<PAGE>
As filed with the Securities and Exchange Commission on April 14, 1999
Registration No. 333-62699
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
AMENDMENT NO. 3 TO FORM SB-2 ON FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
-------------------
AMERICAN MARINE RECREATION, INC.
(Name of small business issuer in its charter)
<TABLE>
<CAPTION>
Delaware 5551 59-3518196
- --------------------------------- --------------------------------------------- --------------------
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial Classification (I.R.S. Employer
incorporation or organization) Code Number) Identification No.)
</TABLE>
2202 33rd Street
Orlando, Florida 32839
(407) 422-8141
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
-------------------
Joseph G. Pozo, Jr., President
American Marine Recreation, Inc.
2202 33rd Street
Orlando, Florida 32839
(407) 422-8141
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------
Copies to:
Martin C. Licht, Esq. Henry O. Smith III, Esq.
McLaughlin & Stern, LLP Proskauer Rose LLP
260 Madison Avenue 1585 Broadway
New York, New York 10016 New York, New York 10036-8299
Telephone: (212) 448-1100 Telephone: (212) 969-3000
Facsimile: (212) 448-6260 Facsimile: (212) 969-2900
Approximate date of proposed sale to the public: As soon as practicable
after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. /X/
If this Form is filed to register additional securities pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act Registration Statement number of the earlier effective
Registration Statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. / /
If 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 Statement number of the earlier effective Registration Statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
-------------------
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 Section 8(a), may
determine.
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================================
Proposed Proposed
maximum maximum
offering aggregate Amount of
Amount to be price per offering registration fee
Title of each class of securities to be registered registered security (1) price (1) (2)(3)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share................ 1,150,000(4) $ 9.00 $ 10,350,000 $ 2,877.30
- --------------------------------------------------------------------------------------------------------------------------------
Representatives' Warrants (5) ........................ 100,000 $ .001 $ 100.00 $ --(6)
- --------------------------------------------------------------------------------------------------------------------------------
Shares of Common Stock issuable upon
exercise of the Representatives' Warrants ........... 100,000(7) $ 10.80 $ 1,080,000 $ 300.24
- --------------------------------------------------------------------------------------------------------------------------------
Total Registration Fee ................................................................................... $ 3,177.54
================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Calculated in accordance with Rule 457 under the Securities Act of 1933, as
amended.
(3) A fee of $7,389.22 was paid upon the initial filing of the Registration
Statement.
(4) Includes 150,000 shares of Common Stock which the Underwriters may purchase
to cover over-allotments, if any.
(5) Represents warrants to be issued by the Company to the Representative at
the time of delivery and acceptance of the securities to be sold by the
Company to the public hereunder.
(6) None, pursuant to Rule 457(g).
(7) Pursuant to Rule 416, there are also being registered such additional
securities as may become issuable pursuant to the anti-dilution provisions
contained in the Representative's Warrants.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PRELIMINARY PROSPECTUS DATED APRIL 14, 1999
SUBJECT TO COMPLETION
1,000,000 Shares
American Marine Recreation, Inc.
Common Stock
All of the shares of Common Stock, par value $.01 per share (the "Common
Stock"), offered hereby (this "Offering") are being issued and sold by American
Marine Recreation, Inc. (the "Company"). Prior to the Offering, there has been
no public market for the Common Stock and there can be no assurance that any
such market will develop. The Company has applied for listing of the Common
Stock on the The American Stock Exchange (the "AMEX") under the symbol "REC."
It is currently estimated that the initial public offering price of the Common
Stock will be between $7.00 and $9.00 per share. For a discussion of the
factors considered in determining the initial public offering price, see
"Underwriting."
---------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS" COMMENCING ON PAGE 12
AND "DILUTION" ON PAGE 21 OF THIS PROSPECTUS FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON STOCK OFFERED HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
================================================================================
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
- --------------------------------------------------------------------------------
Per Share ......... $ $ $
- --------------------------------------------------------------------------------
Total(3) .......... $ $ $
================================================================================
(1) Does not include a 3% non-accountable expense allowance payable to Prime
Charter Ltd., as representative of the several Underwriters (the
"Representative"), and warrants to purchase up to 100,000 shares of Common
Stock (the "Representative's Warrants"). The Company has also agreed to
indemnify the Underwriters against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses of this Offering payable by the Company
(including the Representative's non-accountable expense allowance) estimated
at $1,470,000 ($1,506,000 if the Underwriters over-allotment option is
exercised in full). See "Use of Proceeds."
(3) The Company has granted the Underwriters a 45-day option to purchase up to
150,000 additional shares of Common Stock, on the same terms set forth
above, solely for the purpose of covering over-allotments, if any. If the
Underwriters' over-allotment option is exercised in full, the total Price
to Public, Underwriting Discounts and Commissions and Proceeds to Company
will be $ , $ and $ , respectively. See "Underwriting."
---------------------
The shares of Common Stock offered hereby are offered subject to receipt
and acceptance by the Underwriters, to prior sale and to the right to reject
any order in whole or in part and to withdraw, cancel or modify the offer
without notice and certain other conditions. It is expected that delivery of
the shares of Common Stock offered hereby will be made on or about ,
1999.
PRIME CHARTER LTD.
, 1999.
<PAGE>
[PHOTOS]
AVAILABLE INFORMATION
As of the date of this Prospectus, the Company will become subject to the
reporting requirements of the Securities and Exchange Act of 1934, as amended
(the "Exchange Act") and, in accordance therewith, will file reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). The Company intends to furnish its stockholders with annual
reports containing audited financial statements and such other periodic reports
as the Company deems appropriate or as may be required by law.
-------------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANS-ACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE COMMON STOCK,
INCLUDING PLACING STABILIZING BIDS OR EFFECTING PURCHASES OF THE COMMON STOCK
IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
more detailed information and financial statements, including the notes
thereto, appearing elsewhere in this Prospectus. Each prospective investor is
urged to read this Prospectus in its entirety. Except as otherwise indicated
herein, the information in this Prospectus, including per share data and
information relating to the number of shares of Common Stock outstanding,
assumes no exercise of (i) the over-allotment option to purchase up to 150,000
additional shares of Common Stock, (ii) the Representative's Warrants to
purchase 100,000 shares of Common Stock and (iii) options under the 1998 Stock
Option Plan. See "Underwriting."
In June 1992, Boat Tree, Inc. ("Boat Tree"), a Florida corporation, was
formed by Joseph G. Pozo, Jr. to acquire a retail recreational boat dealership
in Orlando, Florida from an affiliate of Regal Marine Industries, Inc.
("Regal"). Regal is Boat Tree's principal supplier of recreational boats. In
connection with the acquisition of the Orlando dealership, Regal was granted a
10-year option (the "Regal Option") to purchase 25% of the capital stock of
Boat Tree for an aggregate purchase price of $10. Subsequently, the terms of
the option were amended and it now provides for the purchase of 15.65% of Boat
Tree's capital stock. Upon the consummation of this Offering, Regal will
exercise its option and acquire 156,304 shares of the Company's Common Stock.
See "-- Concurrent Closing Transactions."
In September, 1998, the Company entered into an agreement to acquire all
of the outstanding capital stock of Marine America, Inc. ("Marine America")
from Mr. Pozo, Jr. and his son, who formed Marine America in January 1998 to
acquire certain assets relating to a retail boat dealership in Belmont, North
Carolina (the "Marine America Acquisition"). In addition, in January 1999, the
Company entered into an agreement to acquire substantially all of the assets of
Treasure Coast Boating Center, Inc. ("Treasure Coast"), an unaffiliated third
party owned by D. Thomas Grane, including four retail locations in Florida (the
"Treasure Coast Acquisition"). Upon the consummation of this Offering, the
Company will consummate each of the Marine America Acquisition and the Treasure
Coast Acquisition (together, the "Closing Acquisitions.") See "-- Concurrent
Closing Transactions."
Concurrent with the effective date of this Prospectus, all of the
stockholders of Boat Tree (Mr. Pozo, Jr. and members of his family) will
exchange all of the common stock of Boat Tree for all of the outstanding shares
of Common Stock of American Marine Recreation, Inc., a Delaware corporation
formed by Mr. Pozo, Jr. solely for such purpose on June 22, 1998 (the
"Reorganization"). As a result of the Reorganization, Boat Tree will become a
wholly-owned subsidiary of American Marine Recreation, Inc. As used in this
Prospectus, unless the context indicates otherwise, the term "AMRI" refers to
American Marine Recreation, Inc. after giving effect to the Reorganization, and
the historical financial statements for AMRI included in this Prospectus have
been retroactively adjusted to reflect the Reorganization. Since American
Marine Recreation, Inc. has had no operations of its own, the information
presented in such historical financial statements, other than the capital
structure, relates solely to Boat Tree.
In this Prospectus, unless the context requires otherwise, the term
"Company" refers to AMRI and its subsidiaries, after giving effect to the
Reorganization and the Closing Acquisitions (except with respect to financial
information and per share data and information relating to the number of shares
outstanding, which do not reflect the Marine America Acquisition, as the effect
of such acquisition on the information presented is insignificant). The pro
forma financial data presented herein is based on data derived from the
historical financial statements of AMRI and have been prepared to illustrate
the effect of the Treasure Coast Acquisition and the Offering (including the
exercise of the Regal Option) on such data.
The Company
General
The Company is one of the largest retailers of recreational boats in
Florida. In addition to 10 Florida locations, the Company operates a retail
location in North Carolina. See "--Concurrent Closing Transactions." At each of
its locations, the Company offers a wide selection of new and used boats and
related
3
<PAGE>
marine products, such as trailers, parts and accessories and water sport
equipment. In addition, the Company offers boat financing, and insurance and
extended service contracts for its customers and, at most of the Company's
locations, provides customers with convenient, skilled and cost-effective
repair and maintenance services.
The Company is the largest dealer of recreational boats sold under the
Regal and Wellcraft brand names and sells 11 other lines of high quality
recreational boats including the Malibu, Hydra-Sport, Sailfish, Carver, Stratos
Bass Boats, Javelin Bass Boats, AquaSport, Larson, Legacy, Mediterranean Yachts
and Hurricane Deck Boats brand names. These boats range in size from 14 feet to
55 feet and in price from approximately $9,000 to $1,200,000. The Company
believes that it differentiates itself from its competitors by offering a
broader product line and selection, with over 100 different models of new
cruisers, fishing boats, high performance boats, pontoon boats, water-skiing
boats and general recreational boats to choose from, at prices ranging from the
low-end to the high-end of the market spectrum.
The Company has experienced substantial growth as a result of both
internal growth and acquisitions. For the years ended December 31, 1997 and
1998, the Company had total pro forma combined revenue of $31.0 million and
$43.4 million, respectively, and total pro forma combined net income before
taxes of $370,000 and $1.2 million, respectively. For the years ended December
31, 1997 and 1998, the Company sold, on a pro forma combined basis, 802 and
1,032 new boats, respectively, generating revenues of approximately $21.9
million and $31.7 million, respectively, and 366 and 449 used boats,
respectively, for revenues of approximately $4.8 million and $6.1 million,
respectively.
The Company's operating strategy is to maximize its profits by increasing
its operating efficiencies through the structured application of management's
proven operating philosophies, which include (i) centralized management, (ii) a
diverse product line and (iii) consumer loyalty and satisfaction.
The Company's objective is to continue its growth trend by leveraging its
position as one of the premier dealers of recreational boats in the
southeastern United States. The Company intends to continue to acquire existing
dealers of recreational boats and to selectively expand its current retail base
by opening new locations primarily in Florida, North Carolina, South Carolina,
Georgia and Alabama. The Company's growth strategy is to continue to increase
sales at its existing locations while expanding its current retail base through
the further development of its existing markets and by entering new markets.
The Company intends to own and operate at least four additional locations
within the next 18 months, using a combination of the proceeds from this
Offering, seller and inventory financing and working capital. The Company may
also finance future acquisitions in whole or in part through the issuance of
shares of Common Stock or securities exercisable or convertible into shares of
Common Stock. The Treasure Coast Acquisition is an important addition to the
Company and to its expansion strategy. See "--Concurrent Closing Transactions."
The boat retailing industry is not only highly competitive but also highly
fragmented. The market is characterized by thousands of independent retailers,
most of which operate in only a single market, have limited financial
resources, maintain a limited inventory and generally have annual sales of less
than $3 million. Management believes that many of these independent retailers
do not have the managerial or capital resources necessary to compete in the
highly competitive recreational boating industry and are thus attractive
acquisition candidates.
AMRI was incorporated under the laws of the State of Delaware on June 22,
1998. Boat Tree, which will become a wholly-owned subsidiary of AMRI in
connection with the Reorganization, was incorporated under the laws of the
State of Florida in June 1992 and commenced operations that same month when it
purchased the Company's Orlando dealership from Regal. The Company opened an
additional location in Melbourne, Florida in 1995, relocated the Orlando,
Florida dealership to its current superstore facility in 1996 and opened a
location in Jacksonville, Florida in 1997. During the first half of 1998, the
Company commenced operating a location pursuant to a management agreement in
Belmont, North Carolina, which the Company is acquiring in connection with the
Marine America Acquisition. In addition, in February
4
<PAGE>
1998, the Company opened a dealership in Doctor's Lake, Florida; in June 1998,
it opened locations in Tierra Verde and Pinellas Park, Florida; and, upon the
consummation of this Offering, it is acquiring dealerships in Stuart, Jupiter,
Pompano Beach and Vero Beach, Florida in connection with the Treasure Coast
Acquisition.
The Company maintains its principal executive offices at 2202 33rd Street,
Orlando, Florida 32839, and its telephone number is (407) 422-8141.
Concurrent Closing Transactions
Treasure Coast Acquisition
On January 22, 1999, the Company entered into an agreement with Treasure
Coast, Treasure Coast Boating Services, Inc. ("Treasure Services") and D.
Thomas Grane, unaffiliated third parties, to acquire substantially all of the
assets of Treasure Coast, together with certain real property in Stuart,
Florida owned by Treasure Services on which a retail boat dealership is
located. The Treasure Coast Acquisition will close upon the consummation of
this Offering, for an aggregate purchase price of $3.1 million (including
acquisition costs of $120,000), of which a non-refundable deposit of $50,000
has been paid, plus the cost of Treasure Coast's inventory on such date. The
Company intends to use approximately $203,000 of the proceeds from this
Offering to fund a portion of such inventory costs and to obtain floor plan
financing to fund the balance (estimated to be approximately $6.9 million) of
such anticipated inventory costs. Treasure Coast operates four retail boat
dealerships in Stuart, Jupiter, Pompano Beach and Vero Beach, Florida from
which it offers recreational boats under the popular Wellcraft brand name as
well as boats sold under the brand names AquaSport, Larson, Legacy and
Mediterranean Yachts. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Marine America Acquisition
Upon the consummation of this Offering, the Company will acquire all of
the outstanding capital stock of Marine America, a corporation owned 80% by
Joseph G. Pozo, Jr., the Company's Chairman, President, Chief Executive Officer
and majority stockholder, and 20% by Joseph J. Pozo (Mr. Pozo, Jr.'s son). The
purchase price consists of 1,250 shares of Common Stock valued at $10,000,
together with the assumption of liabilities incurred by Marine America in
connection with its redemption of 50% of its capital stock from Lakewood Marine
International, Ltd. ("Lakewood"), an unaffiliated third party. Such liabilities
consist of a loan from the Company to Marine America in the amount of $31,500
(which will be eliminated upon the companies' consolidation) and a promissory
note in the amount of $100,000 payable to Lakewood, which the Company intends
to repay from the proceeds of this Offering. In January 1998, Marine America
acquired certain of Lakewood's assets for a purchase price of $130,858,
including a five-year lease (which lease was amended to a month-to-month lease
commencing January 1999) relating to its 8,000 square foot retail location in
Belmont, North Carolina. As part of such acquisition, Boat Tree, a wholly-owned
subsidiary of the Company as a result of the Reorganization, purchased
Lakewood's new and used boat and trailer inventory for a purchase price of
$998,364 and agreed to provide Marine America with new and used boat inventory,
as needed, at Boat Tree's invoice cost plus freight. In addition, Boat Tree
entered into a management agreement with Marine America pursuant to which Boat
Tree agreed to manage the operations of the Lakewood dealership. The Company
intends to relocate the operations of the Belmont, North Carolina dealership to
a three-acre tract of land located in Cornelius, North Carolina, which the
Company acquired on May 15, 1998 for a purchase price of $348,100, and the
Company intends to utilize $350,000 of the net proceeds of this Offering,
together with additional financing in the anticipated amount of approximately
$1,400,000 to construct a 20,000 square foot superstore on such site. See "Use
of Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Certain Transactions" and Note 11 of Notes to
Financial Statements.
5
<PAGE>
Regal Option Exercise
On June 6, 1992, Boat Tree granted Regal a ten-year option to purchase 25%
of its capital stock for an aggregate purchase price of $10 (the "Regal
Option"). On September 1, 1998, Regal agreed to (i) reduce the number of shares
issuable upon the exercise of the Regal Option to the number of shares equal to
15.65% of Boat Tree's outstanding capital stock, which, after giving effect to
the Reorganization, represents 156,304 shares of AMRI's Common Stock (7.8% of
the number of shares of Common Stock that will be outstanding immediately
following the consummation of this Offering) and (ii) to exercise such option
effective upon the consummation of this Offering. See "Principal Stockholders"
and "Certain Transactions."
Pending S Corporation Termination
Since its incorporation in June 1992, Boat Tree has been treated for
Federal and Florida state income tax purposes as an S Corporation under
Subchapter S of the Internal Revenue Code and Florida law. As a result of Boat
Tree's status as an S Corporation, the stockholders of Boat Tree, rather than
Boat Tree itself, have been taxed on the earnings of Boat Tree for Federal and
State corporate income tax purposes, whether or not such earnings were
distributed to them. In connection with the Reorganization, Boat Tree's status
as an S Corporation will be terminated and AMRI will become subject to Federal
and State income taxes at applicable C Corporation rates.
As of December 31, 1998, the undistributed S Corporation earnings of Boat
Tree totaled $1.4 million. In connection with the conversion of Boat Tree from
an S Corporation to a C Corporation, Boat Tree declared a final distribution of
$700,000 of its undistributed S Corporation earnings to its current (pre-
Reorganization) stockholders of which $150,000 is attributable to the period
commencing on January 1, 1999 and ending on the date of this Prospectus (the
"Final S Corporation Distribution").
The Company intends to pay $550,000 of the Final S Corporation
Distribution out of the net proceeds from this Offering and the balance of the
Final S Corporation Distribution will be paid out of working capital prior to
the consummation of this Offering. Purchasers in this Offering will not receive
any portion of the Final S Corporation Distribution. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 1 of Notes to Financial Statements.
6
<PAGE>
The Offering
Common Stock offered..... 1,000,000 shares
Common Stock to be outstand
ing after the Offering 1,998,750 shares (1)
Use of Proceeds.......... The Company intends to use the net proceeds of
this Offering primarily for the acquisition and
construction of additional retail locations, the
Closing Acquisitions, the payment of $550,000 of the
Final S Corporation Distribution, the upgrading of
management information systems, working capital and
other general corporate purposes. See "Use of
Proceeds."
Risk Factors............. The securities offered hereby involve a high
degree of risk and immediate substantial dilution.
See "Risk Factors" and "Dilution."
Proposed AMEX symbol..... "REC"
- -------------
(1) Includes 156,304 shares of Common Stock which will be issued upon the
consummation of this Offering in connection with the exercise of the Regal
Option, but does not include 1,250 shares of Common Stock which will be
issued in connection with the Marine America Acquisition.
7
<PAGE>
Summary Pro Forma Combined Financial Data
(Dollars in thousands, except per share data)
Set forth below is certain summary pro forma combined financial data for
the Company for the periods, and as of the dates, indicated. The summary pro
forma combined financial data for the Company for the years ended December 31,
1997 and 1998 are based on the historical financial statements of AMRI and has
been prepared to illustrate the effects on such historical financial data of
the Treasure Coast Acquisition and the Offering (including the exercise of the
Regal Option) as if such transactions had occurred as of January 1, 1997 with
respect to the statement of income data and as of December 31, 1998 with
respect to the balance sheet data. The Treasure Coast Acquisition is reflected
using the purchase method of accounting for business combinations. The pro
forma financial data are provided for comparative purposes only and do not
purport to be indicative of the results that actually would have been obtained
if this transaction had been effected on the dates indicated. The information
presented below is qualified in its entirety by, and should be read in
conjunction with, "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Pro Forma Financial Data," "Selected Financial
Data" and the financial statements and notes thereto included elsewhere in this
Prospectus.
Pro Forma Combined Statement of Income Data:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------
1997 1998
------------- -------------
<S> <C> <C>
Revenue .............................................. $ 30,952 $ 43,364
Cost of sales ........................................ 24,142 32,840
---------- ----------
Gross profit ...................................... 6,810 10,524
Selling, general and administrative expenses ......... 5,904 8,530
---------- ----------
Income from operations ............................ 906 1,994
Other income ......................................... 33 67
Interest expense ..................................... (569) (809)
---------- ----------
Income before taxes .................................. 370 $ 1,252
Taxes on income(1) ................................... 142 486
---------- ----------
Net income ........................................ $ 228 $ 766
========== ==========
Net income per common share:
Basic ............................................. $ .11 $ .38
Diluted ........................................... $ .11 $ .38
Weighted average common shares outstanding:
Basic ............................................. 1,998,750 1,998,750
Diluted ........................................... 1,998,750 1,998,750
</TABLE>
Pro Forma Combined Balance Sheet Data (2):
December 31, 1998
------------------
Cash and cash equivalents ........................ 4,688
Working capital .................................. 3,315
Total assets ..................................... 32,171
Short-term debt .................................. 22,244
Long-term debt, less current maturities .......... 2,240
Total liabilities ................................ 25,170
Stockholders' equity ............................. 7,001
(Footnotes appear on following page)
8
<PAGE>
- -------------
(1) Prior to the date of this Prospectus, Boat Tree has been an S Corporation
and therefore has not been subject to Federal or state corporate income
taxes (other than Florida franchise taxes). The S Corporation status has
been terminated as of the date of this Prospectus. Taxes on income reflect
a tax provision as if the Company had not been an S Corporation during the
indicated periods and represents a combined Federal and state tax rate of
approximately 39%. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Notes 1 and 8 of Notes to
Financial Statements.
(2) Adjusted to give retroactive effect to (i) the termination of Boat Tree's S
Corporation status and the net deferred tax asset of $104,000 associated
therewith, (ii) the Treasure Coast Acquisition, (iii) the exercise of the
Regal Option, and (iv) the sale of the 1,000,000 shares of Common Stock
offered hereby at an assumed price of $8.00 per share and the anticipated
application of the estimated net proceeds therefrom, including the payment
of $550,000 of the Final S Corporation Distribution to the stockholders of
Boat Tree. See "Use of Proceeds" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
9
<PAGE>
Summary Historical Financial Data
(Dollars in thousands, except per share data)
Set forth below are certain summary historical financial data for AMRI
(not including Treasure Coast) for the periods, and as of the dates, indicated.
The historical financial data is derived from, and should be read in
conjunction with, the financial statements of AMRI, including the notes
thereto, appearing elsewhere in this Prospectus. The information presented
below is qualified in its entirety by, and should be read in conjunction with,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Selected Financial Data" and the financial statements and notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------
1996 1997 1998
------------- ------------- -------------
<S> <C> <C> <C>
Statement of Income Data:
Sales and service revenue ............................ $ 13,058 $ 20,183 $ 24,229
Finance and insurance income ......................... 591 1,043 1,334
---------- ---------- ----------
Total revenue ..................................... 13,649 21,226 25,563
Cost of sales and service revenue .................... 10,544 16,327 19,083
---------- ---------- ----------
Gross profit ...................................... 3,105 4,899 6,480
Selling, general and administrative expenses ......... 2,493 4,085 5,418
---------- ---------- ----------
Income from operations ............................ 612 814 1,062
Other income ......................................... 10 33 67
Interest expense ..................................... (239) (333) (525)
---------- ---------- ----------
Net income ........................................ 383 514 604
Pro Forma Unaudited Statements of Income Data (1):
Pro forma taxes on income ............................ 150 198 232
---------- ---------- ----------
Pro forma net income ................................. $ 233 $ 316 $ 372
========== ========== ==========
Pro forma net income per common share:
Basic (2) ......................................... $ .26 $ .35 $ .41
Diluted (3) ....................................... $ .22 $ .30 $ .35
Pro forma weighted average common shares
outstanding:
Basic (2) ......................................... 911,908 911,196 911,196
Diluted (3) ....................................... 1,068,212 1,067,500 1,067,500
</TABLE>
Balance Sheet Data:
December 31,
---------------------
1997 1998
-------- ----------
Cash and cash equivalents ....................... 307 1,139
Working capital ................................. 171 (542)
Total assets .................................... 9,681 18,975
Short-term debt ................................. 6,853 15,361
Long-term debt, less current maturities ......... 1,221 1,453
Total liabilities ............................... 8,543 17,498
Stockholders' equity ............................ 1,138 1,477
(Footnotes appear on following page)
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- -------------
(1) Prior to the date of this Prospectus, Boat Tree has been an S Corporation
and therefore has not been subject to Federal or state corporate income
taxes (other than Florida franchise taxes). The S Corporation status has
been terminated as of the date of this Prospectus. Pro forma taxes on
income reflect a tax provision as if the Company had not been an S
Corporation during the indicated periods and represents a combined Federal
and State tax rate of approximately 39%. Historical earnings per share is
not presented because earnings per share of an S Corporation may not be
meaningful. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Notes 1 and 8 of Notes to
Financial Statements.
(2) Gives effect to the sale of 68,750 of the shares of Common Stock offered
hereby at an assumed price of $8.00 per share (the midpoint of the
currently anticipated range of the initial public offering price), which
represents the approximate number of shares of the Common Stock being sold
by the Company to fund the payment of $550,000 of the Final S Corporation
Distribution. See "Use of Proceeds" and Notes 1 and 5 of Notes to
Financial Statements.
(3) Gives effect to the exercise of the Regal Option. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Notes 1 and 6 of Notes to Financial Statements.
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RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. In addition to the other information in this Prospectus,
prospective investors should carefully consider the following risk factors in
evaluating the Company and its business before purchasing shares of the Common
Stock offered hereby.
Risks Relating to Proposed Expansion Plans
The Company's growth has resulted primarily from, and the Company
anticipates it will continue to be increasingly dependent upon, the addition of
new locations and continued sales and profitability from existing locations.
The Company has opened six locations since its inception in 1992, through the
acquisition of existing locations and the development of new facilities, and
will acquire five additional locations concurrently with the consummation of
this Offering in connection with the Closing Acquisitions. In addition, the
Company has allocated $2.7 million (44.5%) of the net proceeds of this Offering
to the acquisition, conversion and/or construction of at least four additional
locations during the next 18 months, as well as to the relocation and expansion
(into a superstore) of its Belmont, North Carolina store. See "Use of
Proceeds."
The Company's expansion plans are based upon acquiring existing locations
and/or opening new locations (either by purchasing or leasing existing
facilities and converting them into new dealership stores or by building new
stores). The success of the Company's expansion plans will depend upon a number
of general factors, including the identification of new markets and locations,
the Company's financial capabilities, the hiring, training and retention of
qualified personnel and the integration of new locations into existing
operations. The Company's growth strategy will also depend upon the Company's
ability to locate and acquire suitable acquisition candidates at a reasonable
cost and to dispose, timely and effectively, of the acquired entity's remaining
inventory, as well as the ability of the Company to sell its product line to
the customer base of the previous owner. In addition, the Company's expansion
plans will depend upon the Company's ability (i) to locate and lease or
construct suitable facilities at a reasonable cost, (ii) to obtain the reliable
data necessary to determine the size and product preferences of potential
markets, (iii) to introduce successfully the Company's product lines, and (iv)
to hire and train management and sales teams for each additional location.
There can be no assurance that suitable acquisition candidates will be
identified, that acquisitions will be consummated, that new facilities will be
constructed on a cost-effective basis or that the operations of any new or
acquired facility will be successfully integrated into the Company's operations
and managed profitably without substantial costs, delays, or other operational
or financial difficulties. In addition, increased competition for acquisition
candidates may increase purchase prices for acquisitions to levels beyond the
Company's financial capability or to levels that would not result in acceptable
returns. Consequently, there can be no assurance that the Company will be able
to achieve its expansion goals or, if it is able to expand its operations, that
the Company will be able to achieve greater operating income or profitability.
Moreover, the Company intends to finance its growth strategy and future
acquisitions through the proceeds of this Offering, seller financing, inventory
financing, working capital and through the issuance of shares of Common Stock
or securities exercisable or convertible into shares of Common Stock. If the
Company is not able to finance its growth strategy or future acquisitions
through additional financing or the use of its securities, such event may have
a material adverse effect on the Company's expansion plans and ultimate
profitability. To the extent that the Company finances future acquisitions in
whole or in part through the issuance of shares of Common Stock or securities
exercisable or convertible into shares of Common Stock, existing stockholders
may experience dilution in the voting power of their shares of Common Stock and
earnings per share may be negatively impacted. In addition, unforeseen
expenses, difficulties, and delays frequently encountered in connection with
rapid expansion could inhibit the Company's growth and negatively impact
profitability. Moreover, in light of the significant up-front capital
expenditures and pre-opening costs (which, in the case of a newly constructed
20,000 square foot superstore, are estimated to be approximately $1.2 million,
excluding the cost of the land and financed inventory) associated with the
establishment of a new location and the length of time required to consummate
an acquisition or construct a new facility and to open a new location, the
failure of any such new location to penetrate the market and achieve profitable
operations would have a material adverse effect on the Company.
In addition, while the Company will explore acquisitions of retail
locations that it believes are compatible with its business strategy and
regularly evaluates possible acquisition opportunities, as of the date of this
Prospectus, the Company has no agreements, commitments, understandings or
arrangements with respect to any
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<PAGE>
potential acquisitions other than the Closing Acquisitions. Consequently, there
is no basis for investors in this Offering to evaluate, prior to their
investment in the Company, the specific merits or risks of any potential
acquisition that the Company may undertake following the consummation of this
Offering. Moreover, under Delaware law, various forms of business combinations
can be effected without stockholder approval; accordingly, investors in this
Offering will, in some instances, neither receive nor otherwise have the
opportunity to evaluate any financial or other information which may be made
available to the Company in the future in connection with any acquisition and
must rely entirely upon the ability of management in selecting, structuring and
consummating acquisitions that are consistent with the Company's business
objectives. Although the Company will endeavor to evaluate the risks inherent
in a particular acquisition, there can be no assurance that the Company will
properly ascertain or assess all significant risk factors prior to consummating
any acquisition. Any inability to do so, particularly in instances in which the
Company has made significant capital investments, could have a material adverse
effect on the Company. In addition, there can be no assurance that any acquired
business will increase the revenues and/or market share of the Company or
otherwise improve the financial condition of the Company. See "Business --
Strategy -- Growth Strategy."
Possible Inability to Manage Growth
As a result of its recent and anticipated future expansion, the Company
has and will increasingly become vulnerable to a variety of business risks
associated with rapidly growing companies. The Company's current growth plans
require, among other things, reviewing and reorganizing acquired business
operations, product offerings, corporate infrastructure and systems, and
financial controls and assimilating newly acquired or start-up operations
within the Company's existing corporate structure. Such strategy may place
significant pressures on the Company's management and staff, working capital
and financial and management control systems as such growth will require
development and operation of a significantly larger business over a broader
geographical area. The failure to maintain or upgrade financial and management
control systems or to recruit additional staff or to respond effectively to
difficulties encountered during growth could have a material adverse effect on
the Company's business, financial condition and operating results. Although the
Company is taking steps to ensure that its systems and controls are adequate to
address its current and anticipated needs, including the recent hiring of a
Chief Financial Officer, and is attempting to recruit additional staff, there
can be no assurance that, if it continues to grow, the Company will be able to
effectively manage its growth, anticipate and satisfy all of the changing
demands and requirements that such growth will impose upon it or achieve
greater operating income or profitability. See "Business -- Strategy."
Reliance on Manufacturers and Other Key Vendors
The Company is substantially dependent upon its relationship with, and
receiving favorable pricing arrangements from, a limited number of major
manufacturers. AMRI purchased 69% of its new boats in 1998 from Regal (which
will be a principal stockholder of the Company upon the consummation of the
Offering), of which 98% were powered with Volvo-Penta engine packages. Sales of
Regal boats constituted approximately 68.5% of AMRI's sales in 1998 and it did
not purchase more than 10% of its new boats from any other manufacturer in
1998. Substantially all of Treasure Coast's purchases and sales for the year
ended December 31, 1998 were boats sold under the Wellcraft brand name. The
Company's success depends to a significant extent on the continued popularity
and reputation for quality of the boating products of its manufacturers,
particularly those of Regal and Wellcraft. In addition, any adverse change in
the financial condition, production efficiency, product development, and
management and marketing capabilities of the Company's manufacturers,
particularly those of Regal and Wellcraft, would have a substantial impact on
the Company's business. To ensure adequate inventory levels to support the
Company's expansion, it may be necessary for Regal and Wellcraft and other
manufacturers to increase production levels or allocate a greater percentage of
their production to the Company. In the event the operations of Regal and
Wellcraft or the Company's other major manufacturers were interrupted or
discontinued, the Company could experience temporary inventory shortfalls, or
disruptions or delays with respect to any unfilled purchase orders. Although
the Company believes that adequate alternate sources would be available that
could replace a manufacturer as a product resource, there can be no assurance
that such alternate sources will be available at the time of any such
interruption or that alternative products will be available at comparable
quality and prices or that the Company's customers would accept such
replacements. The cancellation of the
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<PAGE>
Company's agreement with Regal, Regal's arrangements with Volvo-Penta or the
Company's arrangements with Wellcraft or any other of its major manufacturers;
the unanticipated failure of any manufacturer or supplier to meet the Company's
requirements with regard to volume or design specifications; the Company's
inability to locate acceptable alternative manufacturers or suppliers; the
Company's failure to have dealer agreements renewed or to fail to comply with
the terms of the dealer agreements; or any substantial increase in a
manufacturer's pricing to the Company, could have a material adverse effect on
the Company's business, financial condition and operating results. See
"Business -- Relationship with Boat Manufacturers."
As is typical in the recreational boating industry, the Company generally
deals with its manufacturers pursuant to annually renewable (except for its
current agreement with Regal which has a three-year term), non-exclusive,
dealer agreements. These agreements do not contain any contractual provisions
concerning product pricing or required purchasing levels. Pricing is generally
established on a model year basis, but is subject to change at the
manufacturer's sole discretion. In the event that the Company's arrangements
with these manufacturers were changed or terminated for any reason, including
as a result of changes in competitive, regulatory or marketing practices, the
Company's business, financial condition and operating results could be
materially adversely affected. In addition, the timing, structure and amount of
manufacturer sales incentives and rebates could impact the timing and
profitability of the Company's sales. See "Business -- Relationship with Boat
Manufacturers."
Limited Number of Locations in Operation; Geographic Concentration
The Company currently has 10 retail locations in operation in Florida and
operates one location in North Carolina. Consequently, the results achieved to
date by the Company's retail locations may not be indicative of the prospects
or market acceptance of a larger number of locations, particularly in wider and
more geographically dispersed areas with varied demographic characteristics. In
addition, given the Company's current geographic concentration, adverse
publicity relating to the Company's retail locations or adverse weather
conditions could have a more pronounced adverse effect on the Company's
operating results than might be the case if the Company's retail locations were
more geographically dispersed. Adverse weather conditions or an economic
decline in the areas surrounding the Florida retail locations could have a
material adverse effect on the Company's operations and prospects. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Properties."
Impact of Seasonality and Weather on Operations;
Fluctuations in Operating Results
The recreational boating industry is highly seasonal. The Company's sales
are typically the strongest commencing in March, following the commencement of
the public boat and recreation show season and continuing through October. If
the Company's sales were to be substantially below seasonal norms, the
Company's business, financial condition and operating results would be
materially and adversely affected. Historically, the Company generally realizes
significantly lower sales in the fourth quarter of the year, resulting in
operating losses during that quarter. Weather patterns also may significantly
affect the Company's business and may adversely impact the Company's operating
results. For example, reduced rainfall levels, as well as excessive rain or
drought conditions, may render boating dangerous or inconvenient or force area
lakes to close, thereby reducing customer demand for the Company's products. In
addition, prolonged winter conditions or unseasonably cool weather may lead to
a shorter selling season in affected locations. Moreover, the Company's current
concentration in the Florida area and the limited geographic diversity of the
Company's near term expansion plans increases the potential adverse effect that
adverse weather conditions in the Company's locations could have on the
Company's operating performance. The Company's results of operations may also
fluctuate significantly from quarter to quarter as a result of a number of
other factors, including timing of opening of new locations (and expenses
incurred in connection therewith) by either the Company or its competitors, the
advertising activities of the Company and its competitors and the emergence of
new market entrants. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Seasonality."
Impact of General Economic and Industry Conditions
and Discretionary Consumer Spending
The Company's operations depend upon a number of factors relating to or
affecting consumer spending for luxury goods, such as recreational boats. The
Company's operations may be adversely affected by unfavorable
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<PAGE>
local, regional, or national economic developments or by uncertainties
regarding future economic prospects that reduce consumer spending in the
markets served by the Company. Consumer spending on luxury goods can also be
adversely affected as a result of declines in consumer confidence levels, even
if prevailing economic conditions are favorable. In an economic downturn,
consumer discretionary spending levels generally decline, often resulting in
disproportionately large reductions in the sale of luxury goods. Similarly,
rising interest rates could have a negative impact on consumers' ability or
willingness to finance boat purchases, which could also adversely affect the
ability of the Company to sell its products. There can be no assurance that the
Company could maintain its profitability during any such period of adverse
economic conditions or low consumer confidence. Changes in federal and state
tax laws, such as an imposition of luxury taxes on certain new boat purchases,
also could influence consumers' decisions to purchase products offered by the
Company and could have a negative effect on the Company's sales. See "Business
- -- Recreational Boating Industry."
Fuel Prices and Availability
The boats sold by the Company are powered by diesel or gasoline engines.
Consequently, an interruption in the supply, or a significant increase in the
price or tax on the sale, of such fuel on a regional or national basis could
have a material adverse effect on the Company's sales and operating results. At
various times in the past, diesel or gasoline fuel has been difficult to
obtain, and there can be no assurance that the supply of such fuels will not be
interrupted, that rationing will not be imposed or that the price of or tax on
such fuels will not significantly increase in the future. See "Business --
Recreational Boating Industry."
Limitations to Market Entry
Under certain of its dealer agreements, the Company must obtain permission
from its manufacturers to sell products in new markets. While the Company
believes it can sell products of other manufacturers in new markets, there can
be no assurance that all of the Company's current manufacturers will grant
permission for the Company to sell in new markets, or if unable to obtain such
permission, that the Company can obtain suitable alternative sources of supply.
See "Business -- Relationship with Boat Manufacturers."
Competition
The Company operates in a highly competitive environment. In addition to
facing competition generally from businesses seeking to attract discretionary
spending dollars, the recreational boat industry itself is highly fragmented,
resulting in intense competition for customers, access to quality products,
access to boat show space in new markets and suitable retail locations. The
Company relies heavily on boat shows to generate sales. If the Company is
impeded in its ability to participate in boat shows in its existing or targeted
markets, it could have a material adverse effect on the Company's business,
financial condition and operating results.
The Company competes primarily with single-location boat dealers and
national or regional chains and, with respect to sales of marine parts,
accessories and equipment, with national specialty marine parts and accessories
stores, catalog retailers, sporting goods stores and mass merchants. Dealer
competition continues to increase based on the quality of available products,
the price and value of the products and attention to customer service. There is
significant competition both within markets currently being served by the
Company and in the new markets that the Company plans to enter. The Company
competes in each of its markets with retailers of brands of boats and motors
not sold by the Company in that market. In addition, several of the Company's
competitors, especially those selling boating accessories, are large national
or regional chains that have substantially greater financial, marketing and
other resources than the Company. There can be no assurance that the Company
will continue to be able to compete successfully in the recreational boating
industry. See "Business -- Competition."
Income from Financing, Insurance and Extended Service Contracts
AMRI derives a substantial portion of its income from referral fees
relating to the origination and placement of customer financing and the sale of
extended service contracts and insurance products (collectively, "F&I
Products"), the most significant component of which is the income resulting
from AMRI's origination of customer financing contracts. In fiscal 1998, F&I
Products accounted for 5.2% of AMRI's gross revenues
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<PAGE>
and 20.6% of AMRI's gross profit. The availability of financing for the
Company's customers and the level of participation and other fees received by
the Company in connection with such financing depend on the particular
arrangement between the Company and the lender. The Company's lenders may
choose to pursue this business directly, rather than through intermediaries
such as the Company. Moreover, such lenders may impose terms in their retail
dealer financing arrangements with the Company that may be materially
unfavorable to the Company or its customers. For these and other reasons, the
Company could experience a significant reduction in income resulting from
reduced demand for its customer financing programs. In addition, if profit
margins are reduced on sales of F&I Products, or if these products are no
longer available, it would have a material adverse effect on the Company's
business, financial condition and operating results. Furthermore, under
optional extended service contracts with customers, the Company may experience
significant breach of warranty claims that may, in the aggregate, be material
to the Company's business. Beginning in 1996 and ceasing in April 1998, AMRI's
use of a "dealer rebate" by certain customers as part of, or in lieu of, a
customer down payment resulted in a breach of certain provisions of the retail
dealer financing agreements. Under the terms of these agreements, the use of
dealer rebates obligates the Company in such instances to indemnify the finance
company against foreclosure losses. Upon the Company's repayment of the
customer's defaulted obligation, the finance company will assign the customer's
loan contract to the Company and the Company would attempt to collect on the
customer's loan or repossess the underlying collateral. Repossessed boats would
be sold in the normal course of business through the Company's stores. In the
event that the Company's obligation to indemnify the finance company against
foreclosure losses exceeds the proceeds received by the Company from collection
on the loans and/or the sale of the repossessed boats (plus any amounts accrued
by the Company for such losses), there could be a material adverse effect on
the business, financial condition and operating results of the Company. See
"Business -- Finance and Insurance Products."
Dependence on and availability of Financing
The Company currently has significant floor plan financing and other
inventory lines of credit from financing institutions and other lenders, which
the Company believes are competitive. The Company also intends to finance the
real estate which is being acquired in connection with the Treasure Coast
Acquisition and the development of the North Carolina location. While the
Company believes it will be able to obtain competitive financing, there can be
no assurance that any new or existing financing will be available to the
Company. The failure to obtain sufficient financing on favorable terms and
conditions could have a material adverse effect on the business, financial
condition and operating results of the Company. See "-- Risks Relating to
Proposed Expansion Plans," "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Business -- Operations -- Floor Plan Financing."
Dependence on Floor Plan Financing
The Company finances substantially all of its new boat inventory through
two floor plan financing arrangements, which are collateralized by the
Company's new boat inventory, accounts receivable and equipment and are
personally guaranteed by Joseph G. Pozo, Jr., the Company's Chairman,
President, Chief Executive Officer and majority stockholder. Payments under the
floor plan contracts are due upon the sale of the related boat. As of December
31, 1997 and 1998, the maximum borrowings available under the two floor plan
financing arrangements were $8,750,000 and $15,750,000, respectively, and there
were outstanding balances under such arrangements of $6,250,000 and
$13,220,000, respectively. In addition, as of December 31, 1998, the Company
had a $2,000,000 revolving line of credit through TransAmerica Commercial
Finance Corp. ("TransAmerica"), one of the Company's floor plan lenders.
Generally, the floor plan financing arrangements are terminable upon 30 days'
written notice, or are due immediately in the event of a default. If a floor
plan financing arrangement is terminated, then, depending on the lender, either
all amounts due to the floor plan lender are either immediately due and payable
or outstanding amounts are payable pursuant to the terms of the floor plan
advance. The termination of any of the Company's floor plan financing
arrangements will have a material adverse effect on the business, financial
condition and results of operations of the Company. As of December 31, 1998,
the Company was not in compliance with certain of the financial covenants
provided in each of the Company's floor plan financing arrangements and
inventory lines of credit. The Company has obtained waivers of such
noncompliance through May 15, 1999. The Company will be in compliance with such
financial covenants upon the consummation of this Offering and for a period of
at least 12 months thereafter. If the Company is not in compliance
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<PAGE>
with any of the financial covenants in the future and the Company's inventory
lines of credit and floor plan financing arrangements are terminated, the
Company's business, financial condition and results of operations will be
materially adversely effected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Business -- Operations -- Floor Plan Financing."
Impact of Environmental and Other Regulatory Issues
On December 3, 1996, the U.S. Environmental Protection Agency ("EPA")
announced final regulations for outboard marine motors. Under the regulations,
manufacturers beginning with model year 1998 and phased in over nine years must
reduce hydrocarbon emissions by 75% from the previously acceptable levels. The
regulation only effects new engines. The EPA estimated that average costs for
these engines would, as a consequence, increase modestly, approximately 10-15%
or approximately $700 on the average power output engine. While the Company
believes that its outboard motor manufacturers currently meet or exceed the new
EPA standards and specifications and that any increased costs to the Company
resulting from such new regulations have already been factored into its
manufacturing costs, future costs of compliance and/or the inability of some or
all of the Company's manufacturers to comply with the EPA requirements in the
future, could have a material adverse affect on the Company's business,
financial condition and operating results.
The Company, in the ordinary course of its business, is required to
dispose of certain waste products that are regulated by state or federal
agencies. These products include waste motor oil, tires, batteries and certain
paints. The Company retains a waste management firm to dispose of such
products. If there were improper disposal of these products, it could result in
potential liability for the Company.
Additionally, certain states have required or are considering requiring a
license in order to operate a recreational boat. While such licensing
requirements are not expected to be unduly restrictive, regulations may
discourage potential first-time buyers, thereby limiting future sales and
adversely affecting the Company's business, financial condition and operating
results. See "Business -- Environmental and Other Regulatory Issues."
Product and Service Liability Risks
The Company may be exposed to potential liability for personal injury or
property damage claims relating to the use of products sold and serviced by the
Company. The resolution of product liability claims has not materially affected
the Company in the past. The Company believes that manufacturers of the
products sold by the Company generally maintain product liability insurance.
The Company also maintains third-party product liability insurance that it
believes to be adequate. There can be no assurance, however, that the Company
will not experience claims that are not covered by or that are in excess of its
insurance coverage. Any significant claims against the Company which are not
covered by insurance could adversely affect the Company's business, financial
condition, operating results and prospects as well as its business reputation
with potential customers. See "Business -- Product Liability" and "Business --
Insurance."
Dependence on Key Personnel
The future success of the Company will largely depend on the continued
efforts and abilities of Joseph G. Pozo, Jr., the Company's Chairman,
President, Chief Executive Officer and majority stockholder. Although the
Company has a three-year employment agreement with Mr. Pozo and maintains
key-person life insurance on his life in the amount of $1 million, the Company
cannot assure that Mr. Pozo will remain with the Company throughout the term of
the agreement, or thereafter, or that the proceeds of such insurance policy
would adequately compensate the Company for the lack of Mr. Pozo's services. In
addition, the Company will likely depend on the senior management of any
significant dealers it acquires in the future. The loss of the services of one
or more of these key employees before the Company is able to attract and retain
qualified replacement personnel could adversely affect the Company's business.
The success of the Company will also be dependent upon its ability to hire and
retain additional qualified management, sales and financial personnel. The
Company faces considerable competition for such personnel from other marketers
of recreational boats and other vehicles. There can be no assurance that the
Company will be able to attract and retain additional qualified personnel. Any
inability to do so could have a material adverse effect on the Company. See
"Management."
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Control by Existing Stockholders
Upon the consummation of this Offering, the officers and directors of the
Company will own approximately 36.7% of the outstanding shares of Common Stock
and Mr. Pozo, Jr. will own approximately 31.4% of the outstanding shares of
Common Stock. As a result, management will continue to be able to exert
significant influence over the outcome of all matters submitted to a vote of
the stockholders, including the election of directors, amendments to the
Company's Certificate of Incorporation and approval of significant corporate
transactions. Such consolidation of voting power could also have the effect of
delaying, deterring or preventing a change in control of the Company that might
be beneficial to other stockholders. See "Principal Stockholders" and
"Description of Securities."
Shares Eligible for Future Sale; Registration Rights
No prediction can be made as to the effect, if any, that future sales of
Common Stock or the availability of such shares for future sales will have on
the market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock, or the perception that such sales could
occur, could adversely affect prevailing market prices for the Common Stock.
Upon the consummation of this Offering, the Company will have 1,998,750 (not
including 1,250 shares to be issued in connection with the Marine America
Acquisition) shares of Common Stock issued and outstanding (2,148,750 if the
Representatives' over-allotment option is exercised in full), of which the
1,000,000 shares of Common Stock sold in this Offering will be freely tradeable
without restriction or further registration under the Securities Act, unless
such shares are acquired by an "affiliate" of the Company as that term is
defined under the Rule 144 under the Securities Act ("Rule 144"). The remaining
998,750 shares of Common Stock have not been registered under the Securities
Act and may not be sold unless they are registered or unless an exemption from
registration, such as the exemption provided by Rule 144, is available. Such
unregistered shares of Common Stock will become eligible for sale pursuant to
Rule 144, subject to the volume and manner of sale limitations prescribed by
Rule 144 and/or to the contractual restriction of a 12-month "lock-up"
agreement with the Representative, at various times commencing 90 days
following the date of this Prospectus. In addition, the Representative has been
granted certain demand and "piggyback" registration rights commencing one year
from the date of this Prospectus with respect to the registration under the
Securities Act of the securities issuable upon exercise of the Representative's
Warrants. The exercise of such rights could result in substantial expense to
the Company. Furthermore, in the event the Representative exercises its
registration rights, the Representative and any holder of such warrants who is
a market maker of the Company's securities prior to such distribution, will be
unable to make a market in the Company's securities for up to nine days prior
to the commencement of such distribution and until such distribution is
completed. If the Representative ceases making a market, the market and market
prices for the securities may be adversely affected and the holders thereof may
be unable to sell such securities. See "Shares Eligible for Future Sale" and
"Underwriting."
Absence of Public Market; Possible Volatility of Stock Price
Prior to this Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or be sustained in the future or that the market price of the Common Stock will
not decline below its initial public offering price. If an active public market
for the Common Stock does not develop, the market price and liquidity of the
Common Stock will likely be materially adversely affected. The initial public
offering price of the Common Stock, which will be determined by negotiations
between the Company and the Representative, will not necessarily be related to
the Company's asset value, net worth or other established criteria of value and
may not be indicative of the market price for the Common Stock after this
Offering. The trading price of the Common Stock could be subject to wide
fluctuations in response to variations in the Company's quarterly operating
results, changes in earnings estimates by analysts, conditions in the Company's
businesses or general market or economic conditions. In addition, in recent
years, the stock market has experienced extreme price and volume fluctuations.
These fluctuations have had a substantial effect on the market prices for many
growth companies often unrelated to the operating performance of the specific
companies. Such market fluctuations could have a material adverse effect on the
market price for the Common Stock. See "Underwriting."
No Dividends Anticipated
The Company intends to retain all future earnings for use in the
development of its business and does not anticipate paying any dividends in the
foreseeable future. See "Dividend Policy."
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Immediate and Substantial Dilution to New Investors
Purchasers of Common Stock in this Offering will acquire approximately
50.0% of the then outstanding Common Stock for 99.3% of the total consideration
paid for the then outstanding Common Stock (based on an assumed price of $8.00
per share, the midpoint of the currently anticipated range of the initial
public offering price) and will experience immediate and substantial dilution
in net tangible book value per share. As of December 31, 1998, AMRI had a net
tangible book value of approximately $1.75 per share. After giving retroactive
effect to the sale of the shares of Common Stock offered hereby and the
anticipated use of the estimated net proceeds therefrom and certain other
transactions to be effected by the Company upon the consummation of this
Offering, the as adjusted net tangible book value of AMRI at December 31, 1998
would have been $2.57 per share, representing an immediate dilution of $5.43
(67.9%) per share to purchasers in this Offering. See "Dilution."
Adverse Effect of the Authorization of Preferred Stock;
Anti-Takeover Provisions Affecting Stockholders
The Company's Certificate of Incorporation authorizes the Company's Board
of Directors to issue 1,500,000 shares of "blank check" preferred stock of the
Company (the "Preferred Stock") and to fix the rights, preferences, privileges
and restrictions, including voting rights, of these shares, without further
stockholder approval. The rights of the holders of Common Stock will be subject
to and may be adversely affected by the rights of holders of any Preferred
Stock that may be issued in the future. The ability to issue Preferred Stock
without stockholder approval could have the effect of making it more difficult
for a third party to acquire a majority of the voting stock of the Company,
thereby delaying, deferring or preventing a change in control of the Company.
Moreover, following the consummation of this Offering, the Company will be
subject to the State of Delaware's "business combination" statute, which
prohibits a publicly-traded Delaware corporation from engaging in various
business combination transactions with any of its 15% stockholders for a period
of three years after the date of the transaction in which the person became an
"interested stockholder," unless certain approvals are obtained or other events
occur. The statute could prohibit or delay mergers or other attempted takeovers
or changes in control with respect to the Company and, accordingly, may
discourage attempts to acquire the Company. See "Description of Securities."
Year 2000 Issues
Many currently installed computer systems and software products are coded
to accept only two-digit entries to represent years in the date code field.
Computer systems and products that do not accept four-digit year entries will
need to be upgraded or replaced to accept four-digit entries to distinguish
years beginning with 2000 from prior years. Management is in the process of
becoming compliant with the Year 2000 requirements and believes that its
management information system will comply with the Year 2000 requirements on a
timely basis at a minimal cost. The Company currently does not anticipate that
it will experience any material disruption to its operations as a result of the
failure of its management information system to be Year 2000 compliant. There
can be no assurance, however, that computer systems operated by third parties,
including customers, vendors, credit card transaction processors, and financial
institutions, with which the Company's management information system interface
will continue to properly interface with the Company's system and will
otherwise be compliant on a timely basis with Year 2000 requirements. The
Company currently is developing a plan to evaluate the Year 2000 compliance
status of third parties with which its system interfaces. Any failure of the
Company's management information system or the systems of third parties to
timely achieve Year 2000 compliance could have a material adverse effect on the
Company's business, financial condition, and operating results. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Forward-Looking Information May Prove Inaccurate
This Prospectus contains various forward-looking statements that are based
on the Company's beliefs as well as assumptions made by and information
currently available to the Company. When used in this Prospectus, the words
"believe," "expect," "anticipate," "estimate" and similar expressions are
intended to identify forward-looking statements. The accuracy of such
forward-looking statements is subject to certain risks, uncertainties and
assumptions, including those identified above under "Risk Factors." Should one
or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, estimated, or projected. The Company cautions potential purchasers
not to place undue reliance on any such forward-looking statements.
19
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,000,000 shares of
Common Stock offered hereby are estimated to be approximately $5,970,000
($7,050,000 if the Representatives' over-allotment option is exercised in
full), assuming an initial public offering price of $8.00 per share (the
midpoint of the currently anticipated range of the initial public offering
price) and after deducting underwriting discounts and commissions of $560,000
and estimated offering expenses of $1,470,000. The Company expects to use the
net proceeds substantially as follows:
<TABLE>
<CAPTION>
Approximate
Approximate Percentage of
Anticipated Use of Net Proceeds Dollar Amount Net Proceeds
- ------------------------------- --------------- --------------
<S> <C> <C>
Acquisition and construction of retail locations (1) ......... $2,658,000 44.5%
Closing Acquisitions (2) ..................................... 2,597,000 43.5
Final S Corporation Distribution (3) ......................... 550,000 9.2
Management information systems (4) ........................... 100,000 1.7
Working capital .............................................. 65,000 1.1
---------- -----
Total ...................................................... $5,970,000 100.0%
========== =====
</TABLE>
- ------------
(1) Represents $350,000 to be used in connection with the Company's relocation
of the Belmont, North Carolina location to, and construction of a new
superstore on, property recently acquired by the Company in Cornelius,
North Carolina, as well as $2,308,000 allocated to the acquisition,
conversion and/or construction of at least four additional retail
locations (including at least one additional superstore) during the next
18 months. The Company expects the average cost to construct a new 20,000
square foot superstore to be approximately $1,200,000, excluding the cost
of land. See "Business -- Strategy -- Growth Strategy."
(2) Represents $2,497,000 in connection with the Treasure Coast Acquisition
and $100,000 to repay a note issued in connection with the Marine America
Acquisition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(3) Represents a portion of the Final S Corporation Distribution to be made to
the stockholders of Boat Tree upon the consummation of this Offering. See
"Prospectus Summary -- Pending S Corporation Termination."
(4) Represents amounts to be utilized to upgrade and expand the Company's
management information systems. See "Business -- Management Information
Systems."
If the Underwriters exercise their over-allotment option in full, the
Company will realize additional net proceeds of $1,080,000. Such proceeds, if
received, will be used for working capital and general corporate purposes.
Pending their uses as set forth above, the Company intends to invest the net
proceeds of this Offering in short-term, investment grade, interest-bearing
securities.
<PAGE>
The allocation of the net proceeds set forth above represents the
Company's best estimates based on its proposed plans and assumptions relating
to its operations and growth strategy and on current economic and industry
conditions. The amounts actually expended for the above purposes may vary
significantly; furthermore, new purposes may take precedence over those listed
above, depending upon numerous factors, including the availability of desirable
dealership acquisition opportunities, changes in economic and/or industry
conditions, creditor and supplier relations, the progress and timing of new
dealership openings, government regulation and future revenues and
expenditures. The Company believes that the proceeds of this Offering, together
with anticipated revenues from operations and its existing capital resources,
will be sufficient to satisfy its contemplated cash requirements for at least
18 months following the consummation of this Offering, including for the
opening and/or acquisition of at least four additional locations, the
development of a superstore in Belmont, North Carolina (in connection with
which the Company may choose to fund a portion of the costs therefor through
the utilization of seller, inventory and real estate financing and the use of
the Company's securities) during such period. In the event, however, that the
Company's plans change (due to changes in market conditions, competitive
factors or new opportunities that may become available in the future), its
assumptions change or prove to be inaccurate or if the proceeds of this
Offering or cash flows prove to be insufficient to implement its business
20
<PAGE>
and expansion plans (due to unanticipated expenses, difficulties or otherwise),
the Company could be required to seek additional financing prior to such time.
Consequently, there can be no assurance that the proceeds of this Offering will
be sufficient to permit the Company to implement its business plan or that any
assumptions relating to the implementation of such plans will prove to be
accurate. Moreover, although the Company has applied for a $10 million line of
credit from TransAmerica Commercial Finance Corp. ("TransAmerica"), there can
be no assurance that such application will be granted or that any additional
financing, if needed, would be available to the Company on commercially
reasonable terms, or at all.
DILUTION
The difference between the initial public offering price per share of
Common Stock and the net tangible book value per share of Common Stock after
the Offering constitutes the dilution to investors in the Offering. Net
tangible book value per share on any given date is determined by dividing the
net tangible book value of the Company (total tangible assets less total
liabilities) on such date by the number of then outstanding shares of Common
Stock.
At December 31, 1998, the net tangible book value of AMRI was $1,477,152,
or $1.75 per share. After giving retroactive effect to (i) the termination of
Boat Tree's S Corporation status, (ii) the consummation of the Treasure Coast
Acquisition, (iii) the exercise of the Regal Option, and (iv) the sale of the
1,000,000 shares of Common Stock offered hereby at an assumed price of $8.00
per share (the midpoint of the currently anticipated range of the initial
public offering price) and the receipt and anticipated application of the
estimated net proceeds therefrom, the as adjusted net tangible book value of
AMRI at December 31, 1998 would have been $5,131,162 or $2.57 per share,
representing an immediate increase in net tangible book value of $.82 per share
to existing stockholders and an immediate dilution of $5.43 (67.9%) per share
to investors in this Offering.
The following table illustrates the foregoing information with respect to
dilution to new investors on a per share basis:
<TABLE>
<S> <C> <C> <C>
Assumed initial public offering price ........................ $ 8.00
Net tangible book value before the Offering ................. $ 1.75
Increase attributable to investors in the Offering .......... .82
------
Adjusted net tangible book value after the Offering .......... 2.57
------
Dilution to investors in the Offering ........................ $ 5.43
======
</TABLE>
The following table sets forth, with respect to existing stockholders
(giving retroactive effect to the exercise of the Regal Option and the Treasure
Coast Acquisition) and with respect to the investors in the Offering, a
comparison of the number of shares of Common Stock purchased from the Company,
the percentage ownership of such shares, the aggregate consideration paid, the
percentage of total consideration paid and the average price paid per share.
<TABLE>
<CAPTION>
Shares Acquired Total Consideration
------------------------ ------------------------ Average Price
Number Percent Amount Percent Per Share
------------ --------- ------------ --------- --------------
<S> <C> <C> <C> <C> <C>
Existing stockholders ............. 998,750 50.0% $ 55,110 .7% $ .06
Investors in the Offering ......... 1,000,000 50.0 8,000,000 99.3 $ 8.00(1)
--------- ----- ---------- -----
1,998,750 100.0% $8,055,110 100.0%
========= ===== ========== =====
</TABLE>
- ------------
(1) Based on the midpoint of the currently anticipated range of the initial
public offering price.
21
<PAGE>
If the Underwriters' over-allotment option is exercised in full, the new
investors will have paid $9,200,000 (based on an assumed offering price of
$8.00 per share, the midpoint of the currently anticipated range of the initial
public offering price) for 1,150,000 shares of Common Stock, representing
approximately 99.4% of the total consideration for 53.5% of the total number of
shares outstanding.
DIVIDEND POLICY
From June 1992 through the date of this Prospectus, Boat Tree was an S
Corporation for Federal and Florida state income tax purposes. As a result,
during and for such period, the net income of Boat Tree for Federal and certain
state income tax purposes is reported by, and taxed directly to, the
stockholders of Boat Tree rather than to Boat Tree itself. As an S Corporation,
Boat Tree has made distributions in the form of cash dividends to its
stockholders, and the Company will make the Final S Corporation Distribution to
such stockholders in the amount of $700,000 of which $550,000 will be paid out
of the net proceeds of this Offering and the balance of which will be paid out
of working capital prior to the consummation of this Offering. The Company
currently intends to retain all future available earnings, if any, for the
development and growth of its business and, therefore, does not anticipate
paying any cash dividends in the foreseeable future. Moreover, certain of the
Company's financing agreements restrict the distribution of dividends.
22
<PAGE>
CAPITALIZATION
(Dollars in thousands, except per share data)
The following table sets forth the short-term debt and capitalization of
AMRI, as of December 31, 1998, on (i) an actual basis, (ii) a pro forma basis
to reflect the termination of the Company's S Corporation status and the
consummation of the Treasure Coast Acquisition (including the utilization of a
portion of the net proceeds from the Offering in connection therewith), and
(iii) a pro forma as adjusted basis to give retroactive effect to the exercise
of the Regal Option and the issuance and sale of the balance of the 1,000,000
shares of Common Stock offered hereby at an assumed price of $8.00 per share
(the midpoint of the currently anticipated range of the initial public offering
price) and the anticipated application of the estimated net proceeds therefrom.
This table should be read in conjunction with "Pro Forma Financial Data" and
the financial statements, including the notes thereto, appearing elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
December 31, 1998
------------------------------------
Pro
Forma As
Actual Pro Forma Adjusted
---------- ----------- ---------
<S> <C> <C> <C>
Short-term debt:
Floor plan payable ................................... $13,221 $19,593 $19,593
Lines of credit ...................................... 1,894 2,405 2,405
Current maturities of long-term debt ................. 246 246 246
------- ------- -------
Total short-term debt .............................. 15,361 22,244 22,244
======= ======= =======
Long-term debt, less current maturities ............... 1,453 2,240 2,240
======= ======= =======
Stockholders' equity:
Preferred Stock, $.01 par value; 1,500,000 shares
authorized; none issued ............................ -- -- --
Common Stock, $.01 par value: 20,000,000 shares
authorized; 842,446 shares issued and outstand-
ing (actual), 1,329,531 shares issued and out-
standing (pro forma)(1), and 1,998,750 shares
issued and outstanding (as adjusted)(1)(2) ......... 8 12 20
Additional paid-in capital ........................... 463 4,066 6,981
Retained earnings .................................... 1,006 1,110 --
------- ------- -------
Total stockholders' equity ......................... 1,477 4,078 7,001
------- ------- -------
Total capitalization .............................. $ 2,930 $ 6,318 $ 9,241
======= ======= =======
</TABLE>
- ------------
(1) Includes 418,335 and 68,750 of the shares of Common Stock offered hereby
needed to finance the cash portion of the Treasure Coast Acquisition
purchase price and the payment of $550,000 of the Final S Corporation
Distribution, respectively, in each case, based on an assumed price of
$8.00 per share (the midpoint of the currently anticipated range of the
initial public offering price). See "Management's Discusssion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
(2) Includes 156,304 shares of Common Stock to be issued upon the consummation
of this Offering in connection with the exercise of the Regal Option. See
"Certain Transactions."
23
<PAGE>
PRO FORMA FINANCIAL DATA
Introduction
The following pro forma financial data is based upon the historical
financial statements of AMRI and has been prepared to illustrate the effects on
such historical financial data of the Treasure Coast Acquisition and the
Offering (including the exercise of the Regal Option). The effects of the
Offering proceeds have been isolated from the effects of the Treasure Coast
Acquisition, except to the extent that the Offering proceeds will be used to
finance the Treasure Coast Acquisition. The unaudited pro forma combined
statement of operations for the years ended December 31, 1997 and 1998 gives
effect to the Treasure Coast Acquisition and this Offering as if they had been
completed as of January 1, 1997. The unaudited pro forma combined balance sheet
as of December 31, 1998 gives effect to the Treasure Coast Acquisition and this
Offering as if such transactions had been completed on December 31, 1998. The
Treasure Coast Acquisition is reflected using the purchase method of accounting
for business combinations.
The pro forma financial data is provided for comparative purposes only and
does not purport to represent the actual financial position or results of
operations of the Company that actually would have been obtained if the
Treasure Coast Acquisition had been consummated on the dates specified, nor is
it necessarily indicative of the results of operations that may be achieved in
the future.
The pro forma financial data are based on certain assumptions and
adjustments described in the notes thereto and should be read in conjunction
therewith. See "Management's Discussion and Analysis of Financial Condition and
results of Operations" and the financial statements, including the notes
thereto, appearing elsewhere herein.
24
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
For the year ended December 31, 1997
<TABLE>
<CAPTION>
Historical
---------------------------
Treasure
AMRI Coast
------------- ------------
<S> <C> <C>
Total Revenue .................................... $ 21,226 $9,726
Cost of sales .................................... 16,327 7,815
----------- -----
Gross Profit .................................... 4,899 1,911
Selling, general and administrative expenses ..... 4,085 1,765
Income from operations .......................... 814 146
Other income ..................................... 33 --
Interest expense ................................. (333) (156)
----------- -----
Income before taxes (benefit) ................... 514 (10)
Pro forma taxes on income ........................ 198 (4)
----------- -----
Pro forma net income ........................... $ 316 $ (6)
----------- -----
Net income per common share:
Basic ........................................... $ .35
Diluted ......................................... $ .30
Weighted average common shares outstanding:
Basic ........................................... 911,196
Diluted ......................................... 1,067,500
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
----------------------------------------------------------------
Acquisition Offering Combined
Adjustments Combined Adjustments as Adjusted
------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Total Revenue .................................... $ -- $ 30,952 $ -- $ 30,952
Cost of sales .................................... -- 24,142 -- 24,142
----------- ----------- --------- -----------
Gross Profit .................................... -- 6,810 -- 6,810
Selling, general and administrative expenses ..... (90) (A) 5,904 -- 5,904
19 (B)
125 (C)
-----------
Income from operations .......................... (54) 906 -- 906
Other income ..................................... -- 33 -- 33
Interest expense ................................. (80) (D) (569) -- (569)
----------- ----------- --------- -----------
Income before taxes (benefit) ................... (134) 370 -- 370
Pro forma taxes on income ........................ (52) (E) 142 -- 142
----------- ----------- --------- -----------
Pro forma net income ........................... $ (82) $ 228 $ -- $ 228
----------- ----------- --------- -----------
Net income per common share:
Basic ........................................... $ .17 $ .11
Diluted ......................................... $ .15 $ .11
Weighted average common shares outstanding:
Basic ........................................... 418,335 (F) 1,329,531 669,219 1,998,750
Diluted ......................................... 418,335 (F) 1,485,835 512,915 1,998,750
</TABLE>
<PAGE>
For the year ended December 31, 1998
<TABLE>
<CAPTION>
Historical
-------------------------
Treasure
AMRI Coast
------------- ----------
<S> <C> <C>
Total Revenue .................................... $ 25,563 $17,801
Cost of sales .................................... 19,083 13,757
----------- -------
Gross Profit .................................... 6,480 4,044
Selling, general and administrative expenses ..... 5,418 3,090
Income from operations .......................... 1,062 954
Other income ..................................... 67 --
Interest expense ................................. (525) (204)
----------- -------
Income before taxes ............................. 604 750
Pro forma taxes on income (benefit) .............. 232 294
----------- -------
Pro forma net income ........................... $ 372 $ 456
=========== =======
Net income per common share:
Basic ........................................... $ .41
Diluted ......................................... $ .35
Weighted average common shares outstanding:
Basic ........................................... 911,196
Diluted ......................................... 1,067,500
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
----------------------------------------------------------------
Acquisition Offering Combined
Adjustments Combined Adjustments as Adjusted
------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Total Revenue .................................... $ -- $ 43,364 $ -- $ 43,364
Cost of sales .................................... -- 32,840 -- 32,840
----------- ----------- --------- -----------
Gross Profit .................................... -- 10,524 -- 10,524
Selling, general and administrative expenses ..... (75)(A) 8,530 -- 8,530
(11)(B)
125 (C)
(92)(G)
75 (H)
-----------
Income from operations .......................... (22) 1,994 -- 1,994
Other income ..................................... -- 67 67
Interest expense ................................. (80)(D) (809) -- (809)
----------- ----------- --------- -----------
Income before taxes ............................. (102) 1,252 -- 1,252
Pro forma taxes on income (benefit) .............. (40) 486 -- 486
----------- ----------- --------- -----------
Pro forma net income ........................... $ (62) $ 766 $ -- $ 766
=========== =========== ========= ===========
Net income per common share:
Basic ........................................... $ .58 $ .38
Diluted ......................................... $ .52 $ .38
Weighted average common shares outstanding:
Basic ........................................... 418,335 (F) 1,329,531 669,219 1,998,750
Diluted ......................................... 418,335 (F) 1,485,835 512,915 1,998,750
</TABLE>
(Footnotes appear on following page)
25
<PAGE>
- ------------
(A) To adjust rent expense to reflect the acquisition from Treasure
Services of the real property in Stuart, Florida on which a retail boat
dealership is located.
(B) To adjust depreciation expense to reflect a change in depreciation
expense attributable to (i) assets of Treasure Coast which were not
acquired by the Company and (ii) a recalculation of depreciation expense
based upon the fixed assets acquired by the Company.
(C) To reflect the amortization of goodwill acquired through the Treasure
Coast Acquisition over a period of 15 years.
(D) To adjust interest expense to reflect additional borrowings which will
be partially offered by a reduction in long-term debt not assumed by the
Company.
(E) To adjust income tax expense (benefit) as a result of effects of the
pro forma acquisition adjustments on the Statement of Income.
(F) Represents 418,335 shares of Common Stock offered hereby needed to
finance (including a pro rata portion of the Offering costs) the cash
portion of the Treasure Coast Acquisition purchase price, based on an
assumed price of $8.00 per share (the midpoint of the currently
anticipated range of the initial public offering price).
(G) To adjust operating expenses to reflect a decrease in expenses
attributable to assets not acquired by the Company.
(H) To adjust compensation expense to reflect the terms of an employment
agreement with a principal of Treasure Coast as if the terms of the
employment agreement had been in effect commencing January 1, 1997.
Compensation expense would not have been affected in 1997 as a result of
the employment agreement.
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEETS
As of December 31, 1998
(in thousands)
<TABLE>
<CAPTION>
Historical
---------------------
Treasure
AMRI Coast
--------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents ....... $ 1,139 $ --
Accounts receivable ............. 642 200
Inventories ..................... 13,702 7,226
Prepaid expenses ................ 19 --
Deferred income taxes ........... -- --
------- ------
Total current assets ............. 15,502 7,426
Property and equipment, net ...... 2,744 246
Goodwill ......................... -- --
Other assets ..................... 729 165
------- ------
Total assets ..................... $18,975 $7,837
======= ======
Current liabilities:
Floorplan payable ............... $13,221 $6,372
Line of credit/Note payable ..... 1,894 170
Accounts payable ................ 368 282
Customer deposits ............... 6 --
Accrued expenses ................ 310 152
Current maturities of
long-term debt ................. 246 6
------- ------
Total current liabilities ........ 16,045 6,982
Long-term debt, less
current maturities .............. 1,453 26
Deferred income taxes ............ -- --
------- ------
Total liabilities ................ 17,498 7,008
------- ------
Stockholders' equity:
Common stock .................... 8 --
Additional paid-in-capital ...... 463 105
Retained earnings ............... 1,006 724
------- ------
Total stockholders' equity ...... 1,477 829
------- ------
Total liabilities and
stockholders equity ............ $18,975 $7,837
======= ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
-----------------------------------------------------------------------------
S-Corp
Termination Acquisition Offering Combined
Adjustment(A) Adjustments(B) Combined Adjustments(C) as Adjusted
--------------- ---------------- ---------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents ....... $ -- $ (50) $ 1,089 $3,599 $ 4,688
Accounts receivable ............. -- (200) 642 -- 642
Inventories ..................... -- (140) 20,788 -- 20,788
Prepaid expenses ................ -- -- 19 -- 19
Deferred income taxes ........... 106 -- 106 -- 106
--------- ----- ------- ------ -------
Total current assets ............. 106 (390) 22,644 3,599 26,243
Property and equipment, net ...... -- 1,015 4,005 -- 4,005
Goodwill ......................... -- 1,870 1,870 -- 1,870
Other assets ..................... -- (165) 729 (676) 53
--------- ----- ------- ------ -------
Total assets ..................... $ 106 $2,330 $29,248 $2,923 $32,171
========= ====== ======= ====== =======
Current liabilities:
Floorplan payable ............... $ -- $ -- $19,593 $ -- $19,593
Line of credit/Note payable ..... -- 341 2,405 -- 2,405
Accounts payable ................ -- (282) 368 -- 368
Customer deposits ............... -- -- 6 -- 6
Accrued expenses ................ -- (152) 310 -- 310
Current maturities of
long-term debt ................. -- (6) 246 -- 246
--------- -------- ------- ------ -------
Total current liabilities ........ -- (99) 22,928 -- 22,928
Long-term debt, less
current maturities .............. -- 761 2,240 -- 2,240
Deferred income taxes ............ 2 -- 2 -- 2
--------- ------- ------- ------ -------
Total liabilities ................ 2 662 25,170 -- 25,170
--------- ------- ------- ------ -------
Stockholders' equity:
Common stock .................... -- 4 12 8 20
Additional paid-in-capital ...... 1,110 2,388 4,066 2,915 6,981
Retained earnings ............... (1,006) (724) -- -- 0
--------- ------- ------- ------ -------
Total stockholders' equity ...... 104 1,668 4,078 2,923 7,001
--------- ------- ------- ------ -------
Total liabilities and
stockholders equity ............ $ 106 $2,330 $29,248 $2,923 $32,171
========= ======= ======= ====== =======
</TABLE>
(Footnotes appear on following page)
26
<PAGE>
- ------------
(A) Records a net deferred tax asset of $104,000 and reclassification of
retained earnings to additional paid in capital as a result of the
Reorganization and related termination of Boat Tree's S Corporation
status.
(B) Records the purchase of substantially all of the assets of Treasure
Coast and Treasure Services and related debt financing of a portion of
the inventory and real estate and eliminates assets not being purchased
and liabilities not assumed. The consideration paid upon the
consummation of the Treasure Coast Acquisition will consist of a cash
payment of $2.5 million (based on pro forma inventory balances as of
December 31, 1998). The $2.5 million cash payment will be funded by the
sale of 418,335 of the shares of Common Stock offered hereby at an
assumed price of $8.00 per share net of assumed Offering costs. The
balance of the purchase price is anticipated to be funded through
additional floor plan financing of $6.9 million, a real estate mortgage
note payable of approximately $800,000, Treasure Coast's outstanding
floor plan and note payable line of credit balance as of December 31,
1998.
The acquisition of assets and anticipated financing are as follows:
<TABLE>
<CAPTION>
<S> <C>
Inventory ............................................... $ 7,086,000
Equipment ............................................... 150,000
Land .................................................... 850,000
Buildings and improvements .............................. 261,000
Goodwill ................................................ 1,870,000
------------
Total purchase price .................................... 10,217,000
Less assumed floor plan financing ....................... (6,883,000)
Less assumed real estate financing ...................... (787,000)
Less non refundable deposit paid prior to closing ....... (50,000)
------------
Cash used for Treasure Coast Acquisition ................ $ 2,497,000
============
</TABLE>
(C) Records the (i) receipt and application of the net proceeds from the
sale of the 1,000,000 shares of Common Stock offered hereby (less the
418,335 shares referred to in footnote (B) above) based upon an assumed
offering price of $8.00 per share, and (ii) the issuance of 156,304
shares of Common Stock upon the consummation of this Offering in
connection with the exercise of the Regal Option.
27
<PAGE>
SELECTED FINANCIAL DATA
(Dollars in thousands, except per share data)
The following selected statement of income data and balance sheet data as
of and for each of the years in the five-year period ended December 31, 1998,
are derived from the financial statements of AMRI (not including Treasure
Coast) included elsewhere herein (except that the pro forma share and per share
data gives retroactive effect to the exchange of all of the capital stock of
Boat Tree for shares of Common Stock in connection with the Reorganization).
The selected statement of income data for the years ended December 31, 1996,
1997 and 1998 and the selected statement of balance sheet data as of December
31, 1996, 1997 and 1998 have been audited by BDO Seidman, LLP, independent
auditors, whose report thereon is included elsewhere herein. The following data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements of
AMRI, including the notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------------------
1994 1995 1996 1997 1998
------------- ------------ ------------- ------------- -------------
(unaudited) (unaudited)
------------- ------------
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Sales and service revenue ...................... $ 6,173 $ 10,026 $ 13,058 $ 20,183 $ 24,229
Finance and insurance income ................... 193 308 591 1,043 1,334
---------- ---------- ---------- ---------- ----------
Total revenue ................................ 6,366 10,334 13,649 21,226 25,563
Cost of sales and service revenue .............. 5,362 8,656 10,544 16,327 19,083
---------- ---------- ---------- ---------- ----------
Gross profit ................................. 1,004 1,678 3,105 4,899 6,480
Selling, general and administrative expenses ... 676 1,318 2,493 4,085 5,418
---------- ---------- ---------- ---------- ----------
Income from operations ....................... 328 360 612 814 1,062
Other income ................................... -- -- 10 33 67
Interest expense ............................... (77) (158) (239) (333) (525)
---------- ---------- ---------- ---------- ----------
Net income .................................. 251 202 383 514 604
Pro Forma Unaudited Statements of
Income Data (1):
Pro forma taxes on income ...................... 98 79 150 198 232
---------- ---------- ---------- ---------- ----------
Pro forma net income ........................... $ 153 $ 123 $ 233 $ 316 $ 372
========== ========== ========== ========== ==========
Pro forma net income per share:
Basic(2) .................................... $ .17 $ .13 $ .26 $ .35 $ .41
Diluted(3) .................................. $ .14 $ .12 $ .22 $ .30 $ .35
Pro forma weighted average shares
outstanding:
Basic(2) .................................... 911,908 911,908 911,908 911,196 911,196
Diluted(3) .................................. 1,068,212 1,068,212 1,068,212 1,067,500 1,067,500
</TABLE>
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------
1994 1995 1996 1997 1998
------------- ------------ -------- -------- ----------
(unaudited) (unaudited)
------------- ------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents ....................... 271 213 340 307 1,139
Working capital ................................. 291 579 18 171 (542)
Total assets .................................... 1,434 4,042 7,292 9,681 18,975
Long-term debt, less current maturities ......... 141 99 1,393 1,221 1,453
Total liabilities ............................... 1,185 3,571 6,622 8,543 17,498
Stockholders' equity ............................ 249 471 670 1,138 1,477
</TABLE>
(Footnotes appear on following page)
28
<PAGE>
- ------------
(1) Prior to the date of this Prospectus, AMRI was an S Corporation and
therefore was not subject to Federal or state corporate income taxes
(other than Florida franchise taxes). The S Corporation status has been
terminated as of the date of this Prospectus. Pro forma taxes on income
reflect a tax provision as if the Company had not been an S Corporation
during the indicated periods. The pro forma provision for income taxes
represents a combined Federal and state tax rate of approximately 39%.
Historical earnings per share is not presented because earnings per share
of an S Corporation may not be meaningful. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and Notes 1
and 8 of Notes to Financial Statements.
(2) Gives effect to the sale of 68,750 shares of the Common Stock offered
hereby at an assumed price of $8.00 per share (the midpoint of the
currently anticipated range of the initial public offering price), which
represent the approximate number of shares of the Common Stock being sold
by the Company to fund the payment of the Final S Corporation Distribution
of $550,000. See "Use of Proceeds" and Notes 1 and 5 of Notes to Financial
Statements.
(3) Gives effect to the exercise of the Regal Option for 156,304 shares of
Common Stock. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Notes 1 and 6 of Notes to
Financial Statements.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company is one of the largest retailers of recreational boats in
Florida. In addition to 10 Florida locations, the Company operates a retail
location in North Carolina. The Company has experienced substantial growth as a
result of both internal growth and acquisitions. For the years ended December
31, 1997 and 1998, the Company had total pro forma combined revenue of
$30,952,000 and $43,364,000, respectively, and total pro forma combined net
income before taxes of $370,000 and $1,252,000, respectively. For the years
ended December 31, 1997 and 1998, the Company sold, on a pro forma combined
basis, 802 and 1,032 new boats, respectively, generating revenues of
approximately $21,900,000 and $31,700,000, respectively, and 366 and 449 used
boats, respectively, for revenues of approximately, $4,800,000 and $6,100,000,
respectively.
AMRI derives a substantial portion of its revenue and gross profit from
the sale of F&I Products. AMRI's F&I Product revenue for the years ended
December 31, 1997 and 1998 was $1,043,000 and $1,334,000, respectively,
representing 21.2% and 20.6%, respectively, of AMRI's gross profit during such
years (4.9% and 5.2%, respectively, of total revenue). For the years ended
December 31, 1997 and 1998, Treasure Coast did not report F&I Product revenue
separately. The Company intends to report F&I Product revenue as a separate
line item in its future financial statements.
Results of Operations
AMRI (Pro Forma Combined)
The following unaudited pro forma financial information is based upon data
derived from the historical financial statements of AMRI and has been prepared
to illustrate the effects on such data of the Treasure Coast Acquisition and
the Offering (including the exercise of the Regal Option). The unaudited pro
forma combined statement of operations for the years ended December 31, 1997
and 1998 give effect to the Treasure Coast Acquisition and the Offering as if
they had been completed as of January 1, 1997. See "Pro Forma Financial Data."
Year Ended December 31, 1997 Compared to Year Ended December 31, 1998
Revenue
The Company's pro forma combined total revenue for the year ended December
31, 1997 was $30,952,000 as compared to pro forma combined total revenue for
the year ended December 31, 1998 of $43,364,000, an increase of $12,412,000 or
40.1%. Of this increase, approximately $2,600,000 was attributable to an 8.9%
increase in comparable retail location sales. Management believes that the
increase during the year ended December 31, 1998 resulted primarily from the
maturation of the Jacksonville, Florida location, which opened in February
1997, and the continued maturation of the Orlando, Florida location in its
second full year of operations. Management believes that the increase in
comparable retail location sales was also attributable to an increase in floor
plan availability in 1998 for the Treasure Coast locations, an increase in
service revenues due to greater reimbursements under manufacturer warranty
programs, increased dockage at the Stuart, Florida location and an increase in
the number of used boats sold. The balance of the increase in pro forma
combined total revenue resulted primarily from the opening of new locations in
Doctors Lake, Pinellas Park, Tierra Verde and Pompano Beach, Florida in 1998.
Gross Profit
The Company's pro forma combined cost of sales for the year ended December
31, 1997 was $24,142,000 or 78.0% as a percentage of pro forma combined total
revenue, as compared to $32,840,000 for the year ended December 31, 1998, or
75.7% as a percentage of pro forma combined total revenue. The Company's pro
forma combined gross profit for the year ended December 31, 1997 was
$6,810,000, or 22.0% as a percentage of pro forma combined total revenue, as
compared to $10,524,000 for the year ended December 31, 1998, or 24.3% as
30
<PAGE>
a percentage of pro forma combined total revenue. Management believes that the
increase in pro forma combined gross profit as a percentage of pro forma
combined total revenue was primarily attributable to higher sale prices on the
Company's products for the year ended December 31, 1998. The increase in pro
forma combined gross profit margin is primarily attributable to the increased
revenue.
Selling, General and Administrative Expenses
The Company's pro forma combined selling, general and administrative
expenses for the year ended December 31, 1997 were $5,904,000 or 19.1% as a
percentage of pro forma combined total revenue, as compared to $8,530,000 for
the year ended December 31, 1998, or 19.7% as a percentage of pro forma
combined total revenue. Management believes that the increase in selling,
general and administrative expenses as a percentage of pro forma combined total
revenue is primarily attributable to initial operating expenses associated with
the opening of new locations in Tierra Verde and Pinellas Park, Florida.
Interest Expense
The Company's pro forma combined interest expense was approximately
$569,000 for the year ended December 31, 1997, as compared to approximately
$809,000 for the year ended December 31, 1998, a percentage increase of 42.2%.
Management believes that the increase in interest expense is primarily
attributable to the increase in balances on the Company's floor plan financing
lines of credit used to support the inventory requirements for the additional
locations opened during the year ended December 31, 1998 and anticipated
increases in sales in the new locations. The Company's pro forma combined floor
plan payable balance was $10,600,000 as of December 31, 1997 as compared to
$19,593,000 as of December 31, 1998, reflecting a percentage increase of 84.9%.
AMRI (Historical)
The following financial information for each of the years ended December
31, 1997 and 1998 are derived from the financial statements of AMRI included
elsewhere herein. See "Selected Financial Data."
Year Ended December 31, 1997 Compared to Year Ended December 31, 1998
Sales and Service Revenue
AMRI's sales and service revenue for the year ended December 31, 1997 was
$20,183,000 as compared to sales and service revenue for the year ended
December 31, 1998 of $24,229,000, an increase of $4,046,000 or 20.0%. Of this
increase, $931,000 was attributable to a 4.6% increase in comparable store
sales in 1998. During the year ended December 31, 1998, the Jacksonville,
Florida location and the Orlando, Florida location generated increases of
$641,000 and $812,000, respectively, in sales and service revenues as compared
to the year ended December 31, 1997. Management believes that the increase in
comparable store sales during the year ended December 31, 1998 resulted
primarily from the maturation of the Jacksonville, Florida location, which
opened in February 1997 and the continued maturation of the Orlando, Florida
location in its second full year of operations. The balance of the increase in
sales and service revenue resulted primarily from the opening of new locations
in Doctors Lake, Pinellas Park and Tierra Verde, Florida in 1998.
Finance and Insurance Income
AMRI's finance and insurance income for the year ended December 31, 1997
was $1,043,000 (4.9% as a percentage of total revenue), as compared to
$1,334,000 for the year ended December 31, 1998 (5.2% as a percentage of total
revenue), an increase of 27.9%. Management believes that the increase in
finance and insurance income is primarily attributable to the increase in sales
and service revenue of 20.0% for the year ended December 31, 1998 as well as an
increased emphasis on the sale of finance and insurance products by AMRI .
Gross Profit
AMRI's cost of sales and service revenue for the year ended December 31,
1997 was $16,327,000 or 76.9% as a percentage of total revenue, as compared to
$19,083,000 for the year ended December 31, 1998, or 74.7% as a percentage of
total revenue. AMRI's gross profit for the year ended December 31, 1997 was
$4,899,000, or 23.1% as a percentage of total revenue, as compared to
$6,480,000 for the year ended December 31, 1998, or
31
<PAGE>
25.3% as a percentage of total revenue. AMRI's gross profit includes F&I
Product revenue; however, the cost of sales and service revenue is not
attributable to F&I Product revenue. AMRI's F&I Product revenue constituted
21.2% of AMRI's gross profit for the year ended December 31, 1997 and 20.6% of
AMRI's gross profit for the year ended December 31, 1998. For the year ended
December 31, 1997, AMRI's gross profit on sales and service revenue was
$3,856,000, or 19.1% as a percentage of sales and service revenue. For the year
ended December 31, 1998, AMRI's gross profit on sales and service was
$5,146,000, or 21.2% as a percentage of sales and service revenue. Management
believes that the increase in gross profit as a percentage of total revenue and
of sales and service revenue was primarily attributable to higher sales prices
on AMRI's products for the year ended December 31, 1998 and an increase in F&I
Product revenue.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the year ended December
31, 1997 were $4,085,000, or 19.2% as a percentage of total revenue, as
compared to $5,418,000 for the year ended December 31, 1998, or 21.2% as a
percentage of total revenue. Management believes that the increase in selling,
general and administrative expenses as a percentage of total revenue is
primarily attributable to increased expenses of $827,000 associated with the
opening of new locations in Doctor's Lake, Tierra Verde, Pinellas Park, Florida.
Other Income
Other income was $33,481 for the year ended December 31, 1997 as compared
to $66,480 for the year ended December 31, 1998. Management believes that the
increase in other income is primarily attributable to an increase in interest
income derived from greater cash balances for the year ended December 31, 1998
as compared to December 31, 1997.
Interest Expense
Interest expense was $333,958 for the year ended December 31, 1997 as
compared to $524,720 for the year ended December 31, 1998, a percentage
increase of 57.1%. Management believes that the increase in interest expense is
primarily attributable to the increase in balances on AMRI's floor plan
financing lines of credit used to support the inventory requirements for the
additional locations opened during the year ended December 31, 1998 and
anticipated increases in sales in the new locations. Floor plan payable balance
was $6,250,000 as of December 31, 1997 as compared to $13,220,000 as of
December 31, 1998, reflecting a percentage increase of 111.5%.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1997
Sales and Service Revenue
AMRI's sales and service revenue for the year ended December 31, 1996 was
$13,058,000 as compared to sales and service revenue for the year ended
December 31, 1997 of $20,183,000, an increase of 54.6%. Of this increase,
approximately $2,000,000 was attributable to a 15.5% increase in comparable
retail sales in 1997. Management believes that the increase in comparable
retail sales resulted primarily from the new Orlando, Florida superstore being
fully operational for the full year of 1997 as compared to four months in 1996.
The Orlando Florida superstore was relocated from a smaller location in
September 1996 and, therefore, the larger facility only contributed to the
Company's sales for four months which included the fourth quarter of 1996, the
weakest sales quarter of the year. Management believes that the balance of the
increase in sales and service revenue resulted primarily from the opening of a
Jacksonville, Florida location in February 1997 which contributed approximately
$5,200,000 of sales and service revenue.
Finance and Insurance Income
AMRI's finance and insurance income for the year ended December 31, 1996
was $591,014, or 4.3% as a percentage of total revenue, as compared to
$1,334,000 for the year ended December 31, 1997, or 4.9% as a percentage of
total revenue, an increase of 76.4%. Management believes that the increase in
finance and insurance income is primarily attributable to the increase in sales
and service revenue. Management believes that the increase is also attributable
to more competitive financing packages offered by the third party providers of
customer financing.
32
<PAGE>
Gross Profit
AMRI's cost of sales and service revenue for the year ended December 31,
1996 was $10,544,000, or 77.3% as a percentage of total revenue, as compared to
$16,327,000 for the year ended December 31, 1997, or 76.9% as a percentage of
total revenue. AMRI's gross profit for the year ended December 31, 1996 was
$3,105,000, 22.7% as a percentage of total revenue, as compared to $4,899,000
for the year ended December 31, 1997, or 23.1% as a percentage of total
revenue. Management believes that the increase in gross profit as a percentage
of total revenue was primarily attributable to the increase in F&I Product
revenue.
AMRI's gross profit includes F&I Product revenue, however the cost of
sales and service revenue is not attributable to F&I Product revenue. AMRI's
F&I Product revenue constituted 19.0% of AMRI's gross profit for the year ended
December 31, 1996 and 21.2% of AMRI's gross profit for the year ended December
31, 1997.
For the year ended December 31, 1996, AMRI's gross profit on sales and
service revenue was $2,514,000, or 19.3% as a percentage of sales and service
revenue. For the year ended December 31, 1997, gross profit on sales and
service revenue was $3,856,000, or 19.1% as a percentage of sales and service
revenue. Gross profit as a percentage of sales and service revenue was
relatively constant between the year ended December 31, 1996 and the year ended
December 31, 1997.
Selling, General and Administrative Expenses
AMRI's selling, general and administrative expenses for the year ended
December 31, 1996 were $2,493,000, or 18.3% as a percentage of total revenue,
as compared to $4,085,000 for the year ended December 31, 1997, or 19.2% as a
percentage of total revenue. Management believes that the increase in selling,
general and administrative expenses for the year ended December 31, 1997 is
primarily attributable to the increased costs associated with the establishment
of a larger, multi-location operation as well as the direct costs incurred to
establish the Orlando, Florida superstore, which was opened in September 1996.
Other Income
Other income was $10,115 for the year ended December 31, 1996 as compared
to $33,481 for the year ended December 31, 1997. Management believes that the
increase in other income is primarily attributable to an increase in interest
income attributable to greater cash balances at December 31, 1997.
<PAGE>
Interest Expense
Interest expense was $239,362 for the year ended December 31, 1996 as
compared to $333,958 for the year ended December 31, 1997, reflecting a
percentage increase of 39.5%. Management believes that the increase in interest
expense is primarily attributable to the increase in balances on AMRI's floor
plan financing lines of credit in connection with AMRI's increased levels of
inventory requirements for additional locations and anticipated increases in
sales. Floor plan payables were $4,600,000 at December 31, 1996 as compared to
$6,250,000 at December 31, 1997, reflecting a percentage increase of 34.9%.
Termination of S Corporation Status
As a result of terminating Boat Tree's S Corporation status as of the date
of this Prospectus, AMRI will be required to record a one-time, non-cash tax
benefit added to retained earnings for deferred income taxes, as provided in
the Company's pro forma financial statements. If this benefit had been recorded
at December 31, 1998, the amount would have been $104,000. AMRI expects that,
following the termination of Boat Tree's S Corporation status, its combined
Federal and State income tax rate will be approximately 39%.
Liquidity and Capital Resources
AMRI has funded its requirements for working capital to support operations
and capital expenditures from net cash provided from operations and borrowings
under credit facilities, including lines of credit and inventory floor plan
financing facilities. As of December 31, 1998, AMRI had working capital deficit
of $542,121 and a debt equity ratio of 11.85 to 1.
33
<PAGE>
For the years ended December 31, 1997 and 1998, net cash flows used by
AMRI for operating activities were $1,250,000 and $6,211,000, respectively. The
increase in cash used by operating activities was due primarily to a decrease
in inventory of $1,868,000 for the year ended December 31, 1997 as compared to
an increase of $6,954,000 for the year ended December 31, 1998. The primary
reason for the increase in inventory for the year ended December 31, 1998 was
the increase in sales attributable to the initial purchase of inventory at
AMRI's new locations and to an increase in comparable sales.
For the years ended December 31, 1997 and 1998, cash flows used by
investing activities by AMRI were $175,906 and $309,499, respectively. Cash
used in investing activities during 1997 and 1998 was attributable to the
purchase of property and equipment for the opening of the Jacksonville, Florida
location and improvements to the Orlando, Florida facility.
For the years ended December 31, 1997 and 1998, cash flows provided by
financing activities by AMRI were $1,394,000 and $7,353,000, respectively. Cash
flows used by financing activities by AMRI during the years ended December 31,
1997 and 1998 were for the payment of stockholder distributions and the
repayment of long-term debt, including, for the year ended December 31, 1997,
for the repayment of related party long-term debt which was used by AMRI to
repay a third mortgage on the Orlando, Florida superstore in the amount of
$194,948 and working capital loans of $125,535. For the year ended December 31,
1998, cash used in financing activities also included deferred costs of
$676,031 which relate to this Offering. For the years ended December 31, 1997
and 1998, cash flows provided by financing activities for AMRI increased by net
borrowings on floor plan and net borrowings under line of credit. For the years
ended December 31, 1997 and 1998, stockholder distributions were made by AMRI
in the amounts of $45,000 and $264,528, respectively, for the payment of
stockholder tax liabilities acquired as a result of Boat Tree's S Corporation
status.
At December 31, 1998, AMRI had $1,453,000 of long-term debt, less current
maturities, which consisted of mortgage notes payable on the Orlando, Florida
superstore and on vacant land in Cornelius, North Carolina as well as
installment loans payable relating to various vehicles.
Regal has provided the Company with a $300,000 line of credit which is due
on July 31, 2000. The line of credit from Regal bears interest at the rate of
10% per annum and is guaranteed by Joseph G. Pozo, Jr., the Company's Chairman,
President, Chief Executive Officer and majority stockholder. As of December 31,
1998, the Company had drawn $300,000 on the line of credit from Regal.
TransAmerica has provided the Company with a $2,000,000 line of credit, of
which $1,594,000 was outstanding as of December 31, 1998. Interest on the line
of credit from TransAmerica is payable at the greater of the prime rate or 7%
and the principal is due upon the earliest of (i) 30 days after written notice,
(ii) the termination of the Company's floor plan financing agreement with
TransAmerica or (iii) December 31, 2000. The amount available under the line of
credit is based upon the Company's used boat inventory and parts and
accessories inventory. Mr. Pozo, Jr. has guaranteed the repayment of the
TransAmerica line of credit. See "Certain Transactions."
In January 1999, AMRI executed a promissory note payable to JCJ Family
Partnership, Ltd., in the principal sum of up to $400,000. The general partner
of the partnership is Mr. Pozo, Jr. Interest on the promissory note is payable
monthly at the rate of 12% per annum and the principal sum is payable on demand
after June 30, 2000.
In March 1999 Boat Tree purchased a 1.5 acre parcel adjacent to the
Orlando Florida superstore from Mr. Pozo, Jr. The purchase price of $400,000,
is payable pursuant to a promissory note bearing interest at the prime rate and
is due on August 31, 2000. This note is secured by a mortgage on such parcel.
See "Certain Transactions."
AMRI finances substantially all of its new boat inventory through floor
plan financing arrangements with TransAmerica and Deutsche Financial Services
Corp. ("Deutsche"). Payment on the floor plan financing is due upon the sale of
the related boat and is secured by AMRI's new boat inventory, accounts
receivable, equipment and a personal guarantee from Joseph G. Pozo, Jr.
Generally, the floor plan financing arrangements are terminable upon 30 days
written notice, or are due immediately in the event of a default. If
TransAmerica's floor plan financing is terminated, then all amounts due to
TransAmerica are immediately due and payable. If Deutsche's floor plan
financing is terminated, the outstanding amounts are payable pursuant to the
terms of the floor plan advance. The termination of the Company's floor plan
financing arrangements will have a material adverse
34
<PAGE>
effect on the business, financial condition and results of operations of the
Company. Under the floor plan financing arrangement with Deutsche, the Company
is required to maintain a tangible net worth of at least $850,000 and a debt to
tangible net worth ratio not to exceed 10 to 1. Under the floor plan financing
arrangement with TransAmerica the Company is required to have a minimum cash
balance of $250,000 as of December 31, 1998 and $1,000,000 by February 28, 1999
and a debt to tangible net worth ratio not to exceed 9.75 to 1 as of December
31, 1998 and 6 to 1 by March 31, 1999. As of December 31, 1998 the Company was
not in compliance with the ratio of debt to tangible net worth covenants in
each of its floor plan financing arrangements with Deutsche and TransAmerica
and the TransAmerica inventory line of credit. The Company has obtained waivers
of such noncompliance through May 15, 1999. The Company will be in compliance
with such financial covenants upon the consummation of the Offering and for a
period of at least 12 months thereafter. If the Company is not in compliance
with any of the financial covenants in the future and the Company's inventory
lines of credit and floor plan financing arrangements are terminated, there
will be a material adverse effect on the business, financial condition and
results of operations of the Company. The outstanding balances on the floor
plan financing arrangements at December 31, 1997 and 1998 were $6,250,000 and
$13,220,000, respectively. The boat manufacturers generally provide a
pre-determined period of interest free financing during which the manufacturers
pay the financing costs to the lender. As a result of interest free financing
and certain interest rebates received from boat manufacturers, the weighted
average interest rate on the floor plan financing arrangements was
approximately 5% for the year ended December 31, 1998. The maximum aggregate
borrowing allowable under the floor plan financing arrangements was $8,750,000
and $15,750,000 as of December 31, 1997 and 1998, respectively.
Upon the consummation of this Offering, the Company will acquire all of
the outstanding capital stock of Marine America, a corporation owned 80% by
Joseph G. Pozo, Jr., the Company's Chairman, President, Chief Executive Officer
and majority stockholder, and 20% by Joseph J. Pozo (Mr. Pozo, Jr.'s son) for
1,250 shares of Common Stock valued at $10,000, together with the assumption of
liabilities previously incurred by Marine America in connection with its
redemption of 50% of its capital stock from Lakewood, an unaffiliated third
party. Such liabilities consist of a loan from the Company to Marine America in
the amount of $31,500 (which will be eliminated upon consolidation of the
Company and Marine America) and a promissory note in the amount of $100,000
payable to Lakewood, which the Company intends to repay from the proceeds of
this Offering. In January 1998, Marine America acquired certain of Lakewood's
assets for a purchase price of $130,858, including, a five-year lease (which
lease was amended to a month to month lease commencing January 1999) relating
to its 8,000 square foot retail location in Belmont, North Carolina. As part of
such acquisition, Boat Tree, a wholly-owned subsidiary of the Company as a
result of the Reorganization, purchased Lakewood's new and used boat and
trailer inventory for a purchase price of $998,364 and agreed to provide Marine
America with new and used boat inventory, as needed, at BoatTree's invoice cost
plus freight. In addition, Boat Tree entered into a management agreement with
Marine America pursuant to which BoatTree agreed to manage the operations of
the Lakewood dealership. The Company intends to relocate the operations of the
Belmont, North Carolina dealership to a three-acre tract of land located in
Cornelius, North Carolina, which the Company acquired on May 15, 1998 for a
purchase price of $348,100 and the Company intends to utilize $350,000 of the
net proceeds of this Offering together with additional financing in the
anticipated amount of approximately $1,400,000 to construct a 20,000 square
foot superstore on such site. See "Use of Proceeds," "Certain Transactions" and
Note 11 of Notes to Financial Statements.
Upon the consummation of the Treasure Coast Acquisition, the Company will
utilize a portion of the Offering proceeds ($2,497,000), to acquire
substantially all of the assets of Treasure Coast and certain related real
estate for a purchase price of $3,100,000 (including acquisition costs of
$120,000) plus the cost of Treasure Coast's inventory on such date. The Company
intends to use approximately $203,000 of the proceeds to fund a portion of such
inventory costs, obtain floor plan financing in the amount of approximately
$6,900,000 to fund the balance of the anticipated inventory costs and to obtain
financing on the real estate which is being acquired in the amount of
approximately $800,000. However, although the Company has applied for such
financing, the Company has not received a firm commitment for such financing.
Prior to the effective date of this Prospectus the Company will obtain
sufficient floor plan financing and real estate financing in order to
consummate the Treasurer Coast Acquisition.
35
<PAGE>
In addition to the new North Carolina superstore, the Company intends to
utilize a portion of the net proceeds of the Offering to acquire, convert
and/or construct at least four additional locations (including at least one
additional superstore) during the next 18 months, to consummate the Treasure
Coast Acquisition and to upgrade its management information systems to enhance
internal controls and reporting. See "Use of Proceeds" and "Business."
Management believes that the average cost to build a new 20,000 square
foot superstore will be approximately $1.2 million, excluding the cost of the
land. The Company believes that the conversion of existing facilities into
superstores will typically involve a lower cash investment, yet generate
similar sales and gross profit margins. In addition, for both converted and
newly built superstore locations, initial pre-opening expenses are estimated to
be $75,000 to $100,000 and initial inventory requirements are anticipated to
range from $4 million to $5 million per location, most of which will be
financed by floor plan financing arrangements and will result in little
additional capital investment.
Except as specified in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Company has no material
commitments for capital for the next 18 months. The Company believes that the
proceeds from the Offering, together with anticipated revenues from operations
and its existing capital resources, will be sufficient to satisfy its
contemplated cash requirements for at least 18 months following the
consummation of the Offering, including for the opening and/or acquisition of
at least four additional stores, and the development of a superstore in
Belmont, North Carolina (in connection with which the Company intends to fund a
portion through the utilization of seller, inventory and real estate financing
and the use of the Company's securities) during such period. The success of the
Company's expansion plans, however, will depend upon a number of other factors
besides the Company's financial capabilities, including the identification of
new markets and locations, the hiring, training and retention of qualified
personnel and the integration of new stores into existing operations. The
Company's growth strategy will also depend upon the Company's ability to locate
and acquire suitable acquisition candidates and to dispose, timely and
effectively, of the acquired entity's remaining inventory, as well as the
ability of the Company to sell its product line to the customer base of the
previous owner. In addition, the Company's expansion plans will depend upon the
Company's ability (i) to locate and lease or construct suitable facilities at a
reasonable cost, (ii) to obtain the reliable data necessary to determine the
size and product preferences of potential markets, (iii) to introduce
successfully the Company's product lines and (iv) to hire and train management
and sales teams for each additional location. There can be no assurance that
suitable acquisition candidates will be identified, that acquisitions will be
consummated, that new facilities will be constructed on a cost-effective basis
or that the operations of any new or acquired facility will be successfully
integrated into the Company's operations and managed profitably without
substantial costs, delays, or other operational or financial difficulties.
Moreover, although the Company has applied for a $10 million line of credit
from TransAmerica, there can be no assurance that such application will be
granted or that any additional financing, if needed, would be available to the
Company on commercially reasonable terms, or at all.
Seasonality
The impact of seasonality and weather on the operation of the Company's
business, as well as the entire recreational boating industry, is highly
material. Strong sales typically begin in March following the start of public
boat and recreation show season and continue through October. This eight-month
period for the years ended December 31, 1997 and 1998 has accounted for 77.2%
and 77.3%, respectively, of the Company's pro forma combined annual sales. If,
for any reason, the Company's sales were to fall substantially below those
normally expected during these periods, the Company's business, financial
condition and results of operations would be materially and adversely affected.
The Company generally realizes significantly lower sales in the quarterly
period ending December 31, resulting in operating losses during that quarter.
The Company's business is also significantly affected by weather patterns
which may adversely impact the Company's operating results. For example,
drought conditions or reduced rainfall levels, as well as excessive rain, may
force area lakes to close or render boating dangerous or inconvenient, thereby
curtailing customer demand for the Company's products. In addition,
unseasonably cool weather and prolonged winter conditions
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may lead to a shorter selling season in certain locations. Due to the foregoing
factors, among others, the Company's operating results in some future quarters
may be below the expectations of stock market analysts and investors. In such
event, there could be an immediate and significant adverse effect on the
trading price of the Common Stock.
During the quarter ended September 30, inventory reaches its lowest levels
and accumulated cash reserves reach the highest levels. During the quarter
ended December 31, the Company generally builds inventory levels in preparation
for the upcoming selling season which begins with boat and recreation shows
occurring in March and April in certain market areas in which the Company
conducts business. The Company's operating results would be materially and
adversely affected if net sales were to fall significantly below historical
levels during the months of March through October. Quarterly results also may
fluctuate as a result of the expenses associated with new store openings or
acquisitions. Accordingly, the results for any quarterly period may not be
indicative of the expected results for any other quarterly period.
Year 2000 Issue
Many currently installed computer systems and software products are coded
to accept only two-digit entries to represent years in the date code field.
Computer systems and products that do not accept four-digit year entries will
need to be upgraded or replaced to accept four-digit entries to distinguish
years beginning with 2000 from prior years. Management is in the process of
becoming compliant with the Year 2000 requirements and believes that its
management information system will be compliant on a timely basis at a minimal
cost. The Company currently does not anticipate that it will experience any
material disruption to its operations as a result of the failure of its
management information system to be Year 2000 compliant. There can be no
assurance, however, that computer systems operated by third parties, including
customers, vendors, credit card transaction processors, and financial
institutions, with which the Company's management information system interface
will continue to properly interface with the Company's system and will
otherwise be compliant on a timely basis with Year 2000 requirements. The
Company currently is developing a plan to evaluate the Year 2000 compliance
status of third parties with which its system interfaces. Any failure of the
Company's management information system or the systems of third parties to
timely achieve Year 2000 compliance could have a material adverse effect on the
Company's business, financial condition, and operating results.
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BUSINESS
General
The Company is one of the largest retailers of recreational boats in
Florida. In addition to 10 Florida locations, the Company operates a retail
location in North Carolina. At each of its locations, the Company offers a wide
selection of new and used boats and related marine products, such as trailers,
parts and accessories and water sport equipment. In addition, the Company
offers boat financing, and insurance and extended service contracts for its
customers and, at most of the Company's locations, provides customers with
convenient, skilled and cost-effective repair and maintenance services.
The Company is the largest dealer of recreational boats sold under the
Regal and Wellcraft brand names and sells 11 other lines of high quality
recreational boats including the Malibu, Hydra-Sport, Sailfish, Carver, Stratos
Bass Boats, Javelin Bass Boats, AquaSport, Larson, Legacy, Mediterranean Yachts
and Hurricane Deck Boats brand names. These boats range in size from 14 feet to
55 feet and in price from approximately $9,000 to $1,200,000. The Company
believes that it differentiates itself from its competitors by offering a
broader product line and selection, with over 100 different models of new
cruisers, fishing boats, high performance boats, pontoon boats, water-skiing
boats and general recreational boats to choose from, at prices ranging from the
low-end to the high-end of the market spectrum.
The Company has experienced substantial growth as a result of both
internal growth and acquisitions. For the years ended December 31, 1997 and
1998, the Company had total pro forma combined revenue of $31.0 million and
$43.4 million, respectively, and total pro forma combined net income before
taxes of $370,000 and $1.2 million, respectively. For the years ended December
31, 1997 and 1998, the Company sold, on a pro forma combined basis, 802 and
1,032 new boats, respectively, generating revenues of approximately $21.9
million and $31.7 million, respectively, and 366 and 449 used boats,
respectively, for revenues of approximately $4.8 million and $6.1 million,
respectively.
Strategy
The Company's objective is to continue its growth trend by leveraging its
position as one of the premier dealers of recreational boats in the
southeastern United States.
Growth Strategy
The Company's growth strategy is to continue to increase sales at its
existing locations while expanding its current retail base through the further
development of its existing markets and by entering new markets. Initially, the
Company intends to focus its plans for expansion primarily in Florida, North
Carolina, South Carolina, Georgia and Alabama. The Company intends to own and
operate at least four additional locations, using a combination of the proceeds
from this Offering, seller and inventory financing and working capital, within
the next 18 months. The Company may also finance future acquisitions in whole
or in part through the issuance of Common Stock or securities exercisable or
convertible into shares of Common Stock. The Company intends to accomplish its
growth strategy through the acquisitions and/or through the opening of new
locations, in the latter case either by acquiring (by lease or purchase) and
converting compatible existing facilities or by constructing new facilities.
Strategic Acquisitions of Existing Locations. The Company intends to
capitalize upon the significant consolidation opportunities available in the
highly fragmented recreational boat dealer industry by acquiring additional
retailers and improving their performance and profitability through the
implementation of the Company's operating strategies and the establishment of
the Company's customer service specialties (such as its financing and insurance
facilitation services and its comprehensive repair and maintenance services,
each of which helps to foster customer satisfaction while providing the Company
with an additional revenue stream). The Company's growth strategy includes
acquiring (i) retail locations that, among other criteria, possess either the
sole franchise of a major boat manufacturer or a significant share of new boat
sales in a specific targeted market or (ii) retail locations that, while
located in attractive geographic markets, have not been able to realize
favorable market share or profitability and can benefit substantially from the
Company's capital, systems and operating strategies. In connection with its
growth strategy, the Company may also acquire an existing location merely to
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obtain a new territorial exclusive, with the intention of moving it to a newly
built or converted facility developed by the Company in a more strategic or
larger location within the acquired territory. The Company may also seek to
expand its product mix by acquiring retail locations that distribute a range of
products that are not currently offered by the Company.
Opening of New Locations. In connection with opening new locations, the
Company intends to acquire (by lease or purchase) and convert compatible
existing facilities or to build new facilities with 10,000 to 25,000 square
feet of enclosed space ("superstores"). In connection with its opening of new
superstores, the Company plans to utilize its existing location in Orlando,
Florida as a prototype. The Orlando superstore is located directly off of, and
is visible from, a major interstate highway on five and one-half acres,
abutting a four-acre lake. The building is 20,000 square feet and accommodates
up to 35 boats in an air conditioned showroom. From this location, the Company
has garnered a market share of approximately 30% of the sports boats and
cruisers sold in the Orlando, Florida market.
Management believes that the average cost to build a new 20,000 square
foot superstore will be approximately $1.2 million, excluding the cost of the
land. The Company believes that the conversion of existing facilities into
superstores will typically involve a lower cash investment, yet generate
similar sales and gross profit margins. In addition, for both converted and
newly built superstore locations, initial pre-opening expenses are estimated to
be $75,000 to $100,000 and initial inventory requirements are anticipated to
range from $4 million to $5 million per location, most of which will be
financed by floor plan financing arrangements and will result in little
additional capital investment.
Operating Strategy
The Company's operating strategy is to maximize its profits by increasing
its operating efficiencies through the structured application of management's
proven operating philosophies, key elements of which are set forth below:
o Operate with Centralized Management. The Company has adopted a
centralized approach to the operational management of its retail locations
while conducting each of its locations as separate profit centers. The
Company believes that this system takes advantage of the experience and
knowledge of the Company's senior management, while enabling local
managers to implement the Company's standardized practices with respect to
inventory, advertising, pricing, customer service and personnel.
o Increase Operating Efficiencies. As it grows, the Company will
continually seek ways in which to increase operating efficiencies among
its retail locations, including those that will be provided as a result of
an increasing number of locations (such as the more effective use of
advertising and marketing dollars and the lower inventory costs associated
with bulk financing) in order to enhance its profitability. In connection
with such strategy, the Company will also continue to centralize certain
administrative functions, such as accounting, finance, insurance,
marketing, purchasing and management information systems, at the corporate
level in order to maintain more effective cost controls.
o Maintain a Diverse Product Line. The Company currently sells 13 lines of
high quality recreational boats and intends to obtain additional product
lines through the acquisition of retail locations with product
distribution rights. Management believes that offering a broad selection
of high quality boats enables it to appeal to a wide variety of customers,
minimizes the Company's dependence on any one manufacturer and reduces its
exposure to supply problems and product cycles. In addition, the Company
plans to place an increased emphasis on the sale of used boats, thereby
adding even greater diversity to its product offerings.
o Focus on Consumer Loyalty and Satisfaction. The Company emphasizes
customer satisfaction throughout its organization and continually seeks to
maintain its reputation for quality and fairness. The Company strives to
provide an enjoyable boat purchasing environment at each of its locations
and trains its sales personnel to identify an appropriate boat for each
customer at a price affordable to that customer. In addition, the Company
attempts to make the purchase of a boat a convenient and stress-free
experience by arranging fast, easy and competitive financing and insurance
for its customers. The Company also provides special amenities to its
customers such as boater education and has established cruise clubs,
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fishing clubs and picnics for its customers in order to keep them involved
in boating. These programs have built strong consumer loyalty resulting in
referrals and repeat business. In addition, the Company considers its
parts and service operations to be an integral part of its customer
service program and an important factor in the establishment of customer
loyalty and repeat sales.
Recreational Boating Industry
Based upon information compiled by the National Marine Manufacturers
Association ("NMMA"), the recreational boating industry has experienced
significant growth within the last six years with total nationwide consumer
expenditures related to recreational boating (including sales of new and used
boats, motors, trailers, equipment and accessories and related expenditures for
fuel, docking, storage and repairs) of $19.2 billion in 1998 as compared to
$10.3 billion in 1992.
Retail recreational boating sales were $17.9 billion in 1988, but declined
to a low of $10.3 billion in 1992. The Company believes that this decline can
be attributed to a recession and the imposition of a luxury tax on boats sold
at prices in excess of $100,000.
In 1998, the NMMA estimates that over 74 million people participated in
recreational boating and that new boat and motor sales alone represented $8.5
billion of the $19.2 billion in total recreational boating sales for that year.
The Company's management believes that the southeastern United States is a
particularly strong market for its products due to mild weather conditions,
extended fishing and recreational seasons and accessibility to the Gulf of
Mexico, the Caribbean Sea, the Atlantic Ocean and numerous lakes, rivers,
estuaries and wetlands. Florida generated $834 million, over 4% of the nation's
total recreational boating sales for 1998, placing it number one among the
states in terms of such sales, and, together with the Company's other targeted
expansion areas (North Carolina, South Carolina, Georgia and Alabama), it
generated $1.8 billion of such sales.
Demographics continue to be a key factor in growth. The NMMA reports that
the typical boat owner is in the late 40 year plus category with a household
income in excess of $50,000 per annum. The 35-54 age group, which is the
fastest growing segment of the United States population, is the largest age
group purchasing boats. Although these individuals account for 38% of the U.S.
population over age 16, they account for over 44% of all consumer purchases and
over 48% of all consumer recreation purchases.
Products and Services
New Boat Sales
The Company is the largest dealer of recreational boats sold under the
popular Regal and Wellcraft brand names and sells 11 other lines of high
quality recreational boats, including Malibu, Hydra-Sport, Sailfish, Carver,
Stratos Bass Boats, Javelin Bass Boats, AquaSport, Larson, Legacy,
Mediterranean Yachts and Hurricane Deck Boats brand names. These boats range in
size from 14 feet to 55 feet and in price from approximately $9,000 to
$1,200,000. The Company believes that it differentiates itself from its
competitors by offering a broader product line and selection, with over 100
different models of new cruisers, fishing boats, water-skiing boats and general
recreational boats to choose from, at prices ranging from the low-end to the
high-end of the market spectrum.
For the years ended December 31, 1997 and 1998, the Company sold, on a pro
forma combined basis, 802 and 1,032 new boats, respectively, generating
revenues of approximately $21.9 million and $31.7 million, respectively. The
average sale price per new boat sold by the Company during the years ended
December 31, 1997 and 1998 was approximately $27,300 and $30,750, respectively.
The Company believes that its average sale price is higher than the industry
average as a result of its focus on the sale of cruisers sold under the Regal
and Wellcraft brand name and the high quality of products and customer service
offered by the Company. The Company believes that it accounted for
approximately 13% of Regal's recreational boat sales in 1998.
Used Boat Sales
The Company offers a wide variety of makes and models of used boats. The
sales of used boats are an important part of the Company's operations. The
Company acquires used boats from customer trade-ins and
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purchases used boats from individual boat owners. The Company also sells used
boats on consignment and plans to offer boat brokerage services. The Company
intends to establish a used boat certification program which will include a
limited warranty by the Company on every used boat sold. The Company's goal is
to sell one used boat for every two new boats sold.
For the years ended December 31, 1997 and 1998, the Company sold, on a pro
forma combined basis, 366 and 449 used boats respectively, generating revenues
of $4.8 million and $6.1 million respectively. The average sale price of the
used boats sold by the Company during the years ended December 31, 1997 and
1998 was approximately $13,000 and $13,500, respectively.
Maintenance and Repair Services
The Company considers its service operations to be an integral part of its
customer service program. The Company provides maintenance and repair services
at most of its retail locations. The Company also believes that its maintenance
and repair services contribute to strong customer relationships and that its
emphasis on preventative maintenance and quality service increases the
potential supply of well-maintained boats for its used boat sales.
The Company performs both warranty and non-warranty repair services, with
the cost of warranty work reimbursed by the manufacturer, in accordance with
the manufacturer's warranty reimbursement program. For warranty work, the
manufacturer generally reimburses a percentage of the dealer's posted service
labor rates, with the percentage varying depending on the dealer's customer
satisfaction index rating and attendance at service training courses. The
Company's maintenance and repair services are performed by factory-trained and
certified service technicians. In charging for its mechanics' labor, many of
the Company's dealerships use a variable rate structure designed to reflect the
difficulty and sophistication of different types of repairs. The percentage
markups on parts are similarly based on market conditions for different parts.
Marine Parts and Accessories
The Company sells related marine parts which are primarily the original
equipment manufacturers line of products including oils, lubricants, steering,
control systems, corrosion control products, engine care and service products.
The Company also sells a complete line of boating accessories including life
jackets, ski equipment, cleaners, safety equipment and novelty items such as
shirts, caps, and logo apparel bearing the various manufacturers or dealer's
logo.
Finance and Insurance Products
A substantial portion of the Company's income results from the origination
and placement of customer financing and the sale of insurance products and
extended service contracts, the most significant component of which is the
income resulting from the Company's origination of customer financing. The
Company believes that the ability of its customers to obtain financing at the
Company's locations is critical to its ability to sell new and used boats. The
Company provides a variety of third party financing alternatives in order to
meet the needs of its customers. 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 the
Company believes lack the resources to offer boat financing or which do not
generate sufficient volume to attract the diversity of financing sources that
are available to the Company.
Beginning in 1996 and ceasing in April 1998, the Company's use of a
"dealer rebate" by certain customers as part of, or in lieu of, a customer down
payment resulted in a breach of certain provisions of the retail dealer
financing agreements. Under the terms of these agreements, the use of dealer
rebates obligates the Company in such instances to indemnify the finance
company against foreclosure losses. Upon the Company's repayment of the
customer's defaulted obligation, the finance company would assign the
customer's loan contract to the Company and the Company would attempt to
collect on the customer's loan or repossess the underlying collateral.
Repossessed boats would be sold in the normal course of business through the
Company's stores. At December 31, 1998, the Company had accrued liabilities of
approximately $86,000 for estimated foreclosure losses related to such loans.
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The Company maintains relationships with a number of financing sources and
arranges financing for its customers with those sources that the Company
believes are best suited to satisfy a customer's particular needs. The interest
rates available and the required down payment, if any, depend to a large
extent, upon the bank or other financial institution providing the financing
and the customer's credit history.
Operations
Management Practices
The operations of each retail location are conducted as a separate profit
center. The general manager at each retail location implements management's
decisions relating to inventory, advertising, pricing, customer service and
personnel. The Company compensates its general managers and department managers
based on the profitability of their operations and departments rather than on
sales volume. The Company utilizes computer-based management information
systems to monitor each retail location's sales, profitability and inventory on
a daily basis. The Company believes that its professional management practices
provide it with a competitive advantage over many boat dealers and is critical
to its ability to achieve levels of profitability superior to industry
averages. Upon opening each additional location, the Company will install its
own Company-trained management team. The leader of the management team will
report directly to the Company's senior management.
Sales and Marketing
The general manager at each location is trained at the Company's Orlando
superstore. The Company employs uniform pricing, sales and service techniques
which can only be modified by the Company's senior management. The Company's
sales force works closely with each customer to identify an appropriate boat at
a price affordable to that customer. The Company utilizes a counseling approach
during the sales process which it believes increases the likelihood that a
customer will be satisfied with the boat purchased and will do business with
the Company in the future. The Company believes that this philosophy enables
the Company to sell more boats at higher gross profit margins.
The competitive environment of the boat dealership industry requires that
a portion of each sales dollar be allocated to advertising and boat shows.
However, as with most new boat dealers, approximately 30% of AMRI's qualified
advertising and marketing expenses are paid for by the boat, motor and engine
manufacturers. The manufacturers also provide the Company with the benefit of
market research which assists the Company in developing its own advertising and
marketing programs. The Company believes that it receives a significant benefit
from the manufacturers' advertising of brand awareness on a national basis.
The Company's marketing efforts focus on a wide range of potential buyers.
The Company offers a variety of new and used boats at a wide range of prices
with various financing terms. The Company utilizes newspaper, radio and direct
mail advertising. The Company primarily uses advertising that focuses on
developing its image as a reputable dealer offering quality service, affordable
boats and financing for all potential buyers.
The Company also participates in area boat shows. These shows are normally
held at convention centers with all area dealers attending purchasing space.
The Company believes that boat shows and other offsite promotions generate a
significant amount of interest in products and often have an immediate impact
on sales at a nominal incremental cost. The Company plans to organize
exhibitions with other area boat dealers. In fiscal 1998 approximately 10% of
AMRI's sales were generated at recreational boat shows. In addition, the
Company believes that an additional 25% of AMRI's sales were attributable to
leads generated at recreational boat shows.
The Company's cruise and fishing clubs are another method which the
Company utilizes for promotion. The Company's cruise clubs lead members to a
new destination each month. The Company also offers its fishing customers a
similar opportunity by holding fishing tournaments in which the Company's
customers who have purchased fishing boats compete against one another for cash
prizes.
The Company's focus on customer relationships extends to a strong
commitment to service after the sale. The Company analyzes each boat's systems
and has a certified sea captain deliver the boats rather than a salesperson in
order to provide elementary training. Several times a year the Company's
locations hold free hands-on training classes on topics such as electronics,
charting and docking. The Company also offers special seminars for women
boaters.
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Floor Plan Financing
The Company acquires a substantial portion of its inventory through floor
plan financing agreements. Inventory is generally purchased under floor plan
lines of credit (secured by such inventory) maintained with third party finance
companies and/or commercial banks depending upon the product purchased.
Payments under the floor plan financing arrangements are due upon the sale of
the related boat. In addition, the Company receives interest free floor plan
financing from several vendors. This arrangement is based on the boat's model
year which generally begins July 1. The number of months of free floor plan
financing received by the Company is either based upon date of the inventory
purchased by the Company until the end of the model year, or for a fixed period
of months, depending on the vendor. Management believes that these financing
arrangements are standard within the industry.
Generally, the floor plan financing arrangements are terminable upon 30
days, written notice, and payments are due thereafter or immediately in the
event of a default. In the event that a floor plan financing arrangement is
terminated, then, depending on the lender, all amounts due to the floor plan
lender are either immediately due and payable or outstanding amounts are
payable pursuant to the terms of the floor plan advance. The termination of any
of the Company's floor plan financing arrangements will have a material adverse
effect on the business, financial condition and results of operations of the
Company. As of December 31, 1998 the Company was not in compliance with certain
of the financial covenants provided in each of the Company's floor plan
arrangements and inventory lines of credit. The Company has obtained waivers of
such noncompliance through May 15, 1999. The Company will be in compliance with
the financial covenants upon the consummation of the Offering and for a period
of at least 12 months thereafter. If the Company is not in compliance with the
financial covenants in the future and the Company's floor plan financing
arrangements and inventory lines of credit are terminated, there will be a
material adverse effect on the business, financial and results of operations of
the Company. As of December 31, 1998, AMRI's maximum borrowings allowable under
floor plan lines of credit was $15,750,000 and the average borrowings
outstanding during the year ended December 31, 1998 was $8,000,000.
For the year ended December 31, 1998 as a result of free floor plan
arrangements and certain interest rebates received from manufacturers, the
weighted average interest rate on floor plan debt was approximately 5%. The
Company has applied for a $10 million line of credit from TransAmerica.
However, there can be no assurance that such application will be granted or
that any additional financing, if needed, would be available to the Company on
commercially reasonable terms, or at all. In addition, the Company intends to
obtain additional inventory floor plan financing in the approximate amount of
$6,900,000 and real estate financing in the approximate amount of $800,000 in
order to consummate the Treasure Coast Acquisition.
The Company employs cash management systems designed to maximize returns
and minimize interest expense. The Company, due to its cash position and
financial strength, is able to take advantage of manufacturers' buy outs at a
discount and other special cash discounts.
Management Information Systems
The Company's financial information, operational and accounting data and
other related statistical information are consolidated, processed and
maintained at the Company's headquarters in Orlando, Florida. The flexible
nature of the Company's installed network allows for accumulation, processing
and distribution of information. All sales and expense information, and other
data related to the operations of each dealership are entered at each location
and "key indicators" are reported daily. Reports can be generated that set
forth and compare revenue and expense data by location and department, allowing
management to analyze operating results, identify trends in the business and
focus on areas that require attention at the Company's bi-monthly staff
meetings.
The Company believes that its management information systems will enable
the Company to successfully integrate additional dealerships into the Company's
operations. The Company plans to use a portion of the net proceeds of the
Offering to upgrade and expand the Company's management information systems.
Following the opening of each new location, the Company intends to install its
management information systems, thereby permitting access to financial,
accounting and other operational data.
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Competition
The Company operates in a highly competitive environment. In addition to
facing competition generally from businesses seeking to attract discretionary
spending dollars, the recreational boat industry itself is highly fragmented,
resulting in intense competition for customers, access to quality products,
access to boat show space in new markets and suitable retail locations. The
Company relies heavily on boat shows to generate sales. If the Company is
impeded in its ability to participate in boat shows in its existing or targeted
markets, it could have a material adverse effect on the Company's business,
financial condition and operating results.
The Company competes primarily with single-location boat dealers and
national or regional chains and, with respect to sales of marine parts,
accessories and equipment, with national specialty marine parts and accessories
stores, catalog retailers, sporting goods stores and mass merchants. Dealer
competition continues to increase based on the quality of available products,
the price and value of the products and attention to customer service. There is
significant competition both within markets currently being served by the
Company and in the new markets that the Company plans to enter. The Company
competes in each of its markets with retailers of brands of boats and motors
not sold by the Company in that market. In addition, several of the Company's
competitors, especially those selling boating accessories, are large national
or regional chains that have substantially greater financial, marketing and
other resources than the Company. There can be no assurance that the Company
will continue to be able to compete successfully in the recreational boating
industry.
Relationship with Boat Manufacturers
As is typical in the recreational boating industry, the Company deals with
each of its manufacturers pursuant to annually renewable, (except for its
current agreement with Regal which has a three-year term) non-exclusive, dealer
agreements that do not contain any contractual provisions concerning product
pricing or required purchasing levels. Pricing is generally established on a
model year basis, but is subject to change at the manufacturer's sole
discretion. AMRI purchased 69% of its new boats in 1998 from Regal (which will
become a principal stockholder of the Company upon the consummation of the
Offering) of which 98% were powered with Volvo-Penta engine packages. Sales of
Regal boats constituted approximately 68.5% of AMRI's sales in 1998.
Substantially all of Treasure Coast's purchases and sales for the year ended
December 31, 1998 were boats sold under the Wellcraft brand name. The Company
did not purchase more than 10% of its new boats from any other manufacturer in
1998. The Company's success depends to a significant extent on the continued
popularity and reputation for quality of the boating products of its
manufacturers, particularly those of Regal and Wellcraft.
Pursuant to its arrangements with certain manufacturers, the Company's
right to display some product lines in certain markets may be restricted. The
Company does not believe that these restrictions imposed by manufacturers will
materially affect the Company's expansion plans.
Trademarks
The Company has filed an application to trademark the "Boat Tree" name and
logo.
Environmental and Other Regulatory Issues
On December 3, 1996, the EPA announced final regulations for outboard
marine motors. Under the regulations, manufacturers beginning with model year
1998 and phased in over nine years must reduce hydrocarbon emissions by 75%
from present levels. The regulation only effects new engines. The EPA expects
that average costs for these engines will increase modestly, approximately
10-15% or approximately $700 on the average power output engine. Costs of these
new models, and/or the manufacturers' inability to comply with the EPA
requirements, could have a material adverse affect on the Company's business,
financial condition, operating results and prospects. The Company believes that
its outboard motor manufacturers currently meet all common standards and has
proprietary or licensed technology to meet or exceed EPA standards with a new
line of motors.
The Company, in the ordinary course of its business, is required to
dispose of certain waste products that are regulated by state or federal
agencies. These products include waste motor oil, tires, batteries and certain
44
<PAGE>
paints. It is the Company's policy to use appropriately licensed waste disposal
firms to handle this refuse. The Company retains a waste management firm to
dispose of such products. If there were improper disposal of these products, it
could result in potential liability to the Company.
Additionally, certain states have required or are considering requiring a
license in order to operate a recreational boat. While the licensing
requirements are not expected to be unduly restrictive, such regulations may
discourage potential first-time buyers thereby limiting future sales. The
adoption of such licensing regulations could have a material adverse effect on
the Company's business.
Product Liability
The Company may be exposed to potential liabilities for personal injury or
property damage claims relating to the use of the those products. The
resolution of product liability claims has not materially affected the
Company's business in the past. The Company believes that manufacturers of the
products sold by the Company maintain third-party product liability insurance,
which it believes to be adequate. However, there can be no assurance that the
Company will not experience legal claims in excess of its insurance coverage,
or claims that are ultimately not covered by insurance. Any significant claims
against the Company which are not covered by insurance could adversely affect
the Company's business, financial condition, operating results and prospects.
The Company also may be adversely affected by related negative publicity.
Insurance
The Company carries a general liability policy which provides for coverage
of $1 million per occurrence and $5 million in the aggregate. The Company may
face potential claims and liabilities, including claims for products liability,
which arise out of the Company's business activities. Claims could possibly be
asserted against the Company under federal and state statutes and regulations,
common law, contractual indemnification agreements or otherwise. There can be
no assurance that the Company will not be subject to claims which could
materially and adversely affect its business, financial condition, operating
results or prospects. The Company currently has purchased insurance (which it
believes to be adequate) to cover the exposure it could face from such claims;
however, there can be no assurance that adequate insurance coverage will
continue to be available on terms acceptable to the Company or at all, or that
the Company will not face claims outside or in excess of its coverage under its
insurance in the event a claim is asserted against the Company. Because the
Company has limited financial and managerial resources, such an action (or the
establishment of actual liability against the Company) could materially and
adversely affect the Company.
Employees
As of December 31, 1998, AMRI employed 114 persons on a full-time basis of
which 13 were in store-level management, 57 were in sales and marketing, 24
were in parts and service and 20 were in corporate administration and
management. As of December 31, 1998, Treasure Coast employed 37 persons on a
full-time basis of which 8 were in store-level management, 8 were in sales and
marketing, 18 were in parts and service and 3 were in corporate administration
and management. None of the Company's employees are represented by a labor
union or bound by a collective bargaining agreement. The Company believes that
its relationship with its employees is satisfactory.
Properties
The Company owns the property upon which its signature dealership
superstore and corporate offices are located in Orlando, Florida. The Company
also owns the property upon which the Stuart, Florida location is located, but
leases the dockage at such facility, which lease expires in July 1999. The
Company intends to renew such lease, however, there can be no assurance that it
will be able to do so. The Company does not believe that failure to renew such
lease will have a material effect on the Stuart, Florida location. The balance
of the Company's locations are leased facilities. Subsequent to the
consummation of the Offering, the Company intends to relocate the Belmont,
North Carolina facility to three acres of land it recently acquired in
Cornelius, North Carolina and open a new superstore on such parcel. The Company
and its various locations will occupy an aggregate of approximately 27 acres of
land and approximately 90,000 square feet of building space, of which
45
<PAGE>
approximately 85,000 square feet are utilized for sales, services and parts and
5,000 square feet are utilized for office space. Such properties consist
primarily of boat showrooms, display lots, service facilities, boat storage
lots, parking lots and offices. The Company believes its facilities are
currently adequate for its needs and are in good maintenance and repair.
Pursuant to the leases, the Company is generally responsible for taxes,
utilities, repairs and maintenance. The leases expire commencing in 1999
through 2006 and in certain cases have renewal options. In fiscal 1998, the
Company made pro forma combined lease payments in the aggregate amount of
approximately $879,000.
In March 1999, the Company acquired an approximately 1.5 acre site
adjacent to the Orlando superstore from JCJ Family Partnership for a purchase
price of $400,000. Joseph G. Pozo, Jr., the Company's Chairman, President,
Chief Executive Officer and majority stockholder, is the general partner of JCJ
Family Partnership. See "Certain Transactions."
The following table sets forth each of the Company's facilities, the
approximate square footage at each facility and the acreage of each location.
<TABLE>
<CAPTION>
Dealership/Facility Location Total Building/Square Ft. Total Land/Acres
- ---------------------------------------- --------------------------- -----------------
<S> <C> <C>
Orlando, Florida (superstore) .......... 20,000 5.5
Pinellas Park, Florida ................. 15,000 3.5
Jupiter, Florida (1) ................... 13,575 3.0
Jacksonville, Florida .................. 8,000 3.0
Doctor's Lake, Florida ................. 8,000 2.0
Belmont, North Carolina (2) ............ 8,000 2.5
Stuart, Florida (1) .................... 5,000 1.0
Pompano Beach, Florida (1) ............. 4,000 1.0
Melbourne, Florida ..................... 4,000 3.0
Vero Beach, Florida (2) ................ 3,300 .6
Tierra Verde, Florida (1) .............. 3,000 1.0
</TABLE>
- ------------
(1) To be acquired in connection with the Treasure Coast Acquisition.
(2) To be acquired in connection with the Marine America Acquisition and
subsequently relocated to Cornelius, North Carolina, where the Company
intends to open a 20,000 square foot superstore.
46
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information concerning the
directors, nominees for director and executive officers of the Company. Upon
the consummation of the Offering, Sir Brian Wolfson, Jeffrey Schottenstein,
Brady Churches, James Gregory Humphries and James W. Traweek have agreed to
serve as directors of the Company and, upon the consummation of the Treasure
Coast Acquisition, D. Thomas Grane has agreed to serve as Vice President of the
South Florida Division of the Company.
<TABLE>
<CAPTION>
Name Age Position with the Company
- ---------------------------------- ----- ---------------------------------------
<S> <C> <C>
Joseph G. Pozo, Jr. .............. 51 Chairman, President and
Chief Executive Officer
Melven R. Nehleber ............... 48 Chief Financial Officer, Treasurer and
Secretary
Marcelo Pozo ..................... 50 Vice President
D. Thomas Grane .................. 58 Vice President -- South Florida
Division
Brady Churches ................... 40 Director Nominee
James Gregory Humphries .......... 42 Director Nominee
Jeffrey Schottenstein ............ 57 Director Nominee
Gary E. Stein .................... 48 Director
James W. Traweek ................. 55 Director Nominee
Sir Brian Wolfson ................ 62 Director Nominee
</TABLE>
Joseph G. Pozo, Jr., the founder of Boat Tree and of the Company, has been
the Chairman of the Board, President and Chief Executive Officer of Boat Tree
and of the Company since their respective inceptions. He is also the founder
and a principal stockholder of Dollar Depot, Inc., a multi-chain retailer. Mr.
Pozo has over 25 years of experience in the retail and wholesale industry. Mr.
Pozo is Marcelo Pozo's brother.
Melven R. Nehleber joined the Company as its Chief Financial Officer and
Treasurer in August 1998. From April 1998 through August 1998, Mr. Nehleber was
the Acting President of Rockport Occupational Network, Inc., a worker's
compensation and occupational/industrial medical network in Houston, Texas.
From April 1997 through March 1998, Mr. Nehleber was Administrator and Chief
Financial Officer for Infusion Plus Homecare, a comprehensive health care group
in Midland, Texas. From January 1993 to June 1996, Mr. Nehleber was the Chief
Executive Officer and a principal stockholder of Hospicenter, Inc., a Houston,
Texas company majority-owned by Coram Healthcare, Inc., a New York Stock
Exchange company. Mr. Nehleber has also acted as a consultant for government
business and healthcare companies throughout the above periods.
Marcelo Pozo has been the Vice President of the Company since August 1998
and the Company's General Manager, F&I since January 1996. From 1992 to 1996,
he was the President of Dollar Depot, Inc. Mr. Pozo is the brother of Joseph G.
Pozo, Jr.
D. Thomas Grane will join the Company upon the consummation of the
Treasure Coast Acquisition as Vice President -- South Florida Division. Since
1992, Mr. Grane has been the sole shareholder and general manager of Treasure
Coast, the top Wellcraft dealership in the United States for 1998. Since 1984,
Mr. Grane has been a Wellcraft dealer in various owner/operator dealership
ventures. Prior to that, beginning in 1980, Mr. Grane was the owner and
operator of an automobile dealership. Mr. Grane has over 15 years experience in
the retail boating industry.
Brady Churches has served as the President of Mazel Stores, Inc. since
1996 and has served as President -- Retail since August 1995. Mr. Churches was
employed by Consolidated Stores, Inc. ("Consolidated") for 19 years until he
resigned in April 1995. He held various senior management positions in the
merchandising area at Consolidated and was President from August 1993 until his
resignation. Mr. Churches is currently a member of the Board of Directors of
Sun Television & Appliance, Inc. and Mazel Stores, Inc. Mr. Churches is Gary
Stein's half brother.
47
<PAGE>
James Gregory Humphries has been a partner of the law firm of Shutts &
Bowen in Orlando, Florida since 1997. From 1991 to 1997, Mr. Humphries was a
principal in the law firm of Smith, Williams & Humphries. Mr. Humphries is a
member of the Virginia and Florida Bars.
Jeffrey M. Schottenstein has been the President and Chief Operating
Officer of Schottenstein Realty Company, a company that owns and operates
commercial and residential real estate, and its related entities since 1982.
Gary E. Stein became a director of the Company in June 1998. Prior
thereto, from October 1997 to the present, Mr. Stein has served as a business
consultant to the Company. In addition, from February 1997 to June 1998, Mr.
Stein was the Chief Administrative Officer and Chief Financial Officer of
Pinnacle Technologies Resources, Inc., an information technology consulting
firm. From January 1993 to January 1997, Mr. Stein was the President of DB
Capital Corp., a private investment banking firm. Mr. Stein is licensed to
practice law in Ohio and Florida. Mr. Stein is Brady Churches half brother.
James W. Traweek has been the President and Chief Executive Officer of PS
Management Company and its related companies ("PSM") since August 1994. PSM
owns or manages a chain of floor covering showrooms. From July 1990 to July
1994, Mr. Traweek was the President of Pro Source Wholesale Floor Coverings,
which operated franchise floor covering showrooms.
Sir Brian Wolfson served as Chairman of Wembley, PLC from 1986 to 1995.
Sir Brian is currently a director of Fruit of the Loom, Inc., Kepner-Tregoe,
Inc., Playboy Enterprises, Inc., Autotote Corporation, Inc., and Natural Health
Trends Corp for which he presently serves as Chairman.
Directors are elected to serve until the next annual meeting of
stockholders or until a successor is duly elected and qualified. Executive
officers are duly elected by the Board of Directors to serve until their
respective successors are elected and qualified.
The Company has obtained key man life insurance on the life of Joseph G.
Pozo, Jr. in the amount of $1 million.
Committees of the Board of Directors
Upon the effective date of this Prospectus, the Board of Directors will
establish two standing committees, the Audit Committee and the Compensation
Committee. The Audit Committee will recommend to the Company's Board of
Directors the engagement of auditors, review the results and scope of the audit
and other services provided by the Company's auditors and review the adequacy
of the Company's internal accounting controls. The Compensation Committee will
be responsible for the approval of compensation arrangements for the officers
of the Company, the review of the Company's compensation plans and policies and
the administration of the Company's stock option plans. All of the members of
the Audit Committee and a majority of the members of the Compensation Committee
will be non-employee directors.
Directors' Compensation
Members of the Board of Directors who are not employees of the Company
will receive a quarterly directors' fee of $2,500, half of which will be paid
by the issuance of shares of Common Stock based on the then-current market
value of the Common Stock and the remainder of which will be paid at the
director's option in cash or shares of Common Stock. Non-employee directors who
serve on committees will also receive $500 per committee meeting. All directors
will be reimbursed for out-of-pocket expenses incurred in attending meetings of
the Board of Directors and committee meetings. In addition, non-employee
directors will also receive automatic annual stock option grants for the
purchase of 2,500 shares of Common Stock at the then-current market price, and
will be eligible to receive discretionary stock option grants, under the Option
Plan. Employees of the Company receive no additional compensation for serving
on the Board of Directors.
Executive Compensation
The following table sets forth the aggregate compensation paid or accrued
by the Company for services rendered in all capacities to the Company during
the fiscal years ended December 31, 1997 and 1998 by Joseph G. Pozo, Jr., its
Chief Executive Officer and Marcelo Pozo, the Company's Vice President. No
other executive officer's compensation exceeded $100,000 during the fiscal year
ended December 31, 1998.
48
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
---------------------
Name and Principal Position Year Salary Bonus All Other Compensation
- -------------------------------------------- ------ ----------- ------- -----------------------
<S> <C> <C> <C> <C>
Joseph G. Pozo, Jr.,
Chairman of the Board, President and Chief. 1998 $206,000 -- $ --(1)(2)
Executive Officer 1997 $212,400 -- $ --(1)(2)
Marcelo Pozo ............................... 1998 111,400 $ --(1)
Vice President ............................ 1997 114,700 -- $ --(1)
</TABLE>
- ------------
(1) Perquisites and other personal benefits did not exceed the lesser of
$50,000 or 10% of salary compensation for the named executive officer.
(2) Does not include a stockholder distribution in the amount of $45,000 in
1997 and $264,528 in 1998 for the payment of stockholder tax liabilities
in connection with the Company's S Corporation status.
No stock options were granted to the named executive officer during the
fiscal year ended December 31, 1998. See "--Stock Options."
Employment and Consulting Agreements
The Company has entered into a three-year employment agreement effective
upon the consummation of the Offering with Joseph G. Pozo, Jr., the Company's
Chairman, President and Chief Executive Officer, which provides for an annual
salary of $208,000. The Company has also entered into a three-year employment
agreement, effective upon the consummation of the Offering, with Melven R.
Nehleber, the Company's Chief Financial Officer and Treasurer, which provides
for an annual salary of $120,000. Each of the employment agreements provide
that the executive will be eligible to receive short-term incentive bonus
compensation, the amount of which, if any, will be determined by the Board of
Directors based on the executive's performance, contributions to the Company's
success and on the Company's ability to pay such incentive compensation. The
employment agreements also provide for termination based on death, disability,
voluntary resignation or material failure in performance and for severance
payments upon termination in the event that the executive is terminated without
cause, as described in the agreements, or the executive terminates his
employment for a good reason as described in the agreements, or in the event of
a change in control of the Company as described in the agreements. The
agreements contain non-competition provisions that will preclude each executive
from competing with the Company for periods of at least one year from the date
of termination of employment.
<PAGE>
Upon the consummation of the Treasure Coast Acquisition, the Company will
enter into a three-year employment agreement with D. Thomas Grane, the
principal stockholder of Treasure Coast who will become Vice President of the
South Florida Division of the Company. The employment agreement will provide
for a base salary of $78,000 per annum plus an amount equal to 10% of the net
income (before taxes and after a corporate overhead allocation) of the four
locations which were operated by Treasure Coast.
The Company has also entered into a six-month consulting agreement,
effective upon the consummation of the Offering, with Gary E. Stein, a director
of the Company, which provides for a consulting fee of $10,000 per month. In
addition, Mr. Stein will receive a consulting fee equal to 5% of the purchase
price, not to exceed $75,000, for consulting services rendered in connection
with any acquisitions consummated by the Company during the term of his
consulting agreement.
Stock Options
Effective August 1, 1998, the Company adopted the 1998 Stock Option Plan
(the "Option Plan") for the purpose of attracting, retaining and maximizing the
performance of its executive officers, key employees and consultants. The
Company has reserved 200,000 shares of Common Stock for issuance under the
Option Plan. The Option Plan has a term of ten years. The Option Plan provides
for the grant of "incentive stock options" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended, and non-statutory stock options.
The Option Plan is currently administered by the Board of Directors but will,
commencing upon the
49
<PAGE>
consummation of this Offering, be administered by the Compensation Committee.
The exercise price for incentive stock options may not be less than 100% of the
fair market value of shares of Common Stock on the date of grant (110% of fair
market value in the case of incentive stock options granted to employees who
hold more than 10% percent of the voting power of the Company's issued and
outstanding shares of Common Stock). The exercise price of non-statutory stock
options may be equal to or less than 100% of the fair market value of shares of
Common Stock on the date of grant.
Options granted under the Option Plan may not have a term of more than a
ten-year period (five years in the case of incentive stock options granted to
employees who hold more than 10% percent of the voting power of the Company's
Common Stock). Options generally terminate three months after the optionee's
termination of employment by the Company for any reason other than death,
disability or retirement, and are not transferable by the optionee other than
by will or the laws of descent and distribution.
In August 1998, the Company granted options to purchase an aggregate of
174,000 shares of Common Stock effective upon the consummation of this
Offering, each of which will be exercisable commencing 90 days following the
consummation of this Offering. Options to purchase 30,000 and 12,000 shares of
Common Stock were granted to Marcelo Pozo, the Company's Vice President, and
Melven R. Nehleber, the Company's Chief Financial Officer, respectively,
options to purchase 2,500 shares of Common Stock were granted to each of the
non-employee directors (15,000 in the aggregate) and the balance 117,000 were
granted to various of the Company's non-management employees. See "--Directors'
Compensation" and "Principal Stockholders." The exercise price of the options
is equal to the initial public offering price per share and the options expire
in August 2008. See "Legal Matters."
PRINCIPAL STOCKHOLDERS
The following table sets forth (i) as of the date of this Prospectus and
(ii) as adjusted to reflect the exercise of the Regal Option and the sale of
the 1,000,000 shares of Common Stock offered hereby, certain information
concerning the beneficial ownership of the Common Stock by: (a) each person
known by the Company to beneficially own more than 5% of the outstanding Common
Stock, (b) each of the Company's directors and each person who will become a
director immediately following the consummation of the Offering, (c) the
executive officer named in the Summary Compensation Table, and (d) all
executive officers and directors of the Company as a group:
<TABLE>
<CAPTION>
Percentage
of Outstanding
Number of Shares Beneficially
Owned (2)
Shares ----------------------
Name and Address of Beneficially Before After
Beneficial Owner(1) Owned (2) Offering Offering
- ----------------------------------------------- ---------------- ---------- ---------
<S> <C> <C> <C>
Joseph G. Pozo, Jr. ........................... 697,674(3) 82.8% 31.4%
Brady Churches ................................ --(4) * *
James Gregory Humphries ....................... --(4) * *
Jeffrey Schottenstein ......................... --(4) * *
Gary E. Stein ................................. 53,000(5) * 2.7%
James W. Traweek .............................. --(4) * *
Sir Brian Wolfson ............................. --(4) * *
Regal Marine Industries, Inc. ................. 156,304(6) * 7.8%
All executive officers and directors as a group
(ten persons ) ............................... 733,867 87.1% 36.7%
</TABLE>
- ------------
* Denotes less than 1%
(1) The address of Brady Churches is c/o Mazel Stores, Inc., 4310 E. Fifth
Avenue, Columbus, OH 43219. The address of James Gregory Humphries is 20
North Orange Avenue, Suite 1000, Orlando, Florida 32801. The address of
Jeffrey Schottenstein is c/o Schottenstein Realty, 1201 Brickell Avenue,
Miami, Florida 33131. The address of Gary E. Stein is c/o Pinnacle
Technology Resources, Inc., 6649 High Street, Suite L-1, Worthington, Ohio
43085. The address of James W. Traweek is c/o Pro Source, Inc., 2411 Coit
Road, Suite 100,
50
<PAGE>
Plano, TX 75075. The address of Sir Brian Wolfson is c/o Global Health
Alternatives, 44 Welbeck Street, London W1M 7HF, England. The address of
Regal Marine Industries, Inc. and Paul Kuck, Duane Kuck, Jim Kuck, Gene
Kandel and David Furlow, the directors, officers and principal stockholders
of Regal, is 2300 Jetport Drive, Orlando, FL 32809. The address of each
other beneficial owner identified is c/o American Marine Recreation, Inc.,
2202 33rd Street, Orlando, Florida 32834.
(2) Except as indicated in the footnotes to this table, the Company believes
that all the persons named in the table have sole voting and investment
power with respect to all shares shown as beneficially owned by them,
subject to community property laws where applicable. In accordance with
the rules of the Commission, a person or entity is deemed to be the
beneficial owner of securities that can be acquired by such person or
entity within 60 days from the date of this Prospectus. Each beneficial
owner's percentage ownership is determined by assuming that options that
are held by such person (but not those held by any other person) and which
are exercisable within 60 days of the date of this Prospectus have been
exercised. Except for the Regal Option, none of the options which have
been granted by the Company are exercisable within 60 days of the date of
this Prospectus. The inclusion herein of such shares listed as
beneficially owned does not constitute an admission of beneficial
ownership. Percentages herein assume a base of 842,446 shares of Common
Stock outstanding as of the date of this Prospectus and a base of
1,998,750 shares of Common Stock outstanding immediately after the
consummation of this Offering.
(3) The number of shares of Common Stock owned by Joseph G. Pozo, Jr. includes
428,752 shares of Common Stock owned by JCJ Family Partnership, Ltd., the
general partner of which is Mr. Pozo, Jr. The number of shares of Common
Stock owned by Mr. Pozo, Jr. before this Offering, but not after this
Offering includes 53,000 shares of Common Stock which Gary E. Stein is
purchasing from Mr. Pozo, Jr. upon the consummation of this Offering and
(ii) 16,763 shares of Common Stock which Marcelo Pozo, the Company's vice
president and Mr. Pozo, Jr.'s brother is purchasing from Mr. Pozo, Jr.
upon the consummation of this Offering. See "Certain Transactions."
(4) Does not include 2,500 shares of Common Stock issuable pursuant to options
granted under the Option Plan, effective upon the consummation of this
Offering, which are not exercisable within 60 days from the date of this
Prospectus.
(5) Represents shares of Common Stock which Mr. Stein is purchasing from Joseph
G. Pozo, Jr. upon the consummation of the Offering. See "Certain
Transactions."
(6) Represents shares of Common Stock to be issued in connection with the
exercise of the Regal Option upon the consummation of the Offering.
51
<PAGE>
CERTAIN TRANSACTIONS
On April 1, 1997, Boat Tree entered into a lease with JCJ Family
Partnership, Ltd. for 1.5 acres adjacent to the Company's property in Orlando,
Florida. The general partner of the partnership is Joseph G. Pozo, Jr., the
Chairman, President, Chief Executive Officer and majority stockholder of the
Company. In 1998, the rent paid under the lease was $71,060. In March 1999,
Boat Tree purchased such parcel for a purchase price of $400,000, which the
Company believes is the approximate fair market value of such parcel. The
purchase price will be paid pursuant to a promissory note in the amount of
$400,000 which bears interest at the prime rate and is payable on August 31,
2000. In January 1999, Boat Tree executed a promissory note payable to JCJ
Family Partnership Ltd. in the principal sum of up to $400,000. Interest on the
promissory note is at the rate of 12% per annum and is payable monthly. The
principal sum is due on demand after March 31, 2000.
In May 1998, Mr. Pozo guaranteed a line of credit from Regal to the
Company with a maximum borrowing availability of $300,000 which is due on July
31, 2000. As of December 31, 1998, the entire line of credit was outstanding.
In addition, Mr. Pozo has guaranteed a floor plan financing line of credit and
an additional line of credit in an aggregate amount of up to $12 million from
TransAmerica. Outstanding borrowings under the TransAmerica floor plan
financing line of credit totalled $9.4 million as of December 31, 1998, and are
due upon the sale of the boats which secure such borrowings. Outstanding
borrowings under the other TransAmerica $2 million line of credit totalled $1.6
million as of December 31, 1998 and are due upon the earliest of (i) 30 days
after written notice, (ii) the termination of the TransAmerica floor plan
financing line of credit or (iii) December 31, 2000. Mr. Pozo has also
guaranteed a floor plan financing line of credit in an amount up to $5.8
million from Deutsche Financial Services Corp. Outstanding borrowings under
this line of credit totaled $3.8 million as of December 31, 1998 and are due
upon the sale of the boats which secure such borrowings. Mr. Pozo has
guaranteed the first mortgage loan from AmSouth Bank of Florida ("AmSouth") on
the Company's property in Orlando, Florida in the original principal amount of
$1.2 million, which loan had an outstanding principal balance of $1.1 million
as of December 31, 1998 and is due in May 2016. Mr. Pozo, Jr. has also
guaranteed a series of installment notes payable to AmSouth with interest rates
ranging from 7.5% to 9% collateralized by certain vehicles and equipment of the
Company, with an aggregate outstanding principal balance of $168,099 as of
December 31, 1998, due at various times through October 2003.
Boat Tree made distributions to its stockholders for the payment of taxes
of $45,000 for the year ended December 31, 1997 and $264,528 for the year ended
December 31, 1998. The Company is paying to the stockholders of Boat Tree the
Final S Corporation Distribution in the amount of $700,000 of which $550,000
will be paid out of the net proceeds of this Offering and the balance out of
working capital prior to the consummation of this Offering. As of the date of
this Prospectus, in connection with the Reorganization, all of the stockholders
of Boat Tree will exchange all of the outstanding shares of common stock of
Boat Tree for 998,750 shares of the Company's Common Stock.
During the year ended December 31, 1997, the Company repaid $320,483 to
Joseph G. Pozo, Jr. for advances he made to the Company for the repayment of a
third mortgage on the Orlando, Florida superstore in the amount of $194,948 and
for working capital loans he made to the Company totaling $125,535.
Joseph G. Pozo, Jr. owns 75% of the capital stock of Bob's Boats, Inc.
("Bob's Boats") a corporation which operates an approximately 10,000 square
foot retail boat dealership in Orlando, Florida and primarily sells boats under
the Bayliner brand name. On January 8, 1998, Bob's Boats purchased the assets
of H&J Sales, Inc., an unaffiliated third party which previously operated such
dealership, for a purchase price of $1.8 million, financed in part by loans
collateralized by Bob's Boats' inventory and guaranteed by Boat Tree (which
guarantee has been terminated), Mr. Pozo, Jr. and the other stockholder of
Bob's Boats. In February 1999, Mr. Pozo, Jr. sold his 75% interest in Bob's
Boats to Bob's Boats' other stockholder for $1.3 million pursuant to a secured
promissory note, secured by all of the capital stock of Bob's Boats and
guaranteed by such other stockholder.
Upon the consummation of this Offering, the Company will acquire all of
the outstanding capital stock of Marine America, a corporation owned 80% by
Joseph G. Pozo, Jr., the Company's Chairman, President, Chief Executive Officer
and majority stockholder, and 20% by Joseph J. Pozo (Mr. Pozo, Jr.'s son). The
purchase price consists of 1,250 shares of Common Stock valued at $10,000,
together with the assumption of liabilities incurred
52
<PAGE>
by Marine America in connection with its redemption of 50% of its capital stock
from Lakewood, an unaffiliated third party. Such liabilities consist of a loan
from the Company to Marine America in the amount of $31,500 (which will be
eliminated upon the consolidation of the Company and Marine America) and a
promissory note in the amount of $100,000 payable to Lakewood, which the
Company intends to repay from the proceeds of the Offering. In January 1998,
Marine America acquired certain of Lakewood's assets for a purchase price of
$130,858, including a five-year lease (which lease was amended to a
month-to-month lease commencing January 1999) relating to its retail boat
location in Belmont, North Carolina. As part of such acquisition, Boat Tree
purchased Lakewood's new and used boat and trailer inventory for a purchase
price of $998,364 and agreed to provide Marine America with new and used boat
inventory, as needed, at the Boat Tree's invoice cost plus freight. In
addition, Boat Tree entered into a management agreement with Marine America
pursuant to which the Boat Tree agreed to manage the operations of the Lakewood
dealership.
On January 22, 1999, the Company entered into an agreement with Treasure
Coast, Treasure Services and D. Thomas Grane (the sole stockholder of Treasure
Coast), unaffiliated third parties, to acquire substantially all of the assets
of Treasure Coast, together with certain real property in Stuart, Florida owned
by Treasure Services on which a retail boat dealership is located. The Treasure
Coast Acquisition will close upon the consummation of the Offering, for an
aggregate purchase price of $3.1 million (including acquisition costs of
$120,000) of which a non-refundable deposit of $50,000 has been paid, plus the
cost of Treasure Coast's inventory on such date. In connection with the
Treasure Coast Acquisition, Mr. Grane is entering into a three-year-employment
agreement with the Company and upon the consummation of the Treasure Coast
Acquisition he will become the Company's Vice President -- South Florida
Division. See "Management--Employment and Consulting Agreement" and "Principal
Stockholders."
On June 6, 1992, Boat Tree granted Regal a ten-year option to purchase 25%
of its capital stock for an aggregate purchase price of $10. On September 1,
1998, Regal agreed to (i) reduce the number of shares issuable upon the
exercise of the Regal Option to the number of shares equal to 15.65% of Boat
Tree's outstanding capital stock, which, after giving effect to the
Reorganization, represents 156,304 shares of AMRI's Common Stock (7.8% of the
number of shares of Common Stock that will be outstanding immediately following
the consummation of the Offering) and (ii) to the exercise of such option
effective upon the consummation of the Offering. In May 1998, Regal provided
the Company with a line of credit with maximum borrowings of $300,000 which
bears interest at the rate of 10% and is due on July 31, 2000. As of December
31, 1998, $300,000 was outstanding under the line of credit. See "Principal
Stockholders."
In November 1997, Joseph G. Pozo, Jr. agreed to sell to Gary E. Stein, for
a purchase price of $1.1 million, the number of shares of Common Stock equal to
$1.1 million divided by the initial public offering price per share, and Mr.
Stein has agreed to purchase such shares from Mr. Pozo, Jr. upon the
consummation of this Offering pursuant to a promissory note. In March 1999, Mr.
Stein and Mr. Pozo, Jr. amended the agreement to provide for the purchase of
53,000 shares of Common Stock in exchange for a promissory note in the amount
of $424,000 which is due two years from the consummation of this Offering. Upon
the consummation of this Offering, Mr. Pozo, Jr. has agreed to sell 16,763
shares of Common Stock to Marcelo Pozo, his brother and the Company's vice
president, in exchange for a promissory note in the principal amount of
$134,104 which is due two years from the consummation of this Offering.
The Company believes that the transactions between the Company and any of
its officers, directors and/or 5% stockholders have been on terms no less
favorable to the Company than could have been obtained from independent third
parties. Future transactions, if any, between the Company and any of its
officers, directors and/or 5% stockholders will be on terms no less favorable
to the Company than could be obtained from independent third parties and will
be approved by a majority of the independent, disinterested directors of the
Company.
53
<PAGE>
DESCRIPTION OF SECURITIES
General
The following statements do not purport to be complete and are qualified
in their entirety by reference to the detailed provisions of the Company's
Certificate of Incorporation and By-Laws, copies of which have been filed as
exhibits to the Registration Statement of which this Prospectus forms a part.
The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock, $.01 par value, and 1,500,000 shares of Preferred Stock, $.01
par value. As of the date of this Prospectus, there are 842,446 shares of
Common Stock issued and outstanding and held of record by five stockholders. No
shares of Preferred Stock are outstanding. In addition, an aggregate of 174,000
shares of Common Stock are issuable upon the exercise of outstanding options
granted under the Option Plan, effective upon the consummation of the Offering
and 156,304 shares of Common Stock are issuable upon exercise of the Regal
Option.
Common Stock
Holders of Common Stock are entitled to one vote for each share held of
record on each matter submitted to a vote of stockholders. There is no
cumulative voting for the election of directors. Subject to the prior rights of
any series of Preferred Stock which may from time to time be outstanding, if
any, holders of Common Stock are entitled to receive ratably, dividends when,
as and if declared by the Board of Directors out of funds legally available
therefor and, upon the liquidation, dissolution, or winding up of the Company,
are entitled to share ratably in all assets remaining after payment of
liabilities and payment of accrued dividends and liquidation preferences on the
Preferred Stock, if any. Holders of Common Stock have no preemptive rights and
have no rights to convert their Common Stock into any other securities. The
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable.
Preferred Stock
The Board of Directors of the Company is authorized, without further
stockholder action, to issue a maximum of 1,500,000 shares of Preferred Stock,
in one or more series and containing such rights, privileges and limitations,
including voting rights, dividend rates, conversion privileges, redemption
rights and terms, redemption prices and liquidation preferences, as the Board
may, from time to time, determine. The issuance of shares of Preferred Stock
pursuant to the Board's authority could decrease the amount of earnings and
assets available for distribution to holders of Common Stock, and otherwise
adversely affect the rights and powers, including voting rights, of such
holders and may have the effect of delaying, deferring or preventing a change
in control of the Company or make removal of management more difficult.
Additionally, the issuance of Preferred Stock could have the effect of
decreasing the market price of the Common Stock.
Transfer Agent and Registrar
The Company has appointed Continental Stock Transfer & Trust Company, 2
Broadway, New York, New York 10004, as transfer agent and registrar for the
Common Stock.
Certificate of Incorporation and Bylaws
Pursuant to Delaware Law, the power to adopt, amend and repeal By-Laws is
conferred solely upon the stockholders unless the corporation's certificate of
incorporation also confers such power upon the board of directors. Under the
Company's Certificate of Incorporation, the Board of Directors is granted the
power to amend the Bylaws of the Company. Such Bylaws provide that each
director has one vote on each matter for which directors are entitled to vote.
The By-Laws also provide that the directors will hold office until the next
annual meeting of stockholders and until their respective successors are
elected and qualified, and special meetings of stockholders may only be called
by the Board of Directors, the President of the Company or the Chairman or Vice
Chairman of the Board of Directors. These provisions, in addition to the
existence of authorized but unissued capital stock, may have the effect, either
alone or in combination with each other, of making more difficult or
discouraging an acquisition of the Company deemed undesirable by the Board of
Directors.
54
<PAGE>
Section 203 of the Delaware Law
Section 203 of the Delaware Law prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless (i) prior to the date
of the business combination, the transaction is approved by the board of
directors of the corporation; (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the outstanding voting stock, or (iii) on or
after such date the business combination is approved by the board of directors
and by the affirmative vote of at least 662/3% of the outstanding voting stock
that is not owned by the interested stockholder. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the stockholder. An "interested stockholder" is a person, who,
together with affiliates and associates, owns (or within three years, did own)
15% or more of the corporation's voting stock. This provision of law could
discourage, prevent or delay a change in management or stockholder control of
the Company, which could have the effect of discouraging bids for the Company
and thereby prevent stockholders from receiving the maximum value for their
shares, or a premium for their shares in a hostile takeover situation.
Indemnification of Officers and Directors
The Certificate of Incorporation of the Company provides that the Company
shall indemnify to the fullest extent permitted by Delaware law any person whom
it may indemnify thereunder, including directors, officers, employees and
agents of the Company. Such indemnification (other than as ordered by a court)
shall be made by the Company only upon a determination that indemnification is
proper in the circumstances because the individual met the applicable standard
of conduct. Advances for such indemnification may be made pending such
determination. In addition, the Certificate of Incorporation provides for the
elimination, to the extent permitted by Delaware law, of personal liability of
directors to the Company and its stockholders for monetary damages for breach
of fiduciary duty as directors. The Company intends to obtain directors' and
officers' liability insurance coverage in the amount of $5 million.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company 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 Company, 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 of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this Offering, 1,998,750 shares (not including,
1,250 shares to be issued in connection with the Marine America Acquisition) of
Common Stock will be issued and outstanding, of which the 1,000,000 shares
offered hereby will be freely tradeable without restriction or further
registration under the Securities Act, except that any shares purchased by
"affiliates" of the Company (as defined in Rule 144 promulgated under the
Securities Act) will be subject to the resale limitations of Rule 144, as
described below.
The remaining 998,750 shares of Common Stock outstanding are deemed
"restricted securities," as that term is defined under Rule 144, and may only
be sold pursuant to an effective registration statement under the Securities
Act, in compliance with the exemption provisions of Rule 144 or pursuant to
another exemption under the Securities Act. Such restricted shares of Common
Stock will become eligible for sale, under Rule 144, subject to certain volume
and manner of sale limitations prescribed by Rule 144 and to the contractual
restrictions described below, at various times commencing 90 days following the
date of this Prospectus. All of the Company's officers, directors and
securityholders have agreed with the Representatives that until 12 months after
the date of this Prospectus, they will not, without the prior written consent
of the Representative, directly or indirectly, sell, offer for sale, transfer,
pledge or otherwise dispose of, any securities of the Company or exercise any
registration rights relating to any securities of the Company.
55
<PAGE>
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated), including a person who may be
deemed an "affiliate" of the Company, who has beneficially owned restricted
securities for at least one year may sell, within any three-month period, a
number of shares that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock (approximately 19,988 shares immediately
following the consummation of this Offering) or (ii) the average weekly trading
volume of the Common Stock during the four calendar weeks preceding the date on
which notice of such sale was filed under Rule 144. Sales under Rule 144 are
also subject to certain requirements as to the manner of sale, notice and
availability of current public information about the Company. A person who is
not deemed to have been an affiliate of the Company at any time during the 90
days preceding a sale by such person, and who has beneficially owned the
restricted shares for at least two years, is entitled to sell such shares under
Rule 144(k) without regard to any of the restrictions described above.
56
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part (the "Underwriting Agreement"),
the Underwriters named below, acting through Prime Charter Ltd., as
Representative, have severally agreed to purchase from the Company, and the
Company has agreed to sell to the Underwriters, an aggregate of 1,000,000
shares of Common Stock. The Underwriting Agreement provides that the
Underwriters' obligations to pay for and accept delivery of those shares of
Common Stock are subject to certain conditions precedent, and that the
Underwriters are committed to purchase all of those shares of Common Stock if
any shares are purchased. Under certain circumstances, the commitments of
non-defaulting Underwriters may be increased as set forth in the Underwriting
Agreement.
Number of
Underwriter Shares
- ---------------------------- ----------
Prime Charter Ltd. .........
Total ................... 1,000,000
=========
The Underwriters propose to offer the shares of Common Stock offered
hereby to the public at the public offering price set forth on the cover page
of this Prospectus and to certain dealers, who are members of the National
Association of Securities Dealers, Inc. (the "NASD"), at such price less a
concession not in excess of $.__ per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $.__ per share to other
dealers who are members of the NASD.
The Company has agreed to pay the Representative a non-accountable expense
allowance of 3% of the aggregate offering price of the shares of Common Stock
offered hereby (including any shares of Common Stock purchased pursuant to the
over-allotment option), to cover some of the due diligence expenses and
underwriting costs related to this Offering. The Company has also agreed to pay
the fees and expenses of counsel to the Underwriters.
The Company has agreed to indemnify the Underwriters against certain
liabilities in connection with this Offering, including liabilities under the
Securities Act.
The Company has agreed to sell to the Representative or its designees, for
nominal consideration, the Representative's Warrants to purchase an aggregate
of 100,000 shares of Common Stock. The shares of Common Stock subject to the
Representative's Warrants will be in all respects identical to the shares of
Common Stock offered to the public hereby. The Representative's Warrants will
be exercisable for a four-year period commencing one year after the date hereof
at a per share exercise price equal to 120% of the public offering price of the
Common Stock. The Representative's Warrants will be restricted from sale,
transfer, assignment or hypothecation for a period of one year from the date
hereof, except to officers or partners of the Representative or those of the
Underwriters. During the period beginning one year from the consummation of the
Offering and ending five years after the date hereof, the holder of the
Representative's Warrants may require the Company to register for resale to the
public the shares of Common Stock issued or issuable upon exercise of the
Representative's Warrants. Such demand registration right may be exercised once
during such period. In addition, during the period ending seven years from the
date hereof, the Company has agreed to include such shares of Common Stock in
any appropriate registration statement which is filed by the Company. The
Representative's Warrants will contain anti-dilution provisions providing for
appropriate adjustment of the exercise price and number of shares that may be
purchased upon the occurrence of certain events. The Representative's Warrants
may be exercised by paying the exercise price in cash, through the surrender of
shares of Common Stock, through a reduction in the number of shares covered
thereby, or by using a combination of such methods.
The Company has granted to the Underwriters an option, exercisable during
the 45-day period after the date of this Prospectus to purchase up to 150,000
additional shares of Common Stock at the public offering price,
57
<PAGE>
less the underwriting discounts and commissions and a pro-rata portion of the
non-accountable expense allowance. The Underwriters may exercise this option
solely to cover over-allotments, if any, made in the sale of the shares of
Common Stock offered hereby. To the extent that this option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares of Common Stock as
the percentage of shares of Common Stock it was originally obligated to
purchase pursuant to the Underwriting Agreement.
The Underwriting Agreement provides that, during the three years after the
date of this Prospectus, the Representative has the right to designate a person
to observe meetings of the Company's board of directors or, during the five
years after the date of this Prospectus, require the Company to use its best
efforts to elect the Representative's nominee to the Company's board of
directors. Such observer or nominee shall be entitled to receive compensation
and reimbursement of expenses as provided to other Board members.
The Company and its affiliates, other than individual stockholders, will
grant the Representative a right of first refusal with respect to any sale of
securities to be made by the Company or such affiliates at any time during the
three-year period commencing on the date of this Prospectus.
The Company has applied for listing of the Common Stock on the AMEX under
the symbol "REC".
Prior to this Offering, there has been no public market for the Common
Stock. Accordingly, the public offering price for the Common Stock was
determined by negotiation among the Company and the Representative. Among the
factors considered in determining the public offering price were the Company's
products, the experience of management, the economic conditions of the
Company's industry in general, the general condition of the equity securities
market and the demand for similar securities of companies considered comparable
to the Company and other relevant factors. There can be no assurance, however,
that the prices at which the Common Stock will sell in the public market after
this Offering will not be lower than the price at which the shares of Common
Stock are sold by the Underwriters.
Until the distribution of Common Stock in this Offering is completed,
rules of the Securities and Exchange Commission (the "Commission") may limit
the ability of the Underwriters and certain selling group members to bid for
and purchase the Common Stock. As an exception to these rules, the
Representative is permitted to engage in certain transactions that stabilize
the price of the Common Stock. Such transactions consist of bids or purchases
for the purpose of pegging, fixing or maintaining the price of the Common
Stock. If the Underwriters create a short position in the Common Stock in
connection with this Offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Representative may
reduce the short position by purchasing Common Stock in the open market. The
Representative may also elect to reduce any short position by exercising all or
part of the over-allotment option described above. The Representative may also
impose a penalty bid on certain Underwriters and selling group members. This
means that if the Representative purchases shares of Common Stock in the open
market to reduce the Underwriters' short position or to stabilize the price of
the Common Stock, it may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those shares as part of this
Offering. In general, purchases of a security for the purpose of stabilization
or to reduce a short position could cause the price of the security to be
higher than it might be in the absence of such purchases. The imposition of a
penalty bid might also have an effect on the price of a security to the extent
that it discouraged resales of any security. Neither the Company nor any of the
Underwriters makes any representation or predictions as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Common Stock. In addition, neither the Company nor any of the
Underwriters makes any representation that the Representative will engage in
such transactions or that such transactions, once commenced, will not be
discontinued without notice.
The Company and its officers, directors and stockholders, have agreed that
they will not, directly or indirectly, without the prior written consent of the
Representative, for a period of twelve months after the date of this Prospectus
sell, offer to sell, solicit an offer to buy, contract to sell, pledge, grant
any option for the sale of, or otherwise transfer or dispose of or cause the
transfer or disposition of, any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for any shares of Common Stock
or exercise any registration rights with respect to any shares of Common Stock
or any securities convertible into or exchangeable or exercisable for any
shares of Common Stock. The foregoing restrictions do not apply to grants or
awards under the Option Plan. See "Shares Eligible for Future Sale."
58
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the issuance of the Shares offered
hereby will be passed upon for the Company by McLaughlin & Stern, LLP, New
York, New York. Certain legal matters in connection with this Offering will be
passed upon for the Underwriters by Proskauer Rose LLP, New York, New York.
EXPERTS
The financial statements of AMRI at December 31, 1998 and for the three
years then ended, have been included herein and in the Registration Statement
in reliance upon the report of BDO Seidman, LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of such firm as
experts in accounting and auditing.
The financial statements of Treasure Coast at December 31, 1998 and for
the two years then ended, have been included herein and in the Registration
Statement in reliance upon the report of Feldman Sherb Ehrlich & Co., P.C.,
independent certified public accountants, appearing elsewhere herein, and 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, which constitutes a part of the Registration
Statement, omits certain information contained in the Registration Statement,
and reference is made to 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. Statements contained herein concerning
the provisions of any documents are not necessarily complete; and in each
instance reference is made to the copy of such document filed as an exhibit to
the Registration Statement. Each such statement is qualified in its entirety by
such reference. As of the date of this Prospectus, the Company will become
subject to the informational requirements of the Exchange Act and the rules and
regulations thereunder, and, in accordance therewith, will file reports, proxy
and information statements, and other information with the Commission. The
Registration Statement, including exhibits and schedules filed therewith, and
the Company's reports, proxy and information statements, and other information
filed by the Company with the Commission, may be inspected without charge at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and the Commission's regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048,
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Electronic reports and other information filed through the Electronic Data
Gathering, Analysis, and Retrieval system are publicly available through the
Commission's Web site (http://www.sec.gov). Copies of such material also may be
obtained from the public reference section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, reports and
other information concerning the Company may be inspected at the offices of the
NASD, 1735 K Street, N.W., Washington, D.C. 20006.
59
<PAGE>
INDEX TO FINANCIAL STATEMENTS
American Marine Recreation, Inc. and Subsidiary Consolidated Financial
Statements
<TABLE>
<CAPTION>
Page
-----------
<S> <C>
Report of Independent Certified Public Accountants ......................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998 ............................... F-3
Consolidated Statements of Income for the years ended December 31, 1996, 1997 and 1998 ..... F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996,
1997 and 1998 ............................................................................ F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1997 and 1998.. F-6
Notes to the Consolidated Financial Statements ............................................. F-7 - F-19
</TABLE>
Treasure Coast Boating Center, Inc.
<TABLE>
<CAPTION>
Page
------------
<S> <C>
Independent Auditors' Report .................................................... F-20
Balance Sheet as of December 31, 1998 ........................................... F-21
Statements of Operations for the years ended December 31, 1997 and 1998 ......... F-22
Statements of changes in shareholder's equity as of December 31, 1997 and 1998... F-23
Statements of Cash flows for the years ended December 31, 1997 and 1998 ......... F-24
Notes to Financial Statements ................................................... F-25 - F-28
</TABLE>
F-1
<PAGE>
Report of Independent Certified Public Accountants
(Upon completing the Reorganization as described in Note 1(B) to the
accompanying consolidated financial statements, which is to take place upon the
effectiveness of this Registration Statement, BDO Seidman, LLP will be in a
position to render the following opinion)
American Marine Recreation, Inc. and Subsidiary
Orlando, Florida
We have audited the accompanying consolidated balance sheets of American Marine
Recreation, Inc. and subsidiary as of December 31, 1997 and 1998, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the years ended December 31, 1996, 1997 and 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Marine
Recreation, Inc. and subsidiary at December 31, 1997 and 1998, and the results
of its operations and its cash flows for the years ended December 31, 1996,
1997 and 1998 in conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
Orlando, Florida
January 8, 1999, except for Note 10, 11 and Note 1(B),
as to which the dates are March 31, 1999, January 22, 1999, and
April , 1999, respectively.
F-2
<PAGE>
American Marine Recreation, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1998
1998 Pro Forma
1997 Actual (unaudited)
------------- --------------- --------------
<S> <C> <C> <C>
Assets
Current:
Cash and cash equivalents .................................. $ 307,463 $ 1,139,269 $ 1,139,269
Accounts receivable, less allowance for possible
losses of $42,000 and $27,000, respectively ............... 426,972 641,606 641,606
Inventories ................................................ 6,748,035 13,702,083 13,702,083
Prepaid expenses ........................................... 10,825 19,620 19,620
Deferred income taxes ...................................... -- -- 106,000
----------- ------------ ------------
Total current assets .......................................... 7,493,295 15,502,578 15,608,578
Property and equipment, less accumulated depreciation ......... 2,132,231 2,743,989 2,743,989
Other assets .................................................. 54,983 728,560 728,560
----------- ------------ ------------
$ 9,680,509 $ 18,975,127 $ 19,081,127
=========== ============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Floorplan payable .......................................... $ 6,250,903 $ 13,220,476 $ 13,220,476
Line of credit ............................................. 500,000 1,894,289 1,894,289
Accounts payable ........................................... 226,988 367,760 367,760
Customer deposits .......................................... 16,631 5,474 5,474
Accrued expenses ........................................... 225,525 310,272 310,272
Dividend payable ........................................... -- -- 550,000
Current maturities of long-term debt ....................... 102,104 246,428 246,428
----------- ------------ ------------
Total current liabilities ..................................... 7,322,151 16,044,699 16,594,699
----------- ------------ ------------
Long-term debt, less current maturities ....................... 1,220,251 1,453,276 1,453,276
----------- ------------ ------------
Deferred income taxes ......................................... -- -- 2,000
Commitments and contingencies ................................. -- -- --
Stockholders' equity:
Preferred stock, $.01 par (1,500,000 shares authorized,
no shares outstanding) .................................... -- -- --
Common stock, $.01 par (20,000,000 shares autho-
rized, 842,446 shares issued and outstanding) ............. 8,424 8,424 8,424
Additional paid-in capital ................................. 463,056 463,056 1,022,728
Retained earnings .......................................... 666,627 1,005,672 --
----------- ------------ ------------
Total stockholders' equity .................................... 1,138,107 1,477,152 1,031,152
----------- ------------ ------------
$ 9,680,509 $ 18,975,127 $ 19,081,127
=========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
American Marine Recreation, Inc. and Subsidiary
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1996 1997 1998
-------------- -------------- --------------
<S> <C> <C> <C>
Sales and service revenue ............................ $13,058,313 $20,183,674 $24,228,492
Finance and insurance income ......................... 591,014 1,042,795 1,334,164
----------- ----------- -----------
Total revenue ...................................... 13,649,327 21,226,469 25,562,656
Cost of sales and service revenue .................... 10,544,193 16,327,484 19,082,436
----------- ----------- -----------
Gross profit ....................................... 3,105,134 4,898,985 6,480,220
Selling, general and administrative expenses ......... 2,492,775 4,084,993 5,418,407
----------- ----------- -----------
Income from operations ............................. 612,359 813,992 1,061,813
Other income ......................................... 10,115 33,481 66,480
Interest expense ..................................... (239,362) (333,958) (524,720)
----------- ----------- -----------
Net income ........................................... $ 383,112 $ 513,515 $ 603,573
=========== =========== ===========
Pro forma net income (unaudited):
Historical income before taxes on income .......... $ 383,112 $ 513,515 $ 603,573
Pro forma taxes on income (unaudited) ............. 150,000 198,000 232,000
----------- ----------- -----------
Pro forma net income (unaudited) ..................... $ 233,112 $ 315,515 $ 371,573
----------- ----------- -----------
Pro forma net income per common share (unaudited):
Basic ............................................. $ .41
Diluted ........................................... $ .35
===========
Pro forma weighted average common shares outstanding
(unaudited):
Basic ............................................. 911,196
Diluted ........................................... 1,067,500
===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
American Marine Recreation, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional
-------------------------- Paid-in Retained
Shares Amount Capital Earnings
----------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 ............ 843,158 $8,431 $463,049 $ --
Net income .......................... -- -- -- 383,112
Stockholder distributions ........... -- -- -- (185,000)
------- ------ -------- ----------
Balance, December 31, 1996 ............ 843,158 8,431 463,049 198,112
Repurchase and retirement of
minority shares ................... (712) (7) (3,193) --
Capital contribution ............... -- -- 3,200 --
Net income ......................... -- -- -- 513,515
Stockholder distributions .......... -- -- -- (45,000)
------- ------ -------- ----------
Balance, December 31, 1997 ......... 842,446 8,424 463,056 666,627
Net income ......................... -- -- -- 603,573
Stockholder distributions .......... -- -- -- (264,528)
------- ------ -------- ----------
Balance, December 31, 1998 ............ 842,446 $8,424 $463,056 $1,005,672
======= ====== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
American Marine Recreation, Inc. and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1996 1997 1998
------------ --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income .................................................. $ 383,112 $ 513,515 $ 603,573
Adjustments to reconcile net income to net cash provided
by (used for) operating activities:
Depreciation .............................................. 32,692 100,129 140,293
Amortization .............................................. 7,670 7,670 7,670
Reserve for inventory ..................................... -- 36,500 --
Bad debts ................................................. -- 67,893 65,163
Loss on disposal of property and equipment ................ 15,158 -- --
Cash provided by (used for):
Accounts receivable ...................................... 168,351 (374,176) (279,797)
Inventories .............................................. (199,875) (1,868,008) (6,954,048)
Prepaid expenses ......................................... 3,633 (10,825) (8,795)
Accounts payable ......................................... (194,092) 198,704 140,772
Customer deposits ........................................ (368) (46,969) (11,157)
Accrued expenses ......................................... 85,253 125,321 84,747
---------- ------------ ------------
Net cash provided by (used for) operating activities ......... 301,534 (1,250,246) (6,211,579)
---------- ------------ ------------
Cash flows from investing activities:
Purchase of property and equipment .......................... (371,137) (167,001) (304,283)
Change in other assets ...................................... 2,780 (8,905) (5,216)
---------- ------------ ------------
Net cash used for investing activities ....................... (368,357) (175,906) (309,499)
---------- ------------ ------------
Cash flows from financing activities:
Payment of deferred offering costs........................... -- -- (676,031)
Net borrowings on floorplan ................................. 201,037 1,618,172 6,969,573
Net borrowings on line of credit ............................ 250,000 250,000 1,394,289
Repayment of long-term debt ................................. (72,192) (108,667) (70,419)
Repayment of related party long-term debt ................... -- (320,483) --
Payment of stockholder distributions ........................ (185,000) (45,000) (264,528)
---------- ------------ ------------
Net cash provided by financing activities .................... 193,845 1,394,022 7,352,884
---------- ------------ ------------
Increase (decrease) in cash and cash equivalents ............. 127,022 (32,130) 831,806
Cash and cash equivalents, beginning of period ............... 212,571 339,593 307,463
---------- ------------ ------------
Cash and cash equivalents, end of period ..................... $ 339,593 $ 307,463 $ 1,139,269
========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
American Marine Recreation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Information as of December 31, 1997 and 1998 and for the
Years Ended December 31, 1996, 1997 and 1998
1. Summary of Significant Accounting Policies
(A) Business Description
American Marine Recreation, Inc. (through a reorganization with Boat Tree,
Inc., as described further in Note 1(B) and 1(C) below) (the "Company")
currently operates a chain of six dealerships in Florida engaged in the retail
sales and service of new and used boats and boat parts and accessories. The
dealerships offer a full line of new and used boats and most of the dealerships
maintain a parts, service and body repair facility. The Company also manages a
boat dealership in Belmont, North Carolina (see Note 11). In connection with
the proposed acquisitions (see Note 11), which the Company expects to close
upon the consummation of the Offering (see Note 1[B]), the Company will acquire
four additional dealerships in Florida, as well as the North Carolina
dealership referred to above.
(B) Proposed Public Offering and Reorganization
During 1998, Boat Tree, Inc. engaged attorneys and investment bankers to
assist it in the effectuation of an initial public offering of the common stock
of American Marine Recreation, Inc., a newly formed corporation (the
"Offering"). Boat Tree, Inc. has also initiated certain events (the
"Reorganization") in connection with the Offering which will result in it
becoming a wholly-owned subsidiary of American Marine Recreation, Inc. as of
the effective date of the Offering. The Reorganization will be accomplished
through a stock-for-stock exchange between American Marine Recreation, Inc. and
Boat Tree, Inc.
All of the outstanding shares of Boat Tree, Inc. will be exchanged for
998,750 shares of the Company's common stock (giving effect to the exercise of
the manufacturer's stock option described in Note 6). Consequently, upon the
effective date of the Offering and the related Reorganization, the consolidated
group will include the operations of American Marine Recreation, Inc. and its
wholly-owned subsidiary, Boat Tree, Inc.
(C) Basis of Financial Statement Presentation
The financial statements and related notes presented herein have been
retroactively adjusted to reflect the reorganization of Boat Tree, Inc. with
American Marine Recreation, Inc. The capital structure presented in these
financial statements is that of American Marine Recreation, Inc., but all other
information presented relates to the operations of Boat Tree, Inc., as American
Marine Recreation, Inc. had no operations during the periods presented and will
have no operations until the consummation of the Reorganization. All references
herein to "the Company" refer to American Marine Recreation, Inc. as
consolidated with Boat Tree, Inc.
(D) Balance Sheet Pro Forma Adjustments
In connection with the Reorganization, Boat Tree, Inc. will declare a
dividend (payable upon the closing of the Offering) to its stockholders
representing $700,000 of earned but undistributed earnings through the closing
date of the Reorganization of which $150,000 is attributable to the period
commencing on January 1, 1999 and ending on the date of this Prospectus. The
Company's pro forma balance sheet as of December 31, 1998 reflects a liability
for the $550,000 dividends payable.
Concurrently with the Reorganization, the Company will terminate Boat
Tree's Subchapter S corporation status and will become subject to federal and
state income taxes. The accompanying statements of income reflect a pro forma
provision for income taxes in accordance with Statement for Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS
109 is an asset and liability approach that requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. Measurement of deferred income tax is based on enacted tax laws
including tax rates, with the measurement of deferred income tax assets being
reduced by available tax benefits not expected to be realized.
F-7
<PAGE>
American Marine Recreation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Information as of December 31, 1997 and 1998 and for the
Years Ended December 31, 1996, 1997 and 1998 -- (Continued)
1. Summary of Significant Accounting Policies -- (Continued)
In connection with the termination of Boat Tree's Subchapter S corporation
status, the Company will record a net deferred tax asset and an accompanying
tax benefit to reflect the differences in the financial statement and income
tax basis of certain assets and liabilities. The pro forma balance sheet as of
December 31, 1998 reflects an adjustment as if the Subchapter S corporation
status had terminated on December 31, 1998. As of that date, a net deferred tax
asset of approximately $104,000 would have been recognized as follows:
Current deferred tax assets:
Inventory .............................................. $ 44,000
Accrued expenses ....................................... 52,000
Allowance for possible losses .......................... 10,000
--------
Deferred tax asset -- current ............................. 106,000
--------
Long-term deferred tax asset -- intangible assets ......... 6,000
Long-term deferred tax liability -- depreciation .......... (8,000)
--------
Deferred tax liability -- noncurrent ...................... (2,000)
--------
Net current deferred tax asset ............................ $104,000
========
The retained earnings on the pro forma balance sheet as of December 31,
1998 reflects an adjustment as if the subchapter S Corporation status had
terminated on December 31, 1998. As of that date all remaining earnings were
reclassified to additional paid in capital.
(E) Statement of Income Pro Forma Adjustments
Pro forma net income for the years ended December 31, 1996 through 1998
are based upon pretax income as if the Company had been subject to federal and
state income taxes at an estimated effective tax rate of approximately 38%. The
difference between the federal statutory rate of 34% and the estimated
effective tax rate is due to state income taxes and nondeductible expenses.
(F) Pro Forma Earnings per Share
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). SFAS
128 provides for the calculation of basic and diluted earnings per share. Basic
earnings per share includes no dilution and is computed by dividing income
available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution of securities that could share in the earnings of an entity.
Pro forma earnings per share is computed by dividing pro forma net income by
the basic and diluted weighted average number of common shares (see Note 9).
(G) Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
No. 130"), and No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS No. 131"). SFAS 130 establishes standards for
reporting and displaying comprehensive income, its components and accumulated
balances. SFAS 131 establishes standards for the way that public companies
report information about operating segments in annual financial statements and
requires reporting of selected information about operating segments in interim
financial statements issued to the public. Both SFAS 130 and SFAS 131 are
effective for periods beginning after December 15, 1997. The Company adopted
these new accounting standards in 1998, and their adoption had no effect on the
Company's financial statements and disclosures.
F-8
<PAGE>
American Marine Recreation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Information as of December 31, 1997 and 1998 and for the
Years Ended December 31, 1996, 1997 and 1998 -- (Continued)
1. Summary of Significant Accounting Policies -- (Continued)
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No.
133"). SFAS 133 requires companies to recognize all derivatives contracts as
either assets or liabilities in the balance sheet and to measure them at fair
value. If certain conditions are met, a derivative may be specifically
designated as a hedge, the objective of which is to match the timing of gain or
loss recognition on the hedging derivative with the recognition of (i) the
changes in the fair value of the hedged asset or liability that are
attributable to the hedged risk or (ii) the earnings effect of the hedged
forecasted transaction. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of change.
SFAS 133 is effective for all fiscal quarters of fiscal years beginning after
June 15, 1999.
Historically, the Company has not entered into derivatives contracts to
hedge existing risks or for speculative purposes. Accordingly, the Company does
not expect adoption of the new standard on January 1, 2000 to affect its
financial statements.
(H) Risks and Uncertainties
The recreational boat industry is highly competitive. The Company competes
for boat sales with single location boat dealers and national or regional
chains. With respect to sales of marine parts, accessories and equipment, the
Company competes with national specialty marine stores, catalog retailers,
sporting goods stores and mass merchants. Many of the Company's larger
competitors are well-capitalized companies which seek to increase market share
through price reductions. The recreational boat industry is dependent upon
discretionary consumer spending. Increasing interest rates and periods of
economic downturn have historically reduced consumer spending on non-essential
goods. The risk to the Company of increased competition or a reduction in
consumer spending on non-essential goods may ultimately lead to reduced profits
and affect the ability of the Company to expand operations.
The Company derives a substantial portion of its income from the
origination and placement of customer financing and sale of extended service
contracts and insurance products, collectively, "F&I Products" (see Note 10).
F&I Products accounted for approximately 4%, 5% and 5% of the revenues and 19%,
21% and 21% of the Company's gross profit for the years ended December 31, 1996
through 1998, respectively. The Company's lenders may choose to pursue this
business directly, rather than through intermediaries, such as the Company.
Moreover, such lenders may impose terms in their retail dealer financing
arrangements with the Company that may be materially unfavorable to the Company
or its customers. For these and other reasons, the Company could experience a
significant reduction in income resulting from reduced demand for its customer
financing programs. In addition, if profit margins are reduced on sales of F&I
products, or if these products are no longer available, it would have a
material adverse effect on the Company's business, financial condition and
operating results.
The recreational boating industry is highly seasonal and the Company has
significantly lower sales in the fourth quarter of the calendar year, resulting
in operating losses during this period. Weather patterns or prolonged winter
conditions and unseasonably cool weather may lead to a shorter selling season
in affected locations. The Company's results of operations may fluctuate as a
result of these or other conditions.
The Company deals with each of its manufacturers pursuant to annually
renewable, non-exclusive, dealer agreements. The Company purchased 52%, 65%,
and 69% of its new boats from one manufacturer during the years ended December
31, 1996, 1997 and 1998, respectively.
The Company faces the uncertainty of the continued availability of
increases in its borrowing capacity. Adequate working capital is essential to a
boat retailer due to the significant cash investment required for the purchase
of new and used boat inventory. The Company believes that it has an excellent
relationship with its floorplan lenders and that it will be able to obtain
sufficient working capital to finance its requirements.
F-9
<PAGE>
American Marine Recreation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Information as of December 31, 1997 and 1998 and for the
Years Ended December 31, 1996, 1997 and 1998 -- (Continued)
1. Summary of Significant Accounting Policies -- (Continued)
(I) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
(J) Cash and Cash Equivalents
For financial presentation purposes, the Company considers short-term,
highly liquid investments with original maturities of three months or less to
be cash and cash equivalents.
Due to the seasonality of the boat industry, the Company's bank balances
may periodically exceed amounts that are federally insured. This risk is
mitigated by the Company's use of only high quality financial institutions.
(K) Inventories
Inventories consist of boats, motors, trailers and related parts and
accessories and water sport equipment and accessories. The Company's
inventories are valued at the lower of cost or market. The cost of boats,
motors and trailers is determined using the specific identification method. The
cost of parts and accessory inventories is determined using the first-in,
first-out (FIFO) method.
(L) Property, Equipment and Depreciation
Property and equipment are stated at cost. Depreciation is computed over
the estimated useful lives of the assets by the straight-line and accelerated
methods for financial reporting purposes. Amortization of leasehold
improvements is computed by the straight-line method over the estimated useful
lives of the assets. Interest of $16,345 was incurred in conjunction with the
construction of the Orlando facility during 1996. This amount has been
capitalized as buildings and improvements and amortized on a straight-line
basis.
(M) Revenue Recognition
Retail sales of boats, parts and services are recognized in operations
upon delivery of products or services to the customer or, in the case of boats,
when title passes to the customer.
(N) Advertising Costs
Advertising costs, included in selling expenses, are expensed as incurred
and were $201,541, $208,051 and $287,724 for the years ended December 31, 1996,
1997 and 1998, respectively.
(O) Impairment of Long-Lived Assets
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" ("SFAS 121"), during 1996. SFAS 121 requires impairment
losses to be recorded on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount. The
adoption of SFAS 121 did not impact the financial statements of the Company.
(P) Fair Value of Financial Instruments
The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. Fair value estimates discussed
herein are based upon certain market assumptions and pertinent information
available to management. These financial instruments include cash and cash
equivalents, accounts receivables, accounts payable and accrued expenses. Fair
values were assumed to approximate carrying values for these
F-10
<PAGE>
American Marine Recreation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Information as of December 31, 1997 and 1998 and for the
Years Ended December 31, 1996, 1997 and 1998 -- (Continued)
1. Summary of Significant Accounting Policies -- (Continued)
financial instruments since they are short term in nature and their carrying
amounts approximate fair values or they are receivable or payable on demand.
The fair value of the Company's long-term debt, which approximates its carrying
value, is estimated based upon the quoted market prices for the same or similar
debt instruments or on the current rates offered to the Company for debt of the
same remaining maturities.
2. Inventories
Inventories are summarized as follows:
December 31,
------------------------------
1997 1998
------------- --------------
New boats, motors and trailers ......... $6,036,114 $12,220,940
Used boats ............................. 519,977 1,222,527
Parts and accessories .................. 228,444 295,116
---------- -----------
6,784,535 13,738,583
Reserve for obsolescence ............... (36,500) (36,500)
---------- -----------
$6,748,035 $13,702,083
========== ===========
3. Property and Equipment
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------
Useful
Lives 1997 1998
----------- -------------- --------------
<S> <C> <C> <C>
Land ................................... -- $ 400,000 $ 756,390
Buildings and improvements ............. 8-31 yrs. 1,623,180 1,712,724
Machinery and equipment ................ 6-8 yrs. 70,977 104,849
Office equipment and furniture ......... 6-8 yrs. 112,269 210,046
Vehicles ............................... 6-12 yrs. 146,189 264,585
Signs .................................. 6 yrs. 20,000 33,443
Leasehold improvements ................. 10 yrs. -- 35,629
----------- -----------
2,372,615 3,117,666
Less accumulated depreciation .......... 240,384 373,677
----------- -----------
$ 2,132,231 $ 2,743,989
=========== ===========
</TABLE>
Depreciation expense for the years ended December 31, 1996, 1997 and 1998
was $32,692, $100,129 and $140,293, respectively.
4. Other Assets
Included in other assets at December 31, 1998 is approximately $676,000 of
deferred costs incurred during 1998 which relates to the Offering (see Note
1[B]). These costs will be applied against additional paid-in capital upon the
receipt of the proceeds from the Offering. If the Offering is not consummated,
the deferred costs will be charged to operations.
F-11
<PAGE>
American Marine Recreation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Information as of December 31, 1997 and 1998 and for the
Years Ended December 31, 1996, 1997 and 1998 -- (Continued)
5. Borrowings
Floorplan Contracts
The Company finances substantially all of its new boat inventory through
floorplan financing arrangements, which are collateralized by the Company's new
boat inventory, accounts receivable, equipment and are personally guaranteed by
the Company's majority stockholder. The floorplan contracts are due upon the
sale of the related boat.
The Company has arranged for a free floorplan period whereby the floorplan
interest is paid by boat manufacturers for a predetermined period of time. As a
result of the free floor arrangement and certain floorplan interest rebates
received from manufacturers, the weighted average interest rates on floorplan
debt for the years ending December 31, 1996 through 1998 approximates 5%.
As of December 31, 1997 and 1998, the maximum borrowings allowable under
the floorplan contracts were $8,750,000 and $15,750,000, respectively, and
there were outstanding balances under such contracts of $6,250,903 and
$13,220,476, respectively. The following table summarizes certain information
about the Company's borrowings under the floorplan contracts:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998
------------- --------------
<S> <C> <C>
Maximum month-end borrowings outstanding during the period ......... $6,391,821 $13,220,476
Average borrowings outstanding during the period ................... $5,199,581 $ 7,962,315
========== ===========
</TABLE>
Lines of Credit
The Company is currently a party to three different line of credit
agreements. The following table summarizes certain information about each of
these borrowing facilities:
<TABLE>
<CAPTION>
Balance at December 31,
----------------------------
1997 1998
----------- --------------
<S> <C> <C>
$1,000,000 revolving line of credit, monthly interest payable at prime plus
1/2% (8 1/4% at December 31, 1998), unpaid principal and interest due
September 1999, collateralized by the Company's used boat inventory and
personally guaranteed by the Company's majority stockholder .................... $ 500,000 $ --
$2,000,000 revolving line of credit available through a floorplan lender, inter-
est accruing at the greater of the prime lending rate (73/4% at December 31,
1998) or 7%, all unpaid principal and interest due the earlier of (1)
December 2000, (2) the termination of the related floorplan financing
agreement, or (3) a 30-day written notice, collateralized by the Company's
used boat and parts inventory and personally guaranteed by the Company's
majority stockholder ........................................................... -- 1,594,289
$300,000 unsecured line of credit available from the Company's primary
supplier (see Note 6), interest accruing at 10%, all unpaid principal and
interest due July 2000, personally guaranteed by the Company's majority
stockholder .................................................................... -- 300,000
--------- -----------
$ 500,000 $ 1,894,289
========= ===========
</TABLE>
F-12
<PAGE>
American Marine Recreation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Information as of December 31, 1997 and 1998 and for the
Years Ended December 31, 1996, 1997 and 1998 -- (Continued)
5. Borrowings -- (Continued)
The following table provides certain additional information about the
lines of credit:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1997 1998
-------------- ---------------
<S> <C> <C>
Maximum month-end borrowings outstanding during the period ......... $ 500,000 $ 1,894,289
Average borrowings outstanding during the period ................... $ 108,333 $ 724,524
Weighted average interest rate during the period ................... 8.88% 5.94%
========== ===========
</TABLE>
Long-Term Debt
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1997 1998
-------------- --------------
<S> <C> <C>
7.71% $1,150,000 mortgage note payable dated November 1995, principal
and interest of $9,488 due monthly through May 2001, at which time the
interest rate shall be adjusted and fixed at the average T-Bill rate plus 2%
and principal and interest will continue to be payable monthly in an
amount that will fully amortize the outstanding loan balance by May 2016,
collateralized by certain real and tangible property of the Company and
personally guaranteed by the majority stockholder of the Company ............... $ 1,115,212 $ 1,087,534
8.5% $300,000 mortgage note payable dated June 1998, principal and inter-
est of $2,954 due monthly through June 2003, balloon payment of
$238,377 due July 2003, collateralized by certain real property of the
Company ........................................................................ -- 294,071
5.0% $250,000 mortgage note payable dated November 1995, yearly princi-
pal payments of $50,000 plus interest due December 1996 through
December 1998, with all remaining principal and interest due December
1999, collateralized by a second lien on certain real and tangible property
of the Company ................................................................. 150,000 150,000
Installment loans payable to banks bearing interest at rates from 7.5% to 9%,
principal and interest payable monthly through October 2003, collateral-
ized by certain vehicles and equipment of the Company .......................... 57,143 168,099
----------- -----------
1,322,355 1,699,704
Less current maturities ......................................................... 102,104 246,428
----------- -----------
Total long-term debt ............................................................ $ 1,220,251 $ 1,453,276
=========== ===========
</TABLE>
Aggregate maturities of long-term debt over future years as of December
31, 1998 are as follows:
December 31,
-------------
1998
-------------
1999 $246,428
2000 90,113
2001 87,572
2002 67,743
2003 290,912
Thereafter 916,936
F-13
<PAGE>
American Marine Recreation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Information as of December 31, 1997 and 1998 and for the
Years Ended December 31, 1996, 1997 and 1998 -- (Continued)
5. Borrowings -- (Continued)
Interest rates and interest expense related to the floorplan contracts,
lines of credit, and long-term debt are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1996 1997 1998
------------------ ---------------- -----------------
<S> <C> <C> <C>
Floor plan contracts:
Interest rates ........... 8.25% - 11.75% 8.60% - 12.45% 8.72% - 14.93%
Interest expense ......... $181,544 $226,011 $362,881
Line of credit:
Interest rates ........... 8.75% 8.75% - 9.00% 7.75% - 10.00%
Interest expense ......... $790 $ 11,535 $ 43,040
Long-term debt:
Interest rates ........... 5.00% - 12.00% 5.00% - 9.00% 5.00% - 9.00%
Interest expense ......... $57,028 $ 96,412 $118,799
</TABLE>
Debt Covenants
Included in the Company's $2,000,000 line of credit agreement (see Note 5)
are certain loan covenants. Specifically, the Company must maintain a ratio of
debt to tangible net worth of no more than 9.75 to 1. By March 31, 1999, this
ratio may not exceed 6.0 to 1. Additionally, the Company must maintain a
minimum cash balance of $250,000 through February 26, 1999, at which time the
minimum required balance will be increased to $1,000,000.
As of December 31, 1998, the Company was in compliance with the minimum
cash balance requirement but was in violation of the minimum debt to tangible
net worth ratio. Subsequently, the Company obtained a waiver of such violation
from the lender until May 15, 1999. The Company expects that it will be in
compliance with the required minimum debt to tangible net worth ratio upon the
consummation of the Offering,.
The Company's floorplan financing arrangements have similar debt to net
worth ratio requirements, which the Company was in violation of as of December
31, 1998. The Company has also received waivers until May 15, 1999 of such
violations from its floorplan lenders and expects that it will be in compliance
with the required ratios upon the consummation of the Offering.
6. Stock Options
Manufacturer's Stock Option
The Company entered into a stock option agreement in 1992 with its major
boat manufacturer (see Note 1[H]) as part of a financing agreement. The
agreement granted the manufacturer the right to purchase common stock of the
Company sufficient to equal a 25% ownership interest for $10. The option
expires June 30, 2002.
In December 1995, the manufacturer agreed not to exercise its option as
long as the Company, or any other entity managed, owned or controlled by the
Company or its major stockholder, refrained from selling any new boat product
line that was directly competitive with any of the manufacturer's product
lines.
On September 1, 1998, the manufacturer agreed to reduce the amount of
stock purchasable under its option from a 25% interest to a 15.65% interest in
the Company. This agreement results in a reduction in the value of the
manufacturer's original option. Thus, no remeasurement of the option value is
required. Pursuant to this agreement, the manufacturer also notified the
Company of its intent to exercise its option, contingent on the successful
completion of the Offering. Diluted earnings per share numbers presented in
these financial statements have been adjusted to give retroactive effect to the
change in this option.
F-14
<PAGE>
American Marine Recreation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Information as of December 31, 1997 and 1998 and for the
Years Ended December 31, 1996, 1997 and 1998 -- (Continued)
6. Stock Options -- (Continued)
1998 Stock Option Plan
Effective August 1, 1998, the Company adopted the 1998 Stock Option Plan
(the "Option Plan") for its executive officers, key employees and consultants
and has reserved 200,000 shares of common stock for issuance under the Option
Plan. The Option Plan has a term of ten years. The Option Plan provides for the
grant of "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, and non-statutory stock options. The
Option Plan is currently administered by the Company's Board of Directors but
will, commencing upon the consummation of the Offering, be administered by the
Board's Compensation Committee. The exercise price for incentive stock options
may not be less than 100% of fair market value of shares of the Company's
common stock on the date of grant (110% of the fair market value in the case of
incentive stock options granted to employees who hold more than 10% of the
voting power of the Company's issued and outstanding shares of common stock).
The exercise price of non-statutory stock options may be equal to or less than
100% of the fair market value of shares of the Company's common stock on the
date of grant.
Options granted under the Option Plan may not have a term of more than ten
years (five years in the case of incentive stock options granted to employees
who hold more than 10% of the voting power of the Company's common stock).
Options generally terminate three months after the termination of the
optionee's employment with the Company for any reason other than death,
disability or retirement and are not transferable by the optionee other than by
will or the laws of descent and distribution.
The Company granted (effective upon the consummation of the Offering)
options to purchase an aggregate of 174,000 shares of the Company's common
stock, each of which will be exercisable commencing 90 days following the
consummation of the Offering. Of such options, options to purchase 42,000
shares of common stock were granted to Hampstead Equities, Inc. for consulting
services rendered to the Company and options to purchase 30,000 and 12,000
shares of common stock were granted to Marcelo Pozo, the Company's Vice
President, and Melven R. Nehleber, the Company's Chief Financial Officer,
respectively. Options to purchase 2,500 shares of common stock were granted to
each of the Company's director nominees, and the balance was granted to various
of the Company's non-management employees. The exercise price of the options is
equal to the initial public offering price per share, and the options expire in
August 2008.
7. Employee Benefit Plan
On January 1, 1997, the Company adopted a 401(k) profit sharing plan which
covers substantially all employees meeting certain minimum age and service
requirements. The plan provides for the Company to match 50% of the
participant's contributions to the plan up to a maximum of four percent of each
participant's compensation. The Company's contribution to the plan is included
in selling, general and administrative expenses and approximated $6,600,
$22,600 and $23,100 for the years ended December 31, 1996, 1997 and 1998,
respectively.
8. Election Under Subchapter S
Prior to the Reorganization, Boat Tree elected, and its stockholders
consented, to include their respective share of taxable income of Boat Tree in
their individual tax returns. As a result, no federal or state income tax has
been imposed on Boat Tree. Substantially all of the balance of the Company's
retained earnings at December 31, 1998 represents previously taxed income which
may be distributed tax-free to Boat Tree's stockholders (see Note 1[D]).
9. Earnings per Share
Pro forma basic weighted average shares outstanding include 842,446 actual
shares outstanding plus 68,750 shares that represent the approximate number of
shares of common stock being sold by the Company in
F-15
<PAGE>
American Marine Recreation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Information as of December 31, 1997 and 1998 and for the
Years Ended December 31, 1996, 1997 and 1998 -- (Continued)
9. Earnings per Share -- (Continued)
the Offering in order to fund the final S corporation distribution of $550,000
based upon the assumed price of $8.00 per share (the midpoint of the currently
anticipated range of the public offering price). Pro forma diluted weighted
average shares outstanding include the effect of 156,304 shares of the
Company's common stock to be issued upon the exercise of the manufacturer's
stock option (see Note 6).
The following table sets forth historical basic and diluted earnings per
share. Potential dilutive securities include 156,304 shares related to the
manufacturer's stock option (see Note 6).
Weighted Average Earnings per
Number of Shares Common Share
--------------------- --------------------
Years Ended December 31, Basic Diluted Basic Diluted
- -------------------------- --------- --------- --------- --------
1996 843,158 999,462 $ .45 $ .38
1997 842,446 998,750 $ .61 $ .51
1998 842,446 998,750 $ .72 $ .60
10. Commitments and Contingencies
Leases
The Company conducts its operations partially from leased facilities.
These leases are classified as operating leases and expire on various dates
through March 2003.
On April 1, 1997, the Company began leasing a boat storage area from an
entity owned, in part, by the majority stockholder. The related monthly rent
was based on the number of boats sold by the Company. Beginning in August 1998,
the monthly rent became fixed at $4,000. This lease expires March 31, 2006. The
Company paid $71,060 under this lease in 1998. In March 1999, the Company
purchased the boat storage area for a $400,000 note payable. The note payable
bears interest at the rate of 12% per annum payable monthly. The principal sum
is due on demand after August 31, 2000. The Company believes that the purchase
price is the approximate fair market value of such parcel.
Rental expense under all operating leases was approximately $118,000,
$158,000 and $419,000 for the years ended December 31, 1996, 1997 and 1998,
respectively.
F-16
<PAGE>
American Marine Recreation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Information as of December 31, 1997 and 1998 and for the
Years Ended December 31, 1996, 1997 and 1998 -- (Continued)
10. Commitments and Contingencies -- (Continued)
The future minimum rental payments required under operating leases that
have initial or remaining non-cancelable lease terms in excess of one year are
as follows:
December 31,
-------------
1998
-------------
1999 $ 408,573
2000 371,999
2001 349,186
2002 249,723
2003 110,880
Thereafter 114,480
----------
Total minimum lease payments $1,604,841
==========
Dealer Financing Agreements
The Company has entered into finance agreements with independent financial
institutions including banks and finance companies to assist the Company's
customers in obtaining financing for boat purchases. The process consists of
the Company referring the customer to one or more of the organizations offering
the financing services. The Company does not perform any credit approvals of
the applicant, does not service the collection of the loan, nor does the
Company provide any warranties concerning the lender. The Company's involvement
is limited to making the financial institutions available to the customer for
the customer's consideration, the gathering of information to obtain a credit
report and such other information as required by the financing institution(s)
referred by the Company.
Under the terms of the finance agreements, the Company may receive a
participation fee or "commission" from the financing institution. The financial
institutions typically base the amount of the commission earned by the Company
on the difference between the customer's interest rate as contracted with the
financial institution and the interest buy rate of the institution. The
interest rate normally varies from institution to institution and may be
affected by the customer's credit report standing. The buy rate is published by
the financial institution specifically for the Company and is considered the
base for the commission calculation.
The lender could charge the Company back all or part of the commission if
the loan is paid off or foreclosed on within a specified period of time. The
"chargeback" period is generally limited to the first six months of the term of
the loan.
The Company records commission income based upon the amount earned less an
allowance for chargebacks. In determining the amount of the allowance for
chargebacks, the Company takes into consideration the total customer loans
outstanding and estimates of the exposure for potential chargebacks associated
with these loans.
This process includes an estimate on the probability for loan payoffs
based on historical loan payoff information, consideration for current and
future economic conditions, the effects of changes in consumer interest rates
and the aging of all loans outstanding as they relate to the chargeback period.
Based on an analysis of these factors, the Company has determined that an
allowance for chargebacks is unnecessary at December 31, 1997 and 1998. Actual
finance chargebacks were approximately $4,000, $13,000 and $8,000 for the years
ended December 31, 1996, 1997 and 1998, respectively.
Beginning in 1996 and ceasing in April 1998, the Company's use of a
"dealer rebate" as part of, or in lieu of, a customer down payment resulted in
a breach of certain provisions of the third-party finance agreements. Under the
terms of these agreements, the use of dealer rebates obligates the Company to
indemnify the finance
F-17
<PAGE>
American Marine Recreation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Information as of December 31, 1997 and 1998 and for the
Years Ended December 31, 1996, 1997 and 1998 -- (Continued)
10. Commitments and Contingencies -- (Continued)
company against foreclosure losses for those specific customers. The
indemnification by the Company would include repayment of the customer's
defaulted obligation and receipt by assignment of the customer's loan contract.
Should this occur, the Company would attempt to collect on the customer loan or
repossess the underlying collateral. Repossessed boats would be sold in the
normal course of business through the Company's retail sales centers. During
1997, the Company accrued approximately $86,000 for estimated foreclosure
losses related to such loans. As of December 31, 1998, this accrual balance has
remained unchanged. During the years ended December 31, 1997 and 1998, the
Company charged earnings approximately $86,000 and $33,000 related to these
foreclosure losses.
11. Proposed Acquisitions
Marine America, Inc.
Marine America, Inc. ("MAI") is a corporation that commenced operations on
January 30, 1998 by purchasing equipment and certain intangible assets and
assuming certain equipment operating lease obligations from Lakewood Marine
International, Ltd. ("Lakewood") which operated a retail boat dealership in
Belmont, North Carolina, for $130,858. MAI is owned 50% by the majority
stockholder of the Company and his son and 50% by Lakewood. As part of the
transaction, the Company purchased the new and used boat and trailer inventory
from Lakewood for $998,364. The new boat inventory purchased was financed
through borrowings under the Company's floorplan agreements.
MAI executed a five-year lease with Lakewood which included an option to
purchase the dealership land and buildings and a provision to terminate the
lease before its expiration date. As of December 31, 1998, MAI had given notice
of its intent to terminate the lease as of January 1999 and agreed to continue
the lease on a month-to-month basis thereafter. The Company plans to construct
a new facility on land the Company acquired on May 15, 1998 for $348,100. The
land is located in the same market and was acquired in part through the
issuance of an 8 1/2% mortgage note payable for $300,000 (see Note 5).
Upon its inception, MAI entered into a management agreement with the
Company, under which the Company agreed to manage all of MAI's dealership
operations. The Company also agreed to provide MAI with new and used boat
inventory at the Company's invoice cost plus freight. For its services, the
Company receives a monthly management fee and reimbursement of its operating
expenses incurred on behalf of MAI. The management fee is based on five percent
of the dealership's gross finance and insurance income and one percent of the
month-end balance of the new and used boat inventories. For the year ended
December 31, 1998, the Company earned management fees of approximately
$134,000, which have been included in Sales and Service Revenue.
MAI has agreed to redeem all of its common stock owned by Lakewood for
$125,000 prior to the closing of the Offering (see Note 1[B]). MAI intends to
borrow $31,500 from the Company and issue a note payable for $100,000 to
Lakewood to fund this stock redemption. After the redemption, the Company's
majority stockholder and his son will own 100% of MAI. The Company has agreed
to exchange 1,250 shares of its common stock valued at $10,000, based upon the
offering price of $8.00 per share, for all the outstanding common stock of MAI
as of the closing of the Offering and will repay the $100,000 note payable from
the proceeds of the Offering.
Treasure Coast Boating Center, Inc. and Related Real Estate
On January 22, 1999, the Company entered into an agreement with Treasure
Coast Boating Center, Inc. ("Treasure Coast") , an unaffiliated third party, to
acquire substantially all of the assets of Treasure Coast together with related
real property owned by an affiliate of Treasure Coast on which a retail boat
dealership is located. Treasure Coast operates four retail boat dealerships in
Florida. The Company will acquire substantially all of the
F-18
<PAGE>
American Marine Recreation, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Information as of December 31, 1997 and 1998 and for the
Years Ended December 31, 1996, 1997 and 1998 -- (Continued)
11. Proposed Acquisitions -- (Continued)
assets of Treasure Coast upon the consummation of the Offering for an aggregate
purchase price of $3,131,000 (including acquisition costs estimated to be
$120,000) plus the cost of Treasure Coast's inventory on such date. The
acquisition will be accounted for using the purchase method and the purchase
price includes goodwill estimated at $1,870,000. In connection with the
Treasure Coast acquisition, the Company is entering into a three-year
employment agreement with D. Thomas Grane, the sole stockholder of Treasure
Coast, which provides for a base salary of $78,000 plus an amount equal to 10%
of the net income of the four locations operated by Treasure Coast.
12. Subsequent Event
In January 1999, an entity owned in part by the Company's majority
stockholder agreed to advance the Company up to $400,000 under a promissory
note agreement for working capital purposes. Interest on the promissory note is
payable at the rate of 12% per annum and is payable, together with the
principal sum, on demand, commencing after March 31, 2000.
13. Supplemental Cash Flow Information
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
The following summarizes noncash investing and financing transactions:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1996 1997 1998
------------- ------------ ------------
<S> <C> <C> <C>
Cash paid for interest ..................................... $ 196,315 $ 377,005 $ 494,719
========== ========= =========
Noncash investing and financing activities:
Purchase of fixed assets through the assumption of long-
term debt .............................................. $1,173,559 $ 53,269 $ 447,768
Loan costs paid by majority stockholder ................. 24,948 -- --
Capital contribution .................................... -- 3,200 --
Reduction in capital through repurchase and retirement of
common stock ........................................... -- 3,200 --
</TABLE>
F-19
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Treasure Coast Boating Center, Inc.
Stuart, Florida
We have audited the accompanying balance sheet of Treasure Coast Boating
Center, Inc. as of December 31, 1998, and the related statements of operations,
shareholder's equity and cash flows for the years ended December 31, 1997 and
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 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 Treasure Coast Boating Center,
Inc. at December 31, 1998, and the results of its operations and its cash flows
for the years ended December 31, 1997 and 1998, in conformity with generally
accepted accounting principles.
Feldman Sherb Ehrlich & Co., P.C.
Certified Public Accountants
New York, New York
January 15, 1999, except
for Note 10 as to which
the date is January 22, 1999
F-20
<PAGE>
TREASURE COAST BOATING CENTER, INC.
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Accounts receivable, less allowance for doubtfull accounts of $4,184 ................. $ 199,720
Inventories .......................................................................... 7,226,486
----------
Total current assets .............................................................. 7,426,206
PROPERTY AND EQUIPMENT, net ............................................................. 245,740
OTHER ASSETS:
Loan to shareholder .................................................................. 122,486
Deposits ............................................................................. 42,324
----------
$7,836,756
==========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Cash overdraft ....................................................................... $ 8,237
Accounts payable and accrued expenses ................................................ 317,737
Floor plan financing ................................................................. 6,371,979
Notes payable ........................................................................ 143,900
Other liabilities .................................................................... 107,393
Note payable to related party ........................................................ 26,325
Current portion of long-term debt .................................................... 5,820
----------
Total current liabilities ......................................................... 6,981,391
----------
LONG TERM DEBT .......................................................................... 26,224
SHAREHOLDER'S EQUITY:
Common stock, $.01 par value -- shares authorized 100,000 shares, issued and outstand-
ing 10,000 shares ................................................................... 100
Additional paid-in capital ........................................................... 105,291
Retained earnings .................................................................... 723,750
----------
Total shareholder's equity ........................................................ 829,141
----------
$7,836,756
==========
</TABLE>
See notes to financial statements.
F-21
<PAGE>
TREASURE COAST BOATING CENTER, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------
1997 1998
------------- --------------
<S> <C> <C>
NET SALES ............................................ $9,725,996 $17,800,853
COST OF SALES ........................................ 7,815,152 13,756,752
---------- -----------
GROSS PROFIT ......................................... 1,910,844 4,044,101
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ......... 1,745,761 3,041,504
DEPRECIATION ......................................... 18,982 48,653
---------- -----------
INCOME FROM OPERATIONS ............................... 146,101 953,944
INTEREST EXPENSE, net ................................ (156,270) (204,130)
---------- -----------
NET INCOME (LOSS) .................................... $ (10,169) $ 749,814
========== ===========
</TABLE>
See notes to financial statements.
F-22
<PAGE>
TREASURE COAST BOATING CENTER, INC.
STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
Common Stock
------------------- Additional Retained
Shares Amount Paid-in Capital Earnings Total
-------- -------- ----------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 ........... 10,000 $100 $105,291 $ 82,453 $ 187,844
Net loss ........................ -- -- -- (10,169) (10,169)
Distributions ................... -- -- -- (17,604) (17,604)
------ ---- -------- --------- ---------
Balance, December 31, 1997 ......... 10,000 100 105,291 54,680 160,071
Net income ...................... -- -- -- 749,814 749,814
Distributions ................... -- -- -- (80,744) (80,744)
------ ---- -------- --------- ---------
Balance, December 31, 1998 ......... 10,000 $100 $105,291 $ 723,750 $ 829,141
====== ==== ======== ========= =========
</TABLE>
See notes to financial statements
F-23
<PAGE>
TREASURE COAST BOATING CENTER, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1997 1998
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) .......................................................... $ (10,169) $ 749,814
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Depreciation ............................................................ 18,982 48,653
Change in assets and liabilities:
(Increase) decrease in accounts receivable .............................. 25,162 (114,392)
Increase in inventories ................................................. (3,068,378) (2,128,183)
Increase in other assets ................................................ (15,000) (27,324)
Increase (decrease) in accounts payable and accrued expenses ............ 447,761 (354,066)
Increase in other liabilities ........................................... 4,243 33,565
------------ ------------
Net cash used in operating activities ......................................... (2,597,399) (1,791,933)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ....................................................... (201,744) (33,227)
------------ ------------
Net cash used in investing activities ......................................... (201,744) (33,227)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in floor plan financing ........................................... 3,041,476 2,039,507
Increase in overdraft ...................................................... -- 8,237
Increase in notes payable .................................................. 142,500 3,793
Repayments of debt ......................................................... (62,486) (413,550)
Increase in loan to shareholder ............................................ -- (119,097)
Distribution to shareholder ................................................ (17,604) (80,744)
------------ ------------
Net cash provided by financing activities ..................................... 3,103,886 1,438,146
------------ ------------
Net increase (decrease) in cash ............................................... 304,743 (387,014)
Cash, at beginning of year .................................................... 82,271 387,014
------------ ------------
Cash, at end of year .......................................................... $ 387,014 $ --
============ ============
SUPLEMENTARY CASH FLOW DISCLOSURE
Interest paid .............................................................. $ 156,270 $ 207,018
============ ============
</TABLE>
See notes to financial statements
F-24
<PAGE>
TREASURE COAST BOATING CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 and 1997
1. ORGANIZATION
Treasure Coast Boating Center, Inc. (the "Company") was incorporated in
1992 under the laws of the State of Florida. The Company operates a chain of
dealerships in Florida engaged in retail sales and service of new and used boat
parts and accessories. The dealerships offer a full line of new and used boats
and most of the dealerships maintain a parts, service and body repair facility.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Recent Accounting Pronouncements -- In June 1997, the Financial
Accounting Standards Board issued "Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130"), and No. 131,
Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"). SFAS 130 establishes standards for reporting and displaying
comprehensive income, its components and accumulated balances. SFAS 131
establishes standards for the way that public companies report information
about operating segments in annual financial statements. Both SFAS 130 and SFAS
131 are effective for periods beginning after December 15, 1997. The Company
adopted these new accounting standards in 1998, and their adoption had no
effect on the Company's financial statements and disclosures.
In June 1998, the Financial Accounting Standards Board issued "Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 requires companies
to recognize all derivative contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. If certain conditions are met,
a derivative may be specifically designated as a hedge, the objective of which
is to match the timing of gain or loss recognition on the hedging derivative
with the recognition of (i) the changes in the fair value of the hedged asset
or liability that are attributable to the hedged risk or (ii) the earnings
effect of the hedged forecasted transaction. For a derivative not designated as
a hedging instrument, the gain or loss is recognized in income in the period of
change. SFAS 133 is effective for all fiscal quarters or fiscal years beginning
after June 15, 1999. Historically, the Company has not entered into derivatives
contracts to hedge existing risks or for speculative purposes. Accordingly, the
Company does not expect adoption of the new standard on January 1, 2000 to
affect the financial statements.
B. Revenue Recognition -- Retail sales of boats, parts and services are
recognized in operations upon delivery of products or services to the customer
or, in the case of boats, when title passes to the customer.
C. Inventories -- Inventories, consisting primarily of boats, motors,
trailers and related parts and accessories as well as water sport equipment and
accessories, are stated at the lower of cost or market. The cost of boats,
motors and trailers is determined using the specific identification method. The
cost of parts and accessories is determined using the first-in, first-out
(FIFO) method.
D. Property and Equipment -- Property and Equipment are stated at cost,
less accumulated depreciation. Depreciation is computed over the estimated
useful lives of the assets using the straight-line method which ranges from 3
to 5 years. Leasehold improvements are amortized on a straight-line basis over
the shorter of their useful lives or the term of the related lease.
E. Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
F. Long Lived Assets -- The Company has adopted "Statement of Financial
Accounting Standards No. 121, ("SFAS, No. 121"), Accounting for the Impairment
of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of. In
accordance with this statement, the Company evaluates the recovery of the
carrying amount of its long-lived assets, whenever events or changes in
circumstances indicate that the carrying amount of such assets
F-25
<PAGE>
TREASURE COAST BOATING CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 and 1997 -- (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
may not be fully recoverable. If this review indicates that the carrying value
of the assets will not be recoverable, as determined based on the estimated
non-discounted cash flows of the Company over their remaining estimated useful
lives, the carrying amount is reduced by the estimated shortfall of cash flows.
The adoption of SFAS 121 did not impact the financial statements of the
Company.
G. Income Taxes -- The shareholders of the Company have elected to be
taxed as an S Corporation, as defined in the Internal Revenue Code. Such status
was also elected for state tax purposes. Under this status, taxable income is
passed through and taxed at the shareholder level, rather than at the corporate
level.
H. Fair Value of Financial Instruments -- The respective carrying value of
certain on-balance-sheet financial instruments approximated their fair values.
Fair value estimates discussed herein are based upon certain market assumptions
and pertinent information available to management. These financial instruments
include cash and cash equivalents, accounts receivables, accounts payable and
accrued expenses. Fair values were assumed to approximate carrying values for
these financial instruments since they are short term in nature and their
carrying amounts approximate fair values or they are receivable or payable on
demand. The fair value of the Company's long-term debt, which approximates its
carrying value, is estimated based upon the quoted market prices for the same
or similar debt instruments or on the current rates offered to the Company for
debt of the same remaining maturities.
I. Concentration of Risk -- The recreational boat industry is highly
competitive. The Company competes for boat sales with single location boat
dealers and national or regional chains. With respect to sales of marine parts,
accessories and equipment, the Company competes with national specialty marine
stores, catalog retailers, sporting goods stores and mass merchants. Many of
the Company's larger competitors are well-capitalized companies which seek to
increase market share through price reductions. The recreational boat industry
is dependent upon discretionary consumer spending. Increasing interest rates
and periods of economic downturn have historically reduced consumer spending on
non-essential goods. The risk to the Company of increased competition or a
reduction in consumer spending on non-essential goods may ultimately lead to
reduced profits and affect the ability of the Company to expand operations.
The recreational boating industry is highly seasonal and the Company has
significantly lower sales in the fourth quarter of the calendar year, resulting
in operating losses during this period. Weather patterns or prolonged winter
conditions and unseasonably cool weather may lead to a shorter selling season
in affected locations. The Company's results of operations may fluctuate as a
result of these or other conditions.
The Company deals with each of its manufacturers pursuant to annually
renewable, non-exclusive, dealer agreements.
The Company faces the uncertainty of the continued availability of
increases in its borrowing capacity. Adequate working capital is essential to a
boat retailer due to the significant cash investment required for the purchase
of new and used boat inventory. The Company believes that it has an excellent
relationship with its floorplan lenders and that it will be able to obtain
sufficient working capital to finance it requirements.
3. INVENTORIES
At, December 31, 1998, inventories are comprised of the following:
New boats, motors and trailers ......... $ 6,375,599
Used boats ............................. 537,103
Parts and accessories .................. 313,784
-----------
$ 7,226,486
===========
F-26
<PAGE>
TREASURE COAST BOATING CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 and 1997 -- (Continued)
4. PROPERTY AND EQUIPMENT
At, December 31, 1998, property and equipment is comprised of the
following:
Airplane ............................... $ 167,324
Equipment .............................. 95,904
Vehicles ............................... 41,855
Leasehold improvements ................. 49,471
Furniture and fixtures ................. 6,260
----------
360,814
Less: Accumulated depreciation ......... (115,074)
----------
$ 245,740
==========
5. SHORT-TERM BORROWINGS
Floorplan Contracts
The Company finances substantially all of its new and used boat inventory
through floorplan financing arrangements which are collateralized by the
Company's boat inventory, accounts receivable, equipment and a personal
guaranty from the shareholder. The floorplan contracts are due upon the sale of
the related boat. The interest rates during the periods on floorplan debt
ranged from prime plus .50% to prime plus 2.50%.
The Company has arranged for a free floorplan period whereby the floorplan
interest is paid by boat manufacturers for a period lasting from the date the
boat is received and continues for a predetermined period of time.
The maximum borrowings allowable under the floorplan contracts was
$7,000,000, as of December 31, 1998, of which $6,371,979 was outstanding at
year end.
6. OPERATING LEASES
The Company leases property, vehicles and office equipment under
noncancelable operating leases expiring in various years through 2003. The
leases require the Company to pay maintenance, taxes and insurance. The Company
leases its primary operating facility from a corporation which is owned by its
shareholder. The lease extends through April 2003. Lease payments to the
corporation approximated $90,000 and $75,000 in 1997 and 1998 respectively.
During the years ended December 31, 1997 and 1998, rent expense were $345,778
and $535,303 respectively.
Future minimum rental commitments under long-term noncancelable operating
leases are as follows:
Year ending December 31,
- --------------------------
1999 ................... $ 345,437
2000 ................... 123,062
2001 ................... 70,604
2002 ................... 70,604
2003 ................... 17,651
---------
$ 627,358
=========
F-27
<PAGE>
TREASURE COAST BOATING CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 and 1997 -- (Continued)
7. NOTES PAYABLE
Notes payable are summarized as follows:
<TABLE>
<S> <C>
Demand loan payable with interest at 10.25%, collateralized by
the company's airplane ...................................... $125,000
Demand loan payable with interest at 10% ..................... 18,900
--------
$143,900
========
</TABLE>
8. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<S> <C>
Auto loan, payable in monthly principal payments of $694 including
interest at 8.1% with a balloon payment of $25,188 due on March
29, 2000 ........................................................ $ 32,044
--------
32,044
Less current maturities .......................................... 5,820
--------
$ 26,224
========
</TABLE>
Maturities on long-term debt are as follows:
1999 ................. $ 5,820
2000 ................. 26,224
9. RELATED PARTY TRANSACTIONS
The Company has an unsecured, interest free receivable from its
shareholder, of $122,486 payable on demand.
The Company has a loan payable on demand with interest rate of 15% from
its shareholder's wife in 1998 of $26,325.
10. PROPOSED ACQUISITION
On January 22, 1999, American Marine Recreation, Inc. and American Marine
of South Florida (collectively, the "Purchaser"), unaffiliated third parties,
entered into an agreement with the Company to acquire substantially all of the
assets of the Company together with related real property owned by an affiliate
of the Company on which a retail boat dealership is located. The purchase price
will be equal to $3,011,000 plus the cost of the Company's inventory on such
date.
F-28
<PAGE>
================================================================================
No dealer, sales representative or other person has been authorized to
give any information or to make any representations in connection with this
Offering other than those contained in 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 any Underwriter. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any
securities other than the securities offered by this Prospectus, or an offer to
sell, or a solicitation of an offer to buy, any securities by anyone 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 the information contained herein is
correct as of any time subsequent to the date hereof.
-----------------------------------
TABLE OF CONTENTS
Page
---------
Prospectus Summary ....................... 3
Risk Factors ............................. 12
Use of Proceeds .......................... 20
Dilution ................................. 21
Dividend Policy .......................... 22
Capitalization ........................... 23
Pro Forma Financial Data ................. 24
Selected Financial Data .................. 28
Management's Discussion and Analysis
of Financial Condition and Results of
Operations ............................ 30
Business ................................. 38
Management ............................... 47
Principal Stockholders ................... 50
Certain Transactions ..................... 52
Description of Securities ................ 54
Shares Eligible for Future Sale .......... 55
Underwriting ............................. 57
Legal Matters ............................ 59
Experts .................................. 59
Additional Information ................... 59
Index to Financial Statements ............ F-1
-----------------------------------
Until , 1999 (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 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.
================================================================================
<PAGE>
================================================================================
1,000,000 Shares
American Marine
Recreation, Inc.
Common Stock
----------------------------------------
PROSPECTUS
----------------------------------------
PRIME CHARTER LTD.
, 1999
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses (other than
underwriting commissions and discounts payable to the Underwriters) payable by
the Company in connection with the issuance and distribution of the securities
being registered hereby. With the exception of the registration fee, the NASD
filing fee and the AMEX listing fees, all amounts shown are estimates.
<TABLE>
<S> <C>
Registration fee ................................................ 7,389
AMEX listing fees ............................................... 20,000
NASD filing fee ................................................. 3,005
Printing and engraving expenses ................................. *
Legal fees and expenses (other than Blue Sky) ................... *
Accounting fees and expenses .................................... *
Blue Sky fees and expenses (including legal and filing) ......... *
Transfer agent fees and expenses ................................ *
Underwriters' non-accountable expenses .......................... *
Miscellaneous expenses .......................................... *
---------
Total ........................................................... 1,469,625
=========
</TABLE>
* To be provided by amendment.
Item 14. Indemnification of Officers and Directors.
Section 145 of the Delaware General Corporation Law ("DGCL") permits, in
general, a Delaware corporation to indemnify any person made, or threatened to
be made, a party to an action or proceeding by reason of the fact that he or
she was a director or officer of the corporation, or served another entity in
any capacity at the request of the corporation, against any judgment, fines,
amounts paid in settlement and expenses, including attorney's fees actually and
reasonably incurred as a result of such action or proceeding, or any appeal
therein, if such person acted in good faith, for a purpose he or she reasonably
believed to be in, or, in the case of service for another entity, not opposed
to, the best interests of the corporation and, in criminal actions or
proceedings, in addition had no reasonable cause to believe that his or her
conduct was unlawful. Section 145(e) of the DGCL permits the corporation to pay
in advance of a final disposition of such action or proceeding the expenses
incurred in defending such action or proceeding upon receipt of an undertaking
by or on behalf of the director or officer to repay such amount as, and to the
extent, required by statute. Section 145(f) of the DGCL provides that the
indemnification and advancement of expense provisions contained in the DGCL
shall not be deemed exclusive of any rights to which a director or officer
seeking indemnification or advancement of expenses may be entitled.
The Company's Certificate of Incorporation provides, in general, that the
Company shall indemnify, to the fullest extent permitted by Section 145 of the
DGCL, any and all persons whom it shall have power to indemnify under said
section from and against any and all of the expenses, liabilities or other
matters referred to in, or covered by, said section. The Certificate of
Incorporation also provides that the indemnification provided for therein shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any By-Law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to actions taken in his or her official
capacity and as to acts in another capacity while holding such office.
In accordance with that provision of the Certificate of Incorporation, the
Company shall indemnify any officer or director (including officers and
directors serving another corporation, partnership, joint venture, trust, or
other enterprise in any capacity at the Company's request) made, or threatened
to be made, a party to an action or proceeding (whether civil, criminal,
administrative or investigative) by reason of the fact that he or she was
serving in any of those capacities against judgments, fines, amounts paid in
settlement and reasonable expenses
II-1
<PAGE>
(including attorney's fees) incurred as a result of such action or proceeding.
Indemnification would not be available if a judgment or other final
adjudication adverse to such director or officer establishes that (i) his or
her acts were committed in bad faith or were the result of active and
deliberate dishonesty or (ii) he or she personally gained in fact a financial
profit or other advantage to which he or she was not legally entitled.
The Form of Underwriting Agreement filed as Exhibit 1.1 hereto also
contains, among other things, provisions whereby the Underwriters agree to
indemnify the Company, each officer and director of the Company who has signed
the Registration Statement, and each person who controls the Company within the
meaning of Section 15 of the Securities Act, against any losses, liabilities,
claims or damages arising out of alleged untrue statements or alleged omissions
of material facts with respect to information furnished to the Company by the
Underwriters for use in the Registration Statement or Prospectus.
Item 15. Recent Sales of Unregistered Securities.
In the past three years, the Company has not made any sales of
unregistered securities.
Item 16. Exhibits and Financial Statement Schedules.
The following documents (unless indicated) are filed herewith and made a
part of this Registration Statement.
(a) Exhibits
<TABLE>
<CAPTION>
Number Description of Exhibit
- ---------- -------------------------------------------------------------------------------------------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement between the Company and the Underwriters.*
2.1 -- Exchange Agreement dated as of September 1, 1998 by and among Joseph G. Pozo, Jr. and
Joseph John Pozo and American Marine Recreation, Inc.
2.2 -- Exchange Agreement dated as of September 1, 1998 by and among Joseph G. Pozo, Jr., Joseph
John Pozo, Christine Pozo, Jennifer Jo Pozo and Marcelo A. Pozo and American Marine Rec-
reation, Inc.
2.3 -- Asset Purchase Agreement dated January 22, 1999 by and among Treasure Coast Boating Cen-
ter, Inc., Treasure Coast Boating Services, Inc., & Thomas D. Grane and American Marine of
South Florida, Inc. & American Marine Recreation, Inc.
2.4 -- Amendment No. 1 to Exchange Agreement among Joseph G. Pozo, Jr., Joseph John Pozo and
American Marine Recreation, Inc.
2.5 -- Amendment No. 1 to Exchange Agreement by and among Joseph G. Pozo, Jr., Joseph John
Pozo, Christine Pozo, Jennifer Jo Pozo and Marcelo A. Pozo and American Marine Recreation,
Inc.
3.1 -- Certificate of Incorporation of the Company.
3.2 -- By-Laws of the Company.
4.1 -- Specimen Certificate of the Company's Common Stock.
4.2 -- Form of Representatives' Warrant Agreement, including Form of Representatives Warrant.*
5.1 -- Opinion of McLaughlin & Stern, LLP counsel to the Company.
10.1 -- 1998 Stock Option Plan.
10.2 -- Second Mortgage and Security Agreement dated November 28, 1995 between Boat Tree, Inc.
as Mortgagor and Danis Properties Limited Partnership as Mortgagee.
10.3 -- Promissory Note dated November 28, 1995 for $250,000 between Boat Tree, Inc. as Maker and
Danis Properties Limited Partnership as Holder.
10.4 -- Promissory Note dated November 28, 1995 for $1,150,000 between Boat Tree, Inc. as Maker
and AmSouth Bank of Florida as Payee.
10.5 -- Mortgage and Security Agreement dated November 28, 1995 between Boat Tree, Inc. as Bor-
rower and AmSouth Bank of Florida as Lender.
10.6 -- Commercial Lease dated November 25, 1996 for property located in Melbourne, Florida
between Boat Tree, Inc. as Tenant and 340 North, Inc. as Landlord.
10.7 -- Lease dated December 16, 1996 for property located in Jacksonville, Florida between Boat
Tree, Inc. as Lessee and Rose & Ken, Inc. as lessor, as amended.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Number Description of Exhibit
- ----------- ---------------------------------------------------------------------------------------------
<S> <C> <C>
10.8 -- Lease dated December 10, 1997 for property located in Clay County, Florida between Boat
Tree, Inc. as Lessee and Doctors Lake Marina, Inc. as Lessor.
10.9 -- Lease dated January 30, 1998 for property Located in Gaston County, North Carolina between
Lakewood Marine International, Ltd. as Landlord and Marine America, Inc. as Tenant.
10.10 -- Master Note for Business and Commercial Loans dated September 24, 1997 for $500,000
between Boat Tree, Inc. as Borrower and AmSouth Bank of Florida as Holder.
10.11 -- Inventory Security Agreement dated July 2, 1992 between Boat Tree, Inc. and TransAmerica
Commercial Finance Corporation, as amended.
10.12 -- Agreement for Wholesale Financing (Security Agreement - Arbitration) dated August 1, 1993
between ITT Commercial Finance Corp. and Boat Tree, Inc., as amended.
10.13 -- Lease dated June 16, 1998 by and between Marina Opportunity I (Tierra Verde) L.P., as land-
lord and Boat Tree, Inc., as tenant.
10.14 -- Employment Agreement by and between Joseph G. Pozo, Jr. and the Company.
10.15 -- Employment Agreement by and between Melven R. Nehleber and the Company.
10.16 -- Agreement dated September 1, 1998 among Regal Marine Industries, Inc., the Company and
Joseph G. Pozo, Jr.
10.17 -- Contract of Sale between JCJ Family Partnership L.P., Ltd. and the Company.
10.18 -- Expanded Schedule Rider to the Inventory and Security Agreement dated July 1, 1992 between
Boat Tree, Inc. and TransAmerica Commercial Finance Corporation.
10.19 -- Financial Consulting Agreement between the Company and the Underwriter.
10.20 -- Sales and Service Agreements dated September 1, 1998 between Regal Marine Industries
Incorporated, doing business as Regal Boats, and American Marine Recreation, Inc. doing
business as Boattree for Volusia and Flagler Counties.
10.21 -- Sales and Service Agreements dated September 1, 1998 between Regal Marine Industries
Incorporated, doing business as Regal Boats, and American Marine Recreation, Inc., doing
business as Boattree for Brevard County.
10.22 -- Sales and Service Agreements dated September 1, 1998 between Regal Marine Industries
Incorporated, doing business as Regal Boats, and American Marine Recreation, Inc., doing
business as Boattree for Orange, Seminole, Osceola and Lake Counties.
10.23 -- Sales and Service Agreements dated September 1, 1998 between Regal Marine Industries
Incorporated, doing business as Regal Boats, and American Marine Recreation, Inc., doing
business as Boattree for Hillsborough and Pinellas Counties.
10.24 -- Sales and Service Agreements dated September 1, 1998 between Regal Marine Industries
Incorporated, doing business as Regal Boats, and American Marine Recreation, Inc., doing
business as Boattree for St. Johns, Duval, Nassau, Clay and Putnam Counties.
10.25 -- Lease and Right of First Refusal Agreement dated December 1, 1998 for property located in
Pompano Beach, Florida between Ronald L. Fedor as Lessor and Treasure Coast Boating Cen-
ter, Inc. as Lessee.
10.26 -- Lease dated December 1, 1998 for property located in Pinellas Park, Florida between James E.
McFrederick and Patsy McFrederick as Landlord and Boat Tree, Inc. as Tenant.
10.27 -- Guarantee dated July 1, 1992 by Joseph G. Pozo, Jr. as Guarantor and Transamerica Commer-
cial Finance Corporation to any loan or other financial accommodation made by Transamerica
Finance Corporation to Boat Tree, Inc.
10.28 -- Guaranty (Arbitration) dated October 7, 1992 by Joseph G. Pozo, Jr. as Guarantor and ITT
Commercial Finance Corp. to any financing provided or to be provided to Boat Tree, Inc.
10.29 -- Lease dated December 22, 1998 for property located in Tequesta, Florida by and between
Seagate Land Trust as Landlord and Treasure Coast Boating Center, Inc. as Tenant.
10.30 -- Promissory Note between Boat Tree, Inc. as Maker and JCJ Family Partnership as Payee.
10.31 -- Agreements between Gary E. Stein and Joseph G. Pozo, Jr.
10.32 -- Construction Loan Agreement dated November 28, 1995 by and between Boat Tree, Inc. and
AmSouth Bank of Florida
10.33 -- Form of Employment Agreement dated as of _______, 1999 among American Marine of South
Florida, Inc., the Company and D. Thomas Grane.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Number Description of Exhibit
- ------------ --------------------------------------------------------------------------------------------
<S> <C> <C>
10.34 -- Consulting Letter Agreement dated December 18, 1998 between the Company and Gary Stein.
10.35 -- Promissory note dated April 13, 1999 in the principal amount of $400,000 between Boat Tree,
Inc., as maker, and JCJ Family Partnership, as payee.*
10.36 -- Promissory note dated May 7, 1998, as amended, in the principal amount of $300,000 between
Boat Tree, Inc. as maker, and Regal Marine Industries, as payee.*
10.37 -- Mortgage note dated March 1, 1999 in the principal amount of $400,000 between Boat Tree,
Inc., as maker, and JCJ Family Partnership, as payee.*
10.38 -- Balance Purchase Money Promissory Note in the principal amount of $300,000 dated May 15,
1998 between Boat Tree, Inc., as maker, and Thomas T. Archer and Martha Cashion Archer, as
payee.*
21.1 -- List of Subsidiaries.
23.1 -- Consent of BDO Seidman, LLP*
23.2 -- Consent of Feldman Sherb Ehrlich & Co., P.C.*
23.3 -- Consent of McLaughlin & Stern, LLP (contained in Exhibit 5.1)
24.1 -- Power of Attorney (included on the signature page of this Registration Statement).
27.1 -- Financial Data Schedule*
99.1 -- Consent to Identification as Director Nominee Brady Churches
99.2 -- Consent to Identification as Director Nominee J. Gregory Humphries
99.3 -- Consent to Identification as Director Nominee of Jeffrey Schotteinstein
99.4 -- Consent to Identification as Director Nominee James W. Trawek
99.5 -- Consent to Identification as Director Nominee of Sir Brian Wolfson.
99.6 -- Financial Schedules - Schedule II Valuation and Qualifying Accounts*
</TABLE>
- ------------
* Filed herewith.
Item 17. Undertakings.
1. The Company hereby undertakes:
(a) To file, during any period in which the Company offers or sales are
being made, a post-effective amendment(s) to this Registration Statement:
(1) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(2) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or together,
represent a fundamental change in the information in the Registration
Statement; and
(3) To include any additional or changed material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement;
(b) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering; and
(c) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(d) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment 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.
2. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
II-4
<PAGE>
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company 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 Company 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 of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
3. If the Company relies on Rule 430A under the Securities Act, the
Company will:
(a) For determining any liability under the Securities Act, treat the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Company under Rule 424(b)(1), or (4), or 497(h)
under the Securities Act as part of this Registration Statement as of the
time the Commission declared it effective; and
(b) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the Registration
Statement and treat the offering of such securities at that time as the
initial bona fide offering of those securities.
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing this Amendment No. 3 to Form SB-2 on Form
S-1 and has authorized this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Orlando, Florida,
on April 14, 1999.
AMERICAN MARINE RECREATION, INC.
By: /s/ Joseph G. Pozo, Jr.
------------------------------------
Joseph G. Pozo, Jr., Chairman of the
Board,
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints JOSEPH G. POZO, JR. his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or either of them or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------- ---------------------------------------- ---------------
<S> <C> <C>
/s/ Joseph G. Pozo, Jr. Chairman of the Board, President, Chief April 14, 1999
------------------------- Executive Officer and Director
Joseph G. Pozo, Jr.
/s/ Gary E. Stein Director April 14, 1999
-------------------------
Gary E. Stein
/s/ Melven R. Nehleber Chief Financial Officer and Treasurer April 14, 1999
------------------------- (principal accounting officer)
Melven R. Nehleber
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description of Exhibit
- -------- --------------------------------------------------------------------------------------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement between the Company and the Underwriters.*
2.1 -- Exchange Agreement dated as of September 1, 1998 by and among Joseph G. Pozo,
Jr. and Joseph John Pozo and American Marine Recreation, Inc.
2.2 -- Exchange Agreement dated as of September 1, 1998 by and among Joseph G. Pozo,
Jr., Joseph John Pozo, Christine Pozo, Jennifer Jo Pozo and Marcelo A. Pozo and
American Marine Recreation, Inc.
2.3 -- Asset Purchase Agreement dated January 22, 1999 by and among Treasure Coast
Boating Center, Inc., Treasure Coast Boating Services, Inc., & Thomas D. Grane and
American Marine of South Florida, Inc. & American Marine Recreation, Inc.
2.4 -- Amendment No. 1 to Exchange Agreement among Joseph G. Pozo, Jr., Joseph John
Pozo and American Marine Recreation, Inc.
2.5 -- Amendment No. 1 to Exchange Agreement by and among Joseph G. Pozo, Jr., Joseph
John Pozo, Christine Pozo, Jennifer Jo Pozo and Marcelo A. Pozo and American
Marine Recreation, Inc.
3.1 -- Certificate of Incorporation of the Company.
3.2 -- By-Laws of the Company.
4.1 -- Specimen Certificate of the Company's Common Stock.
4.2 -- Form of Representatives' Warrant Agreement, including Form of Representatives War-
rant.*
5.1 -- Opinion of McLaughlin & Stern, LLP counsel to the Company.
10.1 -- 1998 Stock Option Plan.
10.2 -- Second Mortgage and Security Agreement dated November 28, 1995 between Boat
Tree, Inc. as Mortgagor and Danis Properties Limited Partnership as Mortgagee.
10.3 -- Promissory Note dated November 28, 1995 for $250,000 between Boat Tree, Inc. as
Maker and Danis Properties Limited Partnership as Holder.
10.4 -- Promissory Note dated November 28, 1995 for $1,150,000 between Boat Tree, Inc. as
Maker and AmSouth Bank of Florida as Payee.
10.5 -- Mortgage and Security Agreement dated November 28, 1995 between Boat Tree, Inc.
as Borrower and AmSouth Bank of Florida as Lender.
10.6 -- Commercial Lease dated November 25, 1996 for property located in Melbourne,
Florida between Boat Tree, Inc. as Tenant and 340 North, Inc. as Landlord.
10.7 -- Lease dated December 16, 1996 for property located in Jacksonville, Florida between
Boat Tree, Inc. as Lessee and Rose & Ken, Inc. as lessor, as amended.
10.8 -- Lease dated December 10, 1997 for property located in Clay County, Florida between
Boat Tree, Inc. as Lessee and Doctors Lake Marina, Inc. as Lessor.
10.9 -- Lease dated January 30, 1998 for property Located in Gaston County, North Carolina
between Lakewood Marine International, Ltd. as Landlord and Marine America, Inc.
as Tenant.
10.10 -- Master Note for Business and Commercial Loans dated September 24, 1997 for
$500,000 between Boat Tree, Inc. as Borrower and AmSouth Bank of Florida as
Holder.
10.11 -- Inventory Security Agreement dated July 2, 1992 between Boat Tree, Inc. and Tran-
sAmerica Commercial Finance Corporation, as amended.
10.12 -- Agreement for Wholesale Financing (Security Agreement - Arbitration) dated August
1, 1993 between ITT Commercial Finance Corp. and Boat Tree, Inc., as amended.
10.13 -- Lease dated June 16, 1998 by and between Marina Opportunity I (Tierra Verde) L.P.,
as landlord and Boat Tree, Inc., as tenant.
10.14 -- Employment Agreement by and between Joseph G. Pozo, Jr. and the Company.
10.15 -- Employment Agreement by and between Melven R. Nehleber and the Company.
10.16 -- Agreement dated September 1, 1998 among Regal Marine Industries, Inc., the Com-
pany and Joseph G. Pozo, Jr.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Description of Exhibit
- ----------- -------------------------------------------------------------------------------------
<S> <C> <C>
10.17 -- Contract of Sale between JCJ Family Partnership L.P., Ltd. and the Company.
10.18 -- Expanded Schedule Rider to the Inventory and Security Agreement dated July 1, 1992
between Boat Tree, Inc. and TransAmerica Commercial Finance Corporation.
10.19 -- Financial Consulting Agreement between the Company and the Underwriter.
10.20 -- Sales and Service Agreements dated September 1, 1998 between Regal Marine Indus-
tries Incorporated, doing business as Regal Boats, and American Marine Recreation,
Inc. doing business as Boattree for Volusia and Flagler Counties.
10.21 -- Sales and Service Agreements dated September 1, 1998 between Regal Marine Indus-
tries Incorporated, doing business as Regal Boats, and American Marine Recreation,
Inc., doing business as Boattree for Brevard County.
10.22 -- Sales and Service Agreements dated September 1, 1998 between Regal Marine Indus-
tries Incorporated, doing business as Regal Boats, and American Marine Recreation,
Inc., doing business as Boattree for Orange, Seminole, Osceola and Lake Counties.
10.23 -- Sales and Service Agreements dated September 1, 1998 between Regal Marine Indus-
tries Incorporated, doing business as Regal Boats, and American Marine Recreation,
Inc., doing business as Boattree for Hillsborough and Pinellas Counties.
10.24 -- Sales and Service Agreements dated September 1, 1998 between Regal Marine Indus-
tries Incorporated, doing business as Regal Boats, and American Marine Recreation,
Inc., doing business as Boattree for St. Johns, Duval, Nassau, Clay and Putnam Coun-
ties.
10.25 -- Lease and Right of First Refusal Agreement dated December 1, 1998 for property
located in Pompano Beach, Florida between Ronald L. Fedor as Lessor and Treasure
Coast Boating Center, Inc. as Lessee.
10.26 -- Lease dated December 1, 1998 for property located in Pinellas Park, Florida between
James E. McFrederick and Patsy McFrederick as Landlord and Boat Tree, Inc. as Ten-
ant.
10.27 -- Guarantee dated July 1, 1992 by Joseph G. Pozo, Jr. as Guarantor and Transamerica
Commercial Finance Corporation to any loan or other financial accommodation made
by Transamerica Finance Corporation to Boat Tree, Inc.
10.28 -- Guaranty (Arbitration) dated October 7, 1992 by Joseph G. Pozo, Jr. as Guarantor and
ITT Commercial Finance Corp. to any financing provided or to be provided to Boat
Tree, Inc.
10.29 -- Lease dated December 22, 1998 for property located in Tequesta, Florida by and
between Seagate Land Trust as Landlord and Treasure Coast Boating Center, Inc. as
Tenant.
10.30 -- Promissory Note between Boat Tree, Inc. as Maker and JCJ Family Partnership as
Payee.
10.31 -- Agreements between Gary E. Stein and Joseph G. Pozo, Jr.
10.32 -- Construction Loan Agreement dated November 28, 1995 by and between Boat Tree,
Inc. and AmSouth Bank of Florida
10.33 -- Form of Employment Agreement dated as of ________, 1999 among American
Marine of South Florida, Inc., the Company and D. Thomas Grane.
10.34 -- Consulting Letter Agreement dated December 18, 1998 between the Company and
Gary Stein.
10.35 -- Promissory note dated April 13, 1999 in the principal amount of $400,000 between
Boat Tree, Inc., as maker, and JCJ Family Partnership, as payee.*
10.36 -- Promissory note dated May 7, 1998, as amended, in the principal amount of $300,000
between Boat Tree, Inc. as maker, and Regal Marine Industries, as payee.*
10.37 -- Mortgage note dated March 1, 1999 in the principal amount of $400,000 between Boat
Tree, Inc., as maker, and JCJ Family Partnership, as payee.*
10.38 -- Balance Purchase Money Promissory Note in the principal amount of $300,000 dated
May 15, 1998 between Boat Tree, Inc., as maker, and Thomas T. Archer and Martha
Cashion Archer, as payee.*
21.1 -- List of Subsidiaries
23.1 -- Consent of BDO Seidman, LLP*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Description of Exhibit
- ----------- -----------------------------------------------------------------------------------
<S> <C> <C>
23.2 -- Consent of Feldman Sherb Ehrlich & Co., P.C.*
23.3 -- Consent of McLaughlin & Stern, LLP (contained in Exhibit 5.1)
24.1 -- Power of Attorney (included on the signature page of this Registration Statement).
27.1 -- Financial Data Schedule*
99.1 -- Consent to Identification as Director Nominee Brady Churches
99.2 -- Consent to Identification as Director Nominee J. Gregory Humphries
99.3 -- Consent to Identification as Director Nominee of Jeffrey Schotteinstein
99.4 -- Consent to Identification as Director Nominee James W. Trawek
99.5 -- Consent to Identification as Director Nominee of Sir Brian Wolfson.
99.6 -- Financial Schedules - Schedule II Valuation and Qualifying Accounts*
</TABLE>
- ------------
* Filed herewith.
<PAGE>
1,000,000 Shares
American Marine Recreation, Inc.
Common Stock
UNDERWRITING AGREEMENT
----------------------
, 1999
Prime Charter Ltd.,
As representative of the
several Underwriters named
in Schedule A hereto
810 Seventh Avenue
New York, New York 10019
Ladies and Gentlemen:
American Marine Recreation, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell 1,000,000 shares (the "Firm Shares") of
its authorized but unissued common stock, par value $.01 per share (the "Common
Stock"), to Prime Charter Ltd. (the "Representative") and the other underwriters
listed on Schedule A to this Agreement (the Representative and the other
underwriters being herein collectively called the "Underwriters"). The Company
also proposes to grant to the Underwriters an option to purchase up to an
aggregate of 150,000 additional shares (the "Over-allotment Shares") of Common
Stock on the terms and conditions set forth in Section 3(c). The Firm Shares and
the Over-allotment Shares are hereinafter collectively referred to as the
"Shares."
The Company wishes to confirm as follows its agreements with the
Underwriters in connection with the several purchases by the Underwriters of the
Shares.
1. Registration Statement. The Company has prepared and filed with the
Securities and Exchange Commission (the "Commission") a registration statement
on Form S-1 (File No. 333-62699), including a prospectus relating to the Shares
1
<PAGE>
and each amendment thereto in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"). There have been delivered to the
Representative signed copies of such registration statement and amendments,
together with copies of each exhibit filed therewith. Copies of such
registration statement and amendments and of the related preliminary prospectus
have been delivered to the Representative in such reasonable quantities as the
Representative has requested for each of the Underwriters. If such registration
statement has not become effective, a further amendment to such registration
statement, including a form of final prospectus, necessary to permit such
registration statement to become effective will be filed promptly by the Company
with the Commission. If such registration statement has become effective, a
final prospectus containing all Rule 430A Information (as hereinafter defined)
will be filed by the Company with the Commission in accordance with, and if
required by, Rule 424(b) of the rules and regulations of the Act (the "Rules and
Regulations") on or before the second business day after the date hereof (or
such earlier time as may be required by the Rules and Regulations).
The term "Registration Statement" as used in this Agreement shall mean
such registration statement (including all exhibits and financial statements) at
the time such registration statement becomes or became effective and, if any
post-effective amendment thereto becomes effective prior to the Closing Date (as
hereinafter defined), shall also mean such registration statement as so amended;
provided, however, that such term shall include all Rule 430A Information deemed
to be included in such registration statement at the time such registration
statement becomes effective as provided by Rule 430A of the Rules and
Regulations and shall also mean any registration statement filed pursuant to
Rule 462(b) of the Rules and Regulations with respect to the Shares. The term
"Preliminary Prospectus" shall mean any preliminary prospectus referred to in
the preceding paragraph and any preliminary prospectus included in the
Registration Statement at the time it becomes effective that omits Rule 430A
Information. The term "Prospectus" as used in this Agreement shall mean the
prospectus relating to the Shares in the form in which it is first filed with
the Commission pursuant to Rule 424(b) of the Rules and Regulations or, if no
filing pursuant to Rule 424(b) of the Rules and Regulations is required, shall
mean the form of final prospectus included in the Registration Statement at the
time such registration statement becomes effective. The term "Rule 430A
Information" means information with respect to the Shares and the offering
thereof permitted to
2
<PAGE>
be omitted from the Registration Statement when it becomes effective pursuant to
Rule 430A of the Rules and Regulations.
2. Representations and Warranties. The Company hereby represents and
warrants as follows:
(a) The Company has not received, and has no notice of, any
order of the Commission preventing or suspending the use of any Preliminary
Prospectus, or the institution of proceedings for that purpose, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the Rules and Regulations. When the
Registration Statement became or becomes, as the case may be, effective (the
"Effective Date") and at all times subsequent thereto up to and at the Closing
Date (as hereinafter defined), any later date on which Over-allotment Shares are
to be purchased (the "Over-allotment Closing Date") and when any post-effective
amendment to the Registration Statement becomes effective or any amendment or
supplement to the Prospectus is filed with the Commission, (i) the Registration
Statement and Prospectus, and any amendments or supplements thereto, will
contain all statements which are required to be stated therein by, and will
comply with the requirements of, the Act and the Rules and Regulations and (ii)
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, will include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading. The foregoing representations and
warranties in this Section 2(a) do not apply to any statements or omissions made
in reliance on and in conformity with the information contained in the section
of the Prospectus entitled "Underwriting." The Company has not distributed any
offering material in connection with the offering or sale of the Shares other
than the Registration Statement, the Preliminary Prospectus, the Prospectus or
any other materials, if any, permitted by the Act.
(b) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with full corporate power and authority to own, lease and operate its
properties and conduct its business as described in the Registration Statement.
The Company is duly qualified to do business as a foreign corporation in good
standing in each jurisdiction where the ownership or leasing of its properties
or the conduct of its business requires such qualification, except where the
failure so to qualify would not have a material adverse effect on the business,
properties, prospects, financial condition or results of operations of the
Company (a "Material Adverse Effect").
3
<PAGE>
As of the date hereof, the Company has no subsidiaries (as
defined in the Rules and Regulations), other than Boat Tree, Inc., a Florida
corporation ("Boat Tree") and American Marine of South Florida, Inc., a Florida
corporation ("AMSF"), and as of the Effective Date, the Company will have no
subsidiaries other than Boat Tree, AMSF and Marine America, Inc., a Florida
corporation ("Marine America" and, together with Boat Tree and AMSF, the
"Subsidiaries"). Unless the context otherwise requires, all references to the
"Company" in this Agreement shall include the Subsidiaries. The Company does not
own, directly or indirectly, any shares of stock or any other equity or
long-term debt securities of any corporation or have any equity interest in any
firm, partnership, joint venture, association or other entity. Complete and
correct copies of the certificates of incorporation and of the bylaws of the
Company and the Subsidiaries and all amendments thereto have been delivered to
the Representative and no changes therein will be made subsequent to the date
hereof and prior to the Closing Date or, if later, the Over-allotment Closing
Date.
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 full corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Registration Statement. All of the outstanding shares of capital stock of
the Subsidiaries have been duly authorized and validly issued, are fully paid
and non-assessable. The Company owns all of the outstanding shares of capital
stock of each of the Subsidiaries. None of the outstanding shares of capital
stock of the Subsidiaries owned by the Company are subject to a lien, security
interest, other encumbrance or adverse claim. No options, warrants or other
rights to purchase, agreements or other obligation to issue or other rights to
convert any obligation into shares of capital stock or ownership interests in
the Subsidiaries are outstanding.
(c) The Company has full power and authority (corporate and
other) to enter into this Agreement and the agreement between the Company and
the Representative relating to issuance of the Representative's Warrants (as
hereinafter defined) (the "Representative's Warrant Agreement"), which is being
executed concurrently herewith, and to perform the transactions contemplated
hereby and thereby to be performed by it. Each of this Agreement and the
Representative's Warrant
4
<PAGE>
Agreement has been duly authorized, executed and delivered by the Company and is
a valid and binding agreement on the part of the Company, enforceable against
the Company in accordance with its terms, except as rights to indemnity and
contribution hereunder may be limited by applicable laws or equitable principles
and except as enforcement hereof or thereof may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles. The
performance of this Agreement and the Representative's Warrant Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby will not result in a breach or violation of any of the terms
and provisions of, or constitute a default under, (i) any indenture, mortgage,
deed of trust, loan agreement, bond, debenture, note agreement or other evidence
of indebtedness, or any lease, contract or other agreement or instrument to
which the Company or any of the Subsidiaries is a party or by which its
properties are bound, (ii) the certificate of incorporation or bylaws of the
Company or any of the Subsidiaries or (iii) any law, order, rule, regulation,
writ, injunction or decree of any court or governmental agency or body to which
the Company or any of the Subsidiaries is subject. The Company is not required
to obtain or make (as the case may be) any consent, approval, authorization,
order, designation or filing by or with any court or regulatory, administrative
or other governmental agency or body as a requirement for the consummation by
the Company of the transactions contemplated by this Agreement or the
Representative's Warrant Agreement, except such as may be required under the
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act") or
under state securities or blue sky laws or under the rules and regulations of
the American Stock Exchange, Inc. (the "AMEX").
(d) There is not pending or, to the Company's knowledge,
threatened, any action, suit, claim, proceeding or investigation against the
Company or any of the Subsidiaries or any of their respective officers or any of
their respective properties, assets or rights before any court or governmental
agency or body or otherwise which might result in a Material Adverse Effect or
prevent consummation of the transactions contemplated hereby. There are no
statutes, rules, regulations, agreements, contracts, leases or documents that
are required to be described in the Prospectus, or to be filed as exhibits to
the Registration Statement by the Act or by the Rules and Regulations that have
not been accurately described in all material respects in the Prospectus or
filed as exhibits to the Registration Statement.
5
<PAGE>
(e) All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws and were not issued in violation of any preemptive right, resale
right, right of first refusal or similar right. The authorized and outstanding
capital stock of the Company conforms in all material respects to the
description thereof contained in the Registration Statement and the Prospectus
(and such description correctly states the substance of the provisions of the
instruments defining the capital stock of the Company). The Shares have been
duly authorized for issuance and sale to the Underwriters pursuant to this
Agreement and, when issued and delivered by the Company against payment therefor
in accordance with the terms of this Agreement, will be duly and validly issued
and fully paid and nonassessable. No preemptive right, co-sale right, right of
first refusal or other similar rights of security holders exists with respect to
any of the Shares or the issue and sale thereof other than those that have been
expressly waived prior to the date hereof. Except as set forth in the
Prospectus, no holder of securities of the Company has the right to cause the
Company to include such holder's securities in the Registration Statement.
The Representative's Warrant Agreement and the warrants
issuable pursuant thereto (the "Representative's Warrants") conform in all
material respects to the descriptions thereof contained in the Registration
Statement and the Prospectus. The shares of Common Stock issuable upon exercise
of the Representative's Warrants (the "Warrant Shares") have been duly
authorized for issuance and sale to the holders of the Representative's Warrants
pursuant to the Representative's Warrant Agreement and, when issued and
delivered by the Company against payment therefor in accordance with the terms
of the Representative's Warrant Agreement, will be duly and validly issued and
fully paid and nonassessable. No further approval or authorization of any
security holder, the Board of Directors or any duly appointed committee thereof
or others is required for the issuance and sale or transfer of the Shares or the
Warrant Shares, except as may be required under the Act, the Exchange Act or
blue sky laws. Except as disclosed in or contemplated by the Prospectus and the
financial statements of the Company and the related notes thereto included in
the Prospectus, the Company does not have outstanding any options or warrants to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such options,
rights, convertible securities or obligations. The description of the Company's
stock option and
6
<PAGE>
other plans or arrangements, and the options or other rights which may be or
have been granted thereunder, set forth in the Prospectus accurately and fairly
presents, in all material respects, the information required to be shown with
respect to such plans, arrangements, options and rights.
(f) BDO Seidman, LLP (the "Accountants") who have examined the
financial statements, together with the related schedules and notes, of the
Company and Boat Tree filed with the Commission as a part of the Registration
Statement, which are included in the Prospectus, are independent public
accountants within the meaning of the Act and the Rules and Regulations. The
financial statements of the Company and Boat Tree, together with the related
schedules and notes, forming part of the Registration Statement and the
Prospectus, fairly present the financial position and the results of operations
of the Company and Boat Tree at the respective dates and for the respective
periods to which they apply.
(g) Feldman Sherb Ehrlich & Co., P.C. (the "Treasure Coast
Accountants") who have examined the financial statements, together with the
related schedules and notes, of Treasure Coast Boating Center, Inc. ("Treasure
Coast") filed with the Commission as a part of the Registration Statement, which
are included in the Prospectus, are independent public accountants within the
meaning of the Act and the Rules and Regulations. The financial statements of
Treasure Coast, together with the related schedules and notes, forming part of
the Registration Statement and the Prospectus, fairly present the financial
position and the results of operations of Treasure Coast at the respective dates
and for the respective periods to which they apply.
(h) All financial statements, together with the related
schedules and notes, filed with the Commission as part of the Registration
Statement have been prepared in accordance with generally accepted accounting
principles as in effect in the United States consistently applied throughout the
periods involved except as may be otherwise stated in the Registration
Statement. The selected and summary financial and statistical data included in
the Registration Statement present fairly the information shown therein and have
been compiled on a basis consistent with the financial statements presented
therein. No other financial statements or schedules are required by the Act or
the Rules and Regulations to be included in the Registration Statement.
(i) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
7
<PAGE>
Prospectus, there has not been (i) any material adverse change, or any
development which, in the Company's reasonable judgment, is likely to cause a
material adverse change, in the business, prospects, properties or assets
described or referred to in the Registration Statement (including, without
limitation, the business, prospects, properties or assets to be purchased by the
Company pursuant to the Asset Purchase Agreement or the Marine America
Acquisition(as hereinafter defined)), or the results of operations, condition
(financial or otherwise), business or operations of the Company and the
Subsidiaries taken as a whole, (ii) any transaction which is material to the
Company and the Subsidiaries taken as a whole, except transactions in the
ordinary course of business, (iii) any obligation, direct or contingent, which
is material to the Company and the Subsidiaries taken as a whole, incurred by
the Company or any of the Subsidiaries, except obligations incurred in the
ordinary course of business, (iv) any change in the capital stock or outstanding
indebtedness of the Company or any of the Subsidiaries or (v) (except as
specifically described in the Prospectus) any dividend or distribution of any
kind declared, paid or made on the capital stock of the Company. Neither the
Company nor any of the Subsidiaries has a material contingent obligation which
is not disclosed in the Registration Statement.
(j) Except as set forth in the Prospectus, (A) the Company and
the Subsidiaries have good and marketable title to all material properties and
assets described in the Prospectus as owned by them, free and clear of any
pledge, lien, security interest, charge, encumbrance, claim, equitable interest
or restriction, (B) the agreements to which the Company or any of the
Subsidiaries is a party described in the Prospectus are valid agreements,
enforceable against the Company or the Subsidiaries, as the case may be, in
accordance with their respective terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles and except as rights to indemnity and contribution
thereunder may be limited by applicable laws or equitable principles, and, to
the Company's knowledge, the other contracting party or parties thereto are not
in material breach or default under any of such agreements and (C) each of the
Company and the Subsidiaries has valid and enforceable leases for the properties
described in the Prospectus as leased by it, and such leases conform in all
material respects to the description thereof, if any, set forth in the
Registration Statement.
(k) The Company and the Subsidiaries now hold and at the
Closing Date and any later Over-allotment Closing Date, as
8
<PAGE>
the case may be, will hold, all licenses, certificates, approvals and permits
from all state, United States, foreign and other regulatory authorities that are
material to the conduct of the business of the Company (as such business is
currently conducted or proposed to be conducted by the Company), except for such
licenses, certificates, approvals and permits the failure of which to hold would
not have a Material Adverse Effect), all of which are valid and in full force
and effect (and there is no proceeding pending or, to the knowledge of the
Company, threatened which may cause any such license, certificate, approval or
permit to be withdrawn, canceled, suspended or not renewed). Neither the Company
nor any of the Subsidiaries is in violation of its certificate of incorporation
or bylaws, or, except for defaults or violations which would not have a Material
Adverse Effect, in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any bond, debenture, note or other
evidence of indebtedness or in any contract, indenture, mortgage, loan
agreement, joint venture or other agreement or instrument to which it is a party
or by which it or any of its properties are bound, or in violation of any law,
order, rule, regulation, writ, injunction or decree of any court or governmental
agency or body.
(l) The Company and the Subsidiaries have filed on a timely
basis all necessary federal, state and foreign income, franchise and other tax
returns and have paid all taxes shown thereon as due, and the Company has no
knowledge of any tax deficiency which has been or might be asserted against the
Company or the Subsidiaries which might have a Material Adverse Effect. All
material tax liabilities are adequately provided for within the financial
statements of the Company.
(m) Each of the Company and the Subsidiaries maintains
insurance of the types and in the amounts adequate for its business and
consistent with insurance coverage maintained by similar companies in similar
businesses, including, but not limited to, business interruption insurance and
real and personal property owned or leased against theft, damage, destruction,
acts of vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect.
(n) Neither the Company nor any of the Subsidiaries is
involved in any labor dispute or disturbance or, to the knowledge of the
Company, is any such dispute or disturbance threatened.
(o) The Company and the Subsidiaries own or possess adequate
licenses or other rights to use all patents, trademarks,
9
<PAGE>
service marks, tradenames, copyrights, trade secrets, know-how, franchises, and
other material intangible property and assets (collectively, "Intellectual
Property") necessary to the conduct of their business as conducted and as
proposed to be conducted as described in the Prospectus. The Company has no
knowledge that it or any of the Subsidiaries lacks or will be unable to obtain
any rights or licenses to use any of the Intellectual Property necessary to
conduct the business now conducted or proposed to be conducted by it as
described in the Prospectus. The Prospectus fairly and accurately describes the
Company's rights with respect to the Intellectual Property. The Company has not
received any notice of infringement or of conflict with rights or claims of
others with respect to any Intellectual Property.
(p) Neither the Company nor any of the Subsidiaries is an
"investment company," or a "promoter" or "principal underwriter" for a
registered investment company, as such terms are defined in the Investment
Company Act of 1940, as amended.
(q) The Company has not incurred any liability for a fee or
commission or other compensation on account of the employment of a broker or
finder in connection with the transactions contemplated by this Agreement other
than the underwriting discounts and commissions contemplated hereby.
(r) The Company and the Subsidiaries (i) are in compliance
with any and all applicable United States, foreign, state and local
environmental laws, rules, regulations, treaties, statutes and codes promulgated
by any and all governmental authorities relating to the protection of human
health and safety, the environment or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their business as currently conducted or proposed to be conducted by the Company
and (iii) are in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with Environmental Laws,
failure to receive required permit licenses or other approvals would not,
individually or in the aggregate, have a Material Adverse Effect. No action,
proceeding, revocation proceeding, writ, injunction or claim is pending or
threatened relating to the Environmental Laws or to the Company's or the
Subsidiaries' activities involving Hazardous Materials. "Hazardous Materials"
means any material or substance (A) that is prohibited or regulated by any
environmental law, rule, regulation, order, treaty, statute or code promulgated
by any governmental authority, or any amendment or modification thereto or (B)
that has been designated or regulated by any
10
<PAGE>
governmental authority as radioactive, toxic, hazardous or otherwise a danger to
health, reproduction or the environment.
(s) Neither the Company nor the Subsidiaries have engaged in
the generation, use, manufacture, transportation or storage of any Hazardous
Materials on any of the Company's or any of the Subsidiaries' properties or
former properties, except where such use, manufacture, transportation or storage
is in compliance with Environmental Laws. No Hazardous Materials have been
treated or disposed of on any of the Company's or any of the Subsidiaries'
properties or on properties formerly owned or leased by the Company or any of
the Subsidiaries during the time of such ownership or lease, except in
compliance with Environmental Laws. No spills, discharges, releases, deposits,
emplacements, leaks or disposal of any Hazardous Materials have occurred on or
under or have emanated from any of the Company's or any of the Subsidiaries'
properties or former properties.
(t) Neither the Company nor the Subsidiaries have at any time
during the last five years (i) made any unlawful contribution to any candidate
for foreign office, or failed to disclose fully any contribution in violation of
law or (ii) made any payment to any foreign, United States or state governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the United
States.
(u) The Shares have been duly authorized for listing on the
AMEX upon notice of issuance. The Company has taken no action designed to, or
likely to have the effect of, terminating the registration of the Common Stock
under the Exchange Act or delisting the Common Stock from the AMEX, nor has the
Company received any notification that the Commission or the AMEX is
contemplating terminating such registration or listing.
(v) Neither the Company nor, to its knowledge, any of its
officers, directors or affiliates has taken, and at the Closing Date and at any
later Over-allotment Closing Date, neither the Company nor, to its knowledge,
any of its officers, directors or affiliates will have taken, directly or
indirectly, any action which has constituted, or might reasonably be expected to
constitute, the stabilization or manipulation of the price of sale or resale of
the Shares.
(w) The Company has obtained and delivered to the
Representative agreements (the "Lock-Up Agreements") from each of the persons
and entities listed on Schedule B hereto, representing all of the Company's
officers, directors and
11
<PAGE>
stockholders (or holders of securities convertible into or exchangeable or
exercisable for equity securities of the Company) who own as of the Effective
Date, any shares of outstanding Common Stock, providing that such person or
entity will not, commencing on the date of the Prospectus and continuing for a
12- month period thereafter, without the Representative's prior written consent,
directly or indirectly, offer to sell, sell, pledge, solicit an offer to buy,
contract to sell, grant any option for the sale thereof, or otherwise encumber,
or cause the transfer or disposition of, any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for, Common Stock, or
exercise any registration rights with respect to any shares of Common Stock or
any securities convertible into or exchangeable or exercisable for any shares of
Common Stock.
(x) The Company has not distributed and, prior to the latest
to occur of (i) the Closing Date, (ii) the Over-allotment Closing Date and (iii)
the completion of the distribution of the Shares, will not distribute any
offering material in connection with the offering and sale of the Shares other
than the Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or other
materials, if any, as permitted by the Act.
(y) The representations and warranties of the Company, AMSF,
Treasure Coast, Treasure Coast Boating Services, Inc. ("TCBS") and D. Thomas
Grane contained in the Asset Purchase Agreement, dated January 22, 1999, as
amended, by and among the Company, Treasure Coast, TCBS, D. Thomas Grane and
AMSF (the "Asset Purchase Agreement") are true, accurate and complete in all
material respects as of the date hereof and all conditions to the consummation
of the Treasure Coast Acquisition (as defined in the Prospectus) have been
satisfied, except for the delivery of the Purchase Price (as defined in the
Asset Purchase Agreement). The Company has caused all necessary and relevant
documents to be placed in escrow and held by an escrow agent pursuant to an
escrow agreement for delivery on the Closing Date (as defined in the Asset
Purchase Agreement) and has granted an irrevocable power of attorney to the
escrow agent to execute all necessary instruments and documents and to perform
all acts necessary to carry out the provisions of the Asset Purchase Agreement.
(z) The representations and warranties of the Company, Joseph
G. Pozo, Jr. and Joseph John Pozo contained in the Exchange Agreement, dated
September 1, 1998, as amended, by and among the Company, Joseph G. Pozo, Jr. and
Joseph John Pozo(the "Exchange Agreement") are true, accurate and complete in
all material respects as of the date hereof and all conditions to the
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consummation of the Marine America Acquisition (as defined in the Prospectus)
have been satisfied, except for the delivery of payment of a promissory note in
the amount of $100,000 payable to Lakewood Marine International, Ltd.
("Lakewood"). The Company has caused all necessary and relevant documents to be
placed in escrow and held by an escrow agent pursuant to an escrow agreement for
delivery on the Closing Date and has granted an irrevocable power of attorney to
the escrow agent to execute all necessary instruments and documents and to
perform all acts necessary to consummate the Marine America Acquisition.
(aa) The Reorganization (as defined in the Prospectus) has
been completed on the terms described in the Prospectus.
3. Purchase of the Shares by the Underwriters.
(a) On the basis of the representations and warranties and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell the Firm Shares to the several Underwriters, and each of the
Underwriters agrees to purchase from the Company the respective aggregate number
of Firm Shares set forth opposite its name on Schedule A, plus such additional
number of Firm Shares which such Underwriter may become obligated to purchase
pursuant to Section 3(b) hereof. The price at which such Firm Shares shall be
sold by the Company and purchased by the several Underwriters shall be $_____
per share. In making this Agreement, each Underwriter is contracting severally
and not jointly; except as provided in Section 3(b) and Section 3(c), the
agreement of each Underwriter is to purchase only the respective number of Firm
Shares specified on Schedule A.
(b) If for any reason one or more of the Underwriters shall
fail or refuse (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 10 hereof) to
purchase and pay for the number of Shares agreed to be purchased by such
Underwriter or Underwriters, the non-defaulting Underwriters shall have the
right within 24 hours after such default to purchase, or procure one or more
other Underwriters to purchase, in such proportions as may be agreed upon
between the Representative and such purchasing Underwriter or Underwriters and
upon the terms herein set forth, all or any part of the Shares which such
defaulting Underwriter or Underwriters agreed to purchase. If the non-defaulting
Underwriters fail so to make such arrangements with respect to all such Shares
and portion, the number of Shares which each non-defaulting Underwriter is
otherwise obligated to purchase under this Agreement shall be automatically
increased on a pro rata basis (as adjusted by the Representative in such manner
as
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the Representative deems advisable to avoid fractional shares) to absorb the
remaining shares and portion which the defaulting Underwriter or Underwriters
agreed to purchase; provided, however, that the non-defaulting Underwriters
shall not be obligated to purchase the Shares and portion which the defaulting
Underwriter or Underwriters agreed to purchase if the aggregate number of such
Shares exceeds 10% of the total number of Shares which all Underwriters agreed
to purchase hereunder. If the total number of Shares which the defaulting
Underwriter or Underwriters agreed to purchase shall not be purchased or
absorbed in accordance with the two preceding sentences, the Company shall have
the right, within 24 hours next succeeding the 24-hour period referred to above,
to make arrangements with other underwriters or purchasers reasonably
satisfactory to the Representative for purchase of such Shares and portion on
the terms herein set forth. In any such case, either the Representative or the
Company shall have the right to postpone the Closing Date determined as provided
in Section 5 hereof for not more than seven business days after the date
originally fixed as the Closing Date pursuant to said Section 5 in order that
any necessary changes in the Registration Statement, the Prospectus or any other
documents or arrangements may be made. If the aggregate number of Shares which
the defaulting Underwriter or Underwriters agreed to purchase exceeds 10% of the
total number of Shares which all Underwriters agreed to purchase hereunder, and
if neither the non-defaulting Underwriters nor the Company shall make
arrangements within the 24-hour periods stated above for the purchase of all the
Shares which the defaulting Underwriter or Underwriters agreed to purchase
hereunder, this Agreement shall be terminated without further act or deed and
without any liability on the part of the Company to any non-defaulting
Underwriter and without any liability on the part of any non-defaulting
Underwriter to the Company. Nothing in this Section 3(b), and no action taken
hereunder, shall relieve any defaulting Underwriter from liability in respect of
any default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and
covenants herein contained, and subject to the terms and conditions herein set
forth, the Company hereby grants an option to the several Underwriters to
purchase all or any portion of the Over-allotment Shares from the Company at the
same price per share as the Underwriters shall pay for the Firm Shares. Such
option may be exercised only to cover Over-allotments in the sale of the Firm
Shares by the Underwriters and may be exercised in whole or in part at any time,
or from time to time, on or before the 45th day after the date of the Prospectus
upon written or telegraphic notice by the Representative to the Company setting
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forth the aggregate number of Over-allotment Shares as to which the Underwriters
are exercising the option. Delivery of certificates for the Over-allotment
Shares, and payment therefor, shall be made as provided in Section 5 hereof.
Each Underwriter shall purchase such percentage of the Over-allotment Shares as
is equal to the percentage of Firm Shares that such Underwriter is purchasing,
the exact number of shares to be adjusted by the Representative in such manner
as the Representative deems advisable to avoid fractional shares.
(d) On the Closing Date, the Company shall issue and deliver
to the Representative, or at the direction of the Representative, to its
designees as provided in the Representative's Warrant Agreement, for a purchase
price of $.001 per Representative's Warrant (an aggregate of $100), the
Representative's Warrants entitling the holder thereof to purchase 100,000
shares of Common Stock on the terms and conditions set forth in the
Representative's Warrant Agreement.
4. Offering by Underwriters.
The terms of the offering of the Shares by the Underwriters
shall be as set forth in the Prospectus.
5. Delivery of and Payment for the Shares and the
Representative's Warrants.
(a) Delivery of certificates for the Firm Shares, the
Over-allotment Shares (if the option granted pursuant to Section 3(c) hereof
shall have been exercised not later than 1:00 p.m., New York City time, on the
date at least two business days preceding the Closing Date) and the
Representative's Warrants, and payment therefor, shall be made at the office of
Proskauer Rose LLP, 1585 Broadway, New York, New York 10036-8299 at 9:00 a.m.,
New York City time, on the fourth business day after the date of this Agreement,
or at such time on such other day, not later than seven full business days after
such fourth business day, as shall be agreed upon in writing by the Company and
the Representative (the "Closing Date").
(b) If the option granted pursuant to Section 3(c) hereof
shall be exercised after 1:00 p.m., New York City time, on the date two business
days preceding the Closing Date, and on or before the 45th day after the date of
this Agreement, delivery of certificates for the Over-allotment Shares, and
payment therefor, shall be made at the office of Proskauer Rose LLP, 1585
Broadway, New York, New York 10036-8299 at 9:00 a.m., New York City time, on the
third business day after the exercise of such option.
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(c) Payment for the Shares shall be made to the Company (or in
the case of payment under the Asset Purchase Agreement to consummate the
Treasure Coast Acquisition to D. Thomas Grane or in the case of payment of a
$100,000 promissory note to consummate the Marine America Acquisition to
Lakewood), by either a next day funds check or federal funds wire transfer. Such
payment shall be made upon delivery of certificates for the Shares to the
Representative for the respective accounts of the several Underwriters against
receipt therefor signed by the Representative (or, in the case of payment under
the Asset Purchase Agreement and payment to consummate the Marine America
Acquisition, upon delivery by the escrow agent of all the necessary and relevant
documents for the closing of the Asset Purchase Agreement and the Marine America
Acquisition). Certificates for the Shares to be delivered to the Representative
shall be registered in such name or names and shall be in such denominations as
the Representative may request at least three business days before the Closing
Date, in the case of Firm Shares, and at least two business days prior to the
Over-allotment Closing Date, in the case of the Over-allotment Shares. Such
certificates will be made available to the Underwriters for inspection, checking
and packaging at a location in New York, New York, designated by the
Underwriters not less than one full business day prior to the Closing Date or,
in the case of the Over-allotment Shares, by 3:00 p.m., New York City time, on
the business day preceding the Over-allotment Closing Date.
It is understood that the Representative, individually and not
on behalf of the Underwriters, may (but shall not be obligated to) make payment
to the Company for shares to be purchased by any Underwriter whose check shall
not have been received by the Representative on the Closing Date or any later
Over-allotment Closing Date. Any such payment by the Representative shall not
relieve such Underwriter from any of its obligations hereunder.
(d) Payment for the Representative's Warrants shall be made to
the Company or its order, by either a next day funds check or federal funds wire
transfer. Such payment shall be made upon delivery of certificates for the
Representative's Warrants to the Representative against receipt therefor signed
by the Representative. Certificates for the Representative's Warrants to be
delivered to the Representative shall, subject to the terms and provisions of
the Representative's Warrant Agreement, be registered in such name or names as
permitted by the Representative's Warrant Agreement and shall be in such
denominations as the Representative may request at least three business days
before the Closing Date.
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6. Further Agreements of the Company. The Company covenants and agrees
as follows:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the time
and date that this Agreement is executed and delivered by the parties hereto, to
become effective as promptly as possible; it will notify the Representative,
promptly after it shall receive notice thereof, of the time when the
Registration Statement or any subsequent amendment to the Registration Statement
has become effective or any supplement to the Prospectus has been filed. If the
Company omitted information from the Registration Statement at the time it was
originally declared effective in reliance upon Rule 430A(a), the Company will
provide evidence satisfactory to the Representative that the Prospectus contains
such information and has been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission. If for any reason the filing of the final form of Prospectus is
required under Rule 424(b)(3) of the Rules and Regulations, it will provide
evidence satisfactory to the Representative that the Prospectus contains such
information and has been filed with the Commission within the time period
prescribed. The Company will notify the Representative promptly of any request
by the Commission for the amending or supplementing of the Registration
Statement or the Prospectus or for additional information. Promptly upon the
Representative's request, it will prepare and file with the Commission any
amendments or supplements to the Registration Statement or Prospectus which, in
the reasonable opinion of counsel to the Representative, may be necessary or
advisable in connection with the distribution of the Shares by the Underwriters.
The Company will promptly prepare and file with the Commission, and promptly
notify the Representative of the filing of, any amendments or supplements to the
Registration Statement or Prospectus which may be necessary to correct any
statements or omissions, if, at any time when a prospectus relating to the
Shares is required to be delivered under the Act, any event shall have occurred
as a result of which the Prospectus or any other prospectus relating to the
Shares as then in effect would include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. In case
any Underwriter is required to deliver a prospectus within the nine-month period
referred to in Section 10(a)(3) of the Act in connection with the sale of the
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Shares, the Company will prepare promptly upon request, but at the expense of
such Underwriter, such amendment or amendments to the Registration Statement and
such prospectus or prospectuses as may be necessary to permit compliance with
the requirements of Section 10(a)(3) of the Act. The Company will file no
amendment or supplement to the Registration Statement or Prospectus that shall
not previously have been submitted to the Representative a reasonable time prior
to the proposed filing thereof or to which the Representative shall reasonably
object in writing or which is not in compliance with the Act and Rules and
Regulations or the provisions of this Agreement.
(b) The Company will advise the Representative, promptly after
it shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of the Registration
Statement or the use of the Prospectus or of the initiation or threat of any
proceeding for that purpose; and it will promptly use its best efforts to
prevent the issuance of any such stop order or to obtain its withdrawal at the
earliest possible moment if such stop order should be issued.
(c) 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 designate and to continue
such qualifications in effect for so long as may be required for purposes of the
distribution of the Shares, except that the Company shall not be required in
connection therewith or as a condition thereof to qualify as a foreign
corporation, or to execute a general consent to service of process in any
jurisdiction, or to make any undertaking with respect to the conduct of its
business. In each jurisdiction in which the Shares shall have been qualified,
the Company will make and file such statements, reports and other documents in
each year as are or may be reasonably required by the laws of such jurisdictions
so as to continue such qualifications in effect for so long a period as the
Representative may reasonably request for distribution of the Shares, or as
otherwise may be required by law.
(d) The Company will furnish to the Representative, as soon as
available, copies of the Registration Statement (three of which will be signed
and which will include all exhibits), each Preliminary Prospectus, the
Prospectus, and any amendments or supplements to such documents, including any
prospectus prepared to permit compliance with Section 10(a)(3) of the Act, all
in such quantities as the Representative may from time to time reasonably
request.
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(e) The Company will make generally available to its
stockholders as soon as practicable, but in any event not later than the 45th
day following the end of the fiscal quarter first occurring after the first
anniversary of the Effective Date, an earnings statement (which will be in
reasonable detail but need not be audited) complying with the provisions of
Section 11(a) of the Act and Rule 158 of the Rules and Regulations and covering
a 12-month period beginning after the Effective Date, and will advise the
Representative in writing when such statement has been made available.
(f) During a period of five years after the date hereof, the
Company, as soon as practicable after the end of each respective period, will
furnish to its stockholders annual reports (including financial statements
audited by independent certified public accountants) and will furnish to its
stockholders unaudited quarterly reports of operations for each of the first
three quarters of the fiscal year, and will, upon request, furnish to the
Representative and the other several Underwriters hereunder (i) concurrently
with making such reports available to its stockholders, statements of operations
of the Company for each of the first three quarters in the form made available
to the Company's stockholders; (ii) concurrently with the furnishing thereof to
its stockholders, a balance sheet of the Company as of the end of such fiscal
year, together with statements of operations, of stockholders' equity and of
cash flow of the Company for such fiscal year, accompanied by a copy of the
certificate or report thereon of nationally recognized independent certified
public accountants; (iii) concurrently with the furnishing of such reports to
its stockholders, copies of all reports (financial or other) mailed to
stockholders; (iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, any securities
exchange or automated quotation system by the Company (except for documents for
which confidential treatment is requested); and (v) every material press release
and every material news item or article in respect of the Company or its affairs
which was generally released to stockholders or prepared for general release by
the Company. During such five-year period, if the Company shall have any active
subsidiaries, the foregoing financial statements shall be on a consolidated
basis to the extent that the accounts of the Company are consolidated with any
subsidiaries, and shall be accompanied by similar financial statements for any
significant subsidiary that is not so consolidated.
(g) The Company shall not, during the 12 months following the
Effective Date, except with the Representative's
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prior written consent, file, or announce an intent to file, a registration
statement covering any of its shares of capital stock, except that one or more
registration statements on Form S-8 may be filed at any time following the
Effective Date covering the 200,000 shares of Common Stock reserved for issuance
to employees or directors of the Company pursuant to the 1998 Stock Option Plan.
(h) The Company shall not, during the 12 months following the
Effective Date, except with the prior written consent of the Representative, in
its individual capacity and not in its capacity as representative of the
Underwriters, issue, sell, offer or agree to sell, grant, distribute or
otherwise dispose of, directly or indirectly, any shares of Common Stock, or any
options, rights or warrants with respect to shares of Common Stock, or any
securities convertible into or exchangeable for Common Stock, other than the
issuance of (i) the Over- allotment Shares, (ii) the Representative's Warrants,
(iii) 200,000 shares of Common Stock reserved for issuance to employees or
directors of the Company pursuant to the 1998 Stock Option Plan and (iv) shares
of Common Stock upon exercise of outstanding options and warrants provided that
such shares are also restricted pursuant to the Lock-up Agreements or the
Existing Lock-up Agreements.
(i) The Company will apply the net proceeds from the sale of
the Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(j) The Company will maintain a transfer agent and a registrar
(which may be the same entity as the transfer agent) for the Common Stock.
(k) The Company will use its best efforts to maintain listing
of its shares of Common Stock on the AMEX.
(l) The Company is familiar with the Investment Company Act of
1940, as amended, and the rules and regulations thereunder, and has in the past
conducted its affairs, and will in the future conduct its affairs, in such a
manner so as to ensure that the Company was not and will not be an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
(m) The Company will, at the option of the Representative,(i)
during a period of five years from the Effective Date, appoint a designee of the
Representative to the Board of Directors of the Company, and use its best
efforts to
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nominate and cause to be reelected to the Board of Directors of the Company such
designee or any other designee of the Representative or (ii) during a period of
three years from the Effective Date, permit an agent of the Representative to
attend all meetings of the Board of Directors of the Company as a non-voting
observer. The Company will give such agent or designee notice of all meetings of
the Board of Directors at the same time and in the same manner that directors
are notified and will reimburse such agent for all expenses incurred in
attending such meetings, including, but not limited to food, transportation and
lodging.
(n) During a period of three years from the Effective Date,
the Company and its affiliates, shall grant the Representative, individually and
not as representative of the Underwriters, the right of first refusal to act as
sole underwriter or as agent, as the case may be, with respect to any public or
private offering of the Company's securities, or any secondary offering of the
Company's securities by the principal stockholders of the Company. If during
such three-year period, the Company and the principal stockholders or its
affiliates intends to make any sale of securities, the Company shall notify the
Representative of such intention and of the proposed terms of the sale and shall
thereafter promptly furnish the Representative with information concerning the
operations, business, properties, or assets of the Company as the Representative
may reasonably request. The Company and the principal stockholders shall consult
with the Representative with regard to any such offering and will offer the
Representative exclusively the opportunity to purchase, sell, or act as
underwriter or placement agent for the purchase or sale of any such securities.
If within 20 business days after such notice the Representative does not accept
in writing the offer, the Company shall be free to enter into discussions with
other underwriters or agents with respect to such offering; provided, however,
that such financing is consummated on the identical terms as originally was
proposed to the Representative in the notice. Before the Company shall accept
any proposal less favorable to it than that conveyed to the Representative, the
rights set forth in this Section 6(n) shall be reinstated and the same procedure
as provided above shall be adopted with respect to the modified proposal. In
connection with any public offering, the Representative may include other
persons as underwriters or dealers.
The Company acknowledges that violation of the
Representative's right of first refusal granted under this Section 6(n) would
cause irreparable harm to the Representative and agrees that the Representative
would be entitled to injunctive
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relief to prevent any violation of this provision without the necessity of
posting a bond. The Company represents and warrants that no other person or
entity has any rights to participate in any offer, sale or distribution of
securities or possesses any pre-emptive or similar rights. The failure of the
Representative to exercise the right of first refusal granted under this Section
6(n) in any particular instance shall not affect in any way such right with
respect to any subsequent offering of securities.
7. Expenses.
The Company agrees with each Underwriter that:
(a) The Company is responsible for and will pay and bear all
costs, fees and expenses relating to the public offering. Such expenses include,
without limitation, all filing fees and other expenses relating to the
registration of the Shares (including the Over-allotment Shares and the
Representative's Warrants) with the Commission and the filing of the offering
materials with the National Association of Securities Dealers, Inc., including
fees and expenses of the Representative's counsel with respect to such filings;
all fees and expenses relating to the listing of the Shares (including the
Over-allotment Shares) on the AMEX (or other national exchange) and such other
stock exchange as may be mutually agreed to by the Company and the
Representative; all fees, expenses and disbursements relating to the
registration or qualification of the Shares under the securities laws of the
states and other jurisdictions as the Representative may reasonably designate
(including, without limitation, all filing and registration fees and fees and
disbursements of the Representative's counsel in connection with such blue sky
matters) and the costs of the roadshow presentation; expenses relative to the
Representative's due diligence investigation upon the closing of the public
offering; the costs of mailing and printing of the underwriting documents
(including the Underwriting Agreement, any blue sky surveys and memoranda and,
if appropriate, any Agreement Among Underwriters, Selected Dealers Agreement,
Underwriter's Questionnaire and Power of Attorney), the Registration Statements
and all amendments, supplements and exhibits thereto and as many preliminary and
final prospectuses as the Representative may reasonably deem necessary; and the
costs of delivering such prospectuses, the costs of preparing, printing and
delivering certificates representing Shares; fees and expenses of the transfer
agent for the Shares; stock transfer taxes, if any, payable upon the transfer of
securities from the Company to the Representative; the fees and expenses of the
Company's accountants and the Company's and the Representative's counsel
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and the fees and expenses of the Representative's counsel (including fees and
expenses relating to such due diligence investigation, other than blue sky
filing and registration fees payable to applicable blue sky authorities, all of
which shall be paid by the Company) upon the closing of the public offering.
(b) If the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability on the part of the
Company to perform any agreement on its part to be performed hereunder or to
fulfill any condition of the Underwriters' obligations hereunder, the Company
will, in addition to paying the expenses described in Section 7(a), reimburse
the several Underwriters for all out-of-pocket expenses (including fees and
disbursements of Underwriters' counsel) incurred by the Underwriters in
reviewing the Registration Statement and the Prospectus and in otherwise
investigating, preparing to market or marketing the Shares.
(c) The Representative, in its individual capacity and not as
representative of the Underwriters, shall also be entitled to a non-accountable
expense allowance equal to 3% of the aggregate offering price of the Shares.
8. Conditions of Underwriters' Obligations.
The obligations of the several Underwriters to purchase and pay for the
Shares, as provided herein, shall be subject to the accuracy, as of the date
hereof and the Closing Date and any later Over-allotment Closing Date, as the
case may be, of the representations and warranties of the Company herein and to
the performance by the Company of its obligations hereunder and to the following
additional conditions:
(a) The Registration Statement shall have become effective not
later than 9:00 a.m., New York City time, on the day immediately following the
date of this Agreement, or such later time or date as shall be consented to in
writing by the Representative. If the filing of the Prospectus, or any
supplement thereto, is required pursuant to Rule 424(b) and Rule 430A of the
Rules and Regulations, the Prospectus shall have been filed in the manner and
within the time period required by Rule 424(b) and Rule 430A of the Rules and
Regulations. No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceeding for that purpose shall have
been initiated or, to the knowledge of the Company or any Underwriter,
threatened by the Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise) shall have
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been complied with to the reasonable satisfaction of counsel to
the Underwriters.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery of the
Shares shall have been reasonably satisfactory to counsel to the Underwriters,
and such counsel shall have been furnished with such papers and information as
they may reasonably have requested to enable them to pass upon the matters
referred to herein.
(c) The Representative shall have received, at no cost to it,
on the Closing Date and on any later Over-allotment Closing Date, as the case
may be, the opinion of McLaughlin & Stern, LLP, counsel to the Company, dated
the Closing Date or such later Over-allotment Closing Date, in the form attached
hereto as Appendix A, addressed to the Underwriters and with reproduced copies
of signed counterparts thereof for the Representative.
(d) The Representative shall have received from Proskauer Rose
LLP, Underwriters' counsel, an opinion or opinions, dated the Closing Date or on
any later Over-allotment Closing Date, as the case may be, in form and substance
reasonably satisfactory to the Representative, with respect to certain legal
matters as the Representative may reasonably require, and the Company shall have
furnished to such counsel such documents as it may have reasonably requested for
the purpose of enabling it to pass upon such matters.
(e) The Representative shall have received on the Effective
Date, Closing Date and on any later Over-allotment Closing Date, as the case may
be, a letter from the Accountants addressed to the Company and the Underwriters,
dated the Effective Date, Closing Date or such later Over-allotment Closing
Date, as the case may be, confirming that it is an independent certified public
accountant with respect to the Company within the meaning of the Act and the
Rules and Regulations thereunder and based upon the procedures described in its
letter delivered to the Representative concurrently with the execution of this
Agreement (herein called the "Original Letter"), but carried out to a date not
more than three days prior to the Closing Date or any such later Over-allotment
Closing Date, as the case may be, (i) confirming that the statements and
conclusions set forth in the Original Letter are accurate as of the Closing Date
or such later Over-allotment Closing Date, as the case may be; and (ii) setting
forth any revisions and additions to the statements
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and conclusions set forth in the Original Letter that are necessary to reflect
any changes in the facts described in the Original Letter since the date of such
letter, or to reflect the availability of more recent financial statements, data
or information. The letter shall not disclose any change, or any development
involving a prospective change, in or affecting the business or properties of
the Company which, in the Representative's reasonable judgment, makes it
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus. In addition, the Representative shall have
received from the Accountants a letter addressed to the Company and made
available to the Representative for the use of the Underwriters stating that its
review of the Company's system of internal accounting controls, to the extent it
deemed necessary in establishing the scope of its latest examination of the
Company's financial statements, did not disclose any weaknesses in internal
controls that it considered to be material weaknesses. All such letters shall be
in a form reasonably satisfactory to the Representative and its counsel.
(f) The Representative shall have received on the Closing Date
and on any later Over-allotment Closing Date, as the case may be, a letter from
the Treasure Coast Accountants addressed to the Company and the Underwriters,
dated the Closing Date or such later Over-allotment Closing Date, as the case
may be, confirming that it is an independent certified public accountant with
respect to Treasure Coast within the meaning of the Act and the Rules and
Regulations thereunder and based upon the procedures described in its letter
delivered to the Representative concurrently with the execution of this
Agreement, but carried out to a date not more than three days prior to the
Closing Date or any such later Over-allotment Closing Date, as the case may be,
(i) confirming that the statements and conclusions set forth in the letter are
accurate as of the Closing Date or such later Over-allotment Closing Date, as
the case may be; and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the letter that are necessary to reflect
any changes in the facts described in the letter since the date of such letter,
or to reflect the availability of more recent financial statements, data or
information. The letter shall not disclose any change, or any development
involving a prospective change, in or affecting the business or properties of
Treasure Coast which, in the Representative's reasonable judgment, makes it
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus. In addition, the Representative shall have
received from the Treasure Coast Accountants a letter addressed to the Company
and made available to the Representative
25
<PAGE>
for the use of the Underwriters stating that its review of Treasure Coast's
system of internal accounting controls, to the extent it deemed necessary in
establishing the scope of its latest examination of Treasure Coast's financial
statements, did not disclose any weaknesses in internal controls that it
considered to be material weaknesses. All such letters shall be in a form
reasonably satisfactory to the Representative and its counsel.
(g) The Representative shall have received on the Closing Date
and on any later Over-allotment Closing Date, as the case may be, a certificate
of the President and the Chief Financial Officer of the Company, dated the
Closing Date or such later date, to the effect that as of such date (and the
Representative shall be satisfied that as of such date):
(i) The representations and warranties of the
Company in this Agreement are true and correct, as if made on and as of the
Closing Date or any later Over-allotment Closing Date, as the case may be; and
the Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied at or prior to the Closing
Date or any later Over-allotment Closing Date, as the case may be;
(ii) The Registration Statement has become
effective under the Act and no stop order suspending the effectiveness of the
Registration Statement or preventing or suspending the use of the Prospectus has
been issued, and no proceedings for that purpose have been instituted or are
pending or, to the best of their knowledge, threatened under the Act;
(iii) They have carefully reviewed the Registration
Statement, and the Prospectus; and, when the Registration Statement became
effective and at all times subsequent thereto up to the delivery of such
certificate, the Registration Statement and the Prospectus and any amendments or
supplements thereto contained all statements and information required to be
included therein or necessary to make the statements therein not misleading; and
when the Registration Statement became effective, and at all times subsequent
thereto up to the delivery of such certificate, none of the Registration
Statement, the Prospectus or any amendment or supplement thereto included any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading; and, since the Effective Date, there has occurred no event required
to be set forth in an amended or supplemented Prospectus that has not been so
set forth; and
26
<PAGE>
(iv) Subsequent to the respective dates as of
which information is given in the Registration Statement and the Prospectus,
there has not been (A) any material adverse change in the properties or assets
described or referred to in the Registration Statement and the Prospectus or in
the condition (financial or otherwise), operations, business or prospects of the
Company (including, without limitation, the business, prospects, properties or
assets to be purchased by the Company pursuant to the Asset Purchase Agreement
or the Marine America Acquisition),(B) any transaction which is material to the
Company and the Subsidiaries, (C) any obligation, direct or contingent, incurred
by the Company, which is material to the Company, except obligations incurred in
the ordinary course of business in accordance with past practices,(D) any change
in the capital stock or outstanding indebtedness of the Company which is
material to the Company or (E) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company, in each case, except
as specifically described in the Prospectus.
(h) The Company shall have furnished to the Representative
such further certificates and documents as the Representative shall reasonably
request as to the accuracy of the representations and warranties of the Company
herein, as to the performance by the Company of its obligations hereunder and as
to the other conditions precedent to the obligations of the Underwriters
hereunder.
(i) The Firm Shares and the Over-allotment Shares, if any,
shall have been approved for listing upon notice of issuance on the AMEX.
(j) The consummation of the Treasure Coast Acquisition and the
Marine America Acquisition shall have occurred.
(k) As of the date hereof, the Company will have delivered to
the Underwriters the Lock-Up Letters.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to counsel to the Underwriters. The Company will furnish the Representative with
such number of conformed copies of such opinions, certificates, letters and
documents as the Representative shall reasonably request.
27
<PAGE>
9. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person (including each partner or officer thereof) who
controls any Underwriter within the meaning of Section 15 of the Act from and
against any and all losses, claims, damages or liabilities, joint or several, to
which such indemnified parties or any of them may become subject under the Act,
the Exchange Act, the common law or otherwise, and the Company agrees to
reimburse each such Underwriter and controlling person for any legal or other
out-of-pocket expenses (including, except as otherwise hereinafter provided,
reasonable fees and disbursements of counsel) incurred by the respective
indemnified parties in connection with defending against any such losses,
claims, damages or liabilities or in connection with any investigation or
inquiry of, or other proceeding which may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof and any 462(b)
registration statement) or any post-effective amendment thereto (including any
462(b) registration statement), or 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, or (ii) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus or
the Prospectus (as amended or as supplemented if the Company shall have filed
with the Commission any amendment thereof or supplement thereto) or the omission
or alleged omission to state therein a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that (1) the indemnity agreements of
the Company contained in this Section 9(a) shall not apply to any such losses,
claims, damages, liabilities or expenses if such statement or omission is
contained in the section of the Prospectus entitled "Underwriting" or the last
paragraph of text on the cover page of the Prospectus, and (2) the indemnity
agreement contained in this paragraph (a) with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, claims, damages, liabilities or expenses
purchased the Shares which is the subject thereof (or to the benefit of any
person controlling such Underwriter) if at or prior to the written confirmation
of the sale of such Shares a copy of the Prospectus (or the Prospectus as
amended or supplemented) was not sent or delivered to such person (excluding any
documents incorporated therein by reference) and the untrue statement or
omission of a material fact contained in such Preliminary Prospectus was
corrected in the Prospectus (or the Prospectus as amended or supplemented)
unless the failure is the
28
<PAGE>
result of noncompliance by the Company with Section 6(a) hereof. The indemnity
agreements of the Company contained in this Section 9(a) and the representations
and warranties of the Company contained in Section 2 hereof shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any indemnified party and shall survive the delivery of any
payment for the Shares.
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company, each of its executive officers, each of its directors,
each other Underwriter and each person (including each partner or officer
thereof) who controls the Company or any such other Underwriter within the
meaning of Section 15 of the Act, from and against any and all losses, claims,
damages or liabilities, joint or several, to which such indemnified parties or
any of them may become subject under the Act, the Exchange Act, the common law
or otherwise and to reimburse each of them for any legal or other expenses
including, except as otherwise hereinafter provided, reasonable fees and
disbursements of counsel incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) registration
statement) or any post-effective amendment thereto (including any 462(b)
registration statement) or 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 or (ii) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that in the cases of clauses (i) and (ii) above,
such statement or omission is contained in the Section of the Prospectus
entitled "Underwriting" or the last paragraph on the cover page of the
Prospectus. The indemnity agreement of each Underwriter contained in this
Section 9(b) shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any indemnified party and shall
survive the delivery of and payment for the Shares.
29
<PAGE>
(c) Each party indemnified under the provision of Section 9(a)
or (b) agrees that, upon the service of a summons or other initial legal process
upon it in any action or suit instituted against it or upon its receipt of
written notification of the commencement of any investigation or inquiry of, or
proceeding against it, in respect of which indemnity may be sought on account of
any indemnity agreement contained in such paragraphs, it will promptly give
written notice (a "Notice") of such service or notification to the party or
parties from whom indemnification may be sought hereunder. No indemnification
provided for in such Section 9(a) or (b) shall be available to any party who
shall fail so to give the Notice if the party to whom such Notice was not given
was unaware of the action, suit, investigation, inquiry or proceeding to which
the Notice would have related and was prejudiced by the failure to give the
Notice, but the omission so to notify such indemnifying party or parties of any
such service or notification shall not relieve such 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 such indemnity agreement. Any
indemnifying party shall be entitled at its own expense to participate in the
defense of any action, suit or proceeding against, or investigation or inquiry
of, an indemnified party. Any indemnifying party shall be entitled, if it so
elects within a reasonable time after receipt of the Notice by giving written
notice (the "Notice of Defense") to the indemnified party, to assume (alone or
in conjunction with any other indemnifying party or parties) the entire defense
of such action, suit, investigation, inquiry or proceeding, in which event such
defense shall be conducted, at the expense of the indemnifying party or parties,
by counsel chosen by such indemnifying party or parties and reasonably
satisfactory to the indemnified party or parties; provided, however, that (i) if
the indemnified party or parties reasonably determine that there may be a
conflict between the positions of the indemnifying party or parties and of the
indemnified party or parties in conducting the defense of such action, suit,
investigation, inquiry or proceeding or that there may be legal defenses
available to such indemnified party or parties different from or in addition to
those available to the indemnifying party or parties, then counsel for the
indemnified party or parties shall be entitled to conduct the defense to the
extent reasonably determined by such counsel to be necessary to protect the
interests of the indemnified party or parties and (ii) in any event, the
indemnified party or parties shall be entitled, at its or their own expense to
have counsel chosen by such indemnified party or parties participate in, but not
conduct, the defense. It is understood that the indemnifying parties shall not,
in respect of the legal defenses of any
30
<PAGE>
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for (a) the fees and expenses of more than one
separate firm (in addition to any local counsel) for all of the Underwriters and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Act, and (b) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Company, its directors, its officers who
sign the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act. If, within a reasonable
time after receipt of the Notice, an indemnifying party gives a Notice of
Defense and the counsel chosen by the indemnifying party or parties is
reasonably satisfactory to the indemnified party or parties, the indemnifying
party or parties will not be liable under Section 9(a), (b) or (c) for any legal
or other expenses subsequently incurred by the indemnified party or parties in
connection with the defense of the action, suit, investigation, inquiry or
proceeding, except that (A) the indemnifying party or parties shall bear the
legal and other expenses incurred in connection with the conduct of the defense
as referred to in clause (i) of the proviso to the preceding sentence and (B)
the indemnifying party or parties shall bear such other expenses as it or they
have authorized to be incurred by the indemnified party or parties. If, within a
reasonable time after receipt of the Notice, no Notice of Defense has been
given, the indemnifying party or parties shall be responsible for any legal or
other expenses incurred by the indemnified party or parties in connection with
the defense of the action, suit, investigation, inquiry or proceeding. The
indemnifying party or parties shall not be liable for any settlement of any
proceeding effected without its or their written consent, provided such consent
has not been unreasonably withheld.
(d) If the indemnification provided for in this Section 9 is
unavailable or insufficient to hold harmless an indemnified party under Section
9(a) or (b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of the losses, claims, damages or liabilities referred to in
Section 9(a) or (b),(i) in such proportion as is appropriate to reflect the
relative benefits received by each indemnifying party from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
each indemnifying party in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, or
31
<PAGE>
actions 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 respective
proportions as the total net proceeds from the offering of the Shares received
by the Company and the total underwriting discount received by the Underwriters,
as set forth in the table on the cover page of the Prospectus, bear to the
aggregate public offering price of the Shares. 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 each indemnifying party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if
contributions pursuant to Section 9(d) were to be 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 into account
the equitable considerations referred to in the first sentence of this Section
9(d). The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities or actions in respect thereof, referred to in the first
sentence of this Section 9(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation, preparation to defend or defense against any action or claim
which is the subject of this Section 9(d). Notwithstanding the provisions of
this Section 9(d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discount applicable to the Shares purchased by such
Underwriter. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this Section 9(d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
Each party entitled to contribution agrees that upon the
service of a summons or other initial legal process upon it in any action
instituted against it in respect of which contribution may be sought, it will
promptly give written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
of any such service shall not relieve the party from whom contribution may be
sought from any obligation it may have hereunder or otherwise (except as
specifically provided in Section 9(c)).
32
<PAGE>
(e) The Company will not, without the prior written consent of
each Underwriter, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be sought hereunder (whether or not such Underwriter
or any person who controls such Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act is a party to such claim, action, suit
or proceeding) unless such settlement, compromise or consent includes an
unconditional release of such Underwriter and each such controlling person from
all liability arising out of such claim, action, suit or proceeding.
(f) The parties to this Agreement hereby acknowledge that they
are sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof, including without limitation the
provisions of this Section 9 and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 9 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act.
10. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of the Company and the several Underwriters and, with
respect to the provisions of Section 9 hereof, the several parties (in addition
to the Company and the several Underwriters) indemnified under the provisions of
said Section 9, and their respective personal representatives, successors and
assigns. Nothing in this Agreement is intended or shall be construed to give to
any other person, firm or corporation any legal or equitable remedy or claim
under or in respect of this Agreement or any provision herein contained. The
term "successors and assigns" as herein used shall not include any purchaser, as
such purchaser, of any of the Shares from any of the several Underwriters.
(a) Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters, shall
be mailed, telegraphed or delivered to Prime Charter Ltd., 499 Park Ave. - 20th
Floor New York, New York, 10022, Attention: Mr. Philip M. Getter; and if to the
Company, shall be mailed, telegraphed or delivered to it at its office, American
Marine Recreation, Inc., 2202 33rd Street, Orlando, Florida 32839, Attention:
Joseph G. Pozo, Jr.
33
<PAGE>
(b) Jurisdiction; Venue; Service of Process. Each of the Representative
and the Company (a) agrees that any legal suit, action or proceeding arising out
of or relating to this letter shall be instituted exclusively in New York State
Supreme Court, County of New York or in the United States District Court for the
Southern District of New York, (b) waives any objection to the venue of any such
suit, action or proceeding, and (c) irrevocably consents to the jurisdiction of
the New York State Supreme Court, County of New York, and the United States
District Court for the Southern District of New York, in any such suit, action
or proceeding. Each of the Representative and the Company further agrees to
accept and acknowledge service of any and all process which may be served in any
such suit, action or proceeding in the New York State Supreme Court, County of
New York, or in the United States District Court for the Southern District of
New York. Each of the Representative and the Company further agrees that service
of process upon it mailed by certified mail to its address shall be deemed in
every respect effective service of process upon it in any such suit, action or
proceeding.
(c) Counterparts. 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.
(d) Miscellaneous. 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
(i) any investigation made by or on behalf of any Underwriter or controlling
person thereof, or by or on behalf of the Company or its respective directors or
officers and (ii) delivery of and payment for the Shares under this Agreement.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO RULES GOVERNING THE
CONFLICT OF LAWS.
34
<PAGE>
Please sign and return to the Company the enclosed duplicate of this
letter, whereupon this letter will become a binding agreement among the Company
and the several Underwriters in accordance with its terms.
Very truly yours,
AMERICAN MARINE RECREATION, INC.
By ______________________________
Joseph G. Pozo, Jr.
Chairman of the Board
The foregoing Agreement
is hereby confirmed and
accepted as of the date
first above written.
PRIME CHARTER LTD.
By ______________________________
Philip M. Getter
Managing Director
Acting on behalf of the several
Underwriters, including themselves,
named on Schedule A hereto.
35
<PAGE>
SCHEDULE A
UNDERWRITERS
Number of
Shares
to be
Underwriters Purchased
- ------------ ---------
1. Prime Charter Ltd...........................................................
Total 1,000,000
=========
<PAGE>
SCHEDULE B
Lock-up Agreements
------------------
Name
----
1.
<PAGE>
APPENDIX A
----------
(i) The Registration Statement has become effective under the
Act and, to such counsel's knowledge after due inquiry, no stop order suspending
the effectiveness of the Registration Statement or suspending or preventing the
use of the Prospectus has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act; any required filing
of the Prospectus and any supplement thereto pursuant to Rule 424(b) of the
Rules and Regulations has been made in the manner and within the time period
required by such Rule 424(b).
(ii) The Registration Statement, all Preliminary Prospectuses,
the Prospectus, and each amendment or supplement thereto (other than the
financial statements, financial data and supporting schedules included therein,
as to which such counsel need express no opinion), comply as to form in all
material respects with the requirements of the Act and the applicable Rules and
Regulations and to such counsel's knowledge after due inquiry, there are no
agreements, contracts, leases or documents of a character required to be
described in, or filed as an exhibit to, the Registration Statement which are
not described or filed as required by the Act and the applicable Rules and
Regulations.
(iii) The Company is duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware.
(iv) The Company and the Subsidiaries have full corporate
power and authority to own, lease and operate their properties and to conduct
its business as described in the Registration Statement.
(v) To such counsel's knowledge after due inquiry, other than
the Subsidiaries the Company does not own or control, directly or indirectly,
any shares of stock or any other equity interest in any firm, partnership, joint
venture, association or other entity.
(vi) The Subsidiaries were duly incorporated and are validly
existing as Corporations in good standing under the laws of the State of
Florida. The Company owns all of the issued and outstanding shares of capital
stock of each of the Subsidiaries, free and clear of any security interests,
liens, encumbrances,
A-1
<PAGE>
claims or charges, and all of such shares have been duly authorized, validly
issued, fully paid and nonassessable.
(vii) The Company has full corporate power and authority to
enter into the Underwriting Agreement and the Representative's Warrant Agreement
and to issue, sell and deliver the Firm Shares and the Over-allotment Shares in
accordance with the terms of the Underwriting Agreement and the Representative's
Warrants in accordance with the terms of the Representative's Warrant Agreement.
(viii) The Underwriting Agreement and the Representative's
Warrant Agreement have been duly authorized by all necessary corporate action on
the part of the Company, have been duly executed and delivered by the Company
and the Representative's Warrant Agreement is a valid and binding agreement of
the Company, enforceable in accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other laws of general applicability relating to or affecting
creditors' rights or by general principles of equity, whether considered at law
or in equity, and except as rights to indemnity and contribution thereunder may
be limited by federal or state securities laws or the public policies underlying
such laws.
(ix) The execution, delivery and performance of the
Underwriting Agreement and the Representative's Warrant Agreement by the Company
and the consummation of the transactions therein contemplated do not and will
not (a) conflict with or result in a violation or breach of any of the terms or
provisions of, or constitute a default under (i) any material indenture,
mortgage, deed of trust, loan agreement, bond, debenture, note agreement or
other evidence of indebtedness, or any lease, contract or other agreement or
instrument known to such counsel after due inquiry to which the Company or any
of the Subsidiaries is a party or by which its respective properties are bound
(including, without limitation, properties to be purchased by the Company
pursuant to the Asset Purchase Agreement and the Marine America Acquisition),
(ii) the Certificate of Incorporation or Bylaws (or other organizational
documents) of the Company, (iii) any statute, rule or regulation applicable to
the Company or (iv) any applicable license, authorization, approval, permit,
judgment, franchise, order, writ, injunction or decree of any court or
governmental agency or body known to such counsel after due inquiry and to which
the Company is subject.
(x) The Company and the Subsidiaries are not required to
obtain or make any consent, approval, authorization, order,
A-2
<PAGE>
designation or declaration of or filing by or with any court or regulatory,
administrative or other governmental agency or body in connection with the
execution and delivery of the Underwriting Agreement or the Representative's
Warrant Agreement by the Company and the consummation of the transactions
therein contemplated except such as have been obtained under the Act and the
Rules and Regulations or such as may be required under state securities laws,
blue sky laws or by the rules and regulations of the AMEX in connection with the
purchase and distribution of the Shares by the Underwriters.
(xi) To such counsel's knowledge after due inquiry, there are
no pending or threatened actions, suits, claims, proceedings or investigations
before any court, regulatory body, administrative agency or any other
governmental agency or body, domestic or foreign against the Company or the
Subsidiaries or any of their respective officers or any of their respective
properties, assets or rights (including, without limitation, the properties or
assets to be purchased by the Company pursuant to the Asset Purchase Agreement
and the Marine America Acquisition) that could reasonably be expected to have a
Material Adverse Effect or would limit, revoke, cancel, suspend, or cause not to
be renewed any existing license, certificate, registration, approval or permit
that is material to the conduct of the business of the Company as presently
conducted, or that is of a character otherwise required to be disclosed in the
Registration Statement or the Prospectus under the Act or the applicable Rules
and Regulations.
(xii) The authorized capital stock of the Company consists of
20,000,000 shares of Common Stock, of which there are outstanding 998,750 shares
and 1,500,000 shares of Preferred Stock. All the issued and outstanding shares
of Common Stock have been duly authorized and validly issued, are fully paid and
non-assessable, have been issued in compliance with the registration
requirements of applicable federal and state securities laws and were not issued
in violation of any preemptive right, resale right, registration right, right of
first refusal or other similar right known to such counsel.
(xiii) The issuance and sale of the Shares and the
Representative's Warrants have been duly authorized by the Company. Upon
issuance and delivery against payment therefor in accordance with the terms of
the Underwriting Agreement, the Shares will be validly issued, fully paid and
non-assessable, and, to such counsel's knowledge after due inquiry, the
stockholders of the Company do not have any preemptive right, resale right,
registration right, right of first refusal or other
A-3
<PAGE>
similar right, in connection with the purchase or sale of any of the Shares.
Shares of Common Stock have been duly and validly authorized and reserved for
issuance upon exercise of the Representative's Warrants and, when issued and
delivered by the Company against payment therefor in the manner set forth in the
Representative's Warrant Agreement, the Warrant Shares will be duly and validly
issued, fully paid, non-assessable and free of preemptive rights. To such
counsel's knowledge after due inquiry, there are no outstanding warrants,
options or other rights granted by the Company to purchase shares of its Common
Stock or other securities, other than as described in the Prospectus.
(xiv) The terms and provisions of the Common Stock conform in
all material respects to the description thereof contained in the Registration
Statement and the Prospectus, and the information in the Prospectus under the
caption "Description of Securities," to the extent that it constitutes matters
of law or legal conclusions, has been reviewed by such counsel and is correct,
and the form of certificate evidencing the Common Stock complies with the
applicable provisions of Delaware law.
(xv) The statements in the Registration Statement and the
Prospectus summarizing statutes, rules and regulations, including the Delaware
General Corporation Law and the description of the Certificate of Incorporation
and Bylaws of the Company are accurate and fairly and correctly present the
information required to be presented by the Act or the Rules and Regulations in
all material respects; and there are no statutes, rules or regulations required
to be described in the Registration Statement or the Prospectus that are not
described or referred to therein as required.
(xvi) The statements under the captions "Risk Factors - Shares
Eligible for Future Sale; Registration Rights," "Shares Eligible for Future
Sale," "Management - Employment and Consulting Agreements," "Management - Stock
Options," and "Certain Transactions" in the Prospectus, insofar as such
statements constitute a summary of documents referred to therein or matters of
law, are accurate summaries and fairly and correctly present, in all material
respects, the information called for with respect to such documents and matters.
(xvii) The information required to be set forth in the
Registration Statement in answer to Item 509 of Regulation S-K insofar as it
relates to such counsel is accurately and adequately set forth therein in all
material respects or no response is required with respect to such Item.
A-4
<PAGE>
(xviii) The Company is not in violation of its Certificate of
Incorporation or Bylaws, and to such counsel's knowledge after due inquiry, the
Company is not in breach of or in default with respect to any provision of any
agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit
or other instrument known to such counsel after due inquiry, by which it or any
of its properties may be bound or affected.
(xix) To such counsel's knowledge after due inquiry, except as
set forth in the Registration Statement and Prospectus, no holders of shares of
Common Stock or other securities of the Company have registration rights with
respect to securities of the Company.
(xx) No transfer taxes are required to be paid in connection
with the sale or delivery to the Underwriters of the Firm Shares or the
Over-allotment Shares.
(xxi) The Company is not and will not, upon consummation of
the transactions contemplated by the Underwriting Agreement, be an "investment
company," or a "promoter" or "principal underwriter" for, a "registered
investment company," as such terms are defined in the Investment Company Act of
1940, as amended.
(xxii) The Shares have been approved for listing on the AMEX,
subject to official notice of issuance.
(xxiii) The Reorganization, the Treasure Coast Acquisition,
the Marine America Acquisition and the capitalization of the Company have been
duly and validly consummated under the terms set forth in the Prospectus. The
Company is not required to obtain or make, as the case may be, any consent,
approval, authorization, order, designation or declaration of or filing by or
with any court or regulatory, administrative or other governmental agency or
body as a requirement for the consummation by the Company of the Reorganization,
the Treasure Coast Acquisition, the Marine America Acquisition and the
capitalization of the Company.
(xxiv) Counsel for the Company have participated in
conferences with officials and other representatives of the Company, the
Representative, counsel for the Representative and the independent public
accountants of the Company, at which conferences the contents of the
Registration Statement and the Prospectus and related matters were discussed,
and although such counsel have not verified the accuracy or completeness of the
statements contained in the Registration Statement or the
A-5
<PAGE>
Prospectus, nothing has come to the attention of such counsel which caused them
to believe that, at the time the Registration Statement became effective the
Registration Statement (except as to financial statements, financial and
statistical data and supporting schedules contained therein, as to which such
counsel need express no opinion) contained any 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, or at the Closing Date
or any later Over-allotment Closing Date, as the case may be, the Registration
Statement or the Prospectus (except as aforesaid) contained any 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, in light of the
circumstances under which they were made, not misleading.
Counsel rendering the foregoing opinion may rely as to questions of
fact upon representations or certificates of officers of the Company and of
governmental officials, as the case may be, in which case its opinion is to
state that it is so doing and that it has no actual knowledge of any material
misstatement or inaccuracy in such opinions, representations or certificates,
and that such counsel believes that it and the Underwriters are justified in
relying on such opinions, representations or certificates. Copies of any
opinion, representation or certificate so relied upon shall be delivered to the
Representative, and to the Representative's counsel.
A-6
FORM OF
WARRANT AGREEMENT
BETWEEN
AMERICAN MARINE RECREATION, INC.
AND
PRIME CHARTER LTD.
DATED AS OF _____________, 1999
<PAGE>
WARRANT AGREEMENT, dated as of _________, 1999 (the "Effective Date"),
between AMERICAN MARINE RECREATION, INC., a Delaware corporation (the
"Company"), and PRIME CHARTER LTD., a Delaware corporation ("Prime Charter").
The Company proposes to sell to Prime Charter and/or its designee(s)
warrants (the "Warrants") to purchase an aggregate of 100,000 shares (the
"Warrant Shares") of the Company's common stock, par value $.01 per share (the
"Common Stock"), in connection with a public offering by the Company of
1,000,000 shares of Common Stock (the "Offering") pursuant to a registration
statement (the "Registration Statement") on Form S-1 (File No. 333-62699) filed
by the Company with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act").
THEREFORE, in consideration of the mutual undertakings contained
herein, the Company and Prime Charter hereby agree as follows:
1. Issuance of Warrants. Concurrently with the initial closing (the
"Closing") under the Underwriting Agreement of even date herewith between the
Company and Prime Charter, as representative of the several underwriters named
therein (the "Underwriting Agreement") related to the Offering, the Company
shall issue, sell and deliver the Warrants to Prime Charter and/or, at Prime
Charter's direction, to one or more underwriters or other members of the
National Association of Securities Dealers, Inc. that participate in the
Offering and/or the bona fide officers or partners of Prime Charter or such
other participants (each a "Permitted Designee") for a purchase price of $.001
per Warrant. Each certificate for Warrants (a "Warrant Certificate") shall be
substantially in the form of Annex A attached hereto.
2. Registration. The Company shall maintain a register for the Warrants
at its principal executive offices for the registration of the issuance and
transfer of Warrants. The Company shall be entitled to treat the registered
holder of any Warrant (the "Holder") as the owner in fact thereof for all
purposes and shall not be bound to recognize any equitable or other claim to or
interest in such Warrant on the part of any other person. The Warrants shall be
registered initially in the name of Prime Charter and/or one or more Permitted
Designees in such denominations as Prime Charter may request not less than two
business days prior to the scheduled date of the Closing as set forth in the
Underwriting Agreement.
3. Transfer and Exchange of Warrants. Any Warrant shall be transferable
only upon surrender thereof at the Company's principal executive offices duly
endorsed by its Holder or by such Holder's duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any registration of transfer, the Company shall
deliver a new Warrant or Warrants to the persons entitled thereto. In addition,
a Warrant Certificate may be exchanged, at the option of the Holder thereof, for
another Warrant Certificate or Warrant Certificates of different denominations,
of like tenor and representing in the aggregate the right to purchase a like
number of Warrant Shares upon surrender at the Company's principal executive
offices. Notwithstanding the foregoing, the Warrants may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of until after the
first anniversary of the Effective Date, except the Warrants may be sold, in
whole or in part, to any successor, officer or partner of Prime Charter or the
other underwriters related to the Offering (or to the successor, officers or
partners of any such successor). Thereafter, the Warrants and any Warrant Shares
shall be freely transferable, subject only to compliance with applicable
securities laws.
<PAGE>
4. Exercise of Warrants.
4.1 Exercise Price and Term. Each Warrant shall entitle the Holder
thereof to purchase from the Company one Warrant Share at a purchase price per
share of $____ (the "Exercise Price"), as such purchase price and number of
Warrant Shares may be adjusted from time to time pursuant to the provisions of
Section 8 hereof, payable in full at the time of exercise of such Warrant. The
Warrants may be exercised, in whole or in part, at any time or from time to time
during the four-year period commencing on the first anniversary of the Effective
Date and ending at 5:00 p.m., New York City time, on the fifth anniversary of
the Effective Date (the "Expiration Date"). After the Expiration Date, any
unexercised Warrants shall be void and all rights of the Holders with respect
thereto shall cease.
4.2 Payment of Exercise Price. At the election of any Holder, the
aggregate Exercise Price for any Warrants being exercised may be paid: (a) in
cash in the amount of the aggregate Exercise Price then in effect for the number
of Warrants being exercised, (b) by surrender to the Company of shares of Common
Stock having an aggregate Fair Market Value (as defined below) on the date of
exercise equal to the aggregate Exercise Price then in effect for the number of
Warrants being exercised, or by reduction in the number of shares covered
thereby, (c) by a surrender of Warrants covering a number of Warrant Shares
having an aggregate Fair Market Value, net of the applicable aggregate Exercise
Price therefor, equal to the aggregate Exercise Price then in effect for the
number of Warrants being exercised, or (d) by a combination of the
aforementioned methods of payment. For purposes of this Agreement, the "Fair
Market Value" per share of Common Stock on a given date shall be: (i) if the
Common Stock is listed on a national securities exchange or included on the
Nasdaq National Market, the closing price per share of Common Stock on such date
(or, if there was no trading on such date, on the next preceding day on which
there was trading); (ii) if the Common Stock is not listed on a national
securities exchange or included on the Nasdaq National Market, the average of
the closing bid and asked quotations per share of Common Stock as reported by
Nasdaq (or the National Quotation Bureau Incorporated or any similar
organization) on such date (or, if there were no quotations for the Common Stock
on such date, on the next preceding day on which there were quotations) as
provided by such organization; and (iii) if the Common Stock is not traded on a
national securities exchange or included on the Nasdaq National Market and bid
and asked quotations are not provided by Nasdaq (or the National Quotation
Bureau Incorporated or any similar organization), as determined by the agreement
of the parties in good faith or, in the absence of such agreement, as determined
pursuant to arbitration under the auspices of the American Arbitration
Association.
4.3 Exercise Procedure. Warrants may be exercised by their surrender at
the Company's principal executive offices, with the Election to Purchase form
attached thereto duly completed and executed, accompanied by payment of the
aggregate Exercise Price for the Warrant Shares to be purchased upon such
exercise. Payment for the Warrant Shares shall be made (a) if payment is to be
made in cash, by a certified or bank cashier's check payable to the order of the
Company or by wire transfer to an account designated by the Company, (b) if
payment is to be made through a surrender of shares of Common Stock, by
surrender of certificates duly endorsed for transfer (with all transfer taxes
paid or provided for), and (c) if payment is to be made by a surrender of
Warrants, by surrender of certificates representing such Warrants. Promptly
after the exercise of any Warrants, upon compliance with Section 5 hereof, the
Company shall issue a certificate or certificates, for the number of full
Warrant Shares to which the Holder thereof is entitled, registered in accordance
with the instructions set forth in the Election to Purchase, together with cash
as provided in Section 10 of this Warrant Agreement payable in respect of
fractional shares and (if applicable) a new Warrant Certificate or Certificates
representing all remaining unexercised Warrants. All Warrant Shares shall be
2
<PAGE>
duly authorized, validly issued, fully paid, non-assessable and free of
preemptive rights, and free from all liens and charges other than those created
by the Holder. Upon compliance with Section 5 hereof, certificates representing
such Warrant Shares and remaining unexercised Warrants shall be issued by the
Company in such names and denominations, and shall be delivered to such persons,
as are specified by written instructions of the Holder.
4.4 Record Holder. Each person in whose name any such certificate for
Warrant Shares is issued shall for all purposes be deemed to have become the
holder of record of the Warrant Shares represented thereby on the date upon
which such Warrants were surrendered for exercise, accompanied by payment of the
aggregate Exercise Price as aforesaid, irrespective of the date of issuance or
delivery of such certificate for Warrant Shares; provided, however, that if, at
the date of the surrender of such Warrants and payment of the aggregate Exercise
Price, the transfer books for the Common Stock or any other class of stock
purchasable upon the exercise of such Warrants shall be closed, the certificates
for the Warrant Shares or for shares of such other class of stock in respect of
which such Warrants are then exercisable shall be issuable as of the date on
which such books shall next be opened (whether before or after the Expiration
Date) and, until such date, the Company shall be under no duty to deliver any
certificate for such Warrant Shares or for shares of such other class of stock;
and, provided, further, that the transfer books of record, unless otherwise
required by law, shall not be closed at any one time for a period longer than 20
days.
5. Payment of Taxes. The Company shall promptly pay all documentary
stamp taxes attributable to the issuance of Warrants or the issuance of Warrant
Shares upon the exercise of any Warrants, except that any transfer taxes payable
in connection with the issuance of Warrants or Warrant Shares in any name other
than that of the Holder of the Warrants surrendered shall be paid by such Holder
and, if any such tax would otherwise be payable by the Company, no such issuance
or delivery shall be made unless and until the person requesting such issuance
has paid to the Company the amount of any such tax or it is established to the
reasonable satisfaction of the Company that any such tax has been paid.
6. Replacement Warrants. In case any Warrant Certificate shall be
mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate or in lieu of and substitution for the lost, stolen or destroyed
Warrant Certificate, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction of such Warrant
Certificate, together with an appropriate agreement regarding indemnification of
the Company relating to the issuance of a replacement Warrant Certificate.
7. Reservation of Warrant Shares. The Company shall at all times
reserve and keep available for issuance the number of its authorized but
unissued shares of Common Stock or other stock sufficient to permit the exercise
in full of the Warrants and any transfer agent for the Common Stock or other
stock issuable upon the exercise of Warrants shall be directed at all times to
reserve such number as shall be sufficient for such purpose. The Company will
keep a copy of this Warrant Agreement on file with each such transfer agent and
will supply such transfer agent with duly executed stock certificates for such
purpose and will provide or otherwise make available any cash that may be
payable as provided in Section 10 hereof. All Warrants surrendered upon the
exercise thereof shall be canceled. After the Expiration Date, no shares shall
be subject to reservation in respect of any unexercised Warrants.
3
<PAGE>
8. Adjustments.
8.1 Adjustment of Exercise Price.
8.1.1 Initial Exercise Price. The Exercise Price, which initially
will be as provided in Section 4.1, shall be adjusted and readjusted from time
to time as provided in this Section 8.1 and, as so adjusted or readjusted, shall
remain in effect until a further adjustment or readjustment thereof is required
by this Section 8.1.
8.1.2 Issuance of Additional Shares of Common Stock. In case the
Company, at any time after the date of the Closing, shall issue additional
shares of Common Stock for no consideration in connection with a dividend, stock
split or other distribution on the Common Stock (including, without limitation,
any distribution of Common Stock by way of spin-off, reclassification or
corporate rearrangement), then, and in each such case, the Exercise Price shall
be reduced concurrently with such issuance to a price (calculated to the nearest
cent) determined by multiplying such Exercise Price by a fraction of which:
(a) the numerator shall be the number of shares of Common Stock
outstanding immediately prior to such issuance, and
(b) the denominator shall be the number of shares of Common Stock
outstanding immediately after such issuance.
8.1.3 Dividends and Distributions. In case the Company, at any time
after the Effective Date, shall pay or make a dividend or other distribution on
the Common Stock (including, without limitation, any distribution of stock
(other than Common Stock) or other securities, including securities that are
convertible into or exchangeable or exercisable for Common Stock, property or
options by way of dividend, spin-off, reclassification or corporate
rearrangement) then, and in each such case, the Exercise Price in effect
immediately prior to the close of business on the record date fixed for the
determination of the holders of the Common Stock entitled to receive such
dividend or other distribution shall be reduced, effective as of the close of
business on such record date, to a price (calculated to the nearest cent)
determined by multiplying such Exercise Price by a fraction of which:
(a) the numerator shall be the Exercise Price in effect immediately
prior to the close of business on such record date minus the value of such
dividend or other distribution (as determined in good faith by the Board of
Directors of the Company) applicable to one share of Common Stock, and
(b) the denominator shall be such Exercise Price in effect
immediately prior to the close of business on such record date;
provided, however, that no such reduction shall be made pursuant to this Section
8.1.3 for a dividend payable in shares of Common Stock (which is subject to
Section 8.1.2) or payable in cash or other property and declared out of the
earned surplus (i.e., retained earnings) of the Company (excluding any portion
thereof resulting from a revaluation of property) or which is declared but is
then not paid or made. For purposes of the foregoing, a dividend or distribution
payable other than in cash shall be considered payable out of earned surplus
4
<PAGE>
only to the extent that such earned surplus is charged an amount equal to the
fair value of such dividend or distribution at the time of payment as determined
in good faith by the Board of Directors of the Company. If a dividend or
distribution covered under this Section 8.1.3 is declared prior to the
Expiration Date but not paid by such date, the Expiration Date shall be extended
until the payment thereof.
8.1.4 Adjustments for Combinations, etc. In case the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Exercise Price in effect immediately prior to such combination or
consolidation shall be proportionately increased concurrently with the
effectiveness of such combination or consolidation.
8.1.5 Minimum Adjustment of Exercise Price. If the amount of
any adjustment of the Exercise Price required pursuant to this Section 8.1 would
be less than $.01, such amount shall be carried forward, and an adjustment with
respect thereto shall be made at the time of and together with any subsequent
adjustment that, together with such amount and any other amount or amounts so
carried forward, shall aggregate at least $.01.
8.1.6 Minimum Exercise Price. Notwithstanding anything to the
contrary set forth herein, no adjustment provided for in this Section 8.1 shall
reduce the Exercise Price below the par or stated value of the Common Stock and
the Company shall have no obligation to change such value to permit a further
reduction of the Exercise Price; provided, however, that, except in the event of
any transactions of the type contemplated under Section 8.1.4 hereof, the
Company agrees not to change the par or stated value of the Common Stock.
8.2 Adjustment of Number of Warrant Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of Section 8.1, the number of Warrant
Shares that the Holder of a Warrant shall be entitled to receive upon exercise
thereof shall be adjusted to equal that number of Warrant Shares determined by
multiplying the number of Warrant Shares issuable upon exercise of such Warrant
immediately prior to such adjustment of the Exercise Price by a fraction of
which:
(a) the numerator shall be the Exercise Price in effect immediately
prior to such adjustment of the Exercise Price, and
(b) the denominator shall be the Exercise Price in effect
immediately following such adjustment of the Exercise Price.
8.3 Notice, Evidence of Adjustments. Whenever the Exercise Price is
adjusted as herein provided, the Company shall promptly cause a notice setting
forth the adjusted Exercise Price and adjusted number of Warrant Shares,
issuable upon exercise of each Warrant to be mailed to the Holders, at their
last addresses appearing in the Warrant register, and shall cause a copy thereof
to be mailed to each transfer agent for the Common Stock. The Company shall
retain a firm of independent public accountants of recognized standing selected
by the Board of Directors (who may be the regular accountants employed by the
Company) to make any computation required by this Section 8, and a certificate
signed by such firm shall accompany said notice and shall be conclusive evidence
of the correctness of such adjustments.
5
<PAGE>
9. Consolidation, Merger, Sale of Assets, Reorganization, etc.
9.1 General Provisions. In case the Company at any time after the
Effective Date (a) shall consolidate with or merge into any other person and not
be the continuing or surviving person of such consolidation or merger, or (b)
shall permit any other person to consolidate with or merge into the Company and
the Company shall be the continuing or surviving person but, in connection with
such consolidation or merger, the Common Stock or other securities then issuable
upon exercise of the Warrants shall be changed into or exchanged for cash, stock
or other securities or property, or (c) shall transfer, directly or indirectly,
all or substantially all its properties and assets to any other person, or (d)
shall effect a capital reorganization or reclassification of the Common Stock or
other securities then issuable upon exercise of the Warrants (other than a
capital reorganization or reclassification resulting in an adjustment of the
Exercise Price as provided in Section 8.1), then, and in the case of each such
transaction, the Company shall make proper provision such that, upon the terms
and in the manner provided in this Warrant Agreement, the Holder of each
Warrant, upon the exercise thereof at any time after the consummation of such
transaction, shall be entitled to receive, at the Exercise Price then in effect,
in lieu of the Common Stock or other securities issuable upon such exercise
immediately prior to such transaction, the amount of cash, stock or other
securities or property to which such Holder would have been entitled if such
Warrant had been exercised in full immediately prior to such transaction,
subject to adjustments subsequent to such transaction as nearly equivalent as
possible to the adjustments provided for in Section 8 and this Section 9.
9.2 Assumption of Obligations. Notwithstanding anything contained in
this Warrant Agreement to the contrary, the Company shall not effect any of the
transactions described in Section 9.1(a), (b), (c) or (d) unless, prior to the
consummation thereof, the person (other than the Company) that may be required
to deliver any cash, stock or other securities or property upon exercise of any
Warrant as provided herein shall assume, by written instrument delivered to the
Holders of the Warrants, (a) the obligations of the Company under this Warrant
Agreement and the Warrants (and if the Company shall survive the consummation of
any such transaction, such assumption shall not release the Company from any
continuing obligations of the Company under this Warrant Agreement and the
Warrants) and (b) the obligation to deliver to such Holder such cash, stock or
other securities or other property as such Holder may be entitled to receive in
accordance with the provisions of this Section 9; provided, however, that this
Section 9.2 shall not be applicable to any transaction described in Section 9.1
if all such cash, stock, property or other consideration receivable upon
consummation of such transaction is delivered to the Company at such time. Such
person shall similarly deliver to the Company an opinion of counsel to the
effect that this Warrant Agreement and the Warrants shall continue in full force
and effect after any such transaction and that the terms hereof (including,
without limitation all of the provisions of Section 8 and this Section 9.2) and
thereof shall be applicable to the cash, stock or other securities or property
that such person may be required to deliver upon any exercise of the Warrants.
9.3 No Dilution or Impairment. The Company shall not, by amendment of
its certificate of incorporation or by-laws or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue, sale, grant or
assumption of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant Agreement or
the Warrants, but will at all times, whether or not requested to do so, in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
Holders against dilution or other impairment. Without limiting the generality of
the foregoing, the Company agrees that it shall take all such reasonable action
6
<PAGE>
as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable shares of stock upon the exercise of
all Warrants from time to time outstanding.
10. Fractional Interests. The Company shall not be required to issue
fractions of shares of Common Stock upon the exercise of any Warrants. If more
than one Warrant shall be presented for exercise at the same time by the same
Holder, the number of Warrant Shares that shall be issuable upon the exercise
thereof shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of the Warrants so presented. If any fraction of a share
of Common Stock would, except for the provisions of this Section 10, be issuable
on the exercise of any Warrant, the Company shall purchase such fraction for an
amount in cash equal to the same fraction of the Fair Market Value of one share
of Common Stock on the date of exercise.
11. Restrictions on Dispositions. The Warrants and the Warrant Shares
have been registered under the Act pursuant to the Registration Statement;
however, Prime Charter acknowledges that the Warrants and the Warrant Shares may
not be transferred, assigned or hypothecated for a period of one year, except
pursuant to (i) a post-effective amendment to the Registration Statement, (ii)
an effective registration statement under the Act or (iii) any available
exemption from registration under the Act permitting such disposition of
securities and upon delivery to the Company of an opinion of counsel, reasonably
satisfactory to counsel for the Company, that such exemption from registration
is available. Prime Charter agrees that the certificates representing the
Warrants and Warrant Shares shall bear an appropriate restrictive legend to such
effect.
12. Registration Rights.
12.1 Demand Registration. Upon written request of the Holder(s) of at
least a majority of the then outstanding Warrants and Warrant Shares made at any
time within the period commencing one year and ending five years after the
Effective Date, the Company shall file at the Company's expense within a
reasonable period of time and, in any event within the time period provided in
Section 12.3(a) after receipt of such written request, on one occasion, a
registration statement (or a post-effective amendment to a registration
statement) under the Act registering the Warrant Shares. Within 15 days after
receiving any such notice, the Company shall give notice to the other Holders of
the Warrants and the Warrant Shares advising that the Company is proceeding with
such registration statement or post-effective amendment (the"Demand Registration
Statement"), and offering to include therein the Warrant Shares of such other
Holders. The Company shall not be obligated to include the Warrant Shares of any
such other Holder in such registration unless such other Holder shall accept
such offer by notice in writing to the Company within 15 days after receipt of
such notice from the Company. The Company shall use its reasonable best efforts
to file and cause the Demand Registration Statement to become effective as
promptly as practicable and to remain effective for the period of time provided
in Section 12.3, to reflect in the Demand Registration Statement financial
statements that are prepared in accordance with Section 10(a)(3) of the Act, and
to amend or supplement the Demand Registration Statement to reflect any facts or
events arising that, individually or in the aggregate, represent a material
change in the information set forth in the Demand Registration Statement to
enable any Holders of Warrants to exercise warrants and/or sell the underlying
Warrant Shares during such time period provided in Section 12.3. If any
registration pursuant to this Section 12.1 is an underwritten offering, the
Holders of a majority of the Warrant Shares to be included in such registration
will select an underwriter (or managing underwriter if such offering should be
syndicated) approved by the Company, such approval not to be unreasonably
withheld. Notwithstanding anything in this Warrant Agreement to the contrary,
the Company shall be entitled to postpone for a reasonable period of time
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<PAGE>
(not exceeding 60 days in any 12-month period) the filing or effectiveness of
the Demand Registration Statement otherwise required to be prepared and filed by
it pursuant to this Section 12.1 if the Company's Board of Directors determines,
in its reasonable discretion, that such registration and offering would
adversely affect any financing, acquisition, corporate reorganization or other
material transaction involving the Company and the Company promptly gives the
Holders written notice of such determination specifying the grounds therefor and
an estimate of the anticipated delay. If the Company shall so postpone the
filing of the Demand Registration Statement, a majority-in-interest of the
requesting Holders shall have the right to withdraw the request for demand
registration by giving written notice to the Company within 30 days after
receipt of the notice of postponement.
12.2 Piggyback Registration. If, at any time within the period
commencing one year and ending seven years after the Effective Date, the Company
proposes to register any voting equity securities under the Act in a primary
registration on behalf of the Company and/or in a secondary registration on
behalf of holders of such securities, and the registration form to be used may
be used for registration of the Warrant Shares, the Company shall give prompt
written notice (which, in the case of a registration pursuant to the exercise of
demand registration rights other than those provided in Section 12.1, shall be
within 10 business days after the Company's receipt of notice of such exercise
and, in any event, shall be at least 30 days prior to the date of such filing)
to the Holders of Warrants and/or Warrant Shares (regardless of whether some of
the Holders shall have theretofore availed themselves of the demand rights
provided in Section 12.1) of its intention to effect registration and shall
offer to include in such registration such number of Warrant Shares with respect
to which the Company has received written requests for inclusion therein within
10 business days after receipt of such notice from, the Company upon generally
the same terms and conditions as the person or persons for whom such
registration is being effected has agreed to. This Section 12.2 is not
applicable to any registration statement to be filed by the Company on Forms S-4
or S-8 or any successor forms. The Company shall not be obligated to cause to be
effective any registration statement as to which it has given notice to the
Holders of Warrants and/or Warrant Shares and shall have discretion to withdraw
any such registration without liability to Holders of Warrants and/or Warrant
Shares.
Notwithstanding the foregoing, if the managing underwriter of the
offering shall determine in good faith and advise the Company in writing that
the inclusion of the Warrant Shares and other securities being offered in such
registration would materially and adversely affect the marketability of the
offering, then the Company and the managing underwriter may reduce the number of
Warrant Shares to be registered on a pro rata basis proportionate to the
reduction of all other holders of securities participating in such registration
pursuant to the exercise of piggyback registration rights. In such event, the
Company may reduce the number of Warrant Shares to be registered to zero as long
as no other securities are registered in such registration statement pursuant to
an exercise of piggyback registration rights.
12.3 Registration Procedures. If and whenever the Company is required
by the provisions of this Section 12 to use its reasonable best efforts to
effect the registration of any Warrant Shares under the Act, the Company will,
as expeditiously as possible:
(a) in connection with any registration pursuant to Section 12.1,
prepare and file with the Commission a registration statement (which shall be
filed as soon as practical after receipt of requisite requests from Holders of
Warrant Shares for registration, but not more than 90 days in the case of a
registration statement on Form S-1 or SB-2, or 45 days in the case of any other
form) with respect to the Warrant Shares and use its reasonable best efforts to
8
<PAGE>
cause such registration statement to become and remain effective for the period
of the distribution contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in Section 12.3(a) and comply with the provisions of the
Act with respect to the disposition of all Warrant Shares covered by such
registration statement in accordance with the Holders' intended method of
disposition set forth in such registration statement for such period (so long as
such registration statement was filed pursuant to Section 12.1);
(c) furnish to each seller of Warrant Shares and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Warrant Shares covered by such registration statement;
(d) use its reasonable best efforts to register or qualify the
Warrant Shares covered by such registration statement under such securities or
blue sky laws of such jurisdictions as each seller shall request, and do any and
all other acts and things which may be necessary under such securities or blue
sky laws to enable such seller to consummate the public sale or other
disposition in such jurisdictions of the securities to be sold by such seller,
except that the Company shall not for any such purpose be required to qualify to
do business as a foreign corporation in any jurisdiction wherein it is not
qualified or to file any general consent to service of process;
(e) use its reasonable best efforts to list the Warrant Shares
covered by such registration statement with any securities exchange or automated
quotation system on which the Common Stock of the Company is then listed;
(f) immediately notify each seller of Warrant Shares and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Act, of the happening of
any event of which the Company has knowledge as result of which the prospectus
contained in such registration statement, as then in effect, included an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;
(g) enter into such agreements (including an underwriting
agreement, if applicable) and take all such other actions reasonably necessary
in connection therewith in order to expedite and facilitate the disposition of
the Warrant Shares to be registered;
(h) whether or not the offering is underwritten and at the request
of any seller of Warrant Shares, furnish: (i) such representations and
warranties to such seller and the underwriters, if any, as are customary in
primary underwritten offerings, (ii) an opinion of counsel representing the
Company for the purposes of such registration, addressed to the underwriters, if
any, and to such seller of Warrant Shares, dated the effective date of such
registration statement and in form and substance as is customarily given to
underwriters in an underwritten public offering and to such other effect as
reasonably may be requested by counsel for the underwriters or by such seller of
Warrant Shares or its counsel and (iii) a letter dated such effective date from
the independent public accountants retained by the Company, addressed to the
9
<PAGE>
underwriters, if any, and to such seller of Warrant Shares, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five business days prior to the date of such letter)
with respect to such registration as such underwriters reasonably may request;
(i) make available upon reasonable notice for inspection by each
seller of Warrant Shares, any underwriter participating in any distribution
pursuant to such registration statement, and any attorney, accountant or other
agent retained by such seller of Warrant Shares or underwriter, all financial
and other records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement; and
(j) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
securityholders, as soon as reasonably practicable, but not later than 18 months
after the effective date of the registration statement, an earnings statement
covering the period of at least 12 months beginning with the first full month
after the effective date of such registration statement, which earnings
statements shall satisfy the provisions of Section 11(a) of the Act.
For purposes of Section 12.3(a) and (b), the period of
distribution of Warrant Shares in a firm commitment underwritten public offering
shall be deemed to extend until each underwriter has completed the distribution
of all securities purchased by it, and the period of distribution of Warrant
Shares in any other registration shall be deemed to extend until the earlier of
the sale of all Warrant Shares covered thereby and 120 days after the effective
date thereof.
In connection with each registration hereunder the sellers of
Warrant Shares will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as reasonably shall
be necessary and shall be requested by the Company in order to comply with
federal and applicable state securities laws.
In connection with each registration pursuant to this Section 12
covering an underwritten public offering, the Company and each seller of Warrant
Shares agree to enter into a written agreement with the managing underwriter
(unless the Holder is the managing underwriter) in such form and containing such
provisions as are customary in the securities business for such an arrangement
between such underwriter and companies of the Company's size and investment
stature.
12.4 Expenses. All expenses incurred by the Company in complying with
Sections 12.1, 12.2 and 12.3, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, costs of insurance and
reasonable fees and disbursements of counsel for the sellers of Warrant Shares,
but excluding any Selling Expenses, are herein referred to as "Registration
Expenses." "Selling Expenses," as used herein, mean all underwriting discounts
and selling commissions applicable to the sale of Warrant Shares.
10
<PAGE>
The Company will pay or cause to be paid all Registration Expenses
of the participating sellers of Warrant Shares in connection with each
registration statement under Sections 12.1 and 12.2. All Selling Expenses in
connection with each registration statement under Sections 12.1 and 12.2 shall
be borne by the participating sellers of Warrant Shares in proportion to the
number of Warrant Shares sold by each, or by such participating sellers of
Warrant Shares other than the Company (except to the extent the Company shall be
a seller of Common Stock) as they may agree.
12.5 No Conflicts. The Company will not enter into any agreement
granting registration rights to any person or entity on terms which conflict
with the provisions of this Section 12.
12.6 Indemnification and Contribution. (a) In the event of a
registration of any Warrant Shares under the Act pursuant to this Section 12,
the Company will indemnify and hold harmless, to the fullest extent permitted by
law, each Holder selling Warrant Shares thereunder, each underwriter thereunder,
and each other person, if any, who controls such selling Holder of Warrant
Shares or underwriter within the meaning of the Act or the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), against any losses, claims,
damages, liabilities and expenses, joint or several, to which such selling
Holder, underwriter or controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration statement
under which such Warrant Shares were registered under the Act pursuant to
Section 12, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon 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 pay or reimburse each such selling Holder, each such underwriter and each
such controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company (i) will not be liable
in any such case if and to the extent that (A) 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 so made in conformity with information
furnished by any such selling Holder, any such underwriter or any such
controlling person, as the case may be, in writing specifically for use in such
registration statement, prospectus, amendment or supplement or (B) in respect to
such statement, alleged statement, omission or alleged omission with respect to
which such loss, claim, damage or liability directly relates, the final
prospectus for such registration statement corrected in all material respects
such statement, alleged statement, omission or alleged omission and a copy of
such final prospectus was not sent or given by or on behalf of such Holder (or
otherwise delivered in accordance with applicable law or regulation) at or prior
to the confirmation of the sale of Warrant Shares of such Holder and (ii) will
not be liable for amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, such consent not to be unreasonably withheld or delayed.
(b) In the event of a registration of any Warrant Shares under the
Act pursuant to this Section 12, each Holder selling Warrant Shares thereunder,
severally and not jointly, will indemnify and hold harmless the Company, each
person, if any, who controls the Company within the meaning of the Act, each
officer of the Company who signs the registration statement, each director of
the Company, each underwriter and each person who controls any underwriter
within the meaning of the Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer, director,
underwriter or controlling person may become subject under the Act or otherwise,
but only to the extent that such losses, claims, damages or liabilities (or
actions in respect
11
<PAGE>
thereof) arise out of or are based upon (i) an untrue statement or alleged
untrue statement or omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, made in reliance upon and in conformity with information
pertaining to such selling Holder, as such, furnished in writing to the Company
by such selling Holder specifically for use in such registration statement under
which such Warrant Shares were registered under the Act pursuant to this Section
12, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, and will pay or reimburse the Company and each
such officer, director, underwriter and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage liability or action or (ii) any
statement, alleged statement, omission or alleged omission made by the Company
with respect to which such loss, claim, damage or liability directly relates, if
the final prospectus for such registration statement corrected in all material
respects such statement, alleged statement, omission or alleged omission and a
copy of such final prospectus was not sent or given by or on behalf of such
Holder (or otherwise delivered in accordance with applicable law or regulation)
at or prior to the confirmation of the sale of Warrant Shares of such Holder,
provided, however, that (A) the liability of each selling Holder hereunder shall
be limited to the proportion of any such loss, claim, damage, liability or
expense which is equal to the proportion that the public offering price of the
Warrant Shares sold by such selling Holder under such registration statement
bears to the total public offering price of all securities sold thereunder, but
not in any event to exceed the net proceeds received by such selling Holder from
the sale of Warrant Shares covered by such registration statement and (B) no
selling Holder shall be liable for amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of such selling Holder, such consent not to be unreasonably withheld or
delayed.
(c) Promptly after receipt by an indemnified party hereunder of
written notice of any claim or the commencement of any action or proceeding,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party hereunder, notify the indemnifying party in
writing thereof, but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to such indemnified party,
except to the extent the indemnifying party is materially prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and the indemnified party shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel reasonably satisfactory to such indemnified party and, after notice
from the indemnifying party to such indemnified party of its election so to
assume and undertake the defense thereof, the indemnifying party shall not be
liable to such indemnified party under this Section 12.6(c) for any legal or
other professional expenses subsequently incurred by such indemnified party in
connection with the defense thereof. No indemnifying party, in the defense of
any such claim or litigation against an indemnified party, shall consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation, unless such indemnified party shall otherwise consent in writing. An
indemnifying party who elects to assume the defense of a claim shall not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim (in addition
to any local counsel), unless any indemnified party reasonably concludes that
there may be legal defenses available to such indemnified party with respect to
such claim which are different from or additional to those available to any
other of such indemnified parties or that a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the reasonable fees and expenses of such additional counsel or counsels.
12
<PAGE>
(d) In order to provide for just and equitable contribution in any
case in which either (i) any Holder exercising registration rights under this
Section 12, or any controlling person of any such Holder, makes a claim for
indemnification pursuant to this Section 12.6, but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and following the expiration of time to appeal or the denial of the last right
of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 12.6 provides for indemnification in
such case or (ii) contribution under the Act may be required on the part of any
such Holder or any such controlling person in circumstances for which
indemnification is provided under this Section 12.6, then, and in each such
case, the Company and such Holder shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect both the relative
benefit received by such Holder and the relative fault of the Company and such
Holder; provided, however, that, in any such case, (A) no Holder will be
required to contribute any amount in excess of the public offering price of all
such Warrant Shares offered by it pursuant to such registration statement and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent misrepresentation. For
purposes of the preceding sentence, the relative benefit received by the Holder
of Warrant Shares shall be deemed to be in the same proportion as the public
offering price of its Warrant Shares offered by the registration statement bears
to the public offering price of all securities offered by such registration
statement; and the relative fault of the Company and such Holder shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission of a material fact relates to
information supplied by the Company or by the Holder and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
12.7 Securities Law Compliance. The Company covenants that it will
timely file all reports required to be filed by it under the Act and the
Exchange Act. So long as the Company is subject to the periodic reporting
requirements of the Exchange Act, the Company covenants to make publicly
available such information as may be necessary to permit the sale of Warrant
Shares without registration under the Act pursuant to the exemption provided by
Rule 144 under the Act, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any Holder of Warrants or Warrant Shares at any time, if applicable the
Company will deliver to such Holder or such Holder's prospective transferee such
information as may be necessary to permit the sale of Warrants or Warrant Shares
pursuant to Rule 144A under the Act, as such rule may be amended from time to
time. Upon request of any Holder of Warrants or Warrant Shares, the Company will
deliver to such Holder a written statement as to whether it has complied with
such information requirements.
13. Notices to Holders.
13.1 Nothing contained in this Warrant Agreement or in any of the
Warrants shall be construed as conferring upon the Holders thereof as such the
right to vote or to receive dividends or to consent or to receive notice as
stockholders in respect of the meetings of stockholders or the election of
directors of the Company or any other matter or any other rights whatsoever as
stockholders of the Company.
13
<PAGE>
13.2 In the event the Company intends to:
(a) make any distribution on or with respect to its Common Stock
(or other securities that may then be issuable in lieu thereof upon the exercise
of Warrants), including without limitation any dividend or distribution from
earned surplus, any dividend or distribution of stock, assets or evidences of
indebtedness, or any similar distribution,
(b) issue subscription rights or warrants to holders of its Common
Stock,
(c) consolidate or merge with or into another entity,
(d) liquidate, dissolve or sell or otherwise dispose of
substantially all its assets, or
(e) take any other action that would result in an adjustment to
the Exercise Price or an adjustment to the number of Warrant Shares that the
Holder of a Warrant shall be entitled to receive upon exercise thereof, then the
Company shall cause a notice of its intention to take such action to be sent by
first-class mail, postage prepaid, at least 20 days prior to the date fixed as a
record date or the date of closing the transfer books for the determination of
the stockholders entitled to such distribution or issuance or to vote upon such
proposed consolidation, merger, liquidation, sale or conveyance to each Holder
at its address appearing on the Warrant register, but failure to mail or to
receive such notice or any defect therein or in the mailing thereof shall not
affect the validity of any action taken in connection with such distribution,
issuance, consolidation, merger, liquidation, sale or conveyance.
14. Notices. Any notice or demand required by this Warrant Agreement to
be given or made by any Holder to or on the Company shall be sufficiently given
or made if sent by registered or certified mail, postage prepaid, or by
facsimile transmission addressed as follows:
AMERICAN MARINE RECREATION, INC.
2202 33rd Street
Orlando, Florida 32839
Telephone: (407) 422-8141
Facsimile: (407) 316-0396
Attention: Joseph G. Pozo, Jr.
Any notice or demand required by this Warrant Agreement to be given
or made by the Company to or on the Holder of any Warrant shall be sufficiently
given or made, whether or not such Holder receives the notice, if sent by
first-class mail, postage prepaid, addressed to such Holder at his last address
as shown on the books of the Company.
15. Governing Law. The validity, interpretation and performance of this
Warrant Agreement, of each Warrant issued hereunder and of the respective terms
and provisions thereof shall be governed by the laws of the State of New York
without giving effect to principles of conflicts of law.
16. Counterparts. This Warrant Agreement may be executed in two
counterparts, each of which when so executed shall be deemed to be an original;
but such counterparts shall together constitute but one and the same instrument.
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Warrant
Agreement as of the date first set forth above.
AMERICAN MARINE RECREATION, INC.
By___________________________________________
Name: Joseph G. Pozo, Jr.
Title: Chairman of the Board and President
PRIME CHARTER LTD.
By___________________________________________
Name: Philip M. Getter
Title: Managing Director
15
<PAGE>
ANNEX A
THE WARRANTS REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE
THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"); HOWEVER, NONE OF SUCH SECURITIES MAY BE OFFERED, OR SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO THE
REGISTRATION STATEMENT UNDER WHICH SUCH SECURITIES WERE REGISTERED UNDER THE
ACT; (ii) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR (iii) AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION
OF SECURITIES AND UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT SUCH EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE. IN ADDITION, THE WARRANTS REPRESENTED
HEREBY MAY NOT BE TRANSFERRED OR EXERCISED EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF THE WARRANT AGREEMENT DATED AS OF APRIL ____, 1999 BETWEEN
AMERICAN MARINE RECREATION, INC. AND PRIME CHARTER LTD.
No. 1 100,000 Warrants
Void After 5:00 p.m. New York City Time
On __________, 2004
AMERICAN MARINE RECREATION, INC.
Warrant Certificate
THIS CERTIFIES THAT, for value received, Prime Charter Ltd., or
registered assigns, is the Holder of the number of Warrants set forth above,
each Warrant entitling the owner thereof to purchase at any time after ________
____, 2000 and prior to 5:00 p.m., New York City time, on ___________, 2004 (the
"Expiration Date"), one fully paid and non-assessable share of common stock, par
value $.01 per share ("Common Stock"), of American Marine Recreation, Inc., a
Delaware corporation (the "Company"), at a purchase price per share (the
"Exercise Price") initially equal to $ ____, upon presentation and surrender of
this Warrant Certificate with the Form of Election to Purchase (attached hereto)
duly executed. The number of Warrants evidenced by this Warrant Certificate (and
the number of shares that may be purchased upon exercise hereof (the "Warrant
Shares") set forth above and the Exercise Price set forth above are the number
and Exercise Price as of the date of original issuance of this Warrant
Certificate, based on the Common Stock as constituted at such date. As provided
in the Warrant Agreement referred to below, the Exercise Price and the number or
kind of shares that may be purchased upon the exercise of the Warrants evidenced
by this Warrant Certificate are subject to modification and adjustment upon the
happening of certain events.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of the Warrant Agreement dated
as of __________, 1999 between the Company and Prime Charter Ltd., which Warrant
Agreement is hereby incorporated herein reference and made a part hereof and to
which reference is hereby made for a full description of the rights, limitations
of rights, duties and immunities hereunder of the Company and the Holders of the
Warrant Certificates. A copy of the Warrant Agreement is on file at the
principal office of the Company.
<PAGE>
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of the Company, may be exchanged for
another Warrant Certificate or Warrant Certificates of like tenor, evidencing
Warrants entitling the Holder to purchase a like aggregate number of shares of
Common Stock as the Warrants evidenced by the Warrant Certificate or Warrant
Certificates surrendered entitled such Holder to purchase. If this Warrant
Certificate shall be exercised in part, the Holder hereof shall be entitled to
receive upon surrender hereof another Warrant Certificate or Warrant
Certificates for the number of whole Warrants not exercised.
The Exercise Price may be paid in cash or by surrender of the
appropriate number of Warrants or shares of Common Stock in a cashless exercise
or in a combination thereof as provided in Section 4.2 of the Warrant Agreement.
No fractional shares of Common Stock will be issued upon the exercise
of any Warrant or Warrants evidenced hereby, but in lieu thereof a cash payment
will be made as provided in the Warrant Agreement.
No Holder of this Warrant Certificate, as such, shall be entitled to
vote or to receive dividends or to consent or to receive notice as a stockholder
of the meetings of stockholders for the election of directors of the Company or
any other matter or to any rights whatsoever as stockholder of the Company,
until the Warrant or Warrant evidenced by this Warrant Certificate shall have
been exercised and the Warrant Shares shall have been delivered as provided in
the Warrant Agreement.
If this Warrant Certificate shall be surrendered for exercise within
any period during which the transfer books for the Common Stock or other class
of stock issuable upon exercise of this Warrant Certificate are closed for any
purpose, the Company shall not be required to make delivery of certificates for
shares issuable upon such exercise until the date of the reopening of said
transfer books as provided in the Warrant Agreement.
IN WITNESS WHEREOF, American Marine Recreation, Inc. has caused the
signature (or facsimile signature) of its Chairman and Secretary to be printed
hereon.
AMERICAN MARINE RECREATION, INC.
By________________________________
Name: Joseph G. Pozo, Jr.
Title: Chairman of the Board
Attest:
__________________________________
Name: Melven R. Nehleber
Title: Secretary
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the Holder if such Holder desires to transfer this Warrant
Certificate).
TO AMERICAN MARINE RECREATION, INC.
FOR VALUE RECEIVED, __________________________________________ hereby
sells, assigns and transfers unto ________________________ this Warrant
Certificate, together with all rights, title and interest therein, and does
hereby irrevocably constitute and appoint ______________________, to transfer
the within Warrant Certificate on the books of the within-named Company, with
full power of substitution.
DATED:____________________
Signature______________________________
Signature Guaranteed:
NOTICE:
The signature on the foregoing assignment must correspond to the name
as written upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if Holder desires to exercise the Warrants evidenced by this
Warrant Certificate).
TO AMERICAN MARINE RECREATION, INC.
The undersigned hereby (1) irrevocably elects to exercise
___________________________________ Warrants represented by this Warrant
Certificate to purchase __________ shares of Common Stock issuable upon the
exercise of such Warrants, (2) makes payment in full of the aggregate Exercise
Price for such Warrants by enclosure of a bank cashier's check or money order
therefor or by surrendering Warrants or shares of Common Stock for application
to the aggregate Exercise Price, upon condition that new Warrants be issued for
the balance of the Warrants remaining, and (3) requests that certificates for
shares and Warrants be issued in the name of:
(Please insert social security or other
identifying number)_______________________
___________________________________________________
(Please print name and address)
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
(Please insert social security or other
identifying number)_______________________
___________________________________________________
(Please print name and address)
DATED:_________________________, 19/20___
Signature______________________________
Signature Guaranteed:
NOTICE:
The signature on the foregoing election to purchase must correspond to the name
as written upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE>
THE CREDIT ACCOMMODATION MADE PURSUANT TO THIS NOTE
REPRESENTS A LINE OF CREDIT
------------------
AMENDED AND RESTATED PROMISSORY NOTE
("Note")
$400,000.00 Orange County, Florida
April 13, 1999
THE UNDERSIGNED, Boat Tree, Inc., a Florida corporation ("Maker"),
promises to pay to the order of JCJ Family Partnership, Ltd., a Florida limited
partnership ("Payee"), whose mailing address is 1924 33rd Street, Orlando, FL
32839, the principal sum of FOUR HUNDRED THOUSAND DOLLARS ($400,000.00), or so
much thereof as may be advanced and outstanding from time to time.
This Note supersedes the note dated January 4, 1999 which is hereby
null and void.
Advances hereunder may be made upon the oral, telephonic, or written
request of any person authorized to borrow or any person Payee reasonably
believes is authorized to borrow. Any advance hereunder shall be conclusively
presumed to have been made to and at the request and for the benefit of the
Maker when the proceeds of such advance are deposited to the credit of the Maker
in any account of Maker with Payee regardless of the fact that persons other
than those authorized to borrow may have authority to draw against such
accounts.
Interest on the outstanding principal balance of this Note, shall
accrue at a rate of twelve percent (12%) per annum and shall be payable monthly.
The principal amount of this Note, or so much thereof as has been
advanced and is outstanding, together with all interest accrued thereon, shall
be due and payable on demand within ten (10) days of written notice after June
30, 2000.
This Note may be paid in advance, in whole or in part, without premium
or penalty. Advance payment shall be applied first to payment of accrued
interest and then to payment of the principal.
This Note is payable at the address of the Payee as stated herein, or
at such other place as the holder hereof may from time to time designate in
writing to the Maker.
The Maker promises to pay all costs of collection reasonably incurred
by the holder hereof because of the failure of the Maker to comply with the
agreements in this Note. Presentment, protest, notice of dishonor, and notice of
protest are hereby waived.
Dated this 13th day of April, 1999.
BOAT TREE, INC., a Florida corporation
By: /s/ Joseph G. Pozo, Jr.
------------------------------------------
Joseph G. Pozo, Jr., President
JCJ FAMILY PARTNERSHIP, LTD.,
a Florida limited partnership
By: /s/ Joseph G. Pozo, Jr.
------------------------------------------
Joseph G. Pozo, Jr.
<PAGE>
THE CREDIT ACCOMMODATION MADE PURSUANT TO THIS NOTE
REPRESENTS A LINE OF CREDIT
-----------------------
PROMISSORY NOTE
("Note")
$300,000.00 Orange County, Florida
May 7, 1998
THE UNDERSIGNED, Boat Tree, Inc., a Florida corporation ("Maker"),
promises to pay to the order of Regal Marine Industries ("Payee"), whose mailing
address is 2300 Jet Port Drive, Orlando, FL 32809, the principal sum of THREE
HUNDRED THOUSAND DOLLARS ($300,000.00), or so much thereof as may be advanced
and outstanding one (1) year from the date of the last advance made under this
Note, but in no event later than August 31, 1999.
Advances hereunder may be made upon the oral, telephonic, or written
request of any person authorized to borrow or any person Payee reasonably
believes is authorized to borrow. Any advance hereunder shall be conclusively
presumed to have been made to and at the request and for the benefit of the
Maker when the proceeds of such advance are deposited to the credit of the Maker
in any account of Maker with Payee regardless of the fact that persons other
than those authorized to borrow may have authority to draw against such
accounts.
Interest on the outstanding principal balance of this Note, shall
accrue at a rate of ten percent (10%) per annum.
The principal amount of this Note, together with all interest accrued
thereon, is due and payable upon the earlier to occur of (i) one (1) year from
the date the total advances of principal made under this Note aggregate
$300,00.00, or (ii) August 31, 1999.
This Note may be paid in advance, in whole or in part, without premium
or penalty. Advance payment shall be applied first to payment of accrued
interest and then to payment of the principal.
This Note is payable at the address of the Payee as stated herein, or
at such other place as the holder hereof may from time to time designate in
writing to the Maker.
The Maker promises to pay all costs of collection reasonably incurred
by the holder hereof because of the failure of the Maker to comply with the
agreements in this Note. Presentment, protest, notice of dishonor, and notice of
protest are hereby waived.
<PAGE>
Dated this 7th day of May, 1998.
MAKER:
BOAT TREE, INC., a Florida corporation
By: /s/ Joe G. Pozo, Jr.
------------------------------------
Joe G. Pozo, Jr., President
Regal Marine will advance funds within three (3) days from telephone
notification.
REGAL MARINE INDUSTRIES
By: /s/ David Furlow
------------------------------------
David Furlow, Vice President
GUARANTY
In order to induce Regal Marine to extend credit pursuant to the
foregoing Note/Line of Credit, and for other consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned does hereby
absolutely and unconditionally guarantee to Regal Marine, its successors and
assigns, the full and prompt payment of the indebtedness and all other amounts
provided in said Note to be paid by Boat Tree, Inc., including attorneys' fees
if collection is required. This Guaranty includes all amounts Boat Tree, Inc.
may owe in the future pursuant to said Note, regardless of why the funds are
borrowed. Regal Marine may collect the debt from me without first trying to
collect the debt from Boat Tree, Inc.
/s/ Joe G. Pozo, Jr.
------------------------------------
Joe G. Pozo, Jr., Individually
<PAGE>
AMENDMENT NO. 1 TO PROMISSORY NOTE
Amendment No. 1 dated April , 1999 to the Promissory Note
(the "Note") dated as of the 7th day of May, 1998 by Boat Tree, Inc. (the
"Maker") and Regal Marine Industries (the "Payee").
W I T N E S S E T H
WHEREAS, the parties hereto hereby agree that it would be in
their mutual best interest to amend the Note in the manner set forth herein;
NOW, THEREFORE, in consideration of the above premises and the
mutual promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree that the Note is amended as follows:
I. Modifications.
A. The following language in the first paragraph of the Note shall
be deleted.
"one (1) year from the date of the last advance made under this
Note, but in no event later than August 31, 1999."
and amended to read as follows:
"on July 31, 2000 together with any accrued and unpaid
interest. Any business development rebates due to the Maker
from the Payee shall be applied to the principal sum due
hereunder."
B. The following shall be added to the third paragraph:
"All accrued interest from the date of the Note until August
31, 1999 shall be due and payable on August 31, 1999."
C. The fourth paragraph of the Note is hereby deleted in its
entirety.
II. Confirmation. Except as expressly specified herein, all other
terms, conditions and provisions of the Note are hereby confirmed and shall
remain in full force and effect without modification.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
BOAT TREE, INC.
By: /s/ Joseph G. Pozo, Jr.
------------------------------------
Name: Joseph G. Pozo, Jr.
Title: President
REGAL MARINE INDUSTRIES
By: /s/ David Furlow April 11, 1999
------------------------------------
Name: David Furlow
Title: V.P.
<PAGE>
MORTGAGE NOTE
$400,000.00 Orlando, Florida
March 1, 1999
BEING INDEBTED FOR VALUE RECEIVED, the undersigned, BOAT TREE, INC., a
Florida corporation (the "Maker"), promises to pay to JCJ FAMILY LIMITED
PARTNERSHIP, a Florida limited partnership (the "Payee"), or order, in the
manner hereinafter specified, the principal sum of Four Hundred Thousand and
No/100ths Dollars ($400,000.00) with interest from date at the Note Rate as
hereafter defined on the balance from time to time remaining unpaid. The said
interest shall be payable in lawful money of the United States of America at
1924-33rd Street, Orlando, FL 32839, or at such other place as may hereafter be
designated by written notice from the holder ("Holder") of this instrument to
the Maker, on the dates and in the manner following:
A. Interest Rate. Interest shall accrue at the variable rate
equal to the "SouthTrust Bank Prime Rate" (as hereinafter
defined). The term "SouthTrust Bank Prime Rate" shall mean the
annual rate of interest announced from time to time by
SouthTrust, as its "Prime Rate." SouthTrust Bank Prime Rate is
a reference rate for the information and use of SouthTrust
Bank in establishing the actual rates to be charged its
borrowers and, as such, is purely discretionary and is not
necessarily the best or lowest rate charged borrowing
customers of SouthTrust. If, at any time, or from time to
time, the SouthTrust Bank Prime Rate increases or decreases,
then the rate of interest applicable hereunder (the "Note
Rate") shall be correspondingly increased or decreased as of
the date (a "Change Date") on which such change occurs.
Interest shall be computed on the principal balance from time
to time outstanding.
B. Payments. Maker shall pay to Holder monthly payments of
interest only. The first payment shall commence on April 1,
1999 and a payment shall be made on the 1st of each
consecutive month thereafter through and including July 1,
2000. The entire principal balance plus any accrued interest
will be due and payable on August 31, 2000.
This note with interest is secured by a mortgage on real estate, of
even date herewith, made by the maker hereof in favor of the said payee, and
shall be construed and enforced according to the laws of the State of Florida.
If default be made in the payment of any of the sums or interest
mentioned herein or in said mortgage, or in the performance of any of the
agreements contained herein, or in said mortgage, then the entire principal sum
and accrued interest shall at the option of the holder hereof become at once due
and collectible without notice, time being of the essence; and said principal
sum and accrued interest shall both bear interest from such time until paid at
the highest rate allowable under the laws of the State of Florida. Failure to
exercise this option shall not constitute a waiver of the right to exercise the
same in the event of any subsequent default.
<PAGE>
Each person liable hereon, whether maker or endorser, hereby waives
presentment, protest, notice, notice of protest and notice of dishonor and
agrees to pay all costs, including a reasonable attorneys' fee, whether suit be
brought or not, if, after maturity of this note or default hereunder, or under
said mortgage, counsel shall be employed to collect this note or to protect the
security of said mortgage.
Whenever used herein the terms "holder," "maker" and "payee" shall be
construed in the singular or plural as the context may require or admit.
Maker's address: 1924 33rd Street
Orlando, Florida 32839
BOAT TREE, INC., a Florida corporation
By: /s/ Joseph G. Pozo, Jr.
------------------------------------
Joseph G. Pozo, Jr., President
<PAGE>
SATISFACTION: The Debt evidenced by this Note has been satisfied in full this
______ day of __________, 19__.
Signed: ________________________________
BALANCE PURCHASE MONEY PROMISSORY NOTE
Charlotte, N.C.
$300,000.00 May 15, 1998
FOR VALUE RECEIVED the undersigned, jointly and severally, promise to pay
to THOMAS T. ARCHER and wife, MARTHA CASHION ARCHER or order, the principal sum
of THREE HUNDRED THOUSAND AND NO/100 DOLLARS ($300,000.00), with interest from
May 30, 1998, at the rate of EIGHT AND 50/100 percent (8.5%) per annum on the
unpaid balance until paid or until default, both principal and interest payable
in lawful money of the United States of America, at the office of THOMAS T.
ARCHER and wife, MARTHA CASHION ARCHER, 211 Winthrow Creek Road, Mooresville, NC
28115 or at such place as the legal holder hereof may designate in writing. It
is understood and agreed that additional amounts may be advanced by the holder
hereof as provided in the instruments, if any, securing this Note and such
advances will be added to the principal of this Note and will accrue interest at
the above specified rate of interest from the date of advance until paid. The
principal and interest shall be due and payable as follows:
Sixty (60) monthly installments of principal and interest in the sum of
Two Thousand, Nine Hundred Fifty-Four and 22/100 Dollars ($2,954.22), the first
monthly installment due and payable on June 30, 1998 with the remaining monthly
installments due and payable on the 30th day of each month thereafter until June
30, 2003, at which time the entire principal balance plus accrued interest shall
be due and payable in full.
If not sooner paid, the entire remaining indebtedness shall be due and
payable on June 30, 2003.
If payable in installments, each such installment shall, unless otherwise
provided, be applied first to payment of interest then accrued and due on the
unpaid principal balance, with the remainder applied to the unpaid principal.
Unless otherwise provided, this Note may be prepaid in full or in part at
any time without penalty or premium. Partial prepayments shall be applied to
installments due in reverse order of their maturity.
In the event of (a) default in payment of any installment of principal or
interest hereof as the same becomes due and such default is not cured within ten
(10) days from the due date, or (b) default under the terms of any instrument
securing this Note, and such default is not cured within fifteen (15) days after
written notice to maker, then in either such event the holder may without
further notice, declare the remainder of the principal sum, together with all
interest accrued thereon and, the prepayment premium, if any, at once due and
payable. Failure to exercise this option shall not constitute a waiver of the
right to exercise the same at any other time. The unpaid principal of this Note
and any part thereof, accrued interest and all other sums due under this Note
and the Deed of Trust, if any, shall bear interest at the rate of EIGHT AND
50/100 percent (8.5%) per annum after default until paid.
<PAGE>
All parties to this Note, including maker and any sureties, endorsers, or
guarantors hereby waive protest, presentment, notice of dishonor, and notice of
acceleration of maturity and agree to continue to remain bound for the payment
of principal, interest and all other sums due under this Note and the Deed of
Trust notwithstanding any change or changes by way of release, surrender,
exchange, modification or substitution of any security for this Note or by way
of any extension or extensions of time for the payment of principal and
interest; and all such parties waive all and every kind of notice of such change
or changes and agree that the same may be made without notice or consent of any
of them.
Upon default the holder of this Note may employ an attorney to enforce the
holder's rights and remedies and the maker, principal, surety, guarantor and
endorsers of this Note hereby agree to pay the holder reasonable attorneys fees
not exceeding a sum equal to fifteen percent (15%) of the outstanding balance
owing on said Note, plus all other reasonable expenses incurred by the holder in
exercising any of the holder's rights and remedies upon default. The rights and
remedies of the holder as provided in this Note and any instrument securing this
Note shall be cumulative and may be pursued singly, successively, or together
against the property described in the Deed of Trust or any other funds, property
or security held by the holder for payment or security, in the sole discretion
of the holder. The failure to exercise any such right or remedy shall not be a
waiver or release of such rights or remedies or the right to exercise any of
them at another time.
This Note is to be governed and construed in accordance with the laws of
the State of North Carolina.
This Note is given in consideration for the purchase of real estate
located in North Carolina from the named payees, and is secured by a balance
purchase money deed of trust of even date to Joseph N. Tissue, Trustee which is
a first lien upon the property therein described.
IN TESTIMONY WHEREOF, each corporate maker has caused this instrument to
be executed in its corporate name by its President, attested by its Assistant
Secretary, and its corporate seal to be hereto affixed, all by order of its
Board of Directors first duly given, the day and year first above written.
BOAT TREE, INC., a Florida corporation
By: /s/ Joe G. Pozo, Jr.
---------------------------------
Joe G. Pozo, Jr.
ATTEST:
- -------------------------------
Assistant Secretary
(Corporate Seal)
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
American Marine Recreation, Inc.
Orlando, Florida
We hereby consent to use in the Prospectus constituting a part of this
Registration Statement of our report dated January 8, 1999 except for Notes 11,
10 and Note 1(B) as to which the dates are January 22, 1999, March 31, 1999 and
April __, 1999, respectively, relating to the consolidated financial statements
of American Marine Recreation, Inc. and subsidiary, which is contained in that
Prospectus, and of our report dated January 8, 1999, relating to Schedule II,
which is contained in Part II of the Registration Statement.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO Seidman, LLP
Orlando, Florida
April 14, 1999
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to use in this Registration Statement on Amendment Number 3 to Form
SB-2 on Form S-1, of our report dated January 15, 1999, except for Note 10 as to
which the date is January 22, 1999, relating to the financial statements of
Treasure Coast Boating Centers, Inc. for the year ended December 31, 1997 and
1998, and the reference to our firm under the caption "Experts" in this
Registration Statement.
FELDMAN SHERB EHRLICH & CO., P.C.
Certified Public Accountants
New York, New York
April 14, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,139,269
<SECURITIES> 0
<RECEIVABLES> 665,606
<ALLOWANCES> 27,000
<INVENTORY> 13,702,083
<CURRENT-ASSETS> 15,502,578
<PP&E> 3,117,666
<DEPRECIATION> 373,677
<TOTAL-ASSETS> 18,975,127
<CURRENT-LIABILITIES> 16,044,699
<BONDS> 0
0
0
<COMMON> 8,424
<OTHER-SE> 1,468,728
<TOTAL-LIABILITY-AND-EQUITY> 18,975,127
<SALES> 25,562,656
<TOTAL-REVENUES> 25,629,136
<CGS> 19,082,436
<TOTAL-COSTS> 5,418,407
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 524,720
<INCOME-PRETAX> 603,573
<INCOME-TAX> 0
<INCOME-CONTINUING> 603,573
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 603,573
<EPS-PRIMARY> .72
<EPS-DILUTED> .60
</TABLE>
<PAGE>
Report of Independent Certified Public Accountants
American Marine Recreation, Inc. and Subsidiary
Orlando, Florida
The audits referred to in our report dated January 8, 1999 except for Note 10,
11 and Note 1 (B) as to which the dates are March 31, 1999, January 22, 1999
and April __, 1999 relating to the consolidated financial statements of
American Marine Recreation, Inc. and subsidiary, which is contained in the
prospectus, constituting part of this registration statement, included the
audit of financial statement Schedule II for each of the three years in the
period ended December 31, 1998. The financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based upon our audits.
In our opinion, such financial statement schedule presents fairly, in all
material respects, information set forth therein.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
Orlando, Florida
January 8, 1999, except for Note 10, 11 and Note 1(B) as to which the dates are
March 31, 1999, January 22, 1999 and April __, 1999 respectively.
<PAGE>
SCHEDULE II
AMERICAN MARINE RECREATION, INC. AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED DECEMBER 31, 1996, 1997, 1998
<TABLE>
<CAPTION>
Other
Charges Charges-
Balance at to Cost Charges Additions Balance
Beginning and to Other (Deductions) at End of
Year Description of Period Expenses Accounts (a) Period
- ------- ---------------------------------- ------------ ---------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996 Accounts receivable allowance for
possible losses $ -- $ -- $ -- $ -- $ --
1997 Accounts receivable allowance for
possible losses -- 67,893 -- (25,893 ) 42,000
1998 Accounts receivable allowance for
possible losses 42,000 65,163 -- (80,163 ) 27,000
</TABLE>
(a) Specific accounts receivable written off against the allowance for possible
losses
