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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) December 1, 1999
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Crown Group, Inc.
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(Exact name of registrant as specified in its charter)
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Texas 0-14939 63-0851141
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(State or other jurisdiction (Commission File Number) (IRS Employer Identification No.)
of incorporation)
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4040 North MacArthur Boulevard, Suite 100, Irving, Texas 75038
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(Address of principal executive offices)
Registrant's telephone number, including area code (972) 717-3423
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
SMART CHOICE
On December 1, 1999, pursuant to a definitive stock purchase agreement
negotiated at arms length, Crown Group, Inc. ("Crown") acquired a 70% voting and
economic interest in Smart Choice Automotive Group, Inc. ("Smart Choice")
directly from Smart Choice. The purchase price ("Purchase Price") consisted of
(i) $3.0 million cash, (ii) the conversion of $4.5 million of Smart Choice debt,
which Crown had contemporaneously acquired from a third party for approximately
$2.3 million cash, and (iii) the contribution of Crown's 85% interest in Paaco
Automotive Group, Inc. and Premium Auto Acceptance Corporation (collectively,
"Paaco"). In consideration for the Purchase Price Crown received 1,371,581.47
shares of Smart Choice Series E Convertible Preferred Stock, which is
convertible into 137,158,147 shares of Smart Choice common stock representing
70% of the ownership and voting rights of Smart Choice on an "as converted"
basis. The cash consideration paid by Crown was obtained from working capital.
Contemporaneously with Crown's purchase of a 70% interest in Smart Choice,
approximately $15.0 million of Smart Choice's outstanding debt and preferred
stock was converted into shares of common stock representing a 20.7% interest in
Smart Choice. In addition, the Paaco minority shareholders converted their 15%
interest in Paaco into shares of Smart Choice Series E Convertible Preferred
Stock representing a 5% voting and economic interest in Smart Choice. Paaco is
now a wholly-owned subsidiary of Smart Choice.
In connection with the transaction, each of Paaco and Smart Choice amended
and restructured their senior finance receivables and inventory credit
facilities on more favorable terms than the facilities they replaced.
Excluding Paaco, Smart Choice operates eleven "buy-here pay-here" used car
dealerships in central Florida. Smart Choice's assets consist principally of (i)
finance receivables originated in the sale of used vehicles, and (ii) inventory.
For its most recent fiscal year ended December 31, 1998, Smart Choice reported
revenues from continuing operations of $95.4 million and a loss from continuing
operations of $7.3 million. For the nine months ended September 30, 1999, Smart
Choice reported revenues of $71.4 million and a loss from continuing operations
of $24.2 million.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) and (b). The financial statements and pro forma financial information
required to be filed with this report are not presently available. Crown will
file the required financial statements under cover of Form 8-KA as soon as
practicable but not later than 60 days after the due date of the filing of this
report.
(c). Exhibits.
The following exhibits are filed with this report:
Exhibit Number Description of Exhibit
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2.5 Stock Purchase Agreement dated as of December 1, 1999 by
and between Smart Choice Automotive Group, Inc. and Crown
Group, Inc.
4.7.2 First Amended and Restated Schedule to First Amended and
Restated Loan and Security Agreement dated November 18,
1999 by and between Finova Capital Corporation ("Finova")
and Paaco.
4.9 Second Amended and Restated Loan and Security Agreement
dated November 9, 1998 by and between Florida Finance
Group, Inc., Liberty Finance Company, Smart Choice
Receivables Holding Company and First Choice Auto
Finance, Inc. (collectively, the "Smart Choice
Subsidiaries") and Finova.
4.9.1 First Amended and Restated Schedule to Second Amended and
Restated Loan and Security Agreement dated November 18,
1999 by and between the Smart Choice Subsidiaries and
Finova.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
CROWN GROUP, INC.
By: /s/ Mark D. Slusser
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Mark D. Slusser
Chief Financial Officer
Dated: December 13, 1999
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EXHIBIT INDEX
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EXHIBIT
NUMBER DESCRIPTION
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2.5 Stock Purchase Agreement dated as of December 1, 1999 by
and between Smart Choice Automotive Group, Inc. and Crown
Group, Inc.
4.7.2 First Amended and Restated Schedule to First Amended and
Restated Loan and Security Agreement dated November 18,
1999 by and between Finova Capital Corporation ("Finova")
and Paaco.
4.9 Second Amended and Restated Loan and Security Agreement
dated November 9, 1998 by and between Florida Finance
Group, Inc., Liberty Finance Company, Smart Choice
Receivables Holding Company and First Choice Auto
Finance, Inc. (collectively, the "Smart Choice
Subsidiaries") and Finova.
4.9.1 First Amended and Restated Schedule to Second Amended and
Restated Loan and Security Agreement dated November 18,
1999 by and between the Smart Choice Subsidiaries and
Finova.
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Exhibit 2.5
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
CROWN GROUP, INC.
AND
SMART CHOICE AUTOMOTIVE GROUP, INC.
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TABLE OF CONTENTS
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1. Sale and Purchase of the Shares..........................................................................1
2. Purchase and Payment.....................................................................................2
(a) Purchase Price. ................................................................................2
(b) Further Assurances. ............................................................................2
3. Representations and Warranties of the Company............................................................2
(a) Organization and Standing of the Company........................................................2
(b) Subsidiaries....................................................................................2
(c) Capital Stock...................................................................................3
(d) Corporate Proceedings of the Company............................................................4
(e) Financial Statements............................................................................4
(f) Absence of Certain Changes or Events............................................................5
(g) Tax Matters.....................................................................................8
(h) Title to Properties and Related Matters.........................................................9
(i) Consents and Approvals..........................................................................9
(j) Receivables....................................................................................10
(k) Litigation and Proceedings.....................................................................10
(l) Insurance Coverage.............................................................................11
(m) Employee Benefits..............................................................................12
(n) Employee Relations.............................................................................13
(o) Patents, Trademarks and Licenses...............................................................14
(p) Approvals, Authorizations and Regulations......................................................14
(q) Inventory......................................................................................15
(r) Guarantees, Etc................................................................................15
(s) OSHA...........................................................................................15
(t) No Defaults....................................................................................15
(u) No Conflicts...................................................................................16
(v) Brokers........................................................................................16
(w) Environmental Matters..........................................................................16
(x) Permits, Licenses, Etc.........................................................................19
(y) Software.......................................................................................19
(z) Disclosure.....................................................................................20
4. Representations and Warranties of the Purchaser.........................................................20
(a) Organization, Standing and Authority of the Purchaser..........................................20
(b) No Violation...................................................................................20
(c) Corporate Proceedings of the Purchaser.........................................................20
(d) Financial Statements...........................................................................21
(e) Brokers........................................................................................21
(f) Accredited Investor/Investment.................................................................22
(g) Due Diligence..................................................................................22
(h) No Knowledge of Breach.........................................................................23
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5. Closing Actions.........................................................................................23
(a) Resignations...................................................................................23
(b) Opinion of the Company's Counsel...............................................................23
(c) Opinion of Purchaser's Counsel.................................................................24
(d) Ready Finance Debt.............................................................................25
(e) Conversion of Other Company Debt...............................................................25
(f) High Capital Funding, LLC......................................................................25
(g) Conversion of Company Preferred Stock..........................................................26
(h) Merger of Paaco Automotive Group, Inc..........................................................26
(i) Grant to the Purchaser of Options, Warrants, Etc...............................................27
(j) Finova Capital Corporation.....................................................................27
(k) No Material Adverse Changes....................................................................27
(l) Consents.......................................................................................27
(m) Certified Resolutions of the Company...........................................................28
(n) Certified Resolutions of the Purchaser.........................................................28
(o) Hart-Scott-Rodino Filing and Approval..........................................................28
(p) Employment/Consulting Agreements...............................................................28
(q) Settlement of Existing Litigation..............................................................29
(r) Bankers Insurance Company Investment...........................................................29
6. The Closing.............................................................................................29
7. Nature and Survival of Representations and Warranties...................................................29
(a) Nature of Statements...........................................................................29
(b) Survival of Representations and Warranties.....................................................30
8. Indemnification by Company and Related Matters..........................................................30
9. Indemnification by the Purchaser and Related Matters....................................................31
10. Expenses................................................................................................32
11. Notices.................................................................................................32
12. Miscellaneous...........................................................................................34
(a) Assignment.....................................................................................34
(b) Section and Paragraph Headings.................................................................34
(c) Amendment......................................................................................34
(d) Entire Agreement...............................................................................34
(e) Knowledge......................................................................................34
(f) Public Announcements...........................................................................34
(g) Counterparts...................................................................................34
(h) Governing Law..................................................................................35
(i) Material Adverse Effect........................................................................35
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT dated on or as of December 1, 1999, by
and between CROWN GROUP, INC., a Texas corporation (the "Purchaser" or "Crown
Group"), and SMART CHOICE AUTOMOTIVE GROUP, INC., a Florida corporation (the
"Company" or "Smart Choice").
W I T N E S S E T H:
WHEREAS, the Purchaser desires to purchase 150,000 shares of the Series
E Convertible Preferred Stock, $.01 par value per share, of the Company (herein
referred to as the "Shares"), and the Company desires to sell the Shares to the
Purchaser, all upon the terms and conditions set forth herein; and
WHEREAS, this Agreement sets forth the terms and conditions to which
the parties have agreed and further contemplates the execution and delivery of
certain collateral agreements and the consummation of certain related
transactions hereinafter described;
NOW, THEREFORE, in consideration of the mutual promises and covenants
of the parties, the parties agree as follows:
1. Sale and Purchase of the Shares. The Company hereby sells, assigns
and conveys to the Purchaser on the Closing Date (as hereinafter defined), free
and clear of all security interests, pledges, liens, charges and encumbrances,
the Shares and transfers and delivers to the Purchaser the certificates
evidencing the Shares. The Purchaser hereby purchases and accepts the Shares for
the consideration set forth in Section 2(a) hereof.
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2. Purchase and Payment.
(a) Purchase Price. The total purchase price (the "Purchase
Price") for the Shares is Three Million ($3,000,000) Dollars, payable
by the Purchaser to the Company at Closing (as hereinafter defined), by
wire transfer funds.
(b) Further Assurances. The Company hereby agrees to execute
and deliver from time to time at the request of the Purchaser and
without further consideration, such additional instruments of
conveyance and transfer and to take such other action as the Purchaser
may reasonably require to more effectively convey, assign, transfer and
deliver the Shares to the Purchaser.
3. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with the Purchaser that:
(a) Organization and Standing of the Company. The Company and
each of the Company Subsidiaries (as hereinafter defined) is a
corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation. The Company and the Company
Subsidiaries have all requisite corporate power and authority to
conduct their respective businesses as they are now being conducted.
The Company has delivered to the Purchaser complete and correct copies
of the Articles of Incorporation (duly certified by the Secretary of
State of the respective states of incorporation) and By-Laws (certified
by the Secretary of the Company or the Company Subsidiaries, as the
case may be) of the Company and the Company Subsidiaries as in effect
on the date hereof.
(b) Subsidiaries. All direct and indirect subsidiaries of the
Company (individually, a "Company Subsidiary," and collectively, the
"Company Subsidiaries") are listed on Schedule 3(b) attached hereto.
Except for the Company
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Subsidiaries, the Company does not (i) own, directly or indirectly, any
of the outstanding capital stock or securities convertible into capital
stock of any other corporation, or (ii) own, directly or indirectly,
any participating interest in any partnership, joint venture or other
business enterprise.
(c) Capital Stock. The total authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock, $.01 par value
per share (the "Company Common Stock"), of which as of August 16, 1999,
7,782,277 shares have been issued and are outstanding, and 5,000,000
shares of Preferred Stock, $.01 par value per share, (the "Company
Preferred Stock"), of which (i) 440 shares of Series A Convertible
Preferred Stock (the "Company Series A Preferred Stock"), have been
issued and no shares are outstanding, (ii) 220 shares of Series B
Convertible Preferred Stock (the "Company Series B Preferred Stock"),
have been issued and are outstanding, (iii) 24.98 shares of Series C
Convertible Preferred Stock (the "Company Series C Preferred Stock"),
have been issued and are outstanding, (iv) 350 shares of Series D
Convertible Preferred Stock (the "Company Series D Preferred Stock"),
have been issued and are outstanding, and (v) no shares of Series E
Convertible Preferred Stock (the "Company Series E Preferred Stock"),
have been issued and are outstanding. A true and correct copy of the
Sixth Articles of Amendment to the Articles of Incorporation of the
Company authorizing the designation of the Company Series E Preferred
Stock is attached hereto as Exhibit "A." Except as set forth in
Schedule 3(c) attached hereto, there are no existing options, warrants,
calls, commitments or other rights of any character (including
conversion or preemptive rights) relating to the acquisition of any
issued or unissued
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capital stock or other securities of the Company (collectively, the
"Existing Options").
(d) Corporate Proceedings of the Company. The execution,
delivery and performance of this Agreement has been authorized by the
Board of Directors of the Company and this Agreement constitutes the
valid and legally binding obligation of the Company, enforceable in
accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(e) Financial Statements. The Company has delivered to the
Purchaser correct and complete copies of the Company's and the Company
Subsidiaries' consolidated unaudited monthly financial statements
consisting of consolidated balance sheets of the Company and the
Company Subsidiaries as of the end of each month from January 1999
through September 1999 and the related statements of income for the
periods then ended. The Company has also delivered to the Purchaser
correct and complete copies of financial statements consisting of the
consolidated balance sheets of the Company and the Company Subsidiaries
as of December 31, 1998 and the related consolidated statements of
income, stockholders' equity and cash flows for the period then ended,
all of which have been audited by the firm of BDO Seidman, LLP (the
"Audited Financial Statements"). All such unaudited financial
statements and the Audited Financial Statements are referred to herein
collectively as the "Financial Statements." The Financial Statements
are in accordance with the books and records of the Company and the
Company Subsidiaries in all material respects, and there have not been
any material
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transactions that have not been recorded in the accounting records
underlying such Financial Statements. In addition, The Financial
Statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied and present
accurately, in all material respects, the financial position of the
Company and the Company Subsidiaries as of the dates thereof, and the
results of their operations for the periods then ended, provided,
however, that the unaudited financial statements may be subject to
year-end adjustments and such unaudited financial statements lack
footnotes and other presentation items. The balance sheet of the
Company and the Company Subsidiaries as of September 30, 1999 is
referred to herein as the "Company Balance Sheet," and the date thereof
is referred to as the "Company Balance Sheet Date."
(f) Absence of Certain Changes or Events. Except as set forth
in Schedule 3(f) or except as contemplated by this Agreement, since the
Company Balance Sheet Date, none of the Company and the Company
Subsidiaries has:
(i) issued, delivered or agreed to issue or deliver
any stock, bonds or other corporate securities (whether
authorized and unissued or held in the treasury) or granted or
agreed to grant any options, warrants or other rights calling
for the issuance thereof;
(ii) except as otherwise permitted herein, borrowed
or agreed to borrow any funds or incurred, or become subject
to, any obligation or liability (absolute or contingent)
except in the ordinary course of business in customary
amounts;
(iii) paid any obligation or liability (absolute or
contingent) except in the ordinary course of business in
customary amounts;
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(iv) paid any obligation or liability (absolute or
contingent) other than current liabilities reflected in or
shown on the Financial Statements (or the notes thereto) and
obligations or liabilities incurred since the date thereof and
permitted to be so incurred by the foregoing clause (ii) of
this Section 3(f);
(v) declared or made, or agreed to declare or make,
any payment of dividends or distribution of any assets of any
kind whatsoever to the Company or affiliates of the Company,
or purchased or redeemed any shares of its capital stock;
(vi) sold or transferred, or agreed to sell or
transfer, any of its assets, properties or rights (except
sales in the ordinary course of business) or cancelled or
agreed to cancel, any debts or claims;
(vii) entered or agreed to enter into any agreement
or arrangement granting any preferential rights to purchase
substantially all of the assets, properties or rights of the
Company or the Company Subsidiaries (including management and
control thereof), or requiring the consent of any party to the
transfer and assignment of such assets, properties or rights
(or changes in management or control thereof), or providing
for the merger or consolidation of the Company or the Company
Subsidiaries with or into another corporation, other than as
described in this Agreement and the documents contemplated
hereby;
(viii) waived any rights of material value;
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(ix) except in the ordinary course of business, made
or permitted any amendment or termination of any material
contract, agreement or license to which it is a party;
(x) made any accrual or arrangement for the payment
of bonuses or special compensation of any kind or any
severance or termination pay to any present or former officer
or employee;
(xi) increased the rate of compensation payable or to
become payable by it to any of its officers or key employees
compensated at a rate in excess of $50,000 per annum; or made
any increase in any profit sharing, bonus, incentive, deferred
compensation, insurance, pension, retirement or other employee
benefit plan, payment or arrangement made to, for or with any
such officers or key employees;
(xii) committed to purchase inventories, parts,
supplies or other items in excess of its normal, ordinary and
usual requirements or at excessive prices, all computed based
on historical practices of the Company and the Company
Subsidiaries;
(xiii) experienced any significant labor trouble; or
(xiv) suffered any material losses or any damage,
destruction or loss, whether or not covered by insurance,
which materially and adversely affects its assets or business,
or had any material adverse change in the business, of the
Company or the Company Subsidiaries, in each case, which would
reasonably be expected to have a Material Adverse Effect on
the Company or the Company Subsidiaries.
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(g) Tax Matters. All United States, state, county and local
and other taxes, including without limitation, income taxes, payroll
taxes, corporate franchise taxes, sales, excise and use taxes and ad
valorem taxes, due and payable by the Company and the Company
Subsidiaries for the periods ended prior to the date hereof, have been
paid or accrued and there is no further liability (whether or not
disclosed on their respective tax returns) for any taxes relating to
such periods, and no interest or penalties have accrued or are accruing
with respect thereto, except for taxes that are being contested in good
faith by appropriate proceedings and as to which adequate reserves have
been reflected on the Financial Statements and established (and through
and including the Closing Date will establish) reserves that are
adequate for the payment of all taxes not yet due and payable with
respect to the results of operations through the Closing Date. The
Company and the Company Subsidiaries have timely filed in materially
correct form all tax returns and reports required to be filed by them
on or before the date of this Agreement with all such taxing
authorities, except as otherwise set forth on Schedule 3(g). The
liability for Federal, state and local taxes reflected on the most
recent Company's Financial Statements, if any, represents at the date
thereof, reasonable and adequate provision for the payment of all
accrued and unpaid Federal, state and local taxes of the Company and
the Company Subsidiaries. No assessments of deficiencies have been made
against the Company or the Company Subsidiaries, and no extensions of
time are in effect for the filing of any returns or the assessment of
deficiencies. To the Company's knowledge, no examinations by the
Internal Revenue Service of the Federal income tax returns of the
Company or the Company Subsidiaries for any taxable year are presently
pending. The Company has delivered to the Purchaser true
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and complete copies of all of the Company's and the Company
Subsidiaries' Federal and state Income Tax Returns and payroll tax
returns for each of their fiscal years from 1995 through 1998.
(h) Title to Properties and Related Matters. The assets
reflected in the Financial Statements were at the date thereof, and,
except for assets consumed or disposed of in the ordinary course of
business since the date thereof, are now owned by the Company or the
Company Subsidiaries by good title, free and clear from all security
interests, mortgages, liens, claims, defects and encumbrances except
liens, charges or encumbrances discussed or referred to in the
Financial Statements, the related notes or schedules thereto or in
Schedule 3(h) delivered to the Purchaser pursuant to this Section 3.
Except as disclosed in Schedule 3(h), all such assets are in good
operating condition and repair, subject to ordinary wear and tear. All
of such assets have been properly maintained, with no extraordinary
maintenance planned or anticipated, and are adequate and sufficient for
the operation of the Company's and the Company Subsidiaries' business
as historically operated by the Company and the Company Subsidiaries.
There are no material capital expenditures currently contemplated or
necessary to maintain the current operation of the Company's and the
Company Subsidiaries' business. The Nissan and Volvo new car
dealerships owned by the Company have been sold and all indebtedness
related thereto or secured by the assets thereof, has been released, or
will be released promptly after Closing.
(i) Consents and Approvals. No notification, authorization,
permit, consent or approval of, or notice to, or filing with, any
governmental or regulatory authority or other third party is required
to be obtained, given or made, or waiting
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period required to expire as a condition to the lawful execution and
delivery of this Agreement, the consummation by the Company of the
transaction contemplated herein, or the fulfillment of the terms and
compliance with the provisions hereof, except for such permits,
consents, licenses, approvals or authorizations or declarations,
exemptions, filings or registrations (a) disclosed in Schedule 3(i) or
(b) the failure of which to obtain or make do not and will not (A)
affect the validity and enforceability of this Agreement or (B) either
individually or in the aggregate reasonably be expected to have a
Material Adverse Effect.
(j) Receivables. All notes receivable, contracts receivable
and accounts receivable (collectively, the "Receivables") are properly
reflected on the Company's and the Company Subsidiaries' books and
records are valid and have arisen in the ordinary course of business.
None of such Receivables has been the subject of any factoring by the
Company or the Company Subsidiaries.
(k) Litigation and Proceedings. Except as described in
Schedule 3(k), there are no actions, suits or proceedings pending or,
to the knowledge of the Company or the Company Subsidiaries, threatened
against or affecting the Company or the Company Subsidiaries, at law or
in equity, or before or by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind, which would be reasonably expected
to result in any judgment or liability not fully covered by casualty or
liability insurance (less applicable deductible or retention, if any)
and have a Material Adverse Effect. Neither the Company nor the Company
Subsidiaries are in default with respect to any judgment, order, writ,
injunction, decree, award, or, to the Company's knowledge, in default
with respect to any rule or regulation of any court, arbitrator
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or governmental department, commission, board, bureau, agency or
instrumentality which default would reasonably be expected to have a
Material Adverse Effect.
(l) Insurance Coverage. With respect to each such insurance
policy owned by the Company and the Company Subsidiaries: (A) the
policy is legal, valid, binding, enforceable, except as the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally
and the availability of equitable remedies may be limited by equitable
principles of general applicability, and in full force and effect with
respect to the periods and risks which such policy purports to insure;
(B) the policy will continue to be legal, valid, binding, enforceable
and in full force and effect in accordance with its terms on the same
terms immediately following the consummation of the transactions
contemplated hereby; (C) neither the Company nor the Company
Subsidiaries are in breach or default (including with respect to the
payment of premiums or the giving of notices) of any material term
thereto, and to the Company's knowledge, no event has occurred which,
with notice or the lapse of time, would reasonably be expected to
constitute such a breach or default, or permit termination,
modification or acceleration under the policy; and (D) to the Company's
knowledge, no party to the policy has repudiated any provision thereof.
To the knowledge of the Company, the Company and the Company
Subsidiaries have been covered during the past five years by insurance
in scope and amount customary and reasonable for the businesses in
which it has engaged during such period. The Company and the Company
Subsidiaries do not have any self-insurance arrangements affecting the
Company and the Company Subsidiaries. "Self insurance arrangements"
means any arrangement by which the Company and the Company Subsidiaries
have
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assumed risks in scope and amount customarily insured by businesses in
the Company's and the Company Subsidiaries' industry and geographic
region.
(m) Employee Benefits.
(i) The Company and the Company Subsidiaries have
complied and currently are in compliance, both as to form and
operation, in all material respects with the applicable
provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and the Internal Revenue Code of
1986, as amended (the "Code"), respectively, with respect to
each "employee benefit plan" as defined under Section 3(3) of
ERISA, except where the failure to comply would not reasonably
be expected to have a Material Adverse Effect.
(ii) Neither the Company nor the Company Subsidiaries
have ever maintained, adopted or established, contributed or
been required to contribute to, or otherwise participated or
been required to participate in, a "multiemployer plan" (as
defined in Section 3(37) of ERISA). No amount is due or owing
from the Company or any Company Subsidiary on account of any
withdrawal therefrom.
(iii) Neither the Company nor the Company
Subsidiaries have incurred any liability with respect to a
Plan, including, without limitation, under ERISA, (including,
without limitation, Title I or Title IV of ERISA, other than
liability for premiums due to the Pension Benefit Guaranty
Corporation ("PBGC")), the Code or other applicable law, which
has not been satisfied in full and, to the
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knowledge of the Company, no event has occurred, and there
exists no known condition or set of circumstances, which would
reasonably be expected to result in the imposition of any
liability with respect to a Plan, including, without
limitation, under ERISA (including, without limitation, Title
I or Title IV of ERISA), the Code or other applicable law with
respect to the Plan, wherein any such liability, individually
or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
(iv) Except as set forth in Schedule 3(m) attached
hereto, neither the Company nor the Company Subsidiaries have
any outstanding commitments to provide or to cause to be
provided any severance or other post-employment benefit,
salary continuation, termination, disability, death,
retirement, health or medical benefit or similar benefit to
any person (including, without limitation, any former or
current employee) that has not been reflected in the Company's
Financial Statements.
(n) Employee Relations. The Company and the Company
Subsidiaries are in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours of employees, and
there is no labor strike, dispute, slowdown or representation campaign
or work-stoppage pending or, to the Company's knowledge, threatened
with respect to employees of the Company or the Company Subsidiaries.
Except as disclosed in Schedule 3(n), there is not, pending or, to the
Company's knowledge, threatened, any unfair labor practice complaint
against the Company or
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the Company Subsidiaries pending before any relevant authority or union
representation petition respecting the employees of the Company or the
Company Subsidiaries.
(o) Patents, Trademarks and Licenses. Neither the Company nor
the Company Subsidiaries have any patents or patent applications
pending. Schedule 3(o) contains an accurate and complete list of all
trademarks, trade names, service marks and copyrights of the Company.
None of the foregoing is registered nor have any applications for such
registration been made. Neither the Company nor the Company
Subsidiaries have received any notice of any claim of infringement or
other complaint that its operations conflict with or infringe upon the
patents, trade names, trademarks, trade secrets, copyrights or product
formulas of others.
(p) Approvals, Authorizations and Regulations. Except as
disclosed in Schedule 3(p), the Company's and the Company Subsidiaries'
business is being conducted in compliance with all applicable laws,
ordinances, rules and regulations of all governmental authorities, and
neither the Company, the Company Subsidiaries, nor any officer,
director, stockholder, agent or employee has violated any law,
ordinance, rule or regulation in connection with the Company's and the
Company Subsidiaries' business, except for such violations as would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Further, other than as disclosed on Schedule
3(p), neither the Company nor the Company Subsidiaries have received
any notice (written or otherwise) from any governmental authority
asserting or investigating any alleged failure to comply with any
applicable law, ordinance or regulation, except for such failure as
would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
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<PAGE> 18
(q) Inventory. None of the used vehicle inventories of the
Company and the Company Subsidiaries are obsolete, defective or
otherwise not saleable or usable in the ordinary course of business in
any material respects, except to the extent of the inventory reserve
reflected in the unaudited financial statements for the month ended
September 30, 1999.
(r) Guarantees, Etc. Except as disclosed in Schedule 3(r),
neither the Company nor the Company Subsidiaries have given any
guarantee, indemnity, warranty or bond, or incurred any other similar
obligation or created any security for or in respect of, liabilities,
actual or contingent, of any other person that remains outstanding. All
guaranties of the Company and the Company Subsidiaries on behalf of any
person other than another Company Subsidiary (excluding the Company
Subsidiaries that owned the Nissan and Volvo dealerships) have been
terminated.
(s) OSHA. Neither the Company nor the Company Subsidiaries
have received notice of any violation by the Company or the Company
Subsidiaries, and to the Company's knowledge, neither the Company nor
any Company Subsidiary is in violation of and has not been in violation
of, the Occupational Safety and Health Act of 1970, including rules and
regulations thereunder, or any other federal, state, local or foreign
laws, including rules and regulations thereunder, regulating or
otherwise affecting employee health and safety which would reasonably
be expected to have a Material Adverse Effect.
(t) No Defaults. Except as set forth on Schedule 3(t) attached
hereto, neither the Company nor the Company Subsidiaries are in default
under, nor has any event occurred which with notice or lapse of time or
both, would reasonably be expected to result in a waiver (except caused
by the statute of limitations) of any
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<PAGE> 19
material right or default under, any outstanding indenture, mortgage,
lease, contract or agreement to which the Company or any of the Company
Subsidiaries is a party or by which the Company, the Company
Subsidiaries or their assets may be bound, or under any provision of
the Company's or the Company Subsidiaries' Articles of Incorporation or
By-Laws, which would reasonably be expected to have a Material Adverse
Effect.
(u) No Conflicts. The execution and performance of this
Agreement by the Company and the Company Subsidiaries in accordance
with its terms and the transactions contemplated hereby will not
violate any provision of or result in a breach of or constitute a
default under the Articles of Incorporation or By-Laws of the Company
and the Company Subsidiaries, or under any order, writ, injunction or
decree of any court, governmental agency or arbitration tribunal, or
under any contract, agreement or instrument to which the Company or any
Company Subsidiary is a party or by which its properties may be bound,
or under any law, statute or regulation, except where the violation,
conflict, breach or default would not reasonably be expected to have a
Material Adverse Effect.
(v) Brokers. The Company is not a party to nor in any way
obligated under a contract or other agreement, and there are no
outstanding claims against any of them, for the payment of any broker's
or finder's fees in connection with the origin, negotiation, execution
or performance of this Agreement.
(w) Environmental Matters.
(i) For the purposes of this Agreement, the following
definitions shall apply:
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<PAGE> 20
Environment: Ambient air, surface water, groundwater, soil,
sediment and land.
Environmental Conditions: Any environmental contamination of
any kind or nature resulting from the presence of Hazardous
Materials in the surface soils, subsurface soils, surface
waters or groundwater.
Environmental Laws: All existing federal, state or local laws
or ordinances and any regulations, rules, or administrative or
judicial rulings issued or promulgated thereunder and common
law relating to (a) Releases or threatened Releases of
Hazardous Materials or materials containing Hazardous
Materials; (b) the manufacture, handling, transport, use,
treatment, storage or disposal of Hazardous Materials or
materials containing Hazardous Materials; or (c) otherwise
relating to the protection of human health or the Environment,
including, without limitation, the Comprehensive Environmental
Response Compensation and Liability Act, 42 U.S.C. Section
9601 et seq., ("CERCLA"), the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et seq., ("RCRA"), the
Clean Water Act, 33-U.S.C. Section 1251 et seq., the Clean Air
Act, 42 U.S.C. Section 7401 et seq., the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq., ("TSCA"), and all
state analogues and counterparts to any of the foregoing.
Facilities: The real property and improvements located at the
locations owned or leased by the Company or the Company
Subsidiaries.
Hazardous Materials: Any substance defined as "Hazardous
Waste", "Hazardous Substance", "Hazardous Material", pollutant
or contaminant under any existing Environmental Laws.
Hazardous Materials include, without limitation, asbestos,
polychlorinated biphenyls and petroleum products.
Release: Any spilling, leaking, pumping, pouring, leaching,
emitting, emptying, discharging, injecting, escaping, dumping
or disposing of Hazardous Materials or materials containing
Hazardous Materials into the Environment.
(ii) Except as would not reasonably be expected to
have a Material Adverse Effect or as disclosed in Schedule
3(w), there are
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no Environmental Conditions on, at, under or emanating from
the Facilities.
(iii) Except as would not reasonably be expected to
have a Material Adverse Effect or as disclosed in Schedule
3(w), neither the Company nor any Company Subsidiary has
received any notice claiming or alleging that the Company or
any Company Subsidiary (1) has violated any applicable
Environmental Laws; or (2) is responsible or potentially
responsible for any remedial or removal action under any
applicable Environmental Laws, and to the Company's knowledge,
no such claim is threatened.
(iv) Except as would not reasonably be expected to
have a Material Adverse Effect or as disclosed in Schedule
3(w):
(1) the Company and the Company Subsidiaries have all
Permits required under applicable Environmental Laws
that are necessary to conduct the business of the
Company and the Company Subsidiaries as presently
conducted, the absence of which would have a material
adverse effect on the Company or the Company
Subsidiaries (the "Material Environmental Permits"),
and has provided copies of all the Material
Environmental Permits to the Purchaser;
(2) all the Material Environmental Permits are in
full force and effect and neither the Company nor any
Company Subsidiary is in material default of any
thereof;
(3) there is no threatened suspension, cancellation
or non-renewal of any of the Material Environmental
Permits or any basis for such suspension,
cancellation or non-renewal; and
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<PAGE> 22
(4) the Company and the Company Subsidiaries shall
renew all the Material Environmental Permits that
shall expire on or before Closing.
(v) PCB Items. Except as would not reasonably be
expected to have a Material Adverse Effect or as disclosed in
Schedule 3(w), none of the assets of the Company or the
Company Subsidiaries is a PCB Item (as defined in 40 C.F.R.
Section 761.3).
(x) Permits, Licenses, Etc. The Company and the Company
Subsidiaries have all Permits (except for Environmental Permits, which
are the subject of specific representations and warranties in Section
3(x) hereof), that are required in order to carry on the Company's and
the Company Subsidiaries' business as presently conducted, the absence
of which would reasonably be expected to result in a Material Adverse
Effect on the Company or the Company Subsidiaries (the "Material
Permits"). All Material Permits are in full force and effect, and, to
the knowledge of the Company, no suspension, cancellation or
non-renewal of any Material Permit is threatened, nor, to the best of
the Company's knowledge, does there exist any basis for such
suspension, cancellation or non-renewal.
(y) Software. To the Company's knowledge, all operating and
applications computer programs and data bases (the "Software") which
the Company and the Company Subsidiaries use is owned outright by the
Company and the Company Subsidiaries or if any Software is not owned by
the Company or the Company Subsidiaries, the Company and the Company
Subsidiaries have the right to use the same pursuant to existing leases
or licenses therefor. To the knowledge of the Company, none of the
Software presently used by the Company and the Company
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<PAGE> 23
Subsidiaries, and no present use thereof, infringes upon or violates
any patent, copyright, trade secret or other proprietary right of
anyone else and no claim with respect to any such infringement or
violation is known to be threatened.
(z) Disclosure. No representation or warranty by the Company
or the Company Subsidiaries contained in this Agreement, including the
Schedules attached hereto, taken as a whole, contains any untrue
statement of a material fact or omits to state a material fact
necessary to make the statements contained herein and therein not
misleading.
4 Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company that:
(a) Organization, Standing and Authority of the Purchaser. The
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, and has full corporate
power and authority to conduct its business as it is now being
conducted, to enter into and carry out the provisions of this
Agreement.
(b) No Violation. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any provision of the Articles of Incorporation
or By-Laws of the Purchaser, (ii) violate any provision of any
agreement or other obligation to which the Purchaser is a party or by
which the Purchaser is bound or to which its assets are subject, or
(iii) violate or result in a breach of, constitute a default under, any
judgment, order, decree, rule or regulation of any court or
governmental agency to which the Purchaser is subject.
(c) Corporate Proceedings of the Purchaser. The execution,
delivery and performance of this Agreement has been authorized by the
Board of Directors of the
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<PAGE> 24
Purchaser and this Agreement constitutes the valid and legally binding
obligation of the Purchaser, enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally and the availability of equitable remedies may be
limited by equitable principles of general applicability.
(d) Financial Statements. The Purchaser has delivered to the
Company (i) the audited consolidated balance sheet of the Purchaser at
April 30, 1999 and the related consolidated statements of operations,
cash flows and changes in stockholder's equity for the Purchaser, all
for the year then ended, together with the related notes thereto, as
certified by PricewaterhouseCoopers, LLP, Certified Public Accountants,
and (ii) the unaudited consolidated balance sheet of the Purchaser at
July 31, 1999 (the "Crown Financial Statement Date") and the related
unaudited consolidated statements of operations and cash flows for the
Purchaser, all for the three (3) months then ended, as certified by the
Chief Financial Officer of the Purchaser (hereinafter collectively
called the "Crown Financial Statements"). The Crown Financial
Statements (x) are in accordance with the books of account and records
of the Purchaser and fairly present the consolidated financial position
of the Purchaser at the dates indicated, (y) contain and reflect
reserves for all material liabilities and (z) were prepared in
accordance with GAAP on a basis consistent with prior accounting
periods.
(e) Brokers. The Purchaser is not a party to or in any way
obligated under a contract or other agreement, and there are no
outstanding claims against it, for the payment of any broker's or
finder's fees in connection with the origin, negotiation, execution or
performance of this Agreement.
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<PAGE> 25
(f) Accredited Investor/Investment. The Purchaser is an
"accredited investor" as that term is defined under Regulation D
promulgated by the Securities and Exchange Commission under the
Securities Act of 1933, as amended. The Shares will be acquired for
investment and not with a view to distribution thereof, nor with any
intention of distributing or selling or otherwise disposing of the
Shares.
(g) Due Diligence. The Purchaser is an informed and
sophisticated person and is experienced in the evaluation and purchase
of companies such as the Company and the Company Subsidiaries. In
making the decision to enter into this Agreement and consummate the
transactions contemplated hereby, and the documents related thereto,
the Purchaser has relied on its own independent investigation of the
Company and the Company Subsidiaries as of this date and upon the
representations and warranties and covenants in this Agreement and has
relied on the investigations conducted by the Purchaser's agents. The
Purchaser acknowledges that the Company and the Company Subsidiaries
have made no representation or warranty as to the prospects, financial
or otherwise, of the Company and the Company Subsidiaries. The
Purchaser has conducted its own inspection and examination of the
Company and the Company Subsidiaries conducted by the Purchaser's
agents and is not relying on representations or warranties of any
nature made by or on behalf of or imputed to the Company and the
Company Subsidiaries except as expressly set forth in this Agreement.
Notwithstanding the foregoing, no investigation by the Purchaser
heretofore or hereafter made shall affect the representations and
warranties of the Company, and each such representation and warranty
shall survive any such investigation.
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<PAGE> 26
(h) No Knowledge of Breach. Neither the Purchaser nor the
Purchaser's agents know of any breach of warranty or any
misrepresentation by the Company or the Company Subsidiaries hereunder.
5 Closing Actions. The following actions have taken place prior to the
Closing Date or are taking place on the Closing Date contemporaneously with the
Closing:
(a) Resignations. The Company hereby delivers to the Purchaser
the resignations of those officers and directors of the Company and the
Company Subsidiaries (effective on the Closing Date) as may be
requested by the Purchaser, and the remaining directors of the Company
have elected the persons designated by the Purchaser to the Board of
Directors of the Company. The By-Laws of the Company are also being
amended in a manner satisfactory to the Purchaser.
(b) Opinion of the Company's Counsel. The Purchaser is
receiving the opinion of Robert J. Downing, Chief Legal Officer for the
Company and the Company Subsidiaries, dated the Closing Date, to the
effect that:
(i) each of the Company and the Company Subsidiaries
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida and has
corporate power to carry on its business as it is now being
conducted;
(ii) to such counsel's knowledge, the authorized
capital stock and the outstanding shares of the Company and
the Company Subsidiaries are as set forth herein, and the
Shares are duly and validly issued, fully paid, non-assessable
and outstanding;
(iii) the consummation of the transactions
contemplated by this Agreement will not result in the breach
of or constitute a default
23
<PAGE> 27
under the Articles of Incorporation or By-Laws of the Company
and the Company Subsidiaries, or, to such counsel's knowledge,
any loan, credit or similar agreement or any court decree to
which the Company or the Company Subsidiaries are a party or
by which the Company or the Company Subsidiaries, or their
respective properties may be bound; and
(iv) this Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding
obligation of the Company enforceable in accordance with its
terms (except as otherwise limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting
creditors' rights and except that such counsel need not
express an opinion as to whether any covenant contained herein
is specifically enforceable).
(c) Opinion of Purchaser's Counsel. The Company is receiving
the opinion of T. J. Falgout, III, General Counsel for the Purchaser,
dated the Closing Date, to the effect that:
(i) the Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Texas and has corporate power to carry on its
business as it is now being conducted.
(ii) this Agreement has been duly authorized,
executed and delivered by the Purchaser, and (assuming valid
execution and delivery by the other parties hereto) is, or
will be upon such execution, the valid and binding obligation
of the Purchaser in
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<PAGE> 28
accordance with its terms (except as otherwise limited by
bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors' rights, and except that such counsel
need not express an opinion as to whether any covenant
contained herein or therein is specifically enforceable); and
(iii) to such counsel's knowledge, the consummation
of the transactions contemplated by this Agreement will not
result in the breach of or constitute a default under the
Articles of Incorporation or By-Laws of the Purchaser, or any
loan, credit or similar agreement or any court decree to which
the Purchaser is a party or by which the Purchaser or its
properties may be bound.
(d) Ready Finance Debt. The Purchaser has acquired from Ready
Finance, Inc. ("Ready Finance") two promissory notes issued by the
Company having a principal amount of approximately $4,300,000 plus
accrued and unpaid interest (the "Ready Finance Debt"). The Ready
Finance Debt is being converted into shares of Company Series E
Preferred Stock at a conversion price of $39.00 for each dollar of such
Ready Finance Debt.
(e) Conversion of Other Company Debt. The indebtedness of the
Company to the creditors listed on Schedule 5(e) attached hereto is
being converted into shares of Company Common Stock at the conversion
prices set forth on Schedule 5(e) for each dollar of such debt, and
there shall be no more than $2,601,760.31 of such indebtedness
outstanding at Closing.
(f) High Capital Funding, LLC. The indebtedness of the Company
to High Capital Funding, LLC ("High Capital") in the aggregate
principal amount of
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<PAGE> 29
$2,000,000 plus accrued interest (the "High Capital Debt") has been
modified and amended such that $1,000,000 of the High Capital Debt is
being paid at Closing, with $275,000 of the balance being due and
payable six (6) months after the Closing Date and $725,000 of the
balance being due and payable two (2) years after the Closing Date. The
deferred amount shall bear interest at the rate of ten (10%) percent
per annum, payable monthly.
(g) Conversion of Company Preferred Stock. All of the
outstanding Preferred Stock of the Company and all accumulated
dividends with respect thereto is being converted into shares of
Company Common Stock at the conversion price set forth on Schedule 5(g)
for each dollar of Company Preferred Stock (including accumulated
dividends) outstanding.
(h) Merger of Paaco Automotive Group, Inc. A subsidiary of the
Company is merging (the "Merger") with Paaco Automotive Group, Inc., a
Texas corporation ("Paaco") in exchange for the number of shares of
Company Series E Preferred Stock such that at Closing, as a result of
the Merger, the Purchaser shall own, in conjunction with the shares of
Company Series E Preferred Stock issued to the Purchaser hereunder and
pursuant to Section 5(d) hereof, not less than seventy (70%) percent of
the issued and outstanding capital stock of the Company (the
"Purchaser's Percentage Ownership"). The number of shares of Company
Series E Preferred Stock to be issued to the Purchaser as a result of
the Merger is 1,105,046.44, subject to adjustment at Closing, as set
forth in the immediately preceding sentence, so that the Purchaser will
own the Purchaser's Ownership Percentage. The Merger is being
consummated in accordance with the terms and provisions of the Merger
Agreement between Paaco and the Company (or a
26
<PAGE> 30
subsidiary thereof), in substantially the form of the Merger Agreement
attached hereto as Exhibit "B."
(i) Grant to the Purchaser of Options, Warrants, Etc. The
Purchaser is being granted options or warrants (the "Purchaser's
Warrants") to purchase shares of Common Stock of the Company on the
same terms and conditions that any options or warrants are issued by
the Company on or prior to the Closing Date, such that the Purchaser
shall have the right to maintain the Purchaser's Percentage Ownership
by exercising the Purchaser's Warrants. The Purchaser's Warrants grant
to the Purchaser the right to purchase 1,950,000 shares of Common Stock
of the Company at the purchase price of $.20 per share.
(j) Finova Capital Corporation. The senior debt facilities of
the Company and Paaco with Finova Capital Corporation have been
modified in a manner acceptable to the Purchaser, and an amendment to
the respective loan agreements of the Company and Paaco with Finova
Capital Corporation evidencing such modifications has been entered into
on or before the Closing Date.
(k) No Material Adverse Changes. Prior to the Closing Date,
there has been no material adverse change in the business, operations,
financial condition or properties of the Company and the Company
Subsidiaries, taken in the aggregate, since the Company Balance Sheet
Date, and the Purchaser has received a certificate dated the Closing
Date, signed by the President or a Vice President of the Company to the
effect that such is the case.
(l) Consents. The Company has obtained all approvals and
consents which must be obtained in order to effectuate the transaction
contemplated hereby and to satisfy the terms and conditions of this
Agreement, other than those approvals
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<PAGE> 31
and consents, the failure of which to obtain would not reasonably be
expected to have a Material Adverse Effect.
(m) Certified Resolutions of the Company. The Purchaser has
received resolutions of the Board of Directors of the Company,
certified by the Secretary or an Assistant Secretary of the Company,
authorizing the execution, delivery and performance of this Agreement
and the issuance to the Purchaser of shares of Company Series E
Preferred Stock as set forth herein.
(n) Certified Resolutions of the Purchaser. The Company has
received resolutions of the Board of Directors of the Purchaser,
certified by the Secretary or an Assistant Secretary of the Purchaser,
authorizing the execution, delivery and performance of this Agreement.
(o) Hart-Scott-Rodino Filing and Approval. The Purchaser and
the Company (and any other required parties) have made all necessary
filings with the Federal Trade Commission required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, the required
waiting periods thereunder have expired or early termination thereof
has been granted, and the parties have not received any objection to
the consummation of the transactions contemplated by this Agreement.
(p) Employment/Consulting Agreements. Each of the employment
or consulting agreements listed on Schedule 5(p) attached hereto (which
Schedule shall include all agreements requiring the payment by the
Company of more than $50,000) have been terminated (except as stated in
Schedule 5(p)) without liability to the Company, and the Company has
entered into (i) new employment agreements with Gary R. Smith and
Ronald W. Anderson, (ii) an agreement for the continuation of
employment with Robert J. Downing, and (iii) an agreement for the
continuation of
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<PAGE> 32
consulting with Robert Abrahams, all of which shall be on terms
acceptable to the Purchaser.
(q) Settlement of Existing Litigation. The Company has
settled, or reached agreements to settle, the lawsuits listed on
Schedule 5(q) attached hereto for the respective amounts set forth on
Schedule 5(q).
(r) Bankers Insurance Company Investment. Bankers Insurance
Company has purchased shares of Company Common Stock for the aggregate
purchase price of $1,000,000.
6 The Closing. The execution and delivery of this Agreement and the
instruments, certificates and other documents required hereunder (the "Closing")
is taking place at the offices of Crown Group, Inc., 4040 North MacArthur
Boulevard, Suite 100, Irving, Texas 75038, at 10:00 a.m. local time on December
1, 1999. The date and time of such execution and delivery is herein called the
"Closing Date", and the effective date of the Closing shall be 12:01 a.m.,
Dallas, Texas time on the Closing Date. On the Closing Date, certificates
representing the Shares are being delivered by the Company against delivery of
the Purchase Price pursuant to Section 2 hereof, and Closing shall be deemed to
have occurred when such deliveries have been made by the Purchaser and the
Company in accordance with the terms hereof.
7 Nature and Survival of Representations and Warranties.
(a) Nature of Statements. All statements contained in any
schedule or any certificate or other instrument delivered by or on
behalf of the Company or the Purchaser pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be deemed
representations and warranties made by the Company or the Purchaser, as
the case may be.
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<PAGE> 33
(b) Survival of Representations and Warranties. All
representations, warranties, covenants, agreements and undertakings
contained herein or in any Schedule, certificate or other document
shall remain operative and in full force and effect, and shall survive
the Closing Date and the delivery of all consideration and documents
pursuant to this Agreement, and shall continue in effect for a period
of two (2) years after the Closing Date and, as to representations made
by the Company concerning or affecting any tax liability of the Company
or the Company Subsidiaries, until a date which is six (6) months after
the statute of limitations has run against the Federal, state and local
government; provided, however, that any such representation, warranty,
covenant, agreement or undertaking as to which a bona fide claim shall
have been asserted during such survival period shall continue in effect
until such time as such claim shall have been resolved in accordance
with the terms of this Agreement.
8 Indemnification by Company and Related Matters.
(a) Indemnification by Company. The Company agrees to defend,
indemnify and hold harmless the Purchaser and its successors and
assigns, from, against and in respect of any and all loss or damage
resulting from:
(i) the breach by the Company of any of its
warranties, representations, covenants, agreements or
undertakings contained herein; and
(ii) any liability arising out of any and all
actions, suits, proceedings, claims, demands, judgments, costs
and expenses (including reasonable legal and accounting fees)
incident to any of the foregoing (collectively, the "Losses"),
provided that the Purchaser
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<PAGE> 34
makes a written claim for indemnification against the Company
within the applicable survival period and further provided
that neither the Company nor the Company Subsidiaries will
have any obligation to indemnify the Purchaser from and
against any Losses until the Purchaser has suffered Losses by
reason of all such breaches in excess of a $50,000 aggregate
deductible (the "Indemnification Threshold") (and after the
Indemnification Threshold is reached, the Company will be
obligated to only indemnify the Purchaser from and against
further such Losses, that is, for amounts greater than
$50,000) or thereafter to the extent of the Losses the
Purchaser has suffered by reason of all such breaches exceeds
a $5,000,000 aggregate ceiling (after which point neither the
Company nor the Company Subsidiaries will have any obligation
to indemnify the Purchaser from and against further such
Losses.
9 Indemnification by the Purchaser and Related Matters.
(a) Indemnification by the Purchaser. The Purchaser agrees to
defend, indemnify and hold harmless the Company, its successors and
assigns from, against and in respect of any and all loss or damage
resulting from:
(i) the breach by the Purchaser of any of its
warranties, representations, covenants, agreements or
undertakings contained herein; and
(ii) any liability arising out of any and all
actions, suits, proceedings, claims, demands, judgments, costs
and expenses (including reasonable legal and accounting fees)
incident to any of the
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<PAGE> 35
foregoing (collectively, the "Losses"), provided that the
Company or the Company Subsidiaries make(s) a written claim
for indemnification against the Purchaser within the
applicable survival period and further provided that the
Purchaser will not have to indemnify the Company and the
Company Subsidiaries from and against any Losses until the
Company and the Company Subsidiaries have suffered Losses by
reason of all such breaches in excess of a $50,000 aggregate
deductible (the "Indemnification Threshold") (and after the
Indemnification Threshold is reached, the Purchaser will be
obligated to only indemnify the Company and the Company
Subsidiaries from and against further such Losses, that is,
for amounts greater than $50,000) or thereafter to the extent
of the Losses the Company and the Company Subsidiaries have
suffered by reason of all such breaches exceeds a $500,000
aggregate ceiling (after which point the Purchaser will have
not any obligation to indemnify the Company and the Company
Subsidiaries against further such Losses.
10 Expenses. The Company and the Purchaser shall pay their or its own
expenses (including without limitation counsel and accounting fees and expenses)
incident to the preparation and carrying out of this Agreement and the
consummation of the transactions contemplated hereby. The Purchaser and the
Company shall each pay one half (1/2) of the filing fee related to the
Hart-Scott-Rodino notification and report.
11 Notices. All notices, demands and requests which may be given or
which are required to be given by either party to the other, and any exercise of
a right of termination provided by this Agreement, shall be in writing and shall
be deemed effective when either: (1) personally
32
<PAGE> 36
delivered to the intended recipient; (2) sent by certified or registered mail,
return receipt requested, addressed to the intended recipient at the address
specified below; (3) delivered in person to the address set forth below for the
party to which the notice was given; (4) deposited into the custody of a
nationally recognized overnight delivery service such as Federal Express
Corporation, Emery or Purolator, addressed to such party at the address
specified below; or (5) sent by facsimile, telegram or telex, provided that
receipt for such facsimile, telegram or telex is verified by the sender and
followed by a notice sent in accordance with one of the other provisions set
forth above. Notices shall be effective on the date of delivery or receipt, of,
if delivery is not accepted, on the earlier of the date that delivery is refused
or four (4) days after the date the notice is mailed. For purposes of this
Section, the addresses of the parties for all notices are as follows (unless
changes by similar notice in writing are given by the particular person whose
address is to be changed):
(a) if to the Company, to Smart Choice Automotive Group, Inc.,
5200 South Washington Avenue, Titusville, Florida 32780; Attention:
Gary R. Smith, President and Chief Executive Officer; Fax 407-269-1880;
With a copy to Robert J. Downing, Chief Legal Officer, Smart
Choice Automotive Group, Inc., 5200 South Washington Avenue,
Titusville, Florida 32780; Fax 407-264-0376;
(b) or if to the Purchaser, to Crown Croup, Inc., 4040 North
MacArthur Boulevard, Suite 100, Irving, Texas 75038; Attention: Edward
R. McMurphy, President; Fax 972-717-0973;
With a copy to T. J. Falgout, III, Executive Vice President
and General Counsel, Crown Croup, Inc., 4040 North MacArthur Boulevard,
Suite 100, Irving, Texas 75038; Fax 972-717-0973.
Any party hereto may designate a different address by written notice given to
the other parties.
33
<PAGE> 37
12 Miscellaneous.
(a) Assignment. This Agreement may not be assigned by any
party hereto without the prior written consent of the other parties.
(b) Section and Paragraph Headings. The Section and Paragraph
headings of this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
(c) Amendment. This Agreement may be amended only by an
instrument in writing executed by the parties hereto.
(d) Entire Agreement. This Agreement and the Exhibits,
Schedules, certificates and documents referred to herein constitute the
entire agreement of the parties, and supersede all understandings with
respect to the subject matter hereof.
(e) Knowledge. "Knowledge" of a natural person means actual
knowledge of such natural person, and "knowledge" of a corporate person
means actual knowledge of the directors and executive officers of such
corporate person, in each case (unless otherwise specifically set forth
to the contrary) after reasonable inquiry and investigation.
(f) Public Announcements. No publication and/or press release
of any nature shall be issued pertaining to this Agreement or the
transaction contemplated hereby without the prior written approval of
the Purchaser and the Company, except as may be required by law.
(g) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
34
<PAGE> 38
(h) Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS, AND
VENUE FOR ANY DISPUTE ARISING HEREUNDER SHALL BE IN DALLAS COUNTY,
TEXAS, AND THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE JURISDICTION OF
THE COURTS OF THE STATE OF TEXAS.
(i) Material Adverse Effect. "Material Adverse Effect" means a
material adverse effect on the business of the Company and the Company
Subsidiaries, taken as a whole.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties on or as of the date and year first above written.
PURCHASER:
CROWN GROUP, INC.
By:
-------------------------------------
Edward R. McMurphy, President
COMPANY:
SMART CHOICE AUTOMOTIVE GROUP, INC.
By:
-------------------------------------
Gary R. Smith, President
35
<PAGE> 39
SCHEDULES AND EXHIBITS
SCHEDULE DESCRIPTION
3(b) Subsidiaries
3(c) Warrants, Options, Etc.
3(f) Certain Changes or Events
3(g) Tax Matters
3(h) Title to Properties and Related Matters
3(i) Consents and Approvals
3(k) Litigation and Proceedings
3(m) Certain Employee Benefits in Case of Termination, Death,
Disability, Severance, Etc.
3(n) Employee Relations
3(o) Patents, Trademarks and Licenses
3(p) Approvals, Authorizations and Regulations
3(r) Guaranties
3(t) Company Defaults
3(w) Environmental Matters
5(e) Other Company Creditors
5(g) Conversion of Company Preferred Stock
5(p) Employment/Consulting Agreements to be Terminated
5(q) Existing Litigation to be Settled
EXHIBIT DESCRIPTION
"A" Sixth Articles of Amendment to the Articles of Incorporation
of the Company
"B" Merger Agreement
36
<PAGE> 1
Exhibit 4.7.2
- --------------------------------------------------------------------------------
Rediscount Finance
FIRST AMENDED AND RESTATED SCHEDULE TO
FIRST AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BORROWER: PREMIUM AUTO ACCEPTANCE CORPORATION
ADDRESS: 605 SOUTH LOOP 12
IRVING, TEXAS 75060
BORROWER: PAACO AUTOMOTIVE GROUP, INC.
ADDRESS: 605 SOUTH LOOP 12
IRVING, TEXAS 75060
DATE: NOVEMBER 18, 1999
This First Amended and Restated Schedule to First Amended and Restated
Loan and Security Agreement ("Schedule") is executed in conjunction with a
certain First Amended and Restated Loan and Security Agreement ("Agreement"),
dated March 8, 1999, and as an amendment and restatement of that certain
Schedule to First Amended and Restated Loan and Security Agreement, dated of
even date with the Agreement, by and between FINOVA Capital Corporation, as
Lender, and the borrowers named above (collectively referred to herein as the
"Borrowers" and singularly as "Borrower"), all of whose chief executive offices
are located at the above addresses (collectively referred to herein as
"Borrowers' Address"). Each Borrower shall be separately defined as set forth in
this Schedule. All representations, warranties, covenants, agreements,
undertaking or other obligations of Borrower as set forth in this Agreement and
all other Loan Documents are made by each Borrower as separately set forth for
each Borrower in this Agreement and the other Loan Documents. All financial
covenants and ratios set forth herein shall be applied to the Borrowers in the
aggregate.
1.A. BORROWERS (SECTION 1).
Each Borrower shall be referred to herein as follows:
Premium Auto Acceptance Corporation - "Premium"
PACCO AUTOMOTIVE GROUP, INC. - "PAACO" or "Lead Borrower"
1
<PAGE> 2
1.B. MAXIMUM MILEAGE OF ELIGIBLE INVENTORY AND MAXIMUM AGE OF ELIGIBLE
INVENTORY (SECTION 1)
The term "Maximum Mileage of Eligible Inventory" shall not be
applicable hereunder and shall not be a restriction with
respect to an Eligible Inventory. The term "Maximum Age of
Eligible Inventory" shall not be applicable hereunder and
shall not be a restriction with respect to an Eligible
Inventory.
1.C. MAXIMUM COST OF ELIGIBLE INVENTORY (SECTION 1)
The term "Maximum Cost of Eligible Inventory" shall not be
applicable and shall not be a restriction with respect to an
Eligible Inventory.
1.D. MAXIMUM OWNERSHIP (SECTION 1)
The term "Maximum Ownership" shall mean one hundred and twenty
(120) days from (i) the date of the invoice that evidences the
purchase of each vehicle of Inventory by Borrower and (ii) the
date a repossessed or trade-in vehicle is listed in Borrower's
inventory and ready for retail sale.
1.E. MAXIMUM AMOUNT OF AN ELIGIBLE RECEIVABLE (SECTION 1).
The term "Maximum Amount of an Eligible Receivable" shall mean
the sum of Nineteen Thousand Dollars ($19,000.00) remaining
due thereon at any date of determination, excluding all
unearned finance charges pursuant to the Eligible Receivables.
1.F. MAXIMUM TERM OF AN ELIGIBLE RECEIVABLE (SECTION 1).
The "Maximum Term of an Eligible Receivable" shall be
thirty-six (36) months remaining until the due date of such
Eligible Receivable at any date of determination.
1.G. AGING PROCEDURES AND ELIGIBILITY TEST (SECTION 1).
AGING PROCEDURES FOR A CONTRACTUAL AGING:
1. No payment missed or due = Current.
2. 1 to 30 days past due = "30 day Account".
3. 31 to 60 days past due = "60 day Account".
4. 61 or more days past due = "60 + day Account"
For the purpose only of calculating the aging of any Receivable hereunder,
provided any such extension is after one hundred eighty (180) days of any
Receivable from the origination date of such Receivable, Borrower may grant an
Account Debtor two (2) weekly payment extensions or one (1) bi-weekly payment
extension of the principal portion of a such payment due on any Receivable
within any twelve (12) month period that would allow such Receivable to avoid
2
<PAGE> 3
being classified in a different "past due or missed" payment category set forth
above. All extensions within any twelve (12) month period in excess of that
allowed herein will not be used to delay or defer aging of such Receivable.
ELIGIBILITY TEST:
The term "Eligibility Test" shall mean the test to determine the eligibility of
a Receivable for the purposes of Section 1, Eligible Receivable, hereof, that
test, no payment due on said Receivable remains unpaid more than sixty (60) days
from the specific date on which such payment was due pursuant to the terms of
said Receivable.
1.H. GUARANTOR (WHETHER ONE OR MORE) (SECTION 1).
Crown Group, Inc. (Limited)
SC Holdings, Inc.
Smart Choice Automotive Group, Inc.
1.1 MODIFICATION OF DEFINITIONS (SECTION 1).
The definition of "Charge Offs" is hereby deleted and the
following is substituted in lieu thereof:
"CHARGE OFFS. The term "Charge Offs" shall mean the
principal amount due pursuant to a Receivable on the
date that Borrower charges off such Receivable as
uncollectible, pursuant to Borrower's policies and/or
procedures."
The definition of "Collateral Recovery Rate" is hereby deleted
and the following is substituted in lieu thereof:
"COLLATERAL RECOVERY RATE. The term "Collateral
Recovery Rate" shall mean, for any period of
determination, (i) the total cash collected of
principal payments from all Receivables (including
but not limited to all principal cash proceeds from
charge off recoveries, with such charge off
recoveries calculated at actual sales price of
vehicle sold at auction or ,if vehicle is not sold at
auction, at a value not greater than "average value"
Black Book of such vehicle, pursuant to the most
current edition of the "Black Book" as published by
National Auto Research Division, Hearst Business
Media Corporation, for the market area of Borrower ),
divided by (ii) the sum of (a) the total cash
collected of principal payments from all Receivables
(excluding all cash proceeds from charge off
recoveries) plus (c) the aggregate of all Charge Offs
for that period."
1.J. ADDITIONAL DEFINITIONS (SECTION 1).
The following definition is hereby added to the Agreement:
"NET CASH FLOW. The term "Net Cash Flow" shall mean,
for any period of determination, as reflected on the
financial statements of Borrower supplied to Lender
pursuant to Section 6.7, hereof, the result of (i)
the sum of all cash receipts, including, all
collections on Receivables, repossession recoveries,
cash down payments and trade-ins values (with
trade-ins and repossessions valued at actual sales
price of sold vehicle at auction or, if vehicle is
not sold at auction, at a value not greater than
"average value" Black Book of such vehicle, pursuant
to the most current edition of the "Black Book" as
published by National Auto Research Division, Hearst
Business Media Corporation, for the market area of
Borrower), less (ii) the sum of all cash operating
expenses, including, interest expenses and
3
<PAGE> 4
taxes and the "replacement cost of liquidated
Receivables" ( the "replacement cost of liquidated
Receivables" shall be the amount equal to, for the
period of determination, (a) the percentage
determined by dividing the aggregate actual cost of
all vehicles sold during the period of determination
by the aggregate sales price of all vehicles sold
during the same period of determination, multiplied
by (b) the aggregate principal payments received by
Borrower and Charge Offs with respect to all
Receivables during the period of determination)."
2.1.A. AMOUNT OF REVOLVING CREDIT LINE AND THE AMOUNT OF THE INVENTORY CREDIT
LINE (SECTION 2.1):
(i) The "Amount of the Revolving Credit Line" shall be Sixty
Million Dollars ($60,000,000.00).
(ii) The "Amount of the Inventory Credit Line" shall be Five
Million Dollars ($5,000,000.00).
2.1.B. AVAILABILITY ON ELIGIBLE RECEIVABLES (SECTION 2.1):
The "Availability on Eligible Receivables" shall be an amount
equal to the following:
(i) if the date of determination is before December 1, 2000,
seventy two percent (72%) of the aggregate unmatured and
unpaid amount due to Borrower from the Account Debtor named
thereon, excluding all unearned finance charges, pursuant to
the Eligible Receivables.
(ii) if the date of determination is on or after December 1,
2000, but before December 1, 2001, seventy percent (70%) of
the aggregate unmatured and unpaid amount due to Borrower from
the Account Debtor named thereon, excluding all unearned
finance charges, pursuant to the Eligible Receivables.
(iii) if the date of determination is on or after December 1,
2001, sixty-seven and one-half percent (67.5%) of the
aggregate unmatured and unpaid amount due to Borrower from the
Account Debtor named thereon, excluding all unearned finance
charges, pursuant to the Eligible Receivables.
Notwithstanding any provision contained in the Loan Documents
to the contrary, upon the occurrence of any of the following
events, Lender, in its sole and absolute discretion, may
modify the Availability on Eligible Receivables advance
percentage set forth above or the Availability on Eligible
Inventory set forth in SCHEDULE SECTION 2.1.C.:
(a) the Collateral Recovery Rate is less than the following:
(1) seventy-eight percent (78%), if the date of
determination is on or before November 30, 2000, with
the first period for which such the Collateral
Recovery Rate is determined shall be the immediately
preceding one (1) calendar month beginning with the
month of November, 1999, and thereafter the period of
determination shall increase one (1) calendar month
for each calendar month subsequent to November, 1999,
until the period of determination is the twelve (12)
calendar months immediately prior to the date of
determination, and
(2) eighty-two percent (82%), for the twelve (12)
calendar month period immediately prior to any date
of determination, if the date of determination is
after November 30, 2000.
(b) on any date of determination, the Collateral Performance
Percentage is greater than seven percent (7.0%)
4
<PAGE> 5
(c) for the twelve (12) calendar month period immediately
prior to any date of determination, the Cash Sales Percentage
is greater than five percent (5%), or
(d) the aggregate Net Cash Flow is less than One Dollar
($1.00), for the twelve (12) calendar months immediately
preceding the date of determination, with each date of
determination for the aggregate Cash Flow being the last day
of each fiscal quarter, beginning the fiscal quarter ending
October 31, 2000, (notwithstanding the foregoing to the
contrary the first period of determination shall be the nine
[9] months immediately preceding the fiscal quarter ending
October 31, 2000, and thereafter each period of determination
shall be the twelve [12] calendar months immediately preceding
the date of determination).
2.1.C. AVAILABILITY ON ELIGIBLE INVENTORY (SECTION 2.1)
The "Availability on Eligible Inventory" shall be the lesser
of (i) the Amount of the Inventory Credit Line, or (ii) the
aggregate amount with respect to all Eligible Inventory equal
to the sum of (a) seventy percent (70%) of the invoice cost,
as evidence by a bill of sale or other documents evidencing
the purchase price of such Inventory from an entity that is
not affiliated with Borrower or Guarantors, excluding
trade-ins and repossessions and (b) with respect to trade-ins,
repossessions (not withstanding the definition of "Eligible
Inventory" set forth in the Agreement, repossessed Inventory
shall be eligible if such Inventory otherwise meets the
requirement of the definition of "Eligible Inventory") and
Inventory purchased from an entity affiliated with Borrower or
Guarantors, seventy percent (70%) of the actual value, but not
greater than the of the "average value" Black Book of such
Inventory (pursuant to the most current edition of the "Black
Book" as published by National Auto Research Division, Hearst
Business Media Corporation, for the market area of Borrower).
2.2. STATED INTEREST RATE (SECTION 2.2).
The Receivables Stated Interest Rate shall be the lesser of
(i) the Governing Rate plus (a) if the date of determination
is before December 1, 2000, two and one-quarter percent
(2.25%) per annum, (b) if the date of determination is before
December 1, 2001, but on or after December 1, 2000, two
percent (2.00%) per annum, and (c) if the date of
determination is on or after December 1, 2001, one and
three-quarters percent (1.75%) per annum or (ii) the Maximum
Rate.
The Inventory Stated Interest Rate shall be the lesser of (i)
the Governing Rate plus (a) if the date of determination is
before December 1, 2000, two and one-quarter percent (2.25%)
per annum, (b) if the date of determination is before December
1, 2001, but on or after December 1, 2000, two percent (2.00%)
per annum, and (c) if the date of determination is on or after
December 1, 2001, one and three-quarters percent (1.75%) per
annum or (ii) the Maximum Rate.
2.3. MATURITY DATE (SECTION 2.3.C).
The primary term of this Agreement shall expire on November
30, 2004. If Borrower desires to extend the primary term or
any term thereafter of this Agreement, Borrower shall give
Lender notice of its intent to extend the term no earlier than
one hundred and eighty (180) days and no later than one
hundred and fifty (150) days prior to any expiration date of
this Agreement. Upon the receipt by Lender of Borrower's
notice to extend the term of this Agreement, if Lender desires
to renew and extend the term of this Agreement, Lender shall
give Borrower notice of Lender's intent to extend the term of
this Agreement, within sixty (60) days of Lender's receipt of
Borrower's notice to extend. If Lender does not give Borrower
notice of Lender's intent to extend the term of this Agreement
within the sixty (60) days period, then it shall be deemed
that Lender does not intend to renew and extend the
5
<PAGE> 6
term of this Agreement. Notwithstanding the foregoing, this
Agreement shall remain in full force and effect until the
Indebtedness due and owing to Lender has been paid in full.
2.6. LIQUIDATED DAMAGES (SECTION 2.6).
The amount of "Liquidated Damages" shall be:
(i) if on or before November 30, 2000, if Borrower pays
the balance of the Indebtedness in full and Borrower
requests Lender to terminate Lender's security
interest in the Collateral, an amount equal to three
percent (3%) of the Amount of the Revolving Credit
Line;
(ii) if on or before November 30, 2001, but after November
30, 2000, if Borrower pays the balance of the
Indebtedness in full and Borrower requests Lender to
terminate Lender's security interest in the
Collateral, an amount equal to two percent (2%) of
the Amount of the Revolving Credit Line;
(iii) if on or before November 30, 2003, but after November
30, 2001, if Borrower pays the balance of the
Indebtedness in full and Borrower requests Lender to
terminate Lender's security interest in the
Collateral, an amount equal to one percent (1%) of
the Amount of the Revolving Credit Line;
(iv) if before August 31, 2004, but after November 30,
2003, if Borrower pays the balance of the
Indebtedness in full and Borrower requests Lender to
terminate Lender's security interest in the
Collateral, an amount equal to one-half percent
(.50%) of the Amount of the Revolving Credit Line;
and
(v) if after August 31, 2004, if Borrower pays the
balance of the Indebtedness in full and Borrower
requests Lender to terminate Lender's security
interest in the Collateral, the amount of Liquidated
Damages shall be Zero Dollars ($0.00).
2.8. MODIFICATION OF SECTION 2.8. (SECTION 2.8)
Section 2.8 of the Agreement is hereby deleted and the following is
substituted in lieu thereof:
"2.8. INTEREST AFTER DEFAULT Upon the occurrence and after
the continuation of an Event of Default and after
sixty (60) days prior written notice from Lender,
Borrower shall pay Lender interest on the daily
outstanding balance of Borrower's loan account at a
rate per annum which is greater of (not to exceed the
Maximum Rate): (i) the four percent (4%) in excess of
the highest Stated Interest Rate which would
otherwise be applicable thereto pursuant to the
Schedule (SCHEDULE SECTION 2.2), or (ii) sixteen
percent (16%)."
2.16. FACILITY FEE (SECTION 2.16).
None
6
<PAGE> 7
3.2. BUSINESS LOCATIONS OF BORROWER (SECTIONS 3.2, 3.6 AND 5.1.N.).
All locations are as follows: 605 South Loop 12
Irving, Texas 75060
3200 E. Randol Mill Road
Arlington, Texas 76011
3500 N.E. 28th Street
Ft. Worth, Texas 76111
3363 W. Northwest Hwy
Dallas, Texas 75220
5125 Ross Avenue
Dallas, Texas 75206
945 E. Jefferson Street
Dallas, Texas 75203
2751-2781 S. Garland Road
Garland, Texas 75041
1301 Jacksboro Highway
Fort Worth, Texas 76014
9751 Webbs Chapel (Payment Center)
Dallas, Texas 75220
5334 Ross Avenue (Payment Center)
Dallas, Texas 75206
5715 North Freeway
Houston, TX 77076
8011 Gulf Freeway
Houston, TX 77017
1280 S. Stemmons Freeway
Lewisville, TX 75067
4.4. ANNUAL FINANCIAL STATEMENTS (SECTION 4.4).
Annual consolidated audited financial statements, including
PAACO Automotive Group, Inc. and Premium Auto Acceptance
Corporation, shall be prepared by independent certified public
accountants, reasonably acceptable to Lender.
5.1. BORROWER'S TRADENAMES (WHETHER ONE OR MORE) (SECTION 5.1.B.)
PAACO
PAACO, Inc.
7
<PAGE> 8
6.3.A. LEVERAGE RATIO LIMIT (SECTION 6.3.A).
The term "Leverage Ratio Limit" shall mean 5.0 to 1.0.
6.3.B. MINIMUM NET INCOME (SECTION 6.3.B).
The Minimum Net Income shall be One Dollar ($1.00) for any
fiscal year of Borrower.
6.3.C. DISTRIBUTIONS LIMITATION (SECTION 6.3.C).
Maximum Distributions shall be seventy-five percent (75%) of
Net Income of the fiscal year of Borrower in which such
Distributions are made.
8.1. REIMBURSEMENT OF EXPENSES (SECTION 8.1).
None, except as otherwise set forth in the Loan Documents.
8.2. NOTICES (SECTION 8.2).
Lender: FINOVA Capital Corporation
(copy each office below with all notices)
CORPORATE FINANCE OFFICE:
FINOVA Capital Corporation
355 South Grand Avenue, Suite 2400
Los Angeles, CA 90071
Attn: John J. Bonano, Senior Vice President
Telephone: (213) 253-1600
Telecopy No.: (213) 625-0268
CORPORATE OFFICE:
FINOVA Capital Corporation
1850 N. Central Avenue
Phoenix, AZ 85077
Attn: Joseph R. D'Amore, Vice President - Group
Counsel
Telephone: (602) 207-4900
Telecopy No.: (602) 207-5543
REDISCOUNT FINANCE OFFICE:
FINOVA Capital Corporation
16633 Dallas Parkway, Suite 700
Addison, TX 75001
Attn: Dan Black (Account Executive)
Telephone: (972) 764-1100
Telecopy No.: (972) 764-1135
8
<PAGE> 9
Borrower: Premium Auto Acceptance Corporation
605 South Loop 12
Irving, Texas 75060
Telephone: (972) 445-2180
Telecopy No. (972) 445-2328
Borrower: PAACO Automotive Group, Inc.
605 South Loop 12
Irving, Texas 75060
Telephone: (972) 445-2180
Telecopy No.: (972) 445-2328
Guarantors: SC Holdings, Inc.
Smart Choice Automotive Group, Inc.
5200 S. Washington
Titusville, Florida 32780-7316
Telephone: 407-269-9680
Telecopy No.:407-264-0376
Guarantor: Crown Group, Inc.
4040 North MacArthur Blvd., Suite 1000
Irving, Texas 75038
Telephone: (972) 717-3423
Telecopy No.: (972) 719-4466
Attn: Edward R. McMurphy, President
with a copy to: T. J. Falgout, III, Executive
Vice President and General
Counsel
8.17. AGENT FOR SERVICE OF PROCESS (SECTION 8.17).
Edward R. McMurphy, whose address is 4040 North MacArthur
Blvd., Suite 1000, Irving, Texas 75038, with a copy to: T. J.
Falgout, III, Executive Vice President and General Counsel.
IN WITNESS WHEREOF, the parties have executed this Schedule on the day and
year first set forth above.
LENDER:
FINOVA CAPITAL CORPORATION,
a Delaware corporation
By:
, Vice President (Date)
----------------------
9
<PAGE> 10
BORROWER:
PREMIUM AUTO ACCEPTANCE CORPORATION
By:
, President (Date)
----------------------
PAACO AUTOMOTIVE GROUP, INC.
By:
, President (Date)
----------------------
GUARANTORS:
Crown Group, Inc.
By:
, President (Date)
----------------------
SC HOLDINGS, INC.
By:
, President (Date)
----------------------
SMART CHOICE AUTOMOTIVE GROUP, INC.
By:
, President (Date)
----------------------
10
<PAGE> 1
Exhibit 4.9
[FINOVA FINANCIAL INNOVATORS LOGO]
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
FLORIDA FINANCE GROUP INC.
LIBERTY FINANCE COMPANY
SMART CHOICE RECEIVABLES HOLDING COMPANY
FIRST CHOICE AUTO FINANCE, INC.
Co-Borrowers
Florida Finance Group, Inc.'s FEID No.59-2385410
Liberty Finance Company's FEID No. 59-2530982
Smart Choice Receivables Holding Company's FEID No. 88-0381833
First Choice Auto Finance, Inc.'s FEID No. 59-3231285
5200 S. WASHINGTON
TITUSVILLE, FLORIDA 32780-7316
Address for Florida Finance Group, Inc., Liberty Finance Company
and First Choice Auto Finance, Inc.
P.O. BOX 50102
HENDERSON, NEVADA 89016
Address for Smart Choice Receivables Holding Company
$100,000,000.00
Amount of Loan
NOVEMBER 9, 1998
(DATE)
================================================================================
REDISCOUNT FINANCE
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS...................................................................................2
1.1. ACCOUNT DEBTOR.......................................................................2
1.2. AGREEMENT............................................................................2
1.3. BUSINESS DAY.........................................................................2
1.4. CHARGE OFFS..........................................................................2
1.5. CODE.................................................................................2
1.6. COLLATERAL...........................................................................2
1.7. COLLATERAL PERFORMANCE PERCENTAGE....................................................2
1.8. COLLATERAL RECOVERY RATE.............................................................2
1.9. COMMONLY CONTROLLED ENTITY...........................................................2
1.10. COST OF GOODS SOLD...................................................................2
1.11. DEFAULT..............................................................................2
1.12. DISTRIBUTIONS........................................................................2
1.13. ELIGIBLE INVENTORY...................................................................2
1.14. ELIGIBLE RECEIVABLES.................................................................2
1.15. ERISA................................................................................3
1.16. GAAP.................................................................................3
1.17. GUARANTOR............................................................................3
1.18. GUARANTY AGREEMENT...................................................................3
1.19. GOVERNING RATE.......................................................................3
1.20. INCLUDED REBATE PERCENTAGE...........................................................3
1.21. INCLUDED REBATES.....................................................................3
1.22. INDEBTEDNESS.........................................................................3
1.23. INVENTORY............................................................................3
1.24. INVENTORY BORROWER...................................................................4
1.25. INVENTORY CREDIT FACILITY............................................................4
1.26. LEVERAGE RATIO.......................................................................4
1.27. LOAN DOCUMENTS.......................................................................4
1.28. MAXIMUM RATE.........................................................................4
1.29. NET INCOME...........................................................................4
1.30. NONPAYMENT NET RECEIVABLE REDUCTIONS.................................................4
1.31. NOTE.................................................................................4
1.32. PLAN.................................................................................4
1.33. RECEIVABLES..........................................................................4
1.34. RECEIVABLES BORROWERS................................................................4
1.35. RECEIVABLES CREDIT FACILITY..........................................................4
1.36. REQUEST FOR ADVANCE..................................................................4
1.37. SCHEDULE.............................................................................4
1.38. SUBORDINATED DEBT....................................................................4
1.39. TANGIBLE NET WORTH...................................................................4
2. LOAN ..............................................................................................5
2.1. AMOUNT OF LOAN.......................................................................5
2.2. INTEREST RATE........................................................................5
2.3. PAYMENTS.............................................................................5
2.4. PAYMENT DUE ON A NON-BUSINESS DAY....................................................5
2.5. MANDATORY PAYMENTS...................................................................5
2.6. VOLUNTARY PREPAYMENTS................................................................5
2.7. MAXIMUM INTEREST; CONTROLLING AGREEMENT..............................................6
2.8. INTEREST AFTER DEFAULT...............................................................6
2.9. STATEMENT OF ACCOUNT.................................................................7
2.10. APPLICATION OF PAYMENTS..............................................................7
2.11. ALLOCATION OF PAYMENTS...............................................................7
</TABLE>
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<TABLE>
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2.12. ADVANCES TO LEAD BORROWER...........................................................7
2.13. APPOINTMENT OF AGENT................................................................7
2.14. TERMINATION FEE.....................................................................8
2.15. INVENTORY CREDIT LINE...............................................................8
2.16. RECEIVABLES CREDIT FACILITY.........................................................8
3. SECURITY..........................................................................................8
3.1. SECURITY INTEREST...................................................................8
3.2. FINANCING STATEMENTS AND FURTHER ASSURANCES.........................................9
3.3. PLEDGE OF RECEIVABLES...............................................................9
3.4. FAILURE TO DELIVER..................................................................9
3.5. NOTICE OF COLLATERAL ASSIGNMENT.....................................................9
3.6. LOCATION OF RECEIVABLES.............................................................9
3.7. RECORDS AND INSPECTIONS.............................................................9
3.8. ADDITIONAL DOCUMENTS................................................................9
3.9. COLLECTION..........................................................................9
3.10. BLOCKED ACCOUNTS....................................................................10
3.11. PROTECTION OF RECEIVABLE RECORDS....................................................10
3.12. USE OF COLLECTIONS AND MODIFICATION OF RECEIVABLES..................................10
3.13. USE OF PROCEEDS.....................................................................10
3.14. RETURN OF COLLATERAL................................................................10
3.15. LENDER'S PAYMENT OF CLAIMS..........................................................10
3.16 CROSS COLLATERALIZATION.............................................................10
4. CONDITIONS OF CLOSING; SUBSEQUENT ADVANCES........................................................10
4.1. INITIAL ADVANCE.....................................................................10
4.2. SUBSEQUENT ADVANCES.................................................................12
4.3. ORAL REQUEST FOR ADVANCE............................................................12
4.4. ALL ADVANCES TO CONSTITUTE ONE LOAN.................................................12
4.5. ADVANCES............................................................................12
5. REPRESENTATIONS AND WARRANTIES OF BORROWERS AND GUARANTOR.........................................12
5.1. REPRESENTATIONS AND WARRANTIES......................................................12
5.2. WARRANTIES AND REPRESENTATIONS AS TO ELIGIBLE RECEIVABLES...........................14
6. COVENANTS AND OTHER AGREEMENTS....................................................................15
6.1. AFFIRMATIVE COVENANTS...............................................................15
6.2. NEGATIVE COVENANTS..................................................................16
6.1. REPORTING REQUIREMENTS AND ACCOUNTING PRACTICES.....................................16
6.2. PLEDGE OF RECEIVABLES......................................................16
6.3. ACCOUNT DEBTORS' ADDRESSES..........................................................17
6.4. FINANCIAL REPORTS...................................................................17
6.5. FINANCIAL STATEMENTS OF GUARANTORS..................................................17
6.6. NOTICE OF CHANGES...................................................................17
7. EVENTS OF DEFAULT AND REMEDIES....................................................................17
7.1. EVENTS OF DEFAULT...................................................................18
7.2. ACCELERATION OF THE INDEBTEDNESS....................................................19
7.3. LOUISIANA CONFESSION OF JUDGMENT....................................................19
7.4. REMEDIES............................................................................19
7.5. NO WAIVER...........................................................................20
7.6. APPLICATION OF PROCEEDS.............................................................20
7.7. APPOINTMENT OF LENDER AS ATTORNEY-IN-FACT...........................................20
8. EXPENSES AND INDEMNITIES..........................................................................21
8.1. REIMBURSEMENT FOR EXPENSES..........................................................21
</TABLE>
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8.2. LENDER'S EXPENSES AND ATTORNEY'S FEES...............................................21
8.3. GENERAL INDEMNIFICATION.............................................................21
9. MISCELLANEOUS.......................................................................21
9.1. NOTICES.............................................................................21
9.2. PARTICIPATIONS......................................................................22
9.3. SURVIVAL OF AGREEMENTS..............................................................22
9.4. NO OBLIGATION BEYOND MATURITY.......................................................22
9.5. PRIOR AGREEMENTS SUPERSEDED.........................................................22
9.6. PARTIES BOUND.......................................................................22
9.7. NUMBER AND GENDER...................................................................22
9.8. NO THIRD PARTY BENEFICIARY..........................................................22
9.9. EXECUTION IN COUNTERPARTS...........................................................22
9.10. SEVERABILITY OF PROVISIONS..........................................................22
9.11. HEADINGS............................................................................22
9.12. SCHEDULES AND EXHIBITS..............................................................22
9.13. FURTHER INSTRUMENTS.................................................................22
9.14. LENDER'S EXPENSES AND ATTORNEY'S FEES...............................................23
9.15. GOVERNING LAW.......................................................................23
9.16. JURISDICTION AND VENUE..............................................................23
9.17. WAIVER..............................................................................23
9.18. ADVICE OF COUNSEL...................................................................23
9.19. WAIVER OF RIGHT TO TRIAL BY JURY....................................................23
</TABLE>
<PAGE> 5
[FINOVA FINANCIAL INNOVATORS LOGO]
Rediscount Finance
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BORROWER: FLORIDA FINANCE GROUP INC.
LIBERTY FINANCE COMPANY
FIRST CHOICE AUTO FINANCE, INC.
ADDRESS: 5200 S. WASHINGTON
TITUSVILLE, FLORIDA 32780-7316
BORROWER: SMART CHOICE RECEIVABLES HOLDING COMPANY
ADDRESS: P. O. BOX 50102
HENDERSON, NV 89016
DATE: DECEMBER 13, 1999
================================================================================
THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is entered into on
the above date between FINOVA CAPITAL CORPORATION, a Delaware corporation
("Lender"), whose corporate address is Dial Tower, Dial Corporate Center,
Phoenix, Arizona 85077 and whose Rediscount Finance Office address is 13355 Noel
Road, Suite 800, Dallas, Texas 75240 and the borrowers named above (collectively
referred to herein as the "Borrowers" and singularly as "Borrower"), all of
whose chief executive offices are located at the above addresses (collectively
referred to herein as "Borrowers' Address"), as an amendment and restatement to
that certain Loan and Security Agreement, dated February 24, 1994 and that
certain First Amended and Restated Loan and Security Agreement, dated February
4, 1997, and not an extinguishment of any obligations evidenced thereby. The
terms and provisions set forth herein and in the other documents executed in
conjunction herewith shall supersede all prior agreements.
Each Borrower shall be separately defined as set forth in the Schedule.
All representations, warranties, covenants, agreements, undertaking or other
obligations of Borrowers as set forth in this Agreement and all other Loan
Documents are made by each Borrower as if separately set forth for each Borrower
in this Agreement and the other Loan Documents. All financial covenants and
ratios set forth herein shall be applied to the Borrowers in the aggregate,
except as otherwise specifically set forth in the Loan Documents.
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<PAGE> 6
1. DEFINITIONS
1.1. ACCOUNT DEBTOR. The term "Account Debtor" shall mean any person or
persons that are an obligor in any contractual arrangement with Borrower or any
co-signor in respect of any Receivable.
1.2. AGREEMENT. The term "Agreement" shall mean this Loan and Security
Agreement and any amendment, modifications or extension hereof.
1.3. BUSINESS DAY. The term "Business Day" shall mean a day, other than a
Saturday or Sunday, on which commercial banks are open for business to the
public in Phoenix, Arizona and New York, New York.
1.4. CHARGE OFFS. The term "Charge Offs" shall mean the amount due
(including the principal balance plus all earned fees and charges) pursuant to a
Receivable on the date that Borrower charges off such Receivable as
uncollectible, pursuant to Borrower's policies and/or procedures.
1.5. CODE. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
1.6. COLLATERAL. The term "Collateral" shall have the meaning set forth in
Section 3.1. hereof.
1.7. COLLATERAL PERFORMANCE PERCENTAGE. The term "Collateral Performance
Percentage" shall mean, on any date of determination, the percentage determined
by the aggregate of all of the outstanding balances, including accrued interest,
for all Receivables that are sixty (60) days or more past due or are otherwise
ineligible Receivables divided by the aggregate of all of the outstanding
balances, including accrued interest, for all Receivables.
1.8. COLLATERAL RECOVERY RATE. The term "Collateral Recovery Rate" shall
mean, for any period of determination, (i) the total cash collected from all
Receivables (including but not limited to all cash proceeds from charge off
recoveries, with such charge off recoveries calculated at wholesale value),
divided by (ii) the sum of (a) the Included Rebates plus (b) the total cash
collected from all Receivables (excluding all cash proceeds from charge off
recoveries) plus (c) the aggregate of all Charge Offs for that period.
1.9. COMMONLY CONTROLLED ENTITY. The term "Commonly Controlled Entity"
shall mean an entity, whether or not incorporated, which is under common control
with Borrower within the meaning of Section 414(b) or (c) of the Code.
1.10. COST OF GOODS SOLD. The term "Cost of Goods Sold" shall mean, with
respect to the vehicle that secures the repayment of a Receivable, the sum of
(i) the direct cost paid for such vehicle, (ii) reconditioning costs, (iii)
taxes paid with respect to the sale of such vehicle, (iv) cost of registration
and application for title and (v) all commissions paid by Borrower with respect
to the sale of such vehicle that generated such Receivable.
1.11. DEFAULT. The term "Default" shall mean an event which with the
passage of time or notice or both would constitute an Event of Default (as
defined in Section 7.1).
1.12. DISTRIBUTIONS. The term "Distributions" shall mean any dividends or
other distribution of earnings to Borrower's shareholders.
1.13. ELIGIBLE INVENTORY. The term "Eligible Inventory" shall mean
Inventory of Borrower that are acceptable to Lender, in its reasonable
discretion, and, in each case, that meet, at a minimum, all of the following
requirements (i) consist of motor vehicles available for resale to consumers,
which are not obsolete or unmerchantable (ii) do not exceed the Maximum Mileage
of Eligible Inventory (SCHEDULE SECTION 1.13.A.), the Maximum Age of Eligible
Inventory (SCHEDULE SECTION 1.13.B.) or the Maximum Cost of Eligible Inventory
(SCHEDULE SECTION 1.13.C.); (iii) meets all standards imposed by any
governmental agency or authority; (iv) conforms in all respects to the
warranties and representations set forth herein; (v) is at all times subject to
Lender's duly perfected, first priority security interest; (vi) is situated at a
First Choice location (SCHEDULE SECTION 3.2); (v) Lender has in its possession,
the certificate of title or other similar document (with all prior liens
released), together with applicable assignments or other transfer documents
which if file with the appropriate governmental agency could transfer such title
to Borrower; (vi) such vehicle is not purchased from an entity that has any
common ownership, direct or indirect, with that of Borrower; (vi) such vehicle
has not been repossessed by Borrower or any entity that has any common
ownership, direct or indirect, with that of Borrower; and (vii) such vehicle not
be owned by Borrower for more than the Maximum Ownership (SCHEDULE SECTION
1.3.D.)
1.14. ELIGIBLE RECEIVABLES. The term "Eligible Receivables" shall mean
those Receivables of Borrower that are acceptable to Lender, in its reasonable
discretion, and, in each case, that meet, at a minimum, all of the following
requirements: (i) arise from the extension of credit, the sale and delivery of a
vehicle or the rendering of services in connection with such sale in the
ordinary course of Borrower's business; (ii) represent a valid and
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<PAGE> 7
binding obligation enforceable in accordance with its terms for the amount
outstanding thereof without offset, counterclaim or defense (whether actual or
alleged); (iii) comply in all respects with all applicable laws and regulations,
including, but not limited to, truth in lending and credit disclosure laws and
regulations; (iv) all amounts and information appearing thereon or furnished to
Lender in connection therewith are true and correct and undisputed by the
Account Debtor thereon or any guarantor thereof; (v) Borrower and the Account
Debtor are not engaged in any litigation regarding nonpayment of the Receivable;
(vi) to the best knowledge of Borrower neither the Account Debtor thereon nor
any guarantor thereof is subject to any receivership, insolvency or bankruptcy
proceeding, is insolvent or has failed to meet its debts as they mature; (vii)
Borrower has good and sufficient right to pledge, assign and deliver the
Receivables free from all liens, claims, encumbrances or security interests
whatsoever, except as granted in this Agreement; (viii) neither the Account
Debtor thereon nor any guarantor thereof is employed by, related to or
affiliated with Borrower; (ix) to the best knowledge of Borrower no condition
exists that materially or adversely affects the value of the Receivable or
jeopardizes any security therefor; (x) if the Receivable arose from the sale of
goods, such goods have been delivered and accepted by the Account Debtor and are
still subject to the lawful possession and control of the Account Debtor and
have not been otherwise returned to or repossessed by Borrower; (xi) is not a
renewal or extension of any Receivable previously ineligible hereunder; (xii)
the original principal amount thereof does not exceed the Maximum Amount of an
Eligible Receivable (SCHEDULE SECTION 1.14.A.) and the original term thereof
does not exceed the Maximum Term of an Eligible Receivable (SCHEDULE SECTION
1.14.B.); (xiii) meets the Eligibility Test and has been reported to Lender in
compliance with the Aging Procedures (SCHEDULE SECTION 1.14.C.); (xiv) is not
evidenced by a judgment or has not been reduced to judgment; (xv) is not an open
account; (xvi) is evidenced by a written payment agreement, bearing interest or
containing a time price differential, which has been executed by the Account
Debtor; (xvii) the Account Debtor thereunder is a legal resident of the United
States; (xviii) payments under the Receivable are to be made in United States
dollars; (xix) the number of days between contractual payment dates of the
Receivable does not exceed thirty-one (31) days, and (xxi) with respect to the
Receivable, Lender has in Lender's possession the original contract or agreement
that evidences the primary payment obligation of the Account Debtor and the
original certificate of title or other evidence of title, pursuant to applicable
law, or evidence that such certificate of title or other evidence has been
properly applied for with the proper state agency or department for the issuance
of such certificate or other evidence, satisfactory in form and substance to
Lender.
1.15. ERISA. The term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
1.16. GAAP. The term "GAAP" shall mean generally accepted accounting
principles and other standards as promulgated by the American Institute of
Certified Public Accountants.
1.17. GUARANTOR. The term "Guarantor" shall mean any person or persons who
execute a guaranty agreement in favor of Lender guaranteeing the repayment of
the Borrower's Indebtedness to Lender (SCHEDULE SECTION 1.17).
1.18. GUARANTY AGREEMENT. The term "Guaranty Agreement" shall mean that
certain agreement executed by the Guarantor, in a form and substance approved by
Lender.
1.19. GOVERNING RATE. The term "Governing Rate" shall mean the "Prime" rate
publicly announced by Citibank N.A., New York, New York (or such other "money
center" bank as Lender, in its sole discretion, may select from time to time,
but shall not be more than the highest rate of the five largest banks in the
Continental United States as their respective corporate base, reference, prime
or similar benchmark rate), provided however, that such rate may not be the
lowest rate charged to such bank's customers.
1.20. INCLUDED REBATE PERCENTAGE. The term "Included Rebate Percentage"
shall mean, for any period of determination, the percentage determined by
dividing (i) the aggregate of all Charge Offs for that period, by (ii) the
Nonpayment Net Receivable Reductions for that period.
1.21. INCLUDED REBATES. The term "Included Rebates" shall mean, for any
period of determination, (i) the aggregate of all rebates of interest for that
period, multiplied by (ii) the Included Rebate Percentage.
1.22. INDEBTEDNESS. The term "Indebtedness" shall mean all amounts advanced
hereunder by Lender to Borrower together with all other amounts owing or
becoming owing to Lender by Borrower, direct or indirect, absolute or
contingent, now or hereafter existing, whether pursuant to the terms of this
Agreement or any document or instrument evidencing or securing the transaction
contemplated hereby.
1.23. INVENTORY. The term "Inventory" shall mean all of Borrower's now
owned and hereafter acquired motor vehicles, wherever located, held for sale to
consumer, that are not vehicles primarily used for a commercial purpose
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<PAGE> 8
or for a off-road purpose and all documents of title or other documents
representing ownership of such assets.
1.24. INVENTORY BORROWER. The term "Inventory Borrower" shall mean First
Choice Auto Finance, Inc..
1.25. INVENTORY CREDIT FACILITY. The term "Inventory Credit Facility" shall
mean the credit facility as set forth in Section 2.15.
1.26. LEVERAGE RATIO. The term "Leverage Ratio" shall mean, at any date of
determination, total liabilities of Borrower, including the outstanding balance
of the Indebtedness, less the outstanding balance due pursuant to all
Subordinated Debt, divided by the sum of the amount of Borrower's Tangible Net
Worth plus the outstanding balance due pursuant to all Subordinated Debt.
1.27. LOAN DOCUMENTS. The term "Loan Documents" shall mean this Agreement,
the Note, the Schedule, the Guaranty, Subordination Agreements, Agency and
Custodian Agreements and all other documents executed in connection with this
Agreement, together with any and all renewals, amendments, restatements or
replacements of such documents.
1.28. MAXIMUM RATE. The term "Maximum Rate" shall mean the highest lawful
and nonusurious rate of interest applicable to the Note made and delivered by
Borrower to Lender in connection herewith, that at any time or from time to time
may be contracted for, taken, reserved, charged, or received on the Note and the
Indebtedness under the laws of the United States and the laws of such states as
may be applicable thereto, that are in effect or, to the extent allowed by such
laws, that may be hereafter in effect and that allow a higher maximum
nonusurious and lawful interest rate than would any applicable laws now allow.
1.29. NET INCOME. The term "Net Income" shall mean with respect to any
fiscal period, the net earnings of Borrower (excluding all extraordinary gains
or nonrecurring income) before provision for income taxes for such fiscal period
of Borrower, all as reflected on the financial statements of Borrower supplied
to Lender pursuant to Sections 5.4(A) and 5.4(B) hereof.
1.30. NONPAYMENT NET RECEIVABLE REDUCTIONS. The term "Nonpayment Net
Receivable Reductions" shall mean, for any period of determination, the sum of
(i) the aggregate of all Charge Offs for that period, plus (ii) the aggregate of
all net refinanced balances of Receivables for that period.
1.31. NOTE. The term "Note" shall mean the promissory note of even date
herewith, and all renewals, extensions, or modifications executed by Borrower
and payable to the order of Lender.
1.32. PLAN. The term "Plan" shall mean any pension plan that is covered by
Title IV of ERISA and with respect to which Borrower or a Commonly Controlled
Entity is an "Employer" as defined in Section 3(5) of ERISA.
1.33. RECEIVABLES. The term "Receivables" shall mean all accounts of
Borrower and any other right of Borrower to receive payment, including, without
limitation, all loans, extensions of credit or Borrower's right to payment for
goods sold or services rendered by Borrower.
1.34. RECEIVABLES BORROWERS. The term "Receivables Borrowers" shall mean,
collectively, Florida Finance Group, Inc., Liberty Finance Company and Smart
Choice Receivables Holding Company.
1.35. RECEIVABLES CREDIT FACILITY. The term "Receivables Credit Facility"
shall mean the credit facility as set forth in Section 2.16.
1.36. REQUEST FOR ADVANCE. The term "Request for Advance" shall mean a
written request for an advance in the form of Exhibit "A" attached hereto and
made a part hereof.
1.37. SCHEDULE. The term "Schedule" shall mean the schedule executed in
conjunction with this Agreement of even date herewith, as may be amended from
time to time, upon written agreement of Lender and Borrower.
1.38. SUBORDINATED DEBT. The term "Subordinated Debt" shall mean the
aggregate amount of any indebtedness of Borrower to persons other than Lender
that by its terms is subordinated to the prior payment in full of the
Indebtedness pursuant to a subordination and standstill agreement, in a form and
substance satisfactory to Lender, entered into by all holders of Subordinated
Debt.
1.39. TANGIBLE NET WORTH. The term "Tangible Net Worth" shall mean, at any
time of determination, the shareholder's equity of Borrower determined in
accordance with GAAP minus the aggregate amount of all intangible assets and all
assets consisting of obligations due to Borrower from shareholders, directors,
officers, or any affiliate of Borrower or any Guarantor hereunder.
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<PAGE> 9
2. LOAN
2.1. AMOUNT OF LOAN. Subject to the terms, covenants and conditions
hereinafter set forth, Lender agrees upon the Borrower's request from time to
time, until the Maturity Date, to make advances to Borrower (collectively, the
"Loan"), in an aggregate amount not to exceed at any time outstanding the lesser
of the following: (i) the Amount of Revolving Credit Line (SCHEDULE SECTION
2.1.A.) or (ii) the sum of (a) the Availability on Eligible Receivables
(SCHEDULE SECTION 2.1.B.), (b) the Availability on Eligible Inventory (SCHEDULE
SECTION 2.1.C.). Within the limits of this Section 2.1, Borrower may borrow,
repay and reborrow the advances. The Loan shall be evidenced by the Note.
2.2. INTEREST RATE. The outstanding principal balance of Loan shall bear
interest at the Stated Interest Rate (SCHEDULE SECTION 2.2). If Lender is ever
prevented from charging or collecting interest at the rate set forth in Stated
Interest Rate Section (i) because interest at such rate would exceed interest at
the Maximum Rate, then the rate set forth in Stated Interest Rate Section (i)
shall continue to be the Maximum Rate until Lender has charged and collected the
full amount of interest chargeable and collectable had interest at the rate set
forth in Stated Interest Rate Section (i) always been lawfully chargeable and
collectible. As the Governing Rate changes, the rate set forth in Stated
Interest Rate Section (i) shall be increased or decreased (subject to the
Maximum Rate) on the first day of each calendar month to correspond with the
change in the Governing Rate then in effect and shall remain fixed at such rate
until the first day of the next succeeding calendar month, notwithstanding
fluctuations in the Governing Rate during the month. All changes in the
Governing Rate shall be made without notice to Borrower. The monthly interest
due on the principal balance of the Loan outstanding shall be computed for the
actual number of days elapsed during the month in question on the basis of a
year consisting of three hundred sixty (360) days and shall be calculated by
determining the average daily principal balance outstanding for each day of the
month in question. The daily rate shall be equal to 1/360th times the Stated
Interest Rate (but shall not exceed the Maximum Rate).
2.3. PAYMENTS. PAYMENTS. All payments made by mail or other physical
delivery methods to Lender shall be payable at FINOVA Capital Corporation, File
No. 96425, P. O. Box 1067, Charlotte, NC 28201-1067. All payments made by wire
transfer or other method of electronic transfer methods to Lender shall be
payable to FINOVA Capital Corporation, CITIBANK, NEW YORK, NEW YORK, ABA# 021
000 089, ACCOUNT NAME: FINOVA CAPITAL CORP., ACCOUNT NUMBER: 4068-0485,
REFERENCE: REDISCOUNT FINANCE, ZQX(CLIENT ACCT. #XXX )ZQX.) All payments
received pursuant to this Agreement by wire transfer or other electronic
transfer method, where immediate credit occurs, shall be applied to Borrower's
Indebtedness on the Business Day of actual receipt of such payment by Lender's
depository bank, payments received by any other method shall be applied to
Borrower's Indebtedness three (3) Business Days after the actual receipt of such
payment by Lender's depository bank if such payment is credited to Lender's
account. The Indebtedness shall be due and payable as follows:
A. Accrued but unpaid interest for each calendar month during the term
hereof shall be due and payable, in arrears, on or before the fifteenth (15th)
day of the immediately succeeding calendar month.
B. Costs, fees and expenses payable pursuant to this Agreement shall be due
and payable by Borrower to Lender or to such other person(s) designated by
Lender in writing on demand; and
C. The entire outstanding balance of the Indebtedness shall be due and
payable, if not prepaid, on the Maturity Date (SCHEDULE SECTION 2.3.).
2.4. PAYMENT DUE ON A NON-BUSINESS DAY. If any payment of the Indebtedness
falls due on a day other than a Business Day, then such due date shall be
extended to the next succeeding Business Day.
2.5. MANDATORY PAYMENTS. Provided that Borrower is not otherwise in Default
hereunder, if at any time the amount advanced by Lender to Borrower exceeds the
maximum amount of the Loan allowed pursuant to Section 2.1, Borrower shall
immediately and without notice, repay to Lender an amount sufficient to
eliminate such excess, or, at Lender's option, assign and deliver additional
Eligible Receivables sufficient for such purpose. In the event Borrower sells,
transfers, assigns or otherwise disposes of all or any portion of its
Receivables, other than in the ordinary course of business, Borrower shall apply
all proceeds of any such sale, transfer, assignment or other disposition to
reduce the outstanding balance of the Indebtedness.
2.6. VOLUNTARY PREPAYMENTS. Borrower may, at its option, voluntarily prepay
the Indebtedness in full at any time and request a termination of Lender's
security interest in the collateral, provided, however, that Borrower has given
Lender ninety (90) days written notice of any such intention to prepay the
Indebtedness in full, Borrower requests Lender to terminate its security
interest in the Collateral and as liquidated damages, not as a penalty, pays to
Lender the amount of liquidated damages ("Liquidated Damages") (SCHEDULE SECTION
2.6). Borrower may not make such prepayment prior to the expiration of such
ninety (90) day period. Upon written notice of Borrower's intent to prepay the
Indebtedness in
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full, the commitment by Lender to advance funds to Borrower and all the
obligations of Lender shall terminate on the expiration of said ninety (90) day
notice period, and the entire amount of the Indebtedness shall be due and
payable on such date.
2.7. MAXIMUM INTEREST; CONTROLLING AGREEMENT. The contracted for rate of
interest of the Loan without limitation, shall consist of the following: (i) the
Stated Interest Rate, calculated and applied to the principal balance of the
Note in accordance with the provisions of the Note and this Agreement; (ii)
interest after Event of Default or due date, calculated and applied to the
amounts due under the Note in accordance with the provisions thereof; and (iii)
all Additional Sums (as herein defined), if any. Borrower agrees to pay an
effective contracted for rate of interest which is the sum of the
above-referenced elements.
All fees, charges, goods, things in action or any other sums or things of
value (other than amounts described in the immediately previous paragraph), paid
or payable by Borrower (collectively, the "Additional Sums"), whether pursuant
to the Note, this Agreement or any other documents or instruments in any way
pertaining to this lending transaction, or otherwise with respect to this
lending transaction, that under any applicable law may be deemed to be interest
with respect to this lending transaction, for the purpose of any applicable law
that may limit the maximum amount of interest to be charged with respect to this
lending transaction, shall be payable by Borrower as, and shall be deemed to be,
additional interest and for such purposes only, the agreed upon and "contracted
for rate of interest" of this lending transaction shall be deemed to be
increased by the rate of interest resulting from the inclusion of the Additional
Sums.
It is the intent of the parties to comply with the usury law ("Applicable
Usury Law") applicable pursuant to the terms of the preceding paragraph or such
other usury law which is applicable if the law chosen by the parties is not
applicable. Accordingly, it is agreed that notwithstanding any provisions to the
contrary in the Loan Documents, or in any of the documents securing payment
hereof or otherwise relating hereto, in no event shall the Loan Documents or
such documents require the payment or permit the collection of interest in
excess of the maximum contract rate permitted by the Applicable Usury Law. In
the event (a) any such excess of interest otherwise would be contracted for,
charged or received from Borrower or otherwise in connection with the loan
evidenced hereby, or (b) the maturity of the indebtedness evidenced by the Loan
Documents is accelerated in whole or in part, or (c) all or part of the
principal or interest of the Loan Documents shall be prepaid, so that under any
of such circumstances the amount of interest contracted for, charged or received
in connection with the loan evidenced hereby, would exceed the maximum contract
rate permitted by the Applicable Usury Law, then in any such event (1) the
provisions of this paragraph shall govern and control, (2) neither Borrower nor
any other person or entity now or hereafter liable for the payment hereof will
be obligated to pay the amount of such interest to the extent that it is in
excess of the maximum contract rate permitted by the Applicable Usury Law, (3)
any such excess which may have been collected shall be either applied as a
credit against the then unpaid principal amount hereof or refunded to Borrower,
at Lender's option, and (4) the effective rate of interest will be automatically
reduced to the maximum amount of interest permitted by the Applicable Usury Law.
It is further agreed, without limiting the generality of the foregoing, that to
the extent permitted by the Applicable Usury Law; (x) all calculations of
interest which are made for the purpose of determining whether such rate would
exceed the maximum contract rate permitted by the Applicable Usury Law shall be
made by amortizing, prorating, allocating and spreading during the period of the
full stated term of the loan evidenced hereby, all interest at any time
contracted for, charged or received from Borrower or otherwise in connection
with such loan; and (y) in the event that the effective rate of interest on the
loan should at any time exceed the maximum contract rate allowed under the
Applicable Usury Law, such excess interest that would otherwise have been
collected had there been no ceiling imposed by the Applicable Usury Law shall be
paid to Lender from time to time, if and when the effective interest rate on the
loan otherwise falls below the maximum amount permitted by the Applicable Usury
Law, to the extent that interest paid to the date of calculation does not exceed
the maximum contract rate permitted by the Applicable Usury Law, until the
entire amount of interest which would have otherwise been collected had there
been no ceiling imposed by the Applicable Usury Law has been paid in full.
Borrower further agrees that should the maximum contract rate permitted by the
Applicable Usury Law be increased at any time hereafter because of a change in
the law, then to the extent not prohibited by the Applicable Usury Law, such
increases shall apply to all indebtedness evidenced hereby regardless of when
incurred; but, again to the extent not prohibited by the Applicable Usury Law,
should the maximum contract rate permitted by the Applicable Usury Law be
decreased because of a change in the law, such decreases shall not apply to the
indebtedness evidenced hereby regardless of when incurred.
2.8. INTEREST AFTER DEFAULT. Upon the occurrence and during the continuation
of an Event of Default, Borrower shall pay Lender interest on the daily
outstanding balance of Borrower's loan account at a rate per annum which is
greater of (not to exceed the Maximum Rate): (i) the four percent (4%) in excess
of the highest Stated Interest Rate which would otherwise be
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applicable thereto pursuant to the Schedule (SCHEDULE SECTION 2.2), or (ii)
sixteen percent (16%).
2.9. STATEMENT OF ACCOUNT. Lender shall provide Borrower, each month, with
a statement of Borrower's account, prepared from Lender's records, which shall
conclusively be deemed correct and accepted by Borrower, unless Borrower gives
Lender a written statement of exceptions within thirty (30) days after receipt
of such statement.
2.10. APPLICATION OF PAYMENTS. The amount of all payments or amounts
received by Lender with respect to the Indebtedness shall be applied to the
extent applicable under this Agreement: (i) first, to accrued interest through
the date of such payment, including any Interest After Default; (ii) then, to
any late fees, overdue risk assessments, examination fees and expenses,
collection fees and expenses and any other fees and expenses due to Lender
hereunder; and (iii) last, the remaining balance, if any, to the unpaid
principal balance of the Indebtedness; provided, however, while a Default exists
under the Loan Documents, each payment hereunder shall be applied to amounts
owed to Lender by Borrower as Lender it is sole discretion may determine. In
calculating interest and applying payments as set forth above; (a) interest
shall be calculated and collected through the date a payment is actually applied
by Lender under the terms of this Agreement; (b) interest on the outstanding
balance shall be charged during any grace period permitted hereunder; (c) at the
end of each month, all accrued and unpaid interest and other charges provided
for hereunder shall be added to the principal balance of the Loan; and (d) to
the extent that Borrower makes a payment or Lender receives any payment or
proceeds of the Collateral for Borrower's benefit that is subsequently
invalidated, set aside or required to be repaid to any other person or entity,
then, to such extent, the obligations intended to be satisfied shall be revived
and continue as if such payment or proceeds had not been received by Lender and
Lender may adjust the outstanding balance of the Indebtedness as Lender, in its
sole discretion, deems appropriate under the circumstances.
2.11. ALLOCATION OF PAYMENTS. All payments and collections shall be deemed
to be comprised of a pro rata remittance or payment made by each Borrower, based
upon the proportion that the Eligible Receivables of each Borrower bears to the
aggregate of all Eligible Receivables of the Borrowers, as of the date on which
such remittance or payment is received by Lender. In the event such remittance
or payment shall be made by the Lead Borrower, acting as agent or trustee for
the other Borrowers, each Borrower shall be deemed to have made their
proportionate amount of such remittance or payment to Lender by and through such
agent or trustee.
2.12. ADVANCES TO LEAD BORROWER. Borrower does hereby irrevocably agree
that in the event Lender makes advances to Lead Borrower, as agent or trustee
for each of Borrower, as contemplated in Section 2.13, each such advance shall
be deemed to be made to each Borrower based upon a proportion that each
Borrower's Eligible Receivables bear to the aggregate of all Eligible
Receivables of Borrower, notwithstanding any subsequent disbursement of said
advance by the Lead Borrower, acting as agent or trustee for the Borrowers. In
the event that the actual advances, direct or indirect, received by Lead
Borrower or any other Borrower or the balance due to Lender as shown in the
records of any Borrower shall be disproportionate when compared to the
proportion of the Eligible Receivables of each Borrower, whether by way of
subsequent disbursements by Lead Borrower, acting as agent or trustee, by way of
Lender electing to make advances to each Borrower, as contemplated in Section
2.13 or otherwise, such disproportionalities shall be deemed to have occurred by
virtue of loans made between and among Borrowers.
2.13. APPOINTMENT OF AGENT. Lender agrees that, in the sole discretion of
Lender, Borrower may, by written notice to Lender, designate a Lead Borrower to
receive advances from Lender, make payments to Lender, communicate with Lender
and generally represent the interests of the Borrowers with respect to the
subject matter of this Agreement; notwithstanding the foregoing, Lender may, at
its sole discretion and upon notice to each of the Borrowers, make advances
directly to each of the Borrowers, require that payments due hereunder be made
to Lender by each of the Borrowers, require each of the Borrowers to communicate
directly with Lender, for its own account, and generally deal independently and
separately with each of the Borrowers. Until so notified by Lender, each of the
Borrowers hereby agree that any and all funds advanced by Lender pursuant to the
terms of this Agreement, shall be advanced to the Lead Borrower and may be
deposited or transferred into the general corporate account of Lead Borrower, as
agent and/or trustee for Borrowers. Lead Borrower hereby agrees to keep detailed
and accurate records of all such disbursements made to any other Borrowers. Lead
Borrower hereby agrees to keep detailed and accurate records of all loans and
dealings between or among Lead Borrower and the other Borrowers. Borrowers agree
to furnish copies of such records to Lender upon request. Each Borrower, other
than the Lead Borrower hereby irrevocably makes, constitutes, designates and
appoints Lead Borrower as its agent and/or trustee with full power to receive
all notices, request all Advances hereunder and to deal generally with Lender as
agent and/or trustee for the Borrowers and Lead Borrower is hereby granted full
power and authority to bind the Borrowers in respect of any term, condition,
covenant or undertaking embraced in this Agreement. Lender may, without
liability or responsibility to the
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Borrowers rely upon the instructions or other communications of Lead Borrower on
behalf of each of the Borrowers in connection with any notifications, requests
or communications required or permitted to be given hereunder with the same
force and effect as if actually given by each Borrower; each Borrower hereby
agrees to indemnify and hold Lender harmless from and against any liability,
claim, suit, action, penalty, fine or damage arising out of or incurred in
connection with Lender's reliance upon communications from Lead Borrower on
behalf of the Borrowers. It is specifically understood and agreed that any
Advance made hereunder by Lender to Lead Borrower shall be considered and
treated as an Advance to the Borrowers and each Borrower shall be jointly and
severally liable therefor.
2.14. TERMINATION FEE. Borrower agrees to pay Lender a Termination Fee
(SCHEDULE 2.14) upon the termination of the credit facility evidenced by the
Loan Documents. This Termination Fee shall be due and payable together with the
payment in full of the outstanding balance of the Indebtedness, whether by a
voluntary prepayment in full by Borrower together with a request for Lender to
terminate Lender's security interest in the Collateral, the acceleration of the
outstanding balance of the Indebtedness upon an Event of Default or upon the
expiration of the term hereof, as such term may be extended from time to time.
This Termination Fee shall be included as an Additional Sum as defined in
Section 2.7 of the Agreement.
2.15. INVENTORY CREDIT LINE. The Inventory Credit Line shall be that
portion of the Amount of the Revolving Credit Line, that shall not exceed the
Availability on Eligible Inventory. Advances pursuant to the Inventory Credit
Line shall only be made directly to First Choice, based upon the Eligible
Inventory of First Choice.
The Stated Interest Rate applicable to the that portion of the outstanding
balance of the Indebtedness applicable to the Inventory Credit Line shall be at
the Inventory Stated Interest Rate (SCHEDULE SECTION 2.2.). The Receivables
owned or held by First Choice shall not be eligible Receivables hereunder and
the Inventory owned or held by the Receivables Borrowers shall not be eligible
Inventory hereunder.
Inventory Borrower shall provide Lender such reporting and information as
requested by Lender with respect to all Inventory, including but not limited to
the reports and information set forth in Section 6.4.A. Notwithstanding any
provision contained in the Loan Documents to the contrary, in addition to all
other audit costs and expenses due and payable hereunder, Inventory Borrower
shall reimburse Lender for all of Lender's expenses with respect to the audit or
checks with respect to Inventory, as required by Lender.
2.16. RECEIVABLES CREDIT FACILITY. The Receivables Credit Facility shall be
that portion of the Amount of the Revolving Credit Line, that shall not exceed
the Availability on Eligible Receivables. Advances pursuant to the Receivables
Credit Facility shall only be made directly to the Lead Lender or any of the
Receivable Borrowers, pursuant to the terms of the Loan Documents, based upon
the Eligible Receivables of the Receivable Borrowers.
The Stated Interest Rate applicable to the that portion of the outstanding
balance of the Indebtedness applicable to the Receivables Credit Facility shall
be at the Receivables Stated Interest Rate (SCHEDULE SECTION 2.2.).
3. SECURITY
3.1. SECURITY INTEREST. To secure the prompt payment to Lender of the
Indebtedness and any and all other obligations now existing or hereinafter
arising owed by Borrower to Lender, Borrower hereby irrevocably grants to Lender
a first and continuing security interest in the following property and interests
in property of Borrower, whether now owned or existing or hereafter acquired or
arising and wheresoever located:
A. All Receivables and all accounts, chattel paper, instruments, contract
rights and general intangibles, all of Borrower's right, remedies, security,
liens, guaranties, or other contracts of suretyship with respect thereto, all
deposits or other security or support for the obligation of any Account Debtor
thereunder and credit and other insurance acquired by Account Debtor or the
Borrower in connection therewith.;
B. All Inventory, new or used, including, but not limited to parts and
accessories;
C. All bank accounts of Borrower;
D. All monies, securities and property, now or hereafter held, received by,
or entrusted to, in the possession or under the control of Lender or a bailee of
Lender;
E. All accessions to, substitutions for and all replacements, products and
proceeds of the foregoing, including, without limitation, proceeds of insurance
policies referenced in Section 3.1.A above (including but not limited to claims
paid and premium refunds); and
F. All books and records (including, without limitation, customer lists,
credit files, tapes, ledger cards, computer
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software and hardware, electronic data processing software, computer printouts
and other computer materials and records) of Borrower evidencing or containing
information regarding any of the foregoing.
3.2. FINANCING STATEMENTS AND FURTHER ASSURANCES. Borrower hereby agrees to
execute UCC-1 Financing Statements, in the form and substance of Exhibit "B"
hereto, and any other instruments or documents reasonably necessary to evidence,
preserve or protect Lender's security interest in the Collateral. Borrower
agrees that financing statements shall be filed covering all of Borrower's
locations (SCHEDULE SECTION 3.2.).
Upon Lender's request, Borrower agrees to deliver to Lender, at such places
as Lender may reasonably designate, schedules executed by Borrower, listing the
Receivables and fully and correctly specifying in adequate detail the aggregate
unmatured unpaid face amount of each Receivable and the amount of the deferred
installments thereof falling due each month. These schedules shall be in form
and tenor satisfactory to or supplied by Lender. All schedules delivered and
Collateral pledged to Lender shall be assigned to Lender pursuant to the
"Schedule of Receivables and Assignment" in the form and substance of Exhibit
"E" attached hereto. Borrower further warrants and agrees that in each case
where the terms of any Receivable require the Borrower or the Account Debtor
named in such Receivable to place or carry fire insurance or other insurance in
respect of the merchandise or property to which such Receivable relates, the
Borrower shall or shall cause the Account Debtor to maintain such insurance
until the full amount of such Receivable is collected and if not, Lender, at its
option, may place and maintain such insurance, charging the cost thereof to
Borrower.
3.3. PLEDGE OF RECEIVABLES. Borrower hereby agrees to pledge all
Receivables and, if so requested by Lender, Borrower shall deliver to Lender all
documents evidencing Receivables of Borrower, no less often than on the
twentieth (20th) day of each calendar month during the term of this Agreement,
together with the Schedule of Receivables and Assignment, as set forth in
Section 3.2 hereof.
3.4. FAILURE TO DELIVER. Failure to deliver physical possession of any
instruments, documents or writings in respect of any Receivable to Lender shall
not invalidate Lender's security interest therein. To the extent that possession
may be required by applicable law for the perfection of Lender's security
interest, the original chattel paper and instruments representing the
Receivables shall be deemed to be held by Lender, although kept by the Borrower
as the custodial agent of Lender.
3.5. NOTICE OF COLLATERAL ASSIGNMENT. All contracts, documents or
instruments representing or evidencing a Receivable shall contain (by way of
stamp or other method reasonably satisfactory to Lender) the following language:
"PLEDGED TO FINOVA CAPITAL CORPORATION AS COLLATERAL".
3.6. LOCATION OF RECEIVABLES. Borrower shall, at any reasonable time and at
Borrower's own expense, upon Lender's request, physically deliver to Lender all
Receivables (including any instruments, documents or writings in respect of any
Receivable together with all instruments, documents or writings in respect of
any collateral securing each Receivable) assigned to Lender to any reasonable
place or places designated by Lender. All Receivables shall, regardless of their
location, be deemed to be under Lender's dominion and control (with files so
labeled) and deemed to be in Lender's possession.
3.7. RECORDS AND INSPECTIONS. Borrower shall at all times keep complete and
accurate records pertaining to the Collateral, which records shall be current on
a daily basis and located only at the locations (SCHEDULE SECTION 3.2.). Lender
by or through any of its officers, agents, employees, attorneys or accountants,
shall have the right to enter any such locations, upon reasonable prior notice,
at any reasonable time or times during regular business hours, for so long as
Lender may desire, to inspect the Collateral and to inspect, audit and make
extractions or copies from the books, records, journals, orders, receipts,
correspondence or other data relating to the Collateral or this Agreement.
3.8. ADDITIONAL DOCUMENTS. Borrower hereby agrees to execute any additional
documents or financing statements which Lender deems necessary in its reasonable
discretion in order to evidence Lender's security interest in the Collateral.
Borrower shall not allow any financing statement or notice of assignment of
accounts receivable, other than those executed in connection with this
Agreement, to be on file in any public office covering any Collateral, proceeds
thereof or other matters subject to the security interest granted to Lender.
3.9. COLLECTION. Borrower agrees at its own expense to promptly and
diligently collect each installment of all Receivables in trust for the
exclusive account of Lender, to hold Lender harmless from any and all loss,
damage, penalty, liability, fine or expense arising from such collection by
Borrower or its agents and to faithfully account therefor to Lender. During the
continuance of any Event of Default, Lender expressly retains the unqualified
right at any time it so elects to take over the collection of the Receivables.
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3.10. BLOCKED ACCOUNTS. At Lender's request, any checks, notes, drafts or
any other payment upon and/or proceeds of the Collateral received by Borrower
(or any subsidiaries, divisions, affiliates, proprietorships, shareholders,
directors, officers, employees, agents or those persons acting for or in concert
with Borrower), shall no later than the next Business Day following receipt
thereof, be delivered to Lender, at Lender's address set forth above, for
application on account of the Indebtedness and shall be reflected in the
Statement of Account as provided in Section 2.9 herein, until such time as
Lender has established a depository account at a bank for the deposit of such
payments, made arrangements for such deposits to be transferred to Lender daily
and thereafter established a lock-box arrangement or otherwise. Borrower shall
(i) deposit or cause all Items, as defined below, to be deposited in the special
account so established by Lender or transfer all Items to Lender for application
on account of the Indebtedness and to be reflected in the Statement of Account
as provided in Section 2.9 herein and (ii) maintain copies of all checks or
other items of payment and deposit slips related thereto, together with a
collection report in a form satisfactory to Lender. All cash payments, checks,
drafts, or similar items of payment upon and/or proceeds of the Receivables
(collectively "Items") by or for the account of Borrower shall be the sole and
exclusive property of Lender immediately upon the earlier of the receipt of such
Items by Lender or the receipt of such Items by Borrower; provided, however,
that no such Item received by Lender shall constitute payment to Lender and be
applied to reduce the Indebtedness until the later of: (i) three (3) Business
Days from collection of such Item by Lender's depository bank, or (ii) such Item
being actually collected by Lender's depository bank and such collection being
credited to Lender's account. Notwithstanding anything to the contrary herein,
all such items of payment shall be deemed not received if the same is
subsequently dishonored or not duly credited to Lender's depository account for
any reason whatsoever.
3.11. PROTECTION OF RECEIVABLE RECORDS. Borrower hereby agrees to take the
following protective actions to prevent destruction of Borrower's Collateral and
records pertaining to such Collateral: (i) if Borrower maintains its Collateral
records on a manual system such records shall be kept in a fire proof cabinet or
on no less than a monthly basis, a record of all payments on Receivables and all
other matters relating to the Collateral shall be placed in an off site safety
deposit box (and Lender shall have access to such safety deposit box); or (ii)
if the Collateral records are computerized, Borrower agrees to create a tape or
diskette "back-up" of the computerized information and upon the request of
Lender, provide Lender with a tape or diskette copy of such "back-up"
information.
3.12. USE OF COLLECTIONS AND MODIFICATION OF RECEIVABLES. Provided that
Lender has not required that Borrower remit all collections or proceeds of
Collateral to Lender, Borrower may use or dispose of the funds received on the
Receivables in the ordinary course of business (including returned or
repossessed goods); and unless an Event of Default is continuing, Borrower may
collect or compromise accounts or obligations and accept returned goods or make
repossessions, as Borrower shall determine based upon its reasonable discretion.
3.13. USE OF PROCEEDS. Borrower shall use the proceeds of the Loan as a
distribution to Borrower's shareholder, provided such distribution does not
create a Default hereunder, for such shareholder to effect the acquisitions
contemplated to occur on or about the date of this Agreement (as previously
disclosed to Lender), in the ordinary course of business, in its operations for
costs incurred in the creation or purchasing of Receivables, or for payments to
Lender hereunder.
3.14. RETURN OF COLLATERAL. Upon the payment in full or renewal of any
Receivable to which the written documents evidencing such Receivable are held by
Lender, Borrower shall submit all requests for the return of such documents
pursuant to the "Request For Return of Collateral" form, a copy of which is
attached hereto as Exhibit "C".
3.15. LENDER'S PAYMENT OF CLAIMS. Lender may, in its sole discretion,
discharge or obtain the release of any security interest, lien, claim or
encumbrance asserted by any person against the Collateral. All sums paid by
Lender in respect thereof shall be payable, on demand, by Borrower to Lender and
shall be a part of the Indebtedness.
3.16 CROSS COLLATERALIZATION. Each Borrower agrees that the Collateral of
each Borrower pledged hereunder shall secure all of the obligations of the
Borrowers to Lender hereunder. Upon and after an Event of Default by any
Borrower, Lender may pursue all rights and remedies it may have against all or
any part of the Collateral regardless of the status of legal title to such
Collateral. Each Borrower hereby acknowledges that this Cross Collateralization
of their Collateral is in consideration of Lender's extending the credit
hereunder and mutually beneficial to each Borrower.
4. CONDITIONS OF CLOSING; SUBSEQUENT ADVANCES
4.1. INITIAL ADVANCE. The obligation of Lender to make the initial advance
hereunder is subject to the fulfillment, to the satisfaction of Lender and its
counsel, of
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each of the following conditions prior to the initial advance hereunder:
A. Loan Documents. Lender shall have received each of the following Loan
Documents: (i) this Loan and Security Agreement executed by the respective
parties; (ii) Schedule to Loan and Security Agreement executed by the respective
parties; (iii) the Note executed by Borrower; (iv) Guaranty Agreement executed
by the respective Guarantors; (v) such Blocked Account or Dominion Account
agreements as it shall determine; and (vi) such other documents, instruments and
agreements in connection herewith as Lender shall reasonably require, executed,
certified and/or acknowledged by such parties as Lender shall designate;
B. Terminations by Existing Lender. Borrower's existing lender(s) shall
have executed and delivered UCC termination statements and other documentation
evidencing the termination of its liens and security interests in the Collateral
in form and substance satisfactory to Lender in its sole discretion;
C. Charter Documents. Lender shall have received copies of Borrower's
By-laws and Articles or Certificate of Incorporation, as amended, modified, or
supplemented to the Closing Date, certified by the Secretary or Assistant
Secretary of Borrower;
D. Good Standing. Lender shall have received a certificate of corporate
status with respect to Borrower and each corporate Guarantor, dated within ten
(10) days of the Closing Date, by the Secretary of State of the state of
incorporation of Borrower and such Guarantor, which certificate shall indicate
that Borrower and such Guarantor are in good standing in such state;
E. Foreign Qualification. Lender shall have received certificates of
corporate status with respect to Borrower and each corporate Guarantor, each
dated within ten (10) days of the Closing Date, issued by the Secretary of State
of each state in which such party's failure to be duly qualified or licensed
would have a material adverse effect on its financial condition or assets,
indicating that such party is in good standing;
F. Authorizing Resolutions and Incumbency. Lender shall have received a
certificate from the Secretary or Assistant Secretary of Borrower and each
corporate Guarantor attesting to (i) the adoption of resolutions of each
respective Board of Directors authorizing the borrowing of money from Lender or
the guaranty of the Indebtedness, as the case may be, and execution and delivery
of this Agreement and the other Loan Documents to which Borrower and Guarantor
are a party, and authorizing specific officers of Borrower and Guarantor to
execute same, and (ii) the authenticity of original specimen signatures of such
officers;
G. Initial Availability Report. Lender shall have received an Availability
Report from Borrower executed by an authorized corporate officer of Borrower;
H. Property Insurance. If applicable, Lender shall have received the
insurance certificates and certified copies of policies required herein, along
with a Lender's Loss Payable Endorsement naming Lender as sole loss payee, all
in form and substance satisfactory to Lender and its counsel;
I. Searches; Certificates of Title. Lender shall have received searches
reflecting the filing of its financing statements and other filings in such
jurisdictions as it shall determine, and shall have received certificates of
title with respect to the Collateral which shall have been duly executed in a
manner sufficient to perfect all of the security interests granted to Lender;
J. Fees. Borrower shall have paid all fees payable by it on the Closing
Date pursuant to this Agreement;
K. Opinion of Counsel. Lender shall have received an opinion of Borrower's
counsel covering such matters as Lender shall determine in its sole discretion;
L. Solvency Certificate. If requested by Lender, a signed certificate of
the Borrower's duly elected Chief Financial Officer concerning the solvency and
financial condition of Borrower, on Lender's standard form;
M. Blocked and Pledged Accounts. If applicable, the Blocked Account and/or
Pledged Account referred to in Section 3.10 hereof shall have been established
to the satisfaction of Lender in its sole discretion; and
N. Warrants Agreement. A signed warrants agreement executed by Eckler
Industries, Inc.
O. Voting Agreement. All of the voting rights with respect to the stock in
Eckler Industries, Inc. owned or held by Gerald C. Parker and Thomas Conlan,
directly or indirectly, shall be held by Gary Smith pursuant to a certain Voting
Agreement, in a form and substance acceptable to Lender.
P. Stock Exchange Agreement. Borrowers' shareholders have completed and
closed all matters with respect to a stock exchange agreement with Smart Choice
Automotive Holdings, Inc. ("Holdings"), wherein all of the ownership of Borrower
is held by Holdings, in a form and substance satisfactory to Lender.
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Q. Other Matters. All other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered,
executed and recorded and shall be in form and substance satisfactory to Lender
and its counsel.
4.2. SUBSEQUENT ADVANCES. The obligation of Lender to make any advance
hereunder (including the initial advance) shall be subject to the further
conditions precedent that, on and as of the date of such advance: (a) the
representations and warranties of Borrower set forth in this Agreement shall be
accurate, before and after giving effect to such advance or issuance and to the
application of any proceeds thereof; (b) no Default or Event of Default has
occurred and is continuing, or would result from such advance or issuance or
from the application of any proceeds thereof; (c) no material adverse change has
occurred in the Borrower's business subsequent to the immediately preceding
advance hereunder, operations, financial condition, or assets or in the prospect
of repayment of the Indebtedness; (d) Lender shall have received such other
approvals, opinions or documents as Lender shall reasonably request; and (e)
Borrower shall submit to Lender a completed Request for Advance Report in the
form and substance of Exhibit "A" attached hereto, on the date such advance is
requested or shall have complied with the provisions concerning oral advances
hereunder as set forth in Section 4.3 hereof.
4.3. ORAL REQUEST FOR ADVANCE. All oral requests for advances shall be made
only by an authorized agent of Borrower designated by or acting under the
authority of a resolution of the Board of Directors of Borrower, a duly
certified or executed copy of which shall be furnished to Lender prior to any
oral request. Lender shall be entitled to rely upon such authorization until
written notice to the contrary is received by Lender. Borrower covenants and
agrees to furnish to Lender written confirmation of any such oral request within
two (2) days after such oral request, in a form set forth on Exhibit "A"
attached hereto and incorporated herein, but any such loan or advance shall be
deemed to be made under and entitled to the benefits of this Agreement and any
other documents or instruments executed in connection herewith irrespective of
any failure by Borrower to furnish such written confirmation. Any loan or
advance shall be conclusively presumed to have been made under the terms of this
Agreement, to or for the benefit of Borrower, when made pursuant to the terms of
any written agreement executed in connection herewith; or in accordance with
such requests and directions; or when an advance is deposited to the credit of
the account of any person or persons, corporation or corporations comprising
Borrower, regardless of the fact that persons other than those authorized
hereunder may have authority to draw against such account or regardless of the
fact that the advance was not made or deposited for the benefit of all persons
or corporations comprising Borrower.
4.4. ALL ADVANCES TO CONSTITUTE ONE LOAN. All evidences of credit, loans
and advances made by Lender to Borrower under this Agreement and any other
documents or instruments executed in connection herewith shall constitute one
loan, and all indebtedness and obligations of Borrower to Lender under this
Agreement and all other such documents and instruments shall constitute one
general obligation secured by Lender's security interest in all of the
Collateral and by all other security interests, liens, claims and encumbrances
heretofore, now, or at any time or times hereafter granted by Borrower to
Lender. Borrower agrees that all of the rights of Lender set forth in this
Agreement shall apply to any modification of or supplement to this Agreement and
any other such documents and instruments.
4.5. ADVANCES. Lender shall have the right in Lender's discretion, subject
to availability hereunder on behalf of and without notice to Borrower, to make
and use advances to pay Lender for any amounts due to Lender pursuant to this
Agreement or otherwise, to cure any default hereunder, notwithstanding the
expiration of any applicable cure period.
5. REPRESENTATIONS AND WARRANTIES OF BORROWERS AND GUARANTOR.
5.1. REPRESENTATIONS AND WARRANTIES. Borrower and Guarantor hereby
continuously represent and warrant to Lender as follows:
A. Borrower is a corporation duly incorporated, validly existing and in
good standing under the laws of the state of its incorporation, is duly
qualified to do business and is in good standing as a foreign corporation in all
states where the failure to be so qualified would have a material adverse effect
on Borrower or its assets or business, has all necessary corporate power and
authority to enter into this Agreement and each of the documents and instruments
relating hereto and to perform all of its obligations hereunder and thereunder.
Simultaneously, with the execution of this Agreement, all of the
outstanding stock of Borrower shall be owned by Smart Choice Holdings, Inc.
All of the outstanding stock of Borrower's sole shareholder, Smart Choice
Holdings, Inc. is owned by Eckler Industries, Inc.;
B. Borrower operates its business only under the assumed names (SCHEDULE
SECTION 5.1.) and has not
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used any other assumed name for the operation of its business activities for the
previous seven (7) years.
C. Borrower has all requisite corporate right and power and is duly
authorized and empowered to enter into, execute, deliver and perform this
Agreement and all documents and instruments relating hereto and this Agreement
and all documents and instruments relating hereto are the legal, valid and
binding obligations of Borrower and are enforceable against Borrower in
accordance with their terms, except as may be limited by bankruptcy, insolvency
and other such laws affecting creditors' rights generally, and by general
equitable principles.
D. Each Guarantor is competent to enter into this Agreement and the
Guaranty and to perform all of Guarantor's obligations thereunder.
E. The execution, delivery and performance by Borrower of this Agreement
does not and shall not (i) violate any provision of any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award presently in
effect having applicability to Borrower; (ii) violate any provision of its
Articles of Incorporation or Bylaws; or (iii) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which Borrower is a party or by which it
or any of its assets or properties may be bound or affected; and Borrower is not
in default of any such law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award or any such indenture, agreement, lease or
instrument.
F. No consent, approval, license, exemption of or filing or registration
with, giving of notice to, or other authorization of or by, any court,
administrative agency or other governmental authority is or shall be required in
connection with the execution, delivery or performance by Borrower for the valid
consummation of the transactions contemplated by this Agreement.
G. No event has occurred and is continuing which constitutes a Default or
an Event of Default, as defined in this Agreement. There is no action, suit,
proceeding or investigation pending or, to Borrower's knowledge, threatened
against or affecting Borrower before or by any court, administrative agency or
other governmental authority that brings into question the validity of the
transactions contemplated hereby, or that might result in any material adverse
effect on the businesses, assets, properties or financial conditions of Borrower
or Guarantor.
H. Borrower and/or Guarantor are not in default in the payment of any taxes
levied or assessed against either of them or any of their assets or properties,
except for taxes being contested in good faith and by appropriate proceedings.
I. Borrower and Guarantor have good and marketable title to their assets
and properties as reflected in their financial statements furnished to Lender.
J. Each of the financial statements furnished to Lender by the Borrower and
Guarantor was prepared in accordance with GAAP and fairly and accurately
reflects their financial condition as of the date thereof in all material
respects; and each hereby certifies that there have been no material adverse
changes in their condition, financial or otherwise, since the date of such
statements, and there are no contingent liabilities not provided for or
disclosed in such statements.
K. Neither this Agreement, any Availability Report or any statement or
document referred to herein or delivered to Lender by Borrower and/or Guarantor
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements made herein or therein not misleading.
L. Borrower has good, indefeasible and merchantable title to and ownership
of the Collateral, free and clear of all liens, claims, security interests and
encumbrances, except those of Lender and except where such liens, claims,
charges, security interests and encumbrances are removed contemporaneously with
the execution of this Agreement or are subordinate to those of Lender, in a form
and substance acceptable to Lender.
M. All books, records and documents relating to the Collateral are and
shall be genuine and in all respects what they purport to be; the original
amount and the unpaid balance of each Receivable shown on the books and records
of Borrower and in the schedules represented as owing by each Account Debtor is
and shall be the correct amount actually owing or to be owing by such Account
Debtor at maturity; Borrower has no knowledge of any fact which would impair the
validity or collectibility of any of the Receivables; and the payments shown to
have been made by each Account Debtor on the books and records of Borrower shall
reflect the amounts of and dates on which said payments were actually made.
N. Borrower has places of business only at the locations (SCHEDULE SECTION
3.2.). Borrower shall not begin or do business (either directly or through
subsidiaries) at other locations or cease to do business at any of the above
locations or at Borrower's principal place of business without first notifying
Lender.
O. The present value of all benefits vested under all Plans of Borrower or
any Commonly Controlled Entity (based on the assumptions used to fund the Plans)
did
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not, as of the last annual valuation date (which in case of any Plan was not
earlier than December 31, 1982) exceed the value of the assets of the Plans
applicable to such vested benefits.
P. The liability to which Borrower or any Commonly Controlled Entity would
become subject under Sections 4063 or 4064 of ERISA if Borrower or any Commonly
Controlled Entity were to withdraw from all Multi-employer Plans or if such
Multi-employer Plans were to be terminated as of the valuation date most
closely preceding the date hereof, is not in excess of Twenty Five Thousand
Dollars ($25,000.00);
Q. Borrower is not engaged nor shall it engage, principally or as one of
its important activities, in a business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" within the respective meanings of
each of the quoted terms under Regulations G or X of the Board of Governors of
the Federal Reserve System as now and from time to time hereafter in effect. No
part of the proceeds of any advances hereunder shall be used for "purchasing" or
"carrying" "margin stock" as so defined or for any purpose which violates, or
which would be inconsistent with, the provisions of the Regulations of such
Board of Governors. If requested by Lender, Borrower shall furnish to Lender a
statement in conformity with the requirement of Federal Reserve Form G-3
referred to in said Regulation G to the foregoing effect. All of the outstanding
securities of Borrower have been offered, issued, sold and delivered in
compliance with, or are exempt from, all federal and state laws and rules and
regulations of federal and state regulatory bodies governing the offering,
issuance, sale and delivery of securities.
R. Borrower is not an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
S. Each of the Exhibits and Schedules to this Agreement contain true,
complete and correct information.
T. To the best of Borrower's knowledge, the land and improvements owned or
leased by Borrower for use in its business operations are free of dangerous
levels of contaminates, oils, asbestos, radon, PCB's, hazardous substances or
waste as defined by federal, state or local environmental laws, regulations or
administrative orders or other materials, the removal of which is required or
the maintenance of which is prohibited, regulated or penalized by any federal,
state or local governmental authority.
U. Borrower is solvent, generally able to pay its obligations as they
become due, has sufficient capital to carry on its business and transactions and
all businesses and transactions in which it intends to engage, and the current
value of Borrower's assets, at fair saleable valuation, exceeds the sum of its
liabilities. Borrower shall not be rendered insolvent by the execution and
delivery of the Loan Documents and the consummation of the transactions
contemplated thereby and the capital remaining in Borrower is not now and shall
not foreseeably become unreasonably small to permit Borrower to carry on its
business and transactions and all businesses and transactions in which it is
about to engage. Borrower does not intend to, nor does it reasonably believe it
shall, incur debts beyond its ability to repay the same as they mature.
V. Lender has a perfected security interest in favor of Lender in all of
Borrower's right, title and interest in the Collateral(subject to physical
possession of instruments, if any, and endorsements of title respecting titled
Collateral, if such endorsements of title are necessary for perfection of such
security interest), prior and superior to any other security interest or lien,
except any statutory or constitutional lien for taxes not yet due and payable.
W. There are no material actions, suits or proceedings pending, or, to
Borrower's knowledge, threatened against or affecting the assets of Borrower or
the consummation of the transactions contemplated hereby, at law, or in equity,
or before or by any governmental authority or instrumentality or before any
arbitrator of any kind. Neither Borrower nor Guarantor is subject to any
judgment, order, writ, injunction or decree of any court or governmental agency.
There is not a reasonable likelihood of an adverse determination of any pending
proceeding which would, individually or in the aggregate, have a material
adverse effect on the business operations or financial condition of Borrower or
Guarantor.
5.2. WARRANTIES AND REPRESENTATIONS AS TO ELIGIBLE RECEIVABLES. With
respect to Eligible Receivables, Borrower and Guarantor continuously warrant and
represent to Lender that during the term of this Agreement and so long as any of
the Indebtedness remains unpaid: (i) in determining which Receivables are
"Eligible Receivables," Lender may rely upon all statements or representations
made by Borrower; and (ii) those Receivables designated as Eligible Receivables
meet each requirement set forth below at the time any request for advance is
provided to Lender.
A. The Eligible Receivables are genuine; are in all respects what they
purport to be; and are evidenced by at least one executed original instrument,
agreement, contract or document which has been or shall be delivered to Lender;
B. The Eligible Receivables represent undisputed, bona fide transactions
completed in accordance with the
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terms and provisions contained in any documents related thereto;
C. The amounts of the face value shown on any schedule of Receivables
provided to Lender, and/or all invoices or statements delivered to Lender with
respect to any Eligible Receivables, are actually and absolutely owing to
Borrower and are not contingent for any reason;
D. No set-offs, counterclaims or disputes as to payments or liability thereon
exist or have been asserted with respect thereto and Borrower has not made any
agreement with any Account Debtor thereunder for any deduction therefrom, except
a discount or allowance allowed by Borrower in the ordinary course of its
business for prompt payment, all of which discounts or allowances are reflected
in the calculation of the outstanding amount of the Receivable;
E. No facts, events or occurrences exist that, in any way, impair the
validity or enforcement thereof or tend to reduce the amount payable thereunder
from the amount of the Receivable shown on any schedule, or on all contracts,
invoices or statements delivered to Lender with respect thereto;
F. All Account Debtors in connection with Eligible Receivables: (i) had the
capacity to contract at the time any contract or other document giving rise to
the Receivable was executed; and (ii) generally have the ability to pay their
debts as become due;
G. Within Borrower's knowledge, no proceedings or actions are threatened or
pending against any Account Debtor that might result in any material adverse
change in the Account Debtor's financial condition;
H. The Eligible Receivables have not been assigned or pledged to any person
or entity, other than Lender;
I. The goods giving rise to the Eligible Receivables are not, and were not at
the time of the sale, rental and/or lease thereof, subject to any lien, claim,
encumbrance or security interest except those of Lender, those removed or
terminated prior to the date hereof or those subordinated to Lender's security
interest, by a subordination and standstill agreement acceptable to Lender;
J. The End of Month Delinquency set forth in Section 12 of the Availability
Report shall be delivered to Lender by Borrower hereunder as determined pursuant
to the Aging Procedures and Eligibility Test (SCHEDULE SECTION
1.14.D.).
6. COVENANTS AND OTHER AGREEMENTS
6.1. AFFIRMATIVE COVENANTS. During the term of this Agreement and so long as
any of the Indebtedness remains unpaid, Borrower and Guarantor agree and
covenant, jointly and severally, that they shall:
A. Pay or cause to be paid currently all of their expenses, including all
payments on their obligations whenever due, as well as all payments of any and
all taxes of whatever nature when due. This provision shall not apply to taxes
or expenses which are due, but which are challenged in good faith.
B. Maintain, preserve, and protect the Collateral, including, but not limited
to, keeping documents, instruments or other written records otherwise evidencing
the Collateral in accordance with Section 3.11 hereof.
C. Furnish to Lender written notice as to the occurrence of any Default or
Event of Default hereunder.
D. Furnish to Lender notice of: (i) any development related to the business,
financial condition, properties or assets of Borrower or Guarantor, that would
have or has a materially adverse effect on such business, financial condition,
properties or assets, or ability to perform their obligations under this
Agreement and (ii) any material and adverse litigation or investigation to which
either of them may be a party.
E. Carry on and conduct their business in the same manner and in the same
fields of enterprise as they are presently engaged, and Borrower shall preserve
its corporate existence, licenses or qualifications as a domestic corporation in
the jurisdiction of its incorporation and as a foreign corporation in every
jurisdiction in which the character of its assets or properties or the nature of
the business transacted by it at any time makes qualification as a foreign
corporation necessary and the failure to be so qualified would have a material
adverse effect on Borrower or its assets or business, and to maintain all other
material corporate rights and franchises, provided, however, nothing herein
shall be construed to prevent Borrower from closing any retail location in the
good faith exercise of its business judgment.
F. Comply, and cause each affiliate to comply, with all statutes,
governmental rules and regulations applicable to them.
G. Permit and authorize Lender, without notifying Borrower or Guarantor, to
make such inquiries through business credit or other credit reporting services
concerning Borrower or Guarantor as Lender shall deem appropriate.
H. Provide Lender with evidence of insurance issued by a reputable carrier,
as reasonably required by Lender.
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This insurance shall reflect Lender as a loss payee or additional insured, as
required by Lender, and contain a provision that Lender shall be notified by the
carrier thirty (30) days prior to the termination or cancellation of any such
insurance. Borrower shall maintain insurance, with respect to all Inventory, in
an amount equal to or greater than the cost of such Inventory.
6.2. NEGATIVE COVENANTS. During the term of this Agreement and until the
Indebtedness has been paid in full, Borrower and Guarantor covenant and agree
that they shall not, without Lender's prior written consent, which consent shall
not be unreasonably withheld, do any of the following:
A. Incur or permit to exist any mortgage, pledge, title retention lien or
other lien, encumbrance or security interest with respect to the Collateral now
owned or hereafter acquired by Borrower, except liens in favor of Lender.
B. Delegate, transfer or assign any of their obligations or liabilities under
this Agreement, or any part thereof, to any other person or entity.
C. Be a party to or participate in: (i) any merger or consolidation; (ii) any
purchase or other acquisition of all or substantially all of the assets or
properties or shares of any class of, or any partnership or joint venture
interest in, any other corporation or entity; (iii) any sale, transfer,
conveyance or lease of all or substantially all of Borrower's assets or
properties; or (iv) any sale or assignment with or without recourse of any
Receivables. Notwithstanding the foregoing to the contrary, the negative
covenants set forth in sections (i), (ii) and (iii) in this Section 6.2.C.,
shall not restrict Borrower from participating in the acquisitions or mergers
presented to Lender prior to the date hereof and such do not otherwise cause a
Default hereunder.
D. Cause or take any of the following actions with respect to Borrower: (i)
redeem, retire, purchase or otherwise acquire, directly or indirectly, any of
Borrower's outstanding securities, except in satisfaction of claims for
indemnification against sellers of businesses; or (ii) purchase or acquire,
directly or indirectly, any shares of capital stock, evidences of indebtedness
or other securities of any person or entity.
E. Amend, supplement or otherwise modify Borrower's Articles of Incorporation
or Bylaws which would have a material adverse effect on the condition and
operations, prospects or financial condition of the Borrower.
F. Incur, assume or suffer to exist any debt (including capitalized leases)
other than (i) the Indebtedness, (ii) accounts payable incurred in the ordinary
course of business, (iii) Subordinated Debt, or (iv) other debt consented to in
writing by Lender.
G. Directly or indirectly make loans to, invest in, extend credit to, or
guaranty the debt of any person or entity, other than in the ordinary course of
Borrower's business.
H. Amend, modify, or otherwise change in any material respect any material
agreement, instrument, or arrangement (written or oral) by which Borrower, or
any of its assets, are bound.
I. Allow Borrower to be managed, directly or indirectly, by any person or
entity other than the senior management that controls the management of Borrower
as of the date hereof, or any replacements thereof reasonably satisfactory to
Lender.
J. Permit the Leverage Ratio to be more than the Leverage Ratio Limit
(SCHEDULE SECTION 6.2.A.).
K. Permit the Net Income to be less than the Minimum Net Income requirement
(SCHEDULE SECTION 6.2.B.).
L. Make or allow Distributions, in the aggregate, to exceed the distributions
limitation (SCHEDULE SECTION 6.2.C.); provided, however, that no Distribution
shall be made, at any time that a Default or an Event of Default shall exist,
without waiver in writing by Lender.
M. With respect to First Choice, have cash sales of more than ten percent
(10%) of retail sales per calendar month.
N. With respect to First Choice, request a duplicate certificate of title or
similar document, without the prior written consent of Lender.
6.1. REPORTING REQUIREMENTS AND ACCOUNTING PRACTICES. Borrower shall maintain
(i) a modern system of accounting in accordance with GAAP or other systems of
accounting acceptable to Lender and (ii) standard operating procedures
applicable to all of its locations with respect to the handling and disposition
of cash receipts and other proceeds of Collateral on a daily basis, including
the depositing thereof, aging of account receivables, record keeping and such
other matters as Lender may reasonably request. For the purpose of determining
compliance with the covenants and representations in the Loan Documents, Lender
shall have the right to recast any financial statement or report presented to
Lender by or on behalf of Borrower to comply with GAAP.
6.2. PLEDGE OF RECEIVABLES. Borrower hereby agrees to pledge all Receivables
and deliver documentation evidencing such Receivables (the original
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<PAGE> 21
contract or agreement that evidences Account Debtor's primary payment obligation
to Borrower ("Payment Agreement") and a certificate of title or application
therefore in the name of Account Debtor, with the Borrower as the only secured
party, of the collateral that secures such payment obligation to Lender
["Certificate of Title"]), no less often than on the twentieth (20th) day of
each calendar month during the term of this Agreement. If such evidence of title
of the collateral securing a pledged Receivable is not delivered to Lender with
the original Receivable documentation, Borrower shall deliver evidence that such
original title has been applied for in the name of the respective Account Debtor
with Borrower as the only secured party ("White Slip"), in a form and substance
satisfactory to Lender, and such evidence of title shall be delivered to Lender
not later than fifteen (15) days after such evidence of title is received by
Borrower. Any Receivable for which Borrower has not delivered the original
Payment Obligation and the Certificate of Title or White Slip, such Receivables
shall not be an Eligible Receivable hereunder, until such delivery is made.
Borrower will deliver monthly, with the delivery of the documentation evidencing
the Receivables above, a "Vehicle Title Exception Report" listing all
Certificates of Titles which have not been received by Lender or are due from
the appropriate state motor vehicle department.
6.3. ACCOUNT DEBTORS' ADDRESSES. Borrower agrees to furnish to Lender from
time to time, promptly upon request, a list of all Account Debtors' names and
their most current addresses. Borrower agrees that Lender may from time to time,
consistent with standard or generally accepted auditing practices, verify the
validity, amount and any other matters relating to the Receivables by means of
mail, telephone or otherwise, in the name of Borrower and during the continuance
of an Event of Default in the name of Lender or such other name as Lender may
choose.
6.4. FINANCIAL REPORTS. Borrower shall furnish to Lender the following
financial statements and reports, in a form satisfactory to Lender:
A. As soon as practicable and in any event mailed within twenty (20) days
after the end of each fiscal month: (i) "Availability Report," in the form and
substance of Exhibit "D" attached hereto; (ii) Statement of Accounts Receivable
showing the detailed aging of each Receivable according to the procedures
(SCHEDULE SECTION 1.14.D.); (iii) a monthly Profit and Loss Statement and
Balance Sheet, certified by Borrower's chief financial officer or equivalent
duly elected officer of Borrower; (iv) Schedule of Receivables and Assignment in
the form and substance of Exhibit "E" attached hereto; and (v) with respect to
First Choice's inventory, weekly availability reports (reflecting additions and
deletions), with the original title (open status), the purchase invoice and
applicable Black Book valuation of each vehicle, and monthly availability report
(as a summary of the weekly reports) with a detailed aging of all inventory by
location.
B. Within one hundred twenty (120) days after the end of each of Borrower's
fiscal years, annual financial statements, or consolidated statements, as the
case may be, of Borrower prepared in accordance with GAAP, consistently applied
and certified by its chief financial officer or equivalent duly elected officer.
The financial statements shall consist of a balance sheet as of the end of such
fiscal year and comparative statements of earnings, cash flows, and change in
stockholders' equity for such fiscal year (SCHEDULE SECTION 6.6.).
C. With reasonable promptness, such other financial data as Lender may
reasonably request, including but not limited to tax returns, business plans and
reports.
Together with each delivery of financial statements required by subsections
A, B and C above, Borrower shall deliver to Lender and shall cause each of its
subsidiaries to deliver to Lender, if requested by Lender, a certificate in form
satisfactory to Lender, certifying that no Default or Event of Default exists
under this Agreement as of the date of such certificate, or if a Default or an
Event of Default exists, specifying the nature and period of existence thereof
and what action Borrower proposes to take with respect thereto.
6.5. FINANCIAL STATEMENTS OF GUARANTORS. Each of the Guarantors (SCHEDULE
SECTION 1.17.) shall furnish to Lender annual financial statements in form
reasonably satisfactory to Lender and certified by such Guarantor and a copy of
each Guarantor's Federal Income Tax Return (including all schedules thereto and
amendments thereof) filed during the term hereof, within thirty (30) days of the
filing of the same.
6.6. NOTICE OF CHANGES. Borrower shall promptly notify Lender in writing of
any change of its officers, directors or key employees; change of location of
its principal offices, change of location of any of its principal assets; any
acquisition, disposition or reorganization of any corporate subsidiary,
affiliate or parent of Borrower; change of Borrower's name; death or withdrawal
of any partner (if Borrower is a partnership); any sale or purchase out of the
regular course of Borrower's business; litigation of which Borrower or a
Guarantor is a party; and any other material change in the business or financial
affairs of Borrower.
7. EVENTS OF DEFAULT AND REMEDIES
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7.1. EVENTS OF DEFAULT. The occurrence of any one or more of the following
events shall constitute an "Event of Default":
A. If any payment of principal or interest or any other amount due Lender is
not paid within five (5) days after the same shall be due and payable.
B. If Borrower or Guarantor fails or neglects to perform, keep or observe any
of the terms, provisions, conditions or covenants, contained in this Agreement,
any of the other Loan Documents or any other agreement or document executed in
connection with the transactions contemplated by this Agreement or if any
representation, warranty or certification made by Borrower herein or in any
certificate or other writing delivered pursuant hereto shall prove to be untrue
in any material respect as of the date upon which the same was made or at any
time thereafter, and the same is not cured to Lender's satisfaction within ten
(10) days after Lender has given written notice to Borrower identifying such
Default, provided that if such Default can be reasonably cured within thirty
(30) days after Lender has given written notice to Borrower identifying such
Default, Borrower shall have thirty (30) days after Lender has given written
notice to Borrower identifying such Default, provided Borrower is continuously
and diligently pursuing such cure during such thirty (30) days.
C. If the validity or enforceability of any lien, charge, security interest,
mortgage, pledge or other encumbrance granted to Lender to secure the
Indebtedness shall be impaired in any respect or to any degree, for any reason,
or if any other lien, charge, security interest, mortgage, pledge or other
encumbrance shall be created or imposed upon the Collateral unless such lien,
charge, security interest, mortgage, pledge or other encumbrance is subordinate
to that of Lender, pursuant to a subordination and standstill agreement in a
form and substance acceptable to Lender.
D. If any judgment against Borrower not covered by insurance in an amount in
excess of Twenty-Five Thousand Dollars ($25,000.00), or any attachment or other
levy against the properties or assets of Borrower with respect to a claim for
any amount in excess of Twenty-Five Thousand Dollars ($25,000.00), remains
unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period
of thirty (30) days.
E. Default in the payment of any sum due under any instrument of indebtedness
for borrowed money, in the aggregate outstanding balance in excess of One
Hundred Thousand Dollars ($100,000.00), owed by Borrower or any Guarantor to any
person, or any other default under such instrument of indebtedness for borrowed
money that permits such indebtedness for borrowed money to become due prior to
its stated maturity or permits the holders of such indebtedness for borrowed
money to elect a majority of the board of directors or manage the business of
Borrower or any Guarantor.
F. If a court or governmental authority of competent jurisdiction shall
enter an order, judgment or decree appointing, with or without Borrower's or
Guarantor's consent or acquiescence, a receiver, custodian, liquidator, trustee
or other officer with similar powers of Borrower or Guarantor or of the whole or
any substantial part of its properties or assets, or approving a petition filed
against Borrower or Guarantor seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the federal
bankruptcy laws or any other applicable law, and such order, judgment or decree
shall remain unvacated, unstayed or not set aside for an aggregate of thirty
(30) days (whether or not consecutive) from the date of the entry thereof or if
any petition seeking such relief shall be filed against Borrower or Guarantor
and such petition shall not be dismissed within thirty (30) days.
G. An event shall occur which shall have a material adverse affect on the
operations or financial condition of the Borrower or Guarantor.
H. If either Borrower or Guarantor shall: (i) be generally not paying their
respective debts as they become due; (ii) file a petition in bankruptcy or a
petition to take advantage of any insolvency act or other act for the relief or
aid of debtors; (iii) make an assignment for the benefit of their creditors;
(iv) consent to or acquiesce in the appointment of a receiver, custodian,
liquidator, trustee or other officer with similar powers of either of their
properties or assets; (v) file a petition or answer seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the federal bankruptcy laws or any other applicable law; (vi) be
adjudicated insolvent or be liquidated; (vii) admit in writing either of their
inability to pay debts as they become due; (viii) voluntarily suspend
transaction of usual business; or (ix) take any action, corporate or otherwise,
for the purpose of any of the foregoing.
I. Any of the following shall occur: (i) entry of a court order that enjoins,
restrains or in any way prevents Borrower from conducting all or any material
part of its business affairs in the ordinary course of business or (ii)
withdrawal or suspension of any license or authority required for the conduct of
any material part of Borrower's business.
J. If any Guarantor gives notice of termination or terminates its liability
pursuant to the Guaranty Agreement executed in conjunction with this Agreement.
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<PAGE> 23
7.2. ACCELERATION OF THE INDEBTEDNESS. During the continuance of an Event of
Default, the outstanding principal balance together with all accrued but unpaid
interest on the Indebtedness and all other sums due and payable by Borrower to
Lender hereunder may, at the option of Lender and without demand, presentment,
notice of dishonor, notice of intent to demand or accelerate payment, diligence
in collecting, grace, notice and protest or a legal process of any kind, all of
which are hereby expressly waived, be declared, and immediately shall become due
and payable.
7.3. LOUISIANA CONFESSION OF JUDGMENT. In the event that Borrower is
domiciled in, or Collateral is located in, Louisiana, and to the extent of such
domicile or location where Louisiana law is applicable to this Agreement:
A. Borrower hereby CONFESSES JUDGMENT, up to the full amount of principal,
interest and attorney's fees and for any sums that Lender may advance during the
life of this Agreement for the payment of premiums of insurance, taxes and
assessments or for the protection and preservation of this Agreement as
authorized elsewhere in this Agreement, and does by these presents, consent,
agree and stipulate that, in the event of any payment of principal or interest
due hereunder not being promptly and fully paid when the same becomes due and
payable, or in the event of failure to comply with any of the obligations set
forth herein, the Indebtedness shall, at the option of Lender become due and
payable, and it shall be lawful for Lender, without making a demand and without
notice or putting in default, the same being hereby expressly waived, to cause
all and singular the Collateral herein secured to be seized and sold by
executory process issued by any competent court or to proceed with enforcement
of its security interest in any other manner provided by law; and
B. Borrower hereby expressly waives: (a) the benefit of appraisement, as
provided in Articles 2332, 2336, 2723, and 2724, Louisiana Code of Civil
Procedure, and all other laws conferring the same; (b) the demand and three (3)
days delay according by Articles 2639 and 2721, Louisiana Code of Civil
Procedure, and all other laws conferring the same; (c) the notice of seizure
required by Articles 2293 and 2721, Louisiana Code of Civil Procedure, and all
other laws conferring the same; (d) the three (3) days delay provided by
Articles 2331 and 2722, Louisiana Code of Civil Procedure, and all other laws
conferring the same; and (e) the benefit of the other provisions of Articles
2331, 2722 and 2723, Louisiana Code of Civil Procedure, and all other Articles
not specifically mentioned above; and Borrower expressly agrees to the immediate
seizure of the Collateral in the event of suit thereon.
7.4. REMEDIES. During the continuance of an Event of Default, Lender shall
have the following rights and remedies, which individual remedies shall be
non-exclusive, cumulative and in addition to each and every other remedy set
forth in the Loan Documents or in this Agreement:
A. All of the rights and remedies of a secured party under the Uniform
Commercial Code as enacted in the State of Arizona, as amended, or other
applicable law.
B. The right, to the fullest extent permissible by law, to: (i) enter upon
the premises of Borrower, or any other place or places where the Collateral is
located and kept, without any obligation to pay rent to Borrower, through
self-help and without judicial process, without first obtaining a final judgment
or giving Borrower notice and opportunity for a hearing on the validity of
Lender's claim, and remove the Collateral therefrom to the premises of Lender or
any agent of Lender, for such time as Lender may desire, in order to effectively
collect and liquidate the Collateral; and/or (ii) require Borrower to assemble
the Collateral and make it available to Lender at a place to be designated by
Lender, in Lender's reasonable discretion.
C. The right to sell or otherwise dispose of any or all Collateral in its
then condition at public or private sale or sales, in lots or in bulk, for cash
or on credit, all as Lender, in its discretion, may deem advisable; provided
that such sales may be adjourned from time to time with or without notice. The
requirement of reasonable notice to Borrower of the time and place of any public
sale of the Collateral or of the time after which any private sale either by
Lender or at its option, a broker, or any other intended disposition thereof is
to be made, shall be met if such notice is mailed, postage prepaid, to Borrower
at the address of Borrower designated herein at least ten (10) Business Days
before the date of any public sale or at least ten (10) Business Days before the
time after which any private sale or other disposition is to be made unless
applicable law requires otherwise.
Lender shall have the right to conduct such sales on Borrower's premises or
elsewhere and shall have the right to use Borrower's premises without charge for
such sales for such time or times as Lender may see fit. Lender is hereby
granted a license or other right to use, without charge, Borrower's labels,
copyrights, rights of use of any name, trade secrets, trade names, trademarks
and advertising matter, or any property of a similar nature, as it pertains to
the Collateral, in advertising for sale and selling any Collateral and
Borrower's rights under all licenses and all franchise agreements shall inure to
Lender's benefit. Lender agrees to hold Borrower harmless from any liability
arising out of Lender's use of Borrower's premises, labels, copyrights, rights
of use of any name, trade secrets, trade names, trademarks and
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<PAGE> 24
advertising matter, or any property of a similar nature as it pertains to
advertising for sale, marshaling or selling the Collateral.
Lender shall have the right to sell, lease or otherwise dispose of the
Collateral, or any part thereof, for cash, credit or any combination thereof,
and Lender may purchase all or part of the Collateral at public or, if permitted
by law, private sale and, in lieu of actual payment of such purchase price, may
set off the amount of such price against the Indebtedness owing by Borrower to
Lender. The proceeds realized from the sale of any Collateral shall be applied
first to reasonable costs and expenses, attorney's fees, expert witness fees
incurred by Lender for collection and for acquisition, completion, protection,
removal, storage, sale and delivery of the Collateral; second to all payments,
other than principal and interest, due under this Agreement; third to interest
due upon any of the Indebtedness; fourth to the principal balance owing on the
Indebtedness; and fifth the remainder, if any, to Borrower, its successors or
assigns, or to whomsoever may be lawfully entitled to receive the same. If any
deficiency shall arise, Borrower shall remain liable to Lender therefor.
D. In the event that Borrower is domiciled in, or Collateral is located in,
Louisiana, and to the extent of such domicile or location where Louisiana law is
applicable to this Agreement, the right to cause all and singular the
hereinabove described Collateral to be seized and sold under executory process
without appraisement, appraisement being hereby expressly waived, as an entirety
or in parcels, as Lender may determine, to the highest bidder for cash.
E. The right to appoint or seek appointment of a receiver, custodian or
trustee of Borrower or any of its properties or assets pursuant to court order.
F. The right to cease all advances hereunder.
G. All other rights and remedies that Lender may have at law or in equity.
7.5. NO WAIVER. No delay, failure or omission of Lender to exercise any
right upon the occurrence of any Default or Event of Default shall impair any
such right or shall be construed to be a waiver of any such Default or Event of
Default or an acquiescence therein. Lender may, from time to time, in a writing
waive compliance by the other parties with any of the terms of this Agreement
and its rights and remedies upon any Default or Event of Default, and, Borrower
agrees that no waiver by Lender shall ever be legally effective unless such
waiver shall be acknowledged and agreed in writing by Lender. No waiver of any
Default or Event of Default shall impair any right or remedy of Lender not
specifically waived. No single, partial or full exercise of any right of Lender
shall preclude any other or further exercise thereof. No modification or
amendment of or supplement to this Agreement or any other written agreement
between the parties hereto shall be valid or effective (or serve as a basis of
reliance by way of estoppel) unless the same is in writing and signed by the
party against whom it is sought to be enforced. The acceptance by Lender at any
time and from to time of a partial payment or partial performance of any of
Borrower's obligations set forth herein shall not be deemed a waiver, reduction,
modification or release from any Default or Event of Default then existing. No
waiver by Lender of any Default or Event of Default shall be deemed to be a
waiver of any other existing or any subsequent Default or Event of Default.
7.6. APPLICATION OF PROCEEDS. If an Event of Default shall have occurred and
is continuing, all amounts received by Lender on account of any Indebtedness and
realized by Lender with respect to the Collateral, including any sums which may
be held by Lender, or the proceeds of any thereof, shall be applied in the same
manner as proceeds of Collateral as set forth in Section 7.4.C. hereof.
7.7. APPOINTMENT OF LENDER AS ATTORNEY-IN-FACT. Borrower irrevocably
designates, makes, constitutes and appoints Lender (and all persons reasonably
designated by Lender), with full power of substitution, as Borrower's true and
lawful attorney-in-fact (and not agent-in-fact) and Lender, or Lender's agent,
may, without notice to Borrower, and at such time or times thereafter as Lender
or said agent, in its discretion, may determine, in Borrower's or Lender's name,
at no duty or obligation on Lender, do the following:
A. All acts and things necessary to fulfill Borrower's administrative duties
pursuant to this Agreement, including, but not limited to, the execution of
financing statements;
B. During the continuance any Default, all acts and things necessary to
fulfill Borrower's obligations under this Agreement and the Loan Documents,
except as set forth in Section 7.7.C below, at the cost and expense of Borrower.
C. In addition to, but not in limitation of the foregoing, at any time or
times during the continuance of an Event of Default, Lender shall have the
right: (i) to enter upon Borrower's premises and to receive and open all mail
directed to Borrower and remove all payments to Borrower on the Receivables;
however, Lender shall turn over to Borrower all of such mail not relating to
Receivables; (ii) in the name of Borrower, to notify the Post Office
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<PAGE> 25
authorities to change the address for the delivery of mail addressed to Borrower
to such address as Lender may designate (notwithstanding the foregoing, for the
purposes of notice and service of process to or upon Borrower as set forth in
this Agreement, Lender's rights to change the address for the delivery of mail
shall not give Lender the right to change the address for notice and service of
process to or upon Borrower in this Agreement); (iii) demand, collect, receive
for and give renewals, extensions, discharges and releases of any Receivable;
(iv) institute and prosecute legal and equitable proceedings to realize upon the
Receivables; (v) settle, compromise, compound or adjust claims in respect of any
Receivable or any legal proceedings brought in respect thereof; (vi) generally,
sell in whole or in part for cash, credit or property to others or to itself at
any public or private sale, assign, make any agreement with respect to or
otherwise deal with any of the Receivables as fully and completely as though
Lender were the absolute owner thereof for all purposes, except to the extent
limited by any applicable laws and subject to any requirements of notice to
Borrower or other persons under applicable laws; (vii) take possession and
control in any manner and in any place of any cash or non-cash items of payment
or proceeds of Receivables; (viii) endorse the name of Borrower upon any notes,
acceptances, checks, drafts, money orders, chattel paper or other evidences of
payment of Receivables that may come into Lender's possession; and (ix) sign
Borrower's name on any instruments or documents relating to any of the
Collateral, or on drafts against Account Debtors;
The appointment of Lender as attorney-in-fact for Borrower is coupled with an
interest and is irrevocable, until this Agreement is terminated, the
Indebtedness has been paid in full and Lender's security interest in the
Collateral has been terminated.
8. EXPENSES AND INDEMNITIES
8.1. REIMBURSEMENT FOR EXPENSES. Upon the occurrence of a Default, except as
set forth in the SCHEDULE SECTION 8.1., Borrower agrees to reimburse Lender,
upon demand, for all reasonable out-of-pocket expenses (including costs of
establishing and maintaining accounts or arrangements set forth in Section 3.10,
attorney's fees, expert witness fees and legal expenses) incurred in connection
with the evaluation of collateral, preservation of collateral, or collection of
the Indebtedness.
8.2. LENDER'S EXPENSES AND ATTORNEY'S FEES. UPON AND AFTER AN EVENT OF
DEFAULT, LENDER SHALL BE ENTITLED TO RECOVER FROM BORROWER AND GUARANTORS ALL OF
LENDER'S ATTORNEY'S FEES AND REASONABLE COSTS AND EXPENSES INCURRED IN THE
EXERCISE OF LENDER'S RIGHTS SET FORTH IN THIS AGREEMENT, AND ALL DAMAGES
SUSTAINED BY LENDER BY REASON OF MISREPRESENTATION, BREACH OF WARRANTY OR BREACH
OF COVENANT OF BORROWER HEREIN, EXPRESSED OR IMPLIED, WHETHER CAUSED BY THE ACTS
OR DEFAULTS OF BORROWER, ACCOUNT DEBTORS OR OTHERS; INCLUDING WITHOUT
LIMITATION, ALL ATTORNEY'S FEES ARISING FROM SUCH SERVICES, EXPERT WITNESS FEES
AND ANY EXPENSES, COSTS AND CHARGES RELATING THERETO, AND ALL OF THE FOREGOING
SHALL CONSTITUTE PART OF THE INDEBTEDNESS SECURED BY THE COLLATERAL AND SHALL BE
PAYABLE ON DEMAND.
8.3. GENERAL INDEMNIFICATION. Borrower hereby agrees to indemnify and hold
Lender harmless from and against any and all claims, liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements (collectively "Claim" or "Claims") of any kind or nature
whatsoever, asserted by any party other than Borrower, or with respect to
Borrower only as otherwise provided in this Agreement or pursuant to applicable
law regarding Lender's obligations to Borrower, which may be imposed on,
incurred by or asserted against Lender, or any of its officers, directors,
employees or agents (including accountants, attorneys or other professionals
hired by Lender) in any way relating to or arising out of the Loan Documents or
any action taken or omitted by Lender, or any of its officers, directors,
employees or agents (including accountants, attorneys or other professionals
hired by Lender) under the Loan Documents, except to the extent such indemnified
matters are finally found by a court to be caused by Lender's gross negligence
or wilful misconduct.
9. MISCELLANEOUS
9.1. NOTICES. All notices, demands, billings, requests and other written
communications hereunder shall be deemed to have been properly given: (i) upon
personal delivery; (ii) on the third Business Day following the day sent, if
sent by registered or certified mail; (iii) on the next Business Day following
the day sent, if sent by overnight express courier; or (iv) on the day sent or
if such day is not a Business Day on the next Business Day after the day sent if
sent by telecopy providing the receiving party has acknowledged receipt by
return telecopy, in each case, to Lender, Borrower or Guarantors at its address
and/or telecopy number as set forth in this Agreement or SCHEDULE SECTION 9.1,
or at such other address and/or telecopy number as either party may designate
for such purpose in a written notice given to the other party.
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<PAGE> 26
Lender shall have the right, on or after initial funding pursuant to the
terms of this Agreement, but subject to Borrower's reasonable approval as to the
form, content and recipients thereof, to issue a press release or other brochure
announcing the consummation of the Loan Documents and to distribute that
information to third parties in the normal course of Lender's business, at no
cost to Borrower.
9.2. PARTICIPATIONS. Borrower and Guarantors acknowledge and agree that
Lender may from time to time sell or offer to sell interests in the Indebtedness
and the Loan Documents to one or more participants. Borrower and Guarantors
authorize Lender to disseminate any information it has pertaining to the
Indebtedness, including without limitation, complete and current credit
information on Borrower and any of its principals and Guarantors, to any such
participant or prospective participant.
9.3. SURVIVAL OF AGREEMENTS. All of the various representations, warranties,
covenants and agreements of Borrower (including without limitation, any
agreements to pay costs and expenses and to indemnify Lender) in the Loan
Documents shall survive the execution and delivery of the Loan Documents and the
performance under such Loan Documents, and shall further survive until one (1)
year and one (1) month after all of the Indebtedness is paid in full to Lender
and all of Lender's obligations to Borrower under the Loan Documents are
terminated.
9.4. NO OBLIGATION BEYOND MATURITY. Borrower agrees and acknowledges that
upon the Maturity Date, Lender shall have no obligation to renew, extend, modify
or rearrange the Loan and shall have the right to require all amounts due and
owing under the Loan to be paid in full upon such date.
9.5. PRIOR AGREEMENTS SUPERSEDED. This Agreement constitutes the sole and
only agreement of the parties hereto and supersedes any prior understandings or
written or oral agreements between the parties respecting the subject matter of
this Agreement. No provision of this Agreement or other document or instrument
relating hereto may be modified, waived or terminated except by instrument in
writing executed by the party against whom a modification, waiver or termination
is sought to be enforced.
9.6. PARTIES BOUND. This Agreement shall be binding on and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns, except as
otherwise expressly provided for herein. Borrower and Guarantor shall not assign
any of their respective rights or obligations pursuant this Agreement.
9.7. NUMBER AND GENDER. Whenever used herein, the singular number shall
include the plural and the plural the singular, and the use of any gender shall
be applicable to all genders. The duties, covenants, obligations and warranties
of Borrower in this Agreement shall be joint and several obligations of Borrower
and of each Borrower if more than one.
9.8. NO THIRD PARTY BENEFICIARY. This Agreement is for the sole benefit of
Lender and Borrower and is not for the benefit of any third party.
9.9. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original, and all
of which taken together shall constitute but one and the same instrument.
9.10. SEVERABILITY OF PROVISIONS. Any provision which is determined to be
unconscionable, against public policy or any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
9.11. HEADINGS. The Article and Section headings used in this Agreement are
for convenience only and shall not affect the construction of this Agreement.
9.12. SCHEDULES AND EXHIBITS. Any and all exhibits hereto are hereby
expressly incorporated by reference as though fully set forth at that point
verbatim. All terms and provisions as defined or set forth in Article 1 and in
any Schedule are hereby incorporated into and made a part of this Agreement.
Each reference in this Agreement and the Schedule hereto to any information or
definitions contained in Article 1 or the Schedule shall mean and refer to the
information or definitions as set forth in Article 1 and the Schedule unless the
context specifically requires otherwise. Any terms used in Article 1 and in the
Schedule which are not defined shall have the meanings ascribed to such terms,
as of the date of this Agreement, by the Uniform Commercial Code as enacted in
the State of Arizona to the extent the same are defined therein.
9.13. FURTHER INSTRUMENTS. Borrower and Guarantors shall from time to time
execute and deliver, and shall cause each of Borrower's subsidiaries to execute
and deliver, all such amendments, supplements and other modifications hereto and
to the other Loan Documents and all such financing statements or continuation
statements, instruments of further assurance
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<PAGE> 27
and any other instruments, and shall take such other actions, as Lender
reasonably requests and deems necessary or advisable in furtherance of the
agreements contained herein.
9.14. LENDER'S EXPENSES AND ATTORNEY'S FEES. UPON AND AFTER AN EVENT OF
DEFAULT, LENDER SHALL BE ENTITLED TO RECOVER FROM BORROWER AND GUARANTORS ALL OF
LENDER'S ATTORNEY'S FEES AND REASONABLE COSTS AND EXPENSES INCURRED IN THE
EXERCISE OF LENDER'S RIGHTS SET FORTH IN THIS AGREEMENT, AND ALL DAMAGES
SUSTAINED BY LENDER BY REASON OF MISREPRESENTATION, BREACH OF WARRANTY OR BREACH
OF COVENANT OF BORROWER HEREIN, EXPRESSED OR IMPLIED, WHETHER CAUSED BY THE ACTS
OR DEFAULTS OF BORROWER, ACCOUNT DEBTORS OR OTHERS; INCLUDING WITHOUT
LIMITATION, ALL ATTORNEY'S FEES ARISING FROM SUCH SERVICES, EXPERT WITNESS FEES
AND ANY EXPENSES, COSTS AND CHARGES RELATING THERETO, AND ALL OF THE FOREGOING
SHALL CONSTITUTE PART OF THE INDEBTEDNESS SECURED BY THE COLLATERAL AND SHALL BE
PAYABLE ON DEMAND.
9.15. GOVERNING LAW. THIS AGREEMENT HAS BEEN EXECUTED AND DELIVERED BY
BORROWER AND GUARANTOR AND ACCEPTED BY LENDER IN MARICOPA COUNTY, ARIZONA AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF ARIZONA.
9.16. JURISDICTION AND VENUE. TO INDUCE THE LENDER TO ENTER INTO THIS
AGREEMENT, BORROWER, GUARANTORS AND LENDER IRREVOCABLY AGREE THAT, SUBJECT TO
THE LENDER'S ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT,
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR
THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE COUNTY OF
MARICOPA, STATE OF ARIZONA. BORROWER, GUARANTORS AND LENDER HEREBY CONSENT AND
SUBMIT TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN
SAID COUNTY AND STATE AND WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS UPON
BORROWER, AND AGREE THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED
MAIL DIRECTED TO BORROWER AT THE ADDRESS SET FORTH IN SCHEDULE SECTION 9.16 AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF.
9.17. WAIVER. EXCEPT AS OTHERWISE PROVIDED FOR IN THIS AGREEMENT AND TO THE
EXTENT NOT PROHIBITED BY APPLICABLE LAW, BORROWER AND EACH GUARANTOR HEREBY
WAIVES (i) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST,
DEFAULT, NON-PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, AND ONE OR MORE
EXTENSIONS OR RENEWALS OF ANY OR ALL ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS,
INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY THE LENDER ON
WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS
WHATEVER THE LENDER MAY DO IN THIS REGARD; (ii) ALL RIGHTS TO NOTICE AND HEARING
PRIOR TO THE LENDER'S TAKING POSSESSION OR CONTROL OF, OR THE LENDER'S REPLEVIN,
ATTACHMENT OR LEVY ON OR OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT
BE REQUIRED BY ANY COURT PRIOR TO ALLOWING THE LENDER TO EXERCISE ANY OF THE
LENDER'S REMEDIES; AND (iii) THE BENEFIT OF ALL VALUATION, APPRAISEMENT OR
EXEMPTION LAWS.
9.18. ADVICE OF COUNSEL. BORROWER AND EACH GUARANTOR ACKNOWLEDGES THAT THEY
HAVE BEEN REPRESENTED AND ADVISED BY INDEPENDENT LEGAL COUNSEL WITH RESPECT TO
THE NEGOTIATION, EXECUTION AND ACCEPTANCE OF THIS AGREEMENT AND THE TRANSACTION
GOVERNED BY THIS AGREEMENT AND SPECIFICALLY WITH RESPECT TO THE PROVISIONS
CONTAINED IN SECTIONS 8.3, 9.15, 9.16, 9.17, 9.18, 9.19 and 9.20 HEREOF AND HAS
RELIED UPON THE ADVICE OF ITS INDEPENDENT LEGAL COUNSEL IN AGREEING TO THE TERMS
AND CONDITIONS HEREIN AND IN EXECUTING AND DELIVERING THIS AGREEMENT, AND THAT
THEY HAVE FREELY AND VOLUNTARILY ENTERED INTO THIS AGREEMENT AS THE PRODUCT OF
ARMS' LENGTH NEGOTIATIONS.
9.19. WAIVER OF RIGHT TO TRIAL BY JURY. LENDER, BORROWER AND GUARANTORS
HEREBY COVENANT AND AGREE THAT IN ANY SUIT, ACTION OR PROCEEDING IN RESPECT OF
ANY MATTER ARISING OUT OF THIS AGREEMENT, THE DOCUMENTS EXECUTED IN CONNECTION
HEREWITH, ANY WRITTEN AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER NOW EXISTING
OR HEREAFTER ARISING OR IN ANY WAY RELATED TO, CONNECTED WITH OR INCIDENTAL TO
THE DEALINGS OF THE PARTIES HERETO OR TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE, TRIAL SHALL BE TO A
COURT OF COMPETENT JURISDICTION AND NOT TO A JURY;
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LENDER, BORROWER AND EACH GUARANTOR HEREBY EXPRESSLY WAIVE ANY RIGHT THEY MAY
HAVE TO A TRIAL BY JURY. ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
9.20. TIME OF ESSENCE Subject to any grace periods, cure periods or other
such provisions herein, time is of the essence for the performance the
obligations set forth in this Agreement and the Loan Documents.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first set forth above.
BORROWER:
FLORIDA FINANCE GROUP INC.
By:
----------------------------------------------------
Charles D. Bonanno, Executive Vice President (Date)
LIBERTY FINANCE COMPANY.
By:
----------------------------------------------------
Charles D. Bonanno, Executive Vice President (Date)
SMART CHOICE RECEIVABLES HOLDING COMPANY
By:
----------------------------------------------------
Charles D. Bonanno, Assistant Vice President (Date)
FIRST CHOICE AUTO FINANCE, INC.
By:
----------------------------------------------------
Charles D. Bonanno, Assistant Vice President (Date)
GUARANTORS:
SC HOLDINGS, INC.
By:
----------------------------------------------------
Charles D. Bonanno, Assistant Vice President (Date)
Smart Choice Automotive Group, Inc.
By:
----------------------------------------------------
Charles D. Bonanno, Assistant Vice President (Date)
LENDER:
FINOVA CAPITAL CORPORATION,
a Delaware corporation
By:
----------------------------------------------------
Stephen J. Thomas, Vice President (Date)
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<PAGE> 1
Exhibit 4.9.1
- -------------------------------------------------------------------------------
Rediscount Finance
FIRST AMENDED AND RESTATED SCHEDULE TO
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BORROWER: FLORIDA FINANCE GROUP INC.
LIBERTY FINANCE COMPANY
FIRST CHOICE AUTO FINANCE, INC.
ADDRESS: 5200 S. WASHINGTON
TITUSVILLE, FLORIDA 32780-7316
BORROWER: SMART CHOICE RECEIVABLES HOLDING COMPANY
ADDRESS: P. O. BOX 50102
HENDERSON, NEVADA 89016
DATE: NOVEMBER 18, 1999
This First Amended and Restated Schedule to Second Amended and
Restated Loan and Security Agreement ("First Amended Schedule") is executed in
conjunction with a certain Second Amended and Restated Loan and Security
Agreement ("Agreement") dated November 9, 1998, and as an amendment and
restatement of that certain Schedule to Second Amended and Restated Loan and
Security Agreement, dated November 9, 1998 ("Schedule"), by and between FINOVA
Capital Corporation, as Lender, and the above Borrowers, as Borrower. The terms
and provisions of this First Amended Schedule shall supersede all prior
schedules. All references to Section numbers herein refer to Sections in the
Agreement.
1.A. BORROWERS (SECTION 1).
All references to "Borrower" in any and all Loan Documents
shall mean all Borrowers, as co-borrowers, jointly and
severally, except as otherwise specifically set forth herein:
<TABLE>
<S> <C>
Florida Finance Group, Inc. - "FFG" or "Lead Borrower"
Liberty Finance Company - "Liberty"
Smart Choice Receivables Holding Company "Smart Choice Receivables"
First Choice Auto Finance, Inc. "First Choice"
</TABLE>
The term "Receivable Borrowers" shall mean FFG, Liberty and
Smart Choice Receivables.
The term "Inventory Borrower" shall mean First Choice.
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1.4 MODIFICATION TO THE DEFINITION OF "CHARGE OFFS" (SECTION 1.4)
The definition of "Charge Offs" is hereby deleted and the
following is substituted in lieu thereof:
"1.4 CHARGE OFFS. The term "Charge Offs" shall mean
the principal amount due pursuant to a Receivable on
the date that Borrower charges off such Receivable
as uncollectible, pursuant to Borrower's policies
and/or procedures."
1.7 MODIFICATION OF THE DEFINITION OF "COLLATERAL PERFORMANCE PERCENTAGE
(SECTION 1.7)
Section 1.7 of the Agreement is hereby deleted and the
following is substituted in lieu thereof:
" 1.7 COLLATERAL PERFORMANCE PERCENTAGE. The term
"Collateral Performance Percentage" shall mean, on
any date of determination, the percentage determined
by the aggregate of all of the outstanding balances,
including accrued interest, for all Receivables that
are thirty-one (31) days or more past due or are
otherwise ineligible Receivables divided by the
aggregate of all of the outstanding balances,
including accrued interest, for all Receivables."
1.8 MODIFICATION OF THE DEFINITION OF "COLLATERAL RECOVERY RATE"
(SECTION 1.8).
The definition of "Collateral Recovery Rate" is hereby
deleted and the following is substituted in lieu thereof:
"1.8 COLLATERAL RECOVERY RATE. The term "Collateral
Recovery Rate" shall mean, for any period of
determination, (i) the total cash collected of
principal payments from all Receivables (including
but not limited to all principal cash proceeds from
charge off recoveries, with such charge off
recoveries calculated at actual sales price of
vehicle sold at auction or, if vehicle is not sold
at auction, at a value not greater than "average
value" Black Book of such vehicle, pursuant to the
most current edition of the "Black Book" as
published by National Auto Research Division, Hearst
Business Media Corporation, for the market area of
Borrower ), divided by (ii) the sum of (a) the total
cash collected of principal payments from all
Receivables (excluding all cash proceeds from charge
off recoveries) plus (c) the aggregate of all Charge
Offs for that period."
1.13.A. MAXIMUM MILEAGE OF ELIGIBLE INVENTORY (SECTION 1.13)
The term "Maximum Mileage of Eligible Inventory" shall not be
applicable hereunder and shall not be a restriction with
respect to an Eligible Inventory.
1.13.B. MAXIMUM AGE OF ELIGIBLE INVENTORY (SECTION 1.13)
The term "Maximum Age of Eligible Inventory" shall not be
applicable hereunder and shall not be a restriction with
respect to an Eligible Inventory.
1.13.C. MAXIMUM COST OF ELIGIBLE INVENTORY (SECTION 1.13)
The term "Maximum Cost of Eligible Inventory" shall not be
applicable and shall not be a restriction with respect to an
Eligible Inventory.
1.13.D. MAXIMUM OWNERSHIP (SECTION 1.13)
The term "Maximum Ownership" shall mean one hundred twenty
(120) days from (i) the date of the invoice that evidences
the purchase of each vehicle of Inventory by First Choice and
(ii) the date a repossessed or trade-in vehicle is listed in
First Choice's inventory and ready for retail sale.
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1.14.A. MAXIMUM AMOUNT OF AN ELIGIBLE RECEIVABLE (SECTION 1.14).
The term "Maximum Amount of an Eligible Receivable" shall
mean the sum of Nineteen Thousand Dollars ($19,000.00)
remaining due thereon at any date of determination.
1.14.B. MAXIMUM TERM OF AN ELIGIBLE RECEIVABLE (SECTION 1.14).
The "Maximum Term of an Eligible Receivable" shall be
Forty-Eight (48) months remaining until the due date of such
Eligible Receivable at any date of determination.
1.14.C. AGING PROCEDURES AND ELIGIBILITY TEST (SECTION 1.14.)
AGING PROCEDURES FOR A CONTRACTUAL AGING:
1. No payment missed or due = Current.
2. 1 to 30 days past due = "30 day Account".
3. 31 to 60 days past due = "60 day Account".
4. 61 or more days past due = "60 + day Account"
For the purpose only of calculating the aging of any Receivable hereunder,
provided any such extension is after one hundred eighty (180) days of any
Receivable from the origination date of such Receivable, Borrower may grant an
Account Debtor one (1) extension of the principal portion of a monthly payment
due on any Receivable within any twelve (12) month period that would allow such
Receivable to avoid being classified in a different "past due or missed"
payment category set forth above. All extensions within any twelve (12) month
period in excess of one (1) will not be used to delay or defer aging of such
Receivable. This extension exception shall be applicable to extensions granted
on or after November 9, 1998.
ELIGIBILITY TEST:
The term "Eligibility Test" shall mean the test to determine the eligibility of
a Receivable for the purposes of Section 1.14 hereof, that test, being as
follows: no payment due on said Receivable remains unpaid more than sixty (60)
days from the specific date on which such payment was due pursuant to the terms
of said Receivable.
1.15 GUARANTOR (WHETHER ONE OR MORE) (SECTION 1.15)
SC Holdings, Inc.
Smart Choice Automotive Group, Inc. (formerly known as Eckler
Industries, Inc.)
Crown Group, Inc. (limited)
1.40 ADDITIONAL DEFINITIONS (SECTION 1.40 AND 1.41)
The following definitions are hereby added to the Agreement:
"1.40 CASH SALES PERCENTAGE. The term "Cash Sales
Percentage" shall mean the percentage determined by
dividing the aggregate sales price of all sales that
did not include a Receivable during the period of
determination, by the aggregate sales price of all
sales by Borrower during the same period of
determination.
1.41 NET CASH FLOW. The term "Net Cash Flow" shall
mean, for any period of determination, as reflected
on the financial statements of Borrower supplied to
Lender pursuant to Section 6.4, hereof, the result
of (i) the sum of all cash receipts, including, all
collections on Receivables, repossession recoveries,
cash down payments and trade-ins values (with
trade-ins and repossessions valued at actual sales
price of
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<PAGE> 4
sold vehicle at auction or, if vehicle is not sold at
auction, at a value not greater than "average value"
Black Book of such vehicle, pursuant to the most
current edition of the "Black Book" as published by
National Auto Research Division, Hearst Business
Media Corporation, for the market area of Borrower),
less (ii) the sum of all cash operating expenses,
including, interest expenses and taxes and the
"replacement cost of liquidated Receivables" (the
"replacement cost of liquidated Receivables" shall be
the amount equal to, for the period of determination,
(a) the percentage determined by dividing the
aggregate actual cost of all vehicles sold during the
period of determination by the aggregate sales price
of all vehicles sold during the same period of
determination, multiplied by (b) the aggregate
principal payments received by Borrower and Charge
Offs with respect to all Receivables during the
period of determination)."
2.1.A. AMOUNT OF REVOLVING CREDIT LINE (SECTION 2.1):
The Amount of Revolving Credit Line shall be One Hundred
Million Dollars ($100,000,000.00)
The Amount of the Inventory Credit Line shall be Ten Million
Dollars ($10,000,000.00)
2.1.B. AVAILABILITY ON ELIGIBLE RECEIVABLES (SECTION 2.1):
The "Availability on Eligible Receivables" shall be an amount
equal to the following:
(i) if the date of determination is before July 1, 2001,
eighty-five percent (85%) of the aggregate unmatured and
unpaid amount due to Borrower from the Account Debtor named
thereon, excluding all unearned finance charges, pursuant to
the Eligible Receivables.
(ii) if the date of determination is on or after July 1,
2001, but before January 1, 2003, seventy-seven percent (77%)
of the aggregate unmatured and unpaid amount due to Borrower
from the Account Debtor named thereon, excluding all unearned
finance charges, pursuant to the Eligible Receivables.
(iii) if the date of determination is on or after January 1,
2003, but before January 1, 2004, seventy-five percent (75%)
of the aggregate unmatured and unpaid amount due to Borrower
from the Account Debtor named thereon, excluding all unearned
finance charges, pursuant to the Eligible Receivables.
(iv) if the date of determination is on or after January 1,
2004, seventy percent (70%) of the aggregate unmatured and
unpaid amount due to Borrower from the Account Debtor named
thereon, excluding all unearned finance charges, pursuant to
the Eligible Receivables.
Notwithstanding any provision contained in the Loan Documents
to the contrary, upon the occurrence of any of the following
events, Lender, in its sole and absolute discretion, may
modify the Availability on Eligible Receivables advance
percentage set forth above or the Availability on Eligible
Inventory set forth in SCHEDULE SECTION 2.1.C.:
(a) the Collateral Recovery Rate is less than the following:
(1) seventy-three percent (73%), if the date of
determination is on or before November 30, 2000,
with the first period for which such the Collateral
Recovery Rate is determined shall be the immediately
preceding one (1) calendar month beginning with the
month of November, 1999, and thereafter the period
of determination shall increase one (1) calendar
month for each calendar month subsequent to
November, 1999, until the period of determination is
the twelve (12) calendar months immediately prior to
the date of determination,
(2) seventy-seven percent (77%), for the twelve (12)
calendar month period immediately prior to any date
of determination, if the date of determination is
after November 30, 2000, but on or before November
30, 2001, and
(3) seventy-nine percent (79%) for the twelve (12)
calendar month period immediately prior to any date
of determination, if the date of determination is
after November 30, 2001.
(b) on any date of determination, the Collateral Performance
Percentage is greater than ten percent (10.0%)
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<PAGE> 5
(c) for the twelve (12) calendar month period immediately
prior to any date of determination, the Cash Sales Percentage
is greater than ten percent (10%), or
(d) the aggregate Net Cash Flow is less than One Dollar
($1.00), for the twelve (12) calendar months immediately
preceding the date of determination, with each date of
determination for the aggregate Cash Flow being the last day
of each fiscal quarter, beginning the fiscal quarter ending
October 31, 2000, (notwithstanding the foregoing to the
contrary the first period of determination shall be the nine
[9] months immediately preceding the fiscal quarter ending
October 31, 2000, and thereafter each period of determination
shall be the twelve [12] calendar months immediately
preceding the date of determination).
2.1.C. AVAILABILITY ON ELIGIBLE INVENTORY (SECTION 2.1)
The "Availability on Eligible Inventory" shall be the lesser
of (i) the Amount of the Inventory Credit Line, or (ii) the
aggregate amount with respect to all Eligible Inventory equal
to the sum of (a) seventy percent (70%) of the invoice cost,
as evidence by a bill of sale or other documents evidencing
the purchase price of such Inventory from an entity that is
not affiliated with Borrower or Guarantors, excluding
trade-ins and repossessions and (b) with respect to
trade-ins, repossessions (not withstanding the definition of
"Eligible Inventory" set forth in the Agreement, repossessed
Inventory shall be eligible if such Inventory otherwise meets
the requirement of the definition of "Eligible Inventory")
and Inventory purchased from an entity affiliated with
Borrower or Guarantors, seventy percent (70%) of the actual
value, but not greater than the "average value" Black Book of
such Inventory (pursuant to the most current edition of the
"Black Book" as published by National Auto Research Division,
Hearst Business Media Corporation, for the market area of
Borrower).
2.2. STATED INTEREST RATE (SECTION 2.2).
The Receivables Stated Interest Rate shall be the lesser of
(i) the Governing Rate plus (a) if the date of determination
is before July 1, 2001, two and one-quarter percent (2.25%)
per annum, (b) if the date of determination is before January
1, 2003, but on or after July 1, 2001, two percent (2.00%)
per annum, and (c) if the date of determination is on or
after January 1, 2003, one and three-quarters percent (1.75%)
per annum or (ii) the Maximum Rate.
The Inventory Stated Interest Rate shall be the lesser of (i)
the Governing Rate plus (a) if the date of determination is
before July 1, 2001, two and one-quarter percent (2.25%) per
annum, (b) if the date of determination is before January 1,
2003, but on or after July 1, 2001, two percent (2.00%) per
annum, and (c) if the date of determination is on or after
January 1, 2003, one and three-quarters percent (1.75%) per
annum or (ii) the Maximum Rate.
2.3.B. MATURITY DATE (SECTION 2.3.C).
The primary term of this Agreement shall expire on November
30, 2004. If Borrower desires to extend the primary term or
any term thereafter of this Agreement, Borrower shall give
Lender notice of its intent to extend the term no earlier
than one hundred and eighty (180) days and no later than one
hundred and fifty (150) days prior to any expiration date of
this Agreement. Upon the receipt by Lender of Borrower's
notice to extend the term of this Agreement, if Lender
desires to renew and extend the term of this Agreement,
Lender shall give Borrower notice of Lender's intent to
extend the term of this Agreement, within sixty (60) days of
Lender's receipt of Borrower's notice to extend. If Lender
does not give Borrower notice of Lender's intent to extend
the term of this Agreement within the sixty (60) days period,
then it shall be deemed that Lender does not intend to renew
and extend the term of this Agreement. Notwithstanding the
foregoing, the Borrower's obligation pursuant to this
Agreement shall remain in full force and effect until the
Indebtedness due and owing to Lender has been paid in full.
2.6. LIQUIDATED DAMAGES (SECTION 2.6).
The amount of "Liquidated Damages" shall be:
(i) if on or before November 30, 2000, if Borrower pays the
balance of the Indebtedness in full and Borrower requests
Lender to terminate Lender's security interest in the
Collateral, an amount equal to three percent (3%) of the
Amount of the Revolving Credit Line;
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(ii) if on or before November 30, 2001, but after November 30,
2000, if Borrower pays the balance of the Indebtedness in
full and Borrower requests Lender to terminate Lender's
security interest in the Collateral, an amount equal to two
percent (2%) of the Amount of the Revolving Credit Line;
(iii) if on or before November 30, 2003, but after November 30,
2001, if Borrower pays the balance of the Indebtedness in
full and Borrower requests Lender to terminate Lender's
security interest in the Collateral, an amount equal to one
percent (1%) of the Amount of the Revolving Credit Line;
(iv) if before August 31, 2004, but after November 30, 2003, if
Borrower pays the balance of the Indebtedness in full and
Borrower requests Lender to terminate Lender's security
interest in the Collateral, an amount equal to one-half
percent (.50%) of the Amount of the Revolving Credit Line;
and
(v) if after August 31, 2004, if Borrower pays the balance of the
Indebtedness in full and Borrower requests Lender to
terminate Lender's security interest in the Collateral, the
amount of Liquidated Damages shall be Zero Dollars ($0.00).
2.8. MODIFICATION OF SECTION 2.8. (SECTION 2.8)
Section 2.8 of the Agreement is hereby deleted and the
following is substituted in lieu thereof:
"2.8. INTEREST AFTER DEFAULT Upon the occurrence
and after the
continuation of an
Event of Default and
after sixty (60) days
prior written notice
from Lender, Borrower
shall pay Lender
interest on the daily
outstanding balance of
Borrower's loan
account at a rate per
annum which is greater
of (not to exceed the
Maximum Rate): (i) the
four percent (4%) in
excess of the highest
Stated Interest Rate
which would otherwise
be applicable thereto
pursuant to the
Schedule (SCHEDULE
SECTION 2.2), or (ii)
sixteen percent
(16%)."
2.14 TERMINATION FEE (SECTION 2.14).
None
3.2. BUSINESS LOCATIONS OF BORROWER (SECTIONS 3.2, 3.6 AND 5.1.N.).
All locations are as set forth on the attach List of
Locations
5.1.B. BORROWER'S TRADENAMES (WHETHER ONE OR MORE)(SECTION 5.1.B.)
As set forth in List of Tradenames attached hereto
6.2.A. LEVERAGE RATIO LIMIT (SECTION 6.2.J).
None.
6.2.B. MINIMUM NET INCOME (SECTION 6.2.K).
Section 6.2.K of the Agreement is hereby deleted.
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6.2.C. DISTRIBUTIONS LIMITATION (SECTION 6.2.L).
Maximum Distributions shall be seventy-five percent (75%) of
Net Income of the fiscal year of Borrower in which such
Distributions are made.
6.3.C. ANNUAL FINANCIAL STATEMENTS (SECTION 6.3).
Annual consolidated audited financial statements, including
PAACO Automotive Group, Inc. and Premium Auto Acceptance
Corporation, shall be prepared by independent certified
public accountants, reasonably acceptable to Lender.
8.1. REIMBURSEMENT OF EXPENSES (SECTION 8.1).
None, except as otherwise set forth in the Loan Documents.
9.1. NOTICES (SECTION 9.1).
Lender: FINOVA Capital Corporation
(copy each office below with all notices)
CORPORATE FINANCE OFFICE:
FINOVA Capital Corporation
355 South Grand Avenue, Suite 2400
Los Angeles, CA 90071
Attn: John J. Bonano, Senior Vice
President
Telephone: (213) 253-1600
Telecopy No.: (213) 625-0268
CORPORATE OFFICE:
FINOVA Capital Corporation
1850 N. Central Avenue
Phoenix, AZ 85077
Attn: Joseph R. D'Amore, Senior Counsel
Telephone: (602) 207-4900
Telecopy No.: (602) 207-5543
REDISCOUNT FINANCE OFFICE:
FINOVA Capital Corporation
13355 Noel Road, Suite 800
Dallas, TX 75240
Attn: Douglas M. Fraser (Account
Executive)
Telephone: (972) 458-5600
Telecopy No.: (972) 458-5650
Borrower: Florida Finance Group, Inc.
Liberty Finance Company
First Choice Auto Finance, Inc.
5200 S. Washington
Titusville, Florida 32780-7316
Telephone: 407-269-9680
Telecopy No.:407-268-2959
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Borrower: Smart Choice Receivables Holding Company
P. O. Box 50102
Henderson, NV 89016
Telephone: (702) 598-3738
Telecopy No.: (702) 598-3651
Guarantors: SC Holdings, Inc.
Smart Choice Automotive Group, Inc.
5200 S. Washington
Titusville, Florida 32780-7316
Telephone: 407-269-9680
Telecopy No.:407-264-0376
Guarantor: Crown Group, Inc.
4040 North MacArthur Blvd., Suite 1000
Irving, Texas 75038
Telephone: (972) 717-3423
Telecopy No.: (972) 719-4466
Attn: Edward R. McMurphy, President
with a copy to: T. J. Falgout, III,
Executive Vice President and General
Counsel
9.16. AGENT FOR SERVICE OF PROCESS (SECTION 9.16).
Edward R. McMurphy, whose address is 4040 North MacArthur
Blvd., Suite 1000, Irving, Texas 75038, with a copy to: T. J.
Falgout, III, Executive Vice President and General Counsel.
IN WITNESS WHEREOF, the parties have executed this Schedule on the day and
year first set forth above.
LENDER:
FINOVA CAPITAL CORPORATION,
a Delaware corporation
By:
Bradley R. Fisher, Vice President (Date)
BORROWERS:
FLORIDA FINANCE GROUP INC.
By: President (Date)
-----------------------
LIBERTY FINANCE COMPANY
By: President (Date)
-----------------------
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SMART CHOICE RECEIVABLES HOLDING COMPANY
By: President (Date)
-----------------------
FIRST CHOICE AUTO FINANCE, INC.
By: President (Date)
-----------------------
GUARANTORS:
SC HOLDINGS, INC.
By: President (Date)
-----------------------
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: President (Date)
-----------------------
CROWN GROUP, INC.
By:
Edward R. McMurphy, President (Date)
9
