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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the Securities Exchange Act of 1934
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AUTOMOBILE PROTECTION CORPORATION -- APCO
(Name of Subject Company)
AUTOMOBILE PROTECTION CORPORATION -- APCO
(Name of Person(s) Filing Statement)
COMMON STOCK, $.001 PAR VALUE PER SHARE
(Title of Class of Securities)
052905106
(Cusip Number of Class of Securities)
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MARTIN J. BLANK
CHAIRMAN OF THE BOARD, CHIEF OPERATING OFFICER AND SECRETARY
AUTOMOBILE PROTECTION CORPORATION -- APCO
15 DUNWOODY PARK DRIVE, SUITE 100
ATLANTA, GEORGIA 30338
(770) 394-7070
(Name, Address and Telephone Number of Person Authorized to Receive
Notice and Communications on Behalf of the Person(s) Filing Statement)
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WITH A COPY TO:
ANDREW D. HUDDERS, ESQ.
GRAUBARD MOLLEN & MILLER
600 THIRD AVENUE, 32ND FLOOR
NEW YORK, NEW YORK 10016
(212) 818-8800
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Automobile Protection
Corporation -- APCO, a Georgia corporation ("Company"). The address of the
principal executive offices of the Company is 15 Dunwoody Park Drive, Suite 100,
Atlanta, Georgia 30338. The title of the class of equity securities to which
this statement relates is the common stock, $0.001 par value per share, of the
Company ("Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to a tender offer by AM1 Acquisition Company
("Offeror"), a Georgia corporation, which is wholly owned by Ford Motor Company
("Parent"), a Delaware corporation, disclosed in a Tender Offer Statement on
Schedule 14D-1, dated June 16, 1999 ("Schedule 14D-1"), to purchase all of the
outstanding shares of Common Stock at a price of $13.00 per share ("Offer
Price"), net to each seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated June 16, 1999 (as may be
amended or supplemented from time to time the "Offer to Purchase"), and the
related Letter of Transmittal (which together, as may be amended from time to
time, constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 10, 1999 ("Merger Agreement"), among Parent, Offeror and the Company.
The Merger Agreement provides, among other things, that as soon as practicable
after the consummation of the Offer and the satisfaction or waiver of the other
conditions set forth in the Merger Agreement, Offeror will be merged with and
into the Company ("Merger"), and the Company will continue as the surviving
corporation ("Surviving Corporation") unless Parent elects that Offeror will be
the Surviving Corporation. At the time of the consummation of the Merger
("Effective Time"), each then outstanding share of Common Stock other than
Common Stock owned by the Company, Parent, the Offeror, or any other wholly
owned subsidiary of Parent, or by shareholders, if any, who are entitled to and
who properly exercise and perfect dissenter rights under the Georgia Business
Corporation Code ("GBCC") will be converted automatically into the right to
receive $13.00 in cash without interest thereon. The Merger Agreement has been
filed herewith as Exhibit (c)(1) and is incorporated herein by reference. As set
forth in the Schedule 14D-1, the principal executive offices of Offeror and
Parent are located at The American Road, Dearborn, Michigan 48121.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Set forth below is each material contract, agreement, arrangement and
understanding, and any actual or potential conflict of interest between the
Company or its affiliates and (i) its executive officers, directors or
affiliates or (ii) Offeror and Parent and their executive officers, directors or
affiliates.
THE MERGER AGREEMENT
A copy of the Offer to Purchase ("Offer to Purchase") is enclosed with this
Schedule 14D-9. The summary of the Merger Agreement contained in the Offer to
Purchase is incorporated herein by reference. The summary should be read in its
entirety for a more complete description of the terms and provisions of the
Merger Agreement, which has been filed as Exhibit (c)(1) hereto and is also
incorporated herein by reference. The following is a summary of certain portions
of the Merger Agreement that relate to arrangements among the Company, Offeror,
Parent, and the Company's executive officers and directors. This summary is
qualified in its entirety by reference to the Merger Agreement and the other
agreements.
Board Representation. The Merger Agreement provides that promptly upon
acceptance of the shares of Common Stock for payment by Offeror pursuant to the
Offer, Offeror will be entitled to designate the number of directors, rounded up
to the next whole number, as will give Offeror representation on the Board of
Directors of the Company ("Board") (and on each committee of the Board and on
each board of directors of each subsidiary of the Company designated by the
Parent) equal to at least that number of directors, rounded up to the next whole
number, which is the product of (a) the total number of directors on the Board
(or such
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committee or subsidiary board of directors) giving effect to the directors
appointed or elected pursuant to this sentence multiplied by (b) the percentage
that (i) such number of shares of Common Stock so accepted for payment and paid
for by Offeror plus the number of shares of Common Stock otherwise owned by
Offeror or any other subsidiary of Parent bears to (ii) the number of shares of
Common Stock outstanding, and the Company shall, at such time, cause Offeror's
designees to be so appointed or elected. Information required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 thereunder with respect to the
foregoing is furnished in Schedule I hereto.
Company Stock Plans. The Merger Agreement provides that, as soon as
practicable following the date of the Merger Agreement, the Board shall adopt
such resolutions or the Company will take such other actions as are required to
adjust the terms of all outstanding employee stock options under the 1988 Stock
Option Plan, Outside Directors' Stock Option Plan, 1997 Performance Equity Plan
and 1998 Performance Equity Plan and certain other stock options to provide
that, and shall offer to all holders of third party stock options to amend the
options so that each option outstanding immediately prior to the Effective Time
shall be canceled on the date following the Effective Time in exchange for a
cash payment by the Company to be made on such date of an amount equal to (i)
the excess, if any, of (x) the price per share of Common Stock to be paid
pursuant to the Offer over (y) the exercise price per share of Common Stock
subject to such option, multiplied by (ii) the number of shares of Common Stock
for which such option shall not theretofore have been exercised, subject to
certain exceptions and conditions as described in the Merger Agreement. As of
June 10, 1999, directors and executive officers of the Company as a group
beneficially held options to purchase an aggregate of 306,264 shares of Common
Stock of which 99,142 were vested.
Director and Officer Indemnification and Insurance. The Merger Agreement
provides that the Company, from and after the Effective Time, and for not less
than six years thereafter, will indemnify, defend and hold harmless the present
and former officers, directors and employees of the Company and the subsidiaries
of the Company for actions or omissions occurring prior to the Effective Time
(including without limitation the transactions contemplated by the Merger
Agreement) as provided in their respective certificates of incorporation or
by-laws in effect prior to the Effective Time of the Merger.
The Merger Agreement further provides that the Company will, and after the
consummation of the Offer, Parent will cause the Company to maintain in effect
for not less than three years after the Effective Time, the current policies of
directors' and officers' liability insurance maintained by the Company on June
10, 1999, with respect to matters occurring through the Effective Time and
covering parties who are covered by those current policies. The Merger Agreement
further provides that, prior to consummation of the Offer, the Company will
endeavor to, and will be permitted to, satisfy its obligation to maintain the
insurance policies by extending coverage thereunder pursuant to a three year
"tail" policy, provided that the lump sum payment to purchase the coverage does
not exceed $112,500. If a "tail" policy cannot be purchased on those terms prior
to the consummation of the Offer, then the Company will be obligated under the
Merger Agreement to endeavor to obtain coverage at the lowest premium cost
reasonably available, provided that the Company will not be obligated to pay
annual payments that exceed 125% of the annual premium payment in effect on the
date of the Merger Agreement.
STOCK OPTION AND TENDER AGREEMENTS
The summary of the Stock Option and Tender Agreements contained in the
Offer to Purchase is incorporated herein by reference. The summary should be
read in its entirety for a more complete description of the terms and provisions
of the Stock Option and Tender Agreements, which have been filed as Exhibits
(c)(2) and (c)(3) hereto and are also incorporated herein by reference. The
following is a summary of the Stock Option and Tender Agreements that relate to
arrangements among the Offeror, Parent, and Messrs. Martin J. Blank and Larry I.
Dorfman, each an executive officer and director of the Company. This summary is
qualified in its entirety by reference to the Stock Option and Tender
Agreements.
Concurrently with the execution and delivery of the Merger Agreement,
Parent and each of Messrs. Blank and Dorfman entered into a Stock Option and
Tender Agreement.
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Under these agreements, each of Messrs. Blank and Dorfman agrees to validly
tender (or cause the record owner of such shares to tender), in accordance with
the Offer, as soon as practicable after commencement of the Offer but in no
event later than 2 business days prior to the then scheduled expiration date of
the Offer, all of the Common Stock beneficially owned by them and to not
withdraw the Common Stock from the Offer.
The Stock Option and Tender Agreements also provide that Messrs. Blank and
Dorfman (i) will vote their Common Stock during the term of the Stock Option and
Tender Agreements in favor of the Merger, the Merger Agreement, the approval of
the terms thereof and all transactions contemplated thereby; against any action
or agreement that would result in a breach in any material respect of any
covenant, representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement or under the Stock Option and Tender
Agreement; and against any other extraordinary corporate transaction or sale or
transfer of a material amount of assets of the Company or its subsidiaries, (ii)
have granted an irrevocable proxy to the Offeror and Parent to vote their Common
Stock during the term of the Stock Option and Tender Agreements on any matter
covered by clause (i) in a manner consistent therewith, (iii) have granted an
option to Parent to purchase all (and not less than all) of their Common Stock
beneficially owned upon the occurrence of certain events (set forth below), (iv)
will not directly or indirectly solicit, facilitate, participate in or initiate
any inquiries or the making of any proposal by any person or entity (other than
Parent or any affiliate of Parent) which constitutes or may reasonably be
expected to lead to an alternative takeover proposal or any sale of any of their
Common Stock, and (v) will not sell, transfer, pledge, encumber, assign or
otherwise dispose of any of their Common Stock (except for a limited number of
shares of Common Stock sold in brokers' transactions pursuant to Rule 144 under
the Securities Act of 1933).
Each of Messrs. Blank and Dorfman have granted to Parent an irrevocable,
unconditional option to purchase all (and not less than all) of their Common
Stock ("Shareholder Option") held by them on the terms and subject to the
conditions set forth herein. The Shareholder Option may be exercised by Parent,
in whole, at any time commencing upon the Shareholder Option Exercise Date (as
defined below) and prior to the Shareholder Option Expiration Date (as defined
below). "Shareholder Option Exercise Date" is defined in the Stock Option and
Tender Agreements as the date, if any, on which the first of any of the
following occurs: (i) any person (including the Company or any of its
subsidiaries or affiliates) or group (as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934) other than Parent or any of its affiliates
shall have made, or proposed, communicated or disclosed in a manner which is or
otherwise becomes public prior to or during the pendency of the Offer (including
being known by shareholders of the Company) an intention to make an alternative
takeover proposal; (ii) it shall have been publicly disclosed or Parent shall
have otherwise learned that beneficial ownership (determined for the purposes of
this paragraph as set forth in Rule 13d-3 promulgated under the Securities
Exchange Act of 1934) of more than 35% of the Common Stock has been acquired by
any person; (iii) (A) under certain events which entitle Parent to terminate the
Merger Agreement or (B) under certain events which entitle the Company to
terminate the Merger Agreement; or (iv) the shareholder or the Company breach or
fail to perform or comply with in any material respect certain of their
significant obligations contained in the Stock Option and Tender Agreements or
the Merger Agreement, respectively. "Shareholder Option Expiration Date" is
defined in the Stock Option and Tender Agreements as the first to occur of any
of the following dates: (i) the effective time of the Merger, (ii) written
notice of termination of the Stock Option and Tender Agreements by Parent to the
shareholder, (iii) the termination of the Merger Agreement pursuant to certain
provisions of the Merger Agreement or (iv) the date that is twelve months from
the date of termination of the Merger Agreement; provided that if the option has
not become exercisable on or prior to the date of termination of the Merger
Agreement, then the Shareholder Option Expiration Date shall be the date of
termination of the Merger Agreement.
If Parent exercises the Shareholder Option, the purchase and sale of the
Common Stock shall be at a purchase price per share of Common Stock equal to the
price per share of Common Stock offered by Offeror in the Offer, but in any
event shall not be less than the highest price paid by Offeror for any shares of
Common Stock, if any, purchased pursuant to the Offer. In the event that Parent
exercises the Shareholder Option and the Company enters into a definitive
agreement to consummate an alternative takeover proposal or transactions
contemplated by an alternative takeover proposal are consummated and the price
per share of
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Common Stock paid exceeds the price paid by Parent, then upon the consummation
of such alternative takeover proposal Parent will pay to the shareholder an
amount equal to such excess multiplied by the number of purchased shares of
Common Stock.
The Stock Option and Tender Agreements provide that Messrs. Blank and
Dorfman, subject to certain limitations, jointly and severally shall indemnify
Parent, Offeror and their affiliates and agents from liabilities and losses due
to any breach by the Company of the representations and warranties made by the
Company in the Merger Agreement. Messrs. Blank and Dorfman have agreed to
deposit a portion of the consideration to be paid to each of them pursuant to
the Offer and the Merger into an escrow fund for the purpose of securing such
indemnification obligations.
Each of Messrs. Blank and Dorfman has agreed that, subject to certain
exceptions, from the date of the Stock Option and Tender Agreement and ending on
the sixth year anniversary of the Merger (the "Restricted Period"), he will not,
on behalf of himself, or on behalf of any other person, company, corporation,
partnership or other entity or enterprise, directly or indirectly, as an
employee, proprietor, shareholder, partner, consultant, or otherwise, engage in
any business or activity competitive with the business of the Company, anywhere
in the United States (the "Territory"), provided that the foregoing provisions
shall terminate with respect to either Mr. Blank or Mr. Dorfman, notwithstanding
that the Restricted Period may not have terminated, three years following the
termination of either Mr. Blank or Mr. Dorfman's employment with Company or its
successor. Each has also agreed that during the Restricted Period he will not on
behalf of himself or on behalf of any other person, company, corporation,
partnership or other entity or enterprise (except on behalf of the Company or
the surviving corporation), directly or indirectly, solicit employees, agents or
consultants of the Company or the surviving corporation to become employees,
agents or consultants for him or for such businesses to the extent such
businesses are engaged in activities that compete with the business of the
Company. In addition during the Restricted Period, each has agreed that he will
not, directly or indirectly, as employee, agent, consultant, shareholder,
director, co-partner or in any other individual or representative capacity
intentionally solicit or encourage any present or future customer or supplier of
the Company or the surviving corporation to terminate or otherwise alter his,
her or its relationship with the Company or the surviving corporation in any
manner adverse to the Company or the surviving corporation.
COMPANY OPTION AGREEMENT
The summary of the Company Option Agreement contained in the Offer to
Purchase is incorporated herein by reference. The summary should be read in its
entirety for a more complete description of the terms and provisions of the
Company Option Agreement, which has been filed as Exhibit (c)(4) hereto and is
also incorporated herein by reference. The following is a summary of the Company
Option Agreement that relate to arrangements among the Company and Parent. This
summary is qualified in its entirety by reference to the Company Option
Agreement.
Simultaneously with the execution of the Merger Agreement, Parent and the
Company entered into the Company Option Agreement. The Company Option Agreement
provides for the grant by the Company to Parent of an irrevocable option to
purchase 2,375,406 shares of Common Stock ("Option Shares") (representing 19.9%
of the Common Stock outstanding on June 10, 1999) on the terms and subject to
the conditions set forth in the Company Option Agreement ("Option") at a
purchase price equal to $13.00 per share ("Exercise Price"). In no event however
shall the number of shares of Common Stock for which the Option is exercisable
exceed 19.9% of the issued and outstanding shares of Common Stock, at the time
of exercise without giving effect to the issuance of any Option Shares. The
Option may be exercised by Parent, in whole or in part, at any time, or from
time to time, commencing upon the Company Option Exercise Date (as defined
below) and prior to the Company Option Expiration Date (as defined below).
"Company Option Exercise Date" is defined in the Company Option Agreement as the
date, if any, on which the first of any of the following occurs: (i) any
corporation (including the Company or any of its subsidiaries or affiliates),
partnership, person, other entity or group (as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934) other than Parent or any of its affiliates
shall have made, or proposed, communicated or disclosed in a manner which is or
otherwise becomes public prior to or during the pendency of the Offer (including
being known by shareholders of the Company) an intention to make an alternative
takeover proposal; (ii) it shall
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have been publicly disclosed or Parent shall have otherwise learned that
beneficial ownership (determined for the purposes of this paragraph as set forth
in Rule 13d-3 promulgated under the Securities Exchange Act of 1934) of more
than 35% of the shares of Common Stock has been acquired by any person; (iii)
(A) any event as a result of which the Parent is entitled to terminate the
Merger Agreement as described under paragraph (d) under "Termination Events"
described in Section 11 of the Offer to Purchase (which are incorporated by
reference herein) or (B) the termination of the Merger Agreement by the Company
as described under paragraph (e) under "Termination Events" described in Section
11 of the Offer to Purchase (which are incorporated by reference herein); or
(iv) the Company shall breach or fail to perform or comply with in any material
respect certain of its significant obligations, contained in the Merger
Agreement. "Company Option Expiration Date" is defined in the Company Option
Agreement as the first to occur of any of the following dates: (i) the effective
time of the Merger, (ii) written notice of termination of the Company Option
Agreement by the Parent to the Company, (iii) the termination of the Merger
Agreement pursuant to paragraph (a) or (b)(ii) as described under "Termination
Events," described in Section 11 of the Offer to Purchase (which are
incorporated by reference herein) or (iv) the date that is twelve months from
the date of termination of the Merger Agreement; provided that if the Option has
not become exercisable on or prior to the date of termination of the Merger
Agreement, then the Company Option Expiration Date shall be the date of
termination of the Merger Agreement.
The Company Option Agreement also provides that at any time after the
Company Option Exercise Date, at the request of the Parent, delivered in writing
prior to the Company Option Expiration Date, the Company (or any successor
thereto) shall repurchase from Parent (i) the Option or any part thereof as
Parent shall designate at a price equal to the amount, by which (A) the
Market/Offer Price (as defined below) exceeds (B) the Exercise Price, multiplied
by the number of Option Shares as to which the Option is to be repurchased and
(ii) such number of the Option Shares as Parent shall designate at a price equal
to the Market/Offer Price multiplied by the number of Option Shares so
designated. The term "Market/Offer Price" shall mean the highest of (i) the
price per share of Common Stock offered or paid in any event that causes or
would cause a Company Option Exercise Date, (ii) the highest closing price for
shares of Common Stock during the 30 trading days immediately preceding the date
Parent gives notice of the required repurchase of the Option or Option shares,
as the case may be, or (iii) in the event of a sale of all or substantially all
of the Company's assets, the sum of the net price paid in such sale for such
assets and the current market value of the remaining net assets of the Company
as determined by a nationally recognized investment banking firm selected by
Parent and reasonably acceptable to the Company, divided by the number of shares
of Common Stock outstanding at the time of such sale, which determination,
absent manifest error, shall be conclusive for all purposes of the Company
Option Agreement.
The Company Option Agreement provides that if the Option is exercised and
if Parent shall request in writing, the Company shall use, subject to certain
exceptions, commercially reasonable efforts as promptly as practicable to effect
the registration under the Securities Act of 1933 and any applicable state law
(a "Demand Registration") of such number of Option Shares owned by Parent and
its subsidiaries as the Parent shall request and to keep such Demand
Registration effective for a period of not less than 180 days, unless, in the
written opinion of counsel to the Company, which opinion shall be delivered to
Parent and which shall be satisfactory in form and substance to Parent and its
counsel, such registration under the Securities Act of 1933 is not required in
order to lawfully sell and distribute such Option Shares in the manner
contemplated by the Parent. The Company shall only have the obligation to effect
two Demand Registrations. If the Company effects a registration under the
Securities Act of 1933 of Company Common Stock for its own account or for any
other shareholders of the Company (other than on Form S-4 or Form S-8, or any
successor form), it shall allow the Parent the right to participate in such
registration (an "Incidental Registration"). Participation by Parent in any
Incidental Registration shall not affect the obligation of the Company to effect
Demand Registrations for the Parent.
In the event that the Company enters into an agreement (i) to consolidate
with or merge into any person, other than Parent or any subsidiary of Parent and
the Company shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Parent or any
subsidiary of Parent, to merge into the Company and the Company shall be the
continuing or surviving or acquiring
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corporation, but, in connection with such merger, the then outstanding shares of
Common Stock shall be changed into or exchanged for stock or other securities of
any other person or cash or any other property or the then outstanding shares of
Common Stock shall after such merger represent less than 50% of the outstanding
shares and share equivalents of the merged or acquiring company, or (iii) to
sell or otherwise transfer all or substantially all of its assets to any person,
other than Parent or any subsidiary of Parent, then, and in each such case, the
agreement governing such transaction shall make proper provision so that, unless
earlier exercised by the Parent, the Option shall, upon the consummation of any
such transaction and upon the terms and conditions set forth herein, be
converted into, or exchanged for, an option ("Substitute Option"), at the
election of Parent, of either (x) the acquiring person or (y) any person that
controls the acquiring person. The Substitute Option shall have the same terms
as the Option, provided that if the terms of the Substitute Option cannot, for
legal reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to Parent. The issuer of the
Substitute Option shall enter into an agreement with Parent in substantially the
same form as the Company Option Agreement (including the terms of the Repurchase
Rights and Substitute Option), which agreement shall be applicable to the
Substitute Option. The exercise price of the Substitute Option and the number of
Shares for which the Substitute Option is exercisable would also be equitably
adjusted as described in the Company Option Agreement.
In addition, the Company Option Agreement provides that notwithstanding any
other provision of that agreement, in no event shall the Parent's Total Profit
(as defined below) exceed $6,300,000 less the amount of any termination fee paid
under the Merger Agreement and, if it otherwise would exceed such amount,
Parent, at its sole election, shall either (i) reduce the number of shares of
Common Stock subject to this Option, (ii) deliver to the Company for
cancellation Option Shares previously purchased by Parent, (iii) limit the
payment to be received from the Company pursuant to the Repurchase Rights, (iv)
pay cash to the Company, or (v) any combination thereof, so that Parent's
actually realized Total Profit shall not exceed the amount after taking into
account the foregoing actions. For purposes of the Company Option Agreement, the
term "Total Profit" shall mean the aggregate amount (before taxes) of the
following: (i) the amount received by Parent pursuant to the Company's
repurchase of the Option (or any portion thereof), (ii) (x) the amount received
by Parent pursuant to the Company's repurchase of Option Shares less (y)
Parent's purchase price for such Option Shares, (iii) (x) the net cash amounts
received by Parent pursuant to the sale of Option Shares (or any other
securities into which such Option Shares are converted or exchanged) to any
unaffiliated party, less (y) Parent's purchase price of such Option Shares, (iv)
any amounts received by Parent on the transfer of the Option (or any portion
thereof) to any unaffiliated party, and (v) any amount equivalent to the
foregoing with respect to the Substitute Option.
CERTAIN COMPENSATION ARRANGEMENTS AND STOCK PLANS
The current compensation arrangements, between the Company and certain of
its directors and executive officers are described in "Executive Compensation,"
"1998 Option Grants to Executive Officers," "1998 Option Year-End Option
Values," "Stock Option Plans," "Indebtedness of Management," "Director
Compensation," and "Report on Executive Compensation" in the Company's
Information Statement furnished pursuant to Section 14(f) of the Securities
Exchange Act of 1934 ("Exchange Act") and Rule 14f-1 thereunder, which appears
as Schedule I hereto ("Schedule I"). Information regarding the Company's 1988
Stock Option Plan, Outside Directors' Stock Option Plan, 1997 Performance Equity
Plan and 1998 Performance Equity Plan appears in Schedule I hereto under the
caption "Stock Option Plans."
EMPLOYMENT AGREEMENTS; CURRENT COMPENSATION ARRANGEMENTS
In connection with the Merger Agreement, the Company entered into
employment agreements with each of Messrs. Martin J. Blank and Larry I. Dorfman
("Employment Agreements"). The following is a summary of the Employment
Agreements that relate to arrangements between the Company and each of Messrs.
Blank and Dorfman, who are the Company's executive officers and two of its
directors. This summary is qualified in its entirety by reference to the
Employment Agreements which have been filed as Exhibits (c)(9) and (c)(10)
hereto.
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The employment period under each of the Employment Agreements is from the
earlier of the acceptance date of the tendered shares of Common Stock by Offeror
in the Offer or the date on which the Shareholder Option given by each of
Messrs. Blank and Dorfman is exercised, until December 31, 2002, subject to the
termination provisions of the Employment Agreements. The base salary is $72,000
per year. The Company will pay additional incentive compensation during the term
of employment. For the period from the commencement date of the Employment
Agreement to December 31, 1999, each of Messrs. Blank and Dorfman will be paid
9% of EBITE. EBITE is defined as earnings before interest and taxes (EBIT)
before incentive compensation for Messrs. Blank and Dorfman is deducted. Each
year thereafter they will each be paid an amount equal to a certain percentage
of EBITE depending on the percentage of the target EBITE for such fiscal year
that is attained. The percentages are as follows: 4.5% if 100% of the EBITE
target is achieved, 4.125% if 85-100% of the EBITE target is achieved, 3.75% if
70-85% of the EBITE target is achieved and 1.875% if 70% or less of the EBITE
target is achieved. The EBITE targets are: year 2000 -- $17,302,000; year
2001 -- $23,048,000; and year 2002 -- $29,044,000. Each of Messrs. Blank and
Dorfman will be provided comparable employee benefits offered to all executives
of the Company such as medical, disability and vacation and sickness benefits.
They will also be provided an automobile as a benefit. The term of employment
ends upon death, disability after six months, for cause, and retirement. In
addition, the Company or the executive may terminate their employment at any
time, but if the Company terminates the employment without cause, it will pay
the base salary and the bonus compensation for the full defined Employment
Period which is from the commencement date of the Employment Agreement through
December 31, 2002 as if there had been no termination. Each of Messrs. Blank and
Dorfman are subject to a confidential information provision which extends for a
period of five years after termination, except with respect to confidential
information that constitutes trade secrets which shall be kept secret and
retained in strictest confidence forever.
Also, for a period of three years after termination for whatever reason
(the "Consultancy Period") each of Messrs. Blank and Dorfman will continue to
make his services available to the Company as a consultant. During the term of
the Consultancy Period, each of Messrs. Blank and Dorfman will be subject to
non-competition and non-solicitation provisions, which are similar in all
material respects to the provisions contained in the Stock Option and Tender
Agreements (see above for a description). With respect to the Consultancy
Period, each of Messrs. Blank and Dorfman will be paid an additional amount
equal to one-third of the total cumulative annual incentive compensation paid to
him during the period between January 1, 2000 and the termination date, provided
he has fulfilled his obligations under the Employment Agreement regarding
non-competition and non-solicitation.
The current compensation arrangements of Messrs. Blank and Dorfman provide
that each receives a base salary of $72,000 plus additional compensation based
on the number of vehicle service contracts processed each month which exceed a
prescribed level. Messrs. Blank and Dorfman participate in other employee
benefit plans as generally made available to employees of the Company.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION OF THE BOARD
The Board has approved, by unanimous vote of all the directors, the Offer,
the Merger and the Merger Agreement, and the Stock Option and Tender Agreements
and the Company Option Agreement, has determined that the consideration to be
paid for the shares of Common Stock in connection with the Offer and the Merger
is fair to the shareholders of the Company from a financial point of view, and
has determined that the Offer and the Merger are fair to and otherwise in the
best interests of the Company and its shareholders. The Board recommends that
all shareholders accept the Offer and tender their shares of Common Stock
pursuant thereto.
(b) BACKGROUND; REASONS FOR THE RECOMMENDATION
(1) General Background. The Company was incorporated under the laws of the
State of Georgia in 1984 and since that time has been engaged principally in the
marketing and administration of extended vehicle service contracts and extended
vehicle warranty programs sold by automobile and recreational vehicle dealers
7
<PAGE> 9
located throughout the United States. A subsidiary of the Company also provides
insurance brokerage services to the automotive industry.
From time to time over the last several years, the Board has considered a
variety of strategic alternatives designed to enhance shareholder value through
expansion and diversification of the core business of the Company. The
alternatives have included the expansion of the insurance brokerage business,
acquisition of insurance underwriting companies and expansion into the
administration of warranties of other products, among other things. Various
methods of expansion and diversification have been considered, which have
included the development of strategic partnerships, acquisitions of subsidiaries
and divisions, and merger transactions.
In January 1998, the Company had discussions about its being acquired by a
United States insurance company. These discussions arose from the exploration in
1994 and 1997 of a possible insurance relationship with the insurance company in
which the Company's products would be insured by the insurance company. During
early 1998, the Company executed a confidentiality and standstill agreement and
the insurance company conducted due diligence reviews with its own personnel and
its outside counsel. On March 31, 1998 the insurance company informed the
Company that it would not pursue an acquisition of the Company. On January 6,
1999, the insurance company was contacted by the Company to see if it was
interested in pursuing the acquisition discussed in early 1998. On January 19,
1999, there was a meeting between the executives of the Company and
representatives of the insurance company at which general terms of an
acquisition structure were discussed and various issues were raised by the
insurance company that would impact an acquisition. Between January 19, 1999 and
January 25, 1999 there were additional discussions between these parties, but it
became clear to the Company that there were fundamental differences between the
companies, including the fact that the preliminary structure of the acquisition
suggested by the insurance company was not acceptable to the Company. On January
25, 1999, the Company asked that the confidentiality agreement and standstill
agreement signed in January 1998 be terminated. This termination was agreed to
by the insurance company.
Background of Offer. In mid-November 1998, a representative of Parent
contacted by telephone Mr. Larry I. Dorfman, Chief Executive Officer and
President of the Company, regarding a potential business relationship between
Parent and the Company. These persons agreed to meet in person to pursue further
discussions.
Representatives of the Company met with representatives of Parent in early
December 1998 to continue the brief discussions held in November 1998. In
advance of this meeting, the Company and Parent signed a confidentiality
agreement. At this meeting the parties held broad-ranging discussions concerning
the business of the Company and a number of types of relationships the two
companies could pursue. Representatives of Parent indicated that they would
provide greater detail about the type of transaction Parent desired to pursue at
a later date after further internal consideration by Parent. On December 11,
1998, the Company was informed by representatives of Parent that it was
interested in exploring an acquisition of the Company. The Company indicated
that it had been involved in discussions with another potential acquiror and was
subject to a confidentiality and standstill agreement that would have to be
terminated before any acquisition discussions with Parent took place.
As discussed above, in late January 1999 the Company terminated its
agreement with the potential acquiror and informed Parent that it was interested
in engaging in further discussions with Parent for the purpose of an
acquisition. Thereafter, representatives of Parent met with representatives of
the Company at the Company's offices in Atlanta, Georgia. At this meeting, the
parties discussed in general terms the Company's business and financial
condition. The parties held initial discussions concerning potential values for
the Company. Representatives of Parent also indicated that it was likely that
the Parent would desire certain members of management of the Company enter into
employment agreements to remain employed with the Company following any
acquisition.
During February and March 1999, representatives of Parent continued to
discuss the possibility of an acquisition of the Company, and commenced its due
diligence investigation of the Company. On several occasions members of Parent's
legal staff, Parent's customer service division and other outside consultants
8
<PAGE> 10
retained by Parent visited the Company offices in Atlanta, Georgia to conduct
legal and business due diligence.
On March 16, 1999, the Board met to review the status of management's
discussions with Parent. No representatives of Parent were present at the board
meeting. Members of management of the Company gave to the Board a detailed
presentation concerning the potential terms and potential structure of an
acquisition of the Company by Parent and the due diligence that had been
performed by Parent up to that point in time. The Board authorized management of
the Company to continue to pursue with Parent the terms of a potential
acquisition of the Company by Parent. Following the board meeting,
representatives of the Company and representatives of Parent discussed various
issues related to Parent's proposal to acquire the Company. One of the issues
raised by the representatives of Parent indicated that a condition of its
proposal was that Mr. Martin J. Blank, the Company's Chairman and Chief
Operating Officer, and Mr. Larry I. Dorfman commit to three-year employment
agreements with the post-acquisition entity, and the parties discussed the
general terms of the employment, including compensation levels, duties,
non-competition and similar terms and other provisions.
In late March 1999, representatives of Parent, the Company, Simpson Thacher
& Bartlett, counsel to Parent, and Graubard Mollen & Miller, counsel to the
Company, held a conference call to discuss the structure of a potential
acquisition. During this call, Parent expressed its desire that Messrs. Blank
and Dorfman enter into the Stock Option and Tender Agreements to support the
transaction in their capacities as significant shareholders of the Company and
that the Company enter into the Company Option Agreement.
Following this discussion, drafts of the Merger Agreement and related
agreements were provided to the Company and Graubard Mollen & Miller.
During April and May 1999, Parent continued its business and legal due
diligence. The Company provided copies of documentation essential to of its
business, reviewed with the representatives of Parent the terms of its products,
marketing arrangements and related legal filings and provided a review of an
actuarial study of the Company underwriting data prepared by Tillinghast &
Company.
On May 17, 1999, the Company was informed that Parent was interested in an
acquisition of the Company at a price per share not to exceed $13.00 per share,
subject to further due diligence, the negotiation of definitive acquisition and
related agreements and Parent board approval. Thereafter, Parent and the Company
continued to discuss various due diligence matters and the terms of the proposed
acquisition.
On May 24, 1999 and again on June 2, 1999, representatives of Parent and
its counsel met at the offices of Simpson Thacher & Bartlett with members of
senior management of the Company and the Company's counsel to negotiate the
Merger Agreement, the Company Option Agreement and the Stock Option and Tender
Agreements. The parties continued to discuss the terms of these agreements
during early June 1999.
The Board held a meeting at the offices of the Company in Atlanta, Georgia
and by telephone conference on June 9, 1999 at which it reviewed the course of
discussions between the parties to date and the terms of the Offer and the
Merger Agreement and related agreements. At this meeting, the Board received a
presentation from The Robinson-Humphrey Company, LLC ("Robinson-Humphrey"),
financial advisors to the Company for this acquisition, concerning the financial
terms and effects of the transaction. The Board discussed in detail the terms of
the agreements and the presentation made by Robinson-Humphrey. The Board also
considered the conflicts that may be present in connection with the various
transactions agreements. The directors other than Messrs. Blank and Dorfman
considered the Employment Agreements with Messrs. Blank and Dorfman and compared
the terms of the proposed agreements, including the non-competition and
non-solicitation provisions, with the current compensation arrangements, and
they concluded that the proposed agreements were no more favorable to Messrs.
Blank and Dorfman than the existing compensation arrangements. The Board
(without Messrs. Blank and Dorfman) concluded that the terms of the Employment
Agreements were reasonable and in the best interest of the shareholders of the
Company in the context of the overall Offer and related transactions. At this
meeting, the Board did not approve the Offer or the Merger Agreement or any of
the related agreements but did authorize the officers of the Company to
negotiate final terms of the Offer and the Merger Agreement and related
agreements based on the near final drafts. The Board resolved to hold a
9
<PAGE> 11
meeting on June 10, 1999 to consider the final terms of these agreements and the
formal offer approved by Parent's board of directors. Following the meeting of
the Board, representatives of the parties held several telephone conferences in
which the terms of the Merger Agreement and related agreements were finalized.
During the morning of June 10, 1999, Mr. Martin Blank received a telephone
call from a representative of Parent who told him that the board of directors of
Parent had approved the final terms of the Offer and the Merger. The Board of
the Company met later on June 10, 1999, and reviewed the final agreements
relating to the Offer. The Board also received the opinion of Robinson-Humphrey
that the consideration to be received by shareholders of the Company in the
Offer and the Merger is fair to the shareholders from a financial point of view.
The changes made to the agreements relating to the Offer were considered and the
Offer and Merger Agreement and related agreements of the Company were approved
in their final form.
Shortly after the meeting of the Board on June 10, 1999, the parties
executed the Merger Agreement and the related agreements and announced the
transaction by joint press release.
(2) Reasons for the Recommendation. In approving the Merger Agreement and
the transactions contemplated thereby, and in recommending that all shareholders
of the Company tender their shares of Common Stock pursuant to the Offer, the
Board considered a number of factors. The principal factors are listed below.
(a) The terms of the Merger Agreement and the Stock Option Agreement
and the fact that they were determined through arms-length negotiations.
(b) The financial condition, results of operations and business of the
Company and the prospects of the Company in light of the various business
risks facing it, some of which are noted in items (c), (d) and (e) below.
(c) The significant competition in the Company's markets from other
large, well-financed automobile, recreational vehicle and truck
manufacturers which are offering factory products comparable to those of
the Company and the increasing price competition occurring in the market.
(d) The risks faced by a single-product category company.
(e) The cyclicality of the automotive industry.
(f) The relationship between the acquisition price per share and the
historical market price of the Common Stock.
(g) The presentation of Robinson-Humphrey on June 9, 1999 to the Board
and their opinion dated June 10, 1999 stating that, based upon and subject
to certain matters and assumptions set forth therein, the cash
consideration of $13.00 per share of Common Stock to be received by the
holders of shares of Common Stock in the Offer and the Merger, was fair
from a financial point of view to the holders of Common Stock.
(h) The investigation of acquisition interest in the Company conducted
by the Company during 1998, and the preliminary due diligence and
negotiations of acquisition terms by a United States insurance company
occurring in early 1998 and early 1999.
(i) The fact that the Merger Agreement, while not permitting the
Company to continue to solicit or initiate discussions with other
prospective purchasers, permits the Company under certain specified
circumstances to furnish information to, and negotiate or participate in
discussions with, third parties.
(j) The reasonableness of the termination fee requirements in the
Merger Agreement.
(k) The limited number of conditions to the obligations of Parent and
Offeror to consummate the Offer and the Merger, including the absence of a
financing condition in the Offer, and the financial strength of Parent.
10
<PAGE> 12
The Board did not assign relative weights to the foregoing factors or
determine that any factor was of more importance than other factors. Rather, the
Board viewed its conclusions and recommendations as being based on the totality
of the information presented to and considered by it.
A copy of the written opinion of Robinson-Humphrey which sets forth the
factors considered, assumptions made and any limitations on its review, is
attached as Exhibit (a)(6) to this Schedule 14D-9. Shareholders are urged to
read the opinion of Robinson-Humphrey carefully and in its entirety.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to a letter agreement dated June 3, 1999 (the "Engagement
Letter"), the Company retained Robinson-Humphrey to act as its financial advisor
in connection with the sale of the Company under the terms of the Offer and the
Merger Agreement. Under the terms of the Engagement Letter, the Company paid
Robinson-Humphrey an initial fee of $50,000 upon execution of the Engagement
Letter and agreed to pay $150,000 upon consummation of the Merger. In addition,
the Engagement Letter provides that the Company will reimburse Robinson-Humphrey
for its out-of-pocket expenses and will indemnify Robinson-Humphrey and its
officers, directors, and controlling persons against certain liabilities,
including liabilities arising under the federal securities laws.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Each year the members of the Board who are not otherwise employees of
the Company have been granted an option to purchase shares of Common Stock under
one of the Stock Option Plans as part of their compensation for their services
as directors. The number of shares of Common Stock subject to the option has
been derived by dividing $25,000 by the market price of a share of Common Stock
on the day immediately prior to the date of grant. The date of grant has been
the date on which the annual meeting is held. At the annual meeting of the
Company to be held June 23, 1999, each non-employee director will be paid
$25,000 in lieu of a grant of a stock option to purchase shares of Common Stock.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, each executive officer,
director and affiliate of the Company currently intends to tender to Offeror all
shares of Common Stock held of record or beneficially by them. As indicated
above, each of Messrs. Blank and Dorfman has entered into an agreement with
Parent whereby they have agreed to tender to Parent, in connection with the
Offer, all the shares of Common Stock beneficially owned by them. These
agreements also give Parent and Offeror a proxy to vote these shares of Common
Stock on matters relating to the Offer and Merger and, under certain
circumstances, give Parent an option to purchase these shares of Common Stock.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, no negotiation is being
undertaken or is underway by the Company in response to the Offer that relates
to or would result in (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company or any subsidiary of the Company; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company; (iii) a tender offer for or other acquisition of
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) There are no transactions, board resolutions, agreements in principle,
or signed contracts in response to the Offer, other than as described in this
Schedule 14D-9, that relate to or would result in one or more of the matters
referred to in Item 7(a)(i), (ii), (iii) or (iv).
11
<PAGE> 13
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<C> <S>
(a)(1)*+ Offer to Purchase dated June 16, 1999.
(a)(2)*+ Letter of Transmittal.
(a)(3) Press release issued by Parent and the Company dated June
10, 1999 (incorporated by reference to the Company's Current
Report on Form 8-K, dated June 10, 1999).
(a)(4)* Letter to Shareholders of the Company dated June 16, 1999.
(a)(5)+ Form of Summary Advertisement dated June 16, 1999.
(a)(6)* Opinion dated June 10, 1999 of The Robinson-Humphrey
Company, LLC.
(c)(1)+ Agreement and Plan of Merger dated as of June 10, 1999 by
and among the Company, Parent and Offeror.
(c)(2)+ Stock Option and Tender Agreement dated as of June 10, 1999
between Parent and Martin J. Blank.
(c)(3)+ Stock Option and Tender Agreement dated as of June 10, 1999
between Parent and Larry I. Dorfman.
(c)(4)+ Stock Option Agreement dated as of June 10, 1999 between
Parent and the Company.
(c)(5) 1988 Stock Option Plan (incorporated by reference to the
Company's Registration Statement on Form S-1 filed on June
3, 1988 (Registration Number 33-22279)).
(c)(6) Outside Directors' Stock Option Plan (incorporated by
reference to the Company's Registration Statement on Form
S-1 filed on June 3, 1988 (Registration Number 33-22279)).
(c)(7) 1997 Performance Equity Plan (incorporated by reference to
the Company's Proxy Statement dated May 9, 1997 -- Annex
II).
(c)(8) 1998 Performance Equity Plan (incorporated by reference to
the Company's Proxy Statement dated May 14, 1999 -- Annex
I).
(c)(9) Employment Agreement between the Company and Martin J.
Blank, dated June 10, 1999.
(c)(10) Employment Agreement between the Company and Larry I.
Dorfman, dated June 10, 1999.
</TABLE>
- -------------------------
* Included in materials delivered to shareholders of the Company.
+ Filed as an exhibit to Offeror's Tender Offer Statement on Schedule 14D-1
dated June 16, 1999 and incorporated herein by reference.
12
<PAGE> 14
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
AUTOMOBILE PROTECTION
CORPORATION -- APCO
By: /s/ MARTIN J. BLANK
-----------------------------------
Martin J. Blank
Chairman of the Board,
Chief Operating Officer and
Secretary
Date: June 16, 1999
13
<PAGE> 15
SCHEDULE I
AUTOMOBILE PROTECTION CORPORATION -- APCO
15 DUNWOODY PARK DRIVE -- SUITE 100
ATLANTA, GEORGIA 30338
INFORMATION STATEMENT
PURSUANT TO SECTION 14(f)
OF THE
SECURITIES EXCHANGE ACT OF 1934
AND
RULE 14f-1 THEREUNDER
This Information Statement is being furnished as part of the
Solicitation/Recommendation Statement on Schedule 14D-9 ("Schedule 14D-9") of
Automobile Protection Corporation -- APCO ("Company") to be mailed on or about
June 16, 1999 to shareholders of record of the Company in connection with the
transactions contemplated by the Agreement and Plan of Merger ("Merger
Agreement") dated as of June 10, 1999, by and among the Company, Ford Motor
Company ("Parent") and AM1 Acquisition Company ("Offeror"). Capitalized terms
used herein and not otherwise defined will have the meanings set forth in the
Schedule 14D-9. You are receiving this Information Statement in connection with
the possible election of persons designated by the Offeror to hold at least a
majority of the positions on the board of directors of the Company ("Board").
The Merger Agreement requires the Company, upon acceptance for payment by the
Offeror for the shares of common stock, $.001 par value per share ("Common
Stock"), of the Company pursuant to the Offer ("Offer"), at the election of the
Offeror to either increase the size of the Board or use its best efforts to
cause an appropriate number of the members of the Board to resign and for the
Offeror's designees to be elected or appointed to the Board under the
circumstances described therein. See "Right of Offeror to Designate Directors."
Under the Merger Agreement, the Offeror commenced the Offer on June 16,
1999. The Offer is scheduled to expire on July 14, 1999, unless the Offer is
extended. The Merger Agreement provides that, following the consummation of the
Offer and the satisfaction or waiver of certain conditions, the Offeror will be
merged with and into the Company ("Merger"). As a result of the Offer and the
Merger, the Company will become a wholly-owned subsidiary of Parent.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended, and Rule 14f-1 promulgated thereunder. You are
urged to read this information statement carefully. You are not, however,
required to take any action in connection with this Information Statement.
The information contained in this Information Statement concerning the
Offeror's designees has been furnished to the Company by Parent and the Offeror,
and the Company assumes no responsibility for the accuracy or completeness of
that information.
GENERAL
The Common Stock is the only class of voting securities of the Company
outstanding. Each share of Common Stock entitles the holder to cast one vote
with respect to matters submitted to the Company's shareholders for their
consideration or approval. As of June 10 1999, there were 11,936,716 shares of
Common Stock outstanding. Pursuant to authority granted to it under the
Company's by-laws, the Board has fixed the size of the Board at four members.
All four of the Company's current directors serve staggered four-year terms.
Each director holds office until the director's successor is elected and
qualified or until the director's earlier resignation or removal. Vacancies in
the Board may be filled by the Board; any director chosen to fill a vacancy will
hold office until the next election of directors for the class of directors to
which he has been allocated or until his successor is elected and qualified. In
addition the by-laws provide that the current directors may expand the number of
persons comprising the Board and fill the vacancies thereby created.
<PAGE> 16
RIGHT OF OFFEROR TO DESIGNATE DIRECTORS
The Merger Agreement provides that upon acceptance for payment for the
shares of Common Stock by the Offeror pursuant to the Offer, the Offeror will be
entitled to designate that number of directors, rounded up to the next whole
number, that will confer upon the Offeror representation on the Board equal to
at least that number of directors equal to the product of (i) the total number
of directors on the Board and (ii) the percentage that the number of shares of
Common Stock so purchased by the Offeror bears to the number of shares of Common
Stock outstanding, and the Company is required, at that time, at the option of
the Offeror to either increase the size of the Board or to use its best efforts
to cause the appropriate number of directors to resign and the Offeror's
designees to be appointed or elected. The Offeror has informed the Company that
each of the Offeror's designees named herein has consented to act as a director.
OFFEROR DESIGNEES
The Offeror and Parent have advised the Company that they currently intend
to designate one or more of the persons listed in Section 1 of Schedule I to the
Offer to Purchase, which Schedule I is incorporated herein by reference, to
serve as directors of the Company. The Offeror and Parent have advised the
Company that all of these persons have consented to act as directors of the
Company, if so designated.
CURRENT DIRECTORS OF THE COMPANY
The following table sets forth certain information as of June 10, 1999,
regarding the current directors of the Company. Unless otherwise indicated, each
director has been engaged in the principal occupation shown for more than the
past five years.
<TABLE>
<CAPTION>
TERM DIRECTOR
NAME AGE EXPIRES IN SINCE POSITION
---- --- ---------- -------- --------
<S> <C> <C> <C> <C>
Martin J. Blank...................... 52 2002 1984 Chairman of the Board, Chief Operating
Officer and Secretary
Larry I. Dorfman..................... 43 2001 1984 President, Chief Executive Officer and
Director
Howard C. Miller..................... 72 2000 1989 Director
Mechlin D. Moore..................... 69 1999 1991 Director
</TABLE>
Martin J. Blank, a co-founder of the Company, has served as Secretary and
Director since its incorporation in September 1984 and as the Chairman of the
Board and Chief Operating Officer since April 1988. Mr. Blank is an attorney
admitted to the bar in the States of Georgia and California. Mr. Blank's
experience prior to co-founding the Company includes the practice of law and
representation and financial management for professional athletes. Mr. Blank is
a director of Innotrac Corporation, a corporation that provides fulfillment and
telemarketing services.
Larry I. Dorfman, a co-founder of the Company, has served as President and
Director since its incorporation in September 1984 and as Chief Executive
Officer since April 1988. Prior to co-founding the Company, Mr. Dorfman was Vice
President-Sales for Paymaster Checkwriter Company, Inc. in Atlanta with
responsibility for the direction and supervision of its sales force.
Howard C. Miller has served as Director of the Company since January 1989.
Mr. Miller currently serves on the budget committee of the United States Olympic
Committee. Mr. Miller's past experience includes President and Chief Operating
Officer of Avis, Inc., Vice President of ITT, President and Chief Executive
Officer of Canteen Corporation.
Mechlin D. Moore has served as Director of the Company since June 1991. Mr.
Moore is an independent consultant in insurance communication and marketing. Mr.
Moore's past experience includes President of the Insurance Information
Institute and Senior Vice President of United Air Lines, Inc. Mr. Moore is the
sole nominee for election as director at the Annual Meeting to be held June 23,
1999. Management has indicated it plans to vote any proxies it obtains in favor
of this nominee.
2
<PAGE> 17
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1998, the Board met or took other
action on four occasions. All the directors participated in all the meetings and
actions.
The Board has an Audit Committee and a Compensation Committee. The Audit
Committee, currently comprised of Martin J. Blank, Mechlin D. Moore and Howard
C. Miller, was formed to: (i) recommend annually to the board of directors the
appointment of the independent accountants of the Company; (ii) review with the
independent accountants the scope of the annual audit and review their final
report relating thereto; (iii) review with the independent accountants the
accounting practices and policies of the Company; (iv) review with the internal
and independent accountants the overall accounting and financial controls of the
Company; (v) be available to independent accountants during the year for
consultation; and (vi) review related party transactions by the Company on an
ongoing basis and review potential conflicts of interest situations where
appropriate. The Audit Committee had one meeting in 1998.
The Compensation Committee, currently comprised of Larry I. Dorfman, Howard
C. Miller and Mechlin D. Moore was formed to review overall executive
compensation and review the Company's employee benefit plans. The Compensation
Committee held one meeting in 1998 at which it reviewed the executive
compensation of the executive officers of the Company, Messrs. Martin J. Blank
and Larry I. Dorfman, and the stock option plans of the Company. The
Compensation Committee and the Board continued its policy of linking
compensation of executive officers to enhanced shareholders value.
EXECUTIVE COMPENSATION
Set forth in the following table is information as to the compensation paid
or accrued to the chief executive officer and to each officer receiving
compensation of at least $100,000 (collectively the "Named Executive Officers"),
for the periods indicated.
<TABLE>
<CAPTION>
COMPENSATION OPTIONS/
LONG TERM
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY(1) OTHER NO. OF SHARES(2)
--------------------------- ----------- --------- ----- ---------------------
<S> <C> <C> <C> <C>
Larry I. Dorfman............................ 1998 $685,608 $14,120 50,000
President and Chief Executive 1997 $552,576 -- 50,000
Officer 1996 $362,240 $ 5,093 --
Martin J. Blank............................. 1998 $685,608 $20,780 50,000
Chairman and Chief Operating 1997 $552,576 $16,628 50,000
Officer 1996 $362,240 $18,416 --
</TABLE>
- -------------------------
(1) Represents salary and additional compensation based upon the number of
vehicle service contracts processed each month. See "Report on Executive
Compensation, Employment Arrangements (Chief Executive Officer and Chief
Operating Officer)."
(2) On October 7, 1998, the Board granted each executive stock options to
purchase 50,000 shares of Common Stock at $6.13 per share, which vest
equally over four years and expire each year commencing October 7, 2002 and
ending October 7, 2005.
3
<PAGE> 18
1998 OPTION GRANTS TO EXECUTIVE OFFICERS
The following table sets forth the stock options granted to the Company's
executive officers identified in the compensation table above for the fiscal
year ended December 31, 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
NUMBER OF SHARES APPRECIATION FOR
OF COMMON STOCK PERCENT OF TOTAL OPTION TERM
UNDERLYING OPTIONS GRANTED TO EXERCISE PRICE ---------------------
NAME OPTIONS GRANTED ALL EMPLOYEES PER SHARE 5% 10%
---- ---------------- ------------------ -------------- -- ---
<S> <C> <C> <C> <C> <C>
Larry I. Dorfman.............. 50,000 7.3% $6.13 $94,750 $429,995
President and Chief
Executive Officer
Martin J. Blank............... 50,000 7.3% $6.13 $94,750 $429,995
Chairman and Chief Operating
Officer
</TABLE>
1998 OPTION YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED/ VALUE OPTIONS AT 12/31/98 AT DECEMBER 31, 1998
EXERCISED REALIZED EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE
NAME (#) ($) (#) ($)
---- --------- -------- ---------------------------- -------------------------
<S> <C> <C> <C> <C>
Larry I. Dorfman............... 173,000 -- 56,000/139,000 $536,960/$969,340
Martin J. Blank................ 173,000 -- 10,000/90,000 $ 85,600/$623,400
</TABLE>
STOCK OPTION PLANS
The 1998 Performance Equity Plan ("1998 Plan") of the Company provides for
550,000 shares of Common Stock to be reserved for issuance upon incentive or
non-qualified stock options, stock appreciation rights, restricted stock awards,
deferred stock and other stock based awards ("Awards"). Awards may be made to
officers, directors, key employees and consultants of the Company. The 1998 Plan
will terminate when no further awards may be granted and awards granted are no
longer outstanding, provided incentive options may only be granted until August
7, 2008. The 1998 Plan is administered by the Board. The Board, to the extent
permitted by the provisions of the 1998 Plan, has the authority to determine the
selection of participants, allotment of shares, price, and other conditions of
purchase of Awards and administration of the 1998 Plan in order to attract and
retain persons instrumental to the success of the Company. At April 30, 1999,
there are options outstanding under the 1998 Plan to purchase 476,250 shares of
Common Stock at prices ranging from $6.13 to $9.00. No options under the 1998
Plan have been exercised.
The 1997 Performance Equity Plan ("1997 Plan") of the Company provides for
500,000 shares of Common Stock to be reserved for issuance upon incentive or
non-qualified stock options, stock appreciation rights, restricted stock awards,
deferred stock, stock reload options and other stock based awards ("Awards").
Awards may be made to officers, directors, key employees and consultants of the
Company. The 1997 Plan will terminate when no further awards may be granted and
awards granted are no longer outstanding, provided incentive options may only be
granted until April 4, 2007. The 1997 Plan is administered by the Board. The
Board, to the extent permitted by the provisions of the 1997 Plan, has the
authority to determine the selection of participants, allotment of shares,
price, and other conditions of purchase of Awards and administration of the 1997
Plan in order to attract and retain persons instrumental to the success of the
Company. At April 30, 1999, there are options outstanding under the 1997 Plan to
purchase 486,622 shares of Common Stock at prices ranging from $3.19 to $12.13.
Since inception 13,300 options under the 1997 Plan have been exercised at an
average price of $4.34.
The 1988 Stock Option Plan ("1988 Plan") of the Company provides for
800,000 shares of the Common Stock to be reserved for issuance upon exercise of
options designated as "incentive stock options" or "non-
4
<PAGE> 19
qualified options" within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended. As of April 1, 1998, the Board was no longer
authorized to issue options under the 1988 Plan: outstanding options under the
1988 Plan continue to remain exercisable in accordance with the terms of the
respective option agreements. The 1988 Plan is administered by the Board or a
committee appointed by the Board. Options may be exercised as provided in the
option agreement, but no option granted to an employee may be exercised unless
the grantee is a regular employee of the Company, or a subsidiary, and has been
in a regular employee for at least one year after the date of grant, except that
in the event of death, options may be exercised until the sooner of the
expiration date of the option or six months following the death of the optionee.
Each option not exercised expires as provided in the option agreement. Options
are non-transferable, except in the event of death of the optionee. At April 30,
1999, options to purchase 274,147 shares of the Common Stock, at prices ranging
from $1.75 to $10.50 per share, were outstanding under the 1988 Plan. Between
inception of the 1988 Plan and April 30, 1999, 464,895 options have been
exercised at an average exercise price of $1.82 per share.
Prior to April 1, 1998, directors received automatic grants of options
under the 1988 Outside Director's Stock Option Plan ("Director's Plan") to
purchase that number of shares of Common Stock having an aggregate market value
on the date of grant equal to $25,000, at an exercise price per share equal to
the fair market value of a share of the Common Stock on the date of grant. The
Director's Plan, by its terms, provided that no new awards may be granted after
April 1, 1998. At April 30, 1999, there were outstanding options to purchase
17,964 shares of Common Stock, at prices ranging from $2.32 to $3.50, under the
Director's Plan.
INDEBTEDNESS OF MANAGEMENT
During the fiscal year ended June 10, 1999, the following directors and
executive officers of the Company have been indebted to the Company for amounts
in excess of $60,000. All of the indebtedness listed below are in the nature of
short-term loans, each evidenced by a promissory note, payable on demand by the
Company upon notice to the borrower. Each loan was an advance of compensation to
be paid to the borrower.
<TABLE>
<CAPTION>
POSITION WITH MAXIMUM AMOUNT
NAME COMPANY INDEBTEDNESS OUTSTANDING
---- ------------- ------------ -----------
<S> <C> <C> <C>
Larry I. Dorfman.................. President, Chief Executive Officer
and Secretary $395,992 $393,639
Martin J. Blank................... Chairman of the Board, Chief
Operating Officer and Secretary $ 72,117 $ 51,717
</TABLE>
DIRECTOR COMPENSATION
Members of the Board who are not otherwise employees of the Company receive
director fees of $4,000 per meeting attended. In addition, directors are
reimbursed for their expenses in attending all meetings of the Board. Directors
are also be eligible for other compensation and benefits as may be approved by
the Board from time to time, including benefits under the 1997 Plan. Under the
Merger Agreement, the members of the Board who are not employees of the Company
will be paid $25,000 at the time of the annual meeting to be held June 23, 1999
in lieu of any award of benefits under the 1997 Plan during the fiscal year
ending December 31, 1999.
The following table shows the number of shares of the Common Stock covered
by options granted to current directors since January 1, 1998, the number of
shares of the Common Stock acquired by current directors since that date through
exercise of options and the number of shares of Common Stock subject to all
outstanding options of current directors at December 31, 1998. Additionally,
10,822 options granted to a
5
<PAGE> 20
former director of the Company, which are exercisable at $2.32 per share and
expire in 2004, are also outstanding.
<TABLE>
<CAPTION>
HOWARD C. MILLER MECHLIN D. MOORE
---------------- ----------------
<S> <C> <C>
Granted 1/1/98 -- 12/31/98:
Number of shares.......................................... 2,061 2,061
Average per share option price............................ $ 12.13 $ 12.13
Exercised 1/1/98 -- 12/31/98:
Number of shares.......................................... 140,452 29,207
Aggregate option price of options exercised............... $ 1.42 $ 2.57
Net value realized........................................ $1,677,855 $315,617
Unexercised options at 12/31/98:
Number of shares.......................................... 9,203 9,203
Average unrealized value per share on 12/31/98(1)......... $ 6.40 $ 6.40
</TABLE>
- -------------------------
(1) Calculated as the difference between the market price of one share of the
Common Stock on December 31, 1998 and the average per share option price.
REPORT ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended ("Securities
Act"), or the Securities Exchange Act of 1934, as amended ("Exchange Act") that
might incorporate future filings, including this Information Statement, in whole
or in part, this section entitled "Report on Executive Compensation" and the
Performance Graph appearing elsewhere in this Information Statement will not be
incorporated by reference into any current filings or into any future filings,
and will not be deemed soliciting material or filed under the Securities Act or
Exchange Act.
Report. To date, the compensation policies of the Company have been
developed to link the compensation of the executive officers of the Company with
enhanced shareholder value. Through the establishment of short- and long-term
incentive plans and the use of base salary and performance bonus combinations,
the Company has sought to align the financial interests of its executive
officers with those of its shareholders.
Employment Arrangements (Chief Executive Officer and Chief Operating
Officer)
The Chief Executive Officer and Chief Operating Officer each receive a base
salary of $72,000 plus additional compensation based upon the number of vehicle
service contracts processed each month which exceed a prescribed level. Messrs.
Blank and Dorfman are eligible to participate in other employee benefit plans as
generally made available to employees of the Company.
Martin J. Blank -- Larry I. Dorfman -- Howard C. Miller -- Mechlin D. Moore
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table and accompanying footnotes on the following pages set forth
certain information as of June 10, 1999 with respect to the stock ownership of
(i) those persons or group who beneficially own more than 5% of the Company's
Common Stock, (ii) each director of the Company, (iii) the Company's chief
executive officer and each of the Company's most highly compensated executive
officers whose individual compensation exceeded $100,000 in the year ended
December 31, 1998, and (iv) all directors and executive officers of the Company
as a group (based upon information furnished by those persons). Shares of Common
Stock issuable upon exercise of options which are currently exercisable or
exercisable by their terms within 60 days of the date of this Information
Statement have been included in the following table. All of the options listed
in the
6
<PAGE> 21
table or the notes are subject to acceleration provisions under their governing
instruments in the event of a change of control which will occur upon
consummation of the Offer and the Merger.
<TABLE>
<CAPTION>
PERCENT OF
OWNERSHIP OF
NUMBER OF SHARES OF COMMON COMMON STOCK
NAME OF BENEFICIAL OWNER STOCK BENEFICIALLY OWNED OUTSTANDING
------------------------ -------------------------- ------------
<S> <C> <C>
Martin J. Blank........................................ 1,050,168(1) 8.8%
Larry I. Dorfman....................................... 912,168(2) 7.6%
Howard C. Miller....................................... 7,142(3) *
Mechlin D. Moore....................................... 8,142(4) *
Directors and officers as a group (4 persons).......... 1,977,650(5) 16.4%
</TABLE>
- -------------------------
* Less than 1%.
(1) Includes options to purchase 20,000 shares of Common Stock which are
currently exercisable and excludes options to purchase 80,000 shares of the
Common Stock which are not currently exercisable. All of the shares of
Common Stock held or issuable on exercise of outstanding options are subject
to a voting agreement and grant of a proxy given to the Parent to vote in
favor of the Offer and Merger and all issues related to the Merger as
directed by Parent and are subject to an option granted to Parent by the
holder to permit the Parent to purchase the Common Stock in limited
circumstances at the price paid in the Offer, subject to adjustment. All of
the shares of Common Stock held have been or will be tendered to Parent in
the Offer.
(2) Includes options to purchase 72,000 shares of the Common Stock which are
currently exercisable and excludes options to purchase 123,000 shares of
Common Stock which are not currently exercisable. All of the shares of
Common Stock held and 100,000 shares of Common Stock issuable on exercise of
outstanding options are subject to a voting agreement and grant of a proxy
given to the Parent to vote in favor of the Offer and Merger and all issues
related to the Merger as directed by Parent and are subject to an option
granted to Parent by the holder to permit the Parent to purchase the Common
Stock in limited circumstances at the price paid in the Offer, subject to
adjustment. All of the shares of Common Stock held have been or will be
tendered to Parent in the Offer.
(3) Excludes options to purchase 2,061 shares of the Common Stock which are not
currently exercisable. The holder has indicated his intention to tender the
Common Stock held in the Offer.
(4) Includes options to purchase 7,142 shares of the Common Stock which are
currently exercisable and excludes options to purchase 2,061 shares of
Common Stock which are not currently exercisable. The holder has indicated
his intention to tender the Common Stock held in the Offer.
(5) Includes options to purchase 99,142 shares of the Common Stock and excludes
options to purchase 207,122 shares of Common Stock which are not currently
exercisable.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires officers, directors and persons
who beneficially own more than 10% of a registered class of equity securities of
the Company ("10% Shareholders") to file reports of ownership and changes in
ownership with the Commission. Officers, directors and 10% Shareholders also are
required to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of the copies of the forms furnished to it, and
written representations that no other reports were required, the Company
believes that during the fiscal year ended December 31, 1998, each of its
officers, directors and 10% Shareholders complied with the Section 16(a)
reporting requirements, except that Messrs. Martin J. Blank and Larry I. Dorfman
each filed a Form 4 on April 23, 1999 in respect of an option grant made on
October 7, 1998 that was exempt under Section 16(b) of the Exchange Act.
7
<PAGE> 22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no reportable relationships and related transactions between the
Company and its officers and directors.
PERFORMANCE GRAPH
The following graph demonstrates the performance of the cumulative total
return to the Company's shareholders during the past five years ended December
31, 1998 in comparison to the cumulative total return for The NASDAQ Market
Index and the cumulative total return for a group of insurance agents and broker
companies in the industry.
FIVE-YEAR CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED ON DECEMBER 31, 1993
YEAR ENDED
[BAR GRAPH]
<TABLE>
<CAPTION>
INSURANCE AGENTS, BROKERS,
APCO SERVICE COMPANIES NASDAQ MARKET INDEX
---- -------------------------- -------------------
<S> <C> <C> <C>
'1993' 100.00 100.00 100.00
'1994' 150.00 100.93 104.99
'1995' 187.50 118.21 136.18
'1996' 285.42 140.88 169.23
'1997' 445.83 195.41 207.00
'1998' 783.33 212.03 291.96
</TABLE>
8
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
(a)(1)*+ Offer to Purchase dated June 16, 1999.
(a)(2)*+ Letter of Transmittal.
(a)(3) Press release issued by Parent and the Company dated June
10, 1999 (incorporated by reference to the Company's Current
Report on Form 8-K, dated June 10, 1999).
(a)(4)* Letter to Shareholders of the Company dated June 16, 1999.
(a)(5)+ Form of Summary Advertisement dated June 16, 1999.
(a)(6)* Opinion dated June 10, 1999 of The Robinson-Humphrey
Company, LLC.
(c)(1)+ Agreement and Plan of Merger dated as of June 10, 1999 by
and among the Company, Parent and Offeror.
(c)(2)+ Stock Option and Tender Agreement dated as of June 10, 1999
between Parent and Martin J. Blank.
(c)(3)+ Stock Option and Tender Agreement dated as of June 10, 1999
between Parent and Larry I. Dorfman.
(c)(4)+ Stock Option Agreement dated as of June 10, 1999 between
Parent and the Company.
(c)(5) 1988 Stock Option Plan (incorporated by reference to the
Company's Registration Statement on Form S-1 filed on June
3, 1988 (Registration Number 33-22279)).
(c)(6) Outside Directors' Stock Option Plan (incorporated by
reference to the Company's Registration Statement on Form
S-1 filed on June 3, 1988 (Registration Number 33-22279)).
(c)(7) 1997 Performance Equity Plan (incorporated by reference to
the Company's Proxy Statement dated May 9, 1997 -- Annex
II).
(c)(8) 1998 Performance Equity Plan (incorporated by reference to
the Company's Proxy Statement dated May 14, 1999 -- Annex
I).
(c)(9) Employment Agreement between the Company and Martin J.
Blank, dated June 10, 1999.
(c)(10) Employment Agreement between the Company and Larry I.
Dorfman, dated June 10, 1999.
</TABLE>
- -------------------------
* Included in materials delivered to shareholders of the Company.
+ Filed as an exhibit to Offeror's Tender Offer Statement on Schedule 14D-1
dated June 16, 1999 and incorporated herein by reference.
<PAGE> 1
[AUTOMOBILE PROTECTION CORPORATION LETTERHEAD] EXHIBIT (a)(4)
June 16, 1999
Dear Shareholder:
I am pleased to report that on June 10, 1999, your Company entered into an
agreement and plan of merger (the "Merger Agreement") with Ford Motor Company
and its wholly-owned subsidiary, AMI Acquisition Company ("Offeror"), pursuant
to which Offeror has agreed to acquire the Company.
In accordance with the Merger Agreement, Offeror has today commenced a
tender offer (the "Offer") to purchase all outstanding shares of the Common
Stock of the Company for $13.00 cash per share. If the Offer is successfully
completed, Offeror will, by means of a merger of Offeror into the Company (the
"Merger"), acquire for the same cash price all shares of Common Stock held by
shareholders who do not tender their shares in the Offer and do not exercise
their right to dissent from the Merger under Georgia law. The Offer is
conditioned on at least a majority of the outstanding shares of Common Stock
being validly tendered, the expiration or termination of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and certain
other conditions.
The Board of Directors of the Company has approved, by unanimous vote of
the directors, the Offer, the Merger and the Merger Agreement, and has
determined that the Offer and the Merger are fair to and in the best interests
of the Company and its shareholders. The Board recommends that all shareholders
accept the Offer and tender their shares pursuant thereto.
Enclosed for your consideration are copies of Offeror's tender offer
materials and the Company's Schedule 14D-9, all of which are being filed today
with the Securities and Exchange Commission. These documents, which include a
fairness opinion from the Company's financial adviser, should be read carefully.
In particular, I call your attention to Item 4 of the Schedule 14D-9, which
describes the reasons for the Board's recommendation.
Sincerely,
/s/ LARRY I. DORFMAN
Larry I. Dorfman
President and Chief Executive Officer
<PAGE> 1
EXHIBIT (a)(6)
THE ROBINSON-HUMPHREY COMPANY, LLC
<TABLE>
<S> <C>
CORPORATE FINANCE INVESTMENT BANKERS
DEPARTMENT SINCE 1894
</TABLE>
June 10, 1999
Automobile Protection Corporation
15 Dunwoody Park Drive, Suite 100
Atlanta, GA 30338
Members of the Board of Directors:
We understand that Automobile Protection Corporation (the "Company") has
entered into an agreement to be acquired by Ford Motor Company, or one of its
wholly owned subsidiaries (collectively, "Ford") (the "Proposed Transaction").
The terms and conditions of the Proposed Transaction cause Ford to commence a
tender offer to purchase all of the issued and outstanding shares of the
Company's common stock at a price per share of not less than $13.00, net to the
seller in cash, subject to the terms and conditions set forth in the Definitive
Merger Agreement (the "Agreement").
We have been requested by the Company to render our opinion with respect to
the fairness, from a financial point of view to the Company of the consideration
to be received by the shareholders in the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) financial and
operating information with respect to the business, operations and prospects of
the Company furnished to us by the Company, (2) a trading history of the
Company's common stock and a comparison of that trading history with those of
other companies which we deemed relevant, (3) a comparison of the historical
financial results and present financial condition of the Company with those of
other companies which we deemed relevant, and (4) a comparison of the financial
terms of the Proposed Transaction with the terms of certain other recent
transactions which we deemed relevant. In addition, we have had discussions with
the management of the Company concerning its business, operations, assets,
present condition and future prospects and undertook such other studies,
analyses and investigations as we deemed appropriate.
We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our opinion without
independent verification. With respect to the financial forecasts/projections of
the Company, we have assumed that such forecasts/projections have been
reasonably prepared on the bases reflecting the best currently available
estimates and judgments of the management of the Company as to the future
financial performance of the Company. In arriving at our opinion, we have not
conducted a physical inspection of the properties and facilities of the Company
and have not made nor obtained any evaluations or appraisals of the assets or
liabilities of the Company. In addition, you have not authorized us to solicit,
and we have not solicited, any indications of interest from any third party with
respect to the purchase of all or a part of the Company's business. Our opinion
is necessarily based upon market, economic and other conditions as they exist
on, and can be evaluated as of, the date of this letter.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In
ATLANTA FINANCIAL CENTER
3399 PEACHTREE ROAD. NE - ATLANTA, GEORGIA 30526
(404) 266-6000
<PAGE> 2
Automobile Protection Corporation
June 10, 1999
Page Two
- ------------------------------
addition, the Company has agreed to indemnify us for certain liabilities arising
out of the rendering of this opinion.
Based upon and subject to the forgoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
received in the Proposed Transaction is fair to the shareholders.
THE ROBINSON-HUMPHREY COMPANY, LLC
By: THE ROBINSON-HUMPHREY COMPANY, LLC
<PAGE> 1
EXHIBIT (c)(9)
EMPLOYMENT AGREEMENT
--------------------
This Agreement, entered into as of the 10th day of June, 1999, between
Automobile Protection Corporation, a Georgia corporation, with offices at Suite
100, 15 Dunwoody Park Drive, Atlanta, Georgia 30338 (the "Company") and Martin
Blank, an individual residing at c/o Automobile Protection Corporation, Suite
100, 15 Dunwoody Park Drive, Atlanta, Georgia 30338(the "Executive"). This
Agreement will be effective upon the earlier to occur of (i) the acceptance for
payment of shares of the common stock, par value $.001 per share, of the Company
by AM1 Acquisition Company ("Sub") or any other subsidiary of the Ford Motor
Company ("Parent") pursuant to a tender offer commenced pursuant to the
Agreement and Plan of Merger, dated as of June 10, 1999 among Sub, Parent and
the Company or (ii) the exercise by Parent, in whole or in part, of the option
granted by Employee to Parent pursuant to the Stock Option and Tender Agreement,
dated as of June 10, 1999 between Employee and Parent (the "Effective Date").
RECITALS
1. The Company desires to retain the Executive and the Executive desires to
accept employment with the Company under the terms and provisions set forth
below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and covenants contained
in this Agreement, the Company and the Executive agree as follows:
1. Term. The Term of this Agreement shall commence on the Effective Date and
terminate on December 31, 2002 (the "Employment Period"). Notwithstanding
anything to the contrary contained herein, the Employment Period is subject
to termination pursuant to Section 5.
2. Employment. The Company agrees to employ and engage the services of the
Executive during the Employment Period as Chairman of the Board and Chief
Operating Officer ("Chairman & COO") of the Company and Executive agrees to
serve the Company in such capacity, on a full-time basis, during the
Employment Period of this Agreement. Executive shall perform the services
contemplated and further described herein at the Company Headquarters in
Atlanta, Georgia, except as may be required in the ordinary course of
business. Commercially reasonable efforts will be made to maintain the
Company Headquarters in Atlanta, Georgia.
3. Job Description.
3.1 Position and Duties. During the Employment Period, the Executive's
position, duties and responsibilities shall be those of Chairman & COO
of the Company and Executive shall perform such duties and have such
responsibilities which are of the same character and nature as those
typically performed by a Chairman and COO of
<PAGE> 2
2
the Company, and of the character and nature generally performed prior
to the Closing Date (as defined in the Agreement and Plan of Merger
dated as of June 10, 1999 among Parent, Sub and the Company).
Notwithstanding the above, the Board of Directors shall have the
absolute right to modify or change the position, duties,
responsibilities and title of the Executive in any respect, so long as
the Executive shall continue to be employed in a senior executive
capacity during the Employment Period and the modifications or changes
to Executive's position, duties and responsibilities do not have a
material negative impact on Executive's ability to attain EBITE goals
(as defined in Exhibit A) linked to his Incentive Compensation.
3.2 Devotion of Efforts. The Executive shall devote his full business time
during normal business hours to the business and affairs of the
Company, use his reasonable efforts to promote the interests of the
Company and perform the responsibilities assigned to him in accordance
with this Agreement. During the Employment Period of this Agreement,
Executive shall not engage in other employment, except with the prior
consent of the Board of Directors, which consent will not be
unreasonably withheld so long as the other employment does not
conflict with the interests of Ford Motor Company or its affiliates.
Notwithstanding the foregoing, Executive may continue to own up to 25%
of, and be a member of the board of directors of, Safeguard Products
International, Inc. ("Safeguard"), so long as (W) Executive is not
involved in the business of Safeguard (other than oversight of the
business to the extent necessary to discharge Executive's fiduciary
duties as a member of the board of directors of Safeguard); (X) no
resources of the Company are used or directed towards activities of
Safeguard, except for brokerage services provided by The Aegis Group,
Inc. to Safeguard on an arms length basis, consistent with past
practice, and (Y) no business opportunities of the Company of which
Executive is or may become aware are directed to Safeguard.
4. Compensation and Other Employment Terms.
4.1 Base Salary. The Company shall pay the Executive an initial annual
base salary of $72,000 ("Base Salary"). The Base Salary shall be
payable in cash, subject to applicable withholdings, in accordance
with the then current payment policies of the Company for its
executives.
4.2 Incentive Compensation. As further compensation, the Executive shall
be eligible for incentive compensation payments in an amount described
on Exhibit A hereto ("Incentive Compensation ").
4.3 Employee Benefits. In addition to the Base Salary and payments under
any Incentive Compensation arrangement that are payable hereunder, the
Executive shall be eligible during the Employment Period for the
following employee benefits:
(a) Vacation and Sick Leave. Participation in the vacation and
sick leave benefit maintained for executives of the Company;
paid vacation time shall be 4 weeks per year.
<PAGE> 3
3
(b) Automobile. Executive will be provided with an automobile on
terms and conditions to be mutually agreed upon by Executive
and the Company.
(c) Business Expense Reimbursement. Reimbursement for, or payment
of, the legitimate business expenses, including appropriate
entertainment expenses incurred by Executive on behalf of the
Company, pursuant to the written policies of the Company.
(d) 401(k) Plan. Participation in the 401(k) retirement benefit
plan made available to the employees of the Company on the
same basis that other executives of the Company participate in
such plan.
(e) Employee Benefit Plans. Participation in the employee benefit
plans of the Company made available to the employees of the
Company on the same basis that other executives of the Company
participate in such plans.
(f) Changes to Employee Benefit Plans. Nothing in this Agreement
shall prevent the Board of Directors of the Company from
changing, modifying, amending or terminating the employee
benefit plans of the Company so as to eliminate, reduce or
otherwise change any benefit payable under this Agreement, so
long as Executive is treated in a manner which is
substantially similar to other employees of the Company.
Executive agrees to submit regular reports of personal use of the
employee benefits as required under the Internal Revenue Code of 1986
to be treated as taxable income to Executive in order to allow the
Company to determine the amount which must be reported to the Internal
Revenue Service as compensation to Executive.
5. Termination.
5.1 Death. This Agreement shall terminate automatically upon the
Executive's death. All benefits and compensation then accrued
hereunder, and under any plans provided for in Section 4.3 hereof,
shall be paid to the Executive's beneficiaries, legal representatives,
or heirs, as appropriate.
5.2 Disability. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive (A) shall have been absent
from the full-time performance of his duties with the Company for six
consecutive months, and (B) shall not, within 30 days after written
notice of termination is given to the Executive, have returned to the
full-time performance of his duties, the Company may terminate the
Executive's employment for disability. During such period of absence,
the Executive shall continue to receive the benefits provided in
Section 4 hereof, and thereafter the Executive's benefits shall be
determined under the Company's disability insurance plans and policies
provided under Section 4.3 hereof. In the event that Executive's
employment with the Company is terminated pursuant to this Section
5.2, the Company shall pay the Executive his full accrued Base Salary
at the rate in effect at the time of such termination, as well as
accrued Incentive Compensation through the date of termination.
<PAGE> 4
4
5.3 Cause. The Company may terminate the Executive's employment for Cause.
For purposes of this Agreement, "Cause" shall mean (A) any act of
dishonesty or knowing and willful breach of fiduciary duty on the
Executive's part which is intended to result in his personal
enrichment at the expense of the Company, (B) conviction of a felony
involving moral turpitude or unlawful, dishonest, or unethical
conduct, or other conduct involving moral turpitude, unlawful,
dishonest, or unethical conduct that a reasonable person would
consider damaging to the reputation of the Company; or (C) any
material breach of this Agreement by the Executive, following written
warning and a reasonable opportunity to cure if appropriate. If the
Executive's employment is terminated for Cause, the Company shall pay
the Executive his full accrued Base Salary at the rate in effect at
the time of such termination, as well as accrued Incentive
Compensation through the date of termination. Except as otherwise
provided in Section 6.3 hereof, the Company shall have no further
obligation to the Executive under this Agreement.
5.4 Termination by the Company Other than for Cause. In the event that
this Agreement is terminated for any reason by the Company (except for
a termination for "Cause" as defined in Section 5.3 above or for death
or disability), Executive shall be entitled to receive termination
benefits payable in a lump sum in an amount equal to the greater of
(i) the remaining Base Salary during the Employment Period or (ii) 12
months Base Salary. Executive shall also be entitled to receive
Incentive Compensation through the termination of the Employment
Period, which is December 31, 2002, payable in accordance with the
terms set forth in Paragraph 8 of Exhibit A. Except as provided
otherwise in Section 6.3 hereof, the Executive shall not be entitled
to any further payments under Section 4 except for any appropriate
benefits under Section 4.3 (e) available to terminated employees
generally. The Company shall provide Executive with at least ten (10)
days notice of any termination under this Section 5.4.
5.5 Voluntary Termination by Executive. At any time during the Employment
Period, the Executive may voluntarily terminate employment with the
Company upon ninety (90) days' written notice. In the event of such
termination, all rights, duties and obligations of both parties shall
cease to be effective upon the end of the ninety (90) day notice
period, except with respect to the Restricted Covenants, as defined in
Section 12. In the event that Executive terminates his employment with
the Company pursuant to this Section 5.5, the Company shall pay the
Executive his full accrued Base Salary at the rate in effect at the
time of such termination, as well as accrued Incentive Compensation
through the date of termination.
5.6 Retirement. The Executive may terminate his employment hereunder by
retirement during the Employment Period, provided the Company consents
to such retirement action. In such event, this Agreement shall
terminate automatically except with respect to the Restricted
Covenants and the Company's obligations under Section 6.3. All
benefits and compensation then accrued hereunder, and under any plans
provided for in Section 4.3 hereof, shall be paid promptly to the
Executive.
<PAGE> 5
5
6. Covenant Not to Compete.
6.1 Executive's Acknowledgment. Executive acknowledges that the covenants
in Section 6 are given in consideration for and in connection with
this Agreement. Executive agrees and acknowledges that in order to
assure the Company that it will retain its value as a going concern,
it is necessary that Executive undertake not to utilize his special
knowledge of the Business and his relationships with customer and
suppliers to compete with the Company. Executive further acknowledges
that:
(a) the Company is and will be engaged in the business of the design,
sale and administration of extended service contracts and extended
warranty programs for motor vehicles (the "Business");
(b) Executive will occupy a position of trust and confidence with the
Company during the Employment Period and, during such period and
Executive's employment under this Agreement, Executive will have
access to and have possession of trade secrets and confidential
information concerning the Company and the Business;
(c) the agreements and covenants contained in this Section 6 are
essential to protect the business and goodwill of the Company; and
(d) Executive's employment with the Company has special, unique and
extraordinary value to the Company and the Company would be
irreparably damaged if Executive were to provide services to any
person or entity in violation of the provisions of this Agreement.
6.2 Competitive Activities. Executive hereby agrees that for the
Restricted Period as defined below, he will not, on behalf of himself,
or on behalf of any other person, company, corporation, partnership or
other entity or enterprise, directly or indirectly, as an employee,
proprietor, stockholder, partner, consultant, or otherwise, engage in
any business or activity competitive with the Business, anywhere in
the United States (the "Territory"); except (i) that Executive may
continue to own up to 25% of, and be a member of the board of
directors of Safeguard Products International, Inc. ("Safeguard"), so
long as (W) Executive is not involved in the business of Safeguard
(other than oversight of the business to the extent necessary to
discharge Executive's fiduciary duties as a member of the board of
directors of Safeguard); (X) no resources of the Company are used or
directed towards activities of Safeguard, except for brokerage
services provided by The Aegis Group, Inc. to Safeguard on an arms
length basis, consistent with past practice, and (Y) no business
opportunities of the Company of which Executive is or may become aware
are directed to Safeguard, and (ii) that nothing contained herein
shall be construed to prevent Executive from investing in the stock of
any competing corporation listed on a national securities exchange or
traded in the over-the-counter market, but only if Executive is not
involved in the business of said corporation and if Executive and his
associates (as such term is defined in Regulation 14(A) promulgated
under the Securities Exchange Act of 1934, as in effect on the date
hereof), collectively, do not own more than an aggregate of two
percent of the stock of such corporation. With respect to the
Territory, Executive specifically acknowledges that the Company has
<PAGE> 6
6
conducted or plans to conduct the Business throughout those areas
comprising the Territory and the Company intends to continue to expand
the Business throughout the Territory. For purposes hereof, the
Restricted Period shall mean the sum of (i) the period of time during
which the Executive is employed by the Company and (ii) the
Consultancy Period defined in Section 6.3 below.
6.3 Consultant Agreement. Executive agrees that for the Consultancy Period
as defined below, Employee shall continue to make his services
available to the Company as a consultant, at such times and in such
manner as is mutually agreeable to the parties. For Executive's
services as a consultant and in consideration for the covenant not to
compete as provided in this Section 6, the Company shall pay Executive
annually on the anniversary date of the termination the amounts set
forth in Paragraph 6 of Exhibit A. For purposes hereof, the
Consultancy Period shall mean the three year period commencing on the
date of the Executive's employment termination for any reason.
6.4 Solicitation of Employees. Without limiting the generality of the
provisions of Section 6.2 above, Executive agrees that during the
Restricted Period he shall not on behalf of himself or on behalf of
any other person, company, corporation, partnership or other entity or
enterprise, (except on behalf of the Company), directly or indirectly,
solicit employees, agents or consultants of the Company to become
employees, agents or consultants for him or for such businesses to the
extent such businesses are engaged in activities that compete with the
Business. Executive will not be in violation of this Section 6.4 in
the event that either Cathy Dorfman and/or Mike Curran terminate their
employment with the Company during the Restricted Period.
7. Confidential Information. During the Confidential Information Period as
defined below, Executive shall keep secret and retain in strictest
confidence, and shall not, without the prior written consent of the Board
of Directors of the Company, furnish, make available or disclose to any
third party or use for the benefit of himself or any third party, any
Confidential Information, except in the normal course of business during
the period of time during which the Executive is employed by the Company.
As used in this Agreement, "Confidential Information" shall mean any
information relating to the business or affairs of the Company or the
Company's affiliates or the Business, including but not limited to
information relating to financial statements, customer identities,
potential customers, employees, suppliers, servicing methods, equipment,
product or service programs, strategies and information, databases and
information systems, analyses, profit margins or other proprietary
information used by the Company or the Company's affiliates; provided,
however, that Confidential Information shall not include any information
which is in the public domain or becomes known in the industry through no
wrongful act on the part of Executive. Executive acknowledges that the
Confidential Information is vital, sensitive, confidential and proprietary
to the Company or the Company's affiliates. For purposes hereof, the
Confidential Information Period shall mean (i) as to Confidential
Information generally, the sum of the Restricted Period plus two years and
(ii) as to Confidential Information that constitutes trade secrets as
defined by Georgia law, forever.
<PAGE> 7
7
8. Inventions and Other Intellectual Property. Executive hereby agrees that
all right, title and interest in and to all of the Executive's
"Discoveries" and work product made during the Employment Period related to
the Business of the Company, whether pursuant to this Agreement or
otherwise, shall belong solely to the Company, whether or not they are
protected or protectable under applicable patent, trademark, service mark,
copyright or trade secret laws. For purposes of this Section 8,
"Discoveries" means all inventions, designs, discoveries, improvements and
works of authorship, including, without limitation, any information
relating to the Company's know-how, processes, designs, computer programs
and routines, formulae, techniques, developments or experimental work,
work-in-progress, or business trade secrets made or conceived or reduced to
practice by the Company. Executive agrees that all work or other material
containing or reflecting any such Discoveries and work product shall be
deemed to be work made for hire and shall be owned by the Company without
further consideration. If it is determined that any such works are not
works made for hire, the Executive hereby assigns to the Company all of the
Executive's right, title and interest, including all rights of copyright,
patent, and other intellectual property rights, to or in such Discoveries
or work product. Executive covenants that he shall keep the Company
informed of the development of all Discoveries or work product made,
conceived or reduced to practice by the Company, in whole or in part, alone
or with others, which either result from any work Executive may do for, or
at the request of, the Company, or are related to the Company's present or
contemplated activities, investigations, or obligations. Executive further
agrees that at the Company's request and expense, he will execute any
assignments or other documents necessary to transfer any such Discoveries
or work product to the Company and to cooperate with the Company or its
nominee in perfecting the Company's title (or the title of the Company's
nominee) in such materials. The Executive grants the Company a permanent,
non-exclusive, paid-up and worldwide license under the Executive's
intellectual property rights in any Discoveries or work product that is
delivered to the Company by the Executive in connection with the
performance of services for the Company to use, have used, make, have made,
sell and have sold such Discoveries and reproduce in quantities, prepares
derivative works and publicly display and distribute such work product.
9. Interference with Relationships. During the Restricted Period, Executive
shall not, directly or indirectly, as employee, agent, consultant,
stockholder, director, co-partner or in any other individual or
representative capacity intentionally solicit or encourage any present or
future customer, agent or supplier of the Company to terminate or otherwise
alter his, her or its relationship with the Company in any manner adverse
to the Company.
10. Return of Company Materials Upon Termination. Executive acknowledges that
all price lists, sales manuals, catalogs, binders, customer lists and other
customer information, supplier lists, financial information, and other
records or documents containing Confidential Information prepared by
Executive or coming into Executive's possession by virtue of Executive's
employment by the Company in any media is and shall remain the property of
the Company or the Company's affiliates as the case may be and that upon
termination of Executive's employment hereunder, Executive shall return
immediately to the Company all such items in his possession, together with
all
<PAGE> 8
8
copies thereof.
11. Effect on Termination. Notwithstanding the termination of Executive's
employment with the Company, those provisions contained in Sections 5, 6,
7, 8, 9 10 and 11 hereof shall remain in full force and effect.
12. Remedies. Executive acknowledges and agrees that the covenants set forth in
Sections 6, 7, 8, 9, and 10 of this Agreement (collectively, the
"Restricted Covenants") are reasonable and necessary for the protection of
the Company's business interests, that irreparable injury will result to
the Company if Executive breaches any of the terms of the Restrictive
Covenants, and that in the event of Executive's actual or threatened breach
of any such Restrictive Covenants, the Company will have no adequate remedy
at law. Executive accordingly agrees that in the event of any actual or
threatened breach by him of any of the Restrictive Covenants, the Company
shall be entitled to immediate temporary injunctive and other equitable
relief, without the necessity of showing actual monetary damages, subject
to hearing as soon thereafter as possible. Nothing contained herein shall
be construed as prohibiting the Company from pursuing any other remedies
available to it for such breach or threatened breach, including the
recovery of any damage which it is able to prove.
13. Life Insurance. The Company may at its discretion and at any time apply for
and procure as owner and for its own benefit and at its own expense,
insurance on the life of Employee in such amounts and in some form or forms
as the Company may choose. Executive shall cooperate with the Company in
procuring such insurance and shall, at the request of the Company, submit
to such medical examinations, supply such information and execute such
documents as may be required by the insurance company or companies to whom
the Company has applied for such insurance. Executive shall have no
interest whatsoever in any such policy or policies, except that, upon the
termination of Executive's employment hereunder, Executive shall have the
privilege of purchasing any such insurance from the Company for an amount
equal to the actual premiums thereon previously paid by the Company.
14. Miscellaneous.
14.1 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the parties and
supersedes any prior understandings or agreements between the parties,
written or oral, to the extent they related in any way to the subject
matter hereof.
14.2 No Assignment; Assumption. This Agreement is personal to the Executive
and shall not be assignable by the Executive, other than by last will
and testament or by the laws of descent and distribution with respect
to any amounts due hereunder. This Agreement shall inure to the
benefit of and be binding upon any successor to the business or assets
of the Company.
14.3 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
<PAGE> 9
9
14.4 Arbitration. Any controversy, claim or dispute of whatever nature
between Executive and the Company arising out of or relating to this
Agreement, or arising out of Executive's employment with the Company,
shall be resolved by binding arbitration before a single arbitrator in
New York, New York pursuant to the Employment Dispute Resolution Rules
of the American Arbitration Association. Each party shall bear its own
costs, expenses and fees, including without limitation attorneys' fees
and experts' fees with respect to any such arbitration. Judgment upon
any resulting arbitration award may be entered in any court of
competent jurisdiction.
14.5 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if (and then two business days after) it is sent by registered
or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to Company: Automobile Protection Corporation
Suite 100
15 Dunwoody Park Drive
Atlanta, GA 30338
with a copy to: Ford Motor Company
The American Road
Suite 325
Dearborn, MI 48121
Attn: John Dickerson, Esq.
If to the Executive: Martin Blank
Suite 100
15 Dunwoody Park Drive
Atlanta, GA 30338
with a copy to: Andrew D. Hudders, Esq.
Graubard Mollen & Miller
600 Third Avenue
New York, NY 10016-2097
Either party may send any notice, request, demand, claim or the other
communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it actually is
received by the intended recipient. Either party may change the address to
which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other party notice in the
manner herein set forth.
14.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Georgia without
giving effect
<PAGE> 10
10
to any choice or conflict of law provision or rule (whether the State
of Georgia or any other jurisdiction) that would cause the application
of the law of any jurisdiction other than the State of Georgia.
14.7 Amendments. No amendment of any provision of this Agreement shall be
valid unless the same shall be in writing and signed by both the
Company and the Executive.
14.8 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
*****
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
/s/ Martin Blank
-----------------------
Martin Blank
Automobile Protection Corporation
By: /s/ Larry Dorfman
-------------------------
Title: President and CEO
----------------------
<PAGE> 11
EXHIBIT A
INCENTIVE COMPENSATION
1. Executive will be eligible for Incentive Compensation payable quarterly,
subject to applicable tax withholding by the Company and adjustment after
completion of the Company's annual financial audit, for the period
commencing on the Effective Date and ending December 31, 1999 equal to 9.0%
of the 1999 Earnings Before Interest and Taxes (EBIT) before the Incentive
Compensation for Executive and Larry Dorfman is deducted, minus the EBIT
for the period from January 1, 1999 through the Effective Date. For
purposes of this Agreement, the EBIT before Executive and Larry Dorfman
Incentive Compensation will be referred to as EBITE.
2. In accordance with Section 4.2 of the Employment Agreement, Executive will
be eligible for Incentive Compensation payable quarterly, commencing with
the year ending December 31, 2000 according to a formula based on EBITE.
3. EBITE shall be calculated according to GAAP standards, and shall be
consistent with the accounting practices and conventions utilized by the
Company as of December 31, 1998 and will be certified annually by
Pricewaterhouse Coopers, LLC during the Company's annual financial audit.
Any Incentive Compensation amounts paid to Executive prior to completion of
the annual financial audit from Pricewaterhouse Coopers will be subject to
adjustment upon receipt of the results of the financial audit.
4. If there are any material changes to accounting practices (e.g. method of
depreciation, etc.) or conventions from year to year, EBITE shall continue
to be calculated according to the practices and conventions utilized by the
Company as of December 31, 1998, unless the parties mutually agree
otherwise.
5. The Incentive Compensation for calendar years commencing with the year 2000
shall be calculated according to the table below and will be paid quarterly
based on estimated Fiscal Year EBITE, subject to applicable tax withholding
by the Company and adjustment after completion of the Company's annual
financial audit. For purposes hereof, Fiscal Year shall mean January 1 to
December 31.
a. If the Fiscal Year EBITE for the Company is equal to or
exceeds 100% of the EBITE Target as set forth below, the
Executive's Performance Bonus shall be 4.5% of the Company's
Fiscal Year EBITE.
b. If the Fiscal Year EBITE for the Company is equal to or
exceeds 85% and is less than 100% of the EBITE Target as set
forth below, the Executive's Performance Bonus shall be 4.125%
of the Company's Fiscal Year EBITE.
c. If the Fiscal Year EBITE for the Company is equal to or
exceeds 70% and is less than 85% of the EBITE Target as set
forth below, the Executive's Performance Bonus shall be 3.75%
of the Company's Fiscal Year EBITE.
<PAGE> 12
12
d. If the Fiscal Year EBITE for the Company is less than 70% of the
EBITE Target as set forth below, the Executive's Performance Bonus
shall be 1.875% of the Company's Fiscal Year EBITE.
e. The EBITE Targets are:
<TABLE>
<CAPTION>
85% OF 70% OF
EBITE EBITE EBITE
TARGET TARGET TARGET
YEAR ($000) ($000) ($000)
---- ------ ------ ------
<S> <C> <C> <C>
2000 17,302 14,707 12,111
2001 23,048 19,591 16,134
2002 29,044 24,687 20,331
</TABLE>
6. In accordance with Section 6.3 of the Employment Agreement, the Executive
shall be retained as a consultant for the Company for the Consultancy
Period. The annual amount paid pursuant to Section 6.3 of the Employment
Agreement shall be equal to one third (1/3) of the total cumulative annual
Incentive Compensation paid to the Executive for periods between January 1,
2000 and the termination date. This amount will be paid annually in a lump
sum on the first, second and third anniversaries of the date of the
employment termination, provided that Executive has fulfilled his
obligations set forth in Section 6 of the Employment Agreement.
7. In the event the Employment Agreement terminates by reason of disability or
death of the Executive, the Executive or the Executive's beneficiaries,
legal representatives or heirs, as appropriate, shall not be entitled to
any outstanding Incentive Compensation related to years after the date of
death. However, the Executive or Executive's beneficiaries, legal
representatives or heirs, as appropriate, shall be eligible to receive an
amount equal to the consulting fee specified in Paragraph 6 of this Exhibit
A, as if the Executive had not become disabled or had lived throughout the
Consultancy Period upon the same terms and conditions as specified in
Paragraph 6 of this Exhibit A.
8. In the event the Employment Agreement is terminated by the Company other
than for Cause, the Executive will be paid Incentive Compensation through
December 31, 2002, calculated and paid in accordance with Paragraph 5
hereof, using the actual year to date EBITE and pro rata EBITE Target as of
the date of Executive's termination.
9. Terms not otherwise defined herein shall have the same meanings as set
forth in the Employment Agreement.
<PAGE> 1
EXHIBIT (c)(10)
EMPLOYMENT AGREEMENT
This Agreement, entered into as of the 10th day of June, 1999, between
Automobile Protection Corporation, a Georgia corporation, with offices at Suite
100, 15 Dunwoody Park Drive, Atlanta, Georgia 30338 (the "Company") and Larry
Dorfman, an individual residing at c/o Automobile Protection Corporation, Suite
100, 15 Dunwoody Park Drive, Atlanta, Georgia 30338(the "Executive"). This
Agreement will be effective upon the earlier to occur of (i) the acceptance for
payment of shares of the common stock, par value $.001 per share, of the Company
by AM1 Acquisition Company ("Sub") or any other subsidiary of the Ford Motor
Company ("Parent") pursuant to a tender offer commenced pursuant to the
Agreement and Plan of Merger, dated as of June 10, 1999 among Sub, Parent and
the Company or (ii) the exercise by Parent, in whole or in part, of the option
granted by Employee to Parent pursuant to the Stock Option and Tender Agreement,
dated as of June 10, 1999 between Employee and Parent (the "Effective Date").
RECITALS
1. The Company desires to retain the Executive and the Executive desires to
accept employment with the Company under the terms and provisions set forth
below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and covenants contained
in this Agreement, the Company and the Executive agree as follows:
1. Term. The Term of this Agreement shall commence on the Effective Date and
terminate on December 31, 2002 (the "Employment Period"). Notwithstanding
anything to the contrary contained herein, the Employment Period is subject
to termination pursuant to Section 5.
2. Employment. The Company agrees to employ and engage the services of the
Executive during the Employment Period as President and Chief Executive
Officer ("CEO") of the Company and Executive agrees to serve the Company in
such capacity, on a full-time basis, during the Employment Period of this
Agreement. Executive shall perform the services contemplated and further
described herein at the Company Headquarters in Atlanta, Georgia, except as
may be required in the ordinary course of business. Commercially reasonable
efforts will be made to maintain the Company Headquarters in Atlanta,
Georgia.
3. Job Description.
3.1 Position and Duties. During the Employment Period, the Executive's
position, duties and responsibilities shall be those of President and
CEO of the Company and Executive shall perform such duties and have
such responsibilities which are of the same character and nature as
those typically performed by a President and Chief Executive Officer
of the Company, and of the character and nature generally performed
prior to the Closing Date (as defined in the Agreement and Plan of
Merger dated as of June 10, 1999 among Parent, Sub and the Company).
Notwithstanding the above, the Board of Directors shall have the
absolute right to modify or change the position, duties,
responsibilities and title of the Executive in any respect, so long
as the Executive shall continue to be employed in a senior executive
capacity during the Employment Period and the modifications or
changes to Executive's position, duties and responsibilities do not
have a material negative impact on Executive's ability to attain
EBITE goals (as defined in Exhibit A) linked to his Incentive
Compensation.
<PAGE> 2
3.2 Devotion of Efforts. The Executive shall devote his full business
time during normal business hours to the business and affairs of the
Company, use his reasonable efforts to promote the interests of the
Company and perform the responsibilities assigned to him in
accordance with this Agreement. During the Employment Period of this
Agreement, Executive shall not engage in other employment, except
with the prior consent of the Board of Directors, which consent will
not be unreasonably withheld so long as the other employment does not
conflict with the interests of Ford Motor Company or its affiliates.
Notwithstanding the foregoing, Executive may continue to own up to
25% of, and be a member of the board of directors of, Safeguard
Products International, Inc. ("Safeguard"), so long as (W) Executive
is not involved in the business of Safeguard (other than oversight of
the business to the extent necessary to discharge Executive's
fiduciary duties as a member of the board of directors of Safeguard);
(X) no resources of the Company are used or directed towards
activities of Safeguard, except for brokerage services provided by
The Aegis Group, Inc. to Safeguard on an arms length basis,
consistent with past practice, and (Y) no business opportunities of
the Company of which Executive is or may become aware are directed to
Safeguard.
4. Compensation and Other Employment Terms.
4.1 Base Salary. The Company shall pay the Executive an initial annual
base salary of $72,000 ("Base Salary"). The Base Salary shall be
payable in cash, subject to applicable withholdings, in accordance
with the then current payment policies of the Company for its
executives.
4.2 Incentive Compensation. As further compensation, the Executive shall
be eligible for incentive compensation payments in an amount
described on Exhibit A hereto ("Incentive Compensation ").
4.3 Employee Benefits. In addition to the Base Salary and payments under
any Incentive Compensation arrangement that are payable hereunder,
the Executive shall be eligible during the Employment Period for the
following employee benefits:
(a) Vacation and Sick Leave. Participation in the vacation and sick
leave benefit maintained for executives of the Company; paid
vacation time shall be 4 weeks per year.
(b) Automobile. Executive will be provided with an automobile on
terms and conditions to be mutually agreed upon by Executive and
the Company.
(c) Business Expense Reimbursement. Reimbursement for, or payment of,
the legitimate business expenses, including appropriate
entertainment expenses incurred by Executive on behalf of the
Company, pursuant to the written policies of the Company.
(d) 401(k) Plan. Participation in the 401(k) retirement benefit plan
made available to the employees of the Company on the same basis
that other executives of the Company participate in such plan.
(e) Employee Benefit Plans. Participation in the employee benefit
plans of the Company made available to the employees of the
Company on the same basis that other executives of the Company
participate in such plans.
(f) Changes to Employee Benefit Plans. Nothing in this Agreement
shall prevent the Board of Directors of the Company from
changing, modifying, amending or terminating the employee benefit
plans of the Company so as to eliminate, reduce or otherwise
change any benefit payable under this Agreement, so long as
Executive is treated in a manner which is substantially similar
to other employees of the Company.
Executive agrees to submit regular reports of personal use of the employee
benefits as required under the Internal Revenue Code of 1986 to be treated
as taxable income to Executive in order to allow the Company to determine
the amount which must be reported to the Internal Revenue Service as
compensation to Executive.
<PAGE> 3
5. Termination.
5.1 Death. This Agreement shall terminate automatically upon the
Executive's death. All benefits and compensation then accrued
hereunder, and under any plans provided for in Section 4.3 hereof,
shall be paid to the Executive's beneficiaries, legal
representatives, or heirs, as appropriate.
5.2 Disability. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive (A) shall have been absent
from the full-time performance of his duties with the Company for six
consecutive months, and (B) shall not, within 30 days after written
notice of termination is given to the Executive, have returned to the
full-time performance of his duties, the Company may terminate the
Executive's employment for disability. During such period of absence,
the Executive shall continue to receive the benefits provided in
Section 4 hereof, and thereafter the Executive's benefits shall be
determined under the Company's disability insurance plans and
policies provided under Section 4.3 hereof. In the event that
Executive's employment with the Company is terminated pursuant to
this Section 5.2, the Company shall pay the Executive his full
accrued Base Salary at the rate in effect at the time of such
termination, as well as accrued Incentive Compensation through the
date of termination.
5.3 Cause. The Company may terminate the Executive's employment for
Cause. For purposes of this Agreement, "Cause" shall mean (A) any act
of dishonesty or knowing and willful breach of fiduciary duty on the
Executive's part which is intended to result in his personal
enrichment at the expense of the Company, (B) conviction of a felony
involving moral turpitude or unlawful, dishonest, or unethical
conduct, or other conduct involving moral turpitude, unlawful,
dishonest, or unethical conduct that a reasonable person would
consider damaging to the reputation of the Company; or (C) any
material breach of this Agreement by the Executive, following written
warning and a reasonable opportunity to cure if appropriate. If the
Executive's employment is terminated for Cause, the Company shall pay
the Executive his full accrued Base Salary at the rate in effect at
the time of such termination, as well as accrued Incentive
Compensation through the date of termination. Except as otherwise
provided in Section 6.3 hereof, the Company shall have no further
obligation to the Executive under this Agreement.
5.4 Termination by the Company Other than for Cause. In the event that
this Agreement is terminated for any reason by the Company (except
for a termination for "Cause" as defined in Section 5.3 above or for
death or disability), Executive shall be entitled to receive
termination benefits payable in a lump sum in an amount equal to the
greater of (i) the remaining Base Salary during the Employment Period
or (ii) 12 months Base Salary. Executive shall also be entitled to
receive Incentive Compensation through the termination of the
Employment Period, which is December 31, 2002, payable in accordance
with the terms set forth in Paragraph 8 of Exhibit A. Except as
provided otherwise in Section 6.3 hereof, the Executive shall not be
entitled to any further payments under Section 4 except for any
appropriate benefits under Section 4.3 (e) available to terminated
employees generally. The Company shall provide Executive with at
least ten (10) days notice of any termination under this Section 5.4.
5.5 Voluntary Termination by Executive. At any time during the Employment
Period, the Executive may voluntarily terminate employment with the
Company upon ninety (90) days' written notice. In the event of such
termination, all rights, duties and obligations of both parties shall
cease to be effective upon the end of the ninety (90) day notice
period, except with respect to the Restricted Covenants, as defined
in Section 12. In the event that Executive terminates his employment
with the Company pursuant to this Section 5.5, the Company shall pay
the Executive his full accrued Base Salary at the rate in effect at
the time of such termination, as well as accrued Incentive
Compensation through the date of termination.
5.6 Retirement. The Executive may terminate his employment hereunder by
retirement during the Employment Period, provided the Company
consents to such retirement action. In such event, this Agreement
shall terminate automatically except with respect to the Restricted
Covenants and the Company's obligations under Section 6.3. All
benefits and compensation then accrued hereunder, and under any plans
provided for in Section 4.3 hereof, shall be paid promptly to the
Executive.
<PAGE> 4
6. Covenant Not to Compete.
6.1 Executive's Acknowledgment. Executive acknowledges that the covenants
in Section 6 are given in consideration for and in connection with
this Agreement. Executive agrees and acknowledges that in order to
assure the Company that it will retain its value as a going concern,
it is necessary that Executive undertake not to utilize his special
knowledge of the Business and his relationships with customer and
suppliers to compete with the Company. Executive further acknowledges
that:
(a) the Company is and will be engaged in the business of the design,
sale and administration of extended service contracts and
extended warranty programs for motor vehicles (the "Business");
(b) Executive will occupy a position of trust and confidence with the
Company during the Employment Period and, during such period and
Executive's employment under this Agreement, Executive will have
access to and have possession of trade secrets and confidential
information concerning the Company and the Business;
(c) the agreements and covenants contained in this Section 6 are
essential to protect the business and goodwill of the Company;
and
(d) Executive's employment with the Company has special, unique and
extraordinary value to the Company and the Company would be
irreparably damaged if Executive were to provide services to any
person or entity in violation of the provisions of this
Agreement.
6.2 Competitive Activities. Executive hereby agrees that for the
Restricted Period as defined below, he will not, on behalf of
himself, or on behalf of any other person, company, corporation,
partnership or other entity or enterprise, directly or indirectly, as
an employee, proprietor, stockholder, partner, consultant, or
otherwise, engage in any business or activity competitive with the
Business, anywhere in the United States (the "Territory"); except (i)
that Executive may continue to own up to 25% of, and be a member of
the board of directors of Safeguard Products International, Inc.
("Safeguard"), so long as (W) Executive is not involved in the
business of Safeguard (other than oversight of the business to the
extent necessary to discharge Executive's fiduciary duties as a
member of the board of directors of Safeguard); (X) no resources of
the Company are used or directed towards activities of Safeguard,
except for brokerage services provided by The Aegis Group, Inc. to
Safeguard on an arms length basis, consistent with past practice, and
(Y) no business opportunities of the Company of which Executive is or
may become aware are directed to Safeguard, and (ii) that nothing
contained herein shall be construed to prevent Executive from
investing in the stock of any competing corporation listed on a
national securities exchange or traded in the over-the-counter
market, but only if Executive is not involved in the business of said
corporation and if Executive and his associates (as such term is
defined in Regulation 14(A) promulgated under the Securities Exchange
Act of 1934, as in effect on the date hereof), collectively, do not
own more than an aggregate of two percent of the stock of such
corporation. With respect to the Territory, Executive specifically
acknowledges that the Company has conducted or plans to conduct the
Business throughout those areas comprising the Territory and the
Company intends to continue to expand the Business throughout the
Territory. For purposes hereof, the Restricted Period shall mean the
sum of (i) the period of time during which the Executive is employed
by the Company and (ii) the Consultancy Period defined in Section 6.3
below.
6.3 Consultant Agreement. Executive agrees that for the Consultancy
Period as defined below, Employee shall continue to make his services
available to the Company as a consultant, at such times and in such
manner as is mutually agreeable to the parties. For Executive's
services as a consultant and in consideration for the covenant not to
compete as provided in this Section 6, the Company shall pay
Executive annually on the anniversary date of the termination the
amounts set forth in Paragraph 6 of Exhibit A. For purposes hereof,
the Consultancy Period shall mean the three year period commencing on
the date of the Executive's employment termination for any reason.
6.4 Solicitation of Employees. Without limiting the generality of the
provisions of Section 6.2 above, Executive agrees that during the
Restricted Period he shall not on behalf of himself or on behalf of
any other person, company, corporation, partnership or other entity
or enterprise, (except on behalf of the Company), directly or
indirectly, solicit employees, agents or consultants of the Company
to become employees, agents or consultants for him or for such
businesses to the extent such businesses are engaged in activities
that compete with the Business. Executive will not be in violation of
this Section 6.4 in the event that either Cathy Dorfman and/or Mike
Curran terminate their employment with the Company during the
Restricted Period.
<PAGE> 5
7. Confidential Information. During the Confidential Information Period as
defined below, Executive shall keep secret and retain in strictest
confidence, and shall not, without the prior written consent of the Board
of Directors of the Company, furnish, make available or disclose to any
third party or use for the benefit of himself or any third party, any
Confidential Information, except in the normal course of business during
the period of time during which the Executive is employed by the Company.
As used in this Agreement, "Confidential Information" shall mean any
information relating to the business or affairs of the Company or the
Company's affiliates or the Business, including but not limited to
information relating to financial statements, customer identities,
potential customers, employees, suppliers, servicing methods, equipment,
product or service programs, strategies and information, databases and
information systems, analyses, profit margins or other proprietary
information used by the Company or the Company's affiliates; provided,
however, that Confidential Information shall not include any information
which is in the public domain or becomes known in the industry through no
wrongful act on the part of Executive. Executive acknowledges that the
Confidential Information is vital, sensitive, confidential and proprietary
to the Company or the Company's affiliates. For purposes hereof, the
Confidential Information Period shall mean (i) as to Confidential
Information generally, the sum of the Restricted Period plus two years and
(ii) as to Confidential Information that constitutes trade secrets as
defined by Georgia law, forever.
8. Inventions and Other Intellectual Property. Executive hereby agrees that
all right, title and interest in and to all of the Executive's
"Discoveries" and work product made during the Employment Period related
to the Business of the Company, whether pursuant to this Agreement or
otherwise, shall belong solely to the Company, whether or not they are
protected or protectable under applicable patent, trademark, service mark,
copyright or trade secret laws For purposes of this Section 8,
"Discoveries" means all inventions, designs, discoveries, improvements and
works of authorship, including, without limitation, any information
relating to the Company's know-how, processes, designs, computer programs
and routines, formulae, techniques, developments or experimental work,
work-in-progress, or business trade secrets made or conceived or reduced
to practice by the Company. Executive agrees that all work or other
material containing or reflecting any such Discoveries and work product
shall be deemed to be work made for hire and shall be owned by the Company
without further consideration. If it is determined that any such works are
not works made for hire, the Executive hereby assigns to the Company all
of the Executive's right, title and interest, including all rights of
copyright, patent, and other intellectual property rights, to or in such
Discoveries or work product. Executive covenants that he shall keep the
Company informed of the development of all Discoveries or work product
made, conceived or reduced to practice by the Company, in whole or in
part, alone or with others, which either result from any work Executive
may do for, or at the request of, the Company, or are related to the
Company's present or contemplated activities, investigations, or
obligations. Executive further agrees that at the Company's request and
expense, he will execute any assignments or other documents necessary to
transfer any such Discoveries or work product to the Company and to
cooperate with the Company or its nominee in perfecting the Company's
title (or the title of the Company's nominee) in such materials. The
Executive grants the Company a permanent, non-exclusive, paid-up and
worldwide license under the Executive's intellectual property rights in
any Discoveries or work product that is delivered to the Company by the
Executive in connection with the performance of services for the Company
to use, have used, make, have made, sell and have sold such Discoveries
and reproduce in quantities, prepares derivative works and publicly
display and distribute such work product.
9. Interference with Relationships. During the Restricted Period, Executive
shall not, directly or indirectly, as employee, agent, consultant,
stockholder, director, co-partner or in any other individual or
representative capacity intentionally solicit or encourage any present or
future customer, agent or supplier of the Company to terminate or otherwise
alter his, her or its relationship with the Company in any manner adverse
to the Company.
10. Return of Company Materials Upon Termination. Executive acknowledges that
all price lists, sales manuals, catalogs, binders, customer lists and other
customer information, supplier lists, financial information, and other
records or documents containing Confidential Information prepared by
Executive or coming into Executive's possession by virtue of Executive's
employment by the Company in any media is and shall remain the property of
the Company or the Company's affiliates as the case may be and that upon
termination of Executive's employment hereunder, Executive shall return
immediately to the Company all such items in his possession, together with
all copies thereof.
<PAGE> 6
11. Effect on Termination. Notwithstanding the termination of Executive's
employment with the Company, those provisions contained in Sections 5, 6,
7, 8, 9 10 and 11 hereof shall remain in full force and effect.
12. Remedies. Executive acknowledges and agrees that the covenants set forth
in Sections 6, 7, 8, 9, and 10 of this Agreement (collectively, the
"Restricted Covenants") are reasonable and necessary for the protection of
the Company's business interests, that irreparable injury will result to
the Company if Executive breaches any of the terms of the Restrictive
Covenants, and that in the event of Executive's actual or threatened
breach of any such Restrictive Covenants, the Company will have no
adequate remedy at law. Executive accordingly agrees that in the event of
any actual or threatened breach by him of any of the Restrictive
Covenants, the Company shall be entitled to immediate temporary injunctive
and other equitable relief, without the necessity of showing actual
monetary damages, subject to hearing as soon thereafter as possible.
Nothing contained herein shall be construed as prohibiting the Company
from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of any damage which it is able
to prove.
13. Life Insurance. The Company may at its discretion and at any time apply
for and procure as owner and for its own benefit and at its own expense,
insurance on the life of Employee in such amounts and in some form or
forms as the Company may choose. Executive shall cooperate with the
Company in procuring such insurance and shall, at the request of the
Company, submit to such medical examinations, supply such information and
execute such documents as may be required by the insurance company or
companies to whom the Company has applied for such insurance. Executive
shall have no interest whatsoever in any such policy or policies, except
that, upon the termination of Executive's employment hereunder, Executive
shall have the privilege of purchasing any such insurance from the Company
for an amount equal to the actual premiums thereon previously paid by the
Company.
14. Miscellaneous.
14.1 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the parties and
supersedes any prior understandings or agreements between the
parties, written or oral, to the extent they related in any way to
the subject matter hereof.
14.2 No Assignment; Assumption. This Agreement is personal to the
Executive and shall not be assignable by the Executive, other than by
last will and testament or by the laws of descent and distribution
with respect to any amounts due hereunder. This Agreement shall inure
to the benefit of and be binding upon any successor to the business
or assets of the Company.
14.3 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
14.4 Arbitration. Any controversy, claim or dispute of whatever nature
between Executive and the Company arising out of or relating to this
Agreement, or arising out of Executive's employment with the Company,
shall be resolved by binding arbitration before a single arbitrator
in New York, New York pursuant to the Employment Dispute Resolution
Rules of the American Arbitration Association. Each party shall bear
its own costs, expenses and fees, including without limitation
attorneys' fees and experts' fees with respect to any such
arbitration. Judgment upon any resulting arbitration award may be
entered in any court of competent jurisdiction.
<PAGE> 7
14.5 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if (and then two business days after) it is sent by registered
or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to Company: Automobile Protection Corporation
Suite 100
15 Dunwoody Park Drive
Atlanta, GA 30338
with a copy to : Ford Motor Company
The American Road
Suite 325
Dearborn, MI 48121
Attn: John Dickerson, Esq.
If to the Executive: Larry Dorfman
Suite 100
15 Dunwoody Park Drive
Atlanta, GA 30338
with a copy to : Andrew D. Hudders, Esq.
Graubard Mollen & Miller
600 Third Avenue
New York, NY 10016-2097
Either party may send any notice, request, demand, claim or the other
communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it actually is
received by the intended recipient. Either party may change the address to
which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other party notice in the
manner herein set forth.
14.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Georgia without
giving effect to any choice or conflict of law provision or rule
(whether the State of Georgia or any other jurisdiction) that would
cause the application of the law of any jurisdiction other than the
State of Georgia.
14.7 Amendments. No amendment of any provision of this Agreement shall be
valid unless the same shall be in writing and signed by both the
Company and the Executive.
14.8 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other
jurisdiction.
*****
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
/s/ Larry Dorfman
-----------------------------
Larry Dorfman
Automobile Protection Corporation
By:/s/ Martin J. Blank
------------------------------
Title: Chief Operating Officer
---------------------------
<PAGE> 9
EXHIBIT A
INCENTIVE COMPENSATION
1. Executive will be eligible for Incentive Compensation payable quarterly,
subject to applicable tax withholding by the Company and adjustment after
completion of the Company's annual financial audit, for the period
commencing on the Effective Date and ending December 31, 1999 equal to 9.0%
of the 1999 Earnings Before Interest and Taxes (EBIT) before the Incentive
Compensation for Executive and Martin Blank is deducted, minus the EBIT for
the period from January 1, 1999 through the Effective Date. For purposes of
this Agreement, the EBIT before Executive and Martin Blank Incentive
Compensation will be referred to as EBITE.
2. In accordance with Section 4.2 of the Employment Agreement, Executive will
be eligible for Incentive Compensation payable quarterly, commencing with
the year ending December 31, 2000 according to a formula based on EBITE.
3. EBITE shall be calculated according to GAAP standards, and shall be
consistent with the accounting practices and conventions utilized by the
Company as of December 31, 1998 and will be certified annually by
Pricewaterhouse Coopers, LLC during the Company's annual financial audit.
Any Incentive Compensation amounts paid to Executive prior to completion of
the annual financial audit from Pricewaterhouse Coopers will be subject to
adjustment upon receipt of the results of the financial audit.
4. If there are any material changes to accounting practices (e.g. method of
depreciation, etc.) or conventions from year to year, EBITE shall continue
to be calculated according to the practices and conventions utilized by the
Company as of December 31, 1998, unless the parties mutually agree
otherwise.
5. The Incentive Compensation for calendar years commencing with the year 2000
shall be calculated according to the table below and will be paid quarterly
based on estimated Fiscal Year EBITE, subject to applicable tax withholding
by the Company and adjustment after completion of the Company's annual
financial audit. For purposes hereof, Fiscal Year shall mean January 1 to
December 31.
a. If the Fiscal Year EBITE for the Company is equal to or exceeds 100%
of the EBITE Target as set forth below, the Executive's Performance
Bonus shall be 4.5% of the Company's Fiscal Year EBITE.
b. If the Fiscal Year EBITE for the Company is equal to or exceeds 85%
and is less than 100% of the EBITE Target as set forth below, the
Executive's Performance Bonus shall be 4.125% of the Company's Fiscal
Year EBITE.
c. If the Fiscal Year EBITE for the Company is equal to or exceeds 70%
and is less than 85% of the EBITE Target as set forth below, the
Executive's Performance Bonus shall be 3.75% of the Company's Fiscal
Year EBITE.
d. If the Fiscal Year EBITE for the Company is less than 70% of the
EBITE Target as set forth below, the Executive's Performance Bonus
shall be 1.875% of the Company's Fiscal Year EBITE.
e. The EBITE Targets are:
<TABLE>
<CAPTION>
85% of 70% of
EBITE EBITE EBITE
Target Target Target
Year ($000) ($000) ($000)
---- ------ ------ ------
<S> <C> <C> <C>
2000 17,302 14,707 12,111
2001 23,048 19,591 16,134
2002 29,044 24,687 20,331
</TABLE>
6. In accordance with Section 6.3 of the Employment Agreement, the Executive
shall be retained as a consultant for the Company for the Consultancy
Period. The annual amount paid pursuant to Section 6.3 of the Employment
Agreement shall be equal to one third (1/3) of the total cumulative annual
Incentive Compensation paid to the Executive for periods between January 1,
2000 and the termination date. This amount will be paid annually in a lump
sum on the first, second and third anniversaries of the date of the
employment termination, provided that Executive has fulfilled his
obligations set forth in Section 6 of the Employment Agreement.
7. In the event the Employment Agreement terminates by reason of disability or
death of the Executive, the Executive or the Executive's beneficiaries,
legal representatives or heirs, as appropriate, shall not be entitled to
any outstanding Incentive Compensation related to years after the date of
death. However, the Executive or Executive's beneficiaries, legal
representatives or heirs, as appropriate, shall be eligible to receive an
amount equal to the consulting fee specified in Paragraph 6 of this Exhibit
A, as if the Executive had not become disabled or had lived throughout the
Consultancy Period upon the same terms and conditions as specified in
Paragraph 6 of this Exhibit A.
8. In the event the Employment Agreement is terminated by the Company other
than for Cause, the Executive will be paid Incentive Compensation through
December 31, 2002, calculated and paid in accordance with Paragraph 5
hereof, using the actual year to date EBITE and pro rata EBITE Target as of
the date of Executive's termination.
9. Terms not otherwise defined herein shall have the same meanings as set
forth in the Employment Agreement.
