SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
SMART CHOICE AUTOMOTIVE GROUP, INC.
-----------------------------------
(Name of Registrant as Specified in Its Charter)
Not applicable
--------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ____________________________________
(2) Form, Schedule or Registration Statement No.:__________________________
(3) Filing Party:____________________________________
(4) Date Filed: :____________________________________
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
5200 South Washington Avenue
Titusville, Florida 32780
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held October 19, 2000
To the Shareholders of Smart Choice Automotive Group, Inc.,
Notice is hereby given that the 2000 Annual Meeting of Shareholders of
Smart Choice Automotive Group, Inc., a Florida corporation, will be held at the
Four Seasons Hotel and Resort, 4150 North MacArthur Boulevard, Irving, Texas, on
Thursday, October 19, 2000, at 2:00 p.m., local time, for the following
purposes:
(1) To elect four directors, two to serve for a term of two years and
until their successors have been elected and qualified, and two to
serve for a term of three years and until their successors have
been elected and qualified;
(2) To approve an amendment to the Bylaws of the company to
de-classify the Board of Directors, so that, following the 2000
Annual Meeting, the term of each director will expire at the next
Annual Meeting of Shareholders held following the director's
election;
(3) To approve the adoption by the company of Amended and Restated
Articles of Incorporation, in the form set forth in Appendix A to
the attached proxy statement;
(4) To approve an amendment to the company's 1998 Executive Incentive
Compensation Plan to increase the number of shares of common stock
available for grant thereunder from 37,500 to 1,500,000; and
(5) To conduct such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record as of the close of business on September
15, 2000 will be entitled to notice of and to vote at said meeting or any
adjournment or postponement thereof.
A proxy statement and a proxy solicited by the Board of Directors are
enclosed herewith. Please sign, date and return the proxy promptly. If you
attend the meeting, you may, if you wish, withdraw your proxy and vote in
person.
By Order of the Board of Directors,
Edward R. McMurphy
Chairman of the Board
September 21, 2000
Whether or not you plan to attend the meeting in person, you are urged to
complete, sign, date and mail the enclosed proxy in the accompanying return
envelope, to which no postage is required if mailed within the United States.
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
5200 South Washington Avenue
Titusville, Florida 32780
ANNUAL MEETING OF SHAREHOLDERS
October 19, 2000
------------------------
PROXY STATEMENT
------------------------
This proxy statement, which is first being mailed to shareholders on or
about September 21, 2000, is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors of Smart Choice Automotive
Group, Inc., for use at Smart Choice's 2000 Annual Meeting of Shareholders, to
be held at the Four Seasons Hotel and Resort, 4150 North MacArthur Boulevard,
Irving, Texas, on Thursday, October 19, 2000, at 2:00 p.m., local time, and at
any or all adjournments or postponements thereof. The address of the principal
executive offices of Smart Choice is 5200 South Washington Avenue, Titusville,
Florida 32780, and Smart Choice's telephone number at that address is (321)
269-0834.
The total cost of this solicitation will be borne by Smart Choice. In
addition to the U.S. mail, proxies may be solicited by officers and regular
employees of Smart Choice, without remuneration, by personal interviews,
telephone and facsimile. It is anticipated that banks, brokerage houses and
other custodians, nominees and fiduciaries will forward soliciting material to
beneficial owners of stock entitled to vote at the Annual Meeting.
Any person giving a proxy pursuant to this proxy statement may revoke
it at any time before it is exercised at the Annual Meeting by notifying in
writing the Secretary of Smart Choice, Ronald Anderson, at 5200 South Washington
Avenue, Titusville, Florida 32780, prior to the Annual Meeting date. In
addition, if the person executing the proxy is present at the Annual Meeting, he
may, but need not, revoke the proxy, by giving notice of such revocation to the
Secretary of the Annual Meeting, and vote his shares in person. Proxies in the
form enclosed, if duly signed and received in time for voting, and not so
revoked, will be voted at the Annual Meeting in accordance with the instructions
specified therein. Where no choice is specified, proxies will be voted FOR the
election of the nominees for director named herein, FOR each of the other
proposals described herein, and, on any other matters presented for a vote, in
accordance with the judgment of the persons acting under the proxies.
Abstentions and broker non-votes will not be counted as votes either in favor of
or against the matter with respect to which the abstention or broker non-vote
relates.
Only shareholders of record at the close of business on September 15,
2000 will be entitled to notice of and to vote at the Annual Meeting and any
adjournments or postponements thereof. Each share of common stock issued and
outstanding on such record date is entitled to one vote, and each share of
Series E Convertible Preferred Stock outstanding on such record date is entitled
to five votes. As of September 1, 2000, Smart Choice had outstanding 2,444,394
shares of common stock and 1,469,550 shares of Series E Convertible Preferred
Stock.
<PAGE>
CHANGE IN CONTROL
On December 1, 1999, Smart Choice completed a merger in which a
wholly-owned subsidiary of Smart Choice acquired PAACO Automotive Group, Inc.,
an 85% owned subsidiary of Crown Group, Inc. As a result of the merger and a
$3.0 million cash investment into Smart Choice, Crown Group acquired voting
control of Smart Choice.
Contemporaneously with Crown Group's equity investment and the merger
of PAACO with the Smart Choice subsidiary, approximately $15.0 million of Smart
Choice's outstanding debt and preferred stock was converted into shares of Smart
Choice common stock. An additional $4.5 million of Smart Choice debt, acquired
by Crown Group for approximately $2.3 million in cash, was converted into shares
of Series E Convertible Preferred Stock. Following this transaction, Smart
Choice had approximately $2.6 million of subordinated debt outstanding. In
connection with the transaction, Smart Choice obtained a restructured and
restated $160 million senior finance receivables and inventory credit facility,
which contains more favorable terms than the facilities it replaced.
In exchange for its $3.0 million cash investment and its contribution
of PAACO, and upon the conversion of certain Smart Choice debt, Crown Group
received shares of Series E Convertible Preferred Stock representing 70% of the
ownership and voting rights of Smart Choice on an "as converted" basis, and
allowing Crown Group to cast 70% of the votes, under most circumstances, on
matters submitted to shareholder vote prior to conversion. The minority
shareholders of PAACO received shares of Series E Convertible Preferred Stock
representing 5% of Smart Choice's outstanding voting securities. The holders of
certain converted Smart Choice debt and preferred stock received shares of
common stock equivalent to approximately 20.7% of the outstanding voting
securities of Smart Choice. The common stock held by Smart Choice shareholders
prior to the merger now represents approximately 4.3% of the outstanding voting
securities of Smart Choice.
AGENDA ITEM ONE
ELECTION OF DIRECTORS
The Board of Directors of Smart Choice presently consists of six
directors. The Board of Directors is divided into three classes, with the terms
of the members of each class scheduled to expire at successive annual
shareholders' meetings. At each annual meeting, a successor to each director
whose term is scheduled to expire at that meeting is elected for a three-year
term. The members of Smart Choice's Board of Directors and their classifications
are as follows:
Class I Class II Class III
-------- -------- ---------
Robert J. Abrahams Edward R. McMurphy Larry W. Lange
Gary R. Smith J. Edward Ernst T. J. Falgout, III
The terms of the Class II directors are scheduled to expire at the 2000
Annual Meeting of Shareholders, and management has nominated each of the Class
II directors named above for re-election, to serve for three years and until
their successors are elected and qualified. In addition, because each of the
Class III directors named above was elected by the Board in December 1999 to
fill a vacancy, under Florida law the term of each of these two Class II
directors will also expire at the 2000 Annual Meeting of Shareholders.
Management has nominated these directors for re-election, to serve for two years
and until their successors are elected and qualified. However, in the event the
proposal is approved to amend the Bylaws of the company to de-classify the Board
of Directors, as described below under "Agenda Item Two," the term of each of
the directors of Smart Choice will expire at the 2001 Annual Meeting of
Shareholders.
2
<PAGE>
In the event that any director nominee named above withdraws or for any
reason is not able to serve as a director, all proxies voted in favor of such
nominee will be voted for such other person as may be designated by the Board of
Directors, but in no event will the proxy be voted for more than two Class II
nominees and two Class III nominees. Management of Smart Choice believes that
each nominee will serve if elected. The affirmative vote of a plurality of all
votes cast at the meeting is required for the election of each of the four
nominees standing for election.
The following persons have been nominated for election to the Board of
Directors:
Class II Nominees
Edward R. McMurphy, age 49, has served as Chairman of the Board of
Smart Choice since December 1999. He has served as the Chief Executive Officer
and Chairman of Crown Group, Inc. since July 1984, and has served as a director
of Crown Group since its inception in April 1983.
J. Edward Ernst, C.P.A., age 49, has served as President and Chief
Executive Officer and as a director of Smart Choice since December 1999. Prior
to joining Smart Choice, Mr. Ernst served as a consultant to Crown Group from
November 1998 until December 1999. From December 1995 until October 1998, he
served as President and Chief Executive Officer of Casino Magic Corporation, and
from June 1991 until September 1995, he served as President and Chief Executive
Officer of Casino America, Inc.
Class III Nominees
Larry W. Lange, age 60, has served as a director and Vice President of
Smart Choice since Smart Choice acquired PAACO Automotive Group, Inc. in
December 1999. Mr. Lange, the founder of PAACO, served as its President and
Chief Executive Officer from its inception in 1992 until December 1999. Prior to
1992, he owned and operated several new car franchises.
T. J. Falgout, III, age 51, has served as Executive Vice President and
General Counsel of Crown Group since March 1995, and as a director of Crown
Group since September 1992. Mr. Falgout has served as a director of Smart Choice
since December 1999. From 1978 until June 1995, Mr. Falgout was a partner in the
law firm of Stumpf & Falgout, Houston, Texas.
Class I Directors
Each of the following persons is a member of the Board of Directors who
is not standing for election to the Board of Directors this year and who will
continue to serve as a director until the 2001 Annual Meeting of Shareholders
and until his successor is elected and qualified.
Robert J. Abrahams, age 73, has served as a director of the Company
since 1997. For the past eleven years, Mr. Abrahams has been self employed as an
independent consultant in the financial services industry. Mr. Abrahams also
serves on the Board of Directors of HMI Industries, Inc., a public company, and
six other private companies, five of which are independent consumer finance
companies and one of which is a life insurance company.
Gary R. Smith, age 47, has served as a Vice President of Smart Choice
since December 1999 and as a director of Smart Choice since February 1997. He
served as President and Chief Executive Officer of Smart Choice from February
1997 until December 1999. From 1990 until January 1997, Mr. Smith was the
President, Chief Executive Officer and owner of Florida Finance Group, Inc. Mr.
Smith also served, from 1981 until January 1997, as the President, Chief
Executive Officer and owner of Suncoast Auto Brokers, Inc., an automobile
dealership, and Suncoast Auto Brokers Enterprises, Inc., a used car dealership.
Mr. Smith served as President of the Florida Independent Automobile Dealers
Association in 1993 and currently serves as a member of that association's Board
of Directors. Mr. Smith also serves as a member of the Board of Directors of the
National Independent Automobile Dealers Association.
3
<PAGE>
Committees of the Board and Meetings
The Board of Directors of Smart Choice presently has a standing Audit
Committee, comprised of Robert Abrahams and T.J. Falgout, III, which is
authorized to nominate Smart Choice's independent auditors and to review with
the independent auditors the scope and results of the audit engagement. The
Audit Committee held one meeting during the fiscal year ended April 30, 2000.
Smart Choice does not have a Compensation Committee or a Directors Nominating
Committee, such functions being reserved to the entire Board of Directors.
During Smart Choice's last fiscal year, the Board of Directors did not
hold any meetings, but did act by unanimous written consent on five occasions.
Compensation Committee Interlocks and Insider Participation
The Board of Directors presently does not have a standing compensation
committee, and the entire Board of Directors acts to determine the remuneration
which will be paid to senior management. The following members of the Board of
Directors are also employed by Smart Choice as executive officers: J. Edward
Ernst, Larry W. Lange and Gary R. Smith.
Executive Officers
The executive officers of Smart Choice are as follows:
<TABLE>
<CAPTION>
Name Position and Office
---- -------------------
<S> <C>
J. Edward Ernst President and Chief Executive Officer
Larry W. Lange Vice President
Gary R. Smith Vice President
Ronald W. Anderson Vice President and Chief Operating Officer
Joseph B. Cavalier Vice President, Chief Financial Officer and Treasurer
</TABLE>
Biographical information regarding Messrs. Ernst, Lange and Smith
appears above.
Ronald W. Anderson, age 53, has served as Smart Choice's Vice President
and Chief Operating Officer since April 1997. From June 1996 to March 1997, he
was Vice President of Marketing for North American Mortgage Insurance Group.
From 1989 through June 1996, he served as Executive Vice President for
Operations of the Riverside Group, a diversified holding company, the business
of which included real estate, insurance and retail building supplies.
Joseph B. Cavalier, age 46, joined the Company as Vice President, Chief
Financial Officer and Treasurer in December 1999. In 1999, he assisted Crown
with special projects including serving as Chief Financial Officer of PAACO.
From 1995 to 1998 he served as Chief Financial Officer of HardCote Technologies,
Inc., a manufacturer of aircraft parts. Prior to 1995, he was employed for over
20 years in the retail car and truck dealership industry, serving in various
capacities including General Manager and Chief Financial Officer.
4
<PAGE>
AGENDA ITEM TWO
PROPOSAL TO AMEND BYLAWS
Article II, Section 4 of the Bylaws of Smart Choice provides that the
company's Board of Directors is divided three classes, with the term of each
class scheduled to expire at successive annual shareholders' meetings, with the
successor of each director whose term expires at a particular Annual Meeting of
Shareholders elected to serve a three-year term. The text of Section 4 is as
follows:
Section 4. Election and Term. The directors shall be divided
into three classes, designated Class I, Class II and Class III. Each
Class shall consist, as nearly as may be possible, of one-third of the
total number of directors constituting the entire Board of Directors.
The term of the initial Class I directors shall terminate on the date
of the 2001 Annual Meeting of Stockholders; the term of the initial
Class II directors shall terminate on the date of the 2000 Annual
Meeting of Stockholders; and the term of the initial Class III
directors shall terminate on the date of the 1999 Annual Meeting of
Stockholders. At each Annual Meeting of Stockholders beginning in 1999,
successors to the class of directors whose term expires at the Annual
Meeting of Stockholders shall be elected for a three-year term. If the
number of directors changes, any increase or decrease in directorships
shall be apportioned among the Classes so as to maintain the number of
directors in each Class as nearly equal as possible, and any additional
directors of any Class elected to fill a vacancy resulting from an
increase in such Class shall hold office only until the next election
of directors of that Class by the stockholders of the Corporation, but
in no case will a decrease in the number of directors shorten the term
of any incumbent director. Directors shall hold office until the Annual
Meeting of Stockholders for the year in which their terms expire and
until their successors shall be duly elected and qualified, subject,
however, to prior death, resignation, retirement, disqualification or
removal from office. Notwithstanding the foregoing, whenever the
holders of any one or more classes or series of Preferred Stock issued
by the Corporation shall have the right, voting separately by class or
series, to elect directors at an Annual or Special Meeting of
Stockholders, the election, term of office, filling of vacancies and
other features of such directorships shall be governed by the terms of
the Company's Articles of Incorporation, or the resolution or
resolutions adopted by the Board of Directors creating such class or
series, as the case may be, applicable thereto, and such directors so
elected shall be divided into classes pursuant to this Section 4 as may
be determined by the Board of Directors.
The Board of Directors has proposed that Article II, Section 4 of the
company's Bylaws be amended at the 2000 Annual Meeting to remove the
classification of the Board of Directors, such that in the future each director
elected (including the directors elected at the 2000 Annual Meeting) will be
elected for a one-year term, to expire at the next Annual Meeting of
Shareholders. The Board proposes that Article II, Section 4 be amended to
provide in its entirety as follows:
Section 4. Election and Term. Each member of the Board of Directors,
including each member elected at the shareholders' meeting at which
this Bylaw was adopted, shall hold office until the annual meeting of
shareholders held next after his or her election and until his or her
successor has been duly elected and has qualified, or until his or her
earlier resignation, removal from office, or death.
The present Article II, Section 4 of the Bylaws was adopted by the
shareholders of the company at the 1998 Annual Meeting of Shareholders. The
primary reason the Board of Directors proposed the adoption of a classified
Board at that time was to enable the Board of Directors to discourage any
efforts to obtain control of the Company which the Board of Directors considered
not in the best interests of the company. The classification of directors
generally has the effect of making it more difficult for
5
<PAGE>
shareholders to change the composition of the Board in a relatively short period
of time since at least two Annual Meetings of Shareholders are required to
effect a change in a majority of the members of the Board.
As described above under the caption "Change in Control," Crown Group
presently holds a number of shares of Series E Convertible Preferred Stock
entitling it, under most circumstances, to cast 70% of the vote on matters
submitted to vote of the shareholders, including proposals to merge or sell the
company's assets to any unaffiliated third party. Due to Crown Group's position
as the controlling shareholder of Smart Choice, the Board of Directors believes
that classification of the Board is not necessary to protect the interests of
the shareholders of the company.
The proposal to amend the Bylaws of the company to de-classify the
Board of Directors will be adopted if the number of votes cast in favor of the
proposal exceeds the number of votes cast against the proposal. The Board of
Directors recommends a vote "FOR" the proposal to amend the Bylaws.
AGENDA ITEM THREE
PROPOSAL TO ADOPT AMENDED AND RESTATED ARTICLES OF INCORPORATION
The Board of Directors has proposed that Amended and Restated Articles
of Incorporation, in the form set forth in Appendix A to this proxy statement,
be adopted at the 2000 Annual Meeting of Shareholders, to replace in their
entirety the present Articles of Incorporation of Smart Choice, as amended,
which are set forth in Appendix B to this proxy statement.
The changes to Smart Choice's Articles of Incorporation which will be
effected through the adoption of this proposal are outlined below.
Increase of authorized shares of common stock. Article V of the
Articles of Incorporation establishes the capitalization of the company and
provides, among other things, that Smart Choice is authorized to issue up to
2,500,000 shares of common stock. The proposed Amended and Restated Articles of
Incorporation would authorize the issuance of up to 50,000,000 shares of common
stock, but would otherwise leave the text of Article V unchanged.
The Board of Directors recommends that number of authorized shares of
common stock be increased because it considers the proposal to be in the best
long-term and short-term interests of the company. The proposed increase in the
number of shares of authorized common stock will ensure that additional shares
of common stock will be available, if needed, for issuance in connection with
any possible future transactions approved by the Board of Directors, including,
among others, stock splits, stock dividends, acquisitions, financings and other
corporate purposes. The Board of Directors believes that the availability of the
additional shares of common stock for such purposes without delay or the
necessity for a special shareholders' meeting (except as may be required by
applicable law or regulatory authorities or by the rules of any stock exchange
on which the company's securities may then be listed) will be beneficial to the
company by providing it with the flexibility required to consider and respond to
future business opportunities and needs as they arise. The availability of
additional authorized shares of common stock will also enable the company to act
promptly when the Board of Directors determines that the issuance of additional
shares of common stock is advisable. It is possible that shares of common stock
may be issued at a time and under circumstances that may increase or decrease
earnings per share and increase or decrease the book value per share of shares
presently held.
On September 1, 2000, 2,444,394 shares of common stock were issued and
outstanding, and approximately 55,000 shares were reserved for issuance upon the
exercise of outstanding options. In addition, 1,469,550 shares of Series E
Convertible Preferred Stock were issued and outstanding, which will be
convertible, at the option of the respective holders, into 7,347,750 shares of
common stock at such
6
<PAGE>
time as the number of authorized shares of common stock is increased to at least
10,000,000. Except with respect to shares underlying outstanding options and
shares issuable upon conversion of the outstanding shares of Series E
Convertible Preferred Stock, the company does not have any immediate agreements,
arrangements, commitments or understandings with respect to the issuance of any
of the additional shares of common stock.
It should be noted that the availability of additional shares could
render more difficult or discourage a takeover attempt. For example, additional
shares of common stock could be issued and sold to purchasers who oppose a
takeover bid which is not in the best long-term and short-term interests of the
company, its shareholders and its other constituencies or could be issued to
increase the aggregate number of outstanding shares of common stock and thereby
dilute the interest of parties attempting to obtain control of the company. In
connection with any issuance of shares of common stock, the Board of Directors
is required to determine that such issuance would be in the best long-term and
short-term interests of the company, its shareholders and its other
constituencies. The Board of Directors is presently unaware of any specific
effort to accumulate the shares of common stock of the company or obtain control
of the company; as noted above, Crown Group presently controls the company.
Corporate Governance Provisions. Articles VII and VIII of the Articles
of Incorporation contain provisions governing the following matters:
o the number of members of the Board of Directors;
o the manner of filling vacancies on the Board of Directors;
o the procedures required to be followed in order to nominate
directors or bring a particular action for shareholder vote; and
o the procedure by which a special meeting of the shareholders may be
called.
The Board of Directors believes that it is in the best interests of the
company that these matters be addressed in the company's Bylaws, rather than in
its Articles of Incorporation, thereby allowing the Board of Directors the
flexibility to amend the company's corporate governance procedures from time to
time in its discretion. If this agenda item is adopted, the Board of Directors
will ensure that the matters addressed in the company's present Articles of
Incorporation relating to corporate governance procedures will be addressed in
the company's Bylaws.
Anti-takeover Provisions. Article VII, Paragraph B of the Articles of
Incorporation provides that (i) directors may only be removed by the
shareholders for cause and (ii) the affirmative vote of the shareholders
entitled to cast two-thirds of the total votes entitled to be cast by all
shareholders is required to remove a director. These provisions serve primarily
as a means to increase the ability of the Board of Directors to defeat an
attempt to gain control of the company. The Board of Directors believes, in
light of Crown Group's voting control of Smart Choice, this provision is no
longer necessary, and the proposed Amended and Restated Articles of
Incorporation do not contain any restrictions on the ability of the shareholders
to remove members of the Board of Directors.
In accordance with Florida law, the proposal to adopt Amended and
Restated Articles of Incorporation will be adopted if the number of votes cast
in favor of the proposal exceeds the number of votes cast against the proposal.
The Board of Directors recommends that the company's shareholders vote "FOR" the
proposal to adopt Amended and Restated Articles of Incorporation.
7
<PAGE>
AGENDA ITEM FOUR
PROPOSAL TO AMEND 1998 EXECUTIVE INCENTIVE COMPENSATION PLAN
General
In April 1998, the Board of Directors of Smart Choice adopted the Smart
Choice 1998 Executive Incentive Compensation Plan. The 1998 Plan provides for
the grant of stock-based incentive awards, such as stock options, restricted
stock and stock appreciation rights, in the discretion of the Board of Directors
or a committee of the Board. The purpose of the 1998 Plan is to encourage and
enable eligible directors, officers and key employees of Smart Choice and its
subsidiaries to acquire proprietary interests in the company through the
ownership of common stock and to provide motivation for Plan participants to
remain in the employ of and to give greater effort on behalf of the company.
The number of shares of common stock which are presently authorized for
issuance under the 1998 Plan is 37,500.
Description of Proposed Amendment
As of September 15, 2000, a total of approximately 30,300 shares of
common stock had been either issued pursuant to the exercise of options granted
under the 1998 Plan or reserved for issuance upon the exercise of outstanding
options granted under the 1998 Plan. The Board of Directors of the Company has
adopted an amendment to the 1998 Plan which would increase the number of shares
of common stock available for grant thereunder from 37,500 to 1,500,000. The
proposed increase in the number of authorized shares would ensure the
uninterrupted continuation of the 1998 Plan.
Additional Option Grants
The Board of Directors has granted the following options under the 1998
Plan, subject to the approval of this agenda item and the approval of the
adoption of Amended and Restated Articles of Incorporation as described above
under "Agenda Item Three":
Number of Shares
Name of Optionee Subject to Option Exercise Price
---------------- ----------------- --------------
J. Edward Ernst 200,000 $2.00
Larry W. Lange 100,000 $2.00
Gary R. Smith 100,000 $2.00
Joseph Cavalier 50,000 $2.00
Ronald W. Anderson 50,000 $2.00
Each of the options summarized above was granted July 26, 2000. The exercise
price of $2.00 is equal to the average of the high and low sales price on that
date. Each of the options will vest in four equal annual installments commencing
December 1, 2000. Additional options or other awards may be made in the future
under the 1998 Plan in the sole discretion of the Board of Directors or
Committee administering the 1998 Plan.
Vote Required
The proposal to amend the 1998 Plan will be adopted if the number of
votes cast in favor of the proposal exceeds the number of votes cast against the
proposal. The Board of Directors recommends that the company's shareholders vote
"FOR" the proposal to amend the 1998 Plan.
8
<PAGE>
Description of 1998 Plan
Eligibility. The persons eligible to receive awards under the 1998 Plan
are the officers, directors, employees and independent contractors of the
company and its subsidiaries. No independent contractor will be eligible to
receive any awards other than stock options. An employee on leave of absence may
be considered as still in the employ of the company or a subsidiary for purposes
of eligibility for participation in the 1998 Plan.
Administration. The 1998 Plan may be administered by the full Board of
Directors or a committee designated by the Board of Directors consisting of not
less than three directors, each member of which must be a "non-employee
director" as defined under Rule 16b-3 under the Exchange Act (such administering
body referred to as the "Committee"). Subject to the terms of the 1998 Plan, the
Committee is authorized to select eligible persons to receive awards, determine
the type and number of awards to be granted and the number of shares of common
stock to which awards will relate, specify times at which awards will be
exercisable or settleable (including performance conditions that may be required
as a condition thereof), set other terms and conditions of awards, prescribe
forms of award agreements, interpret and specify rules and regulations relating
to the 1998 Plan, and make all other determinations that may be necessary or
advisable for the administration of the 1998 Plan.
Stock Options and Stock Appreciation Rights. The Committee is
authorized to grant stock options, including both incentive stock options
("ISOs"), which can result in potentially favorable tax treatment to the
participant, and non-qualified stock options, and stock appreciation rights
("SARs") entitling the participant to receive the amount by which the fair
market value of a share of common stock on the date of exercise (or defined
"change in control price" following a change in control) exceeds the grant price
of the SAR. The exercise price per share subject to an option and the grant
price of an SAR are determined by the Committee, but in the case of an ISO must
not be less than the fair market value of a share of common stock on the date of
grant. For purposes of the 1998 Plan, the term "fair market value" means the
fair market value of common stock, awards or other property as determined by the
Committee. The maximum term of each option or SAR, the times at which each
option or SAR will be exercisable, and provisions requiring forfeiture of
unexercised options or SARs at or following termination of employment generally
are fixed by the Committee, except that no option or SAR may have a term
exceeding ten years. Options may be exercised by payment of the exercise price
in cash, shares that have been held for at least 6 months, outstanding awards or
other property having a fair market value equal to the exercise price, as the
Committee may determine from time to time. Methods of exercise and settlement
and other terms of the SARs are determined by the Committee.
Restricted and Deferred Stock. The Committee is authorized to grant
restricted stock and deferred stock under the 1998 Plan. Restricted stock is
common stock which may not be sold or disposed of, and which may be forfeited in
the event of certain terminations of employment, prior to the end of a
restricted period specified by the Committee. A participant granted restricted
stock generally has all of the rights of a shareholder of the Company, unless
otherwise determined by the Committee. An award of deferred stock confers upon a
participant the right to receive shares of common stock at the end of a
specified deferral period, subject to possible forfeiture of the award in the
event of certain terminations of employment prior to the end of a specified
restricted period. Prior to settlement, an award of deferred stock carries no
voting or dividend rights or other rights associated with share ownership,
although dividend equivalents may be granted, as discussed below.
Dividend Equivalents. The Committee is authorized to grant dividend
equivalents conferring on participants the right to receive, currently or on a
deferred basis, cash, shares of common stock, other awards or other property
equal in value to dividends paid on a specific number of shares of common stock
or other periodic payments. Dividend equivalents may be granted alone or in
connection with another award, may be paid currently or on a deferred basis and,
if deferred, may be deemed to have been reinvested in additional shares of
common stock, awards or otherwise as specified by the Committee.
9
<PAGE>
Bonus Stock and Awards in Lieu of Cash Obligations. The Committee is
authorized to grant shares of common stock as a bonus free of restrictions, or
to grant shares of common stock or other awards in lieu of company obligations
to pay cash under the 1998 Plan or other plans or compensatory arrangements,
subject to such terms as the Committee may specify.
Other Stock-Based Awards. The Committee is authorized to grant awards
that are denominated or payable in, valued by reference to, or otherwise based
on or related to shares of common stock. Such awards could include convertible
or exchangeable debt securities, other rights convertible or exchangeable into
shares of common stock, purchase rights for shares of common stock, awards with
value and payment contingent upon Smart Choice's performance or any other
factors designated by the Committee, and awards valued by reference to the book
value of shares of common stock or the value of securities of or the performance
of specified subsidiaries or business units. The Committee determines the terms
and conditions of such awards.
Acceleration of Vesting; Change in Control. The Committee may, in its
discretion, accelerate the exercisability, the lapsing of restrictions or the
expiration of deferral or vesting periods of any award, and such accelerated
exercisability, lapse, expiration and if so provided in the award agreement,
vesting shall occur automatically in the case of a "change in control" of Smart
Choice, as defined in the 1998 Plan. In addition, the Committee may provide in
an award agreement that the performance goals relating to any performance-based
award will be deemed to have been met upon the occurrence of any "change in
control." Upon the occurrence of a change in control, if so provided in the
award agreement, stock options and SARs may be cashed out based on a defined
"change in control price," which will be the higher of (i) the cash and fair
market value of property that is the highest price per share paid (including
extraordinary dividends) in any reorganization, merger, consolidation,
liquidation, dissolution or sale of substantially all assets of the company, or
(ii) the highest fair market value per share (generally based on market prices)
at any time during the 60 days before and 60 days after a change in control. For
purposes of the 1998 Plan, the term "change in control" generally means (a)
approval by shareholders of any reorganization, merger or consolidation or other
transaction or series of transactions if persons who were shareholders
immediately prior to such reorganization, merger or consolidation or other
transaction do not, immediately thereafter, own more than 50% of the combined
voting power of the reorganized, merged or consolidated company's then
outstanding, voting securities, or a liquidation or dissolution of the company
or the sale of all or substantially all of the assets of the company (unless the
reorganization, merger, consolidation or other corporate transaction,
liquidation, dissolution or sale is subsequently abandoned), or (b) a change in
the composition of the Board of Directors such that the persons constituting the
current Board, and subsequent directors approved by the current Board (or
approved by such subsequent directors), cease to constitute at least a majority
of the Board.
Amendment and Termination. The Board of Directors may amend, alter,
suspend, discontinue or terminate the 1998 Plan, except shareholder approval
must be obtained for any amendment or alteration if such approval is required
bylaw or regulation or under the rules of any stock exchange or quotation system
on which shares of common stock are then listed or quoted. Shareholder approval
will not be deemed to be required under laws or regulations, such as those
relating to ISOs, that condition favorable treatment of participants on such
approval, although the Board may, in its discretion, seek shareholder approval
in any circumstance in which it deems such approval advisable. Unless earlier
terminated by the Board, the 1998 Plan will terminate at such time as no shares
of common stock remain available for issuance under the 1998 Plan and the
company has no further rights or obligations with respect to outstanding awards.
Federal Income Tax Consequences. The following is a brief description of
the federal income tax consequences generally arising with respect to awards of
options under the 1998 Plan. The 1998 Plan is not qualified under Section 401(a)
of the Internal Revenue Code (the "Code") and is not subject to the provisions
of the Employee Retirement Income Security Act of 1974.
10
<PAGE>
Incentive Stock Options. All incentive stock options granted or to be
granted under the 1998 Plan are intended to be incentive stock options as
defined in Section 422 of the Code.
Under the provisions of Section 422 of the Code, neither the holder of
an incentive stock option nor the issuer of such option will recognize income,
gain, deduction or loss upon the grant or exercise of an incentive stock option,
except through alternative minimum tax liability as discussed below. An optionee
will be taxed only when the stock acquired upon exercise of his or her incentive
stock option is sold or otherwise disposed of in a taxable transaction. If at
the time of such sale or disposition the optionee has held the shares for the
required holding period (two years from the date the option was granted and one
year from the date of the transfer of the shares to the optionee), the optionee
will recognize long-term capital gain or loss, as the case may be, based upon
the difference between his or her exercise price and the net proceeds of the
sale. However, if the optionee disposes of the shares before the end of such
holding period, the optionee will recognize ordinary income on such disposition
in an amount equal to the lesser of: (i) the gain on the sale or other
disposition; or (ii) the amount by which the fair market value of the shares on
the date of exercise exceeded the option exercise price, with any excess gain
being capital gain, long-term or short-term, depending on whether or not the
shares had previously been held for more than one year on the date of sale or
other taxable disposition.
The foregoing discussion and the reference to capital gain or loss
treatment therein assume that the option shares are a capital asset in the hands
of the optionee. A sale or other disposition which results in the recognition of
ordinary income to the optionee will also result in a corresponding income tax
deduction for the company.
Incentive stock options offer two principal tax benefits: (i) the
possibility of converting ordinary income into capital gain to the extent of the
excess of fair market value over option price at the time of exercise, and (ii)
the deferral of recognition of gain until disposition of the stock acquired upon
the exercise of the option.
The Taxpayer Relief Act of 1997 (the "1997 Tax Act") made significant
changes to individual capital gains tax rates. The 1997 Tax Act generally
reduces the maximum tax rate for gains realized by individual taxpayers from the
sale of capital assets held for more than 18 months from 28% to 20% (18% if the
property has been held for more than five years and is acquired and sold after
the year 2000). For capital assets held for more than one year but not more than
18 months, the maximum tax rate remains at 28%, as it was under prior law. In
addition, taxpayers otherwise subject to the 15% rate bracket will be entitled
to a 10% maximum tax rate on long-term capital gains (18% if the property has
been held for more than five years and is sold after the year 2000). The new
maximum tax rates for long-term capital gains will apply for purposes of both
the regular income tax and the alternative minimum tax. However, the excess of
the fair market value of shares acquired through the exercise of an incentive
stock option over the exercise price is taken into account in computing an
individual taxpayer's alternative minimum taxable income. Thus, the exercise of
an incentive stock option could result in the imposition of an alternative
minimum tax liability.
In general, an option granted under the 1998 Plan which is designated as
an incentive stock option will be taxed as described above. However, in some
circumstances an option which is designated as an incentive stock option will be
treated as a nonqualified stock option and the holder taxed accordingly. For
example, a change in the terms of an option which gives the employee additional
benefits may be treated as the grant of a new option. Unless all the criteria
for treatment as an incentive stock option are met on the date the "new option"
is considered granted (such as the requirement that the exercise price of the
option be not less than the fair market value of the stock as of the date of the
grant), the option will be treated and taxed as a nonqualified stock option.
11
<PAGE>
Nonqualified Stock Options. All options granted or to be granted under
the 1998 Plan which do not qualify as incentive stock options are nonqualified
stock options not entitled to special tax treatment under Section 422 of the
Code.
A participant in the 1998 Plan will recognize taxable income upon the
grant of a nonqualified stock option only if such option has a readily
ascertainable fair market value as of the date of the grant. In such a case, the
recipient will recognize taxable ordinary income in an amount equal to the
excess of the fair market value of the option as of such date over the exercise
price, if any, to be paid for such option. No income would then be recognized on
the exercise of the option, and when the shares obtained through the exercise of
the option are disposed of in a taxable transaction, the resulting gain or loss
would be capital gain or loss (assuming the shares are a capital asset in the
hands of the optionee). However, under the applicable Treasury Regulations, the
nonqualified stock options issued under the 1998 Plan will not have a readily
ascertainable fair market value unless at the time such options are granted
similar options of the company are actively traded on an established market. The
company presently has no such actively traded options.
Upon the exercise of a non-statutory option not having a readily
ascertainable fair market value, the optionee recognizes ordinary income in an
amount equal to the excess of the fair value of the shares on the date of
exercise over the option exercise price for those shares. Smart Choice is not
entitled to an income tax deduction with respect to the grant of a nonqualified
stock option or the sale of stock acquired pursuant thereto. Smart Choice
generally is permitted a deduction equal to the amount of ordinary income the
optionee is required to recognize as a result of the exercise of a nonqualified
stock option.
The preceding discussion is based upon federal tax laws and regulations
in effect on the date of this proxy statement, which are subject to change, and
upon an interpretation of the statutory provisions of the Code, its legislative
history and related income tax regulations. Furthermore, the foregoing is only a
general discussion of the federal income tax consequences of the 1998 Plan and
does not purport to be a complete description of all federal income tax aspects
of the 1998 Plan. Option holders may also be subject to state and local taxes in
connection with the grant or exercise of options granted under the 1998 Plan and
the sale or other disposition of shares acquired upon exercise of the options.
Individuals receiving a grant of options should consult with his or her personal
tax advisor regarding federal, state and local consequences of participating in
the 1998 Plan.
12
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth, for the twelve months ended April 30,
2000 and 1999, and December 31, 1998 and 1997 (these periods shown because Smart
Choice's fiscal year-end changed from December 31 to April 30 in connection with
its acquisition of PAACO in December 1999), the compensation paid or accrued by
Smart Choice to or on behalf of Smart Choice's Chief Executive Officer and each
other executive officer who received salary and bonus in excess of $100,000
during the fiscal year ended April 30, 2000 (the "Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------ ------------
Twelve Number of Shares
Name and Months of Common Stock All Other
Principal Position Ended Salary Bonus Underlying Options Compensation
------------------ ----- ------ ----- ------------------ ------------
<S> <C> <C> <C> <C> <C>
J. Edward Ernst 04/30/00 $118,846 -- -- $90,000 (1)
President and Chief
Executive Officer
Gary R. Smith 04/30/00 $285,580 -- 3,750 --
Director and former 04/30/99 $323,077 -- -- --
Chief Executive Officer 12/31/98 $282,692 -- 2,502 --
12/31/97 $217,851 -- 7,562 --
Ronald W. Anderson 04/30/00 $192,408 $100,000 3,750 --
Vice President and 04/30/99 $215,077 -- -- --
Chief Operating Officer 12/31/98 $188,461 -- -- --
12/31/97 $115,328 -- -- --
Joseph A. Alvarez 04/30/00 $ 88,096 $50,000 -- $200,000 (2)
Former Executive 04/30/99 $150,000 -- -- --
Vice President (3) 12/31/98 $150,000 $50,000 2,502 --
12/31/97 $113,000 $50,000 625 --
Robert Downing 04/30/00 $112,170 -- 3,750 $253,142 (2)
Former General 04/30/99 $126,923 -- -- --
Counsel (4) 12/31/98 $113,512 -- -- --
</TABLE>
---------------
(1) Represents payment in consideration of services rendered in connection
with, and prior to, the acquisition of PAACO by Smart Choice.
(2) Represents a negotiated severance payment.
(3) Mr. Alvarez resigned from Smart Choice effective December 1, 1999.
(4) Mr. Downing resigned from Smart Choice effective January 15, 2000.
13
<PAGE>
Stock Option Plan
In April 1998, the Board of Directors adopted Smart Choice's 1998
Executive Incentive Compensation Plan which was subsequently approved by the
shareholders at the 1998 Annual Meeting. The provisions of the 1998 Plan are
described in this proxy statement under the caption "Agenda Item Four." The
following table sets forth certain information regarding grants of stock options
to the Named Executive Officers during the fiscal year ended April 30, 2000.
Individual Grants
<TABLE>
<CAPTION>
% of Total
Number of Options Granted
Options to Employees Exercise Price Expiration
Name Granted in Fiscal Year Per Share Date
---- ------- --------------- --------- ----
<S> <C> <C> <C> <C>
J. Edward Ernst -- -- -- --
Gary R. Smith 3,750 21.4% $13.12 8/2/09
Ronald W. Anderson 3,750 21.4% $13.12 8/2/09
Joseph A. Alvarez -- -- -- --
Robert Downing (1) 3,750 21.4% $13.12 4/15/00
</TABLE>
-----------------------
(1) The options granted to Mr. Downing expired April 15, 2000 as a result of
the termination of his employment on January 15, 2000.
During the fiscal year ended April 30, 2000, no options were exercised
by any Named Executive Officer. The following table sets forth certain
information regarding the amount and value of stock options held by the Named
Executive Officers at April 30, 2000.
Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
Fiscal Year End at Fiscal Year End
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
---- ------------- -------------
<S> <C> <C>
J. Edward Ernst 0 / 0 $0 / $0
Gary R. Smith 4,375 / 0 $0 / $0
Ronald W. Anderson 3,250 / 2500 $0 / $0
Joseph A. Alvarez 0 / 0 $0 / $0
Robert Downing 0 / 0 $0 / $0
</TABLE>
Employment Agreements
Smart Choice entered into a one-year employment agreement with each of
Gary Smith and Ronald Anderson effective as of December 1, 1999. The agreements
provide that Mr. Smith and Mr. Anderson shall receive annual base salaries of
$275,000 and $180,000, respectively, or such higher salary as determined from
time to time by the Board of Directors. In addition, Mr. Smith and Mr. Anderson
each receives either the use of an automobile or a monthly automobile allowance,
and each is eligible to receive an annual performance bonus and stock option
grants as determined in the sole discretion of the Board of Directors. Each
agreement provides that if Smart Choice terminates the employment of the
executive during the term of the agreement without cause, the executive will be
entitled to receive payments equal to amount of the salary payments which would
have been received by the executive if
14
<PAGE>
such termination had not occurred, and to receive such payments for an
additional six months thereafter, as severance pay. Each agreement also contains
non-competition and non-solicitation provisions.
Director Compensation
No director of Smart Choice other than Robert Abrahams receives any
separate compensation for his service as a director. Mr. Abrahams has entered
into an agreement with Smart Choice pursuant to which he receives monthly
payments in the amount of $5,000 as payment for certain consulting services
related to Smart Choice's credit policies and as compensation for his service as
a member of the Board of Directors.
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total
shareholder return on Smart Choice's common stock with (i) the cumulative total
return of the Nasdaq Market Index (U.S. companies), and (ii) the MG Group Index
744 - Auto Dealerships ("Automobile Index"), for the period commencing on
January 29, 1997 (the date the company entered its present line of business as a
result of its acquisition of Eckler Industries, Inc.) and ending on April 30,
2000.
Smart Choice believes the Automobile Index is an accurate reflection of
Smart Choice's peer group as the Automobile Index is comprised of companies
involved in the sale of automobiles and other vehicles through dealerships. The
graph assumes that the value of the investment in Smart Choice's common stock
and each index was $100 on January 29, 1997.
<TABLE>
<CAPTION>
January 29, April 30, April 30, April 30, April 30,
1997 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Smart Choice Automotive Group, Inc. 100.00 89.36 74.47 21.81 5.32
Automobile Index 100.00 68.18 63.10 60.20 39.91
Nasdaq Market Index (U.S. Companies) 100.00 92.88 138.87 190.46 288.70
</TABLE>
15
<PAGE>
Notwithstanding anything to the contrary set forth in any of Smart
Choice's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this proxy statement, in whole or in part, the following
Report of the Board of Directors on Executive Compensation and the Shareholder
Return Performance Graph shall not be incorporated by reference into any such
filings.
REPORT OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
Because Smart Choice does not have a compensation committee, the Board
of Directors of Smart Choice establishes compensation levels for the company's
executive officers, including the Chief Executive Officer. Smart Choice's
compensation program for executive officers is primarily comprised of base
salary, bonus, and short and long-term incentives in the form of stock option
grants. Executives also participate in various other benefit plans, including
medical and 401(k) plans, versions of which are generally available to all
employees of Smart Choice. The philosophy of the company is to pay base salaries
to executives at levels that enable it to attract, motivate and retain highly
qualified executives, and to reward executives through the granting of bonuses,
based upon the contribution of the executive and the overall financial results
of the company. Stock options may also be granted under the company's 1998 Plan,
which will result in no reward if Smart Choice's stock price does not
appreciate, but will provide substantial reward if the stock price appreciates
significantly.
In connection with the acquisition by Smart Choice of PAACO in December
1999, two directors of Smart Choice resigned and four new directors were elected
by the two directors then remaining. This reconstituted Board appointed J.
Edward Ernst as President and Chief Executive Officer of Smart Choice, and set
his initial annual salary at $300,000. The Board of Directors believes that Mr.
Ernst's salary is at or below the compensation paid to Chief Executive Officers
of comparable companies. With respect to the other executive officers of Smart
Choice, the Board of Directors believes that each of these individuals receives
a salary which is competitive with that of similarly situated executives in the
company's industry, and is commensurate with the executive's individual
experience and performance.
In addition to base salary, each executive officer is eligible to
receive an annual bonus based on performance criteria established by the Board
of Directors. The amount of bonus and the performance criteria vary with the
position and role of the executive within the Company, although all bonuses are
tied to the Company's financial performance.
The Board of Directors may from time to time provide additional
incentive compensation to the executive officers and other employees of Smart
Choice through the award of stock options under the company's 1998 Executive
Incentive Compensation Plan. During fiscal 2000, no stock options were granted
to any of the executive officers of Smart Choice.
The Board of Directors will continue to evaluate Smart Choice's
compensation policies in light of the company's financial position and results
of operations and with the goal of rewarding members of management for their
contributions to Smart Choice's success and aligning the financial interests of
executive officers with those of the Smart Choice's shareholders.
EDWARD R. J. EDWARD T. J. GARY R. LARRY W. ROBERT J.
MCMURPH Y ERNST FALGOUT, III SMITH LANGE ABRAHAMS
16
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of September 1,
2000, with respect to the ownership of Smart Choice's outstanding common stock
and Series E Convertible Preferred Stock by (i) all persons known to Smart
Choice to own beneficially more than five percent of either class of stock (each
of whose business address is the address of the principal offices of Smart
Choice, unless otherwise indicated), (ii) each director and Named Executive
Officer, and (iii) all directors and executive officers as a group. Unless
otherwise indicated, each shareholder possesses sole voting and investment power
with respect to the shares owned by the shareholder.
<TABLE>
<CAPTION>
Common Stock Series E Preferred
----------------------------- -----------------------------
Shares Shares
Beneficially Percent of Beneficially Percent of Voting
Beneficial Owner Owned (1) Class (2) Owned (1) Class (2) Power (3)
---------------- -------------- ------------ ------------ ----------- ------------
<S> <C> > <C> <C> <C>
Crown Group, Inc......................... 6,955,407 (4) 74.0% 1,371,581 93.3% 70.0%
Finova Mezzanine Capital, Inc. .......... 1,171,722 (5) 47.9% -- -- 12.0%
Edward R. McMurphy....................... -- -- -- -- --
J. Edward Ernst.......................... -- -- -- -- --
Robert J. Abrahams....................... 444,934 (6) 16.7% -- -- 2.4%
T. J. Falgout, III....................... -- -- -- -- --
Larry W. Lange........................... 347,793 (7) 12.5% 69,558 4.7% 3.6%
Ted Lange................................ 142,056 (8) 5.5% 28,411 1.9% 1.4%
Gary R. Smith............................ 59,050 (9) 2.4% -- -- 0.4%
Ronald W. Anderson....................... 178,163(10) 7.2% -- -- --
All directors and executive
officers as a group (8 persons)...... 1,029,940(11) 32.2% 1,469,551 6.7% 6.4%
</TABLE>
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a
person is deemed to be the beneficial owner of a security if the person has
or shares voting power or dispositive power with respect to such security
or has the right to acquire such ownership within 60 days. As used herein,
"voting power" is the power to vote or direct the voting of shares, and
"dispositive power" is the power to dispose or direct the disposition of
shares, irrespective of any economic interest therein.
(2) In calculating the percentage ownership for a given shareholder or group of
shareholders, the number of shares of the class of stock outstanding
includes unissued shares subject to options, warrants, rights or conversion
privileges exercisable within 60 days held by such shareholder or group of
shareholders, but such unissued shares are not deemed outstanding in
calculating the percentage ownership for other shareholders.
(3) The holders of common stock and Series E Convertible Preferred Stock
generally vote together as a single class on matters submitted to a
shareholder vote. The holders of common stock are entitled to one vote for
each share held, while the holders of Series E Convertible Preferred Stock
are entitled to five votes for each share held. This column shows the
percent of the total votes generally entitled to be cast by each
shareholder shown in the table on any matter submitted to the common and
preferred shareholders as a class, assuming no exercise of any options by
any shareholder.
(4) Represents (i) 6,857,907 shares of common stock into which the shares of
Series E Convertible Preferred Stock held by Crown Group are convertible,
and (ii) 97,500 shares of common stock subject to presently exercisable
warrants held by Crown Group. The business address of Crown Group is 4040
North MacArthur Boulevard, Suite 100, Irving, Texas 75038.
(5) This information is provided based on a Form 13G/A filed by Finova
Mezzanine Capital, Inc. on January 12, 2000. Finova's address, as shown in
the Form 13G/A, is 500 Churt Street, Suite 200, Nashville, Tennessee 37219.
(6) Includes 211,400 shares subject to presently exercisable options.
(7) Represents shares of common stock into which the shares of Series E
Convertible Preferred Stock held by Mr. Larry Lange are convertible.
(8) Represents shares of common stock into which the shares of Series E
Convertible Preferred Stock held by Mr. Ted Lange are convertible.
(9) Includes 15,005 shares subject to presently exercisable options.
(10) Includes 177,663 shares subject to exercisable options.
(11) Includes 404,068 shares subject to presently exercisable options, and
347,793 shares of common stock into which shares of Series E Convertible
Preferred Stock are convertible.
17
<PAGE>
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires Smart
Choice's directors, certain officers, and persons who own more than 10% of the
outstanding common stock of Smart Choice, to file with the Securities and
Exchange Commission reports of changes in ownership of the common stock of Smart
Choice held by such persons. Officers, directors and greater than 10%
shareholders are also required to furnish Smart Choice with copies of all forms
they file under this regulation. To Smart Choice's knowledge, based solely on a
review of the copies of such reports furnished to Smart Choice, during the
fiscal year ended April 30, 2000, all Section 16(a) filing requirements
applicable to its officers, directors and greater than 10% shareholders were
complied with.
CERTAIN TRANSACTIONS
Gary Smith leases to Smart Choice the real property in Pinellas Park,
Florida on which Smart Choice operates two of its used car dealerships. The
monthly lease payments are in the aggregate amount of $8,700 plus taxes, and the
lease agreement is subject to annual renewal.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
On December 1, 1999, Smart Choice terminated the appointment of BDO
Siedman, LLP as its independent public accountants. On January 28, 2000, Smart
Choice engaged Grant Thornton LLP as its new independent accountants.
During the two most recent fiscal years and subsequent interim period
preceding the engagement of Grant Thornton LLP, Smart Choice did not consult
with Grant Thornton LLP on (i) the application of accounting principles to a
specified transaction, (ii) the type of audit opinion that might be rendered on
the Company's financial statements, or (iii) any matter that was either the
subject of a disagreement or a reportable event.
INDEPENDENT PUBLIC ACCOUNTANTS
Grant Thornton LLP served as Smart Choice's independent auditors for
the fiscal year ended April 30, 2000. Smart Choice has not as yet executed an
engagement letter with respect to the audit of Smart Choice's financial
statements for the fiscal year ending April 30, 2001, but expects to do so in
due course.
A representative of Grant Thornton LLP is expected to be present at the
Annual Meeting, will have an opportunity to make a statement, and will be
available to respond to appropriate questions which shareholders might have.
Smart Choice knows of no direct or indirect material financial interest or
relationship that members of this firm have with Smart Choice.
REPORT ON FORM 10-K
Smart Choice's Annual Report on Form 10-K for the fiscal year ended
April 30, 2000, as filed with the Securities and Exchange Commission, is
available to shareholders who make written request therefor to the Secretary of
Smart Choice, Ronald Anderson, at the offices of Smart Choice, 5200 South
Washington Avenue, Titusville, Florida 32780. Copies of exhibits filed with that
report or referenced therein will be furnished to shareholders of record upon
request and payment of Smart Choice's expenses in furnishing such documents.
18
<PAGE>
SHAREHOLDER PROPOSALS
Any proposal to be presented at next year's Annual Meeting must be
received at the principal executive offices of Smart Choice not later than May
24, 2001, directed to the attention of the Secretary, for consideration for
inclusion in Smart Choice's proxy statement and form of proxy relating to that
meeting. In connection with Smart Choice's Annual Meeting of shareholders to be
held in 2001, if Smart Choice does not receive notice of a matter or proposal to
be considered by August 7, 2001, then the persons appointed by the Board of
Directors to act as the proxies for such Annual Meeting (named in the form of
proxy) will be allowed to use their discretionary voting authority with respect
to any such matter or proposal at the Annual Meeting, if such matter or proposal
is raised at that Annual Meeting. Any such proposals must comply in all respects
with the rules and regulations of the Securities and Exchange Commission.
OTHER MATTERS
Management does not know of any matter to be brought before the meeting
other than those described above. If any other matter properly comes before the
meeting, the persons designated as proxies will vote on each such matter in
accordance with their best judgment.
By Order of the Board of Directors,
Edward R. McMurphy
Chairman of the Board
September 21, 2000
19
<PAGE>
APPENDIX A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
SMART CHOICE AUTOMOTIVE GROUP, INC.
(Proposed for Adoption at the 2000 Annual Meeting of Shareholders)
ARTICLE I
Name
----
The name of the Corporation is Smart Choice Automotive Group, Inc.
ARTICLE II
Capital Stock
-------------
The aggregate number of shares of capital stock which the Corporation
has authority to issue is 55,000,000 shares, which shall consist of 50,000,000
shares of common stock, $.01 par value per share ("Common Stock") and 5,000,000
shares of preferred stock, $.01 par value per share ("Preferred Stock"). No
shareholder of any stock of this Corporation shall have preemptive rights. There
shall be no cumulative voting by the shareholders of the Corporation.
A. Common Stock. Subject to the preferential dividend rights applicable
to shares of any series of Preferred Stock, the holders of shares of Common
Stock shall be entitled to receive such dividends as may be declared by the
Board of Directors. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, after distribution in full of the
preferential amounts to be distributed to the holders of shares of the Preferred
Stock, the holders of shares of the Common Stock shall be entitled to receive
all of the remaining assets of the Corporation available for distribution to its
shareholders, ratably in proportion to the number of shares of the Common Stock
held by them. Each holder of record of the Common Stock shall have one vote for
such share of Common Stock standing in such holder's name on the books of the
Corporation and entitled to vote.
B. Preferred Stock. The Preferred Stock may be issued by the Board of
Directors, from time to time, in one or more series. Authority is hereby vested
solely in the Board of Directors of the Corporation to provide, from time to
time, for the issuance of Preferred Stock in one or more series and in
connection therewith to determine without shareholder approval, the number of
shares to be included and such of the designations, powers, preferences, and
relative rights and the qualifications, limitations, and restrictions of any
such series, including, without limiting the generality of the foregoing, any of
the following provisions with respect to which the Board of Directors shall
determine to make affirmative provision:
1. The designation and name of such series and the number of shares
that shall constitute such series;
2. The annual dividend rate or rates payable on shares of such series,
the date or dates from which such dividends shall commence to accrue, and the
dividend payment dates for such dividends;
<PAGE>
3. Whether dividends on such series are to be cumulative or
noncumulative, and the participating or other special rights, if any, with
respect to the payment of dividends;
4. Whether such series shall be subject to redemption and, if so, the
manner of redemption, the redemption price or prices and the terms and
conditions on which shares of such series may be redeemed;
5. Whether such series shall have a sinking fund or other retirement
provisions for the redemption or purchase of shares of such series, and, if so,
the terms and amount of such sinking fund or other retirement provisions and the
extent to which the charges therefor are to have priority over the payment of
dividends on or the making of sinking fund or other like retirement provisions
for shares of any other series or over the payment of dividends on the Common
Stock;
6. The amounts payable on shares of such series on voluntary or
involuntary dissolution, liquidation, or winding up of the affairs of the
corporation and the extent to which such payment shall have priority over the
payment of any amount on voluntary or involuntary dissolution, liquidation, or
winding up of the affairs of the corporation on shares of any other series or on
the Common Stock;
7. The terms and conditions, if any, on which shares of such series may
be converted into, or exchanged for, shares of any other series or of Common
Stock;
8. The extent of the voting powers, if any, of the shares of such
series;
9. The stated value, if any, for the shares of such series, the
consideration for which shares of such series may be issued and the amount of
such consideration that shall be credited to the capital account; and
10. Any other preferences and relative, participating, option, or other
special rights, and qualifications, limitations or restriction thereof, or any
other term or provision of shares of such series as the Board of Directors may
deem appropriate or desirable.
The Board of Directors is expressly authorized to vary the provisions
relating to the foregoing matters between the various series of Preferred Stock.
All shares of Preferred Stock of any one series shall be identical in
all respects with all other shares of such series, except that shares of any one
series issued at different times may differ as to the dates from which dividends
thereon shall be payable, and if cumulative, shall cumulate.
Shares of any series of Preferred Stock that shall be issued and
thereafter acquired by the Corporation through purchase, redemption (whether
through the operating of a sinking fund or otherwise), conversion, exchange, or
otherwise, shall, upon appropriate filing and recording to the extent required
by law, have the status of authorized and unissued shares of Preferred Stock and
may be reissued as part of such series or as part of any other series of
Preferred Stock. Unless otherwise provided in the resolution or resolutions of
the Board of Directors providing for the issuance thereof, the number of
authorized shares of stock of any series of Preferred Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by
resolution or resolutions of the Board of Directors and appropriate filing and
recording to the extent required by law. In case the number of shares of any
such series of Preferred Stock shall be decreased, the shares representing such
decrease shall, unless otherwise provided in the resolution or resolutions of
the Board of Directors providing for the issuance thereof, resume the status of
authorized but unissued shares of Preferred Stock, undesignated as to series.
A-2
<PAGE>
ARTICLE III
Super-Majority Vote Requirement
-------------------------------
The affirmative vote of the holders of not less than two-thirds of the
outstanding shares of this Corporation's voting stock (other than the shares
beneficially owned by an "Acquiring Person" as hereinafter defined) shall be
required for the approval or authorization of any "Business Combination" (as
hereinafter defined) of this Corporation or any subsidiary of this Corporation
with any Acquiring Person, notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified by law or otherwise;
provided, however, that the two-thirds voting requirement shall not be
applicable and such Business Combination shall require only such affirmative
vote as is required by law or otherwise if: (a) the Board of Directors of this
Corporation by at least an affirmative vote of a majority of the disinterested
directors then on the Board has expressly approved such Business Combination
either in advance of or subsequent to such Acquiring Person becoming an
Acquiring Person; or (b) as of the date of the consummation of a Business
Combination, the holders of a particular class or series of capital stock, as
the case may be, of this Corporation receive a "fair price" as such term is
defined below.
For the purpose of this Article III:
(A) The term "Business Combination" shall mean any (i) merger
or consolidation of this Corporation or a subsidiary of this
Corporation with an Acquiring Person or any other Corporation which is
or after such merger or consolidation would be an "Affiliate" or
"Associate" (as hereinafter defined) of an Acquiring Person; (ii) sale,
lease, exchange, mortgage, pledge or transfer or other disposition (in
one transaction or a series of transactions) to or with any Acquiring
Person or any Affiliate of any Acquiring Person, of all or
substantially all of the assets of this Corporation or of a subsidiary
of this Corporation to an Acquiring Person or any Affiliate or
Associate of any Acquiring Person; (iii) adoption of any plan or
proposal for the liquidation or dissolution of this Corporation
proposed by or on behalf of an Acquiring Person or any Affiliate or
Associate of any Acquiring Person; (iv) reclassification of securities
(including any reverse stock split) or recapitalization of this
Corporation or any other transaction that would have the effect, either
directly or indirectly, of increasing the proportionate share of any
class of equity or convertible securities of this Corporation or any
subsidiary of this Corporation which is directly or indirectly
beneficially owned by an Acquiring Person or any Affiliate or Associate
of any Acquiring Person; and (v) an agreement, contract or other
arrangement providing for any of the transactions described in this
definition of Business combination.
(B) The term "fair market value" shall mean (i) in the case of
shares, the highest closing sale price quoted during the 30-day
calendar period immediately preceding the Business Combination on the
National Association of Securities Dealers, Inc., automated quotations
system or any similar system then in general use, or if such shares are
listed on an exchange, the highest closing bid quotation with respect
to the share during the 30-day calendar period preceding the date in
question, or, if no such quotations are available, the fair market
value of a share on the date in question as determined by the
affirmative vote of a majority of the disinterested directors then on
the Board; and (ii) in the case of property other than cash or shares,
the fair market value of such property on the date in question as
determined by the affirmative vote of a majority of the disinterested
directors then on the Board.
(C) The term "fair price" shall mean that the aggregate amount
of cash and the fair market value of consideration other than cash to
be received per share are at least equal to the highest of the
following: (i) if applicable, the highest per share price, including
any brokerage commissions, transfer taxes, and soliciting dealers'
fees, paid by the Acquiring Person for any
A-3
<PAGE>
share acquired by it within the two year period immediately preceding
the consummation of the Business Combination or the transaction in
which it became an Acquiring Person, whichever is higher; or (ii) the
fair market value per share.
(D) The term "person" shall mean any individual, firm,
corporation or other entity and shall include any group comprised of
any person and any other person with whom such person or any Affiliate
or Associate of such person has any agreement, arrangement or
understanding, directly or indirectly, for the purpose of acquiring,
holding, voting or disposing of voting stock of this Corporation.
(E) The term "Acquiring Person" shall mean any person (other
than this Corporation, or any subsidiary and other than any
profit-sharing, employee stock ownership or other employee benefit plan
of this corporation or any subsidiary or any trustee of or fiduciary
with respect to any such plan when acting in such capacity) who or
which: (i) is the beneficial owner (as hereinafter defined) of ten
percent (10%) or more of the voting stock; (ii) is an Affiliate or
Associate of this Corporation and at any time within the two year
period immediately prior to the date in question was the beneficial
owner of ten percent (10%) or more of the voting stock; or (iii) is at
such time an assignee of or has otherwise succeeded to the beneficial
ownership of any shares of voting stock which were at any time within
the two year period immediately prior to the date in question
beneficially owned by any Acquiring Person, if such assignment or
succession shall have occurred in the course of a transaction or series
of transactions not involving a public offering within the meaning of
the Securities Act of 1933.
(F) A person shall be a beneficial owner of any voting stock:
(i) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or (ii) which such person or
any of its Affiliates or Associates has, directly or indirectly, (a)
the right to acquire whether such right is exercisable immediately or
not, pursuant to any agreement, arrangement or understanding or upon
the exercise of conversion rights, exchange rights, warrants or
options, or otherwise; (b) the right to vote pursuant to any agreement,
arrangement or understanding; or (c) which are beneficially owned,
directly or indirectly, by any other person by which such person or any
of its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of voting stock.
(G) The terms "Affiliate" or "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934.
(H) An Acquiring Person shall be deemed to have acquired a
share of the voting stock of this Corporation at the time when such
Acquiring Person became the beneficial owner thereof.
The Board of Directors of this Corporation shall have the power and duty
to determine for the purposes of this Article III, on the basis of information
known to them after reasonable inquiry, (1) whether a person is an Acquiring
Person, (2) the number of shares of Common Stock beneficially owned by any
person, (3) whether a person is an Affiliate or Associate of another.
Nothing contained in this Article III shall be construed to relieve any
Acquiring Person or any of its Affiliates or Associates from any fiduciary
obligation imposed by law.
[The provisions of the Articles of Incorporation setting forth the
designations and rights of the five series of preferred stock which have been
established by the Board of Directors have been
A-4
<PAGE>
omitted solely to reduce the costs of printing this proxy statement. These
provisions, which may generally be amended or repealed by the Board of Directors
in its sole discretion, will not be affected by the adoption of the Amended and
Restated Articles of Incorporation, as described under the caption "Agenda Item
Three" in this proxy statement.]
ARTICLE IV
Evaluation of Business Combinations
-----------------------------------
The Board of Directors of this Corporation, when evaluating any offer
of another party, (a) to make a tender offer for any securities of this
Corporation or (b) to effect a Business Combination (as defined in Article III)
shall, in connection with the exercise of its judgment in determining what is in
the best interests of this Corporation as a whole, be authorized to give due
consideration to such factors as the Board of Directors determines to be
relevant, including, without limitation:
(1) the interests of this Corporation's stockholders;
(2) whether the proposed transaction might violate federal or
state law;
(3) the consideration being offered in the proposed
transaction, in relation to the then current market price
for the outstanding shares of this Corporation over a
period of years, the estimated price that might be
achieved in a negotiated sale of this Corporation as a
whole or in part or through orderly liquidation, the
premiums over market price for the securities of other
companies engaged in similar transactions, current
political, economic and other factors bearing on
securities' prices and this Corporation's financial
condition and future prospects; and
(4) the social, legal and economic effects upon employees,
suppliers, customers and other having similar
relationships with this Corporation, and the communities
in which this Corporation conducts its business.
In connection with any such evaluation, the Board of Directors is
authorized to conduct such investigations and to engage in such legal
proceedings to test the legal propriety of proposed offers or transactions as
the Board of Directors may determine.
ARTICLE V
Bylaws
------
(A) Adoption, Amendment, Etc. The power to adopt the bylaws of this
Corporation, to alter, amend or repeal the bylaws, or to adopt new bylaws, shall
be vested in the Board of Directors of this Corporation; provided, however, that
any bylaw or amendment thereto as adopted by the Board of Directors may be
altered, amended, or repealed by vote of the stockholders entitled to vote
thereon, or a new bylaw in lieu thereof may be adopted by the stockholders, and
the stockholders may prescribe in any bylaw made by them that such bylaw shall
not be altered, amended or repealed by the Board of Directors.
(B) Scope. The bylaws of this Corporation shall be for the government
of this Corporation and may contain any provisions or requirements for the
management of this Corporation and may contain any provisions or requirements
for the management or conduct of the affairs and business of this Corporation,
provided the same are not inconsistent with the provisions of these Articles of
Incorporation, or contrary to the laws of the State of Florida or of the United
States.
A-5
<PAGE>
ARTICLE VI
Amendments
----------
This Corporation reserves the right to amend or repeal any provisions
contained in these Articles of Incorporation, or any amendment hereto, and any
right conferred upon the stockholders is subject to this reservation; provided,
however, notwithstanding any other provisions of these Articles of Incorporation
or the Bylaws of the Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, in these Articles of Incorporation or the
Bylaws of this Corporation), the affirmative vote of the holders of not less
than two-thirds of the outstanding shares of this Corporation's voting stock
[other than the shares beneficially owned by an "acquiring Person" (as defined
in Article III hereof), shall be required to amend, repeal or adopt any
provisions inconsistent with Articles III, IV or VI of these Articles of
Incorporation, in addition to any affirmative vote required by law or these
Articles of Incorporation with respect to any other shares of capital stock of
this Corporation.
A-6
<PAGE>
APPENDIX B
----------
ARTICLES OF INCORPORATION
OF
SMART CHOICE AUTOMOTIVE GROUP, INC.
(As Amended at September 1, 2000)
ARTICLE I
Address
-------
The address of the principal office and mailing address of this
Corporation shall be:
5200 S. Washington Avenue
Titusville, Florida 32780
ARTICLE II
Name
----
The name of this Corporation shall be:
SMART CHOICE AUTOMOTIVE GROUP, INC.
ARTICLE III
Term of Existence
-----------------
This Corporation is to exist perpetually.
ARTICLE IV
General Purpose
---------------
This Corporation is organized for the purpose of carrying on any lawful
business.
ARTICLE V
The aggregate number of shares of capital stock which the Corporation
has authority to issue is 7,500,000 shares, which shall consist of 2,500,000
shares of Common Stock, $.01 par value per share ("Common Stock") and 5,000,000
shares of preferred stock, $.01 par value per share ("Preferred Stock"). No
shareholder of any stock of this Corporation shall have preemptive rights. There
shall be no cumulative voting by the shareholders of the Corporation.
<PAGE>
A. Common Stock. Subject to the preferential dividend rights applicable
to shares of any series of Preferred Stock, the holders of shares of Common
Stock shall be entitled to receive such dividends as may be declared by the
Board of Directors. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, after distribution in full of the
preferential amounts to be distributed to the holders of shares of the Preferred
Stock, the holders of shares of the Common Stock shall be entitled to receive
all of the remaining assets of the Corporation available for distribution to its
shareholders, ratably in proportion to the number of shares of the Common Stock
held by them. Each holder of record of the Common Stock shall have one vote for
such share of Common Stock standing in such holder's name on the books of the
Corporation and entitled to vote.
B. Preferred Stock. The Preferred Stock may be issued by the Board of
Directors, from time to time, in one or more series. Authority is hereby vested
solely in the Board of Directors of the Corporation to provide, from time to
time, for the issuance of Preferred Stock in one or more series and in
connection therewith to determine without shareholder approval, the number of
shares to be included and such of the designations, powers, preferences, and
relative rights and the qualifications, limitations, and restrictions of any
such series, including, without limiting the generality of the foregoing, any of
the following provisions with respect to which the Board of Directors shall
determine to make affirmative provision:
1. The designation and name of such series and the number of
shares that shall constitute such series;
2. The annual dividend rate or rates payable on shares of such
series, the date or dates from which such dividends shall commence to accrue,
and the dividend payment dates for such dividends;
3. Whether dividends on such series are to be cumulative or
noncumulative, and the participating or other special rights, if any, with
respect to the payment of dividends;
4. Whether such series shall be subject to redemption and, if
so, the manner of redemption, the redemption price or prices and the terms and
conditions on which shares of such series may be redeemed;
5. Whether such series shall have a sinking fund or other
retirement provisions for the redemption or purchase of shares of such series,
and, if so, the terms and amount of such sinking fund or other retirement
provisions and the extent to which the charges therefor are to have priority
over the payment of dividends on or the making of sinking fund or other like
retirement provisions for shares of any other series or over the payment of
dividends on the Common Stock;
6. The amounts payable on shares of such series on voluntary
or involuntary dissolution, liquidation, or winding up of the affairs of the
corporation and the extent to which such payment shall have priority over the
payment of any amount on voluntary or involuntary dissolution, liquidation, or
winding up of the affairs of the corporation on shares of any other series or on
the Common Stock;
7. The terms and conditions, if any, on which shares of such
series may be converted into, or exchanged for, shares of any other series or of
Common Stock;
8. The extent of the voting powers, if any, of the shares of
such series;
B-2
<PAGE>
9. The stated value, if any, for the shares of such series,
the consideration for which shares of such series may be issued and the amount
of such consideration that shall be credited to the capital account; and
10. Any other preferences and relative, participating, option,
or other special rights, and qualifications, limitations or restriction thereof,
or any other term or provision of shares of such series as the Board of
Directors may deem appropriate or desirable.
The Board of Directors is expressly authorized to vary the provisions
relating to the foregoing matters between the various series of Preferred Stock.
All shares of Preferred Stock of any one series shall be identical in
all respects with all other shares of such series, except that shares of any one
series issued at different times may differ as to the dates from which dividends
thereon shall be payable, and if cumulative, shall cumulate.
Shares of any series of Preferred Stock that shall be issued and
thereafter acquired by the Corporation through purchase, redemption (whether
through the operating of a sinking fund or otherwise), conversion, exchange, or
otherwise, shall, upon appropriate filing and recording to the extent required
by law, have the status of authorized and unissued shares of Preferred Stock and
may be reissued as part of such series or as part of any other series of
Preferred Stock. Unless otherwise provided in the resolution or resolutions of
the Board of Directors providing for the issuance thereof, the number of
authorized shares of stock of any series of Preferred Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by
resolution or resolutions of the Board of Directors and appropriate filing and
recording to the extent required by law. In case the number of shares of any
such series of Preferred Stock shall be decreased, the shares representing such
decrease shall, unless otherwise provided in the resolution or resolutions of
the Board of Directors providing for the issuance thereof, resume the status of
authorized but unissued shares of Preferred Stock, undesignated as to series.
[The provisions of the Articles of Incorporation setting forth the
designations and rights of the five series of preferred stock which have been
established by the Board of Directors have been omitted solely to reduce the
costs of printing this proxy statement. These provisions, which may generally be
amended or repealed by the Board of Directors in its sole discretion, will not
be affected by the adoption of the Amended and Restated Articles of
Incorporation, as described under the caption "Agenda Item Three" in this proxy
statement.]
ARTICLE VI
Registered Office and Registered Agent
--------------------------------------
The registered office of this Corporation shall be located at 5200 S.
Washington Avenue, Titusville, Florida 32780 and the registered agent of this
Corporation at such office shall be Ralph Eckler. This corporation shall have
the right to change such registered office and such registered agent from time
to time, as provided by law.
B-3
<PAGE>
ARTICLE VII
Directors
---------
A. Number. The Board of Directors of this Corporation shall consist of not less
than one (1) nor more than (9) members, the exact numbers of directors to be
fixed from time to time as provided in the bylaws of this Corporation.
B. Removal. Any or all of the directors of this Corporation may be removed from
office for cause by the stockholders of this Corporation at any annual or
special meeting of stockholders by the affirmative vote of at least 66 2/3% of
the outstanding shares of Common Stock of this Corporation. Notice of any such
annual or special meeting of stockholders shall state that the removal of a
director or directors for cause is among the purposes of the meeting. Directors
may not be removed by the stockholders without cause.
C. Vacancies. Newly created directorships resulting from any increase in the
number of directors or any vacancy on the Board of Directors resulting from
death, resignation, disqualification, removal or other cause shall be filled
solely by the affirmative vote of a majority of the remaining directors then in
office, even though less than a quorum, or by a sole remaining director, or by
the stockholders. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the class of directors
in which the new directorship was created or the vacancy occurred and until such
director's successor shall have been elected and qualified. No decrease in the
number of directors constituting the Board of Directors shall shorten the term
of any incumbent director.
D. Nominations and Elections. Only persons who are nominated in accordance with
the following procedures shall be eligible for election as directors at meetings
of stockholders.
Nominations of persons for election to the Board of Directors of this
Corporation may be made at a meeting of stockholders by or at the direction of:
(a) the Board of Directors; (b) any nominating committee or person appointed by
the Board; (c) or by any stockholder of this Corporation entitled to vote for
the election of directors at the meeting who complies with the notice procedures
set forth in this Article VII, Section D.
Nominations by stockholders shall be made pursuant to timely notice in
writing to the Secretary of this Corporation. To be timely, a stockholder's
notice must be delivered to, or mailed and received at, the principal executive
offices of this Corporation not less than 60 days prior to the date of the
meeting at which the director(s) are to be elected, regardless of any
postponements, deferrals or adjournments of that meeting to a later date;
provided however, that if less than 70 days' notice or prior public disclosure
of the date of the scheduled meeting is given or made, notice by the
stockholder, to be timely, must be so delivered or received not later than the
close of business on the tenth day following the earlier of the day on which
notice was given or such public disclosure was made.
A stockholder's notice to the Secretary shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or reelection as a
director, (i) the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the person, (iii) the
class and number of shares of capital stock of this Corporation which are
beneficially owned by the person and (iv) any other information relating to the
person that is required to be disclosed in solicitations for proxies for
election of directors pursuant to Schedule 14A under the Securities Exchange Act
of 1934, as amended; and (b) as to the stockholder giving the notice (i) the
name and address, as they appear on this Corporation's books, of the stockholder
and (ii) the class and number of shares of this Corporation's stock which are
beneficially owned by the stockholder on the date of such stockholder notice.
This Corporation
B-4
<PAGE>
may require any proposed nominee to furnish such other information as may
reasonably be required by this Corporation to determine the eligibility of such
proposed nominee to serve as a director of this Corporation.
The presiding officer of the meeting shall determine and declare at the
meeting whether the nomination was made in accordance with the terms of the this
Article VII, Section D. If the presiding officer determines that a nomination
was not made in accordance with the terms of this Article VII, Section D, he
shall so declare at the meeting and any such defective nomination shall be
disregarded.
ARTICLE VIII
Stockholder Meetings
--------------------
A. Annual Meetings. At an annual meeting of stockholders, only such business
shall be conducted, and only such proposals shall be acted upon, as shall have
been brought before the annual meeting (a) by, or at the direction of, the Board
of Directors, or (b) by any stockholder of this Corporation who complies with
the notice procedures set forth in this Article VIII, Section A and the
requirements of Rule 14a-8 under the Securities Exchange Act of 1934.
For a proposal to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of this Corporation. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the principal executive offices of this
Corporation not less than 60 days prior to the scheduled annual meeting,
regardless of any postponements, deferrals or adjournments of that meeting to a
later date; provided, however, that if less than 70 days' notice or prior public
disclosure of the date of the scheduled annual meeting is given or made, notice
by the stockholder, to be timely, must be so delivered or received not later
than the close of business on the tenth day following the earlier of the day on
which such notice of the date of the scheduled annual meeting was given or the
day on which such public disclosure was made.
A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (a) a brief
description of the proposal desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on this Corporation's books, of the stockholder
proposing such business and any other stockholders known by such stockholder to
be supporting such proposal, (c) the class and number of shares of this
Corporation's stock which are beneficially owned by the stockholder on the date
of such stockholder notice and by any other stockholders known by such
stockholder to be supporting such proposal on the date of such stockholder
notice, and (d) any financial interest of the stockholder in such proposal.
The presiding officer of the annual meeting shall determine and declare
at the annual meeting whether the stockholder proposal was made in accordance
with the terms of this Article VIII, Section A. If the presiding officer
determines that a stockholder proposal was not made in accordance with the terms
of this Article VIII, Section A, he shall so declare at the annual meeting and
any such proposal shall not be acted upon at the annual meeting.
This provision shall not prevent the consideration and approval or
disapproval at the annual meeting of reports of officers, directors and
committees of the Board of Directors, but, in connection with such reports, no
new business shall be acted upon at such annual meeting unless stated, filed and
received as herein provided.
B-5
<PAGE>
B. Special Meetings. Special meetings of the stockholders of this Corporation
for any purpose or purposes may be called at any time by (a) the Board of
Directors; (b) the Chairman of the Board of Directors (if one is so appointed);
(c) the President of this Corporation; (d) the Chief Executive Officer; or (e)
by holders of not less than 25% of all the votes entitled to be cast on any
issue proposed to be considered at the proposed special meeting, if such
stockholders sign, date and deliver to this Corporation's secretary one or more
written demands for the meeting describing the purpose or purposes for which it
is to be held. Special meetings of stockholders of this Corporation may not be
called by any other person or persons.
At any special meeting of stockholders, only such business shall be
conducted, and only such proposals shall be acted upon, as shall have been set
forth in the notice of such special meeting.
C. Written Consents. After the date on which a Registration Statement, filed
with the U.S. Securities and Exchange Commission under the Securities Act of
1933 for an initial offering of its common stock in an underwritten public
offering, becomes effective and the shares described in such Registration
Statement are sold, any action required or permitted to be taken at any annual
or special meeting of stockholders of this Corporation may be taken only upon
the vote of such stockholders at an annual or special meeting duly called in
accordance with the terms of this Article VIII, Sections A and B, and may not be
taken by written consent of such stockholders.
ARTICLE IX
Super-Majority Vote for Business Combinations
---------------------------------------------
D. The affirmative vote of the holders of not less than two-thirds of the
outstanding shares of this Corporation's voting stock (other than the shares
beneficially owned by an "Acquiring Person" as hereinafter defined) shall be
required for the approval or authorization of any "Business Combination" (as
hereinafter defined) of this Corporation or any subsidiary of this Corporation
with any Acquiring Person, notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified by law or otherwise;
provided, however, that the two-thirds voting requirement shall not be
applicable and such Business Combination shall require only such affirmative
vote as is required by law or otherwise if: (a) the Board of Directors of this
Corporation by at least an affirmative vote of a majority of the disinterested
directors then on the Board has expressly approved such Business Combination
either in advance of or subsequent to such Acquiring Person becoming an
Acquiring Person; or (b) as of the date of the consummation of a Business
Combination, the holders of a particular class or series of capital stock, as
the case may be, of this Corporation receive a "fair price" as such term is
defined below.
E. For the purpose of this Article IX:
1. The term "Business Combination" shall mean any (i) merger or
consolidation of this Corporation or a subsidiary of this Corporation
with an Acquiring Person or any other Corporation which is or after
such merger or consolidation would be an "Affiliate" or "Associate" (as
hereinafter defined) of an Acquiring Person; (ii) sale, lease,
exchange, mortgage, pledge or transfer or other disposition (in one
transaction or a series of transactions) to or with any Acquiring
Person or any Affiliate of any Acquiring Person, of all or
substantially all of the assets of this Corporation or of a subsidiary
of this Corporation to an Acquiring Person or any Affiliate or
Associate of any Acquiring Person; (iii) adoption of any plan or
proposal for the liquidation or dissolution of this Corporation
proposed by or on behalf of an Acquiring Person or any Affiliate or
Associate of any Acquiring Person; (iv) reclassification of securities
(including any reverse stock split) or recapitalization of this
Corporation or any other transaction that would have the
B-6
<PAGE>
effect, either directly or indirectly, of increasing the proportionate
share of any class of equity or convertible securities of this
Corporation or any subsidiary of this Corporation which is directly or
indirectly beneficially owned by an Acquiring Person or any Affiliate
or Associate of any Acquiring Person; and (v) an agreement, contract or
other arrangement providing for any of the transactions described in
this definition of Business combination.
2. The term "fair market value" shall mean (i) in the case of shares,
the highest closing sale price quoted during the 30-day calendar period
immediately preceding the Business Combination on the National
Association of Securities Dealers, Inc., automated quotations system or
any similar system then in general use, or if such shares are listed on
an exchange, the highest closing bid quotation with respect to the
share during the 30-day calendar period preceding the date in question,
or, if no such quotations are available, the fair market value of a
share on the date in question as determined by the affirmative vote of
a majority of the disinterested directors then on the Board; and (ii)
in the case of property other than cash or shares, the fair market
value of such property on the date in question as determined by the
affirmative vote of a majority of the disinterested directors then on
the Board.
3. The term "fair price" shall mean that the aggregate amount of cash
and the fair market value of consideration other than cash to be
received per share are at least equal to the highest of the following:
(i) if applicable, the highest per share price, including any brokerage
commissions, transfer taxes, and soliciting dealers' fees, paid by the
Acquiring Person for any share acquired by it within the two year
period immediately preceding the consummation of the Business
Combination or the transaction in which it became an Acquiring Person,
whichever is higher; or (ii) the fair market value per share.
4. The term "person" shall mean any individual, firm, corporation or
other entity and shall include any group comprised of any person and
any other person with whom such person or any Affiliate or Associate of
such person has any agreement, arrangement or understanding, directly
or indirectly, for the purpose of acquiring, holding, voting or
disposing of voting stock of this Corporation.
5. The term "Acquiring Person" shall mean any person (other than this
Corporation, or any subsidiary and other than any profit-sharing,
employee stock ownership or other employee benefit plan of this
corporation or any subsidiary or any trustee of or fiduciary with
respect to any such plan when acting in such capacity) who or which:
(i) is the beneficial owner (as hereinafter defined) of ten percent
(10%) or more of the voting stock; (ii) is an Affiliate or Associate of
this Corporation and at any time within the two year period immediately
prior to the date in question was the beneficial owner of ten percent
(10%) or more of the voting stock; or (iii) is at such time an assignee
of or has otherwise succeeded to the beneficial ownership of any shares
of voting stock which were at any time within the two year period
immediately prior to the date in question beneficially owned by any
Acquiring Person, if such assignment or succession shall have occurred
in the course of a transaction or series of transactions not involving
a public offering within the meaning of the Securities Act of 1933.
6. A person shall be a beneficial owner of any voting stock: (i) which
such person or any of its Affiliates or Associates beneficially owns,
directly or indirectly; or (ii) which such person or any of its
Affiliates or Associates has, directly or indirectly, (a) the right to
acquire whether such right is exercisable immediately or not, pursuant
to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise;
(b) the right to vote pursuant to any agreement, arrangement or
understanding; or (c) which are beneficially owned, directly or
indirectly, by any other person by which such person or any of its
B-7
<PAGE>
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of voting stock.
7. The terms "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934.
8. An Acquiring Person shall be deemed to have acquired a share of the
voting stock of this Corporation at the time when such Acquiring Person
became the beneficial owner thereof.
F. The Board of Directors of this Corporation shall have the power and duty to
determine for the purposes of this Article IX, on the basis of information known
to them after reasonable inquiry, (1) whether a person is an Acquiring Person,
(2) the number of shares of Common Stock beneficially owned by any person, (3)
whether a person is an Affiliate or Associate of another.
G. Nothing contained in this Article IX shall be construed to relieve any
Acquiring Person or any of its Affiliates or Associates from any fiduciary
obligation imposed by law.
ARTICLE X
Evaluation of Business Combinations
-----------------------------------
The Board of Directors of this Corporation, when evaluating any offer
of another party, (a) to make a tender offer for any securities of this
Corporation or (b) to effect a Business Combination (as defined in Article IX)
shall, in connection with the exercise of its judgment in determining what is in
the best interests of this Corporation as a whole, be authorized to give due
consideration to such factors as the Board of Directors determines to be
relevant, including, without limitation:
(i) the interests of this Corporation's stockholders;
(ii) whether the proposed transaction might violate federal or state
law;
(iii) the consideration being offered in the proposed transaction, in
relation to the then current market price for the outstanding shares of
this Corporation over a period of years, the estimated price that might
be achieved in a negotiated sale of this Corporation as a whole or in
part or through orderly liquidation, the premiums over market price for
the securities of other companies engaged in similar transactions,
current political, economic and other factors bearing on securities'
prices and this Corporation's financial condition and future prospects;
and
(iv) the social, legal and economic effects upon employees, suppliers,
customers and other having similar relationships with this Corporation,
and the communities in which this Corporation conducts its business.
In connection with any such evaluation, the Board of Directors is
authorized to conduct such investigations and to engage in such legal
proceedings to test the legal propriety of proposed offers or transactions as
the Board of Directors may determine.
B-8
<PAGE>
ARTICLE XI
Bylaws
------
H. Adoption, Amendment, Etc. The power to adopt the bylaws of this Corporation,
to alter, amend or repeal the bylaws, or to adopt new bylaws, shall be vested in
the Board of Directors of this Corporation; provided, however, that any bylaw or
amendment thereto as adopted by the Board of Directors may be altered, amended,
or repealed by vote of the stockholders entitled to vote thereon, or a new bylaw
in lieu thereof may be adopted by the stockholders, and the stockholders may
prescribe in any bylaw made by them that such bylaw shall not be altered,
amended or repealed by the Board of Directors.
I. Scope. The bylaws of this Corporation shall be for the government of this
Corporation and may contain any provisions or requirements for the management of
this Corporation and may contain any provisions or requirements for the
management or conduct of the affairs and business of this Corporation, provided
the same are not inconsistent with the provisions of these Articles of
Incorporation, or contrary to the laws of the State of Florida or of the United
States.
ARTICLE XII
Amendments
----------
This Corporation reserves the right to amend or repeal any provisions
contained in these Articles of Incorporation, or any amendment hereto, and any
right conferred upon the stockholders is subject to this reservation; provided,
however, notwithstanding any other provisions of these Articles of Incorporation
or the Bylaws of the Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, in these Articles of Incorporation or the
Bylaws of this Corporation), the affirmative vote of the holders of not less
than two-thirds of the outstanding shares of this Corporation's voting stock
[other than the shares beneficially owned by an "acquiring Person" (as defined
in Article IX hereof), shall be required to amend, repeal or adopt any
provisions inconsistent with Articles IX, X or XII of these Articles of
Incorporation, in addition to any affirmative vote required by law or these
Articles of Incorporation with respect to any other shares of capital stock of
this Corporation.
B-9
<PAGE>
APPENDIX C (Edgar Only)
This Proxy is solicited on behalf of the Board of Directors
of
Smart Choice Automotive Group, Inc.
The undersigned shareholder(s) of Smart Choice Automotive Group, Inc.,
a Florida corporation, hereby appoints J. Edward Ernst and Joseph B. Cavalier,
and each of them, proxies and attorneys-in-fact, with full power to each of
substitution, on behalf and in the name of the undersigned, to represent the
undersigned at the 2000 Annual Meeting of Shareholders of Smart Choice
Automotive Group, Inc. to be held at the Four Seasons Hotel and Resort, 4150
North MacArthur Boulevard, Irving, Texas 75038, on Thursday, October 19, 2000,
at 2:00 p.m. local time, to vote the shares of common stock which the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth below:
(1) To elect three Class II directors to the Board of Directors:
[ ] FOR all nominees listed below (except as indicated to the
contrary below)
[ ] WITHHOLD authority to vote for all nominees
Nominees: Edward R. McMurphy and J. Edward Ernst
Instruction: To withhold authority to vote for one or more
individual nominees, write that nominee's name in
the following space:________________________________.
(2) To elect three Class III directors to the Board of Directors:
[ ] FOR all nominees listed below (except as indicated to the
contrary below)
[ ] WITHHOLD authority to vote for all nominees
Nominees: Larry W. Lange and T. J. Falgout, III
Instruction: To withhold authority to vote for one or more
individual nominees, write that nominee's name in
the following space:________________________________.
(3) To approve an amendment to the Bylaws of the company to de-classify the
Board of Directors, as described in the company's proxy statement dated
September 21, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) To approve the adoption by the company of Amended and Restated Articles
of Incorporation, in the form set forth in Appendix A to the company's
proxy statement dated September 21, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(5) To approve an amendment to the company's 1998 Executive Incentive
Compensation Plan to increase the number of shares of common stock
available for grant thereunder from 37,500 shares to 1,500,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(6) In their discretion, upon such other matter or matters which may
properly come before the meeting or any adjournment or adjournments
thereof.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY. This proxy, when
properly executed, will be voted in accordance with directions given by the
undersigned shareholder. If no direction is made, it will be voted FOR election
of each of nominees named above and as the proxies deem advisable on such other
matters as may come before the meeting.
Dated________________________ , 2000
_____________________________
Signature
_____________________________
Signature
(This Proxy should be marked, dated, and signed by
the shareholder(s) exactly as his or her name appears
hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity
should so indicate. If shares are held by joint
tenants or as community property, both should sign.
