-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HQaBK/KwsngeqMdlGjfgbSoe11ZUspgVUjtw4athYkguYbw2BClaS5D0k+zFCpwd DrIr2mhj8tWKhNDIl/NKMA== 0000949459-96-000008.txt : 19960401 0000949459-96-000008.hdr.sgml : 19960401 ACCESSION NUMBER: 0000949459-96-000008 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 36 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AUTOMOBILE PROTECTION CORP APCO CENTRAL INDEX KEY: 0000833441 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 581582432 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-17231 FILM NUMBER: 96541865 BUSINESS ADDRESS: STREET 1: 15 DUNWOODY PK DR STE 100 CITY: ATLANTA STATE: GA ZIP: 30338 BUSINESS PHONE: 4043947070 10-K 1 ANNUAL REPORT FOR YEAR ENDED 12/31/95 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For fiscal year ended December 31, 1995 Commission file number 0-17231 AUTOMOBILE PROTECTION CORPORATION - APCO ------------------------------------------------------ (Exact name of registrant as specified in its charter) Georgia 58-1582432 ------------------------------------------------------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 15 Dunwoody Park Drive, Suite 100 Atlanta, Georgia 30338 ----------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (770) 394-7070 ----------------- Registrant's telephone number, including area code Securities registered pursuant to Section 12(b) of the Act: None ---------------- Securities registered pursuant to Section 12(g) of the Act: Common Stock - Par Value $.001 per share ------------------------------------------------------------------------ (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes (X) No ( ) Based on the average of the bid and asked prices ($3.97) at the close of business on March 15, 1996, the aggregate market value of the Registrant's common stock held by non-affiliates of the Registrant was approximately $31,385,000. The number of shares outstanding of the Registrant's common stock, $.001 par value, was 9,620,916 on March 15, 1996. DOCUMENTS INCORPORATED BY REFERENCE: None Exhibit index is located on page - 34. PART 1 ITEM 1. BUSINESS. GENERAL Automobile Protection Corporation - APCO and its subsidiaries (the "Company") are engaged principally in the marketing and administration of extended vehicle service contracts and extended vehicle warranty programs sold by automobile dealers (hereinafter referred to as "Dealers") located throughout the United States. The Company also provides insurance brokerage services to the automotive industry. EXTENDED VEHICLE SERVICE CONTRACTS AND EXTENDED VEHICLE WARRANTIES The Company derives the majority of its revenues from the marketing and administration of extended vehicle service contracts and extended vehicle warranties (hereinafter referred to as "VSCs"). A consumer purchases a VSC from a Dealer to provide for the repair or replacement of designated parts of a vehicle for the term of the agreement, which can extend to seven years and 100,000 miles depending on vehicle eligibility. A VSC augments and enhances the original warranty provided by the manufacturer of the vehicle and is available on new, used and leased vehicles. Dealers often engage a third party administrator, such as the Company, to design a VSC program, arrange for insurance to limit their financial risk, and to perform all of the related administrative functions associated therewith. A principal function of the Company is to arrange for insurance to cover obligations to pay all future claims. Since 1991, coverage has been provided primarily by certain Underwriters at Lloyd's of London ("Lloyd's"). The Company's wholly-owned subsidiary, The Aegis Group, Inc. ("Aegis"), has been appointed by Lloyd's as the administrator of VSCs insured by Lloyd's. Aegis' duties include, but are not limited to, the following: (a) Collection of revenues from Dealers; (b) Disbursement and reporting of premiums and taxes to Lloyd's, brokers and state agencies; (c) Product design; (d) Production of contract forms and advertising materials; (e) Record keeping; (f) Claims adjusting and payment; and (g) Appointment of sales agents to market such programs to Dealers. During 1994, the Company entered into a production and administration agreement with Royal Insurance Company of America, which is rated "A-" (Excellent) by A.M. Best. Royal Insurance insured approximately 3% of the VSC obligations for the most recent year. During 1995, the Company entered into Program Administrator Agreements with Greenwich Insurance Company and Indian Harbor Insurance Company, both of which are subsidiaries of NAC Re Corporation, which is rated "A" (Excellent) by A.M. Best. These insurers will provide insurance coverage for certain programs starting in 1996. The Agreements expire on December 31, 1999. The Company markets its products under the trade name, EasyCare - - registered trademark -. There are EasyCare products for new, used and leased vehicles, which provide either total mechanical breakdown coverage or stated coverage. EasyCare products include various benefits such as trip inter- ruption, rental reimbursement and emergency roadside assistance. The Company also offers limited warranties, powertrain warranties and administers programs Corporation. The Company's price of the VSC to the Dealer includes: (a) The Company's fee for its administrative services, and (b) the cost of insurance, brokerage fees and taxes. The underlying insurance cost is determined by the VSC term and coverage, in addition to the repair profile of the specific vehicle. The Company also receives a fee for each claim processed, which is paid by the insurer. - 2 - INSURANCE BROKERAGE SERVICES DIVISION In addition to being a third party administrator for VSCs, Aegis includes an Insurance Brokerage Services Division which markets and administers automotive related insurance products. This division markets its products through Dealers, financial institutions and leasing companies. This division provided approximately 1% of the Company's total revenues for the Company's most recent year. MARKETING The Company's products are sold by Dealers to consumers. The Company markets its VSCs to Dealers through a national network of independent sales representatives and a few employee sales representatives. The independent sales representatives often market other automotive related insurance products to Dealers, in addition to the Company's VSCs. The Company's agreement with each independent sales organization and representative is terminable by the Company if production quotas are not met or by the representative upon the giving of written notice. Independent sales representatives are compensated on a commission basis which is linked to sales volumes. At March 15, 1996, 116 individual sales representatives represented the Company. The Company supports the sales representatives with a marketing department which is available to provide proposal assistance, competitive analysis and training of dealership personnel. In February 1994, the Company entered into a five year agreement with American Honda Finance Corporation to administer a VSC program for non-Honda and non-Acura vehicles sold through participating Honda and Acura dealerships. This agreement provided less than 10% of the Company's revenues for 1995. The Company has entered into an associate sponsorship agreement with Joe Gibbs Racing for 1996, whereby the Company will be sponsoring Gibbs' National Association of Stock Car and National Hot Rod Association cars. Additionally, Gibbs has become the national spokesperson for the Company, appearing in national trade publications, videos and in person at Company sponsored events. The Company is using its association with Gibbs to enhance the recognition and value of the EasyCare trade name to Dealers. COMPETITION The VSC industry is highly competitive and is dominated by the major automobile manufacturers and several large third party administrators. Management believes the Company is competitive against both the factory products and other third party administrators. In order to be competitive, the Company designs products which enhance a Dealer's Customer Satisfaction Index, provides training to Dealership personnel, and obtains insurance for the Dealer to provide comprehensive coverage at reasonable prices. EMPLOYEES At March 15, 1996, the Company had 86 employees. The Company is not subject to any collective bargaining agreements and considers its relationships with employees to be good. SEASONALITY The VSC industry is subject to the seasonality of the automobile industry. It is anticipated that the Company's revenues will be lower during its first and fourth quarters due to lower sales of motor vehicles during the winter months as compared to other times of the year. GOVERNMENT REGULATION Although the Company does not operate as an insurance company, the sale of VSCs by Dealers and the issuance of insurance policies is regulated by the insurance laws of most states and the Company's ability to market and perform its services is affected by such insurance laws. It is possible that some states in which the Company now conducts business free of insurance regulation may change their insurance laws to regulate the activities of the Company. In such event, the Company would have to comply with the regulatory requirements of those states or cease its business activities in those states. The Company is not aware of any proposed legislative change which will materially affect its business as it is currently conducted. - 3 - PROPRIETARY RIGHTS The Company regards its VSC administration and software as proprietary. In order to protect its software from illegal reproduction, the Company relies on copyright protection, trade secret laws and restrictions in its license agreements with respect to the use and reproduction of such software. The names "APCO -- Automobile Protection Corp. - registered trademark- ", "Easy Care - registered trademark- " and "Perfect Profit Program - registered trademark- " have been registered with the United States Patent and Trademark Office. The Company uses these service marks in its sales and marketing programs. ITEM 2. PROPERTIES. The Company conducts its operations from a 15,000 sq. ft. leased office facility at 15 Dunwoody Park Drive, Suite 100, Atlanta, Georgia 30338. The lease was renewed in January 1995 for a period ending on April 15, 2001. ITEM 3. LEGAL PROCEEDINGS. In November 1995, the Company filed a lawsuit against an independent sales agent in the United States District Court for the Northern District of Georgia, contending that the agent breached an Independent Contractor Agreement. The Company is seeking a declaration of its rights to cancel the agreement for cause, and damages. The agent is contesting the jurisdiction of the Court. In January 1996, the agent filed a lawsuit against the Company, its President, National Sales Manager and others, in the Civil District Court for the Parish of Orleans, Louisiana, alleging that the defendants engaged in unfair trade practices, civil conspiracy, intentional interference with business relations, defamation, restraint of trade, violation of Uniform Trade Secrets Act, and bad faith breach of contract. The agent is seeking damages in excess of $5 million. The Company believes the agent's claims are without merit and intends to vigorously challenge the jurisdiction of the Louisiana court and to defend itself and its officers vigorously. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matter was submitted during the fourth quarter of the year covered by this report to a vote of shareholders of the Company through the solicit- ation of proxies or otherwise. - 4 - PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. The Company's common stock has been traded in the over-the-counter securities market. The Company's common stock is quoted on the Nasdaq SmallCap Market under the symbol "APCO." The following figures represent quarterly high and low bid information related to trading in the Company's common stock. The figures reflect inter dealer prices without retail markup, markdown or commissions and may not be representative of actual transactions which occurred in the market. Such information has been obtained from Nasdaq.
Low Bid High Bid -------- -------- Fiscal year 1994: Quarter 11/30/93 1 1/2 2 Quarter 2/28/94 1 7/8 2 9/16 Quarter 5/31/94 1 7/8 2 5/8 Quarter 8/31/94 1 13/16 2 3/8 Transition period (1): Quarter 11/30/94 2 1/16 2 13/16 Month 12/31/94 2 1/8 2 3/8 Calendar year 1995: Quarter 3/31/95 1 3/4 2 3/8 Quarter 6/30/95 1 5/8 2 3/8 Quarter 9/30/95 2 1/8 2 9/16 Quarter 12/31/95 2 1/4 3 5/16 Calendar year 1996: First Quarter* 2 11/16 4 5/16 * through March 15, 1996 (1) On February 1, 1995, the Company changed its fiscal year end from August 31 to December 31. For further information, see Note 1 to the accompanying consolidated financial statements.
The closing bid price for the common stock on March 15, 1996 was $3.94. There were approximately 250 holders of record of the Company's common stock as of March 15, 1996. The Company believes there are approximately 3,000 beneficial owners of its common stock, which is held in street name by brokerage firms. No dividends have been declared or paid to date on the Company's common stock, nor are any anticipated in the foreseeable future. The Company has adopted a policy of reinvesting cash in the business. - 5 - ITEM 6. SELECTED FINANCIAL DATA. Set forth below is a summary of the selected financial data of the Company:
For the Four months For the For the For the For the year ended ended year ended year ended year ended year ended December 31, December 31, August 31, August 31, August 31, August 31, 1995 1994 1994 1993 1992 1991 ------------ ------------ ------------- ----------- ------------ ------------ Statement of Operations: Total revenues $ 49,210,774 $ 11,197,168 $ 26,553,554 $ 23,507,191 $ 16,087,506 $ 23,204,933 Income (loss) before (provision) benefit for income taxes and cumulative effect of accounting change 2,447,582 413,747 1,290,453 (232,047) (1,386,281) 482,563 (Provision) benefit for income taxes (922,000) (144,000) (445,705) 439,289 (184,744) Cumulative effect of accounting change 67,780 - ------------------------------------------------------------------------------------------------------------------------ Net income (loss) $ 1,525,582 $ 269,747 $ 912,528 $ (232,047) $ (946,992) $ 297,819 ======================================================================================================================== Per share data: Primary Income (loss) before cumulative effect of accounting change $ 0.20 $ 0.04 $ 0.15 $ (0.04) $ (0.18) $ 0.06 Cumulative effect of accounting change 0.01 - ------------------------------------------------------------------------------------------------------------------------ Net income (loss) $ 0.20 $ 0.04 $ 0.16 $ (0.04) $ (0.18) $ 0.06 ======================================================================================================================== Fully diluted Income (loss) before cumulative effect of accounting change $ 0.20 $ 0.04 $ 0.14 $ (0.04) $ (0.18) $ 0.05 Cumulative effect of accounting change 0.01 - ------------------------------------------------------------------------------------------------------------------------ Net income (loss) $ 0.20 $ 0.04 $ 0.15 $ (0.04) $ (0.18) $ 0.05 ========================================================================================================================
As of As of As of As of As of As of December 31, December 31, August 31, August 31, August 31, August 31, 1995 1994 1994 1993 1992 1991 ------------- ------------ ----------- ------------ ------------ ------------ Balance Sheet Data: - ------------------ Working capital $ 11,270,716 $ 3,317,098 $ 3,134,005 $ 2,164,306 $ 2,124,849 $ 2,914,691 Total assets $ 19,592,461 $ 9,352,256 $ 8,398,317 $ 6,720,107 $ 6,240,327 $ 6,180,562 Total liabilities $ 4,898,455 $ 3,931,752 $ 4,150,491 $ 3,405,559 $ 2,693,432 $ 1,686,400 Shareholders' equity $ 14,694,006 $ 5,420,504 $ 4,247,826 $ 3,314,548 $ 3,546,895 $ 4,494,162
- 6 - ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis of financial condition and results of operations presents the more significant factors affecting the Company during the periods indicated. The discussion and analysis should be read in conjunction with the Consolidated Financial Statements and related notes, and with the other financial information appearing herein. Liquidity and Capital Resources The Company believes that its current working capital and anticipated levels of internally generated funds will be sufficient to fund its operating and capital expenditure requirements for the next twenty four months. This estimate is based on the Company's current level of operations and certain assumptions relating to the Company's business and planned growth. At December 31, 1995, the Company had working capital of $11,270,716 and non-current investment securities of $1,509,288. The Company's liquidity increased in 1995 due to the exercise of a significant number of the Company's Class A and Class B warrants and net income from operations. Results of Operations Year ended December 31, 1995 ("1995") compared to year ended August 31, 1994 ("1994"). Revenues for 1995 increased by 85% or $22,657,220 to $49,210,774 over 1994. The Company's largest revenue source is from the marketing and administration of extended vehicle service contracts ("VSCs") under the EasyCare - registered trademark - name, which provided 99% of revenues for 1995. EasyCare revenues increased due to the introduction of additional Dealers to EasyCare by the Company's independent sales representatives and from the contract with American Honda Finance Corporation. The Company's gross margin decreased to 20% of revenues in 1995 from 22% of revenues in 1994. The margin decrease is due to the increase in commissions and incentives to independent sales representatives and the inclusion of emergency roadside assistance benefits in the VSC. The change in the mix of new and used, makes and models of vehicles also impacts the gross margin. Compensation, selling and administrative expenses for 1995 increased by 75% or $3,245,717 to $7,548,902 over 1994. The increase for 1995 is primarily attributable to headcount and compensation for marketing personnel, related travel, printing and advertising costs. Additional administrative costs were incurred to support the higher volumes and resulting claims, principally in headcount and communications. Expenses for 1994 were reduced by approximately $340,000 from the recoupment of previously expensed legal costs. Interest, dividend and other income for 1995 increased by 332% or $361,040 to $469,612 over 1994. The increase is due to the larger cash and investment securities balances on hand from the exercise of a significant number of the Company's Class A and Class B warrants, net income from operations and higher cash floats resulting from the increased volume of business. - 7 - The Company recorded a provision for income taxes in 1995 of $922,000 compared to $445,705 for 1994. The increase is due to higher net income and a higher combined tax rate. Year ended August 31, 1994 ("1994") compared to year ended August 31, 1993 ("1993"). Revenues for 1994 increased by 13% or $3,046,363 to $26,553,554 over 1993. The Company's largest revenue source is from the marketing and administration of extended vehicle service contracts under the EasyCare - - registered trademark - name, which provided 91% of revenues for 1994. EasyCare revenues increased due to the recruitment of additional independent sales representatives, the introduction of additional Dealers to the EasyCare product by the Company's independent sales representatives and the strength of vehicle sales. The Company's gross margin increased to 22% of revenues in 1994 from 17% of revenues in 1993. The increase is due to the increased proportion of business from EasyCare VSCs as compared to VSCs administered under a discontinued program. The change in the mix of new and used, makes and models of vehicles also impacts the gross margin. Compensation, selling and administrative expenses for 1994 increased by 11% or $440,447 to $4,303,185 over 1993. The increase is primarily attributable to compensation, advertising and promotion, travel and printed program materials due to the increase in sales volumes. Expenses for 1994 were reduced by approximately $340,000 from the recoupment of previously expensed legal costs, which were approximately $200,000 in 1993. The Company recorded a provision for income taxes in 1994 of $445,705 compared to no provision in 1993. The Company incurred a loss in 1993. The Company adopted Statement of Financial Accounting Standards No. 109 on September 1, 1993 and recognized income of $67,780 as the cumulative effect of an accounting change. Impact of Inflation Although the Company's costs may increase from time to time as a result of increases in some or all of the Company's costs, the precise effect of inflation on the operations of the Company cannot be determined. The Company believes that continuation of the general levels of inflation experienced in recent years should not have a significant impact on the Company's current and contemplated operations. Recent Accounting Pronouncements During the four month period ended December 31, 1994, the Company adopted Statement of Financial Accounting Standards No. 115 - "Accounting for Certain Investments in Debt and Equity Securities", which did not have a material affect on the Company's results. In October, 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 - "Accounting for Stock- Based Compensation", which the Company is required to adopt next year. Management has not decided whether the Company will adopt the accounting requirements or the alternative disclosure requirements. Although the effect of this standard is indeterminable for the 1996 financial statements at this time, it could result in a significant noncash compensation cost if the Company issues a large number of options, although this is not presently contemplated by management. - 8 - ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. - --------------------------------------------------- Index to Financial Statements and Financial Statement Schedules. Page ---- Financial Statements: - -------------------- Report of Independent Accountants 10 Consolidated Balance Sheet at December 31, 1995 11 December 31, 1994 and August 31, 1994 Consolidated Statement of Operations for the twelve months ended December 31, 1995, four months ended December 31, 1994, twelve months ended August 31, 1994, twelve months ended August 31, 1993 and four months ended December 31, 1993 12 Consolidated Statement of Changes in Shareholders' Equity for the twelve months ended December 31, 1995, four months ended December 31, 1994, twelve months ended August 31, 1994 and twelve months ended August 31, 1993 13 Consolidated Statement of Cash Flows for the twelve months ended December 31, 1995, four months ended December 31, 1994, twelve months ended August 31, 1994, twelve months ended August 31, 1993 and four months ended December 31, 1993 14 Notes to Consolidated Financial Statements 15 - 22 Financial Statement Schedules: - ------------------------------ I. Marketable Securities - Other Investments at December 31, 1995 23 VIII. Valuation and Qualifying Accounts for the twelve months ended December 31, 1995, four months ended December 31, 1994, twelve months ended August 31, 1994 and twelve months ended August 31, 1993 24 X. Supplementary Income Statement Information for the twelve months ended December 31, 1995, four months ended December 31, 1994, twelve months ended August 31, 1994 and twelve months ended August 31, 1993 25 All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. - 9 - Report of Independent Accountants To the Board of Directors and Shareholders of Automobile Protection Corporation - APCO In our opinion, the accompanying consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Automobile Protection Corporation - APCO and its subsidiaries at December 31, 1995, December 31, 1994 and August 31, 1994,and the results of their operations and their cash flows for the twelve months ended December 31, 1995, August 31, 1994 and August 31, 1993 and for the four months ended December 31, 1994 and December 31, 1993 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 6 to the consolidated financial statements, the Company changed its method of accounting for income taxes by adopting Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes during the year ended August 31, 1994. PRICE WATERHOUSE, LLP Atlanta, Georgia March 7, 1996 - 10 - AUTOMOBILE PROTECTION CORPORATION - APCO CONSOLIDATED BALANCE SHEET
December 31, December 31, August 31, 1995 1994 1994 ----------- ----------- ---------- ASSETS Current Assets: Cash and cash equivalents $10,210,768 $5,383,643 $4,932,535 Trading securities, at fair value 3,582,423 802,170 1,596,982 Investment securities held to maturity 255,576 Accounts receivable, net of provision for doubtful accounts of $36,000, $45,000 and $45,000 1,212,000 473,577 271,665 Notes receivable, net of provision for doubtful accounts of $9,000, $16,000 and $13,000 421,882 60,482 128,910 Officer and employee receivables 133,072 81,154 58,105 Income tax refund receivable 57,000 57,000 Prepaid expenses 220,177 226,555 173,999 Deferred tax asset 110,643 85,056 45,000 ----------- ----------- ---------- Total current assets 16,146,541 7,169,637 7,264,196 Property and equipment, net of accumulated depreciation of $1,389,800, $1,086,800, and $987,800 874,718 687,798 688,367 Investment securities held to maturity 1,509,288 604,316 Deposits to secure licenses 726,319 653,250 152,500 Deferred tax asset 185,861 18,857 Other assets 149,734 218,398 293,254 ----------- ----------- ---------- $19,592,461 $9,352,256 $8,398,317 =========== =========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Premiums, fees and taxes payable $3,467,947 $3,067,925 $3,290,216 Accounts payable 886,155 558,726 474,748 Accrued liabilities 470,723 212,283 269,227 Current income taxes payable 51,000 13,605 96,000 ----------- ----------- ---------- Total current liabilities 4,875,825 3,852,539 4,130,191 Deferred income taxes 22,330 78,913 20,000 Redeemable preferred stock 300 300 300 ----------- ----------- ---------- 4,898,455 3,931,752 4,150,491 ----------- ----------- ---------- Shareholders' equity: Common stock; $.001 par value, 40,000,000 authorized, 9,614,616, 5,679,895 and 5,183,000 issued and outstanding 9,614 5,679 5,183 Additional paid-in capital 12,102,172 4,358,187 3,455,752 Retained earnings 2,582,220 1,056,638 786,891 ----------- ----------- ---------- Total shareholders' equity 14,694,006 5,420,504 4,247,826 ----------- ----------- ---------- Commitments ----------- ----------- ---------- $19,592,461 $9,352,256 $8,398,317 =========== =========== ========== The accompanying notes are an integral part of these consolidated financial statements.
- 11 - AUTOMOBILE PROTECTION CORPORATION - APCO CONSOLIDATED STATEMENT OF OPERATIONS
Twelve Months Four Months Twelve Months Twelve Months Four Months Ended Ended Ended Ended Ended December 31, December 31, August 31, August 31, December 31, 1995 1994 1994 1993 1993 ----------- ----------- ----------- ----------- ----------- Revenues $49,210,774 $11,197,168 $26,553,554 $23,507,191 $7,848,154 Cost of sales 39,322,773 8,771,946 20,652,166 19,626,799 6,223,248 ----------- ----------- ----------- ----------- ----------- 9,888,001 2,425,222 5,901,388 3,880,392 1,624,906 ----------- ----------- ----------- ----------- ----------- Expenses: Compensation, selling and administrative 7,548,902 1,914,130 4,303,185 3,862,738 1,425,101 Depreciation and amortization 361,129 117,588 416,322 378,068 144,638 Interest, dividend and other income (469,612) (20,243) (108,572) (128,367) (25,007) ----------- ----------- ----------- ----------- ----------- 7,440,419 2,011,475 4,610,935 4,112,439 1,544,732 ----------- ----------- ----------- ----------- ----------- Income (loss) before provision for income taxes 2,447,582 413,747 1,290,453 (232,047) 80,174 Provision for income taxes 922,000 144,000 445,705 27,761 Cumulative effect of accounting change (67,780) (67,780) ----------- ----------- ----------- ----------- ----------- Net income (loss) $1,525,582 $269,747 $912,528 ($232,047) $120,193 =========== =========== =========== =========== =========== Net income (loss) per share: Primary Net income (loss) per share before cumulative effect of accounting change $0.20 $0.04 $0.15 ($0.04) $0.01 Cumulative effect of accounting change 0.01 0.01 ----------- ----------- ----------- ----------- ----------- Net income (loss) per share $0.20 $0.04 $0.16 ($0.04) $0.02 =========== =========== =========== =========== =========== Fully diluted Net income (loss) per share before cumulative effect of accounting change $0.20 $0.04 $0.14 ($0.04) $0.01 Cumulative effect of accounting change 0.01 0.01 ----------- ----------- ----------- ----------- ----------- Net income (loss) per share $0.20 $0.04 $0.15 ($0.04) $0.02 =========== =========== =========== =========== =========== The accompanying notes are an integral part of these consolidated financial statements.
- 12 - AUTOMOBILE PROTECTION CORPORATION - APCO CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Common Stock Additional --------------------- Paid-in Retained Shares Amount Capital Earnings Total --------- ------- ----------- ---------- ----------- Balances at August 31, 1992 5,168,000 $5,168 $3,435,017 $106,410 $3,546,595 Net loss for the period September 1, 1992 through August 31, 1993 (232,047) (232,047) --------------------------------------------------------- Balances at August 31, 1993 5,168,000 5,168 3,435,017 (125,637) 3,314,548 Net income for the period September 1, 1993 through August 31, 1994 912,528 912,528 Issuance of common stock upon exercise of stock options 15,000 15 20,735 20,750 --------------------------------------------------------- Balances at August 31, 1994 5,183,000 5,183 3,455,752 786,891 4,247,826 Net income for the period September 1, 1994 through December 31, 1994 269,747 269,747 Issuance of common stock upon exercise of stock options 496,895 496 975,265 975,761 Registration costs (82,830) (82,830) Stock compensation expense 10,000 10,000 --------------------------------------------------------- Balances at December 31, 1994 5,679,895 5,679 4,358,187 1,056,638 5,420,504 Net income for the period January 1, 1995 through December 31, 1995 1,525,582 1,525,582 Issuance of common stock upon exercise of stock options, net of underwriting fee 3,934,721 3,935 7,459,515 7,463,450 Registration costs (19,526) (19,526) Stock compensation expense 54,996 54,996 Tax effect of option exercise 249,000 249,000 --------------------------------------------------------- Balances at December 31, 1995 9,614,616 $9,614 $12,102,172 $2,582,220 $14,694,006 ========================================================= The accompanying notes are an integral part of these consolidated financial statements.
- 13 - AUTOMOBILE PROTECTION CORPORATION - APCO CONSOLIDATED STATEMENT OF CASH FLOWS
Twelve Months Four Months Twelve Months Twelve Months Four Months Ended Ended Ended Ended Ended December 31, December 31, August 31, August 31, December 31, 1995 1994 1994 1993 1993 ----------- ----------- ---------- ----------- ----------- Cash flows from operating activities: Net income (loss) $1,525,582 $269,747 $912,528 ($232,047) $120,193 ----------- ----------- ---------- ----------- ----------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 361,129 117,588 416,322 378,068 144,638 Cumulative effect of accounting change (67,780) Deferred income taxes (249,174) 42,780 (55,446) Provision for doubtful accounts 1,367 3,000 (67,549) 70,803 Tax benefit from stock option exercise 249,000 Stock compensation expense 54,996 10,000 Change in operating assets and liabilities: (Increase) decrease in accounts receivable (734,790) (201,912) 267,285 (203,048) (91,236) (Increase) decrease in officer and employee receivables (51,918) (23,049) 24,972 61,213 (39,812) (Increase) decrease in notes receivable (366,400) 65,428 36,754 (165,664) 121,859 Decrease in income tax refund receivable 57,000 19,789 412,124 70,350 Decrease (increase) in prepaid expenses and other assets 16,913 (55,998) (16,956) 125,882 (70,265) Increase (decrease) in premiums, fees and taxes payable 400,022 (222,291) 575,800 825,899 (161,418) Increase (decrease) in accounts payable 327,429 83,978 (14,748) 183,383 32,918 Increase (decrease) in accrued liabilities 258,440 (56,944) 197,218 (117,710) (49,306) Increase (decrease) in income taxes payable 37,395 (82,395) 96,000 Purchases of trading securities (5,323,507) (734,235) Sales of trading securities 2,543,254 1,424,731 ----------- ----------- ---------- ----------- ----------- Total adjustments (2,418,844) 327,901 1,509,887 1,570,950 (97,718) ----------- ----------- ---------- ----------- ----------- Net cash (used in) provided by operating activities (893,262) 597,648 2,422,415 1,338,903 22,475 ----------- ----------- ---------- ----------- ----------- Cash flows from investing activities: Purchases of property and equipment (489,920) (98,431) (195,473) (103,185) (19,740) Purchases of investment securities (1,160,548) (500,000) (1,689,465) (1,023,007) Sales of investment securities 1,001,079 1,307,341 26,541 Decrease in margin loan (129,338) (179,745) (28,501) Increase in deposits to secure licenses (73,069) (500,750) (152,500) ----------- ----------- ---------- ----------- ----------- Net cash (used in) provided by investing activities (1,723,537) (1,099,181) (1,165,697) 1,404 (21,700) ----------- ----------- ---------- ----------- ----------- Cash flows from financing activities: Issuance of common stock, net of underwriting fee 7,463,450 975,761 20,750 Registration Costs (19,526) (23,120) (59,710) ----------- ----------- ---------- ----------- ----------- Net cash provided by (used in) financing activities 7,443,924 952,641 (38,960) ----------- ----------- ---------- ----------- ----------- Net increase in cash and cash equivalents 4,827,125 451,108 1,217,758 1,340,307 775 Cash and cash equivalents at beginning of period 5,383,643 4,932,535 3,714,777 2,374,470 3,714,777 ----------- ----------- ---------- ----------- ----------- Cash and cash equivalents at end of period $10,210,768 $5,383,643 $4,932,535 $3,714,777 $3,715,552 =========== =========== ========== =========== =========== Supplemental disclosure of cash flow information: Cash paid during the period for income taxes $850,000 $226,075 $370,000 $0 $0 =========== =========== ========== =========== =========== The accompanying notes are an integral part of these consolidated financial statements.
- 14 - Notes to Consolidated Financial Statements NOTE 1 NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Automobile Protection Corporation - APCO was incorporated in the State of Georgia on September 10, 1984. APCO and its wholly-owned subsidiaries (the "Company") are engaged primarily in the marketing and administration of extended vehicle service contracts and extended vehicle warranty programs sold by new and used automobile retailers located throughout the United States. Extended vehicle service contracts augment and enhance upon the basic warranty offered by the automobile manufacturer. The Company markets its contracts nationally under the EasyCare - registered trademark - trade name and also administers vehicle service contracts under a private label program for a major automobile manufacturer. The Company has entered into agreements with insurance companies and certain Underwriters' at Lloyd's of London ("Lloyd's"), whereby the insurers underwrite and insure the obligations to pay for covered mechanical repairs and benefits under all vehicle service contract and warranty programs marketed and administered by the Company. The Company's subsidiary, The Aegis Group, Inc., provides a wide range of third party administrative and insurance brokerage services to companies serving the automotive industry. The following is a summary of the significant accounting policies followed by the Company: Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Change in Reporting Period On February 1, 1995, the Company's Board of Directors approved a change in the Company's fiscal year end from August 31 to December 31. Revenues Revenues from the sale of extended vehicle service contracts and extended warranty programs are recognized when the service contract or extended warranty sold by the dealer is received and accepted by the Company. Revenues are comprised of the Company's administration fee, underlying insurance premium and tax. Cash and Cash Equivalents Cash and cash equivalents include all funds with an original maturity of ninety days or less. Certain funds are considered restricted as they are held for the benefit of the insurers and to pay claims. Restricted funds aggregated $3,468,000, $3,068,000 and $3,384,000 at December 31, 1995, December 31, 1994 and August 31, 1994, respectively. Investment Securities During the four month period ended December 31, 1994, the Company adopted Statement of Financial Accounting Standards No. 115 - "Accounting for Certain Investments in Debt and Equity Securities". The adoption had no effect on retained earnings at the beginning of this period. The Company's investments consist of trading securities and held to maturity securities. Trading securities are stated at their fair value, which is based on quoted market prices, and all unrealized gains and losses are recorded in earnings as incurred. Held to maturity securities are stated at their amortized cost. Gains and losses during the periods encompassed by these financial statements were insignificant. The Company had no significant concentration of credit risk at December 31, 1995. - 15 - Property and Equipment Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method for financial reporting purposes and accelerated methods for income tax purposes over the estimated useful lives of the assets ranging from three to seven years. Maintenance and repair costs are charged to expense as incurred, and major renewals and betterments are capitalized. When property and equipment is retired or sold, the related carrying value and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in income. Premiums and Taxes Payable Premiums and taxes payable includes premiums due to the insurers or their agents, taxes payable to various states and amounts advanced to the Company by the insurers for payment of claims. Income Taxes The Company provides income taxes on income reported for financial statement purposes. Deferred income taxes are recorded for differences in the recognition of various items for financial reporting and income tax purposes. The Company files a consolidated income tax return with its subsidiaries. Net Income (Loss) per Common Share Net income (loss) per share has been calculated based on the weighted average number of common shares and common share equivalents outstanding during each period presented. The weighted average number of common shares and common share equivalents on a primary basis are 7,531,000, 5,818,451 and 5,168,000 for the twelve months ended December 31, 1995, August 31, 1994 and August 31, 1993, respectively, and 6,875,000 and 5,697,000 for the four months ended December 31, 1994 and December 31, 1993, respectively. The weighted average number of common shares and common share equivalents on a fully diluted basis are 7,604,000, 5,945,997 and 5,168,000 for the twelve months ended December 31, 1995, August 31, 1994 and August 31, 1993, respectively, and 6,875,000 and 5,697,000 for the four months ended December 31, 1994 and December 31, 1993, respectively. Reclassifications Certain comparative amounts have been reclassified to conform with current year presentation. NOTE 2 RISKS AND UNCERTAINTIES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities as recorded in the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The industry in which the Company operates is highly competitive, with some competitors having significantly greater financial resources than the Company. The Company depends on independent sales representatives and automobile retailers to market its products. No single sales source provides in excess of 10% of the Company's revenues. The insurance companies, primarily certain Underwriters' at Lloyd's of London, insure the obligations under the vehicle service contracts. The availability of insurance coverage at competitive rates and of insurance funds to make claims payments, including the financial condition of the insurance carriers, are critical to the Company. - 16 - NOTE 3 TRADING AND INVESTMENT SECURITIES: Trading and investment securities are summarized as follows:
December 31, December 31, 1995 1994 ------------- ------------ Trading securities (at fair value): Municipal bonds $ 3,578,358 U.S. treasuries $ 684,501 Certificates of deposit and cash balances 4,065 117,669 ------------ ------------ $ 3,582,423 $ 802,170 ============ ============ Investment securities held to maturity (at amortized cost): Municipal bonds (market value: $1,057,007; $ 103,158) $ 1,055,198 $ 104,316 Preferred stocks (market value: $ 500,000; $ 500,000) 500,000 500,000 Certificates of deposit 209,666 ------------ ------------ 1,764,864 604,316 Less: Current investment securities 255,576 ------------ ------------ Non-Current investment securities $ 1,509,288 $ 604,316 ============ ============ Marketable securities at August 31, 1994 are stated at the lower of aggregate cost or market (which approximates fair value), which are $1,619,630 and $1,596,982, respectively. The fair values of the municipal bonds, preferred stock and certificates of deposit are $909,896, $614,125 and $72,961, respectively, at August 31, 1994. The investment securities mature within five years from December 31, 1995.
NOTE 4 PROPERTY AND EQUIPMENT: Property and equipment is summarized as follows:
December 31, December 31, August 31, 1995 1994 1994 ------------ ------------ ------------ Office and computer equipment $ 1,406,553 $ 1,202,271 $ 1,160,672 Furniture and fixtures 273,435 247,850 247,850 Vehicles 172,194 113,677 56,845 Leasehold improvements 412,336 210,800 210,800 ------------ ------------ ------------ 2,264,518 1,774,598 1,676,167 Less: Accumulated depreciation and amortization (1,389,800) (1,086,800) (987,800) ------------ ------------ ------------ $ 874,718 $ 687,798 $ 688,367 ============ ============ ============
NOTE 5 DEPOSITS TO SECURE LICENSES: Certain states require the Company to secure its financial obligations by providing security in the form of pledged securities or bank certificates of deposit. Additionally, one state requires the Company's subsidiary to maintain capitalization of $500,000. - 17 - NOTE 6 INCOME TAXES: The components of the provision for income taxes are as follows:
Four months Four months Year ended ended Year ended ended December 31, December 31, August 31, December 31, 1995 1994 1994 1993 ------------ ----------- ---------- ------------ Current: Federal $ 1,077,174 $ 141,000 $ 386,990 $ 24,052 State 94,000 3,000 15,935 ------------ ----------- ---------- ------------ 1,171,174 144,000 402,925 24,052 ------------ ----------- ---------- ------------ Deferred: Federal (232,174) 41,088 3,709 State (17,000) 1,692 ------------ ----------- ---------- ------------ (249,174) 42,780 3,709 ------------ ----------- ---------- ------------ Provision for income taxes $ 922,000 $ 144,000 $ 445,705 $ 27,761 ============ =========== ========== ============
No income tax provision (benefit) was recorded for the year ended August 31, 1993 due to net operating losses and the utilization of net operating loss carrybacks in the prior year. An analysis of the differences between the statutory federal income tax rate of 34% and the effective tax rate is as follows:
Year ended Year ended Year ended December 31, August 31, August 31, 1995 1994 1993 ------------ ----------- ---------- Statutory federal taxes $ 832,178 $ 438,754 $ (78,895) Operating losses generating no current tax benefits 61,997 State income taxes, net of federal tax benefit 50,729 11,634 Amortization of goodwill 16,921 16,921 16,921 Non-taxable income (26,318) (12,117) (10,455) Non-deductible expenses 48,490 30,902 5,080 Other (40,389) 5,352 ------------ ----------- ---------- $ 922,000 $ 445,705 $ - ============ =========== ==========
There are no significant differences between income taxed at the statutory federal tax rate of 34% and the Company's effective tax rate for the four month periods ended December 31, 1994 and 1993. - 18 - The Company recorded a benefit of $67,780 upon adoption of Statement of Financial Accounting Standards No. 109 effective September 1, 1993. The components of deferred tax assets and liabilities are as follows:
December 31, December 31, August 31, 1995 1994 1994 ------------ ----------- ---------- Accounts receivable allowances $ 27,916 $ 39,602 $ 40,716 Other asset allowances 3,016 4,284 Depreciation and amortization 37,648 18,857 Non-deductible accruals 230,940 42,438 ------------ ----------- ---------- Deferred tax asset $ 296,504 $ 103,913 $ 45,000 ============ =========== ========== Other liabilities $ 22,330 $ 78,913 $ 20,000 ------------ ----------- ---------- Deferred tax liability $ 22,330 $ 78,913 $ 20,000 ============ =========== ==========
NOTE 7 STOCKHOLDERS' EQUITY: Warrants Issued in Connection with the Company's Initial Public Offering: On October 31, 1995, 1,564,844 unexercised warrants, issued in connection with the 1988 initial public offering, expired. In September 1994, all of the underwriter's unit purchase options, also issued in connection with the initial public offering, were exercised. During the twelve months ended December 31, 1995 and four months ended December 31, 1994, the Company received net proceeds of $7,424,950 and $975,761, respectively, from the exercise of 3,853,876 warrants and 75,120 underwriter's unit purchase options. The average exercise price per share was $2.06. At December 31, 1995, no warrants or underwriter's unit purchase options remained. Non-Plan Options(non-qualified): The Company's Board of Directors has approved the issuance of non-plan stock options to financial consultants, company spokespersons, independent sales agents and certain senior executive officers. The outstanding options at December 31, 1995 and their terms are summarized as follows: Year Number of Exercise Expiration of Grant Options Prices Dates ---------- ---------- ----------- ------------- 1990 100,000 $0.85 1999 1992 100,000 $1.00 2000 1993 200,000 $1.93 1998 1994 826,000 $2.00-$3.00 1997 - 2001 1995 298,000 $2.44-$3.00 1998 - 2000 ---------- 1,524,000 =========== - 19 - The 1994 options include 100,000 options granted to two executive officers which vest on December 31, 1996 in proportion to actual net income as a percentage of $3,000,000. At August 31, 1994, the Company had granted 1,655,000 non-plan options. During the period September 1, 1994 through December 31, 1994, 590,000 options were granted; 100,000 options expired; and no options were exercised. During the period January 1, 1995 through December 31, 1995, 298,000 options were granted; 469,000 options expired; and 450,000 options were exercised. In connection with the options exercised, the Company issued 315,380 shares in return for the surrender of 450,000 options in a cashless exchange with certain senior executives and a former officer of the Company. In connection with the issuance of certain options, the Company recorded a non-cash stock compensation expense of $54,996 for the twelve months ended December 31, 1995 and $10,000 for the four months ended December 31, 1994. 1988 Stock Option Plan (qualified): Under the 1988 Stock Option Plan, the Company has 778,000 shares of common stock for issuance to officers, employees and persons instrumental to the success of the Company. The exercise price of any option granted under the 1988 Stock Option Plan may not be less than the fair market value of the shares subject to the option at the date of grant. The term of each option and the manner in which it may be exercised are to be determined by the Board of Directors. The options are generally subject to vesting schedules which range from 2 years to 4 years and some are also subject to the attainment of specified corporate goals. The 1988 Stock Option Plan was registered in 1994. At August 31, 1994, the Company had granted 593,053 options. During the period September 1, 1994 through December 31, 1994, 44,000 options were granted and none were exercised or expired. During the period January 1, 1995 through December 31, 1995, 101,813 options were granted; 35,013 options expired; and 12,000 options were exercised at an average price of $1.12 per share. Options to purchase 10,000 shares at a price of $1.00 per share were exercised in the fiscal year ended August 31, 1994. The following options to purchase the Company's common shares were outstanding under this plan at December 31, 1995: Year Number Exercise of of Price Expiration Grants Shares Range Date ------ ------ ---------- ---------- 1991 7,500 $0.88 - $0.94 1996 1993 17,750 $0.83 - $0.89 1997 - 1998 1994 564,790 $1.50 - $2.54 1997 - 2001 1995 101,813 $2.06 - $2.25 1998 - 2003 ------- 691,853 ======= Outside Directors' Stock Option Plan (qualified): Under the Outside Directors' Stock Option Plan, the Company has 275,000 shares of common stock reserved for issuance to directors who are not salaried employees of, or full-time consultants to the Company or its subsidiaries. Each eligible director, as defined, will be granted an option to purchase the maximum number of full shares having an aggregate fair market value on the date of grant equal to $25,000 on an annual basis at an exercise price per share equal to the fair market value of a share of common stock on the date of grant. These options can be exercised at any time for a ten year period from the date of grant. The Outside Directors' Stock Option Plan was registered in 1994. - 20 - At August 31, 1994, the Company had granted 235,033 options. During the period September 1, 1994 through December 31, 1994, no options were granted, exercised or expired. During the period January 1, 1995 through December 31, 1995, 24,270 options were granted; and 25,000 options were exercised by a former director at an average price of $1.00 per share. The following options to purchase the Company's common shares were outstanding under this plan at December 31, 1995: Year Number Exercise of of Price Expiration Grants Shares Range Date ------ ------ ---------- ---------- 1988 18,181 $1.38 1998 1990 25,510 $0.98 2000 1991 33,490 $1.44 - $1.55 2001 1992 43,244 $1.16 2002 1993 57,142 $0.88 2003 1994 32,466 $2.32 2004 1995 24,270 $2.06 2005 -------- 234,303 ======== NOTE 9 PREFERRED STOCK: Class C Redeemable Preferred Stock: The Company issued 300 shares of Class C Redeemable Preferred Stock for $1.00 per share to its principal shareholders in 1988. The holders of the Class C Redeemable Preferred Stock, as a class, shall be entitled to elect a majority of the Board of Directors irrespective of any ownership of the Company's common stock. There are no dividend rights attached to the Class C Redeemable Preferred Stock. In the event of the Company's liquidation, the holders of the Class C Redeemable Preferred Stock will be entitled to $.01 per share. All the Class C Redeemable Preferred Stock is subject to mandatory redemption by the Company at $.01 per share on September 11, 1998. Class D Preferred Stock: In 1987, the Board of Directors authorized the issuance of 5,000,000 shares of Class D Preferred Stock, with a $.01 par value. The rights and preferences of the Class D Preferred Stock are determined at the discretion of the Board of Directors. No Class D Preferred Stock is issued or outstanding. NOTE 10 COMMITMENTS: The Company leases its office space, certain office equipment and vehicles under non-cancelable operating lease agreements. Future minimum annual rental payments under these leases as of December 31, 1995 are: Year Amount ---- --------- 1996 $ 289,007 1997 291,711 1998 269,542 1999 249,799 2000 249,690 Thereafter 68,064 ---------- $1,417,813 ========== - 21 - Rent expense for all operating leases for the twelve months ended December 31, 1995, August 31, 1994 and August 31, 1993 was $314,000, $330,000 and $258,000, respectively. Rent expense for the four months ended December 31, 1994 and December 31, 1993 was $108,000 and $103,000, respectively. In December 1995, the Company entered into a one year sponsorship agreement with Joe Gibbs Racing, Inc., whereby the Company has undertaken to be an associate sponsor of the Joe Gibbs NASCAR and NHRA teams for 1996. The Company may renew this sponsorship for two additional racing seasons. NOTE 11 SUBSEQUENT EVENTS: The Company's Board of Directors authorized the issuance of options to various financial consultants to purchase 250,000 shares of the Company's stock at $3.50 per share. These options expire in February 1997. The Company established a Profit Sharing and 401(k) Plan effective January 1, 1996. The Company has elected to voluntarily match a portion of the employee contributions for 1996 in the form of Company stock. Employer matching contributions vest evenly over five years. - 22 - AUTOMOBILE PROTECTION CORPORATION - APCO SCHEDULE I: Marketable Securities - Other Investments FORM 10-K DECEMBER 31, 1995
Column A Column B Column C Column D Column E - --------- -------- -------- -------- -------- Name of issuer and Number of shares Cost of Market value Amount at title of each issue or units-principal each issue of each issue which of bonds and notes at December 31, carried in the 1995 balance sheet - ---------------------------------------------------------------------------------------------------- Ford Holdings, Inc. Series N, Preferred Stock $ 500,000 $ 500,000 $ 500,000 $ 500,000 Kentucky State Turnpike Authority Economic Development, 4.00% 45,000 45,000 45,000 45,000 Illinois State Refunding General Obligation, 5.25% 250,000 255,116 255,360 255,116 North Carolina Housing Finance Agency, 4.30% 15,000 14,706 14,697 14,706 Port Seattle Revenue Bonds, Series A, 5.45% 25,000 25,560 25,605 25,560 Tulsa County General Obligation, 6.70% 100,000 104,801 105,235 104,801 Georgia Municipal Electric Authority Series S, 6.85% 100,000 106,252 103,666 103,666 Illinois Development Finance Authority Revenue, 5.20% 50,000 50,950 51,211 50,950 Wisconsin Health & Education Revenue, 4.35% 250,000 249,494 250,493 249,494 Plover, WI General Obligation, 7.00% 20,000 21,152 21,295 21,152 West Allis School District Promissory Notes, 6.80% 100,000 103,226 102,282 103,226 California Health Facilities Financing Authority, 6.50% 55,000 57,250 56,703 57,250 Certificates of Deposit and cash balances 233,943 233,943 233,943 233,943
- 23 - AUTOMOBILE PROTECTION CORPORATION - APCO SCHEDULE VIII: Valuation and Qualifying Accounts FORM 10-K
Description Balance at Charged to Deductions Balance beginning of costs and at end of period expenses period - ---------------------------------------------------------------------------------------------- Year ended December 31, 1995: - ----------------------------- Allowance for doubtful accounts $61,000 $1,367 $17,367 $45,000 Four months ended December 31, 1994: - ----------------------------------- Allowance for doubtful accounts 58,000 3,000 61,000 Year ended August 31, 1994: - --------------------------- Allowance for doubtful accounts 125,549 5,728 73,277 58,000 Year ended August 31, 1993: - --------------------------- Allowance for doubtful accounts 54,746 70,803 125,549 The Company changed its year end from August 31 to December 31; accordingly the above information is presented for the four month transition period ended December 31, 1994 and then for the year ended December 31, 1995.
- 24 - AUTOMOBILE PROTECTION CORPORATION - APCO SCHEDULE X: Supplementary Income Statement Information FORM 10-K DECEMBER 31, 1995
Item Charged to costs and expenses - ---- ----------------------------- Four months Year ended ended Year ended Year ended December 31, December 31, August 31, August 31, 1995 1994 1994 1993 - -------------------------------------------------------------------------------------- Maintenance and repairs $ 13,703 $ 2,098 $ 20,384 $ 39,697 Taxes, other than payroll and income 57,385 19,933 14,412 23,064 Advertising costs 430,539 58,570 224,999 107,431 The Company changed its year end from August 31 to December 31; accordingly the above information is presented for the four month transition period ended December 31, 1994 and then for the year ended December 31, 1995.
- 25 - ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Since inception, the Company has not changed accountants and has had no disagreement on any matter of accounting principles or practices or financial statement disclosure. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The directors and executive officers of the Company and their positions are listed below, followed by a brief description of their business experience during the past five years. Director Name Age Since Position - ------------------------------------------------------------------------------ Martin J. Blank 49 1984 Chairman of the Board, Chief Operating Officer, Secretary and Director Larry I. Dorfman 40 1984 President, Chief Executive Officer and Director Anthony R. Levinson 38 - Chief Financial Officer, Treasurer Howard C. Miller 69 1989 Director Mechlin D. Moore 65 1991 Director Martin J. Blank, a co-founder of the Company, has served as Secretary and Director since its incorporation in September 1984 and as the Chairman of the Board and Chief Operating Officer since April 1988. Mr. Blank is an attorney admitted to the bar in the States of Georgia and California. Mr. Blank's experience prior to co-founding the Company includes the practice of law and representation and financial management for professional athletes. Larry I. Dorfman, a co-founder of the Company, has served as President and Director since its incorporation in September 1984 and as Chief Executive Officer since April 1988. Prior to co-founding the Company, Mr. Dorfman was Vice President-Sales for Paymaster Checkwriter Company, Inc. in Atlanta with responsibility for the direction and supervision of its sales force. Anthony R. Levinson has served as Chief Financial Officer and Treasurer of the Company since November 1993. From 1982 to November 1993 Mr. Levinson served as a business consultant and auditor to public companies, private businesses and individuals with the accounting firm, Price Waterhouse, LLP. Mr. Levinson is a Certified Public Accountant in the State of Georgia. Howard C. Miller has served as Director of the Company since January 1989. Mr. Miller currently serves on the audit committee of the United States Olympic Committee and as a Director of Stone Container Corporation. Mr. Miller's past experience includes President and CEO of Avis, Inc., Vice President of ITT, President and CEO of Canteen Corporation. Mechlin D. Moore has served as Director of the Company since June 1991. Mr. Moore is an independent consultant in insurance communication and marketing. Mr. Moore's past experience includes President of the Insurance Information Institute and Senior Vice President of United Air Lines, Inc. - 26 - Directors are elected by the stockholders at each annual meeting (or in the case of a vacancy, are appointed by the directors then in office) to serve until the next annual meeting or until their successors are elected and qualified. Officers serve at the discretion of the Board of Directors. Compliance with Section 16(a) of the Exchange Act Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's officers, directors and persons who beneficially own more than ten percent of a registered class of the Company's equity securities ("ten -percent stockholders") to file reports of ownership and changes in ownership with the Securities and Exchange Commission ("SEC") and with the National Association of Securities Dealers, Inc. ("NASD"). Officers, directors and ten-percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received by it, the Company believes that since August 31, 1994, all its officers, directors and ten-percent stockholders complied with the Section 16(a) reporting requirements. ITEM 11. EXECUTIVE COMPENSATION. The following table sets forth the compensation of the Company's Chief Execu- tive Officer and Chief Operating Officer for the periods indicated.
Long-term Compensation Name and principal Options- position Period Salary (1) No. shares (2) - ---------------------------------------------------------------------------- , Larry I. Dorfman 12 months ended President and Chief 12/31/95 $249,636 Executive Officer 4 months ended 12/31/94 $ 40,288 12 months ended 8/31/94 $124,723 200,000 12 months ended 8/31/93 $ 85,638 Martin J. Blank 12 months ended Chairman and Chief 12/31/95 $249,636 Operating Officer 4 months ended 12/31/94 $ 40,288 12 months ended 8/31/94 $124,723 200,000 12 months ended 8/31/93 $ 85,638 - -------------
(1) Represents base salary and compensation based upon the number of vehicle service contracts processed each month. See Report on Executive Compensation, Employment Arrangements (Chief Executive Officer and Chief Operating Officer). - 27 - (2) On September 10, 1993, the Company's Board of Directors granted each executive 100,000 non-qualified stock options to purchase 100,000 shares of the Company's common stock at $1.93 per share, which is 110% of the market value of one share of the Company's common stock on the date of grant. On June 28, 1994, the Company's Board of Directors granted each executive 100,000 non-qualified stock options to purchase 100,000 shares of the Company's common stock at $2.54 per share, which is 110% of the market value of one share of the Company's common stock on the date of grant. See Insider Participation in Compensation Matters. Option Grants during past year and transition period The following table sets forth certain information with respect to stock options granted to executive officers during 1995 by the Company's Board of Directors. No grants were made during the transition period of September 1, 1994 to December 31, 1994. No stock appreciation rights have been granted.
Potential Realizable Value at Assumed % of Annual Rates of Total Options Stock Price Granted to Appreciation for Options Employees in Exercise Expiration Option Term Name Granted Fiscal Year Price Date 5% 10% - ------------------- -------- -------------- -------- ---------- ------- ------------ Anthony R. Levinson 10,000} 16% $2.09 5/5/99 $4,600 $ 9,600 (1) 10,000} $2.09 5/5/00 $5,800 $ 12,700 (2) - -------------
(1) The assumed annual rates of appreciation of five and ten percent would result in the price of the Company's common stock increasing to $2.55 and $3.05, respectively, from the price on the date of grant which was $2.09. (2) The assumed annual rates of appreciation of five and ten percent would result in the price of the Company's common stock increasing to $2.67 and $3.36, respectively, from the price on the date of grant which was $2.09. Option Exercises during past year and transition period and Year-End Option Values Value of Number of Unexercised Unexercised In-the Money Options at Options at December 31, December 31, 1995 1995 Acquired Value Exercisable/ Exercisable/ Exercise Realized Unexercisable Unexercisable -------- -------- ------------- ------------- (#) ($) (#)(1) ($) Larry I. Dorfman 150,000 $211,500 138,000/50,000 $98,260/$13,500 Martin J. Blank 150,000 $211,500 138,000/50,000 $98,260/$13,500 Anthony R. Levinson - - 39,000/65,000 $26,330/$42,350 Compensation of Outside Directors Directors who are not full time employees of the Company receive, as compensation for their services, $2,000 for each Board of Directors meeting attended. The amount of compensation was changed by the Board of Directors (Mr. Miller and Mr. Moore abstained from the vote) in February 1996 to $4,000 per meeting. Each director is reimbursed for their travel expenses incurred in connection with attendance at meetings of the Board of Directors. - 28 - Outside Directors' Stock Option Plan The Company has a stock option plan for the benefit of its directors who are not salaried employees of the Company or full time consultants to the Company or its subsidiaries (the "Outside Directors' Plan") pursuant to which 300,000 shares of the Company's common stock have been reserved for issuance upon exercise of such options. The purpose of the Outside Directors' Plan is to advance the interests of the Company by affording eligible directors of the Company the opportunity to acquire an equity interest or increase their equity interest in the Company. The Outside Directors' Plan terminates in May 1998. Each eligible director in office on the effective date of the Outside Directors' Plan and each director elected to a regular term as a director at an annual meeting of stockholders thereafter at which directors are elected, will automatically be granted an option to purchase the maximum number of full shares having an aggregate market value on the date of grant equal to $25,000 at an exercise price per share equal to the fair market value of a share of the Company's common stock on the date of grant. An option may be exercised at any time for a period of 10 years from the date of grant. The number of shares which may be purchased upon exercise of an option is subject to adjust- ment in certain circumstances. Options are not transferable other than by will or the laws of descent and distribution, and in the event of death, an option may be exercised by the optionee's legatee, distributee or personal representative. Options are granted under the Outside Directors' Plan without regard to other forms of compensation eligible directors may receive from the Company. At March 15, 1996, options to purchase 234,303 shares of the Company's common stock, at prices ranging from $0.88 to $2.32 were outstanding under the Outside Directors' Plan. During 1995, a former director exercised an option to purchase 25,000 shares of the Company's stock at an exercise price of $1.00 per share. No options were exercised during the transition period of September 1, 1994 to December 31, 1994. The following table shows the number of shares of the Company's common stock covered by options granted under the Outside Directors' Plan to current directors since September 1, 1994, the number of shares of the Company's common stock acquired by current directors since that date through exercise of options and the number of the Company's common shares subject to all outstanding options of current directors at December 31, 1995. Additionally, 10,822 options granted to a former director of the Company, which are exercisable at $2.32 per share and expire in 2004, are also outstanding. Howard C. Mechlin D. Miller Moore --------- ---------- Granted 9/1/94 - 12/31/95: Number of shares 12,135 12,135 Average per share option price $ 2.06 $ 2.06 Exercised 9/1/94 - 12/31/95: Number of shares 0 0 Aggregate option price of options exercised 0 0 Net value realized 0 0 Unexercised options at 12/31/95: Number of shares 134,202 89,279 Average unrealized value per share on 12/31/95 (1) $ 1.50 $ 1.41 - --------------- (1) Calculated as the difference between the market price of one share of the Company's common stock on December 31, 1995 and the average per share option price. - 29 - Insider Participation in Compensation Matters On March 2, 1994, the Board of Directors established a compensation committee comprised of Messrs. Miller, Moore and Dorfman which is responsible for determining compensation levels for the executive officers of the Company. The Board of Directors follows a policy of linking compensation of executive officers to enhanced shareholder value. On December 18, 1995, the Compensation Committee of the Board of Directors (Mr. Dorfman abstained from the vote) voted to modify the vesting schedule for the options granted to Mr. Blank, Mr. Dorfman and Mr. Levinson in 1994, in light of the significant turnaround in the Company's operations and profitability. The option price was not changed and was in excess of the market price of the Company's stock on December 18, 1995. The options for Mr. Blank and Mr. Dorfman were modified such that the option is exercisable up to 50,000 shares on each of December 31, 1995 and 1996 for a period of five years after it becomes exercisable based on the following formula: (a) options exercisable on or after December 31, 1995 will be equal to the number derived by dividing the actual net income of the Company by $2 million multiplied by 50,000 and (b) options exercisable on or after December 31, 1996 will be equal to the number derived by dividing the actual net income of the Company by $3 million multiplied by 50,000, provided, if the fraction resulting from the net income calculation is one or greater, then only 50,000 shares will be purchasable commencing in each year as stated above. Mr. Levinson's options were modified in the same manner, except that Mr. Levinson has 25,000 options which are exercisable on each of December 31, 1995 and 1996. Report on Executive Compensation The compensation policies of the Company have been developed to link the compensation of the executive officers of the Company with enhanced shareholder value. Through the establishment of short- and long-term incentive plans and the use of base salary and performance bonus combinations, the Company seeks to align the financial interests of its executive officers with those of its shareholders. Employment Arrangements (Chief Executive Officer and Chief Operating Officer) These executives each receive a base salary of $72,000 plus additional compensation based upon the number of vehicle service contracts processed each month which exceed a prescribed level. Messrs. Blank and Dorfman are eligible to participate in other employee benefit plans as generally made available to employees of the Company. Martin J. Blank -- Larry I. Dorfman -- Howard C. Miller -- Mechlin D. Moore 1988 Stock Option Plan The Company has a stock option plan ("Plan") pursuant to which 800,000 shares of the Company's common stock have been reserved for issuance upon exercise of options designated as "incentive stock options" or "non-qualified options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. The purpose of the Plan is to encourage stock ownership by certain officers and employees of the Company, and certain other persons instrumental to the success of the Company, and give them a greater personal interest in the success of the Company. Persons who are directors of the Company are not eligible to receive options under the Plan. The Plan is - 30 - administered by the Board of Directors of the Company, or a committee appointed by the Board of Directors, which determines among other things, the persons to be granted options under the Plan, the number of shares subject to each option and the option price. The exercise price of any option granted under the Plan may not be less than the fair market value of the shares subject to the option on the date of grant, provided however, that the exercise price of any incentive option granted to an eligible employee owning more than 10% of the outstanding common stock of the Company may not be less than 110% of the fair market value of the shares underlying such option on the date of grant. The term of each option and the manner in which it may be exercised is determined by the Board of Directors, or a committee appointed by the Board of Directors, provided that no option may be exercised more than 10 years after the date of grant and, in the case of an incentive option granted to an eligible employee owning more than 10% of the Company's common stock, not more than 5 years after the date of grant. Incentive options may be granted only to employees. Options may be exercised as provided in the option agreement, but no option granted to an employee may be exercised unless the grantee is a regular employee of the Company, or a subsidiary, and has been in such position for at least one year after the date of grant, except that in the event of death, options may be exercised until the sooner of the expiration date of the option or six months following the death of the optionee. Each option not exercised expires as provided in the option agreement. Options are non-transferable, except in the event of death of the optionee. At March 15, 1996, options to purchase 722,853 shares of the Company's common stock, at prices ranging from $0.83 to $2.54 per share, were outstanding under the Plan. Between inception and March 15, 1996, 28,300 options have been exercised at an average exercise price of $1.17 per share. Performance Graph The following graph demonstrates the performance of the cumulative total return to the Company's shareholders during the past five years in comparison to the cumulative total return for the NASDAQ Market Index and the cumulative total return for a group of companies in SIC code 641 - Insurance Agents, Brokers and Service (the "Peer Group"). FIVE-YEAR CUMULATIVE TOTAL RETURNS VALUE OF $100 INVESTED ON DECEMBER 31, 1990 [ID: Graphic -- Performance Graph]
1990 1991 1992 1993 1994 1995 APCO 100 128.57 133.32 228.55 342.83 428.54 SIC 641 Code Index 100 116.97 126.95 116.92 118.01 138.22 NASDAQ Market Index 100 128.38 129.64 155.5 163.26 211.77
- 31 - ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth certain information regarding the Company's common stock and Class C Redeemable Preferred Stock owned on March 15, 1996 (i) by each person who is known by the Company to own beneficially 5% or more of the Company's outstanding common stock and Class C Redeemable Preferred Stock; (ii) by each of the Company's directors and officers; and (iii) by all directors and officers as a group. Number of Shares of Number of Class C Shares of Percent of Redeemable Common Ownership Preferred Stock of Common Stock Name and address Beneficially Stock Beneficially of Beneficial Owner Owned Outstanding Owned - ---------------------------------------------------------------------------- Martin J. Blank 995,168 (1) 10.2% 150 15 Dunwoody Park Dr. Atlanta, GA 30338 Larry I. Dorfman 1,014,168 (2) 10.4% 150 15 Dunwoody Park Dr. Atlanta, GA 30338 Anthony R. Levinson 15 Dunwoody Park Dr. Atlanta, GA 30338 39,000 (3) * - Howard C. Miller 135,202 (4) 1.4% - 15 Dunwoody Park Dr. Atlanta, GA 30338 Mechlin D. Moore 90,279 (5) 1.0% - 15 Dunwoody Park Dr. Atlanta, GA 30338 J. Morton Davis 511,560 (6) 5.3% - 44 Wall Street New York, NY 10005 Directors and officers as 2,273,817 (7) 22.3% 300 a group (5 persons) * Less than 1% (1) Includes options to purchase 138,000 shares of the Company's common stock. which are currently exercisable. Excludes options to purchase 50,000 shares which are not currently exercisable and Class C Redeemable Preferred Stock. The Class C Redeemable Preferred Stock gives the holders the right to elect the majority of the Company's Board of Directors until September 11, 1998. - 32 - (2) Includes options to purchase 158,000 shares of the Company's common stock, which are currently exercisable. Excludes options to purchase 70,000 shares which are not currently exercisable and Class C Redeemable Preferred Stock. The Class C Redeemable Preferred Stock gives the holders the right to elect the majority of the Company's Board of Directors until September 11, 1998. (3) Includes options to purchase 39,000 shares of the Company's common stock, which are currently exercisable. Excludes options to purchase 65,000 shares which are not currently exercisable. (4) Includes options to purchase 134,202 shares of the Company's common stock, all of which are currently exercisable. (5) Includes options to purchase 89,279 shares of the Company's common stock, all of which are currently exercisable. (6) Includes securities owned by Mr. J. Morton Davis, D.H. Blair Holdings, Inc. and D.H. Blair Investment Banking Corp., reported as of December 31, 1995. (7) Includes 1,715,336 issued shares, 558,481 currently exercisable options to purchase shares of the Company's common stock, but excludes 185,000 options which are not currently exercisable. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. - 33 - PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. The following documents are filed as part of this report under Part II Item 8: Financial Statements and Financial Statement Schedules. Reference is made to the Index to Financial Statements and Financial Statement Schedules included in Item 8 of Part II hereof, where such documents are listed. Exhibits as required by Item 601 of Regulation S-K: Exhibit Number Description - ------- ----------- 3 (a) Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1(a) to the Registrant's Registration Statement on Form S-1 (file number 33-22279) filed with the Commission on June 3, 1988). * 3 (b) Certificate of Amendment to Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant's Registration Statement on Form S-1 (file number 33-22279) filed with the Commission on June 3, 1988). * 3 (c) By-Laws (incorporated by reference to Exhibit 3.2 to the Registrant's Registration Statement on Form S-1 (file number 33-22279) filed with the Commission on June 3, 1988). * 4 (a) Certificate of Designation, Preferences and Rights of Series 1 Class D Preferred Stock (incorporated by reference to Registrant's Current Report on Form 8-K filed with the Commission on December 15, 1988). * 4 (b) Certificate of Designation, Preferences and Rights of Series 2 Class D Preferred Stock (incorporated by reference to Registrant's Current Report on Form 8-K filed with the Commission on March 15, 1989). * 10 (a) 1988 Stock Option Plan (incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form S-1 (file number 33-22279) filed with the Commission on June 3, 1988). * - 34 - PAGE> 10 (b) Outside Directors' Stock Option Plan (incorporated by reference to Exhibit 10.2 to the Registrant's Registration Statement on Form S-1 (file number 33-22279) filed with the Commission on June 3, 1988). * 10 (c) Cover Note Between Byas, Mosley & Co., Ltd. and The Aegis Group, Inc. dated June 6, 1991 (incorporated by reference to Exhibit 10(h) to the Registrant's Annual Report on Form 10-K for the year ended August 31, 1991 as filed with the Commission on December 13, 1991). * 10 (d) Lease Agreement between Registrant and Dunwoody Shallowford Partners, L.P. dated July 27, 1989 (incorporated by reference to Exhibit 10(e) to the Registrant's Annual Report on Form 10-K filed with the Commission on November 30, 1989) * 10 (e) Consulting Agreement and Option and Registration Rights Agreement dated March 29, 1994 between the Registrant and Corporate Management Group, Inc. (incorporated by reference to Exhibit 10(g) to the Registrant's Post Effective Amendment No. 2 to Form S-1 (file number 33-22279) filed with the Commission on May 17, 1994). * 10 (f) Third Amendment to Lease Agreement between Registrant and Dunwoody Shallowford Partners, L.P. dated January 27, 1995 10 (g) Fourth Amendment to Lease Agreement between Registrant and Dunwoody Shallowford Partners, L.P. dated May 16, 1995. 10 (h) Consulting Agreement and Option and Registration Rights Agreement dated January 2, 1996 between the Registrant and John R. Clarke. 10 (i) Consulting Agreement and Option and Registration Rights Agreement dated January 2, 1996 between the Registrant and Paul T. Mannion. 10 (j) Consulting Agreement and Option and Registration Rights Agreement dated January 2, 1996 between the Registrant and David Cowherd. 10 (k) Consulting Agreement and Option and Registration Rights Agreement dated January 2, 1996 between the Registrant and Max Morgulis. - 35 - 10 (l) Consulting Agreement and Option and Registration Rights Agreement dated January 2, 1996 between the Registrant and John Clarke, Paul Mannion, David Cowherd, Max Morgulis and Sutherland, Asbill & Brennan, as escrow agent. 10 (m) Consulting Agreement and Option and Registration Rights Agreement dated October 6, 1994 between the Registrant and Ronnie Wohl and Ladenburg Thalmann & Co., Inc. 10 (n) Consulting Agreement and Option and Registration Rights Agreement dated October 6, 1994 between the Registrant and Marshall Leeds. 10 (o) Consulting Agreement and Option and Registration Rights Agreement dated October 6, 1994 between the Registrant and Leonard J. Sokolow. 10 (p) Option Agreement dated October 10, 1995 between the Registrant and Joe Gibbs. 10 (q) Option Agreement dated December 18, 1995 between the Registrant and Bobby Labonte. 10 (r) Option Agreement dated November 30, 1995 between the Registrant and Cruz Pedregon. 10 (s) Option Agreement dated November 30, 1995 between the Registrant and Cory McClenathan. 10 (t) Warrant Agreement dated September 1, 1994 between the Registrant and Bix Brown. 10 (u) Warrant Agreement dated September 1, 1994 between the Registrant and Frank Shoop. 10 (v) Warrant Agreement dated September 1, 1994 between the Registrant and Josephine Shoop. 10 (w) Option Agreement dated August 31, 1995 between the Registrant and Mark Wachs. 10 (x) Option Agreement dated February 1, 1996 between the Registrant and Mark Wachs. 10 (y) Option Agreement dated August 31, 1995 between the Registrant and John Jameson. 10 (z) Option Agreement dated August 31, 1995 between the Registrant and The Providence Group. - 36 - 10 (aa) Option Agreement dated August 31, 1995 between the Registrant and The Dealer Group. 10 (bb) Option Agreement dated August 31, 1995 between the Registrant and Automotive Development Group. 167 - 170 10 (cc) Option Agreement dated August 31, 1995 between the Registrant and Rodger Anderson. 10 (dd) Option Agreement dated August 31, 1995 between the Registrant and Cartel Marketing. 10 (ee) Option Agreement dated August 31, 1995 between the Registrant and Joe Kuboff. 10 (ff) Option Agreement dated August 31, 1995 between the Registrant and Frank Follari. 10 (gg) Option Agreement dated August 31, 1995 between the Registrant and David Golden. 10 (hh) Option Agreement dated August 31, 1995 between the Registrant and Jerry Henley. 10 (ii) Option Agreement dated August 31, 1995 between the Registrant and Jack Atkin. 10 (jj) Option Agreement dated August 31, 1995 between the Registrant and Charles Mann. 10 (kk) Option Agreement dated August 31, 1995 between the Registrant and TASA. 11 Statement re computation of per share earnings for the year ended December 31, 1995, four months ended December 31, 1994 and fiscal years ended August 31, 1994 and 1993 - 37 - 22 Subsidiaries of the Registrant: Name Of State of Subsidiary Incorporation ---------- ------------- APCO Finance and Insurance Systems, Inc. Georgia Aftermarket Profit Plus, Inc. Georgia W.I.N. Systems, Inc. Georgia The Aegis Group, Inc. Georgia Automobile Protection Corporation - APCO Florida 23 Consent of Independent Accountants (Price Waterhouse) 27 Financial Data Schedule * Incorporated by reference to the referenced document previously filed by the registrant with the Commission. Reports on Form 8-K - 38 - SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Automobile Protection Corporation - APCO has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized: AUTOMOBILE PROTECTION CORPORATION - APCO /s/ Larry Dorfman - ------------------------------------------------------------------------------ By: Larry I. Dorfman Date: March 27, 1996 President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Larry Dorfman - ------------------------------------------------------------------------------ Larry I. Dorfman Date: March 27, 1996 President (Principal Executive Officer) and Director /s/ Martin Blank - ------------------------------------------------------------------------------ Martin J. Blank Date: March 27, 1996 Chairman of the Board, Secretary (Principal Operating Officer) and Director /s/ Anthony Levinson - ------------------------------------------------------------------------------ Anthony R. Levinson Date: March 27, 1996 Chief Financial Officer (Principal Accounting and Financial Officer) /s/ Howard Miller - ------------------------------------------------------------------------------ Howard C. Miller Date: March 27, 1996 Director /s/ Mechlin Moore - ------------------------------------------------------------------------------ Mechlin D. Moore Date: March 27, 1996 Director - 39 - EXHIBITS TO ANNUAL REPORT ON FORM 10-K DECEMBER 31, 1995 EXHIBIT No. - ----------- 10 (f) Third Amendment to Lease Agreement between Registrant and Dunwoody Shallowford Partners, L.P. dated January 27, 1995 10 (g) Fourth Amendment to Lease Agreement between Registrant and Dunwoody Shallowford Partners, L.P. dated May 16, 1995. 10 (h) Consulting Agreement and Option and Registration Rights Agreement dated January 2, 1996 between the Registrant and John R. Clarke. 10 (i) Consulting Agreement and Option and Registration Rights Agreement dated January 2, 1996 between the Registrant and Paul T. Mannion. 10 (j) Consulting Agreement and Option and Registration Rights Agreement dated January 2, 1996 between the Registrant and David Cowherd. 10 (k) Consulting Agreement and Option and Registration Rights Agreement dated January 2, 1996 between the Registrant and Max Morgulis. 10 (l) Consulting Agreement and Option and Registration Rights Agreement dated January 2, 1996 between the Registrant and John Clarke, Paul Mannion, David Cowherd, Max Morgulis and Sutherland, Asbill & Brennan, as escrow agent. 10 (m) Consulting Agreement and Option and Registration Rights Agreement dated October 6, 1994 between the Registrant and Ronnie Wohl and Ladenburg Thalmann & Co., Inc. 10 (n) Consulting Agreement and Option and Registration Rights Agreement dated October 6, 1994 between the Registrant and Marshall Leeds. 10 (o) Consulting Agreement and Option and Registration Rights Agreement dated October 6, 1994 between the Registrant and Leonard J. Sokolow. 10 (p) Option Agreement dated October 10, 1995 between the Registrant and Joe Gibbs. - 40 - EXHIBIT No. - ----------- 10 (q) Option Agreement dated December 18, 1995 between the Registrant and Bobby Labonte. 10 (r) Option Agreement dated November 30, 1995 between the Registrant and Cruz Pedregon. 10 (s) Option Agreement dated November 30, 1995 between the Registrant and Cory McClenathan. 10 (t) Warrant Agreement dated September 1, 1994 between the Registrant and Bix Brown. 10 (u) Warrant Agreement dated September 1, 1994 between the Registrant and Frank Shoop. 10 (v) Warrant Agreement dated September 1, 1994 between the Registrant and Josephine Shoop. 10 (w) Option Agreement dated August 31, 1995 between the Registrant and Mark Wachs. 10 (x) Option Agreement dated February 1, 1996 between the Registrant and Mark Wachs. 10 (y) Option Agreement dated August 31, 1995 between the Registrant and John Jameson. 10 (z) Option Agreement dated August 31, 1995 between the Registrant and The Providence Group. 10 (aa) Option Agreement dated August 31, 1995 between the Registrant and The Dealer Group. 10 (bb) Option Agreement dated August 31, 1995 between the Registrant and Automotive Development Group. 10 (cc) Option Agreement dated August 31, 1995 between the Registrant and Rodger Anderson. 10 (dd) Option Agreement dated August 31, 1995 between the Registrant and Cartel Marketing. 10 (ee) Option Agreement dated August 31, 1995 between the Registrant and Joe Kuboff. 10 (ff) Option Agreement dated August 31, 1995 between the Registrant and Frank Follari. 10 (gg) Option Agreement dated August 31, 1995 between the Registrant and David Golden. - 41 - EXHIBIT No. 10 (hh) Option Agreement dated August 31, 1995 between the Registrant and Jerry Henley. 10 (ii) Option Agreement dated August 31, 1995 between the Registrant and Jack Atkin. 10 (jj) Option Agreement dated August 31, 1995 between the Registrant and Charles Mann. 10 (kk) Option Agreement dated August 31, 1995 between the Registrant and TASA. 11 Statement re computation of per share earnings for the year ended December 31, 1995, four months ended December 31, 1994 and fiscal years ended August 31, 1994 and 1993 23 Consent of Independent Accountants (Price Waterhouse) 27 Financial Data Schedule - 42 - EX-10.(F) 2 THIRD AMENDMENT TO LEASE AGREEMENT Third Amendment to Lease State of Georgia DeKalb County FOR AND IN CONSIDERATION of the sum of one and no/100 dollars each to the other paid, the receipt and sufficiency being hereby acknowledged, and the mutual covenants contained herein that certain lease dated the 27th day of July, 1989, as amended the 28th day of June, 1991 and as amended the 26th day of February, 1992 among DUNWOODY SHALLOWFORD PARTNERS, L.P., as Lessor/Landlord, and AUTOMOBILE PROTECTION CORPORATION - APCO, as Lessee/Tenant, and WORKMAN & COMPANY, as Agent, for premises known as 15 Dunwoody Park, Suite 100, Dunwoody, Georgia 30338, is hereby amended as follows: The provisions of Amendment to Lease dated 28th day of June, 1991 and Second Amendment to Lease dated 26th day of February, 1992 are deleted in their entirety upon commencement of this Third Amendment to Lease on April 16, 1995. 1. PREMISES Paragraph 1.1 is amended to contain approximately 15,184 square feet. The location and boundaries of the Demised Premises are outlined on a floor plan and building specifications of the Building are set forth in Exhibit "A" which is attached hereto and thereby made a part of this Lease. 2. TERM Paragraph 2.1 is deleted in its entirety and replaced as follows: To have and to hold the same for an initial term beginning on April 16, 1995 and ending on April 15, 1998. The Lessee shall have the right to extend the Lease for the period April 16, 1998 through October 15, 1999 by the giving of written notice on or before October 15, 1997 (the "First Extension"). The Lessee shall have the right to extend the Lease for the period October 16, 1999 through April 15, 2001 by the giving of written notice on or before April 15, 1999 (the "Second Extension"). The Lessee shall have the right to extend the term of this Lease for the period April 16, 2001 through April 15, 2004 by the giving of written notice on or before October 15, 2000 (the "Third Extension"). The Lessee shall have the right to extend the term of this Lease for the period April 16, 2004 through April 15, 2007 by the giving of written notice on or before October 15, 2003 (the "Fourth Extension"). The rental rates applicable to the initial term and the four extension periods are set forth in paragraph 3 to this Third Amendment to Lease. Lessee can immediately occupy and commence construction in the additional space, which is approximately 2,584 square feet. Rentals will be payable commencing on April 16, 1995. 3. TOTAL RENT Paragraph 3.1 is deleted in its entirety and replaced as follows: The Total Rental Rate for the initial term, the First Extension and the Second Extension of the Lease shall be as follows: For the period April 16, 1995 to October 15, 1996: $13.00 per square foot/$197,392.00 annually For the period October 16, 1996 to April 15, 1998: $13.39 per square foot/$203,313.76 annually For the period April 16, 1998 to October 15, 1999: $13.79 per square foot/$209,387.36 annually For the period October 16, 1999 to April 15, 2001: $14.20 per square foot/$215,612.80 annually The Total Rental Rate for the first year of the Third Extension period shall be the Fair Market Rental Rate of the Demised Premises as of April 16, 2001. For subsequent years of the Third Extension period and for the Fourth Extension period, the Total Rental Rate shall be the Fair Market Rental Rate as of April 16, 2001 multiplied by the annual CPI change added to the prior year's calculated rate. Such rate shall be adjusted annually on April 16 of each year during the Third and Fourth Extension periods. The term "Total Rental Rate" includes base rents, all utilities, all cleaning costs, all property taxes, all property and liability insurance, all common area maintenance and all other costs and operating expenses incurred by the Landlord with respect to the Demised Premises. The Lessee shall not be separately assessed or billed by the Landlord for any costs or operating expenses in excess of the Total Rental Rate as defined and stated in this paragraph. The term "Fair Market Rental Rate" is based on the average Total Rental Rates of at least three competing properties which would be available in the market area, the boundaries of which are I-285 (South), Chamblee Dunwoody Rd (East), Barfield Rd. (West) and Northridge Rd. (North). The Total Rental Rates are to be adjusted to eliminate all tenant improvement and relocation allowances from the offered rental rates and after due consideration of the property's market rating (A, B, C, D), age, physical condition and appearance of the interior finishes. If the "Fair Market Rental Rate" cannot be agreed upon, both parties then agree to a mediation process, whereby each party shall select a licensed commercial real estate broker and the two brokers shall jointly select a third licensed commercial real estate broker. The determination by the third broker shall be final and binding on the Lessor. The costs associated with this process shall be shared equally by the Lessor and Lessee. 4. USE OF DEMISED PREMISES Paragraph 4.3 is deleted in its entirety and replaced as follows: Return of Premises. Lessee shall deliver the Demised Premises to Lessor upon expiration of the initial term of this Lease. The Lessee will not intentionally damage or destroy the Demised Premises during the Lessee's term of occupancy. 5. LESSEE'S ACCEPTANCE Paragraph 5 is amended as follows: Lessee's Acceptance. Lessee accepts the Demised Premises as set forth in Exhibit "A" to this Third Amendment to Lease. 6. REPAIRS AND ALTERATIONS Paragraph 6.5 is added to this section of the Lease: Lessee's Repair Rights. The Lessor's responsibility to repair the Demised Premises is set forth in paragraph 6.1. Lessee shall promptly notify Lessor of any items requiring repair, which are the Lessor's responsibility. The Lessor is obligated to use its best efforts, within commercially acceptable practice, but in no event later than 3 days (excluding official government holidays and weekends) after receiving notification from the Lessee, to commence the repair. Should the Lessor not comply with this requirement, the Lessee has the right to undertake the repair using qualified contractors of the Lessee's selection. The Lessee may not bind the Lessor in any contract with a qualified contractor; however, the Lessee may offset the costs it incurs to make the required repairs against rentals payable to the Lessor. Should the Lessee undertake the repair, it shall not have the right to offset more than 110% of the costs the Lessor would have incurred had the Lessor made the repair within the required period. The Lessor is required to provide the Lessee with a written quotation from a qualified contractor of its selection, if it disputes the amount deducted by the Lessee. Paragraph 6.6 is added to this section of the Lease: Uninterruptable Power Supply. Lessee shall have the right to install an uninterruptable power supply (fueled by propane gas or a similar fuel source) on the exterior boundary of the Demised Premises in the general vicinity of the central computer and telephone room. Lessee shall abide by all building codes, fire safety codes and environmental laws, codes and regulations as they pertain to uninterruptable power supply equipment. Lessee shall indemnify Lessor for any losses due to leakage caused by the uninterruptable power supply equipment and shall also pay for the costs of removing the equipment on termination of the Lease. Lessee shall provide landscaping screening which is uniform with the office park as it now exists. Paragraph 6.7 is added to this section of the Lease: Renovation. Lessee shall have the right to renovate the Demised Premises using contractors of its own selection. Lessor shall allow Lessee's contractor to switch existing exterior metal doors with glass doors or glass panels from adjoining vacant space. Lessor shall also allow Lessee to create window and door openings in the Demised premises, in compliance with building and fire codes, and at Lessee's own cost and expense. Lessee shall use its best efforts not to take or omit any actions which will cause the filing of any mechanic's, materialman's or laborer's lien on the Demised Premises. Lessee agrees to indemnify Lessor for the actual costs incurred by Lessor to have such liens, which resulted from the direct actions of the Lessee, removed. Paragraph 6.8 is added to this section of the Lease: Heating and air conditioning. Lessor shall provide heating and air conditioning in the expansion space (of approximately 2,584 square feet), at Lessor's sole cost and expense. Lessor shall use its best efforts to make the heating and air conditioning available to Lessee by no later than March 1, 1995. Lessor shall install heating and air conditioning which is of a standard that is at least equivalent to the heating and air conditioning in the original space. 7. DAMAGE BY FIRE, ETC. Paragraph 7.5 is added to this section of the Lease: Structural or Foundational Damage. If the Demised Premises or parking areas designated as parking for Lessee's visitors and employees become uninhabitable or damaged by any natural or manmade causes to such an extent that normal business operations cannot be conducted by the Lessee, Lessee shall promptly notify Lessor. Notwithstanding any other provisions of this Lease, if said destruction rendered to the building is 10% or more of the leasable area, or 30% or more of the parking area designated as parking for Lessee's visitors and employees, Lessor shall use its best efforts to have the building and parking areas repaired, within commercially acceptable practice, and within the time frames set forth herein. The Lessor shall commence the repairs as soon as possible but not later than 60 days from the date of notification by the Lessee and complete the repairs as soon as possible but not later than 120 days from the date of notification by the Lessee. In the event the Lessor does not commence the repairs to the building within 60 days from the date of notification by the Lessee or does not complete the repairs within 120 days from the date of notification by the Lessee, then the Lessee has the unconditional right to terminate this Lease. In the event the Lessor does not commence the repairs to the parking area within 60 days from the date of notification by the Lessee or does not complete the repairs within 120 days from the date of notification by the Lessee and the Lessor is unable to provide alternate parking space within the property owned by Dunwoody Shallowford Partners L.P. or the office park now known as Dunwoody Park, then the Lessee has the unconditional right to terminate this Lease. During the period of the repair, Lessor will make vacant office space available to Lessee, at no cost, and permit Lessee to use vacant parking spaces wherever available. 8. EXPENSES Paragraph 8.2 is deleted in its entirety and replaced as follows: Utilities. Lessee shall be responsible for paying the cost of telephone service. Lessor shall be responsible for paying the cost of all utilities including, but not limited to, electricity, gas, water and sewer serving the Demised Premises. The Lessor's obligation to pay for electricity usage is capped at $3,870.00 per month during the first year of the Lease; $4,100.00 per month during the second year of the Lease; $4,350.00 per month during the third year of the Lease; $4,610.00 per month during the fourth year of the Lease; $4,900.00 per month during the fifth year of the Lease; and $5,200.00 per month during the sixth year of the Lease. The Lessor may bill the Lessee for any electricity charges in excess of the aforementioned amounts. Paragraph 8.3 is deleted in its entirety and replaced as follows: Cleaning. Lessor shall be responsible for providing cleaning, maid or janitorial services to the Demised Premises, at the sole cost and expense of Lessor. 9. ASSIGNMENT AND SUBLETTING The last sentence of Paragraph 9.1 is deleted and replaced as follows: Lessee shall have the unconditional right to sublease the Demised Premises as office space in accordance with paragraph 4.1 of the Lease, subject to the Lessee assuming complete responsibility for the sublessee's compliance with all of the provisions of this Lease. Lessee shall notify Lessor 5 days prior to the execution of any sublease. 13. TAXES AND INSURANCE Paragraph 13.1 is deleted in its entirety and replaced as follows: 13.1 Taxes. Lessor shall be responsible for paying the cost of all real estate taxes. The first and second paragraphs of Paragraph 13.2 are deleted in their entirety and replaced as follows: Lessor shall be responsible for obtaining and paying the cost of all insurance including, without limitation, "All Risk", fire and extended coverage insurance, general liability insurance, including rental loss insurance on the Demised Premises, except as described in the following paragraphs of this section 13.2. 14. COMMON AREAS The second paragraph of Paragraph 14.1 is deleted in its entirety and replaced as follows: Lessee shall have the primary use of sixty (60) parking spaces which directly wrap around the Demised Premises. In the event other tenants begin to continuously use these 60 parking spaces, Lessor shall use its best efforts to communicate to the other tenants that these 60 spaces are intended primarily for use by the Lessee's employees and visitors. Additionally, Lessor shall make available to Lessee an additional eighteen (18) parking spaces as close to the Demised Premises as possible. Lessor shall not charge for the use of the parking area during the term of this Lease. 15. MISCELLANEOUS The following is added to 15.6 Attorneys Fees: In the event that Lessee in order to obtain enforcement of any provision(s) of this Lease, finds it necessary to retain the services of an attorney at law, then Lessor agrees to pay reasonable attorneys fees and all costs arising out of or connected with said enforcement. The following is added to 15.21 Indemnity: Lessor shall indemnify and save harmless Lessee from and against any and all loss, cost (including reasonable attorneys fees), damage, expense and liability in connection with any and all claims for damages as a result of injury or death of any person or property damage to any property sustained by Lessee, its partners, customers, invitees, agents, employees, contractors and subcontractors and all other person's including Lessor's agents and employees if such injury, death or property damage arises from or in any manner grows out of any act or neglect on or about the Demised Premises by Lessor, its partners, agents, employees, customers, invitees, contractors or subcontractors or which arise from or in any manner grow out of any defect in any undertaking hereunder by Lessor or any failure of Lessor to comply with the provisions of this Lease. Paragraph 15.22 is added: Lessor warrants that it has obtained the written approval of First Union National Bank of Georgia to enter into this Lease on the terms stated herein, except as specifically noted by First Union National Bank of Georgia in Exhibit "B", which is an authenticated copy of such approval. 16. AGENT This section is deleted in its entirety and replaced as follows: Workman & Company has acted as agent for Dunwoody Shallowford Partners, L.P. in negotiating this transaction. Howard B. Workman, Honey C. Workman and Carolyn Bailey are licensed real estate brokers and principals in the partnership of the property. The Lessee is not responsible for paying any commissions or fees to Workman & Company relating to this Third Amendment to Lease. 17. SPECIAL STIPULATIONS Paragraph 17.1 is added: 17.1 Lead Shielding. Lessor will provide, at its own cost, lead shielding between the Demised Premises and the adjoining physician office space if the x-ray equipment utilized by the physician office is located in a room abutting or near the Demised Premises. Paragraph 17.2 is added: 17.2 First Refusal Right. Lessor shall notify Lessee in writing each time a vacancy of 2,000 square feet or more becomes available in any portion of the property of Dunwoody Shallowford Partners, L.P. (hereinafter referred to as the "Additional Space"). Lessee shall have 14 days in which to negotiate a lease for the Additional Space with the Lessor, after which the space can be marketed to other parties without further restrictions. Paragraph 17.3 is added: 17.3 Successors In Interest. Nothwithstanding any provisions contained in any other sections of the Lease, the Lessee's Repair Rights which are described in paragraph 6.5 shall remain in full force and effect against the Lessor and any direct or indirect successors in interest to the Lessor. For example, if Lessee incurs repair costs which it then deducts from rentals due to Lessor, the successors in interest to the Lessor cannot assert any claim against the Lessee for amounts withheld from rentals and this action by Lessee shall not constitute a breach of this Lease or affect any other rights of Lessee contained herein. WHEREAS HEREIN PROVIDED, all other terms and conditions of the within Lease shall remain in full force and effect. Dated this 27th day of January, 1995 LANDLORD/LESSOR: DUNWOODY SHALLOWFORD PARTNERS, L.P. ATTEST: /s/ Carolyn Bailey BY: /s/ Howard Workman, G.P. TENANT/LESSEE: AUTOMOBILE PROTECTION CORPORATION - APCO ATTEST: /s/ Carolyn Bailey BY: /s/ Anthony Levinson, CFO AGENT: WORKMAN & COMPANY ATTEST: /s/ Carolyn Bailey BY: /s/ Howard Workman, Broker/President EX-10.(G) 3 FOURTH AMENDMENT TO LEASE AGREEMENT Fourth Amendment to Lease State of Georgia DeKalb County FOR AND IN CONSIDERATION of the sum of one and no/100 dollars each to the other paid, the receipt and sufficiency being hereby acknowledged, and the mutual covenants contained herein that certain lease dated the 27th day of July, 1989, as amended the 28th day of June, 1991, as amended the 26th day of February, 1992 and as amended the 27th day of January, 1995 among DUNWOODY SHALLOWFORD PARTNERS, L.P., as Lessor/Landlord, and AUTOMOBILE PROTECTION CORPORATION - APCO, as Lessee/Tenant, and WORKMAN & COMPANY, as Agent, for premises known as 15 Dunwoody Park, Suite 100, Dunwoody, Georgia 30338, is hereby further amended. The following changes are made to the Third Amendment to Lease dated the 27th day of January, 1995 to reflect the additional contiguous leased space of approximately 1,250 square feet. Except for the following, no other provisions or definitions contained in any previous amendments to the Lease are amended in any manner by this Fourth Amendment to Lease. 1. PREMISES Paragraph 1.1 is amended to contain approximately 16,434 square feet (replaces 15,184 square feet). 2. TERM Paragraph 2.1 is amended to include the following sentence: "Rentals are payable on this additional space (of approximately 1,250 square feet) commencing on June 1, 1995". Except for the preceding, no other provisions or definitions in paragraph 2.1 are amended. 3. TOTAL RENT Paragraph 3.1 is amended as follows: The Total Rental Rate for the initial term, the First Extension and the Second Extension of the Lease shall be as follows: For the period April 16, 1995 to October 15, 1996: $13.00 per square foot/$213,642.00 annually For the period October 16, 1996 to April 15, 1998: $13.39 per square foot/$220,051.26 annually For the period April 16, 1998 to October 15, 1999: $13.79 per square foot/$226,624.86 annually For the period October 16, 1999 to April 15, 2001: $14.20 per square foot/$233,362.80 annually Except for the above, no other provisions or definitions contained in paragraph 3.1 are amended. 6. REPAIRS AND ALTERATIONS Paragraph 6.8 (Heating and air conditioning) is amended to include 3,834 square feet (replaces 2,584 square feet). Except for the preceding, no other provisions or definitions contained in paragraph 6.8 are amended. 8. EXPENSES Paragraph 8.2 is replaced in its entirety as follows: Utilities. Lessee shall be responsible for paying the cost of telephone service. Lessor shall be responsible for paying the cost of all utilities including, but not limited to, electricity, gas, water and sewer serving the Demised Premises. The Lessor's obligation to pay for electricity usage is capped at $4,150.00 per month during the first year of the Lease; $4,400.00 per month during the second year of the Lease; $4,650.00 per month during the third year of the Lease; $4,950.00 per month during the fourth year of the Lease; $5,250.00 per month during the fifth year of the Lease; and $5,500.00 per month during the sixth year of the Lease. The Lessor may bill the Lessee for any electricity charges in excess of the aforementioned amounts. WHEREAS HEREIN PROVIDED, all other terms and conditions of the within Lease shall remain in full force and effect. Dated this 16th day of May, 1995 LANDLORD/LESSOR: DUNWOODY SHALLOWFORD PARTNERS, L.P. ATTEST: /s/ Carolyn Bailey BY: /s/ Howard Workman TENANT/LESSEE: AUTOMOBILE PROTECTION CORPORATION - APCO ATTEST: /s/ Ramona Benson BY: /s/ Anthony Levinson, CFO AGENT: WORKMAN & COMPANY ATTEST: /s/ Lisa Fagg BY: /s/ Carolyn Bailey, V.P. EX-10.(H) 4 CONSULTING AGREEMENT AND OPTION AND REGISTRATION RIGHTS AGREEMENT CONSULTING AGREEMENT AND OPTION AND REGISTRATION RIGHTS AGREEMENT AGREEMENT, dated January 2, 1996, by and between JOHN R. CLARKE (the "Holder") and AUTOMOBILE PROTECTION CORPORATION - APCO (the "Company"). WHEREAS, the Company seeks to obtain the services of Holder as a financial consultant. NOW, THEREFORE, the parties hereto agree as follows: 1. The Holder will act as financial consultant to the Company on a non-exclusive basis for the period January 2, 1996 to February 15, 1997. Holder shall devote such time as it determines in its sole discretion to the provision of consulting services as requested by the Company, such services to include, but not be limited to, general investor relations, introducing the Company to potential market makers, investment strategies in respect of the Company's capital and corporate acquisition strategies. 2. In consideration of acting as financial consultant, the Company hereby grants to the Holder the right to purchase up to 60,000 shares of the Common Stock, $0.001 par value (the Common Stock) , of the Company as follows: (a) The Holder has the right to purchase up to 60,000 shares of Common Stock at a purchase price per share of $3.50 at any time from the date of this agreement until February 15, 1997. (b) Upon the close of business on February 15, 1997, the rights embodied herein to purchase Common Stock shall expire and the Holder will have no further right to purchase such Common Stock after the expiration date. If, on February 15, 1997, the Holder has not exercised any portion of this option then this Option shall expire and this agreement will be null and void. 3. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the Option is exercised, will be paid in full at the time of exercise in cash, unless otherwise agreed to in writing by the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by payment of the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 4. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 5. Transferability. Unless consented to in writing by the Company, which consent shall not be unreasonably withheld, this option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this Option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, without the written consent of the Company, this option and the rights conferred hereby shall immediately become null and void. Before the Company consents to any transfer, assignment, pledge or hypothecation of this option, the transferee., assignee or pledgee of the option shall agree to be bound by the terms of this option and deliver such other certificates and agreements as the Company reasonably requests. Notwithstanding the foregoing, the option may be transferred to the then current officers, directors and shareholders of the Holder (the "Permitted Transferees") , provided such Permitted Transferees agree to be bound by the terms of this option and deliver such certificates and agreements as the Company reasonably requests. 6. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any Option hereunder. The Holder represents that it has received the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that it is capable of evaluating an investment in the option and that its financial condition is such that it can bear the economic risks of acquiring and holding this option. 7. Sales under Securities Act. Anything in this Agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by Holder upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 8. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an option agreement dated December 15, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 9. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassifi-cation, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent, publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 10. "Piggyback" Registration. (a) Basic Right. If, at any time prior to February 15, 1997, the Company proposes to register for sale by it or for the account of others, any of its equity securities under the Act, other than in connection with a merger, acquisition or exchange offer, and other than an offering on Form S-8 or any successor form on which the Holder's securities may be registered, and provided further that any person to which the Company has granted or may in the future grant a registration right does not object in writing to the exercise of the Holder's registration rights hereunder in connection with any registration rights of theirs, the Company shall at least fifteen (15) days prior to the filing of such registration statement with the Securities and Exchange Commission (the "Commission") , give notice of its intention to do so to the Holder. If the Holder notifies the Company within ten (10) days after the giving of such notice by the Company of its desire to include any shares of Common Stock received on exercise of this option in such proposed registration statement (which notice must state the number of shares to be included and the proposed plan of disposition thereof), the Company shall, subject to the provisions of subparagraph (b) below, include the shares of Common Stock designated by said Holder in such registration statement. The "piggyback" registration rights described herein shall be available for exercise by the Holder on two occasions only, and after the exercise thereof, the Company shall be under no further obligation to give to the Holder the notice described in this subparagraph (a) or to include any of the Holder's Common Stock received on exercise of this option in any subsequent registration statement pursuant to this subparagraph (a). (b) Withdrawal of Registration Statement. Notwithstanding the provisions of subparagraph (a) above, the Company shall at all times have the absolute right to elect not to file any proposed registration statement, or to withdraw the same after the filing but prior to the effective date thereof. In addition, notwithstanding the provisions of subparagraph (a) above, the Company may exclude from such registration statement all or a portion of the shares of Common Stock for which registration was requested by the Holder if, in the written opinion of the Company's managing underwriter, if any, the inclusion of all or a portion of such shares, when added to the securities being registered for sale by the Company, will exceed the maximum amount of the Company's securities which can be marketed (i) at a price reasonably related to their then current market value, or (ii) without otherwise materially and adversely affecting the entire offering. If less than all of the shares of Common Stock requested for inclusion in said registration statement are to be included pursuant to the foregoing provision, the shares of Common Stock which are included shall be allocated among the selling shareholders (other than the Company) on a pro rata basis. 11. Terms and Conditions Relating to Registration of Shares. Anything in paragraph 10 above contained to the contrary notwithstanding, the following terms and conditions shall apply to each registration of shares of Common Stock under the Act pursuant to the provisions of paragraph 10 above: (a) Registration Not Required. The Company shall not be required to register any shares of Common Stock under the Act if, in the written opinion of counsel for the Company, which shall be in form and substance reasonably satisfactory to the Holder of the relevant shares of Common Stock, said shares may be sold in the manner set forth in the notice to the Company requesting registration without the need for compliance with the registration provisions of the Act. (b) Amendment of Registration Statement. The Company shall, as expeditiously as possible, prepare and file with the Commission such amendments and supplements to the registration statement (and to any prospectus included therein) as may be necessary to keep such registration statement effective until the sale of the shares of Common Stock so registered has been completed or until the expiration of a period of 90 days after the effective date of the registration statement, whichever is earlier. (c) Prospectuses, etc. The Company shall furnish to the selling Holder, such number of prospectuses, preliminary prospectuses and other documents as the selling Holder may reasonably request in order to facilitate the public sale of its shares of Common Stock. (d) Expenses. The Company shall pay all costs, fees and expenses in connection with the registration of the shares of Common Stock, including, without limitation, the Company's legal and accounting fees, printing expenses, and blue sky fees and expenses; provided, however, that the Company shall not be required to pay any (i) fees and expenses of legal counsel for the Holder, (ii) transfer taxes, or (iii) underwriters' or brokers' fees, discounts or commissions. (e) Blue Sky Laws. The Company shall take all actions which may be required in order to qualify or register the shares of Common Stock under the securities or blue sky laws of up to five states as are requested by the Holder; provided, however, that the Company shall not be obligated to execute or file any general consent to service of process or to qualify as a foreign corporation to do business under the laws of any such jurisdiction. (f) Indemnification. (i) By the Company. The Company shall indemnify, to the full extent permitted by law, the Holder, its directors and officers (if applicable) and each person, if any, who controls the Holder within the meaning of Section 15 of the Act, against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of a material fact contained in any registration statement, prospectus or preliminary prospectus or any omission or alleged omission to state therein a material fact necessary to make the statements therein (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading, except insofar as the same are caused by or contained in any information with respect to the Holder furnished in writing to the Company by the Holder expressly for use therein. (ii) By the Holder. In connection with any registration statement in which the Holder is participating, the Holder shall indemnify, to the full extent permitted by law, the Company, its directors and officers and each person who controls the Company (within the meaning of Section 15 of the Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of a material fact or any omission or alleged omission to state a material fact necessary to make the statements in the registration statement or prospectus or preliminary prospectus (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in or caused by any information with respect to the Holder furnished in writing to the Company by the Holder expressly for use therein. (iii) Indemnification Procedures. Any person who is entitled to indemnification under this subparagraph 12(f) shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. Whether or not such defense is assumed by the indemnifying party, the indemnifying party shall not be subject to any liability for any settlement made without its consent. No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. An indemnifying party who is not entitled to, or elects not to, assume the defense of such claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels. (iv) Contribution. If for any reason the indemni fication provided for in the preceding subparagraph 10(f) (i) or 10(f) (ii) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission to state material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (v) Actions by Holder. The Holder shall, at their cost and expense., complete, execute and deliver all questionnaires, power of attorney, undertakings and other documents and instruments, and take all such other actions, as are from time to time reasonably requested by the Company. (vi) Use of Prospectus. The Holder, upon receipt of notice from the Company of the occurrence of an event which requires a post-effective amendment to the registration statement or a supplement to the prospectus included therein, shall promptly discontinue the sale of their shares of Common Stock until they have received copies of a supplemented or amended prospectus from the Company. 12. Miscellaneous Provisions. (a) Applicable Law. This Agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This Agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: John R. Clarke 11 Piedmont Center Atlanta, GA 30305 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement. (g) Severability. Any provision of this Agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this Agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the date first above written. AUTOMOBILE PROTECTION CORPORATION - APCO By: /s/ Larry Dorfman Holder: JOHN R. CLARKE /s/ John R. Clarke EX-10.(I) 5 CONSULTING AGREEMENT AND OPTION AND REGISTRATION RIGHTS AGREEMENT CONSULTING AGREEMENT AND OPTION AND REGISTRATION RIGHTS AGREEMENT AGREEMENT, dated January 2, 1996, by and between PAUL T. MANNION (the "Holder") and AUTOMOBILE PROTECTION CORPORATION - APCO (the "Company"). WHEREAS, the Company seeks to obtain the services of Holder as a financial consultant. NOW, THEREFORE, the parties hereto agree as follows: 1. The Holder will act as financial consultant to the Company on a non-exclusive basis for the period January 2, 1996 to February 15, 1997. Holder shall devote such time as it determines in its sole discretion to the provision of consulting services as requested by the Company, such services to include, but not be limited to, general investor relations, introducing the Company to potential market makers, investment strategies in respect of the Company's capital and corporate acquisition strategies. 2. In consideration of acting as financial consultant, the Company hereby grants to the Holder the right to purchase up to 60,000 shares of the Common Stock, $0.001 par value (the Common Stock) , of the Company as follows: (a) The Holder has the right to purchase up to 60,000 shares of Common Stock at a purchase price per share of $3.50 at any time from the date of this agreement until February 15, 1997. (b) Upon the close of business on February 15, 1997, the rights embodied herein to purchase Common Stock shall expire and the Holder will have no further right to purchase such Common Stock after the expiration date. If, on February 15, 1997, the Holder has not exercised any portion of this option then this Option shall expire and this agreement will be null and void. 3. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the Option is exercised, will be paid in full at the time of exercise in cash, unless otherwise agreed to in writing by the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by payment of the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 4. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 5. Transferability. Unless consented to in writing by the Company, which consent shall not be unreasonably withheld, this option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this Option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, without the written consent of the Company, this option and the rights conferred hereby shall immediately become null and void. Before the Company consents to any transfer, assignment, pledge or hypothecation of this option, the transferee., assignee or pledgee of the option shall agree to be bound by the terms of this option and deliver such other certificates and agreements as the Company reasonably requests. Notwithstanding the foregoing, the option may be transferred to the then current officers, directors and shareholders of the Holder (the "Permitted Transferees") , provided such Permitted Transferees agree to be bound by the terms of this option and deliver such certificates and agreements as the Company reasonably requests. 6. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any Option hereunder. The Holder represents that it has received the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that it is capable of evaluating an investment in the option and that its financial condition is such that it can bear the economic risks of acquiring and holding this option. 7. Sales under Securities Act. Anything in this Agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by Holder upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 8. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an option agreement dated December 15, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 9. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassifi-cation, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent, publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 10. "Piggyback" Registration. (a) Basic Right. If, at any time prior to February 15, 1997, the Company proposes to register for sale by it or for the account of others, any of its equity securities under the Act, other than in connection with a merger, acquisition or exchange offer, and other than an offering on Form S-8 or any successor form on which the Holder's securities may be registered, and provided further that any person to which the Company has granted or may in the future grant a registration right does not object in writing to the exercise of the Holder's registration rights hereunder in connection with any registration rights of theirs, the Company shall at least fifteen (15) days prior to the filing of such registration statement with the Securities and Exchange Commission (the "Commission") , give notice of its intention to do so to the Holder. If the Holder notifies the Company within ten (10) days after the giving of such notice by the Company of its desire to include any shares of Common Stock received on exercise of this option in such proposed registration statement (which notice must state the number of shares to be included and the proposed plan of disposition thereof), the Company shall, subject to the provisions of subparagraph (b) below, include the shares of Common Stock designated by said Holder in such registration statement. The "piggyback" registration rights described herein shall be available for exercise by the Holder on two occasions only, and after the exercise thereof, the Company shall be under no further obligation to give to the Holder the notice described in this subparagraph (a) or to include any of the Holder's Common Stock received on exercise of this option in any subsequent registration statement pursuant to this subparagraph (a). (b) Withdrawal of Registration Statement. Notwithstanding the provisions of subparagraph (a) above, the Company shall at all times have the absolute right to elect not to file any proposed registration statement, or to withdraw the same after the filing but prior to the effective date thereof. In addition, notwithstanding the provisions of subparagraph (a) above, the Company may exclude from such registration statement all or a portion of the shares of Common Stock for which registration was requested by the Holder if, in the written opinion of the Company's managing underwriter, if any, the inclusion of all or a portion of such shares, when added to the securities being registered for sale by the Company, will exceed the maximum amount of the Company's securities which can be marketed (i) at a price reasonably related to their then current market value, or (ii) without otherwise materially and adversely affecting the entire offering. If less than all of the shares of Common Stock requested for inclusion in said registration statement are to be included pursuant to the foregoing provision, the shares of Common Stock which are included shall be allocated among the selling shareholders (other than the Company) on a pro rata basis. 11. Terms and Conditions Relating to Registration of Shares. Anything in paragraph 10 above contained to the contrary notwithstanding, the following terms and conditions shall apply to each registration of shares of Common Stock under the Act pursuant to the provisions of paragraph 10 above: (a) Registration Not Required. The Company shall not be required to register any shares of Common Stock under the Act if, in the written opinion of counsel for the Company, which shall be in form and substance reasonably satisfactory to the Holder of the relevant shares of Common Stock, said shares may be sold in the manner set forth in the notice to the Company requesting registration without the need for compliance with the registration provisions of the Act. (b) Amendment of Registration Statement. The Company shall, as expeditiously as possible, prepare and file with the Commission such amendments and supplements to the registration statement (and to any prospectus included therein) as may be necessary to keep such registration statement effective until the sale of the shares of Common Stock so registered has been completed or until the expiration of a period of 90 days after the effective date of the registration statement, whichever is earlier. (c) Prospectuses, etc. The Company shall furnish to the selling Holder, such number of prospectuses, preliminary prospectuses and other documents as the selling Holder may reasonably request in order to facilitate the public sale of its shares of Common Stock. (d) Expenses. The Company shall pay all costs, fees and expenses in connection with the registration of the shares of Common Stock, including, without limitation, the Company's legal and accounting fees, printing expenses, and blue sky fees and expenses; provided, however, that the Company shall not be required to pay any (i) fees and expenses of legal counsel for the Holder, (ii) transfer taxes, or (iii) underwriters' or brokers' fees, discounts or commissions. (e) Blue Sky Laws. The Company shall take all actions which may be required in order to qualify or register the shares of Common Stock under the securities or blue sky laws of up to five states as are requested by the Holder; provided, however, that the Company shall not be obligated to execute or file any general consent to service of process or to qualify as a foreign corporation to do business under the laws of any such jurisdiction. (f) Indemnification. (i) By the Company. The Company shall indemnify, to the full extent permitted by law, the Holder, its directors and officers (if applicable) and each person, if any, who controls the Holder within the meaning of Section 15 of the Act, against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of a material fact contained in any registration statement, prospectus or preliminary prospectus or any omission or alleged omission to state therein a material fact necessary to make the statements therein (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading, except insofar as the same are caused by or contained in any information with respect to the Holder furnished in writing to the Company by the Holder expressly for use therein. (ii) By the Holder. In connection with any registration statement in which the Holder is participating, the Holder shall indemnify, to the full extent permitted by law, the Company, its directors and officers and each person who controls the Company (within the meaning of Section 15 of the Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of a material fact or any omission or alleged omission to state a material fact necessary to make the statements in the registration statement or prospectus or preliminary prospectus (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in or caused by any information with respect to the Holder furnished in writing to the Company by the Holder expressly for use therein. (iii) Indemnification Procedures. Any person who is entitled to indemnification under this subparagraph 12(f) shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. Whether or not such defense is assumed by the indemnifying party, the indemnifying party shall not be subject to any liability for any settlement made without its consent. No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. An indemnifying party who is not entitled to, or elects not to, assume the defense of such claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels. (iv) Contribution. If for any reason the indemni fication provided for in the preceding subparagraph 10(f) (i) or 10(f) (ii) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission to state material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (v) Actions by Holder. The Holder shall, at their cost and expense., complete, execute and deliver all questionnaires, power of attorney, undertakings and other documents and instruments, and take all such other actions, as are from time to time reasonably requested by the Company. (vi) Use of Prospectus. The Holder, upon receipt of notice from the Company of the occurrence of an event which requires a post-effective amendment to the registration statement or a supplement to the prospectus included therein, shall promptly discontinue the sale of their shares of Common Stock until they have received copies of a supplemented or amended prospectus from the Company. 12. Miscellaneous Provisions. (a) Applicable Law. This Agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This Agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Paul T. Mannion 11 Piedmont Center Atlanta, GA 30305 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement. (g) Severability. Any provision of this Agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this Agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the date first above written. AUTOMOBILE PROTECTION CORPORATION - APCO By: /s/ Larry Dorfman Holder: PAUL T. MANNION /s/ Paul T. Mannion EX-10.(J) 6 CONSULTING AGREEMENT AND OPTION AND REGISTRATION RIGHTS AGREEMENT CONSULTING AGREEMENT AND OPTION AND REGISTRATION RIGHTS AGREEMENT AGREEMENT, dated January 2, 1996, by and between DAVID COWHERD (the "Holder") and AUTOMOBILE PROTECTION CORPORATION - APCO (the "Company"). WHEREAS, the Company seeks to obtain the services of Holder as a financial consultant. NOW, THEREFORE, the parties hereto agree as follows: 1. The Holder will act as financial consultant to the Company on a non-exclusive basis for the period January 2, 1996 to February 15, 1997. Holder shall devote such time as it determines in its sole discretion to the provision of consulting services as requested by the Company, such services to include, but not be limited to, general investor relations, introducing the Company to potential market makers, investment strategies in respect of the Company's capital and corporate acquisition strategies. 2. In consideration of acting as financial consultant, the Company hereby grants to the Holder the right to purchase up to 60,000 shares of the Common Stock, $0.001 par value (the Common Stock) , of the Company as follows: (a) The Holder has the right to purchase up to 60,000 shares of Common Stock at a purchase price per share of $3.50 at any time from the date of this agreement until February 15, 1997. (b) Upon the close of business on February 15, 1997, the rights embodied herein to purchase Common Stock shall expire and the Holder will have no further right to purchase such Common Stock after the expiration date. If, on February 15, 1997, the Holder has not exercised any portion of this option then this Option shall expire and this agreement will be null and void. 3. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the Option is exercised, will be paid in full at the time of exercise in cash, unless otherwise agreed to in writing by the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by payment of the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 4. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 5. Transferability. Unless consented to in writing by the Company, which consent shall not be unreasonably withheld, this option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this Option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, without the written consent of the Company, this option and the rights conferred hereby shall immediately become null and void. Before the Company consents to any transfer, assignment, pledge or hypothecation of this option, the transferee., assignee or pledgee of the option shall agree to be bound by the terms of this option and deliver such other certificates and agreements as the Company reasonably requests. Notwithstanding the foregoing, the option may be transferred to the then current officers, directors and shareholders of the Holder (the "Permitted Transferees") , provided such Permitted Transferees agree to be bound by the terms of this option and deliver such certificates and agreements as the Company reasonably requests. 6. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any Option hereunder. The Holder represents that it has received the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that it is capable of evaluating an investment in the option and that its financial condition is such that it can bear the economic risks of acquiring and holding this option. 7. Sales under Securities Act. Anything in this Agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by Holder upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 8. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an option agreement dated December 15, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 9. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassifi-cation, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent, publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 10. "Piggyback" Registration. (a) Basic Right. If, at any time prior to February 15, 1997, the Company proposes to register for sale by it or for the account of others, any of its equity securities under the Act, other than in connection with a merger, acquisition or exchange offer, and other than an offering on Form S-8 or any successor form on which the Holder's securities may be registered, and provided further that any person to which the Company has granted or may in the future grant a registration right does not object in writing to the exercise of the Holder's registration rights hereunder in connection with any registration rights of theirs, the Company shall at least fifteen (15) days prior to the filing of such registration statement with the Securities and Exchange Commission (the "Commission") , give notice of its intention to do so to the Holder. If the Holder notifies the Company within ten (10) days after the giving of such notice by the Company of its desire to include any shares of Common Stock received on exercise of this option in such proposed registration statement (which notice must state the number of shares to be included and the proposed plan of disposition thereof), the Company shall, subject to the provisions of subparagraph (b) below, include the shares of Common Stock designated by said Holder in such registration statement. The "piggyback" registration rights described herein shall be available for exercise by the Holder on two occasions only, and after the exercise thereof, the Company shall be under no further obligation to give to the Holder the notice described in this subparagraph (a) or to include any of the Holder's Common Stock received on exercise of this option in any subsequent registration statement pursuant to this subparagraph (a). (b) Withdrawal of Registration Statement. Notwithstanding the provisions of subparagraph (a) above, the Company shall at all times have the absolute right to elect not to file any proposed registration statement, or to withdraw the same after the filing but prior to the effective date thereof. In addition, notwithstanding the provisions of subparagraph (a) above, the Company may exclude from such registration statement all or a portion of the shares of Common Stock for which registration was requested by the Holder if, in the written opinion of the Company's managing underwriter, if any, the inclusion of all or a portion of such shares, when added to the securities being registered for sale by the Company, will exceed the maximum amount of the Company's securities which can be marketed (i) at a price reasonably related to their then current market value, or (ii) without otherwise materially and adversely affecting the entire offering. If less than all of the shares of Common Stock requested for inclusion in said registration statement are to be included pursuant to the foregoing provision, the shares of Common Stock which are included shall be allocated among the selling shareholders (other than the Company) on a pro rata basis. 11. Terms and Conditions Relating to Registration of Shares. Anything in paragraph 10 above contained to the contrary notwithstanding, the following terms and conditions shall apply to each registration of shares of Common Stock under the Act pursuant to the provisions of paragraph 10 above: (a) Registration Not Required. The Company shall not be required to register any shares of Common Stock under the Act if, in the written opinion of counsel for the Company, which shall be in form and substance reasonably satisfactory to the Holder of the relevant shares of Common Stock, said shares may be sold in the manner set forth in the notice to the Company requesting registration without the need for compliance with the registration provisions of the Act. (b) Amendment of Registration Statement. The Company shall, as expeditiously as possible, prepare and file with the Commission such amendments and supplements to the registration statement (and to any prospectus included therein) as may be necessary to keep such registration statement effective until the sale of the shares of Common Stock so registered has been completed or until the expiration of a period of 90 days after the effective date of the registration statement, whichever is earlier. (c) Prospectuses, etc. The Company shall furnish to the selling Holder, such number of prospectuses, preliminary prospectuses and other documents as the selling Holder may reasonably request in order to facilitate the public sale of its shares of Common Stock. (d) Expenses. The Company shall pay all costs, fees and expenses in connection with the registration of the shares of Common Stock, including, without limitation, the Company's legal and accounting fees, printing expenses, and blue sky fees and expenses; provided, however, that the Company shall not be required to pay any (i) fees and expenses of legal counsel for the Holder, (ii) transfer taxes, or (iii) underwriters' or brokers' fees, discounts or commissions. (e) Blue Sky Laws. The Company shall take all actions which may be required in order to qualify or register the shares of Common Stock under the securities or blue sky laws of up to five states as are requested by the Holder; provided, however, that the Company shall not be obligated to execute or file any general consent to service of process or to qualify as a foreign corporation to do business under the laws of any such jurisdiction. (f) Indemnification. (i) By the Company. The Company shall indemnify, to the full extent permitted by law, the Holder, its directors and officers (if applicable) and each person, if any, who controls the Holder within the meaning of Section 15 of the Act, against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of a material fact contained in any registration statement, prospectus or preliminary prospectus or any omission or alleged omission to state therein a material fact necessary to make the statements therein (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading, except insofar as the same are caused by or contained in any information with respect to the Holder furnished in writing to the Company by the Holder expressly for use therein. (ii) By the Holder. In connection with any registration statement in which the Holder is participating, the Holder shall indemnify, to the full extent permitted by law, the Company, its directors and officers and each person who controls the Company (within the meaning of Section 15 of the Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of a material fact or any omission or alleged omission to state a material fact necessary to make the statements in the registration statement or prospectus or preliminary prospectus (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in or caused by any information with respect to the Holder furnished in writing to the Company by the Holder expressly for use therein. (iii) Indemnification Procedures. Any person who is entitled to indemnification under this subparagraph 12(f) shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. Whether or not such defense is assumed by the indemnifying party, the indemnifying party shall not be subject to any liability for any settlement made without its consent. No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. An indemnifying party who is not entitled to, or elects not to, assume the defense of such claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels. (iv) Contribution. If for any reason the indemni fication provided for in the preceding subparagraph 10(f) (i) or 10(f) (ii) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission to state material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (v) Actions by Holder. The Holder shall, at their cost and expense., complete, execute and deliver all questionnaires, power of attorney, undertakings and other documents and instruments, and take all such other actions, as are from time to time reasonably requested by the Company. (vi) Use of Prospectus. The Holder, upon receipt of notice from the Company of the occurrence of an event which requires a post-effective amendment to the registration statement or a supplement to the prospectus included therein, shall promptly discontinue the sale of their shares of Common Stock until they have received copies of a supplemented or amended prospectus from the Company. 12. Miscellaneous Provisions. (a) Applicable Law. This Agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This Agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: David Cowherd 11 Piedmont Center Atlanta, GA 30305 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement. (g) Severability. Any provision of this Agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this Agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the date first above written. AUTOMOBILE PROTECTION CORPORATION - APCO By: /s/ Larry Dorfman Holder: DAVID COWHERD /s/ David Cowherd EX-10.(K) 7 CONSULTING AGREEMENT AND OPTION AND REGISTRATION RIGHTS AGREEMENT CONSULTING AGREEMENT AND OPTION AND REGISTRATION RIGHTS AGREEMENT AGREEMENT, dated January 2, 1996, by and between MAX MORGULIS (the "Holder") and AUTOMOBILE PROTECTION CORPORATION - APCO (the "Company"). WHEREAS, the Company seeks to obtain the services of Holder as a financial consultant. NOW, THEREFORE, the parties hereto agree as follows: 1. The Holder will act as financial consultant to the Company on a non-exclusive basis for the period January 2, 1996 to February 15, 1997. Holder shall devote such time as it determines in its sole discretion to the provision of consulting services as requested by the Company, such services to include, but not be limited to, general investor relations, introducing the Company to potential market makers, investment strategies in respect of the Company's capital and corporate acquisition strategies. 2. In consideration of acting as financial consultant, the Company hereby grants to the Holder the right to purchase up to 20,000 shares of the Common Stock, $0.001 par value (the Common Stock) , of the Company as follows: (a) The Holder has the right to purchase up to 20,000 shares of Common Stock at a purchase price per share of $3.50 at any time from the date of this agreement until February 15, 1997. (b) Upon the close of business on February 15, 1997, the rights embodied herein to purchase Common Stock shall expire and the Holder will have no further right to purchase such Common Stock after the expiration date. If, on February 15, 1997, the Holder has not exercised any portion of this option then this Option shall expire and this agreement will be null and void. 3. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the Option is exercised, will be paid in full at the time of exercise in cash, unless otherwise agreed to in writing by the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by payment of the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 4. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 5. Transferability. Unless consented to in writing by the Company, which consent shall not be unreasonably withheld, this option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this Option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, without the written consent of the Company, this option and the rights conferred hereby shall immediately become null and void. Before the Company consents to any transfer, assignment, pledge or hypothecation of this option, the transferee., assignee or pledgee of the option shall agree to be bound by the terms of this option and deliver such other certificates and agreements as the Company reasonably requests. Notwithstanding the foregoing, the option may be transferred to the then current officers, directors and shareholders of the Holder (the "Permitted Transferees") , provided such Permitted Transferees agree to be bound by the terms of this option and deliver such certificates and agreements as the Company reasonably requests. 6. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any Option hereunder. The Holder represents that it has received the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that it is capable of evaluating an investment in the option and that its financial condition is such that it can bear the economic risks of acquiring and holding this option. 7. Sales under Securities Act. Anything in this Agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by Holder upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 8. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an option agreement dated December 15, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 9. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassifi-cation, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent, publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 10. "Piggyback" Registration. (a) Basic Right. If, at any time prior to February 15, 1997, the Company proposes to register for sale by it or for the account of others, any of its equity securities under the Act, other than in connection with a merger, acquisition or exchange offer, and other than an offering on Form S-8 or any successor form on which the Holder's securities may be registered, and provided further that any person to which the Company has granted or may in the future grant a registration right does not object in writing to the exercise of the Holder's registration rights hereunder in connection with any registration rights of theirs, the Company shall at least fifteen (15) days prior to the filing of such registration statement with the Securities and Exchange Commission (the "Commission") , give notice of its intention to do so to the Holder. If the Holder notifies the Company within ten (10) days after the giving of such notice by the Company of its desire to include any shares of Common Stock received on exercise of this option in such proposed registration statement (which notice must state the number of shares to be included and the proposed plan of disposition thereof), the Company shall, subject to the provisions of subparagraph (b) below, include the shares of Common Stock designated by said Holder in such registration statement. The "piggyback" registration rights described herein shall be available for exercise by the Holder on two occasions only, and after the exercise thereof, the Company shall be under no further obligation to give to the Holder the notice described in this subparagraph (a) or to include any of the Holder's Common Stock received on exercise of this option in any subsequent registration statement pursuant to this subparagraph (a). (b) Withdrawal of Registration Statement. Notwithstanding the provisions of subparagraph (a) above, the Company shall at all times have the absolute right to elect not to file any proposed registration statement, or to withdraw the same after the filing but prior to the effective date thereof. In addition, notwithstanding the provisions of subparagraph (a) above, the Company may exclude from such registration statement all or a portion of the shares of Common Stock for which registration was requested by the Holder if, in the written opinion of the Company's managing underwriter, if any, the inclusion of all or a portion of such shares, when added to the securities being registered for sale by the Company, will exceed the maximum amount of the Company's securities which can be marketed (i) at a price reasonably related to their then current market value, or (ii) without otherwise materially and adversely affecting the entire offering. If less than all of the shares of Common Stock requested for inclusion in said registration statement are to be included pursuant to the foregoing provision, the shares of Common Stock which are included shall be allocated among the selling shareholders (other than the Company) on a pro rata basis. 11. Terms and Conditions Relating to Registration of Shares. Anything in paragraph 10 above contained to the contrary notwithstanding, the following terms and conditions shall apply to each registration of shares of Common Stock under the Act pursuant to the provisions of paragraph 10 above: (a) Registration Not Required. The Company shall not be required to register any shares of Common Stock under the Act if, in the written opinion of counsel for the Company, which shall be in form and substance reasonably satisfactory to the Holder of the relevant shares of Common Stock, said shares may be sold in the manner set forth in the notice to the Company requesting registration without the need for compliance with the registration provisions of the Act. (b) Amendment of Registration Statement. The Company shall, as expeditiously as possible, prepare and file with the Commission such amendments and supplements to the registration statement (and to any prospectus included therein) as may be necessary to keep such registration statement effective until the sale of the shares of Common Stock so registered has been completed or until the expiration of a period of 90 days after the effective date of the registration statement, whichever is earlier. (c) Prospectuses, etc. The Company shall furnish to the selling Holder, such number of prospectuses, preliminary prospectuses and other documents as the selling Holder may reasonably request in order to facilitate the public sale of its shares of Common Stock. (d) Expenses. The Company shall pay all costs, fees and expenses in connection with the registration of the shares of Common Stock, including, without limitation, the Company's legal and accounting fees, printing expenses, and blue sky fees and expenses; provided, however, that the Company shall not be required to pay any (i) fees and expenses of legal counsel for the Holder, (ii) transfer taxes, or (iii) underwriters' or brokers' fees, discounts or commissions. (e) Blue Sky Laws. The Company shall take all actions which may be required in order to qualify or register the shares of Common Stock under the securities or blue sky laws of up to five states as are requested by the Holder; provided, however, that the Company shall not be obligated to execute or file any general consent to service of process or to qualify as a foreign corporation to do business under the laws of any such jurisdiction. (f) Indemnification. (i) By the Company. The Company shall indemnify, to the full extent permitted by law, the Holder, its directors and officers (if applicable) and each person, if any, who controls the Holder within the meaning of Section 15 of the Act, against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of a material fact contained in any registration statement, prospectus or preliminary prospectus or any omission or alleged omission to state therein a material fact necessary to make the statements therein (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading, except insofar as the same are caused by or contained in any information with respect to the Holder furnished in writing to the Company by the Holder expressly for use therein. (ii) By the Holder. In connection with any registration statement in which the Holder is participating, the Holder shall indemnify, to the full extent permitted by law, the Company, its directors and officers and each person who controls the Company (within the meaning of Section 15 of the Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of a material fact or any omission or alleged omission to state a material fact necessary to make the statements in the registration statement or prospectus or preliminary prospectus (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in or caused by any information with respect to the Holder furnished in writing to the Company by the Holder expressly for use therein. (iii) Indemnification Procedures. Any person who is entitled to indemnification under this subparagraph 12(f) shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. Whether or not such defense is assumed by the indemnifying party, the indemnifying party shall not be subject to any liability for any settlement made without its consent. No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. An indemnifying party who is not entitled to, or elects not to, assume the defense of such claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels. (iv) Contribution. If for any reason the indemni fication provided for in the preceding subparagraph 10(f) (i) or 10(f) (ii) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission to state material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (v) Actions by Holder. The Holder shall, at their cost and expense., complete, execute and deliver all questionnaires, power of attorney, undertakings and other documents and instruments, and take all such other actions, as are from time to time reasonably requested by the Company. (vi) Use of Prospectus. The Holder, upon receipt of notice from the Company of the occurrence of an event which requires a post-effective amendment to the registration statement or a supplement to the prospectus included therein, shall promptly discontinue the sale of their shares of Common Stock until they have received copies of a supplemented or amended prospectus from the Company. 12. Miscellaneous Provisions. (a) Applicable Law. This Agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This Agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Max Morgulis 11 Piedmont Center Atlanta, GA 30305 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement. (g) Severability. Any provision of this Agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this Agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the date first above written. AUTOMOBILE PROTECTION CORPORATION - APCO By: /s/ Larry Dorfman Holder: MAX MORGULIS /s/ Max Morgulis EX-10.(L) 8 CONSULTING AGREEMENT AND OPTION AND REGISTRATION RIGHTS AGREEMENT CONSULTING AGREEMENT AND OPTION AND REGISTRATION RIGHTS AGREEMENT AGREEMENT, dated January 2, 1996, by and between John Clarke, Paul Mannion, David Cowherd and Max Morgulis (collectively the "Holder"), AUTOMOBILE PROTECTION CORPORATION - APCO (the "Company") and SUTHERLAND, ASBILL & BRENNAN, AS ESCROW AGENT (the "Escrow Agent"). WHEREAS, the Company seeks to obtain the services of the Holder as a financial consultant. WHEREAS, the Holder has instructed the Company to issue the options to the Escrow Agent, to be held pursuant to their arrangements with the Escrow Agent. NOW, THEREFORE, the parties hereto agree as follows: 1. The Holder will act as a financial consultant to the Company on a non-exclusive basis for the period January 2, 1996 to February 15, 1997. Holder shall devote such time as it determines in its sole discretion to the provision of consulting services as requested by the Company, such services to include, but not be limited to, general investor relations, introducing the Company to potential market makers, investment strategies in respect of the Company's capital and corporate acquisition strategies. 2. In consideration of acting as financial consultant, the Company hereby grants to the Holder the right to purchase up to 50,000 shares of the Common Stock, $0.001 par value (the Common Stock) , of the Company as follows: (a) The Holder has the right to purchase up to 50,000 shares of Common Stock at a purchase price per share of $3.50 at any time from the date of this agreement until February 15, 1997. (b) Upon the close of business on February 15, 1997, the rights embodied herein to purchase Common Stock shall expire and the Holder will have no further right to purchase such Common Stock after the expiration date. If, on February 15, 1997, the Holder has not exercised any portion of this option then this Option shall expire and this agreement will be null and void. (c) The Holder has instructed the Company to issue the options herein to the Escrow Agent, to be held by the Escrow Agent for such time as the Holder instructs, subject to the expiration provisions of paragraph 2 (b) above. 3. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the Option is exercised, will be paid in full at the time of exercise in cash, unless otherwise agreed to in writing by the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by payment of the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 4. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 5. Transferability. Unless consented to in writing by the Company, which consent shall not be unreasonably withheld, this option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this Option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, without the written consent of the Company, this option and the rights conferred hereby shall immediately become null and void. Before the Company consents to any transfer, assignment, pledge or hypothecation of this option, the transferee., assignee or pledgee of the option shall agree to be bound by the terms of this option and deliver such other certificates and agreements as the Company reasonably requests. Notwithstanding the foregoing, the option may be transferred to the then current officers, directors and shareholders of the Holder (the "Permitted Transferees") , provided such Permitted Transferees agree to be bound by the terms of this option and deliver such certificates and agreements as the Company reasonably requests. 6. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any Option hereunder. The Holder represents that it has received the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that it is capable of evaluating an investment in the option and that its financial condition is such that it can bear the economic risks of acquiring and holding this option. 7. Sales under Securities Act. Anything in this Agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by Holder upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 8. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an option agreement dated December 15, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 9. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassifi-cation, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent, publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 10. "Piggyback" Registration. (a) Basic Right. If, at any time prior to February 15, 1997, the Company proposes to register for sale by it or for the account of others, any of its equity securities under the Act, other than in connection with a merger, acquisition or exchange offer, and other than an offering on Form S-8 or any successor form on which the Holder's securities may be registered, and provided further that any person to which the Company has granted or may in the future grant a registration right does not object in writing to the exercise of the Holder's registration rights hereunder in connection with any registration rights of theirs, the Company shall at least fifteen (15) days prior to the filing of such registration statement with the Securities and Exchange Commission (the "Commission") , give notice of its intention to do so to the Holder. If the Holder notifies the Company within ten (10) days after the giving of such notice by the Company of its desire to include any shares of Common Stock received on exercise of this option in such proposed registration statement (which notice must state the number of shares to be included and the proposed plan of disposition thereof), the Company shall, subject to the provisions of subparagraph (b) below, include the shares of Common Stock designated by said Holder in such registration statement. The "piggyback" registration rights described herein shall be available for exercise by the Holder on two occasions only, and after the exercise thereof, the Company shall be under no further obligation to give to the Holder the notice described in this subparagraph (a) or to include any of the Holder's Common Stock received on exercise of this option in any subsequent registration statement pursuant to this subparagraph (a). (b) Withdrawal of Registration Statement. Notwithstanding the provisions of subparagraph (a) above, the Company shall at all times have the absolute right to elect not to file any proposed registration statement, or to withdraw the same after the filing but prior to the effective date thereof. In addition, notwithstanding the provisions of subparagraph (a) above, the Company may exclude from such registration statement all or a portion of the shares of Common Stock for which registration was requested by the Holder if, in the written opinion of the Company's managing underwriter, if any, the inclusion of all or a portion of such shares, when added to the securities being registered for sale by the Company, will exceed the maximum amount of the Company's securities which can be marketed (i) at a price reasonably related to their then current market value, or (ii) without otherwise materially and adversely affecting the entire offering. If less than all of the shares of Common Stock requested for inclusion in said registration statement are to be included pursuant to the foregoing provision, the shares of Common Stock which are included shall be allocated among the selling shareholders (other than the Company) on a pro rata basis. 11. Terms and Conditions Relating to Registration of Shares. Anything in paragraph 10 above contained to the contrary notwithstanding, the following terms and conditions shall apply to each registration of shares of Common Stock under the Act pursuant to the provisions of paragraph 10 above: (a) Registration Not Required. The Company shall not be required to register any shares of Common Stock under the Act if, in the written opinion of counsel for the Company, which shall be in form and substance reasonably satisfactory to the Holder of the relevant shares of Common Stock, said shares may be sold in the manner set forth in the notice to the Company requesting registration without the need for compliance with the registration provisions of the Act. (b) Amendment of Registration Statement. The Company shall, as expeditiously as possible, prepare and file with the Commission such amendments and supplements to the registration statement (and to any prospectus included therein) as may be necessary to keep such registration statement effective until the sale of the shares of Common Stock so registered has been completed or until the expiration of a period of 90 days after the effective date of the registration statement, whichever is earlier. (c) Prospectuses, etc. The Company shall furnish to the selling Holder, such number of prospectuses, preliminary prospectuses and other documents as the selling Holder may reasonably request in order to facilitate the public sale of its shares of Common Stock. (d) Expenses. The Company shall pay all costs, fees and expenses in connection with the registration of the shares of Common Stock, including, without limitation, the Company's legal and accounting fees, printing expenses, and blue sky fees and expenses; provided, however, that the Company shall not be required to pay any (i) fees and expenses of legal counsel for the Holder, (ii) transfer taxes, or (iii) underwriters' or brokers' fees, discounts or commissions. (e) Blue Sky Laws. The Company shall take all actions which may be required in order to qualify or register the shares of Common Stock under the securities or blue sky laws of up to five states as are requested by the Holder; provided, however, that the Company shall not be obligated to execute or file any general consent to service of process or to qualify as a foreign corporation to do business under the laws of any such jurisdiction. (f) Indemnification. (i) By the Company. The Company shall indemnify, to the full extent permitted by law, the Holder, its directors and officers (if applicable) and each person, if any, who controls the Holder within the meaning of Section 15 of the Act, against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of a material fact contained in any registration statement, prospectus or preliminary prospectus or any omission or alleged omission to state therein a material fact necessary to make the statements therein (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading, except insofar as the same are caused by or contained in any information with respect to the Holder furnished in writing to the Company by the Holder expressly for use therein. (ii) By the Holder. In connection with any registration statement in which the Holder is participating, the Holder shall indemnify, to the full extent permitted by law, the Company, its directors and officers and each person who controls the Company (within the meaning of Section 15 of the Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of a material fact or any omission or alleged omission to state a material fact necessary to make the statements in the registration statement or prospectus or preliminary prospectus (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in or caused by any information with respect to the Holder furnished in writing to the Company by the Holder expressly for use therein. (iii) Indemnification Procedures. Any person who is entitled to indemnification under this subparagraph 12(f) shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. Whether or not such defense is assumed by the indemnifying party, the indemnifying party shall not be subject to any liability for any settlement made without its consent. No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. An indemnifying party who is not entitled to, or elects not to, assume the defense of such claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels. (iv) Contribution. If for any reason the indemni fication provided for in the preceding subparagraph 10(f) (i) or 10(f) (ii) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission to state material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (v) Actions by Holder. The Holder shall, at their cost and expense., complete, execute and deliver all questionnaires, power of attorney, undertakings and other documents and instruments, and take all such other actions, as are from time to time reasonably requested by the Company. (vi) Use of Prospectus. The Holder, upon receipt of notice from the Company of the occurrence of an event which requires a post-effective amendment to the registration statement or a supplement to the prospectus included therein, shall promptly discontinue the sale of their shares of Common Stock until they have received copies of a supplemented or amended prospectus from the Company. 12. Miscellaneous Provisions. (a) Applicable Law. This Agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This Agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: John Clarke If to the Escrow Agent, to: Peter J. Anderson Sutherland, Asbill & Brennan 99 Peachtree Street Atlanta, GA 30309 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement. (g) Severability. Any provision of this Agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this Agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the date first above written. AUTOMOBILE PROTECTION CORPORATION - APCO By: /s/ Larry Dorfman Holder: By: SUTHERLAND, ASBILL & BRENNAN, Escrow Agent By: /s/ Peter J. Anderson EX-10.(M) 9 CONSULTING AGREEMENT AND OPTION AND REGISTRATION RIGHTS AGREEMENT CONSULTING AGREEMENT AND OPTION AND REGISTRATION RIGHTS AGREEMENT AGREEMENT, dated October 6, 1994, by and between RONNIE WOHL and LADENBURG THALMANN & CO., INC. (the "Holder") and AUTOMOBILE PROTECTION CORPORATION - APCO (the "Company"). WHEREAS, the Company seeks to obtain the services of Holder as a financial consultant. NOW, THEREFORE, the parties hereto agree as follows: 1. The Holder will act as financial consultant to the Company on a non-exclusive basis for the period October 6, 1994 to October 7, 1995. Holder shall devote such time as it determines in its sole discretion to the provision of consulting services as requested by the Company, such services to include, but not be limited to, general investor relations, introducing the Company to potential market makers, investment strategies in respect of the Company's capital and corporate acquisition strategies. 2. In consideration of acting as financial consultant, the Company hereby grants to the Holder the right to purchase up to 50,000 shares of the Common Stock, $0.001 par value (the Common Stock) , of the Company as follows: (a) The Holder has the right to purchase up to 50,000 shares of Common Stock at a purchase price per share of $2.25 at any time from the date of this agreement until February 15, 1997. (b) Upon the close of business on February 15, 1997, the rights embodied herein to purchase Common Stock shall expire and the Holder will have no further right to purchase such Common Stock after the expiration date. If, on February 15, 1997, the Holder has not exercised any portion of this option then this Option shall expire and this agreement will be null and void. 3. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the Option is exercised, will be paid in full at the time of exercise in cash, unless otherwise agreed to in writing by the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by payment of the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 4. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 5. Transferability. Unless consented to in writing by the Company, which consent shall not be unreasonably withheld, this option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this Option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, without the written consent of the Company, this option and the rights conferred hereby shall immediately become null and void. Before the Company consents to any transfer, assignment, pledge or hypothecation of this option, the transferee., assignee or pledgee of the option shall agree to be bound by the terms of this option and deliver such other certificates and agreements as the Company reasonably requests. Notwithstanding the foregoing, the option may be transferred to the then current officers, directors and shareholders of the Holder (the "Permitted Transferees") , provided such Permitted Transferees agree to be bound by the terms of this option and deliver such certificates and agreements as the Company reasonably requests. 6. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any Option hereunder. The Holder represents that it has received the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that it is capable of evaluating an investment in the option and that its financial condition is such that it can bear the economic risks of acquiring and holding this option. 7. Sales under Securities Act. Anything in this Agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by Holder upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 8. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an option agreement dated October 6, 1994, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 9. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassifi-cation, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent, publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 10. "Piggyback" Registration. (a) Basic Right. If, at any time prior to February 15, 1997, the Company proposes to register for sale by it or for the account of others, any of its equity securities under the Act, other than in connection with a merger, acquisition or exchange offer, and other than an offering on Form S-8 or any successor form on which the Holder's securities may be registered, and provided further that any person to which the Company has granted or may in the future grant a registration right does not object in writing to the exercise of the Holder's registration rights hereunder in connection with any registration rights of theirs, the Company shall at least fifteen (15) days prior to the filing of such registration statement with the Securities and Exchange Commission (the "Commission") , give notice of its intention to do so to the Holder. If the Holder notifies the Company within ten (10) days after the giving of such notice by the Company of its desire to include any shares of Common Stock received on exercise of this option in such proposed registration statement (which notice must state the number of shares to be included and the proposed plan of disposition thereof), the Company shall, subject to the provisions of subparagraph (b) below, include the shares of Common Stock designated by said Holder in such registration statement. The "piggyback" registration rights described herein shall be available for exercise by the Holder on two occasions only, and after the exercise thereof, the Company shall be under no further obligation to give to the Holder the notice described in this subparagraph (a) or to include any of the Holder's Common Stock received on exercise of this option in any subsequent registration statement pursuant to this subparagraph (a). (b) Withdrawal of Registration Statement. Notwithstanding the provisions of subparagraph (a) above, the Company shall at all times have the absolute right to elect not to file any proposed registration statement, or to withdraw the same after the filing but prior to the effective date thereof. In addition, notwithstanding the provisions of subparagraph (a) above, the Company may exclude from such registration statement all or a portion of the shares of Common Stock for which registration was requested by the Holder if, in the written opinion of the Company's managing underwriter, if any, the inclusion of all or a portion of such shares, when added to the securities being registered for sale by the Company, will exceed the maximum amount of the Company's securities which can be marketed (i) at a price reasonably related to their then current market value, or (ii) without otherwise materially and adversely affecting the entire offering. If less than all of the shares of Common Stock requested for inclusion in said registration statement are to be included pursuant to the foregoing provision, the shares of Common Stock which are included shall be allocated among the selling shareholders (other than the Company) on a pro rata basis. 11. Terms and Conditions Relating to Registration of Shares. Anything in paragraph 10 above contained to the contrary notwithstanding, the following terms and conditions shall apply to each registration of shares of Common Stock under the Act pursuant to the provisions of paragraph 10 above: (a) Registration Not Required. The Company shall not be required to register any shares of Common Stock under the Act if, in the written opinion of counsel for the Company, which shall be in form and substance reasonably satisfactory to the Holder of the relevant shares of Common Stock, said shares may be sold in the manner set forth in the notice to the Company requesting registration without the need for compliance with the registration provisions of the Act. (b) Amendment of Registration Statement. The Company shall, as expeditiously as possible, prepare and file with the Commission such amendments and supplements to the registration statement (and to any prospectus included therein) as may be necessary to keep such registration statement effective until the sale of the shares of Common Stock so registered has been completed or until the expiration of a period of 90 days after the effective date of the registration statement, whichever is earlier. (c) Prospectuses, etc. The Company shall furnish to the selling Holder, such number of prospectuses, preliminary prospectuses and other documents as the selling Holder may reasonably request in order to facilitate the public sale of its shares of Common Stock. (d) Expenses. The Company shall pay all costs, fees and expenses in connection with the registration of the shares of Common Stock, including, without limitation, the Company's legal and accounting fees, printing expenses, and blue sky fees and expenses; provided, however, that the Company shall not be required to pay any (i) fees and expenses of legal counsel for the Holder, (ii) transfer taxes, or (iii) underwriters' or brokers' fees, discounts or commissions. (e) Blue Sky Laws. The Company shall take all actions which may be required in order to qualify or register the shares of Common Stock under the securities or blue sky laws of up to five states as are requested by the Holder; provided, however, that the Company shall not be obligated to execute or file any general consent to service of process or to qualify as a foreign corporation to do business under the laws of any such jurisdiction. (f) Indemnification. (i) By the Company. The Company shall indemnify, to the full extent permitted by law, the Holder, its directors and officers (if applicable) and each person, if any, who controls the Holder within the meaning of Section 15 of the Act, against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of a material fact contained in any registration statement, prospectus or preliminary prospectus or any omission or alleged omission to state therein a material fact necessary to make the statements therein (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading, except insofar as the same are caused by or contained in any information with respect to the Holder furnished in writing to the Company by the Holder expressly for use therein. (ii) By the Holder. In connection with any registration statement in which the Holder is participating, the Holder shall indemnify, to the full extent permitted by law, the Company, its directors and officers and each person who controls the Company (within the meaning of Section 15 of the Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of a material fact or any omission or alleged omission to state a material fact necessary to make the statements in the registration statement or prospectus or preliminary prospectus (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in or caused by any information with respect to the Holder furnished in writing to the Company by the Holder expressly for use therein. (iii) Indemnification Procedures. Any person who is entitled to indemnification under this subparagraph 12(f) shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. Whether or not such defense is assumed by the indemnifying party, the indemnifying party shall not be subject to any liability for any settlement made without its consent. No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. An indemnifying party who is not entitled to, or elects not to, assume the defense of such claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels. (iv) Contribution. If for any reason the indemni fication provided for in the preceding subparagraph 10(f) (i) or 10(f) (ii) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission to state material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (v) Actions by Holder. The Holder shall, at their cost and expense., complete, execute and deliver all questionnaires, power of attorney, undertakings and other documents and instruments, and take all such other actions, as are from time to time reasonably requested by the Company. (vi) Use of Prospectus. The Holder, upon receipt of notice from the Company of the occurrence of an event which requires a post-effective amendment to the registration statement or a supplement to the prospectus included therein, shall promptly discontinue the sale of their shares of Common Stock until they have received copies of a supplemented or amended prospectus from the Company. 12. Miscellaneous Provisions. (a) Applicable Law. This Agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This Agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Ronnie Wohl and Ladenburg Thalmann & Co., Inc. 540 Madison Ave New York, NY 10022 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement. (g) Severability. Any provision of this Agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this Agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the date first above written. AUTOMOBILE PROTECTION CORPORATION - APCO By: /s/ Larry Dorfman Holders: RONNIE WOHL /s/ Ronnie Wohl LADENBURG THALMANN & CO., INC. /s/ Peter Graham EX-10.(N) 10 CONSULTING AGREEMENT AND OPTION AND REGISTRATION RIGHTS AGREEMENT CONSULTING AGREEMENT AND OPTION AND REGISTRATION RIGHTS AGREEMENT AGREEMENT, dated October 6, 1994, by and between MARSHALL LEEDS (the "Holder") and AUTOMOBILE PROTECTION CORPORATION - APCO (the "Company"). WHEREAS, the Company seeks to obtain the services of Holder as a financial consultant. NOW, THEREFORE, the parties hereto agree as follows: 1. The Holder will act as financial consultant to the Company on a non-exclusive basis for a period of twenty-four (24) months from the date hereof. Holder shall devote such time as it determines in its sole discretion to the provision of consulting services as requested by the Company, such services to include, but not be limited to, general investor relations, introducing the Company to potential market makers, investment strategies in respect of the Company's capital and corporate acquisition strategies. 2. In consideration of acting as financial consultant, the Company hereby grants to the Holder the right to purchase up to 175,000 shares of the Common Stock, $.001 par value (the "Common Stock"), of the Company as follows: (a) The Holder has the right to purchase up to 175,000 shares of Common Stock at a purchase price per share of $2.25 at any time from the date of this agreement until February 15, 1996. (b) Upon the close of business on February 15, 1996, the rights embodied herein to purchase Common Stock shall expire and the Holder will have no further right to purchase such Common Stock after the expiration date. If, on February 15, 1996, the Holder has not exercised any portion of this option then this option shall expire and this agreement will be null and void. 3. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise in cash, unless otherwise agreed to in writing by the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by payment of the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 4. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 5. Transferability. Unless consented to in writing by the Company, which consent shall not be unreasonably withheld, this option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, without the written consent of the Company, this option and the rights conferred hereby shall immediately become null and void. Before the Company consents to any transfer, assignment, pledge or hypothecation of this option, the transferee, assignee or pledgee of the option shall agree to be bound by the terms of this option and deliver such other certificates and agreements as the Company reasonably requests. Notwithstanding the foregoing, the option may be transferred to the then current officers, directors and shareholders of the Holder (the "Permitted Transferees"), provided such Permitted Transferees agree to be bound by the terms of this option and deliver such certificates and agreements as the Company reasonably requests. 6. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act"). As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that it is capable of evaluating an investment in the option and that its financial condition is such that it can bear the economic risks of acquiring and holding this option. 7. Sales under Securities Act. Anything in this Agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 8. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an option agreement dated October 6, 1994, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 9. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent, publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 10. "Piggyback" Registration. (a) Basic Right. If, at any time prior to February 15, 1996, the Company proposes to register for sale by it or for the account of others, any of its equity securities under the Act, other than in connection with a merger, acquisition or exchange offer, and other than an offering on Form S-8 or any successor form on which the Holder's securities may be registered, and provided further that any person to which the Company has granted or may in the future grant a registration right does not object in writing to the exercise of the Holder's registration rights hereunder in connection with any registration rights of theirs, the Company shall at least fifteen (15) days prior to the filing of such registration statement with the Securities and Exchange Commission (the "Commission"), give notice of its intention to do so to the Holder. If the Holder notifies the Company within ten (10) days after the giving of such notice by the Company of its desire to include any shares of Common Stock received on exercise of this option in such proposed registration statement (which notice must state the number of shares to be included and the proposed plan of disposition thereof), the Company shall, subject to the provisions of subparagraph (b) below, include the shares of Common Stock designated by said Holder in such registration statement. The "piggyback" registration rights described herein shall be available for exercise by the Holder on two occasions only, and after the exercise thereof, the Company shall be under no further obligation to give to the Holder the notice described in this subparagraph (a) or to include any of the Holder's Common Stock received on exercise of this option in any subsequent registration statement pursuant to this subparagraph (a). (b) Withdrawal of Registration Statement. Notwithstanding the provisions of subparagraph (a) above, the Company shall at all times have the absolute right to elect not to file any proposed registration statement, or to withdraw the same after the filing but prior to the effective date thereof. In addition, notwithstanding the provisions of subparagraph (a) above, the Company may exclude from such registration statement all or a portion of the shares of Common Stock for which regis tration was requested by the Holder if, in the written opinion of the Company's managing underwriter, if any, the inclusion of all or a portion of such shares, when added to the securities being registered for sale by the Company, will exceed the maximum amount of the Company's securities which can be marketed (i) at a price reasonably related to their then current market value, or (ii) without otherwise materially and adversely affecting the entire offering. If less than all of the shares of Common Stock requested for inclusion in said registration statement are to be included pursuant to the foregoing provision, the shares of Common Stock which are included shall be allocated among the selling shareholders (other than the Company) on a pro rata basis. 11. Terms and Conditions Relating to Registration of Shares. Anything in paragraph 10 above contained to the contrary notwithstanding, the following terms and conditions shall apply to each registration of shares of Common Stock under the Act pursuant to the provisions of paragraph 10 above: (a) Registration Not Required. The Company shall not be required to register any shares of Common Stock under the Act if, in the written opinion of counsel for the Company, which shall be in form and substance reasonably satisfactory to the Holder of the relevant shares of Common Stock, said shares may be sold in the manner set forth in the notice to the Company requesting registration without the need for compliance with the registration provisions of the Act. (b) Amendment of Registration Statement. The Company shall, as expeditiously as possible, prepare and file with the Commission such amendments and supplements to the registration statement (and to any prospectus included therein) as may be necessary to keep such registration statement effective until the sale of the shares of Common Stock so registered has been completed or until the expiration of a period of 90 days after the effective date of the registration statement, whichever is earlier. (c) Prospectuses, etc. The Company shall furnish to the selling Holder, such number of prospectuses, preliminary prospectuses and other documents as the selling Holder may reasonably request in order to facilitate the public sale of its shares of Common Stock. (d) Expenses. The Company shall pay all costs, fees and expenses in connection with the registration of the shares of Common Stock, including, without limitation, the Company's legal and accounting fees, printing expenses, and blue sky fees and expenses; provided, however, that the Company shall not be required to pay any (i) fees and expenses of legal counsel for the Holder, (ii) transfer taxes, or (iii) underwriters' or brokers' fees, discounts or commissions. (e) Blue Sky Laws. The Company shall take all actions which may be required in order to qualify or register the shares of Common Stock under the securities or blue sky laws of up to five states as are requested by the Holder; provided, however, that the Company shall not be obligated to execute or file any general consent to service of process or to qualify as a foreign corporation to do business under the laws of any such jurisdiction. (f) Indemnification. (i) By the Company. The Company shall indemnify, to the full extent permitted by law, the Holder, its directors and officers (if applicable) and each person, if any, who controls the Holder within the meaning of Section 15 of the Act, against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of a material fact contained in any registration statement, prospectus or preliminary prospectus or any omission or alleged omission to state therein a material fact necessary to make the statements therein (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading, except insofar as the same are caused by or contained in any information with respect to the Holder furnished in writing to the Company by the Holder expressly for use therein. (ii) By the Holder. In connection with any registration statement in which the Holder is participating, the Holder shall indemnify, to the full extent permitted by law, the Company, its directors and officers and each person who controls the Company (within the meaning of Section 15 of the Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of a material fact or any omission or alleged omission to state a material fact necessary to make the statements in the registration statement or prospectus or preliminary prospectus (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in or caused by any information with respect to the Holder furnished in writing to the Company by the Holder expressly for use therein. (iii) Indemnification Procedures. Any person who is entitled to indemnification under this subparagraph 12(f) shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. Whether or not such defense is assumed by the indemnifying party, the indemnifying party shall not be subject to any liability for any settlement made without its consent. No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels. (iv) Contribution. If for any reason the indemni fication provided for in the preceding subparagraph 10(f)(i) or 10(f)(ii) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission to state material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (v) Actions by Holder. The Holder shall, at his cost and expense, complete, execute and deliver all questionnaires, powers of attorney, undertakings and other documents and instruments, and take all such other actions, as are from time to time reasonably requested by the Company. (vi) Use of Prospectus. The Holder, upon receipt of notice from the Company of the occurrence of an event which requires a post-effective amendment to the registration statement or a supplement to the prospectus included therein, shall promptly discontinue the sale of his shares of Common Stock until he has received copies of a supplemented or amended prospectus from the Company. 12. Miscellaneous Provisions. (a) Applicable Law. This Agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This Agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Marshall Leeds 3000 Island Boulevard - 405 North Miami, FL 33160 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement. (g) Severability. Any provision of this Agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this Agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the date first above written. AUTOMOBILE PROTECTION CORPORATION - APCO By: President MARSHALL LEEDS EX-10.(O) 11 CONSULTING AGREEMENT AND OPTION AND REGISTRATION RIGHTS AGREEMENT CONSULTING AGREEMENT AND OPTION AND REGISTRATION RIGHTS AGREEMENT AGREEMENT, dated October 6, 1994, by and between LEONARD J. SOKOLOW (the "Holder") and AUTOMOBILE PROTECTION CORPORATION - APCO (the "Company"). WHEREAS, the Company seeks to obtain the services of Holder as a financial consultant. NOW, THEREFORE, the parties hereto agree as follows: 1. The Holder will act as financial consultant to the Company on a non-exclusive basis for a period of twenty-four (24) months from the date hereof. Holder shall devote such time as it determines in its sole discretion to the provision of consulting services as requested by the Company, such services to include, but not be limited to, general investor relations, introducing the Company to potential market makers, investment strategies in respect of the Company's capital and corporate acquisition strategies. 2. In consideration of acting as financial consultant, the Company hereby grants to the Holder the right to purchase up to 275,000 shares of the Common Stock, $.001 par value (the "Common Stock"), of the Company as follows: (a) The Holder has the right to purchase up to 275,000 shares of Common Stock at a purchase price per share of $2.25 at any time from the date of this agreement until February 15, 1996. (b) Upon the close of business on February 15, 1996, the rights embodied herein to purchase Common Stock shall expire and the Holder will have no further right to purchase such Common Stock after the expiration date. If, on February 15, 1996, the Holder has not exercised any portion of this option then this option shall expire and this agreement will be null and void. 3. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise in cash, unless otherwise agreed to in writing by the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by payment of the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 4. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 5. Transferability. Unless consented to in writing by the Company, which consent shall not be unreasonably withheld, this option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, without the written consent of the Company, this option and the rights conferred hereby shall immediately become null and void. Before the Company consents to any transfer, assignment, pledge or hypothecation of this option, the transferee, assignee or pledgee of the option shall agree to be bound by the terms of this option and deliver such other certificates and agreements as the Company reasonably requests. Notwithstanding the foregoing, the option may be transferred to the then current officers, directors and shareholders of the Holder (the "Permitted Transferees"), provided such Permitted Transferees agree to be bound by the terms of this option and deliver such certificates and agreements as the Company reasonably requests. 6. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act"). As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that it is capable of evaluating an investment in the option and that its financial condition is such that it can bear the economic risks of acquiring and holding this option. 7. Sales under Securities Act. Anything in this Agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 8. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an option agreement dated October 6, 1994, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 9. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent, publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 10. "Piggyback" Registration. (a) Basic Right. If, at any time prior to February 15, 1996, the Company proposes to register for sale by it or for the account of others, any of its equity securities under the Act, other than in connection with a merger, acquisition or exchange offer, and other than an offering on Form S-8 or any successor form on which the Holder's securities may be registered, and provided further that any person to which the Company has granted or may in the future grant a registration right does not object in writing to the exercise of the Holder's registration rights hereunder in connection with any registration rights of theirs, the Company shall at least fifteen (15) days prior to the filing of such registration statement with the Securities and Exchange Commission (the "Commission"), give notice of its intention to do so to the Holder. If the Holder notifies the Company within ten (10) days after the giving of such notice by the Company of its desire to include any shares of Common Stock received on exercise of this option in such proposed registration statement (which notice must state the number of shares to be included and the proposed plan of disposition thereof), the Company shall, subject to the provisions of subparagraph (b) below, include the shares of Common Stock designated by said Holder in such registration statement. The "piggyback" registration rights described herein shall be available for exercise by the Holder on two occasions only, and after the exercise thereof, the Company shall be under no further obligation to give to the Holder the notice described in this subparagraph (a) or to include any of the Holder's Common Stock received on exercise of this option in any subsequent registration statement pursuant to this subparagraph (a). (b) Withdrawal of Registration Statement. Notwithstanding the provisions of subparagraph (a) above, the Company shall at all times have the absolute right to elect not to file any proposed registration statement, or to withdraw the same after the filing but prior to the effective date thereof. In addition, notwithstanding the provisions of subparagraph (a) above, the Company may exclude from such registration statement all or a portion of the shares of Common Stock for which regis tration was requested by the Holder if, in the written opinion of the Company's managing underwriter, if any, the inclusion of all or a portion of such shares, when added to the securities being registered for sale by the Company, will exceed the maximum amount of the Company's securities which can be marketed (i) at a price reasonably related to their then current market value, or (ii) without otherwise materially and adversely affecting the entire offering. If less than all of the shares of Common Stock requested for inclusion in said registration statement are to be included pursuant to the foregoing provision, the shares of Common Stock which are included shall be allocated among the selling shareholders (other than the Company) on a pro rata basis. 11. Terms and Conditions Relating to Registration of Shares. Anything in paragraph 10 above contained to the contrary notwithstanding, the following terms and conditions shall apply to each registration of shares of Common Stock under the Act pursuant to the provisions of paragraph 10 above: (a) Registration Not Required. The Company shall not be required to register any shares of Common Stock under the Act if, in the written opinion of counsel for the Company, which shall be in form and substance reasonably satisfactory to the Holder of the relevant shares of Common Stock, said shares may be sold in the manner set forth in the notice to the Company requesting registration without the need for compliance with the registration provisions of the Act. (b) Amendment of Registration Statement. The Company shall, as expeditiously as possible, prepare and file with the Commission such amendments and supplements to the registration statement (and to any prospectus included therein) as may be necessary to keep such registration statement effective until the sale of the shares of Common Stock so registered has been completed or until the expiration of a period of 90 days after the effective date of the registration statement, whichever is earlier. (c) Prospectuses, etc. The Company shall furnish to the selling Holder, such number of prospectuses, preliminary prospectuses and other documents as the selling Holder may reasonably request in order to facilitate the public sale of its shares of Common Stock. (d) Expenses. The Company shall pay all costs, fees and expenses in connection with the registration of the shares of Common Stock, including, without limitation, the Company's legal and accounting fees, printing expenses, and blue sky fees and expenses; provided, however, that the Company shall not be required to pay any (i) fees and expenses of legal counsel for the Holder, (ii) transfer taxes, or (iii) underwriters' or brokers' fees, discounts or commissions. (e) Blue Sky Laws. The Company shall take all actions which may be required in order to qualify or register the shares of Common Stock under the securities or blue sky laws of up to five states as are requested by the Holder; provided, however, that the Company shall not be obligated to execute or file any general consent to service of process or to qualify as a foreign corporation to do business under the laws of any such jurisdiction. (f) Indemnification. (i) By the Company. The Company shall indemnify, to the full extent permitted by law, the Holder, its directors and officers (if applicable) and each person, if any, who controls the Holder within the meaning of Section 15 of the Act, against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of a material fact contained in any registration statement, prospectus or preliminary prospectus or any omission or alleged omission to state therein a material fact necessary to make the statements therein (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading, except insofar as the same are caused by or contained in any information with respect to the Holder furnished in writing to the Company by the Holder expressly for use therein. (ii) By the Holder. In connection with any registration statement in which the Holder is participating, the Holder shall indemnify, to the full extent permitted by law, the Company, its directors and officers and each person who controls the Company (within the meaning of Section 15 of the Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of a material fact or any omission or alleged omission to state a material fact necessary to make the statements in the registration statement or prospectus or preliminary prospectus (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in or caused by any information with respect to the Holder furnished in writing to the Company by the Holder expressly for use therein. (iii) Indemnification Procedures. Any person who is entitled to indemnification under this subparagraph 12(f) shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. Whether or not such defense is assumed by the indemnifying party, the indemnifying party shall not be subject to any liability for any settlement made without its consent. No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels. (iv) Contribution. If for any reason the indemni fication provided for in the preceding subparagraph 10(f)(i) or 10(f)(ii) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission to state material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (v) Actions by Holder. The Holder shall, at his cost and expense, complete, execute and deliver all questionnaires, powers of attorney, undertakings and other documents and instruments, and take all such other actions, as are from time to time reasonably requested by the Company. (vi) Use of Prospectus. The Holder, upon receipt of notice from the Company of the occurrence of an event which requires a post-effective amendment to the registration statement or a supplement to the prospectus included therein, shall promptly discontinue the sale of his shares of Common Stock until he has received copies of a supplemented or amended prospectus from the Company. 12. Miscellaneous Provisions. (a) Applicable Law. This Agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This Agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Leonard J. Sokolow If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement. (g) Severability. Any provision of this Agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this Agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the date first above written. AUTOMOBILE PROTECTION CORPORATION - APCO By: President LEONARD J. SOKOLOW EX-10.(P) 12 OPTION AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of October 10, 1995, by and between Joseph Gibbs (the "Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for services of Holder to the Company. NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company, the Company hereby grants to the Holder the right to purchase up to 50,000 shares of the Common Stock, $.001 per value ("Common Stock") of the Company at an exercise price equivalent to $2.50 per share of Common Stock, as follows: the Holder shall have the right to purchase one- third of the shares of Common Stock purchasable under this agreement on October 31 in each of 1996, 1997 and 1998, provided that on that date and for the year immediately preceding that date Holder is then, and has been providing, services under a sponsorship agreement between the Company and Holder. Once Holder has the right to acquire a portion of the shares of Common Stock hereunder, Holder may purchase such shares of Common Stock subject to the terms of this agreement for a period of two years thereafter. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act"). As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issuedupon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of October 10, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent, publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to the sponsorship agreement between Holder and the Company or the sponsorship agreement is terminated for any reason, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Mr. Joseph Gibbs 9900 Twin Lakes Parkway Charlotte, North Carolina 28269 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION - APCO By: JOSEPH GIBBS, AS HOLDER EX-10.(Q) 13 OPTION AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of December 18, 1995, by and between BOBBY LABONTE (the Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for services of Holder to the Company NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company, the Company hereby grants to the Holder the right to purchase up to 5,000 shares of the Common Stock, $.00l per value ("Common Stock") of the Company at an exercise price equivalent to $2.50 per share of Common Stock. This option is not granted under a stock option plan other than the plan formed by the terms of this agreement. This is not an incentive stock option as that term is defined in the Internal Revenue Code of 1986, as amended. The stock option may be exercised at any time prior to December 18, 2000. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise, either in cash or in a manner to be determined at the sole discretion of the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of August 31, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to paragraph 1, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Mr. Bobby Labonte If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdic tion(s), ineffective to the extent of such prohibition or unen forceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION By: HOLDER By: EX-10.(R) 14 OPTION AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of November 30, 1995, by and between CRUZ PEDREGON (the Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for services of Holder to the Company NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company, the Company hereby grants to the Holder the right to purchase up to 5,000 shares of the Common Stock, $.00l per value ("Common Stock") of the Company at an exercise price equivalent to $3.00 per share of Common Stock. This option is not granted under a stock option plan other than the plan formed by the terms of this agreement. This is not an incentive stock option as that term is defined in the Internal Revenue Code of 1986, as amended. The stock option may be exercised at any time prior to November 30, 2000. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise, either in cash or in a manner to be determined at the sole discretion of the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of August 31, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to paragraph 1, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Mr. Cruz Pedregon 2575 Duval Rd. Camarillo, CA 93012 If to Company, to: AutomobileProtection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdic tion(s), ineffective to the extent of such prohibition or unen forceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION By: /s/ Larry Dorfman HOLDER By: /s/ Cruz Pedregon EX-10.(S) 15 OPTION AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of November 30, 1995, by and between CORY McCLENATHAN (the Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for services of Holder to the Company NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company, the Company hereby grants to the Holder the right to purchase up to 5,000 shares of the Common Stock, $.00l per value ("Common Stock") of the Company at an exercise price equivalent to $3.00 per share of Common Stock. This option is not granted under a stock option plan other than the plan formed by the terms of this agreement. This is not an incentive stock option as that term is defined in the Internal Revenue Code of 1986, as amended. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise, either in cash or in a manner to be determined at the sole discretion of the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of August 31, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to paragraph 1, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Mr. Cory McClenathan If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdic tion(s), ineffective to the extent of such prohibition or unen forceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION By: /s/ Larry Dorfman HOLDER By: /s/ Cory McClenathan EX-10.(T) 16 WARRANT AGREEMENT WARRANT AGREEMENT AGREEMENT, dated as of September 1, 1994, by and between Bix Brown (the "Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder is an automobile dealer in Georgetown, Kentucky; WHEREAS, the Holder has agreed to receive the warrant herein set forth as consideration for services of Holder to the Company. NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In full consideration of the services of Holder to Company, the Company hereby grants to the Holder (a) right to purchase up to 10,000 shares of the Common Stock, $.001 per value ("Common Stock") of the Company at an exercise price of $2.00 per share of Common Stock, and (b) the right to purchase up to 5,000 shares of Common Stock at an exercise price of $3.00 per share of Common Stock, as set forth herein. The right to purchase shares of Common Stock pursuant to this agreement shall be as follows: (a) the Holder shall have the right to purchase one-third of the shares of Common Stock purchasable at an exercise price of $2.00 commencing on August 31, of each of 1995, 1996 and 1997, and once purchasable, the Holder shall have the right to acquire such shares of Common Stock, subject to the terms of this agreement, for a period of two years thereafter; and (b) the Holder shall have the right to purchase one-half of the shares of Common Stock purchasable at an exercise price of $3.00 commencing on August 31, of each of 1998 and 1999, and once purchasable, the Holder shall have the right to acquire such shares of Common Stock, subject to the terms of this agreement, for a period of two years thereafter. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the warrant is exercised, will be paid in full at the time of exercise in cash. Exercise of any warrant hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by payment of the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the warrant. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the warrant is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the warrant shall have been exercised shall be registered in the name of the person exercising the warrant. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the warrant until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This warrant and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this warrant or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this warrant and the rights con ferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This warrant and the shares of Common Stock receivable on the exercise of the warrant are not registered under the Securities Act of 1933, as amended (the "Act"). As a condition to the sale of Common Stock on the exercise of the warrant, the person exercising such warrant may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any warrant hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this warrant solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that it is capable of evaluating an investment in the warrant and that its financial condition is such that it can bear the economic risks of acquiring and holding this warrant. 6. Sales under Securities Act. Anything in this Agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the warrant or the Common Stock acquired by him upon exercise of the warrant hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the warrant hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the warrant may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of September 1, 1994, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this warrant, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding warrant. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent, publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this warrant shall terminate unless provision be made in writing in connection with such transaction for the assumption of the warrant granted, or the substitution for the warrant of a new warrant covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new warrant substituted therefor, shall continue in the manner and under the terms so provided. (C) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder and/or Frank Shoop Chev/Buick/Pontiac ("Dealer") fails to fulfill its obligations pursuant to that certain letter agreement dated September 26, 1994 between the Dealer and the Company, including but not limited to, the requirements that any one of Bix Brown, Frank Shoop and Josephine Shoop maintain an ownership interest in at least two automobile dealerships retailing a combined average per calendar year of 200 vehicles per month, or such dealerships are marketing only the EasyCare product of the Company after September 1, 1994, then that portion of this warrant that is not then exercisable shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this warrant, if the Holder as of a time immediately prior to such termination has the right to acquire any shares of Common Stock at such time, the Holder will have the right to exercise such right pursuant to the terms of this Warrant. 10. Miscellaneous Provisions. (a) Applicable Law. This Agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This Agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Mr. Bix Brown c/o 1111 Cynthiana Road Georgetown, Kentucky 40324 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement. (g) Severability. Any provision of this Agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this Agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION - APCO By: BIX BROWN, AS HOLDER EX-10.(U) 17 WARRANT AGREEMENT WARRANT AGREEMENT AGREEMENT, dated as of September 1, 1994, by and between Frank Shoop (the "Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder is an automobile dealer in Georgetown, Kentucky; WHEREAS, the Holder has agreed to receive the warrant herein set forth as consideration for services of Holder to the Company. NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In full consideration of the services of Holder to Company, the Company hereby grants to the Holder (a) right to purchase up to 25,000 shares of the Common Stock, $.001 per value ("Common Stock") of the Company at an exercise price of $2.00 per share of Common Stock, and (b) the right to purchase up to 12,500 shares of Common Stock at an exercise price of $3.00 per share of Common Stock, as set forth herein. The right to purchase shares of Common Stock pursuant to this agreement shall be as follows: (a) the Holder shall have the right to purchase one-third of the shares of Common Stock purchasable at an exercise price of $2.00 commencing on August 31, of each of 1995, 1996 and 1997, and once purchasable, the Holder shall have the right to acquire such shares of Common Stock, subject to the terms of this agreement, for a period of two years thereafter; and (b) the Holder shall have the right to purchase one-half of the shares of Common Stock purchasable at an exercise price of $3.00 commencing on August 31, of each of 1998 and 1999, and once purchasable, the Holder shall have the right to acquire such shares of Common Stock, subject to the terms of this agreement, for a period of two years thereafter. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the warrant is exercised, will be paid in full at the time of exercise in cash. Exercise of any warrant hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by payment of the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the warrant. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the warrant is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the warrant shall have been exercised shall be registered in the name of the person exercising the warrant. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the warrant until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This warrant and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this warrant or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this warrant and the rights con ferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This warrant and the shares of Common Stock receivable on the exercise of the warrant are not registered under the Securities Act of 1933, as amended (the "Act"). As a condition to the sale of Common Stock on the exercise of the warrant, the person exercising such warrant may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any warrant hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this warrant solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that it is capable of evaluating an investment in the warrant and that its financial condition is such that it can bear the economic risks of acquiring and holding this warrant. 6. Sales under Securities Act. Anything in this Agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the warrant or the Common Stock acquired by him upon exercise of the warrant hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the warrant hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the warrant may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of September 1, 1994, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this warrant, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding warrant. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent, publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this warrant shall terminate unless provision be made in writing in connection with such transaction for the assumption of the warrant granted, or the substitution for the warrant of a new warrant covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new warrant substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder and/or Frank Shoop Chev/Buick/Pontiac ("Dealer") fails to fulfill its obligations pursuant to that certain letter agreement dated September 26, 1994 between the Dealer and the Company, including but not limited to, the requirements that any one of Bix Brown, Frank Shoop and Josephine Shoop maintain an ownership interest in at least two automobile dealerships retailing a combined average per calendar year of 200 vehicles per month, or such dealerships are marketing only the EasyCare product of the Company after September 1, 1994, then that portion of this warrant that is not then exercisable shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this warrant, if the Holder as of a time immediately prior to such termination has the right to acquire any shares of Common Stock at such time, the Holder will have the right to exercise such right pursuant to the terms of this Warrant. 10. Miscellaneous Provisions. (a) Applicable Law. This Agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This Agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Mr. Frank Shoop c/o 1111 Cynthiana Road Georgetown, Kentucky 40324 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement. (g) Severability. Any provision of this Agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this Agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION - APCO By: FRANK SHOOP, AS HOLDER EX-10.(V) 18 WARRANT AGREEMENT WARRANT AGREEMENT AGREEMENT, dated as of __________, 1994, by and between Josephine Shoop (the "Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder is an automobile dealer in Georgetown, Kentucky; WHEREAS, the Holder has agreed to receive the warrant herein set forth as consideration for services of Holder to the Company. NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In full consideration of the services of Holder to Company, the Company hereby grants to the Holder (a) right to purchase up to 25,000 shares of the Common Stock, $.001 per value ("Common Stock") of the Company at an exercise price of $2.00 per share of Common Stock, and (b) the right to purchase up to 12,500 shares of Common Stock at an exercise price of $3.00 per share of Common Stock, as set forth herein. The right to purchase shares of Common Stock pursuant to this agreement shall be as follows: (a) the Holder shall have the right to purchase one-third of the shares of Common Stock purchasable at an exercise price of $2.00 commencing on August 31, of each of 1995, 1996 and 1997, and once purchasable, the Holder shall have the right to acquire such shares of Common Stock, subject to the terms of this agreement, for a period of two years thereafter; and (b) the Holder shall have the right to purchase one-half of the shares of Common Stock purchasable at an exercise price of $3.00 commencing on August 31, of each of 1998 and 1999, and once purchasable, the Holder shall have the right to acquire such shares of Common Stock, subject to the terms of this agreement, for a period of two years thereafter. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the warrant is exercised, will be paid in full at the time of exercise in cash. Exercise of any warrant hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by payment of the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the warrant. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the warrant is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the warrant shall have been exercised shall be registered in the name of the person exercising the warrant. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the warrant until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This warrant and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this warrant or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this warrant and the rights con ferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This warrant and the shares of Common Stock receivable on the exercise of the warrant are not registered under the Securities Act of 1933, as amended (the "Act"). As a condition to the sale of Common Stock on the exercise of the warrant, the person exercising such warrant may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any warrant hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this warrant solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that it is capable of evaluating an investment in the warrant and that its financial condition is such that it can bear the economic risks of acquiring and holding this warrant. 6. Sales under Securities Act. Anything in this Agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the warrant or the Common Stock acquired by him upon exercise of the warrant hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the warrant hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the warrant may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of September 1, 1994, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this warrant, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding warrant. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent, publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this warrant shall terminate unless provision be made in writing in connection with such transaction for the assumption of the warrant granted, or the substitution for the warrant of a new warrant covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new warrant substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder and/or Frank Shoop Chev/Buick/Pontiac ("Dealer") fails to fulfill its obligations pursuant to that certain letter agreement dated September 26, 1994 between the Dealer and the Company, including but not limited to, the requirements that any one of Bix Brown, Frank Shoop and Josephine Shoop maintain an ownership interest in at least two automobile dealerships retailing a combined average per calendar year of 200 vehicles per month, or such dealerships are marketing only the EasyCare product of the Company after September 1, 1994, then that portion of this warrant that is not then exercisable shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this warrant, if the Holder as of a time immediately prior to such termination has the right to acquire any shares of Common Stock at such time, the Holder will have the right to exercise such right pursuant to the terms of this Warrant. 10. Miscellaneous Provisions. (a) Applicable Law. This Agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This Agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Ms. Josephine Shoop c/o 1111 Cynthiana Road Georgetown, Kentucky 40324 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement. (g) Severability. Any provision of this Agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this Agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION - APCO By: JOSEPHINE SHOOP, AS HOLDER EX-10.(W) 19 OPTION AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of August 31, 1995, by and between MARK WACHS (the Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for financial consulting services of Holder to the Company NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company and subject to the terms of this agreement, the Company hereby grants to the Holder the right to purchase up to 2,000 shares of the Common Stock, $.00l per value ("Common Stock") of the Company from the date hereof until August 31, 1998, at an exercise price equivalent to $2.44 per share of Common Stock This option is not granted under a stock option plan other than the plan formed by the terms of this agreement. This is not an incentive stock option as that term is defined in the Internal Revenue Code of 1986, as amended. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise, either in cash or in a manner to be determined at the sole discretion of the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of August 31, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to paragraph 1, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Mark Wachs 101 Jerricho Turnpike Jerricho, NY 11753 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdic tion(s), ineffective to the extent of such prohibition or unen forceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION By: /s/ Larry Dorfman HOLDER By: /s/ Mark Wachs EX-10.(X) 20 OPTION AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of February 1, 1996, by and between MARK WACHS (the Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for financial consulting services of Holder to the Company NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company and subject to the terms of this agreement, the Company hereby grants to the Holder the right to purchase up to 2,000 shares of the Common Stock, $.00l per value ("Common Stock") of the Company from the date hereof until August 31, 1998, at an exercise price equivalent to $2.44 per share of Common Stock This option is not granted under a stock option plan other than the plan formed by the terms of this agreement. This is not an incentive stock option as that term is defined in the Internal Revenue Code of 1986, as amended. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise, either in cash or in a manner to be determined at the sole discretion of the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of August 31, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to paragraph 1, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Mark Wachs 101 Jerricho Turnpike Jerricho, NY 11753 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdic tion(s), ineffective to the extent of such prohibition or unen forceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION By: /s/ Larry Dorfman HOLDER By: /s/ Mark Wachs EX-10.(Y) 21 WARRANT AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of August 31, 1995, by and between JOHN JAMESON (the Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for services of Holder to the Company NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company, the Company hereby grants to the Holder the right to purchase up to 30,000 shares of the Common Stock, $.00l per value ("Common Stock") of the Company at an exercise price equivalent to $2.44 per share of Common Stock, as follows: the Holder shall have the right to purchase one-third of the shares of Common Stock purchasable under this agreement on June 30 in each of 1996, 1997 and 1998, provided that during the term of this agreement the Holder sells not less than 10,000 EasyCare service contracts during each period ending June 30 and either (a) the Holder sells only EasyCare service contracts, or (b) if there is no EasyCare service contract available for specific customer needs, the Holder sells service contracts other than EasyCare service contracts not to exceed 10% of the Holder's total service contract revenues. If Holder fails to meet any of the aforementioned conditions, this agreement will terminate and any option that has not vested will immediately expire and any option that has vested will no longer be exercisable. Subject to the foregoing, once Holder has the right to acquire a portion of the shares of Common Stock hereunder, Holder may purchase such shares of Common Stock subject to the terms of this agreement until June 30, 1999. This option is not granted under a stock option plan other than the plan formed by the terms of this agreement. This is not an incentive stock option as that term is defined in the Internal Revenue Code of 1986, as amended. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise, either in cash or in a manner to be determined at the sole discretion of the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of August 31, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to paragraph 1, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: John Jameson 660 Griswold # 100 Northville, MI 48167 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdic tion(s), ineffective to the extent of such prohibition or unen forceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION By: HOLDER By: EX-10.(Z) 22 OPTION AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of August 31, 1995, by and between THE PROVIDENCE GROUP (the Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for services of Holder to the Company NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company, the Company hereby grants to the Holder the right to purchase up to 21,000 shares of the Common Stock, $.00l per value ("Common Stock") of the Company at an exercise price equivalent to $2.44 per share of Common Stock, as follows: the Holder shall have the right to purchase one-third of the shares of Common Stock purchasable under this agreement on June 30 in each of 1996, 1997 and 1998, provided that during the term of this agreement the Holder sells not less than 7,200 EasyCare service contracts during each period ending June 30 and either (a) the Holder sells only EasyCare service contracts, or (b) if there is no EasyCare service contract available for specific customer needs, the Holder sells service contracts other than EasyCare service contracts not to exceed 10% of the Holder's total service contract revenues. If Holder fails to meet any of the aforementioned conditions, this agreement will terminate and any option that has not vested will immediately expire and any option that has vested will no longer be exercisable. Subject to the foregoing, once Holder has the right to acquire a portion of the shares of Common Stock hereunder, Holder may purchase such shares of Common Stock subject to the terms of this agreement until June 30, 1999. This option is not granted under a stock option plan other than the plan formed by the terms of this agreement. This is not an incentive stock option as that term is defined in the Internal Revenue Code of 1986, as amended. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise, either in cash or in a manner to be determined at the sole discretion of the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of August 31, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to paragraph 1, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: The Providence Group 121 Shockoe Slip Richmond, VA 23219 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdic tion(s), ineffective to the extent of such prohibition or unen forceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION By: HOLDER By: EX-10.(AA) 23 OPTION AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of August 31, 1995, by and between THE DEALER GROUP (the Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for services of Holder to the Company NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company, the Company hereby grants to the Holder the right to purchase up to 21,000 shares of the Common Stock, $.00l per value ("Common Stock") of the Company at an exercise price equivalent to $2.44 per share of Common Stock, as follows: the Holder shall have the right to purchase one-third of the shares of Common Stock purchasable under this agreement on June 30 in each of 1996, 1997 and 1998, provided that during the term of this agreement the Holder sells not less than 7,200 EasyCare service contracts during each period ending June 30 and either (a) the Holder sells only EasyCare service contracts, or (b) if there is no EasyCare service contract available for specific customer needs, the Holder sells service contracts other than EasyCare service contracts not to exceed 10% of the Holder's total service contract revenues. If Holder fails to meet any of the aforementioned conditions, this agreement will terminate and any option that has not vested will immediately expire and any option that has vested will no longer be exercisable. Subject to the foregoing, once Holder has the right to acquire a portion of the shares of Common Stock hereunder, Holder may purchase such shares of Common Stock subject to the terms of this agreement until June 30, 1999. This option is not granted under a stock option plan other than the plan formed by the terms of this agreement. This is not an incentive stock option as that term is defined in the Internal Revenue Code of 1986, as amended. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise, either in cash or in a manner to be determined at the sole discretion of the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of August 31, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to paragraph 1, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: The Dealer Group 301 Lake Hinsdale Drive, # 407 Willowbrook, IL 60514 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdic tion(s), ineffective to the extent of such prohibition or unen forceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION By: HOLDER By: EX-10.(BB) 24 OPTION AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of August 31, 1995, by and between AUTOMOTIVE DEVELOPMENT GROUP (the Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for services of Holder to the Company NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company, the Company hereby grants to the Holder the right to purchase up to 21,000 shares of the Common Stock, $.00l per value ("Common Stock") of the Company at an exercise price equivalent to $2.44 per share of Common Stock, as follows: the Holder shall have the right to purchase one-third of the shares of Common Stock purchasable under this agreement on June 30 in each of 1996, 1997 and 1998, provided that during the term of this agreement the Holder sells not less than 7,200 EasyCare service contracts during each period ending June 30 and either (a) the Holder sells only EasyCare service contracts, or (b) if there is no EasyCare service contract available for specific customer needs, the Holder sells service contracts other than EasyCare service contracts not to exceed 10% of the Holder's total service contract revenues. If Holder fails to meet any of the aforementioned conditions, this agreement will terminate and any option that has not vested will immediately expire and any option that has vested will no longer be exercisable. Subject to the foregoing, once Holder has the right to acquire a portion of the shares of Common Stock hereunder, Holder may purchase such shares of Common Stock subject to the terms of this agreement until June 30, 1999. This option is not granted under a stock option plan other than the plan formed by the terms of this agreement. This is not an incentive stock option as that term is defined in the Internal Revenue Code of 1986, as amended. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise, either in cash or in a manner to be determined at the sole discretion of the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of August 31, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to paragraph 1, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Automotive Development Group 48 Rolling Hills Rd #127 Mooresville, NC 28115 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdic tion(s), ineffective to the extent of such prohibition or unen forceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION By: HOLDER By: EX-10.(CC) 25 OPTION AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of August 31, 1995, by and between RODGER ANDERSON (the Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for services of Holder to the Company NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company, the Company hereby grants to the Holder the right to purchase up to 21,000 shares of the Common Stock, $.00l per value ("Common Stock") of the Company at an exercise price equivalent to $2.44 per share of Common Stock, as follows: the Holder shall have the right to purchase one-third of the shares of Common Stock purchasable under this agreement on June 30 in each of 1996, 1997 and 1998, provided that during the term of this agreement the Holder sells not less than 7,200 EasyCare service contracts during each period ending June 30 and either (a) the Holder sells only EasyCare service contracts, or (b) if there is no EasyCare service contract available for specific customer needs, the Holder sells service contracts other than EasyCare service contracts not to exceed 10% of the Holder's total service contract revenues. If Holder fails to meet any of the aforementioned conditions, this agreement will terminate and any option that has not vested will immediately expire and any option that has vested will no longer be exercisable. Subject to the foregoing, once Holder has the right to acquire a portion of the shares of Common Stock hereunder, Holder may purchase such shares of Common Stock subject to the terms of this agreement until June 30, 1999. This option is not granted under a stock option plan other than the plan formed by the terms of this agreement. This is not an incentive stock option as that term is defined in the Internal Revenue Code of 1986, as amended. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise, either in cash or in a manner to be determined at the sole discretion of the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of August 31, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to paragraph 1, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Rodger Anderson 13610 N. Scottsdale Rd #10-317 Scottsdale, AZ 85254 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdic tion(s), ineffective to the extent of such prohibition or unen forceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION By: HOLDER By: EX-10.(DD) 26 OPTION AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of August 31, 1995, by and between CARTEL MARKETING (the Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for services of Holder to the Company NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company, the Company hereby grants to the Holder the right to purchase up to 21,000 shares of the Common Stock, $.00l per value ("Common Stock") of the Company at an exercise price equivalent to $2.44 per share of Common Stock, as follows: the Holder shall have the right to purchase one-third of the shares of Common Stock purchasable under this agreement on June 30 in each of 1996, 1997 and 1998, provided that during the term of this agreement the Holder sells not less than 7,200 EasyCare service contracts during each period ending June 30 and either (a) the Holder sells only EasyCare service contracts, or (b) if there is no EasyCare service contract available for specific customer needs, the Holder sells service contracts other than EasyCare service contracts not to exceed 10% of the Holder's total service contract revenues. If Holder fails to meet any of the aforementioned conditions, this agreement will terminate and any option that has not vested will immediately expire and any option that has vested will no longer be exercisable. Subject to the foregoing, once Holder has the right to acquire a portion of the shares of Common Stock hereunder, Holder may purchase such shares of Common Stock subject to the terms of this agreement until June 30, 1999. This option is not granted under a stock option plan other than the plan formed by the terms of this agreement. This is not an incentive stock option as that term is defined in the Internal Revenue Code of 1986, as amended. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise, either in cash or in a manner to be determined at the sole discretion of the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of August 31, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to paragraph 1, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Cartel Marketing 9841 Airport Blvd, #1424 Los Angeles, CA 90045 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdic tion(s), ineffective to the extent of such prohibition or unen forceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION By: HOLDER By: EX-10.(EE) 27 OPTION AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of August 31, 1995, by and between JOE KUBOFF (the Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for services of Holder to the Company NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company, the Company hereby grants to the Holder the right to purchase up to 12,000 shares of the Common Stock, $.00l per value ("Common Stock") of the Company at an exercise price equivalent to $2.44 per share of Common Stock, as follows: the Holder shall have the right to purchase one-third of the shares of Common Stock purchasable under this agreement on June 30 in each of 1996, 1997 and 1998, provided that during the term of this agreement the Holder sells not less than 4,000 EasyCare service contracts during each period ending June 30 and either (a) the Holder sells only EasyCare service contracts, or (b) if there is no EasyCare service contract available for specific customer needs, the Holder sells service contracts other than EasyCare service contracts not to exceed 10% of the Holder's total service contract revenues. If Holder fails to meet any of the aforementioned conditions, this agreement will terminate and any option that has not vested will immediately expire and any option that has vested will no longer be exercisable. Subject to the foregoing, once Holder has the right to acquire a portion of the shares of Common Stock hereunder, Holder may purchase such shares of Common Stock subject to the terms of this agreement until June 30, 1999. This option is not granted under a stock option plan other than the plan formed by the terms of this agreement. This is not an incentive stock option as that term is defined in the Internal Revenue Code of 1986, as amended. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise, either in cash or in a manner to be determined at the sole discretion of the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of August 31, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to paragraph 1, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Joe Kuboff 458 Helen Drive Hubbard, OH 44425 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdic tion(s), ineffective to the extent of such prohibition or unen forceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION By: HOLDER By: EX-10.(FF) 28 OPTION AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of August 31, 1995, by and between FRANK FOLLARI (the Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for services of Holder to the Company NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company, the Company hereby grants to the Holder the right to purchase up to 12,000 shares of the Common Stock, $.00l per value ("Common Stock") of the Company at an exercise price equivalent to $2.44 per share of Common Stock, as follows: the Holder shall have the right to purchase one-third of the shares of Common Stock purchasable under this agreement on June 30 in each of 1996, 1997 and 1998, provided that during the term of this agreement the Holder sells not less than 4,000 EasyCare service contracts during each period ending June 30 and either (a) the Holder sells only EasyCare service contracts, or (b) if there is no EasyCare service contract available for specific customer needs, the Holder sells service contracts other than EasyCare service contracts not to exceed 10% of the Holder's total service contract revenues. If Holder fails to meet any of the aforementioned conditions, this agreement will terminate and any option that has not vested will immediately expire and any option that has vested will no longer be exercisable. Subject to the foregoing, once Holder has the right to acquire a portion of the shares of Common Stock hereunder, Holder may purchase such shares of Common Stock subject to the terms of this agreement until June 30, 1999. This option is not granted under a stock option plan other than the plan formed by the terms of this agreement. This is not an incentive stock option as that term is defined in the Internal Revenue Code of 1986, as amended. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise, either in cash or in a manner to be determined at the sole discretion of the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of August 31, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to paragraph 1, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder,to: Frank Follari 625 From Rd Paramus, NJ 07652 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdic tion(s), ineffective to the extent of such prohibition or unen forceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION By: HOLDER By: EX-10.(GG) 29 OPTION AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of August 31, 1995, by and between DAVID GOLDEN (the Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for services of Holder to the Company NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company, the Company hereby grants to the Holder the right to purchase up to 12,000 shares of the Common Stock, $.00l per value ("Common Stock") of the Company at an exercise price equivalent to $2.44 per share of Common Stock, as follows: the Holder shall have the right to purchase one-third of the shares of Common Stock purchasable under this agreement on June 30 in each of 1996, 1997 and 1998, provided that during the term of this agreement the Holder sells not less than 4,000 EasyCare service contracts during each period ending June 30 and either (a) the Holder sells only EasyCare service contracts, or (b) if there is no EasyCare service contract available for specific customer needs, the Holder sells service contracts other than EasyCare service contracts not to exceed 10% of the Holder's total service contract revenues. If Holder fails to meet any of the aforementioned conditions, this agreement will terminate and any option that has not vested will immediately expire and any option that has vested will no longer be exercisable. Subject to the foregoing, once Holder has the right to acquire a portion of the shares of Common Stock hereunder, Holder may purchase such shares of Common Stock subject to the terms of this agreement until June 30, 1999. This option is not granted under a stock option plan other than the plan formed by the terms of this agreement. This is not an incentive stock option as that term is defined in the Internal Revenue Code of 1986, as amended. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise, either in cash or in a manner to be determined at the sole discretion of the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of August 31, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to paragraph 1, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: David Golden 4000 N.E. 33rd Terrace # 6 Kansas City, MO 64117 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdic tion(s), ineffective to the extent of such prohibition or unen forceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION By: HOLDER By: EX-10.(HH) 30 OPTION AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of August 31, 1995, by and between JERRY HENLEY (the Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for services of Holder to the Company NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company, the Company hereby grants to the Holder the right to purchase up to 12,000 shares of the Common Stock, $.00l per value ("Common Stock") of the Company at an exercise price equivalent to $2.44 per share of Common Stock, as follows: the Holder shall have the right to purchase one-third of the shares of Common Stock purchasable under this agreement on June 30 in each of 1996, 1997 and 1998, provided that during the term of this agreement the Holder sells not less than 4,000 EasyCare service contracts during each period ending June 30 and either (a) the Holder sells only EasyCare service contracts, or (b) if there is no EasyCare service contract available for specific customer needs, the Holder sells service contracts other than EasyCare service contracts not to exceed 10% of the Holder's total service contract revenues. If Holder fails to meet any of the aforementioned conditions, this agreement will terminate and any option that has not vested will immediately expire and any option that has vested will no longer be exercisable. Subject to the foregoing, once Holder has the right to acquire a portion of the shares of Common Stock hereunder, Holder may purchase such shares of Common Stock subject to the terms of this agreement until June 30, 1999. This option is not granted under a stock option plan other than the plan formed by the terms of this agreement. This is not an incentive stock option as that term is defined in the Internal Revenue Code of 1986, as amended. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise, either in cash or in a manner to be determined at the sole discretion of the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of August 31, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to paragraph 1, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Jerry Henley 21717 Inverness Blvd # 2304 Houston, TX 77073 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdic tion(s), ineffective to the extent of such prohibition or unen forceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION By: HOLDER By: EX-10.(II) 31 OPTION AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of August 31, 1995, by and between JACK ATKIN (the Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for services of Holder to the Company NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company, the Company hereby grants to the Holder the right to purchase up to 12,000 shares of the Common Stock, $.00l per value ("Common Stock") of the Company at an exercise price equivalent to $2.44 per share of Common Stock, as follows: the Holder shall have the right to purchase one-third of the shares of Common Stock purchasable under this agreement on June 30 in each of 1996, 1997 and 1998, provided that during the term of this agreement the Holder sells not less than 4,000 EasyCare service contracts during each period ending June 30 and either (a) the Holder sells only EasyCare service contracts, or (b) if there is no EasyCare service contract available for specific customer needs, the Holder sells service contracts other than EasyCare service contracts not to exceed 10% of the Holder's total service contract revenues. If Holder fails to meet any of the aforementioned conditions, this agreement will terminate and any option that has not vested will immediately expire and any option that has vested will no longer be exercisable. Subject to the foregoing, once Holder has the right to acquire a portion of the shares of Common Stock hereunder, Holder may purchase such shares of Common Stock subject to the terms of this agreement until June 30, 1999. This option is not granted under a stock option plan other than the plan formed by the terms of this agreement. This is not an incentive stock option as that term is defined in the Internal Revenue Code of 1986, as amended. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise, either in cash or in a manner to be determined at the sole discretion of the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of August 31, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to paragraph 1, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Jack Atkin 2607 Palisades Court Lake Oswego, OR 97034 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdic tion(s), ineffective to the extent of such prohibition or unen forceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION By: HOLDER By: EX-10.(JJ) 32 OPTION AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of August 31, 1995, by and between CHARLES MANN (the Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for services of Holder to the Company NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company, the Company hereby grants to the Holder the right to purchase up to 12,000 shares of the Common Stock, $.00l per value ("Common Stock") of the Company at an exercise price equivalent to $2.44 per share of Common Stock, as follows: the Holder shall have the right to purchase one-third of the shares of Common Stock purchasable under this agreement on June 30 in each of 1996, 1997 and 1998, provided that during the term of this agreement the Holder sells not less than 4,000 EasyCare service contracts during each period ending June 30 and either (a) the Holder sells only EasyCare service contracts, or (b) if there is no EasyCare service contract available for specific customer needs, the Holder sells service contracts other than EasyCare service contracts not to exceed 10% of the Holder's total service contract revenues. If Holder fails to meet any of the aforementioned conditions, this agreement will terminate and any option that has not vested will immediately expire and any option that has vested will no longer be exercisable. Subject to the foregoing, once Holder has the right to acquire a portion of the shares of Common Stock hereunder, Holder may purchase such shares of Common Stock subject to the terms of this agreement until June 30, 1999. This option is not granted under a stock option plan other than the plan formed by the terms of this agreement. This is not an incentive stock option as that term is defined in the Internal Revenue Code of 1986, as amended. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise, either in cash or in a manner to be determined at the sole discretion of the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of August 31, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to paragraph 1, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: Charles Mann 3509 Avenida Charada N.W. Albuquerque, NM 87017 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdic tion(s), ineffective to the extent of such prohibition or unen forceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION By: HOLDER By: EX-10.(KK) 33 OPTION AGREEMENT OPTION AGREEMENT AGREEMENT, dated as of August 31, 1995, by and between TASA (the Holder") and Automobile Protection Corporation - APCO (the "Company"). WHEREAS, the Holder has agreed to receive the option herein set forth as consideration for services of Holder to the Company NOW, THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as follows: 1. In consideration of the services of Holder to Company, the Company hereby grants to the Holder the right to purchase up to 12,000 shares of the Common Stock, $.00l per value ("Common Stock") of the Company at an exercise price equivalent to $2.44 per share of Common Stock, as follows: the Holder shall have the right to purchase one-third of the shares of Common Stock purchasable under this agreement on June 30 in each of 1996, 1997 and 1998, provided that during the term of this agreement the Holder sells not less than 4,000 EasyCare service contracts during each period ending June 30 and either (a) the Holder sells only EasyCare service contracts, or (b) if there is no EasyCare service contract available for specific customer needs, the Holder sells service contracts other than EasyCare service contracts not to exceed 10% of the Holder's total service contract revenues. If Holder fails to meet any of the aforementioned conditions, this agreement will terminate and any option that has not vested will immediately expire and any option that has vested will no longer be exercisable. Subject to the foregoing, once Holder has the right to acquire a portion of the shares of Common Stock hereunder, Holder may purchase such shares of Common Stock subject to the terms of this agreement until June 30, 1999. This option is not granted under a stock option plan other than the plan formed by the terms of this agreement. This is not an incentive stock option as that term is defined in the Internal Revenue Code of 1986, as amended. 2. Payment of Exercise Price. The purchase price for the shares of Common Stock pursuant to which the option is exercised, will be paid in full at the time of exercise, either in cash or in a manner to be determined at the sole discretion of the Company. Exercise of any option hereunder shall be by written notice to the Company at its principal place of business, specifying the number of shares of Common Stock being purchased and accompanied by the purchase price and any withholding tax obligations imposed on the Company by reason of the exercise of the option. In the event that the tax obligation, if any, is not paid, the Company will be permitted to treat as payment of any withholding tax amount due, the exercise of that number of whole shares of Common Stock equal to the amount of the tax due divided by the fair market value of the Common Stock as of the date the option is exercised, and the Company will be permitted to deduct such number of shares of Common Stock from the total number being exercised. Certificates representing the shares as to which the option shall have been exercised shall be registered in the name of the person exercising the option. 3. Rights of Stockholder. The Holder shall not have any of the rights of a stockholder with respect to the Common Stock covered by the option until the date of the issuance of a stock certificate for shares of Common Stock purchased hereunder. 4. Transferability. This option and the rights conferred may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right conferred hereby, or upon the levy of any attachment or similar process on the rights conferred hereby, this option and the rights conferred hereby shall immediately become null and void. 5. Restricted Nature of Securities. This option and the shares of Common Stock receivable on the exercise of the option are not registered under the Securities Act of 1933, as amended (the "Act") . As a condition to the sale of Common Stock on the exercise of the option, the person exercising such option may be required by the Company to give it such documents, including such appropriate investment representations as may be required by Counsel for the Company and such additional agreements as the Counsel for the Company may determine, as a condition to the acceptance of the exercise of any option hereunder. The Holder represents that it has received and carefully reviewed the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, and Annual Report to Stockholders and related proxy materials for the Company's Annual Meeting to be held in February 1995, and has been granted the opportunity to obtain any additional, publicly available information relating to the Company and ask questions of executives of the Company that it deems necessary to verify the accuracy and completeness of the information provided to it. Holder represents that it is acquiring this option solely for its own account for the purpose of investment and not with a view to or for resale in connection with any distribution thereof, except in compliance with the Act, any applicable state securities laws and the rules and regulations thereunder. Holder represents that its knowledge and experience in financial and business matters is such that Holder is capable of evaluating an investment in the option and that Holder's financial condition is such that Holder can bear the economic risks of acquiring and holding this option. 6. Sales under Securities Act. Anything in this agreement to the contrary notwithstanding, the Holder hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the option or the Common Stock acquired by him upon exercise of the option hereunder without registration under the Act, or in the event that they are not so registered, unless (a) an exemption from the Act is available thereunder, and (b) the Holder has furnished the Company with notice of such proposed transfer, and the Counsel for the Company, in its reasonable opinion, shall deem such proposed transfer to be so exempt, or the Holder has furnished the Company with notice of such proposed transfer, together with an opinion of legal counsel reasonably satisfactory to the Counsel for the Company, that in such counsel's opinion such proposed transfer shall be so exempt. 7. Stop Transfer: Legend. (a) The Company may place stop transfer orders with its transfer agent against the transfer of the shares of Common Stock issuable under the option hereof in the absence of registration under the Act or an exemption therefrom provided herein. (b) The certificates evidencing shares of Common Stock to be issued upon the exercise of the option may bear the following legends: "The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." "The shares represented by this certificate have been acquired pursuant to an agreement dated as of August 31, 1995, a copy of which is on file with the Company, and may not be transferred, pledged or disposed or exempt in accordance with the terms and conditions thereof." 8. Adjustment to Number of Securities. (a) If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or stock of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split, amendment to the Company's Certificate of Incorporation or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding option. (b) Upon the effective date of the dissolution or liquidation of the Company, or of a reorganization, merger or consolidation of the Company with one or more corporations in which the Company will not survive as an independent publicly owned corporation, or of a transfer of substantially all the property or more than eighty percent (80%) of the then outstanding shares of Common Stock of the Company to another corporation, this option shall terminate unless provision be made in writing in connection with such transaction for the assumption of the option granted, or the substitution for the option of a new option covering the shares of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of stock and prices in which event the new option substituted therefor, shall continue in the manner and under the terms so provided. (c) Adjustments under this paragraph shall be made by the Board of Directors, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under the Plan or any such adjustment. 9. Termination. If the Holder fails to fulfill its obligations pursuant to paragraph 1, then that portion of this option that is not then exercisable on such termination shall immediately terminate and no additional shares of Common Stock shall become exercisable hereunder. Notwithstanding the foregoing, in the event of a termination of this option, if the Holder, as of a time immediately prior to such termination, has the right to acquire any shares of Common Stock, the Holder will have the right to exercise such right pursuant to the terms of this Option. 10. Miscellaneous Provisions. (a) Applicable Law. This agreement shall be governed by the laws of the State of Georgia applicable to contracts made and to be wholly performed therein. (b) Amendment. This agreement may only be amended by a written instrument executed by the Company and by the Holder. (c) Entire Agreement. This agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. (d) Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered by hand or mailed by registered or certified mail, postage prepaid, return receipt requested, as follows: If to the Holder, to: TASA 9200 Montgomery Rd #9 Cincinnati, OH 45242 If to Company, to: Automobile Protection Corporation - APCO 15 Dunwoody Park Drive Dunwoody, GA 30338 Attention: Secretary (f) Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this agreement. (g) Severability. Any provision of this agreement which is held by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s) shall be, as to such jurisdic tion(s), ineffective to the extent of such prohibition or unen forceability without invalidating the remaining provisions of this agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (h) Gender. Unless the context otherwise requires, all personal pronouns used in this agreement, whether in the masculine, feminine or neuter gender, shall include all other genders. IN WITNESS WHEREOF, this agreement has been executed and delivered by the parties hereto. AUTOMOBILE PROTECTION CORPORATION By: HOLDER By: EX-11 34 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS AUTOMOBILE PROTECTION CORPORATION - APCO EXHIBIT 11 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS FORM 10-K DECEMBER 31, 1995
For the Four months For the For the year ended ended year ended year ended December 31, December 31, August 31, August 31, 1995 1994 1994 1993 . - ------------------------------------------------------------------------------------------ PRIMARY Weighted average number of shares outstanding 6,703,332 5,679,895 5,183,000 5,168,000 Net effect of dilutive stock options based on the treasury stock method, using average market price 827,668 1,195,105 635,451 135,000 - ------------------------------------------------------------------------------------------ 7,531,000 6,875,000 5,818,451 5,303,000 - ------------------------------------------------------------------------------------------ Net income (loss) $1,525,582 $ 269,747 $ 912,528 $ (232,047) - ------------------------------------------------------------------------------------------ Per share $ 0.20 $ 0.04 $ 0.16 $ (0.04) - ------------------------------------------------------------------------------------------ FULLY DILUTED Weighted average number of shares outstanding 6,703,332 5,679,895 5,183,000 5,168,000 Net effect of dilutive stock options based on the treasury stock method, using the year-end market price which was higher than the average market price 900,668 1,195,105 762,997 527,000 - ------------------------------------------------------------------------------------------ 7,604,000 6,875,000 5,945,997 5,695,000 - ------------------------------------------------------------------------------------------ Net income (loss) $1,525,582 $ 269,747 $ 912,528 $ (232,047) - ------------------------------------------------------------------------------------------ Per share $ 0.20 $ 0.04 $ 0.15 $ (0.04) - ------------------------------------------------------------------------------------------ The weighted average number of shares for the fiscal year ended August 31, 1993 in the above calculation is anti-dilutive.
EX-23 35 CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-86594) of Automobile Protection Corporation - APCO of our report dated March 7, 1996 appearing on page 10 of this Annual Report on Form 10-K. PRICE WATERHOUSE LLP Atlanta, GA March 28, 1996 EX-27 36 EXHIBIT 27
5 1,000 YEAR DEC-31-1995 DEC-31-1995 10,211 5,092 1,212 36 0 16,147 2,264 1,390 19,592 4,876 0 10 0 0 14,684 19,592 49,211 49,211 39,323 39,323 0 0 0 2,448 922 0 0 0 0 1,526 .20 .20
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