL OWNERS(S) WHICH NAME AND ADDRESS OF PERSON(S) OR ENTITY(IES) PERCENTAGE
ARE PARTNERSHIPS OR CORPORATIONS HAVING OWNERSHIP INTEREST(S) IN PRINCIPAL OWNERS(S) OF OWNERSHIP
(STATE OF INCORPORATIONS) (INDICATE STOCKHOLDER OR PARTNER) INTEREST
- --------------------------------- ---------------------------------------------------------------- ------------
SUNBELT AUTOMOTIVE GROUP, INC. WALTER M. BOOMERSHINE, JR., (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
GEORGIA 4636 POWERS ROAD, MARIETTA, GA 30067 5.9
- --------------------------------- ---------------------------------------------------------------- ------------
ALAN K. ARNOLD, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
4415 PEMBERTON COVE, ALPHARETTA, GA 30201 2.8
- --------------------------------- ---------------------------------------------------------------- ------------
WALTER M. BOOMERSHINE, III & WMB III FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
337 REDLAND ROAD, ATLANTA, GA 30309 7.1
- --------------------------------- ---------------------------------------------------------------- ------------
RENEE B. JOCHUM & RBJ FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
6 STARLIGHT COURT, POTOMAC, MD 20854 6.5
- --------------------------------- ---------------------------------------------------------------- ------------
JACQUELYN B. THOMPSON & JBT FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
219 BATES ROAD, CARTERSVILLE, GA 30120 6.5
- --------------------------------- ---------------------------------------------------------------- ------------
PATRICE B. MITCHELL & PBM FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
2074 SHILLINGWOOD DRIVE, KENNESAW, GA 30144 6.5
- --------------------------------- ---------------------------------------------------------------- ------------
LINDSEY B. ROBERTSON & LBR FAMILY TRUST, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
2355 BROWNS BRIDGE ROAD, GAINESVILLE, GA 30504 6.8
- --------------------------------- ---------------------------------------------------------------- ------------
REMAINING STOCKHOLDERS, (STOCKHOLDER)
- --------------------------------- ---------------------------------------------------------------- ------------
57.9
- --------------------------------- ---------------------------------------------------------------- ------------
</TABLE>
The provisions of this paragraph F requiring notice to and consent by the
Company to any changes in ownership shall apply to any change in the person(s)
or entity(ies) having an ownership interest in the principal owner(s) set forth
in this clause F(i)(a).
IN WITNESS WHEREOF, the Company and the Dealer have duly executed this addendum
in duplicate as of the__________day of_______________, 19___________.
FORD MOTOR COMPANY BOOMERSHINE FORD, INC.
-----------------------------------------
(Dealer's Trade Name)
By By
------------------------------ ---------------------------------------
Assistant Secretary (Signature and Title)
- ----- ----- -----
<PAGE> 6
DEALER INSURANCE FILE - PLAN IV
SOLICITATION OF ELIGIBLE DEALER-OWNERS FOR PARTICIPATION IN THE FORD MOTOR
COMPANY
DEALER-OWNER GROUP LIFE AND ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE PLAN
AND REPORTING PROPOSED CHANGES IN ACTIVITY STATUS AND OWNERSHIP INTEREST
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
DEALERSHIP NAME DEALER CODE NUMBER
BOOMERSHINE FORD 21B025
- -----------------------------------------------------------------------------------------------------------------------------------
MAILING ADDRESS (P.O. BOX IF AVAILABLE) CITY STATE ZIP CODE
3230 SATELLITE BOULEVARD (P.O.BOX 957057) DULUTH GA 30096
- -----------------------------------------------------------------------------------------------------------------------------------
CHECK [X] TYPE OF AGREEMENT ENTER NOTES
[ ] APPOINTMENT: LIST ALL PROPOSED OWNERS "X" LIST TOTAL ARE 1. If an insured owner in the
REGARDLESS OF PERCENT AND DETERMINE DEALERSHIP IF OWNERSHIP INTEREST ELIGIBLE outgoing dealership becomes an
INSURANCE CLASS BELOW BASED ON CURRENT I % AS SHOWN IN OWNERS incoming owner by concurrent
- - PLANNING VOLUME NOTE 1. N EXISTING AND/OR ENROLLING? Resignation and Appointment in
[X] AMENDMENT [ ] ASSIGNMENT [ ] RENEWAL OR A PROPOSED AGREEMENTS YES, NO, a qualified incoming dealership,
[ ] INTERIM: LIST ALL EXISTING AND PROPOSED OWNERS C C/I show his former % of ownership
ONCE REGARDLESS OF PERCENT AND IF NOT ALREADY T C/I-N/E under "Existing %." Such owner's
ESTABLISHED. DETERMINE DEALERSHIP INSURANCE I MAX insurance coverage will then
CLASS BELOW BASED ON ENTIRE PRECEDING CALENDAR V automatically be changed in
YEAR NEW UNIT RETAIL SALES, NOTE 4. E accordance with his new
NOTE 2 NOTE 3 "Ownership Class" and new
"Dealership Insurance Class,"
effective as required under 4,
reverse side:
EXISTING PROPOSED SOCIAL BIRTHDATE
NOTE 1 NOTE 2 SECURITY NUMBER
Sunbelt Automotive Group, Inc. X 0% 100% N/E
Walter M. Boomershine, Jr. 100% 0% C/I - N/E ###-##-#### 7/20/29
EXISTING AND/OR PROPOSED % MUST TOTAL 100% 100% 2. In certain instances as outlined
DETERMINATION OF DEALERSHIP INSURANCE CLASS on page 3 of the Explanatory
AMEND. ASSIGN Booklet, inactive family
CHECK [X] EACH VEHICLE LINE THE APPOINTMENT RENEWAL INTERIM TOTAL interests or certain types of
DEALERSHIP IS FRANCHISED TO SELL PLANNING NEW RETAIL SALES INSURANCE INSURANCE indirect interest may be
VOLUME (INCLUDING FLEET) CREDITS CREDITS considered as part of the active
NOTE 4 owner's interest solely for the
X FORD DIVISION - CARS 647 X 1.0 = 647 purpose of determining
X FORD TRUCK (LIGHT & MED. HVY.) 1484 X 1.2 = 1781 eligibility and "Ownership
FORD TRUCKS (EXTRA HVY.) X 2.3 = Class" under the insurance plan
MERCURY CARS X 1.2 = for such active owner. Explain
LINCOLN CARS X 2.3 = in "Remarks."
FORD IMPORTS X 1.0 =
CHECK [X] THE DEALERSHIP INSURANCE CLASS THAT APPLIES: TOTAL 2427 3. YES: If "Yes" complete
LESS THAN 150 CREDITS: [ ] CLASS 1 500 BUT LESS THAN 800 CREDITS: [ ] CLASS 4 enrollment card and see reverse
150 BUT LESS THAN 300 CREDITS: [ ] CLASS 2 800 BUT LESS THAN 1200 CREDITS: [ ] CLASS 5 side for information on
300 BUT LESS THAN 500 CREDITS: [ ] CLASS 3 1200 OR MORE CREDITS: [X] CLASS 6 eligibility requirements,
insurance amounts, contributions
REMARKS: (If any of above eligible owners are eligible or enrolled for insurance under and effective dates.
other Ford, L.M., or Ford New Holland dealership(s), list owner(s), and NO: If "NO" explain in
dealership(s) here.) "Remarks" why
dealer-owner did not
enroll.
C/I If currently insured in
this dealership enter
"C/I." Changes in
"Ownership Class" and
insurance will be
effective as required
under 4, reverse side.
C/I-N/E: If currently insured in
this dealership but
becoming ineligible (due
to new inactive status or
ownership less than 20%)
enter "C/I-N/E" Insurance
will terminate as required
under 6 reverse side.
N/E: If not eligible due to
"X" inactive or owning
less than 20% enter "N/E".
MAX: If not eligible because
the plan maximum Group
Life Insurance coverage
has already been provided
due to ownership of other
Ford Motor Company
dealerships enter "MAX".
4. If not a Dealership for the
entire preceding calendar
year, enter the current
planning volume for each
Vehicle line. When the class
of the above Dealership has
been established on either;
(1) Planning volume as a new
dealer or (2) subsequent
calendar year new retail
sales, the highest class
achieved will not be decreased
by future lower sales. Higher
sales in future calendar years
may result in a dealership
insurance class increase April
1st as outlined on page 3 of
the Explanatory Booklet.
If APPOINTMENT enter name or prior
dealer
- -----------------------------------------------------------------------------------------------------------------------------------
ENROLLMENT FOR PLAN IV: An owner cannot enroll in Plan IV if another owner of the same dealership continues in Plan, I, II or III.
Once Plan IV is established for this dealership, all future eligible owners will be solicited for Plan IV only.
- -----------------------------------------------------------------------------------------------------------------------------------
YES, I do elect to participate in Plan IV, for the NO, I do not elect to participate in Plan IV. I understand, if I wish to
Group Life Insurance to which I am now entitled or to enroll in Plan IV, at a later date, a medical examination will be
which I may become entitled under the provisions of required.
the Ford Motor Company Dealer-Owner Group Life
Insurance Plan as set forth in the master policy
issued to Ford Motor Company by the Metropolitan Life
Insurance Company. I understand that under no
circumstances may I be insured for more than the plan
maximum amounts of Life and AD & D insurance. I
certify that I am now actively engaged in the
operation of the above-named Dealership and the above
information is true. If previously eligible for
dealer-owner insurance but not currently enrolled, or
if Plan IV was not elected when first available. I
understand I must now take a medical examination.
DATE DEALER-OWNER SIGNATURE TITLE DATE DEALER-OWNER SIGNATURE TITLE
- -------- -------------------------- ------------ ----------- ------------------------- -----------
- -------- -------------------------- ------------ ----------- ------------------------- -----------
- -------- -------------------------- ------------ ----------- ------------------------- -----------
- -----------------------------------------------------------------------------------------------------------------------------------
DATE REGION HAVE ENROLLMENT CARDS BEEN ATTACHED OPNS. MGR. OR MKT. REP. MGR.
ATLANTA FOR OWNERS SHOWN AS "YES" ABOVE WHO
ARE NOT CURRENTLY ENROLLED? SIGNATURE:
---------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
(TYPE OF AGREEMENT TO BE CIRCLED BY GENERAL SALES OFFICE)
APPOINTMENT, AMENDMENT, ASSIGNMENT, RENEWAL OR INTERIM EXECUTED BY FORD MOTOR COMPANY. (DATE):
- -----------------------------------------------------------------------------------------------------------------------------------
[FORD LOGO] FD 1849-1 Sept.
LM 7576A 1995 DEALER OWNER GROUP LIFE INSURANCE OFFICE COPY RECEIVED
(9/95) Macro 5045/5535
(PREVIOUS REVISIONS MAY NOT BE USED)
</TABLE>
<PAGE> 7
(FOR MORE DETAILS SEE PLAN IV EXPLANATORY BOOKLET)
1. WHO IS ELIGIBLE:
Active-Dealer Owner in the United States or District of Columbia with at
least 20% interest, and authorized to sell cars or trucks manufactured or
imported by Ford Motor Company or its subsidiaries.
2. WHEN ELIGIBLE:
First day of calendar month following Date of Appointment by Ford Motor
Company, or First day of calendar month following Date Amendment,
Assignment, Renewal or Interim Agreement executed by Ford Motor Company if
not previously an active owner with at least 20% interest in this
dealership.
3. EFFECTIVE DATE OF INSURANCE COVERAGE:
For Owners not currently insured - Date eligible if enrolled within 31 days
of the first day of calendar month, above, or the first day of calendar
month next following date of approval of insurability by insurance company
if enrolled later than 31 days of date eligible.
The insurance of an eligible Owner who is away from work due to illness or
injury on the date his insurance otherwise would become effective, will
become effective on the date he returns to work.
For Owners currently insured in Plan III who elect Plan IV - An insured
Owner who elects to go from Plan III to Plan IV must not have been away
from work due to illness or injury for any one of the seven consecutive
scheduled working days immediately prior to the scheduled effective date
of Plan IV. An insured Owner who fulfills this requirement on the
scheduled effective date of Plan IV is to be insured in Plan IV from such
date. Each other insured Owner is to be insured in Plan IV on the date
following a period of seven connective scheduled working days during which
he has not been away from work due to illness or injury for any one day.
A currently insured Owner who elects to remain in Plan III will be required
to pass a medical examination satisfactory to the Metropolitan Life
Insurance Company at his own expense in order to become insured in Plan IV
after the scheduled effective date of Plan IV. His insurance will become
effective on the first day of the calendar quarter following the date that
the Metropolitan Life Insurance Company shall have approved the results of
such medical examination.
4. EFFECTIVE DATE OF INSURANCE CHANGES:
Amendments and Assignments, Renewal or Interim Agreements; Changes become
effective the first day of the calendar quarter following date Amendment
or Assignment, Renewal or Interim Agreement executed by Ford Motor Company
unless the owner is away from work on such first day due to illness or
injury, then the insurance change is effective the date he returns to
work, except no change if age 65 or over with at least 20%.
5. OWNERS ATTAINING AGE 65:
Owners insurance reduced 10% on quarter date following 65th birthday and
on each following anniversary. Minimum 20% or $6,666 Life and $6,666
AD&D.
6. TERMINATION DATE OF INSURANCE COVERAGE:
The 31st day following the due date of a required contribution if the
insurance office fails to receive such contribution by the 31st day; or if
received, then the last day of calendar quarter in which the dealer-owner,
as determined by Ford Motor Company.
(1) Ceases to be active in the operation of the dealership for reasons
other than disability.
(2) Ceases to own at least 20% as shown in the most recent amendment or
assignment, renewal or interim agreement.
(3) Ceases to be an authorized Dealer under Ford Motor Company.
Conversion allowed during 31 days following termination for reasons (1)
(2) or (3) by the Metropolitan Life Insurance Company, 5130 Eisenhower
Blvd., Tampa, Florida 33634.
<TABLE>
<CAPTION>
AMOUNTS OF GROUP LIFE AND THE PRINCIPAL SUM OF ACCIDENTAL DEATH & DISMEMBERMENT (AD&D) INSURANCE
------------------------------------------------------------------------------------------------
Owners must be insured for the amount of Life and AD & D applicable to their age and class,
subject to plan maximum and applicable statutory provisions for Texas (see last page of Explanatory
Booklet).
Under 65 years of Age When First Insured
---------------------------------------------------------------
Ownership Class
Dealership ---------------------------------------------------------------
Insurance Insurance At Least 20% At Least 50% 80%
Credit Class But Less than 50% But Less than 50% Or Greater
- -------------------------------- ----------- -------- -------- -------- -------- -------- --------
Life AD & D Life AD & D Life AD & D
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Less than 150 Credits 1 $ 33,333 $ 33,333 $ 50,000 $ 50,000 $ 66,667 $ 66,667
150 But less than 300 Credits 2 66,667 66,667 100,000 100,000 133,333 133,333
300 But less than 500 Credits 3 100,000 100,000 150,000 150,000 200,000 200,000
500 But less than 800 Credits 4 133,333 133,333 200,000 200,000 266,666 266,666
800 But less than 12000 Credits 5 166,666 166,666 250,000 250,000 333,333 333,333
1200 or more Credits 6 200,000 200,000 300,000 300,000 400,000 400,000
<CAPTION>
65 Year of Age and Over When First Insured
---------------------------------------------------------------
Ownership Class
Dealership ---------------------------------------------------------------
Insurance Insurance At Least 20% At Least 50% 80%
Credit Class But Less than 50% But Less than 50% Or Greater
- -------------------------------- ----------- -------- -------- -------- -------- -------- --------
Life AD & D Life AD & D Life AD & D
-------- -------- -------- -------- -------- --------
Less than 150 Credits 1 $ 6,666 $ 6,666 $ 10,000 $ 10,000 $ 13,333 $ 13,333
150 But less than 300 Credits 2 13,333 13,333 20,000 20,000 26,666 26,666
300 But less than 500 Credits 3 20,000 20,000 30,000 30,000 40,000 40,000
500 But less than 800 Credits 4 26,666 26,666 40,000 40,000 53,333 53,333
800 But less than 12000 Credits 5 33,333 33,333 50,000 50,000 66,666 66,666
1200 or more Credits 6 40,000 40,000 60,000 60,000 80,000 80,000
</TABLE>
<TABLE>
<CAPTION>
QUARTERLY CONTRIBUTIONS FOR EACH OWNER FOR AMOUNTS OF LIFE INSURANCE SHOWN
--------------------------------------------------------------------------
INCLUDING ACCIDENTAL DEATH & DISMEMBERMENT (AD & D) OF:
FOR OWNERS UNDER AGE 65
Owner's Attained Age Life $33,333 $50,000 $66,667 $100,000 $133,333 $150,000 $166,666 $ 200,000
- ------------------------- --------- ------- ------- ------- -------- -------- -------- -------- ---------
AD&D $33,333 $50,000 $66,667 $100,000 $133,333 $150,000 $166,666 $ 200,000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Under Age 30 $ 9.00 $ 13.00 $ 17.00 $ 26.00 $ 35.00 $ 39.00 $ 43.00 $ 52.00
30 but less than 35 10.00 15.00 20.00 30.00 40.00 45.00 50.00 60.00
35 but less than 40 13.00 19.00 25.00 38.00 51.00 57.00 63.00 76.00
40 but less than 45 18.00 28.00 37.00 55.00 73.00 83.00 92.00 110.00
45 but less than 50 27.00 41.00 54.00 81.00 108.00 122.00 135.00 162.00
50 but less than 55 40.00 60.00 79.00 119.00 159.00 179.00 198.00 238.00
55 but less than 60 62.00 94.00 125.00 187.00 249.00 281.00 312.00 374.00
60 but less than 65 96.00 145.00 193.00 289.00 385.00 434.00 482.00 578.00
<CAPTION>
FOR OWNERS AGE 65 OR OVER
Owner's Attained Age Life $ 6,666 $10,000 $13,333 $ 20,000 $ 26,666 $ 30,000 $ 33,333 $ 40,000
- -------------------------- --------- ------- ------- ------- -------- -------- -------- -------- ---------
AD&D $ 6,666 $10,000 $13,333 $ 20,000 $ 26,666 $ 30,000 $ 33,333 $ 40,000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
65 but less than 70 $ 31.00 $ 47.00 $ 62.00 $ 94.00 $ 125.00 $ 140.00 $ 156.00 $ 187.00
70 but less than 75 58.00 88.00 117.00 175.00 234.00 263.00 292.00 350.00
75 but less than 80 94.00 141.00 188.00 282.00 376.00 423.00 470.00 564.00
80 and over 180.00 271.00 361.00 541.00 722.00 812.00 902.00 1,083.00
<CAPTION>
FOR OWNERS UNDER AGE 65
Owner's Attained Age Life $ 250,000 $ 266,666 $ 300,000 $ 333,333 $ 400,000
- ------------------------- --------- --------- --------- --------- --------- ---------
AD&D $ 250,000 $ 266,666 $ 300,000 $ 333,333 $ 400,000
<S> <C> <C> <C> <C> <C> <C>
Under Age 30 $ 65.00 $ 69.00 $ 78.00 $ 87.00 $ 104.00
30 but less than 35 75.00 80.00 90.00 100.00 120.00
35 but less than 40 95.00 101.00 114.00 127.00 152.00
40 but less than 45 138.00 147.00 165.00 183.00 220.00
45 but less than 50 203.00 216.00 243.00 270.00 324.00
50 but less than 55 298.00 317.00 357.00 397.00 476.00
55 but less than 60 468.00 499.00 561.00 623.00 748.00
60 but less than 65 723.00 771.00 867.00 963.00 1,156.00
<CAPTION>
FOR OWNERS AGE 65 OR OVER
Owner's Attained Age Life $ 50,000 $ 53,333 $ 60,000 $ 66,666 $ 80,000
- -------------------------- --------- --------- --------- --------- --------- ---------
AD&D $ 50,000 $ 53,333 $ 60,000 $ 66,666 $ 80,000
<S> <C> <C> <C> <C> <C> <C>
65 but less than 70 $ 234.00 $ 250.00 $ 281.00 $ 312.00 $ 374.00
70 but less than 75 438.00 467.00 526.00 584.00 701.00
75 but less than 80 706.00 753.00 847.00 941.00 1,129.00
80 and over 1,354.00 1,144.00 1,624.00 1,805.00 2,166.00
</TABLE>
<PAGE> 8
FORD MOTOR COMPANY [FORD RENT-A-CAR LOGO]
ATLANTA REGION
AMENDMENT TO FORD RENT-A-CAR SYSTEM AGREEMENT
<TABLE>
SUPPLEMENTAL AGREEMENT, made at Dearborn, Michigan as of this ___________ day of _____________, 19__
by and between BOOMERSHINE FORD a(n) CORPORATION
--------------------- ---------------------------------------
(LICENSEE TRADE NAME) (INDIVIDUAL PARTNERSHIP OR CORPORATION)
in the State of GEORGIA with a principal place of business at
----------------------------------------
(SHOW NAME OF STATE IN WHICH REGISTERED)
<S> <C>
3230 SATELLITE BOULEVARD (P.O. BOX 957057) DULUTH, GA 30096 (hereinafter called
- -------------------------------------------------------------------------------
(STREET ADDRESS) (CITY AND STATE) (ZIP CODE)
"Licensee"), and Ford Motor Company, a Delaware corporation with its principal
place of business at Dearborn, Michigan (hereinafter called "Ford").
</TABLE>
The parties hereto have previously enter into a Ford Rent-A-Car System
Agreement dated AUGUST 12, 1992 and now desire to make certain changes therein.
NOW, THEREFORE, in consideration of these premises, the parties hereto
mutually agree that said Ford Rent-A-Car System Agreement be amended by
changing Paragraph B to read as follows:
B. Ford has entered into this agreement in reliance upon the Licensee's
representation and agreement that:
a. The identity or ownership of the Licensee is as follows: (Strike
out the two following clauses that are least applicable.)
i. The Licensee is an Authorized Ford dealer; or
<PAGE> 9
b. The following persons shall have full managerial authority and
responsibility for the operating management of the Licensee in the
performance of this agreement:
<TABLE>
<CAPTION>
Name Address Title
<S> <C> <C>
- ----------------------------- ------------------------------------------------ ----------------------
ALAN K. ARNOLD 4415 PEMBERTON COVE, ALPHARETTA, GA 30201 PRESIDENT
- ----------------------------- ------------------------------------------------ ----------------------
TIMOTHY A. BARNETT 4623 KENTUCKY SADDLER CT, KENNESAW, GA 30152 GENERAL MANAGER
- ----------------------------- ------------------------------------------------ ----------------------
- ----------------------------- ------------------------------------------------ ----------------------
- ----------------------------- ------------------------------------------------ ----------------------
- ----------------------------- ------------------------------------------------ ----------------------
</TABLE>
Licensee shall give Ford prior written notice of any change in the ownership or
management of Licensee but no such change or notice shall be effective until
embodied in an appropriate amendment to this agreement duly executed and
delivered by Ford and Licensee.
This supplemental Agreement is subject to all the terms and conditions
contained in said Ford Rent-A-Car System Agreement, except insofar as such
terms and conditions may be inconsistent with the express terms hereof.
IN WITNESS WHEREOF the parties hereto have executed this agreement as
of the day and year first above written and Ford is authorized to deliver the
same to the Licensee by placing the Licensee's copy thereof in the United
States Mail, duly stamped and addressed to the Licensee at his principal place
of business, or by delivery to such place of business or to the Licensee in
person.
FORD MOTOR COMPANY Boomershine Ford
----------------------------------------
(LICENSEE'S TRADE NAME)
By By
---------------------------------- --------------------------------------
(ASSISTANT SECRETARY) (SIGNATURE AND TITLE)
- ------------------------------------
(REGIONAL MANAGER)
- ------------------------------------
ii
<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. 3 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
July 20, 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. 3 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
July 20, 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. 3 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
July 20, 1998
