Securities And Exchange Commission
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995
and the Transition Quarter ended December 31,1994
Commission file number 0-2290
Southern Acceptance Corporation
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-0898219
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
277 Pat Mell Road, Suite A, Marietta, Georgia 30060
--------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 432-6684
Securities registered pursuant to Section 12(b) of the Act: none
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
----------------------------
(Title of class)
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein
and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Aggregate market value of the voting stock held by non-
affiliates of the Registrant at December 31, 1995: $489,121,
based on $.10 per share, the last known sales price of the
Registrant's Common Stock.
At December 31, 1995, there were issued and outstanding
5,238,905 shares of Common Stock, par value $.10 per share.
DOCUMENTS INCORPORATED BY REFERENCE. None.<PAGE>
PART I
Item I - Business
- -----------------
GENERAL. The Registrant was incorporated in 1962 as a
Georgia corporation, and for 34 years engaged in the business of
real estate sales and development in Georgia. Specifically, the
Registrant purchased or built and operated motels and apartments.
In 1974, following several years of losses, the Registrant filed
for bankruptcy under Chapter XI of the federal bankruptcy laws.
At the time the Registrant filed for bankruptcy in 1974, it owned
approximately 18 properties, most of which the Registrant sold
during the bankruptcy proceedings.
The Registrant emerged from bankruptcy in 1980. Thereafter,
the Registrant operated five motels until the motels were sold in
the early 1980s. Following the sale of the motels, the
Registrant continued to engage to a limited extent in the
purchase and sale of real estate in Georgia.
The Registrant is currently primarily engaged in the
business of real estate sales and earns commissions from such
real estate sales. In addition, the Registrant earns interest on
its notes receivable, rental income from its rental properties
and income from the purchase and sale of investment properties.
As of December 31, 1995, the book value of the Registrant's
assets was $244,536. Management does not believe there is
any substantial unrecognized value in these assets.
RECENT DEVELOPMENTS. On January 22, 1996, the Registrant
entered into an Agreement and Plan of Merger with Efficiency
Lodge, Inc., a Georgia corporation ("ELI") pursuant to which ELI
will be merged into the Registrant (the "Merger"). As part of
the Merger, the ELI shareholders will receive approximately 95%
of the shares of the surviving corporation. Shareholders of the
Registrant will receive one share of stock in the surviving
corporation for each one hundred shares of stock of the
Registrant held by them prior to the Merger and collectively will
hold 5% of the shares of the surviving corporation. The
Registrant has filed a preliminary proxy statement with the
Securities and Exchange Commission (the "SEC") concerning the
proxy statement to be sent to shareholders of the Registrant in
connection with the proposed Merger. Following review of the
proxy statement by the SEC, the Registrant will call a special
meeting of its shareholders to consider the proposed Merger.
The principal executive offices of the Registrant are
located at 277 Pat Mell Road, Suite A, Marietta, Georgia 30060,
and the telephone number at that address is 770-432-6684.
Item 2 - Properties
- -------------------
As of March 15, 1996 the Registrant owns the 3,813 square-foot,
one-story office building at 277 Pat Mell Road in Cobb County, Georgia
that houses its principal executive offices as well as one tenant of the
Registrant. This property constitutes substantially all of the assets
of the Registrant. The Pat Mell Road property is subject to a mortgage,
the balance of which as of December 31, 1995 was approximately $42,546.
The mortgage on the Pat Mell Road property accrues interest at the rate
of 10% per year, and will mature in 2004.
-1-
<PAGE>
Item 3 - Legal Proceedings
- --------------------------
There were no substantial, ongoing legal proceedings
involving the Registrant at December 31, 1995.
Item 4 - Submissions of Matters to a Vote of Security Holders
- -------------------------------------------------------------
No matters were submitted to a vote of security holders
during the year ended December 31, 1995.
PART II
Item 5 - Market for the Registrant's Common Stock and Related
Stockholder Matters
----------------------------------------------------
There is no public trading market for the Registrant's
common stock. As of January 1, 1996, there were 5,238,905
outstanding shares of Registrant's common stock and approximately 3,770
holders of record of such shares. Although there are currently no legal
or contractual restrictions on the payment of dividends by the
Registrant, it has not paid any dividends since 1974 because of
poor operational results and insufficient earnings.
-2-
<PAGE>
Item 6 - Selected Financial Data
- --------------------------------
<TABLE>
<CAPTION>
Year Ended Quarter
December Ended Year Ended September 30,
31, December 31, ----------------------------------------------
1995 1994 1994 1993 1992 1991
---------- ------------ --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues $224,574 $16,225 $ 85,072 $ 73,548 $ 81,103 $ 109,229
(Loss) from
continuing operations (156,302) (27,337) (66,061) (75,247) (81,780) (76,357)
Total assets 298,628 497,689 499,692 751,103 742,154 869,834
Current portion of long-
term debt 3,603 5,958 4,814 4,279 3,806 3,388
Long-term debt, less current
maturities 38,973 59,431 60,726 65,540 69,820 73,626
(Loss) from
continuing operations
per common share (.03) (.01) (.01) (.01) (.01) (.01)
Net (loss)
per common share (.03) (.01) (.01) (.01) (.01) (.01)
Cash dividends paid
per common share .00 .00 .00 .00 .00 .00
Average number of common
and common equivalent
shares outstanding 5,238,905 5,238,905 5,591,129 6,157,204 6,157,204 6,157,204
</TABLE>
-3-
<PAGE>
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
--------------------------------------------------
The Registrant is primarily engaged in the business of real
estate sales. The Registrant also earns commissions from real
estate sales and receives rental income from its office building.
Although the Registrant sold a piece of investment property and
two pieces of property held for resale at gains during 1995, the
Registrant's fiscal year ended December 31, 1995 was another
disappointing one in that the Registrant experienced a net loss
for the eighth consecutive year. During 1995 the Registrant
changed its fiscal year from September 30 to December 31 in
anticipation of the Merger which management hopes will revitalize
the Registrant's operations.
Results of Operations
- ---------------------
Operating revenues for the year ended December 31, 1995
increased 164% over the year ended September 30, 1994 due
primarily to sales of two pieces of property for resale compared
to a 16% increase of fiscal 1994 over fiscal 1993. There were no
such sales in either the year ended September 30, 1994 or the
transition quarter ended December 31, 1994 although there was a
significant gain on the sale of some investment property in
fiscal 1994. Costs and expenses for the year ended December 31,
1995 increased 152% over the year ended September 30, 1994 due
primarily to the cost of sales of property held for resale, for
which there were no comparable transactions in either the year
ended September 30, 1994 or the transition quarter ended
December 31, 1994 and to the $50,294 write-down of investment
property to its net realizable value. During 1995, the Board
of Directors concluded that it would be in the best interests
of the shareholders to merge the Registrant with ELI. Work was
commenced on the legal and accounting matters necessary to present
the merger to a vote of shareholders, resulting in a 16% increase
in administrative and general expenses due to increased legal
and accounting fees. Administration and general expenses for the
year ended September 30, 1994 increased 24% over fiscal 1993 due
primarily to a $5,679 increase in commissions paid for real estate
sales, $5,577 of expenses incurred in an abandoned attempt to enter
the electronic health claim filing business, a $5,454 increase in
advertising, and the $6,609 loss incurred in the repossession of
property previously sold.
Liquidity and Sources of Capital
- --------------------------------
The ratio of current assets to current liabilities was 9 to
1 at December 31, 1995; 7 to 1 at December 31, 1994; 24 to 1 at
September 30, 1994; and 2 to 1 at September 30, 1993. The
Registrant hopes to use some of its funds to buy and sell
property at a profit. There is no assurance, however, that such
transactions will be consummated. Management anticipates that
some of the Registrant's funds will continue to be used to pay
legal, accounting and other expenses in connection with the
proposed Merger.
Impact of Inflation
- -------------------
Inflation and changing prices did not have a significant
impact on the Registrant's revenues or income from continuing
operations during the year ended December 31, 1995, the quarter
ended December 31, 1994 or the two years ended September 30,
1994.
-4-
<PAGE>
Impact of Tax Reform
- --------------------
The Revenue Reconciliation Act of 1993 is not expected to
have a significant effect on the Registrant's operations.
Item 8 - Financial Statements and Supplementary Data
- -----------------------------------------------------
The response to this item is included herein beginning on
page F-1.
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
- ---------------------------------------------------------
None.
PART III
Item 10 - Directors and Officers of the Registrant
- --------------------------------------------------
The following table sets forth certain items of information
with respect to each Director of Registrant as of December 31,
1995:
<TABLE>
<CAPTION>
Name and Years of Business Experience
Service as Director Age Last Five Years
------------------- --- --------------------
<S> <C> <S>
J. A. Cochran 63 Director, President and
1966 - present General Counsel of the
Registrant; Senior Partner
- Cochran, Camp & Snipes,
Attorneys and Director of
Republic Data Corp.
Wesley H. Stembridge 72 Director of the Registrant;
1963 - present Trading consultant
Dr. Roy W. Sweat 68 Director and Vice President
1963 - present of the Registrant;
Chiropractor; and Director
of Capital City Bank &
Trust
Harry W. Chappell, Jr. 70 Director of the Registrant;
1985 - present Engineer, Fabric
Development with Goodyear
Tire & Rubber Registrant
(Retired)
Bonnie L. Byers 52 Secretary-Treasurer of
1991 - present Registrant since September
1, 1983; Vice President of
Registrant since May 15,
1990; Director of
Registrant since December
10, 1991
Arthur Crowe 71 Attorney with the law firm
1994 - present of Cauthorn & Phillips;
Director of Registrant
since January 27, 1994
Ken Thigpen 55 President of Georgia
1994 - present Bankers Bank until
September 1900; President
of Georgia State Bank since
September 1990; Director of
Registrant since January
27, 1994
</TABLE>
-5-
<PAGE>
The terms of the directors are for a period of one year or
until a successor is elected at the annual meeting of the
shareholders. There is no family relationship between any of the
above directors or any executive officer of the Registrant.
The following table sets forth certain information as to all
executive officers:
<TABLE>
<CAPTION>
Name of Officer Age Position with the Registrant
- --------------- --- ----------------------------
<S> <C> <S>
J. A. Cochran 63 President and Director
Dr. Roy W. Sweat 68 Vice President and Director
Bonnie L. Byers 52 Vice President, Secretary-
Treasurer and Director
</TABLE>
Executive officers are elected by the Board and serve until
the earlier of their resignation or removal by the Board.
The following is a brief account of the business experience
during the past five years of each executive officer of the
Registrant:
J. A. Cochran Director, President and General
Counsel of Registrant; Senior
Partner - Cochran, Camp & Snipes,
Attorneys, and Director of Republic
Data Corporation.
Dr. Roy W. Sweat Director and Vice President of
Registrant; Chiropractor
Bonnie L. Byers Secretary-Treasurer of Registrant
since September 1, 1983; Vice
President of Registrant since May
15, 1990; Director of Registrant
since December 10, 1991.
No family relationship exists between any of the directors
or executive officers of the Registrant.
-6-<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. Each
officer, director and beneficial officer of the Registrant
identified above failed to file Form 3s on a timely basis during
1995.
Item 11 - Executive Compensation
- --------------------------------
During 1993, 1994 and 1995, J. A. Cochran, President of the
Registrant, did not receive any short or long-term compensation
from the Registrant, other than director's fees. No officers of
the Registrant received salary and bonus in excess of $100,000
during 1993, 1994 or 1995.
Directors of the Registrant received $50 for each Board of
Directors meeting attended.
REPORT ON EXECUTIVE COMPENSATION. Compensation decisions
for the Registrant are made by the entire Board of Directors.
During 1995, only one executive officer of the Registrant, Bonnie
Byers, received any compensation from the Registrant, other than
Director's fees. The Board based its compensation decision for
Ms. Byers on the amount paid to her in prior years. Ms. Byers
did not participate in deliberations of the Board regarding her
compensation. The Registrant does not have a pension plan and
does not grant stock options, stock appreciation rights or
similar incentive awards.
BOARD OF DIRECTORS OF SOUTHERN ACCEPTANCE CORPORATION
J. A. Cochran Bonnie L. Byers
Wesley H. Stembridge Arthur Crowe
Dr. Roy W. Sweat Ken Thigpen
Harry W. Chappell, Jr.
No market for the Registrant's common stock exists, and the
common stock has not been actively traded within the last 20
years. In addition, the Registrant has very limited resources
and is not aware of similar companies with which it could compare
the performance of its common stock over the past five years.
Accordingly, the Board of Directors believes that constructing a
stock performance graph would be extremely costly and the results
would not be meaningful.
Item 12 - Security Ownership of Certain Beneficial Owners and
Management
---------------------------------------------------
(a) The following person is known by the Registrant to own
beneficially more than five percent of the Registrant's voting
securities:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
- ------------- ------------------ -------------------- ---------
<S> <C> <C> <C>
Common Stock Roy W. Sweat 270,698 Shares 5.17%
3274 Buckeye Road
Chamblee, GA
</TABLE>
-7-
<PAGE>
(b) The following table sets forth the amount of shares
beneficially owned, directly or indirectly, by all directors and
officers of the Registrant:
<TABLE>
<CAPTION>
Name of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
- -------------- ---------------- -------------------- --------
<S> <S> <C> <C>
Common Stock Arthur Crowe 21,186 .40%
Common Stock Bonnie L. Byers 103 <F1> -
Common Stock J. A. Cochran 34,838 <F2> .66
Common Stock Wesley H. Stembridge 2,704 .05
Common Stock Roy Sweat 270,698 5.17
Common Stock Harry W. Chappell, Jr. 17,139 <F3> .33
Common Stock Ken Thigpen 1,030 .02
------- ----
Common Stock All officers and 347,698 6.63%
Directors as a ======= ====
group (7 persons)
________________________
<FN>
<F1> Owned by Mrs. Byers jointly with her husband.
<F2> Owned by Mr. Chappell jointly with his wife.
<F3> 25,550 shares are owned by Mr. Cochran jointly with his
wife.
</FN>
</TABLE>
(c) There are no contractual arrangements known to
Registrant which may at a subsequent date result in a change in
control of the Registrant.
Item 13 - Certain Relationships and Related Transactions
- --------------------------------------------------------
The law firm of Mr. J. A. Cochran serves as legal counsel to
the Registrant for which it received $677 in fiscal 1995. In
addition to being a director and President of the Registrant, Mr.
Cochran has served as counsel to the Registrant on various
matters.
All officers and directors of the Registrant served as
officers and directors of all wholly-owned subsidiaries. Both
the Registrant and its subsidiaries share the same offices,
personnel and equipment.
-8-
<PAGE>
PART IV
Item 14 - Exhibits, Financial Statement Schedules and Reports on
Form 8-K
------------------------------------------------------
(a) List of Financial Statements and Financial Statement
Schedules.
The following consolidated financial statements of Southern
Acceptance Corporation and subsidiaries are included in Item 8:
Consolidated Balance Sheets -
December 31, 1995 and 1994 and
September 30, 1994
Consolidated Statements of Operations
and Retained-Earnings (Deficit) -
Years Ended December 31, 1995, Quarter Ended
December 31, 1994 and Years Ended September 30, 1994,
and 1993
Consolidated Statement of Cash Flows -
Years Ended December 31, 1995, Quarter Ended
December 31, 1994 and Years Ended September 30,
1994, and 1993
Notes to Consolidated Financial Statements -
December 31, 1995
The following consolidated financial statement schedules of
Southern Acceptance Corporation and subsidiaries are included in
Item 14(d):
Schedule V - Property, Plant, and Equipment
Schedule VI - Accumulated Depreciation, Depletion
and Amortization of Property, Plant and
Equipment
Schedule VIII - Valuation and Qualifying Accounts
Schedule IX - Short-term Borrowings
Schedule X - Supplementary Income
Statement Information
Schedule XI - Real Estate and Accumulated
Depreciation
Schedule XII - Mortgage Loans on Real Estate
-9-
<PAGE>
All other schedules for which provision is made in the
applicable regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable and therefore have been omitted.
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed
by the Registrant during the quarter ended December 31, 1995.
(c) EXHIBITS. The exhibits filed as part of this Annual
report on Form 10-K are as follows:
Exhibit No. Description
----------- -----------
2.1 Agreement and Plan of Merger dated as of
January 22, 1996 by and between the
Registrant and Efficiency Lodge, Inc.
21 Subsidiaries of the Registrant
27 Financial Data Schedules
(d) FINANCIAL STATEMENTS. The following financial
statements are filed as part of this Annual Report on Form 10-K:
-10-<PAGE>
RANDALL C. BROWN & ASSOCIATES, P.C.
Certified Public Accountants
338 Paces Center
455 E. Paces Ferry Road, N.E.
Atlanta, Georgia 30305-3329
404-237-4732
Fax 404-266-2943
Report of Independent Auditors
Board of Directors
Southern Acceptance Corporation
Marietta, Georgia 30067
We have audited the consolidated financial statements of
Southern Acceptance Corporation and subsidiaries listed in the
accompanying index to financial statements (Item 14(a)). These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements listed in the
accompanying index to financial statements (Item 14(a)) present
fairly, in all material respects, the consolidated financial
position of Southern Acceptance Corporation and subsidiaries at
December 31, 1995 and 1994 and September 30, 1994, and the
consolidated results of their operations and their cash flows for
each of the two years in the period ended September 30, 1994, the
quarter ended December 31, 1994 and the year ended December 31,
1995, in conformity with generally accepted accounting
principles.
/s/ Randall C. Brown & Associates, P.C.
Atlanta, Georgia
March 20, 1996
F-1<PAGE>
CONSOLIDATED BALANCE SHEETS
SOUTHERN ACCEPTANCE CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31, September 30,
------------------- -------------
1995 1994 1994
------- ------- ------------
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $128,728 $ 11,093 $ 11,681
Current maturities of note
receivable - Note B -0- 72,755 71,641
Property for resale -0- 167,735 167,735
Other current assets 852 3,781 3,303
-------- -------- --------
TOTAL CURRENT ASSETS 129,580 255,364 254,360
PROPERTY, PLANT AND EQUIPMENT - Note A
Land 15,000 20,000 20,000
Buildings and improvements 133,727 169,542 169,542
Furniture and equipment 13,447 13,845 13,845
-------- -------- --------
162,174 203,387 203,387
Less allowance for depreciation 118,820 137,050 134,043
-------- -------- --------
TOTAL PROPERTY, PLANT AND
EQUIPMENT 43,354 66,337 69,344
INVESTMENT PROPERTY - Notes A, G and J 125,694 175,988 175,988
-------- -------- --------
$298,628 $497,689 $499,692
======== ======== ========
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
December 31, September 30,
------------------- -------------
1995 1994 1994
------- ------- ------------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable to bank $ -0- $ 22,370 $ -0-
Trade accounts payable 10,171 8,771 4,727
Accrued interest -0- 71 -0-
Current maturities of long-term
debt - Note C 3,603 4,958 4,814
Other current liabilities 1,375 1,250 1,250
------- -------- -------
TOTAL CURRENT LIABILITIES 15,149 37,420 10,791
LONG-TERM DEBT, less current
maturities - Note C 38,943 59,431 60,726
STOCKHOLDERS' EQUITY - Note E
Common Stock - par value $.10 per
share - authorized 7,500,000
shares; issued and outstanding
(including 1,034,352 shares held
in treasury); 6,273,257 shares 627,326 627,326 627,326
Additional paid-in capital 2,615,506 2,615,506 2,615,506
Retained-earnings (deficit) (2,892,317) (2,736,015) (2,708,678)
---------- ---------- ----------
350,515 506,817 534,154
Less treasury stock, at cost 105,979 105,979 105,979
---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY 244,536 400,838 428,175
---------- ---------- ----------
$ 298,628 $ 497,689 $ 499,692
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED-EARNINGS (DEFICIT)
SOUTHERN ACCEPTANCE CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended Quarter Ended Year Ended September 30,
December 31, December 31, -------------------------
1995 1994 1994 1993
------------ ------------- ---------- ---------
<S> <C> <C> <C> <C>
Income
Interest $ 5,594 $ $ 1,650 $ 10 450 $ 19,145
Rental income 7,481 3,690 9,255 8,800
Sales commissions 2,341 10,885 3,920 19,917
Sales of property held
for resale 180,263 -0- -0- 24,975
Gain on sale of
investment property 28,895 -0- 61,447 -0-
Other income -0- -0- -0- 711
------- ------- ------- -------
224,574 16,225 85,072 73,548
Costs and Expenses
Interest 8,104 2,046 8,078 8,473
Commissions 10,490 8,164 22,510 16,813
Cost of sales of property
held for resale 175,327 -0- -0- 23,110
Administrative and
general expenses 125,742 30,345 108,717 87,967
Depreciation 10,919 3,007 11,828 12,432
Loss on write-down of investment
property - Notes G and J 50,294 -0- -0- -0-
-------- ------- -------- --------
380,876 43,562 151,133 148,795
-------- ------- -------- --------
(LOSS) BEFORE PROVISION
FOR INCOME TAXES (156,302) (27,337) (66,061) (75,247)
Provision for income taxes -
Notes A and D -0- -0- -0- -0-
--------- -------- -------- --------
NET (LOSS) (156,302) (27,337) (66,061) (75,247)
Retained-earnings (deficit)
at beginning of period (2,736,015) (2,708,678) (2,642,617) (2,567,370)
---------- ---------- ---------- ----------
RETAINED-EARNINGS
(DEFICIT) AT END OF PERIOD $(2,892,317) $(2,736,015) $(2,708,678) $(2,642,617)
========== ========== ========== ==========
Net (loss) per common
share - Note A $ (.03) $ (.01) $ (.01) $ (.01)
========== ========== ========== ==========
Average number of common
shares outstanding
during the period 5,238,905 5,238,905 5,591,129 6,157,204
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
SOUTHERN ACCEPTANCE CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended Quarter Ended Year Ended September 30,
December 31, December 31, -----------------------------
1995 1994 1994 1993
----------- ------------- --------- ---------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) $(156,302) $(27,337) $ (66,061) $(75,247)
Adjustments to reconcile net
(loss) to net cash (used
in) operating activities:
Depreciation 10,919 3,007 11,828 12,432
Bad debt expense (recovery) -0- (2,000) 6,609 -0-
Property for resale:
Additions to (7,592) -0- (5,882) (91,542)
Proceeds from sale of 171,839 -0- -0- 24,975
(Gain) Loss on sale of 3,488 -0- -0- (1,865)
(Gain) on sale of fixed assets
or investment property (25,675) -0- (35,354) -0-
Loss on write-down of investment
property 50,294 -0- -0- -0-
Change in assets and
liabilities:
Decrease in notes receivable 72,755 886 32,796 68,703
Decrease (increase) in other
current assets and
liabilities - net 4,383 3,637 3,610 (5,262)
------- ------- ------- ------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 124,109 (21,807) (52,454) (67,806)
INVESTING ACTIVITIES
Capital expenditures (3,584) -0- (3,495) -0-
Proceeds from sale of fixed
assets or investment property 41,323 -0- 234,569 -0-
Deductions from (additions to)
deferred charges -0- -0- 3,879 (3,879)
------- ------- ------- ------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 37,739 -0- 234,953 (3,879)
FINANCING ACTIVITIES
Short-term borrowing 10,500 22,370 5,000 93,000
Payments on notes payable and
long-term debt (54,713) (1,151) (97,279) (8,807)
Purchase of treasury Stock -0- -0- (91,782) -0-
------- ------- ------- ------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (44,213) 21,219 (184,061) 84,193
------- ------- ------- ------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 117,635 (588) (1,562) 12,508
Cash and cash equivalents at
beginning of period 11,093 11,681 13,243 735
------- ------- ------- ------
Cash and cash equivalents at
end of period $ 128,728 $ 11,093 $ 11,681 $ 13,243
======== ======= ======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 7,855 $ 2,296 $ 11,617 $ 10,572
Income taxes -0- -0- -0- -0-
</TABLE>
See notes to consolidated financial statements.
F-5<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SOUTHERN ACCEPTANCE CORPORATION AND SUBSIDIARIES
December 31, 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements
- ---------------------------
include the accounts of the Company and all of its subsidiaries. No
minority interest is reflected as the subsidiary with minority ownership,
Nu-Moo Lite Industries, Inc. (56.67% owned), had a negative net worth.
All significant intercompany accounts and transactions have been
eliminated in consolidation.
Cash Equivalents - The Company considers all highly liquid investments
- ---------------
with a maturity of three months or less when purchased to be "cash
equivalents."
Income Taxes - Income taxes reported for financial reporting purposes are
- ------------
substantially the same as amounts payable under applicable federal
income tax rules and regulations. The investment tax credit is
recognized as a reduction of the income tax provision in the year in
which credits become available for tax purposes. The Company has
sizeable net operating loss carryforwards, which are included in the same
type of income of the current year that absorbs that particular operating
loss and carryforward. (See Note D).
Property for Resale - Property for resale consists of residential lots,
- -------------------
some of which include houses built by the Company. These properties
are valued at the lower of cost or estimated net realizable value.
Investment Property - Investment property consists of land held for
- -------------------
eventual development, subdivision, or sale depending on the market and
other factors. Such properties are valued at the lower of cost or
estimated net realizable value.
Revenue Recognition - Interest income is recognized when earned; rental
- -------------------
income is recognized in accordance with the lease terms; and sales
commissions, sales of property held for resale, and gains on sale of
investment property are recognized when market transactions are
consummated as evidenced by a real estate closing.
Property, Plant and Equipment - Property, plant and equipment are stated
- -----------------------------
at cost. Depreciation is determined principally by the straight-line
method over the estimated useful life of each asset as follows:
Buildings 15 years
Furniture and equipment 5-10 years
Expenditures for maintenance, repairs and improvements which do
not materially prolong the life of the related asset are charged
to expense. The cost of assets retired or sold and the related
accumulated depreciation are removed from the accounts upon such
disposition and any gain or loss is included in income.
Net Income Per Common Share - Net income per common share is
- ---------------------------
based upon the number of shares of Common Stock outstanding
during each period, not including the shares held in treasury by
the Company. There were no common stock equivalents or
dilutive instruments outstanding.
F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
SOUTHERN ACCEPTANCE CORPORATION AND SUBSIDIARIES
December 31, 1995
NOTE B - MORTGAGE NOTE RECEIVABLE
The mortgage note receivable is summarized as follows:
<TABLE>
<CAPTION>
December 31, September 30,
------------------- ------------
1995 1994 1994
-------- ------- ------------
<S> <C> <C> <C>
Mortgage note receivable $ -0- $72,755 $73,641
Less allowance for doubtful amounts -0- -0- 2,000
------ ------ ------
-0- 72,755 71,641
Less current maturities -0- 72,755 71,641
------ ------ ------
$ -0- $ -0- $ -0-
====== ====== ======
</TABLE>
The mortgage note receivable, which bears interest at 9%,
consists of a first mortgage residential real estate and is
secured by the property. This note did not arise from retail
land sales activity.
NOTE C - Long-term Debt
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
December 31, September 30,
------------------- ------------
1995 1994 1994
-------- ------- ------------
<S> <C> <C> <C>
Mortgage note payable:
10% note maturing in 2004 42,546 45,807 $46,572
15.5% note maturing in 2001 -0- 18,582 18,968
------ ------ ------
42,546 64,389 65,540
Less current maturities 3,603 4,958 4,814
------ ------ ------
$38,943 $59,431 $60,726
====== ====== ======
</TABLE>
Minimum aggregate payments on long-term debt for the five fiscal years
subsequent to December 31, 1995 are approximately as follows:
1996 $3,603
1997 3,980
1998 4,396
1999 4,857
2000 5,365
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
SOUTHERN ACCEPTANCE CORPORATION AND SUBSIDIARIES
December 31, 1995
NOTE D - INCOME TAXES
The Company has available certain net operating loss
carryovers and investment tax credit carryforwards, both of which
are generally carried forward for fifteen years from the year
incurred. The approximate remaining carryforwards at December
31, 1995 are summarized as follows:
<TABLE>
<CAPTION>
Date of Net Operating Investment
Expiration Loss Tax Credit
------------- ------------- ----------
<S> <C> <C>
September 30,
1996 $107,671 $ 166
1997 106,028 -0-
1999 76,652 381
2003 276,723 -0-
2004 68,760 -0-
2005 39,863 -0-
2006 52,383 -0-
2007 78,820 -0-
2008 72,822 -0-
2009 56,693 -0-
------- ---
$936,415 $547
======= ===
</TABLE>
Nu-Moo Lite Industries, Inc., a 56.67% owned subsidiary, does not
meet the 80% ownership requirement for filing a consolidated
income tax return with Southern Acceptance Corporation. Thus
this subsidiary may also generate net operating loss
carryforwards which may be utilized to the extent of the income
taxes on its future earnings.
NOTE E - CHANGES IN CAPITAL
The only change in Common Stock, additional paid-in capital, or
treasury stock during the four and one-quarter years ended
December 31, 1995 was the purchase of 918,299 shares of the
Company's common stock for the treasury during the year ended
September 30, 1994. This stock was purchased from a Canadian
stockholder at the price he paid to acquire the stock from other
stockholders when he wanted to be become active in the
Company. He later decided to discontinue participating in the
Company's activities and offered to sell his stock to the
Company at his cost. After obtaining a favorable legal
opinion, the Company accepted his offer.
NOTE F - PURCHASES AND SALES OF PROPERTY FOR RESALE
During the year ended September 30, 1993, the Company sold one
of its residential lots at a gain of $1,865 and began
construction of a house on another of its lots. The project was
completed in the year ended September 30, 1994, and the improved
property was sold during the year ended December 31, 1995 at a
gain of $2,090.
During the year ended September 30, 1994, the Company
repossessed a home which it had previously sold in 1986 because
the buyers were experiencing financial difficulty and had become
unable to service their mortgage debt to the Company. In
recording the property at its estimated net realizable value in
exchange for the note receivable and accrued interest, the
Company recognized bad debt expense in the amount of $6,609.
The Company resold the property during the year ended December
31, 1995 at a gain of $2,846.
F-8
<PAGE>
NOTE G - SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
During the fiscal year ended September 30, 1994, the Company
repossessed a house due to a troubled loan (See Note F) resulting
in the following noncash transaction:
Assets exchanged for the property:
Note receivable $51,569
Accrued interest receivable 2,060
------
Noncash items 53,629
Cash paid to attorney 180
------
53,809
Cash paid for improvements 1,625
------
55,434
Estimated net realizable value 48,825
------
Bad debt expense recognized $ 6,609
======
During the fiscal year ended December 31, 1995, the Company wrote
down the carrying value of its remaining piece of investment property
to net realizable value as evidenced by a sale subsequent to year end
(See Note J) resulting in the following noncash transaction:
Cost of property $175,988
Loss on valuation adjustment (50,294)
--------
Net realizable value $125,694
=======
NOTE H - PROPOSED MERGER
On May 30, 1995 the Company signed a letter of intent to
effect a merger with Efficiency Lodge, Inc. pursuant to which an
unspecified number of shares of the Company's common stock
would be issued in exchange for the net assets of Efficiency
Lodge, Inc., at which time each of the latter's common stock
issued and outstanding prior to the Effective Time would be
canceled and extinguished. On January 25, 1996, a preliminary
proxy statement which indicated, among other things, that under
the proposed merger up to 992,390 shares of the Company's
common stock would be exchanged for 900 shares of the common
stock of Efficiency Lodge, Inc. was filed with the Securities and
Exchange Commission.
NOTE I - CHANGE IN FISCAL YEAR
On September 12, 1995, the Company's Board of Directors voted to
change the Company's fiscal year from September 30 to December 31
in anticipation of the proposed merger discussed in Note B, and a
Form 8-K to report this event was filed with the Securities and
Exchange Commission.
NOTE J - SUBSEQUENT EVENT
On February 1, 1996, the Company sold its remaining 29.433 acres
of investment property at a loss in the amount of $50,294. The
carrying amount of this property was accordingly reduced to net
realizable value at December 31, 1995 with a corresponding charge
to income at that date.
F-9
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
SOUTHERN ACCEPTANCE CORPORATION AND SUBSIDIARIES
Other Changes -
Balance at Debit and Balance
Beginning Additions Requirements /or Credit - at Close
Classification of Period at Cost or Sales Describe of Period
-------------- ---------- --------- ------------ ---------------- ---------
<S> <C> <C> <C> <C>
Year Ended December 31, 1995:
Land $ 20,000 $ 5,000 $ 15,000
Buildings and improvements 169,542 $ 3,584 39,399 133,727
Furniture and equipment 13,845 398 13,447
------- ------ ------ -------
$203,387 $ 3,584 $44,797 $162,174
======= ====== ====== =======
Quarter Ended December 31, 1994:
Land $ 20,000 $ 20,000
Buildings and improvements 169,542 169,542
Furniture and equipment 13,845 13,845
------- --------
$203,387 $203,387
======= =======
Year Ended September 30, 1994:
Land $ 20,000 $ 20,000
Buildings and improvements 168,882 $ 660 169,542
Furniture and equipment 11,010 2,835 13,845
------- ----- -------
$199,892 $3,495 $203,387
======= ===== =======
Year Ended September 30, 1993:
Land $ 20,000 $ 20,000
Buildings and improvements 168,882 168,882
Furniture and equipment 11,010 11,010
------- -------
$199,892 $199,892
======= =======
</TABLE>
(1) The annual provisions for depreciation have been computed
principally in accordance with the following ranges of rates:
Buildings and improvements 7% to 20%
Furniture and equipment 10
F-10
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
SOUTHERN ACCEPTANCE CORPORATION AND SUBSIDIARIES
Additions Deductions from Reserves
------------------- ------------------------
Charged Charged
Balance at to Profit to Other Retirements Balance at
Beginning and Loss Accounts- Renewals, and Other - Close
Description of Period or Income Describe Replacements Describe of Period
----------- ---------- --------- ---------- -------------- -------- ----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1995:
Buildings and improvements $128,878 $10,004 $29,020 $109,862
Furniture and equipment 8,172 915 129 8,958
------- ------ ------ -------
$137,050 $10,919 $29,149 $118,820
======= ====== ====== =======
Quarter Ended December 31, 1994:
Buildings and improvements $126,105 $ 2,773 $128,878
Furniture and equipment 7,938 234 8,172
------- ------ --------
$134,043 $ 3,007 $137,050
======= ====== =======
Year Ended September 30, 1994:
Buildings and improvements $115,212 $10,893 $126,105
Furniture and equipment 7,003 935 7,938
------- ------- -------
$122,215 $ 11,828 $134,043
======= ======= =======
Year Ended September 30, 1993:
Buildings and improvements $103,452 $11,760 $115,212
Furniture and equipment 6,331 672 7,003
------- ------ -------
$109,783 $12,432 $122,215
======= ====== =======
</TABLE>
F-11
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
SOUTHERN ACCEPTANCE CORPORATION AND SUBSIDIARIES
Additions
-------------------
Charged Charged
Balance at to Profit to Other Balance at
Beginning and Loss Accounts- Deductions from Reserves Close
Description of Period or Income Describe - Describe of Period
----------- ---------- --------- ---------- -------------------------- ----------
<S> <C> <C> <C>
Quarter Ended December 31, 1994:
Allowance for doubtful accounts $2,000 $2,000(1) $ -0-
Year Ended September 30, 1994:
Allowance for doubtful accounts $2,000 $ 2,000
Year Ended September 30, 1993:
Allowance for doubtful accounts $2,000 $ 2,000
</TABLE>
(1) Removed from the valuation account and taken into income
inasmuch as the related notes receivable were collected
prior to issuance of financial statements.
F-12
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE IX - SHORT-TERM BORROWINGS
SOUTHERN ACCEPTANCE CORPORATION AND SUBSIDIARIES
Maximum Average Weighted
Weighted Amount Amount Average
Balance Average Outstanding Outstanding Interest Rate
Category of Aggregate at End of Interest During the During the During the
Short-Term Borrowings Period Rate Period Period <F3> Period <F4>
--------------------- --------- -------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Note payable to bank <F1> $ -0- 10.50% $25,370 $ 4,228 18.42%
Quarter ended December 31, 1994:
Note payable to bank <F1> 22,370 10.50 22,370 4,123 2.91
Year ended September 30, 1994:
Note payable to bank <F2> -0- 8.00 88,000 36,667 8.96
Year ended September 30, 1993:
Note payable to bank <F2> 88,000 8.00 88,000 32,644 7.21
<FN>
<F1> The note payable to bank represents a
short-term home equity line of
credit secured by the property.
<F2> The note payable to bank represents a
short-term construction loan secured by
the property.
<F3> The average amount outstanding during
the period was computed by dividing the
total month-end outstanding principal
balances by the number of months in
the period.
<F4> The weighted average interest rate during
the period was computed by dividing the actual
interest expense by average short-term debt
outstanding.
</FN>
</TABLE>
F-13
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
SOUTHERN ACCEPTANCE CORPORATION AND SUBSIDIARIES
Year Ended
Year Ended Quarter Ended September 30,
December 31, December 31, ------------------
1995 1994 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Maintenance and repairs $ 7,545 $ 1,035 $ 2,315 $ 4,137
Depreciation and amortization
of intangible assets,
preoperating costs and
similar deferrals 10,919 3,007 11,828 12,432
Taxes, other than payroll
and income taxes:
Taxes and licenses 1,055 1,155 1,312 1,403
Property taxes 4,854 4,680 6,313 4,718
Royalties -0- -0- -0- -0-
Advertising Costs 7,368 2,772 18,002 12,548
</TABLE>
F-14
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
SOUTHERN ACCEPTANCE CORPORATION AND SUBSIDIARIES
Life on Which
Gross Amount Depreciation
Costs at Which in Latest
Capitalized Carried Income
Initial Cost Subsequent to at End Accumulated Date of Date Statements
to Company Acquisition of Period Depreciation Construction Acquired is Computed
--------------- ------------------ ------------- ------------ ------------ --------- -------------
Land Buildings/ Improve- Carrying
Improvements ments Costs
--------------- ------------------ ------------- ------------- -------------- -------- -------------
<S> <C> <C> <C> <C> <S>
Land - Bartow
County, GA $173,820 $2,168 $125,694(1) 7/02/87 N/A
======= ===== =======
</TABLE>
(1) Represents aggregate cost for Federal income tax purposes.
(2) Reconciliation of "Real Estate and Accumulated Depreciation."
<TABLE>
<CAPTION>
Year Ended Quarter Ended Year Ended September 30,
December 31, December 31, ------------------------------
1995 1994 1994 1993 1992
----------- ------------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment in Real Estate:
Balance at beginning of period $175,988 $175,988 $375,203 $375,203 $375,203
Additions through cash
expenditures -0- -0- -0- -0- -0-
Deductions - cost of real
estate sold -0- -0- 199,215 -0- -0-
Adjustment to net realizable
value 50,294 -0- -0- -0- -0-
------- ------- ------- ------- -------
Balance at close of period $125,694 $175,988 $175,988 $375,203 $375,203
======= ======= ======= ======= =======
Accumulated Depreciation:
Balance at beginning of period $ -0- $ -0- $ -0- $ -0- $ -0-
Additions -0- -0- -0- -0- -0-
Deductions -0- -0- -0- -0- -0-
------- ------- ------- ------- -------
Balance at close of period $ -0- $ -0- $ -0- $ -0- $ -0-
======= ======= ======= ======= =======
</TABLE>
F-15
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE XII - MORTGAGE LOANS ON REAL ESTATE
SOUTHERN ACCEPTANCE CORPORATION AND SUBSIDIARIES
Principal Amount of
Final Periodic Face Carrying Loans Subject to
Maturity Payment Prior Amount of Amount of Delinquent Principal
Description Interest Rate Date Terms Items Mortgages Mortgages or Interest
- ----------- ------------- -------- -------- ----- --------- --------- ---------------------
<S> <C> <C> <S> <C> <C>
First mortgage
on townhome 9% March 1995 Monthly $73,641 $73,641
</TABLE>
(1) For income tax purposes, the cost of investments is
the carrying amount, as disclosed in the schedule.
(2) Reconciliation of "Mortgage Loans on Real Estate."
<TABLE>
<CAPTION>
Year Ended
Year Ended Quarter Ended September 30,
December 31, December 31, -------------------
1995 1994 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance at beginning of period $72,755 $73,641 $160,246 $228,949
Additions - new mortgage loans -0- -0- -0-
Deductions - collections 72,755 (886) (35,036) (68,703)
- repossession of house -0- -0- (51,569) -0-
------ ------ ------- -------
Balance at close of period $ -0- $72,755 $ 73,641 $160,246
====== ====== ======= =======
</TABLE>
F-16
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
(Registrant) SOUTHERN ACCEPTANCE CORPORATION
By: /s/ J. A. Cochran
Name: J. A. Cochran
President and Director
Date: March 30, 1996
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the date
indicated.
/s/ W. H. Stembridge Director March 30, 1996
W. H. Stembridge
/s/ Roy W. Sweat Director March 30, 1996
Roy W. Sweat
/s/ Arthur Crowe Director March 30, 1996
Arthur Crowe
/s/ Harry W. Chappell, Jr. Director March 30, 1996
Harry W. Chappell, Jr.
/s/ Bonnie L. Byers Vice President, March 30, 1996
Bonnie L. Byers Secretary-Treasurer
and Director
/s/ Ken Thigpen Director March 30, 1996
Ken Thigpen<PAGE>
EXHIBIT INDEX
Exhibit No. Description
2.1 Agreement and Plan of Merger dated January
22, 1996 by and between the Registrant and
Efficiency Lodge, Inc.
21 Subsidiaries of the Registrant
27 Financial Data Schedule
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
between
SOUTHERN ACCEPTANCE CORPORATION
and
EFFICIENCY LODGE, INC.
Dated January 22, 1996
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into
this 22nd day of January, 1996, by and between SOUTHERN
ACCEPTANCE CORPORATION, a Georgia corporation ("SAC"), and
EFFICIENCY LODGE, INC. a Georgia corporation ("ELI").
WHEREAS, the Boards of Directors of ELI and SAC deem it
advisable and in the best interests of their respective
shareholders to effect the merger (the "Merger") of ELI and SAC
upon the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, the Board of Directors of SAC has duly approved the
Merger and the other transactions contemplated by this Agreement
and resolved to recommend the approval of this Agreement and such
transactions to its shareholders; and
WHEREAS, the Board of Directors and the shareholders of ELI
have duly approved the Merger;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein, and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, ELI and SAC hereby agree as follows:
ARTICLE 1. THE MERGER
At the Effective Time (as defined in Section 3.3), upon the
terms and subject to the conditions set forth in this Agreement,
and in accordance with the applicable corporation law of the
state of Georgia, ELI shall be merged with and into SAC, the
separate existence of ELI (except as may be continued by
operation of law) shall cease, and SAC shall continue as the
surviving corporation. SAC, after the Merger, is sometimes
referred to herein as the "Surviving Corporation." At the
Effective Time, the Surviving Corporation shall continue its
corporate existence under the laws of the State of Georgia and
shall succeed to all rights, privileges, immunities, franchises
and powers, and be subject to all duties, liabilities, debts and
obligations, of SAC and ELI in accordance with the provisions of
the laws of Georgia.
ARTICLE 2. THE SURVIVING CORPORATION
2.1 Articles. The Articles of Incorporation of SAC as in
effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation, and in
the Merger said Articles of Incorporation shall be amended as of
the Effective Time to change the name of the Surviving
Corporation to "Efficiency Lodge, Inc." and to change the
principal address of the Surviving Corporation to 928 Bankhead
Highway, Mableton, Georgia.
-2-
<PAGE>
2.2 Bylaws. The Bylaws of SAC as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with
applicable law, the Articles of Incorporation of such Surviving
Corporation and such Bylaws.
ARTICLE 3. CONVERSION; CLOSING
3.1 Conversion of Shares. At the Effective Time, by virtue
of the Merger and without any action on the part of the holders
thereof, (a) every one hundred (100) shares of SAC common stock
issued and outstanding immediately prior to Effective Time held
by each shareholder of record ("Pre-Merger Shares") shall be
converted into and become the right to receive one new share of
the common stock of the Surviving Corporation, $.10 par value per
Share (the common stock to be received by shareholders of SAC is
referred to herein as the "New Shares"), and the number of New Shares
received by shareholders of SAC shall constitute five percent (5%) of the
shares of outstanding stock of the Surviving Corporation; (b) each share
of common stock of ELI issued and outstanding immediately prior to the
Effective Time that is owned by ELI or held in the treasury of
ELI shall be cancelled and retired, and no payment shall be made
with respect thereto; (c) all shares of common stock of ELI
issued and outstanding immediately prior to the Effective Time
shall be cancelled and extinguished and shall be converted into
and become the right to receive such number of shares as shall constitute
95% of the outstanding shares of the common stock of the Surviving
Corporation, $.10 par value per share (the common stock to be received
by the shareholders of ELI is referred to herein as the "Shares") and each
share of common stock of ELI shall be converted into that number of shares
of the Surviving Corporation as shall constitute a proportionate share of
the total Shares to be issued to the ELI shareholders upon consummation
of the Merger. No scrip or fractional share certificate of the Surviving
Corporation shall be issued to the SAC or ELI shareholders in connection
with the Merger, and an outstanding fractional share interest will not
entitle the owner thereof to vote, to receive dividends or to have any
of the rights of a shareholder with respect to such fractional interest.
In lieu of the issuance of any fractional interest, there shall
be paid in cash to (i) each former ELI shareholder an amount
(computed to the nearest cent) equal to such fraction multiplied
by $.10 and (ii) to each former SAC shareholder an amount
(computed to the nearest cent) equal to the number of shares of
SAC common stock held by such shareholder that were not converted
to shares of the Surviving Corporation in the Merger multiplied
by $.10 per share.
3.2 Closing of Transfer Books. (a) At the Effective Time,
the stock transfer books of ELI shall be closed and there shall
be no further registration or transfers of shares thereafter on
the records of ELI. If, after the Effective Time, certificates
formerly representing shares of ELI are presented for transfer,
they shall be cancelled and exchanged for Shares as provided in
this Article 3. From and after the Effective Time, the holders
of certificates representing shares of ELI shall cease to have
any rights with respect to such shares, except as otherwise
provided herein or by law, and such shares of ELI common stock
shall instead represent the right to receive Shares as provided
herein.
(b) At the Effective Time, the stock transfer books of
SAC shall be closed, and there shall be no further registration
or transfers of Pre-Merger shares thereafter on the records of
SAC. If, after the Effective Time, certificates formerly
representing Pre-Merger Shares are presented for transfer, they
shall be cancelled and exchanged for New Shares or cash as
provided in this Article 3. From and after the Effective time,
the holders of certificates representing Pre-Merger Shares shall
cease to have any rights with respect to such shares, except as
otherwise provided herein or by applicable law, and such
-3-
<PAGE>
Pre-Merger Shares shall instead represent the right to receive
New Shares or cash as provided herein.
3.3 Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices
of Kilpatrick & Cody, 1100 Peachtree Street, Atlanta, Georgia
30309 at 10:00 a.m., local time, on the day after the later to
occur of the Special Meeting (as defined in Section 6.4(c)) or
the date on which all the conditions set forth in Article 7
hereof are satisfied or waived, or at such other date, time and
place as SAC and ELI shall agree. On the date of Closing, SAC
and ELI shall file the Certificate of Merger in accordance with
Georgia law. The Merger shall become effective at the close of
business on the date of Closing (the "Effective Time").
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SAC
SAC has delivered to ELI certain documents and materials
pursuant to this Agreement, and all such documents and materials
are true, correct and complete as of the date furnished, and any
and all modifications or amendments thereto have been delivered
to ELI. At all times prior to and including the date of Closing,
SAC shall promptly provide ELI with written notification of any
event, occurrence or other information of any kind whatsoever
which affects, or may affect, the continued truth, correctness or
completeness of any representation or warranty made in this
Agreement or in any other document or writing furnished to ELI
pursuant to this Agreement. SAC represents and warrants to ELI
as follows:
4.1 Organization and Qualification. SAC is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Georgia and has the requisite corporate
power to own, lease or operate its properties and to carry on its
business as and in all places where such business is now
conducted and such properties are owned or leased. SAC is duly
qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its
properties owned, leased or operated or the nature of its
activities makes such qualification necessary, except for
failures to be so qualified or in good standing which would not
have a material adverse effect on its business, operations,
properties, assets, liabilities, condition (financial or
otherwise) or results of operations ("Material Adverse Effect").
4.2 Capitalization. SAC's authorized share capital is as
set forth in SAC's Form 10-K filed for the year ended September
30, 1994, and the Articles of Incorporation previously delivered
to ELI. All of the issued and outstanding shares of SAC common
stock, par value $.10 per share (the "SAC Stock"), have been duly
and validly authorized and are validly issued, fully paid and
non-assessable. Following the effectiveness of the Merger, the
Shares will be duly authorized and reserved for issuance. There
are no preemptive rights to the issuance of the Shares. There
are no outstanding (a) securities of SAC convertible into or
exchangeable for shares of share capital or other voting
securities of SAC, and (b) options or other rights to acquire
from SAC, and no other obligation of SAC to issue, any share
capital, voting securities or other ownership interests in SAC.
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There are no outstanding obligations of SAC to repurchase, redeem
or otherwise acquire any of its outstanding securities.
4.3 Subsidiaries. The Subsidiaries of SAC are as set forth
on Exhibit 21 to SAC's Form 10-K filed for the year ended
September 30,1994. For purposes of this Agreement, "Subsidiary"
means (i) any corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a
majority of the Board of Directors or other persons performing
similar functions are directly or indirectly owned by a person,
or (ii) any partnership (whether or not a limited partnership) or
similar entity in which a person directly or indirectly owns an
equity interest entitling such person to 50% or more of the
voting interests therein.
4.4 Authority; No Inconsistent Agreements. (a) The officers
executing this Agreement on behalf of SAC have full power and
authority to execute and perform this Agreement and the other
agreements contemplated hereby and to perform SAC's obligations
hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. All proceedings and actions
required to be taken by SAC to authorize the execution,
delivery and performance of this Agreement have been properly
taken. Except for the approval of SAC's shareholders to be
sought at the Special Meeting, no other corporate proceeding
on the part of SAC is necessary to authorize this Agreement
or the transactions contemplated hereby. This Agreement has
been, and any other agreements contemplated hereby
to which SAC is or will be a party, have been, or will be, duly
executed and delivered by SAC and constitute, or when executed
and delivered will constitute, the valid and binding obligation
of SAC and will be enforceable, in accordance with their
respective terms, except as (i) such enforcement may be subject
to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights generally, and (ii) the remedy of specific performance and
injunctive relief may be subject to equitable defenses and to the
discretion of the court in which any proceeding may be brought.
(b) Neither the execution, delivery or performance of
this Agreement or of any other agreement contemplated hereby nor
the consummation of the transactions contemplated hereby or
thereby does or will (with the passage of time, the giving of
notice or otherwise) constitute a violation of or conflict with
any provision of (i) the Articles of Incorporation or the Bylaws
of SAC; (ii) any term or provision of any indenture, note,
mortgage, bond, security agreement, loan agreement, guaranty,
pledge or other agreement, instrument or commitment to which SAC
is a party; (iii) any writ, order, judgment, decree, ruling,
consent agreement or award ("Order") of any court, government or
administrative body of competent jurisdiction; (iv) any
constitution, statute, rule, regulation, ordinance, act, code,
legislation, treaty, convention or judicial decision ("Law"); or
(v) any other written commitment or restriction to which SAC is a
party or by which SAC or any of its assets or properties is
subject or bound; nor will such actions result in (1) the
creation of any lien, claim, charge, encumbrance, or restriction
("Lien") on any of the assets or properties of SAC; (2) the
creation or acceleration of any obligation of SAC; or (3) the
forfeiture of any right or privilege of SAC, except for
violations or defaults which will not in the aggregate have a
Material Adverse Effect on SAC.
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4.5 Corporate Books and Records. All of the minute books
of SAC have heretofore been furnished to ELI by SAC and correctly
show all corporate action taken by the shareholders, directors
and committees of the Board of Directors of SAC and contain
copies or originals of SAC's Articles of Incorporation and Bylaws
and all amendments thereto.
4.6 Commission Filings; Financial Statements. (a) SAC has
heretofore made available to ELI the following reports, documents
and other materials (collectively, the "SEC Reports"):
(i) its Annual Report on Form 10-K for the fiscal year
ended September 30, 1994;
(ii) its Quarterly Reports on Form 10-Q for the fiscal
quarters ended June 30, 1995, March 31, 1995, and December 31,
1994; and
(iii) all other reports and registration statements
(in the forms in which such registration statements were declared
effective) filed by SAC with the Securities and Exchange
Commission (the "Commission") since September 30, 1990 through
the date of this agreement.
As of their respective dates, the SEC Reports did not
contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading.
(b) The audited financial statements and unaudited
interim financial statements of SAC included or incorporated by
reference in the SEC Reports (the "SAC Financial Statements")
have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis
during the periods involved, and fairly present, in all material
respects, the financial position, results of operations and
changes in financial position as of such dates and for the
periods then ended, subject, in the case of unaudited interim
financial statements, to normal year-end adjustments. As of
September 30, 1995, the date of the unaudited interim financial
statements in SAC's Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission, to the knowledge of SAC, (a)
SAC had no liability or expense of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become
due, which was not reflected in the September 30, 1995 Balance
Sheet forming part of the SAC Financial Statements and which was
of a nature required under GAAP to be reflected in the SAC
Financial Statements or disclosed in the notes thereto; (b) all
allowances and reserves set forth in the SAC Financial Statements
were adequate for the respective purposes for which they were
established; and (c) there were no loss contingencies (as such
term is used in Statement of Financial Accounting Standards No.
5) which were of a nature required under GAAP to be reflected or
disclosed therein and were not reflected in the SAC Financial
Statements or disclosed in the notes thereto and which would have
a Material Adverse Effect on SAC. Since September 30, 1995,
except for liabilities that have been incurred in the ordinary
course of business consistent with past practices, SAC has not
incurred any liability of any nature (whether accrued, absolute,
contingent or otherwise).
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4.7 Absence of Changes. Except as expressly provided for
in this Agreement, since September 30, 1994:
(a) there has been no change in the business,
properties, financial condition or actual or anticipated results
of operations of SAC or in its relationships with suppliers,
customers, employees, lessors, or others, other than changes in
the ordinary course of business, none of which have had or will
have, a Material Adverse Effect on SAC; (b) the
business of SAC has been operated in the ordinary course and
consistent with its prior practices; and
(c) the books, accounts and records of SAC have been
maintained in the usual, regular and ordinary manner on a basis
consistent with prior years.
4.8 No Violation. SAC is not in default under or in
violation of (a) its Articles of Incorporation or Bylaws;
(b) any Order; (c) any Law; or (d) any material contract
to which SAC is a party, in each case, except for violations
or defaults which will not in the aggregate have a
Material Adverse Effect on SAC.
4.9 Compliance with Laws. SAC has in the past duly
complied, and is presently duly complying, with all applicable
Laws except where the failure to have so complied or be so
complying would not have a Material Adverse Effect on SAC.
SAC has not received any notification of any asserted past
or present failure by it to comply with any such Laws.
4.10 Broker's Fees. SAC has not authorized any person to
act as a broker, finder or financial advisor or in any similar
capacity in connection with the Merger or the transactions
contemplated by this Agreement in such a manner as to give rise
to a valid claim against SAC or ELI for any brokers', finders',
financial advisors' or similar fees or expenses.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF ELI
ELI has delivered to SAC certain documents and materials
pursuant to this Agreement, and all such documents and materials
are true, correct and complete as of the date furnished and any
and all modifications or amendments thereto have been delivered
to SAC. At all times prior to and including the date of Closing,
ELI shall promptly provide SAC with written notification of any
event, occurrence or other information of any kind whatsoever
which affects, or may affect, the continued truth, correctness or
completeness of any representation or warranty made in this
Agreement or any other document or writing furnished to SAC
pursuant to this Agreement. ELI represents and warrants to SAC
as follows:
5.1 Organization and Qualification. ELI is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Georgia and has the requisite corporate
power to own, lease or operate its properties and to carry on its
business as and in all places where such business is now
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conducted and such properties are owned or leased. ELI is duly
qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its
properties owned, leased or operated or the nature of its
activities makes such qualification necessary, except for
failures to be so qualified or in good standing which would not
have a Material Adverse Effect on ELI.
5.2 Capitalization. (a) The authorized share capital, the
total number of outstanding shares of ELI, and the number of
shares owned by each shareholder of ELI, are set forth on
Schedule 5.2 hereto. All of the issued and outstanding shares of
ELI have been duly and validly authorized and are validly issued,
fully paid and non-assessable, free and clear of Liens, were
authorized, issued and sold in accordance with all applicable Law
and were not issued in violation of the preemptive rights of any
shareholder. The Articles of Incorporation of ELI do not provide
for preemptive rights in favor of any person.
(b) There are no outstanding subscriptions, options,
warrants, rights, convertible or exchangeable securities or other
agreements or commitments of any character relating to the issued
or unissued share capital, or other securities of ELI obligating
ELI to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of share capital, or other securities
of ELI or obligating ELI to grant, extend or enter into any
subscription, option, warrant, right, convertible security or
other similar agreement or commitment with respect thereto. ELI
is not liable for any dividends declared or accrued, but unpaid,
with respect to its share capital.
5.3 Subsidiaries. ELI has no Subsidiaries.
5.4 Authority; No Inconsistent Agreements. (a) The
officers executing this Agreement on behalf of ELI have full
power and authority to execute and perform this Agreement and the
other agreements contemplated hereby and to perform the
obligations of ELI hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. All proceedings
and actions required to be taken by ELI to authorize the
execution, delivery and performance of this Agreement have been
properly taken. No other corporate proceedings on the part of
ELI are necessary to authorize this Agreement or the transactions
contemplated hereby. This Agreement has been, and the other
agreements contemplated hereby to which ELI is or will be a
party, have been or will be, duly executed and delivered by ELI
and constitute, or when executed and delivered will constitute,
the valid and binding obligation of ELI, enforceable in
accordance with their respective terms, except that (i) such
enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights generally, and (ii) the
remedy of specific performance and injunctive relief may be
subject to equitable defenses and to the discretion of the court
in which any proceeding may be brought.
(b) Neither the execution, delivery or performance by
ELI of this Agreement or of any other agreement contemplated
hereby, nor the consummation by ELI of any of the transactions
contemplated hereby or thereby, does or will (with the passage of
time, the giving of notice or otherwise), constitute a violation
or conflict with, any provision (i) of the Articles of
Incorporation or Bylaws of ELI; (ii) any term of any indenture,
note, mortgage, bond, security agreement, loan agreement, pledge
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or other agreement, instrument or commitment to which ELI is a
party; (iii) any Order; (iv) any applicable Law; or (v) any other
written commitment or restriction to which ELI is a party or by
which ELI or any of its assets or properties is subject or bound;
nor will such actions result in (1) the creation of any Lien on
any of the assets or properties of ELI; (2) the creation or
acceleration of any obligation of ELI; or (3) the forfeiture of
any right or privilege of ELI, except for violations or defaults
which will not in the aggregate have a Material Adverse Effect on
ELI.
5.5 Corporate Books and Records. All of the share records
and minute books of ELI have heretofore been furnished to SAC by
ELI and reflect fully all issuances, transfers and redemptions of
the share capital of ELI, correctly show all corporate action
taken by the shareholders, directors and committees of the Board
of Directors of ELI, and contain copies or originals of ELI's
Articles of Incorporation and Bylaws and all amendments thereto.
5.6 Consents. Schedule 5.6 sets forth a true, correct and
complete list of all consents as may be necessary or appropriate
to consummate the transactions contemplated by this Agreement in
accordance with the terms of this Agreement and to enable the
Surviving Corporation to carry on and conduct the business of ELI
in all material respects subsequent to the Closing in
substantially the same manner as was carried on and conducted
prior to the Closing, or that are necessary to prevent a breach
of, or a default or penalty under, or increase the payments
under, or decrease the obligations of any party to, or cause or
permit a termination of, a contract relating to the business and
operations of ELI, which would have a Material Adverse Effect on
ELI.
5.7 Financial Statements. (a) Prior to the date hereof,
ELI has delivered to SAC copies of (i) the balance sheet of ELI
as of December 31, 1994 and the related statements of income,
changes in stockholders equity, and cash flows for the period
ended December 31, 1994, together with the auditors' report
thereon of Moore & Cubbedge, independent certified public
accountants, and (ii) the unaudited balance sheet of ELI as of
August 31, 1995, and the related statements of income, changes in
stockholders equity, and cash flows for the period ended August
31, 1995 (the "ELI Financial Statements"). The ELI Financial
Statements have been prepared in accordance with GAAP applied on
a consistent basis during the periods involved, and fairly
present, in all material respects, the financial position,
results of operations and changes in financial position for the
periods then ended, subject, in the case of unaudited interim
financial statements, to normal year-end adjustments.
(b) As of August 31, 1995, to the knowledge of ELI,
(i) ELI had no liability or expense of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to
become due, which was not reflected in the August 31, 1995
Balance Sheet forming part of the ELI Financial Statements and
which was of a nature required under GAAP to be reflected in the
ELI Financial Statements or disclosed in the notes thereto; (ii)
all allowances and reserves set forth in the ELI Financial
Statements were adequate for the respective purposes for which
they were established; and (iii) there were no loss contingencies
(as such term is used in Statement of Financial Accounting
Standards No. 5) which were of a nature required under GAAP to be
reflected or disclosed therein and were not reflected in the ELI
Financial Statements or disclosed in the notes thereto and which
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would have a Material Adverse Effect on ELI. Since August 31,
1995, except for liabilities that have been incurred in the
ordinary course of business consistent with past practices, ELI
has not incurred any liability of any nature (whether accrued,
absolute, contingent or otherwise).
5.8 Absence of Changes. Except as expressly provided for
in this Agreement, since December 31, 1994:
(a) there has been no change in the business,
properties, financial condition or actual or anticipated results
of operations of ELI or in its relationships with suppliers,
customers, employees, lessors or others, other than changes in
the ordinary course of business, none of which have had or will
have a Material Adverse Effect on ELI;
(b) the business of ELI has been operated in the
ordinary course and consistent with its prior practices;
(c) the books, accounts and records of ELI have been
maintained in the usual, regular and ordinary manner on a basis
consistent with prior years.
5.9 No Violation. ELI is not in default under or in
violation of (a) its Articles of Incorporation or Bylaws; (b)
any Order; (c) any applicable Law; or (d) any material contract
to which ELI is a party; except, in each case, for violations
or defaults which will not in the aggregate have a Material
Adverse Effect on ELI.
5.10 Title to Properties. ELI owns or has the right to use
all properties and assets necessary to conduct its business as
such business is currently being conducted and was conducted
during the periods covered by the ELI Financial Statements and
through the date hereof. ELI has full title to all properties
and assets owned by it, real and personal (including intellectual
property), including, without limitation, those reflected on the
August 31, 1995 Balance Sheet constituting part of the ELI
Financial Statements, free and clear of Liens except:
(a) assets sold or otherwise disposed of in the
ordinary course of business, since August 31, 1995;
(b) as expressly set forth in the ELI Financial
Statements as securing specific liabilities (with respect to
which no default exists);
(c) Liens for applicable taxes which are not past due;
(d) easements for the erection and maintenance of
public utilities serving the owned or leased properties of ELI;
and
(e) minor imperfections of title and encumbrances, if
any, which are not substantial in amount, did not arise from the
borrowing of money or the obtaining of advances or credit, do not
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detract from the value of the property subject thereto or impair
the operations of ELI and have arisen only in the ordinary course
of business.
5.11 Contracts. All material contracts to which ELI is a
party are valid and binding upon ELI and the other parties
thereto and are in full force and effect and enforceable in
accordance with their terms, and ELI nor, to the knowledge of
ELI, any other party to any of such material contracts has
breached any provision of, or is in default in any respect under
the terms of, any material contract.
5.12 Compliance with Laws. ELI has in the past duly
complied, and is presently duly complying, with all applicable
Laws, except where the failure to have so complied or be so
complying would not have a Material Adverse Effect on ELI. ELI
has not received any notification of any asserted past or present
failure by it to comply with any of such Laws. Without limiting
the generality of the foregoing, ELI is in compliance with, and
has been in compliance with, all permits, regulatory plans, and
compliance schedules and applicable Laws relating to pollution
and environmental control, including but not limited to, said
requirements relating to the disposal, treatment, transportation
or other handling of hazardous or toxic waste, materials and
substances on, in, under or off-site from any facility used for
manufacturing or for storage of raw materials or byproducts or
relating to emissions or potential emissions into the environment
of solids, liquids, gases, heat, light, noise, or radiation or
the proper disposal of materials, including without limitation
solid and liquid waste materials that are applicable to ELI.
5.13 Broker's Fees. ELI has not paid or become obligated
to pay any fee or commission to any broker, finder or
intermediary in connection with the transactions contemplated
hereby, and SAC shall not become obligated to pay any fee or
commission to such persons or entities.
ARTICLE 6. ADDITIONAL AGREEMENTS
6.1 Conduct of Businesses. Except as otherwise
specifically provided in this Agreement, from the date hereof to
the Effective Time, each of ELI and SAC shall carry on their
respective businesses only in the ordinary and usual course and
consistent with past practice and shall use their best efforts to
(a) preserve intact their respective business organizations, (b)
maintain in effect all licenses, approvals, qualifications and
authorizations that are required to carry on their respective
businesses, (c) keep available the services of their respective
key officers and employees, and (d) maintain satisfactory
relationships with their lenders, suppliers, customers, and
others having business relationships with them.
6.2 Non-Solicitation of Third Party Offers. SAC, on the
one hand, and ELI, on the other hand, each agrees not to
initiate, solicit or encourage, and will direct and use its best
efforts to cause each officer, director, employee, investment
banker, attorney, accountant or other agent employed or retained
by it not to initiate, solicit or encourage, any proposal or
offer to acquire all or any substantial part of its business and
properties or share capital, whether by merger, purchase of
assets, tender offer or otherwise (each, a "Business Combination
Transaction"), and not to engage in any negotiations concerning,
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or provide any confidential information or data to, or have any
discussions with a corporation, partnership, person or other
entity or group ("Third Party") relating to a Business
Combination Transaction; provided, however, that SAC may furnish
information concerning its business, properties or assets to a
Third Party which has expressed an interest in making a bona fide
offer or proposal to enter into a Business Combination
Transaction and which in the opinion SAC has the financial
capability to consummate such a Business Combination Transaction
subject to receipt of appropriate information (and when SAC has
not initiated the offer or proposal and has not solicited or
encouraged such Third Party to express such offer or proposal in
breach of this Section) and, following receipt of such expression
of interest, may negotiate any of the actions otherwise
prohibited by this Section, including without limitation,
entering into appropriate agreements with such Third Party with
regard to a Business Combination Transaction, if outside counsel
to SAC advises the Board of Directors of SAC to the effect that
the failure to furnish such information or negotiate or enter
into appropriate agreements with such Third Party would subject
said directors to a substantial risk of liability for breach of
their fiduciary duties or for failure to comply with the
requirements of applicable Law. If either party shall receive an
expression of interest or offer of the type referred to in this
Section, it shall promptly inform the other party as to (and
provide the other party with copies of) any such inquiry, offer
or proposal.
6.3 Access to Information. From the date hereof until the
Closing, ELI and SAC shall, and shall cause the officers,
directors, employees and agents of each to, afford to the other
and to the other's financial advisors, legal counsel,
accountants, consultants and other representatives full access
(during regular business hours and upon reasonable notice) to all
of its officers, employees, agents, properties, offices and other
facilities, and to the books, records and contracts of each and
shall furnish to the other all financial, operating and other
data and information as such other party may reasonably request
through its officers, employees or agents from time to time. No
investigation pursuant to this Section shall affect any
representations or warranties of the parties hereto or the
conditions to the obligations of the parties hereto.
6.4 Proxy Statement; SAC Shareholder Approvals. (a) As
promptly as practicable following the execution of this
Agreement, SAC shall file with the Commission a Proxy Statement
(the "Proxy Statement") with respect to the proposals described
below. SAC and ELI shall (i) use all reasonable efforts to have
the Proxy Statement cleared by the Commission at the earliest
practicable time; and (ii) prepare and file any other filings
required under the Securities Exchange Act of 1934, as amended,
or any other federal or state securities or blue sky laws
relating to the Merger and the other transactions contemplated
hereby at the earliest practicable time. The Proxy Statement
shall comply as to form in all material respects with all
applicable requirements of the federal securities laws.
(b) The information to be provided by ELI for use in
the Proxy Statement shall not contain any untrue statement of any
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances, not misleading at the
time the documents are filed with the Commission, at the time it
is mailed, and at the time of the Special Meeting.
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(c) SAC, acting through its Board of Directors, shall,
in accordance with applicable Georgia law and its Articles of
Incorporation and Bylaws, promptly and duly call and give notice
of, convene and hold as soon as practicable a meeting of its
shareholders (the "Special Meeting") for the purpose of voting to
approve the Merger on the terms and conditions contained herein
(the "Merger Proposal"). Consistent with the fiduciary duties of
directors under Georgia law as advised by counsel, the SAC Board
of Directors shall recommend approval of the Merger Proposal by
the shareholders of SAC and include in the Proxy Statement such
recommendations.
6.5 Registration Rights; Resale. (a) If at any time
during the three years after the Closing the Surviving
Corporation shall file one or more registration statements under
the Securities Act of 1933, as amended, with respect to a public
offering of equity securities of the Surviving Corporation (the
"1933 Act"), or of any such securities of the Surviving
Corporation held by its security holders, the Surviving
Corporation will include in any such registration statement such
information as may be required to permit a public offering of the
shares of the SAC Stock beneficially owned by the former
shareholders of ELI or their respective designees or transferees
(such shareholders and their designees or transferees are
referred to collectively herein as the "Designees"). The number
of shares of the Surviving Corporation stock held by such persons
as may be requested by them shall be included in such
registration statement. The Surviving Corporation shall bear all
fees and expenses incurred in connection with the preparation and
filing of such registration statement.
(b) In the event of such a proposed registration, the
Surviving Corporation shall furnish the Designees with not less
than 30 days' written notice prior to the proposed date of filing
of the registration statement. Such notice shall continue to be
given by the Surviving Corporation to the Designees until such
time as these "piggy-back" registration rights shall expire or
until all of the Surviving Corporation stock owned by any of them
shall have been registered pursuant to these "piggy-back" rights.
The "piggy-back" rights provided for herein shall be exercised by
written notice of the Designees given to the Surviving
Corporation within 20 days of receipt of the Surviving
Corporation's notice of its intention to file a registration
statement.
(c) In addition to the foregoing "piggy-back"
registration rights, at any time during the three years after
Closing, the Designees holding a majority of the Shares, acting
together, shall have the one-time right to require the Surviving
Corporation to use its reasonable best efforts to promptly file a
registration statement under the 1933 Act in order to permit a
public offering of the Shares beneficially owned by the
Designees. Such right shall be exercised by written notice from
Designees holding a majority of the Shares to the Surviving
Corporation. The Surviving Corporation shall bear all fees and
expenses incurred in connection with the preparation and filing
of such registration statement.
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(d) Each Designee will not offer to sell, sell or
otherwise dispose of any of the shares of the Surviving
Corporation issued to him pursuant to the Merger, except pursuant
to an effective registration statement or in compliance with Rule
145 or another exemption from the registration requirements of
the Securities Act of 1933.
6.6 Best Efforts. Subject to the terms and conditions
contained herein, SAC and ELI agree to use their reasonable best
efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with each other in
doing, all things necessary, proper or advisable under applicable
Law to ensure that the conditions set forth in this Agreement are
satisfied and to consummate and make effective the transactions
contemplated by this Agreement and to obtain in a timely manner
all waivers, consents, approvals of, and to make filings with and
notifications to, any third parties as are necessary in order to
consummate the transactions contemplated by this Agreement.
6.7 Notification of Certain Matters. ELI shall give prompt
notice to SAC, and SAC shall give prompt notice to ELI, of the
occurrence, or failure to occur, of any event which the
occurrence or failure to occur is likely to cause (i) any
representation or warranty contained in this Agreement (and made
by the party required to give such notice) to be untrue or
inaccurate in any material respect at any time from the date
hereof to the Effective Time, or (ii) any material failure of the
party required to give such notice, or of any officer, director,
employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied
by it under this Agreement, provided that no such notification
shall affect the representations or warranties of the parties or
the conditions to the obligations of the parties hereunder.
6.8 Public Announcements. SAC and ELI will each consult
with the other before issuing any press releases or making any
public statement with respect to this Agreement and the
transactions contemplated hereby and will not issue any such
press release or make any such public statement prior to such
consultation; provided, however, that SAC may issue such press
releases or make other disclosures as required by applicable Law.
ARTICLE 7. CONDITIONS
7.1 Conditions to Obligations of Each Party. The
respective obligations of each party to effect the Merger shall
be subject to the satisfaction or waiver at or prior to the
Effective Time of each of the following conditions:
(a) Shareholder Approval. The Merger Proposal shall
have been approved and adopted by the holders of a majority of
the outstanding shares of SAC Stock.
(b) Legal Proceedings. No Order issued by a court of
competent jurisdiction or by a governmental, regulatory or
administrative agency or commission and no Law promulgated or
enacted by any governmental authority shall be in effect which
prohibits the consummation of the Merger shall have been issued
or adopted and remain in effect.
-14-
<PAGE>
(c) Tax Opinion. ELI and SAC shall have received from
Kilpatrick & Cody its opinion, in form and substance reasonably
satisfactory to ELI, dated as of the date of Closing,
substantially to the effect that, on the basis of the facts,
representations and assumptions set forth in such opinion:
(i) The Merger of ELI into SAC and the issuance
of Shares in connection therewith, as described herein,
will constitute a tax-free reorganization under Section
368 of the Code.
(ii) No gain or loss will be recognized by ELI or
SAC or by holders of share capital of ELI upon the
exchange of such stock for Shares as a result of the
Merger.
(iii) The tax basis of the Shares received in
the Merger by any shareholder of ELI will (on an
aggregate basis) be the same as the tax basis of the
stock exchanged therefor.
(iv) The holding period of the Shares received by
the shareholders of ELI will include the holding period
during which such shareholders respectively held the
shares of ELI exchanged for the Shares, provided that
such shares were held as a capital asset at the
Effective Time.
(d) Governmental Consents. All consents,
authorizations, orders, and approvals from any and all public or
governmental authorities, bodies or agencies and judicial
authorities having jurisdiction over the transactions
contemplated by this Agreement, or any part hereof (including
without limitation permits or other actions regarding the
issuance of securities pursuant to this Agreement and approvals
under the HSR Act), necessary for the consummation thereof shall
have been received, and such transactions shall not violate any
order, decree or judgment of any court or governmental body
having competent jurisdiction.
7.2 Conditions to the Obligations of SAC. The obligations
of SAC to effect the Merger shall also be subject to the
satisfaction or waiver at or prior to the date of Closing of each
of the following conditions:
(a) Performance of Obligations. ELI shall have
performed or complied with all agreements, obligations and
covenants required by this Agreement to be performed by it on or
prior to the date of Closing, and ELI shall have delivered to SAC
a certificate to that effect.
(b) Representations and Warranties. The
representations and warranties of ELI contained herein or in any
certificate, schedule or other document delivered pursuant hereto
shall be true and correct in all material respects on the date of
execution of this Agreement and at and as of the date of Closing
as if made at and as of such date, and ELI shall have delivered
to SAC certificates to that effect.
-15-
<PAGE>
(c) Legal Opinion. ELI shall have delivered to SAC an
opinion of Barnes, Browning, Tanksley & Casurella, counsel for
ELI, as of the date of Closing in form and substance reasonably
satisfactory to SAC and its counsel.
(d) Consents. ELI shall have obtained prior to the
date of Closing each consent or waiver specified in Schedule 5.6.
(e) Absence of Material Adverse Changes. ELI shall
not have experienced or suffered any material adverse change in
its business, prospects, operations, assets or condition
(financial or otherwise) since the date hereof.
7.3 Conditions to Obligations of ELI. The obligations of
ELI to effect the Merger shall be subject to the satisfaction or
waiver at or prior to the Effective Time of each of the following
conditions:
(a) Performance of Obligations. SAC shall have
performed or complied in all material respects with all
agreements, obligations and covenants required by this Agreement
to be performed by it on or prior to the Effective Time and shall
have delivered to ELI a certificate to that effect.
(b) Representations and Warranties. The
representations and warranties of SAC contained herein or in any
certificate, schedule or other document delivered pursuant hereto
shall be true and correct in all material respects at and as of
the date of Closing as if made at and as of such date and SAC
shall have delivered to ELI a certificate to that effect.
(c) Legal Opinion. SAC shall have delivered to ELI an
opinion of Kilpatrick & Cody, counsel for SAC, as of the date of
Closing in form and substance reasonably satisfactory to ELI and
its counsel.
(d) Consents. ELI shall have obtained prior to the
date of Closing each consent or waiver specified in Schedule 5.6.
(e) Board of Directors. Wesley Howard Stembridge,
Harry W. Chappell, Jr., and Bonnie L. Byers shall have tendered
their resignations from the Board of Directors of SAC effective
as of the Effective Time, and the remaining directors of SAC
shall have appointed Roy Barnes, Ray Barnes and Annette Bone as
directors to fill the vacancies created by their resignations,
which appointment will be contingent upon consummation of the
Merger and will be effective as of the Effective Time.
(f) Resignation of Officers. All of the officers of
SAC shall have tendered their resignations as officers of SAC
effective as of the Effective Time, and the Board of Directors of
SAC shall have appointed Roy Barnes as Chairman of the Board of
Directors and Secretary of SAC, Annette Bone as Vice President
-16-
<PAGE>
and Chief Operating Officer and Ray Barnes as President and Chief
Executive Officer of SAC, which appointments shall be contingent
upon consummation of the Merger and will be effective as of the
Effective Time.
(g) Authorization. All action necessary to authorize
the execution, delivery and performance of this Agreement and the
other agreements and transactions contemplated hereby by SAC
shall have been duly and validly taken on or prior to the date of
Closing.
(h) Absence of Material Adverse Changes. SAC shall
not have experienced or suffered any material adverse change in
its business, prospects, operations, assets or condition
(financial or otherwise) since the date hereof.
ARTICLE 8. TERMINATION
8.1 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time,
whether prior to or after approval by the shareholders of SAC and
ELI:
(a) by mutual written consent of SAC and ELI.
(b) By SAC or ELI if:
(i) the Merger has not been consummated on or
prior to 120 days after filing of the Proxy Statement
with the Commission (the "Termination Date") or such
other date, if any, as SAC and ELI shall agree upon,
provided that the right to terminate this Agreement
under this Section 8.1(b)(i) shall not be available to
any party whose failure to fulfill any obligation under
this Agreement has been the cause of or resulted in the
failure of the Merger to be consummated by such date;
(ii) the stockholders of SAC fail to adopt and
approve the Merger Proposal at the Special Meeting
(including any adjournment thereof);
(iii) a court of competent jurisdiction or a
governmental, regulatory or administrative agency or
commission shall have issued an order, decree, or
ruling or taken any other action, in each case
permanently restraining, enjoining or otherwise
prohibiting any action contemplated by this Agreement
and such order, decree, ruling or other action shall
have become final and nonappealable; or
(iv) there shall be any Law that makes
consummation of the transactions contemplated by this
Agreement illegal or otherwise prohibited.
-17-
<PAGE>
(c) By SAC if prior to the Effective Time (i) the
Board of Directors of SAC shall have withdrawn, modified or
amended in a manner adverse to ELI its approval or recommendation
that the shareholders of SAC adopt and approve the Merger
Proposal in order to permit SAC to execute a definitive agreement
providing for the acquisition of SAC, or in order to approve an
offer for any or all of the SAC Stock, in either case, as
determined by the Board of Directors of SAC, pursuant to the
actions permitted by Section 6.4, or (ii) if there has been (x) a
material breach of any covenant or agreement herein on the part
of ELI which has not been cured or adequate assurance (acceptable
to SAC in its reasonable discretion) of cure given, in either
case within 10 business days following receipt of notice of such
breach, or (y) a breach of a representation or warranty herein
which by its nature cannot be cured prior to the Termination
Date, or (iii) if SAC shall have discovered, upon a review of any
document or upon an investigation of the matters to which any of
such documents pertain, a condition existing with respect to the
earnings of ELI or any of the properties or assets of ELI which
might materially adversely affect the earnings, business or
prospects of ELI. SAC shall notify ELI in writing of any such
condition on or before February 1, 1996, and such notice shall be
deemed to be a termination of this Agreement. SAC's failure to
so notify ELI on or before such date shall be deemed to
conclusively indicate that the conditions set forth in Subsection
8(c)(iii) have been satisfied.
(d) By ELI, if prior to the Effective Time, (i) the
SAC Board of Directors shall have withdrawn, modified or amended
in a manner adverse to ELI its approval or recommendation that
the shareholders of SAC adopt and approve the Merger Proposal in
order to permit SAC to execute a definitive agreement providing
for the acquisition of SAC, or in order to approve an offer for
any or all of the SAC Stock, in either case, as determined by the
Board of Directors of SAC pursuant to the actions permitted by
Section 6.4, or (ii) if there has been (x) a material breach of
any covenant or agreement herein on the part of SAC which has not
been cured or adequate assurance (acceptable to ELI in its
reasonable discretion) of cure given, in either case within 10
business days following receipt of notice of such breach, or (y)
a breach of a representation or warranty of SAC herein which by
its nature cannot be cured prior to the Termination Date.
8.2 Effect of Termination. In the event of the termination
of this Agreement as provided in Section 8.1, this Agreement
shall become void and of no further force or effect; provided,
however, that such termination shall not eliminate any claims
which one party may have against the other arising out of a
breach of this Agreement before such termination.
ARTICLE 9. MISCELLANEOUS
9.1 Survival. The representations and warranties contained
herein and in any certificate or other writing delivered pursuant
hereto shall survive the date of Closing, the consummation of the
transactions contemplated hereby and any investigation made at
any time by or on behalf of the parties and shall continue in
full force and effect for a period of three years after the date
of Closing. Covenants and agreements set forth in this Agreement
to be performed after the Closing will survive the Closing in
accordance with their terms.
-18-
<PAGE>
9.2 Amendments; No Waivers. Any provision of this
Agreement may be amended or waived prior to the date of Closing,
if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by ELI and SAC or, in the
case of a waiver, by the party against whom the waiver is to be
effective. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies
provided herein shall be cumulative and not exclusive of any
rights or remedies provided by law.
9.3 Notices. All notices, requests and other
communications to any party hereunder shall be in writing and
shall be deemed given if delivered personally or by telecopy to
the respective parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to SAC, to:
Southern Acceptance Corporation
c/o Cochran, Camp & Snipes
2950 Atlanta Street, S.E.
Smyrna, Georgia 30080
Telephone No. (770) 435-2131
Fax No. (770) 436-6877
Attn.: J. Al Cochran, President
with copies to:
Kilpatrick & Cody
1100 Peachtree Street
Atlanta, Georgia 30309
Telephone No. (404) 815-6500
Fax No. (404) 815-6555
Attn.: Michael H. Trotter, Esq.
(b) if to ELI:
Efficiency Lodge, Inc.
P.O. Box 635
Mableton, Georgia 30059
Attn.: W. Ray Barnes
-19-
<PAGE>
with a copy to:
Barnes, Browning, Tanksley & Casurella
166 Anderson Street
Suite 225
Marietta, Georgia 30060
Telephone No. (770) 424-1500
Fax No. (770) 424-1740
Attn.: Roy E. Barnes, Esq.
Each such notice, request or other communication shall be
effective when delivered at the address specified in this
Section.
9.4 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted
assigns. No party may assign, delegate or otherwise transfer any
of its rights or obligations under this Agreement without the
consent of the other party hereto.
9.5 Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws of the State of
Georgia, without giving effect to the principles of conflict of
laws thereof.
9.6 Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signature thereto and
hereto were upon the same instrument. This Agreement shall
become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
9.7 Entire Agreement; Severability. This Agreement
constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all other
prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof. Any term
or provision of this Agreement which is invalid or unenforceable
in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability
without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity of
this Agreement in any other jurisdiction.
9.8 Parties In Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this
Agreement.
-20-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed as of the date first above written
by their respective duly authorized officers.
SOUTHERN ACCEPTANCE CORPORATION
By: /S/ J. A. Cochran
Name: J.A. Cochran
Title: President
Attest: /s/ Bonnie L. Byers
Name: Bonnie L. Byers
Title:Vice President/Sec.Treas.
EFFICIENCY LODGE, INC.
By: /s/ W. Ray Barnes
Name: w/ Ray Barnes
Title: President
Attest: /s/ Roy E. Barnes
Name: Roy E. Barnes
Title: Secretary
-21-
<PAGE>
<PAGE>
SCHEDULE 5.2
CAPITALIZATION OF ELI
Authorized Share Capital: 100,000 shares, $1.00 par value per
share
Number of Outstanding Shares: 900 shares
Shareholders: Ray Barnes, 450 shares
Roy Barnes, 450 shares
-22-
<PAGE>
<PAGE>
SCHEDULE 5.6
REQUIRED CONSENTS
None
-23-
Exhibit 21 - Subsidiaries of the Registrant
There follows a brief description of the Company's
subsidiaries, all but one of which are Georgia corporations.
Unless otherwise noted, all corporate subsidiaries of the Company
are wholly-owned.
1. Ramco Inns of Georgia, Inc. ("Ramco") - former owner of
an interest in a limited partnership joint venture that
previously owned the Ramada Inn located on Delk Road in
Marietta, Georgia.
2. SAC Building, Inc. - this subsidiary holds no assets
and makes no contribution to the operations of the
Company.
3. Pacemaker Properties, Inc. - operates as a real estate
sales division and engages in commercial and
residential brokerage activity.
4. Piedmont Southern Company - this subsidiary functions
as a central management and administrative unit for all
other operating segments of the Company.
5. Piedmont Southern Insurance Agency - this wholly-owned
subsidiary of Piedmont Southern Company is a registered
insurance agency with the State of Georgia. It has
functioned primarily to service internal insurance
policy sales nd service in the past, but is presently
inactive and makes no contribution to the operations of
the Company.
6. SAC Holding Company - this dormant subsidiary is a
Delaware Corporation which functions as an agent of the
Company for apartment purchases and sales. It has
conducted no operations in the last three fiscal years.
7. Nu-Moo Lite Industries, Inc. - Piedmont Southern
Company owns approximately 56.67% of the outstanding
stock of this corporation, which it organized in May,
1981 for the purpose of sales and distribution of non-
diary milk substitute products. It makes no
significant contribution to the operations of the
Company, and it ceased operations in 1986.
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<ARTICLE> 5
<CIK> 0000092066
<NAME> SOUTHERN ACCEPTANCE CORPORATION
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995
<PERIOD-START> OCT-31-1994 JAN-01-1995
<PERIOD-END> DEC-31-1994 DEC-31-1995
<CASH> 11,093 128,728
<SECURITIES> 0 0
<RECEIVABLES> 72,755 0
<ALLOWANCES> 0 0
<INVENTORY> 167,735 0
<CURRENT-ASSETS> 255,364 129,580
<PP&E> 203,387 162,174
<DEPRECIATION> 137,050 118,820
<TOTAL-ASSETS> 497,689 348,922
<CURRENT-LIABILITIES> 37,420 15,149
<BONDS> 59,431 38,943
0 0
0 0
<COMMON> 521,347 521,347
<OTHER-SE> (120,509) (226,517)
<TOTAL-LIABILITY-AND-EQUITY> 497,689 348,922
<SALES> 0 180,263
<TOTAL-REVENUES> 16,225 224,574
<CGS> 0 175,327
<TOTAL-COSTS> 8,164 185,817
<OTHER-EXPENSES> 35,398 144,765
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,046 8,104
<INCOME-PRETAX> (27,337) (106,008)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (27,337) (106,008)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (27,337) (106,008)
<EPS-PRIMARY> (.01) (.02)
<EPS-DILUTED> (.01) (.02)
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