<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 14, 1996
REGISTRATION NO. 33-96520-A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
POST-EFFECTIVE AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
___________
ECKLER INDUSTRIES, INC.
(Name of Small Business Issuer in Its Charter)
<TABLE>
<S> <C> <C>
FLORIDA 5961 591469577
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
5200 SOUTH WASHINGTON AVENUE
TITUSVILLE, FLORIDA 32780
(407) 269-9680
(Address and Telephone Number of Principal Executive Offices and Principal
Place of Business)
RALPH H. ECKLER
PRESIDENT
ECKLER INDUSTRIES, INC.
5200 SOUTH WASHINGTON AVENUE
TITUSVILLE, FLORIDA 32780
(407) 269-9680
(Name, Address and Telephone Number of Agent for Service)
___________
COPIES TO:
Randolph H. Fields, Esq.
Greenberg Traurig Hoffman Lipoff
Rosen & Quentel, P.A.
111 North Orange Avenue, Suite 2050
Orlando, Florida 32801
Telephone: (407) 420-1000
Telecopier: (407) 420-5909
___________
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, as amended, check the following box: /X/
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE AMOUNT OF REGISTRATION
SECURITIES TO BE REGISTERED(11) REGISTERED OFFERING PRICE PER SECURITY OFFERING PRICE (1) FEE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Redeemable Class A Common Stock 1,200,000 $.05 $60,000 $21
Purchase Warrants(2)
- -----------------------------------------------------------------------------------------------------------------------------
Class A Common Stock, $.01 1,200,000 $6.50 $7,800,000 $2,690
par value (3)
- -----------------------------------------------------------------------------------------------------------------------------
Unit Purchase Option (4) 84,000 $.001 $84 $1
- -----------------------------------------------------------------------------------------------------------------------------
Units (5) 84,000 $6.00 $504,000 $174
- -----------------------------------------------------------------------------------------------------------------------------
- Class A Common Stock, $.01 par
value
- -----------------------------------------------------------------------------------------------------------------------------
- Class A Common Stock Purchase
Warrants
- -----------------------------------------------------------------------------------------------------------------------------
Class A Common Stock, $.01 par
value (6) 84,000 $6.50 $546,000 $188
- -----------------------------------------------------------------------------------------------------------------------------
Class A Common Stock, $.01 par
value (7) 100,000 $2.50 $250,000 $87
- -----------------------------------------------------------------------------------------------------------------------------
Class A Common Stock, $.01 par
value (8) 102,500 $6.00 $615,000 $212
- -----------------------------------------------------------------------------------------------------------------------------
Class A Common Stock, $.01 par
value (9) 254,500 $4.13(10) $1,051,085 (10) $363
- -----------------------------------------------------------------------------------------------------------------------------
Total $3,736*
- -----------------------------------------------------------------------------------------------------------------------------
Previously Paid...........$7,184**
Amount Due................$ 0***
</TABLE>
_________________
* The 1,200,000 shares of Class A Common Stock issuable upon exercise of
the Redeemable Class A Common Stock Purchase Warrants (the "Public
Warrants"), the Unit Purchase Option, the 84,000 shares of Class A
Common Stock issuable upon exercise of the Unit Purchase Option, the
84,000 Class A Common Stock Purchase Warrants (the "Underwriters'
Warrants") issuable upon exercise of the Unit Purchase Option, the
84,000 Class A shares of Common Stock issuable upon exercise of the
Underwriters' Warrants, the 100,000 shares of Class A Common Stock
issuable upon exercise of an option held by Greyhouse Services
Corporation, the 102,500 shares of Class A Common Stock issuable upon
exercise of non-public warrants held by certain investors and executive
management of the Company, and the 254,500 issued and outstanding shares
of Class A Common Stock held by existing shareholders (of which 102,500
shares were issued to certain investors and executive management as
repayment of loans to the Company, 140,000 shares were issued to investors
pursuant to a private placement, and 12,000 were issued in respect of
conversion of preferred stock) (altogether, the "Securities"), were
previously registered pursuant to Registration No. 33-96520-A, which
registration statement was declared effective on November 9, 1996, and
the $3,736 identified above was previously paid in connection with
Registration No. 33-96520-A.
** Of this amount, $2,285 related to 1,200,000 Units sold in the initial
public offering. Each Unit was comprised of one share of Class A Common
Stock and one Redeemable Common Stock Purchase Warrant (the "Public
Warrant(s)), and an over-allotment of 126,000 Units; and $2,972 related
to 1,200,000 shares underlying said Public Warrants and an additional
126,000 shares had the over-allotment been exercised. The $.05 proposed
maximum offering price set forth opposite the Redeemable Class A Common
Stock Purchase Warrants (Public Warrants) in the table is included in
the $5.00 offering price of the Units sold in the Company's initial
public offering and the registration fee is included in the amount
previously paid.
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Each warrant is exercisable for one share of Class A Common Stock, $.01
par value (the "Public Warrants"). The Public Warrants are traded on the
NASDAQ SmallCap Market. The $.05 referenced in the table is subsumed in
the $5.00 per Unit offering price of the Units sold in the Company's
initial public offering.
(3) Issuable upon exercise of the Public Warrants.
(4) Issued to Underwriters at the closing of the Company's initial public
offering.
(5) Issuable upon exercise of the Unit Purchase Option. Each unit consists of
one share of Class A Common Stock and one Class A Common Stock Purchase
Warrant (the "Underwriters' Warrants").
(6) Issuable upon exercise of the Underwriters' Warrants.
(7) Issuable upon exercise of option issued to a consultant, Greyhouse
Services Corporation.
(8) Issuable upon exercise of warrants issued to investors, including certain
officers of the Company, as repayment of loans made to the Company.
(9) Represents shares of issued and outstanding Class A Common Stock.
(10) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933, as amended. Represents the average of the high/low price as quoted
November 11, 1996 by the Nasdaq SmalCap Market.
(11) This Registration Statement covers the exercise of (a) the Public Warrants,
(b) the Unit Purchase Option, (c) the Underwriters' Warrants, and (d) the
non-public warrants and option owned by certain Selling Shareholders, as
well as the shares of Class A Common Stock issuable upon such conversion or
exercise.
Pursuant to Rule 416, there are also being registered hereby such
additional indeterminate number of shares of such Class A Common Stock as may
become issuable by reason of stock splits, stock dividends, and similar
adjustments as set forth in the provisions of the Public Warrants, the
Underwriters' Unit Purchase Option, and the non-public warrants and option
owned by certain Selling Shareholders.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER __, 1996
PROSPECTUS
ECKLER INDUSTRIES, INC.
1,200,000 SHARES OF CLASS A COMMON STOCK
INCLUDED IN 1,200,000 REDEEMABLE CLASS A
COMMON STOCK PURCHASE WARRANTS ("PUBLIC WARRANTS")
___________________
84,000 SHARES OF CLASS A COMMON STOCK, INCLUDED IN UNIT PURCHASE OPTION
___________________
84,000 SHARES OF CLASS A COMMON STOCK, INCLUDED IN 84,000 CLASS A
COMMON STOCK PURCHASE WARRANTS ("UNDERWRITERS' WARRANTS")
___________________
457,000 SHARES OF CLASS A COMMON STOCK FOR SELLING SHAREHOLDERS
___________________
This Prospectus relates to an offering (the "Offering") by Eckler
Industries, Inc., a Florida corporation (the "Company") of 1,825,000 shares
of Class A Common Stock, $.01 par value, of the Company (the "Common Stock"),
consisting of: (i) 1,200,000 shares of Common Stock underlying 1,200,000
outstanding Public Warrants, (ii) 84,000 shares of Common Stock underlying an
Underwriters' Unit Purchase Option, (iii) 84,000 shares of Common Stock
underlying 84,000 Underwriters' Warrants issuable upon exercise of the
Underwriters' Unit Purchase Option, and (iv) 457,000 shares of Common Stock
(the "Selling Shareholders' Shares") beneficially held by certain
shareholders of the Company (the "Selling Shareholders"). See "Plan of
Distribution" and "Selling Shareholders". Each Public Warrant entitles the
holder to purchase one share of Common Stock for $6.50 per share until
November 9, 2000. The Underwriters' Unit Purchase Option entitles the
Underwriter to purchase 84,000 units (each unit consisting of one share of
Common Stock and one Underwriter's Warrant) for $6.00 per unit until November
15, 2000. Each Underwriter's Warrant entitles the holder to purchase one
share of Common Stock for $6.50 per share until November 9, 2000. See
"Description of Securities -- Warrants", and "Unit Purchase Option."
The outstanding Public Warrants were originally issued as a component of
Units sold in connection with a November 1995 initial public offering of the
Company's securities ("Public Offering"), and the Underwriters' Warrants are
issuable upon exercise of the Underwriters' Unit Purchase Option sold to the
Underwriter of the Public Offering. The Company will receive the proceeds
from the exercise of the Public Warrants, and the Underwriters' Warrants
(which are sometimes collectively referred to in this Prospectus as the
"Warrants"), as well as from the exercise of the Underwriters' Unit Purchase
Option, as well as from the Bridge Warrants (as hereinafter defined) and the
Consultant Option (as hereinafter defined).
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND SHOULD BE CONSIDERED ONLY BY SUCH PERSONS CAPABLE OF BEARING THE
ECONOMIC RISK OF SUCH INVESTMENT. PROSPECTIVE INVESTORS SHOULD CAREFULLY
CONSIDER THE RISKS DESCRIBED UNDER THE CAPTION "RISK FACTORS" WHICH APPEAR
BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS NOVEMBER __, 1996.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
<PAGE>
The persons identified herein as the Selling Shareholders acquired their
457,000 Selling Shareholders' Shares being offered hereby in various
transactions, including: (i) 140,000 shares of Common Stock issued as a
component of units sold by the Company for $25,000 per unit in a private
placement that closed on September 20, 1995, each of which units were
comprised of 3,500 shares of Common Stock and 2,500 shares of convertible
preferred stock; (ii) 12,000 shares of Common Stock issued upon conversion of
5,000 shares of preferred stock at a conversion rate of 6,000 shares of
Common Stock for 2,500 shares of preferred stock; (iii) 102,500 shares of
Common Stock issued to an independent investor and certain executives of the
Company in consideration for cancellation of $205,000 of promissory notes in
respect of loans made to the Company ("Bridge Loans"); (iv) 102,500 shares of
Common Stock underlying warrants exercisable at $3.63 per share ($6.00 after
December 31, 1996) (the "Bridge Warrants") issued as additional consideration
for cancellation of the Bridge Loans; and (v) 100,000 shares of Common Stock
underlying a stock option issued to a consultant as partial consideration for
services rendered to the Company (the "Consultant Option").
The Company's publicly traded Common Stock and Public Warrants are
currently listed separately on the automated quotation system of the Nasdaq
SmallCap Market ("Nasdaq") under the symbols "ECKL" and "ECKLW",
respectively. The Common Stock and Redeemable Class A Warrants are also
separately listed on the Boston Stock exchange under the symbols "EKL" and
"EKL&W", respectively. On November 11, 1996, the last trade prices for the
Common Stock and the Public Warrants reported on Nasdaq were $4 1/4 per
share, and $5/8 per Public Warrant, respectively.
The various exercise prices of each of the Public Warrants, Unit Purchase
Option, Underwriters' Warrants, Bridge Warrants, and Consultant Option are all
subject to adjustment pursuant to the anti-dilution provisions thereof. The
Company will only receive proceeds from the exchange of the foregoing warrants
and option, but will not receive any proceeds from the resale thereof.
The exercise of the Public Warrants may be prohibited in certain states.
See "Risk Factors -- Costs Resulting from Necessity of Continuing Post-Effective
Amendments to the Company's Registration Statement and State Blue Sky
Registration; Exercise of Public Warrants Dependent on Current Registration
Statement; Costs Resulting from Obligations to Selling Shareholders." Although
the Public Warrants were initially sold in jurisdictions in which the Public
Warrants and underlying shares of Common Stock were qualified for sale,
purchasers who reside in or may move to jurisdictions in which the Public
Warrants or underlying shares are not registered for sale or otherwise qualified
may have purchased such Public Warrants in the aftermarket during the period
when the Public Warrants are exercisable. In this event, the Company would be
unable to issue shares to such persons desiring to exercise their Public
Warrants unless and until the shares could be qualified for sale in the
jurisdictions in which such purchasers reside, or unless an exemption to such
qualification exists. The exercise prices and other terms of the Public
Warrants were originally determined by negotiation between the Company and the
underwriters of the Units sold in the Public Offering, and such terms were not
necessarily related to the Company's asset value, net worth, or any other
established criteria of value. See "Risk Factors" and "Plan of Distribution"
and "Selling Shareholders."
The Company will not receive any of the proceeds from sales of the
Selling Shareholders' Shares by the Selling Shareholders. The Shares may be
offered from time to time by the Selling Shareholders through ordinary
brokerage transactions in the over-the-counter market, in negotiated
transactions or otherwise, at market prices prevailing at the time of sale or
at negotiated prices. The Selling Shareholders
<PAGE>
may be deemed to be "Underwriters" as defined in the Securities Act of 1933,
as amended (the "Securities Act"). If any broker-dealers are used by the
Selling Shareholders, any commissions paid to broker-dealers and, if
broker-dealers purchase any Selling Shareholders' Shares as principals, any
profits received by such broker-dealers on the resales of the shares may be
deemed to be underwriting discounts or commissions. In addition, any profits
realized by the Selling Shareholders may be deemed to be underwriting
commissions. All costs, expenses and fees in connection with the
registration of the Selling Shareholders' Shares offered by Selling
Shareholders will be borne by the Company. Brokerage commissions, if any,
attributable to the sale of the Selling Shareholders' Shares will be borne by
the Selling Shareholders. The Company has agreed to indemnify the Selling
Shareholders' against certain liabilities, including liabilities under the
Securities Act.
The shares offered by this Prospectus may be sold from time to time by
the Selling Shareholders, or by transferees. No underwriting arrangements
have been entered into by the Selling Shareholders. The distribution of the
Selling Shareholders' Shares by the Selling Shareholders may be effected in
one or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions
or through sales to one or more dealers for resale of such shares as
principals, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or negotiated prices. Usual and
customary or specifically negotiated brokerage fees or commissions may be
paid by the Selling Shareholders in connection with the sales of the Selling
Shareholders' Shares. See "Plan of Distribution" and "Selling Shareholders."
<PAGE>
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and, in accordance therewith, files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "SEC" or the "Commission"). Such reports and other information
filed by the Company can be inspected and copied at the public reference
facilities of the Commission at its principal office at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
regional offices at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and at 7 World Trade Center, 13th Floor, New
York, New York 10048. Copies of each such document may be obtained at prescribed
rates from the Public Reference Section of the Commission at its principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549.
The Company has filed with the Commission a Registration Statement on Form
SB-2 and amendments thereto (collectively with any amendments thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities being offered by this
Prospectus. This Prospectus does not contain all of the information set forth
in the Registration Statement and the schedules and exhibits thereto. For
further information with respect to the Company and the Company's Common Stock,
reference is hereby made to the Registration Statement and to the exhibits filed
as a part thereof. The statements contained in this Prospectus as the contents
of any contract or other documents identified as exhibits in this Prospectus are
not necessarily complete and, in each instance, reference is made to a copy of
such contract or document filed as an exhibit to the Registration Statement,
each statement being qualified in any and all respects by such reference. The
Registration Statement, including exhibits, may be inspected without charge at
the principal reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies of all or any part thereof may
be obtained upon payment of fees prescribed by the Commission from the Public
Reference Section of the Commission at its principal office in Washington, D.C.
set forth above.
The Company's Common Stock and Public Warrants are quoted on the NASDAQ
SmallCap Market under the symbols "ECKL" and "ECKLW," respectively. All of the
reports required to be filed by the Company with NASD, if any, and other
information concerning the Company can be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company will provide without charge to each person to whom a Prospectus
is delivered, upon written or oral request of such person, a copy of any and all
documents referred to above that have been incorporated into this Prospectus by
reference. Written or oral requests for such copies should be directed to:
Ronald V. Mohr, Vice President Finance and Administration, Eckler Industries,
Inc., 5200 S. Washington Avenue, Titusville, Florida 32801, (407) 269-9680.
1
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION (INCLUDING FINANCIAL
STATEMENTS AND NOTES THERETO) CONTAINED IN THIS PROSPECTUS AND IS QUALIFIED
IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION APPEARING ELSEWHERE HEREIN.
UNLESS OTHERWISE SPECIFIED, ALL REFERENCES IN THIS PROSPECTUS REFLECT THE
1500 FOR 1 SPLIT OF THE COMPANY'S COMMON STOCK EFFECTED IN JULY 1995. EACH
PROSPECTIVE INVESTOR IS URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY.
THE COMPANY
The Company is one of the largest aftermarket suppliers of Corvette
automotive parts and accessories in the United States. The Company has four
basic product lines which include accessories, Corvette restoration parts,
maintenance items and gift and apparel items. The Company markets its 17,000
item product line primarily through the distribution of its extensive parts
catalog. The Company has numerous suppliers of the products it offers, and in
the case of certain fiberglass products, operates its own production facility
to design and manufacture replacement body parts for Corvettes. In addition,
in December 1993, the Company entered into a long-term license agreement with
General Motors Corporation, Service Parts Operations (the "GM Agreement")
pursuant to which the Company was granted the right to manufacture and sell
licensed parts under certain GM trademarks for Corvettes for various model
years. In consideration for the grant of the license, the Company pays GM a
royalty on licensed parts sold. The GM Agreement further granted to the
Company the right to use available GM tooling to manufacture the licensed
parts. The Company utilizes the tooling to produce certain high demand
restoration parts. Furthermore, the Company purchases existing GM inventory
of licensed parts to sell direct to customers and wholesale to GM dealers.
Although the Company did not manufacture parts with GM tooling nor purchased
inventory of discontinued parts from GM until recently, the Company sold
parts from its own inventory under the GM Restoration Parts label since 1993.
For the fiscal years ended September 30, 1995 and 1994 the Company's
sales mix of its basic product lines was 49.5% and 48%, respectively, for
accessories, 38% and 37%, respectively, for restoration parts, 9.5% and 11%,
respectively, for maintenance items and, 3% and 4%, respectively, for gift
and apparel items.
The Company historically has generated most of its revenues as a result
of its catalog sales. The Company's telemarketing staff is principally an
inbound, order-taking department. During the years ended September 30, 1995
and 1994, catalog sales accounted for approximately 93% of the Company's
revenues. The Company's sales force specializes in selling Corvette parts and
accessories. This group handles in excess of 600 inquiries daily and
processes an average of 285 orders daily.
In September 1995, the Company raised gross proceeds of $1,000,000
through a private placement of units comprised of Class A Common Stock
(hereinafter sometimes referred to as "Common Stock") and convertible
preferred stock (the "Preferred Stock"). Of the Selling Shareholders' Shares
subject to sale under this Prospectus, 140,000 represent Common Stock issued
in that private placement and 12,000 shares of Common Stock issued upon
conversion of 5,000 shares of Preferred Stock.
In November 1995, the Company completed an initial public offering of
units comprised of Common Stock and redeemable warrants (the "Public
Warrants") and raised gross proceeds to the Company of $4,200,000. Included
in that initial public offering were 360,000 shares of Common Stock sold by
Ralph H. Eckler who is the Company's largest shareholder and a Director, and
who is also President and Chief Executive Officer. Gross proceeds to Mr.
Eckler from the sale of those shares was $1,800,000.
2
<PAGE>
As a result of those financings, the Company was able to substantially
reduce long term debt and trade payables, renew favorable terms with its
vendors, complete its initial royalty payments under the GM Agreement, and
increase inventory. The Company also redeemed 95,000 shares of outstanding
preferred stock from the proceeds of its initial public offering, and the
holders of the remaining 5,000 shares of preferred stock converted these
shares into 12,000 shares of Class A Common Stock.
Eckler Industries, Inc. is a Florida corporation formed in 1973. The
Company maintains its principal executive offices at 5200 South Washington
Avenue, Titusville, Florida 32780, (407) 269-9680.
THE OFFERING
SECURITIES OFFERED: - 1,200,000 shares of Common Stock
issuable upon exercise of 1,200,000
outstanding Public Warrants. Each
Public Warrant entitles the holder,
for $6.50, to purchase one share of
Common Stock until November 9, 2000.
- 84,000 shares of Common Stock issuable
upon exercise of 84,000 Underwriters'
Warrants. Each Underwriter Warrant
entitles the holder, for $6.50, to
purchase one share of Common Stock
until November 9, 2000.
- 84,000 shares of Common Stock
issuable upon exercise of an
Underwriters' Unit Purchase Option.
The Unit Purchase Option entitles the
holder, for $6.00, to purchase one
share of Common Stock and one
Underwriters' Warrant.
- 457,000 shares of Common Stock to
be sold by the Selling Shareholders.
- See "Description Of Securities," "Plan
Of Distribution," and "Selling
Shareholders".
COMMON STOCK OUTSTANDING BEFORE THE - 1,646,750 shares of Class A Common
OFFERING(1) Stock; 510,375 shares of Class B
Common Stock
COMMON STOCK OUTSTANDING AFTER THE - 3,217,250 shares of Class A Common
OFFERING IF ALL PUBLIC WARRANTS, Stock; 510,375 shares of Class B
UNDERWRITERS' WARRANTS, BRIDGE Common Stock
WARRANTS, UNIT PURCHASE OPTION AND
CONSULTANT OPTION ARE EXERCISED(2)
RISK FACTORS: - The shares offered hereby involve a
high degree of risk. See "Risk
Factors."
3
<PAGE>
USE OF PROCEEDS: - See "Use of Proceeds." Net proceeds
from the exercise of the Public
Warrants, Underwriters' Warrants, Unit
Purchase Option, Bridge Warrants and
Consultant Option, if any are
exercised, will be used for working
capital and general corporate
purposes. On November 11, 1996, the
last sales price on Nasdaq for
a share of Common Stock was $4 1/4.
Due to the fact that the exercise
price of the Public Warrants and
Underwriters' Warrants is $6.50 per
share and the exercise price of the
Unit Purchase Option is $6.00 per
share, it is unlikely that any of
such securities will be exercised and
the proceeds of exercise received by
the Company without a significant
increase in the market price of the
Company's Common Stock or a lowering
of the exercise prices of the Warrants.
It is possible that the 102,500 Bridge
Warrants, currently exercisable at
$3.63 per share until December 31,
1996, and the Consultant Option
exercisable at $2.50 per share, may be
exercised insofar as the current market
price of the Common Stock exceeds such
exercise price. Without such warrant
and option exercises, the Company will
not receive any of the proceeds of this
Offering. It is impossible to predict
how many of the warrants or options
will be exercised and the magnitude of
the proceeds, if any, realizable
therefrom. The Company will not
receive any of the proceeds from the
resale of any Common Stock described
herein. See "Discussion And Analysis
And Results Of Operations -- Liquidity
And Capital Resources."
NASDAQ SYMBOL: - Common Stock -- ECKL
- Public Warrants -- ECKLW
______________
(1) Does not include (i) a maximum of 1,200,000 shares of Common Stock issuable
upon exercise of the Public Warrants, (ii) a maximum of 84,000 shares of
Common Stock issuable upon exercise of the Unit Purchase Option, (iii) a
maximum of 84,000 shares of Common Stock issuable upon exercise of the
Underwriters' Warrants (iv) a maximum of 102,500 shares of Common Stock
issuable upon exercise of the Bridge Warrants, (v) a maximum of 100,000
shares of Common Stock issuable upon exercise of the Consultant Option,
(vi) 175,000 shares of Common Stock issuable upon exercise of options
granted under the Company's stock option plans at exercise prices ranging
from $2.50 to $3.30 per share, (vii) 40,000 shares of Common Stock issuable
to certain directors of the Company and exercisable at $3.00 per share;
(viii) 200,000 shares of Common Stock issuable upon exercise of an option
granted to a principal of the Company at $2.88 per share, (ix) 200,000
shares of Common Stock issuable upon exercise of an option granted to the
Underwriter at $2.88
4
<PAGE>
per share; and (x) 20,000 shares of Common Stock issuable upon exercise of
an outstanding option issued for consulting services and exercisable at
$4.20 per share.
(2) Assumes (i) issuance of 1,200,000 shares of Common Stock upon exercise of
the Public Warrants, (ii) the issuance of 84,000 shares of Common Stock
upon exercise of the Unit Purchase Option, (iii) the issuance of 84,000
shares of Common Stock upon exercise of the Underwriters' Warrants, and
(iv) the issuance of 102,500 shares of Common Stock upon issuance of the
Bridge Warrants, and (v) issuance of 100,000 shares of Common Stock upon
exercise of the Consultant Option. Does not include (a) the issuance of
any of the 175,000 shares of Common Stock issuable upon exercise of stock
options granted under the Company's stock option plans, (b) the issuance
of 440,000 shares of Common Stock issuable upon exercise of stock options
granted otherwise than in connection with a stock option plan.
SUMMARY FINANCIAL INFORMATION
The following table presents summary historical data of the Company for the
two years ended September 30, 1995 and September 30, 1994 which have been
derived from the Company's audited financial statements included elsewhere in
this Prospectus and unaudited financial data for the nine months ended June 30,
1996 and 1995. The information should be read in conjunction with "Selected
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements and the related notes
thereto. Since 1989, the Company was treated as an S Corporation for federal and
certain state income tax purposes. As a result, the Company's earnings through
September 20, 1995, the date of termination of the Company's S Corporation
status (the "Termination Date") were taxed, with certain exceptions for
federal and certain state income tax purposes, directly to the Company's then
shareholders. As of September 20, 1995, the Company became subject to federal
and state income taxes. See "S Corporation Status" and Note 6 to Notes to
Financial Statements.
[CONTINUED ON NEXT PAGE]
5
<PAGE>
<TABLE>
<CAPTION>
JUNE 30 SEPTEMBER 30
---------- -------------------------
1996 1995 1994
---------- ----------- ----------
<S> <C> <C>
SUMMARY BALANCE SHEET DATA
Working capital (deficit). . . . . . . . . . . . $ 331,399 $(1,602,027) $ (473,502)
Total assets . . . . . . . . . . . . . . . . . . 6,551,560 5,950,042 5,539,650
Total liabilities. . . . . . . . . . . . . . . . 4,561,910 6,288,173 5,688,347
Shareholders' equity (deficit) . . . . . . . . . 1,989,650 (1,027,004) (148,697)
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30 YEARS ENDED SEPTEMBER 30
------------------------- ------------------------
1996 1995 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SUMMARY INCOME STATEMENT DATA
Net sales . . . . . . . . . . . . . . . . . . . $11,144,484 $10,178,889 $12,932,450 $13,942,936
Cost of goods sold. . . . . . . . . . . . . . . 7,247,478 6,642,539 8,443,912 9,074,824
Gross profit. . . . . . . . . . . . . . . . . . 3,897,006 3,536,350 4,488,538 4,868,112
Operating expenses. . . . . . . . . . . . . . . 3,880,145 3,165,099 4,136,322 4,508,770
Income (loss) from operations . . . . . . . . . 16,861 371,251 352,216 359,342
Net income (loss) . . . . . . . . . . . . . . . (17,636) 139,673 (444,600) 22,010
Net income (loss) per share (2) . . . . . . . . ($.23)
Pro forma Net Income (loss) (1). . . . . . . . 92,173 924 146,510
Pro forma Net Income (loss) per share(1)(2). . $.04 ($.05) $.07
Average number of common shares outstanding (2) 2,525,000 2,117,500 2,117,500 2,117,500
</TABLE>
___________
(1) Reflects reductions in stockholder compensation of $200,000 for
the year ended September 30, 1994. Also reflects expenses of $47,500,
$476, and $75,500 for the nine months ended June 30, 1995 and the years
ended September 30, 1995 and 1994, respectively, for income taxes as if
the Company had not been an S Corporation.
(2) Pro forma net income (loss) per share of Class A Common Stock is
based on pro forma net income (loss) and the weighted average of
shares of Class A Common Stock and common stock equivalents outstanding
during each period after giving retroactive effect to the Company's
recapitalization. Shares of Class B Common Stock become convertible
into shares of Class A Common Stock on a 1 for 2 basis and are
considered to be Class A Common Stock equivalents.
Pursuant to requirements of SEC Staff Accounting Bulletin No. 83, common
shares issued by the Company during the twelve months immediately
preceding the initial public offering (242,500 shares) at a price below
the initial public offering price plus the number of common shares
subject to the grant of common stock options and warrants and
convertible preferred stock issued during such period (375,000 shares)
having exercise or conversion prices below the initial public offering
price have been included in the calculation of the shares used in
computing net income per share as if they were outstanding for all
periods prior to the November 15, 1995 closing of the Company's initial
public offering.
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND SHOULD ONLY BE PURCHASED BY INVESTORS WHO CAN AFFORD TO LOSE THEIR
ENTIRE INVESTMENT. PROSPECTIVE INVESTORS, PRIOR TO MAKING AN INVESTMENT, SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISKS AND SPECULATIVE FACTORS,
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<PAGE>
AS WELL AS OTHER INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS,
ASSOCIATED WITH THIS OFFERING, INCLUDING THE INFORMATION CONTAINED IN THE
FINANCIAL STATEMENTS HEREIN.
DEPENDENCE ON KEY EXECUTIVES. The success of the Company is dependent on
the services and efforts of its existing key management personnel. The loss of
the services of one or more of its existing management personnel, particularly
those of Mr. Ralph H. Eckler, would have a material adverse effect on the
Company's business. The Company currently maintains a $1,000,000 key-man life
insurance policy on the life of Mr. Eckler, under which the Company is the
beneficiary. The Company's success and plans for future growth will also depend
on its ability to attract and retain additional qualified personnel. Although
the Company has thus far been successful in attracting and retaining qualified
personnel for its business, there can be no assurance that experienced and
qualified management level personnel will be available to the Company in the
future on terms satisfactory to the Company. Ralph Eckler and the Company
entered into an employment agreement effective May 23, 1995 for a term of seven
years which is automatically renewable for successive two-year terms unless
otherwise terminated. The Company has no other employment agreements with its
other management personnel. See "Management -- Employment Agreement."
IMPLEMENTATION OF GM AGREEMENT. The Company executed a Reproduction and
Service Part Tooling License Agreement (the "GM Agreement") with General Motors
Corporation ("GM") in December 1993 and made advances to GM against future
royalties, which royalties will be payable to GM as a result of sales by the
Company of licensed GM Restoration Parts. Until recently, no GM Restoration
Parts covered by the GM Agreement had been manufactured by the Company or
purchased from GM, although the Company sold parts from its own inventory under
the GM Restoration Parts label. While the Company's recent private and public
financings have permitted it to commence manufacturing parts and acquiring
additional inventory from GM, no assurances can be given as to when the Company
will fully implement the GM Agreement. See "Business -- General Motors
Agreement."
SEASONALITY. The Company's operations are highly seasonal. The Company has
historically derived, on average, in excess of 70% of its revenues during the
period from March through August. See "Business -- Seasonality."
COMPETITION. The GM Agreement grants to the Company the exclusive license
to use certain GM tools and tooling as designated by GM and accepted by the
Company for Corvette parts declared obsolete (i.e., discontinued by GM)
(provided there are no pre-existing GM license agreements or written GM policies
which conflict with or prohibit such and that the tools are not common to other
non-licensed parts not yet declared obsolete by GM), the right to use certain GM
trademarks and GM technology and the right of first refusal to purchase any
inventory of discontinued Corvette parts. However, the GM Agreement does not
prohibit the Company's competitors from manufacturing and selling parts that are
compatible and/or nearly identical to those manufactured and sold by the
Company. See "Business -- Competition."
RECENT DECLINE IN SALES. Over the past several years the Company
experienced a decline in sales. The Company believes the primary reason for this
trend is due to the Company's decision to deploy Company capital to satisfy the
other financial needs of Ralph H. Eckler rather than to maintain a high level of
parts inventory. The decrease in inventory resulted in a loss in sales and
profitability. The capital infusion from the Company's initial public offering
allowed the Company to increase inventory and obtain better terms from vendors
for future inventory acquisitions; however, there can be no assurances that such
replenishment of capital and increase of inventory will result in increased
sales and profitability. See "Management Discussion and Analysis of Financial
Condition and Results of Operations" and "Certain Transactions."
7
<PAGE>
FLUCTUATING MARKET FOR COLLECTIBLES. The market for Corvette automobiles
(especially the collectible models) fluctuates generally with the demand for
other collectibles and the sales of the Company's products may correspond to the
demand of the Corvette automobile. Accordingly, no prediction of the continued
market for the Company's products can be made.
DEBT OBLIGATIONS. The Company's property is encumbered by a $2.4 million
mortgage in favor of Barnett Banks which refinanced a prior debt obligation of
the Company. The Company also obtained a $1 million revolving line of credit
from Barnett Banks, secured by certain personal property of the Company. The
loan documents contain cross-default provisions pursuant to which the bank could
accelerate payment of both loans in the event of a default under one of the
loans. If the Company subsequently defaults in its obligations to Barnett
Banks, the bank may foreclose on the property which would have a material
adverse affect on the Company's operations. See "Business -- Property."
NO PROCEEDS TO THE COMPANY FROM THE OFFERING. Unless the Warrants, the
Unit Purchase Option, the Bridge Warrants, and/or the Consultant Option are
exercised, the Company will not receive any proceeds of this Offering to be
applied to its working capital. On November 11, 1996, the last sales price
reported on Nasdaq for a share of the Company's Common Stock was $4 1/4 per
share. Due to the fact that the exercise price of the Warrants is $6.50 per
share and the exercise price of the Unit Purchase Option is $6.00 per share, it
is unlikely that any of such warrants or option will be exercised without a
significant increase in the market price of the Company's Common Stock. Even
though the exercise prices of the Bridge Warrants, currently at $3.63 and the
Consultation Option at $2.50, are below the current market price of the Common
Stock, it is impossible to predict how many of such warrants and options will be
exercised and the magnitude of the proceeds, if any, realizable therefrom.
COMPLETE DISCRETION IN APPLICATION OF PROCEEDS. Upon exercise of any of
the Warrants, the Unit Purchase Option, the Underwriters' Warrants, the Bridge
Warrants and/or the Consultant Option, all of the net proceeds to the Company
therefrom have been designated for general corporate and working capital
purposes and may be expended at the discretion of the Company's management. As
a result of the foregoing, any return on investment to investors will be
substantially dependent upon the discretion and judgment of the Company's
management with respect to the application and allocation of the net proceeds,
if any, to the Company of the Offering. See "Risk Factors -- No Proceeds to
Company Upon Failure to Exercise Warrants."
PRIOR S CORPORATION STATUS AND OTHER TAX MATTERS. From October 1, 1989
until September 20, 1995, the Company was treated as an S Corporation for
federal (and most state) tax purposes. Unlike a C Corporation, an S Corporation
is generally not subject to income tax at the corporate level. In the event that
the Internal Revenue Service were to deny such S Corporation status for periods
during which the Company was treated as an S Corporation by reason of the
failure to satisfy the S Corporation requirements of the Internal Revenue Code
of 1986, as amended (the "Code"), the Company would be subject to income tax as
a C Corporation. See "S Corporation Status."
NO ASSURANCE OF CONTINUED MARKET FOR SECURITIES. Although the Company's
Class A Common Stock and Public Warrants are listed on the NASDAQ SmallCap
Market, there can be no assurances that a public trading market for the
securities will be sustained. If for any reason the Company fails to maintain
sufficient qualifications for continued listing on the NASDAQ SmallCap
Market, purchasers of the securities may have difficulty in selling their
securities should they desire to do so. In any event, because certain
restrictions may be placed upon the sale of securities at prices under $5,
unless such securities qualify for an exemption from the "penny stock" rules,
such as a listing on the NASDAQ SmallCap Market, some brokerage firms will
not effect transactions in the securities if they trade below $5 and it is
unlikely that any bank or financial institution will accept the securities as
collateral, which could have an adverse
8
<PAGE>
effect in developing or sustaining any market for the securities. See "Risk
Factors -- Listing Maintenance Criteria for NASDAQ System; Penny Stock
Regulations."
CONTROL BY MANAGEMENT. Under the provisions of the Company's governing
instruments, a director may be removed only for cause by a 66 2/3% vote of the
outstanding common shares. A director may not be removed without cause. See
"Management -- Governing Instruments."
CONTROL BY PRINCIPAL SHAREHOLDER. Ralph H. Eckler beneficially owns
and/or controls approximately 40.75% of the outstanding shares of the
Company's Common Stock. Thus, Mr. Eckler controls a substantial block of
voting shares and is thereby in a position to influence the policies of the
Company. See "Security Ownership of Certain Beneficial Owners and
Management."
DILUTION AND ADVERSE EFFECT ON STOCK PRICE FROM FUTURE ISSUANCE OF
ADDITIONAL SHARES. As of the date of this Prospectus, the Company granted
options for 175,000 shares of Class A Common Stock to employees, officers and
directors of the Company, 130,000 of which options are first exercisable at
$2.50 per share in August, 1997, 45,000 of which are first exercisable at
$3.00 to $3.30 per share in January, 1997, and 40,000 of which are first
exercisable in April, 1997. The Company also issued an option for 200,000
shares of Class A Common Stock to the Underwriter and an option to Ralph H.
Eckler for 200,000 shares Class A Common Stock, which options are exercisable
at $2.88 per share commencing in August 1996 and January 1997, respectively.
Additionally, there is an outstanding option for 20,000 shares of Common
Stock issued to a consultant, exercisable at $4.20 per share. Further,
1,570,000 shares of Common Stock underlying outstanding warrants and options
are included in this Prospectus. The issuance of any additional shares by
the Company in the future may result in a reduction of the book value or
market price of the then-outstanding Class A Common Stock. Issuance of
additional shares of Class A Common Stock may reduce the proportionate
ownership and voting power of then-existing shareholders. As of October 30,
1996, the Company had outstanding 1,646,750 shares of Class A Common Stock
and 510,375 shares of Class B Common Stock (convertible into 1,020,750 Class
A shares on a 2 for 1 basis), of which 1,367,000 shares were freely tradable.
495,375 Class B shares (convertible into 990,750 Class A shares) are
subject to a lock-up agreement, but once released, may be sold subject to
volume and other limitations of Rule 144 under the Securities Act (unless
such shares are subsequently registered under the Securities Act, in which
case they would be free from the Rule 144 limitations). See "Risk Factors --
Impact on Market of Warrant Exercise", "-- Underwriters' Unit Purchase Option",
"-- Adverse Impact of Significant Number of Shares Eligible For Future
Sale"; "Plan of Distribution" "Selling Shareholders"; "Management --
Management and Employee Stock Option Plans"; "Description of Securities";
and, "Shares Available for Future Sale."
IMPACT ON MARKET OF WARRANT EXERCISE. The Company's Public Warrants are
subject to redemption by the Company, at any time after November 9, 1996 at a
price of $.05 per warrant if the average closing price for the Class A Common
Stock equals or exceeds $8.75 per share for the twenty consecutive trading days
ending on the third day prior to the date of the notice of redemption. In the
event that the Public Warrants are called for redemption by the Company,
warrantholders will have thirty days during which they may exercise their rights
to purchase shares of Class A Common Stock. In the event a current prospectus is
not available, the warrants may not be exercised and the Company will be
precluded from redeeming the warrants. As a result of an exercise of the Public
Warrants, existing shareholders could be diluted and the market price of the
Class A Common Stock may be adversely affected. In the event of the exercise
of a substantial number of warrants within a reasonably short period of time
after the right to exercise commences, the resulting increase in the amount of
Class A Common Stock of the Company in the trading market could substantially
affect the market price of the Class A Common Stock. See "Description of
Securities -- Warrants."
9
<PAGE>
NO DIVIDENDS ANTICIPATED. Although the Company paid dividends on its
common stock through 1995, it does not intend to pay dividends thereon in the
foreseeable future. Any earnings which the Company may realize in the
foreseeable future will be retained to finance the growth of the Company. See
"Dividend Policy."
POSSIBLE RESTRICTIONS ON MARKET MAKING ACTIVITIES IN THE SECURITIES.
Although it has no legal obligation to do so, Argent Securities, Inc.
("Argent"), the Company's underwriter of its initial public offering which
closed on November 15, 1995, and other broker-dealer firms from time to time
may act as market makers and otherwise effect transactions in the Company's
securities. Unless granted an exemption by the Commission from Rule 10b-6
under the Exchange Act, the broker-dealers will be prohibited from engaging
in any market making activities or solicited brokerage activities with
respect to the Company's securities for the period from nine business days
prior to any solicitation of the exercise of any Warrant or nine business
days prior to the exercise of any Warrant based on a prior solicitation until
the later of the termination of such solicitation activity or the termination
(by waiver or otherwise) of any right Argent and other broker-dealers may
have to receive such a fee for the exercise of the Warrants following such
solicitation. As a result, such firms may be unable to continue to provide a
market for the Company's securities during certain periods while the Warrants
are exercisable. The prices and liquidity of the securities may be adversely
affected by the cessation of such market making activities. In addition,
there is no assurance that Argent and other firms will continue to be market
makers in the Company's securities. The prices and liquidity of the
Securities may be affected significantly by the degree, if any, of Argent's
participation in the market. The market makers may voluntarily discontinue
such participation at any time.
CIVIL LIABILITY OF SELLING SHAREHOLDERS. Under the Securities Act, a
purchaser of securities sold under a registration statement may recover from
the person from whom he bought the securities damages incurred as a result of
material misstatements contained in, or material information omitted from the
registration statement. The damages recoverable are the difference between
the price the purchaser paid for the security (but not more than the public
offering price) and the price at which the purchaser disposed of the security
or (if he still owns it) its value at the time of suit.
Persons subject to liability under the Securities Act are certain
officers and directors (including prospective directors) of the issuer of the
securities, certain experts, and every underwriter who sold the securities.
Under the Securities Act, the term "underwriter" is generally defined as any
person who has purchased from an issuer (or from a control person of the
issuer) with a view to, or offers or sells for an issuer in connection with,
the distribution of any security. Thus, when a person has purchased
securities directly from an issuer, and subsequently resells them, he may be
deemed to have "purchased from an issuer with a view to distribution" and may
be deemed an "underwriter" for purposes of imposing civil liability under the
Securities Act. Therefore, selling shareholders who acquired securities from
the Company, and subsequently resell those securities under this Prospectus
(including the sale of common stock resulting from a conversion or exercise
of those securities), may be deemed underwriters and therefore subject to
civil liability for material misstatements contained in, or material
omissions from, this Prospectus.
UNDERWRITERS' UNIT PURCHASE OPTION . In connection with its initial
public offering, the Company sold to Argent, for nominal consideration, an
option to purchase an aggregate of 84,000 units (the "Unit Purchase Option"),
with each such unit consisting of one share of Class A Common Stock and one
warrant. The Unit Purchase Option is exercisable for a period of four years,
commencing November 15, 1996, at an exercise price of $6.00 per unit. The
terms of the warrants underlying such Units (the "Underwriters' Warrants")
are the same as the public warrants, except that they are not redeemable by
the Company. The holder of the Unit Purchase Option will have the opportunity
to profit from a rise in the market price of the Company's securities, if
any, without assuming the risk of ownership. The Company may find it more
difficult to raise additional equity capital if it should be needed for the
business of the Company while the
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<PAGE>
Unit Purchase Option is outstanding. At any time when the holders thereof
might be expected to exercise them, the Company would probably be able to
obtain additional capital on terms more favorable than those provided by the
Unit Purchase Option. The 84,000 shares of Common Stock issuable upon
exercise of the Unit Purchase Option and the 84,000 shares of Common Stock
issuable upon exercise of the Underwriters' Warrants are included for sale
under this Prospectus.
LISTING MAINTENANCE CRITERIA FOR NASDAQ SYSTEM; "PENNY STOCK" REGULATIONS.
The Company's Class A Common Stock and Public Warrants are listed on the Nasdaq
SmallCap Market. Continued inclusion on the NASDAQ SmallCap Market currently
requires two market makers and a minimum bid price of $1.00 per share; provided,
however, if the Company falls below the minimum bid price, it will remain
eligible for continued inclusion if the market value of the public float is at
least $1,000,000 and the Company has $2,000,000 in capital and surplus. As of
December 31, 1995, the minimum bid price of the Company's Class A Common Stock
was $3.25 per share; the market value of the public float was $4,727,125, and
the Company had $1,571,241 in capital and surplus. If the Company fails to
maintain the NASDAQ minimum threshold requirements, it would lose NASDAQ listing
and trading, if any, and trading in the securities would be conducted in the
over-the-counter market known as the NASD OTC Electronic Bulletin Board, or more
commonly referred to as "pink sheets." As a result, an investor may find it more
difficult to dispose of, or to obtain accurate quotations as to the market value
of, the Company's Class A Common Stock if it were to lose its NASDAQ SmallCap
Market listing.
The Commission has adopted regulations which generally define "penny
stock" to be any equity security that has a market price (as defined) less
than $5 per share or an exercise price of less than $5 per share, subject to
certain exceptions. Since the Securities have been accepted for quotation on
NASDAQ, they will initially be exempt from the definition of "penny stock."
If the Securities are later removed from listing by NASDAQ and are traded at
a price below $5, the Securities may become subject to rules that impose
additional sales practice requirements on broker-dealers who sell such
Securities to persons other than established customers and institutional
accredited investors. For transactions covered by these rules, the
broker-dealer must make a special suitability determination for the purchase
of such Securities and have received the purchaser's written consent to the
transaction prior to the purchase. Additionally, for any transaction
involving a penny stock, unless exempt, the rules require the delivery, prior
to the transaction, of a disclosure schedule prepared by the Commission
relating to the penny stock market. The broker-dealer also must disclose the
commissions payable to both the broker-dealer and the registered
representative, current quotations for the Securities, and, if the
broker-dealer is the sole market-maker, the broker-dealer must disclose this
fact and the broker-dealer's presumed control over the market. Finally,
monthly statements must be sent disclosing recent price information for the
penny stock held in the account and information on the limited market in
penny stocks. Consequently, the "penny stock" rules may restrict the ability
of broker-dealers to sell the Securities and may affect the ability of
purchasers in this Offering to sell the Securities in the secondary market.
ADVERSE IMPACT OF SIGNIFICANT NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE.
No assurance can be given as to the effect, if any, that future sales of
Common Stock, or the availability of shares of Common Stock for future sales,
will have on the market price of the Common Stock from time to time. Sales
of substantial amounts of Common Stock (including shares issued upon the
exercise of warrants or stock options), or the possibility that such sales
could occur, could adversely affect the market price of the Common Stock and
could also impair the Company's ability to raise capital through an offering
of its equity securities in the future. Assuming exercise of all the
warrants and the Consultant Option, the underlying shares of Common Stock of
which are included for sale under this Prospectus, upon completion of the
Offering the Company will have 3,217,250 shares of Common Stock outstanding,
of which the approximately 3,192,000 will be transferable without restriction
under the Securities Act. The remaining 510,375 shares of Class B Common
Stock (convertible into 1,020,750 shares of Class A Common Stock) to be
outstanding on
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<PAGE>
completion of this Offering are "restricted securities" (as that term is
defined in Rule 144 promulgated under the Securities Act) which may be
publicly sold only if registered under the Securities Act or if sold in
accordance with an applicable exemption from registration, such as Rule 144.
The 510,375 shares of Class B Common Stock (and the 1,020,750 Class A
Common Stock into which the Class B shares are convertible) are "restricted
securities" as that term is defined by Rule 144 under the Securities Act, and,
in the future, may be sold in compliance with Rule 144 or pursuant to an
effective registration statement. However, of the 510,375 shares, Mr. Ralph
Eckler owns 495,375 shares which are further subject to the provisions of a
lock-up agreement between him and Argent Securities, Inc. ("Argent"), the
Company's underwriter for its initial public offering). Ordinarily, under
Rule 144, a person who is an affiliate of the Company (as that term is defined
in Rule 144) and has beneficially owned restricted securities for a period of
two years is entitled to sell in brokerage transactions (together with any
person with whom such individual is required to aggregate sales), within any
three-month period, an amount that does not exceed the greater of (i) 1% of the
outstanding number of shares of a particular class of such securities, or
(ii) the average weekly trading volume in such securities on all national
exchanges and/or reported on Nasdaq during the four calendar weeks preceding the
sale. A person who has not been an affiliate of the Company for at least the
immediately preceding three months, and who has beneficially owned restricted
securities for at least three years, is entitled to sell such shares under Rule
144 without regard to any of the limitations described above. In the future,
sales of restricted stock pursuant to Rule 144 may have an adverse effect on the
market price of the Company's Class A Common Stock. Under Rule 144, Mr. Eckler
may sell his shares immediately, subject to the aforementioned timing and volume
limitations. However, Mr. Eckler has agreed with Argent in writing not to sell,
assign or transfer any of his shares of Class B Common Stock (or the Class A
Common Stock into which such shares are convertible) without the consent of
Argent for periods ranging from 24 to 60 months from November 15, 1995, subject
to earlier incremental release upon the achievement of specified performance
goals. See "Shares Available for Future Sale."
COSTS RESULTING FROM NECESSITY OF CONTINUING POST-EFFECTIVE AMENDMENTS TO
THE COMPANY'S REGISTRATION STATEMENT AND STATE BLUE SKY REGISTRATION; EXERCISE
OF WARRANTS DEPENDENT ON CURRENT REGISTRATION STATEMENT; COSTS RESULTING FROM
OBLIGATIONS TO SELLING STOCKHOLDERS. Although the Warrants were not knowingly
sold by the Company to purchasers in jurisdictions in which the Warrants were
not registered or otherwise knowingly were sold to purchasers in jurisdictions
in which the Warrants are not registered or otherwise qualified for sale,
purchasers may buy Warrants in the after-market or may move to jurisdictions in
which the Warrants and the Common Stock underlying the Warrants are not so
registered or qualified. In this event, the Company would be unable to issue
Common Stock to those persons desiring to exercise their Warrants unless and
until the Warrants and the underlying Common Stock are qualified for sale in
jurisdictions in which such purchasers reside, or an exemption from such
qualification exists in such jurisdictions. In addition, any additional
financing may result in further dilution to Company stockholders resulting from
the issuance of Common Stock or securities exercisable for or convertible into
Common Stock. There can be no assurance that the Company will be able to effect
any required qualification.
The Warrants will not be exercisable unless the Company maintains a
current Registration Statement on file with the Commission through
post-effective amendments to the Registration Statement containing this
Prospectus. Although the Company has agreed to file appropriate
post-effective amendments to the Registration Statement containing this
Prospectus, and to maintain a current Registration Statement on file with the
Commission relating to the Warrants, there can be no assurance that such will
be accomplished or that the Warrants will continue to be so registered. See
"Description of Securities -- Warrants."
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The Selling Shareholders' Shares are included in this Prospectus for
offer and sale pursuant to certain registration obligations of the Company.
The obligation to maintain a current registration statement may impose a
financial burden on the Company and create a contractual liability of the
Company to the Selling Shareholders.
POSSIBLE COMBINATION OF THE COMPANY. On October 28, 1996, the Company
entered into a letter of intent with Smart Choice Holdings, Inc., a newly
organized, privately held Delaware corporation ("Smart Choice") for the
purpose of combining the two companies. The combination would be effected by
the holders of Smart Choice securities exchanging all of their securities for
6.5 million shares of the Company's Class A Common Stock. To the extent the
Company does not have a sufficient number of Class A Common Stock authorized,
unissued and unreserved, the Company will issue one-half share of the
Company's Class B Common Stock for every share of Class A Common Stock it is
unable to issue. Following the completion of the transaction, the Company
would seek shareholder approval to change its name to Smart Choice Holdings,
Inc. (or other name) ("Smart Choice Holdings"). Following the combination,
the combined companies would be comprised of four divisions: corvette parts
and accessories (the "Eckler Division"), which would continue to be
headquartered in Titusville, Florida, new car sales, used car sales,
insurance, auto finance and leasing. The primary focus of the combined
companies would be the establishment of a network of neighborhood stores for
the financed sales of new and used cars, with a specific focus on sub-prime
borrowers. The resultant company would be acquiring various used car
dealerships and finance companies for purposes of offering a full-service
package to customers for one-stop transportation shopping encompassing
automobiles, warranties, service, financing, leasing and insurance. Although
Smart Choice Holdings has entered into several purchase contracts, letters of
intent and/or oral agreements in principle to acquire certain new and used
car sales and finance companies, there can be no assurance that the
acquisitions will be successfully completed and closed. Further, there is no
assurance that, given the highly competitive nature of the industry and the
need for significant additional capital to fund the acquisitions, that the
new public company will be successful in meeting its goals.
The proposed combination would result in substantial share dilution for
existing shareholders. Further, although Ralph H. Eckler would continue to
be Chairman of the Eckler Division, it is anticipated that new management
will be responsible for the overall direction of the new public company. In
addition, under the terms of the Smart Choice letter of intent, the Company
would become one of four divisions of the new company. Initially, the
combined companies will benefit from the income provided by the Company, as
well as the proceeds from the exercise of any of the Public Warrants, Unit
Purchase Option, Underwriters' Warrants, Bridge Warrants and Consultant
Option. It is anticipated that a substantial portion of such proceeds would
be used by the combined companies to fund various planned acquisitions.
Although the companies that Smart Choice intends to acquire have had ongoing
operations, Smart Choice itself has no independent history of operations or
revenues. Because of its aggressive growth plans (i.e., to establish a
network of automobile and automobile finance stores through the acquisition
of on-going businesses), it can be vulnerable to a variety of business risks
generally associated with young, rapidly growing companies, such as the
inability to achieve continued profitability. Outside factors, such as the
economic, regulatory, and judicial environments in which it would operate,
will also have an effect on the new combined companies' business. The
combined companies' inability to achieve any or all of its goals could have a
material adverse effect on its operation, profitability and growth.
There is no assurance that the Company will consummate the proposed
stock exchange with Smart Choice. The consummation of the transaction is
contingent upon the satisfaction and performance of various conditions,
including, but not limited to: (a) the negotiation and execution of a
definitive stock exchange agreement on or before November 30, 1996; (b) the
closing of a definitive stock exchange agreement on or before December 31,
1996; (c) opinions of counsel for the Company and Smart Choice Holdings, Inc.
as are customary for a transaction of the type proposed; and (d) fairness
13
<PAGE>
opinions from the parties' respective investment bankers as to the
transaction from a financial perspective. There is no assurance that the
transaction will be consummated, or if consummated, that the resulting new
public company will be able to meet projected aggressive growth goals and
profitability. See "Business -- Letter of Intent for Consolidation of the
Company with Smart Choice Holdings, Inc."
A vote of the Company's shareholders is not required for approval of the
consolidation and if the consolidation is consummated, the Company's
shareholders would become shareholders of the newly organized Smart Choice
Holdings, a public company, which, but for the Eckler Division, would have no
history of sales or other measure of performance on which to base an
investment decision.
S CORPORATION STATUS
From October 1, 1989 to September 20, 1995, the Company was treated for
federal and certain state tax purposes as an S Corporation under the Code and
comparable state tax laws. As a result, the Company's earnings during that
time were taxed, with certain exceptions, for federal and certain state
income tax purposes, directly to Ralph H. Eckler, the Company's sole
shareholder during that time period. Since September 20, 1995, the Company
has not been treated as an S Corporation and, accordingly, is fully taxable
pursuant to federal and state income tax laws. Upon converting from S
Corporation status, the Company recorded a charge of $ 447,300 to income tax
expense to recognize deferred income tax liabilities as of that date.
USE OF PROCEEDS
On the assumption that all of the Warrants, the Unit Purchase Option,
the Bridge Warrants and the Consultant Option are exercised, the net proceeds
which the Company will receive from such exercise, after deduction of
expenses of this Offering, will be approximately $9,448,575. The Company
intends to utilize the net proceeds of the Offering for working capital and
general corporate purposes. To the extent that less than all of the Warrants,
Unit Purchase Option, Bridge Warrants and Consultant Option are exercised and
the Company receives less than $9,448,575 of net proceeds of the Offering,
such net proceeds will still be added to working capital and used for general
corporate purposes, including additional inventory and catalogue production.
Unless any of such warrants and options are exercised, the Company will not
receive any proceeds of this Offering. The Company will not receive any
proceeds from the resale by the holder of any of the Warrants or shares of
Common Stock issuable upon exercise of such warrants or options or shares
held by Selling Shareholders. The Company has entered into a letter of
intent regarding the proposed consolidation of the Company with Smart Choice
Holdings, Inc., a newly formed Delaware corporation, that intends to
establish and operate a network of one-stop used automobile stores. The
proposed transaction is subject to various contingencies. However, if
consummated and the Company receives proceeds from the exercise of the
Warrants, etc., a majority of the proceeds would be used to finance the newly
public company's acquisition plans. However, since the transaction is
subject to various contingencies, including the execution and closing of a
definitive exchange agreement between the Company and Smart Choice Holdings,
Inc. before the end of calendar 1996, it is impossible to predict how and
when such proceeds, if available, would be used. See "Risk Factors --
Possible Consolidation of the Company", and "Business -- Letter of Intent For
Combination of the Company with Smart Choice Holdings, Inc."
On November 11, 1996, the last sales price reports on Nasdaq for a share
of the Company's Common Stock was $4 1/4 per share. Due to the fact that the
exercise price of the Warrants is $6.50 per share, the exercise price of the
Unit Purchase Option is $6.00 per share, it is unlikely that any of such
warrants and option will be exercised without a significant increase in the
market price of the Company's
14
<PAGE>
Common Stock. Although it is possible that the Bridge Warrants and the
Consultant Option will be exercised, insofar as the Bridge Warrants are
exercisable until December 31, 1996 at $3.63 per share and the Consultant Option
is exercisable at $2.50 per share, it is impossible to predict how many of such
warrants and options will be exercised and the magnitude of the proceeds, if
any, realizable therefrom. See "Risk Factors - No Proceeds to Company upon
Failure to Exercise Warrants and Options", "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and Capital
Resources."
PLAN OF DISTRIBUTION
Common Stock issuable upon exercise of the Warrants is distributed when and
as such Warrants are exercised by Warrant holders. No Warrants have been
exercised as of the date indicated on the cover of the Prospectus. The Company
may solicit the exercise of the Warrants (except the Underwriters' Warrants) at
any time provided certain conditions are met. The Company may also reduce the
exercise price of the Warrants in order to encourage their exercise. See
"Description of Securities - The Warrants."
In November 1995, Argent Securities, Inc. (the "Underwriter") acted as the
underwriter of the Company's Public Offering in which the Company sold 840,000
shares of Class A Common Stock and 1,200,000 Public Warrants, and a selling
securityholder sold 360,000 shares of Class A Common Stock. In partial
consideration for its services, the Underwriter received a Unit Purchase Option,
exercisable for 84,000 Units, exercisable at $6.00 per Unit. Each such Unit
consists of 84,000 shares of Common Stock and 84,000 Underwriters' Warrants
exercisable at $6.50 per share. The exercise price and the other terms of the
Warrants were determined by negotiation between the Company and the Underwriter.
The Selling Shareholders may effect sales of their Selling Shareholders'
Securities by selling such Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Shareholders and/or purchasers of
shares for whom they may act as agent (which compensation may be in excess of
customary commissions).
The sale of such Shares will be subject to state securities laws of states
in which a transaction is sought to be effected and cannot be sold in a
particular state unless such securities have been registered or qualified for
sale in such state or an exemption from registration or qualification is
available and complied with.
The registration of the shares hereby covers the exercise of the option and
warrants held by certain Selling Shareholders as well as the shares of Class A
Common Stock issuable upon such exercise. See "Selling Shareholders."
DETERMINATION OF OFFERING PRICE. The Company's Class A Common Stock is
traded on the NASDAQ SmallCap Market and The Boston Stock Exchange ("BSE").
Such shares of Common Stock may be offered by or on behalf of the Selling
Shareholders from time to time in or through transactions or distributions in
the NASDAQ SmallCap Market, the BSE, on any other stock exchange on which such
shares are listed, or in privately negotiated transactions, or otherwise at
prices prevailing in such market or exchange or as may be negotiated at the time
of sale. As of November 11, 1996, the per share high and low bid prices for
the Company's Class A Common Stock on the NASDAQ SmallCap Market were $4 1/4
and $4, respectively.
15
<PAGE>
EXPENSES OF OFFERING. The Company will receive proceeds from the exercise
of the Warrants, Unit Purchase Option, Bridge Warrants and Consultant's Option,
if any of them are exercised. The Company will receive none of the proceeds of
the sale of the Selling Shareholders' Shares. Expenses in connection with the
registration with the SEC of the shares offered hereby will be paid by the
Company, including expenses involved with "blue sky" filings in up to ten (10)
states as may be required under the terms of the Registration Rights Agreement
between the Company and investors who purchased shares in the Company's private
placement in September, 1995 (the "Private Placement Investors"). The Company
will also incur further expenses associated with any continuing responsibilities
to maintain the effectiveness of the registration statement with the SEC and
various states, including amending and supplementing the registration statement
from time to time as required by applicable federal and state securities laws.
Such additional expenses are not capable of being estimated, but the Company
does not expect them to be material. The Company is obligated to pay these
expenses and register the shares offered hereby pursuant to the terms of the
Registration Rights Agreement and the Consultant Option. The expenses to be paid
by the Company are estimated at $23,500. The Selling Shareholders will be
responsible for payment of transfer taxes and broker/dealer commissions or
underwriter discounts, if any are payable.
16
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996. Insofar as the Company will not receive the proceeds from the sales
of shares by Selling Stockholders, and it is impossible to predict the number of
Warrants, Bridge Warrants, Underwriters' Warrants, Unit Purchase Option, and
Consultant Options that will be exercised and the proceeds therefrom received by
the Company, there is no way to predict the amount of net proceeds to be
received by the Company as a result of this Offering. Therefore, it is
similarly impossible to give effect to the anticipated use of any proceeds from
this Offering which may be received by the Company. See "Use of Proceeds" and
"Business - Letter of Intent re: Consideration and Management Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources." This table should be read in conjunction with the Company's
Financial Statements and the notes thereto which are included elsewhere in this
Prospectus.
June 30, 1996
(Unaudited)
----------
Current portion of long-term liabilities $1,003,700
Long Term Debt 1,692,907
Class A Common Stock $.01 par value;
authorized 10,000,000 shares; 1,516,500
issued and outstanding 15,165
Class B Common Stock, $.01 par value
authorized 5,000,000 shares; issued and
outstanding 523,000 shares 5,230
Additional paid-in capital 2,514,865
Accumulated deficit (545,610)
----------
Total stockholders' equity 1,989,650
----------
Total Capitalization $4,686,257
----------
----------
17
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth certain information with respect to persons
for whom the Company is registering the Selling Shareholders' Shares for resale
to the public. The Company will not receive any of the proceeds from the sale
of the Selling Shareholders' Shares by such Selling Shareholders.
NAME CLASS A SHARES(1)(2)
---- --------------------
Gary R. Ostoski/Thomas DeRita/Louis V. Cianfrongna,
as tenants in common(3) 19,000
Daryl Leehaug(3) 7,000
Quad Capital Partners (3) 3,500
OK Associates, Inc.(3) 3,500
R. William Timberman(3) 14,000
Caldwell Johnson Winston & Massengill, PC
Profit Sharing Trust Account M(3) 3,500
Caldwell Johnson Winston & Massengill, PC
Pension Trust Account M(3) 3,500
Alex Theriot, Jr.(3) 3,500
Paul Wall Farm Service Center, Inc.(3) 3,500
Kitty Geldrich(3) 17,500
Putich Sales, Inc. Defined Benefit Pension Plan,
Frank Pultich, Trustee(3) 14,000
George J. Hoffman & Kimberly B. Hoffman(3) 3,500
Edward M. Kalinowski, Sr.(3) 3,500
David M. Ford(3) 3,500
Howard S. Leyser(3) 7,000
Craig S. Jennings(3) 3,500
Baywood Pension Plan & Trust, Charles Fletcher, Trustee(3) 3,500
18
<PAGE>
Charles Fletcher(3) 3,500
Myers Massengill(3) 7,000
Dolores Hamrick(3) 3,500
James R. Pinke, M.D.(3) 7,000
David Dueffley(3) 3,500
Frank J. Todora(3) 3,500
M. Jenkins Cromwell, Jr.(3) 3,500
Revel L. Anderson, Jr.(3) 3,500
Greyhouse Services Corporation(4) 100,000
Jerry Brown(5) 75,000
Thomas Brown(5) 75,000
Ralph H. Eckler(6)(8) 10,000
Ronald V. Mohr(6)(8) 10,000
G. Edward Mills(6)(8) 10,000
Michael G. Wilson(6)(8) 10,000
Robert M. Eckler(7)(8) 15,000
-------
TOTAL 457,000
-------
-------
_______________
(1) All shares are issued and outstanding unless otherwise indicated in a
footnote.
(2) Since the Selling Shareholders may offer all or part of the shares of
Class A Common Stock which they hold pursuant to this Prospectus or may
hold upon exercise of options or warrants, and since this offering is not
being underwritten on a firm commitment basis, no estimate can be given as
to the amount of shares of Class A Common Stock to be offered for sale by
the Selling Shareholders nor the amount of such shares of Class A Common
Stock that will be held by the Selling Shareholders upon termination of
this offering. See "Plan Of Distribution".
(3) Pursuant to a registration rights agreement with the Company, commencing
May 15, 1996 and for a period of three months thereafter, these Selling
Shareholders could sell up to 25% of their Selling Shareholders' Shares.
In each subsequent three-month period, they may sell an additional 25% of
such shares (in addition to any unsold shares from the previous quarter(s).
(4) Represents 100,000 shares of Class A Common Stock issuable upon exercise of
an option.
19
<PAGE>
(5) Represents 37,500 issued and outstanding shares of Class A Common Stock
and 37,500 shares of Class A Common Stock issuable upon exercise of Bridge
Warrants.
(6) Represents 5,000 issued and outstanding shares of Class A Common Stock and
5,000 shares of Class A Common Stock issuable upon exercise of Bridge
Warrants.
(7) Represents 7,500 issued and outstanding shares of Class A Common Stock and
7,500 shares of Class A Common Stock issuable upon exercise of Bridge
Warrants.
(8) Pursuant to an agreement with the Company, and further, none of these
shares may be sold by these Selling Shareholders for less than $6.00 per
share.
20
<PAGE>
MARKET PRICE OF COMMON STOCK AND RELATED STOCKHOLDERS MATTERS.
MARKET INFORMATION. The Company's Class A Common Stock and Public
Warrants are listed on the NASDAQ SmallCap Market and the Boston Stock Exchange.
Since the Company has been listed on the NASDAQ SmallCap Market only since mid
November, 1995, quarterly information is provided for quarters since that date.
High Low
---- ---
Class A Common Stock
December 31, 1995 3 15/32 3 1/8
March 31, 1996 4 1/4 4 1/8
June 30, 1996 3 3/4 3 5/8
September 30, 1996 4 3 11/16
Warrants
December 31, 1995 5/8 7/16
March 31, 1996 9/16 9/16
June 30, 1996 21/32 19/32
September 30, 1996 23/32 21/32
The quotations represent prices between dealers in securities; they do not
include retail mark-ups, mark-downs, or commissions, and do not necessarily
represent actual transactions.
HOLDERS. As of September 30, 1996, there were approximately 107 holders of
record of the Class A Common Stock and 29 holders of record of Public Warrants.
The Company's management estimates that there are over 1,200 beneficial owners
of the Company's Common Stock and 500 beneficial owners of the Company's Public
Warrants.
DIVIDENDS. Historically the Company as an S Corporation periodically paid
cash distributions to its then sole shareholder. Upon becoming a C Corporation,
the Company has not declared or paid any cash dividends on its common stock and
has no present plans to pay cash dividends in the foreseeable future and intends
to retain earnings for the future operation and expansion of the business. Any
determination to declare or pay dividends in the future will be at the
discretion of the Company's Board of Directors and will depend upon the
Company's results of operations, financial condition, any contractual
restrictions, considerations imposed by applicable law and other factors deemed
relevant by the Board of Directors. Pursuant to an underwriting agreement
between the Company and Argent Securities, Inc. (the "Underwriter"), the
Underwriter has certain approval rights respecting the Company's issuance of
dividends until November 15, 1997.
SELECTED FINANCIAL DATA
The following table presents selected financial data for the two years
ended September 30, 1995, which have been derived from the Company's audited
financial statements included elsewhere in this Prospectus, and unaudited
historical financial data for the nine months ended June 30, 1996 and June 30,
1995. The information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements and the related notes thereto. Since 1989, the Company
had been treated as an S Corporation for federal and certain state income tax
purposes. As a result, the Company's earnings through September 20, 1995, the
termination date of S Corporation status were taxed, with certain exceptions for
federal and certain income tax purposes, directly to the Company's founding
shareholder. Upon closing of the Private Placement offering on September 20,
1995, the Company's status as an S Corporation terminated and the Company
became
21
<PAGE>
subject to federal and state income taxes. See "S Corporation Status" and Note 6
to Notes to Financial Statements.
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
JUNE 30 SEPTEMBER 30
--------------- ------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current assets . . . . . . . . . . . . . . . . . . . . . . $3,200,402 $ 1,983,516 $ 2,016,088
Total assets . . . . . . . . . . . . . . . . . . . . . . . 6,551,560 5,950,042 5,539,650
Current liabilities. . . . . . . . . . . . . . . . . . . . 2,869,003 3,585,543 2,489,590
Long term debt . . . . . . . . . . . . . . . . . . . . . . 1,692,907 2,351,130 3,198,757
Total liabilities. . . . . . . . . . . . . . . . . . . . . 4,561,910 6,288,173 5,688,347
Shareholders' equity (deficit) . . . . . . . . . . . . . . 1,989,650 (1,027,004) (148,697)
Working capital (deficit). . . . . . . . . . . . . . . . . 331,399 (1,602,027) (473,502)
</TABLE>
<TABLE>
<CAPTION>
INCOME STATEMENT DATA:
NINE MONTHS ENDED JUNE 30 YEARS ENDED SEPTEMBER 30
------------------------- ------------------------
1996 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . . . $11,144,484 $10,178,889 $12,932,450 $13,942,936
Cost of goods sold . . . . . . . . . . . . . . . . . . 7,247,478 6,642,539 8,443,912 9,074,824
Gross profit . . . . . . . . . . . . . . . . . . . . . 3,897,006 3,536,350 4,488,538 4,868,112
Operating expenses . . . . . . . . . . . . . . . . . . 3,880,145 3,165,099 4,136,322 4,508,770
Income (loss) from operations. . . . . . . . . . . . . 16,861 371,251 352,216 359,342
Net income (loss). . . . . . . . . . . . . . . . . . . (17,636) 139,673 (444,600) 22,010
Net income (loss) per share(2) . . . . . . . . . . . . (.23)
Pro forma net income (loss) (1). . . . . . . . . . . . 92,173 924 146,510
Pro forma net income (loss) per
share (1)(2) . . . . . . . . . . . . . . . . . . . . $.04 ($.05) $.07
Average number of common shares outstanding (2). . . . 2,525,000 2,117,500 2,117,500 2,117,500
</TABLE>
___________
(1) Reflects reductions in stockholder compensation of $200,000 for the year
ended September 30, 1994. Also reflects expenses of $47,500, $476, and
$75,500 for the nine months ended June 30, 1995, and the years ended
September 30, 1995, and 1994, respectively, for income taxes as if the
Company had not been an S Corporation.
(2) Pro forma net income (loss) per share of Class A Common Stock is based on
pro forma net income (loss) and the weighted average of shares of Class A
Common Stock and common stock equivalents outstanding during each period
after giving retroactive effect to the Company's recapitalization. Shares
of Class B Common Stock become convertible into shares of Class A Common
Stock on a 1 for 2 basis and are considered to be Class A Common Stock
equivalents.
Pursuant to requirements of SEC Staff Accounting Bulletin No. 83, common
shares issued by the Company during the twelve months immediately preceding
the initial public offering (242,500 shares) at a price below the initial
public offering price plus the number of common shares subject to the grant
of common stock options and warrants and convertible preferred stock issued
during such period (375,000 shares) having exercise or conversion prices
below the initial public offering price have been included in the
calculation of the shares used in computing net income per share as if they
were outstanding for all periods prior to the November 15,1995 closing date
of the Company's initial public offering.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING ANALYSIS OF THE COMPANY'S FINANCIAL CONDITION AS OF AND
THE COMPANY'S RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE
COMPANY'S FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS
PROSPECTUS.
RESULTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1996 COMPARED TO NINE MONTHS ENDED JUNE 30, 1995
SALES. Sales increased $965,595 or 9% for the nine months ended June 30,
1996, compared to the same period in 1995 primarily due to increased inventory
which allowed the Company to fill customer orders and decrease lost sales, and
the implementation of an aggressive marketing strategy which included free
shipping, guaranteed lowest price, and ten percent discount for items not in
stock.
COSTS AND EXPENSES. Costs of sales increased $604,939 or 9% for the nine
months ended June 30, 1996, compared to the same period in 1995, due primarily
to the increase in sales. Gross profit as a percentage of sales remained
constant at 35% during the nine months ended June 30, 1996 and 1995.
Selling, general and administrative expenses increased by $715,046, or 23%
compared to the same period in 1995. This resulted primarily from increases in
advertising costs associated with the production and mailing of the Company's
catalog, and the hiring of additional sales personnel in order to increase
sales. In addition, general overhead increased due to the compliance and
reporting requirements of being a public company.
Other expense consisted of interest income and expense and miscellaneous
income at a net expense amount of $40,997 for the nine months ended June 30,
1996, compared to $231,578 for the same period in 1995. Interest expense
decreased by $70,557, or 24%, for the nine months ended June 30, 1996 compared
to the same period in 1995 primarily due to $900,000 in principal reductions of
long-term debt made during the first quarter of 1996. Miscellaneous income
increased by $109,429 or 188% for the nine months ended June 30, 1996 compared
to the same period in 1995 primarily due to income generated by the Company's
affinity charge card program which began in the second quarter of 1995.
Benefit from income taxes increased $6,500 for the nine months ended June
30, 1996. This is mainly due to a decrease in net deferred tax liabilities.
Benefit from income taxes for the nine months ended June 30, 1996 increased
$54,000 as compared to pro forma income tax expense for the nine months ended
June 30, 1995.
In connection with the Company's completion of a private placement on
September 20, 1995, the excess of the $950,000 of cash paid and Class A Common
Stock issued (which was valued at $60,000) to redeem and convert the preferred
stock issued, over the private placement proceeds assigned to preferred stock
($363,265) is being accreted from the issuance date to the redemption date
(November 15, 1995). This resulted in a decrease in net earnings applicable to
common stock of $533,032 during the first quarter of 1996.
23
<PAGE>
YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO YEAR ENDED SEPTEMBER 30, 1994
SALES. Sales decreased $1,010,486 or 7% for the year ended September 30,
1995, compared to the same period in 1994 primarily due to the inability to
purchase inventory to fill customer orders as a result of marginal working
capital. The marginal working capital position did not allow the Company to
take full advantage of favorable terms offered by its vendors and in some cases
the Company was not able to supply product to its customers due to the lack of
open terms with its vendors.
COST AND EXPENSES. Costs of sales decreased $630,912 or 7%, for the year
ended September 30, 1995 compared to the same period in 1994 due primarily to
the decrease in sales. Gross profit as a percentage of sales remained constant
at 35% during the years ended September 30, 1995 and 1994.
Selling, general and administrative expenses decreased by $72,448 or 8%
compared to the same period in 1994. This decrease resulted primarily from
reductions in advertising and general overhead.
Other expense consisted of interest income and expense and miscellaneous
income and expense at a net expense amount of $350,816 for the year ended
September 30, 1995 compared to $337,332 for the same period in 1994. Interest
expense increased by $8,203, or 7%, for the year ended September 30, 1995
compared to the same period in 1994 primarily due to interest paid and accrued
on investor notes.
Deferred income taxes increased $446,000 for the year ended September 30,
1995. This is due to the automatic revocation of the company's S election
effective with the completion of a private placement of securities on September
20, 1995.
In connection with the Company's private placement on September 20, 1995,
the excess of the fair value of the $1,000,000 of consideration issued over the
private placement proceeds assigned to preferred stock ($363,265) is being
accreted from the issuance date to the redemption date (November 15, 1995).
This resulted in a decrease in net earnings applicable to common stock of
$113,703 and $523,032 during 1995 and the first quarter of 1996, respectively
LIQUIDITY AND CAPITAL RESOURCES.
The following table sets forth the major components of the increase
(decrease) in cash:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
----------------- ------------
JUNE 30 SEPTEMBER 30,
------- -------------
- ------------------------------------------------------------------------------------------------------------
1996 1995 1995 1994
---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------
(dollar amounts in thousands)
<S> <C> <C> <C> <C>
Net cash provided by (used for) operating activities $(1,515) $ 893 $ 551 $ 1,000
Net cash provided by (used for) investing activities 496 (109) (144) 163
Net cash provided by (used for) financing activities $ 1,180 (784) $ (407) (1,280)
Net increase (decrease) in cash $ 161 $ --- $ --- $ (117)
------- ------ ------- --------
------- ------ ------- --------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The Company's net cash provided by operating activities in the periods
indicated above, except for the nine months ended June 30, 1996, has been
significantly greater than its net loss. Included in net cash provided by
operating activities is net income (loss) plus non-cash adjustments aggregating
$747,170 and $376,800 for the fiscal years ended September 30, 1995 and 1994,
respectively and $250,722 and $253,651 for the nine months ended June 30, 1996
and 1995, respectively. Depreciation expense of $301,170 and deferred income
taxes of $446,000 represented the components of non-cash
24
<PAGE>
adjustments during the fiscal year ended September 30, 1995. Depreciation
expense represented the major component of non-cash adjustments during the
fiscal year ended September 30, 1994.
Inventory levels decreased by $116,126 and $327,392 for the years ended
September 30, 1995 and 1994, respectively, and increased by $675,633 and
decreased by $25,681 for the nine months ended June 30, 1996 and 1995,
respectively. The primary reason for the changes in the levels of inventory was
the Company's working capital position. Prior to the initial public offering
which closed on November 15, 1995, the Company was unable to replenish
inventory, as needed, due to marginal working capital. This is also the reason
for the increase in accounts payable of $273,583 for the year ended September
30, 1995 and $481,103 for the year ended September 30, 1994. The capital
infusion from the initial public offering accounts for the decrease in accounts
payable of $198,662 for the nine months ended June 30, 1966 compared to an
increase of $687,576 for the nine months ended June 30, 1995.
Prepaid expenses increased by $452,495 for the year ended September 30,
1994. This increase was primarily due to the consummation of the GM Agreement
for $1,000,000. Of this amount, $825,000 had been paid by September 30, 1995
and the remaining $175,000 was paid in November 1995. Prepaid expenses
increased by $474,537 and $167,756 for the nine months ended June 30, 1996 and
1995, respectively. This was primarily due to additional costs associated with
catalog production and mailing, and prepayment of consulting fees for the nine
months ended June 30, 1996.
Cash provided by investing activities exceeded cash used for investing
activities by $163,323 for the year ended September 30, 1994 primarily due to
payments received on notes from a stockholder of $361,214 for the period.
Cash used for investing activities exceeded cash provided by investing
activities by $143,719 for the year ended September 30, 1995, primarily due to
advances to affiliated companies in the amount of $143,339.
Cash used for investing activities exceeded cash provided by investing
activities by $109,071 for the nine months ended June 30, 1995 primarily due to
advances made to affiliates of $97,732.
Cash provided by investing activities exceeded cash used for investing
activities by $496,169 for the nine months ended June 30, 1996, primarily due to
repayments of notes and advances by affiliates in the amount of $561,850 during
the period.
Financing activities used cash of $1,280,666 for the year ended September
30, 1994 primarily due to repayment of long term debt of $960,666 and payment of
distributions from S Corporation earnings in the amount of $412,883.
Financing activities used cash of $407,309 for the year ended September 30,
1995. This resulted from the excess of repayments of long-term debt of
$387,017, payments on capital lease obligations of $46,375, deferred public
offering costs of $463,081, deferred financing costs of $61,500, and
distributions of S Corporation earnings of $320,004 over proceeds from sale of
common stock of $211,905, proceeds of sale of preferred stock of $363,265, and
issuance of long term debt of $295,498.
Financing activities used cash of $784,093 for the nine months ended June
30, 1995 primarily due to payment of distributions from S Corporation earnings
in the amount of $270,000 and deferred public offering costs of $412,883.
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Financing activities provided cash of $1,179,586 for the nine months ended
June 30, 1996. This resulted from the excess of proceeds from the sale of
common stock of $3,219,075 over repayments of long-term debt of $1,025,044,
payments on capital lease obligations of $26,272, redemption of preferred stock
of $950,000, and dividends paid to preferred stockholders of $18,106.
The Company had negative working capital at September 30, 1995 in the
amount of $1,602,027 which resulted primarily from a 1993 forgiveness of debt
on loans due from the stockholder. The Company had working capital at June 30,
1996 in the amount of $331,399. The management of the Company has developed and
implemented strategies to meet future liquidity needs. These strategies include
(i) an initial public offering of the Company's Class A Common Stock which was
completed on November 15, 1995; (ii) refinancing of the Company's mortgage to
obtain more favorable terms, and arranging a revolving line of credit to finance
its seasonal increase in inventory and annual catalogue production costs, which
was accomplished in September, 1996; and (iii) a tighter control on overall
costs. The management of the Company believes that these actions, in addition
to the improved working capital position at June 30, 1996, will allow the
Company to meet its future liquidity needs.
In the past, the Company advanced funds to Mr. Eckler (its then sole
shareholder) for his use to invest in other, unrelated business ventures. Mr.
Eckler, through various entities, purchased real property and entered into
mortgage commitments with certain financial institutions. As a condition of the
mortgages, the Company was required to guarantee such loans. The Company funded
these advances through its working capital by reducing inventory levels. This
resulted in the Company's inability to adequately fill sales orders thereby
reducing sales and cash flow.
The Company renegotiated with various lenders to eliminate guarantees on
the related entities' loans. The Company further terminated lease contracts
with related entities thereby decreasing occupancy costs. The Company is no
longer advancing funds to Mr. Eckler or his affiliated entities. Mr. Eckler
repaid outstanding balances on loans from the Company to him and his affiliated
entities upon completion of the initial public offering. The Company does not
anticipate any new transactional activity between the Company and Mr. Eckler or
his affiliated entities. However, in the event any such transactions were
proposed, they would be subject to full disclosure to and authorization by a
majority of Board members or Board-appointed committee not having an interest in
the transaction, full disclosure to and approval of a majority of the
shareholders who do not have an interest in the transaction, or the transaction
is fair and reasonable as to the Company under Florida law at the time it is
authorized by the Board or the shareholders. Further, affiliated transactions
having fair market values exceeding certain statutory amounts are required to be
approved by holders of two-thirds of the voting shares other than the shares
beneficially owned by the shareholder interested in the transaction, unless the
transaction is approved by majority vote of disinterested directors.
In September, 1996, the Company refinanced the $2.1 million NationsBank
loan, which was secured by the Company's real and personal property, matured on
October 1, 1997, and carried an interest rate of 3% above the prime rate quoted
by NationsBank. The Company's monthly interest payments under the NationsBank
note were $22,000 and an interim balloon payment of $750,000 was due in October,
1996. In replacement thereof, the Company obtained a $2.4 million loan from
Barnett Banks, Inc. ("Barnett Banks") in September, 1996, secured by the
Company's real and personal property, on terms the Company's management believes
are more favorable to the Company. The new Barnett Banks loan matures on
September 30, 1999. The Company is obligated to make monthly payments of
$13,333 principal plus interest at the rate of 1.5% above the prime rate quoted
by Barnett Banks from time to time. After using the loan proceeds to pay off
the NationsBank loan in the amount of $2,197,623, a first mortgage on certain
real property owned by the Company in the amount of $130,902,
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and loan closing costs in the amount of $54,009, the Company received net loan
proceeds of approximately $17,466.
In September, 1996, the Company also obtained a $1 million revolving line
of credit from Barnett Banks. Any outstanding principal balance will bear
interest at 1.5% above the prime rate quoted by Barnett Banks. Interest is
payable monthly and any unpaid principal balance, plus accrued and unpaid
interest, is due on demand. After payment of closing costs in the amount of
$143,823, the Company had an available line of credit at September 30, 1996 of
$856,176. Included in the closing costs of $143,823 was approximately $130,00
to pay off capital leases secured by computer equipment. However, the total
principal balance outstanding on the line of credit at any time shall not
exceed, prior to or after a request for a draw or advance, the lesser of (i)
$1,000,000, (ii) 70% of the Company's accounts receivable that meet certain
criteria, (iii) 50% of the Company's inventory that meet certain criteria, (iv)
25% of work in process in molds.
The capital infusion from the Company's initial public offering permitted
the Company to commence increasing inventory levels to enhance more favorable
terms with its lenders and take advantage of quantity and cash discounts.
Similarly, the Company's management believes that the addition of the new line
of credit available from Barnett Banks will enhance the Company's management of
cash flow, and further facilitate the Company's ability to build inventory for
its peak marketing season and fund catalog production costs which approximate
$950,000 annually. The Company believes that this will facilitate improvement
of its sales and gross margins. Prior to obtaining the line of credit, the
Company was required to utilize its own cash in the approximate amount of
$1,200,000 for costs associated with the publication and mailing of its
catalogue in preparation for its peak selling season. This affected the
Company's cash flow and Company's ability to keep on hand sufficient inventory
to meet product demand during the peak selling season. The Company's management
believes that the availability of the line of credit will also further enhance
the Company's ability to purchase and manufacture inventory under the GM
Agreement which will also result in an increase in sales and cash flow. The
Company believes that its refinancing of bank debt and the obtaining of a
revolving line of credit will provide the Company with sufficient cash to meet
its needs for the foreseeable future.
S CORPORATION ELECTION
Effective October 1, 1989, the Company elected to become an S Corporation
for Federal and Florida income tax purposes. As such, the Company generally had
not been subject to Federal or certain state income taxes, but its income had
been taxable to its shareholders. The Company's status as an S Corporation was
terminated upon the closing of the Private Placement on September 20, 1995 and
the issuance of the Class A Common and preferred stock.
The Board of Directors authorized distributions to the sole shareholder of
the Company in the amount of $320,004 and $450,000 for the years ended September
30, 1995 and 1994, respectively.
SEASONALITY
The business of the Company is subject to seasonal fluctuations.
Historically, the business has realized a higher portion of its revenues in the
third and fourth quarters of the Company's fiscal year and the lowest portion of
its revenues in the first quarter. The business of the Company is particularly
dependent on sales to Corvette enthusiasts during the spring and summer months.
This is the time of year that Corvette enthusiasts are preparing for upcoming
car shows that are held in the late summer and early fall.
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INFLATION
Although the effects of inflation on the Company cannot be accurately
determined, the Company does believe that inflation has had a significant impact
on the Company's results of operations for the periods presented. Historically,
the Company has been generally unable to pass price increases on to customers
due to the competitive environment in which the Company operates. Management
believes it has been able to minimize the effect of inflation by decreasing its
operating costs, increasing its employee productivity and fully utilizing its
marketing capabilities.
BUSINESS
GENERAL. The Company, also known as "Eckler's", was incorporated in
Florida in 1973. The Company is a major manufacturer and supplier of
aftermarket parts for Corvettes. The Company's marketing tool is its catalogue
offering approximately 17,000 items of Corvette maintenance and restoration
parts, accessories, and gift and apparel items. The Company entered into an
agreement with General Motors affording it a right of first refusal to purchase
Corvette parts discontinued from manufacture by GM and to acquire exclusive
rights to tooling for the discontinued parts. The Company and General Motors
are currently implementing the agreement which the Company anticipates will
result in substantial increases in sales revenue.
Until September 20, 1995, the Company had been a Subchapter S Corporation
wholly-owned by Ralph H. Eckler. On that date, the Company converted to a C
Corporation as a result of a private placement of $1,000,000 of Class A Common
and Preferred Stock. Further, in November 1995, the Company became a public
company upon the closing of its initial public offering of 840,000 Units, each
Unit consisting of one share of Class A Common Stock and one redeemable Class A
Common Stock Purchase Warrant (the "Public Warrants") for gross proceeds to the
Company of $4,200,000. The Class A Common Stock and the Public Warrants are
separately tradable and are listed on the NASDAQ SmallCap Market and the Boston
Stock Exchange.
Included in the Company's initial public offering were 360,000 Shares of
Class A Common Stock sold by Ralph H. Eckler, the Company's then majority
shareholder, for gross proceeds of $1,800,000, from which he repaid the Company
$570,000 representing the remaining outstanding balances of loans the Company
had in previous years made to Mr. Eckler and various entities owned by Mr.
Eckler.
As a result of the foregoing private and public financings, the Company was
able to decrease balances on long term debt, reduce trade payables, increase
inventory, complete advance royalty payments under the GM Agreement, commence
implementation of the GM Agreement, and purchase additional equipment. Prior to
the public financing, the Company experienced cash flow deficiencies and was
unable to meet many of its obligations as they became due. During that time
period, the Company made substantial loans and distributions to Mr. Eckler and
his affiliated entities for other projects resulting in a decrease in inventory
and sales. Although the Company anticipates increased sales volume and a
profitable level of operations, there is no assurance that the Company's efforts
will be successful. There are many events and factors impacting the Company's
business over which the Company has little or no control including, without
limitation, economic conditions generally affecting the public's ability and
willingness to purchase collectible vehicles and parts, delays in obtaining
product, and competitors' products. There can be no assurance that future
operations will be profitable or will satisfy future cash flow requirements.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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PRODUCTS AND MARKETS. For the fiscal years ended September 30, 1995 and
1994, the Company's sales mix of its basic product lines was 49.5% and 48%,
respectively, for accessories; 38% and 37%, respectively, for restoration parts;
9.5% and 11%, respectively, for maintenance items; and, 3% and 4%, respectively,
for gift and apparel items.
ACCESSORIES. The accessory items sold by the Company are primarily those
products that enhance the appearance and/or functionality of the Corvette. These
items can generally be readily installed by the end user and are typically
purchased by retail customers. Examples of popular accessory items include car
covers, floor mats, nosemasks, radios and car care products. The Company also
includes its manufactured, customized fiberglass parts in this category.
RESTORATION PARTS. These parts are items that restore the Corvette to its
original condition. Such products may require certain skills and tools to
install and are purchased primarily by dealers and repair shops as opposed to
retail customers. Restoration parts include body panels, interior trim (seats,
seat covers, dash boards), wheels, emblems and moldings. Some
Company-manufactured fiberglass parts are included in this classification if the
part is manufactured to resemble the original part as opposed to custom made
parts which are considered accessories. The Company's management anticipates
this product line to increase substantially with the implementation of the
Company's license agreement with GM. Under that agreement, the Company is
licensed to manufacture, sell, distribute and market numerous parts discontinued
by GM which the Company can sell under the GM Restoration Parts trademark for
various Corvette model years. The model years of the Corvettes for which GM will
declare parts obsolete and whether a particular part for any model year is
declared obsolete are discretionary with GM. See "General Motors Agreement."
MAINTENANCE ITEMS. The Company offers an array of items which enable
Corvette owners to maintain their cars in optimum condition. These are items
that are generally considered do-it-yourself type products and are typically
purchased by retail customers. They include carburetors, valves, engine parts,
and chrome parts that enhance the overall appearance of the car.
GIFT AND APPAREL ITEMS. Such items include T-shirts, jackets, key rings,
clocks, cup holders, luggage and other novelty items. These products are
principally purchased by retail customers.
GENERAL MOTORS AGREEMENT. In December 1993, the Company entered into a
Reproduction and Service Part Tooling License Agreement with General Motors
Corporation, Service Parts Operations ("GM") (the "GM Agreement"). Under the GM
Agreement, the Company is licensed to manufacture, market, sell and distribute a
wide variety of Corvette automotive parts under the GM trademark "GM Restoration
Parts" for restoration of Corvettes, pursuant to which the Company will pay GM
royalties on licensed parts the Company sells. Corvette restoration parts
licensed by GM to the Company are parts that have been discontinued by GM and
include body panels, interior trim, convertible tops, wheels, moldings, lights,
brackets, grilles, headlight mechanisms, bumpers, inner fenders and
miscellaneous similar parts. Pursuant to the GM Agreement, the Company is
required to meet and maintain GM's quality standards for all licensed Corvette
parts manufactured and sold by the Company.
Due to the complexity of licensing such a broad range of parts, the Company
has been working closely with GM to implement the GM Agreement in order to
market the first group of licensed products to its existing customer base and to
the approximately 4,500 Chevrolet dealerships worldwide. The initial term of the
GM Agreement continues through July 31, 2000 with two consecutive five-year
renewal options to July 31, 2010. As consideration for the GM Agreement, the
Company paid GM an advance of $1,000,000 against future royalties on sales of
licensed parts through July 31, 1997 ("Advance Payment"). The renewal options
are subject to the Company making certain minimum net royalty payments to GM of
at least
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$750,000 during the 12 months immediately preceding the first renewal term and
at least $1,000,000 during the 12 months immediately preceding the second
renewal term.
For each twelve month period commencing August 1, 1997 through July 31,
2000, and annually thereafter during any renewal term, the Company is obligated
to pay to GM a percentage royalty up to a maximum of 8% on net sales, with a
minimum of $500,000 annually in royalties for net sales of the licensed parts
(i.e., gross sales of licensed parts less quantity discounts and returns for
damaged goods); provided, however, if during the period December 1, 1993 through
July 31, 1997 aggregate royalties of $1,000,000 are not achieved, then the
guaranteed minimum for the period August 1, 1997 to July 31, 1998 shall be
reduced (up to a maximum of $200,000) by an amount equal to the difference
between the $1,000,000 Advance Payment and actual royalties paid. The guaranteed
minimum royalties beginning after August 1, 1997 are payable in quarterly
installments.
GM LICENSED PARTS AND GM TOOLING. Based upon its discussions with GM, the
Company's management estimates that GM will be discontinuing thousands of
Corvette parts during the term of the GM Agreement. As each part covered by the
GM Agreement is discontinued by GM, the Company will also have the right of
first refusal to use the same tooling, when available, which GM and/or its
authorized suppliers have been using to produce the parts (provided there are no
pre-existing GM license agreements or written GM policies which conflict with or
prohibit such and that the tools are not common to other non-licensed, not yet
GM obsolete parts). If the Company elects to utilize the tooling, the Company
will in most cases have the option of submitting manufacturing requests to and
contracting with the present manufacturer where the tooling is housed to produce
the parts or to have the tooling moved to another manufacturer. The primary
expense in utilizing the tooling will be in relocating and refurbishing the
equipment, if necessary. In addition, in the event that the part is discontinued
and GM has maintained an inventory of a particular part, the Company will have a
right of first refusal to purchase the existing inventory on terms that the
Company believes are favorable. The Company believes that the purchase and
resale of this inventory will give the Company a substantial market advantage
for those particular parts insofar as the competition will not have access to
these particular parts utilizing the GM Restoration Parts trademark. In
connection with manufacturing and marketing the licensed parts, the GM Agreement
grants the Company a license to use the GM trademark, "GM Restoration Parts,"
and GM part numbers associated with the licensed parts. To date, GM has
identified various parts that are subject to the GM Agreement, and has
transferred to the Company various technology and tooling for certain parts
declared obsolete by GM. As a result of the Company's recent influx of capital,
the Company has commenced manufacturing such parts through third party
manufacturers and has commenced purchasing inventory of discontinued GM parts.
Although prior to the Company's IPO, it had not yet manufactured parts with GM
tooling nor purchased inventory of discontinued parts from GM, the Company had
sold parts from its own inventory under the GM Restoration Parts label since
1993.
BENEFITS. Among the benefits of this program, in addition to utilization
of the GM tooling as previously described, is the use of the GM Restoration
Parts trademark on each restoration part sold by the Company. When GM
discontinues a Corvette automotive part covered by the GM Agreement and licenses
the part to the Company, GM dealers, including Chevrolet dealerships, upon
inquiry about the discontinued part, will be directed to the Company for that
part through GM's computerized parts directory and the GM Restoration Parts
Reference Guide. As a result, the Company will have a built-in prospective
customer base with GM dealerships. In addition, independent body and repair
shops will also be able to purchase licensed Corvette Restoration Parts directly
from the Company.
CORVETTE MODEL YEARS. Under the GM Agreement, the Company is presently
licensed to sell a variety of discontinued parts for Corvettes for various model
years. The model years of the Corvettes for
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which GM will declare parts obsolete and whether a particular part for any model
year is declared obsolete are discretionary with GM.
SALES, AND DISTRIBUTION METHODS. The Company typically generates its
revenues through three different mediums: catalog sales, showroom sales and
mail-in orders.
CATALOG. The Company markets its products primarily through the
distribution of the "Eckler's" catalog which markets approximately 17,000 items
and historically has generated most of the Company's revenues. The Company has
printed its catalog annually since 1972 and currently prints 400,000 catalogues
for distribution in February of each year. In each of February 1994 and
February 1995, the Company distributed over 270,000 copies of its catalog to
existing and prospective customers, both retail and wholesale. The remaining
catalogues were distributed pursuant to individual requests.
The Company's telemarketing staff is principally an inbound, order-taking
department. During the fiscal years ended September 30, 1994 and 1995, catalog
sales accounted for approximately 93% of the Company's revenues. The Company's
sales force specializes in selling Corvette parts and accessories. This group
handles in excess of 600 inquiries daily and processes an average of 285 orders
daily. Through the Company's Management Information System ("MIS"), management
is able to evaluate sales performance daily as well as track the Company's total
sales, back orders, inventory levels, price and product changes, and other
related statistics.
SHOWROOM SALES. For the fiscal years ended September 30, 1995 and
September 30, 1994, the Company generated approximately 6.5% and 6%,
respectively, of its total revenue through its 5,000 square foot Titusville
showroom where it displays over 3,000 items from its product line. Annually,
more than 20,000 people visit the Company's Titusville showroom.
OTHER ADVERTISING AND PROMOTIONS.. In addition to its catalog, the Company
advertises in magazines and trade publications that are directed toward the
Corvette owner or dealer. The primary purpose of the ads is to introduce the
Company to new Corvette owners and shops who are not already familiar with the
Company name as well as promote actual product sales.
The Company also sponsors various promotional programs including a program
that matches a competitor's price if lower than the Company's, a Restoration
Club program pursuant to which customer-members are given discounts on specified
products, and an annual "Corvette Reunion" held at the Company's main facilities
where, during one weekend in October, thousands of Corvette enthusiasts gather
to participate in or view a Corvette car show and auction, tour the Company's
facilities, and purchase products sold by the Company and various automotive
parts vendors.
GEOGRAPHIC CONCENTRATION OF SALES. In fiscal years ended September 30,
1995 and September 30, 1994, domestic sales accounted for approximately 97% and
96.5%, respectively, of the Company's total, with the states of Florida,
Pennsylvania, New Jersey, New York, Indiana, Illinois, Ohio, Texas, Michigan and
California constituting approximately 50% of total sales. International sales
accounted for 3% and 3.5% of total sales in fiscal 1995 and 1994, respectively.
The international market will be a new area of concentration for the Company.
The Company currently distributes parts in Japan, and is increasing distribution
of its products in Europe. To continue expanding this market, the Company
prints order blanks in three different foreign languages (French, German, and
Japanese) and has added the Language Line from AT&T which allows access to
interpreters in any language.
SOURCING AND PRODUCTION. A substantial majority of the Company's products
are obtained from many independent manufacturers who produce parts to Corvette
specifications to the extent such items are
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standard equipment on Corvettes. In the case of accessories and gift and
apparel items, such items are purchased by the Company from various
manufacturers and distributors.
In addition, the Company recently added to its product line the GM
restoration parts licensed to the Company under the GM Agreement. The Company is
sourcing its GM restoration parts by having them made by third party
manufacturers and by purchasing inventory of discontinued parts directly from
GM. In those cases where the Company has the restoration parts manufactured, the
Company selects manufacturers that can produce the restoration parts most
economically while meeting delivery requirements and maintaining product
quality. Through such relationships, the Company anticipates continuing sources
for the supply of its products, thereby accommodating variations in market
demand.
The Company owns all of the tooling for its exclusive products, such as
Corvette fiberglass molds. All of the Company's manufacturing employees are
cross-trained to perform each production step for a particular product. In
addition, individual production stations can be easily retooled to respond to
market demands.
CERTAIN TRADEMARKS AND LICENSES. The Company does business under the name
of "Eckler's" which is a registered trademark of the Company in the United
States and Japan. In addition to the license granted to the Company under the
GM Agreement discussed above, the Company entered into the following license
agreements with GM.
TRADEMARK LICENSE AGREEMENT FOR ACCESSORIES. Effective October 13, 1992,
the Company and General Motors Corporation, Service Parts Operations, entered
into a Trademark License Agreement pursuant to which the Company has the
non-exclusive right to use certain GM trademarks in connection with the
manufacture, sale, promotion and distribution of pre-approved accessory items.
Some of the licensed trademarks utilized by the Company for accessory items are
"CORVETTE," "VETTE," and Corvette body designs. For this right, the Company pays
GM a percentage royalty on net sales of licensed products, with a guaranteed
minimum of $7,500 annually. The agreement terminated on December 31, 1995, and
the Company is in the process of renewing the agreement.
TRADEMARK LICENSING AGREEMENT FOR GIFT AND APPAREL ITEMS. Effective
October 14, 1992, the Company and Chevrolet Motor Division, General Motors
Corporation, entered into another Trademark Licensing Agreement pursuant to
which the Company has the non-exclusive right to use certain GM trademarks in
connection with the manufacture, sale, promotion and distribution of
pre-approved novelty, gift and apparel items. The Company pays GM a percentage
royalty on net sales of licensed products, with a guaranteed minimum of $1,500
annually. The agreement terminates April 30, 1997, but is subject to renewal at
the expiration date if the parties mutually agree.
COMPETITION. The Company competes directly with a number of local,
regional and national suppliers of aftermarket Corvette automotive parts. Some
of the Company's competitors have greater financial, marketing and other
resources than the Company. The Company has identified nine competitors, five of
which are located in the mid-west, one in California, one in Texas, one in
Pennsylvania and one in Virginia. Although the Company believes that its prices
are competitive for similar products, certain competitors may have greater
financial resources than the Company so as to permit more aggressive pricing.
The Company has over 500 product suppliers with no single source accounting
during each of the fiscal years 1995 and 1994 for more than 5% of purchases. Of
the Company's 75,000 customers, no single customer accounts for more than 5% of
total revenues during the Company's most recent fiscal year.
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SEASONALITY. The Company has historically recorded losses during its first
and second fiscal quarters October 1 through March 31. Historically, the
Company's prime selling season has been March through August, and the largest
portion of the Company's revenues are realized in the third and fourth quarters
of the Company's fiscal year.
EMPLOYEES. As of October 30, 1996, the Company employed approximately 70
individuals on a full-time basis.
PROPERTY.
The Company's main facilities are located at 5200 South Washington Avenue,
Titusville, Florida, on approximately 5.57 acres (the "Main Facility"). Three
buildings comprise the Company's Main Facility as follows: one building of
approximately 33,000 square feet housing the Company's main office, showroom and
a warehouse; a building of approximately 29,750 square feet housing the
Company's manufacturing facilities where the Company manufactures Corvette body
parts; and a third building of approximately 24,825 square feet serving as an
additional warehouse and the Company's shipping and receiving department. The
Company also owns additional undeveloped acreage adjacent to its Main Facility,
comprising approximately 5.3 acres (the "Undeveloped Property").
The Main Facility and the Undeveloped Property are subject to a mortgage
and security agreement in favor of Barnett Bank, N.A., with an outstanding
principal balance of $2.4 million, which loan was obtained in September, 1996
and which refinanced an existing mortgage on the Company's property held by
NationsBank. The Barnett Bank loan is also secured by the Company's machinery,
equipment, fixtures, and other personal property, including trade names. The
loan bears interest at 1.5% above the prime rate as periodically quoted by
Barnett Bank. Commencing in October, 1996, and monthly thereafter, until
August 30, 1999, the Company is obligated to make monthly payments of $13,338
principal plus interest at the rate of 1.5% above the prime rate as quoted by
Barnett Bank from time to time. The loan matures on September 30, 1999, when
the outstanding principal balance, and accrued and unpaid interest, is due and
payable.
Concurrently with refinancing its mortgage debt in September, 1996, the
Company obtained a $1 million revolving line of credit from Barnett Bank. Any
outstanding principal will bear interest at 1.5% above the prime rate quoted by
Barnett Bank. Interest on the outstanding principal balance is paid monthly
and any unpaid principal balance, plus accrued and unpaid interest, is due on
demand. The outstanding principal balance of the line of credit as of September
30, 1996 was $143,823, leaving an available line of credit of $856,176.
However, the total principal balance at any time outstanding on the line of
credit note shall not exceed, prior to or after a request for a draw or advance,
the lesser of (i) $1,000,000, (ii) 70% of the Company's accounts receivable that
meet certain criteria, (iii) 50% of the Company's inventory that meet certain
criteria, (v) 25% of work in process in molds. The line of credit is secured by
the Company's accounts receivable, inventory, chattel paper, equipment and
general intangibles.
Each of the mortgage loan and line of credit facility contain cross-default
provisions pursuant to which a default under one loan will trigger a default
under the terms of the other loan. There are various financial and other
covenants of the Company contained in the loan documents, including the covenant
of prompt payment. If the Company defaults under one of the loans, Barnett
Banks may accelerate the amounts due under both loans, which would have a
material adverse affect on the Company's business.
The Company leases approximately 10,680 square feet of one of its buildings
to Titusville Chevrolet-GEO, Inc., which utilizes the space as offices and a
service center. The lease is a one year lease commencing February 15, 1996 and
is subject to renewal for two consecutive additional one year
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terms. The annual rent for the first year is $31,020, and if renewed for a
second and third year, $43,020 and $53,020, respectively. The Company also
leases to Titusville Chevrolet-GEO, Inc. approximately 10,500 square feet of
land pursuant to a three-year land lease commencing on February 15, 1996. The
annual rent for the first year is $12,000, and increases $500 per year for each
of the second and third years. Titusville Chevrolet-GEO, Inc., formerly owned
by an affiliate of Ralph H. Eckler, was sold to a third party unrelated to Mr.
Eckler, the Company or any of their affiliates.
LETTER OF INTENT FOR COMBINATION OF THE COMPANY WITH SMART CHOICE HOLDINGS, INC.
On October 28, 1996, the Company entered into a letter of intent with
Smart Choice, a newly organized, privately held Delaware corporation for the
purpose of combining the two companies. The combination would be effected by
the holders of Smart Choice securities exchanging all of their securities for
6.5 million shares of the Company's Class A Common Stock. To the extent the
Company does not have a sufficient number of Class Common Stock authorized,
unissued and unreserved, the Company will issue one-half share of the
Company's Class B Common Stock for every share of Class A Common Stock it is
unable to issue. The resulting company would be known as Smart Choice
Holdings, Inc. (or other name)(previously defined as "Smart Choice Holdings")
which would be comprised of four divisions: corvette parts and accessories
(the "Eckler Division"), new car sales, used car sales, insurance, auto
finance and leasing. The primary focus of the combined companies would be
the establishment of a network of neighborhood stores for the financed sales
of new and used cars, with a specific focus on sub-prime borrowers. The
combined companies would be acquiring various used car dealerships and
finance companies for purposes of offering a full-service package to
customers for one-stop transportation shopping encompassing automobiles,
warranties, service, financing, leasing and insurance. Although Smart Choice
Holdings, Inc. has entered into several purchase contracts, letters of intent
and/or oral agreements in principal to acquire certain new and used car sales
and finance companies, there can be no assurance that the acquisitions will
be successfully completed and closed. Further, there is no assurance that,
given the highly competitive nature of the industry and the need for
significant additional capital to fund the acquisitions, that the resultant
company will be successful in meeting its goals.
In order to complete the transaction contemplated by the letter of
intent, the parties must satisfy and perform certain conditions, including,
but not limited to: (a) the negotiation and execution of a definitive stock
exchange agreement on or before November 30, 1996; (b) the closing of a
definitive stock exchange agreement on or before December 31, 1996; (c)
opinions of counsel for the Company and Smart Choice as is customary for a
transaction of this type; and (d) fairness opinions from the parties'
respective investment bankers as to the transaction from a financial
point-of-view. Following is a summary of certain provisions of the letter of
intent. However, there is no assurance that a definitive agreement will be
entered into by the Company and Smart Choice, or if entered into, that it
will contain the same terms as described below. The approval of the
consolidation is not required by the Company's shareholders, however, the
Company's Board of Directors has an obligation to act in the best interests
of the Company's shareholders.
As a result of the combination, the Company will be reorganized into a
holding company, known as Smart Choice Holdings, Inc. (previously defined as
"Smart Choice Holdings"), or other name designated by Smart Choice, that will
encompass four divisions: Corvette parts and accessories, new car sales,
used car sales, insurance, and auto finance and leasing. The reorganized
company will operate as a division of Smart Choice Holdings (the "Eckler
Division") and would continue to be headquartered in Titusville, Florida.
The primary focus of Smart Choice Holdings would be the establishment of a
network of neighborhood stores for the financed sales of new and used cars,
with a specific focus on sub-prime borrowers. It is anticipated that the
combined companies would acquire various car dealerships and finance
companies for purposes of offering a full-service package to
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customers for one-stop transportation shopping encompassing automobiles,
warranties, service, financing, leasing and insurance. Although Smart Choice
has entered into several purchase contracts, letters of intent and/or oral
agreements in principle to acquire certain used car sales and finance
companies, there can be no assurance that the acquisitions will be
successfully completed and closed.
The letter of intent provides for a stock for stock exchange whereby the
holders of Smart Choice's outstanding common stock and securities convertible
into common stock shall exchange their shares and/or rights to acquire Smart
Choice stock for 6,500,000 shares of the Company's Class A Common Stock. To
the extent that there are insufficient authorized, unissued and unreserved
Class A shares, the Company shall issue one-half shares of its Class B Common
Stock for every share of Class A Common Stock that it is not able to issue as
a result of such unavailability. Thus, the Company's shareholders will
become shareholders of the resulting reorganized public company, Smart Choice
Holdings.
The letter of intent provides that upon the consummation of the
consolidation, Ralph H. Eckler would surrender certain warrants, options and
other contract rights to acquire the Company's shares that he holds (except
for options he holds under the Company's stock option plans or issued to him
in his capacity as a director) in exchange for 5 year options to acquire
100,000 shares of the Company's Class A Common Stock at $8.75 per share and 5
year options to acquire 50,000 shares of the Company's Class A Common Stock
at $10.00 per share. Mr. Eckler's employment agreement will be modified
pursuant to which he will relinquish all existing salary and bonus provisions
and in lieu thereof, he would be entitled to receive (i) $800,000 ($200,000
of which would be placed in escrow and made payable January 15, 1997, and the
balance of which would be payable upon the earlier of the completion of a
secondary public offering or April 30, 1997), and (ii) an annual salary of
$125,000 through September 30, 1998 and $150,000 for each fiscal year
beginning October 1, 1998 and ending September 30, 2002, and a performance
bonus equal to 4% of the profits of the Eckler Division before deductions for
interest, depreciation, and taxes. Mr. Eckler would continue to serve as the
Chairman of the Eckler Division; however, representatives of Smart Choice
would have the right to appoint new officers of the new holding Company. The
new company would also indemnify Mr. Eckler against liabilities arising as a
result of his guarantees of various Company loans. Mr. Eckler would continue
to receive a 2% annual fee, payable quarterly, calculated on the outstanding
principal balance of loans of the Company guaranteed by Mr. Eckler. See
"CERTAIN TRANSACTIONS."
If the combination is consummated, the Board of Directors of the new
public company, Smart Choice Holdings, would be expanded to seven members,
three of whom would be appointed by representatives of Smart Choice and three
of whom would be appointed by representatives of the Company, all of whom
would in turn appoint the seventh director.
LEGAL PROCEEDINGS
The Company was a named defendant in two foreclosure actions filed by
banks pertaining to mortgaged commercial properties owned by affiliates of
the Company. These proceedings were settled in September 1995 and the Company
was released as a guarantor and from certain master leases. See "Certain
Transactions." The Company is not involved in any litigation or legal
proceeding the outcome of which would materially adversely affect the
Company. There can be no assurance that any future legal proceedings will not
have a material adverse effect on the Company's business, reputation or
financial condition.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names, ages, addresses and positions
with the Company as of the date of this Prospectus of all of the officers and
directors of the Company. Also set forth below is information as to the
principal occupation and background for each person in the table.
NAME AGE POSITION AND OFFICE
---- ---- -------------------
Ralph H. Eckler 53 President, Chief Executive Officer,
Secretary, Treasurer, Director and Founder
Ronald V. Mohr 44 Vice President of Finance and
Administration; Director
Donald A. Wojnowski, Jr. 36 Director
Joseph Yossifon 50 Director
G. Edward Mills 51 Senior V.P. -- Operations
Michael G. Wilson 47 Vice President Sales and Marketing
Ernest Restina 37 Controller
Ralph H. Eckler has served as President, Chief Executive Officer and as
a Director of the Company since its inception in 1973. Prior thereto, Mr.
Eckler was the principal and served as the product designer to the Company's
predecessors which were Eckler's Corvette Shop (founded in 1961 in Illinois)
and Eckler's Corvette Custom Center (founded in 1966 in Illinois). Concurrent
with his management of the Company, Mr. Eckler also identified market
opportunities and established new business operations in the automotive,
property management and marine industries. Mr. Eckler has also served as
President and a director and is a majority shareholder of Eckler Enterprises,
Inc. since 1990, Eckler Development, Inc. since 1988, and Eckler Water
Sports, Inc. (a manufacturer of pleasure boats) since 1993.
Ronald V. Mohr, a Director and officer, serves as the Vice President of
Finance and Administration of the Company and has served as the Company's
Chief Financial Officer since June 1982. Prior to that time, Mr. Mohr had
eight years of financial and management experience. He was the sole
proprietor of Mohr Construction from 1980 to 1982, which primary business was
housing remodeling. From 1975 to 1980, Mr. Mohr served as Controller of Kusel
Equipment Company, a food processing equipment manufacturer located in
Watertown, Wisconsin, and from 1974 to 1975 he was a staff accountant at
Livesey Enterprises, a commercial developer located in Madison, Wisconsin.
Mr. Mohr obtained his B.B.A. in Accounting from the University of Wisconsin
in 1974.
Donald A. Wojnowski, Jr. has been a director of the Company since
February 12, 1996. Since 1992 he has been a stockbroker and registered
principal of Empire Financial Group, an NASD registered broker dealer. From
1987 to 1992, Mr. Wojnowski was a stockbroker with Dean Witter Reynolds in
Cocoa Beach, Florida, and was a stockbroker in 1987 with Royall Alliance
(Intergrated Resources), located in Cocoa Beach, Florida, and from 1982 to
1987 he was a stockbroker with E.F. Hutton & Co., located in Cocoa Beach,
Florida.
Joseph Yossifon has been a director of the company since February 12,
1996 and since 1985 has been self-employed as an independent investor in real
estate and securities. From 1976 to 1985 he was the president of A-1-A
Discounts, an appliance retailer located in Orlando, Florida.
G. Edward Mills has served as Senior Vice President of Operations for
the Company since April 1992 and is responsible for the Company's
manufacturing, engineering/tooling, warehousing, fulfillment
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requirements, and quality control activities. From January 1973 to April
1992, Mr. Mills served as General Manager for the Company. Before being hired
by the Company in January 1973 as its General Manager, Mr. Mills worked as a
printer with Wagoner Printing Company located in Illinois.
Michael G. Wilson serves as Vice President of Marketing and Sales for
the Company and has held this responsibility since joining the Company in May
1981. Prior thereto, from January 1979 to May 1981, Mr. Wilson was the
Director of Advertising and Sales Promotion for Autotronic Controls
Corporation, an aftermarket automotive parts manufacturer, a division of
General Dynamics. Prior to his employment with Autotronic, Mr. Wilson spent
two years promoting convention sales for the City of El Paso, Texas. Mr.
Wilson holds a B.B.A. degree in Marketing from the University of Texas.
Ernest Restina joined the Company in November 1995 as the Company's
Controller. Prior to his employment with the Company, from 1994 to 1995, Mr.
Restina was a senior accountant with Berman Shapiro Hopkins & Company,
Certified Public Accountants and business consultants, located in Merritt
Island, Florida. From 1988 to 1994, he was a senior accountant with Retz
Baker P.A., CPAs Titusville, Florida. From 1986 to 1988, Mr. Restina served
as Business Manager for Jon-Glenn Chevrolet, Inc., Titusville, administering
that firm's accounting, payroll and inventory management system. Mr. Restina
was General Manager and Vice President of Bob Restina Chevrolet, Inc.,
Titusville, from 1983 to 1986. Mr. Restina is a Certified Public Accountant
and holds a B.S.B.A. degree in accounting from the University of Central
Florida.
EXECUTIVE COMPENSATION
Only Ralph H. Eckler, the Company's President and its chief executive
officer, received compensation in excess of $100,000 during the fiscal years
ended September 30, 1995 and 1994. Except as set forth in the table below, no
bonuses or other compensation were paid during fiscal year ended
September 30, 1995.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-------------------
FISCAL YEAR OTHER ANNUAL
NAME AND PRINCIPAL POSITION ENDED 9/30 SALARY BONUS COMPENSATION
- --------------------------- ----------- -------- ------- ------------
RALPH H. ECKLER, PRESIDENT
(CEO) 1995 $105,776 -- --
1994 $300,000 $13,385 --
EMPLOYMENT AGREEMENT
The Company entered into an employment agreement with its sole
shareholder, Ralph H. Eckler, effective as of May 23, 1995. Under the
employment agreement, Mr. Eckler shall serve as Chief Executive Officer and
President of the Company. The term of the agreement is seven years. The
agreement is automatically renewable for two successive two-year terms,
unless notice of termination is given prior to a renewal period. The
agreement provides that Mr. Eckler shall receive an initial annual base
salary of $100,000. Such base salary increases to $150,000 for the second and
third years of the agreement, and to
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$175,000 and $200,000 for the fourth and fifth years of the agreement,
respectively. The base salary increases to $250,000 for the sixth, seventh
and eighth years, and is subject to automatic renewal options thereafter. On
each January 1, the annual base salary shall be increased to reflect the
change in the cost of living, based upon the change, from the preceding
January 1, in the Consumer Price Index for All Urban Consumers, as published
by the U.S. Bureau of Labor Statistics.
The agreement also provides Mr. Eckler with stock options that will
enable him to acquire Class A Common Stock of the Company annually for the
first seven years following the closing of this Offering. The exercise of the
stock options is contingent upon the Company achieving either a specified
earnings per share level or a specified stock price level (the "performance
threshold"), for the corresponding fiscal year-end. Commencing with fiscal
year ended September 30, 1996 and at each of the six fiscal year ends
thereafter, provided the performance threshold is met, Mr. Eckler may
acquire, in specified annual increments, Class A Common Stock aggregating
over such seven year period a total of (a) 160,000 shares at an exercise
price of $2.50 per share, and (b) 320,000 shares at an exercise price of
$5.00 per share. The stock option grants are cumulative. Accordingly, for
the year in which the Company attains either of the performance thresholds,
stock options for prior years not previously granted shall be granted in
addition to the stock options granted for the applicable year. See the table
under "Management and Employee Stock Option Plans -- Chief Executive Officer
Stock Option Plan."
As additional compensation, Mr. Eckler shall participate in a management
bonus pool ("Bonus Pool") to be established by the Company. Certain other
officers of the Company shall also participate in the Bonus Pool. The Company
shall cause up to ten percent (10%) of its annual pre-tax profit to be paid
into the Bonus Pool. The Board of Directors shall determine the allocation of
Bonus Pool funds, if any. Further, Mr. Eckler will receive annual fixed
bonuses payable in quarterly installments, provided the Company achieves
either of the above-mentioned performance thresholds. The annual bonus shall
be $250,000 for each of the fiscal years ended September 30, 1996 through
September 30, 2002.
The agreement contains a covenant pursuant to which Mr. Eckler will not
compete with the Company during the term of the agreement and for two years
following termination of the agreement.
RETIREMENT AND SAVINGS PLAN
The Company has a Retirement and Savings Plan (the "401(k) Plan") for
the benefit of eligible employees. Pursuant to the 401(k) Plan, employees may
elect to contribute a percentage of their salaries to the 401(k) Plan subject
to certain limits. The 401(k) Plan permits, but does not require additional
matching contributions and profit sharing contributions to the 401(k) Plan by
the Company on behalf of all eligible participants in the Plan. The Company's
contributions vest over seven years. During 1995 and 1994, the Company made
no contributions to the 401(k) Plan for its employees.
MANAGEMENT AND EMPLOYEE STOCK OPTION PLANS
COMBINED QUALIFIED AND NON-QUALIFIED STOCK OPTION PLAN. The Company
maintains a Combined Qualified and Non-Qualified Employee Stock Option Plan
(the "Combined Plan" or the "Plan"). The purpose of the Combined Plan is to
enable the Company to encourage key employees and directors to contribute to
the success of the Company by granting "incentive stock options" (as defined
in Section 422 of the Internal Revenue Code ("ISOs"), as well as
non-qualified stock options ("NQSOs").
The Combined Plan provides for administration by the Board of Directors
or a committee appointed by the Board of Directors (the "Committee") which
determines in its discretion, among other things, the recipients of grants,
whether a grant will consist of ISOs or NQSOs or a combination thereof,
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and the number of shares to be subject to such options. The Combined Plan
provides for the granting of ISOs to purchase Class A Common Stock at an
exercise price to be determined by the Board of Directors or the Committee
of not less than the fair market value of the Class A Common Stock on the
date the option is granted. NQSOs may be granted with an exercise price to be
determined by the Board of Directors or the Committee.
The total number of shares with respect to which options may be granted
under the Combined Plan is 475,000. ISOs may not be granted to an individual
to the extent that in the calendar year in which such ISOs first become
exercisable the shares subject to such ISOs have a fair market value on the
date of grant in excess of $100,000. No option may be granted under the Plan
after August 24, 2005 and no option may be outstanding for more than ten
years after its grant. Additionally, no ISO can be granted with a term of
more than five years to a shareholder owning 10% or more of the combined
voting power of all classes of stock of the Company.
Upon the exercise of an option, the holder must make payment of the full
exercise price. Such payment may be made in cash or in shares of Class A
Common Stock (based on the fair market value of the Class A Common Stock on
the date prior to exercise), or in a combination of both. Subject to certain
exceptions, options may be exercised any time up to three months after
termination of the holder's employment.
The Combined Plan may be terminated or amended at any time by the Board
of Directors, except that, shareholder approval will be necessary for
material modifications such as any material increase of the number of shares
authorized for issuance under the Plan or a material change in the
requirements of Plan eligibility.
There are currently outstanding options for 140,000 shares of the
Company's Common Stock issued to employees and officers under the Combined
Plan, of which options for 95,000 shares are exercisable at $2.50 per share
from August 25, 1997 until August 25, 2000, options for 25,000 shares are
exercisable at $3.00 to $3.30 per share commencing in January 1997 and
terminating in July 2001, and options for 20,000 shares are exercisable at
$3.00 to $3.30 per share commencing in April 1997 and terminating in October
2001.
NON-QUALIFIED STOCK OPTION PLAN. The Company also established a
non-qualified stock option plan in 1995 for the purpose of granting options
to management employees. The Company reserved 35,000 shares of its Class A
Common Stock for issuance pursuant to such options, all of which are subject
to options granted to executive officers of the Company. The options expire
on August 25, 2000 and are first exercisable on August 27, 1997 at an
exercise price of $2.50 per share.
CHIEF EXECUTIVE OFFICER STOCK OPTION PLAN. Ralph Eckler's employment
agreement (as previously described), provides Mr. Eckler with stock options
that will enable Mr. Eckler to acquire stock of the Company annually until
2002. The granting of the stock options is contingent upon the Company
achieving either a specified earnings per share level or a specified stock
price level (the "performance threshold") for the corresponding fiscal
year-end. Commencing with fiscal year ended September 30, 1996 and at each
of the six fiscal year ends hereafter, provided the performance threshold is
met for the corresponding years, Mr. Eckler may acquire the number of shares
at the corresponding exercise prices as follows:
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FYE 9/30 NO. SHARES EXERCISE PRICE PER SHARE
-------- ---------- ------------------------
1996 . . . . . . . . . . . 10,000 $2.50
20,000 $5.00
1997 . . . . . . . . . . . 15,000 $2.50
30,000 $5.00
1998 . . . . . . . . . . . 20,000 $2.50
40,000 $5.00
1999 . . . . . . . . . . . 25,000 $2.50
50,000 $5.00
2000 . . . . . . . . . . . 30,000 $2.50
60,000 $5.00
2001 . . . . . . . . . . . 30,000 $2.50
60,000 $5.00
2002 . . . . . . . . . . . 30,000 $2.50
60,000 $5.00
The stock options are cumulative. Accordingly, for any year in which the
Company attains either of the performance thresholds, stock options for prior
years not previously granted shall be granted in addition to the stock
options granted for the applicable year. The Company has reserved 480,000
shares of its Class A Common Stock for issuance under Mr. Eckler's employment
agreement.
OTHER OPTIONS. Until September 30, 2002, all future grants of options
to directors, officers and employees of the Company not disclosed in this
Prospectus shall be at exercise prices of at least 85% of the fair market
value of the stock at the time of grant. In July, 1996, the Company granted
stock options outside of its stock option plans to Ralph H. Eckler (for
200,000 shares of Common Stock) and to Argent Securities, Inc., the Company's
Underwriter for its initial public offering and a consultant (for 200,000
shares of Common Stock). The exercise price of both options is $2.88 per
share, representing the last trade as quoted by Nasdaq on the date of grant.
Mr. Eckler's option is exercisable commencing in January 1997 and expires in
July 2001. Argent's option is currently exercisable and expires in July
2001. The Company also issued options to its independent directors which is
discussed under "Director Compensation," below.
DIRECTOR COMPENSATION. The Company pays its directors annually in the
form of stock options for shares of the Company's Class A Common Stock. In
August 1996, the Company granted stock options to Messrs. Don Wojnowski and
Joseph Yossifon for 20,000 shares of Class A Common Stock each, 10,000 of
which are exercisable commencing in February 1997 at $3.00 per share and
terminating in August 2001, and 10,000 of which are exercisable commencing
April 1997 at $3.00 per share and terminating in October 2001. The $3.00 per
share represented the last trade as quoted by Nasdaq on the date of grant.
These options were granted independently of the Company's Combined Plan. The
Company also granted an option for 10,000 shares to each of Ralph H. Eckler
and Ronald V. Mohr under the Company's Combined Plan in respect of their
service as directors, at per share exercise prices of $3.30 and $3.00,
respectively.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning options granted
during the fiscal year ended September 30, 1995 to those persons named in the
preceding Summary Compensation Table.
Numbers of % of Total
Securities Options Granted
Underlying to Employees in Exercise Price
Name Options Granted Fiscal Year ($/share) Expiration Date
- ---- --------------- ---------------- -------------- ---------------
Ralph H. Eckler 35,000(1) 25.93% $2.50 8/25/2000
- ---------------
(1) Granted under the Company's 1995 Combined Qualified and Non-Qualified
Employee Stock Option Plan. The option may not be exercised until
August 25, 1997.
--------------------
AGGREGATED OPTIONS IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
The following table sets forth information concerning the value of
unexercised stock options at September 30, 1995 for those persons named in
the Summary Compensation Table.
Number of Securities
Underlying Unexercised Value of Unexercised In-The-
Options at Fiscal Year End Money Options at fiscal Year
Name Exercisable/Unexercisable End Exercisable/Unexercisable
- ---- --------------------------- -----------------------------
Ralph H. Eckler 0/35,000 0/$87,500(1)
- -----------------
(1) There was no public or established trading market for the underlying
securities on September 30, 1995. Therefore, the initial public offering
price of $5.00 per share is used for value calculations for purposes of
this table.
CONSULTING AGREEMENTS
In August 1994, the Company retained the consulting services of
Greyhouse Services Corporation ("Greyhouse") in connection with certain of
the Company's activities, including but not limited to the renegotiation of
the Company bank loans and related obligations, and the Company's
reorganization and operational matters relating thereto. The agreement
provides for payment at the rate of $150 per hour, not to exceed $7,500 per
month without prior approval of the Company through May 31, 1998. The
compensation arrangement includes an option to purchase 100,000 shares of
Class A Common Stock of the Company at a per share exercise price of $2.50,
exercisable until August 29, 1997, which shares are included in this
Offering. Pursuant to a shareholder voting agreement, Greyhouse granted to
Ralph H. Eckler its proxy to vote all shares acquired by Greyhouse, if any,
under the option.
The Company entered into a consulting agreement with the underwriters of
its initial public offering, Argent Securities, Inc. ("Argent") on March 31,
1995, pursuant to which various executive and staff personnel of Argent
provide financial and investor relations services, public relation services
and corporate communications services for a period of three years at the rate
of $4,166 per month. Monthly payments accrued until November 15, 1995.
At that time, the payment terms were amended to provide for payment in three
installments of $50,000 each on November 15, 1995 (paid upon closing of the
initial public offering), January 15, 1996 and April 1, 1996. The agreement
includes certain provisions regarding the payment of out of pocket expenses,
indemnification of Argent, and arbitration. Argent acted as the Company's
underwriter for its initial public offering. Argent received Unit Purchase
Option to acquire 84,000 units, exercisable during a four year period
commencing November 15, 1996 at an exercise price of $6.00 per unit. Each
unit consists of one share of Class A Common Stock and one Underwriters'
Warrant exercisable at $6.50 per share. Argent has certain "piggyback" and
demand registration rights with respect to the Class A Common Stock and
Underwriters' Warrants underlying the Unit Purchase Option for a period of
four years commencing November 9, 1996. The Common Stock issuable upon
exercise of the Unit Purchase Option and the Underwriters' Warrants are
included in this Offering.
In January 1996, the Company entered into a marketing services agreement
with an independent consultant for consulting services regarding on-going
public relations with market makers, brokers, and shareholders in the
after-market. The Company paid for such services with 62,000 shares of its
Class A Common Stock (valued at $3.50 per share, which approximated the then
market price) which shares were issued pursuant to a Registration Statement
on Form S-8 filed with the Securities and Exchange Commission on January 18,
1996.
In July 1996, the Company entered into a financial consulting services
agreement with another independent consultant regarding on-going public
relations with existing and potential market makers, analysts, brokers, the
media; services in connection with shareholder communications and meetings;
the enlistment of additional market makers; and various other services in
connection with public relations activities in connection with the Company's
management and products. The Company agreed to pay compensation in the form
of 35,000 shares of Class A Common Stock and options to purchase an
additional 275,000 shares of Class A Common Stock at exercise prices ranging
from $3.00 per share (which approximated the then market price) to $4.00 per
share. The consulting agreement was terminated in October 1996 and the
Company had issued a total of 105,000 shares of Class A Common Stock to the
consultant pursuant to the consulting agreement and exercise of stock
options, which shares were issued pursuant to a Registration Statement on
Form S-8 filed with the Securities and Exchange Commission on August 28, 1996.
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GOVERNING INSTRUMENTS
AMENDED AND RESTATED ARTICLES OF INCORPORATION. On August 31, 1995, the
Company filed with the Florida Secretary of State Amended and Restated
Articles of Incorporation. Unless otherwise provided in its articles of
incorporation, Florida law generally requires the affirmative vote of holders
of a majority of the outstanding voting stock for approval of mergers,
consolidations, and certain other transactions. The Amended and Restated
Articles of Incorporation contain anti-takeover provisions to discourage
attempts by other corporations or groups to acquire control of the Company
without negotiating with the Company's Board of Directors, and attempt to
ensure that such transactions are on terms favorable to all of the Company's
shareholders. Such acquisitions, however, may or may not be generally in the
best interest of the Company and its shareholders.
The anti-takeover provisions require an affirmative vote of no less than
two-thirds of the outstanding shares (with Class B shares having 2 votes per
share) of the Company's voting stock for the approval or authorization of
certain mergers, consolidations or sales of all or substantially all of the
properties and assets of the Company. However, such super-majority vote of
the shareholders does not apply to any merger or other transaction and such
transaction requires only such affirmative vote as required by law or
otherwise if: (a) the Board of Directors approves the transaction by a
resolution adopted by the affirmative vote of a majority of the disinterested
Directors at any time prior to its consummation, or (b) if the shareholders
receive a "fair price".
The determination of "fair price" would be based on the fair market
value of the stock as may be determined, if applicable, by an exchange or
public quotation system, or if no such quotations are available, by a
majority vote of the disinterested Directors then on the Board. Such a fair
price provision would make it more difficult and costly for a purchaser to
acquire control of the Company. Therefore, the likelihood of a tender offer
is decreased and, as a result, that may adversely affect those shareholders
who would desire to participate in a tender offer. Further, such a fair price
provision may give veto power to the holders of a minority of the voting
stock with respect to a tender offer which is opposed by the Board but which
a voting majority may believe to be desirable and beneficial.
The overall effect of such anti-takeover provisions is to render more
difficult the accomplishment of mergers or the assumption of control by a
principal shareholder, and thus to make difficult the removal of management.
However, the Company believes that the advantages to the Company and its
shareholders of such anti-takeover provisions would outweigh any
disadvantages and afford the Board of Directors greater flexibility in the
management of the Company.
The Amended and Restated Articles of Incorporation set forth the rights,
preferences and limitations respecting Preferred Stock. However, all
outstanding Preferred Stock of the Company was redeemed or converted on
November 15, 1995.
The Amended and Restated Articles of Incorporation authorize 10 million
shares of Class A Common Stock, $.01 par value and 5 million shares of Class
B Common Stock, $.01 par value, and set forth the voting rights with respect
to each class of common stock and provisions regarding the conversion of
Class B shares into Class A shares. See "Description of Securities -- Common
Stock."
The Amended and Restated Articles provide that the shareholders may not
remove a director without cause and require a super-majority vote of the
common shareholders to remove a director for cause. A super-majority vote is
also required to amend the Amended and Restated Articles of Incorporation.
Certain procedures for the nomination and election of directors, the
consideration of proposals at annual
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meetings, and the calling of special meetings of the stockholders are also
set forth in the Amended and Restated Articles.
The Amended and Restated Articles of Incorporation do not provide
shareholders with any preemptive rights or cumulative voting rights.
AMENDED AND RESTATED BYLAWS. The Company's Amended and Restated Bylaws
provide for the removal of a director for cause upon the affirmative vote of
at least 66 2/3% of the outstanding shares of Class A and Class B Common
Stock at any annual or special meeting of stockholders. The Bylaws also
specifically provide that a director may not be removed without cause. The
Company's Amended and Restated Articles of Incorporation contains a similar
provision, as discussed above. The super-majority vote requirement for
removal of a director (or the entire Board) makes it difficult for
shareholders to remove and replace management.
The Amended and Restated Bylaws also provide for indemnification of
directors, officers, employees or agents of the Company (as well as their
heirs or personal representative) against certain liabilities to the fullest
extent permitted by Florida law. Generally, the Florida Business Corporation
Act (the "Florida Act") provides that a corporation shall have the power to
indemnify any director, officer, employee or agent, and to advance related
expenses with respect to, any threatened, pending or completed action or
proceeding to which such person is made, or threatened to be made a party by
reason of the fact that he is or was a director, officer, employee or agent
of the corporation, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The Florida Act also allows a
corporation to make any other or further indemnification or advancement of
expenses of any of its directors, officers, employees, or agents, under any
bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise, except under certain enumerated circumstances.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the number of
shares of Class A Common Stock beneficially owned by (i) each director of the
Company, (ii) the executive officer named in the "Summary Compensation Table"
(the "Named Officer"), (iii) all directors and officers of the Company as a
group and (iv) each shareholder known by the Company to be a beneficial owner
of more than 5% of any class of the Company's voting securities as of
November 10, 1996. The Company believes that except as otherwise noted, each
individual named has sole investment and voting power with respect to the
shares of Common Stock indicated as beneficially owned by such individual.
As of November 10, 1996, one stockholder was known by the Company to
beneficially own five percent (5%) or more of the outstanding voting
securities of the Company.
Name of Individual or Number Amount and Nature of
of Persons in Group Beneficial Ownership(1)(2) Percentage of Class(2)
- ---------------------------- -------------------------- ----------------------
Ralph H. Eckler 1,126,000(3)(4) 40.68%
Ronald V. Mohr 10,000(5) .38%
Donald A. Wojnowski, Jr. 0(6) 0%
Joseph Yossifon 0(6) 0%
All Directors and Executive
Officers as a group (7 persons) 1,166,000(7) 42.12%
_________________________
(1) For purposes of calculating beneficial ownership percentages, 2,668,220
shares of Class A Common Stock were deemed outstanding, which includes
1,020,750 shares of Class A Common Stock issuable upon conversion of
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510,375 shares of outstanding Class B Common Stock on a 2 for 1 basis.
However, for purposes of calculating Mr. Eckler's percentage ownership
and that of officers and directors as a group, 2,768,220 shares were
deemed outstanding which includes the 100,000 Shares of Class A Common
Stock issuable upon exercise of the Consultant Option for which Mr. Eckler
holds a voting proxy.
(2) In accordance with Rule 13d-3 promulgated under the Exchange Act, the
percentage calculations were made on the basis of the amount of
outstanding securities plus, for each person or group, any securities
that person or group has the right to acquire within 60 days pursuant to
options, warrants, conversion privileges or other rights. If the
director or officer does not own shares, or options or warrants
exercisable within the next 60 days, percentage ownership is deemed to
be zero. No officer or director has options or warrants exercisable
within the next 60 days; however, Ralph H. Eckler holds a voting proxy
for 100,000 Class A Shares issuable upon exercise of an option currently
exercisable by Greyhouse Services Corporation, which shares were
included in calculating Mr. Eckler's beneficial ownership.
(3) Includes 495,375 shares of Class B Common Stock as though converted on a
2 for 1 basis into Class A Common Stock for a total of 990,750 shares of
Class A Common Stock. Mr. Eckler previously owned 555,000 Class B shares
but on March 29, 1996, made a capital contribution to the Company of
47,000 Class B shares. Mr. Eckler also converted 12,625 Class B shares
into 25,250 Class A shares for purposes of pledging such shares to a
bank as security for a personal obligation. Mr. Eckler's 495,375 shares
of Class B Common Stock are subject to a Lock-Up Agreement between him,
the Company, and Argent Securities, Inc., the Company's Underwriter for
its initial public offering. Also includes (i) 5,000 shares of Class A
Common stock issuable upon exercise of a Bridge Warrants and included in
this Offering, (ii) 100,000 shares of Class A Common Stock issuable upon
exercise of the Consultant Option and for which Ralph H. Eckler holds a
voting proxy as to all such shares. The Consultant Option is exercisable
within the next 60 days and the shares of Class A Common Stock into
which it is convertible are registered as part of this Offering. Does
not include 55,000 Class A Shares subject to options which are not
exercisable within the next 60 days.
(4) All of Mr. Eckler's Class B shares are subject to a lock-up agreement
with Argent Securities, Inc. from 2 to 5 years, which shares may be
released incrementally over the term of the lock-up agreement if certain
performance targets are met. Those shares not incrementally released
will be subject to a proxy to be given to Argent if the targets are not
met. Any proxy held by Argent would expire on September 30, 2000. The
effect of the banks exercising their rights under their respective
pledge agreements and Argent exercising its rights under the lock-up
agreement at a subsequent date may result in a change in control of the
Company.
(5) Includes 5,000 Class A Shares issuable upon exercise of a Bridge Warrant
and included in this Offering. Does not include 47,500 Class A Shares
subject to options which are not exercisable within the next 60 days.
(6) Does not include stock options for 20,000 Class A Shares issued to each
of Mr. Yossifon and Wojnowski which are not exercisable within the next
60 days.
(7) The Company's executive officers were subject to one-year lock-up
agreements between them and the Company pursuant to which they could not
sell, encumber or otherwise transfer any securities of the Company owned
by them until November 15, 1996. The agreement provides that for a
period of six months after such date, the sales price for any shares
sold by them shall not be less than $6.00 per share.
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LOCK-UP AGREEMENTS
Ralph H. Eckler and Argent entered into an Amended and Restated Lock-Up
Letter Agreement dated October 12, 1995 (the "Lock-Up Agreement") which
places certain restrictions on the transferability of Mr. Eckler's shares of
Class B Common Stock and the Class A Common Stock into which it is
convertible. Under the agreement, approximately 60% of his Class B shares
are subject to a two-year absolute lock-up subject to incremental release
annually commencing in 1997 if certain cumulative earnings per share or price
per share targets are met. Mr. Eckler's remaining shares of Class B Common
Stock are subject to five year lock-up subject to incremental release each
year if the Company meets certain criteria based on gross sales, earnings
and price earnings ratio calculations. Those shares not incrementally
released under the Lock-Up Agreement will be subject to a proxy to be held by
Argent in the event that the performance targets are not met. However, any
such proxies shall expire on September 30, 2000. The Lock-Up Agreement
permits Mr. Eckler to transfer 15,000 of his Class B shares to a former
spouse, which transaction was effected in January 1996.
Further, Mr. Eckler and certain other executive officers of the Company
are subject to a one-year lock-up agreement with the Company under which they
may not sell or otherwise transfer any securities of the Company until
November 9, 1996. The Agreement also provides for the six month period
after November 9, 1996, they may not sell any securities of the Company for
less than $6.00 per share.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
GUARANTEE OF BANK LOANS TO AFFILIATES. The Company guaranteed certain
leases and/or bank loans made to various entities owned and controlled by
Ralph H. Eckler. The Company was released from various leases and guaranties
in September 1995 and March 1996, pursuant to agreements among the banks,
Ralph H. Eckler and various affiliates of Mr. Eckler.
(i) SUNBANK LOAN. At September 30, 1990, under the terms of a
master lease, the Company became a guarantor of a loan by SunBank to Eckler
Enterprises, (a general partnership, of which Mr. Eckler and Eckler
Enterprises, Inc. are the partners), and Eckler Development, Inc., which
owned and operated commercial property in Titusville, Florida. SunBank
required the Company to enter into a master lease (the "Master Lease")
pursuant to which the Company guaranteed the payment of rental income up to
$165,120 per year less any amounts received under subleases. In September
1995, the Master Lease was terminated and the Company was released from all
obligations under the Master Lease. As part of his agreement with SunBank,
Mr. Eckler assumed certain obligations and in connection therewith is
obligated to pledge 25,250 Class A Shares (which will be converted from
12,625 of his Class B Shares).
(ii) FIRST UNION LOAN. The Company guaranteed a loan from First
Union National Bank of Florida ("First Union") to Eckler Development, Inc.
("Eckler Development"), which loan encumbered Eckler Development's commercial
property in Titusville. The Company had also entered into a warehouse lease
with Eckler Development, Inc. pursuant to which it leased 20,000 square feet
of space from Eckler Development, Inc. for $9,500 per month. Pursuant to an
agreement among First Union, Ralph H. Eckler and various Eckler-affiliated
entities, the guaranty of the Company and the warehouse lease were terminated
and the Company was released from any obligations thereunder.
(iii) NATIONSBANK LOAN. The Company was a guarantor of a
mortgage loan made by NationsBank of Florida, N.A. ("NationsBank") to Eckler
Properties, Inc., which owned commercial property adjacent to the Company's
main facility, which commercial property housed a GM car dealership owned and
operated by an affiliate of Ralph H. Eckler. The approximate amount of the
original loan was
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$850,000 with a remaining balance as of August 31, 1995 of approximately
$780,000. The dealership franchise was sold in October 1995 and the real
estate securing the NationsBank loan was sold in March 1996. Upon the
closing of the sale of the real property, the bank released a lien it held on
120,000 shares of Mr. Eckler's Class B Common Stock and released the Company
from its guaranty.
LOAN FROM ECKLER INDUSTRIES, INC. RETIREMENT AND SAVINGS PLAN. On
October 22, 1992, the Company borrowed $265,000 at an interest rate of 8% per
annum from Eckler Industries, Inc.'s Retirement and Savings Plan secured by a
first mortgage on real property owned by the Company located adjacent to the
Company's headquarters in Titusville, Florida. The loan was amortized over
three years and the final payment was made in October 1995.
OTHER TRANSACTIONS WITH AFFILIATES. Until February 1996, the Company
sold products to Eckler Service Center, Inc., a company wholly owned by Ralph
H. Eckler ("Service Center"), which specialized in mechanical work on and
restoration of Corvettes. Transactions with Service Center were conducted at
arm's length and accounted for approximately $60,000 to $70,000 in orders
from the Company annually. Service Center also leased approximately 6,800
square feet of space from the Company at its Main Facility at a monthly
rental of $1,587.46 per month, subject to annual increases of four percent
(4%). However, in February 1996, Mr. Eckler sold Service Center to
Titusville Chevrolet-GEO, Inc., the dealership that acquired the automobile
dealership and real property from affiliates of Mr. Eckler. The Company
leases certain space and land to Titusville Chevrolet-GEO, Inc. Titusville
Chevrolet-GEO, Inc. is not related to Mr. Eckler, the Company or any of their
affiliates. See "Business - Property."
During fiscal years ended September 30, 1994 and 1995, the Company
provided engineering services to and manufactured fiberglass boat hulls and
decks for Eckler Water Sports, Inc., a corporation owned by Ralph H. Eckler.
The revenue from these transactions during such time period approximated
$160,000, and $112,213, respectively.
For approximately 18 months, to August 1995, the Company leased 20,000
square feet of warehouse space in Titusville from Eckler Development, Inc.,
owned by Ralph H. Eckler, at a monthly rent of approximately $9,500. The
lease was terminated in September 1995. See "Certain Transactions -- First
Union Loan."
The Company acquired certain undeveloped property (approximately 1.7
acres) from Ralph H. Eckler in 1995. The property was subject to a note and
first mortgage in favor of the original seller in the principal amount of
$130,000, payable interest only at 10% per annum, which note was paid in full
from the loan proceeds from a refinancing of the Company's property. The
property was also subject to a second mortgage in favor of Ralph H. Eckler in
the principal amount of $33,873, which mortgage was paid off in 1996.
In prior years the Company had made various loans and advances to Mr.
Eckler and his affiliated entities. Prior to the closing of the Company's
initial public offering, there remained an outstanding balance of
approximately $536,000 which was paid in full by Mr. Eckler from the proceeds
he received as a selling shareholder in the initial public offering.
In calendar 1995 the Company received $205,000 in respect of loans made
by various investors to Ralph H. Eckler (the "Investor Loans") who in turn
loaned the funds to the Company. Of that amount, $55,000 was loaned by
certain officers of the Company. In November 1995, the Company issued an
aggregate of 27,500 restricted Class A Shares and Bridge Warrants for an
aggregate of 27,500 Class A shares to Messrs. Ralph H. Eckler, Ronald V.
Mohr, G. Edward Mills, Michael G. Wilson and Robert M. Eckler in respect of
cancellation of obligations owed by the Company to them in the aggregate
amount of
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$55,000. The Bridge Warrants became exercisable on November 9, 1996 at $6.00
per share. The remaining $150,000 of the Investor Loans was made by a
private investor not affiliated with the Company or its officers or
directors, and was converted into 75,000 Class A shares and Bridge Warrants
for 75,000 Class A shares, which warrants became exercisable as of March 15,
1996 at $6.00 per share. The Bridge Warrants provide that the Company's
Board of Directors may change the exercise price from time to time. To
encourage investment in the Company and increase working capital, on October
9, 1996 the Company's Board of Directors approved a decrease in the exercise
price of the Bridge Warrants to $3.63 per share, the closing bid price
reported by Nasdaq on such date. The revised exercise price will remain in
effect until December 31, 1996, after which any unexercised Bridge Warrants
will be exercisable at $6.00 per share, unless again adjusted by the Board of
Directors. The 102,500 Class A shares and the 102,500 Class A shares
underlying the Bridge Warrants are included for resale under this Prospectus.
See "Selling Shareholders."
Effective November 15, 1995, pursuant to Ralph H. Eckler's employment
agreement with the Company, he is paid a 2% annual fee, payable quarterly,
which fee is based on the outstanding principal of loans of the Company which
he has personally guaranteed. During the fiscal year ended September 30,
1996, Mr. Eckler was paid $38,459 in such fees.
TRANSACTIONS WITH UNDERWRITER. The Company entered into an underwriting
agreement with Argent Securities, Inc. ("Argent"), the Underwriter of its
initial public offering which closed on November 15, 1995. The underwriting
agreement provides that the Company will pay to Argent a warrant solicitation
fee (the "Warrant Solicitation Fee") equal to 5% of the exercise price of the
Public Warrants exercised beginning November 9, 1996. Such Warrant
Solicitation Fee will be paid to Argent if (a) the market price of the Class
A Common Stock on the date that any Public Warrant is exercised is greater
than the exercise price of the Public Warrant; (b) the exercise of such
Public Warrant was solicited by Argent; (c) prior specific written approval
for exercise is received from the customer if the Public Warrant is held in a
discretionary account; (d) disclosure of this compensation agreement is made
prior to or upon the exercise of such Public Warrant; (e) solicitation of the
exercise is not in violation of Rule 10b-6 of the Exchange Act; (f) Argent
provided bona fide services in exchange for the Public Warrant Solicitation
Fee; and (g) Argent has been specifically designated in writing by the
holders of the Public Warrants as the broker. In addition, unless granted an
exemption by the Commission from Rule 10b-6 under the Exchange Act, Argent
will be prohibited from engaging in any market making activities or solicited
brokerage activities with respect to the Company's securities for the period
from nine business days prior to any solicitation of the exercise of any
Public Warrant or nine business days prior to the exercise of any Public
Warrant based on a prior solicitation until the later of the termination of
such solicitation activity or the termination (by waiver or otherwise) of any
right Argent may have to receive such a fee for the exercise of the Public
Warrants following such solicitation. As a result, Argent, a market maker for
the Company's registered securities, may be unable to continue to provide a
market for the Securities during certain periods while the Public Warrants
are exercisable.
Argent has been given certain "piggyback" and demand registration rights
with respect to the Class A Common Stock and warrants underlying the Unit
Purchase Option for a period of four years commencing November 9, 1996. The
exercise of any of such registration rights by Argent may result in dilution
to the interest of the Company's shareholders, hinder efforts by the Company
to arrange future financing of the Company and/or have an adverse effect on
the market price of the Securities.
The Company has agreed with Argent that for a period of 24 months
commencing on November 9, 1995, it will not issue or sell, directly or
indirectly, any shares of its capital stock, or sell or grant options,
warrants or rights to purchase any shares of its capital stock, without the
written consent of Argent, except for issuances pursuant to (i) the Company's
initial public offering, (ii) the exercise of the Unit Purchase Option and
the warrants issuable thereunder, (iii) outstanding convertible securities or
contractual obligations existing on November 9, 1995, (iv) the grant of
options and the issuance of shares issued upon exercise of options to be
granted under the Company's Stock Option Plans, and (v) an acquisition,
merger or similar transaction provided that the acquirer of such capital
stock does not receive, and will not be entitled to demand, registered
securities during such 24-month period and such issuance of shares has the
approval
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of Argent. The Company has granted Argent a three-year preferential right
with respect to future financing relating to the offering of the Company's
securities.
Under the terms of a lock-up agreement between Ralph H. Eckler and
Argent, Mr. Eckler's 495,375 Class B shares (990,750 Class A Shares on an as
converted basis) are subject to lock-up for periods ranging from two to five
years, subject to incremental release annually if and when certain
performance targets are met. Those shares not released will be subject to a
proxy to be held by Argent in the event that the performance targets are not
met. However, any such proxy expires on September 30, 2000. See "Security
Ownership of Certain Beneficial Owners and Management-Lock-Up Agreements."
DESCRIPTION OF SECURITIES
COMMON STOCK
CLASS A
The Company is authorized to issue up to 10,000,000 shares of Class A
Common Stock, $.01 par value, of which 1,646,750 shares of Class A Common
Stock are issued and outstanding. The holders of Class A Common Stock are
entitled to one vote per share. The holders of common stock are entitled to
receive ratably such dividends, if any, as may be declared by the Board of
Directors out of legally available funds.
CLASS B
The Company is authorized to issue up to 5,000,000 shares of Class B
Common Stock, $.01 par value. Ralph H. Eckler holds 495,375 shares of Class B
Common Stock which are subject to a lock-up agreement. A former spouse of
Mr. Eckler holds 15,000 Class B shares pursuant to a recent marital
settlement agreement, which shares are not subject to lock-up. Pursuant to
the terms of Mr. Eckler's employment agreement and the Lock-Up Agreement, his
Class B shares are subject to incremental release from the terms of the
lock-up agreement and subsequent conversion to Class A stock upon achieving
certain performance goals; provided, however, all Class B shares not
previously released from the lock-up will be released on September 30, 2000.
Each share of Class B Common Stock shall have two (2) votes per share and
shall be entitled to all of the rights of the Class A shares on a two for one
basis including, but not limited to, stock splits, dividends and dissolution
rights. The Class B Common Stock may be converted to Class A Common Stock,
(on a basis of one share of Class B Common Stock for two shares of Class A
Common Stock) after any lock-up terms are satisfied between Mr. Eckler and
Argent See, "Security Ownership of Certain Beneficial Owners and Management-
Lock-Up Agreements."
The current policy of the Board of Directors is to retain earnings, if
any, for the operation and expansion of the Company. Upon liquidation,
dissolution or winding up of the Company, the holders of Class A Common Stock
are entitled to share ratably (Class B participating on a two for one basis
with the Class A shares) in all assets of the Company which are legally
available for distribution, after payment of or provisions for all debts and
liabilities. The holders of Class A and Class B Common Stock have no
preemptive, subscription, or redemption rights. Class B Common Stock is
convertible into Class A Common Stock on a basis of one share of Class B
Common Stock for two shares of Class A Common Stock, subject to certain
restrictions contained in the Lock-Up Agreement. Holders of Class A Common
Stock do not have conversion rights.
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PREFERRED STOCK
The Company is authorized to issue up to 100,000 shares of non-voting
preferred stock, par value $10.00 per share, with a cumulative dividend of
12% per annum (the "Preferred Stock") all of which stock was issued and
outstanding as of November 15, 1995. In the event of a liquidation of the
Company, the Preferred Stock has the right to receive, prior to any
distribution being made to holders of shares of all classes of common stock,
$10.00 in cash per share plus accrued and unpaid dividends. The Preferred
Stock is not be entitled to any further distributions. At the conclusion of
its initial public offering, the Company redeemed 95,000 shares of the
Preferred Stock and the holders of the remaining 5,000 shares of Preferred
Stock converted these shares into 12,000 shares of Class A Common Stock.
There are no outstanding shares of Preferred Stock.
WARRANTS
REDEEMABLE CLASS A COMMON STOCK PURCHASE WARRANTS (THE "PUBLIC
WARRANTS"). As of the date of this Prospectus, there are issued and
outstanding 1,200,000 publicly traded warrants (the "Public Warrants"). The
Public Warrants were issued pursuant to the terms and conditions of a Warrant
Agreement between the Company and American Stock Transfer & Trust Company
dated November 15, 1995 (the "Warrant Agreement"). Each Public Warrant
entitles the holder thereof to purchase one share of Class A Common Stock at
a price of $6.50 per share for a period of four years commencing on the first
anniversary of the effective date of this Offering (the "First Exercise
Date"). Each Public Warrant is redeemable by the Company for $.05 per
Warrant, at any time after the First Exercise Date, upon thirty days' prior
written notice to the holders thereof, if the average closing price of the
Class A Common Stock, as reported by the principal exchange on which the
Class A Common Stock is traded, NASDAQ, or the National Quotation Bureau
Incorporated, as the case may be, equals or exceeds $8.75 per share for the
twenty consecutive trading days ending three days prior to the date of the
notice of redemption. In the Warrant Agreement, "closing price" is defined
as: (i) the last sale price regular way as reported on the principal national
securities exchange on which the Class A Common Stock is listed or admitted
to trading, or (ii) if the Class A Common Stock is not listed or admitted to
trading on any national securities exchange, the average of the closing bid
and asked prices regular way for the Class A Common Stock as reported by the
Nasdaq National Market or Nasdaq SmallCap Market of the Nasdaq Stock Market,
Inc. ("NASDAQ") or (iii) if the Class A Common Stock is not listed or
admitted for trading on any national securities exchange, and is not reported
by NASDAQ, the average of the closing bid and asked prices in the
over-the-counter market as furnished by the National Quotation Bureau, Inc.
or if no such quotation is available, the fair market value of the Class A
Common Stock as determined in good faith by the Board of Directors of the
Company. Pursuant to applicable federal and state securities laws, in the
event a current prospectus is not available, the Public Warrants may not be
exercised by the holders thereof and the Company will be precluded from
redeeming the Public Warrants. There can be no assurance that the Company
will not be prevented by financial or other considerations from maintaining a
current prospectus. Any Public Warrant holder who does not exercise prior to
the redemption date, as set forth in the Company's notice of redemption, will
forfeit the right to purchase the Class A Common Stock underlying the Public
Warrants, and after the redemption date or upon conclusion of the exercise
period any outstanding Public Warrants will become void and be of no further
force or effect, unless extended by the Board of Directors of the Company.
The number of Class A shares that may be purchased is subject to
adjustment upon the occurrence of certain events including a dividend
distribution to the Company's shareholders, or a subdivision, combination or
reclassification of the outstanding Class A shares. Further, the Public
Warrant exercise price is subject to adjustment in the event the Company
issues to all holders of Class A Common Stock additional stock or rights to
acquire stock at a price per share that is less than the current market price
per share of
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Class A Common Stock on the record date established for the issuance of
additional stock or rights to acquire stock. The term "current market price"
is defined as the average of the daily closing prices for the 20 consecutive
trading days ending three days prior to the record date. However, the Public
Warrant exercise price will not be adjusted in the case of the issuance or
exercise of options pursuant to the Company's stock option plans, the
issuance of the Underwriters' Unit Purchase Option or any other options or
warrants outstanding as of November 9, 1995. The Warrant exercise price is
also subject to adjustment in the event of a consolidation or merger where a
distribution by the Company is made to its stockholders of the Company's
assets or evidences of indebtedness (other than cash or stock dividends) or
pursuant to certain subscription rights or other rights to acquire Class A
shares.
The Company may at any time, and from time to time, extend the exercise
period of the Public Warrants, provided that written notice of such extension
is given to the Public Warrant holders prior to the expiration date then in
effect. Also, the Company may reduce the exercise price of the Public
Warrants for limited periods or through the end of the exercise period if
deemed appropriate by the Board of Directors or the Company, in addition to
the adjustments to the exercise price arising from certain events as
discussed above. Any extension of the term and/or reduction of the exercise
price of the Public Warrants will be subject to compliance with Rule 13e-4
under the Exchange Act including the filing of a Schedule 13E-4. Notice of
any extension of the exercise period and/or reduction of the exercise price
will be given to the Public Warrant holders. The Company does not presently
contemplate any extension of the exercise period nor does it contemplate any
reduction in the exercise price of the Warrants. The Public Warrants are also
subject to price adjustment upon the occurrence of certain events including
subdivisions or combinations of the Class A Common Stock.
NONREDEEMABLE STOCK PURCHASE WARRANTS. The Company issued nonredeemable
stock purchase warrants (the "Bridge Warrants") to holders of $205,000 in
notes who elected to convert the outstanding principal balance of those notes
to Class A Common Stock and warrants to purchase Class A Common Stock. The
Company issued to holders in the aggregate 102,500 Class A shares and
warrants for another 102,500 Class A shares exercisable at $6.00 per share.
The Bridge Warrants provide that the Company's Board of Directors may change
the exercise price from time to time. To encourage investment in the Company
and increase working capital, on October 9, 1996 the Company's Board of
Directors approved a decrease in the exercise price of the Bridge Warrants to
$3.63 per share, the closing bid price funded by Nasdaq on such date. The
revised exercise price will remain in effect until December 31, 1996, after
which any unexercised Bridge Warrants will be exercisable at $6.00 per share,
unless again adjusted by the Board of Directors. All Bridge Warrants are
currently exercisable and expire on November 9, 2001. These Bridge Warrants
contain the same share and price adjustment provisions as the Public
Warrants, discussed above. Further, as with the Public Warrants, the Company
may reduce the exercise price of the Bridge Warrants for limited periods or
through the end of the exercise period if deemed appropriate by the Board of
Directors of the Company. The Company has included the Class A Shares
underlying the Bridge Warrants for sale in this Offering pursuant to certain
"piggy-back" registration rights contained in the Bridge Warrants. Of the
102,500 Class A shares subject to the Bridge Warrants, certain officers of
the Company hold Bridge Warrants for 27,500 shares, and two individuals not
affiliated with the Company hold Bridge Warrants for 75,000 shares. All
102,500 shares issuable upon exercise of the Bridge Warrants are included for
resale in this Prospectus. The Company also issued a nonredeemable stock
purchase warrant to a consultant for 20,000 Class A shares, which warrant has
the same terms as the other nonredeemable warrants except it is exercisable
for a term of five years commencing March 31, 1996 at $4.20 per share, which
reflects the average of the high/low price of the Company's Class A Common
Stock as quoted by NASDAQ SmallCap Market on March 31, 1996.
50
<PAGE>
OPTIONS
In addition to the stock options issued to its employees, officers, and
directors, the Company issued to the underwriter of its initial public
offering, Argent Securities, Inc. ("Argent"), a Unit Purchase Option to
purchase up to 84,000 units. The Unit Purchase Option is exercisable during
a four-year period commencing November 15, 1996. The Unit Purchase Option may
not be assigned, transferred, sold or hypothecated by Argent until November
9, 1996, except to officers or partners of Argent, to a successor to Argent,
to a purchaser of substantially all of the assets of Argent, or by operation
of law. The exercise price of the units issuable upon exercise of the Unit
Purchase Option during the period of exercisability is $6.00 per unit. Each
such unit consists of one share of Class A Common Stock and one nonredeemable
warrant exercisable at $6.50 per share (the "Underwriter's Warrant(s)"). The
exercise of the Unit Purchase Option and the number of shares of Class A
Common Stock covered thereby and under the Underwriters' Warrants are subject
to adjustment in certain events to prevent dilution. The Unit Purchase
Option contains certain "piggyback" and demand registration rights with
respect to the Class A Common Stock and Underwriters' Warrants underlying the
Unit Purchase Price Option for a period of four years commencing November 9,
1996. The Class A shares underlying the Unit Purchase Option and the
Underwriters' Warrants are included for resale in this Prospectus.
The Company issued an option (the "Consultant Option") for 100,000
shares of Class A Common Stock to Greyhouse Services Corporation in
connection with a consulting agreement. The Consultant Option is exercisable
until August 14, 1997 at $2.50 per share. The 100,000 shares of Class A
Common Stock underlying the Consultant Option are included for sale in this
Prospectus. Ralph H. Eckler holds a proxy for voting the Shares issuable upon
exercise of the Consultant Option.
Additionally, in July 1996, the Company issued an option to Argent for
200,000 shares of Class A Common Stock and an option to Ralph H. Eckler for
200,000 shares of Class A Common Stock, each exercisable for a period of five
years at an exercise price of $2.88 per share (which on the date of grant was
the market price of a share of the Company's Common Stock). Mr. Eckler's
option is first exercisable in January 1997 and expires in July 2001.
Argent's option is currently exercisable and expires in July 2001.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's securities is
American Stock Transfer & Trust Company, 40 Wall Street, New York, New York.
SHARES AVAILABLE FOR FUTURE SALE
Assuming exercise of all warrants and options for which the underlying
shares of Class A Common Stock are included for resale in this Prospectus,
there will be 3,217,200 shares of Class A Common Stock outstanding, of which
1,367,000 are currently tradeable without restriction. Further, there are
issued and outstanding a total of 510,375 shares of Class B Common Stock
which are convertible into 1,020,750 shares of Class A Common Stock. There
are also outstanding additional stock options and warrants for another
615,000 shares of Class A Common Stock, which shares are not included for
resale in this Prospectus. No predictions can be made as to the effect, if
any, that sales of such shares will have on the market, if any, prevailing
from time to time. Sales of substantial amounts of the Class A Common Stock
pursuant to this registration statement may adversely affect the market price
of the securities offered hereby. See "Plan of Distribution."
Shares issued pursuant to option exercise which are not registered would
be "restricted securities" within the meaning of Rule 144 under the
Securities Act and would be eligible for sale in the public market in
reliance upon Rule 144 or pursuant to a registration statement. In general,
under Rule 144 as currently in effect, a person (or persons whose shares are
aggregated), including persons who may be deemed to be "affiliates" of the
Company as that term is defined under Rule 144, is entitled to sell within
any three-month period a number of shares beneficially owned for at least two
years that does not exceed the greater of (i) one percent of the then
outstanding shares of Class A Common Stock (16,417 shares as of October 31,
1996) or (ii) the average weekly trading volume in the Class A Common Stock
during the four calendar weeks preceding such sale. Sales under Rule 144 are
also subject to certain requirements as to the manner
51
<PAGE>
of sale, notice and the availability of current public information about the
Company. However, a person who is not an affiliate and has beneficially
owned such shares for at least three years is entitled to sell such shares
without regard to the volume, manner of sale or notice requirements.
In addition to the restrictions under Rule 144, the Company and certain
of the Company's officers are restricted from disposing of securities of the
Company pursuant to the terms of certain outstanding option agreements
between the officers and the Company and pursuant to the terms of lock-up
agreements. See "Management -- Management and Employee Stock Option Plans,"
and, "-- Lock-Up Agreements."
LEGAL MATTERS
Certain legal matters in connection with the issuance of shares of Class
A Common Stock will be passed upon by Greenberg Traurig Hoffman Lipoff Rosen
& Quentel, P.A., Orlando, Florida. Randolph H. Fields, Esq., a shareholder
in the law firm, holds a warrant to purchase 20,000 shares of the Company's
Class A Common Stock, at an exercise price of $4.20 per share. See
"Description of Securities - Nonredeemable Stock Purchase Warrants."
EXPERTS
The financial statements included in this Prospectus have been audited
by BDO Seidman, LLP, independent certified public accountants, to the extent
and for the periods set forth in their report appearing elsewhere herein, and
are included in reliance on such report given upon the authority of said firm
as experts in auditing and accounting.
CHANGES IN ACCOUNTANTS
On December 27, 1994, the Company executed an engagement letter with the
certified public accounting firm of BDO Seidman, LLP ("BDO") formalizing
their relationship, and detailing the scope of work to be performed by BDO
for the next fiscal year. After executing the letter agreement with BDO to
serve as independent auditors for the Company, the Company terminated its
relationship with the certified public accounting firm of Graham & Cottrill,
P.A. ("G&C"). G&C's report on the Company's financial statements for the
fiscal year ended September 30, 1993, did not contain an adverse opinion or a
disclaimer of opinion, nor were they qualified or modified as to audit scope,
or accounting principles. Since G&C was engaged by the Company in 1980
through the date of G&C's dismissal, there were no disagreements with G&C on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of G&C, would have caused it to make a reference
to the subject matter of the disagreements in connection with its reports.
52
<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 607.0850(1) of the Florida Business Corporation Act, ("FBCA")
permits a Florida corporation to indemnify any person who was or is a party
to any third party proceeding by reason of the fact that he is or was a
director, officer, employee or agent of the corporation or is or was serving
at the request of the corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, or other
enterprise, against liability incurred in connection with such proceeding,
including any appeal thereof, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Section 607.0850(2) of the FBCA permits a Florida corporation to
indemnify any person, who was or is a party to a derivative action if such
person acted in any of the capacities set forth in the preceding paragraph,
against expenses and amounts paid in settlement not exceeding, in the
judgment of the board of directors, the estimated expense of litigating the
proceeding to conclusion, actually and reasonably incurred in connection with
the defense or settlement of such proceeding, including any appeal thereof.
Such indemnification shall be authorized if such person acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation, except that no indemnification shall be made
under this subsection in respect of any claim, issue, or matter as to which
such person shall have been adjudged to be liable unless, and only to the
extent that, the court in which such proceeding was brought, or any other
court of competent jurisdiction, shall determine upon application that,
despite the adjudication of liability, but in view of all circumstances of
the case, such person is fairly and reasonably entitled to indemnification
for such expenses which such court deems proper.
Section 607.0850(4) of the FBCA provides that any indemnification made
under the above provisions, unless pursuant to a court determination, may be
made only after a determination that the person to be indemnified has met the
standard of conduct described above. This determination is to be made by a
majority vote of a quorum consisting of the disinterested directors of the
board of directors, by independent legal counsel, or by a majority vote of
the disinterested shareholders. The board of directors also may designate a
special committee of disinterested directors to make this determination.
Section 607.0850(3), however, provides that to the extent that any officer,
director, employee or agent of a corporation has been successful on the
merits or otherwise in defense of any proceeding referred to in subsection
607.0850(1) or subsection 607.0850(2), or in defense of any claim, issue, or
matter therein, the Corporation must indemnify him against expenses actually
and reasonably incurred by him in connection therewith.
Section 607.0850(7) provides further that the indemnification and
advancement of expenses provided in Section 607.0850 are not exclusive, and a
corporation may make any other or further indemnification of advancement of
expenses of any of its directors, officers, employees or agents under any
bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office. However, a corporation cannot
indemnify or advance expenses to or on behalf of such person if a judgment or
other final adjudication establishes that his actions, or omissions to act,
were material to the cause of action so adjudicated and the director,
officer, employee or agent (a) violated criminal law, unless he had
reasonable cause to believe his conduct was not unlawful, (b) derived an
improper personal benefit from a transaction, (c) was or is a director in a
circumstance where liability under Section 607.0834 (relating to unlawful
distribution) applies, or (d) engages in willful misconduct or conscious
disregard for the best interests of the corporation in a proceeding by or in
right of the corporation to procure a judgment in its favor or in a
proceeding by or in right of a shareholder.
53
<PAGE>
The Company's Amended and Restated Bylaws ("Bylaws") provide for
indemnification of directors, officers and others. The general effect of the
Bylaws provision is to indemnify any officer, director, employee or agent
against any liability arising from any action or suit to the fullest extent
permitted by the FBCA. Advances against expenses may be made under the
Bylaws, and indemnity coverage provided thereunder includes liabilities under
federal securities laws as well as in other contexts. Specifically, Article V
provides that any person, his heirs, or personal representative, made, or
threatened to be made, a party to any threatened, pending, or completed
action or proceeding, whether civil, criminal, administrative, or
investigative, because he is or was a director, officer, employee or agent of
this Corporation or serves or served any other corporation or other
enterprise in any capacity at the request of this Corporation, shall be
indemnified by the Corporation, and the Corporation shall advance his related
expenses to the full extent permitted by Florida law. In discharging his
duty, any director, officer, employee or agent, when acting in good faith,
may rely upon information, opinions, reports, or statements, including
financial statements and other financial data, in each case prepared or
presented by (1) one or more officers or employees of the Corporation whom
the director, officer, employee or agent reasonably believes to be reliable
and competent in the matters presented, (2) counsel, public accountants, or
other persons as to matters that the director, officer, employee or agent
believes to be within that person's professional or expert competence, or (3)
in the case of a director, a committee of the board of directors upon which
he does not serve, duly designated according to law, as to matters within its
designated authority, if the director reasonably believes that the committee
is competent. The foregoing right of indemnification or reimbursement shall
not be exclusive of other rights to which the person, his heirs, or personal
representatives may be entitled. The Corporation may, upon the affirmative
vote of a majority of its full board of directors, purchase insurance for the
purpose of indemnifying these persons. The insurance may be for the benefit
of all directors, officers, or employees.
The Company, Ralph H. Eckler and Argent Securities, Inc. ("Argent")
entered into an Underwriting Agreement pursuant to which Argent sold the
Company's securities on a firm commitment basis in an initial public offering
which closed on November 15, 1995. The Underwriting Agreement provides for
reciprocal indemnification between the Company, Mr. Eckler and Argent against
certain liabilities in connection with the registration statement, including
liabilities under the Securities Act.
The Company, Argent and the Private Placement Investors entered into a
Registration Rights Agreement in connection with the Company's private
placement of securities which closed in September 1995. The Registration
Rights Agreement also provides for reciprocal indemnification against certain
liabilities in connection with the registration statement, including
liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities
Act may be provided to officers, directors or persons controlling the
Company, the Company has been informed that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
54
<PAGE>
INDEX TO FINANCIAL STATEMENTS
AUDITED FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants F-2
Balance Sheet at September 30, 1995 F-3
Statements of Operations for the Years Ended September 30, 1995 and 1994 F-5
Statements of Stockholders' Equity (Deficit) for the Years
Ended September 30, 1995 and 1994 F-6
Statements of Cash Flows for the Years Ended September 30, 1995 and 1994 F-7
Summary of Significant Accounting Policies F-8
Notes to Audited Financial Statements F-11
INTERIM FINANCIAL STATEMENTS
Balance Sheet at June 30, 1996 (Unaudited) F-25
Statements of Operations for the Nine Months Ended June 30,
1996 and 1995 (Unaudited) F-27
Statement of Stockholders' Equity for the Nine Months Ended
June 30, 1996 (Unaudited) F-28
Statements of Cash Flows for the Nine Months Ended June 30, 1996
and 1995 (Unaudited) F-29
Notes to unaudited Financial Statements F-30
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Eckler Industries, Inc.
We have audited the accompanying balance sheet of Eckler Industries, Inc. as of
September 30, 1995 and the related statements of operations, stockholders'
equity (deficit) and cash flows for each of the two years in the period ended
September 30, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Eckler Industries, Inc. as of
September 30, 1995 and the results of its operations and its cash flows for each
of the two years in the period ended September 30, 1995 in conformity with
generally accepted accounting principles.
BDO Seidman, LLP
Orlando, Florida
December 20, 1995
F-2
<PAGE>
ECKLER INDUSTRIES, INC.
BALANCE SHEET
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
ASSETS (Note 7)
CURRENT:
Accounts receivable - trade, less allowance for
possible losses of $2,335 $ 108,660
Due from affiliates (Note 4) 561,850
Inventories (Note 2) 697,388
Prepaid expenses (Note 3) 615,618
- --------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,983,516
- --------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, less accumulated
depreciation and amortization (Note 5) 2,597,428
- --------------------------------------------------------------------------------
OTHER ASSETS:
Deferred public offering costs 463,081
Deferred financing costs 61,500
Prepaid royalty expense (Note 3) 776,455
Other 68,062
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS 1,369,098
- --------------------------------------------------------------------------------
$5,950,042
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
NOTES TO FINANCIAL STATEMENTS.
F-3
<PAGE>
ECKLER INDUSTRIES, INC.
BALANCE SHEET
(CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 1,598,994
Royalties payable (Note 3) 175,000
Accrued wages 117,629
Other accrued expenses 358,727
Current maturities of long-term debt (Note 7) 1,208,853
Current portion of obligations under capital leases 31,840
Deferred income taxes (Note 6) 94,500
- --------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,585,543
- --------------------------------------------------------------------------------
LONG-TERM DEBT, less current maturities (Note 7) 2,338,108
OBLIGATIONS UNDER CAPITAL LEASES, less current portion 13,022
DEFERRED INCOME TAXES (Note 6) 351,500
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 6,288,173
- --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 8 and 12)
REDEEMABLE PREFERRED STOCK; $10 par value; 100,000 shares
authorized, issued and outstanding (Note 9) 476,968
CLASS A COMMON STOCK SUBJECT TO RESCISSION OFFER, 140,000
shares (Note 9) 211,905
STOCKHOLDERS' DEFICIT (Notes 10 and 13):
Class A common stock; $.01 par value; 10,000,000 shares
authorized; 360,000 issued and outstanding 3,600
Class B common stock; $.01 par value; 5,000,000 shares
authorized; 570,000 issued and outstanding 5,700
Additional paid-in capital (923,939)
Deficit (112,365)
- --------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' DEFICIT (1,027,004)
- --------------------------------------------------------------------------------
$5,950,042
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
NOTES TO FINANCIAL STATEMENTS.
F-4
<PAGE>
ECKLER INDUSTRIES, INC.
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1995 1994
- --------------------------------------------------------------------------------
NET SALES $ 12,932,450 $13,942,936
COST OF SALES 8,443,912 9,074,824
- --------------------------------------------------------------------------------
Gross profit 4,488,538 4,868,112
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 4,136,322 4,508,770
- --------------------------------------------------------------------------------
Income from operations 352,216 359,342
- --------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest expense (434,589) (406,386)
Interest income 6,050 6,842
Gain (loss) on sale of assets - (9,383)
Miscellaneous income 77,723 71,595
- --------------------------------------------------------------------------------
(350,816) (337,332)
- --------------------------------------------------------------------------------
Income before taxes on income 1,400 22,010
TAXES ON INCOME - DEFERRED (Note 6) 446,000 -
- --------------------------------------------------------------------------------
NET INCOME (LOSS) $ (444,600) $22,010
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRO FORMA (UNAUDITED):
Historical income before taxes on income $ 1,400 $22,010
Pro forma adjustment to eliminate compensation
in excess of $100,000 received by the stockholder
(Note 12) - 200,000
- --------------------------------------------------------------------------------
Pro forma income before taxes on income 1,400 222,010
Pro forma taxes on income (Note 6) 476 75,500
- --------------------------------------------------------------------------------
PRO FORMA NET INCOME 924 146,510
ACCRETION OF REDEMPTION VALUE OF REDEEMABLE
PREFERRED STOCK (Note 9) (113,703) -
PREFERRED STOCK DIVIDENDS (3,288) -
- --------------------------------------------------------------------------------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK $ (116,067) $146,510
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRO FORMA EARNINGS (LOSS) PER SHARE $ (.05) $ .07
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES AND SHARE
EQUIVALENTS OUTSTANDING 2,117,500 2,117,500
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
NOTES TO FINANCIAL STATEMENTS.
F-5
<PAGE>
ECKLER INDUSTRIES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
---------------- -------------- ADDITIONAL RETAINED
NUMBER PAR NUMBER PAR PAID-IN EARNINGS
OF SHARES VALUE OF SHARES VALUE CAPITAL (DEFICIT)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, September 30, 1993 200,000 $2,000 650,000 $6,500 $156,504 $520,693
Dividends - - - - - (856,404)
Net income - - - - - 22,010
- -------------------------------------------------------------------------------------
BALANCE, September 30, 1994 200,000 2,000 650,000 6,500 156,504 (313,701)
Conversion of Class B
shares into
Class A shares 160,000 1,600 (80,000) (800) (800) -
Dividends - - - - - (320,004)
Transfer of accumulated
deficit as of September 20,
1995 as a result of conversion
from an S Corporation to
a C Corporation - - - - (1,079,643)1,079,643
Accretion of redemption value
of redeemable preferred stock
(Note 9) - - - - - (113,703)
Net loss - - - - - (444,600)
- -------------------------------------------------------------------------------------
BALANCE, September 30, 1995 360,000 $3,600 570,000 $5,700 $(923,939)$(112,365)
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
NOTES TO FINANCIAL STATEMENTS.
F-6
<PAGE>
ECKLER INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1995 1994
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(444,600) $ 22,010
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 301,170 367,417
(Gain) loss on sale of assets - 9,383
Deferred income taxes 446,000 -
Cash provided by (used for):
Accounts receivable 70,892 209,632
Inventories 116,126 327,392
Prepaid expenses (45,547) (452,495)
Accounts payable 273,583 481,103
Royalties payable (175,000) -
Accrued expenses 8,404 35,497
- --------------------------------------------------------------------------------
Net cash provided by operating activities 551,028 999,939
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Notes and advances to affiliates (143,339) (216,685)
Purchases of property, plant and equipment (23,303) (58,352)
Proceeds from disposal of property and
equipment - 37,000
Payments received on notes from stockholder - 361,214
Decrease in other assets 22,923 40,146
- --------------------------------------------------------------------------------
Net cash provided by (used for) investing activities (143,719) 163,323
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 295,498 130,000
Principal payments of long-term debt (387,017) (960,666)
Payments on capital lease obligations (46,375) -
Proceeds from sale of common stock 211,905 -
Proceeds from sale of preferred stock 363,265 -
Deferred public offering costs (463,081) -
Deferred financing costs (61,500) -
Dividends (320,004) (450,000)
- --------------------------------------------------------------------------------
Net cash used for financing activities (407,309)(1,280,666)
- --------------------------------------------------------------------------------
NET DECREASE IN CASH - (117,404)
CASH, beginning of year - 117,404
- --------------------------------------------------------------------------------
CASH, end of year $ - $ -
- --------------------------------------------------------------------------------
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
NOTES TO FINANCIAL STATEMENTS.
F-7
<PAGE>
ECKLER INDUSTRIES, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
INVENTORIES
Inventories are priced at the lower of cost or market with costs being
determined by the use of the last-in, first-out (LIFO) method.
PREPAID EXPENSES AND ROYALTIES
The Company capitalizes catalog costs and amortizes the costs on the
straight-line method over the life of the catalog which is usually one year.
Total catalog costs expensed during the years ended September 30, 1995 and
1994 were approximately $907,000 and $988,000, respectively.
The Company amortizes the cost of advance royalties paid under the GM
agreement when sales of GM products are made at rates specified in the
agreement. (See Note 3).
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost. Depreciation is computed
over the estimated useful lives of the assets by the straight-line method for
financial reporting and by accelerated methods for income tax purposes.
DEFERRED OFFERING COSTS
Fees, costs and expenses related to the Company's anticipated initial public
offering (see Note 13) are being deferred and will be charged against the
proceeds therefrom.
DEFERRED FINANCING COSTS
Deferred financing costs related to notes payable to a bank are capitalized
and amortized over the term of the loan (see Note 7).
REVENUE RECOGNITION
Sales are recognized upon shipment of products to customers.
INCOME TAXES
Through September 20, 1995, the Company, with the consent of its stockholder,
elected under certain provisions of the Internal Revenue Code to be treated
as an S Corporation. Effective with the completion of the private placement
of securities (see Note 9), the Company automatically revoked this election.
Upon terminating the S Corporation election, the Company was required to
adopt Statement of Financial Accounting Standards No. 109 ("SFAS 109"),
"Accounting for Income Taxes" which requires, among other things, a
F-8
<PAGE>
ECKLER INDUSTRIES, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
liability approach to calculating deferred income taxes. This method uses an
asset and liability approach that requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events
that have been recognized in the Company's financial statements or tax
returns. Measurement of deferred income tax is based on enacted tax laws
including tax rates, with the measurement of deferred income tax assets being
reduced by available tax benefits not expected to be realized. The effect of
adopting SFAS 109 was a charge to deferred tax expense of $447,300 resulting
from temporary differences at September 20, 1995, the date of the revocation
of the Company's S election.
PRO FORMA AMOUNTS
STATEMENT OF OPERATIONS
The Company has entered into employment arrangements with its President that
provide for a base annual salary of $100,000 in 1995 and increases in future
years. A pro forma adjustment for the year ended September 30, 1994 was
presented for the difference between the current compensation and the actual
compensation paid during 1994.
Pro forma adjustments are also presented to reflect a provision for income
taxes based upon pro forma income before taxes as if the Company had been a C
Corporation for each of the years presented (see Note 6).
EARNINGS (LOSS) PER SHARE
Pro forma earnings (loss) per share of Class A common stock is based on pro
forma net income less accretion of redemption value of redeemable preferred
stock and dividends thereon and the weighted average number of shares of
Class A common stock and common stock equivalents outstanding during each
period after giving retroactive effect to the Company's recapitalization
discussed in Note 10. Shares of Class B common stock become convertible into
shares of Class A common stock on a 1-for-2 basis and are considered to be
Class A common stock equivalents.
Pursuant to the requirements of SEC Staff Accounting Bulletin No. 83, common
shares issued by the Company during the twelve months immediate-
F-9
<PAGE>
ECKLER INDUSTRIES, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
ly preceding the initial public offering (242,500 shares) at a price below
the initial public offering price plus the number of common shares subject to
the grant of common stock options and warrants and convertible preferred
stock issued during such period (375,000 shares) having exercise or
conversion prices below the initial public offering price have been included
in the calculation of the shares used in computing net income (loss) per
share as if they were outstanding for all periods presented.
RECENT ACCOUNTING PRONOUNCEMENTS
The FASB has issued SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets Being Disposed of," which provides
guidance on how and when impairment losses are recognized on long-lived
assets. This statement, when adopted, is not expected to have a material
impact on the Company.
The FASB has issued SFAS No. 123, "Accounting for Stock-Based Compensation,"
which establishes a fair value based method of accounting for stock-based
compensation plans. This statement provides a choice to either adopt the
fair value based method of accounting or continue to apply APB Opinion No.
25, which would require only disclosure of the pro forma net income and
earnings per share, determined as if the fair value based method had been
applied. The Company plans to continue to apply APB Opinion No. 25 when
adopting this statement, and accordingly, this statement is not expected to
have a material impact on the Company.
F-10
<PAGE>
ECKLER INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
Eckler Industries, Inc. (the Company) is an aftermarket supplier of Corvette
automotive parts and accessories throughout the United States. The Company
has four basic product lines which include accessories, Corvette restoration
parts, maintenance items and gift and apparel items.
2. INVENTORIES
Inventories consist of the following:
- ---------------------------------------------------------------------------
Raw materials and supplies $ 67,749
Work in progress 43,620
Finished goods 3,320
- ---------------------------------------------------------------------------
Total manufactured inventories 114,689
Inventory purchased for resale 582,699
- ---------------------------------------------------------------------------
$697,388
- ---------------------------------------------------------------------------
If the first-in, first-out (FIFO) method had been used, inventories would
have been higher by $135,530 at September 30, 1995.
3. PREPAID EXPENSES
Prepaid expenses consist of the following:
- --------------------------------------------------------------------------
Prepaid royalties $ 919,685
Catalog costs 404,504
Other prepaid expenses 67,884
- --------------------------------------------------------------------------
1,392,073
- --------------------------------------------------------------------------
Less noncurrent portion of prepaid royalties 776,455
- --------------------------------------------------------------------------
$ 615,618
- --------------------------------------------------------------------------
On December 22, 1993, the Company entered into a reproduction and service
part tooling licensing agreement (the "GM Agreement") with General Motors
Corporation ("GM"), whereby the Company has the right to use the licensed GM
trademarks, technology and tools to manufacture, sell, distribute and market
GM parts solely for the restoration or repair of older model GM
F-11
<PAGE>
ECKLER INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
vehicles. The GM Agreement became effective December 1, 1993 and expires July
31, 2000. The Company has the right to two successive five-year renewal
terms, subject to the satisfaction of certain minimum royalty payment
requirements during the 12-month period preceding each renewal date. The
terms of the GM Agreement provide that the Company pay a nonrefundable
advance royalty in the amount of $1,000,000, of which $825,000 has been paid
as of September 30, 1995 and the remaining $175,000 was paid on November 15,
1995. The maximum royalty rate to be paid by the Company is 8% of net sales
of licensed GM parts.
For each 12-month period from August 1, 1997 through July 31, 2000, and
annually thereafter during any renewal term, the Company is obligated to pay
to GM a minimum of $500,000 annually in royalties for net sales of the
licensed parts. However, if during the period from December 1, 1993 through
July 31, 1997 aggregate royalties of $1,000,000 are not achieved, then the
guaranteed minimum for the period August 1, 1997 to July 31, 1998 shall be
reduced (up to a maximum of $200,000) by an amount equal to the difference
between the $1,000,000 advance payment and actual royalties paid.
4. NOTES AND ACCOUNTS RECEIVABLE FROM AFFILIATES
At September 30, 1995, the Company had made advances to affiliated companies
under accounts and notes receivable amounting to $561,850. These receivables
may be offset against a note payable to the Company's stockholder (see Note
7). The stockholder paid these receivables in their entirety from proceeds
of the sale of his shares in connection with the Company's initial public
offering (see Note 13).
F-12
<PAGE>
ECKLER INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
USEFUL
LIVES
- -----------------------------------------------------------------------------------
<S> <C> <C>
Land $ 641,699
Buildings and improvements 10 - 40 years 2,674,989
Machinery and equipment 3 - 7 years 554,476
Molds 5 - 10 years 344,576
Equipment under capital leases 5 years 288,739
Vehicles 3 - 7 years 142,960
Furniture and fixtures 3 - 8 years 407,996
Computer hardware and software 4 - 5 years 1,399,265
- -----------------------------------------------------------------------------------
6,454,700
- -----------------------------------------------------------------------------------
Less accumulated depreciation and amortization 3,857,272
- -----------------------------------------------------------------------------------
$2,597,428
- -----------------------------------------------------------------------------------
</TABLE>
Substantially all of the assets listed above have been pledged by the Company
as collateral for various long and short-term borrowings (see Note 7).
Accumulated amortization on equipment under capital leases was $238,706 as of
September 30, 1995.
6. INCOME TAXES
Effective as of the closing date of the private placement, September 20,
1995, the Company converted to a C corporation. Prior to this date, the
Company had elected to be taxed as an S corporation pursuant to the Internal
Revenue Code with the consent of its stockholder. Under this arrangement,
the stockholder included the taxable income of the corporation in his
individual tax return.
The Company accounts for income taxes under the provisions of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (FAS 109). Under
the provisions of FAS 109, a net deferred tax liability of $447,300
F-13
<PAGE>
ECKLER INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
was recorded as of September 20, 1995 as a charge to earnings. The pro forma
provision for income taxes represents the estimated income taxes that would
have been reported had the Company been subject to income taxes for all
periods presented.
Deferred income taxes arise from temporary differences between the tax basis
of assets and liabilities and their reported amounts in the financial
statements.
The components of the net deferred tax liabilities consist of the following:
- -------------------------------------------------------------------------------
Deferred tax assets:
Provision for bad debts $ 900
Accrued vacation 30,200
Accrued interest 5,900
Deferred compensation 19,800
Net operating loss carryforward 1,300
- -------------------------------------------------------------------------------
Gross deferred income tax assets 58,100
- -------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation (351,500)
Prepaid catalog costs (152,600)
- -------------------------------------------------------------------------------
Gross deferred tax liabilities (504,100)
- -------------------------------------------------------------------------------
Net deferred tax liabilities (446,000)
Less current portion (94,500)
- -------------------------------------------------------------------------------
Long-term deferred tax liabilities $(351,500)
- -------------------------------------------------------------------------------
F-14
<PAGE>
ECKLER INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. LONG-TERM DEBT
Long-term debt consists of the following:
- --------------------------------------------------------------------------------
Notes payable to bank, collateralized
by substantially all assets (see below) $3,071,932
Note payable to the Company's employee
pension plan, interest at 8%, due October 1995 7,733
Note payable to the Company's principal
stockholder, interest at 18% per annum,
due on demand, subject to offset against
accounts and notes receivable from affiliates
(see Note 4) 6,361
Note payable to the Company's principal
stockholder, interest at 10%, principal and
interest due monthly to September 30, 1998 33,873
Mortgage payable, interest at 10% per
annum payable monthly, principal and
accrued interest due November 1, 1997
collateralized by real estate. 130,000
Investor notes payable (see below) 205,000
Other 92,062
- --------------------------------------------------------------------------------
3,546,961
Less current maturities 1,208,853
- --------------------------------------------------------------------------------
$2,338,108
- --------------------------------------------------------------------------------
F-15
<PAGE>
ECKLER INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES PAYABLE TO BANK
Among other provisions of these loan agreements, there are restrictions upon the
Company with respect to additional borrowings, loans to related parties, lease
commitments and payment of dividends or salaries above specified amounts to its
principal stockholder. Such agreements also impose financial covenants requiring
the Company to maintain specified leverage ratios which include debt to equity
and liabilities to tangible net worth. The debt has been guaranteed by the
Company's principal stockholder and certain of its affiliates. At September 30,
1995 and 1994, the Company was in default under the debt agreements.
On October 6, 1995, the Company renegotiated and consolidated its loans with
the bank. The terms of the loan refinancing require a principal payment of
$500,000 which was paid out of the proceeds of the initial public offering
("IPO") (see Note 13). The additional terms of the refinancing include
principal repayments of $100,000 per month from October 1995 through January
1996. For the period from February 1996 through September 1996, payments
under the terms of this refinancing will consist of interest only. In October
1996, the Company will pay an additional amount toward principal in the
amount of $750,000. Thereafter, payments will include monthly principal
payments of $25,600 per month until October 1, 1997, at which time the
remaining balance on this note will be due and payable. Interest will accrue
at the rate of 3% over prime and will be payable monthly.
INVESTOR NOTES
Through September 1995, the Company issued convertible investor notes to an
outside investor and to its officers and controller in the amount of $205,000.
The interest rate on these notes was 12%. Under the terms of these notes, as
amended, upon closing of the IPO, the holders of such notes converted their
notes into 102,500 shares of Class A common stock and 102,500 warrants to
purchase shares of Class A common stock at 120% of the IPO price.
F-16
<PAGE>
ECKLER INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The aggregate amount of the maturities of long-term debt maturing in future
years is as follows:
- ----------------------------------------------------------------------
1996 $1,208,853
1997 1,083,537
1998 1,254,571
- ----------------------------------------------------------------------
8. RETIREMENT BENEFIT PLAN
The Company sponsors a defined contribution pension plan for all employees
meeting certain eligibility requirements. The plan provides for voluntary
employee contributions and contributions by the Company to be determined at
the discretion of the Board of Directors. The Company made no contribution to
the plan for the years ended September 30, 1995 and 1994.
9. PRIVATE PLACEMENT
On September 20, 1995, the Company completed a private placement of
$1,000,000 of securities consisting of 40 units. Each unit consisted of 2,500
shares of preferred stock, par value $10 per share with cumulative dividends
at 12% per annum, and 3,500 shares of the Company's Class A common stock, par
value $.01 per share. Proceeds from this offering, net of offering costs,
were approximately $575,170. Of this amount, $363,265 was assigned to the
preferred stock sold, and $211,905 was assigned to the common stock sold.
Cumulative dividends in arrears as of September 30, 1995 amounted to $3,288.
Concurrent with the IPO discussed in Note 13, the Company commenced an offer
of rescission (which expired December 9, 1995) to all purchasers who
purchased units in the private placement. Holders of such units were offered
the right to rescind their purchases and receive a refund of the price paid
by them plus interest at 12% per annum in exchange for the return to the
Company of their Class A common stock and preferred stock. No purchasers
accepted the rescission offer.
At the completion of the Company's IPO, the Company had the option to call
the preferred stock sold in the private placement. The Company exercised
this option, in which case the investor could either (i) require the Company
to redeem his/her 2,500 shares of preferred stock
F-17
<PAGE>
ECKLER INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
for $25,000 plus any cumulative dividend or (ii) convert his/her 2,500 shares
of preferred stock into 6,000 shares of Class A common stock. In either
event, the investor would keep the 3,500 shares of Class A common stock that
comprise a part of the unit. All holders of preferred stock required the
Company to redeem such shares. The excess of the fair value of the $1,000,000
of consideration issued over the private placement proceeds assigned to the
preferred stock ($363,265) is being accreted from the issuance date to the
redemption date (November 15, 1995) and reduces net earnings applicable to
common stock during that period.
10. CAPITAL STOCK
RECAPITALIZATION
In September 1995, the Company issued 200,000 shares of Class A common stock
and 650,000 shares of Class B common stock to its stockholder in exchange for
all previously outstanding shares of common stock. The financial statements
give retroactive effect to this recapitalization. Subsequent to the
recapitalization, 80,000 Class B shares were converted into 160,000 Class A
shares. Shares of Class B common stock are entitled to the same rights as
Class A shares on a 2-for-1 basis. Class B shares become convertible into
Class A shares on a 1-for-2 basis. The dates upon which conversion of the
remaining 570,000 Class B shares may be made range from 24 to 60 months from
the completion of the Company's IPO (see Note 13). The Company has reserved
1,140,000 Class A shares for conversion of Class B shares.
CONSULTANT OPTION
In August 1994, pursuant to a consulting agreement (see Note 12), the Company
granted to a consultant an option to purchase 100,000 shares of the Company's
Class A common stock at an exercise price of $2.50 per share, which
approximated the value of the Company's common stock at the date of grant.
The option is exercisable for three years and is granted with certain "piggy
back" registration rights.
F-18
<PAGE>
ECKLER INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EMPLOYEE STOCK OPTION PLAN
Effective August 25, 1995, the Company adopted the 1995 Employee Combined
Qualified and Non-Qualified Employee Stock Option Plan (the "Combined Plan"),
pursuant to which 475,000 shares of Class A common stock have been reserved
for issuance upon the exercise of options designated as either "incentive
stock options" or as "non-qualified stock options." These options may be
granted to employees and consultants of the Company at terms stated in each
option agreement. The Company granted 100,000 incentive stock options under
the plan on August 25, 1995 at an exercise price of $2.50 per share (which
the Company believes approximated fair value at the date of grant). Those
options are exercisable for five years from the grant date and are subject to
a 24-month exercise restriction.
MANAGEMENT STOCK OPTION PLAN
The Company established a non-qualified stock option plan in 1995 for the
purpose of granting options to certain management employees. The Company
reserved 35,000 shares of its Class A common stock for issuance pursuant to
such options, all of which are subject to options granted to certain
executives on August 25, 1995. The options are exercisable for five years at
an exercise price of $2.50 per share (which the Company believes approximated
fair value at the date of grant) and are subject to a 24-month exercise
restriction.
F-19
<PAGE>
ECKLER INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SHARES RESERVED
At September 30, 1995, the Company has reserved Class A common stock for
future issuance under the following arrangements:
- --------------------------------------------------------------------------
Conversion of Class B common stock 1,140,000
Consultant option 100,000
Employee stock option plan 475,000
Management stock option plan 35,000
Investor notes (see Note 7) 205,000
Conversion of preferred stock (see Note 9) 240,000
Employment agreement (see Note 12) 480,000
- --------------------------------------------------------------------------
2,675,000
- --------------------------------------------------------------------------
11. SUPPLEMENTAL CASH FLOW INFORMATION
YEAR ENDED SEPTEMBER 30, 1995 1994
- --------------------------------------------------------------------------
Cash paid for interest $374,360 $434,653
- --------------------------------------------------------------------------
Non-cash investing and financing activities:
Land acquired through assumption of
mortgage payable $163,873 $ -
Assets acquired through obligation under
capital leases and note payable to stockholder 20,860 21,331
Dividend paid to stockholder through reduction
of debt owed to the Company - 406,404
Accretion of redemption value of
redeemable preferred stock 113,703 -
- --------------------------------------------------------------------------
F-20
<PAGE>
ECKLER INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
12. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leased approximately 20,000 square feet of warehouse space in an
industrial park located in Titusville, Florida from Eckler Development, Inc.,
a corporation that is wholly owned by the Company's principal stockholder.
The lease had an expiration date of January 31, 1998 and monthly rent of
$9,499. Rent expense for the years ended September 30, 1995 and 1994 amounted
to $62,727 and $113,988, respectively. As a part of the settlement with the
bank on August 30, 1995, under foreclosure proceedings, the lease was
terminated, and the Company was released from the lease obligation.
The Company leases approximately 6,800 square feet of warehouse space to
Eckler Service Center, Inc., a corporation that is wholly owned by the
Company's principal stockholder. The lease is for a term of five years and
expires on August 31, 1996. The initial rent for the building is $1,440 per
month, subject to annual increases at the rate of four percent (4%). Rental
income for the years ended September 30, 1995 and 1994 amounted to $19,050.
GUARANTEES
The Company was a guarantor of a lease agreement between Eckler Properties,
Inc. ("EPI") as lessor and Eckler Service Center, Inc. ("ESCI") as lessee,
corporations owned 100% by the Company's principal stockholder. In addition,
the property under this lease is subleased pursuant to a lease agreement
between ESCI as lessor and Eckler Chevrolet GEO, Inc., a corporation owned
50% by the Company's principal stockholder. The lease and sublease provide
for annual lease payments of $110,000 for a period of ten years. Lease
payments due from Eckler Chevrolet GEO, Inc. are in arrears under the terms
of the lease agreement. Furthermore, the Company was also a guarantor of up
to $850,000 of EPI's debt incurred in connection with the acquisition and
improvement of the subject property under the lease agreement. The balance of
the debt was approximately $780,000 at September 30, 1995. EPI was in default
under the terms of this loan. The Company's principal shareholder has pledged
120,000 shares of the Company's Class B common stock owned by him as
additional collateral.
F-21
<PAGE>
ECKLER INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EPI is negotiating the sale of this property and plans to satisfy this
mortgage with the proceeds therefrom. The Company's original guarantee of
ESCI's lease obligation is secondary to the shareholder's pledge of
additional collateral and will be completely eliminated upon the sale of the
property.
LITIGATION
The Company is involved in legal and administrative proceedings and claims of
various types. While any litigation contains an element of uncertainty,
based upon the opinion of the Company's legal counsel, management presently
believes that the outcome of such proceedings or claims which are pending or
known to be threatened will not have a material adverse effect on the
Company's financial position.
ENVIRONMENTAL MATTERS
Some of the Company's past and present operations involve activities which
are subject to extensive and changing federal and state environmental
regulations and can give rise to environmental issues. As a result, the
Company is from time to time involved in administrative and judicial
proceedings and administrative inquiries related to environmental matters.
Based on advice of counsel, management believes that the outcome of these
matters will not have a material impact on the Company's financial position.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with its President and CEO
effective May 23, 1995. The term of the agreement is seven years and is
automatically renewable for two successive two-year terms, unless notice of
termination is given prior to a renewal period. The agreement provides that
the employee shall receive an annual base salary of $100,000 with increases
to $150,000 for the second and third years of the agreement and to $175,000
and $200,000 for the fourth and fifth years of the agreement, respectively.
The base salary increases to $250,000 for the sixth, seventh and any years
subject to the automatic renewal options.
F-22
<PAGE>
ECKLER INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The agreement also provides the employee with incentive stock options to
acquire 160,000 and 320,000 shares of the Company's Class A common stock at
exercise prices of $2.50 and $5.00 per share, respectively. These options
accumulate annually at varying amounts for the first seven years following
the closing of the IPO (see Note 13) and are "earned" contingent upon the
Company achieving either a specified earnings per share level or a specified
stock price level (the "performance threshold") for the corresponding fiscal
year end. To the extent that the common stock's fair market value exceeds
the exercise prices at the grant dates, compensation expense will be recorded.
In addition, the employee will receive annual fixed bonuses which shall be
paid quarterly, provided the Company achieves either of the above-mentioned
performance thresholds. The annual bonuses shall be $250,000 for each of the
fiscal years ending September 30, 1996 through September 30, 2002.
CONSULTING AGREEMENTS
The Company entered into a consulting agreement dated as of August 29, 1994
with a financial consultant. The agreement provides for payment at the rate
of $150 per hour. The agreement further provides for minimum payments of
$7,500 per month commencing June 1, 1995 through May 31, 1998 and a grant of
stock options (see Note 10).
The Company entered into a consulting agreement with its underwriter dated
March 31, 1995, pursuant to which the underwriter will provide financial and
investor relation services, public relation services and corporate
communications services for a period of three years. The agreement provides for
prepayment of the consulting fees in three $50,000 installments on November 15,
1995 (which was paid upon closing of the IPO), January 15, 1996 and April 1,
1996. If the Company does not have stockholders' equity of at least $2 million
by December 15, 1995, the agreement is null and void. The Company may terminate
the agreement for any reason upon ten days written notice to the underwriter.
However, if termination is after December 15, 1995, the underwriter shall not be
required to perform any additional services under the agreement, and the
remainder of the unpaid
F-23
<PAGE>
ECKLER INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
balance of funds due to the underwriter shall be earned and shall be
immediately due and payable. The agreement also includes certain provisions
regarding the payment of out-of-pocket expenses, indemnification of the
underwriter and arbitration.
13. INITIAL PUBLIC OFFERING
On November 15, 1995, the Company completed its initial public offering of
1,200,000 units consisting of its Class A common stock and warrants at $5 per
unit. Each unit consisted of one share of Class A common stock and one
warrant to purchase one share of Class A common stock at a price equal to
$6.50 per share. The Company sold 840,000 shares of Class A common stock and
1,200,000 warrants and received approximately $2,981,000 in proceeds, net of
offering costs. Three hundred sixty thousand (360,000) shares of the Class A
common stock included in the units were sold by a stockholder, and the
Company received none of the proceeds from the sale of such shares. However,
the stockholder used approximately $570,000 of the proceeds from the sale of
such shares to repay amounts owed to the Company (see Note 4). The Company
plans to use these proceeds to purchase additional inventory, reduce notes
payable to bank (see Note 7) and redeem preferred stock issued in the private
placement (see Note 9). The underwriter was granted an option to purchase
84,000 units at $6 per unit, exercisable for a period of four years,
commencing one year after the effective date of the Registration Statement.
F-24
<PAGE>
ECKLER INDUSTRIES, INC.
BALANCE SHEET
(Unaudited)
- --------------------------------------------------------------------------------
June 30, 1996
- --------------------------------------------------------------------------------
ASSETS
CURRENT:
Cash and cash equivalents $ 160,641
Accounts receivable - net of allowance 243,243
Inventories 1,508,551
Prepaid expenses 1,287,967
- --------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 3,200,402
- --------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, less accumulated
depreciation and amortization 2,471,161
- --------------------------------------------------------------------------------
OTHER ASSETS:
Deferred financing costs, less accumulated amortization 86,572
Prepaid royalty expense 768,517
Other 24,908
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS 879,997
- --------------------------------------------------------------------------------
$ 6,551,560
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-25
<PAGE>
ECKLER INDUSTRIES, INC.
BALANCE SHEET
(Unaudited)
(Continued)
- --------------------------------------------------------------------------------
June 30, 1996
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 1,400,332
Accrued expenses 386,571
Deferred income taxes 78,400
Current maturities of long-term debt 987,640
Obligations under capital leases 16,060
- --------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,869,003
- --------------------------------------------------------------------------------
LONG-TERM DEBT, less current maturities 1,331,807
DEFERRED INCOME TAXES 361,100
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 4,561,910
- --------------------------------------------------------------------------------
STOCKHOLDER'S EQUITY:
Class A common stock; $.01 par value; 10,000,000 shares
authorized; 1,516,500 issued and outstanding 15,165
Class B common stock; $.01 par value; 5,000,000 shares
authorized; 523,000 issued and outstanding 5,230
Additional paid-in capital 2,514,865
Deficit (545,610)
- --------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 1,989,650
- --------------------------------------------------------------------------------
$ 6,551,560
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-26
<PAGE>
ECKLER INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
------------------ -----------------
6/30/96 6/30/95 6/30/96 6/30/95
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $ 5,048,996 $ 4,293,201 $ 11,144,484 $ 10,178,889
COST OF SALES 3,300,587 2,782,454 7,247,478 6,642,539
- ----------------------------------------------------------------------------------------------
Gross Profit 1,748,409 1,510,747 3,897,006 3,536,350
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 1,436,737 1,155,404 3,880,145 3,165,099
- ----------------------------------------------------------------------------------------------
Income from operations 311,672 355,343 16,861 371,251
- ----------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest expense (68,449) (111,594) (223,258) (293,815)
Interest income 2,264 1,517 14,635 4,040
Miscellaneous income 85,308 25,257 167,626 58,197
- ----------------------------------------------------------------------------------------------
19,123 (84,820) (40,997) (231,578)
- ----------------------------------------------------------------------------------------------
Income (loss) before (income taxes)
benefit from income taxes 330,795 270,523 (24,136) 139,673
(INCOME TAXES) BENEFIT FROM INCOME
TAXES (124,300) -- 6,500 --
- ----------------------------------------------------------------------------------------------
NET INCOME (LOSS) 206,495 270,523 (17,636) 139,673
- ----------------------------------------------------------------------------------------------
ACCRETION OF REDEMPTION VALUE
OF REDEEMABLE PREFERRED STOCK (533,032)
DIVIDENDS ON PREFERRED STOCK (18,106)
- ----------------------------------------------------------------------------------------------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCK 206,495 -- (568,774) --
- ----------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER SHARE $ .08 $ (.23)
- ----------------------------------------------------------------------------------------------
PROFORMA:
Historical income before
income taxes 270,523 139,673
Proforma income taxes 92,000 47,500
- ----------------------------------------------------------------------------------------------
Proforma net income 178,523 92,173
- ----------------------------------------------------------------------------------------------
Proforma earnings per share $ .08 $ .04
- ----------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
SHARES AND SHARE EQUIVALENTS
OUTSTANDING 2,562,500 2,117,500 2,525,000 2,117,500
- ----------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-27
<PAGE>
ECKLER INDUSTRIES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
----------------------- ----------------------- ADDITIONAL
NUMBER PAR NUMBER PAR PAID-IN
OF SHARES VALUE OF SHARES VALUE CAPITAL DEFICIT
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1995:
As previously reported 360,000 $3,600 570,000 $5,700 $(923,939) $(112,365)
Prior period adjustment to reflect
change in method of accounting
for inventories -- -- -- -- -- 135,529
- ----------------------------------------------------------------------------------------------------------------------------
As restated -- -- -- -- -- 23,164
- ----------------------------------------------------------------------------------------------------------------------------
Initial Public Offering, net of 840,000 8,400 -- -- 2,747,594 --
offering costs
Release Of Class A Common 140,000 1,400 -- -- 210,505 --
Stock subject to rescission
Conversion of Preferred
Stock 12,000 120 -- -- 59,880 --
Conversion of investor notes into
Class A Shares 102,500 1,025 -- -- 203,975 --
Issuance of Class A shares for
consulting services 62,000 620 -- -- 216,380 --
Dividends on preferred stock -- -- -- -- -- (18,106)
Contribution and retirement
of Class B Shares -- -- (47,000) (470) 470 --
Accretion of redemption value of
redeemable preferred stock -- -- -- -- -- (533,032)
Net Loss -- -- -- -- -- (17,636)
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE, June 30, 1996 1,516,500 $15,165 523,000 $5,230 $2,514,865 $(545,610)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-28
<PAGE>
ECKLER INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
- --------------------------------------------------------------------------------
Nine months ended June 30, 1996 1995
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net income (loss) $ (17,636) $ 139,673
Adjustments to reconcile net income (loss)
to net cash provided by (used for)
operating activities:
Depreciation and amortization 229,937 253,651
Loss on sale of assets 160 -
Issuance of common stock for consulting fees 27,125 -
Deferred income taxes (6,500) -
Cash provided by (used for):
Accounts receivable (134,583) (133,049)
Inventories (675,633) 25,681
Prepaid expenses (474,537) (167,756)
Accounts payable (198,662) 686,576
Royalties payable (175,000) -
Accrued expenses (89,785) 88,388
- --------------------------------------------------------------------------------
Net cash provided by (used for) operating activities (1,515,114) 893,164
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Notes and advances to affiliates 561,850 (97,732)
Purchases of property, plant and equipment (70,000) (16,530)
Proceeds from disposal of property and equipment 4,850 -
(Increase) decrease in other assets (531) 5,191
- --------------------------------------------------------------------------------
Net cash provided by (used for) investing activities 496,169 (109,071)
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments of long-term debt (1,025,044) (261,474)
Payments on capital lease obligations (26,272) (34,736)
Proceeds from sale of common stock 3,219,075 -
Proceeds from issuance of investor notes payable - 195,000
Redemption of preferred stock (950,000) -
Deferred public offering costs - (412,883)
Dividends (18,106) (270,000)
Deferred financing costs (20,067) -
- --------------------------------------------------------------------------------
Net cash provided by (used for) financing
activities 1,179,586 (784,093)
- --------------------------------------------------------------------------------
Net increase in cash and cash equivalents 160,641 -
Cash and cash equivalents, beginning of period - -
- --------------------------------------------------------------------------------
Cash and cash equivalents, end of period 160,641 -
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-29
<PAGE>
ECKLER INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-QSB, and do not include all of the
information and disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto for the year ended September 30, 1995. The
accompanying financial statements have not been audited by an independent
accountant in accordance with generally accepted auditing standards, but in the
opinion of management, such financial statements include all adjustments,
consisting only of normal recurring adjustments and accruals, to fairly report
the Company's financial position and results of operations. The results of
operations for the interim periods shown in this report are not necessarily
indicative of results to be expected for the fiscal year.
NOTE 2 - CAPITAL STOCK
On November 15, 1995, the Company completed its initial public offering of
1,200,000 units consisting of its Class A common stock and warrants at $5.00 per
unit. Each unit consisted of one share of Class A common stock and one warrant
to purchase one share of Class A common stock at a price equal to $6.50 per
share. The Company sold 840,000 Class A Common shares and 1,200,000 warrants
and received $2,755,994 in proceeds net of offering costs. Three hundred sixty
thousand (360,000) shares of the Class A common stock included in the units were
sold by a stockholder, and the Company received some of the proceeds from the
sale of such shares through repayment of amounts owed by the stockholder to the
Company. The Company used these proceeds to reduce accounts payable and debt,
redeem preferred stock, and for working capital and general corporate purposes.
NOTE 3 - EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is based upon the weighted average number of common
shares outstanding during each period. Shares of Class B common stock become
convertible into shares of Class A common stock on a 1-for-2 basis and are
included in weighted average shares outstanding. Common stock equivalents have
not been included since the effect would either be antidilutive or
insignificant.
Pursuant to the requirements of the SEC Staff Accounting Bulletin No. 83, common
shares issued by the Company during the twelve months immediately preceding the
initial public offering (242,500 shares) at a price below the initial public
offering price plus the number of common shares subject to the grant of common
stock options and warrants and convertible preferred stock issued during such
period (375,000 shares) having exercise or conversion prices below the initial
F-30
<PAGE>
public offering price have been included in the calculation of the shares used
in computing net loss per share as if they were outstanding for all periods
presented, prior to the November 15, 1995 closing of the Company's initial
public offering.
NOTE 4 - PRO FORMA AMOUNTS
Pro forma adjustments are presented for the three months ended and nine months
ended June 30, 1995 to reflect a provision for income taxes based upon
historical income before benefit from income taxes as if the Company had been a
C Corporation.
NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash and cash equivalents include checking accounts and money market funds. For
purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
The Company accreted $533,032 of redemption value of redeemable preferred stock
during the nine months ended June 30, 1996. In addition, investor notes of
$205,000 were converted into 102,500 shares of Class A common stock and 102,500
warrants and $50,000 of preferred stock was converted into 12,000 shares of
Class A common stock valued at $60,000 during the nine months ended June 30,
1996. Also, the Company issued 62,000 shares of Class A common stock valued at
$217,000 for consulting services during the nine months ended June 30, 1996. In
addition, a shareholder contributed 47,000 shares of Class B common stock to the
Company which had a market value of $405,375. The Company retired the shares
immediately upon receipt. The Company acquired land through assumption of a
mortgage payable in the amount of $163,873 during the nine months ended June 30,
1995. Also, the Company reclassified trade payables, incurred for professional
services, in the amount of $72,050 to notes payable during the nine months ended
June 30, 1995.
NOTE 6 - CHANGE IN ACCOUNTING METHOD FOR INVENTORIES
During the third quarter of 1996, the Company changed its method of accounting
for inventories from the last-in, first-out (LIFO) method to the first-in,
first-out (FIFO) method. Under the current economic environment of low
inflation, the Company believes that the FIFO method will result in a better
measurement of operating results. This change has been applied by retroactively
restating the accompanying financial statements. The change did not have a
significant effect on results of operations for the nine months ended June 30,
1996, nor is it anticipated that it will have a material effect on future
periods.
F-31
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDER, OR
ANY UNDERWRITER OR BROKER/DEALER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN
SUCH JURISDICTION.
___________
TABLE OF CONTENTS
PAGE
----
ADDITIONAL INFORMATION 1
PROSPECTUS SUMMARY 2
RISK FACTORS 6
S CORPORATION STATUS 14
USE OF PROCEEDS 14
PLAN OF DISTRIBUTION 15
CAPITALIZATION 17
SELLING SHAREHOLDERS 18
MARKET PRICE OF COMMON STOCK
AND RELATED STOCKHOLDERS MATTERS 21
SELECTED FINANCIAL DATA 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 23
BUSINESS 28
MANAGEMENT 36
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT 43
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 45
DESCRIPTION OF SECURITIES 48
SHARES AVAILABLE FOR FUTURE SALE 51
LEGAL MATTERS 52
EXPERTS 52
CHANGES IN ACCOUNTANTS 52
INDEMNIFICATION OF DIRECTORS AND OFFICERS 53
FINANCIAL STATEMENTS F-1
_______________
PROSPECTUS
_______________
ECKLER INDUSTRIES, INC.
1,200,000 SHARES OF CLASS A COMMON STOCK
INCLUDED IN 1,200,000 REDEEMABLE CLASS A
COMMON STOCK PURCHASE WARRANTS
_______________
84,000 SHARES OF CLASS A COMMON STOCK,
INCLUDED IN 84,000 CLASS A COMMON STOCK
PURCHASE WARRANTS
_______________
84,000 SHARES OF CLASS A COMMON STOCK,
INCLUDED IN UNIT PURCHASE OPTION
_______________
457,000 SHARES OF CLASS A COMMON STOCK FOR
SELLING STOCKHOLDERS
_______________
November ___, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 607.0850(1) of the Florida Business Corporation Act, ("FBCA")
permits a Florida corporation to indemnify any person who was or is a party to
any third party proceeding by reason of the fact that he is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against
liability incurred in connection with such proceeding, including any appeal
thereof, if he acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
Section 607.0850(2) of the FBCA permits a Florida corporation to indemnify
any person, who was or is a party to a derivative action if such person acted in
any of the capacities set forth in the preceding paragraph, against expenses and
amounts paid in settlement not exceeding, in the judgment of the board of
directors, the estimated expense of litigating the proceeding to conclusion,
actually and reasonably incurred in connection with the defense or settlement of
such proceeding, including any appeal thereof. Such indemnification shall be
authorized if such person acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation,
except that no indemnification shall be made under this subsection in respect of
any claim, issue, or matter as to which such person shall have been adjudged to
be liable unless, and only to the extent that, the court in which such
proceeding was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability, but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnification for such expenses which such court deems proper.
Section 607.0850(4) of the FBCA provides that any indemnification made
under the above provisions, unless pursuant to a court determination, may be
made only after a determination that the person to be indemnified has met the
standard of conduct described above. This determination is to be made by a
majority vote of a quorum consisting of the disinterested directors of the board
of directors, by independent legal counsel, or by a majority vote of the
disinterested shareholders. The board of directors also may designate a special
committee of disinterested directors to make this determination.
Section 607.0850(3), however, provides that to the extent that any officer,
director, employee or agent of a corporation has been successful on the merits
or otherwise in defense of any proceeding referred to in subsection 607.0850(1)
or subsection 607.0850(2), or in defense of any claim, issue, or matter therein,
the Corporation must indemnify him against expenses actually and reasonably
incurred by him in connection therewith.
Section 607.0850(7) provides further that the indemnification and
advancement of expenses provided in Section 607.0850 are not exclusive, and a
corporation may make any other or further indemnification of advancement of
expenses of any of its directors, officers, employees or agents under any bylaw,
agreement, vote of shareholders or disinterested directors, or otherwise, both
as to action in his official capacity and as to action in another capacity while
holding such office. However, a corporation cannot indemnify or advance expenses
to or on behalf of such person if a judgment or other final adjudication
establishes that his actions, or omissions to act, were material to the cause of
action so adjudicated and the director, officer, employee or agent (a) violated
criminal law, unless he had reasonable cause to believe his conduct was not
unlawful, (b) derived an improper personal benefit from a transaction, (c) was
or is a director in a circumstance where liability under Section 607.0834
(relating to unlawful distribution) applies, or (d) engages in willful
misconduct or conscious disregard for the best interests of the
II-1
<PAGE>
corporation in a proceeding by or in right of the corporation to procure a
judgment in its favor or in a proceeding by or in right of a shareholder.
The Company's Amended and Restated Bylaws ("Bylaws") provide for
indemnification of directors, officers and others. The general effect of the
Bylaws provision is to indemnify any officer, director, employee or agent
against any liability arising from any action or suit to the fullest extent
permitted by the FBCA. Advances against expenses may be made under the Bylaws,
and indemnity coverage provided thereunder includes liabilities under federal
securities laws as well as in other contexts. Specifically, Article V provides
that any person, his heirs, or personal representative, made, or threatened to
be made, a party to any threatened, pending, or completed action or proceeding,
whether civil, criminal, administrative, or investigative, because he is or was
a director, officer, employee or agent of this Corporation or serves or served
any other corporation or other enterprise in any capacity at the request of this
Corporation, shall be indemnified by the Corporation, and the Corporation shall
advance his related expenses to the full extent permitted by Florida law. In
discharging his duty, any director, officer, employee or agent, when acting in
good faith, may rely upon information, opinions, reports, or statements,
including financial statements and other financial data, in each case prepared
or presented by (1) one or more officers or employees of the Corporation whom
the director, officer, employee or agent reasonably believes to be reliable and
competent in the matters presented, (2) counsel, public accountants, or other
persons as to matters that the director, officer, employee or agent believes to
be within that person's professional or expert competence, or (3) in the case of
a director, a committee of the board of directors upon which he does not serve,
duly designated according to law, as to matters within its designated authority,
if the director reasonably believes that the committee is competent. The
foregoing right of indemnification or reimbursement shall not be exclusive of
other rights to which the person, his heirs, or personal representatives may be
entitled. The Corporation may, upon the affirmative vote of a majority of its
full board of directors, purchase insurance for the purpose of indemnifying
these persons. The insurance may be for the benefit of all directors, officers,
or employees.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Registration fee. . . . . . . . . . . . . . . . . . . . . . $ -0- *
Accounting fees and expenses. . . . . . . . . . . . . . . . 2,500 **
Legal fees and expenses . . . . . . . . . . . . . . . . . . 10,000 **
Blue sky fees and expenses. . . . . . . . . . . . . . . . . 3,000 **
Printing expenses . . . . . . . . . . . . . . . . . . . . . 5,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 3,000 **
-----------
Total . . . . . . . . . . . . . . . . . . . . . . $23,500 **
-----------
__________
* Paid on September 1, 1995.
** Estimated expenses.
RECENT SALES OF UNREGISTERED SECURITIES.
Within the past three years, the Company has sold the following securities
without registration under the Securities Act of 1933, as amended, (the
"Securities Act"), pursuant to exemption from registration afforded by
Section 4(2) or the rules and regulations promulgated thereunder.
1. In October 1996, the Company issued a stock option to each of its
four directors for 10,000 shares of Class A Common Stock (aggregating 40,000
shares), exercisable for five years commencing April 1997 and expiring
October 2001, at an exercise price of $3.00 per share ($3.30 per share for
Ralph M. Ecklar, a member of the Board and over 10% beneficial owner).
2. In July 1996, the Company issued stock options as follows: (i)
incentive stock options to certain officers of the Company under its Combined
Qualified and Non-Qualified Stock Option Plan for an aggregate of 25,000 shares
of Class A Common Stock, which options expire in July 1001 and are first
II-2
<PAGE>
exercisable in January 1997 at exercise prices ranging from $3.00 to $3.30
per share; (ii) non-qualified stock options for a total of 20,000 shares of
its Class A Common Stock to two independent directors of the Company, which
options expire in July 2001 and are first exercisable in January 1997 at an
exercise price of $3.00 per share; (iii) a non-qualified stock option to
Ralph H. Eckler for 200,000 shares of Class A Common Stock, which option
expires in July 2001 and is first exercisable in January 1997 at $2.88 per
share; and (iv) a non-qualified stock option to Argent Securities, Inc. for
200,000 shares of Class A Common Stock, which option expires in July 2001 and
which became exercisable in August, 1996.
3. Effective March 31, 1996, the Company issued to Randolph Fields, Esq.
for consulting services, a nonredeemable stock purchase warrant for 20,000
shares of Class A Common Stock, exercisable at $4.20 per share for a term of
five years commencing March 31, 1996 and expiring March 31, 2001.
4. Effective November 15, 1995, the Company issued a Unit Purchase Option
to Argent Securities, Inc., the Company's underwriter of its initiFal public
offering. The Unit Purchase Option entitles Argent to acquire 84,000 units,
each unit consisting of one share of Class A Common Stock and one nonredeemable
Class A Common Stock purchase warrant. The Unit Purchase Option is exercisable
for a period of four years commencing November 15, 1996 at $6.00 per unit, and
the underlying warrants are exercisable for four years commencing November 15,
1996 at $6.50 per share.
5. Effective November 15, 1995, the Company issued 102,500 shares of
Class A Common Stock and warrants for 102,500 shares of Class A Common Stock
to seven individuals in cancellation of $205,000 of promissory notes, five of
whom are executive officers of the Company. Each warrant is exercisable for
four years commencing November 9, 1996 for one share of Class A Common Stock
at $6.00 per share.
6. In August 1995, the Company granted stock options pursuant to its
stock option plans to certain of its executive officers in consideration of
their service to the Company. The options are for an aggregate of 135,000 shares
of the Company's Class A Common Stock at a per share exercise price of $2.50.
The term of the options are for 5 years, however, they may not be exercised for
2 years from the date of grant.
7. In September 1995, the Company completed a private placement of 40
units, each unit consisting of 3,500 shares of Class A Common Stock and 2,500
shares of Preferred Stock ("Private Placement"). The Preferred Stock was
redeemed by the Company on November 15, 1995. The price for each unit was
$25,000 for gross offering proceeds of $1,000,000 from which the Company
netted after underwriting commissions and costs, approximately $575,170. The
securities were offered in reliance on an exemption under Rule 506 of
Regulation D. However, the SEC informed the Company that such shares may
have been sold in violation of Section 5 of the Securities Act. Therefore,
the Company included the units in its registered initial public offering
pursuant to a rescission offer to the investors in the private placement.
None of the investors elected to rescind.
8. In August 1994. the Company granted to Greyhouse Service Corporation
an option to purchase 100,000 shares of the Company's Class A Common Stock at a
per share exercise price of $2.50. The option is exercisable for a term of
5 years and was granted to Greyhouse as partial compensation for its consulting
services rendered the Company.
II-3
<PAGE>
EXHIBITS
The following exhibits are filed as part of this registration statement:
<TABLE>
<CAPTION>
EXHIBIT
LIST EXHIBIT DESCRIPTION PAGE NUMBER OR INCORPORATED BY REFERENCE TO:
- ------- ------------------- --------------------------------------------
<S> <C> <C>
3.1 Amended and Restated Articles Exhibit 3.1 to Form SB-2 Registration
of Incorporation of the Company Statement, filed on September 1,
1995, File No. 33-96520-A
3.2 Amended and Restated By-Laws Exhibit 3.2 to Form SB-2 Registration
of the Company Statement, filed on September 1,
1995, File No. 33-96520-A
3.2.1 Amendment No. 1 to Amended and Exhibit 3.2.1 to Amendment No. 2 to
Restated Bylaws Form SB-2 Registration Statement,
filed on November 6, 1995, File No. 33-96520-A
4.1 Specimen of Class A Common Exhibit 4.2.1 to Amendment No. 2 to
Stock Certificate Form SB-2 Registration Statement,
filed on November 6, 1995, File No. 33-96520-A
4.2 Specimen of Class B Common Exhibit 4.2.2 to Amendment No. 1 to
Stock Certificate Form SB-2 Registration Statement, filed
on October 13, 1995, File No. 33-96520-A
4.3 Specimen of Warrant Exhibit 4.4 to Amendment No. 2 to Form
Certificate SB-2 Registration Statement, filed on
November 6, 1995, File No. 33-96520-A
4.4 Form of Warrant Agreement Exhibit 4.5 to Amendment No. 2 to
between the Company and Form SB-2 Registration Statement, filed
American Stock Transfer & on November 6, 1995, File No. 33-96520-A
Trust Company, as Warrant
Agent, dated November 9, 1995
4.5 Form of Nonredeemable Stock Exhibit 4.6 to Amendment No. 2 of
Purchase Warrant Form SB-2 Registration Statement, filed
on November 6, 1995, File No. 33-96520-A
4.6 Stock Purchase Warrant in Exhibit 10.20 to Annual Report on
favor of Ralph H. Eckler Form 10KSB, filed on January 16, 1997,
dated November 15, 1995 File No. 1-14082
4.7 Stock Purchase Warrant in Exhibit 10.21 to Annual Report on
favor of Ronald V. Mohr Form 10KSB, filed on January 16, 1997,
dated November 15, 1995 File No. 1-14082
4.8 Stock Purchase Warrant in Exhibit 10.22 to Annual Report on
favor of G. Edward Mills Form 10KSB, filed on January 16, 1997,
dated November 15, 1995 File No. 1-14082
4.9 Stock Purchase Warrant in Exhibit 10.23 to Annual Report on
favor of Robert M. Eckler Form 10KSB, filed on January 16, 1997,
dated November 15, 1995 File No. 1-14082
4.10 Stock Purchase Warrant in Exhibit 10.24 to Annual Report on
favor of Michael G. Wilson Form 10KSB, filed on January 16, 1997,
dated November 15, 1995 File No. 1-14082.
II-4
<PAGE>
5. Opinion of Greenberg Traurig Filed herewith
10.1 Trademark License Agreement Exhibit 10.17 to Amendment No. 1 to Form
dated effective October 14, SB-2 Registration Statement, filed on
1992 between the Company October 13, 1995, File No. 33-96520-A
and Chevrolet Motor Division,
General Motors Corporation
10.2 Trademark License Agreement Exhibit 10.2 to Amendment No. 1 to Form
dated effective October 3, 1992 SB-2 Registration Statement, filed on
between the Company and General October 13, 1995, File No. 33-96520-A
Motors Corporation
10.3.1 Reproduction and Service Parts Exhibit 10.3.1 to Amendment No. 1 of Form
Tooling License Agreement dated SB-2 Registration Statement, filed on
December 22, 1993 between the October 13, 1995, File No. 33-96520-A
Company and Service Parts
Operation, General Motors
Corporation ("GM License
Agreement")*
10.3.2 First Amendment to GM License Exhibit 10.3.2 to Amendment No. 1 of Form
Agreement, dated July 29, 1994 SB-2 Registration Statement, filed on
October 13, 1995, File No. 33-96520-A
10.3.3 Second Amendment to GM License Exhibit 10.3.3 to Amendment No. 1 of Form
Agreement, dated January 31, SB-2 Registration Statement, filed on
1995* October 13, 1995, File No. 33-96520-A
10.3.4 Third Amendment to GM License Exhibit 10.3.4 to Amendment No. 1 of Form
Agreement, dated February 14, SB-2 Registration Statement, filed on
1995 October 13, 1995, File No. 33-96520-A
10.3.5 Fourth Amendment to GM Exhibit 10.3.5 to Amendment No. 1 of Form
License Agreement, dated SB-2 Registration Statement, filed on
May 1, 1995 October 13, 1995, File No. 33-96520-A
10.3.6 Fifth Amendment to GM Exhibit 10.3.6 to Amendment No. 1 of Form
License Agreement, dated SB-2 Registration Statement, filed on
June 15, 1995 October 13, 1995, File No. 33-96520-A
10.3.7 Sixth Amendment to GM Exhibit 10.3.7 to Amendment No. 1 of Form
License Agreement, dated SB-2 Registration Statement, filed on
July 31, 1995 October 13, 1995, File No. 33-96520-A
10.3.8 Seventh Amendment to GM Exhibit 10.3.8 to Amendment No. 1 of Form
License Agreement, dated SB-2 Registration Statement, filed on
September 12, 1995 October 13, 1995, File No. 33-96520-A
10.4.1 Eckler Industries, Inc. Exhibit 10.4.1 to Form SB-2 Registration
Retirement and Savings Plan Statement, filed on September 1, 1995,
and Trust Agreement, as File No. 33-96520-A
Amended and Restated on
September 14, 1992
II-5
<PAGE>
10.4.2 Amendment No. 1 to Eckler Exhibit 10.4.2 to Form SB-2 Registration
Industries, Inc. Retirement Statement, filed on September 1, 1995,
and Savings Plan Trust File No. 33-96520-A
Agreement dated March 28, 1994
10.5 Lease Agreement dated Exhibit 10.5 to Form SB-2 Registration
September 1, 1991 between Statement, filed on September 1, 1995,
the Company, as Owner, and File No. 33-96520-A
Eckler Service Center, Inc.,
as Tenant
10.6 Eckler Industries, Inc. Exhibit 10.6 to Form SB-2 Registration
Non-Qualified Stock Option Plan Statement, filed on September 1, 1995,
File No. 33-96520-A
10.7 Eckler Industries, Inc. Exhibit 10.7 to Form SB-2 Registration
1995 Combined Qualified and Statement, filed on September 1, 1995,
Non-Qualified Employee Stock File No. 33-96520-A
Option Plan
10.8 Amended and Restated Exhibit 10.8 to Form SB-2 Registration
Employment Agreement dated Statement, filed on September 1, 1995,
effective May 23, 1995 File No. 33-96520-A
between the Company and
Ralph H. Eckler
10.9 Consulting Services Exhibit 10.9 to Amendment No. 1 of Form
Agreement dated effective SB-2 Registration Statement, filed on
August 29, 1994 between the October 13, 1995, File No. 33-96520-A
Company and Greyhouse
Services Corporation
10.10.1 Stock Option Agreement Exhibit 10.10.1 to Amendment No. 1 of Form
dated effective August 29, SB-2 Registration Statement, filed on
1994 between the Company October 13, 1995, File No. 33-96520-A
and Greyhouse Services
Corporation
10.10.2 Amendment No. 1 to Stock Exhibit 10.10.2 to Amendment No. 1 of Form
Option Agreement dated SB-2 Registration Statement, filed on
October 10, 1995 between October 13, 1995, File No. 33-96520-A
the Company and Greyhouse
Services Corporation
10.10.3 Shareholder's Voting Exhibit 10.10.3 to Amendment No. 1 of Form
Agreement between the SB-2 Registration Statement, filed on
Company, Ralph H. Eckler October 13, 1995, File No. 33-96520-A
and Greyhouse Services
Corporation dated
October 10, 1995
10.11 Amended and Restated Exhibit 10.14 to Amendment No. 2 to Form
Lock-Up Letter Agreement by SB-2 Registration Statement, filed on
Ralph H. Eckler to Argent November 6, 1995, File No. 33-96520-A
Securities, Inc., dated
October 12, 1995
10.12 Registration Rights Exhibit 10.15 to Amendment No. 1 to Form
Agreement by and among the SB-2 Registration Statement, filed on
Company and each of the October 13, 1995, File No. 33-96520-A
Purchasers referred to in
Schedule I thereto, dated
September 20, 1995
10.13.1 Consulting Agreement with Exhibit 10.16 to Form SB-2 Registration
Argent Securities, Inc. Statement, filed on September 1, 1995,
dated March 31, 1995, File No. 33-96520-A
together with assignment
thereof to the Company
dated effective as of July
28, 1995
II-6
<PAGE>
10.13.2 Amendment to Consulting Exhibit 10.16.1 to Amendment No. 1 to Form
Agreement dated October 10, SB-2 Registration Statement, filed on
1995 by and between Argent October 13, 1995, File No. 33-96520-A
Securities, Inc. and the
Company
10.13.3 Second Amendment to Exhibit 10.16.2 Amendment No. 2 to Form
Consulting Agreement dated SB-2 Registration Statement, filed on
November 6, 1995 by and November 6, 1995, File No. 33-96520-A
between Argent Securities,
Inc. and the Company
10.14 Unit Purchase Option Exhibit 1.2 to Amendment No. 2 to Form
Agreement between the SB-2 Registration Statement, filed on
Company and Argent November 6, 1995, File No. 33-96520-A
Securities, Inc. and
Certificate dated November
15, 1995
10.15 Marketing Services Exhibit 10.1 to Form S-8 Registration
Agreement between the Statement, filed on January 18, 1996,
Company and Richard F. File No. 333-382.
Flanigan dated January 8, 1995
10.16 Lease Agreement between the Exhibit 10.21 to Post Effective Amendment
Company and Titusville No. 1 to Form SB-2 Registration Statement,
Chevrolet-GEO, Inc., dated filed on April 10, 1996, File No. 33-96520-A
March 4, 1996
10.17 Lease Agreement between the Exhibit 10.22 to Post-Effective Amendment
Company and Titusville No. 1 to Form SB-2 Registration Statement,
Chevrolet-GEO, Inc. , dated filed on April 10, 1996, File No. 33-96520-A
March 4, 1996
10.18 Financial Public Relations Exhibit 10.1 and 10.1.1 to Form S-8
Consulting Agreement and Registration Statement filed on August 28,
related Stock Option 1996, File No. 333-10921
Agreement between the
Company and Gerald A.
Larder dated July 25, 1996
10.19 Loan Agreement between the Filed herewith
Company and Barnett Bank
N.A. dated September 30, 1996
10.20 Mortgage and Security Filed herewith
Agreement between the
Company and Barnett Bank
N.A. dated September 30, 1996
10.21 Promissory Note in the Filed herewith
amount of $2,400,000 from
the Company in favor of
Barnett Bank N.A. dated
September 30, 1996
10.22 Line of Credit Loan Filed herewith
Agreement between the
Company and Barnett Bank
N.A. dated September 30, 1996
II-7
<PAGE>
10.23 Security Agreement between Filed herewith
the Company and Barnett
Bank N.A. dated September
30, 1996
10.24 Promissory Note in the Filed herewith
amount of $1,000,000 in
favor of Barnett Bank N.A.
10.25 Termination of consulting Filed herewith
agreement, dated October
28, 1996
16. Letter on change in Exhibit 16 to Amendment No. 1 to Form SB-2
certifying accountant Registration Statement, filed on October
13, 1995, File No. 33-96520-A
23.1 Consent of BDO Seidman, LLP Filed herewith
23.2 Consent of Greenberg Traurig
(included in Exhibit 5)
</TABLE>
___________
* The Company applied for and was granted by the SEC confidential treatment of
portions of Exhibits 10.3.1 and 10.3.3. Accordingly, portions thereof were
omitted and filed separately.
UNDERTAKINGS.
The small business issuer will:
(1) file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(a) include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");
(b) reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered, (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(c) include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Act, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial BONA FIDE offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
II-8
<PAGE>
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement on Form SB-2 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Titusville, State of Florida, on November 14,
1996.
ECKLER INDUSTRIES, INC.
By: /s/ Ralph H. Eckler
-------------------------------------
Ralph H. Eckler
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933 as amended,
this Post-Effective Amendment No. 2 to the Registration Statement on Form
SB-2 (the "Registration Statement") has been signed by the following persons
in the capacities and on the dates indicated. Each person whose signature
appears below on this Registration Statement hereby constitutes and appoints
Ralph H. Eckler and Ronald V. Mohr, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any
and all capacities) (until revoked in writing) to sign any and all amendments
(including additional post-effective amendments and amendments thereto) to
this Registration Statement of Eckler Industries, Inc. and to file the same
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes, as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or their or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------- ------------------------------------ -----------------
<S> <C> <C>
/s/ RALPH H. ECKLER Director, President, Chief Executive November 14, 1996
- -------------------- Officer, Secretary, and Treasurer
Ralph H. Eckler
/s/ RONALD V. MOHR Director, Vice President of Finance November 14, 1996
- ------------------- and Administration; (principal
Ronald V. Mohr financial officer)
/s/ JOSEPH YOSSIFON Director November 14, 1996
- -------------------
Joseph Yossifon
II-10
<PAGE>
/s/ DONALD A. WOJNOWSKI, JR. Director November 14, 1996
- ----------------------------
Donald A. Wojnowski, Jr.
/s/ ERNEST RESTINA Controller November 14, 1996
- ------------------
Ernest Restina
</TABLE>
II-11
<PAGE>
INDEX TO EXHIBITS
EXHIBITS
- --------
5. Opinion of Greenberg Traurig
10.19 Loan Agreement between the
Company and Barnett Bank
N.A. dated September 30, 1996
10.20 Mortgage and Security
Agreement between the
Company and Barnett Bank
N.A. dated September 30, 1996
10.21 Promissory Note in the
amount of $2,400,000 from
the Company in favor of
Barnett Bank N.A. dated
September 30, 1996
10.22 Line of Credit Loan
Agreement between the
Company and Barnett Bank
N.A. dated September 30, 1996
10.23 Security Agreement between
the Company and Barnett
Bank N.A. dated September
30, 1996
10.24 Promissory Note in the
amount of $1,000,000 in
favor of Barnett Bank N.A.,
dated September 30, 1996
10.25 Termination of consulting
agreement, dated October 28,
1996
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Greenberg Traurig
(included in Exhibit 5)
<PAGE>
[LETTERHEAD]
November 14, 1996
Eckler Industries, Inc.
5200 South Washington Avenue
Titusville, Florida 32780
Gentlemen:
You have requested our opinion in connection with Post-Effective Amendment
No. 2 to the Registration Statement on Form SB-2 (the "Registration Statement")
of Eckler Industries, Inc. (the "Company") relating to the following shares of
Class A Common Stock (the "Shares"):
(a) 1,200,000 shares of Class A Common Stock issuable upon exercise
of 1,200,000 Redeemable Class A Common Stock Purchase Warrants (the "Public
Warrants");
(b) 84,000 shares of Class A Common Stock issuable upon exercise of
an Underwriters' Unit Purchase Option;
(c) 84,000 shares of Class A Common Stock issuable upon exercise of
84,000 Underwriters' Common Stock Purchase Warrants (the "Underwriters'
Warrants");
(d) 102,500 shares of Class A Common Stock issuable upon exercise of
non-public Class A Common Stock Purchase Warrants held by certain investors
and executive management of the Company (the "Bridge Warrants");
(e) 100,000 shares of Class A Common Stock issuable upon exercise of
an option held by Greyhouse Services Corporation (the "Consultant Option");
(f) 254,500 shares of Class A Common Stock held by certain existing
shareholders identified in the Registration Statement.
We have made such examination of the corporate records and proceedings of
the Company and have taken such further action as we deemed necessary or
appropriate to the rendering of our opinion herein.
Based on the foregoing, we are of the opinion that the 254,500 Shares
referenced above were legally issued, fully paid and non-assessable. Further,
the Shares underlying the Public Warrants, the Underwriters' Unit Purchase
Option, the Underwriters' Warrants, the Bridge Warrants and the Consultant
Option, when paid for and issued as contemplated by their respective option and
warrant agreements, will be legally issued, fully paid and non-assessable.
Therefore, the purchasers acquiring Shares upon subsequent resale as
contemplated in the
<PAGE>
Eckler Industries, Inc.
November 14, 1996
Page 2
Registration Statement will receive Shares that, as applicable, have been or
will be legally issued, fully paid and non-assessable by the Company.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the
reference to our firm under the heading "Legal Matters" therein.
/s/ GREENBERG TRAURIG HOFFMAN
LIPOFF ROSEN & QUENTEL, P.A.
<PAGE>
EXHIBIT 10.19
LOAN AGREEMENT
This Loan Agreement entered into this 30th day of September, 1996, by and
between BARNETT BANK, N.A., a national banking association, whose mailing
address is Post Office Box 678267, Orlando, Florida, 32867-8267, hereinafter
referred to as "Lender"; ECKLER INDUSTRIES, INC., a Florida corporation,
hereinafter referred to as "Borrower"; and RALPH H. ECKLER, individually,
hereinafter referred to as "Guarantor", whose mailing address is 5200 South
Washington Avenue, Titusville, FL 32780.
W I T N E S S E T H :
WHEREAS, on the 30th day of September, 1996, Borrower executed a certain
Promissory Note in the principal sum of $2,400,000.00, which Promissory Note is
secured by a Mortgage and Security Agreement in favor of Lender, dated of even
date herewith, said Mortgage and Security Agreement encumbering certain real
property located in Brevard County, Florida, more particularly described on
attached Exhibit "A"; and
WHEREAS, as a condition of the aforementioned mortgage loan Lender
required certain conditions and obligations of the Borrower; and
WHEREAS, the Borrower has agreed that the conditions and obligations
contained hereinafter should be conditions and obligations for the
aforementioned mortgage loan; and
WHEREAS, Lender and Borrower agree that the conditions and obligations
contained hereinafter are a part of the Promissory
1
<PAGE>
Note executed by the Borrower in the same manner and effect as if stated
therein,
IT THEREFORE IS AGREED AS FOLLOWS:
1. Borrower and Guarantor agree that so long as any indebtedness
shall be due Lender from Borrower under this note, Barnett Bank,
N. A. shall remain the primary bank of account for all operating
account deposits of the Borrower and failure by Borrower to abide
by the conditions of this clause shall constitute a default by
Borrower under this note. All business operating accounts and all
business merchant services shall be maintained with Barnett Bank,
N. A., Central Florida.
2. As requested from Lender from time to time, promptly furnish
Lender with such additional information and statements, lists of
assets and liabilities, agings of receivables and payables,
inventory schedules, budgets, forecasts, tax payments and other
reports with respect to Borrower's financial condition and
business operations.
3. ADDITIONAL COVENANTS.
(a) Borrower will submit 10-K's annually within ninety (90) days
of Borrower's fiscal year end.
(b) Borrower will submit 10-Q's quarterly within
2
<PAGE>
sixty (60) days of period end.
(c) CPA audited fiscal year end statement shall be submitted to
Lender within ninety (90) days of Borrower's fiscal year end.
(d) Guarantor will provide to Lender annual personal financial
statements in a form and content acceptable to Lender by August
31st of each year.
(e) Guarantor will provide to Lender a copy of Guarantor's
personal income tax return, including all schedules, immediately
upon filing. In the event an extension is requested of IRS, then
a copy of such extension request shall be submitted to Lender
immediately upon filing.
(f) If requested by Lender, evidence of paid ad valorem taxes
shall be provided to Lender annually by May 1st of each year.
NEGATIVE COVENANT ALLOWANCES:
(a) Borrower will not create, incur or add additional
indebtedness, except for trade debt, including capital leases
without Lender's written consent.
(b) Borrower will not permit any purchase money security
interests without Lender's written consent.
3
<PAGE>
(c) Borrower will not enter into any operating leases as
permitted indebtedness without Lender's written consent.
(d) Borrower will not permit loans or investments to officers or
shareholders without Lender's written consent.
(e) Borrower will not pledge assets without Lender's prior
written consent.
4. FINANCIAL COVENANTS AND RATIOS. Comply with the following
covenants and ratios, which ratios are to be tested 3/31 and 9/30 of each
year.
Tangible Net Worth. Maintain a minimum Tangible Net Worth of not less
than:
Period Ratio
------ -----
At All Times $1,900,000.00
Leverage Ratio. Maintain a ratio of Total Liabilities to Tangible Net
Worth of less than:
Period Ratio
------ -----
At All Times 2.5:1
Current Ratio. Maintain a ratio of Current Assets to Current Liabilities
in excess of:
Period Ratio
------ -----
At All Times 1.0:1
4
<PAGE>
Fixed Charge Ratio. Maintain a ratio of Adjusted Net Income to Fixed
Charges of not less than:
Period Ratio
------ -----
At All Times 1.25:1 as of fiscal year end, de-
fined as earnings before interest,
deprecations, amortization and
taxes less dividends and bonuses
divided by principal and interest.
5. Borrower may not make any distribution of dividends unless bank
cash flow requirements are met and only to minimum cash flow level of
1.25:1 as defined above, and restricted to 50% of earnings.
6. Notwithstanding anything to the contrary, or any other loan
document in connection with the loan transaction Borrower's right to any
advances under the Revolving Line of Credit is subject to a quarterly audit
to be conducted by the "ABL" Department and which audit shall determine
that Borrower is in compliance with all of the terms and conditions of this
Loan Agreement as well as the terms and conditions of all other loan
documents.
For purposes of this Agreement and to the extent the following terms are
utilized in this Agreement, the term "Tangible Net Worth" shall mean Borrower's
total assets excluding all intangible assets determined in accordance with GAAP
(i.e., goodwill, trademarks, patents, copyrights, organizational
5
<PAGE>
expenses, and similar intangible items, but including leaseholds and
leasehold improvements at book value) or Borrower less total Debt. The term
"Debt" shall be determined in accordance with GAAP. The term "Subordinated
Debt" shall mean indebtedness and liabilities of Borrower which have been
subordinated by written agreement to indebtedness owed by Borrower to Lender
in form and substance acceptable to Lender. The term "Working Capital" shall
mean Borrower's current assets at lower of cost or current market value less
amounts due from any officer, director, shareholder or any entity related by
common control or ownership, excluding prepaid expenses, less Borrower's
current liabilities. The term "Liquid Assets" shall mean Borrower's cash on
hand, marketable securities, bank deposits and Borrower's receivables. The
term "Adjusted Net Income" means net income after taxes plus depreciation,
amortization, lease expense, and interest expense. The term "Fixed Charges"
means interest expense plus lease expense, current maturities of long-term
debt and current maturities of capital leases. The term "Cash Flow" shall
mean net income after taxes, and exclusive of extraordinary gains and income,
plus depreciation and amortization. The term "Senior Debt" shall mean Debt
less Subordinated Debt. The term "Capital Funds" shall mean Tangible Net
Worth plus Subordinated Debt. Except as provided above, all computations
made to determine compliance with the requirements contained in this
paragraph shall be made in accordance with GAAP and certified by Borrower as
being true and correct.
6
<PAGE>
A default in any of the conditions of this Agreement shall constitute a
default in the Mortgage.
IN WITNESS WHEREOF, the parties hereto have executed this Loan Agreement as
of the day and year first above written.
BORROWER:
ECKLER INDUSTRIES, INC.
a Florida corporation
By: /s/ RALPH H. ECKLER
________________________ _____________________________________
Witness Signature Ralph H. Eckler, President
________________________ Address: 5200 S. Washington Ave.
Print Witness Name Titusville, FL 32780
GUARANTOR:
________________________
Witness Signature
/s/ RALPH H. ECKLER
____________________________________
________________________ Ralph H. Eckler, Individually
Print Witness Name
7
<PAGE>
LENDER:
BARNETT BANK, N.A.
By: /s/
________________________ _____________________________________
Witness Signature
________________________ Address: 707 Mendham Boulevard
Print Witness Name Suite 123
Orlando, FL 32825-3262
________________________
Witness Signature
________________________
Print Witness Name
8
<PAGE>
[LETTERHEAD]
EXH. 10.20
BARNETT BANK, N.A.
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT (the "Mortgage"), made this 30 day of
September, 1996, between ECKLER INDUSTRIES, INC., a Florida corporation, whose
mailing address is 5200 S. Washington Ave., Titusville, FL 32780 (the
"Borrower"), and BARNETT BANK, N.A., a national banking association, whose
mailing address is Post Office Box 678267, Orlando, Florida 32867-8267,
Attention: Credit Administration Manager (the "Lender");
W I T N E S S E T H:
WHEREAS, Borrower is indebted to Lender in the principal sum of TWO MILLION
FOUR HUNDRED ($2,400,000.00) DOLLARS, together with interest thereon, as
evidenced by that certain promissory note of even date herewith, executed by
Borrower and delivered to Lender (the "Note"), which by reference is made a part
hereof to the same extent as though set out in full herein, together with all
modifications, renewals and extensions hereof. The Note, this Mortgage and all
other documents executed in connection therewith, now or hereafter, are herein
referred to as the "Loan Documents."
NOW, THEREFORE, to secure the performance and observance by Borrower of all
covenants and conditions in the Note, together with all renewals, extensions and
modifications thereof, and in this Mortgage and in all other Loan Documents, and
in order to charge the properties, interests and rights hereinafter described
with such payment, performance and observance, and for and in consideration of
the sum of ONE ($1.00) DOLLAR, paid by Lender to Borrower this date, and for
other valuable considerations, the receipt of which is acknowledged, Borrower
does hereby grant, bargain, sell, alien, remise, release, convey, assign,
transfer, mortgage, hypothecate, pledge, deliver, set over, warrant and confirm
unto Lender, its successors and assigns forever:
THE MORTGAGED PROPERTY
1. THE LAND. All the land located in the County of Brevard, State of
Florida (the "Land"), described as follows, to-wit:
SEE EXHIBIT A ATTACHED HERETO.
2. THE IMPROVEMENTS. TOGETHER WITH all buildings, structures and
improvements of every nature whatsoever now or hereafter situated on the Land,
and all fixtures, machinery, appliances, equipment, furniture, and personal
property of every
<PAGE>
nature whatsoever now or hereafter owned by Borrower and located in or on, or
attached to, or used or intended to be used in connection with or with the
operation of, the Land, buildings, structures or other improvements, or in
connection with any construction being conducted or which may be conducted
thereon, and owned by Borrower, including all extensions, additions,
improvements, betterments, renewals, substitutions, and replacements to any of
the foregoing and all of the right, title and interest of Borrower in and to any
such personal property or fixtures (subJect to any lien, security interest or
claim) together with the benefit of any deposits or payments now or hereafter
made on such personal property or fixtures by Borrower or on its behalf (the
"Improvements").
3. EASEMENTS OR OTHER INTERESTS. TOGETHER WITH all easements, rights of
way, gores of land, streets, ways, alleys, passages, sewer rights, waters, water
courses, water rights and powers, and all estates, rights, titles, interests,
privileges, liberties, tenements, hereditaments and appurtenances whatsoever, in
any way belonging, relating or appertaining to any of the property hereinabove
described, or which hereafter shall in any way belong, relate or be appurtenant
thereto, whether now owned or hereafter acquired by Borrower, and the reversion
and reversions, remainder and remainders, rents, issues and profits thereof, and
all the estate, right, title, interest, property, possession, claim and demand
whatsoever, at law as well as in equity, of Borrower of, in and to the same,
including but not limited to all judgments, awards of damages and settlements
hereafter made resulting from condemnation proceedings or the taking of the
property described in paragraphs (A), (B) and (C) (the "Property") hereof or any
part thereof under the power of eminent domain, or for any damage (whether
caused by such taking or otherwise) to the Property hereof or any part thereof,
or to any rights appurtenant thereto, and all proceeds of any sales or other
dispositions of the Property or any part thereof.
4. ASSIGNMENT OF RENTS. TOGETHER WITH all rents, royalties, issues,
profits, revenue, income and other benefits from the Property to be applied
against the indebtedness and other sums secured hereby, provided, however, that
permission is hereby given to Borrower so long as no default has occurred
hereunder, to collect, receive, take, use and enjoy such rents, royalties,
issues, profits, revenue, income and other benefits as they become due and
payable, but not in advance thereof, to enforce all Borrower's rights under any
lease now or hereafter affecting the Property. The foregoing assignment shall
be fully operative without any further action on the part of either party and
specifically Lender shall be entitled, at its option upon the occurrence of a
default hereunder, to all rents, royalties, issues, profits, revenue, income and
other benefits from the Property whether or not Lender takes possession of the
Property. Upon any such default hereunder, the permission hereby given to
Borrower to collect such rents, royalties, issues, profits, revenue,
<PAGE>
income and other benefits from the Property shall terminate and such
permission shall not be reinstated upon a cure of the default without Lender's
specific consent. Neither the exercise of any rights under this paragraph by
Lender nor the application of any such rents, royalties, issues, profits,
revenue, income or other benefits to the indebtedness and other sums secured
hereby, shall cure or waive any default or notice of default hereunder or
invalidate any act done pursuant hereto or to any such notice, but shall be
cumulative of all other rights and remedies.
5. ASSIGNMENT OF LEASES. TOGETHER WITH all right, title and interest of
Borrower in and to any and all leases now or hereafter on or affecting the
Property, together with all security therefor and all monies payable thereunder,
subject, however, to the conditional permission hereinabove given to Borrower to
collect the rentals and enforce its rights under any such lease. The foregoing
assignment of any lease shall not be deemed to impose upon Lender any of the
obligations or duties of Borrower provided in any such lease, and Borrower
agrees to fully perform all obligations of the lessor under all such leases.
Upon Lender's request, Borrower agrees to send to Lender a list, or copy, of all
leases covered by the foregoing assignment and as any such lease shall expire or
terminate or as any new lease shall be made, Borrower shall so notify Lender in
order that at all times Lender shall have a current list of all leases affecting
the Property. Lender shall have the right, at any time and from time to time, to
notify any lessee of the rights of Lender as provided by this paragraph. From
time to time, upon request of Lender, Borrower shall specifically assign to
Lender as additional security hereunder, by an instrument in writing in such
form as may be approved by Lender, all right, title and interest of Borrower in
and to any and all leases now or hereafter on or affecting the Mortgaged
Property, together with all security therefor and all monies payable thereunder,
subject to the conditional permission hereinabove given to Borrower to collect
the rentals and enforce its rights under any such lease. Borrower shall also
execute and deliver to Lender any notification, financing statement or other
document reasonably required by Lender to perfect the foregoing assignment as to
any such lease. Upon the reasonable request of the Lender, the Borrower shall
provide the Lender with estoppel letters or certificates from the various
tenants, if any, occupying the Mortgaged Property, stating in detail the current
status of their lease and/or occupancy of the Mortgage Property.
This instrument constitutes an absolute and present assignment of the
rents, royalties, issues, profits, revenue, income and other benefits from the
Mortgaged Property, subject, however, to the conditional permission given to
Borrower to collect, receive, take, use and enjoy the same and enforce its
rights as provided hereinabove; provided, further, that the existence or
exercise of such right of Borrower shall not operate to subordinate this
assignment to any subsequent assignment, in whole or
<PAGE>
in part, by Borrower, and any such subsequent assignment by Borrower shall be
subject to the rights of Lender hereunder.
6. FIXTURES AND PERSONAL PROPERTY. TOGETHER WITH a security interest in
(i) all property and fixtures affixed to or located on the Property which, to
the fullest extent permitted by law shall be deemed fixtures and a part of the
Property; (ii) all articles of personal property and all materials delivered to
the Property for use in any construction being conducted thereon, and owned by
Borrower; (iii) all proceeds, products, replacements, additions, substitutions,
renewals and accessions of any of the foregoing; (iv) all contract rights,
general intangibles, water and sewer payments, leases and lease payments,
eminent domain awards, insurance policies and proceeds, actions and rights in
action, as all of the same may relate to the Property; (v) all contracts,
agreements, licenses and permits, now or hereafter in existence, used by the
Borrower in connection with the operation of any business now, or hereafter,
operated on the Land; and (vi) all instruments, documents, chattel papers and
general business intangibles relating to or arising from the collateral
described in this paragraph (F) and all cash and noncash proceeds and products
thereof. The foregoing items (i), (ii) and (iii) (hereinafter the "Tangible
Property") include (a) all rights, title and interest of Borrower in and to the
minerals, soil, flowers, shrubs, crops, trees, timber and other emblements now
or hereafter on the Property or under or above the same or any part or parcel
thereof; (b) all machinery, apparatus, equipment, fittings, fixtures, whether
actually or constructively attached to the Property and including all trade,
domestic and ornamental fixtures and articles of personal property of every kind
and nature whatsoever now or hereafter located in, upon or under the Property or
any part thereof and used or usable in connection with any present or future
operation of the Property and now owned or hereafter acquired by Borrower,
including, but without limiting the generality of the foregoing, all heating,
air conditioning, freezing, lighting, laundry, incinerating and power equipment;
engines; pipes; pumps; tanks; motors; conduits; switchboards; plumbing, lifting,
cleaning, fire prevention, fire extinguishing, refrigerating, ventilating and
communications apparatus; boilers, ranges, furnaces, oil burners or units
thereof; appliances; air cooling and air conditioning apparatus; vacuum cleaning
systems; elevators; escalators; shades; awnings; screens; storm doors and
windows; stoves; wall beds; refrigerators; attached cabinets; partitions; ducts
and compressors; rugs and carpets; draperies; furniture and furnishings;
together with all building materials and equipment now or hereafter delivered to
the Property and intended to be installed therein, including but not limited to
lumber, plaster, cement, shingles, roofing, plumbing, fixtures, pipe, lath,
wallboard, cabinets, nails, sinks, toilets, furnaces, heaters, brick, tile,
water heaters, screens, window frames, glass doors, flooring, paint, lighting
fixtures and unattached refrigerating, cooking, heating and ventilating
appliances and equipment; together with all proceeds,
<PAGE>
additions and accessions thereto and replacements thereof; (c) all of the water,
sanitary and storm sewer systems now or hereafter owned by the Borrower which
are now or hereafter located by, over and upon the Property or any part and
parcel thereof, and which water system includes all water mains, service
laterals, hydrants, valves and appurtenances, and which sewer system includes
all sanitary sewer lines, including mains, laterals, manholes, sewer and water
tap units, and appurtenances thereto; and (d) all paving for streets, roads,
walkways or entrance ways now or hereafter owned by Borrower and which are now
or hereafter located on the Property or any part or parcel thereof. The
foregoing items (iv), (v) and (vi) (hereinafter the "Intangible Collateral")
include (aa) all sewer permits, connection fees, impact fees, reservation fees,
and other deposits or payments made in connection with the reservation,
allocation, permitting or providing of wastewater treatment and potable water to
the Property and any and all claims or demands relating thereto, now owned or
which may hereafter be acquired by Borrower, together with all right, title,
interest, equity, estate, demand or claim to the provision of wastewater
treatment and potable water to the Property, now existing or which may hereafter
be acquired by Borrower; (bb) all of Borrower's interest as lessor in and to all
leases or rental arrangements of the Property or any part thereof, heretofore
made and entered into, and in and to all leases or rental arrangements hereafter
made and entered into by Borrower during the life of the security agreements or
any extension or renewal thereof, together with all rents and payments in lieu
of rents, together with any and all guarantees of such leases or rental
arrangements and including all present and future security deposits and advance
rentals; (cc) any and all awards or payments, including interest thereon and the
right to receive the same, as a result of (a) the exercise of the right of
eminent domain, (b) the alteration of the grade of any street, or (c) any other
injury to, taking of or decrease in the value of the Property; (dd) all of the
right, title and interest of the Borrower in and to all unearned premiums
accrued, accruing or to accrue under any and all insurance policies now or
hereafter provided pursuant to the terms of security agreements, and all
proceeds or sums payable for the loss of or damage to the Property herein, or
rents, revenues, income, profits or proceeds from leases, franchises,
concessions or licenses of or on any part of the Property; (ee) all contracts
and contract rights of Borrower arising from contracts entered into in
connection with development, construction upon or operation of the Property,
including but not limited to, all deposits held by or on behalf of the Borrower,
and all management, franchise and service agreements, related to the business
now or hereafter conducted by the Borrower on the Property; (ff) all of the
right, title and interest of the Borrower in and to any trade name, names of
businesses, or fictitious names of any kind used in conjunction with the
operation of any business or endeavor located on the Property; and (gg) all of
Borrower's interest in all utility security deposits or bonds on the Prop-
<PAGE>
erty or any part or parcel thereof. Borrower (Debtor) hereby grants to Lender
(Creditor) a security interest in all of the foregoing items (i) through (vi).
7. SECURITY AGREEMENT. To the extent any of the property described
encumbered by this Mortgage from time to time constitutes personal property
subject to the provisions of the Florida Uniform Commercial Code (the "Code"),
this Mortgage constitutes a "Security Agreement" for all purposes under the
Code. Without limitation, Lender, at its election, upon Borrower's default
under this Mortgage continuing beyond any applicable curative period, will have
all rights, powers, privileges, and remedies from time to time available to a
secured party under the provisions of the Code with respect to such property.
Notwithstanding any provision of this Mortgage to the contrary, Borrower and
Lender agree that, unless and until Lender affirmatively elects otherwise, all
property in any manner used, useful, or intended to be used for the improvement
of, or production of income from, the Land is, and at all times and for all
purposes and in all proceedings both legal or equitable shall be, regarded as
part of the real estate irrespective of whether (i) any such items are
physically attached to the Improvements; (ii) serial numbers are used for the
better identification of certain equipment; or (iii) any such item is referred
to or reflected in any financing statement filed or recorded at any time.
Similarly, the mention in any financing statement of the rights in, or the
proceeds of, any fire and/or hazard insurance policy, or any award in eminent
domain proceedings for a taking or for loss of value, or Borrower's interest as
lessor in any present or future lease or rights to income growing out of the use
of the Mortgage Property, whether pursuant to a lease or otherwise, shall not be
construed as altering any of Lender's rights as determined by this Mortgage, or
otherwise available at law or in equity, or impugning the priority of this
Mortgage, or the Loan Documents, or both, but such mention in any financing
statement is declared to be for Lender's protection if, as, and when any court
holds that notice of Lender's priority of interest, to be effective against a
particular class of persons, including the Federal government and any
subdivisions or entity of the Federal government, must be perfected in the
manner required by the Code. Borrower agrees to execute and deliver on demand
such other security agreements, financing statements and other instruments as
Lender may request in order to perfect its security interest or to impose the
lien hereof more specifically upon any of such property.
Everything referred to in paragraphs (A), (B), (C), (D), (E) (F) and (G)
hereof and any additional property hereafter acquired by Borrower to be used in
connection with the Property and subject to the lien of this Mortgage or
intended to be so is herein referred to as the "Mortgaged Property."
TO HAVE AND TO HOLD the same, together with all and singular the tenements,
hereditaments and appurtenances thereunto belong-
<PAGE>
ing or in anywise appertaining, and the reversion and reversions, remainder or
remainders, rents, issues, and profits thereof, and also all the estate, right,
title, interest, homestead, dower and right of dower, separate estate,
possession, claim and demand whatsoever, as well in law as in equity, of the
said Borrower in and to the same, and every part thereof, with the appurtenances
of the said Borrower in and to the same, and every part and parcel thereof unto
the said Lender in fee simple.
And the Borrower hereby covenants with the Lender, that the Borrower is
indefeasibly seized of the Land in fee simple; that the Borrower has full power
and lawful right to convey the same in fee simple as aforesaid; that the Land is
and will remain free from all encumbrances except taxes for the current year;
that said Borrower will make such further assurances to prove the fee simple
title to the Land in said Borrower as may be reasonably required, and that said
Borrower does hereby fully warrant the title to the Land, and every part
thereof, and will defend the same against the lawful claims of all persons
whomsoever.
PROVIDED ALWAYS, that if the Borrower shall well and truly pay said
indebtedness unto the Lender, and any renewals or extensions thereof, and the
interest thereon, together with all costs, charges and expenses, including a
reasonable attorney's fee, which the Lender may incur or be put to in collecting
the same by foreclosure, or otherwise, and shall duly, promptly, and fully
perform, discharge, execute, effect, complete, and comply with and abide by each
and every stipulation, agreement, condition, and covenant of the Note and of
this Mortgage, then this Mortgage and the estate hereby created shall cease and
be null and void.
And the Borrower hereby further covenants as follows:
1. PAYMENT. That Borrower will pay all and singular the principal and
interest and the various and sundry sums of money payable by virtue of the Note
and this Mortgage, each and every, promptly on the days respectively the same
severally become due. If any payment hereunder (other than the final payment)
is not made within ten (10) days after it is due, the Borrower shall pay to
Lender a late charge equal to five percent (5%) of the late payment. It is
further agreed that any sums, including without limitation payments of principal
and interest on said Note, which shall not be paid when due, subject to any
applicable grace and/or cure periods and whether becoming due by lapse of time
or by reason of acceleration under the provisions herein stated, shall bear
interest at the Penalty Rate as defined in the Note and shall be secured by the
lien of this Mortgage.
2. TAXES, ETC. That Borrower will pay, when due and before any penalty
attaches, all real estate taxes, tangible personal property taxes, assessments,
water rates, and other governmental or municipal charges, fines, or impositions,
on the Mortgaged Property for which provision has not been made herein-
<PAGE>
before, and in default thereof the Lender may pay the same, and all such sums so
paid by the Lender shall be immediately due and payable, and shall be secured by
the lien of this Mortgage; and the Borrower will promptly deliver the official
receipts therefor to the Lender. On or before March 1st of each year during the
term of this Mortgage, the Borrower shall provide the Lender with paid receipts
evidencing the payment of all real estate and tangible personal property taxes
due with respect to the Mortgaged Property.
3. WASTE; REPAIRS. That Borrower will permit, commit, or suffer no
waste, impairment, or deterioration of the Mortgaged Property or any part
thereof; and in the event of the failure of the Borrower to keep any buildings
on said premises and those to be erected on the Mortgaged Property or
improvements thereon, in good repair, the Lender may, after giving the Borrower
written notice and ten (10) days to cure any such defects, make such repairs, as
in its discretion, it may deem necessary for the proper preservation thereof,
and the full amount of each and every such payment shall be immediately due and
payable, and shall be secured by the lien of this Mortgage.
4. USE AND ALTERATION OF MORTGAGED PROPERTY. Unless required by
applicable law or unless Lender has otherwise agreed in writing, Borrower shall
not allow changes in the nature of the occupancy for which the Mortgaged
Property was intended at the time this Mortgage was executed. Borrower shall
not initiate or acquiesce in a change in the zoning classification of the
Mortgaged Property without Lender's written consent. Borrower shall not make
any change in the use of the Mortgaged Property which will create a fire or
other hazard not in existence on the date hereof, nor shall Borrower in any way
increase any hazard. Without the prior written consent of Lender, no building
or improvement may be erected on the Land, nor may Borrower structurally remove
or demolish any building or improvement, nor may Borrower materially
structurally alter any building or improvement that would change the use of the
Mortgaged Property or that would otherwise decrease its value, nor shall any
fixture or chattel covered by this Mortgage be removed at any time unless
simultaneously replaced by an article of equal kind, quality and value owned by
Borrower, and which is unencumbered except by the lien of this Mortgage and
other instruments of security securing the Note.
5. SURFACE ALTERATION AND MINERAL RIGHTS. Borrower shall not consent to,
permit or indulge in any entry, either by itself or by any others, upon the
surface of the Land for the purpose of exploration, drilling, prospecting,
mining, excavation or removal of any earth, sand, dirt, rock, minerals, oil or
any other substance without the Lender's approval and written consent.
6. COLLECTION EXPENSES. All parties liable for the payment of the Note
agree to pay the Lender all costs incurred by
<PAGE>
the Lender, whether or not an action be brought, in collecting the sums due
under the Note, enforcing the performance and/or protecting its rights under the
Loan Documents and in realizing on any of the security for the Note. Such costs
and expenses shall include, but are not limited to, reasonable attorneys, fees,
filing fees, costs of publication, deposition fees, stenographer fees, witness
fees, title search or abstract costs and other court and related costs incurred
or paid by Lender in any action, proceeding or dispute in which Lender is made a
part or appears as a party plaintiff or party defendant because of the failure
of the Borrower promptly and fully to perform and comply with all conditions and
covenants of this Mortgage, the Note secured hereby, or any other Loan Document,
including but not limited to, the foreclosure of this Mortgage, condemnation of
all or part of the Mortgaged Property, or any action to protect the security
thereof. Sums advanced by the Lender for the payment of collection costs and
expenses shall accrue interest at the Penalty Rate, as defined in the Note, from
the time they are advanced or paid by the Lender, and shall be due and payable
upon payment by Lender without notice or demand and shall be secured by the lien
of the Mortgage.
7. ATTORNEYS' FEES. All parties liable for the payment of the Note agree
to pay the Lender reasonable attorneys, fees incurred by the Lender, whether or
not an action be brought, in collecting the sums due under the Note, enforcing
the performance and/or protecting its rights under the Loan Documents and in
realizing on any of the security for the Note. Such reasonable attorneys, fees
shall include, but not be limited to, fees for attorney's, paralegal's, legal
assistant's, and expenses incurred in any and all judicial, bankruptcy,
reorganization, administrative receivership, or other proceedings effecting
creditor's rights and involving a claim under the Note or any Loan Document,
which such proceedings may arise before or after entry of a final judgment. Such
fees shall be paid regardless whether suit is brought and shall include all fees
incurred by Lender at all trial and appellate levels including bankruptcy court.
Sums advanced by the Lender for the payment of attorneys, fees shall accrue
interest at the Penalty Rate, as defined in the Note, from the time they are
advanced by the Lender, and shall be due and payable upon payment by Lender
without notice or demand and shall be secured by the lien of the Mortgage.
8. INSURANCE.
(a) TYPES OF COVERAGE; ASSIGNMENT; APPLICATION OF FUNDS. Borrower
shall keep the Mortgaged Property insured for the benefit of Lender against loss
or damage by fire, lightning, windstorm, hail, explosion, riot, riot attending a
strike, civil commotion, aircraft, vehicles and smoke; and such other hazards,
including, but not limited to, six (6) months business interruption insurance
covering loss of rents, revenues, income, profits or proceeds from leases,
franchises, concessions or licenses of
<PAGE>
or on any part of the Mortgaged Property, as Lender may from time to time
require; all in amounts approved by Lender not less than one hundred percent
(100%) of full insurable value; all insurance herein provided for shall be in
form and underwritten by companies approved by Lender; and, regardless of the
types or amounts of insurance required and approved by Lender, Borrower shall
assign and deliver to Lender. All such policies of insurance and renewals
thereof which insure against any loss or damage to the Mortgaged Property shall
be held by the Lender and shall contain a non-contributory standard Mortgagee's
endorsement making losses payable to the Lender as its interest may appear.
Borrower shall furnish to Lender evidence of insurable value, upon request, at
no cost to Lender. The delivery of the insurance policies shall constitute an
assignment, as further security, of all unearned premiums existing from time to
time thereon. In event of loss, Borrower will give immediate notice by mail to
Lender, and Lender may make proof of loss if not made promptly by Borrower, and
each insurance company concerned is hereby authorized and directed to make
payment for such loss directly to Lender instead of to Borrower and Lender
jointly, and the insurance proceeds, or any part thereof, may be applied by
Lender either to the repayment of monies paid or advanced by Lender on behalf of
the Borrower, or to the payment of interest due on the Note, or to the payment
of principal due under the Note or to the restoration or repair of the Mortgaged
Property as the Lender, at its sole option, may elect.
(b) PUBLIC LIABILITY INSURANCE. The Borrower shall at all times
maintain public liability insurance and Workers Compensation policies insuring
against all claims for personal or bodily injury, death or property damage
occurring upon, in or about the Mortgaged Property in amounts not less than
$1,000,000.00 for injury or damage to any one person and $1,000,000.00 for
injury or damage from any one accident and $100,000.00 for property damage. Such
insurance coverage shall be in form and with companies approved by the Lender.
Borrower shall furnish to Lender evidence that such insurance is in effect, upon
request, at no cost to Lender. All such policies shall name Lender as an
additional insured.
(c) FLOOD INSURANCE. If required, insurance under the Federal Flood
Insurance program shall be maintained at all times within the minimum
requirements and amounts required under said program for federally financed or
assisted loans under the Flood Disaster Protection Act of 1973, as amended.
(d) MINIMUM INSURANCE COVERAGE. In the absence of written direction
from Lender, the insurance amount required herein shall not be less than such
amount as may be required to prevent Borrower from becoming co-insurer under the
terms of any applicable policy, or the amount of the indebtedness secured
hereby, whichever is greater.
<PAGE>
(e) RENEWAL. Not less than thirty (30) days prior to the expiration
date of each policy of insurance required of Borrower pursuant to this
paragraph, and of each policy of insurance held as additional collateral to
secure the indebtedness secured hereby, Borrower shall deliver to Lender a
renewal policy or policies marked "premium paid" or accompanied by other
evidence of payment satisfactory to Lender.
(f) NOTICE OF CANCELLATION. All policies of insurance shall provide
that no cancellation, reduction in amount or material change in coverage thereof
shall be effective until at least thirty (30) days after receipt by Lender and
Borrower of written notice thereof.
(g) FORECLOSURE; SUCCESSOR IN INTEREST. In the event of a
foreclosure of this Mortgage, or other transfer of title to the Mortgaged
Property in extinguishment of the indebtedness secured hereby, the purchaser of
the Mortgaged Property shall succeed to all the rights of Borrower, including
any right to unearned premiums, in and to all policies of insurance assigned and
delivered to Lender, with respect to all property herein encumbered.
(h) FAILURE TO PROVIDE INSURANCE. Borrower agrees to deliver to
Lender, within ten (10) days from the date of this Agreement, evidence of the
required insurance as provided above, with an effective date of September 30,
1996, or earlier. Borrower acknowledges and agrees that if Borrower fails to
provide any required insurance or fails to continue such insurance in force,
Lender may do so at Borrower's expense as provided in the security documents.
The cost of any such insurance, at the option of Lender, shall be (1) payable on
demand; (2) be added to the balance of the Loan and be apportioned among and be
payable with any installment payments to become due during either (a) the terms
of any applicable insurance policy or (b) the remaining term of the Loan; or (3)
be treated as a balloon payment which will be due and payable at the Loan's
maturity. Any amount expended by Lender will bear interest at the rate of
charged under the Loan from the date incurred or paid by Lender to the date of
full repayment by Borrower.
BORROWER ACKNOWLEDGES THAT IF LENDER SO PURCHASES ANY SUCH INSURANCE, THE
INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE REAL
ESTATE, UP TO THE BALANCE OF THE LOAN; HOWEVER, BORROWER'S EQUITY IN THE
COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE ANY
PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
9. EVENTS OF DEFAULT. The occurrence of any of the following constitutes
an Event of Default by Borrower under this
<PAGE>
Mortgage and, at the option of the Lender, under the Loan Documents:
(a) SCHEDULED PAYMENT. Borrower's failure to make any payment
required by the Note within ten (10) days of the due date thereof, without
further notice or demand.
(b) MONETARY DEFAULT. Borrower's failure to make any other payment
required by this Mortgage, or the other Loan Documents, or both, within ten (10)
days after written demand therefor.
(c) OTHER. Borrower's continued failure to perform any other
obligation imposed upon Borrower by this Mortgage, for a period of ten (10) days
after written demand; provided (i) if Borrower reasonably cannot perform within
such ten (10) day period, and in Lender's judgment, Lender's security reasonably
will not be impaired, Borrower may have such additional time to perform as
Borrower reasonably may require, provided and for so long as Borrower proceeds
with due diligence to cure said default; and (ii) if Lender's security
reasonably will be materially impaired if Borrower does not perform in less than
ten (10) days, Borrower will have only such period following written demand in
which to perform as Lender reasonably may specify.
(d) REPRESENTATION. Any verbal or written representation, statement
or warranty of Borrower, any co-signer, endorser, surety or guarantor of the
Note, contained in the Note, this Mortgage or any other Loan Document, or in any
certificate delivered pursuant hereto, or in any other instrument or statement
made or furnished in connection herewith, proves to be incorrect or misleading
in any material respect as of the time when the same shall have been made,
including, without limitation, any and all financial statements furnished by
Borrower to Lender as an inducement to Lender's making the loan evidenced by the
Note or pursuant to any provision of this Mortgage.
(e) DEATH/INCOMPETENCY/INSOLVENCY. The dissolution or insolvency
of, the appointment of a receiver by or on the behalf of, the assignment for
the benefit of creditors by or on behalf of, the voluntary or involuntary
termination of existence by, or the commencement under any present or future
federal or state insolvency, bankruptcy, reorganization, composition or
debtor relief law by or against, Borrower.
(f) INSECURITY. A good faith determination by Lender at any time
that Lender is insecure, that the prospect of any payment is impaired or that
the collateral securing the Note is insecure provided however, Lender shall not
be unreasonable, arbitrary or capricious in making this determination.
<PAGE>
(g) TRANSFER OF ASSETS. A transfer of a substantial part of
Borrower's money or property.
(h) DEFAULT UNDER LEASE. A failure of the Tenant to pay rent due
under the Lease within thirty (30) days after its due date or the existence of
any other event of default under the Lease which is not cured within thirty (30)
days; provided, however, that no such Event of Default will be deemed to have
occurred if the Borrower shall have re-leased the Mortgaged Property to another
tenant at a rental rate which shall provide a minimum of 1:1 debt service
coverage.
(i) DEFAULT UNDER LOAN DOCUMENT. An Event of Default under any Loan
Document exists and continues beyond any applicable cure period.
10. REMEDIES. Upon the occurrence of any default continuing beyond any
applicable curative period under this Mortgage, as provided in the preceding
paragraph, Lender may exercise any one or more of the following rights and
remedies, in addition to all other rights and remedies otherwise available at
law or in equity:
(a) OTHER DOCUMENTS. To pursue any right or remedy provided by the
Loan Documents including the right to sue for collection of all sums due and
payable in connection with the indebtedness secured hereby.
(b) ACCELERATION. To declare the entire unpaid amount of the
indebtedness secured hereby immediately due and payable.
(c) FORECLOSURE. To foreclose the lien of this Mortgage, and obtain
possession of the Mortgaged Property, or either, by any lawful procedure.
(d) CODE RIGHTS. To exercise any right or remedy available to Lender
as a secured party under the Code, as it from time to time is in force and
effect, with respect to any portion of the Mortgaged Property or the Intangible
Collateral then constituting property subject to the provisions of the Code; or
Lender, at its option, may elect to treat the Mortgaged Property or the
Intangible Collateral, or any combination, as real property, or an interest
therein, for remedial purposes.
(e) RECEIVER. To apply, on ex parte motion to any court of competent
jurisdiction, for and obtain the appointment of a receiver to take charge of,
manage, preserve, protect, complete construction of, and operate the Mortgaged
Property, and any business or businesses situated thereon, or any combination;
to collect the rents; to make all necessary and needed repairs; to pay all
taxes, assessments, insurance premiums, and all other costs incurred in
connection with the Mortgaged Property; and, after payment of the expenses of
the receivership, including
<PAGE>
reasonable attorneys, and legal assistants, fees, and after compensation to the
receiver for management and completion of the Mortgaged Property, to apply all
net proceeds derived therefrom in reduction of the indebtedness secured hereby
or in such other manner as the court shall direct. The appointment of such
receiver shall be a matter of strict right to Lender, regardless of the adequacy
of the security or of the solvency of any party obligated for payment of the
indebtedness secured hereby. All expenses, fees, and compensation incurred
pursuant to any such receivership shall be secured by the lien of this Mortgage
until paid. The receiver, personally or through agents, may exclude Borrower
wholly from the Mortgaged Property and have, hold, use, operate, manage, and
control the Mortgaged Property, and may in the name of Borrower exercise all of
Borrower's rights and powers to maintain, construct, operate, restore, insure,
and keep insured the Mortgaged Property in such manner as such receiver deems
appropriate.
(f) OTHER SECURITY. Lender may proceed to realize upon any and all
other security for the indebtedness secured hereby in such order as Lender may
elect; and no such action, suit, proceeding, judgment, levy, execution, or other
process will constitute an election of remedies by Lender, or will in any manner
alter, diminish, or impair the lien and security interest created by this
Mortgage, unless and until the indebtedness secured hereby is paid in full.
(g) ADVANCES. To advance such monies, and take such other action, as
is authorized by Paragraphs 2, 3 and 8 above. All such advances shall bear
interest at the Penalty Rate, as defined in the Note, and shall be immediately
due and payable by Borrower to Lender without demand therefor, and such advances
together with interest and costs accruing thereon shall be secured by this
Mortgage.
11. EXERCISE OF REMEDIES. The remedies of Lender as provided in the Loan
Documents, shall be cumulative and concurrent and may be pursued singly,
successively or together, at the sole discretion of Lender, and may be exercised
as often as occasion therefor shall arise. No act, or omission or commission or
waiver of Lender, including specifically any failure to exercise any right,
remedy or recourse, shall be effective unless set forth in a written document
executed by Lender and then only to the extent specifically recited therein. A
waiver or release with reference to one event shall not be construed as
continuing, as a bar to, or as a waiver or release of, any subsequent right,
remedy or recourse as to any subsequent event.
12. EMINENT DOMAIN. If at any time all, or any portion, of the Mortgaged
Property shall (i) be taken or damaged by condemnation proceedings under the
power of eminent domain, or (ii) be the subject of an inverse condemnation
action, all compensation awarded or otherwise paid shall be paid directly to the
Lender
<PAGE>
and applied to the repayment of monies paid or advanced by the Lender on behalf
of the Borrower, or to the payment of interest due on the Note, or to the
payment of principal due under the Note as the Lender, at its sole option, may
elect.
13. CONSENT TO TRANSFER. In the event the Borrower, without the prior
written consent of the Lender, (a) shall sell, convey, transfer (including a
transfer by agreement for deed or land contract) the Mortgaged Property or any
part thereof or any interest therein, or (b) shall be divested of title or any
interest in the Mortgaged Property in any manner or way, whether voluntary or
involuntary, or (c) enters into an oral or written agreement to lease the entire
fee simple interest of the Mortgaged Property (and not simply the improvements
or buildings located thereon) not in the ordinary course of business or (d)
further encumbers the Mortgaged Property then the entire balance of the
indebtedness evidenced by the Note shall be accelerated and become immediately
due and payable, at the option of the Lender upon ten (10) days written notice
to the Borrower. In the event the Lender elects to accelerate the entire
balance of the indebtedness, the Lender shall have no obligation to allege or
show any impairment of its security and may pursue any legal or equitable
remedies for default in such payment without allegation or showing. It is
specifically understood by the parties that as a condition of granting its
approval required by this paragraph, the Lender may adjust the interest rate
stated in the Note.
14. FUTURE ADVANCES. Upon request of Borrower, Lender, at Lender's
option, within twenty (20) years from date of this Mortgage, may make future
advances to Borrower. It is hereby specifically agreed that any sum or sums
which may be loaned or advanced by the Lender to the Borrower at any time after
the recording of this Mortgage, together with interest thereon at the rate
agreed upon at the time of such loan or advance, shall be equally secured with
and have the same priority as the original indebtedness and be subject to all
the terms and provisions of this Mortgage, providing that the aggregate amount
of principal outstanding at any time shall not exceed an amount equal to two and
one-half (2 1/2) times the principal amount originally secured hereby.
15. FINANCIAL STATEMENTS. The Borrower will keep its books of account in
accordance with generally accepted accounting practices.
16. ENVIRONMENTAL AGREEMENT. Borrower and Lender have executed an
Environmental Agreement of even date herewith which by reference is made a part
hereof.
Any breach of any warranty, representation or agreement contained in
this Section shall be a default hereunder and shall
<PAGE>
entitle Lender to exercise any and all remedies provided in this Mortgage or
otherwise permitted by law.
The provisions of this paragraph will survive the foreclosure of this
Mortgage or any deed in lieu of foreclosure delivered to Lender by Borrower.
17. AFTER ACQUIRED PROPERTY. Without the necessity of any further act of
Borrower or Lender, the lien of, and security interest created by, this Mortgage
automatically will extend to and include (i) any and all renewals, replacements,
substitutions, accessions, proceeds, products, or additions of or to the
Mortgage Property, the Rents, and the Intangible Collateral, and (ii) any and
all monies and other property that from time to time may, either by delivery to
Lender or by any instrument (including this Mortgage) be subjected to such lien
and security interest by Borrower, or by anyone on behalf of Borrower, or with
the consent of Borrower, or which otherwise may come into the possession or
otherwise be subject to the control of Lender pursuant to this Mortgage, or the
Loan Documents, or both.
18. APPRAISAL. Notwithstanding any term or provision hereof to the
contrary, if at any time the Lender in its sole discretion reasonably believes
that the value of the Mortgaged Property may have declined or that the value of
the Mortgaged Property is less than the value utilized by the Lender at the time
of loan approval or renewal, within thirty (30) days from Lender's written
request to Borrower therefor, Borrower shall provide Lender, at Borrower's sole
cost and expense, a current appraisal of the Mortgaged Property to be ordered by
the Lender from an appraiser designated by Lender and in form and content as
required by Lender. Borrower shall cooperate fully with any such appraiser and
provide all such documents and information as such appraiser may request in
connection with such appraiser's performance and preparation of such appraisal.
Borrower's failure to promptly and fully comply with Lender's requirements under
this paragraph shall, without further notice, constitute an Event of Default
under this Mortgage, the Note and the other Loan Documents.
19. INSPECTION. Lender shall be entitled to inspect the Mortgaged
Property at all reasonable times and Borrower agrees to permit Lender, or its
agents or employees, access to the Mortgaged Property for such purpose.
20. CHOICE OF LAW AND VENUE. This Mortgage shall be governed by the Laws
of the State of Florida, and the United States of America, whichever the context
may require or permit. The Borrower and all guarantors, if any, expressly agree
that proper venue for any action which may be brought under this Mortgage in
addition to any other venue permitted by law shall be any county in which
property encumbered by the Mortgage is located as well as Brevard County,
Florida. Should Lender insti-
<PAGE>
tute any action under this Mortgage, the Borrower and all guarantors, if any,
hereby submit themselves to the jurisdiction of any court sitting in Florida.
21. DEBTOR-CREDITOR RELATIONSHIP ONLY. It is understood by and between
Lender and its successors, or assigns, and the Borrower, that the funds received
on the Note which are secured by this Mortgage create the relationship of Lender
and Borrower, and it is not the intention of the parties to create the
relationship of a partnership, a joint venture or syndicate, or mutual
enterprise or endeavor.
22. TAXES ON NOTE AND MORTGAGE. To pay any and all taxes which may be
levied or assessed directly or indirectly upon the Note and this Mortgage
(except for income taxes payable by the holder thereof) or the debt secured
hereby, without regard to any law which may be hereafter enacted imposing
payment of the whole or any part thereof upon the Lender, its successors or
assigns. Upon violation of this agreement, or upon the rendering by any court
of competent jurisdiction of a decision that such an agreement by the Borrower
is legally inoperative, or if any court of competent jurisdiction shall render a
decision that the rate of said tax when added to the rate of interest provided
for in said Mortgage Note exceeds the then maximum rate of interest allowed by
law, then, and in any such event, the debt hereby secured shall, at the option
of the Lender, its successors or assigns, become immediately due and payable,
anything contained in this Mortgage or in the Note secured hereby
notwithstanding, without the imposition of premium or penalty. The additional
amounts which may become due and payable hereunder shall be part of the debt
secured by this Mortgage.
23. TIME OF THE ESSENCE. Time is of the essence with respect to each
provision of this Mortgage where a time or date for performance is stated. All
time periods or dates for performance stated in this Mortgage are material
provisions of this Mortgage.
24. CAPTIONS AND PRONOUNS. The captions and headings of the various
sections of this Mortgage are for convenience only, and are not to be construed
as confining or limiting in any way the scope or intent of the provisions
hereof. Whenever the context requires or permits, the singular shall include
the plural, the plural shall include the singular, and the masculine, feminine
and neuter shall be freely interchangeable.
25. INDEMNIFICATION AGREEMENT. The Borrower hereby indemnifies the law
firm of GRAY, HARRIS & ROBINSON, P.A., and all of its attorneys, including, but
not limited to D. A. NOHRR, ESQ., from any and all loss, cost, expense, damage
or claim, whether or not valid, including attorneys, fees and disbursements,
arising under or in any way connected with Section 697.10 of the Florida
Statutes or any similar law. The Borrower hereby verifies and
<PAGE>
confirms all factual information in this Mortgage, including the accuracy and
correctness of the legal description set forth herein. In the event any factual
errors are found in this Mortgage or in the legal description, the Borrower
shall, at its own cost and expense, promptly correct or cause to be corrected
subsequent to the date hereof any and all such errors with no further liability
incurred by counsel for either the Borrower or the Lender. The Borrower shall
promptly pay or cause to be paid all damages, claims or any other costs
whatsoever arising out of any impairment of title due to or caused by any
inaccuracy or incorrectness of the legal description set forth herein.
Notwithstanding the foregoing, all rights are preserved against the Lender's
title insurer, the surveyor, the engineer, if any, and the appraiser, if any,
and after payment is made by the Borrower, the Borrower shall be subrogated to
such rights.
26. NON-HOMESTEAD. The Borrower has never resided on the Land and the
Land does not now nor has it ever constituted the constitutional homestead of
the Borrower.
27. TRUTH-IN-LENDING PROVISION. The Borrower hereby represents and
certifies that the extension of credit secured by this Mortgage is exempt from
any and all provisions of the Federal Consumers Credit Protection Act (Truth-in-
Lending Act) and Regulation "Z" of the Board of Governors of the Federal Reserve
System; because it is an organization fully excluded therefrom, and/or also
because the loan or credit represented by this Mortgage and the Note is only for
business or commercial purposes of the Borrower other than agricultural purposes
and the proceeds of the loan are not being used for personal, family, household
or agricultural purposes.
28. NOTICE. Any written notice, demand or request that is required to be
made in any of the Loan Documents shall be served in person, or by registered or
certified mail, return receipt requested, or by express mail or similar courier
service, addressed to the party to be served at the address set forth in the
first paragraph hereof. The addresses stated herein may be changed as to the
applicable party by providing the other party with notice of such address change
in the manner provided in this paragraph. In the event that written notice,
demand or request is made as provided in this paragraph, then in the event that
such notice is returned to the sender by the United States Postal Service
because of insufficient address or because the party has moved or otherwise,
other than for insufficient postage, such writing shall be deemed to have been
received by the party to whom it was addressed on the date that such writing was
initially placed in the United States Postal Service or courier service by the
sender.
29. WAIVER OF TRIAL BY JURY. The Borrower and the Lender knowingly,
voluntarily and intentionally waive the right either may have to a trial by jury
in respect of any litigation based
<PAGE>
hereon, or arising out of, under or in connection with this Mortgage and any
agreement contemplated to be executed in conjunction herewith, or any course of
conduct, course of dealing, statements (whether verbal or written) or actions of
either party. This provision is a material inducement for the Lender entering
into the loan evidenced by this Mortgage.
The covenants herein contained shall bind, and the benefits and advantages
shall inure to, the respective heirs, executors, administrators, successors, and
assigns of the parties hereto. Whenever used, the singular number shall include
the plural, the plural the singular, and the use of any gender shall include all
genders.
IN WITNESS WHEREOF, the Borrower has executed these presents the day and
year first above written in manner and form sufficient to be binding.
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF:
BORROWER:
[SEAL]
ECKLER INDUSTRIES, INC., a Florida
corporation
/s/ Donald A. Nohrr By: /s/ Ralph H. Eckler
- -------------------------------- --------------------------------
Witness Signature RALPH H. ECKLER, President
Donald A. Nohrr Address: 5200 S. Washington Ave.
- -------------------------------- Titusville, FL 32780
Print Witness Name
/s/ Barry H. Chait
- --------------------------------
Witness Signature
Barry H. Chait
- --------------------------------
Print Witness Name
STATE OF FLORIDA )
) ss:
COUNTY OF BREVARD )
THE FOREGOING INSTRUMENT was acknowledged before me this 30th day of
September, 1996, by RALPH H. ECKLER, as President of ECKLER INDUSTRIES, INC., a
Florida corporation, who is personally known to me, or who produced Fl. Driver's
License as identification, and who did take an oath.
/s/ Kim Marie Dexter
__________________________________
Notary Public Signature
My commission expires:
July 22, 1999 Kim Marie Dexter
<PAGE>
LEGAL DESCRIPTION
PARCEL A:
A parcel of land lying in Section 26, Township 22 South, Range 35 East, Brevard
County, Florida, being a portion of Lots 27, 28, 29, 30, 31, 32, 33 and 34 of
the PLAT OF SECOND ADDITION TO INDIAN RIVER CITY, FLORIDA as recorded in Plat
Book 2, page 73, of the Public Records of Brevard County, Florida, together with
a portion of Government Lot 2 of said Section 26, all of which is lying West of
the Westerly right-of-way line of State Road No. 5 (a 200.00 foot wide right-of-
way as described in Official Records Book 515, pages 513 and 515 of said Public
Records) and East of the Easterly right-of-way line of The Florida East Coast
Railway Company (A 100.00 foot wide right-of-way as currently existing), being
more particularly described as follows:
Begin at the intersection of the North line of Lot 27 of said PLAT OF SECOND
ADDITION TO INDIAN RIVER CITY, with the Westerly right-of-way line of said State
Road No. 5, said point being the Point-of-Beginning of the herein described
parcel; thence run 5.00 degrees 04'48"W., along said Westerly right-of-way line
a distance of 568.86 feet to the Point-of-Curvature of a circular curve to the
left having a radius of 2,964.93 feet; thence continue Southerly along said
right-of-way line and the arc of said curve through a central angle of 03
degrees 03'07" for a distance of 157.93 feet; thence N. 89 degrees 25'12" W.,
parallel with and 25.00 feet North of by perpendicular measurement from the
North line of the lands described in Official Records Book 642, pages 978, 979
and 980 of said Public Records a distance of 250.00 feet; thence N 00 degrees
34'48" E., perpendicular to said North line a distance of 439.61 feet to a point
lying on the Northerly line of a 10.00 foot wide Florida Gas Transmission
Company Easement as recorded in Official Records Book 665, pages 458 and 459 of
said Public Records, also being the Northerly right-of-way line of a vacated
40.00 foot wide railroad spur line thence N. 52 degrees 21'36" W., along said
Northerly right-of-way line of vacated railroad spur line a distance of 306.59
feet to a point lying on the South line of Lot 27 of said PLAT OF SECOND
ADDITION TO INDIAN RIVER CITY; thence N. 69 degrees 41'21" W., along said South
line of Lot 27 a distance of 101.72 feet to a point lying on the Easterly
right-of-way line of said Florida East Coast Railway Company, said point also
lying on the arc of a circular curve concave in the Northeast with a radial
bearing of S. 63 degrees 18'40" W., and having a radius of 2,814.66 feet, thence
Northwesterly along said Easterly right-of-way line and the arc of said curve
through a central angel of 02 degrees 15'45" for a distance of 111.15 feet to
the Northwest corner of Lot 27 of said PLAT OF SECOND ADDITION TO INDIAN RIVER
CITY; thence S. 89 degrees 41'21" E., along the North line of said Lot 27 a
distance of 634.80 feet to the Point-of-Beginning of the described parcel.
<PAGE>
PARCEL B:
A parcel of land lying in Section 26, Township 22 South, Range 35 East, Brevard
County, Florida, being a portion of Lots 27, 28, 29, 30, 31, 32, 33 and 34 of
the PLAT OF SECOND ADDITION TO INDIAN RIVER CITY, FLORIDA as recorded in Plat
Book 2, page 73, of the Public Records of Brevard County, Florida, together with
a portion of Government Lot 2 of said Section 26, all of which is lying West of
the Westerly right-of-way line of State Road No. 5 (a 200.00 foot wide right-of-
way as described in Official Records Book 515, pages 513 and 515 of said Public
Records) and East of the Easterly right-of-way line of the Florida East Coast
Railway Company (a 100.00 foot wide right-of-way as currently existing), being
more particularly described as follows:
Commence at the intersection of the North line of Lot 27 of said PLAT OF SECOND
ADDITION TO INDIAN RIVER CITY, with the Westerly right-of-way line of said
State Road No. 5 and run S. 00 degrees 04'48" W., along said Westerly
right-of-way line a distance of 568.86 feet to the Point-of-Curvature of a
circular curve to the left having a radius of 2,964.93 feet; thence continue
Southerly along said right-of-way line and the arc of said curve through a
central angle of 03 degrees 03'07" for a distance of 157.93 feet to the
Point-of-Beginning of the herein described parcel; thence continue Southerly
along the arc of said curve through a central angle of 00 degrees 29'03" for a
distance of 25.05 feet to the Northeast corner of the lands described in
Official Records Book 642, pages 978, 979 and 980 of said Public Records,
thence N. 89 degrees 25'12" W., along the North line of said lands a distance
of 336.01 feet to a point lying on the Easterly right-of-way line of said
Florida East Coast Railway Company, said point also lying on the arc of a
circular curve concave to the Southwest with a radial bearing of N. 72 degrees
10'13" E., and having a radius of 5,808.32 feet, thence Northwesterly along said
Easterly right-of-way line and the arc of said curve through a central angle of
03 degrees 10'32" for a distance of 524.67 feet to the Point-of-Tangency of
said curve; thence N. 23 degrees 00'20" W., continuing along said Easterly
right-of-way line a distance of 199.35 feet to a point lying on the arc of a
circular curve concave to the Northeast with a radial bearing of S. 62 degrees
09'48" W., and having a radius of 2,814.66 feet; thence Northwesterly along said
Easterly right-of-way line and the arc of said curve through a central angle of
01 degrees 08'52" for a distance of 56.38 feet to the Southwest corner of Lot
27 of said PLAT OF SECOND ADDITION TO INDIAN RIVER CITY; thence S. 89 degrees
42'21" E., along the South line of said Lot 27 a distance of 101.72 feet to a
point lying on the Northerly line of a 10.00 foot wide Florida Gas Transmission
Company Easement as recorded in Official Records Book 665, pages 458 and 459 of
said Public Records, also being the Northerly right-of-way line of a vacated
40.00 foot wide railroad spur line; thence S. 52 degrees 21'36" E., along said
Northerly right-of-way line of vacated railroad spur line a distance of 306.59
feet; thence S. 00 degrees 34'48" W., perpendicular to the North line of the
lands described in Official Records Book 642, pages 978, 979 and 980 of said
Public Records a distance of 439.61 feet; thence S. 89 degrees 25'12" E.,
parallel with and 25.00 feet North of by perpendicular measurement from said
North line a distance of 250.00 feet to the Point-of-Beginning of the described
parcel.
<PAGE>
Parcel 1
The North 154 feet of the following described property:
Start at the SW corner of Government Lot 2, Section 26, Township 22 South, Range
35 East, Brevard County, Florida; thence run S. 89 deg. 25'12"E. on the South
line of said Lot 2, 429.50 feet to the East Right-of-Way line of Florida East
Coast Railway as relocated; thence N. 15 deg. 51'12"W., 208.52 feet along said
East Right-of-Way line to the P.O.B., and the SW corner of lands herein
described, thence continue on East Right-of-Way aforesaid N. 15 deg. 51'12"W.,
228.32 feet; thence N. 16 deg. 7'22"W., 189.15 feet on a chord of a curve whose
radius is 5,789.65 feet, concave to the Southwest with an angle of 1 deg.
52'19"; thence departing from the F.E.C. R/W S. 89 deg. 25'12"E., 336.34 feet to
the West Right-of-Way of U.S. Highway #1, as relocated; thence along said West
Right-of-Way of U.S. Highway #1, S. 5 deg. 23'14"E., 201.10 feet on a chord of a
curve whose radius is 2,964.93 feet, an angle of 3 deg. 53'13", concave to the
NE; thence continue on the same curve S. 9 deg. 17'33"E., 203.00 feet on the
chord of a curve, radius 2,964.93 feet, angle 3 deg. 55'25", thence N. 89 deg.
25'12"W., 270.56 feet to the Point of Beginning.
Containing 1.12 acres of land, more or less.
Parcel 2
Start at the SW corner of Government Lot 2, Section 26, Township 22 South, Range
35 East, Brevard County, Florida; thence run S. 89 deg. 25'12"E. on the South
line of said Lot 2, 429.50 feet to the East Right-of-Way line of Florida East
Coast Railway as relocated; thence N. 15 deg. 51'12"W., 208.52 feet along said
East Right-of-Way line to the P.O.B., and the SW corner of lands herein
described; thence continue on East Right-of-Way aforesaid N. 15 deg. 51'12"W.,
228.32 feet; thence N. 16 deg. 47'22"W., 189.15 feet on a chord of a curve whose
radius is 5,789.65 feet, concave to the Southwest with an angle of 1 deg.
52'19"; thence departing from the F.E.C. R/W S. 89 deg. 25'12"E., 336.34 feet to
the West Right-of-Way of U.S. Highway #1, as relocated; thence along said West
Right-of-Way of U.S. Highway #1, S. 5 deg. 23'14"E., 201.10 feet on a chord of a
curve whose radius is 2,964.93 feet, an angle of 3 deg. 53'13" concave to the
NE; thence continue on the same curve S. 9 deg. 17'33"E., 203.00 feet on the
chord of a curve, radius 2,964.93 feet, angle 3 deg. 55'25", thence N. 89 deg.
25'12"W., 270.56 feet to the Point of Beginning; Less and except the North 154
feet as described in Official Records Book 2431, Page 2184, of the Public
Records of Brevard County, Florida.
Containing 1.61 acres of land, more or less.
<PAGE>
PROMISSORY NOTE
("NOTE")
$2,400,000.00
MELBOURNE, FLORIDA
SEPTEMBER 30, 1996
THE UNDERSIGNED, ("Maker"), promises to pay to the order of BARNETT
BANK, N.A., a national banking association, ("Payee"), whose mailing address
is Post Office Box 678267, Orlando, Florida 32867-8267, Attention: Closing
Department Manager, the principal sum of TWO MILLION FOUR HUNDRED THOUSAND &
NO/100 ($2,400,000.00) DOLLARS, or so much thereof as may be advanced and
outstanding from time to time, with interest on the unpaid principal from the
date of each such advance at the following rate and payable in the following
manner:
(a) The interest rate ("Stated Rate") shall be a variable rate of One and
One-half percent (1.50%) per annum simple interest in excess of the
"Prime Rate". The term "Prime Rate" shall be the "prime rate"
announced from time to time by the BARNETT BANKS, INC. which rate is a
reference rate for the information and use of the BARNETT BANKS, INC.
in establishing the actual rates to be charged borrowers. The variable
rate applied to this loan will be adjusted prospectively on interest
payment dates based on the rate in effect on said date.
Notwithstanding anything herein to the contrary, the interest rate
applied to this Note shall at no time exceed the maximum rate
permitted by applicable law, whether now or hereafter in effect.
(b) Interest on this Note, as calculated above, shall be payable monthly
in arrears on the 30th day of each month commencing the 30th day of
October, 1996 and continuing thereafter on the same day of each
successive month including the month of August, 1999,
1
<PAGE>
except that in any month that does not contain a 30th day, then the
payment shall be due on the last day of that month.
(c) Principal shall be paid in consecutive monthly installments of
THIRTEEN THOUSAND THREE HUNDRED THIRTY THREE & 34/100 ($13,333.34)
DOLLARS, on the 30th day of each month commencing October 30, 1996,
and continuing thereafter on the same day of each successive month
including the month of August, 1999, except that in any month that
does not contain a 30th day, then the payment shall be due on the
last day of that month.
(d) The entire unpaid principal balance, together with accrued interest,
shall be due and payable on or before September 30, 1999 ("Maturity
Date").
DEFAULT RATE. After the occurrence of an Event of Default, as
hereinafter defined or after maturity, this Note and all sums due hereunder
shall bear interest at the Stated Rate plus five percent (5%) per annum
("Penalty Rate") (but in no event at a rate which is higher than the maximum
allowable rate permitted by law) from the date of default or maturity until
paid.
INTEREST BASIS. Interest shall be calculated on the basis of a three
hundred sixty (360) day year for actual days elapsed.
INTEREST PARITY. This loan evidenced by this Note is being made
pursuant to the rate provisions of Chapters 665 and 687 of the Florida
Statutes.
LATE CHARGE. If any payment hereunder (other than the final payment) is
not made within ten (10) days after it is due, the Maker shall pay to Payee a
late charge equal to five percent (5%) of the late payment.
DISBURSEMENT OF PROCEEDS. Advances hereunder may be made upon the oral,
telephonic, or written request of any person authorized to borrow or any
person Payee reasonably believes is authorized to borrow. Any advance
hereunder shall be conclusively presumed to have been made to and at the
request and for the benefit of the Maker when the proceeds of such advance
are deposited to the credit of the Maker in any account of Maker with Payee
regardless of the fact that persons other than those authorized to borrow may
have authority to draw against such account.
- 2 -
<PAGE>
PREPAYMENT. The Maker shall have the privilege of prepaying this Note
in part or in full, without penalty, at any time, and any prepayment shall be
applied to the installment or installments of principal last maturing. No
partial prepayment shall excuse or defer Maker's subsequent payment
obligations.
APPLICATION OF PAYMENTS. All payments made on the indebtedness
evidenced by this Note shall be applied first to repayment of monies paid or
advanced by Payee on behalf of the Maker in accordance with the terms of the
Mortgage securing this Note, and thereafter shall be applied to payment of
accrued interest, and lastly to payment of principal.
PLACE AND MANNER OF PAYMENT. All payments of interest and principal are
payable at the office of Payee, or at such other place as the holder may
designate in writing, in lawful money of the United States of America.
SECURITY. This Note is secured by, among other things, a Mortgage (the
"Mortgage") upon real property (the "Property") in Brevard County, Florida.
This Note, the Mortgage and other loan documents as may be now or hereafter
executed in connection therewith ("Loan Document(s)") shall together evidence
the debt and constitute the security for the Note.
EVENTS OF DEFAULT. Maker shall be in default in this Note upon the
occurrence of any of the following events, circumstances or conditions (each
an "Event of Default"):
(a) Maker's failure to make any payment of any sum due hereunder
within ten (10) days of the due date thereof without further notice or
demand, or to make any other payment due by the Maker to the Payee under any
other promissory note or under any security agreement or other written
obligation of any kind now existing or hereinafter created.
(b) The existence of a default or breach of any of the terms of
this Note or any other Loan Document that is not cured within any applicable
grace and/or cure period.
REMEDIES AFTER DEFAULT. At the option of Payee, all or any part of the
principal and accrued interest on the Note, and all other obligations of the
Maker to the Payee shall become immediately due and payable without
additional notice or demand, upon the occurrence of an Event of Default or at
any time thereafter. Payee may exercise all rights and remedies provided by
law, equity, this Note or any other Loan Document or any other
- 3 -
<PAGE>
obligation of the Maker to the Payee. All rights and remedies as set forth
in the Loan Documents are cumulative and concurrent and may be pursued
singly, successively or together, at the sole discretion of Payee, and may be
exercised as often as occasion therefore shall arise. Such remedies are not
exclusive, and Payee is entitled to all remedies provided at law or equity,
whether or not expressly set forth therein. No act, or omission or
commission or waiver of Payee, including specifically any failure to exercise
any right, remedy or recourse, shall be effective unless set forth in a
written document executed by Payee and then only to the extent specifically
recited therein. A waiver or release with reference to one event shall not
be construed as continuing, as a bar to, or as a waiver or release of, any
subsequent right, remedy or recourse as to any subsequent event.
RIGHT OF SET-OFF. Neither the Maker, any co-signer, endorser, surety
nor guarantor shall have any right of set-off against the Payee under this
Note or under any Loan Document executed in connection with the loan
evidenced by this Note. In addition to the remedies provided for herein, the
Maker, each co-signer, endorser, surety or guarantor grants to the Payee a
security interest in any funds or other assets from time to time on deposit
with or in possession of the Payee, and the Payee may, at any time set-off
the indebtedness evidenced by this Note against any such funds or other
assets, including but not limited to, all money owed by Payee to Maker, each
co-signer, endorser, surety or guarantor whether or not due. Maker, each
co-signer, endorser, surety or guarantor acknowledge and agree that Payee may
exercise its right of set-off to pay all or any part of the outstanding
principal balance and accrued interest owed on this Note or on any other
obligation of the Maker to the Payee against any obligation Payee may have,
now or hereafter, to pay money to Maker, each co-signer, endorser, surety or
guarantor. This right of set-off includes, but is not limited to, the
following:
(a) Any deposit, account balance, securities account balance or
certificate of deposit balance Maker has with Payee whether special, general,
time, savings, checking or NOW account; and
(b) Any money owing to Maker on an item presented to Payee or in
Payee's possession for collection or exchange; and
(c) Any repurchase agreement or any other non-deposit obligation
or any credit in favor of Maker.
If any such money is also owned by some other person who has not
- 4 -
<PAGE>
agreed to pay this Note (such as another depositor on a joint account),
Payee's right of set-off will extend to the amount which could be withdrawn
or paid directly to Maker on Maker's request, endorsement or instruction
alone. In addition, (where Maker may obtain payment from Payee only with the
endorsement or consent of someone who has not agreed to pay this Note),
Payee's right of set-off will extend to Maker's interest in the obligation.
Payee's right of set-off will not apply to any account if it clearly appears
that Maker's rights in the account are solely as a fiduciary for another or
to any account, which by its nature and applicable law (for example an IRA or
other tax deferred retirement account), must be exempt from the claims of
creditors. Maker hereby appoints Payee as its attorney-in-fact and
authorizes Payee to redeem or obtain payment on any certificate of deposit in
which Maker has an interest in order to exercise Payee's right of set-off.
Such authorization applies to any certificate of deposit even if not matured.
Maker further authorizes Payee to assess and withhold any early withdrawal
penalty without liability against Payee in the event such penalty is
applicable as a result of Payee's set-off against a certificate of deposit
prior to its maturity.
Payee's right of set-off may be exercised upon an Event of Default:
(a) Without prior demand or notice; and
(b) Without regard to the existence or value of any
collateral securing this Note; and
(c) Without regard to the number or creditworthiness of any
other persons who have agreed to pay this Note.
Payee will not be liable for dishonor of a check or other request for payment
where there is insufficient funds in the account (or other obligation) to pay
such request because of Payee's exercise of its right of set-off. Maker
agrees to indemnify and hold Payee harmless from any person's claims, arising
as the result of Payee's right of set-off and the costs and expenses,
including without limitation, attorneys' fees.
COLLECTION EXPENSES. All parties liable for the payment of the Note
agree to pay the Payee all costs incurred by the Payee, whether or not an
action be brought, in collecting the sums due under the Note, enforcing the
performance and/or protecting its rights under the Loan Documents and in
realizing on any of the security for the Note. Such costs and expenses
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shall include, but are not limited to, filing fees, costs of publication,
deposition fees, stenographer fees, witness fees and other court and related
costs. Sums advanced by the Payee for the payment of collection costs and
expenses shall accrue interest at the Penalty Rate, from the time they are
advanced or paid by the Payee, and shall be due and payable upon payment by
Payee without notice or demand and shall be secured by the lien of the
Mortgage.
ATTORNEYS' FEES. All parties liable for the payment of the Note agree
to pay the Payee reasonable attorneys' fees incurred by the Payee, whether or
not an action be brought, in collecting the sums due under the Note,
enforcing the performance and/or protecting its rights under the Loan
Documents and in realizing on any of the security for the Note. Such
reasonable attorneys' fees shall include, but not be limited to, fees for
attorney's, paralegal's, legal assistant's, and expenses incurred in any and
all judicial, bankruptcy, reorganization, administrative receivership, or
other proceedings effecting creditor's rights and involving a claim under the
Note or any Loan Document, which such proceedings may arise before or after
entry of a final judgment. Such fees shall be paid regardless whether suit is
brought and shall include all fees incurred by Payee at all trial and
appellate levels including bankruptcy court. Sums advanced by the Payee for
the payment of attorneys' fees shall accrue interest at the Penalty Rate,
from the time they are advanced by the Payee, and shall be due and payable
upon payment by Payee without notice or demand and shall be secured by the
lien of the Mortgage.
WAIVER AND CONSENT. By the making, signing, endorsement or guaranty of
this Note:
(a) Maker and each co-signor, endorser, surety or guarantor waive
protest, presentment for payment, notice of dishonor, notice of intent to
accelerate and notice of acceleration;
(b) Each co-signer, endorser, surety or guarantor consents to any
renewals or extensions of time for payment on this Note;
(c) Maker and each co-signor, endorser, surety or guarantor
consents to Payee's release of any co-signer, endorser, surety or guarantor;
(d) Maker and each co-signor, endorser, surety or guarantor waive
and consent to the release, substitution or
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<PAGE>
impairment of any collateral securing this Note;
(e) Each co-signer, endorser, surety or guarantor consents to any
modification of the terms of this Note or any other Loan Document;
(f) Maker and each co-signor, endorser, surety or guarantor
consent to any and all sales, repurchases and participations of this Note to
or by any person or entity in any amounts and waive notice of such sales,
repurchases and participations of this Note; and
(g) Maker and each co-signor, endorser, surety or guarantor
consent to Payee's right of set-off as well as any participating bank's right
of set-off.
(h) Maker and each co-signor, endorser, surety or guarantor waive
the right of exemption under the Constitution and the laws of the State of
Florida.
(i) Maker and each co-signor, endorser, surety or guarantor
promise to pay all collection costs, including reasonable attorneys' fees,
whether incurred in connection with collection, trial, appeal or otherwise.
USURY LIMITATION. The parties agree and intend to comply with the
applicable usury law, and notwithstanding anything contained herein or in any
of the Loan Documents, or other document related to the loan evidenced by
this Note, the effective rate of interest to be paid on this Note (including
all costs, charges and fees which are characterized as interest under
applicable law) shall not exceed the maximum contract rate of interest
permitted under applicable law, as it exists from time to time. Payee agrees
not to knowingly collect or charge interest (whether denominated as fees,
interest or other charges) which will render the interest rate hereunder
usurious, and if any payment of interest or fees by Maker to Payee would
render this Note usurious, Maker agrees to give Payee written notice of such
fact with or in advance of such payment. If Payee should receive any payment
which constitutes interest under applicable law in excess of the maximum
lawful contract rate permitted under applicable law (whether denominated as
interest, fees or other charges), the amount of interest received in excess
of the maximum lawful rate shall automatically be applied to reduce the
principal balance, regardless of how such sum is characterized or recorded by
the parties.
JOINT AND SEVERAL. The obligations of this Note shall be
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joint and several.
NO OBLIGATION TO EXTEND. On Maturity Date, Maker must repay the entire
principal balance of this Note and unpaid interest then due. The Payee is
under no obligation to refinance the Note at maturity. Maker will therefore
be required to make payment out of other assets Maker may own, or Maker will
have to find a lender willing to lend the money at prevailing market rates,
which may be considerably higher than the interest rate on this Note.
DISCLAIMER OF RELATIONSHIP. The Maker and all co-signers, endorsers,
sureties and guarantors, if any, to this obligation acknowledge that:
(a) The relationship between the Payee, Maker and any co-signer,
endorser, surety or guarantor is one of creditor and debtor and not one of
partner or joint venturer;
(b) There exists no confidential or fiduciary relationship
between Payee and Maker and any co-signer, endorser, surety or guarantor
imposing a duty of disclosure upon the Payee; and
(c) The Maker and any co-signer, endorser, surety or guarantor
have not relied on any representation of the Payee regarding the merits of
the use of proceeds of the loan.
Maker and any co-signer, endorser, surety or guarantor waive any and all
claims and causes of action which exist now or may exist in the future
arising out of any breach or alleged breach of a duty on the part of the
Payee to disclose any facts material to this loan transaction and the use of
the proceeds.
CHOICE OF LAW AND VENUE. This Note shall be governed by the Laws of the
State of Florida, and the United States of America, whichever the context may
require or permit. The Maker and all guarantors, if any, to this obligation
expressly agree that proper venue for any action which may be brought under
this Note in addition to any other venue permitted by law shall be any county
in which property encumbered by the Mortgage is located as well as Orange
County, Florida. Should Payee institute any action under this Note, the
Maker and all guarantors, if any, hereby submit themselves to the
jurisdiction of any court sitting in Florida.
SEVERABILITY. If any provision of this Note shall be held unenforceable
or void, then such provision shall be deemed
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<PAGE>
severable from the remaining provisions and shall in no way affect the
enforceability of the remaining provisions nor the validity of this Note.
MAKER AND PAYEE DEFINED. The term "Maker" includes each and every
person or entity signing this Note and any co-signers, guarantors, their
successors and assigns. The term "Payee" shall include the Payee and any
transferee and assignee of Payee or other holder of this Note.
CAPTIONS AND PRONOUNS. The captions and headings of the various
sections of this Note are for convenience only, and are not to be construed
as confining or limiting in any way the scope or intent of the provisions
hereof. Whenever the context requires or permits, the singular shall include
the plural, the plural shall include the singular, and the masculine,
feminine and neuter shall be freely interchangeable.
RECEIPT OF COPY. By signing this Note, Maker acknowledges that it was
read by Maker prior to execution and a copy was received by Maker.
BUSINESS PURPOSE. Maker represents and warrants that the loan or credit
represented by this Note is only for business or commercial purposes of the
Maker other than agricultural purposes and the proceeds of the loan are not
being used for personal, family, household or agricultural purposes.
TIME OF THE ESSENCE. Time is of the essence with respect to each
provision in this Note where a time or date for performance is stated. All
time periods or dates for performance stated in this Note are material
provisions of this Note.
DOCUMENTARY STAMPS. Florida Documentary stamp tax as required by
Chapter 201 of the Florida Statutes in the amount required by Florida law
have been paid and are affixed to the original Mortgage and Security
Agreement, of even date herewith, which secures this Note.
WAIVER OF TRIAL BY JURY. THE MAKER HEREBY, AND THE PAYEE BY ITS
ACCEPTANCE OF THIS NOTE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE
RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING
OUT OF, UNDER, OR IN CONNECTION WITH THIS NOTE AND ALL LOAN DOCUMENTS AND
OTHER AGREEMENTS EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONNECTION
HEREWITH, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTION
OF EITHER PARTY, WHETHER IN CONNECTION WITH
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<PAGE>
THE MAKING OF THE LOAN, COLLECTION OF THE LOAN, OR OTHERWISE. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE PAYEE MAKING THE LOAN EVIDENCED BY THIS NOTE.
IN WITNESS WHEREOF, Maker has executed and delivered this instrument
this day and year first above written.
ECKLER INDUSTRIES, INC.,
a Florida corporation
By: /s/ RALPH H. ECKLER
_____________________________
Ralph H. Eckler,
President
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<PAGE>
STATE OF FLORIDA
COUNTY OF BREVARD
The foregoing instrument was acknowledged before me this ___ day of
September, 1996 by Ralph H. Eckler, as President of ECKLER INDUSTRIES, INC.,
a Florida corporation, on behalf of said corporation, who is personally known
to me or who provided _______________________________ as identification and
who did take an oath.
My Commission expires: __________________________________
Notary Public
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<PAGE>
Exhibit 10.22
LOAN AGREEMENT
Borrower: ECKLER INDUSTRIES, INC., a Florida corporation
Lender: BARNETT BANK, N.A.
707 Mendham Boulevard, Suite 123
Orlando, Florida 32825-3262
THIS LOAN AGREEMENT ("Agreement") between ECKLER INDUSTRIES, INC., a
Florida corporation ("Borrower"); RALPH H. ECKLER, individually ("Guarantor");
and BARNETT BANK, N. A. ("Lender") is made and executed on the following terms
and conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans or other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) in
granting, renewing or extending any Loan, Lender is relying upon Borrower's
representations, warranties and agreements, as set forth in this Agreement; (b)
the granting, renewing or extending of any Loan by Lender at all times shall be
subject to Lender's sole judgment and discretion; and (c) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement.
1. TERM. This Agreement shall be effective as of September 30,
1996, and shall continue thereafter until all indebtedness of Borrower to Lender
has been performed in full and the parties terminate this Agreement in writing.
2. DEFINITIONS. The following words shall have the following
meanings when used in this Agreement. Terms not otherwise defined in this
Agreement shall have the meanings attributed to such terms in the Uniform
Commercial Code. All references to dollar amounts shall mean amounts in lawful
money of the United States of America.
A. AGREEMENT. The word "Agreement" means this Loan Agreement,
as this Agreement may be amended or modified from time to time, together
with all exhibits and schedules attached to this Agreement from time to
time.
B. ACCOUNT. The word "Account" means a trade account, account
receivable, or other right to payment for goods sole or services rendered
owing to Borrower (or to a third party grantor acceptable to Lender).
C. ACCOUNT DEBTOR. The words "Account Debtor" mean the person
or entity obligated upon an account.
<PAGE>
D. ADJUSTED NET INCOME. The words "Adjusted Net Income" mean
net income after taxes plus depreciation, amortization, lease expense and
interest expense.
E. ADVANCE. The word "Advance" means a disbursement of loan
funds under this Agreement.
F. BORROWER: The word "Borrower" means ECKLER INDUSTRIES,
INC., a Florida corporation.
G. BUSINESS DAY. The words "Business Day" mean a day on which
commercial banks are open for business in the State of Florida.
H. CERCLA. The word "CERCLA" means the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended.
I. COLLATERAL. The word "Collateral" means and includes
without limitation all property and assets granted as collateral security
for a loan, whether real or personal property, whether granted directly or
indirectly, whether granted now or in the future, and whether granted in
the form of a security interest, mortgage, deed of trust, assignment,
pledge, chattel mortgage, chattel trust, factor's lien, equipment trust,
conditional sale, trust receipt, lien, charge lien or title retention
contract, lease or consignment intended as a security device, or any other
security or lien interest whatsoever, whether created by law, contract or
otherwise. The word "Collateral" includes without limitation all
collateral described below in the section titled "COLLATERAL."
K. ERISA. The word "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time,and the regulations and
published interpretations thereof.
L. EVENT OF DEFAULT. The words "Event of Default" mean and include
without limitation any of the Events of Default set forth below in the
section titled "EVENTS OF DEFAULT."
M. EXPIRATION DATE. The words "Expiration Date" mean the date of
termination of Lender's commitment to lend under this Agreement.
N. GAAP. The word "GAAP" means generally accepted
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<PAGE>
accounting principles consistently applied.
O. GRANTOR. The word "Grantor" means and includes without
limitation each and all of the persons or entities granting a Security
Interest in any Collateral for the indebtedness, including without
limitation all Borrowers granting such a Security Interest.
P. INDEBTEDNESS. The word "indebtedness" means and includes without
limitation all Loans, together with other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well as
all claims by Lender against Borrower, or any one or more of them; whether
now existing, contemporaneously with or hereafter incurred or created and
any renewals, modifications, extensions, substitutions or consolidations
thereof, voluntary or involuntary incurred, secured or unsecured, absolute
or contingent, liquidated or unliquidated; determined or undetermined;
whether Borrower may be liable individually or jointly with others, or
primarily or secondarily, or as guarantor, surety, or otherwise; whether
recovery upon the indebtedness may be or hereafter may become barred by any
statute of limitations; and whether such indebtedness may be or hereafter
may become otherwise unenforceable.
Q. LENDER. The word "Lender" means BARNETT BANK, N.A., its
successors and/or assigns.
R. LINE OF CREDIT. The words "Line of Credit" mean the credit
facility described in the Section titled "LINE OF CREDIT" below.
S. LOAN. The word "Loan" or "Loans" means and includes any and al
loans, advances, interest, costs, fees, documentary stamp tax and/or
intangible taxes, debts, overdraft indebtedness, leases, drafts, letters of
credit, credit cards, and business services from Lender to Borrower,
whether now existing, contemporaneously with, or hereafter incurred or
created and any renewals, modification, extensions, substitutions or
consolidations thereof, and however evidenced, including without limitation
those loans and financial accommodations described herein or described on
any exhibit or schedule attached to this Agreement from time to time.
T. NOTE. The word "Note" means Borrower's promissory note or notes,
if any, evidencing Borrower's Loan obligations in favor of Lender, as well
as any renewal, extension, modification, consolidation, substitute,
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replacement or refinancing note or notes therefor.
U. PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and
security interested securing indebtedness owed by Borrower to Lender; (b)
liens for taxes, assessments, or similar charges either not yet due or
being contested in good faith; (c) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in the ordinary
course of business and securing obligations which are not yet delinquent;
(d) purchase money liens or purchase money security interests upon or in
any property acquired or held by Borrower in the ordinary course of
business to secure indebtedness outstanding on the date of this Agreement
or permitted to be incurred under the paragraphs of this Agreement titled
"Indebtedness and Liens"; (e) liens and security interests which, as of the
date of this Agreement, have been disclosed to and approved by the Lender
in writing; and (f) those liens and security interests in which the
aggregate constitute an immaterial and insignificant monetary amount with
respect to the net value of Borrower's assets.
V. RELATED DOCUMENTS. The words "Related Documents" mean and
include without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with
the Indebtedness.
W. SECURITY AGREEMENT. The words "Security Agreement" mean and
include without limitation any agreements, promises, covenants,
arrangements, understandings or other agreements, whether created by law,
contract or otherwise, evidencing, governing, representing, or creating a
Security Interest.
X. SECURITY INTEREST. The words "Security Interest" mean and
include without limitation any type of collateral security, whether in the
form of a lien, charge, mortgage, deed of trust, assignment, pledge,
chattel mortgage, chattel trust, factor's lien, equipment trust,
conditional sale, trust receipt, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract or otherwise.
Y. SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1985 as now or
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hereafter amended.
3. LINE OF CREDIT. Lender agrees to make Advances to Borrower from
time to time from the date of this Agreement to the Expiration Date, provided
the aggregate amount of such Advances outstanding at any time does not exceed
the Borrowing Base. Within the foregoing limits, Borrower may borrow, partially
or wholly prepay, and reborrow under this Agreement as follows:
A. CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation
to make any Advance to or for the account of Borrower under this Agreement
is subject to the following conditions precedent, with all documents,
instruments, opinions, reports, and other items required under this
Agreement to be in form and substance satisfactory to Lender.
(1) Lender shall have received evidence that this Agreement
and all Related Documents have been duly authorized, executed and
delivered by Borrower to Lender.
(2) Lender shall have received such opinions of counsel,
supplemental opinions, and documents as Lender may have requested.
(3) The security interests in the Collateral shall have
been duly authorized, created, and perfected with first lien priority
and shall be in full force and effect.
(4) All guaranties required by Lender for the Line of
Credit shall have been executed by each Guarantor, delivered to
Lender, and be in full force and effect.
(5) Lender, at its option and for its sole benefit, shall
have conducted an audit of Borrower's Accounts, inventory, books,
records, and operations, and Lender shall be satisfied as to their
condition.
(6) There shall not exist at the time of any Advance a
condition which would constitute an Event of Default under this
Agreement, and Borrower shall have delivered to Lender the compliance
certificate called for in the paragraph below titled "Compliance
Certificate."
B. MAKING LOAN ADVANCES. Advances under the Lien of
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<PAGE>
Credit may be required only in writing subject to the limitations set
forth below. Each Advance shall be conclusively deemed to have been made
at the request of and for the benefit of Borrower. (a) when credited to
any deposit account of Borrower maintained with Lender; or (b) when
advanced in accordance with the instructions of an authorized person.
Lender, at its opinion, may set a cutoff time, after which all requests
for Advances will be treated as having been requested on the next
succeeding Business Day.
C. MANDATORY LOAN REPAYMENTS. If at any time the aggregate
principal amount of the outstanding Advances shall exceed the applicable
Borrowing Base, Borrower, immediately upon written or oral notice from
Lender, shall pay to Lender an amount equal to the difference between the
outstanding principal balance of the Advances and the Borrowing Base. On
the Expiration Date, Borrower shall pay to Lender in full the aggregate
unpaid principal amount of all Advances then outstanding and all accrued
unpaid interest, together with all other applicable fees, costs and
charges, if any, not yet paid.
It is contemplated that Borrower will pay interest monthly on all
outstanding loan balances. Principal payments may be made by Borrower at
any time or as contained in the Cash Collateral Account executed by the
Borrower in favor of Lender.
D. LOAN ACCOUNT. Lender shall maintain on its books a record
of account in which Lender shall make entries for each Advance and such
other debits and credits as shall be appropriate in connection with the
credit facility. Lender shall provide Borrower with periodic statements of
Borrower's account, which statements shall be considered to be correct and
conclusively binding on Borrower unless Borrower notifies Lender to the
contrary within thirty (30) days after Borrower's receipt of any such
statement which Borrower deems to be incorrect.
4. COLLATERAL. To secure payment of the Line of Credit and
Performance of all other Loans, obligations and duties owed by Borrower to
Lender, Borrower (and others, if required) shall grant to Lender Security
Interests in such property and assets as Lender may required (the
"Collateral"), including without limitation Borrower's present and future
Accounts, general intangible, and inventory. Lender's Security Interests in
the Collateral shall be continuing liens and shall include the proceeds and
products of the Collateral, including without
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<PAGE>
limitation, the proceeds of any insurance. With respect to
the Collateral, Borrower agrees and presents and warrants to Lender:
A. PERFECTION OF SECURITY INTERESTS. Borrower agrees to
execute such financing statements and to take whatever other actions are
requested by Lender to perfect and continue Lender's Security Interests in
the collateral. Upon request of Lender, Borrower shall deliver to Lender
any and all of the documents evidencing or constituting the Collateral, and
Borrower will note Lender's interest upon any and all chattel paper if not
delivered to Lender for possession by Lender. Contemporaneous with the
execution of this Agreement, Borrower shall execute on or more UCC-
financing statements and any similar statements as may be required by
applicable law, and will file such financing statements and all such
similar statements in the appropriate location or locations. Borrower
hereby appoints Lender as its irrevocable attorney-in-fact for the purpose
of executing any documents necessary to perfect or to continue any Security
Interest. Lender may at any time, and without further authorization from
Borrower, file a carbon, photograph, facsimile, or other reproduction of
any financing statement for use as financing statement. Borrower shall
reimburse Lender for all expenses for the perfection, termination and the
continuation of the perfection of Lender's Security Interest in the
Collateral. Borrower promptly will notify Lender of any change in
Borrower's name, including any change to the assumed business names of
Borrower. Borrower also promptly will notify Lender of any change in
Borrower's Social Security Number of Employer Identification Number.
Borrower further agrees to notify Lender in writing prior to any change in
address or location of Borrower's principal governance office or should
Borrower merge or consolidate with any other entity.
B. COLLATERAL RECORDS. Borrower does now, and at all times
hereafter shall, keep correct and accurate records of the Collateral, all
of which records shall be available to Lender or Lender's representative
upon demand for inspection and copying at any reasonable time. With
respect to the Accounts, Borrower agrees to keep and maintain such records
as Lender may require, including without limitation information concerning
Eligible Accounts and Account balances and agings. With respect to the
inventory, Borrower agrees to keep and maintain such records as Lender may
require, including without limitation, information concerning Eligible
Inventory and records itemizing and describing the kind, type, quality and
quantity of
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inventory, Borrower's inventory costs and selling prices, and the daily
withdrawals and additions to inventory.
C. COLLATERAL SCHEDULES. Concurrently with the execution and
delivery of this Agreement, Borrower shall execute and deliver to Lender
schedules of Accounts and Inventory and Eligible Accounts and Eligible
Inventory, in form and substance satisfactory to the Lender. Thereafter,
Borrower shall execute and deliver to Lender such supplemental schedules of
Eligible Accounts and Eligible Inventory and such other matters and
information relating to the Accounts and Inventory as Lender may request.
Supplemental Schedules shall be delivered according to the following
schedule: By the 15th of the subsequent month.
D. REPRESENTATIONS AND WARRANTIES CONCERNING ACCOUNTS. With
respect to the Accounts, Borrower represents and warrants to Lender: (a)
Each Account represented by Borrower to be an Eligible Account for purposes
of this Agreement conforms to the requirements of the definition of an
Eligible Account; (b) All Account Information listed on schedules delivered
to Lender will be true and correct, subject to immaterial variance; and (c)
Lender, it assigns, or agents shall have the right at any time and at
Borrower's expense to inspect, examine, and audit Borrower's records and to
confirm with Account Debtors the accuracy of such Accounts.
E. REPRESENTATIONS AND WARRANTIES CONCERNING INVENTORY. With
respect to the Inventory, Borrower represents and warrants to Lender: (a)
all inventory represented by Borrower to be Eligible Inventory for purposes
of this Agreement conforms to the requirements of the definition of
Eligible Inventory; (b) All inventory values listed on schedules deliver to
Lender will be true and correct, subject to immaterial variance; (c) The
value of the Inventory will be determined on a consistent accounting basis;
(d) Except as agreed to the contrary by Lender in writing, all Eligible
Inventory is now and at all times hereafter will be in Borrower's physical
possession and shall not be held by others on consignment, sale on
approval, or sale or return; (d) Except as reflected in the Inventory
schedules delivered to Lender, all Eligible Inventory is now and at all
times hereafter will be of good and merchantable quality, free from
defects; (f) Eligible Inventory is not now and will not at any time
hereafter be stored with a bailee, warehouseman, or similar party without
Lender's prior written consent, and, in such event, Borrower will
concurrently at the time of bailment cause any such
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<PAGE>
bailee, warehouseman, or similar party to issue and deliver to Lender,
in form acceptable to Lender, warehouse receipts in Lender's name
evidencing the storage of Inventory; and (g) Lender, its assigns, or
agents shall have the right at any time and at Borrower's expense to
inspect and examine the inventory and to check and test the same as to
quality, quantity, value and condition.
F. NOTIFICATION BASIS. Borrower agrees and understands that
this Loan shall be on a notification basis pursuant to which Lender shall
directly collect and receive all proceeds and payments from the Accounts in
which Lender has a security interest. In order to facilitate the
foregoing, Borrower agrees to deliver to Lender, upon demand, any and all
of Borrower's records, ledger sheets, payment cards, and other
documentation, in the form requested by Lender with regard to the Accounts.
Borrower further agrees that Lender shall have the right to notify each
Account Debtor, pay such proceeds and payments directly to Lender, and to
do any and all other things as Lender may deem to be necessary and
appropriate, within its sole discretion, to carry out the terms and intent
of this Agreement. Lender shall have the further right, where appropriate
and within Lender's sole discretion, to file suit, either in its own name
or in the name of Borrower, to collect any and all such Accounts. Borrower
further agrees that Lender may take such other actions, either in
Borrower's name or Lender's name, as Lender may deem appropriate within its
sole judgment, with regard to collection and payment of the Accounts,
without affecting the liability of Borrower under this Agreement or on the
Indebtedness.
G. REMITTANCE AMOUNT. Borrower agrees that Lender may at any
time require Borrower to institute procedures whereby the payments and
other proceeds of the Accounts that shall be paid by the Account Debtors
under a remittance account arrangement with Lender, or Lender's agent, or
with one or more financial institutions designated by Lender. Borrower
further agrees that, if no Event of Default exists under this Agreement,
any and all of such funds received under such a remittance account
arrangement shall, at Lender's sole election and discretion, either be (a)
paid or turned over to Borrower; (b) deposited into one or more accounts
for the benefit of Borrower (which deposit accounts shall be subject to a
security assignment in favor of Lender); (c) deposited into one or more
accounts for the joint benefit of Borrower and Lender (which deposit
accounts shall likewise be subject to a security assignment in favor
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of Lender); (d) paid or turned over to Lender to be applied to the
indebtedness in such order and priority as Lender may determine within
its sole discretion; or (e) any combination of the foregoing as Lender
shall determine from time to time. Borrower further agrees that, should
one or more Events of Default exist, any and all funds received under
such a remittance account arrangement shall be paid or turned over to
Lender to be applied to the Indebtedness, again in such order and
priority as Lender may determine within its sole discretion.
5. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants
to Lender, as of the date of this Agreement, as of the date of each disbursement
of Loan proceeds, as of the date of any renewal, extension or modification of
any loan, and at all times any indebtedness exists:
A. ORGANIZATION. Borrower is a corporation which is duly
organized, validly existing, and in good standing under the laws of the
state of Borrower's incorporation and is validly existing and in good
standing in all states in which Borrower is doing business. Borrower has
the full power and authority to own its properties and to transact the
business in which it is presently engaged or presently proposes to engage.
Borrower also is duly qualified as a foreign corporation and is in good
standing in all states in which the failure to so qualify would have a
material adverse effect on its businesses or financial condition.
B. AUTHORIZATION. The execution, delivery, and performance of
this Agreement and all Related Documents by Borrower, to the extent to be
executed, delivered or performed by Borrower, have been duly authorized by
all necessary action by Borrower; do not require the consent or approval of
any other person, regulatory authority or governmental body; and do not
conflict with, result in a violation of, or constitute a default under (a)
any provision of its articles of incorporation or organization, or bylaws,
or any agreement or other instrument binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
C. FINANCIAL INFORMATION. Each financial statement of Borrower
and each information, exhibit, or report supplied to Lender by Borrower,
its agents or accountants truly and completely disclosed Borrower's
financial condition as of the date of the statement in accordance with
GAAP, and there has been no material adverse change in Borrower's financial
or business condition or operations
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subsequent to the date of the most recent financial statement supplied
to Lender and non are imminent or threatened. Borrower has no material
contingent obligations excepts as disclosed in such financial
statements. Borrower acknowledges and agrees that Lender is relying on
all such financial information in entering into, continuing, renewing or
extending any Loan.
D. LEGAL EFFECT. This Agreement constitutes, and any
instrument or agreement required hereunder to be given by Borrower when
delivered will constitute, legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms.
E. PROPERTIES. Except for Permitted Liens, Borrower owns and
has good title to all of Borrower's properties free and clear of all
Security interests and has not executed any security documents or financing
statements relating to such properties. All of Borrower's properties are
listed in Borrower's legal name, and Borrower has not used, or filed a
financing statement under, any other name for at least the last five (5)
years. Additionally, Borrower and Borrower's real and personal properties
comply fully with all laws, ordinances, statutes, codes and requirements of
the Americans with Disabilities Act of 1990.
F. Borrower and Lender have executed an Environmental Agreement of
even date herewith which by reference is made a part hereof.
G. LITIGATION AND CLAIMS. No litigation, claims, investigation,
administrative proceeding or similar action (including those for unpaid
taxes) against Borrower is pending or threatened, and no other event has
occurred which may materially adversely affect Borrower's financial
condition or properties, other than litigation, claims, or other events, if
any, that have been disclosed to and acknowledged by Lender in writing.
H. TAXES. To the best of Borrower's knowledge, all tax returns and
reports of Borrower that are or were required to be filed, have been filed,
and all taxes, assessments, and other governmental charges have been paid
in full, except those presently being or to be contested by Borrower in
good faith in the ordinary course of business and for which adequate
reserves have been provided.
I. LIEN PRIORITY. Unless otherwise previously
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disclosed to Lender in writing, Borrower has not entered into or granted
any Security Agreements, or permitted the filing of attachment of any
Security Interests on or affecting any of the Collateral directly or
indirectly securing repayment of Borrower's Loan and Note, that would be
prior to or that may in any way be superior to Lender's Security
Interests and rights in and to such Collateral.
J. BINDING EFFECT. This Agreement, the Note and all Security
Agreements directly or indirectly securing repayment of Borrower's Loan and
Note are binding upon Borrower as well as upon Borrower's successors,
representatives, and assigns, and are legally enforceable in accordance
with their respective terms.
K. PERMITS. Borrower possess and will continue to possess all
permits, licenses, copyrights, trademarks, trade names, patents and rights
thereto to conduct its business and its business does not conflict or
violate any valid rights of others with respect to the foregoing.
L. COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds
solely for business or commercial related purposes and will not purchase or
carry margin stock (within the meaning of Regulations G, T and U of the
Board of Governors of the Federal Reserve System).
M. EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which
Borrower may have any liability complies in all material aspects with all
applicable requirements of law and regulations, and (i) no Reportable Event
nor Prohibited Transaction (as defined in ERISA) has occurred with respect
to any such plan, (ii) Borrower has not withdrawn from any such plan or
indicated steps to do so, and (iii) no steps have been taken to terminate
any such plan.
N. LOCATION OF BORROWER'S OFFICES AND RECORDS. The chief place of
business of Borrower and the office or offices where Borrower keeps its
records concerning the Collateral is located at 5200 South Washington
Avenue, Titusville, Florida 32780.
O. INFORMATION. All information heretofore or contemporaneously
herewith furnished by Borrower to Lender for the purposes of or in
connection with this Agreement or any transaction contemplated hereby is,
and all information hereafter furnished by or on behalf of Borrower or
Lender will be, true and accurate in every material respect on the date of
which such information is dated or certified; an
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none of such information is or will be incomplete by omitting to state
any material fact necessary to make such information not misleading.
P. SURVIVAL OF REPRESENTATIVES AND WARRANTIES. Borrower understands
and agrees that Lender, without independent investigation, is relying upon
the above representations and warranties in extending Loan Advances to
Borrower. Borrower further agrees that the foregoing representations and
warranties shall be continuing in nature and shall remain in full force and
effect until such time as Borrower's indebtedness shall be paid in full, or
until this Agreement shall be terminated in the manner provided above,
whichever is the last to occur.
6. AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender
that, while this Agreement is in effect, Borrower shall:
A. DEPOSIT ACCOUNTS. Maintain its primary banking accounts
with Lender.
B. LITIGATION. Promptly inform Lender in writing of (a) all
material adverse changes in Borrower's financial condition, and (b) all
litigation and claims and all threatened litigation and claims affecting
Borrower or any Guarantor which could materially affect the financial
condition of Borrower or the financial condition of any Guarantor.
C. UPDATES. Promptly inform Lender in writing of details of
all litigation, legal or administrative proceedings, investigation or other
action of similar nature, pending or threatened against Borrower, at any
time during the term of this Agreement, which in part or in whole may or
will render any of the above representations and warranties no longer true,
accurate and correct in each and every respect. Borrower will bring such
details to Lender's attention, in writing, within thirty (30) days from the
date Borrower acquires knowledge of same.
D. FINANCIAL RECORDS. Maintain its books and records in
accordance with GAAP and permit Lender to examine and audit Borrower's
books and records at all reasonable times.
E. FINANCIAL STATEMENTS. Furnish Lender with, as soon as
available, but in no event later than fifteen (15) days after the end of
each month, Borrower's balance sheet and profit and loss statement for the
period ended, prepared
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and certified as correct to the best knowledge and belief by Borrower's
chief financial officer or other officer or person acceptable to Lender.
All financial records required to be provided under this Agreement
shall be prepared in accordance with GAAP and certified by Borrower as
being true and correct. Provide to Lender annually for each individual
Borrower and Guarantor, if any, signed and dated personal financial
statements on Lender's forms and, immediately after filing, the person
income tax return filed for the past calendar year. Simultaneously with
the financial information required herein of Borrower, the same
information of all corporate or partnership guarantors, if any, prepared
in accordance with GAAP.
Promptly, after the furnishing thereof, provide Lender with copies of
any statement or report furnished to any other party pursuant to the terms
of any indenture, loan, credit or similar agreement and not otherwise
required to be furnished to Lender pursuant to any other section of this
Agreement.
Promptly after the sending or filing thereof, provide Lender with
copies of all proxy statements, financial statements and reports which
Borrower sends to its stockholders, and copies of all regular periodic,
special reports, and all registration statements which Borrower files with
the Securities and Exchange Commission or any governmental authority which
may be substituted therefor, or with any national securities exchange.
F. ADDITIONAL COVENANTS.
(a) Borrower will submit 10-K's annually within ninety (90) days
of Borrower's fiscal year end.
(b) Borrower will submit 10-Q's quarterly within sixty (60) days
of period end.
(c) CPA audited fiscal year end statement shall be submitted to
Lender within ninety (90) days of Borrower's fiscal year end.
(d) Guarantor will provide to Lender annual personal financial
statements in a form and content acceptable to Lender by August
31st of each year.
(e) Guarantor will provide to Lender a copy of Guarantor's
personal income tax return, including
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all schedules, immediately upon filing. In the event an
extension is requested of IRS, then a copy of such extension
request shall be submitted to Lender immediately upon filing.
(f) All business operating accounts and all business merchant
services shall be maintained with Barnett Bank, N. A., Central
Florida.
(g) Company prepared accounts receivable aging, to include a
customer listing, shall be submitted within fifteen (15) days of
month end.
(h) Company prepared accounts payable aging shall be submitted
within fifteen (15) days of month end.
(i) Company prepared inventory stock status report and a
certificate of inventory shall be submitted monthly within
fifteen (15) days of month end.
(j) A borrowing base compliance certificate with back-up
documentation shall be delivered once a week.
NEGATIVE COVENANT ALLOWANCES:
(a) Borrower will not create, incur or add additional
indebtedness, except for trade debt, including capital leases
without Lender's written consent.
(b) Borrower will not permit any purchase money security
interests without Lender's written consent.
(c) Borrower will not enter into any operating leases as
permitted indebtedness without Lender's written consent.
(d) Borrower will not permit loans or investments to officers or
shareholders without Lender's written consent.
(e) Borrower will not pledge assets without Lender's prior
written consent.
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G ADDITIONAL INFORMATION. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and other
reports with respect to Borrower's financial condition and business
operations as Lender may request from time to time.
H FINANCIAL COVENANTS AND RATIOS. Comply with the following
covenants and ratios, which ratios are to be tested 3/31 and 9/30 of each
year.
Tangible Net Worth. Maintain a minimum Tangible Net Worth of not less
than:
Period Ratio
------ -----
At All Times $1,900,000.00
Leverage Ratio. Maintain a ratio of Total Liabilities to Tangible Net
Worth of less than:
Period Ratio
------ ------
At All Times 2.5:1
Current Ratio. Maintain a ratio of Current Assets to Current Liabilities
in excess of:
Period Ratio
------ ------
At All Times 1.0:1
Fixed Charge Ratio. Maintain a ratio of Adjusted Net Income to Fixed
Charges of not less than:
Period Ratio
------ ------
At All Times 1.25:1 as of fiscal year end, de-
fined as earnings before interest,
depreciations, amortization and
taxes less dividends and bonuses
divided by principal and interest.
I. Borrower may not make any distribution of dividends unless bank cash
flow requirements are met and only to minimum cash flow level of 1.25:1 as
defined above, and restricted to 50% of earnings.
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J. Notwithstanding anything to the contrary, or any other loan document
in connection with the loan transaction Borrower's right to any advances
under the Revolving Line of Credit is subject to a quarterly audit to be
conducted by the "ABL" Department and which audit shall determine that
Borrower is in compliance with all of the terms and conditions of this Loan
Agreement as well as the terms and conditions of all other loan documents.
For purposes of this Agreement and to the extent the following terms are
utilized in this Agreement, the term "Tangible Net Worth" shall mean Borrower's
total assets excluding all intangible assets determined in accordance with GAAP
(i.e., goodwill, trademarks, patents, copyrights, organizational expenses, and
similar intangible items, and excluding all loans to shareholders and
affiliates, but including leaseholds and leasehold improvements at book value)
of Borrower less total Debt. The term "Debt" shall be determined in accordance
with GAAP. The term "Subordinated Debt" shall mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement to
indebtedness owed by Borrower to Lender in form and substance acceptable to
Lender. The term "Working Capital" shall mean Borrower's current assets at
lower of cost or current market value less amounts due from any officer,
director, shareholder or any entity related by common control or ownership,
excluding prepaid expenses, less Borrower's current liabilities. The term
"Liquid Assets" shall mean Borrower's cash on hand, marketable securities, bank
deposits and Borrower's receivables. The term "Adjusted Net Income" means net
income after taxes plus depreciation, amortization, lease expense, and interest
expense. The term "Fixed Charges" means interest expense plus lease expense,
current maturities of long-term debt and current maturities of capital leases.
The term "Cash Flow" shall mean net income after taxes, and exclusive of
extraordinary gains and income, plus depreciation and amortization. The term
"Senior Debt" shall mean Debt less Subordinated Debt. The term "Capital Funds"
shall mean Tangible Net Worth plus Subordinated Debt. Except as provided above,
all computations made to determine compliance with the requirements contained in
this paragraph shall be made in accordance with GAAP and certified by Borrower
as being true and correct.
F. INSURANCE. Maintain fire and other risk insurance, business
interruption, theft, public liability insurance, and such other insurance
in such amounts and covering such risks as are usually covered by
businesses engaged in the same or a similar business and similarly situated
with respect to Borrower's properties and operations in form, coverages and
with insurance companies
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reasonably acceptable to Lender. Borrower, upon request of Lender, will
deliver to Lender from time to time the policies or certificates of
insurance in form satisfactory to Lender, including stipulations that
coverages will not be canceled or diminished without at least thirty
(30) days prior written notice to Lender. In connection with all policies
covering assets in which Lender holds or is offered a security interest for
the Loans, Borrower will provide Lender with such loss payable or other
endorsements as Lender may require.
G. INSURANCE REPORTS. Furnish to Lender, upon request of
Lender, reports on each existing insurance policy showing such information
as Lender may reasonably request, including without limitation the
following: (a) the name of the insurer; (b) the risks insured; (c) the
amount of the policy; (d) the properties insured; (e) the then current
property values on the basis of which insurance has been obtained, and the
manner of determining those values; and (f) the expiration date of the
policy. In addition, upon request of Lender (however not more often than
annually), Borrower will have an independent appraiser satisfactory to
Lender determine, as applicable, the actual cash value or replacement cost
of any Collateral. The cost of such appraisal shall be paid by Borrower.
H. OTHER AGREEMENTS. Comply with all terms and conditions of
all other agreements, whether now or hereafter existing, between Borrower
and any other party and notify Lender immediately in writing of any default
in connection with any other such agreements.
I. LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's
business operations, unless specifically consented to the contrary by
Lender in writing.
J. TAXES, CHARGES AND LIENS. Pay and discharge when due all of
its indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every kind
and nature, imposed upon Borrower or its properties, income, or profits,
prior to the date on which penalties would attach, and all lawful claims
that, if unpaid, might become a lien or charge upon any of Borrower's
properties, income, or profits. Provided however, Borrower will not be
required to pay and discharge any such assessment, tax, charge, levy, lien
or claim so long as (a) the legality of the same shall be contested in good
faith by appropriate proceedings, and (b) Borrower shall have established
on its books adequate reserves with
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respect to such contested assessment, tax, charge, levy, lien, or claim in
accordance with generally accepted accounting practices. Borrower, upon
demand of Lender, will furnish to Lender evidence of payment of the
assessments, taxes, charges, levies, liens and claims and will authorize
the appropriate governmental official to deliver to Lender at any time a
written statement of any assessments, taxes, charges, levies, liens and
claims against Borrower's properties, income, or profits.
K. PERFORMANCE. Perform and comply with all terms, conditions,
and provisions set forth in this Agreement and in the Related Documents in
a timely manner, and promptly notify Lender if Borrower learns of the
occurrence of any event which constitutes an Event of Default under this
Agreement or under any of the Related Documents.
L. OPERATIONS. Substantially maintain its present executive
and management personnel, conduct its business affairs in a reasonable and
prudent manner and in compliance with all applicable federal, state and
municipal laws, ordinances, rules and regulations respecting its
properties, charters, businesses and operations, including without
limitation compliance with the Americans With Disabilities Act and with all
minimum funding standards and other requirements of ERISA and other laws
applicable to Borrower's employee benefit plans, and continue to engage in
an efficient and economical manner in a business of the same general type
as now conducted by it, provided, however, that nothing contained in this
Agreement shall prevent Borrower from discontinuing any part of Borrower's
business, if in Borrower's opinion, this discontinuance is in the best
interests of Borrower and not disadvantageous to Lender.
M. MAINTENANCE. Maintain, keep and preserve Borrower's
buildings and properties and every part thereof in good repair, working
order, and condition and from time to time make all needful and proper
repairs, renewals, replacements, additions, betterments and improvements
thereto, so that at all times the efficiency thereof shall be fully
preserved and maintained, ordinary wear and tear excepted.
N. INSPECTION. Permit employees or agents of Lender at any
reasonable time to inspect any and all collateral for the Loan or Loans and
Borrower's other properties and to examine or audit Borrower's books,
accounts and records and to make copies and memoranda of Borrower's books,
accounts and records. If Borrower now or at any time hereafter
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maintains any records (including without limitation computer generated
records and computer software programs for the generation of such records)
in the possession of a third party, Borrower, upon request of Lender, shall
notify such party to permit Lender free access to such records at all
reasonable times and to provide Lender with copies of any records it may
request, all at Borrower's expense and discuss the affairs, finances and
accounts of Borrower with Lender.
O. COMPLIANCE CERTIFICATE. Unless waived in writing by Lender,
provide Lender quarterly a compliance certificate executed by Borrower's
chief financial officer, or other officer or person acceptable to Lender,
certifying that the representations and warranties set forth in this
Agreement are true and correct as of the date of the certificate and
further certifying that, as of the date of the certificate, no default or
Event of Default has occurred, or has occurred and is continuing under this
Agreement.
P. Environmental Compliance and Reports. Borrower and Lender have
executed an Environmental Agreement of even date herewith which by
reference is made a part hereof.
Q. ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to
perfect all Security Interests.
7. CESSATION OF ADVANCES. If Lender has made any commitment to make
any Loan to Borrower whether under this Agreement or under any other agreement,
Lender shall have no obligation to make Loan Advances or to disburse Loan
proceeds if (a) Borrower or any Guarantor is in default under the terms of this
Agreement or any of the Related Documents or any other agreement that Borrower
or any Guarantor has with Lender: (b) Borrower or any Guarantor becomes
insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged
a bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition. In the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender; or (e) Lender in good faith deems itself insecure even
though no Event of Default shall have occurred.
8. ADDITIONAL ELIGIBLE ACCOUNTS. Notwithstanding anything
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else contained in this Agreement to the contrary, "Eligible Accounts" do not
include Accounts which Lender in its sole discretion, deems ineligible from
time to time.
9. AUDITS. Periodic audits of Borrower's Collateral will be performed by
Barnett Banks, Inc.'s Asset Based Lending Department, the results of which must
be satisfactory to Lender in its sole discretion.
10. RIGHT OF SETOFF. Borrower authorizes Lender, to the extent permitted
by applicable law, to charge, withdraw or setoff all sums owing on this
Agreement against any and all the accounts set forth below in the Accounts
section without prior demand or notice to Borrower.
11. ACCOUNTS. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all of Borrower's right, title and interest in and to, Borrower's
deposits, accounts (whether checking, savings, or some other account), or
securities now or hereafter in the possession of or any deposit with Lender or
with any Barnett Banks, Inc. affiliate or subsidiary including without
limitation all accounts held jointly with someone else and all accounts Borrower
may open in the future, excluding however all IRA, Keogh, and trust accounts.
12. EVENTS OF DEFAULT. If any of the following events shall occur each
shall constitute an Event of Default under this Agreement:
A. DEFAULT ON INDEBTEDNESS. An event of default as defined in
any Loan or Note or demand for full payment of any Loan or Note.
B. OTHER DEFAULTS. Failure of Borrower or any Grantor to
comply with or to perform when due any other term, obligation, covenant or
condition contained in this Agreement or in any of the Related Documents,
or failure of Borrower to comply with or to perform any other term,
obligation, covenant or condition contained in any other agreement between
Lender and Borrower.
C. DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any
Grantor default under any loan, extension of credit, security agreement,
purchase or sales agreement or any other agreement, in favor of any other
creditor or person that may materially affect any of Borrower's property or
Borrower's or any Grantor's ability to repay the Loans or perform their
respective obligations under this Agreement or
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any of the Related Documents.
D. FALSE STATEMENTS. Any warranty, representation, or
statement made or furnished to Lender by or on behalf of Borrower or any
Grantor under this Agreement or the Related Documents is false or
misleading in any material respect, either now or at the time made or
furnished.
E. DEFECTIVE COLLATERALIZATION. This Agreement or any of the
Related Documents ceases to be in full force and effect (including failure
of any Security Agreement to create a valid and perfected Security
Interest) at any time and for any reason.
F. INSOLVENCY. The dissolution or termination of Borrower's
existence as a going business, insolvency, appointment of a receiver for
any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
G. CREDITOR PROCEEDINGS. Commencement of foreclosure
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower, any creditor of any grantor of
collateral for the Loan. This includes a garnishment, attachment, or levy
on or of any of Borrower's deposit accounts with Lender.
H. FORFEITURE. The filing of formal charges under any federal
or state law against any Borrower which forfeiture is the penalty.
However, this Event of Default shall not apply if there is a good faith
dispute by Borrower as to the validity or reasonableness of the claim which
is the basis of the proceeding, and if Borrower gives Lender written notice
of the proceeding and furnishes reserves or a surety bond for the
proceeding satisfactory to Lender.
I. EVENTS AFFECTING GUARANTOR. Any of the preceding events
occurs with respect to any Guarantor of any of the indebtedness or such
Guarantor dies or becomes incompetent.
J. INSECURITY. Lender, in good faith, deems itself insecure.
18. EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur,
except where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other
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agreement immediately will terminate (including any obligation to make Loan
Advances or disbursements), and, at Lender's option, all indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights
and remedies provided in the Related Documents or available at law, in
equity, or otherwise. Except as may be prohibited by applicable law, all of
Lender's rights and remedies shall be cumulative and may be exercised
singularly or concurrently. Election by Lender to pursue any remedy shall
not exclude pursuit of any other remedy, and an election to make expenditures
or to take action to perform an obligation of Borrower or of any Grantor
shall not affect Lender's right to declare a default and to exercise its
rights and remedies.
19. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are
a part of this Agreement:
K. AMENDMENTS. This Agreement, together with any Related
Documents, constitutes the entire understanding and agreement of the
parties as to the matters set forth in this Agreement and supersedes all
prior understandings and correspondence, oral or written, with respect to
the subject matter hereof. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.
L. APPLICABLE LAW. This Agreement shall be governed buy and
construed in accordance with the laws of the State of Florida.
M. CAPTION HEADINGS. Caption headings in this Agreement are
for convenience purposes only and are not be used to interpret or define
the provisions of this Agreement.
N. CONTINUING AGREEMENT. This Agreement is a continuing
agreement and shall continue in effect notwithstanding that from time to
time, no indebtedness may exist.
O. CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents
to Lender's sale or transfer, whether now or later, of one or more
participation interests in the Loans to one or more purchasers, whether
related or unrelated to Lender. Lender may provide, without any limitation
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whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any other
matter relating to the Loan, and Borrower hereby waives any rights to
privacy it may have with respect to such matters. Borrower additionally
waives any and all notices of sale of participation interest, as well as
all notices of any repurchase of such participation interests. Borrower
also agrees that the purchasers of any such participation interests will be
considered as the absolute owners of such interests in the Loans and will
have all the rights granted under the participation agreement or agreements
governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or later
against Lender or against any purchaser of such a participation interest
and unconditionally agrees that either Lender or such purchaser may enforce
Borrower's obligation under the Loans irrespective of the failure or
insolvency of any holder of any interest in the Loans. Borrower further
agrees that the purchaser of any such participation interest may enforce
its interests irrespective of any personal claims or defenses that Borrower
may have against Lender.
P. COSTS AND EXPENSES. Borrower agrees to pay upon demand all
of Lender's out-of-pocket expenses, including reasonable attorney's fees,
incurred in connection with the preparation, execution, enforcement and
collection of this Agreement, or in connection with the Loans made pursuant
to this Agreement. Lender may pay someone else to help collect the Loans
and to enforce this Agreement, and Borrower will pay that amount. This
includes, subject to any limits under applicable law, Lender's reasonable
attorney's fees and Lender's legal expenses, whether or not there is a
lawsuit, including reasonable attorney's fees for bankruptcy proceedings
(including efforts t modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Borrower
also will pay any court costs, in addition to all other sums provided by
law.
Q. NOTICES. All notices required to be given under this
Agreement shall be given in writing and shall be effective when actually
delivered or when deposited with a nationally recognized overnight courier
or deposited in the United States registered or certified mail, first
class, postage prepaid, return receipt requested, addressed to the party to
whom the notice is to be given at the address shown above; notification by
facsimile is specifically not
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allowed. Any party may change its address for notices under this Agreement
by giving formal written notice to the other parties, specifying that the
purpose of the notice is to change the party's address. To the extent
permitted by applicable law, if there is more than one Borrower, notice to
any Borrower will constitute notice to all Borrowers. For notice purposes,
Borrower agrees to keep Lender informed at all times of Borrower's current
address(es).
R. SEVERABILITY. If a court of competent jurisdiction finds
any provision of this Agreement to be invalid or unenforceable as to any
person or circumstance, such finding shall not render that provision
invalid or unenforceable as to any other person or circumstances. If
feasible, any such offending provision shall be deemed to be modified to be
within the limits of enforceability of validity; however, if the offending
provision cannot be so modified, it shall be stricken and all other
provisions of this Agreement in all other respects shall remain valid and
enforceable.
S. SUCCESSORS AND ASSIGNS. All covenants and agreements
contained by or on behalf of Borrower shall bind its successors and assigns
and shall inure to the benefit of Lender, its successors and assigns,
Borrower shall not, however, have the right to assign its rights under this
Agreement or any interest therein, without the prior written consent of the
Lender.
T. SURVIVAL. All warranties, representations, and covenants
made by Borrower in this Agreement or in any certificate or other
instrument delivered by Borrower to Lender under this Agreement shall be
considered to have been relied upon by Lender and will survive the making
of the Loan and delivery to Lender of the Related Documents, regardless of
any investigation made by Lender or on Lender's behalf.
U. TIME. Time is of the essence in the performance of this
Agreement.
V. WAIVER. Lender shall not be deemed to have waived any
rights under this Agreement unless such waiver is given in writing and
signed by Lender. No delay or omission on the part of Lender in exercising
any right shall operate as a waiver of such right or any other right. A
waiver by Lender of a provision of this Agreement shall not prejudice or
constitute a waiver of Lender's right otherwise to demand strict compliance
with that provision or any other provision
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of this Agreement. No prior waiver by Lender, nor any course of dealing
between Lender and Borrower, or between Lender and any Guarantor, shall
constitute a waiver of any of Lender's rights or of any obligation of
Borrower or of any Guarantor as to any future transactions. Whenever the
consent of Lender is required under this Agreement, the granting of such
consent by Lender in any instance shall not constitute continuing consent
in subsequent instances where such consent is required, and in all cases
such consent may be granted or withheld in the sole discretion of Lender.
X. ORDER OF EXECUTION. All of the parties hereto acknowledge that
the order of execution of this Agreement is as follows: execution by the Lender
in the State of Florida, followed by delivery to the Borrower and Guarantors in
Wilmington, Ohio and execution by the Borrower and Guarantors in the State of
Ohio.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
SEPTEMBER ___, 1996.
BORROWER:
ECKLER INDUSTRIES, INC.
a Florida corporation
By: /s/
- -------------------------- ----------------------------------
Witness Signature Ralph H. Eckler, President
- -------------------------- Address: 5200 S. Washington Ave.
Print Witness Name Titusville, FL 32780
- -------------------------- GUARANTOR:
Witness Signature /s/
----------------------------------
- -------------------------- Ralph H. Eckler, Individually
Print Witness Name
LENDER:
BARNETT BANK, N.A.
By: /s/
- -------------------------- ----------------------------------
Witness Signature
- -------------------------- Address: 707 Mendham Boulevard
Print Witness Name Suite 123
Orlando, FL 32825-3262
- --------------------------
Witness Signature
- --------------------------
Print Witness Name
- --------------------------
26
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EXHIBIT 10.23
SECURITY AGREEMENT
ECKLER INDUSTRIES, INC., a Florida corporation (the "Borrower"), of 5200
South Washington Avenue, Titusville, Florida 32780, for value received, hereby
grants to BARNETT BANK, N.A., with an office at 707 Mendham Boulevard, P. O. Box
678267, Orlando, Florida 32867-8267(the "Secured Party"), a continuing security
interest in the following property:
ALL INVENTORY, CHATTEL PAPER, ACCOUNTS RECEIVABLE, EQUIPMENT AND
GENERAL INTANGIBLES, WHETHER ANY OF THE FOREGOING IS OWNED NOW OR
HEREAFTER ACQUIRED; ALL ACCESSIONS, ADDITIONS, REPLACEMENTS AND
SUBSTITUTIONS RELATING TO ANY OF THE FOREGOING; ALL RECORDS OF ANY
KIND RELATING TO ANY OF THE FOREGOING; AND ALL PROCEEDS RELATING TO
ANY OF THE FOREGOING (INCLUDING INSURANCE, GENERAL INTANGIBLES AND
OTHER ACCOUNT PROCEEDS).
together with all products of the collateral and all additions and accessions
to, replacements of, insurance or condemnation proceeds of, and documents
covering the collateral, all property received wholly or partly in trade or
exchange for the collateral, and all rents, revenues, issues, profits and
proceeds arising from the sale, lease, license, encumbrance, collection, or any
other temporary or permanent disposition of, the collateral or any interest
therein, whether now owned or existing or hereafter acquired or arising (all of
which is hereinafter called "Collateral"), to secure the payment of that certain
indebtedness evidenced by a promissory note or notes executed by Borrower in the
amount of ONE MILLION ($1,000,000.00) DOLLARS, of even date herewith, and any
and all extensions or renewals thereof, and all obligations of every description
whether now existing or hereafter arising or acquired by Secured Party by
purchase, assignment or otherwise, and whether direct or indirect, primary or as
guarantor or surety, absolute or contingent, liquidated or unliquidated, matured
or unmatured, whether or not secured by additional collateral, and including
without limitation obligations to perform or forbear from performing acts, all
amounts represented by letters of credit now or hereafter issued by Secured
Party for the benefit of or at the request of Borrower, and all expenses and
attorneys' fees incurred by Secured Party in the preparation, execution,
perfection, administration or enforcement of this Agreement, the security
interest created hereby, or any other documents relating to any obligation (all
hereinafter called the "Obligations").
Notwithstanding the foregoing, Secured Party waives any rights to the
Collateral or to any deposit account or any other property of Borrower with
Secured Party as security for any indebtedness of an individual Borrower to
Secured Party to which the Truth-in-Lending Act and Regulation Z promulgated
thereunder apply.
<PAGE>
To the extent not defined herein, unless the context otherwise requires,
all other terms contained in this Agreement shall have the meanings attributed
to them by Article 9 of the Uniform Commercial Code in force in the State of
Florida as of the date hereof, to the extent the same are used or defined
therein.
A. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Secured Party, and such representations and warranties shall be continuing
representations and warranties so long as any Obligations shall remain
outstanding, as follows:
1. If a corporation, Borrower has been duly incorporated and
organized and is existing as a corporation in good standing under the laws
of its jurisdiction of incorporation and is duly qualified and in good
standing as a foregoing corporation in those jurisdictions where the
conduct of its business or the ownership of its properties requires
qualification; and Borrower has the power and authority to own the
Collateral, to enter into and perform this Agreement and any other document
or instrument delivered in connection herewith and to incur the
Obligations.
2. Borrower utilizes no trade names in the conduct of its business
except as set forth herein, has not changed its name, been the surviving
entity in a merger, acquired any business, or (if Accounts or Accounts
Receivable are included as Collateral) changed the location of its chief
place of business or chief executive office or the location of its records
with respect to such Accounts or Accounts Receivable or the location of any
returns of Inventory, or (if Inventory is included as Collateral) the
location of any of the Inventory, or (if Equipment is included as
Collateral) the location of the Equipment, except as set forth herein.
3. The execution and performance of this Agreement and any other
document or instrument delivered in connection herewith will not result in
the creation or imposition of any lien or encumbrance upon any of the
Collateral (immediately, with the passage of time, or with the giving of
notice and the passage of time) except the lien created hereby.
4. This Agreement and any document or instrument delivered in
connection herewith and the transactions contemplated hereby or thereby
have been duly authorized and/or executed and delivered, as appropriate;
and this
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<PAGE>
Agreement and such other documents and instruments constitute valid
and legally binding obligations of Borrower and are enforceable
against Borrower in accordance with their respective terms.
5. Borrower is the owner of the Collateral free and clear of all
security interests, encumbrances or liens, except liens which arise by
operation of law with respect to obligations of Borrower which are not yet
due and payable and except as may be specifically set forth herein, and
Borrower will defend the Collateral against all claims and demands of all
persons at any time claiming an interest therein.
6. Borrower has filed all federal, state and local tax returns and
other reports it is required to file and has paid or made adequate
provision for payment of all such taxes, assessments and other governmental
charges.
7. No representation, warranty or statement by Borrower contained
herein or in any certificate or other document furnished or to be furnished
by Borrower pursuant hereto contains or at the time of delivery shall
contain any untrue statement of material fact, or omits, or shall omit at
the time of delivery, to state a material fact necessary to make it not
misleading.
B. SPECIFIC REPRESENTATIONS, WARRANTIES AND COVENANTS WITH RESPECT TO
COLLATERAL. With respect to the Collateral, Borrower hereby represents and
warrants and covenants with Secured Party as follows:
1. If Inventory is a part of the Collateral:
(a) All Inventory is in possession of Borrower at Borrower's
address set forth above and all records of Borrower pertaining thereto
are kept at Borrower's address except as set forth herein, and
Borrower shall notify Secured Party in writing no later than thirty
(30) days prior to any change of any location where the Inventory is
or may be kept;
(b) Borrower shall not sell, lease or otherwise transfer any
interest in the Inventory except that Borrower may, until an Event of
Default occurs, hold, process, sell, use or consume Inventory in the
ordinary course of Borrower's business, excluding, however, any sale
or transfer made in partial or total satisfaction of a debt;
3
<PAGE>
(c) Borrower shall keep current stock, cost and sales records of
the Inventory, accurately itemizing and describing the types or
quantities of Inventory, and the cost and selling price thereof and
all books, records and documents relating to the Inventory are and
will be genuine, complete and correct;
(d) None of the Inventory is, or at any time or times hereafter
will be, stored with a bailee, without the prior written consent of
Secured Party;
(e) Borrower shall, at Secured Party's request, deliver to
Secured Party any and all evidence of ownership of, certificates of
title to, or other documents evidencing any interest in, any and all
of the Inventory; and
(f) Borrower has not purchased any of the Inventory in a bulk
transfer or in a transaction which was outside the ordinary course of
business of the Seller.
2. If Equipment is a part of the Collateral:
(a) The Equipment is in the possession of Borrower at Borrower's
address set forth above or at the location(s) set forth herein and
that said location(s) if not owned by Borrower, are leased by Borrower
as set forth herein; if Equipment is or shall be affixed to any real
estate, including any buildings owned or leased by Borrower or used by
Borrower in the operation of its business, Borrower shall provide
Secured Party with disclaimers and waivers necessary to make the
security interest in the Equipment valid against Borrower and other
persons holding an interest in such real estate;
(b) Borrower shall keep and maintain all Equipment in good
operating condition and repair, make all necessary repairs thereto and
replacement of parts thereof so that the value and operating
efficiency thereof shall at all times be maintained and preserved; and
Borrower shall keep complete and accurate books and records with
respect to Equipment, including maintenance records;
(c) Borrower shall deliver to Secured Party any and all evidence
of ownership of, and certificates of title to, any and all of the
Equipment;
4
<PAGE>
(d) Except as set forth herein, Borrower shall not, without the
prior written consent of Secured Party, sell, lease or in any other
manner dispose of any Equipment. Borrower may from time to time
substitute Equipment provided that the value, marketability and
operating integrity of the Collateral after such action is not
impaired. Any such substituted Equipment shall become a part of the
Collateral, and the Equipment for which substitution has been made
shall become the property of Borrower free and clear of any claims of
Secured Party.
(e) Borrower shall notify Secured Party in writing no later than
thirty (30) days prior to any change of any location where the
Equipment is or may be kept.
3. If Accounts Receivable (Receivables) are part of the Collateral:
(a) The address of the chief executive office and chief place of
business of Borrower is set forth above and Borrower has no other
places of business except as set forth herein. All records pertaining
to the Receivables (including computer records) and all returns of
Inventory are kept at Borrower's address; Borrower will notify Secured
Party in writing, no later than thirty (30) days prior to any change
in address of the chief executive office or chief place of business of
Borrower or of any change of the location where records pertaining to
Receivables or returns of Inventory are kept.
(b) All books, records and documents relating to any of the
Receivables (including computer records) are and will be genuine and
in all respects what they purport to be; and the amount of each
Receivable shown on the books and records of Borrower is and will be
the correct amount actually owing or to be owing at maturity of such
Receivables.
(c) Until Secured Party directs otherwise, Borrower shall
collect the Receivables, subject to the direction and control of
Secured Party at all times. Any proceeds of Receivables collected by
Borrower shall not be commingled with other funds of Borrower and
shall, upon the request of Secured Party, be immediately delivered to
Secured Party in the form received, except for necessary endorsements
to permit
5
<PAGE>
collection; Secured Party may in its sole discretion, allow Borrower
to use such funds to such extent and for such periods, if any, as
Secured Party elects;
(d) Borrower shall notify Secured Party if any Receivables arise
out of contracts with the United States or any department, agency or
instrumentality thereof, and Borrower shall execute any instruments
and take any steps to perfect the assignment of the rights of the
Borrower to Secured Party as required under the Federal Assignment of
Claims Act or any similar act or regulation;
(e) Borrower shall provide Secured Party, at its request, from
time to time with: confirmatory assignment schedules; copies of all
invoices relating to Receivables; evidence of shipment or delivery of
Inventory; and, such further information and/or schedules as Secured
Party may reasonably require, all in a form satisfactory to Secured
Party;
(f) Borrower shall not sell any accounts or other rights to
monies due, except for endorsing and depositing checks for collection;
and
(g) Borrower shall not cancel any claim or debt it owns except
for adequate consideration and in the ordinary course of business.
4. The security interests granted to Secured Party pursuant hereto
and to any of the other loan documents are first priority security interest
in and to the Collateral described herein and therein, assuming delivery of
any property as to which possession is the only method of perfecting a
security interest and the filing or recording of financing statements,
chattel mortgages, trademark mortgages, patent mortgages and certificates
of title with respect thereof. Borrower has delivered all agreements,
letters of credit, promissory notes, certificates of deposit, chattel
paper, or anything else the physical possession of which is necessary in
order for Secured Party to perfect or preserve the priority of its security
interest, and shall immediately so deliver all of such items hereafter
arising or acquired by Borrower.
5. If the Collateral declines substantially in value Borrower shall
grant a security interest to Secured Party in additional collateral
satisfactory to Secured Party with a
6
<PAGE>
value at least equal to the decline in value of the existing collateral.
6. If any collateral is stored in a warehouse which has issued a
negotiable warehouse receipt therefor, Borrower shall immediately deliver
such warehouse receipt to Secured Party.
C. GENERAL COVENANTS. Borrower covenants and agrees that so long as any
Obligations remain outstanding:
1. Borrower shall not mortgage, pledge, grant or permit to exist a
security interest in, or lien or encumbrance upon any of the Collateral
except in favor of Secured Party.
2. Borrower shall, upon the request of Secured Party, furnish
Secured Party:
(a) Promptly and in form satisfactory to Secured Party, any
information as Secured Party may reasonably request from time to time.
3. Borrower shall maintain casualty insurance coverage on the
Collateral in such amounts and of such types as may be requested by Secured
Party, and in any event, as are ordinarily carried by similar businesses;
and, in the case of all policies insuring property in which Secured Party
shall have a security interest of any kind whatsoever, all such insurance
policies shall provide that the proceeds thereof shall be payable to
Borrower and Secured Party, as their respective interests may appear. All
said policies or certificates thereof, including all endorsements thereof
and those required hereunder, shall be deposited with Secured Party; and
such policies shall contain provisions that no such insurance may be
canceled or decreased without ten (10) days prior written notice to Secured
Party; and in the event of acquisition of additional insurable Collateral,
Borrower shall cause such insurance coverage to be increased or amended in
such manner and to such extent as prudent business judgment would dictate.
If Borrower shall at any time or times hereafter fail to obtain and/or
maintain any of the policies of insurance required herein, or fail to pay
any premium relating to any such policies, Secured Party may, but shall not
be obligated to, obtain and/or cause to be maintained insurance coverage
with respect to the Collateral, including at Secured Party's option, the
coverage provided by all or any of the policies of Borrower and pay all or
any part of the premium therefor, without
7
<PAGE>
waiving any Event of Default by Borrower, and any sums so disbursed by
Secured Party shall be additional Obligations of Borrower to Secured
Party payable on demand. Secured Party shall have the right to settle
and compromise any and all claims under any of the policies required to
be maintained by Borrower hereunder and Borrower hereby appoints Secured
Party as its attorney-in-fact, with power to demand, receive and receipt
for all monies payable thereunder, to execute in the name of Borrower or
Secured Party or both any proof of loss, notice, draft or other
instruments in connection with such policies or any loss thereunder and
generally to do and perform any and all acts as Borrower, but for this
appointment, might or could perform.
4. Borrower shall permit Secured Party, through its authorized
attorneys, accountants and representatives, to inspect and examine the
Collateral and the books, accounts, records, ledgers and assets of
every kind and description of Borrower with respect thereto at all
reasonable times. Secured Party (by any of its officers, employees
and/or agents) shall have the right to inspect, audit and make extracts
from all of the Borrower's records, files and books of account, and to
enter and inspect Borrower's premises. Borrower shall deliver any
document or instrument necessary for Secured Party to obtain records
from any service bureau maintaining records for Borrower and shall
maintain duplicate records on media, including, without limitation,
computer tapes and discs, owned entirely by Borrower. All reasonable
out-of-pocket costs, fees and expenses incurred by Secured Party (other
than salaries paid to Secured Party's employees), or for which Secured
Party has become obligated, in connection with such inspection and/or
verification shall be payable by Borrower to Secured Party.
5. Borrower shall promptly notify Secured Party of any condition
or event which constitutes, or would constitute with the passage of time
or giving of notice or both, an Event of Default under this Agreement,
and promptly inform Secured Party of any events or change in the financial
condition of Borrower occurring since the date of the last financial
statement of Borrower delivered to Secured Party which individually or
cumulatively when viewed in light of prior financial statements, may result
in a material adverse change in the financial condition of Borrower.
6. Borrower shall, if a corporation, maintain in good standing its
corporate existence in its jurisdiction of
8
<PAGE>
incorporation and its status as a foreign corporation qualified to do
business in those jurisdictions where Borrower is required to be
qualified; if Borrower is presently not incorporated, Borrower will not
incorporate or transfer any of its assets to a corporation without the
prior written consent of Secured Party.
7. If Borrower shall now or hereafter maintain an employee benefit
plan covered by Section 4021(a) of the Employee Retirement Income Security
Act of 1974 (hereinafter referred to as "ERISA") relating to plan
termination insurance, it shall promptly:
(a) Notify Secured Party of filing of notice with the Pension
Benefit Guaranty Corporation ("PBGC") pursuant to Section 4041 of
ERISA that the plan is to be terminated; and
(b) Notify Secured Party of the institution of proceedings by
the PBGC under Section 4042 of ERISA.
8. Borrower shall pay or deposit promptly when due all sales, use,
excise, personal property, income, withholding, corporate, franchise and
other taxes, assessments and governmental charges upon or relating to its
ownership or use of any of the Collateral and submit to Secured Party proof
satisfactory to Secured Party that such payments and/or deposits have been
made.
9. Borrower shall, at any time and from time to time upon the
request of Secured Party, execute and deliver to Secured Party, in form and
substance satisfactory to Secured Party, such documents as Secured Party
shall deem necessary or desirable to perfect or maintain perfected the
security interest of Secured Party in the Collateral or which may be
necessary to comply with the provisions of the law of the State of Florida
or the law of any other jurisdiction in which Borrower may then be
conducting business or in which any of the Collateral may be located.
10. Borrower shall maintain and preserve all patents, copyrights,
trademarks, service marks, trade names and the like, and shall diligently
pursue all applications for any of the aforesaid.
11. Borrower shall not occupy any premises other than those currently
occupied, enter into any leases for premises other than those currently in
existence, or enter into any warehouse storage agreements other than those
in existence,
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without in each case first obtaining and delivering to Secured Party a
waiver of lien by such landlord or warehouseman in form and substance
satisfactory to Borrower.
12. Borrower is not a party to any contracts to supply items to the
United States of America or any department, agency, subdivision or
instrumentality thereof. Borrower shall not enter into any such contracts
except upon prior written notice to Secured Party specifically stating
whether such contract provides for progress or similar pre-delivery
payments to Borrower, and Borrower shall take all action necessary to
assign to Secured Party all rights to such progress payments.
D. EVENTS OF DEFAULT AND ACCELERATION.
1. The occurrence of any one or more of the following events shall
constitute an Event of Default hereunder:
(a) Default in the payment of any principal, interest or other
charges in respect to any of the Obligations as and when due;
(b) Default in the observance or performance of any covenant or
agreement of any Borrower herein set forth or set forth in any
agreement, note or instrument heretofore, now or hereafter executed by
any Borrower in favor of Secured Party;
(c) Any representation, warranty, certificate, schedule or other
information made or furnished by Borrower to Secured Party herein or
pursuant hereto which is or shall be untrue or materially misleading;
(d) Loss, theft, damage or destruction of any material portion
of the Collateral for which there is either no insurance coverage or
for which in the opinion of Secured Party there is insufficient
insurance coverage; or the making of any levy, seizure or attachment
upon the Collateral;
(e) Insolvency of any Borrower; or the appointment of a
creditor's committee for the business of any Borrower; or any
assignment by any Borrower for the benefit of creditors; or the filing
by any Borrower of a petition in bankruptcy or for reorganization or
to effect a plan of arrangement with creditors; or an application by
any Borrower for or permitting the appointment of a receiver or
trustee for any or all of
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the property or assets of Borrower or if any such receiver or
trustee shall have been appointed for any or all property or assets
of any Borrower; or the commencement of any of the above actions or
proceedings whatsoever by or against any Borrower or any guarantor
or any other party liable for any of the Obligations;
(f) The filing or commencement of any proceeding by or against
any Borrower or any guarantor of any of the Obligations for
dissolution or liquidation; or any Borrower or any guarantor dies (if
an individual) or voluntarily or involuntarily terminates or dissolves
or is terminated or dissolved;
(g) The occurrence or existence of any situation which leads
Secured Party to reasonably believe that Borrower may not, or may be
unable to, pay in the normal course any of the Obligations; or
(h) The occurrence of any event which might, in Secured Party's
opinion, have a material adverse effect on the Collateral or on
Borrower's financial or business conditions, operations or prospects.
2. If any Event of Default shall occur, then or at any time
thereafter, while such Event of Default shall continue, Secured Party may
declare all Obligations to be due and payable, without notice, protest,
presentment or demand, all of which are hereby expressly waived by
Borrower.
E. RIGHTS AND REMEDIES. Secured Party shall have, by way of example and
not of limitation, the rights and remedies set forth herein and provided by the
Uniform Commercial Code in effect in the State of Florida at all times after the
occurrence of an Event of Default:
1. Secured Party and any officer or agent of Secured Party is hereby
constituted and appointed as true and lawful attorney-in-fact of Borrower
with power:
(a) If Receivables are part of the Collateral, to notify or
require Borrower to notify any and all account debtors or parties
against which Borrower has a claim that the Receivables have been
assigned to Secured Party and/or that Secured Party has a security
interest therein and that all payments should be made to Secured
Party;
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(b) To endorse the name of Borrower upon any instrument of
payment (including payments made under any policy of insurance) that
may come into possession of Security Party in full or part payment of
any amount owing to Secured Party;
(c) To sign and endorse the name of Borrower upon any invoice,
freight or express bill, bill of lading, storage or warehouse receipt,
drafts against account debtors or other obligors and if Receivables
are a part of Collateral, to sign and endorse the name of Borrower on
any assignments, verifications and notices in connection with
Receivables, and any instrument or document relating thereto or to
rights of Borrower therein;
(d) To notify the post office authorities to change the address
for delivery of mail for Borrower to an address designated by Secured
Party and to receive, open and dispose of all mail addressed to
Borrower;
(e) If Receivables are a part of the Collateral, to send
requests for verification to account debtors or other obligors; and
(f) To sell, assign, sue for, collect or compromise payment of
all or any part of the Collateral in the name of Borrower or its own
name, or make any other disposition of Collateral, or any part
thereof, which disposition may be for cash, credit or any combination
thereof and Secured Party may purchase all or any 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 Obligations;
granting to Secured Party, as the attorney-in-fact of Borrower, full power
of substitution and full power to do any or all things necessary to be done
in and about the premises as fully and effectually as Borrower might or
could do but for this appointment, and hereby ratifying all that said
attorney-in-fact shall lawfully do or cause to be done by virtue hereof.
Neither Secured Party nor its agents shall be liable for any acts or
omissions or for any error of judgment or mistake of fact or law in its
capacity as such attorney-in-fact. This power of attorney is coupled with
an interest and shall be irrevocable so long as any Obligations shall
remain outstanding.
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2. Secured Party shall have the right to enter and/or remain upon
the premises of Borrower without any obligation to pay rent to Borrower or
others, or any other place or places where any of the Collateral is located
and kept and:
(a) Remove Collateral therefrom to the premises of Secured Party
or any agent of Secured Party, for such time as Secured Party may
desire, in order to maintain, collect, sell and/or liquidate the
Collateral; or
(b) Use such premises, together with materials, supplies, books
and records of Borrower, to maintain possession and/or the condition
of the Collateral, and to prepare the Collateral for selling,
liquidating or collecting. Secured Party may require Borrower to
assemble the Collateral and make it available to Secured Party at a
place to be designated by Secured Party which is reasonably convenient
to both parties.
3. Borrower recognizes that in the event Borrower fails to perform,
observe or discharge any of its obligations or liabilities under this
Agreement, no remedy of law will provide adequate relief to Secured Party,
and Borrower agrees that Secured Party shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of
proving actual damages.
4. Secured Party shall have the right to set-off, without notice to
Borrower, any and all deposits or other sums at any time or times credited
by or due from Secured Party to Borrower, whether in a special account or
other account or represented by a certificate of deposit (whether or not
matured) which deposits and other sums shall at all times constitute
additional security for the Obligations and may be set-off against all or
any part of the Obligations at any time if Borrower is primary obligor with
respect to such Obligations, or, at or after the maturity of Obligations if
Borrower is secondary obligor.
5. Secured Party shall have, in addition to any other rights and
remedies contained in this Agreement, and any other agreements, guarantees,
notes, instruments and documents heretofore, now or at any time or times
hereafter executed by Borrower and delivered to Secured Party, all of the
rights and remedies of a secured party under the Uniform Commercial Code in
force in the State of Florida, as of the date hereof, all of which rights
and remedies shall be
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cumulative, and nonexclusive, to the extent permitted by law.
6. Any notice required to be given by Secured Party of a sale or
other disposition or other intended action by Secured Party with respect to
any of the Collateral, or otherwise, made in accordance with the terms of
this Agreement at least five (5) days prior to such proposed action, shall
constitute fair and reasonable notice to Borrower of any such action. In
the event that any of the Collateral is used in conjunction with any real
estate, the sale of the Collateral in conjunction with and as one parcel
with any such real estate of Borrower shall be deemed to be a commercially
reasonable manner of sale. The net proceeds realized by Secured Party upon
any such sale or other disposition, after deduction of the expenses of
retaking, holding, preparing for sale, selling or the like and reasonable
attorneys' fees and any other expenses incurred by Secured Party, shall be
applied toward satisfaction of the Obligations hereunder. Secured Party
shall account to Borrower for any surplus realized upon such sale or other
disposition and Borrower shall remain liable for any deficiency. The
commencement of any action, legal or equitable, shall not affect the
security interest of Secured Party in the Collateral until the Obligations
hereunder or any judgment therefor are fully paid. Secured Party may, if
Secured Party deems it reasonable, postpone or adjourn any sale of the
Collateral, or any part thereof, from time to time by an announcement at
the time and place of sale or by announcement at the time and place of such
postponed or adjourned sale, without being required to give a new notice of
sale. Borrower agrees that Secured Party has no obligation to preserve
rights against prior parties to the Collateral.
F. GENERAL PROVISIONS.
1. The failure of Secured Party at any time or times hereafter to
require strict performance by Borrower of any of the provisions,
warranties, terms and conditions contained in this Agreement or in any
other agreement, guaranty, note, instrument or document now or at any time
or times hereafter executed by Borrower and delivered to Secured Party
shall not waive, affect or diminish any right of Secured Party at any time
or times thereafter to demand strict performance thereof. No rights of
Secured Party hereunder shall be deemed to have been waived by any act or
knowledge of Secured Party, its agents, officers or employees, unless such
waiver is contained in an instrument
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in writing signed by an officer of Secured Party and directed to
Borrower specifying such waiver. No waiver by Secured Party of any of
its rights shall operate as a waiver of any other of its rights or any
of its rights on a future occasion.
2. Any written demand or notice required or permitted to be given
hereunder shall be deemed effective when deposited in the United States
mail, and sent by certified mail, return receipt requested, postage
prepaid, addressed to Secured Party's address or to Borrower's address, as
applicable; or to such other address as may be provided by the party to be
notified, on ten (10) days' prior written notice to the other party.
3. This Agreement contains the entire understanding between the
parties hereto with respect to the transactions contemplated herein and
such understanding shall not be modified except in writing signed by or on
behalf of the parties hereto.
4. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable
law; should any portion of this Agreement be declared invalid for any
reason in any jurisdiction, such declaration shall have no effect upon the
remaining portion of this Agreement; furthermore, the entirety of this
Agreement shall continue in full force and effect in all other
jurisdictions and said remaining portions of this Agreement shall continue
in full force and effect in the subject jurisdiction as if this Agreement
had been executed with the invalid portions thereof deleted.
5. In the event Secured Party seeks to take possession of any or all
of the Collateral by court process, Borrower hereby irrevocably waives any
bonds and any surety or security relating thereto required by any statute,
court rule or otherwise as an incident to such possession, and waives any
demand for possession prior to the commencement of any suit or action to
recover with respect thereto.
6. The provisions of this Agreement shall be binding upon and shall
inure to the benefit of the heirs, administrators, successors and assigns
of Secured Party and Borrower, provided, however, Borrower may not assign
any of its rights or delegate any of its obligations hereunder without the
prior written consent of Secured Party.
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7. This Agreement is and shall be deemed to be a contract entered
into and made pursuant to the laws of the State of Florida and shall in all
respects be governed, construed, applied and enforced in accordance with
the laws of said state; in the event that the Secured Party brings any
action hereunder in any court of record of Florida or the federal
government, Borrower consents to and confers personal jurisdiction over
Borrower by such court and agrees that service of process may be made upon
Borrower by mailing a copy of the summons to Borrower at Borrower's
address; and in any action hereunder Borrower waives the right to demand a
trial by jury.
8. This Agreement is the result of the joint efforts and
negotiations of the parties hereto, with each party being represented, or
having the opportunity to be represented, by legal counsel of its own
choice, and no singular party is the author or drafter of the provisions
hereof. Each of the parties assumes joint responsibility for the form and
composition of each and all of the contents of this Agreement and each
party agrees that this Agreement shall be interpreted as though each of the
parties participated equally in the composition of this Agreement and each
and every provision and part hereof. The parties agree that the rule of
judicial interpretation to the effect that any ambiguity or uncertainty
contained in an agreement is to be construed against the party who drafted
the agreement shall not be applied in the event of any disagreement or
dispute arising out of this Agreement.
9. If, prior hereto and/or at any time or times hereafter, Secured
Party shall employ counsel in connection with the execution and
consummation of the transactions contemplated by this Agreement or to
commence, defend or intervene, file a petition, complaint, answer, motion
or other pleadings, or to take any other action in or with respect to any
suit or proceeding (bankruptcy or otherwise) relating to this Agreement,
the Collateral or any other agreement, guaranty, note, instrument or
document heretofore, now, or at any time or times hereafter executed by
Borrower and delivered to Secured Party, or to protect, collect, lease,
sell, take possession of or liquidate any of the Collateral, or to attempt
to enforce or to enforce any security interest in any of the Collateral, or
to enforce any rights of Secured Party hereunder, whether before or after
the occurrence of any Event of Default, or to collect any of the
Obligations, then in any of such event, all of the reasonable attorneys'
fees arising from such services, and any expenses, costs and charges
relating thereto, shall
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be part of the Obligations, payable on demand and secured by the
Collateral.
10. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute but one and the same instrument.
11. Each reference herein to Secured Party shall be deemed to include
its successors and assigns, and each reference to Borrower and any pronouns
referring thereto as used herein shall be construed in the masculine,
feminine, neuter, singular or plural, as the context may require, and shall
be deemed to include the legal representatives, successors and assigns of
Borrower, all of whom shall be bound by the provisions hereof. The term
"Borrower" as used herein shall, if this Agreement is signed by more than
one Borrower, mean, unless this Agreement otherwise provides or unless the
context otherwise requires, the "Borrower and each of them" and each and
every representation, promise, agreement and undertaking shall be joint and
several, except that the granting of the security interest, right of
set-off and lien shall be by each Borrower in its several respective
property. In the event that there is more than one Borrower, any loan
which is secured by this Agreement shall be deemed to be made at the
request of and for the benefit of each Borrower.
12. The section headings herein are included for convenience only and
shall not be deemed to be a part of this Agreement.
G. ASSIGNMENT BY SECURED PARTY. Secured Party, from time to time,
without notice to the Borrower, may sell, assign, transfer or otherwise dispose
of all or any part of the Obligations and/or the Collateral therefor. In such
event, each and every immediate and successive purchaser, assignee, transferee
or holder of all or any part of the Obligations and/or the Collateral shall have
the right to enforce this Agreement, by legal action or otherwise, for its own
benefit as fully as if such purchaser, assignee, transferee or holder were
herein by name specifically given such rights. Secured Party shall have an
unimpaired right to enforce this Agreement for its benefit to that portion of
the Obligations of Borrower as Secured Party has not sold, assigned, transferred
or otherwise disposed of.
IN WITNESS WHEREOF, this agreement has been duly executed as of the 30th
day of September, 1996.
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SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF:
BORROWER:
ECKLER INDUSTRIES, INC., a Florida corporation
/s/ Donald A. Nohrr
- -------------------------
Witness Signature By: /s/ Ralph H. Eckler
--------------------------
RALPH H. ECKLER, President
DONALD A. NOHRR
- -------------------------
Print Witness Name Address: 5200 So. Washington Avenue
Titusville, FL 32780
/s/ Barry H. Chait
- -------------------------
Witness Signature
Barry H. Chait
- -------------------------
Print Witness Name
STATE OF FLORIDA )
) ss:
COUNTY OF BREVARD )
THE FOREGOING INSTRUMENT was acknowledged before me this 30th day of
September, 1996, by RALPH H. ECKLER, as President of ECKLER INDUSTRIES, INC.,
a Florida corporation, who is personally known to me, or who produced
Fl. Drivers License as identification, and who did take an oath.
/s/ Kim Marie Dexter
--------------------------------------------
Notary Public Signature
--------------------------------------------
Print Notary Public Name
My commission expires:
[Notary Stamp]
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<PAGE>
THE CREDIT ACCOMMODATION MADE PURSUANT TO THIS NOTE REPRESENTS A
LINE OF CREDIT
--------------------
PROMISSORY NOTE
("NOTE")
$1,000,000.00
-----------------------------
September 30, 1996
THE UNDERSIGNED, ("Maker"), promises to pay to the order of BARNETT
BANK, N.A., a national banking association, ("Payee"), whose mailing address
is Post Office Box 678267, Orlando, Florida 32867-8267, Attention: Closing
Department Manager, the principal sum of ONE MILLION AND NO/100
($1,000,000.00) DOLLARS, or so much thereof as may be advanced and
outstanding from time to time, with interest on the unpaid principal from the
date of each such advance at the following rate and payable in the following
manner:
(a) The interest rate ("Stated Rate") shall be a variable rate of One and
One-half percent (1.50%) per annum simple interest in excess of the
"Prime Rate". The term "Prime Rate" shall be the "prime rate" announced
from time to time by the BARNETT BANKS, INC. which rate is a reference
rate for the information and use of the BARNETT BANKS, INC. in
establishing the actual rates to be charged borrowers. The variable rate
applied to this loan will be adjusted prospectively on interest payment
dates based on the rate in effect on said date. Notwithstanding anything
herein to the contrary, the interest rate applied to this Note shall at
no time exceed the maximum rate permitted by applicable law, whether now
or hereafter in effect.
(b) Interest on this Note, as calculated above, shall be payable
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<PAGE>
monthly in arrears on the 30th day of each month commencing the 30th day
of October, 1996 and continuing thereafter on the same day of each
successive month until date of demand for payment, except that in any
month that does not contain a 30th day, the payment shall be due on the
last day of that month.
(c) The entire unpaid principal balance, together with accrued interest,
shall be due and payable on DEMAND ("Maturity Date").
DEFAULT RATE. After the occurrence of an Event of Default, as
hereinafter defined or after maturity, this Note and all sums due hereunder
shall bear interest at the Stated Rate plus five percent (5%) per annum
("Penalty Rate") (but in no event at a rate which is higher than the maximum
allowable rate permitted by law) from the date of default or maturity until
paid.
INTEREST BASIS. Interest shall be calculated on the basis of a three
hundred sixty (360) day year for actual days elapsed.
LATE CHARGE. If any payment hereunder (other than the final payment) is
not made within ten (10) days after it is due, the Maker shall pay to Payee a
late charge equal to five percent (5%) of the late payment.
DISBURSEMENT OF PROCEEDS. Advances hereunder may be made upon the
telephone request of any person authorized to borrow or any person Payee
reasonably believes is authorized to borrow, accompanied by a Borrowing Base
Certificate of even date herewith, which by reference is made a part hereof.
Any advance hereunder shall be conclusively presumed to have been made to and
at the request and for the benefit of the Maker when the proceeds of such
advance are deposited to the credit of the Maker in any account of Maker with
Payee regardless of the fact that persons other than those authorized to
borrow may have authority to draw against such account.
PREPAYMENT. The Maker shall have the privilege of prepaying this Note
in part or in full, without penalty, at any time, and any prepayment shall be
applied to the installment or installments of principal last maturing. No
partial prepayment shall excuse or
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<PAGE>
defer Maker's subsequent payment obligations.
APPLICATION OF PAYMENTS. All payments made on the indebtedness
evidenced by this Note shall be applied first to repayment of monies paid or
advanced by Payee on behalf of the Maker in accordance with the terms of the
Credit Agreement and Security Agreement securing this Note, and thereafter
shall be applied to payment of accrued interest, and lastly to payment of
principal.
PLACE AND MANNER OF PAYMENT. All payments of interest and principal are
payable at the office of Payee, or at such other place as the holder may
designate in writing, in lawful money of the United States of America.
SECURITY. This Note is secured by, among other things, a Security
Agreement and UCC-1 Financing Statement (the "Security Agreement"). This
Note, the Security Agreement, UCC-1 Financing Statement and other loan
documents as may be now or hereafter executed in connection therewith ("Loan
Document(s)") shall together evidence the debt and constitute the security
for the Note.
PRIMARY BANKING RELATIONSHIP. The Borrower will maintain its primary
depository relationship with the Holder unless and until this Note is
assigned to a Holder not affiliated with Barnett Banks, Inc. Upon written
request of the Holder, the Holder shall have the right to debit the
Borrower's deposit account with the Holder for the monthly and other payments
to be made to the Holder under this Note. If the funds in the Borrower's
deposit account are insufficient to satisfy any payments on the dates
required herein, the Borrower shall immediately remit to the Holder the
amount of such deficiency.
EVENTS OF DEFAULT. Maker shall be in default in this Note upon the
occurrence of any of the following events, circumstances or conditions (each
an "Event of Default"):
(a) Maker's failure to make any payment of any sum due hereunder
within ten (10) days of the due date thereof without further notice or demand,
or to make any other payment due by the
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<PAGE>
Maker to the Payee under any other promissory note or under any security
agreement or other written obligation of any kind now existing or hereinafter
created.
(b) The existence of a default or breach of any of the terms of this
Note or any other Loan Document that is not cured within any applicable grace
and/or cure period.
REMEDIES AFTER DEFAULT. At the option of Payee, all or any part of the
principal and accrued interest on the Note, and all other obligations of the
Maker to the Payee shall become immediately due and payable without
additional notice or demand, upon the occurrence of an Event of Default or at
any time thereafter. Payee may exercise all rights and remedies provided by
law, equity, this Note or any other Loan Document or any other obligation of
the Maker to the Payee. All rights and remedies as set forth in the Loan
Documents are cumulative and concurrent and may be pursued singly,
successively or together, at the sole discretion of Payee, and may be
exercised as often as occasion therefore shall arise. Such remedies are not
exclusive, and Payee is entitled to all remedies provided at law or equity,
whether or not expressly set forth therein. No act, or omission or
commission or waiver of Payee, including specifically any failure to exercise
any right, remedy or recourse, shall be effective unless set forth in a
written document executed by Payee and then only to the extent specifically
recited therein. A waiver or release with reference to one event shall not
be construed as continuing, as a bar to, or as a waiver or release of, any
subsequent right, remedy or recourse as to any subsequent event.
RIGHT OF SET-OFF. Neither the Maker, any co-signer, endorser, surety
nor guarantor shall have any right of set-off against the Payee under this
Note or under any Loan Document executed in connection with the loan
evidenced by this Note. In addition to the remedies provided for herein, the
Maker, each co-signer, endorser, surety or guarantor grants to the Payee a
security interest in any funds or other assets from time to time on deposit
with or in possession of the Payee, and the Payee may, at any time set-off
the indebtedness evidenced by this Note against any such funds or other
assets, including but not limited to, all money owed by Payee to Maker, each
co-signer, endorser, surety or guarantor
4
<PAGE>
whether or not due. Maker, each co-signer, endorser, surety or guarantor
acknowledge and agree that Payee may exercise its right of set-off to pay all
or any part of the outstanding principal balance and accrued interest owed on
this Note or on any other obligation of the Maker to the Payee against any
obligation Payee may have, now or hereafter, to pay money to Maker, each
co-signer, endorser, surety or guarantor. This right of set-off includes,
but is not limited to, the following:
(a) Any deposit, account balance, securities account balance or
certificate of deposit balance Maker has with Payee whether special, general,
time, savings, checking or NOW account; and
(b) Any money owing to Maker on an item presented to Payee or in
Payee's possession for collection or exchange; and
(c) Any repurchase agreement or any other non-deposit obligation
or any credit in favor of Maker.
If any such money is also owned by some other person who has not agreed to pay
this Note (such as another depositor on a joint account), Payee's right of set-
off will extend to the amount which could be withdrawn or paid directly to Maker
on Maker's request, endorsement or instruction alone. In addition, (where Maker
may obtain payment from Payee only with the endorsement or consent of someone
who has not agreed to pay this Note), Payee's right of set-off will extend to
Maker's interest in the obligation. Payee's right of set-off will not apply to
any account if it clearly appears that Maker's rights in the account are solely
as a fiduciary for another or to any account, which by its nature and applicable
law (for example an IRA or other tax deferred retirement account), must be
exempt from the claims of creditors. Maker hereby appoints Payee as its
attorney-in-fact and authorizes Payee to redeem or obtain payment on any
certificate of deposit in which Maker has an interest in order to exercise
Payee's right of set-off. Such authorization applies to any certificate of
deposit even if not matured. Maker further authorizes Payee to assess and
withhold any early withdrawal penalty without liability against Payee in the
event such penalty is applicable as a result of Payee's set-off against a
certificate of deposit prior to its
5
<PAGE>
maturity.
Payee's right of set-off may be exercised upon an Event of Default:
(a) Without prior demand or notice; and
(b) Without regard to the existence or value of any
collateral securing this Note; and
(c) Without regard to the number or creditworthiness of any
other persons who have agreed to pay this Note.
Payee will not be liable for dishonor of a check or other request for payment
where there is insufficient funds in the account (or other obligation) to pay
such request because of Payee's exercise of its right of set-off. Maker
agrees to indemnify and hold Payee harmless from any person's claims, arising
as the result of Payee's right of set-off and the costs and expenses,
including without limitation, attorneys' fees.
COLLECTION EXPENSES. All parties liable for the payment of the Note
agree to pay the Payee all costs incurred by the Payee, whether or not an
action be brought, in collecting the sums due under the Note, enforcing the
performance and/or protecting its rights under the Loan Documents and in
realizing on any of the security for the Note. Such costs and expenses shall
include, but are not limited to, filing fees, costs of publication,
deposition fees, stenographer fees, witness fees and other court and related
costs. Sums advanced by the Payee for the payment of collection costs and
expenses shall accrue interest at the Penalty Rate, from the time they are
advanced or paid by the Payee, and shall be due and payable upon payment by
Payee without notice or demand and shall be secured by the lien of the Credit
Agreement and Security Agreement.
ATTORNEYS' FEES. All parties liable for the payment of the Note agree
to pay the Payee reasonable attorneys' fees incurred by the Payee, whether or
not an action be brought, in collecting the sums due under the Note,
enforcing the performance and/or
6
<PAGE>
protecting its rights under the Loan Documents and in realizing on any of the
security for the Note. Such reasonable attorneys' fees shall include, but
not be limited to, fees for attorney's, paralegal's, legal assistant's, and
expenses incurred in any and all judicial, bankruptcy, reorganization,
administrative receivership, or other proceedings effecting creditor's rights
and involving a claim under the Note or any Loan Document, which such
proceedings may arise before or after entry of a final judgment. Such fees
shall be paid regardless whether suit is brought and shall include all fees
incurred by Payee at all trial and appellate levels including bankruptcy
court. Sums advanced by the Payee for the payment of attorneys' fees shall
accrue interest at the Penalty Rate, from the time they are advanced by the
Payee, and shall be due and payable upon payment by Payee without notice or
demand and shall be secured by the lien of the Credit Agreement and Security
Agreement.
WAIVER AND CONSENT. By the making, signing, endorsement or guaranty of
this Note:
(a) Maker and each co-signor, endorser, surety or guarantor waive
protest, presentment for payment, notice of dishonor, notice of intent to
accelerate and notice of acceleration;
(b) Each co-signer, endorser, surety or guarantor consents to any
renewals or extensions of time for payment on this Note;
(c) Maker and each co-signor, endorser, surety or guarantor
consents to Payee's release of any co-signer, endorser, surety or guarantor;
(d) Maker and each co-signor, endorser, surety or guarantor waive
and consent to the release, substitution or impairment of any collateral
securing this Note;
(e) Each co-signer, endorser, surety or guarantor consents to any
modification of the terms of this Note or any other Loan Document;
7
<PAGE>
(f) Maker and each co-signor, endorser, surety or guarantor
consent to any and all sales, repurchases and participations of this Note to
or by any person or entity in any amounts and waive notice of such sales,
repurchases and participations of this Note; and
(g) Maker and each co-signor, endorser, surety or guarantor
consent to Payee's right of set-off as well as any participating bank's right
of set-off.
(h) Maker and each co-signor, endorser, surety or guarantor waive
the right of exemption under the Constitution and the laws of the State of
Florida.
(i) Maker and each co-signor, endorser, surety or guarantor
promise to pay all collection costs, including reasonable attorneys' fees,
whether incurred in connection with collection, trial, appeal or otherwise.
USURY LIMITATION. The parties agree and intend to comply with the
applicable usury law, and notwithstanding anything contained herein or in any
of the Loan Documents, or other document related to the loan evidenced by
this Note, the effective rate of interest to be paid on this Note (including
all costs, charges and fees which are characterized as interest under
applicable law) shall not exceed the maximum contract rate of interest
permitted under applicable law, as it exists from time to time. Payee agrees
not to knowingly collect or charge interest (whether denominated as fees,
interest or other charges) which will render the interest rate hereunder
usurious, and if any payment of interest or fees by Maker to Payee would
render this Note usurious, Maker agrees to give Payee written notice of such
fact with or in advance of such payment. If Payee should receive any payment
which constitutes interest under applicable law in excess of the maximum
lawful contract rate permitted under applicable law (whether denominated as
interest, fees or other charges), the amount of interest received in excess
of the maximum lawful rate shall automatically be applied to reduce the
principal balance, regardless of how such sum is characterized or recorded by
the parties.
JOINT AND SEVERAL. The obligations of this Note shall be
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<PAGE>
joint and several.
NO OBLIGATION TO EXTEND. This Note is payable in full on demand. If
the Payee demands payment, Maker must repay the entire principal balance of
this Note and unpaid interest then due. The Payee shall be under no
obligation to refinance the loan at that time. Maker will therefore be
required to make payment out of other assets Maker may own, or Maker will
have to find a lender willing to lend Maker the money at prevailing market
rates, which may be considerably higher than the interest rate on this Note.
DISCLAIMER OF RELATIONSHIP. The Maker and all co-signers, endorsers,
sureties and guarantors, if any, to this obligation acknowledge that:
(a) The relationship between the Payee, Maker and any co-signer,
endorser, surety or guarantor is one of creditor and debtor and not one of
partner or joint venturer;
(b) There exists no confidential or fiduciary relationship
between Payee and Maker and any co-signer, endorser, surety or guarantor
imposing a duty of disclosure upon the Payee; and
(c) The Maker and any co-signer, endorser, surety or guarantor
have not relied on any representation of the Payee regarding the merits of
the use of proceeds of the loan.
Maker and any co-signer, endorser, surety or guarantor waive any and all
claims and causes of action which exist now or may exist in the future
arising out of any breach or alleged breach of a duty on the part of the
Payee to disclose any facts material to this loan transaction and the use of
the proceeds.
CHOICE OF LAW AND VENUE. This Note shall be governed by the Laws of the
State of Florida, and the United States of America, whichever the context may
require or permit. The Maker and all guarantors, if any, to this obligation
expressly agree that proper venue for any action which may be brought under
this Note in addition to any other venue permitted by law shall be any county
in which property encumbered by the Credit Agreement and Security
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<PAGE>
Agreement is located as well as Orange County, Florida. Should Payee
institute any action under this Note, the Maker and all guarantors, if any,
hereby submit themselves to the jurisdiction of any court sitting in Florida.
SEVERABILITY. If any provision of this Note shall be held unenforceable
or void, then such provision shall be deemed severable from the remaining
provisions and shall in no way affect the enforceability of the remaining
provisions nor the validity of this Note.
MAKER AND PAYEE DEFINED. The term "Maker" includes each and every
person or entity signing this Note and any co-signers, guarantors, their
successors and assigns. The term "Payee" shall include the Payee and any
transferee and assignee of Payee or other holder of this Note.
CAPTIONS AND PRONOUNS. The captions and headings of the various
sections of this Note are for convenience only, and are not to be construed
as confining or limiting in any way the scope or intent of the provisions
hereof. Whenever the context requires or permits, the singular shall include
the plural, the plural shall include the singular, and the masculine,
feminine and neuter shall be freely interchangeable.
RECEIPT OF COPY. By signing this Note, Maker acknowledges that it was
read by Maker prior to execution and a copy was received by Maker.
BUSINESS PURPOSE. Maker represents and warrants that the loan or credit
represented by this Note is only for business or commercial purposes of the
Maker other than agricultural purposes and the proceeds of the loan are not
being used for personal, family, household or agricultural purposes.
TIME OF THE ESSENCE. Time is of the essence with respect to each
provision in this Note where a time or date for performance is stated. All
time periods or dates for performance stated in this Note are material
provisions of this Note.
WAIVER OF TRIAL BY JURY. THE MAKER HEREBY, AND THE PAYEE BY
10
<PAGE>
ITS ACCEPTANCE OF THIS NOTE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS NOTE AND ALL LOAN DOCUMENTS
AND OTHER AGREEMENTS EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONNECTION
HEREWITH, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTION
OF EITHER PARTY, WHETHER IN CONNECTION WITH THE MAKING OF THE LOAN,
COLLECTION OF THE LOAN, OR OTHERWISE. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR THE PAYEE MAKING THE LOAN EVIDENCED BY THIS NOTE.
IN WITNESS WHEREOF, Maker has executed and delivered this instrument the
day and year first above written.
ECKLER INDUSTRIES, INC.,
a Florida corporation
By: /s/ RALPH H. ECKLER
______________________________
Ralph H. Eckler, President
WITNESSES:
________________________________
Printed name: __________________
________________________________
Printed name: __________________
STATE OF ________________
COUNTY OF _______________
The foregoing instrument was acknowledged before me this 30th day of
September, 1996, by Ralph H. Eckler, as President of ECKLER INDUSTRIES, INC.,
a Florida corporation, on behalf of said corporation, who is personally
known to me or who provided _______________________ as identification and who
did take an oath.
______________________________
- 11 -
<PAGE>
Notary Public
My Commission expires: Printed name: ____________________
Commission No. ____________________
- 12 -
<PAGE>
EXHIBIT 10.25
October 28, 1996
Eckler Industries, Inc.
5200 W. Washington Avenue
Titusville, FL 32780
Gentlemen:
I hereby acknowledge and agree that the Stock Option Agreement and
Financial Public Relations Consulting Agreement previously entered into
between Gerald Larder and Eckler Industries, Inc. is hereby terminated. I
understand tht the Promissory Note signed by me in favor of Eckler
Industries, Inc. and dated August 29, 1996 will be extended in accordance
with the attached Amendment to Promissory Note.
I hereby release, acquit and discharge Eckler Industries, Inc., its
directors and officers from and against any and all actions and causes of
action, debts, liabilities, claims, amounts and demands of any kind or nature
whatsoever, whether in law or in equity, including without limitation any of
the foregoing arising out of or in relation to the foregoing Stock Option
Agreement and Financial Public Relations Consulting Agreement regardless of
whether such claims or the nature thereof are known or unknown as of the date
of this letter.
Sincerely,
/s/ GERALD LARDER
---------------------------------
Gerald Larder
On acceptance of this contract, bal. due of 5,000 shares of Eckler's stock
for work completed up to October 25th, 1996.
/s/ GERLAD A. LARDER /s/ RALPH H. ECKLER
- ----------------------------------- ------------------------------------
Gerald A. Larder Ralph H. Eckler, President
<PAGE>
Amendment to
Promissory Note
Dated August 29, 1996
REPAYMENT TERMS:
Repayment of the Promissory Note has been extended an additional
sixty (60) days to and including December 31, 1996.
INTEREST RATE:
Interest will be calculated at eight percent (8%) per annum.
COLLATERAL:
This Promissory Note is secured by an account in the name of
Gerald A. Larder located at Empire Financial Group, 1485 N. Atlantic Avenue,
Suite 200, Cocoa Beach, Florida 32931.
The remaining terms of the Promissory Note remain unchanged.
/s/ GERALD A. LARDER
------------------------------------
Gerald A. Larder
6459 S. Gibraltar Circle
Aurora, CO 80016
Agreed:
ECKLER INDUSTRIES, INC.
By: /s/ RALPH H. ECKLER
- -------------------------------------
Ralph H. Eckler, President
<PAGE>
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Eckler Industries, Inc.
Titusville, Florida
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated December 20, 1995 relating to the
financial statements of Eckler Industries, Inc. which is contained in that
Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
Orlando, Florida
November 14, 1996
