<TABLE>
<CAPTION>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO __________
COMMISSION FILE NUMBER 1-14082
SMART CHOICE AUTOMOTIVE GROUP, INC.
-----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-1469577
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
5200 S. WASHINGTON AVENUE, TITUSVILLE, FLORIDA 32780
----------------------------------------
(Address of principal executive offices)
(Zip Code)
(407) 269-9680
------------------------------------------------
(Registrant's telephone number, including area code)
ECKLER INDUSTRIES, INC.
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate number or shares outstanding of each of the Issuer's classes of common
stock as of the latest practicable date:
As of May 15, 1997, 8,938,088 shares of the Registrant's Common Stock were
issued and outstanding.
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
INDEX TO FORM 10-Q
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
SMART CHOICE AUTOMOTIVE GROUP, INC.
Condensed Consolidated Balance Sheet as of
March 31, 1997 (unaudited) and December 31, 1996 5
Condensed Consolidated Statement of Operations for the
Three Months Ended March 31, 1997 (unaudited) 7
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1997 (unaudited) 8
Notes to Condensed Consolidated Financial Statements 10
LIBERTY FINANCE COMPANY, INC. AND AFFILIATES
Condensed Combined Balance Sheet as of
December 31, 1996 13
Condensed Combined Statement of Operations for the
Period January 1, 1997 to February 12, 1997 (unaudited) 15
Condensed Combined Statement of Cash Flows for the
Period January 1, 1997 to February 12, 1997 (unaudited) 16
Condensed Combined Statement of Income for the
Three Months Ended March 31, 1996 (unaudited) 17
Condensed Combined Statement of Cash Flows for the
Three Months Ended March 31, 1996 (unaudited) 18
-Continued-
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
SMART CHOICE AUTOMOTIVE GROUP, INC.
INDEX TO FORM 10-Q
(CONTINUED)
<S> <C>
FLORIDA FINANCE GROUP, INC., SUNCOAST AUTO BROKERS, INC.
AND SUNCOAST AUTO BROKERS ENTERPRISES, INC.
Condensed Combined Balance Sheet as of
December 31, 1996 19
Condensed Combined Statement of Operations for the
Period January 1, 1997 to January 28, 1997 (unaudited) 21
Condensed Combined Statement of Cash Flows for the
Period January 1, 1997 to January 28, 1997 (unaudited) 22
Condensed Combined Statement of Income for the
Three Months Ended March 31, 1996 (unaudited) 23
Condensed Combined Statement of Cash Flows for the
Three Months Ended March 31, 1996 (unaudited) 24
TWO TWO FIVE NORTH MILITARY TRAIL CORPORATION D/B/A MIRACLE MILE
MOTORS AND PALM BEACH FINANCE COMPANY, INC.
Condensed Combined Balance Sheet as of
December 31, 1996 25
Condensed Combined Statement of Income for the
Period January 1, 1997 to February 14, 1997 (unaudited) 27
Condensed Combined Statement of Cash Flows for the
Period January 1, 1997 to February 14, 1997 (unaudited) 28
Condensed Combined Statement of Income for the
Three Months Ended March 31, 1996 (unaudited) 29
Condensed Combined Statement of Cash Flows for the
Three Months Ended March 31, 1996 (unaudited) 30
ECKLER INDUSTRIES, INC.
Condensed Balance Sheet as of December 31, 1996 (unaudited) 31
Condensed Statement of Operations for the
Period January 1, 1997 to January 28, 1997 (unaudited) 33
Condensed Statement of Cash Flows for the
Period January 1, 1997 to January 28, 1997 (unaudited) 34
Condensed Statement of Operations for the
Three Months Ended March 31, 1996 (unaudited) 35
Condensed Statement of Cash Flows for the
Three Months Ended March 31, 1996 (unaudited) 36
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SMART CHOICE AUTOMOTIVE GROUP, INC.
INDEX TO FORM 10-Q
(CONTINUED)
<S> <C>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 37
PART II-OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS 44
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 45
</TABLE>
3
<PAGE>
PART I
SMART CHOICE AUTOMOTIVE GROUP, INC.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
4
<PAGE>
<TABLE>
<CAPTION>
SMART CHOICE AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
As of March 31, 1997 As of December 31, 1996
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 1,657,404 $ -
Accounts Receivable 747,144 25,000
Finance Receivables
Principal Balances, Net 23,710,066 -
Less: Allowance for Credit Losses (3,590,363) -
- --------------------------------------------------------------------------------------------------------------
20,119,703 -
Inventories, at Cost 4,087,013 -
Land Held for Resale 1,050,000 -
Property and Equipment, Net 2,944,782 22,454
Notes Receivable 1,542,596 400,000
Deferred Tax Asset 330,610 -
Deferred Acquisition Costs 54,511 194,101
Deferred Debt Costs 266,952 24,735
Goodwill 16,084,555 -
Prepaid Expenses 1,375,202 -
Deposits 477,300 50,000
Other Assets 142,036 -
- -------------------------------------------------------------------------------------------------------------
$ 50,879,808 $ 716,290
- -------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
<TABLE>
<CAPTION>
SMART CHOICE AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
- ---------------------------------------------------------------------------------------------------------------------------
(Unaudited)
As of March 31, 1997 As of December 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Bank Overdraft $ - $ 82,884
Accounts Payable 3,150,748 438,890
Accrued Expenses 1,170,041 183,314
Deferred Income 150,879 -
Floorplan Payable 1,085,396 -
Customer Deposits 348,296 -
Notes Payable 28,373,529 60,000
Deferred Income Taxes 402,814 -
Convertible Debt 562,000 262,000
Acquisition Debt 4,418,609 -
Other Liabilities 1,246,000 -
- -------------------------------------------------------------------------------------------------------------------
Total Liabilities 40,908,312 1,027,088
- -------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Preferred Stock 3,950 1,983
Common Stock 8,939 5,488
Additional Paid In Capital 17,184,824 385,519
Deficit (6,159,529) (703,788)
Unearned Compensation (1,066,688) -
- -------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 9,971,496 (310,798)
- --------------------------------------------------------------------------------------------------------------------
$ 50,879,808 $ 716,290
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE>
<TABLE>
<CAPTION>
SMART CHOICE AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31, 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
VEHICLE AND RELATED REVENUES:
Sales of Used Vehicles $ 4,488,493
Income on Finance Receivables 834,363
Income from Insurance & Training 302,775
Income from Parts & Accessories 2,802,215
- ----------------------------------------------------------------------------------------------------------------
8,427,846
- ----------------------------------------------------------------------------------------------------------------
COST OF VEHICLE AND VEHICLE RELATED REVENUES:
Cost of Used Vehicles Sold 3,599,885
Cost of Insurance & Training 16,041
Cost of Parts & Accessories Sold 1,720,715
Provision for Credit Losses 903,531
- ----------------------------------------------------------------------------------------------------------------
6,240,172
- ----------------------------------------------------------------------------------------------------------------
NET REVENUES FROM VEHICLE SALES AND VEHICLE
RELATED ACTIVITIES 2,187,674
- ----------------------------------------------------------------------------------------------------------------
EXPENSES:
Operating Expenses 4,895,834
Compensation Expense Related to Employee Stock Options 2,236,875
- ----------------------------------------------------------------------------------------------------------------
7,132,709
- ----------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (4,945,035)
- -----------------------------------------------------------------------------------------------------------------
OTHER EXPENSE (INCOME):
Interest Expense 469,485
Other Income (15,855)
Miscellaneous Expense 57,075
- ----------------------------------------------------------------------------------------------------------------
510,705
- ----------------------------------------------------------------------------------------------------------------
NET LOSS $ (5,455,740)
- -----------------------------------------------------------------------------------------------------------------
NET LOSS PER SHARE $ (0.69)
- -----------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES
AND SHARE EQUIVALENTS OUTSTANDING 7,853,134
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7
<PAGE>
<TABLE>
<CAPTION>
SMART CHOICE AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31, 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,455,740)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Provision for credit losses 535,286
Common stock and options issued for consulting fees 150,000
Loss on disposal of fixed assets 1,151
Stock option compensation 2,236,875
Depreciation and amortization 245,530
Cash provided by (used for), net of effect of acquisitions:
Accounts receivable (70,894)
Inventory (442,499)
Prepaid expenses (18,974)
Other assets (1,453)
Accounts payable 964,984
Accrued expenses 950,891
Deferred income 20,772
Other liabilities 1,246,000
Customer deposits (116,099)
Floorplan payable 224,876
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 470,706
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in finance receivables (1,153,486)
Cash for acquisition, net of cash acquired (2,797,310)
Issuance of notes receivable (565,896)
Increase in deposits (477,300)
Increase in deferred acquisition costs (15,400)
Purchase of property and equipment (56,379)
Decrease in other assets 40,435
- -------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (5,025,336)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
CONTINUED ON NEXT PAGE
8
<PAGE>
<TABLE>
<CAPTION>
SMART CHOICE AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
- -----------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31, 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable $ (1,835,310)
Proceeds from issuance of Sirrom debt 3,500,000
Proceeds from issuance of notes payable 3,996,722
Increase in deferred debt costs (256,494)
Proceeds from issuance of preferred stock 590,000
Proceeds from issuance of convertible debentures 300,000
Bank overdraft (82,884)
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 6,212,034
- -----------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,657,404
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 0
- -----------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,657,404
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
===============================================================================
NOTE 1 - BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements presented herein have
been prepared in accordance with the instructions to Form 10-Q, 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 December 31, 1996. 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 - ACQUISITIONS
Smart Choice Automotive Group, Inc. (the "Company"), formerly named "Eckler
Industries, Inc.", operates a network of self-financed used vehicle dealerships
in Florida and underwrites, finances, and services retail installment contracts
generated from the sale of used cars by its dealerships. The Company also
operates automobile dealers training and insurance divisions as well as
Eckler's, one of the largest suppliers of Corvette parts and accessories in the
world. On January 28, 1997, pursuant to an Agreement and Plan of Merger by and
among Eckler Industries, Inc. ("EII"), Eckler Acquisition Corporation, Ralph H.
Eckler, Smart Choice Holdings, Inc. ("SCHI"), Thomas E. Conlan and Gerald C.
Parker, dated December 30, 1996 (the "Agreement"), EII acquired all of the
issued and outstanding shares of common stock of SCHI in exchange for 2,927,939
shares of EII Class A and 1,576,324.5 shares of EII Class B, common stock. Under
the terms of the Agreement, the shareholders of SCHI obtained approximately 64%
of the voting rights of EII. Although EII is the parent of SCHI following the
transaction, the transaction was accounted for as a purchase of EII by SCHI (a
reverse acquisition in which SCHI is considered the acquirer for accounting
purposes), since the shareholders of SCHI obtained a majority of the voting
rights in EII as a result of the transaction. Accordingly, the financial
statements of the Company for the periods prior to January 28, 1997 are those of
SCHI, the assets and liabilities of EII are recorded at their estimated fair
values and the accounts of EII are included in the consolidated financial
statements from the date of acquisition (January 28, 1997).
SCHI was incorporated on June 21, 1996 and was a development stage corporation
prior to January 28, 1997. On August 16, 1996, SCHI acquired the stock of First
Choice Auto Finance, Inc. ("FCAF"). On January 28, 1997, in addition to the
acquisition of EII, SCHI acquired the stock of Florida Finance Group, Inc.
("FFG"), Dealer Insurance Services, Inc.
10
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
("DIS"), and Dealer Development Services, Inc. ("DDS"). FFG underwrites,
finances and services automobile retail installment contracts and was based in
St. Petersburg, Florida prior to moving to the Company headquarters in
Titusville, Florida. FCAF was incorporated on March 22, 1994 and had no
significant operations or assets until it acquired the assets of Suncoast Auto
Brokers, Inc. ("SAB"), and Suncoast Auto Brokers Enterprises, Inc. ("SABE") on
January 28, 1997. FCAF, based at the Company headquarters in Titusville,
Florida, now operates the three used vehicle lots in St. Petersburg and Tampa,
previously operated by SAB and SABE. DIS is based in Tampa, Florida and provides
insurance services for automobile dealers. DDS is based in Tampa and provides
consulting services and training programs to automobile dealers. The assets and
liabilities of FFG, FCAF, DIS and DDS are recorded at their estimated fair
values and their accounts are included in the consolidated financial statements
from the date of acquisition (January 28, 1997).
On February 12, 1997, the Company acquired the stock of Liberty Finance Company
("Liberty"). On the same date, FCAF acquired the stock of Wholesale
Acquisitions, Inc. ("WA"), and Team Automobile Sales and Finance, Inc. ("Team").
Liberty underwrites, finances and services automobile retail service contracts
and was based in Orlando, Florida prior to moving to the Company headquarters in
Titusville, Florida. WA and Team operate five self-financed used vehicle lots in
Orlando, Florida. The assets of Liberty, WA, and Team are recorded at their
estimated fair values and their accounts are included in the consolidated
financial statements from the date of acquisition (February 12, 1997).
On February 14, 1997, FCAF acquired the assets of Palm Beach Finance and
Mortgage Company ("PBF") and Two Two Five North Military Corp. d/b/a Miracle
Mile Motors ("MMM"). FFG services the receivables purchased from PBF, and FCAF
operates the used vehicle lot previously operated by MMM located in West Palm
Beach, Florida. The assets of PBF and MMM are recorded at their estimated fair
values and their accounts are included in the consolidated financial statements
from the date of acquisition (February 14, 1997).
NOTE 3 - SUMMARY OF FINANCE RECEIVABLES
The following is a summary of principal balances, net as of March 31, 1997:
March 31, 1997
-------------
Contractually Scheduled Payments $ 30,270,134
Less: Unearned Finance Charges (6,560,068)
------------
Principal Balances, Net $ 23,710,066
============
11
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
===============================================================================
NOTE 4 - PRESENTATION OF DEALERSHIP REVENUES AND COST OF REVENUES
Revenues from Company dealership operations consist of Sales of Used Cars,
Income on Finance Receivables, Income from Insurance and Training, and Income
from Parts and Accessories. Cost of Revenues of Dealership operations is
comprised of Cost of Used Cars Sold, the Provision for Credit Losses, Costs of
Insurance and Training Income and Cost of Parts and Accessories Sold.
The prices at which the Company sells its cars and the interest rate that it
charges to finance these sales take into consideration that the Company's
primary customers are high-risk borrowers, many of whom ultimately default. The
Provision for Credit Losses reflects these factors and is treated by the Company
as a cost of both the future finance income derived on the contract receivables
originated at Company dealerships as well as a cost of the sale of the cars
themselves. Accordingly, unlike traditional car dealerships, the Company does
not present gross profit/margin in its Statement of Operations calculated as
Sales of Used Cars less Cost of Used Cars Sold.
NOTE 5 - EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is based upon the weighted average number of common
shares outstanding during each period. Common stock equivalents have not been
included since the effect would be antidillutive.
NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION
In connection with the acquisition described in Note 2, the Company issued the
following securities:
Common Stock 3,781,084 shares, valued at $12,761,161
===========
Promissory Notes $ 4,904,183
===========
Cash paid for interest $ 400,139
===========
12
<PAGE>
LIBERTY FINANCE COMPANY, INC. & AFFILIATES
CONDENSED COMBINED BALANCE SHEET
- --------------------------------------------------------------------------------
As of December 31, 1996
- --------------------------------------------------------------------------------
ASSETS
Cash and Cash Equivalents $ 163,184
Finance Receivables:
Principal Balances, Net 12,283,431
Less: Allowance for Credit Losses (900,000)
- -------------------------------------------------------------------------------
11,383,431
Inventories, at Cost 2,861,848
Land Held for Resale 1,050,000
Property and Equipment, Net 272,543
Other Assets 87,908
- -------------------------------------------------------------------------------
$ 15,818,914
- -------------------------------------------------------------------------------
13
<PAGE>
LIBERTY FINANCE COMPANY, INC. & AFFILIATES
CONDENSED COMBINED BALANCE SHEET
- -------------------------------------------------------------------------------
As of December 31, 1996
- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts Payable $ 473,088
Accrued Expenses 116,077
Floorplan Payable 1,378,601
Notes Payable 13,059,981
Related Party Payable 197,237
Other Liabilities 113,781
- -------------------------------------------------------------------------------
Total Liabilities 15,338,765
- -------------------------------------------------------------------------------
Stockholders' Equity:
Common Stock 700
Stock Subscriptions (600)
Additional Paid In Capital 703,044
Deficit (222,995)
- -------------------------------------------------------------------------------
Total Stockholders' Equity 480,149
- -------------------------------------------------------------------------------
$ 15,818,914
- -------------------------------------------------------------------------------
14
<PAGE>
LIBERTY FINANCE COMPANY, INC. & AFFILIATES
CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
- -------------------------------------------------------------------------------
Period January 1, 1997
to February 12, 1997
- -------------------------------------------------------------------------------
VEHICLE AND RELATED REVENUES:
Sales of Used Vehicles $ 1,296,130
Income on Finance Receivables 458,028
Income from Insurance & Training 3,724
Income from Parts & Accessories 55,708
- -------------------------------------------------------------------------------
1,813,590
- -------------------------------------------------------------------------------
COST OF VEHICLE AND VEHICLE RELATED REVENUES:
Cost of Used Vehicles Sold 1,394,719
Cost of Insurance & Training 2,524
Cost of Parts & Accessories Sold 49,173
Provision for Credit Losses 65,315
- -------------------------------------------------------------------------------
1,511,731
- -------------------------------------------------------------------------------
NET REVENUES FROM VEHICLE SALES AND VEHICLE
RELATED ACTIVITIES 301,859
- -------------------------------------------------------------------------------
OPERATING EXPENSES 434,243
- -------------------------------------------------------------------------------
LOSS FROM OPERATIONS (132,384)
- -------------------------------------------------------------------------------
OTHER EXPENSE:
Interest Expense 176,585
- -------------------------------------------------------------------------------
176,585
- -------------------------------------------------------------------------------
NET LOSS $ (308,969)
- -------------------------------------------------------------------------------
15
<PAGE>
LIBERTY FINANCE COMPANY, INC. & AFFILIATES
CONDENSED COMBINED STATEMENT OF CASH FLOWS
(UNAUDITED)
- -------------------------------------------------------------------------------
Period January 1, 1997
to February 12, 1997
- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (308,969)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 27,846
Cash provided by (used for):
Accounts receivable (35,150)
Inventory 691,586
Prepaid expenses (25,498)
Other assets 46,244
Accounts payable 218,244
Accrued expenses 28,174
Floorplan payable (518,081)
- -------------------------------------------------------------------------------
Net cash provided by operating activities 124,396
- -------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in finance receivables 234,795
Purchase of property and equipment (2,410)
Increase in other assets (45,375)
- -------------------------------------------------------------------------------
Net cash used in investing activities 187,010
- -------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments from related party (197,237)
Principal payments on notes payable (241,697)
Distribution to stockholder (5,000)
- --------------------------------------------------------------------------------
Net cash used in financing activities (443,934)
- --------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (132,528)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 163,184
- -------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 30,656
- -------------------------------------------------------------------------------
16
<PAGE>
LIBERTY FINANCE COMPANY, INC. & AFFILIATES
CONDENSED COMBINED STATEMENT OF INCOME
(UNAUDITED)
- -------------------------------------------------------------------------------
Three Months Ended
March 31, 1996
- -------------------------------------------------------------------------------
VEHICLE AND RELATED REVENUES:
Sales of Used Vehicles $ 4,305,092
Income on Finance Receivables 697,416
Income from Insurance & Training 139,295
Income from Parts & Accessories 382,849
- -------------------------------------------------------------------------------
5,524,652
- -------------------------------------------------------------------------------
COST OF VEHICLE AND VEHICLE RELATED REVENUES:
Cost of Used Vehicles Sold 3,440,621
Cost of Insurance & Training 66,363
Cost of Parts & Accessories Sold 216,957
Provision for Credit Losses 26,387
- -------------------------------------------------------------------------------
3,750,328
- -------------------------------------------------------------------------------
NET REVENUES FROM VEHICLE SALES AND VEHICLE RELATED ACTIVITIES 1,774,324
- -------------------------------------------------------------------------------
OPERATING EXPENSES 1,087,700
- -------------------------------------------------------------------------------
INCOME FROM OPERATIONS 686,624
- -------------------------------------------------------------------------------
OTHER EXPENSE (INCOME):
Interest Expense 298,072
Other Income (11,664)
Miscellaneous Expense 2,574
- -------------------------------------------------------------------------------
288,982
- -------------------------------------------------------------------------------
NET INCOME $ 397,642
- -------------------------------------------------------------------------------
17
<PAGE>
LIBERTY FINANCE COMPANY, INC. & AFFILIATES
CONDENSED COMBINED STATEMENT OF CASH FLOWS
(UNAUDITED)
- -------------------------------------------------------------------------------
Three Months Ended
March 31, 1996
- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 397,642
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 16,685
Cash provided by (used for):
Accounts receivable (133,959)
Inventory 284,055
Other assets 31,714
Accounts payable 308,910
Accrued expenses (13,759)
Floorplan payable (365,771)
- -------------------------------------------------------------------------------
Net cash provided by operating activities 525,517
- -------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in finance receivables (1,297,537)
Purchase of property and equipment (30,909)
- -------------------------------------------------------------------------------
Net cash used in investing activities (1,328,446)
- -------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments to related party (182,096)
Distribution to stockholder (90,973)
Proceeds from issuance of notes payable 1,150,275
- -------------------------------------------------------------------------------
Net cash provided by financing activities 877,206
- -------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 74,277
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,368
- -------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 82,645
- -------------------------------------------------------------------------------
18
<PAGE>
FLORIDA FINANCE GROUP, INC.
SUNCOAST AUTO BROKERS, INC.
SUNCOAST AUTO BROKERS ENTERPRISES, INC.
CONDENSED COMBINED BALANCE SHEET
- -------------------------------------------------------------------------------
As of December 31, 1996
- -------------------------------------------------------------------------------
ASSETS
Cash and Cash Equivalents $ 20,272
Finance Receivables:
Principal Balances, Net 5,479,404
Less: Allowance for Credit Losses (1,095,645)
- -------------------------------------------------------------------------------
4,383,759
Inventories, at Cost 440,317
Property and Equipment, Net 111,950
Prepaid Expenses 44,705
Other Assets 2,360
- -------------------------------------------------------------------------------
$ 5,003,363
- -------------------------------------------------------------------------------
19
<PAGE>
FLORIDA FINANCE GROUP, INC.
SUNCOAST AUTO BROKERS, INC.
SUNCOAST AUTO BROKERS ENTERPRISES, INC.
CONDENSED COMBINED BALANCE SHEET
- -------------------------------------------------------------------------------
As of December 31, 1996
- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Accounts Payable $ 95,093
Accrued Expenses 16,505
Deferred Income 134,571
Notes Payable 5,018,343
Stockholder Loans 345,250
Related Party Payable 811,600
- -------------------------------------------------------------------------------
Total Liabilities 6,421,362
- -------------------------------------------------------------------------------
Stockholders' Deficit:
Common Stock 1,600
Additional Paid In Capital 220,129
Deficit (1,639,728)
- -------------------------------------------------------------------------------
Total Stockholders' Deficit (1,417,999)
- -------------------------------------------------------------------------------
$ 5,003,363
- -------------------------------------------------------------------------------
20
<PAGE>
<TABLE>
<CAPTION>
FLORIDA FINANCE GROUP, INC.
SUNCOAST AUTO BROKERS, INC.
SUNCOAST AUTO BROKERS ENTERPRISES, INC.
CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
- ---------------------------------------------------------------------------------------
Period January 1, 1997
to January 28, 1997
- ---------------------------------------------------------------------------------------
<S> <C>
VEHICLE AND RELATED REVENUES:
Sales of Used Vehicles $ 225,599
Income on Finance Receivables 162,203
Income from Parts & Accessories 1,235
- ----------------------------------------------------------------------------------------
389,037
- ----------------------------------------------------------------------------------------
COST OF VEHICLE AND VEHICLE RELATED REVENUES:
Cost of Used Vehicles Sold 272,312
Cost of Parts & Accessories Sold 8,970
Provision for Credit Losses 8,538
- ----------------------------------------------------------------------------------------
289,820
- ----------------------------------------------------------------------------------------
NET REVENUES FROM VEHICLE SALES AND VEHICLE RELATED ACTIVITIES 99,217
- ----------------------------------------------------------------------------------------
OPERATING EXPENSES 152,053
- ----------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (52,836)
- -----------------------------------------------------------------------------------------
OTHER EXPENSE:
Interest Expense 64,061
- ----------------------------------------------------------------------------------------
64,061
- ----------------------------------------------------------------------------------------
NET LOSS $ (116,897)
- -----------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
FLORIDA FINANCE GROUP, INC.
SUNCOAST AUTO BROKERS, INC.
SUNCOAST AUTO BROKERS ENTERPRISES, INC.
CONDENSED COMBINED STATEMENT OF CASH FLOWS
(UNAUDITED)
- -------------------------------------------------------------------------------
Period January 1, 1997
to January 28, 1997
- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (116,897)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 2,750
Cash provided by (used for):
Inventory 221,697
Prepaid expenses 650
Accounts payable (67,993)
Accrued expenses 87,749
Deferred income (4,464)
- -------------------------------------------------------------------------------
Net cash provided by operating activities 123,492
- -------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in finance receivables (25,306)
Increase in other assets (750)
- -------------------------------------------------------------------------------
Net cash used in investing activities (26,056)
- -------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable (93,087)
- -------------------------------------------------------------------------------
Net cash used in financing activities (93,087)
- -------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,349
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 20,272
- ------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 24,621
- ------------------------------------------------------------------------------
22
<PAGE>
FLORIDA FINANCE GROUP, INC.
SUNCOAST AUTO BROKERS, INC.
SUNCOAST AUTO BROKERS ENTERPRISES, INC.
CONDENSED COMBINED STATEMENT OF INCOME
(UNAUDITED)
- -------------------------------------------------------------------------------
Three Months Ended
March 31, 1996
- -------------------------------------------------------------------------------
VEHICLE AND RELATED REVENUES:
Sales of Used Vehicles $ 1,710,002
Income on Finance Receivables 370,143
- -------------------------------------------------------------------------------
2,080,145
- -------------------------------------------------------------------------------
COST OF VEHICLE AND VEHICLE RELATED REVENUES:
Cost of Used Vehicles Sold 1,292,762
Provision for Credit Losses 91,238
- -------------------------------------------------------------------------------
1,384,000
- -------------------------------------------------------------------------------
NET REVENUES FROM VEHICLE SALES AND VEHICLE
RELATED ACTIVITIES 696,145
- -------------------------------------------------------------------------------
OPERATING EXPENSES 442,667
- -------------------------------------------------------------------------------
INCOME FROM OPERATIONS 253,478
- -------------------------------------------------------------------------------
OTHER EXPENSE:
Interest Expense 124,200
- -------------------------------------------------------------------------------
124,200
- -------------------------------------------------------------------------------
NET INCOME $ 129,278
- -------------------------------------------------------------------------------
23
<PAGE>
FLORIDA FINANCE GROUP, INC.
SUNCOAST AUTO BROKERS, INC.
SUNCOAST AUTO BROKERS ENTERPRISES, INC.
CONDENSED COMBINED STATEMENT OF CASH FLOWS
(UNAUDITED)
- -------------------------------------------------------------------------------
Three Months Ended
March 31, 1996
- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 129,278
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 8,300
Cash provided by (used for):
Accounts receivable (25,731)
Inventory (94,758)
Prepaid expenses (24,254)
Accounts payable (70,375)
Accrued expenses (43,751)
Deferred income 60,639
- --------------------------------------------------------------------------------
Net cash used in operating activities (60,652)
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in finance receivables (507,451)
Purchase of property and equipment (3,806)
Decrease in other assets 2,520
- --------------------------------------------------------------------------------
Net cash used in investing activities (508,737)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments to related party (32,046)
Proceeds from issuance of notes payable 566,731
- --------------------------------------------------------------------------------
Net cash provided by financing activities 534,685
- --------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (34,704)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 50,701
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15,997
- --------------------------------------------------------------------------------
24
<PAGE>
TWO TWO FIVE NORTH MILITARY TRAIL CORPORATION
D/B/A MIRACLE MILE MOTORS
PALM BEACH FINANCE COMPANY, INC.
CONDENSED COMBINED BALANCE SHEET
- -------------------------------------------------------------------------------
As of December 31, 1996
- -------------------------------------------------------------------------------
ASSETS
Cash and Cash Equivalents $ 192,999
Finance Receivables:
Principal Balances, Net 5,041,682
Less: Allowance for Credit Losses (984,000)
- --------------------------------------------------------------------------------
4,057,682
Inventories, at Cost 799,358
Property and Equipment, Net 10,086
Other Assets 48,275
- -------------------------------------------------------------------------------
$ 5,108,400
- -------------------------------------------------------------------------------
25
<PAGE>
TWO TWO FIVE NORTH MILITARY TRAIL CORPORATION
D/B/A MIRACLE MILE MOTORS
PALM BEACH FINANCE COMPANY, INC.
CONDENSED COMBINED BALANCE SHEET
- -------------------------------------------------------------------------------
As of December 31, 1996
- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts Payable $ 220,887
Accrued Expenses 128,206
Notes Payable 300,000
- -------------------------------------------------------------------------------
Total Liabilities 649,093
- -------------------------------------------------------------------------------
Stockholders' Equity:
Common Stock 800
Additional Paid In Capital 20,000
Retained Earnings 4,438,507
- -------------------------------------------------------------------------------
Total Stockholders' Equity 4,459,307
- -------------------------------------------------------------------------------
$ 5,108,400
- -------------------------------------------------------------------------------
26
<PAGE>
<TABLE>
<CAPTION>
TWO TWO FIVE NORTH MILITARY TRAIL CORPORATION
D/B/A MIRACLE MILE MOTORS
PALM BEACH FINANCE COMPANY, INC.
CONDENSED COMBINED STATEMENT OF INCOME
(UNAUDITED)
- --------------------------------------------------------------------------------------
Period January 1, 1997
to February 14, 1997
- --------------------------------------------------------------------------------------
<S> <C>
VEHICLE AND RELATED REVENUES:
Sales of Used Vehicles $ 1,334,472
Income on Finance Receivables 178,098
- ---------------------------------------------------------------------------------------
1,512,570
- ---------------------------------------------------------------------------------------
COST OF VEHICLE AND VEHICLE RELATED REVENUES:
Cost of Used Vehicles Sold 942,541
Provision for Credit Losses 118,273
- ---------------------------------------------------------------------------------------
1,060,814
- ---------------------------------------------------------------------------------------
NET REVENUES FROM VEHICLE SALES AND VEHICLE RELATED ACTIVITIES 451,756
- ---------------------------------------------------------------------------------------
OPERATING EXPENSES 207,336
- ---------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 244,420
- ---------------------------------------------------------------------------------------
OTHER EXPENSE:
Interest Expense 3,694
- ---------------------------------------------------------------------------------------
3,694
- ---------------------------------------------------------------------------------------
NET INCOME $ 240,726
- ---------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
TWO TWO FIVE NORTH MILITARY TRAIL CORPORATION
D/B/A MIRACLE MILE MOTORS
PALM BEACH FINANCE COMPANY, INC.
CONDENSED COMBINED STATEMENT OF CASH FLOWS
(UNAUDITED)
- -------------------------------------------------------------------------------
Period January 1, 1997
to February 14, 1997
- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 240,726
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 306
Cash provided by (used for):
Inventory 16,202
Other assets 10,184
Accounts payable 9,858
Accrued expenses 9,311
- -------------------------------------------------------------------------------
Net cash provided by operating activities 286,587
- -------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in finance receivables (363,699)
- -------------------------------------------------------------------------------
Net cash used in investing activities (363,699)
- -------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to stockholder (61,618)
Proceeds from issuance of notes payable 100,000
- -------------------------------------------------------------------------------
Net cash provided by financing activities 38,382
- -------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (38,730)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 192,999
- -------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 154,269
- -------------------------------------------------------------------------------
28
<PAGE>
TWO TWO FIVE NORTH MILITARY TRAIL CORPORATION
D/B/A MIRACLE MILE MOTORS
PALM BEACH FINANCE COMPANY, INC.
CONDENSED COMBINED STATEMENT OF INCOME
(UNAUDITED)
- -------------------------------------------------------------------------------
Three Months Ended
March 31, 1996
- -------------------------------------------------------------------------------
VEHICLE AND RELATED REVENUES:
Sales of Used Vehicles $ 3,281,562
Income on Finance Receivables 292,867
- --------------------------------------------------------------------------------
3,574,429
- --------------------------------------------------------------------------------
COST OF VEHICLE AND VEHICLE RELATED REVENUES:
Cost of Used Vehicles Sold 2,531,535
Provision for Credit Losses 270,857
- --------------------------------------------------------------------------------
2,802,392
- --------------------------------------------------------------------------------
NET REVENUES FROM VEHICLE SALES AND VEHICLE
RELATED ACTIVITIES 772,037
- --------------------------------------------------------------------------------
OPERATING EXPENSES 445,057
- --------------------------------------------------------------------------------
NET INCOME $ 326,980
- --------------------------------------------------------------------------------
29
<PAGE>
TWO TWO FIVE NORTH MILITARY TRAIL CORPORATION
D/B/A MIRACLE MILE MOTORS
PALM BEACH FINANCE COMPANY, INC.
CONDENSED COMBINED STATEMENT OF CASH FLOWS
(UNAUDITED)
- -------------------------------------------------------------------------------
Three Months Ended
March 31, 1996
- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 326,980
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for credit losses 64,000
Depreciation and amortization 120
Cash provided by (used for):
Accounts receivable (42,000)
Inventory 62,414
Prepaid expenses (9,138)
Accounts payable (103,713)
Accrued expenses 19,207
- --------------------------------------------------------------------------------
Net cash provided by operating activities 317,870
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in finance receivables (256,138)
Decrease in other assets 17,139
- --------------------------------------------------------------------------------
Net cash used in investing activities (238,999)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable 155,000
Profit distributions (67,233)
- --------------------------------------------------------------------------------
Net cash provided by financing activities 87,767
- --------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 166,638
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 304,914
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 471,552
- --------------------------------------------------------------------------------
30
<PAGE>
ECKLER INDUSTRIES, INC.
CONDENSED BALANCE SHEET
(UNAUDITED)
- -------------------------------------------------------------------------------
As of December 31, 1996
- -------------------------------------------------------------------------------
ASSETS
Cash and Cash Equivalents $ 241,652
Accounts Receivable 153,285
Inventories, at Cost 1,307,525
Property, Plant and Equipment, Net 2,512,645
Deferred Tax Asset 330,610
Prepaid Expenses 1,385,398
Other Assets 108,693
- -------------------------------------------------------------------------------
$ 6,039,808
- -------------------------------------------------------------------------------
31
<PAGE>
ECKLER INDUSTRIES, INC.
CONDENSED BALANCE SHEET
(UNAUDITED)
- -------------------------------------------------------------------------------
As of December 31, 1996
- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts Payable $ 545,765
Accrued Expenses 309,613
Notes Payable 2,706,206
Deferred Income Taxes 402,814
- -------------------------------------------------------------------------------
Total Liabilities 3,964,398
- -------------------------------------------------------------------------------
Stockholders' Equity:
Class A Common Stock: $.01 Par Value; 10,000,000 17,367
shares authorized; 1,736,750 issued and outstanding
Class B Common Stock: $.01 Par Value; 5,000,000 5,104
shares authorized; 510,375 issued and outstanding
Additional Paid In Capital 3,419,251
Note Receivable Class A Common Stock (326,700)
Deficit (1,039,612)
- -------------------------------------------------------------------------------
Total Stockholders' Equity 2,075,410
- -------------------------------------------------------------------------------
$ 6,039,808
- -------------------------------------------------------------------------------
32
<PAGE>
ECKLER INDUSTRIES, INC.
CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
- -------------------------------------------------------------------------------
Period January 1, 1997
to January 28, 1997
- -------------------------------------------------------------------------------
VEHICLE AND RELATED REVENUES:
Income from Parts & Accessories $ 853,881
- ------------------------------------------------------------------------------
853,881
- ------------------------------------------------------------------------------
COST OF VEHICLE AND VEHICLE RELATED REVENUES:
Cost of Parts & Accessories Sold 582,117
- ------------------------------------------------------------------------------
582,117
- ------------------------------------------------------------------------------
NET REVENUES FROM VEHICLE SALES AND VEHICLE
RELATED ACTIVITIES 271,764
- ------------------------------------------------------------------------------
OPERATING EXPENSES 432,006
- ------------------------------------------------------------------------------
LOSS FROM OPERATIONS (160,242)
- ------------------------------------------------------------------------------
OTHER EXPENSE (INCOME):
Interest Expense 23,728
Other Income (6,412)
- -----------------------------------------------------------------------------
17,316
- -----------------------------------------------------------------------------
NET LOSS $ (177,558)
- -----------------------------------------------------------------------------
33
<PAGE>
ECKLER INDUSTRIES, INC.
CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
- -------------------------------------------------------------------------------
Period January 1, 1997
to January 28, 1997
- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (177,558)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 37,332
Cash provided by (used for):
Accounts receivable (9,325)
Inventory (113,614)
Prepaid expenses 56,229
Accounts payable 125,680
Accrued expenses 637
- -------------------------------------------------------------------------------
Net cash used in operating activities (80,619)
- -------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (21,911)
Increase in other assets (24,687)
- -------------------------------------------------------------------------------
Net cash used in investing activities (46,598)
- -------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable (14,136)
Proceeds from issuance of notes payable 10,750
- -------------------------------------------------------------------------------
Net cash used in financing activities (3,386)
- -------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (130,603)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 241,652
- ------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 111,049
- ------------------------------------------------------------------------------
34
<PAGE>
<TABLE>
<CAPTION>
ECKLER INDUSTRIES, INC.
CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31, 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C>
VEHICLE AND RELATED REVENUES:
Income from Parts & Accessories $ 3,273,125
- --------------------------------------------------------------------------------------------------------------
3,273,125
- --------------------------------------------------------------------------------------------------------------
COST OF VEHICLE AND VEHICLE RELATED REVENUES:
Cost of Parts & Accessories Sold 2,142,041
- --------------------------------------------------------------------------------------------------------------
2,142,041
- --------------------------------------------------------------------------------------------------------------
NET REVENUES FROM VEHICLE SALES AND VEHICLE RELATED ACTIVITIES 1,131,084
- --------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES 1,301,222
- --------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (170,138)
- ---------------------------------------------------------------------------------------------------------------
OTHER EXPENSE (INCOME):
Interest Expense 81,215
Other Income (33,237)
- --------------------------------------------------------------------------------------------------------------
47,978
- --------------------------------------------------------------------------------------------------------------
LOSS BEFORE INCOME TAX BENEFIT (218,116)
BENEFIT FROM INCOME TAXES 77,500
- -------------------------------------------------------------------------------------------------------------
NET LOSS $ (140,616)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
ECKLER INDUSTRIES, INC.
CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
- -------------------------------------------------------------------------------
Three Months Ended
March 31, 1996
- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (140,616)
Adjustments to reconcile net loss to
net cash used in operating activities:
Deferred income taxes (62,400)
Issuance of common stock for consulting fees 27,125
Loss on disposal of fixed assets 517
Depreciation and amortization 59,207
Cash provided by (used for):
Accounts receivable (37,993)
Inventory (558,064)
Prepaid expenses (838,774)
Accounts payable 1,225,607
Accrued expenses 49,535
- ------------------------------------------------------------------------------
Net cash used in operating activities (275,856)
- ------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (17,107)
Proceeds of sale of property and equipment 4,350
Decrease in other assets 24,800
- -----------------------------------------------------------------------------
Net cash provided by investing activities 12,043
- -----------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable (131,910)
Payments on capital leases (11,869)
- ------------------------------------------------------------------------------
Net cash used in financing activities (143,779)
- ------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (407,592)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 541,991
- -----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 134,399
- -----------------------------------------------------------------------------
36
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING ANALYSIS OF THE COMPANY'S FINANCIAL CONDITION AS OF MARCH
31, 1997 AND THE COMPANY'S RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT.
BACKGROUND
Smart Choice Automotive Group, Inc. (the "Company"), formerly named "Eckler
Industries, Inc.", operates a network of self-financed used vehicle dealerships
in Florida and underwrites, finances, and services retail installment contracts
generated from the sale of used cars by its dealerships. The Company also
operates automobile dealers training and insurance divisions as well as
Eckler's, one of the largest suppliers of Corvette parts and accessories in the
world. On January 28, 1997, pursuant to an Agreement and Plan of Merger by and
among Eckler Industries, Inc. ("EII"), Eckler Acquisition Corporation, Ralph H.
Eckler, Smart Choice Holdings, Inc. ("SCHI"), Thomas E. Conlan and Gerald C.
Parker, dated December 30, 1996 (the "Agreement"), EII acquired all of the
issued and outstanding shares of common stock of SCHI in exchange for 2,927,939
shares of EII Class A and 1,576,324.5 shares of EII Class B, common stock. Under
the terms of the Agreement, the shareholders of SCHI obtained approximately 64%
of the voting rights of EII. Although EII is the parent of SCHI following the
transaction, the transaction was accounted for as a purchase of EII by SCHI (a
reverse acquisition in which SCHI is considered the acquirer for accounting
purposes), since the shareholders of SCHI obtained a majority of the voting
rights in EII as a result of the transaction. Accordingly, the financial
statements of the Company for the periods prior to January 28, 1997 are those of
SCHI, the assets and liabilities of EII are recorded at their estimated fair
values and the accounts of EII are included in the consolidated financial
statements from the date of acquisition (January 28, 1997).
SCHI was incorporated on June 21, 1996 and was a development stage corporation
prior to January 28, 1997. On August 16, 1996, SCHI acquired the stock of First
Choice Auto Finance, Inc. ("FCAF"). On January 28, 1997, in addition to the
acquisition of EII, SCHI acquired the stock of Florida Finance Group, Inc.
("FFG"), Dealer Insurance Services, Inc. ("DIS"), and Dealer Development
Services, Inc. ("DDS"). FFG underwrites, finances and services automobile retail
installment contracts and was based in St. Petersburg, Florida prior to moving
to the Company headquarters in Titusville, Florida. FCAF was incorporated on
March 22, 1994 and had no significant operations or assets until it acquired the
assets of Suncoast Auto Brokers, Inc. ("SAB"), and Suncoast Auto Brokers
Enterprises, Inc. ("SABE") on January 28, 1997. FCAF, based at the Company
headquarters in Titusville, Florida, now operates the three used vehicle lots in
St. Petersburg and Tampa, previously operated by SAB and SABE. DIS is based in
Tampa, Florida and provides insurance services for automobile dealers. DDS is
based in Tampa and provides consulting services and training programs to
automobile dealers. The assets and liabilities of FFG, FCAF, DIS and DDS are
recorded at their estimated fair values and their accounts are included in the
consolidated financial statements from the date of acquisition (January 28,
1997).
37
<PAGE>
On February 12, 1997, the Company acquired the stock of Liberty Finance Company
("Liberty"). On the same date, FCAF acquired the stock of Wholesale
Acquisitions, Inc. ("WA"), and Team Automobile Sales and Finance, Inc. ("Team").
Liberty underwrites, finances and services automobile retail service contracts
and was based in Orlando, Florida prior to moving to the Company headquarters in
Titusville, Florida. WA and Team operate five self-financed used vehicle lots in
Orlando, Florida. The assets of Liberty, WA, and Team are recorded at their
estimated fair values and their accounts are included in the consolidated
financial statements from the date of acquisition (February 12, 1997).
On February 14, 1997, FCAF acquired the assets of Palm Beach Finance and
Mortgage Company ("PBF") and Two Two Five North Military Corp. d/b/a Miracle
Mile Motors ("MMM"). FFG services the receivables purchased from PBF, and FCAF
operates the used vehicle lot previously operated by MMM located in West Palm
Beach, Florida. The assets of PBF and MMM are recorded at their estimated fair
values and their accounts are included in the consolidated financial statements
from the date of acquisition (February 14, 1997).
RESULTS OF OPERATIONS
The following table sets forth revenues and expenses in aggregate
dollars and as a percentage of total revenue for the Company and its
predecessors, EII, FFG and affiliates, Liberty and affiliates, and PBF and
affiliate, for the three months ended March 31, 1997 and 1996. As a result of
the acquisitions discussed above, and the related differences in cost basis of
the assets and liabilities of the Company after the acquisitions and the cost
bases of the predecessors, the results of operations for the past two years are
not comparable. Such lack of comparability is explained in the discussion below.
<TABLE>
<CAPTION>
1997 1996
---------------------------------------------- -----------------
(Dollars in Thousands)
Company(1) Predecessors(2) Combined(3) Combined(3) Combined(4)
<S> <C> <C> <C> <C> <C>
Vehicle and Related Revenues $ 8,428 $ 4,569 $ 12,997 100.00% $ 14,452 100.00%
Cost of Vehicle and Related Revenues 6,240 3,444 9,684 74.51% 10,079 69.74%
----- ----- ----- ------ ------ ------
Net Revenues from Vehicles Sales and
Vehicle Related Revenues 2,188 1,125 3,313 25.49% 4,373 30.26%
Operating Expenses 7,133 1,226 8,359 64.31% 3,277 22.68%
----- ----- ------- ------ ----- ------
(4,945) (101) (5,046) -38.82% 1,096 7.58%
Interest Expense 470 268 738 5.68% 503 3.48%
Other Expense (Income) 41 (6) 35 0.27% (42) -0.29%
----- ----- ----- ------ ------ ------
Net Income (Loss) $ (5,456) $ (363) $ (5,819) -44.77% $ 635 4.39%
===== ===== ===== ====== ====== ======
</TABLE>
(1) The financial data for 1997 was derived from the unaudited consolidated
financial statements of the Company which includes the unaudited combined
financial statements of the four predecessors from the date of acquisition
to March 31, 1997. Because the financial data for 1997 includes data of the
Company and its predecessors which are presented on different cost bases,
such data are not comparable to the financial data for 1996.
(2) The financial data for 1997 was derived from the unaudited combined
financial statements included herein of the four predecessors from January
1, 1997 to the date of acquisition.
38
<PAGE>
(3) The combined financial data is the sum of the actual results for the
Company and its predecessors.
(4) The financial data for 1996 is the sum of the actual results of the four
predecessors included herein. Because the financial data of the
predecessors are presented on cost bases different from those of the
Company after the acquisitions, the 1996 data is not comparable to the
financial data for 1997.
COMPARISON OF COMBINED THREE MONTHS ENDED MARCH 31, 1997 TO COMBINED THREE
MONTHS ENDED MARCH 31, 1996.
VEHICLE AND RELATED REVENUES. The Company (combined with its
predecessors) experienced a 10% decrease in revenues for the three months ended
March 31, 1997 compared to the combined results of its predecessors for the same
period in 1996. The decrease resulted primarily from lower used vehicle sales.
Due to the merger, the floorplan financing arrangements for the predecessors had
to be restructured, and the Company's access to floorplan financing was
curtailed for approximately forty-five days, resulting in reduced levels of
inventory available for sale, which resulted in decreased sales. The Company was
unable to replenish inventory and therefore sales decreased accordingly.
COST OF VEHICLE AND RELATED REVENUES. Cost of vehicle and related
revenues was $9,684,654 for the three months ended March 31, 1997 compared to
$10,078,761 for the predecessors during the same period in 1996, a decrease of
$394,107. The decrease was primarily the result of two major elements. Cost of
used vehicles sold decreased by $1,055,461 due to the decrease in sales
discussed above. Provision for credit losses increased $707,175 due to
management's assessment of the risk associated with the increase in finance
receivables.
OPERATING EXPENSES. Operating expenses consist of selling and
marketing, general and administrative expenses, and depreciation and
amortization. Operating expenses were $8,358,347 for the three months ended
March 31, 1997 compared to $3,276,646 for the predecessors for the same period
in 1996 an increase of 155%. This increase was primarily due to recognition of
compensation expense of $2,236,875 from the issuance of stock options in the
first quarter to attract key management personnel. In addition, the Company
recognized expense of approximately $1,668,000 to settle various consulting
agreements and employment contracts of the predecessors. The increase also
reflects increased corporate infrastructure resulting from the merger, offset
only partially by certain decreases in costs resulting from the consolidation of
the acquired companies' management functions.
INTEREST EXPENSE. Interest expense totaled $737,553 for the three
months ended March 31, 1997 compared to $503,487 for the predecessors during the
same period in 1996, an increase of 46%. This resulted primarily from interest
on subordinated debt attributable to the merger and related acquisitions. In
addition, the Company accrued interest on a $3,500,000 note more fully discussed
in "Liquidity and Capital Resources".
39
<PAGE>
ALLOWANCE FOR CREDIT LOSSES. The allowance for credit losses on finance
receivables (the "Allowance") at the Company's used vehicle dealerships was
15.1% of the outstanding principal balance as of March 31, 1997. The following
table reflects activity in the Allowance, as well as information regarding
charge off activity, on finance receivables originated at the Company
dealerships for the three months ended March 31, 1997.
Three Months Ended
March 31, 1997
------------------
ALLOWANCE ACTIVITY:
Balance, beginning of period $ 2,979,645
Provision for credit losses 903,531
Net charge offs (292,813)
-----------------
Balance, end of period $ 3,590,363
=================
CHARGE OFF ACTIVITY:
Principal Balances:
Collateral Repossessed $ (258,432)
Other (36,637)
-----------------
Total Principal Balances (295,069)
Recoveries, net 2,256
-----------------
Net Charge Offs $ (292,813)
=================
Analysis of the portfolio delinquencies is considered in evaluating the adequacy
of the Allowance. The following table reflects the principal balances of current
and delinquent finance receivables as a percentage of total outstanding finance
receivable principal balances as of March 31, 1997.
March 31, 1997
--------------
AGING PERCENTAGES:
Principal balances current 88.7%
Principal balances 31 to 60 days 6.3%
Principal balances over 60 days 5.0%
40
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES.
The following table sets forth the major components of the increase
(decrease) in the Company's cash and cash equivalents:
<TABLE>
<CAPTION>
1997 1996
------------------------------------- -------------
COMPANY (1) PREDECESSORS (2) COMBINED (3) COMBINED (4)
------- ------------ -------- --------
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 471 $ 453 $ 924 $ 506
Net cash used in investing activities (5,026) (250) (5,276) (2,064)
Net cash provided by (used in)
financing activities 6,212 (502) 5,710 1,356
-------- ---- ------ -----
Net increase (decrease) in cash and
cash equivalents $ 1,657 $ (299) $ 1,358 $ (202)
======== ==== ====== =====
</TABLE>
(1) The financial data for 1997 was derived from the unaudited consolidated
financial statements of the Company which includes the unaudited
combined financial statement of the four predecessors from the date of
acquisition to March 31, 1997. Because the financial data for 1997
includes data of the Company and its predecessors which are presented
on different cost bases, such data are not comparable to the financial
data for 1996.
(2) The financial data for 1997 was derived from the unaudited combined
financial statements included herein of the four predecessors from
January 1, 1997 to the date of acquisition.
(3) The combined financial data is the sum of the actual results for the
Company and its predecessors.
(4) The financial data for 1996 is the sum of the actual results of the
four predecessors included herein. Because the financial data of the
predecessors are presented on costs bases different from those of the
Company after the acquisitions, the 1996 data is not comparable to the
financial data for 1997.
The Company requires capital to support increases in its finance receivables,
and vehicle inventory, parts and accessories inventory, property and equipment,
and working capital for general corporate purposes. Funding sources available to
the Company include operating cash flow, third party investors, financial
institution borrowings and borrowings against finance receivables.
Net cash provided by operating activities of $924,562 in 1997 is primarily due
to increases in stock option compensation, accounts payable, accrued expenses,
other liabilities and provision for credit losses. The cash provided by
operating activities of the predecessor companies of $506,879 in 1996 can be
attributed to increases in net earnings, inventory, provision for credit losses
and accounts payable.
Net cash used in investing activities of $5,275,679 in 1997 is the result of the
increase in finance receivables, use of cash in the acquisition of the
predecessors, issuance of notes receivable and deposits paid. The cash used in
investing activities of the predecessor companies of $2,064,139 in 1996 is
primarily due to increases in the finance receivables.
Net cash provided by financing activities of $5,710,009 in 1997 is the result of
borrowings from Sirrom Capital Corporation ("Sirrom"), notes payable on finance
receivables, preferred stock and convertible debentures. Net cash provided by
financing activities of the predecessor companies of
41
<PAGE>
$1,355,879 in 1996 is primarily due to the issuance of notes payable and notes
payable on finance receivables.
Management of the Company has developed strategies to meet future liquidity
needs. These strategies include: (1) increasing the Company's revolving facility
with Finova Capital Corporation ("Finova") from $20 million to $35 million (2)
obtaining additional funding on May 13, 1997, from Sirrom in the amount of
$4,000,000, and (3) tighter control on overall costs. The Company's management
believes that these actions, in addition to the working capital position at
March 31, 1997, will allow the Company to meet its future liquidity needs.
REVOLVING CREDIT FACILITY. The revolving credit facility (the
"Revolving Facility") with Finova has a maximum commitment of up to $35.0
million. Under the Revolving Facility, the Company may borrow up to 70.0% of the
principal balance of eligible finance contracts. The Revolving Facility expires
on December 31, 1999, at which time the Company has the option to renew the
Revolving Facility. The Revolving Facility is secured by substantially all of
the Company's assets. As of March 31, 1997, the Company's borrowing capacity
under the Revolving Facility was approximately $8.7 million and the aggregate
principal amount outstanding under the Revolving Facility was $8.7 million. The
Revolving Facility bears interest at the governing rate (currently the prime
rate) plus 3%.
CONVERTIBLE NOTE. The Company has outstanding $7.5 million in
convertible notes from Sirrom. These notes are convertible into common stock at
varying amounts per share.
NOTES PAYABLE. EII has a $1.0 million line of credit with a bank that
had an outstanding balance of approximately $344,000 at March 31,1997. Advances
on the credit line carry an interest rate of prime plus 1.5% and are
collateralized by accounts receivable and inventory. Effective April 16, 1997,
modifications to the terms of the line of credit agreement with the lender were
effected whereby no further advances under the line of credit were to be made
and EII would begin making principal reductions according to a schedule provided
by the bank. This schedule calls for a principal reduction of $50,000 on or
before May 30, 1997, with a second principal reduction of $100,000 on or before
June 30, 1997, and a third principal reduction of $100,000 on or before July 30,
1997 and payment of all remaining amounts due under the line of credit on or
before August 30, 1997.
MORTGAGE LOAN. EII also has a long term mortgage payable to a bank with
a current principal balance of approximately $2.3 million. The mortgage loan is
collateralized by substantially all property and equipment of EII and guaranteed
by a stockholder of the Company. Effective April 16, 1997, modifications to the
terms of the original mortgage loan agreement with the lender were completed.
Under the modified mortgage loan agreement, the original payment schedule
remains but the maturity date is modified to provide for a maturity date of July
1, 1998 rather than September 30, 1999.
ACQUISITION DEBT. On the closing of the acquisitions during the three
months ended March 31, 1997, the Company incurred debt to certain stockholders
of the acquired companies. The payable balance as of March 31, 1997 for the
acquisition debt totaled $4.4 million. The notes mature at the earlier of
December 31, 1997 or when the Company successfully completes a secondary
offering of its common stock to the public.
42
<PAGE>
SEASONALITY. Historically, the Company's predecessors, except for EII,
have experienced higher revenues in the first two quarters of the calendar year
than in the latter half of the year. Management believes that these results are
due to seasonal buying patterns resulting in part from the fact that many of its
customers receive income tax refunds during the first half of the year, which
are a primary source of down payments on used car purchases.
EII's business is also subject to seasonal fluctuations. Historically,
EII's business has realized a higher portion of its revenues in the second and
third quarters of the calendar year and the lowest portion of its revenues in
the fourth quarter. The business of EII 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.
INFLATION. Increases in inflation generally result in higher interest
rates. Higher interest rates on the Company's borrowings would decrease the
profitability of the Company's existing portfolio. The Company will seek to
limit this risk, to the extent market conditions permit, for the Company's
finance receivables, either by increasing the interest rate charged, or the
profit margin on the cars sold. To date, inflation has not had a significant
impact on the Company's operations.
43
<PAGE>
PART II
SMART CHOICE AUTOMTOVE GROUP, INC.
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
On March 21, 1997, the Company held its 1997 annual meeting of
shareholders (the "Annual Meeting"). At the Annual Meeting directors were
elected as set forth below and the shareholders of the Company approved the
following matters by the votes indicated:
1. Approval of changing the Company's name to "Smart Choice
Automotive Group, Inc." For - 6,679,245; against - 16,675;
abstain - 6,910.
2. Approval of an amendment to the Company's Articles of
Incorporation to effect a recapitalization. For - 6,627,076;
against - 46,930; abstain - 28,824; Class Votes: Class A
Common Stock, For - 3,091,547; against 46,930; abstain -
7,557; Class B Common Stock, For - 1,767,764.5; against -
none; abstain - none.
3. Appointment of BDO Seidman, LLP as independent certified
public accountants for the Company. For - 6,678,253;
against - 10,500; abstain - 14,077.
4. The following persons were elected to serve as directors of
the Company:
WITHHOLD
FOR AUTHORITY
--- ---------
Robert J. Abrahams 6,692,640 10,190
David E. Bumgardner 6,696,140 6,690
Ralph H. Eckler 6,695,140 7,690
Gary R. Smith 6,696,130 6,700
Donald A. Wojnowski, Jr. 6,696,140 6,690
Joseph Yossifon 6,692,630 10,200
44
<PAGE>
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT EXHIBIT DESCRIPTION FILING STATUS-INCORPORATED BY
NO. REFERENCE TO
-- ------------
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporation of the Exhibit 3.1 to Form SB-2 Registration
Company. Statement, filed on September 1, 1995,
File No. 33-96520-A
3.2 Articles of Amendment to Articles of Incorporation of the Filed herewith
Company.
4.1 First Amended and Restated Loan and Security Agreement Filed herewith
between Florida Finance Group, Inc. ("FFG") and Finova
Capital Corporation ("Finova"), dated February 4, 1997.
4.2 Warrant to Purchase Common Stock of the Company between Filed herewith
the Company and Finova, dated January 13, 1997.
4.3 Sixth Amended and Restated Promissory Note dated May 7, Filed herewith
1997, $35,000,000 principal amount, FFG and Liberty
Finance Company, makers, Finova, payee.
4.4 First Amended and Restated Schedule to Amended and Filed herewith
Restated Loan and Security Agreement, FFG, borrower,
Finova, lender, dated April 22, 1997.
4.5 Guaranty to Finova from the Company dated January 13, Filed herewith
1997.
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
4.6 Security Agreement between Manheim Automotive Financial Not filed pursuant to Item
Services, Inc. and First Choice Auto Finance, Inc., dated 601(b)(4)(iii) of Regulation S-K. The
March 21, 1997, and related documents. Company agrees to furnish a copy to the
commission on request.
4.7 Loan Agreement dated March 13, 1997 between the Company Not filed pursuant to Item
and Sirrom Capital Corporation ("Sirrom") and related 601(b)(4)(iii) of Regulation S-K. The
documents. Company agrees to furnish a copy to the
commission on request.
4.8 Loan Agreement dated May 13, 1997 between the Company and Not filed pursuant to Item
Sirrom and related documents. 601(b)(4)(iii) of Regulation S-K. The
Company agrees to furnish a copy to the
commission on request.
4.9 Loan Agreement dated May 13, 1997 between the Company and Not filed pursuant to Item
Bankers Credit Insurance Services, Inc., and related 601(b)(4)(iii) of Regulation S-K. The
documents. Company agrees to furnish a copy to the
commission on request.
4.10 12% Convertible Debentures of Smart Choice Holdings, Inc. Not filed pursuant to Item
("SCHI") and related documents. 601(b)(4)(iii) of Regulation S-K. The
Company agrees to furnish a copy to the
commission on request.
4.11 Promissory Note dated February 12, 1997 by the Company in Not filed pursuant to Item
favor of R.C. Hill, II. 601(b)(4)(iii) of Regulation S-K. The
Company agrees to furnish a copy to the
commission on request.
10.1 Stock Purchase Agreement dated January 28, 1997 between Filed herewith
SCHI and Gary Smith.
10.2 Promissory Note dated January 28, 1997, First Choice Auto Filed herewith
Finance, Inc. ("FCAF"), maker, Gary Smith, payee, in the
principal amount of $1,031,008.
10.3 Asset Purchase Agreement dated January 28, 1997 between Filed herewith
FCAF and Gary Smith.
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10.4 Asset Purchase Agreement dated December 19, 1996 among Filed herewith
FCAF, Jack Winters Enterprises, Inc., Jack Winters, and
F. Craig Clemens.
10.5 Addendum to Asset Purchase Agreement dated March 24, 1997 Filed herewith
among FCAF, Jack Winters Enterprises, Inc., Jack Winters,
and F. Craig Clemens.
10.6 Merger Agreement dated February 12, 1997 among the Exhibit 10.1 to Form 8-K of the Company
Company, R.C. Hill Acquisition, Inc., and R.C. Hill, II. dated February 12, 1997 filed with the
Commission on February 26, 1997 (the
"2/12/97 8-K").
10.7 Stock Purchase Agreement dated February 12, 1997 among Exhibit 10.10 to the 2/12/97 8-K
the Company, FCAF, and R.C. Hill, II.
10.8 Corporate Guaranty of the Company in favor of R.C. Hill, Exhibit 10.12 to the 2/12/97 8-K
II, dated February 12, 1997.
10.9 Registration Rights Agreement between the Company and Exhibit 4.1 to the 2/12/97 8-K
R.C. Hill, II, dated February 12, 1997.
10.10 Asset Purchase Agreement among FCAF, Palm Beach Finance Exhibit 10.17 to the 2/12/97 8-K
and Mortgage Company ("PBF"), Two Two Five North Military
Corp. ("225"), and David Bumgardner, and Amendment
thereto.
10.11 Loan and Security Agreement between 225 and FCAF dated Exhibit 10.18 to the 2/12/97 8-K
February 14, 1997.
10.12 9% Secured Convertible Note of FCAF to 225 and PBF. Exhibit 10.20 to the 2/12/97 8-K
10.13 9% Convertible Debenture of SCHI to PBF. Exhibit 10.21 to the 2/12/97 8-K
10.14 Executive Employment Agreement between the Company and Filed herewith
Fred E. Whaley.
10.15 Executive Employment Agreement between the Company and Filed herewith
Gary Smith.
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10.16 Executive Employment Agreement between the Company and Filed herewith
Robert Abrahams.
10.17 Merger Agreement dated December 30, 1996 between the Exhibit 10.1 to the Form 8-K of the Company
Company, SCHI, et al. dated January 28, 1997, filed with the
Commission on February 12, 1997.
10.18 Convertible Senior Promissory Note dated March 31, 1997, Filed herewith
the Company, maker, Sirrom, payee.
10.19 Convertible Senior Promissory Note dated May 13, 1997, Filed herewith
the Company, maker, Sirrom, payee.
10.20 Amended and restated Registration Rights Agreement Filed herewith
between the Company and Sirrom, dated May 13, 1997.
27 Financial Data Schedules
</TABLE>
(B) REPORTS ON FORM 8-K
A CURRENT REPORT ON FORM 8-K ITEM 5 WAS FILED BY
SMART CHOICE AUTOMOTIVE GROUP, INC. ON FEBRUARY 12,
1997.
A CURRENT REPORT ON FORM 8-K ITEM 5 WAS FILED BY
SMART CHOICE AUTOMOTIVE GROUP, INC. ON FEBRUARY 26,
1997.
A CURRENT REPORT ON FORM 8-K/A ITEM 7 WAS FILED BY
SMART CHOICE AUTOMOTIVE GROUP, INC. ON APRIL 14,
1997.
48
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized on May 20, 1997.
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /S/ GARY R. SMITH
-----------------
Gary R. Smith
President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Signatures Title Date
---------- ----- -----
/S/ GARY R. SMITH President, Chief Executive May 20, 1997
- ------------------------ Officer and Director
Gary R. Smith
/S/ FRED E. WHALEY Executive Vice President, May 20 , 1997
- ----------------------- and Director
Fred E. Whaley (chief financial officer)
/S/ JOSEPH M. BARNES Vice President of Finance May 20, 1997
- -----------------------
Joseph M. Barnes
/S/ ERNEST RESTINA Controller May 20, 1997
- -----------------------
Ernest Restina
49
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXH
- ---
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporation of the Exhibit 3.1 to Form SB-2 Registration
Company. Statement, filed on September 1, 1995,
File No. 33-96520-A
3.2 Articles of Amendment to Articles of Incorporation of the Filed herewith
Company.
4.1 First Amended and Restated Loan and Security Agreement Filed herewith
between Florida Finance Group, Inc. ("FFG") and Finova
Capital Corporation ("Finova"), dated February 4, 1997.
4.2 Warrant to Purchase Common Stock of the Company between Filed herewith
the Company and Finova, dated January 13, 1997.
4.3 Sixth Amended and Restated Promissory Note dated May 7, Filed herewith
1997, $35,000,000 principal amount, FFG and Liberty
Finance Company, makers, Finova, payee.
4.4 First Amended and Restated Schedule to Amended and Filed herewith
Restated Loan and Security Agreement, FFG, borrower,
Finova, lender, dated April 22, 1997.
4.5 Guaranty to Finova from the Company dated January 13, Filed herewith
1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
4.6 Security Agreement between Manheim Automotive Financial Not filed pursuant to Item
Services, Inc. and First Choice Auto Finance, Inc., dated 601(b)(4)(iii) of Regulation S-K. The
March 21, 1997, and related documents. Company agrees to furnish a copy to the
commission on request.
4.7 Loan Agreement dated March 13, 1997 between the Company Not filed pursuant to Item
and Sirrom Capital Corporation ("Sirrom") and related 601(b)(4)(iii) of Regulation S-K. The
documents. Company agrees to furnish a copy to the
commission on request.
4.8 Loan Agreement dated May 13, 1997 between the Company and Not filed pursuant to Item
Sirrom and related documents. 601(b)(4)(iii) of Regulation S-K. The
Company agrees to furnish a copy to the
commission on request.
4.9 Loan Agreement dated May 13, 1997 between the Company and Not filed pursuant to Item
Bankers Credit Insurance Services, Inc., and related 601(b)(4)(iii) of Regulation S-K. The
documents. Company agrees to furnish a copy to the
commission on request.
4.10 12% Convertible Debentures of Smart Choice Holdings, Inc. Not filed pursuant to Item
("SCHI") and related documents. 601(b)(4)(iii) of Regulation S-K. The
Company agrees to furnish a copy to the
commission on request.
4.11 Promissory Note dated February 12, 1997 by the Company in Not filed pursuant to Item
favor of R.C. Hill, II. 601(b)(4)(iii) of Regulation S-K. The
Company agrees to furnish a copy to the
commission on request.
10.1 Stock Purchase Agreement dated January 28, 1997 between Filed herewith
SCHI and Gary Smith.
10.2 Promissory Note dated January 28, 1997, First Choice Auto Filed herewith
Finance, Inc. ("FCAF"), maker, Gary Smith, payee, in the
principal amount of $1,031,008.
10.3 Asset Purchase Agreement dated January 28, 1997 between Filed herewith
FCAF and Gary Smith.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10.4 Asset Purchase Agreement dated December 19, 1996 among Filed herewith
FCAF, Jack Winters Enterprises, Inc., Jack Winters, and
F. Craig Clemens.
10.5 Addendum to Asset Purchase Agreement dated March 24, 1997 Filed herewith
among FCAF, Jack Winters Enterprises, Inc., Jack Winters,
and F. Craig Clemens.
10.6 Merger Agreement dated February 12, 1997 among the Exhibit 10.1 to Form 8-K of the Company
Company, R.C. Hill Acquisition, Inc., and R.C. Hill, II. dated February 12, 1997 filed with the
Commission on February 26, 1997 (the
"2/12/97 8-K").
10.7 Stock Purchase Agreement dated February 12, 1997 among Exhibit 10.10 to the 2/12/97 8-K
the Company, FCAF, and R.C. Hill, II.
10.8 Corporate Guaranty of the Company in favor of R.C. Hill, Exhibit 10.12 to the 2/12/97 8-K
II, dated February 12, 1997.
10.9 Registration Rights Agreement between the Company and Exhibit 4.1 to the 2/12/97 8-K
R.C. Hill, II, dated February 12, 1997.
10.10 Asset Purchase Agreement among FCAF, Palm Beach Finance Exhibit 10.17 to the 2/12/97 8-K
and Mortgage Company ("PBF"), Two Two Five North Military
Corp. ("225"), and David Bumgardner, and Amendment
thereto.
10.11 Loan and Security Agreement between 225 and FCAF dated Exhibit 10.18 to the 2/12/97 8-K
February 14, 1997.
10.12 9% Secured Convertible Note of FCAF to 225 and PBF. Exhibit 10.20 to the 2/12/97 8-K
10.13 9% Convertible Debenture of SCHI to PBF. Exhibit 10.21 to the 2/12/97 8-K
10.14 Executive Employment Agreement between the Company and Filed herewith
Fred E. Whaley.
10.15 Executive Employment Agreement between the Company and Filed herewith
Gary Smith.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10.16 Executive Employment Agreement between the Company and Filed herewith
Robert Abrahams.
10.17 Merger Agreement dated December 30, 1996 between the Exhibit 10.1 to the Form 8-K of the Company
Company, SCHI, et al. dated January 28, 1997, filed with the
Commission on February 12, 1997.
10.18 Convertible Senior Promissory Note dated March 31, 1997, Filed herewith
the Company, maker, Sirrom, payee.
10.19 Convertible Senior Promissory Note dated May 13, 1997, Filed herewith
the Company, maker, Sirrom, payee.
10.20 Amended and restated Registration Rights Agreement Filed herewith
between the Company and Sirrom, dated May 13, 1997.
27 Financial Data Schedules
</TABLE>
EXHIBIT 3.2
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
ECKLER INDUSTRIES, INC.
Pursuant to the provisions of section 607.1006, Florida Statutes, this
corporation adopts the following articles of amendment to its articles of
incorporation:
FIRST: ARTICLE II
1. The name of the Corporation is Eckler Industries, Inc. (the
"Corporation").
2. Article II of the Articles of Incorporation of the Corporation is
amended to read as follows:
NAME
----
The name of this Corporation shall be:
SMART CHOICE AUTOMOTIVE GROUP, INC.
SECOND: ARTICLE V
Article V of the Articles of Incorporation of the Corporation is
amended to read as follows:
CAPITAL STOCK
-------------
The aggregate number of shares of capital stock which the Corporation
has authority to issue is 105,000,000 shares, which shall consist of 100,000,000
shares of Common Stock, $.01 par value per share ("Common Stock"), and 5,000,000
shares of preferred stock, $.01 par value per share ("Preferred Stock"). No
shareholder of any stock of this Corporation shall have preemptive rights. There
shall be no cumulative voting by the shareholders of the Corporation.
Each share of Class A Common Stock of the Corporation outstanding when
these Articles become effective, shall be reclassified, changed and converted
into one fully paid and nonassessable share of Common Stock, $.01 par value per
share. Each share of Class B Common Stock of this Corporation issued and
outstanding when these Articles become effective, shall be reclassified, changed
and converted into two fully paid and nonassessable shares of Common Stock, $.01
par value per share. The stated capital applicable to the shares of Common Stock
resulting from such reclassification and changes of each outstanding share of
Class A
<PAGE>
Common Stock and Class B Common Stock be the same as the stated capital
then applicable to such outstanding shares.
A. COMMON STOCK. Subject to the preferential dividend rights applicable
to shares of any series of Preferred Stock, the holders of shares of Common
Stock shall be entitled to receive such dividends as may be declared by the
Board of Directors. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, after distribution in full of the
preferential amounts to be distributed to the holders of shares of the Preferred
Stock, the holders of shares of the Common Stock shall be entitled to receive
all of the remaining assets of the Corporation available for distribution to its
shareholders, ratably in proportion to the number of shares of the Common Stock
held by them. Each holder of record of the Common Stock shall have one vote for
such share of Common Stock standing in such holder's name on the books of the
Corporation and entitled to vote.
B. PREFERRED STOCK. The Preferred Stock may be issued by the Board of
Directors, from time to time, in one or more series. Authority is hereby vested
solely in the Board of Directors of the Corporation to provide, from time to
time, for the issuance of Preferred Stock in one or more series and in
connection therewith to determine without shareholder approval, the number of
shares to be included and such of the designations, powers, preferences, and
relative rights and the qualifications, limitations, and restrictions of any
such series, including, without limiting the generality of the foregoing, any of
the following provisions with respect to which the Board of Directors shall
determine to make affirmative provision:
1. The designation and name of such series and the number of shares
that shall constitute
such series;
2. The annual dividend rate or rates payable on shares of such
series, the date or dates from which such dividends shall commence to accrue,
and the dividend payment dates for such dividends;
3. Whether dividends on such series are to be cumulative or
noncumulative, and the participating or other special rights, if any, with
respect to the payment of dividends;
4. Whether such series shall be subject to redemption and, if so,
the manner of redemption, the redemption price or prices and the terms and
conditions on which shares of such series may be redeemed;
5. Whether such series shall have a sinking fund or other retirement
provisions for the redemption or purchase of shares of such series, and, if so,
the terms and amount of such sinking fund or other retirement provisions and the
extent to which the charges therefor are to have priority over the payment of
dividends on or the making of sinking fund or other like retirement provisions
for shares of any other series or over the payment of dividends on the Common
Stock;
2
<PAGE>
6. The amounts payable on shares of such series on voluntary or
involuntary dissolution, liquidation, or winding up of the affairs of the
corporation and the extent to which such payment shall have priority over the
payment of any amount on voluntary or involuntary dissolution, liquidation, or
winding up of the affairs of the corporation on shares of any other series or on
the Common Stock;
7. The terms and conditions, if any, on which shares of such series
may be converted into, or exchanged for, shares of any other series or of Common
Stock;
8. The extent of the voting powers, if any, of the shares of such
series;
9. The stated value, if any, for the shares of such series, the
consideration for which shares of such series may be issued and the amount of
such consideration that shall be credited to the capital account; and
10. Any other preferences and relative, participating, optional, or
other special rights, and qualifications, limitations or restrictions thereof,
or any other term or provision of shares of such series as the Board of
Directors may deem appropriate or desirable.
The Board of Directors is expressly authorized to vary the provisions
relating to the foregoing matters between the various series of Preferred Stock.
All shares of Preferred Stock of any one series shall be identical in
all respects with all other shares of such series, except that shares of any one
series issued at different times may differ as to the dates from which dividends
thereon shall be payable, and if cumulative, shall cumulate.
Shares of any series of Preferred Stock that shall be issued and
thereafter acquired by the Corporation through purchase, redemption (whether
through the operation of a sinking fund or otherwise), conversion, exchange, or
otherwise, shall, upon appropriate filing and recording to the extent required
by law, have the status of authorized and unissued shares of Preferred Stock and
may be reissued as part of such series or as part of any other series of
Preferred Stock. Unless otherwise provided in the resolution or resolutions of
the Board of Directors providing for the issuance thereof, the number of
authorized shares of stock of any series of Preferred Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by
resolution or resolutions of the Board of Directors and appropriate filing and
recording to the extent required by law. In case the number of shares of any
such series of Preferred Stock shall be decreased, the shares representing such
decrease shall, unless otherwise provided in the resolution or resolutions of
the Board of Directors providing for the issuance thereof, resume the status of
authorized but unissued shares of Preferred Stock, undesignated as to series.
3
<PAGE>
THIRD:
The Board of Directors adopted each of these amendments February 1,
1997 and recommended the Amendments to Article II and Article V of the Articles
of Incorporation to the Corporation's shareholders at the Corporation's Annual
Meeting held on March 21, 1997.
FOURTH:
The Amendment to Article II of the Articles of Incorporation was
approved by the affirmative vote of a majority of (a) the Class A Common Stock
entitled to vote on the matter and (b) the Class B Common Stock entitled to vote
on the matter, voting together as a single class. The number of votes cast by
the Class A Common Stock and the Class B Common Stock voting together as a
single class was sufficient for approval of the Amendment to Article II of the
Corporation's Articles of Incorporation. The Class A Common Stock and the Class
B Common Stock, voting together as a single class, is the only voting group
entitled to vote on the Amendment to Article II of the Articles of
Incorporation.
The Amendment to Article V of the Articles of Incorporation was
approved by (i) the holders of the Class A Common Stock, voting as a separate
voting group, and (ii) the holders of the Corporation's Class B Common Stock,
voting as a separate voting group. The number of votes cast by the Class A
voting group was sufficient for approval, and the number of votes cast by the
Class B voting group was sufficient for approval . The Class A Common Stock and
the Class B Common Stock are the only voting groups that are entitled to vote on
the Amendment to Article V of the Articles of Incorporation.
SIGNED, this 21st day of March, 1997.
ECKLER INDUSTRIES, INC.
By: /s/ GARY R. SMITH
------------------------
Gary R. Smith, President
EXHIBIT 4.1
FINOVA/REGISTERED MARK/
FINANCIAL INNOVATORS
FIRST AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
FLORIDA FINANCE GROUP INC.
--------------------------
Borrower
59-2385410
Borrower Fed ID Tax No.
4037 66TH STREET NORTH
ST. PETERSBURG, FLORIDA 33709
-----------------------------
Address
$20,000,000.00
--------------
Amount of Loan
FEBRUARY 4, 1997
================================================================================
REDISCOUNT FINANCE
================================================================================
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
1. DEFINITIONS....................................................................................................................5
1.1. ACCOUNT DEBTOR...................................................................................................5
1.2. AGREEMENT........................................................................................................5
1.3. BUSINESS DAY.....................................................................................................5
1.4. CHARGE OFFS......................................................................................................5
1.5. CODE.............................................................................................................5
1.6. COLLATERAL.......................................................................................................5
1.7. COLLATERAL PERFORMANCE PERCENTAGE................................................................................5
1.8. COLLATERAL RECOVERY RATE.........................................................................................6
1.9. COMMONLY CONTROLLED ENTITY.......................................................................................6
1.10. COST OF GOODS SOLD...............................................................................................6
1.11. DEFAULT..........................................................................................................6
1.12. DISTRIBUTIONS....................................................................................................6
1.13. ELIGIBLE RECEIVABLES.............................................................................................6
1.14. ERISA............................................................................................................6
1.15. GAAP.............................................................................................................6
1.16. GUARANTOR........................................................................................................7
1.17. GUARANTY AGREEMENT...............................................................................................7
1.18. GOVERNING RATE...................................................................................................7
1.19. INCLUDED REBATE PERCENTAGE.......................................................................................7
1.20. INCLUDED REBATES.................................................................................................7
1.21. INDEBTEDNESS.....................................................................................................7
1.22. LEVERAGE RATIO...................................................................................................7
1.23. LOAN DOCUMENTS...................................................................................................7
1.24. MAXIMUM RATE.....................................................................................................7
1.25. NET INCOME.......................................................................................................7
1.26. NONPAYMENT NET RECEIVABLE REDUCTIONS.............................................................................7
1.27. NOTE.............................................................................................................7
1.28. PLAN.............................................................................................................7
1.29. RECEIVABLES......................................................................................................7
1.30. REQUEST FOR ADVANCE..............................................................................................7
1.31. SCHEDULE.........................................................................................................7
1.32. SUBORDINATED DEBT................................................................................................7
1.33. TANGIBLE NET WORTH...............................................................................................8
2. LOAN ..........................................................................................................................8
2.1. AMOUNT OF LOAN...................................................................................................8
2.2. INTEREST RATE....................................................................................................8
2.3. PAYMENTS.........................................................................................................8
2.4. PAYMENT DUE ON A NON-BUSINESS DAY................................................................................8
2.5. MANDATORY PAYMENTS...............................................................................................8
2.6. VOLUNTARY PREPAYMENTS............................................................................................8
2.7. MAXIMUM INTEREST; CONTROLLING AGREEMENT..........................................................................9
2.8. INTEREST AFTER DEFAULT...........................................................................................9
2.9. STATEMENT OF ACCOUNT.............................................................................................9
2.10. APPLICATION OF PAYMENTS.........................................................................................10
2.11. FACILITY FEE....................................................................................................10
3. SECURITY......................................................................................................................10
3.1. SECURITY INTEREST...............................................................................................10
3.2. FINANCING STATEMENTS AND FURTHER ASSURANCES.....................................................................10
3.3. PLEDGE OF RECEIVABLES...........................................................................................11
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3.4. FAILURE TO DELIVER..............................................................................................11
3.5. NOTICE OF COLLATERAL ASSIGNMENT.................................................................................11
3.6. LOCATION OF RECEIVABLES.........................................................................................11
3.7. RECORDS AND INSPECTIONS.........................................................................................11
3.8. ADDITIONAL DOCUMENTS............................................................................................11
3.9. COLLECTION......................................................................................................11
3.10. BLOCKED ACCOUNTS................................................................................................11
3.11. PROTECTION OF RECEIVABLE RECORDS................................................................................12
3.12. USE OF COLLECTIONS AND MODIFICATION OF RECEIVABLES..............................................................12
3.13. USE OF PROCEEDS.................................................................................................12
3.14. RETURN OF COLLATERAL............................................................................................12
3.15. LENDER'S PAYMENT OF CLAIMS......................................................................................12
4. CONDITIONS OF CLOSING; SUBSEQUENT ADVANCES....................................................................................12
4.1. INITIAL ADVANCE.................................................................................................12
4.2. SUBSEQUENT ADVANCES.............................................................................................13
4.3. ORAL REQUEST FOR ADVANCE........................................................................................13
4.4. ALL ADVANCES TO CONSTITUTE ONE LOAN.............................................................................14
4.5. ADVANCES........................................................................................................14
5. REPRESENTATIONS AND WARRANTIES OF BORROWERS AND GUARANTOR.....................................................................14
5.1. REPRESENTATIONS AND WARRANTIES..................................................................................14
5.2. WARRANTIES AND REPRESENTATIONS AS TO ELIGIBLE RECEIVABLES.......................................................16
6. COVENANTS AND OTHER AGREEMENTS................................................................................................16
------------------------------
6.1. AFFIRMATIVE COVENANTS...........................................................................................16
6.2. NEGATIVE COVENANTS..............................................................................................17
6.3. REPORTING REQUIREMENTS AND ACCOUNTING PRACTICES.................................................................18
6.4. PLEDGE OF RECEIVABLES...........................................................................................18
6.5. ACCOUNT DEBTORS' ADDRESSES......................................................................................18
6.6. FINANCIAL REPORTS...............................................................................................18
6.7. FINANCIAL STATEMENTS OF GUARANTORS..............................................................................19
6.8. NOTICE OF CHANGES...............................................................................................19
7. EVENTS OF DEFAULT AND REMEDIES................................................................................................19
7.1. EVENTS OF DEFAULT...............................................................................................19
7.2. ACCELERATION OF THE INDEBTEDNESS................................................................................20
7.3. LOUISIANA CONFESSION OF JUDGMENT................................................................................20
7.4. REMEDIES........................................................................................................20
7.5. NO WAIVER.......................................................................................................21
7.6. APPLICATION OF PROCEEDS.........................................................................................21
7.7. APPOINTMENT OF LENDER AS ATTORNEY-IN-FACT.......................................................................21
8. EXPENSES AND INDEMNITIES......................................................................................................22
------------------------
8.1. REIMBURSEMENT FOR EXPENSES......................................................................................22
8.2. LENDER'S EXPENSES AND ATTORNEY'S FEES...........................................................................22
8.3. GENERAL INDEMNIFICATION.........................................................................................22
9.2. PARTICIPATIONS..................................................................................................23
9.3. SURVIVAL OF AGREEMENTS..........................................................................................23
9.4. NO OBLIGATION BEYOND MATURITY...................................................................................23
9.5. PRIOR AGREEMENTS SUPERSEDED.....................................................................................23
9.6. PARTIES BOUND...................................................................................................23
9.7. NUMBER AND GENDER...............................................................................................23
9.8. NO THIRD PARTY BENEFICIARY......................................................................................23
9.9. EXECUTION IN COUNTERPARTS.......................................................................................23
-------------------------
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9.10. SEVERABILITY OF PROVISIONS......................................................................................23
9.11. HEADINGS........................................................................................................23
9.12. SCHEDULES AND EXHIBITS..........................................................................................23
9.13. FURTHER INSTRUMENTS.............................................................................................24
9.14. LENDER'S EXPENSES AND ATTORNEY'S FEES...........................................................................24
9.15. GOVERNING LAW...................................................................................................24
9.16. JURISDICTION AND VENUE..........................................................................................24
9.17. WAIVER..........................................................................................................24
9.18. ADVICE OF COUNSEL...............................................................................................24
9.19. WAIVER OF RIGHT TO TRIAL BY JURY................................................................................25
</TABLE>
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<PAGE>
FINOVA/REGISTERED MARK/
FINANCIAL INNOVATORS
Rediscount Finance
FIRST AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BORROWER: FLORIDA FINANCE GROUP INC.
ADDRESS: 4037 66TH STREET NORTH
ST. PETERSBURG, FLORIDA 33709
DATE: FEBRUARY 4, 1997
THIS FIRST AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is entered into on
the above date between FINOVA CAPITAL CORPORATION, a Delaware corporation
("Lender"), whose corporate address is Dial Tower, Dial Corporate Center,
Phoenix, Arizona 85077 and whose Rediscount Finance Office address is 13355 Noel
Road, Suite 800, Dallas, Texas 75240 and the borrower named above (referred to
herein as the "Borrower"), whose chief executive office is located at the above
address (referred to herein as "Borrower's Address"), as an amendment and
restatement to that certain Loan and Security Agreement, dated February 24, 1994
and not an extinguishment of any obligations evidenced thereby. The terms and
provisions set forth herein and in the other documents executed in conjunction
herewith shall supersede all prior agreements.
1. DEFINITIONS
1.1. ACCOUNT DEBTOR. The term "Account Debtor" shall mean any person or
persons that are an obligor in any contractual arrangement with Borrower or any
co- signor in respect of any Receivable.
1.2. AGREEMENT. The term "Agreement" shall mean this Loan and Security
Agreement and any amendment, modifications or extension hereof.
1.3. BUSINESS DAY. The term "Business Day" shall mean a day, other than a
Saturday or Sunday, on which commercial banks are open for business to the
public in Phoenix, Arizona and New York, New York.
1.4. CHARGE OFFS. The term "Charge Offs" shall mean the amount due (including
the principal balance plus all earned fees and charges) pursuant to a Receivable
on the date that Borrower charges off such Receivable as uncollectible, pursuant
to Borrower's policies and/or procedures.
1.5. CODE. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
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<PAGE>
1.6. COLLATERAL. The term "Collateral" shall have the meaning set forth in
Section 3.1. hereof.
1.7. COLLATERAL PERFORMANCE PERCENTAGE. The term "Collateral Performance
Percentage" shall mean, on any date of determination, the percentage determined
by the aggregate of all of the outstanding balances, including accrued interest,
for all Receivables that are sixty (60) days or more past due or are otherwise
ineligible Receivables divided by the aggregate of all of the outstanding
balances, including accrued interest, for all Receivables.
1.8. COLLATERAL RECOVERY RATE. The term "Collateral Recovery Rate" shall
mean, for any period of determination, (i) the total cash collected from all
Receivables (including but not limited to all cash proceeds from charge off
recoveries, with such charge off recoveries calculated at wholesale value),
divided by (ii) the sum of (a) the Included Rebates plus (b) the total cash
collected from all Receivables (excluding all cash proceeds from charge off
recoveries) plus (c) the aggregate of all Charge Offs for that period.
1.9. COMMONLY CONTROLLED ENTITY. The term "Commonly Controlled Entity" shall
mean an entity, whether or not incorporated, which is under common control with
Borrower within the meaning of Section 414(b) or (c) of the Code.
1.10. COST OF GOODS SOLD. The term "Cost of Goods Sold" shall mean, with
respect to the vehicle that secures the repayment of a Receivable, the sum of
(i) the direct cost paid for such vehicle, (ii) reconditioning costs, (iii)
taxes paid with respect to the sale of such vehicle, (iv) cost of registration
and application for title and (v) all commissions paid by Borrower with respect
to the sale of such vehicle that generated such Receivable.
1.11. DEFAULT. The term "Default" shall mean an event which with the passage
of time or notice or both would constitute an Event of Default (as defined in
Section 7.1).
1.12. DISTRIBUTIONS. The term "Distributions" shall mean any dividends or
other distribution of earnings to Borrower's shareholders.
1.13. ELIGIBLE RECEIVABLES. The term "Eligible Receivables" shall mean those
Receivables of Borrower that are acceptable to Lender, in its reasonable
discretion, and, in each case, that meet, at a minimum, all of the following
requirements: (i) arise from the extension of credit, the sale and delivery of a
vehicle or the rendering of services in connection with such sale in the
ordinary course of Borrower's business; (ii) represent a valid and binding
obligation enforceable in accordance with its terms for the amount outstanding
thereof without offset, counterclaim or defense (whether actual or alleged);
(iii) comply in all respects with all applicable laws and regulations,
including, but not limited to, truth in lending and credit disclosure laws and
regulations; (iv) all amounts and information appearing thereon or furnished to
Lender in connection therewith are true and correct and undisputed by the
Account Debtor thereon or any guarantor thereof; (v) Borrower and the Account
Debtor are not engaged in any litigation regarding nonpayment of the Receivable;
(vi) to the best knowledge of Borrower neither the Account Debtor thereon nor
any guarantor thereof is subject to any receivership, insolvency or bankruptcy
proceeding, is insolvent or has failed to meet its debts as they mature; (vii)
Borrower has good and sufficient right to pledge, assign and deliver the
Receivables free from all liens, claims, encumbrances or security interests
whatsoever, except as granted in this Agreement; (viii) neither the Account
Debtor thereon nor any guarantor thereof is employed by, related to or
affiliated with Borrower; (ix) to the best knowledge of Borrower no condition
exists that materially or adversely affects the value of the Receivable or
jeopardizes any security therefor; (x) if the Receivable arose from the sale of
goods, such goods have been delivered and accepted by the Account Debtor and are
still subject to the lawful possession and control of the Account Debtor and
have not been otherwise returned to or repossessed by Borrower; (xi) is not a
renewal or extension of any Receivable previously ineligible hereunder; (xii)
the original principal amount thereof does not exceed the Maximum Amount of an
Eligible Receivable (SCHEDULE SECTION 1.13.A.) and the original term thereof
does not exceed the Maximum Term of an Eligible Receivable (SCHEDULE SECTION
1.13.B.); (xiii) meets the Eligibility Test and has been reported to Lender in
compliance with the Aging Procedures (SCHEDULE SECTION 1.13.C.); (xiv) is not
evidenced by a judgment or has not been reduced to judgment; (xv) is not an open
account; (xvi) is evidenced by a written payment agreement, bearing interest or
containing a time price differential, which has been executed by the Account
Debtor; (xvii) the Account Debtor thereunder is a legal resident of the United
States; (xviii) payments under the Receivable are to be made in United States
dollars; (xix) the number of days between contractual payment dates of the
Receivable does not exceed thirty-one (31) days, and (xxi) with respect to the
Receivable, Lender has in Lender's possession the original contract or agreement
that evidences the primary payment obligation of the Account Debtor and the
original certificate of title or other evidence of title, pursuant to applicable
law, or evidence that such certificate of title or other evidence has been
properly applied for with the proper state agency or department for the issuance
of such certificate or other evidence, satisfactory in form and substance to
Lender.
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1.14. ERISA. The term "ERISA" shall mean the
Employee Retirement Income Security Act of 1974, as amended from time to time.
1.15. GAAP. The term "GAAP" shall mean generally accepted accounting
principles and other standards as promulgated by the American Institute of
Certified Public Accountants.
1.16. GUARANTOR. The term "Guarantor" shall mean any person or persons who
execute a guaranty agreement in favor of Lender guaranteeing the repayment of
the Borrower's Indebtedness to Lender (SCHEDULE SECTION 1.16).
1.17. GUARANTY AGREEMENT. The term "Guaranty Agreement" shall mean that
certain agreement executed by the Guarantor, in a form and substance approved by
Lender.
1.18. GOVERNING RATE. The term "Governing Rate" shall mean the "Prime" rate
publicly announced by Citibank N.A., New York, New York (or such other "money
center" bank as Lender, in its sole discretion, may select from time to time,
but shall not be more than the highest rate of the five largest banks in the
Continental United States as their respective corporate base, reference, prime
or similar benchmark rate), provided however, that such rate may not be the
lowest rate charged to such bank's customers.
1.19. INCLUDED REBATE PERCENTAGE. The term "Included Rebate Percentage" shall
mean, for any period of determination, the percentage determined by dividing (i)
the aggregate of all Charge Offs for that period, by (ii) the Nonpayment Net
Receivable Reductions for that period.
1.20. INCLUDED REBATES. The term "Included Rebates" shall mean, for any
period of determination, (i) the aggregate of all rebates of interest for that
period, multiplied by (ii) the Included Rebate Percentage.
1.21. INDEBTEDNESS. The term "Indebtedness" shall mean all amounts advanced
hereunder by Lender to Borrower together with all other amounts owing or
becoming owing to Lender by Borrower, direct or indirect, absolute or
contingent, now or hereafter existing, whether pursuant to the terms of this
Agreement or any document or instrument evidencing or securing the transaction
contemplated hereby.
1.22. LEVERAGE RATIO. The term "Leverage Ratio" shall mean, at any date of
determination, total liabilities of Borrower, including the outstanding balance
of the Indebtedness, less the outstanding balance due pursuant to all
Subordinated Debt, divided by the sum of the amount of Borrower's Tangible Net
Worth plus the outstanding balance due pursuant to all Subordinated Debt.
1.23. LOAN DOCUMENTS. The term "Loan Documents" shall mean this Agreement,
the Note, the Schedule, the Guaranty, Subordination Agreements, Agency and
Custodian Agreements and all other documents executed in connection with this
Agreement, together with any and all renewals, amendments, restatements or
replacements of such documents.
1.24. MAXIMUM RATE. The term "Maximum Rate" shall mean the highest lawful and
nonusurious rate of interest applicable to the Note made and delivered by
Borrower to Lender in connection herewith, that at any time or from time to time
may be contracted for, taken, reserved, charged, or received on the Note and the
Indebtedness under the laws of the United States and the laws of such states as
may be applicable thereto, that are in effect or, to the extent allowed by such
laws, that may be hereafter in effect and that allow a higher maximum
nonusurious and lawful interest rate than would any applicable laws now allow.
1.25. NET INCOME. The term "Net Income" shall mean with respect to any fiscal
period, the net earnings of Borrower (excluding all extraordinary gains or
nonrecurring income) before provision for income taxes for such fiscal period of
Borrower, all as reflected on the financial statements of Borrower supplied to
Lender pursuant to Sections 5.4(A) and 5.4(B) hereof.
1.26. NONPAYMENT NET RECEIVABLE REDUCTIONS. The term "Nonpayment Net
Receivable Reductions" shall mean, for any period of determination, the sum of
(i) the aggregate of all Charge Offs for that period, plus (ii) the aggregate of
all net refinanced balances of Receivables for that period.
1.27. NOTE. The term "Note" shall mean the promissory note of even date
herewith, and all renewals, extensions, or modifications executed by Borrower
and payable to the order of Lender.
1.28. PLAN. The term "Plan" shall mean any pension plan that is covered by
Title IV of ERISA and with respect to which Borrower or a Commonly Controlled
Entity is an "Employer" as defined in Section 3(5) of ERISA.
1.29. RECEIVABLES. The term "Receivables" shall mean all accounts of Borrower
and any other right of Borrower to receive payment, including, without
limitation, all loans, extensions of credit or Borrower's right to payment for
goods sold or services rendered by Borrower.
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1.30. REQUEST FOR ADVANCE. The term "Request for Advance" shall mean a
written request for an advance in the form of EXHIBIT "A" attached hereto and
made a part hereof.
1.31. SCHEDULE. The term "Schedule" shall mean the schedule executed in
conjunction with this Agreement of even date herewith, as may be amended from
time to time, upon written agreement of Lender and Borrower.
1.32. SUBORDINATED DEBT. The term "Subordinated Debt" shall mean the
aggregate amount of any indebtedness of Borrower to persons other than Lender
that by its terms is subordinated to the prior payment in full of the
Indebtedness pursuant to a subordination and standstill agreement, in a form and
substance satisfactory to Lender, entered into by all holders of Subordinated
Debt.
1.33. TANGIBLE NET WORTH. The term "Tangible Net Worth" shall mean, at any
time of determination, the shareholder's equity of Borrower determined in
accordance with GAAP minus the aggregate amount of all intangible assets and all
assets consisting of obligations due to Borrower from shareholders, directors,
officers, or any affiliate of Borrower or any Guarantor hereunder.
2. LOAN
2.1. AMOUNT OF LOAN. Subject to the terms, covenants and conditions
hereinafter set forth, Lender agrees upon the Borrower's request from time to
time, until the Maturity Date, to make advances to Borrower (collectively, the
"Loan"), in an aggregate amount not to exceed at any time outstanding the lesser
of the following: (a) the Amount of Revolving Credit Line (SCHEDULE SECTION
2.1.A.) or (b) the Availability on Eligible Receivables (SCHEDULE SECTION
2.1.B.). Within the limits of this Section 2.1, Borrower may borrow, repay and
reborrow the advances. The Loan shall be evidenced by the Note.
2.2. INTEREST RATE. The outstanding principal balance of Loan shall bear
interest at the Stated Interest Rate (SCHEDULE SECTION 2.2). If Lender is ever
prevented from charging or collecting interest at the rate set forth in Stated
Interest Rate Section (i) because interest at such rate would exceed interest at
the Maximum Rate, then the rate set forth in Stated Interest Rate Section (i)
shall continue to be the Maximum Rate until Lender has charged and collected the
full amount of interest chargeable and collectable had interest at the rate set
forth in Stated Interest Rate Section (i) always been lawfully chargeable and
collectible. As the Governing Rate changes, the rate set forth in Stated
Interest Rate Section (i) shall be increased or decreased (subject to the
Maximum Rate) on the first day of each calendar month to correspond with the
change in the Governing Rate then in effect and shall remain fixed at such rate
until the first day of the next succeeding calendar month, notwithstanding
fluctuations in the Governing Rate during the month. All changes in the
Governing Rate shall be made without notice to Borrower. The monthly interest
due on the principal balance of the Loan outstanding shall be computed for the
actual number of days elapsed during the month in question on the basis of a
year consisting of three hundred sixty (360) days and shall be calculated by
determining the average daily principal balance outstanding for each day of the
month in question. The daily rate shall be equal to 1/360th times the Stated
Interest Rate (but shall not exceed the Maximum Rate).
2.3. PAYMENTS. All payments to Lender shall be payable at FINOVA Capital
Corporation, File No. 96425, P. O. Box 668100, Charlotte, NC 28266-8100. All
payments received pursuant to this Agreement shall be applied to Borrower's
Indebtedness three (3) Business Days after the actual receipt of such payment by
Lender's depository bank if such payment is credited to Lender's account. The
Indebtedness shall be due and payable as follows:
A. Accrued but unpaid interest for each calendar month during the term hereof
shall be due and payable, in arrears, on or before the fifteenth (15th) day of
the immediately succeeding calendar month.
B. Costs, fees and expenses payable pursuant to this Agreement shall be due
and payable by Borrower to Lender or to such other person(s) designated by
Lender in writing on demand; and
C. The entire outstanding balance of the Indebtedness shall be due and
payable, if not prepaid, on the Maturity Date (SCHEDULE SECTION 2.3.).
2.4. PAYMENT DUE ON A NON-BUSINESS DAY. If any payment of the Indebtedness
falls due on a day other than a Business Day, then such due date shall be
extended to the next succeeding Business Day.
2.5. MANDATORY PAYMENTS. Provided that Borrower is not otherwise in Default
hereunder, if at any time the amount advanced by Lender to Borrower exceeds the
maximum amount of the Loan allowed pursuant to Section 2.1, Borrower shall
immediately and without notice, repay to Lender an amount sufficient to
eliminate such excess, or, at Lender's option, assign and deliver additional
Eligible Receivables sufficient for such purpose. In the event Borrower sells,
transfers, assigns or otherwise disposes of all or any portion of its
Receivables, other than in the ordinary course of business, Borrower shall apply
all proceeds of any such sale, transfer, assignment or other
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disposition to reduce the outstanding balance of the Indebtedness.
2.6. VOLUNTARY PREPAYMENTS. Borrower may, at its option, voluntarily prepay
the Indebtedness in full at any time and request a termination of Lender's
security interest in the collateral, provided, however, that Borrower has given
Lender ninety (90) days written notice of any such intention to prepay the
Indebtedness in full, Borrower requests Lender to terminate its security
interest in the Collateral and as liquidated damages, not as a penalty, pays to
Lender the amount of liquidated damages ("Liquidated Damages") (SCHEDULE SECTION
2.6). Borrower may not make such prepayment prior to the expiration of such
ninety (90) day period. Upon written notice of Borrower's intent to prepay the
Indebtedness in full, the commitment by Lender to advance funds to Borrower and
all the obligations of Lender shall terminate on the expiration of said ninety
(90) day notice period, and the entire amount of the Indebtedness shall be due
and payable on such date.
2.7. MAXIMUM INTEREST; CONTROLLING AGREEMENT. The contracted for rate of
interest of the Loan without limitation, shall consist of the following: (i) the
Stated Interest Rate, calculated and applied to the principal balance of the
Note in accordance with the provisions of the Note and this Agreement; (ii)
interest after Event of Default or due date, calculated and applied to the
amounts due under the Note in accordance with the provisions thereof; and (iii)
all Additional Sums (as herein defined), if any. Borrower agrees to pay an
effective contracted for rate of interest which is the sum of the
above-referenced elements.
All fees, charges, goods, things in action or any other sums or things of
value (other than amounts described in the immediately previous paragraph), paid
or payable by Borrower (collectively, the "Additional Sums"), whether pursuant
to the Note, this Agreement or any other documents or instruments in any way
pertaining to this lending transaction, or otherwise with respect to this
lending transaction, that under any applicable law may be deemed to be interest
with respect to this lending transaction, for the purpose of any applicable law
that may limit the maximum amount of interest to be charged with respect to this
lending transaction, shall be payable by Borrower as, and shall be deemed to be,
additional interest and for such purposes only, the agreed upon and "contracted
for rate of interest" of this lending transaction shall be deemed to be
increased by the rate of interest resulting from the inclusion of the Additional
Sums.
It is the intent of the parties to comply with the usury law ("Applicable
Usury Law") applicable pursuant to the terms of the preceding paragraph or such
other usury law which is applicable if the law chosen by the parties is not
applicable. Accordingly, it is agreed that notwithstanding any provisions to the
contrary in the Loan Documents, or in any of the documents securing payment
hereof or otherwise relating hereto, in no event shall the Loan Documents or
such documents require the payment or permit the collection of interest in
excess of the maximum contract rate permitted by the Applicable Usury Law. In
the event (a) any such excess of interest otherwise would be contracted for,
charged or received from Borrower or otherwise in connection with the loan
evidenced hereby, or (b) the maturity of the indebtedness evidenced by the Loan
Documents is accelerated in whole or in part, or (c) all or part of the
principal or interest of the Loan Documents shall be prepaid, so that under any
of such circumstances the amount of interest contracted for, charged or received
in connection with the loan evidenced hereby, would exceed the maximum contract
rate permitted by the Applicable Usury Law, then in any such event (1) the
provisions of this paragraph shall govern and control, (2) neither Borrower nor
any other person or entity now or hereafter liable for the payment hereof will
be obligated to pay the amount of such interest to the extent that it is in
excess of the maximum contract rate permitted by the Applicable Usury Law, (3)
any such excess which may have been collected shall be either applied as a
credit against the then unpaid principal amount hereof or refunded to Borrower,
at Lender's option, and (4) the effective rate of interest will be automatically
reduced to the maximum amount of interest permitted by the Applicable Usury Law.
It is further agreed, without limiting the generality of the foregoing, that to
the extent permitted by the Applicable Usury Law; (x) all calculations of
interest which are made for the purpose of determining whether such rate would
exceed the maximum contract rate permitted by the Applicable Usury Law shall be
made by amortizing, prorating, allocating and spreading during the period of the
full stated term of the loan evidenced hereby, all interest at any time
contracted for, charged or received from Borrower or otherwise in connection
with such loan; and (y) in the event that the effective rate of interest on the
loan should at any time exceed the maximum contract rate allowed under the
Applicable Usury Law, such excess interest that would otherwise have been
collected had there been no ceiling imposed by the Applicable Usury Law shall be
paid to Lender from time to time, if and when the effective interest rate on the
loan otherwise falls below the maximum amount permitted by the Applicable Usury
Law, to the extent that interest paid to the date of calculation does not exceed
the maximum contract rate permitted by the Applicable Usury Law, until the
entire amount of interest which would have otherwise been collected had there
been no ceiling imposed by the Applicable Usury Law has been paid in full.
Borrower further agrees that should the maximum contract rate permitted by the
Applicable Usury Law be increased at any time hereafter because of a change in
the law, then
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to the extent not prohibited by the Applicable Usury Law, such increases shall
apply to all indebtedness evidenced hereby regardless of when incurred; but,
again to the extent not prohibited by the Applicable Usury Law, should the
maximum contract rate permitted by the Applicable Usury Law be decreased because
of a change in the law, such decreases shall not apply to the indebtedness
evidenced hereby regardless of when incurred.
2.8. INTEREST AFTER DEFAULT. Upon the occurrence and during the continuation
of an Event of Default, Borrower shall pay Lender interest on the daily
outstanding balance of Borrower's loan account at a rate per annum which is four
percent (4%) in excess of the rate which would otherwise be applicable thereto
pursuant to the Schedule (SCHEDULE SECTION 2.2).
2.9. STATEMENT OF ACCOUNT. Lender shall provide Borrower, each month, with a
statement of Borrower's account, prepared from Lender's records, which shall
conclusively be deemed correct and accepted by Borrower, unless Borrower gives
Lender a written statement of exceptions within thirty (30) days after receipt
of such statement.
2.10. APPLICATION OF PAYMENTS. The amount of all payments or amounts received
by Lender with respect to the Indebtedness shall be applied to the extent
applicable under this Agreement: (i) first, to accrued interest through the date
of such payment, including any Interest After Default; (ii) then, to any late
fees, overdue risk assessments, examination fees and expenses, collection fees
and expenses and any other fees and expenses due to Lender hereunder; and (iii)
last, the remaining balance, if any, to the unpaid principal balance of the
Indebtedness; provided, however, while a Default exists under the Loan
Documents, each payment hereunder shall be applied to amounts owed to Lender by
Borrower as Lender it is sole discretion may determine. In calculating interest
and applying payments as set forth above; (a) interest shall be calculated and
collected through the date a payment is actually applied by Lender under the
terms of this Agreement; (b) interest on the outstanding balance shall be
charged during any grace period permitted hereunder; (c) at the end of each
month, all accrued and unpaid interest and other charges provided for hereunder
shall be added to the principal balance of the Loan; and (d) to the extent that
Borrower makes a payment or Lender receives any payment or proceeds of the
Collateral for Borrower's benefit that is subsequently invalidated, set aside or
required to be repaid to any other person or entity, then, to such extent, the
obligations intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by Lender and Lender may adjust the
outstanding balance of the Indebtedness as Lender, in its sole discretion, deems
appropriate under the circumstances.
2.11. FACILITY FEE. Borrower agrees to pay Lender a monthly Facility Fee
(SCHEDULE SECTION 2.11) for and in consideration of Lender's management and
administration of credit facility set forth herein. This Facility Fee is due and
payable, in arrears, on the fifteenth (15th) day of each calendar month during
the term hereof.
3. SECURITY
3.1. SECURITY INTEREST. To secure the prompt payment to Lender of the
Indebtedness and any and all other obligations now existing or hereinafter
arising owed by Borrower to Lender, Borrower hereby irrevocably grants to Lender
a first and continuing security interest in the following property and interests
in property of Borrower, whether now owned or existing or hereafter acquired or
arising and wheresoever located:
A. All Receivables and all accounts, chattel paper, instruments, contract
rights and general intangibles, all of Borrower's right, remedies, security,
liens, guaranties, or other contracts of suretyship with respect thereto, all
deposits or other security or support for the obligation of any Account Debtor
thereunder and credit and other insurance acquired by Account Debtor or the
Borrower in connection therewith.;
B. All Inventory, new or used, including, but not limited
to parts and accessories;
C. All bank accounts of Borrower;
D. All monies, securities and property, now or hereafter
held, received by, or entrusted to, in the possession or
under the control of Lender or a bailee of Lender;
E. All accessions to, substitutions for and all
replacements, products and proceeds of the foregoing,
including, without limitation, proceeds of insurance policies
referenced in Section 3.1.A above (including but not limited
to claims paid and premium refunds); and
F. All books and records (including, without limitation, customer lists,
credit files, tapes, ledger cards, computer software and hardware, electronic
data processing software, computer printouts and other computer materials and
records) of Borrower evidencing or containing information regarding any of the
foregoing.
3.2. FINANCING STATEMENTS AND FURTHER ASSURANCES. Borrower hereby agrees to
execute UCC- 1 Financing Statements, in the form and substance of EXHIBIT "B"
hereto, and any other instruments or documents
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reasonably necessary to evidence, preserve or protect Lender's security interest
in the Collateral. Borrower agrees that financing statements shall be filed
covering all of Borrower's locations (SCHEDULE SECTION 3.2.).
Upon Lender's request, Borrower agrees to deliver to Lender, at such places
as Lender may reasonably designate, schedules executed by Borrower, listing the
Receivables and fully and correctly specifying in adequate detail the aggregate
unmatured unpaid face amount of each Receivable and the amount of the deferred
installments thereof falling due each month. These schedules shall be in form
and tenor satisfactory to or supplied by Lender. All schedules delivered and
Collateral pledged to Lender shall be assigned to Lender pursuant to the
"Schedule of Receivables and Assignment" in the form and substance of EXHIBIT
"E" attached hereto. Borrower further warrants and agrees that in each case
where the terms of any Receivable require the Borrower or the Account Debtor
named in such Receivable to place or carry fire insurance or other insurance in
respect of the merchandise or property to which such Receivable relates, the
Borrower shall or shall cause the Account Debtor to maintain such insurance
until the full amount of such Receivable is collected and if not, Lender, at its
option, may place and maintain such insurance, charging the cost thereof to
Borrower.
3.3. PLEDGE OF RECEIVABLES. Borrower hereby agrees to pledge all Receivables
and, if so requested by Lender, Borrower shall deliver to Lender all documents
evidencing Receivables of Borrower, no less often than on the twentieth (20th)
day of each calendar month during the term of this Agreement, together with the
Schedule of Receivables and Assignment, as set forth in Section 3.2 hereof.
3.4. FAILURE TO DELIVER. Failure to deliver physical possession of any
instruments, documents or writings in respect of any Receivable to Lender shall
not invalidate Lender's security interest therein. To the extent that possession
may be required by applicable law for the perfection of Lender's security
interest, the original chattel paper and instruments representing the
Receivables shall be deemed to be held by Lender, although kept by the Borrower
as the custodial agent of Lender.
3.5. NOTICE OF COLLATERAL ASSIGNMENT. All contracts, documents or instruments
representing or evidencing a Receivable shall contain (by way of stamp or other
method reasonably satisfactory to Lender) the following language: "PLEDGED TO
FINOVA CAPITAL
CORPORATION AS COLLATERAL".
3.6. LOCATION OF RECEIVABLES. Borrower shall, at any reasonable time and at
Borrower's own expense, upon Lender's request, physically deliver to Lender all
Receivables (including any instruments, documents or writings in respect of any
Receivable together with all instruments, documents or writings in respect of
any collateral securing each Receivable) assigned to Lender to any reasonable
place or places designated by Lender. All Receivables shall, regardless of their
location, be deemed to be under Lender's dominion and control (with files so
labeled) and deemed to be in Lender's possession.
3.7. RECORDS AND INSPECTIONS. Borrower shall at all times keep complete and
accurate records pertaining to the Collateral, which records shall be current on
a daily basis and located only at the locations (SCHEDULE SECTION 3.2.). Lender
by or through any of its officers, agents, employees, attorneys or accountants,
shall have the right to enter any such locations, upon reasonable prior notice,
at any reasonable time or times during regular business hours, for so long as
Lender may desire, to inspect the Collateral and to inspect, audit and make
extractions or copies from the books, records, journals, orders, receipts,
correspondence or other data relating to the Collateral or this Agreement.
3.8. ADDITIONAL DOCUMENTS. Borrower hereby agrees to execute any additional
documents or financing statements which Lender deems necessary in its reasonable
discretion in order to evidence Lender's security interest in the Collateral.
Borrower shall not allow any financing statement or notice of assignment of
accounts receivable, other than those executed in connection with this
Agreement, to be on file in any public office covering any Collateral, proceeds
thereof or other matters subject to the security interest granted to Lender.
3.9. COLLECTION. Borrower agrees at its own expense to promptly and
diligently collect each installment of all Receivables in trust for the
exclusive account of Lender, to hold Lender harmless from any and all loss,
damage, penalty, liability, fine or expense arising from such collection by
Borrower or its agents and to faithfully account therefor to Lender. During the
continuance of any Event of Default, Lender expressly retains the unqualified
right at any time it so elects to take over the collection of the Receivables.
3.10. BLOCKED ACCOUNTS. At Lender's request, any checks, notes, drafts or any
other payment upon and/or proceeds of the Collateral received by Borrower (or
any subsidiaries, divisions, affiliates, proprietorships, shareholders,
directors, officers, employees, agents or those persons acting for or in concert
with Borrower), shall no later than the next Business Day following receipt
thereof, be delivered to Lender, at Lender's address set forth above, for
application on account of the Indebtedness and shall be reflected in the
Statement of Account as
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provided in Section 2.9 herein, until such time as Lender has established a
depository account at a bank for the deposit of such payments, made arrangements
for such deposits to be transferred to Lender daily and thereafter established a
lock-box arrangement or otherwise. Borrower shall (i) deposit or cause all
Items, as defined below, to be deposited in the special account so established
by Lender or transfer all Items to Lender for application on account of the
Indebtedness and to be reflected in the Statement of Account as provided in
Section 2.9 herein and (ii) maintain copies of all checks or other items of
payment and deposit slips related thereto, together with a collection report in
a form satisfactory to Lender. All cash payments, checks, drafts, or similar
items of payment upon and/or proceeds of the Receivables (collectively "Items")
by or for the account of Borrower shall be the sole and exclusive property of
Lender immediately upon the earlier of the receipt of such Items by Lender or
the receipt of such Items by Borrower; provided, however, that no such Item
received by Lender shall constitute payment to Lender and be applied to reduce
the Indebtedness until the later of: (i) three (3) Business Days from collection
of such Item by Lender's depository bank, or (ii) such Item being actually
collected by Lender's depository bank and such collection being credited to
Lender's account. Notwithstanding anything to the contrary herein, all such
items of payment shall be deemed not received if the same is subsequently
dishonored or not duly credited to Lender's depository account for any reason
whatsoever.
3.11. PROTECTION OF RECEIVABLE RECORDS. Borrower hereby agrees to take the
following protective actions to prevent destruction of Borrower's Collateral and
records pertaining to such Collateral: (i) if Borrower maintains its Collateral
records on a manual system such records shall be kept in a fire proof cabinet or
on no less than a monthly basis, a record of all payments on Receivables and all
other matters relating to the Collateral shall be placed in an off site safety
deposit box (and Lender shall have access to such safety deposit box); or (ii)
if the Collateral records are computerized, Borrower agrees to create a tape or
diskette "back-up" of the computerized information and upon the request of
Lender, provide Lender with a tape or diskette copy of such "back-up"
information.
3.12. USE OF COLLECTIONS AND MODIFICATION OF RECEIVABLES. Provided that
Lender has not required that Borrower remit all collections or proceeds of
Collateral to Lender, Borrower may use or dispose of the funds received on the
Receivables in the ordinary course of business (including returned or
repossessed goods); and unless an Event of Default is continuing, Borrower may
collect or compromise accounts or obligations and accept returned goods or make
repossessions, as Borrower shall determine based upon its reasonable discretion.
3.13. USE OF PROCEEDS. Borrower shall use the proceeds of the Loan as a
distribution to Borrower's shareholder, provided such distribution does not
create a Default hereunder, for such shareholder to effect the acquisitions
contemplated to occur on or about the date of this Agreement (as previously
disclosed to Lender), in the ordinary course of business, in its operations for
costs incurred in the creation or purchasing of Receivables, or for payments to
Lender hereunder.
3.14. RETURN OF COLLATERAL. Upon the payment in full or renewal of any
Receivable to which the written documents evidencing such Receivable are held by
Lender, Borrower shall submit all requests for the return of such documents
pursuant to the "Request For Return of Collateral" form, a copy of which is
attached hereto as EXHIBIT "C".
3.15. LENDER'S PAYMENT OF CLAIMS. Lender may, in its sole discretion,
discharge or obtain the release of any security interest, lien, claim or
encumbrance asserted by any person against the Collateral. All sums paid by
Lender in respect thereof shall be payable, on demand, by Borrower to Lender and
shall be a part of the Indebtedness.
4. CONDITIONS OF CLOSING; SUBSEQUENT
ADVANCES
4.1. INITIAL ADVANCE. The obligation of Lender to make the initial advance
hereunder is subject to the fulfillment, to the satisfaction of Lender and its
counsel, of each of the following conditions prior to the initial advance
hereunder:
A. LOAN DOCUMENTS. Lender shall have received each of the following Loan
Documents: (i) this Loan and Security Agreement executed by the respective
parties; (ii) Schedule to Loan and Security Agreement executed by the respective
parties; (iii) the Note executed by Borrower; (iv) Guaranty Agreement executed
by the respective Guarantors; (v) such Blocked Account or Dominion Account
agreements as it shall determine; and (vi) such other documents, instruments and
agreements in connection herewith as Lender shall reasonably require, executed,
certified and/or acknowledged by such parties as Lender shall designate;
B. TERMINATIONS BY EXISTING LENDER. Borrower's existing lender(s) shall have
executed and delivered UCC termination statements and other documentation
evidencing the termination of its liens and security interests
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in the Collateral in form and substance satisfactory to Lender in its sole
discretion;
C. CHARTER DOCUMENTS. Lender shall have received copies of Borrower's By-laws
and Articles or Certificate of Incorporation, as amended, modified, or
supplemented to the Closing Date, certified by the Secretary or Assistant
Secretary of Borrower;
D. GOOD STANDING. Lender shall have received a certificate of corporate
status with respect to Borrower and each corporate Guarantor, dated within ten
(10) days of the Closing Date, by the Secretary of State of the state of
incorporation of Borrower and such Guarantor, which certificate shall indicate
that Borrower and such Guarantor are in good standing in such state;
E. FOREIGN QUALIFICATION. Lender shall have received certificates of
corporate status with respect to Borrower and each corporate Guarantor, each
dated within ten (10) days of the Closing Date, issued by the Secretary of State
of each state in which such party's failure to be duly qualified or licensed
would have a material adverse effect on its financial condition or assets,
indicating that such party is in good standing;
F. AUTHORIZING RESOLUTIONS AND INCUMBENCY. Lender shall have received a
certificate from the Secretary or Assistant Secretary of Borrower and each
corporate Guarantor attesting to (i) the adoption of resolutions of each
respective Board of Directors authorizing the borrowing of money from Lender or
the guaranty of the Indebtedness, as the case may be, and execution and delivery
of this Agreement and the other Loan Documents to which Borrower and Guarantor
are a party, and authorizing specific officers of Borrower and Guarantor to
execute same, and (ii) the authenticity of original specimen signatures of such
officers;
G. INITIAL AVAILABILITY REPORT. Lender shall have received an Availability
Report from Borrower executed by an authorized corporate officer of Borrower;
H. PROPERTY INSURANCE. If applicable, Lender shall have received the
insurance certificates and certified copies of policies required herein, along
with a Lender's Loss Payable Endorsement naming Lender as sole loss payee, all
in form and substance satisfactory to Lender and its counsel;
I. SEARCHES; CERTIFICATES OF TITLE. Lender shall have received searches
reflecting the filing of its financing statements and other filings in such
jurisdictions as it shall determine, and shall have received certificates of
title with respect to the Collateral which shall have been duly executed in a
manner sufficient to perfect all of the security interests granted to Lender;
J. FEES. Borrower shall have paid all fees payable by it on the Closing Date
pursuant to this Agreement;
K. OPINION OF COUNSEL. Lender shall have received an opinion of Borrower's
counsel covering such matters as Lender shall determine in its sole discretion;
L. SOLVENCY CERTIFICATE. If requested by Lender, a signed certificate of the
Borrower's duly elected Chief Financial Officer concerning the solvency and
financial condition of Borrower, on Lender's standard form;
M. BLOCKED AND PLEDGED ACCOUNTS. If applicable, the Blocked Account and/or
Pledged Account referred to in Section 3.10 hereof shall have been established
to the satisfaction of Lender in its sole discretion; and
N. WARRANTS AGREEMENT. A signed warrants agreement executed by Eckler
Industries, Inc.
O. VOTING AGREEMENT. All of the voting rights with respect to the stock in
Eckler Industries, Inc. owned or held by Gerald C. Parker and Thomas Conlan,
directly or indirectly, shall be held by Gary Smith pursuant to a certain Voting
Agreement , in a form and substance acceptable to Lender.
P. STOCK EXCHANGE AGREEMENT. Borrowers' shareholders have completed and
closed all matters with respect to a stock exchange agreement with Smart Choice
Automotive Holdings, Inc. ("Holdings"), wherein all of the ownership of Borrower
is held by Holdings, in a form and substance satisfactory to Lender.
Q. OTHER MATTERS. All other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered,
executed and recorded and shall be in form and substance satisfactory to Lender
and its counsel.
4.2. SUBSEQUENT ADVANCES. The obligation of Lender to make any advance
hereunder (including the initial advance) shall be subject to the further
conditions precedent that, on and as of the date of such advance: (a) the
representations and warranties of Borrower set forth in this Agreement shall be
accurate, before and after giving effect to such advance or issuance and to the
application of any proceeds thereof; (b) no Default or Event of Default has
occurred and is continuing, or would result from such advance or issuance or
from the application of any proceeds thereof; (c) no material adverse change has
occurred in the Borrower's business subsequent to the immediately preceding
advance hereunder, operations,
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financial condition, or assets or in the prospect of repayment of the
Indebtedness; (d) Lender shall have received such other approvals, opinions or
documents as Lender shall reasonably request; and (e) Borrower shall submit to
Lender a completed Request for Advance Report in the form and substance of
EXHIBIT "A" attached hereto, on the date such advance is requested or shall have
complied with the provisions concerning oral advances hereunder as set forth in
Section 4.3 hereof.
4.3. ORAL REQUEST FOR ADVANCE. All oral requests for advances shall be made
only by an authorized agent of Borrower designated by or acting under the
authority of a resolution of the Board of Directors of Borrower, a duly
certified or executed copy of which shall be furnished to Lender prior to any
oral request. Lender shall be entitled to rely upon such authorization until
written notice to the contrary is received by Lender. Borrower covenants and
agrees to furnish to Lender written confirmation of any such oral request within
two (2) days after such oral request, in a form set forth on EXHIBIT "A"
attached hereto and incorporated herein, but any such loan or advance shall be
deemed to be made under and entitled to the benefits of this Agreement and any
other documents or instruments executed in connection herewith irrespective of
any failure by Borrower to furnish such written confirmation. Any loan or
advance shall be conclusively presumed to have been made under the terms of this
Agreement, to or for the benefit of Borrower, when made pursuant to the terms of
any written agreement executed in connection herewith; or in accordance with
such requests and directions; or when an advance is deposited to the credit of
the account of any person or persons, corporation or corporations comprising
Borrower, regardless of the fact that persons other than those authorized
hereunder may have authority to draw against such account or regardless of the
fact that the advance was not made or deposited for the benefit of all persons
or corporations comprising Borrower.
4.4. ALL ADVANCES TO CONSTITUTE ONE LOAN. All evidences of credit, loans and
advances made by Lender to Borrower under this Agreement and any other documents
or instruments executed in connection herewith shall constitute one loan, and
all indebtedness and obligations of Borrower to Lender under this Agreement and
all other such documents and instruments shall constitute one general obligation
secured by Lender's security interest in all of the Collateral and by all other
security interests, liens, claims and encumbrances heretofore, now, or at any
time or times hereafter granted by Borrower to Lender. Borrower agrees that all
of the rights of Lender set forth in this Agreement shall apply to any
modification of or supplement to this Agreement and any other such documents and
instruments.
4.5. ADVANCES. Lender shall have the right in Lender's discretion, subject to
availability hereunder on behalf of and without notice to Borrower, to make and
use advances to pay Lender for any amounts due to Lender pursuant to this
Agreement or otherwise, to cure any default hereunder, notwithstanding the
expiration of any applicable cure period.
5. REPRESENTATIONS AND WARRANTIES OF BORROWERS AND GUARANTOR.
5.1. REPRESENTATIONS AND WARRANTIES. Borrower and Guarantor hereby
continuously represent and warrant to Lender as follows:
A. Borrower is a corporation duly incorporated, validly existing and in good
standing under the laws of the state of its incorporation, is duly qualified to
do business and is in good standing as a foreign corporation in all states where
the failure to be so qualified would have a material adverse effect on Borrower
or its assets or business, has all necessary corporate power and authority to
enter into this Agreement and each of the documents and instruments relating
hereto and to perform all of its obligations hereunder and thereunder.
Simultaneously, with the execution of this Agreement, all of the outstanding
stock of Borrower shall be owned by Smart Choice Holdings, Inc.
All of the outstanding stock of Borrower's sole shareholder, Smart Choice
Holdings, Inc. is owned by Eckler Industries, Inc.;
B. Borrower operates its business only under the assumed names (SCHEDULE
SECTION 5.1.) and has not used any other assumed name for the operation of its
business activities for the previous seven (7) years.
C. Borrower has all requisite corporate right and power and is duly
authorized and empowered to enter into, execute, deliver and perform this
Agreement and all documents and instruments relating hereto and this Agreement
and all documents and instruments relating hereto are the legal, valid and
binding obligations of Borrower and are enforceable against Borrower in
accordance with their terms, except as may be limited by bankruptcy, insolvency
and other such laws affecting creditors' rights generally, and by general
equitable principles.
D. Each Guarantor is competent to enter into this Agreement and the Guaranty
and to perform all of Guarantor's obligations thereunder.
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E. The execution, delivery and performance by Borrower of this Agreement does
not and shall not (i) violate any provision of any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award presently in effect
having applicability to Borrower; (ii) violate any provision of its Articles of
Incorporation or Bylaws; or (iii) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other agreement, lease or
instrument to which Borrower is a party or by which it or any of its assets or
properties may be bound or affected; and Borrower is not in default of any such
law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award or any such indenture, agreement, lease or instrument.
F. No consent, approval, license, exemption of or filing or registration
with, giving of notice to, or other authorization of or by, any court,
administrative agency or other governmental authority is or shall be required in
connection with the execution, delivery or performance by Borrower for the valid
consummation of the transactions contemplated by this Agreement.
G. No event has occurred and is continuing which constitutes a Default or an
Event of Default, as defined in this Agreement. There is no action, suit,
proceeding or investigation pending or, to Borrower's knowledge, threatened
against or affecting Borrower before or by any court, administrative agency or
other governmental authority that brings into question the validity of the
transactions contemplated hereby, or that might result in any material adverse
effect on the businesses, assets, properties or financial conditions of Borrower
or Guarantor.
H. Borrower and/or Guarantor are not in default in the payment of any taxes
levied or assessed against either of them or any of their assets or properties,
except for taxes being contested in good faith and by appropriate proceedings.
I. Borrower and Guarantor have good and marketable title to their assets and
properties as reflected in their financial statements furnished to Lender.
J. Each of the financial statements furnished to Lender by the Borrower and
Guarantor was prepared in accordance with GAAP and fairly and accurately
reflects their financial condition as of the date thereof in all material
respects; and each hereby certifies that there have been no material adverse
changes in their condition, financial or otherwise, since the date of such
statements, and there are no contingent liabilities not provided for or
disclosed in such statements.
K. Neither this Agreement, any Availability Report or any statement or
document referred to herein or delivered to Lender by Borrower and/or Guarantor
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements made herein or therein not misleading.
L. Borrower has good, indefeasible and merchantable title to and ownership of
the Collateral, free and clear of all liens, claims, security interests and
encumbrances, except those of Lender and except where such liens, claims,
charges, security interests and encumbrances are removed contemporaneously with
the execution of this Agreement or are subordinate to those of Lender, in a form
and substance acceptable to Lender.
M. All books, records and documents relating to the Collateral are and shall
be genuine and in all respects what they purport to be; the original amount and
the unpaid balance of each Receivable shown on the books and records of Borrower
and in the schedules represented as owing by each Account Debtor is and shall be
the correct amount actually owing or to be owing by such Account Debtor at
maturity; Borrower has no knowledge of any fact which would impair the validity
or collectibility of any of the Receivables; and the payments shown to have been
made by each Account Debtor on the books and records of Borrower shall reflect
the amounts of and dates on which said payments were actually made.
N. Borrower has places of business only at the locations (SCHEDULE SECTION
3.2.). Borrower shall not begin or do business (either directly or through
subsidiaries) at other locations or cease to do business at any of the above
locations or at Borrower's principal place of business without first notifying
Lender.
O. The present value of all benefits vested under all Plans of Borrower or
any Commonly Controlled Entity (based on the assumptions used to fund the Plans)
did not, as of the last annual valuation date (which in case of any Plan was not
earlier than December 31, 1982) exceed the value of the assets of the Plans
applicable to such vested benefits.
P. The liability to which Borrower or any Commonly Controlled Entity would
become subject under Sections 4063 or 4064 of ERISA if Borrower or any Commonly
Controlled Entity were to withdraw from all Multi-employer Plans or if such
Multi- employer Plans were to be terminated as of the valuation date most
closely preceding the date hereof, is not in excess of Twenty Five Thousand
Dollars ($25,000.00);
Q. Borrower is not engaged nor shall it engage, principally or as one of its
important activities, in a business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" within the respective
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meanings of each of the quoted terms under Regulations G or X of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect. No part of the proceeds of any advances hereunder shall be used for
"purchasing" or "carrying" "margin stock" as so defined or for any purpose which
violates, or which would be inconsistent with, the provisions of the Regulations
of such Board of Governors. If requested by Lender, Borrower shall furnish to
Lender a statement in conformity with the requirement of Federal Reserve Form
G-3 referred to in said Regulation G to the foregoing effect. All of the
outstanding securities of Borrower have been offered, issued, sold and delivered
in compliance with, or are exempt from, all federal and state laws and rules and
regulations of federal and state regulatory bodies governing the offering,
issuance, sale and delivery of securities.
R. Borrower is not an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
S. Each of the Exhibits and Schedules to this Agreement contain true,
complete and correct information.
T. To the best of Borrower's knowledge, the land and improvements owned or
leased by Borrower for use in its business operations are free of dangerous
levels of contaminates, oils, asbestos, radon, PCB's, hazardous substances or
waste as defined by federal, state or local environmental laws, regulations or
administrative orders or other materials, the removal of which is required or
the maintenance of which is prohibited, regulated or penalized by any federal,
state or local governmental authority.
U. Borrower is solvent, generally able to pay its obligations as they become
due, has sufficient capital to carry on its business and transactions and all
businesses and transactions in which it intends to engage, and the current value
of Borrower's assets, at fair saleable valuation, exceeds the sum of its
liabilities. Borrower shall not be rendered insolvent by the execution and
delivery of the Loan Documents and the consummation of the transactions
contemplated thereby and the capital remaining in Borrower is not now and shall
not foreseeably become unreasonably small to permit Borrower to carry on its
business and transactions and all businesses and transactions in which it is
about to engage. Borrower does not intend to, nor does it reasonably believe it
shall, incur debts beyond its ability to repay the same as they mature.
V. Lender has a perfected security interest in favor of Lender in all of
Borrower's right, title and interest in the Collateral(subject to physical
possession of instruments, if any, and endorsements of title respecting titled
Collateral, if such endorsements of title are necessary for perfection of such
security interest), prior and superior to any other security interest or lien,
except any statutory or constitutional lien for taxes not yet due and payable.
W. There are no material actions, suits or proceedings pending, or, to
Borrower's knowledge, threatened against or affecting the assets of Borrower or
the consummation of the transactions contemplated hereby, at law, or in equity,
or before or by any governmental authority or instrumentality or before any
arbitrator of any kind. Neither Borrower nor Guarantor is subject to any
judgment, order, writ, injunction or decree of any court or governmental agency.
There is not a reasonable likelihood of an adverse determination of any pending
proceeding which would, individually or in the aggregate, have a material
adverse effect on the business operations or financial condition of Borrower or
Guarantor.
5.2. WARRANTIES AND REPRESENTATIONS AS TO ELIGIBLE RECEIVABLES. With respect
to Eligible Receivables, Borrower and Guarantor continuously warrant and
represent to Lender that during the term of this Agreement and so long as any of
the Indebtedness remains unpaid: (i) in determining which Receivables are
"Eligible Receivables," Lender may rely upon all statements or representations
made by Borrower; and (ii) those Receivables designated as Eligible Receivables
meet each requirement set forth below at the time any request for advance is
provided to Lender.
A. The Eligible Receivables are genuine; are in all respects what they
purport to be; and are evidenced by at least one executed original instrument,
agreement, contract or document which has been or shall be delivered to Lender;
B. The Eligible Receivables represent undisputed, bona fide transactions
completed in accordance with the terms and provisions contained in any documents
related thereto;
C. The amounts of the face value shown on any schedule of Receivables
provided to Lender, and/or all invoices or statements delivered to Lender with
respect to any Eligible Receivables, are actually and absolutely owing to
Borrower and are not contingent for any reason;
D. No set-offs, counterclaims or disputes as to payments or liability thereon
exist or have been asserted with respect thereto and Borrower has not made any
agreement with any Account Debtor thereunder for any deduction therefrom, except
a discount or allowance allowed by Borrower in the ordinary course of its
business for prompt payment, all of which discounts or allowances are reflected
in the calculation of the outstanding amount of the Receivable;
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E. No facts, events or occurrences exist that, in any way, impair the
validity or enforcement thereof or tend to reduce the amount payable thereunder
from the amount of the Receivable shown on any schedule, or on all contracts,
invoices or statements delivered to Lender with respect thereto;
F. All Account Debtors in connection with Eligible Receivables: (i) had the
capacity to contract at the time any contract or other document giving rise to
the Receivable was executed; and (ii) generally have the ability to pay their
debts as become due;
G. Within Borrower's knowledge, no proceedings or actions are threatened or
pending against any Account Debtor that might result in any material adverse
change in the Account Debtor's financial condition;
H. The Eligible Receivables have not been assigned or pledged to any person
or entity, other than Lender;
I. The goods giving rise to the Eligible Receivables are not, and were not at
the time of the sale, rental and/or lease thereof, subject to any lien, claim,
encumbrance or security interest except those of Lender, those removed or
terminated prior to the date hereof or those subordinated to Lender's security
interest, by a subordination and standstill agreement acceptable to Lender;
J. The End of Month Delinquency set forth in Section 12 of the Availability
Report shall be delivered to Lender by Borrower hereunder as determined pursuant
to the Aging Procedures and Eligibility Test (SCHEDULE SECTION 1.13.D.).
6. COVENANTS AND OTHER AGREEMENTS
6.1. AFFIRMATIVE COVENANTS. During the term of this Agreement and so long as
any of the Indebtedness remains unpaid, Borrower and Guarantor agree and
covenant, jointly and severally, that they shall:
A. Pay or cause to be paid currently all of their expenses, including all
payments on their obligations whenever due, as well as all payments of any and
all taxes of whatever nature when due. This provision shall not apply to taxes
or expenses which are due, but which are challenged in good faith.
B. Maintain, preserve, and protect the Collateral, including, but not limited
to, keeping documents, instruments or other written records otherwise evidencing
the Collateral in accordance with Section 3.11 hereof.
C. Furnish to Lender written notice as to the occurrence of any Default or
Event of Default hereunder.
D. Furnish to Lender notice of: (i) any development related to the business,
financial condition, properties or assets of Borrower or Guarantor, that would
have or has a materially adverse effect on such business, financial condition,
properties or assets, or ability to perform their obligations under this
Agreement and (ii) any material and adverse litigation or investigation to which
either of them may be a party.
E. Carry on and conduct their business in the same manner and in the same
fields of enterprise as they are presently engaged, and Borrower shall preserve
its corporate existence, licenses or qualifications as a domestic corporation in
the jurisdiction of its incorporation and as a foreign corporation in every
jurisdiction in which the character of its assets or properties or the nature of
the business transacted by it at any time makes qualification as a foreign
corporation necessary and the failure to be so qualified would have a material
adverse effect on Borrower or its assets or business, and to maintain all other
material corporate rights and franchises, provided, however, nothing herein
shall be construed to prevent Borrower from closing any retail location in the
good faith exercise of its business judgment.
F. Comply, and cause each affiliate to comply, with all statutes,
governmental rules and regulations applicable to them.
G. Permit and authorize Lender, without notifying Borrower or Guarantor, to
make such inquiries through business credit or other credit reporting services
concerning Borrower or Guarantor as Lender shall deem appropriate.
H. Provide Lender with evidence of insurance issued by a reputable carrier,
as reasonably required by Lender. This insurance shall reflect Lender as a loss
payee or additional insured, as required by Lender, and contain a provision that
Lender shall be notified by the carrier thirty (30) days prior to the
termination or cancellation of any such insurance.
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I. Within thirty (30) days from the date of this Agreement, the following
shall have occurred:
(ii)The name of Borrower's sole shareholder shall have
been changed its name from Smart Choice Holdings,
Inc. to Smart Choice Automotive Holdings, Inc.;
(iii) The name of Eckler Industries, Inc. shall have been
changed to Smart Choice Holdings, Inc.;
6.2. NEGATIVE COVENANTS. During the term of this Agreement and until the
Indebtedness has been paid in full, Borrower and Guarantor covenant and agree
that they shall not, without Lender's prior written consent, which consent shall
not be unreasonably withheld, do any of the following:
A. Incur or permit to exist any mortgage, pledge, title retention lien or
other lien, encumbrance or security interest with respect to the Collateral now
owned or hereafter acquired by Borrower, except liens in favor of Lender.
B. Delegate, transfer or assign any of their obligations or liabilities under
this Agreement, or any part thereof, to any other person or entity.
C. Be a party to or participate in: (i) any merger or consolidation; (ii) any
purchase or other acquisition of all or substantially all of the assets or
properties or shares of any class of, or any partnership or joint venture
interest in, any other corporation or entity; (iii) any sale, transfer,
conveyance or lease of all or substantially all of Borrower's assets or
properties; or (iv) any sale or assignment with or without recourse of any
Receivables. Notwithstanding the foregoing to the contrary, the negative
covenants set forth in sections (i), (ii) and (iii) in this Section 6.2.C.,
shall not restrict Borrower from participating in the acquisitions or mergers
presented to Lender prior to the date hereof and such do not otherwise cause a
Default hereunder.
D. Cause or take any of the following actions with respect to Borrower: (i)
redeem, retire, purchase or otherwise acquire, directly or indirectly, any of
Borrower's outstanding securities, except in satisfaction of claims for
indemnification against sellers of businesses; or (ii) purchase or acquire,
directly or indirectly, any shares of capital stock, evidences of indebtedness
or other securities of any person or entity.
E. Amend, supplement or otherwise modify Borrower's Articles of Incorporation
or Bylaws which would have a material adverse effect on the condition and
operations, prospects or financial condition of the Borrower.
F. Incur, assume or suffer to exist any debt (including capitalized leases)
other than (i) the Indebtedness, (ii) accounts payable incurred in the ordinary
course of business, (iii) Subordinated Debt, or (iv) other debt consented to in
writing by Lender.
G. Directly or indirectly make loans to, invest in, extend credit to, or
guaranty the debt of any person or entity, other than in the ordinary course of
Borrower's business.
H. Amend, modify, or otherwise change in any material respect any material
agreement, instrument, or arrangement (written or oral) by which Borrower, or
any of its assets, are bound.
I. Allow Borrower to be managed, directly or indirectly, by any person or
entity other than the senior management that controls the management of Borrower
as of the date hereof, or any replacements thereof reasonably satisfactory to
Lender.
J. Permit the Leverage Ratio to be more than the Leverage Ratio Limit
(SCHEDULE SECTION 6.2.A.).
K. Permit the Net Income to be less than the Minimum Net Income requirement
(SCHEDULE SECTION 6.2.B.).
L. Make or allow Distributions, in the aggregate, to exceed the distributions
limitation (SCHEDULE SECTION 6.2.C.); provided, however, that no Distribution
shall be made, at any time that a Default or an Event of Default shall exist,
without waiver in writing by Lender.
6.3. REPORTING REQUIREMENTS AND ACCOUNTING PRACTICES. Borrower shall maintain
(i) a modern system of accounting in accordance with GAAP or other systems of
accounting acceptable to Lender and (ii) standard operating procedures
applicable to all of its locations with respect to the handling and disposition
of cash receipts and other proceeds of Collateral on a daily basis, including
the depositing thereof, aging of account receivables, record keeping and such
other matters as Lender may reasonably request. For the purpose of determining
compliance with the covenants and representations in the Loan Documents, Lender
shall have the right to recast any financial statement or report presented to
Lender by or on behalf of Borrower to comply with GAAP.
6.4. PLEDGE OF RECEIVABLES. Borrower hereby agrees to pledge all Receivables
and deliver documentation evidencing such Receivables (the original contract or
agreement that evidences Account Debtor's primary payment obligation to Borrower
("Payment Agreement") and a certificate of title or application therefore in the
name of Account Debtor, with the Borrower as the
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only secured party, of the collateral that secures such payment obligation to
Lender ["Certificate of Title"]), no less often than on the twentieth (20th) day
of each calendar month during the term of this Agreement. If such evidence of
title of the collateral securing a pledged Receivable is not delivered to Lender
with the original Receivable documentation, Borrower shall deliver evidence that
such original title has been applied for in the name of the respective Account
Debtor with Borrower as the only secured party ("White Slip"), in a form and
substance satisfactory to Lender, and such evidence of title shall be delivered
to Lender not later than fifteen (15) days after such evidence of title is
received by Borrower. Any Receivable for which Borrower has not delivered the
original Payment Obligation and the Certificate of Title or White Slip, such
Receivables shall not be an Eligible Receivable hereunder, until such delivery
is made. Borrower will deliver monthly, with the delivery of the documentation
evidencing the Receivables above, a "Vehicle Title Exception Report" listing all
Certificates of Titles which have not been received by Lender or are due from
the appropriate state motor vehicle department.
6.5. ACCOUNT DEBTORS' ADDRESSES. Borrower agrees to furnish to Lender from
time to time, promptly upon request, a list of all Account Debtors' names and
their most current addresses. Borrower agrees that Lender may from time to time,
consistent with standard or generally accepted auditing practices, verify the
validity, amount and any other matters relating to the Receivables by means of
mail, telephone or otherwise, in the name of Borrower and during the continuance
of an Event of Default in the name of Lender or such other name as Lender may
choose.
6.6. FINANCIAL REPORTS. Borrower shall furnish to Lender the following
financial statements and reports, in a form satisfactory to Lender:
A. As soon as practicable and in any event mailed within twenty (20) days
after the end of each fiscal month: (i) "Availability Report," in the form and
substance of EXHIBIT "D" attached hereto; (ii) Statement of Accounts Receivable
showing the detailed aging of each Receivable according to the procedures
(SCHEDULE SECTION 1.13.D.); (iii) a monthly Profit and Loss Statement and
Balance Sheet, certified by Borrower's chief financial officer or equivalent
duly elected officer of Borrower; and (iv) Schedule of Receivables and
Assignment in the form and substance of EXHIBIT "E" attached hereto.
B. Within one hundred twenty (120) days after the end of each of Borrower's
fiscal years, annual financial statements, or consolidated statements, as the
case may be, of Borrower prepared in accordance with GAAP, consistently applied
and certified by its chief financial officer or equivalent duly elected officer.
The financial statements shall consist of a balance sheet as of the end of such
fiscal year and comparative statements of earnings, cash flows, and change in
stockholders' equity for such fiscal year (SCHEDULE SECTION 6.6.).
C. With reasonable promptness, such other financial data as Lender may
reasonably request, including but not limited to tax returns, business plans and
reports.
Together with each delivery of financial statements required by subsections
A, B and C above, Borrower shall deliver to Lender and shall cause each of its
subsidiaries to deliver to Lender, if requested by Lender, a certificate in form
satisfactory to Lender, certifying that no Default or Event of Default exists
under this Agreement as of the date of such certificate, or if a Default or an
Event of Default exists, specifying the nature and period of existence thereof
and what action Borrower proposes to take with respect thereto.
6.7. FINANCIAL STATEMENTS OF GUARANTORS. Each of the Guarantors (SCHEDULE
SECTION 1.16.) shall furnish to Lender annual financial statements in form
reasonably satisfactory to Lender and certified by such Guarantor and a copy of
each Guarantor's Federal Income Tax Return (including all schedules thereto and
amendments thereof) filed during the term hereof, within thirty (30) days of the
filing of the same.
6.8. NOTICE OF CHANGES. Borrower shall promptly notify Lender in writing of
any change of its officers, directors or key employees; change of location of
its principal offices, change of location of any of its principal assets; any
acquisition, disposition or reorganization of any corporate subsidiary,
affiliate or parent of Borrower; change of Borrower's name; death or withdrawal
of any partner (if Borrower is a partnership); any sale or purchase out of the
regular course of Borrower's business; litigation of which Borrower or a
Guarantor is a party; and any other material change in the business or financial
affairs of Borrower.
7. EVENTS OF DEFAULT AND REMEDIES
7.1. EVENTS OF DEFAULT. The occurrence of any one or more of the following
events shall constitute an "Event of Default":
A. If any payment of principal or interest or any other amount due Lender is
not paid within five (5) days after the same shall be due and payable.
B. If Borrower or Guarantor fails or neglects to perform, keep or observe any
of the terms, provisions, conditions or covenants, contained in this Agreement,
any of the other Loan Documents or any other agreement or document
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executed in connection with the transactions contemplated by this Agreement or
if any representation, warranty or certification made by Borrower herein or in
any certificate or other writing delivered pursuant hereto shall prove to be
untrue in any material respect as of the date upon which the same was made or at
any time thereafter, and the same is not cured to Lender's satisfaction within
ten (10) days after Lender has given written notice to Borrower identifying such
Default, provided that if such Default can be reasonably cured within thirty
(30) days after Lender has given written notice to Borrower identifying such
Default, Borrower shall have thirty (30) days after Lender has given written
notice to Borrower identifying such Default, provided Borrower is continuously
and diligently pursuing such cure during such thirty (30) days.
C. If the validity or enforceability of any lien, charge, security interest,
mortgage, pledge or other encumbrance granted to Lender to secure the
Indebtedness shall be impaired in any respect or to any degree, for any reason,
or if any other lien, charge, security interest, mortgage, pledge or other
encumbrance shall be created or imposed upon the Collateral unless such lien,
charge, security interest, mortgage, pledge or other encumbrance is subordinate
to that of Lender, pursuant to a subordination and standstill agreement in a
form and substance acceptable to Lender.
D. If any judgment against Borrower not covered by insurance in an amount in
excess of Twenty-Five Thousand Dollars ($25,000.00), or any attachment or other
levy against the properties or assets of Borrower with respect to a claim for
any amount in excess of Twenty-Five Thousand Dollars ($25,000.00), remains
unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period
of thirty (30) days.
E. Default in the payment of any sum due under any instrument of indebtedness
for borrowed money, in the aggregate outstanding balance in excess of One
Hundred Thousand Dollars ($100,000.00), owed by Borrower or any Guarantor to any
person, or any other default under such instrument of indebtedness for borrowed
money that permits such indebtedness for borrowed money to become due prior to
its stated maturity or permits the holders of such indebtedness for borrowed
money to elect a majority of the board of directors or manage the business of
Borrower or any Guarantor.
F. If a court or governmental authority of competent jurisdiction shall enter
an order, judgment or decree appointing, with or without Borrower's or
Guarantor's consent or acquiescence, a receiver, custodian, liquidator, trustee
or other officer with similar powers of Borrower or Guarantor or of the whole or
any substantial part of its properties or assets, or approving a petition filed
against Borrower or Guarantor seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the federal
bankruptcy laws or any other applicable law, and such order, judgment or decree
shall remain unvacated, unstayed or not set aside for an aggregate of thirty
(30) days (whether or not consecutive) from the date of the entry thereof or if
any petition seeking such relief shall be filed against Borrower or Guarantor
and such petition shall not be dismissed within thirty (30) days.
G. An event shall occur which shall have a material adverse affect on the
operations or financial condition of the Borrower or Guarantor.
H. If either Borrower or Guarantor shall: (i) be generally not paying their
respective debts as they become due; (ii) file a petition in bankruptcy or a
petition to take advantage of any insolvency act or other act for the relief or
aid of debtors; (iii) make an assignment for the benefit of their creditors;
(iv) consent to or acquiesce in the appointment of a receiver, custodian,
liquidator, trustee or other officer with similar powers of either of their
properties or assets; (v) file a petition or answer seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the federal bankruptcy laws or any other applicable law; (vi) be
adjudicated insolvent or be liquidated; (vii) admit in writing either of their
inability to pay debts as they become due; (viii) voluntarily suspend
transaction of usual business; or (ix) take any action, corporate or otherwise,
for the purpose of any of the foregoing.
I. Any of the following shall occur: (i) entry of a court order that enjoins,
restrains or in any way prevents Borrower from conducting all or any material
part of its business affairs in the ordinary course of business or (ii)
withdrawal or suspension of any license or authority required for the conduct of
any material part of Borrower's business.
J. If any Guarantor gives notice of termination or terminates its liability
pursuant to the Guaranty Agreement executed in conjunction with this Agreement.
7.2. ACCELERATION OF THE INDEBTEDNESS. During the continuance of an Event of
Default, the outstanding principal balance together with all accrued but unpaid
interest on the Indebtedness and all other sums due and payable by Borrower to
Lender hereunder may, at the option of Lender and without demand, presentment,
notice of dishonor, notice of intent to demand or accelerate payment, diligence
in collecting, grace, notice and protest or a legal process of any kind, all of
which are hereby expressly waived, be declared, and immediately shall become due
and payable.
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7.3. LOUISIANA CONFESSION OF JUDGMENT. In the event that Borrower is
domiciled in, or Collateral is located in, Louisiana, and to the extent of such
domicile or location where Louisiana law is applicable to this Agreement:
A. Borrower hereby CONFESSES JUDGMENT, up to the full amount of principal,
interest and attorney's fees and for any sums that Lender may advance during the
life of this Agreement for the payment of premiums of insurance, taxes and
assessments or for the protection and preservation of this Agreement as
authorized elsewhere in this Agreement, and does by these presents, consent,
agree and stipulate that, in the event of any payment of principal or interest
due hereunder not being promptly and fully paid when the same becomes due and
payable, or in the event of failure to comply with any of the obligations set
forth herein, the Indebtedness shall, at the option of Lender become due and
payable, and it shall be lawful for Lender, without making a demand and without
notice or putting in default, the same being hereby expressly waived, to cause
all and singular the Collateral herein secured to be seized and sold by
executory process issued by any competent court or to proceed with enforcement
of its security interest in any other manner provided by law; and
B. Borrower hereby expressly waives: (a) the benefit of appraisement, as
provided in Articles 2332, 2336, 2723, and 2724, Louisiana Code of Civil
Procedure, and all other laws conferring the same; (b) the demand and three (3)
days delay according by Articles 2639 and 2721, Louisiana Code of Civil
Procedure, and all other laws conferring the same; (c) the notice of seizure
required by Articles 2293 and 2721, Louisiana Code of Civil Procedure, and all
other laws conferring the same; (d) the three (3) days delay provided by
Articles 2331 and 2722, Louisiana Code of Civil Procedure, and all other laws
conferring the same; and (e) the benefit of the other provisions of Articles
2331, 2722 and 2723, Louisiana Code of Civil Procedure, and all other Articles
not specifically mentioned above; and Borrower expressly agrees to the immediate
seizure of the Collateral in the event of suit thereon.
7.4. REMEDIES. During the continuance of an Event of Default, Lender shall
have the following rights and remedies, which individual remedies shall be
non-exclusive, cumulative and in addition to each and every other remedy set
forth in the Loan Documents or in this Agreement:
A. All of the rights and remedies of a secured party under the Uniform
Commercial Code as enacted in the State of Arizona, as amended, or other
applicable law.
B. The right, to the fullest extent permissible by law, to: (i) enter upon
the premises of Borrower, or any other place or places where the Collateral is
located and kept, without any obligation to pay rent to Borrower, through
self-help and without judicial process, without first obtaining a final judgment
or giving Borrower notice and opportunity for a hearing on the validity of
Lender's claim, and remove the Collateral therefrom to the premises of Lender or
any agent of Lender, for such time as Lender may desire, in order to effectively
collect and liquidate the Collateral; and/or (ii) require Borrower to assemble
the Collateral and make it available to Lender at a place to be designated by
Lender, in Lender's reasonable discretion.
C. The right to sell or otherwise dispose of any or all Collateral in its
then condition at public or private sale or sales, in lots or in bulk, for cash
or on credit, all as Lender, in its discretion, may deem advisable; provided
that such sales may be adjourned from time to time with or without notice. The
requirement of reasonable notice to Borrower of the time and place of any public
sale of the Collateral or of the time after which any private sale either by
Lender or at its option, a broker, or any other intended disposition thereof is
to be made, shall be met if such notice is mailed, postage prepaid, to Borrower
at the address of Borrower designated herein at least ten (10) Business Days
before the date of any public sale or at least ten (10) Business Days before the
time after which any private sale or other disposition is to be made unless
applicable law requires otherwise.
Lender shall have the right to conduct such sales on Borrower's premises or
elsewhere and shall have the right to use Borrower's premises without charge for
such sales for such time or times as Lender may see fit. Lender is hereby
granted a license or other right to use, without charge, Borrower's labels,
copyrights, rights of use of any name, trade secrets, trade names, trademarks
and advertising matter, or any property of a similar nature, as it pertains to
the Collateral, in advertising for sale and selling any Collateral and
Borrower's rights under all licenses and all franchise agreements shall inure to
Lender's benefit. Lender agrees to hold Borrower harmless from any liability
arising out of Lender's use of Borrower's premises, labels, copyrights, rights
of use of any name, trade secrets, trade names, trademarks and advertising
matter, or any property of a similar nature as it pertains to advertising for
sale, marshaling or selling the Collateral.
Lender shall have the right to sell, lease or otherwise dispose of the
Collateral, or any part thereof, for cash, credit or any combination thereof,
and Lender may purchase all or part of the Collateral at public or, if permitted
by law, private sale and, in lieu of actual payment of such purchase price, may
set off the amount of such price against the Indebtedness owing by Borrower to
Lender. The proceeds realized from the sale of any
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Collateral shall be applied first to reasonable costs and expenses, attorney's
fees, expert witness fees incurred by Lender for collection and for acquisition,
completion, protection, removal, storage, sale and delivery of the Collateral;
second to all payments, other than principal and interest, due under this
Agreement; third to interest due upon any of the Indebtedness; fourth to the
principal balance owing on the Indebtedness; and fifth the remainder, if any, to
Borrower, its successors or assigns, or to whomsoever may be lawfully entitled
to receive the same. If any deficiency shall arise, Borrower shall remain liable
to Lender therefor.
D. In the event that Borrower is domiciled in, or Collateral is located in,
Louisiana, and to the extent of such domicile or location where Louisiana law is
applicable to this Agreement, the right to cause all and singular the
hereinabove described Collateral to be seized and sold under executory process
without appraisement, appraisement being hereby expressly waived, as an entirety
or in parcels, as Lender may determine, to the highest bidder for cash.
E. The right to appoint or seek appointment of a receiver, custodian or
trustee of Borrower or any of its properties or assets pursuant to court order.
F. The right to cease all advances hereunder.
G. All other rights and remedies that Lender may have at law or in equity.
7.5. NO WAIVER. No delay, failure or omission of Lender to exercise any right
upon the occurrence of any Default or Event of Default shall impair any such
right or shall be construed to be a waiver of any such Default or Event of
Default or an acquiescence therein. Lender may, from time to time, in a writing
waive compliance by the other parties with any of the terms of this Agreement
and its rights and remedies upon any Default or Event of Default, and, Borrower
agrees that no waiver by Lender shall ever be legally effective unless such
waiver shall be acknowledged and agreed in writing by Lender. No waiver of any
Default or Event of Default shall impair any right or remedy of Lender not
specifically waived. No single, partial or full exercise of any right of Lender
shall preclude any other or further exercise thereof. No modification or
amendment of or supplement to this Agreement or any other written agreement
between the parties hereto shall be valid or effective (or serve as a basis of
reliance by way of estoppel) unless the same is in writing and signed by the
party against whom it is sought to be enforced. The acceptance by Lender at any
time and from to time of a partial payment or partial performance of any of
Borrower's obligations set forth herein shall not be deemed a waiver, reduction,
modification or release from any Default or Event of Default then existing. No
waiver by Lender of any Default or Event of Default shall be deemed to be a
waiver of any other existing or any subsequent Default or Event of Default.
7.6. APPLICATION OF PROCEEDS. If an Event of Default shall have occurred and
is continuing, all amounts received by Lender on account of any Indebtedness and
realized by Lender with respect to the Collateral, including any sums which may
be held by Lender, or the proceeds of any thereof, shall be applied in the same
manner as proceeds of Collateral as set forth in Section 7.4.C. hereof.
7.7. APPOINTMENT OF LENDER AS ATTORNEY-IN- FACT. Borrower irrevocably
designates, makes, constitutes and appoints Lender (and all persons reasonably
designated by Lender), with full power of substitution, as Borrower's true and
lawful attorney-in-fact (and not agent-in-fact) and Lender, or Lender's agent,
may, without notice to Borrower, and at such time or times thereafter as Lender
or said agent, in its discretion, may determine, in Borrower's or Lender's name,
at no duty or obligation on Lender, do the following:
A. All acts and things necessary to fulfill Borrower's administrative duties
pursuant to this Agreement, including, but not limited to, the execution of
financing statements;
B. During the continuance any Default, all acts and things necessary to
fulfill Borrower's obligations under this Agreement and the Loan Documents,
except as set forth in Section 7.7.C below, at the cost and expense of Borrower.
C. In addition to, but not in limitation of the foregoing, at any time or
times during the continuance of an Event of Default, Lender shall have the
right: (i) to enter upon Borrower's premises and to receive and open all mail
directed to Borrower and remove all payments to Borrower on the Receivables;
however, Lender shall turn over to Borrower all of such mail not relating to
Receivables; (ii) in the name of Borrower, to notify the Post Office authorities
to change the address for the delivery of mail addressed to Borrower to such
address as Lender may designate (notwithstanding the foregoing, for the purposes
of notice and service of process to or upon Borrower as set forth in this
Agreement, Lender's rights to change the address for the delivery of mail shall
not give Lender the right to change the address for notice and service of
process to or upon Borrower in this Agreement); (iii) demand, collect, receive
for and give renewals, extensions, discharges and releases of any Receivable;
(iv) institute and prosecute legal and equitable proceedings to realize upon the
Receivables; (v) settle, compromise, compound or adjust claims in respect of any
Receivable or any legal
-22-
<PAGE>
proceedings brought in respect thereof; (vi) generally, sell in whole or in part
for cash, credit or property to others or to itself at any public or private
sale, assign, make any agreement with respect to or otherwise deal with any of
the Receivables as fully and completely as though Lender were the absolute owner
thereof for all purposes, except to the extent limited by any applicable laws
and subject to any requirements of notice to Borrower or other persons under
applicable laws; (vii) take possession and control in any manner and in any
place of any cash or non-cash items of payment or proceeds of Receivables;
(viii) endorse the name of Borrower upon any notes, acceptances, checks, drafts,
money orders, chattel paper or other evidences of payment of Receivables that
may come into Lender's possession; and (ix) sign Borrower's name on any
instruments or documents relating to any of the Collateral, or on drafts against
Account Debtors; .
The appointment of Lender as attorney-in-fact for Borrower is coupled with an
interest and is irrevocable, until this Agreement is terminated, the
Indebtedness has been paid in full and Lender's security interest in the
Collateral has been terminated.
8. EXPENSES AND INDEMNITIES
8.1. REIMBURSEMENT FOR EXPENSES. Upon the occurrence of a Default, except as
set forth in the SCHEDULE SECTION 8.1., Borrower agrees to reimburse Lender,
upon demand, for all reasonable out-of-pocket expenses (including costs of
establishing and maintaining accounts or arrangements set forth in Section 3.10,
attorney's fees, expert witness fees and legal expenses) incurred in connection
with the evaluation of collateral, preservation of collateral, or collection of
the Indebtedness.
8.2. LENDER'S EXPENSES AND ATTORNEY'S FEES. UPON AND AFTER AN EVENT OF
DEFAULT, LENDER SHALL BE ENTITLED TO RECOVER FROM BORROWER AND GUARANTORS ALL OF
LENDER'S ATTORNEY'S FEES AND REASONABLE COSTS AND EXPENSES INCURRED IN THE
EXERCISE OF LENDER'S RIGHTS SET FORTH IN THIS AGREEMENT, AND ALL DAMAGES
SUSTAINED BY LENDER BY REASON OF MISREPRESENTATION, BREACH OF WARRANTY OR BREACH
OF COVENANT OF BORROWER HEREIN, EXPRESSED OR IMPLIED, WHETHER CAUSED BY THE ACTS
OR DEFAULTS OF BORROWER, ACCOUNT DEBTORS OR OTHERS; INCLUDING WITHOUT
LIMITATION, ALL ATTORNEY'S FEES ARISING FROM SUCH SERVICES, EXPERT WITNESS FEES
AND ANY EXPENSES, COSTS AND CHARGES RELATING THERETO, AND ALL OF THE FOREGOING
SHALL CONSTITUTE PART OF THE INDEBTEDNESS SECURED BY THE COLLATERAL AND SHALL BE
PAYABLE ON DEMAND.
8.3. GENERAL INDEMNIFICATION. Borrower hereby agrees to indemnify and hold
Lender harmless from and against any and all claims, liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements (collectively "Claim" or "Claims") of any kind or nature
whatsoever, asserted by any party other than Borrower, or with respect to
Borrower only as otherwise provided in this Agreement or pursuant to applicable
law regarding Lender's obligations to Borrower, which may be imposed on,
incurred by or asserted against Lender, or any of its officers, directors,
employees or agents (including accountants, attorneys or other professionals
hired by Lender) in any way relating to or arising out of the Loan Documents or
any action taken or omitted by Lender, or any of its officers, directors,
employees or agents (including accountants, attorneys or other professionals
hired by Lender) under the Loan Documents, except to the extent such indemnified
matters are finally found by a court to be caused by Lender's gross negligence
or wilful misconduct.
9. MISCELLANEOUS
9.1. NOTICES. All notices, demands, billings, requests and other written
communications hereunder shall be deemed to have been properly given: (i) upon
personal delivery; (ii) on the third Business Day following the day sent, if
sent by registered or certified mail; (iii) on the next Business Day following
the day sent, if sent by overnight express courier; or (iv) on the day sent or
if such day is not a Business Day on the next Business Day after the day sent if
sent by telecopy providing the receiving party has acknowledged receipt by
return telecopy, in each case, to Lender, Borrower or Guarantors at its address
and/or telecopy number as set forth in this Agreement or SCHEDULE SECTION 9.1,
or at such other address and/or telecopy number as either party may designate
for such purpose in a written notice given to the other party.
Lender shall have the right, on or after initial funding pursuant to the
terms of this Agreement, but subject to Borrower's reasonable approval as to the
form, content and recipients thereof, to issue a press release or other brochure
announcing the consummation of the Loan Documents and to distribute that
information to third parties in the normal course of Lender's business, at no
cost to Borrower.
9.2. PARTICIPATIONS. Borrower and Guarantors acknowledge and agree that
Lender may from time to time sell or offer to sell interests in the Indebtedness
and the Loan Documents to one or more participants. Borrower
-23-
<PAGE>
and Guarantors authorize Lender to disseminate any information it has pertaining
to the Indebtedness, including without limitation, complete and current credit
information on Borrower and any of its principals and Guarantors, to any such
participant or prospective participant.
9.3. SURVIVAL OF AGREEMENTS. All of the various representations, warranties,
covenants and agreements of Borrower (including without limitation, any
agreements to pay costs and expenses and to indemnify Lender) in the Loan
Documents shall survive the execution and delivery of the Loan Documents and the
performance under such Loan Documents, and shall further survive until one (1)
year and one (1) month after all of the Indebtedness is paid in full to Lender
and all of Lender's obligations to Borrower under the Loan Documents are
terminated.
9.4. NO OBLIGATION BEYOND MATURITY. Borrower agrees and acknowledges that
upon the Maturity Date, Lender shall have no obligation to renew, extend, modify
or rearrange the Loan and shall have the right to require all amounts due and
owing under the Loan to be paid in full upon such date.
9.5. PRIOR AGREEMENTS SUPERSEDED. This Agreement constitutes the sole and
only agreement of the parties hereto and supersedes any prior understandings or
written or oral agreements between the parties respecting the subject matter of
this Agreement. No provision of this Agreement or other document or instrument
relating hereto may be modified, waived or terminated except by instrument in
writing executed by the party against whom a modification, waiver or termination
is sought to be enforced.
9.6. PARTIES BOUND. This Agreement shall be binding on and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns, except as
otherwise expressly provided for herein. Borrower and Guarantor shall not assign
any of their respective rights or obligations pursuant this Agreement.
9.7. NUMBER AND GENDER. Whenever used herein, the singular number shall
include the plural and the plural the singular, and the use of any gender shall
be applicable to all genders. The duties, covenants, obligations and warranties
of Borrower in this Agreement shall be joint and several obligations of Borrower
and of each Borrower if more than one.
9.8. NO THIRD PARTY BENEFICIARY. This Agreement is for the sole benefit of
Lender and Borrower and is not for the benefit of any third party.
9.9. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original, and all
of which taken together shall constitute but one and the same instrument.
9.10. SEVERABILITY OF PROVISIONS. Any provision which is determined to be
unconscionable, against public policy or any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
9.11. HEADINGS. The Article and Section headings used in this Agreement are
for convenience only and shall not affect the construction of this Agreement.
9.12. SCHEDULES AND EXHIBITS. Any and all exhibits hereto are hereby
expressly incorporated by reference as though fully set forth at that point
verbatim. All terms and provisions as defined or set forth in Article 1 and in
any Schedule are hereby incorporated into and made a part of this Agreement.
Each reference in this Agreement and the Schedule hereto to any information or
definitions contained in Article 1 or the Schedule shall mean and refer to the
information or definitions as set forth in Article 1 and the Schedule unless the
context specifically requires otherwise. Any terms used in Article 1 and in the
Schedule which are not defined shall have the meanings ascribed to such terms,
as of the date of this Agreement, by the Uniform Commercial Code as enacted in
the State of Arizona to the extent the same are defined therein.
9.13. FURTHER INSTRUMENTS. Borrower and Guarantors shall from time to time
execute and deliver, and shall cause each of Borrower's subsidiaries to execute
and deliver, all such amendments, supplements and other modifications hereto and
to the other Loan Documents and all such financing statements or continuation
statements, instruments of further assurance and any other instruments, and
shall take such other actions, as Lender reasonably requests and deems necessary
or advisable in furtherance of the agreements contained herein.
9.14. LENDER'S EXPENSES AND ATTORNEY'S FEES. UPON AND AFTER AN EVENT OF
DEFAULT, LENDER SHALL BE ENTITLED TO RECOVER FROM BORROWER AND GUARANTORS ALL OF
LENDER'S ATTORNEY'S FEES AND REASONABLE COSTS AND EXPENSES INCURRED IN THE
EXERCISE OF LENDER'S RIGHTS SET FORTH IN THIS AGREEMENT, AND ALL DAMAGES
SUSTAINED BY LENDER BY
-24-
<PAGE>
REASON OF MISREPRESENTATION, BREACH OF WARRANTY OR BREACH OF COVENANT OF
BORROWER HEREIN, EXPRESSED OR IMPLIED, WHETHER CAUSED BY THE ACTS OR DEFAULTS OF
BORROWER, ACCOUNT DEBTORS OR OTHERS; INCLUDING WITHOUT LIMITATION, ALL
ATTORNEY'S FEES ARISING FROM SUCH SERVICES, EXPERT WITNESS FEES AND ANY
EXPENSES, COSTS AND CHARGES RELATING THERETO, AND ALL OF THE FOREGOING SHALL
CONSTITUTE PART OF THE INDEBTEDNESS SECURED BY THE COLLATERAL AND SHALL BE
PAYABLE ON DEMAND.
9.15. GOVERNING LAW. THIS AGREEMENT HAS BEEN EXECUTED AND DELIVERED BY
BORROWER AND GUARANTOR AND ACCEPTED BY LENDER IN MARICOPA COUNTY, ARIZONA AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF ARIZONA.
9.16. JURISDICTION AND VENUE. TO INDUCE THE LENDER TO ENTER INTO THIS
AGREEMENT, BORROWER, GUARANTORS AND LENDER IRREVOCABLY AGREE THAT, SUBJECT TO
THE LENDER'S ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT,
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR
THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE COUNTY OF
MARICOPA, STATE OF ARIZONA. BORROWER, GUARANTORS AND LENDER HEREBY CONSENT AND
SUBMIT TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN
SAID COUNTY AND STATE AND WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS UPON
BORROWER, AND AGREE THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED
MAIL DIRECTED TO BORROWER AT THE ADDRESS SET FORTH IN SCHEDULE SECTION 9.16 AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF.
9.17. WAIVER. EXCEPT AS OTHERWISE PROVIDED FOR IN THIS AGREEMENT AND TO THE
EXTENT NOT PROHIBITED BY APPLICABLE LAW, BORROWER AND EACH GUARANTOR HEREBY
WAIVES (i) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST,
DEFAULT, NON-PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, AND ONE OR MORE
EXTENSIONS OR RENEWALS OF ANY OR ALL ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS,
INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY THE LENDER ON
WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS
WHATEVER THE LENDER MAY DO IN THIS REGARD; (ii) ALL RIGHTS TO NOTICE AND HEARING
PRIOR TO THE LENDER'S TAKING POSSESSION OR CONTROL OF, OR THE LENDER'S REPLEVIN,
ATTACHMENT OR LEVY ON OR OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT
BE REQUIRED BY ANY COURT PRIOR TO ALLOWING THE LENDER TO EXERCISE ANY OF THE
LENDER'S REMEDIES; AND (iii) THE BENEFIT OF ALL VALUATION, APPRAISEMENT OR
EXEMPTION LAWS.
9.18. ADVICE OF COUNSEL. BORROWER AND EACH GUARANTOR ACKNOWLEDGES THAT THEY
HAVE BEEN REPRESENTED AND ADVISED BY INDEPENDENT LEGAL COUNSEL WITH RESPECT TO
THE NEGOTIATION, EXECUTION AND ACCEPTANCE OF THIS AGREEMENT AND THE TRANSACTION
GOVERNED BY THIS AGREEMENT AND SPECIFICALLY WITH RESPECT TO THE PROVISIONS
CONTAINED IN SECTIONS 8.3, 9.15, 9.16, 9.17, 9.18, 9.19 and 9.20 HEREOF AND HAS
RELIED UPON THE ADVICE OF ITS INDEPENDENT LEGAL COUNSEL IN AGREEING TO THE TERMS
AND CONDITIONS HEREIN AND IN EXECUTING AND DELIVERING THIS AGREEMENT, AND THAT
THEY HAVE FREELY AND VOLUNTARILY ENTERED INTO THIS AGREEMENT AS THE PRODUCT OF
ARMS' LENGTH NEGOTIATIONS.
9.19. WAIVER OF RIGHT TO TRIAL BY JURY. LENDER, BORROWER AND GUARANTORS
HEREBY COVENANT AND AGREE THAT IN ANY SUIT, ACTION OR PROCEEDING IN RESPECT OF
ANY MATTER ARISING OUT OF THIS AGREEMENT, THE DOCUMENTS EXECUTED IN CONNECTION
HEREWITH, ANY WRITTEN AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER NOW EXISTING
OR HEREAFTER ARISING OR IN ANY WAY RELATED TO, CONNECTED WITH OR INCIDENTAL TO
THE DEALINGS OF THE PARTIES HERETO OR TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE, TRIAL SHALL BE TO A
COURT OF COMPETENT JURISDICTION AND NOT TO A JURY; LENDER, BORROWER AND EACH
GUARANTOR HEREBY EXPRESSLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY. ANY
PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
(Intentionally left blank)
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<PAGE>
9.20. TIME OF ESSENCE Subject to any grace periods, cure periods or other
such provisions herein, time is of the essence for the performance the
obligations set forth in this Agreement and the Loan Documents.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first set forth above.
BORROWER:
FLORIDA FINANCE GROUP INC.
By: /s/ GARY SMITH 2-4-97
---------------------------- ---------
Gary Smith, President (Date)
GUARANTORS:
SMART CHOICE HOLDINGS, INC.
By: /s/ GARY SMITH 2-4-97
---------------------------- ---------
Gary Smith, President (Date)
ECKLER INDUSTRIES, INC.
By: /s/ GARY SMITH 2-4-97
---------------------------- ---------
Gary Smith, President (Date)
LENDER:
FINOVA CAPITAL CORPORATION,
a Delaware corporation
By:/s/ DAVID B. FRICKE 2-4-97
------------------------------ ---------
David B. Fricke, Vice President (Date)
-26-
<PAGE>
FINOVA/REGISTERED MARK/
FINANCIAL INNOVATORS
Rediscount Finance
REQUEST FOR ADVANCE FORM
FLORIDA FINANCE GROUP, INC.
To: FINOVA Capital Corporation
13355 Noel Road
Suite 800
Dallas, Texas 75240
Re: Loan and Security Agreement (as amended from time to time,
the "Loan Agreement"), dated as of ______________, by and
among FINOVA Capital Corporation and FLORIDA FINANCE GROUP
INC.
Date of Request:______________, 199__
This Advance Request is delivered pursuant to SECTION 4.2 of the Loan
Agreement. All terms defined in the Loan Agreement shall have the same meaning
herein, except as expressly stipulated otherwise herein.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
I. (i) Total Receivables at Request Date: -----------------------------
(ii) LESS:
(A) Unearned finance charges/insurance/fees ( )
-----------------------------
(B) Net Ineligible Receivables ( )
-----------------------------
Total Eligible Receivables (I.(i) minus I.(ii)(A) and (B)) -----------------------------
II. (i) Gross Availability:
Advance Rate __________% x Total Eligible Receivables -----------------------------
(ii) LESS Current Outstanding Balance of Indebtedness (-----------------------------)
(iii) Net Availability (II.(i) minus II.(ii)) -----------------------------
(IV) REQUEST FOR ADVANCE -----------------------------
Availability after Advance (II.(iii) minus II.(iv)) -----------------------------
</TABLE>
EXHIBIT "A" - PAGE 1
<PAGE>
Borrower hereby certifies that:
a. upon making the Advance, the principal balance of the
outstanding Advances made by the Lender shall be
equal to or less than the lesser of (i) the Amount of
Revolving Loan Credit Line or (ii) the Availability
on Eligible Receivables.
b. the representations and warranties made in the
Loan Agreement are true and correct in all material
respects as of the date hereof;
c. no Event of Default or a Default has occurred and
is continuing or would be caused by the Advance
requested hereby;
d. Borrower has performed and complied in all
material respects with all agreements and conditions
required to be performed or complied with by it under
the Loan Documents.
e. all necessary authorizations and approvals
contemplated by the Loan Documents have been duly
obtained and are in full force and effect; and
f. the proceeds of the requested Advance shall be
used for the purposes set forth in Section 3.13 of
the Loan Agreement.
FLORIDA FINANCE GROUP, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
EXHIBIT "A" - PAGE 2
<PAGE>
SAMPLE FINANCING STATEMENT
To be filed with the Secretary of State
of the State of
FINANCING STATEMENT
This Financing Statement is presented to a Filing Officer for filing
pursuant to the __________ Uniform Commercial Code.
1. The name and address of the Debtor ("Debtor") is:
_______________________ Taxpayer Identification Number:______
_______________________
_______________________
2. The name and address of the Secured Party ("Secured Party")
is:
FINOVA Capital Corporation
Dial Tower
Dial Corporate Center
Phoenix, Arizona 85077
Attn: Vice President - Law Department
3. Debtor hereby grants a security interest to Secured Party in,
and this Financing Statement covers, the following types of
collateral whether now owned or hereafter acquired and
wherever located ("Collateral"):
A. All accounts and any other rights of Debtor to receive
payment; including, without limitation, all loans, extensions
of credit or Debtor's right to payment for goods sold or
services rendered by Debtor and all chattel paper,
instruments, contract rights and general intangibles, all of
Debtor's right, remedies, security, liens, guaranties, or
other contracts of suretyship with respect thereto, all
deposits or other security or support for the obligation
thereunder and credit and other insurance acquired by the
obligor thereon or the Debtor in connection therewith.;
B. All Inventory, new or used, including, but not limited to,
parts and accessories;
C. All bank accounts of Debtor;
D. All monies, securities and property, now or hereafter held,
received by, or entrusted to in the possession or under the
control of Secured Party or a bailee of Secured Party;
E. All accessions to, substitutions for and all replacements,
products and proceeds of the foregoing, including,
without limitation, proceeds (including but not limited to
claims paid and premium refunds) of insurance policies
referenced in Section A above; and
EXHIBIT "B" - PAGE 1
<PAGE>
F. All books and records (including, without limitation, customer
lists, credit files, tapes, ledger cards, computer software
and hardware, electronic data processing software, computer
programs, printouts and other computer materials and records)
of Debtor evidencing or containing information regarding any
of the foregoing.
This Financing Statements covers all of the foregoing, whether located
at those locations set forth on Exhibit "A" attached hereto and fully
incorporated herein for all purposes; or elsewhere.
SECURED PARTY: DEBTOR:
FINOVA CAPITAL CORPORATION
By:_____________________________ By:_______________________
(Signature) (Signature)
________________________________ __________________________
(Printed Name and Title) (Printed Name and Title)
EXHIBIT "B" - PAGE 2
<PAGE>
FINOVA/REGISTERED MARK/
FINANCIAL INNOVATORS
Rediscount Finance
REQUEST FOR RETURN OF COLLATERAL
To: FINOVA Capital Corporation
13355 Noel Road
Suite 800
Dallas, Texas 75240
From: FLORIDA FINANCE GROUP INC.
4037 66th Street North
St. Petersburg, Florida 33709
By:________________________________(Authorized Agent)
Please return the collateral you are holding on the following accounts which
have been paid-out or renewed during the period
from_______________________________to ______________________________;
INSTRUCTIONS: Please list accounts in NUMERICAL ORDER and designate the reason
for request (P/O - Paid Out; R Renewed; L - Legal; C/O - Charge-off). Send this
form to FINOVA; a copy shall be returned to you along with collateral requested.
EXHIBIT "C" - PAGE 1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
BORROWER LOAN/ACCOUNT DATE OF REASON FOR NAME OF ACCOUNT DEBTOR
BRANCH NUMBER LOAN REQUEST
OFFICE
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Collateral for the above loans and/or accounts is being returned to you.
Date Collateral Requested:________________
Date Collateral Mailed:___________________
FINOVA Representative Responsible for Return of Collateral:_____________ _______
(Signature) (Date)
FINOVA Managing Account Executive Authorization for Return:_____________ _______
(Signature) (Date)
EXHIBIT "C" - PAGE 2
<PAGE>
FINOVA/REGISTERED MARK/
FINANCIAL INNOVATORS
Rediscount Finance
AVAILABILITY REPORT
FLORIDA FINANCE GROUP INC.
(60 DAY CONTRACTUAL AGING)
Date:__________________________________________
Report No.:____________________________________
Reporting Period: From__________________To:_______
1. Receivables pledged at previous report date
___________________________
(Line 5 of previous report)
2. Plus accounts pledged since previous reporting period
A. Cash Advance ___________
B. Net refinance balances ___________
C. Finance charges ___________
D. Insurance ___________
E. Miscellaneous ___________
Total of Line 2
_______________
3. Sub-Total of Lines 1 and 2 _______________
4. Less deductions from receivables pledged (received since previous
reporting period):
A. Collections on Account
or paid in full ___________
B. Net refinance balances ___________
C. Rebates ___________
D. Charge offs ___________
E. Miscellaneous ___________
Total of Line 4
_______________
5. Total receivables pledged (Line 3 minus Line 4) _______________
6. Deduct:
A. Unearned finance charges/insurance/fees _______________
B. Net ineligible balances pledged _______________
EXHIBIT "D" - Page 1
<PAGE>
7. Eligible collateral pledged _______________
(Line 5 minus Line 6 A. and 6.B.) _______________
8. ______% x Line 7 less (Net Eligible Availability)
9. Advances:
Per previous report _____________
Plus: Advances since previous
report date _____________
Less: Principal Payments since previous
report date ( )
_____________
Total Outstanding Advances as of report date _______________
10. Net Availability (Line 8 minus Line 9) _______________
11. Percentage of cash collections to Receivables assigned _______________
(Line 4.A divided by Line 1)
12. Delinquency as of report date
Current Account _____________
30 Day Account _____________
60 Day Account _____________
90 Day Account _____________
90 + Day Account _____________
Other ineligibles _____________
TOTAL _____________
Borrower hereby represents, warrants, certifies and agrees that the
warranties and representations contained in that certain Loan and Security
Agreement dated____between FINOVA and the undersigned Borrower (the "Loan
Agreement") are true and correct as of the date hereof; no Default or Event of
Default has occurred and is continuing under the terms and conditions of the
Loan Agreement and the Receivables described on Line 7 above constitute Eligible
Receivables as the term is defined in the Loan Agreement. The above is a true
and correct description of the status of Borrower's account with Lender as of
the above Report Date.
Borrower:
FLORIDA FINANCE GROUP INC.
By:_________________________________
(Signature)
_________________________________
(Printed Name and Title)
EXHIBIT "D" - Page 2
<PAGE>
FINOVA/REGISTERED MARK/
FINANCIAL INNOVATORS
Rediscount Finance
SCHEDULE OF RECEIVABLES AND ASSIGNMENT
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assignor hereby assigns, transfers,
sets over, and delivers in pledge to FINOVA CAPITAL CORPORATION, (hereinafter
called the "Assignee"), its successors or assigns, each and every of the
Accounts, Notes, Security Agreements, Conditional Sale Contracts, Lease
Agreements, Chattel Mortgages, Deeds of Trust, Contracts, Drafts, Acceptances,
and other lien instruments, obligations, claims, chooses-in-action and
receivables (hereinafter collectively designated as "Receivables") identified by
account no.___ through no.___, inclusive, made/purchased during the period
from__________________________ through _______________________, inclusive, and
totaling $__________ as evidenced by the individual notes/instruments and
listing of the receivables assigned herein which is attached hereto with the
same force and effect as if each account was individually listed and set forth
hereon in detail, together with all right, title and interest of the undersigned
in and to the same and in and to the merchandise, equipment and property
described in the Receivables or thereto appertaining, and together with all
monies owing or to become due thereon, and any and all notes, drafts,
acceptances, evidences of indebtedness, contracts, mortgages, deeds of trust,
liens, security, collateral, guaranties, rights, remedies and powers thereto
relating or appertaining, and all proceeds of any of the foregoing, with full
right and irrevocable power and authority in said assignee, and its assigns for
sole benefit and use of said assignee and its assigns, at any and all times to
collect, enforce, sue on, sell, transfer, assign, pledge, compromise and
discharge the same, or otherwise deal therewith as the absolute property of the
Assignee and its assigns. The term "Receivables" wherever used herein shall be
deemed to also include any other receivables assigned to or acquired by Assignee
in substitution or replacement of any of the original receivables or in addition
thereto. All capitalized terms used, but not defined herein, shall have the
respective meanings ascribed to such terms in that certain Loan and Security
Agreement by and among FINOVA Capital Corporation, assignor and the guarantor
named therein, dated________________, 199______(the "Loan Agreement"). Reference
is made to the Loan Agreement for a statement of additional terms, conditions
and provisions with respect to the Receivables.
And for value received, the undersigned hereby represents, covenants, and
warrants to FINOVA Capital Corporation, its successors and assigns, that said
receivables are genuine and in all respects what they purport to be; that the
undersigned has no knowledge of any fact which would impair the validity of any
said receivable; that said receivables are valid and subsisting and that the
undersigned has good right to pledge and transfer the same; that the amounts
owing thereon are not disputed by the Account Debtor; that the payment thereof
is not contingent on the fulfillment of any warranties or conditions past or
future; and that there is now owing by the Account Debtor named in each such
receivable the total amount of unpaid balance as shown above and that the amount
thereof is not subject to any dispute or counterclaims; and that the undersigned
hereby warrants and represents that the Receivables assigned hereunder are
Eligible Receivables as of the date hereof, as defined in the Loan Agreement.
The undersigned further covenants and warrants that no prior transfer or
assignment of any said receivables has been made.
FLORIDA FINANCE GROUP INC.
Date
:________________________ By:____________________________
Name:__________________________
Title:_________________________
EXHIBIT "E" - Page 1
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LISTING OF ASSIGNED RECEIVABLES
(ATTACHMENT TO SCHEDULE OF RECEIVABLES AND ASSIGNMENT)
ACCOUNT ADDRESS TELEPHONE RENEWAL(R) TOTAL OF TERM PAYMENT
NAME NUMBER NEW PAYMENTS
LOAN(N)
<S> <C> <C> <C> <C> <C> <C>
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</TABLE>
FLORIDA FINANCE GROUP INC.
Date:____________________ By:_______________________
Name:_____________________
Title:____________________
EXHIBIT "E" - Page 2
EXHIBIT 4.2
FINOVA/registered trademark/[LOGO]
FINANCIAL INNOVATORS
- -------------------------------------------------------------------------------
Rediscount Finance
Warrant to Purchase
70,000 Shares of
Common Stock
WARRANT TO PURCHASE COMMON STOCK OF
ECKLER INDUSTRIES, INC., A FLORIDA CORPORATION
This certifies that, for value received, FINOVA CAPITAL CORPORATION or
its transferees or assigns, is entitled upon exercise of this Warrant, subject
to the terms set forth below, to purchase from ECKLER INDUSTRIES, INC.
(hereinafter defined as the "Association") up to Seventy Thousand (70,000)
shares of fully paid and nonassessable shares of common stock, $______ par
value, of the Association ("Common Stock") at the purchase price per share (the
"Exercise Price") of Two Dollars ($2.00). The price and number of shares to
which the Warrant holder is entitled are subject to adjustment as provided in
this Warrant at any time or from time to time from the date of this Warrant
until the Expiration Date indicated below.
THE WARRANT AND RIGHTS TO PURCHASE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO,
OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
Expiration Date:
The Warrant represented by this Warrant Certificate shall
expire, and become wholly void and of no value, at 5:00 p.m.,
Dallas, Texas time, on December 31, 1999, unless sooner
terminated as provided in this Warrant.
1. DEFINITIONS.
As used in this Warrant Certificate, the following terms, unless the
context otherwise requires, have the following meanings:
WARRANT TO PURCHASE COMMON STOCK - PAGE 1
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(a) "ASSOCIATION" shall mean Eckler Industries, Inc., to be known as
Smart Choice Holdings, Inc., a Florida corporation, (pursuant to a name change
that is scheduled to occur within thirty [30] days of the date hereof) and any
association or corporation which shall succeed to or assume the obligations of
the Association under this Warrant.
(b) "COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
(c) "COMMON STOCK" when used with reference to stock of the
Association, means all shares, now or hereafter authorized, of the class of the
common stock of the Association, $______ par value.
(d) "EXERCISE PRICE" shall mean Two Dollars ( $2.00) per share, as
adjusted from time to time pursuant to the provisions of Section 4 hereof.
(e) "MAXIMUM EXERCISE PAYMENT" shall mean the number of shares for
which the Warrant is from time to time exercisable (originally multiplied by the
Exercise Price then in effect).
(f) "RESTRICTED SECURITIES" shall mean the securities of the
Association required to bear the legend set forth in Section 5.2 hereof.
(g) "SECURITIES ACT" shall mean the Securities Act Of 1933, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
(h) "SHARES" shall mean shares of Common Stock.
(i) "WARRANT CERTIFICATE" OR "CERTIFICATE" shall mean this certificate.
(i) "WARRANTHOLDER", "HOLDER OF WARRANT", "HOLDER", or similar terms
when the context refers to a holder of this Warrant shall mean any person who
shall at the time be the holder of this Warrant Certificate.
(k) "WARRANT" means all of those securities, representing rights to
purchase shares of Common Stock, which are evidenced by this Warrant
Certificate.
(l) "WARRANT SHARES" means the Shares of Common Stock which are
purchasable by the Warrant holder upon surrender of this Warrant Certificate and
exercise of the Warrant.
2. EXERCISE PROVISIONS.
(a) The holder of this Warrant Certificate may exercise the Warrant
represented hereby in whole or in part at any time by surrendering the
Certificate, with the purchase form attached hereto duly executed by the holder,
to the Association at its principal office, accompanied by payment in the amount
obtained by multiplying (i) the number of Shares designated in the purchase form
by (ii) the Exercise Price.
WARRANT TO PURCHASE COMMON STOCK - PAGE 2
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(b) Payment may be in cash or by certified or official bank check or
wire funds payable to the order of the Association.
(c) On partial exercise hereof, the Association shall promptly issue
and deliver to the holder of this Certificate a new Certificate or Certificates
of like tenor in the name of that holder providing for the right to purchase
that number of Warrant Shares as to which this Certificate has not been
exercised.
(d) The rights represented hereby shall expire at 5:00 p.m., Dallas,
Texas time, on December 31, 1999, unless sooner terminated pursuant to paragraph
6 hereof.
3. DELIVERY OF STOCK CERTIFICATES.
As soon as possible after full or partial exercise of this Warrant, the
Association at its expense will cause to be issued in the name of and delivered
to the holder hereof, a certificate or certificates for the number of fully paid
and nonassessable Shares to which that holder shall be entitled upon such
exercise (each a "Warrant Share"), together with any other securities and
property to which that holder is entitled upon such exercise under the terms
hereof. No fractional Shares will be issued upon exercise of rights to purchase;
if upon any such exercise a fraction of a Share results, the Association will
pay the cash value of that fractional Share, calculated on the basis of the fair
market value as of the date of exercise.
4. ANTI-DILUTION PROVISIONS.
The Exercise Price and number of Warrant Shares purchasable upon
exercise shall be subject to adjustment from time to time as follows:
(a) STOCK DIVIDENDS AND SPLITS. In the event the Association shall at
any time or from time to time after the date hereof fix a record date for the
effectuation of a split or subdivision of the outstanding Shares or the
determination of holders of Shares entitled to receive a dividend or other
distribution payable in additional Shares, then, as of such record date (or the
date of such dividend distribution, split or subdivision if no record date is
fixed), the number of Warrant Shares issuable on exercise of this Warrant shall
be increased in proportion to such increase of outstanding Shares, and
concurrently therewith the Exercise Price shall be proportionately decreased
(i.e., by adjusting such Price downward by multiplying it by the inverse of the
proportion or multiple by which the number of Warrant Shares issuable upon
exercise was increased).
(b) DECREASES IN SHARES. If the number of Shares outstanding at any
time after the date of this Agreement is decreased by a combination or reverse
split of the outstanding Shares, then, as of the record date of such
combination, the number of Shares for which the Warrant represented by this
Certificate may be exercised shall be decreased in proportion to such decrease
in outstanding Shares, and the Exercise Price shall be proportionately
increased.
(c) OTHER DISTRIBUTIONS. In the event the Association shall declare a
distribution to all holders of its Common Stock payable in securities of other
persons, evidences of indebtedness issued by the Association or other persons,
or assets (excluding cash dividends), then, in each
WARRANT TO PURCHASE COMMON STOCK - PAGE 3
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such case for the purpose of this paragraph 4(c), the Warrantholders shall,
upon the exercise of its right to purchase Warrant Shares hereunder after the
record date for such distribution or, in the absence of a record date, after
the date of such distribution, receive, in addition to the Warrant Shares
subscribed for, the amount of such securities, evidences of indebtedness or
assets (or, at the option of the Association, a sum equal to the value thereof
at the time of distributions as determined by the Board of Directors of the
Association) which would have been distributed to such Warrantholder if he had
exercised his right to purchase Warrant Shares hereunder immediately prior to
the record date for such distribution or, in the absence of a record date,
immediately prior to the date of such distribution.
(d) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALE OF ASSETS. If at
any time there shall be (i) a recapitalization or reorganization of the
Association's capital structure involving, or affecting the book value or voting
rights of, the Shares or (ii) a merger or consolidation of the Association with
or into another corporation, or (iii) the sale of the Association's properties
and assets as, or substantially as, an entirety to any other person (each of the
occurrences in (i), (ii) and (iii) referred to herein as an "Event"), then, as a
part of such Event, lawful provision shall be made so that the Warrantholder
shall thereafter be entitled to receive, upon exercise of the Warrant evidenced
by this Certificate prior to the Expiration Date and upon payment of the
Exercise Price, the number of Warrant Shares or other securities or property of
the Association, or of the successor corporation resulting from such Event, to
which such Warrantholder would have been entitled in such Event if the Warrant
evidenced hereby had been exercised and the corresponding Warrant Shares issued
immediately before such Event. In any such case, appropriate adjustment (as
determined by the Association's Board of Directors) shall be made in the
application of the provisions of this Warrant Certificate with respect to the
rights and interests of the Warrantholder after any such Event, such that the
provisions of this Section 4 (including adjustment of the Exercise Price then in
effect and the number of Warrant Shares purchasable upon exercise of the
Warrant) shall be applicable after such Event, as near as reasonably may be, in
relation to any Warrant Shares, other securities or property deliverable after
that Event upon exercise of the Warrant. The Association shall, within thirty
(30) days after making such adjustment, give written notice (by certified mail,
postage prepaid) to the registered holder of this Certificate at the address of
that holder shown on the Association's books. That notice shall set forth, in
reasonable detail, the Event requiring the adjustment and the method by which
the adjustment was calculated, and specify the Exercise Price then in effect
after the adjustment and the increased or decreased number of Warrant Shares
purchasable upon exercise of the Warrant evidenced hereby. When appropriate,
that notice may be given in advance and be included as part of the notice
required under other provisions hereof.
(e) NO IMPAIRMENT. The Association will not, by amendment of its
Certificate of Incorporation nor through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Association, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary appropriate in order to protect the respective rights of the
holders of the Warrant against impairment.
WARRANT TO PURCHASE COMMON STOCK - PAGE 4
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(f) NO FRACTIONAL SHARES. No fractional Shares shall be issued upon
exercise of the Warrant. In lieu of fractional Shares, the Association shall pay
cash equal to such fraction multiplied by the then fair market value of a share
of Common Stock, as determined by the Board of Directors. Whether or not
fractional shares would be issuable upon such exercise shall be determined on
the basis of the total number of Warrant Shares issuable at the time of exercise
of the Warrant.
(g) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Exercise Price pursuant to this Section 4, the
Association, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to the
Warrantholder a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Association shall, within a reasonable time following the written request at
any time of the Warrantholder, furnish or cause to be furnished to such holder a
like certificate setting forth (i) such adjustment and readjustment, (ii) the
Exercise Price at the time in effect, and (iii) the number of Warrant Shares and
the amount, if any, of other securities or property that at the time would be
received upon the exercise of Warrant.
(h) NOTICE OF RECORD DATE. In the event of any taking by the
Association of a record of its Stockholders for the purpose of determining
stockholders who are entitled to receive payment of any dividend on its Shares
(other than a cash dividend) or other distribution, or in respect of its Shares
in connection with the dissolution, liquidation or winding up of the
Association, any right to subscribe for, purchase or otherwise acquire any
shares of any class or any other securities or property, or to receive any other
right, the Association shall mail to each Warrantholder, at least twenty (20)
days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
(i) RESERVATION OF SHARES ISSUABLE UPON EXERCISE. The Association shall
at all times reserve and keep available out of its authorized but unissued
Shares, solely for the purpose of effecting the exercise of the Warrant, such
number of its Shares as shall from time to time be sufficient to effect the
exercise of the Warrant; and if at any time the number of authorized but
unissued Shares shall not be sufficient to effect the exercise of the Warrant
then outstanding, the Association will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
Shares to such number of Shares as shall be sufficient for such purposes.
(j) NOTICES. Any notice required by the provisions of this Section to
be given to the Warrantholder, shall be deemed to be delivered when deposited in
the United States mail, postage prepaid, registered or certified, and addressed
to each holder of record at its address appearing on the stock transfer books of
the Association.
5. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; COMPLIANCE WITH
SECURITIES ACT.
5.1 RESTRICTIONS ON TRANSFERABILITY. The Warrant and the Warrant Shares
shall not be sold, assigned, transferred, or pledged except upon the conditions
specified in this Section 5, which
WARRANT TO PURCHASE COMMON STOCK - PAGE 5
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conditions are intended to insure compliance with the provisions of the
Securities Act and all applicable state and federal regulatory agencies. Each
Warrantholder will cause any proposed purchaser, assignee, transferee, or
pledgee of the Warrant held by such Warrantholder to agree to take and hold
such securities subject to the provisions and upon the conditions specified in
this Section 5.
5.2 RESTRICTIVE LEGEND. Each certificate representing (i) the Warrant,
(ii) the Warrant Shares, or (iii) any other securities issued in respect to the
Warrant or Warrant Shares upon any stock split, stock dividend,
recapitalization, merger, consolidation, or similar event, shall (unless
otherwise permitted by the provisions of Section 5.3 below) be stamped or
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required under applicable state securities laws);
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, OR ANY STATE SECURITIES ACT. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
ASSOCIATION RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT
STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACTS. COPIES OF THE APPLICABLE
PORTION OF THE AGREEMENT RESTRICTING THE TRANSFER MAY BE OBTAINED AT NO
COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE ASSOCIATION AT THE PRINCIPAL PLACE
OF BUSINESS OR REGISTERED OFFICE OF THE ASSOCIATION.
The Warrantholder consents to the Association making a notation on its
records and giving instructions to any transfer agent of the Warrant or the
Common Stock in order to implement the restrictions on transfer established in
this Section 5.
5.3 NOTICE OF PROPOSED TRANSFERS. Each holder of Restricted Securities,
by acceptance thereof, agrees to comply in all respects with the provisions of
this Section 5.3. Prior to any proposed sale, assignment, transfer, or pledge of
any Restricted Securities (other than a transfer not involving a change in
beneficial ownership), unless there is in effect a registration statement under
the Securities Act covering the proposed transfer, the holder thereof shall give
written notice to the Association of such holder's intention to effect such
transfer, sale, assignment, or pledge. Each such notice shall describe the
manner and circumstances of the proposed transfer, sale, assignment, or pledge
in sufficient detail, and shall be accompanied, at such holder's expense, by
either (i) an unqualified written opinion of legal counsel who shall be, and
whose legal opinion shall be, reasonably satisfactory to the Association,
addressed to the Association, to the effect that the proposed transfer of the
Restricted Securities may be effected without registration under the Securities
Act or any applicable state securities laws, or (ii) a "no action" letter from
the Commission, and the securities administrator of any state whose securities
acts may be applicable, to the effect that the transfer of such securities
without registration will not result in a recommendation by the staff of the
Commission, and the securities administrator of any state
WARRANT TO PURCHASE COMMON STOCK - PAGE 6
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whose securities acts might be applicable, that action be taken with respect
thereto. Thereupon the holder of such Restricted Securities shall be entitled to
transfer such Restricted Securities in accordance with the terms of the notice
delivered by the holder to the Association. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear, except if such
transfer is made to a non-affiliate of the Association pursuant to Commission
Rule 144, the appropriate restrictive legend set forth in Section 5.2 above,
except that, such certificate shall not bear such restrictive legend if in the
opinion of counsel for such holder and of counsel for the Association such
legend is not required in order to establish compliance with the provisions of
the Securities Act or any applicable state securities laws.
6. REGISTRATION RIGHTS.
(a) ASSOCIATION REGISTRATION. Whenever the Association proposes to
register any of its Common Stock under the Securities Act for a public offering
for cash, whether as a primary or secondary offering (or pursuant to
registration rights granted to holders of other securities of the Association),
but excluding a registration on form S-4, S-8 or other comparable registration
in respect of mergers or acquisitions or employee benefit plans, the Association
shall, each such time, give the holder written notice of its intent to do so.
Upon the written request of the holder given within thirty (30) days after
receipt of any such notice, the Association shall use its best efforts to cause
to be included in such registration all of the Warrant Shares (the "Registration
Shares") which the holder requested to be registered; provided (i) the Holder
agrees to sell Warrant Shares in the same manner and on the same terms and
conditions as the other Common Stock which the Association proposes to register,
including any "lock-up" agreements required of other selling stockholders of the
Association, and (ii) if the registration is to include Common Stock to be sold
for the account of the Association, the proposed managing underwriter does not
advise the Association that in its opinion the inclusion of the holder's Shares
is likely to affect adversely the success of the offering by the Association or
the price it would receive.
b) DEMAND REGISTRATION. If the Association has not effectuated the
registration of the Registration Shares on or before one (1) year from the date
of this Warrant Certificate, holder shall have the right, upon written notice to
the Association, to require the Association to exercise its best efforts to
cause the Registration Shares to be registered under the Securities Act.
(c) OBLIGATIONS OF THE ASSOCIATION. Whenever required under subsections
7(a) or 7(b) to use its best efforts to effect the registration of any of the
Warrant Shares, the Association shall, as expeditiously as reasonably possible,
but subject to the holder providing such information and customary indemnities
as reasonably requested by the Association or its underwriters:
(i) Prepare and file with the Commission a Registration
Statement with respect to such Shares and use its best efforts to cause
such Registration Statement to become and remain effective; provided,
however, that in connection with any proposed registration intended to
permit an offering of any securities from time to time (i.e., a so
called "shelf registration"), the Association shall in no event be
obligated to cause any such registration to remain effective for more
than one hundred and eighty (180) days.
WARRANT TO PURCHASE COMMON STOCK - PAGE 7
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(ii) Prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to permit the disposition of
all securities covered by such Registration Statement.
(iii) Furnish to the holder such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as it may
reasonably request in order to facilitate the disposition of Shares
owned by it.
(iv) Use its best efforts to register and qualify the
securities covered by such Registration Statement under such other
securities or Blue Sky laws of such jurisdictions as shall be
reasonably appropriate for the distribution of the securities covered
by the Registration Statement, provided that the Association shall not
be required in connection therewith or as a condition thereto to
qualify to do business in any such states or jurisdictions, to subject
itself to taxation therein or to submit to the general jurisdiction
thereof.
(d) EXPENSES OF REGISTRATION. All expenses incurred in connection with
any registration pursuant to this section 6, including without limitation all
registration and qualification fees, printing and accounting fees, fees and
disbursements of counsel for the Association, but excluding underwriting
discounts and commissions (the "Registration Expenses"), shall be borne by the
Association. Each selling shareholder shall bear the fees and costs of its own
counsel, if different from counsel for the Association.
(e) LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
execution hereof, the Association will not, without the prior written consent of
the holder enter into any agreement with any holder or prospective holder of any
Shares of the Association which allows such holder or prospective holder of any
Shares of the Association to include such Shares in any registration filed under
the Securities Act unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only to
the extent that the inclusion of his securities will not diminish the amount of
Registration Shares of the holder which are included.
8. MISCELLANEOUS PROVISIONS.
(a) LOST CERTIFICATE. On receipt of evidence reasonably satisfactory to
the Association of the loss, theft, destruction, or mutilation of this
Certificate and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the
Association or, in the case of mutilation, on surrender and cancellation of this
Certificate, the Association at its expense will execute and deliver, in lieu of
this Certificate, a new Certificate of like tenor.
(b) EXCHANGE AND TRANSFER. On surrender of this Warrant Certificate for
exchange, properly endorsed on the form of assignment attached hereto, and
subject to the provisions herein
WARRANT TO PURCHASE COMMON STOCK - PAGE 8
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regarding compliance with the Securities Act, the Association at its expense
will issue to or on the order of the holder of this Certificate a new
Certificate or Certificates of like tenor, in the name of that holder or as
that holder (on payment by that holder of any applicable transfer taxes) may
direct, evidencing in the aggregate on the face or faces of such Certificate or
Certificates for the number of Warrant Shares called for on the face hereof.
(c) NO RIGHTS AS STOCKHOLDER. No holder of this Certificate, as such,
shall be entitled to vote or receive dividends or be considered a stockholder of
the Association for any purpose, nor shall anything in this Certificate be
construed to confer on any holder of this Certificate as such, any rights of a
stockholder of the Association or any right to vote, give or withhold consent to
any corporate action, or except as otherwise specified herein, to receive notice
of meeting of stockholders, to receive dividends, or to receive subscription
rights except as otherwise specified herein, or otherwise.
(d) HOLDER DEEMED OWNER. The holder hereof may be treated by the
Association, any warrant agent, and all other persons dealing with the Warrant
as the absolute owner hereof for any purpose and as the person entitled to
exercise the rights represented hereby.
(e) NEGOTIABILITY. Title to this Certificate may be transferred by
endorsement (by the holder of this Certificate executing the form of assignment
attached hereto) and delivery in the same manner as a negotiable instrument
transferable by endorsement and delivery.
(f) MODIFICATION. This Warrant Certificate and any of its terms may be
changed, waived, or terminated only by a written instrument signed by the party
against whom enforcement of that change, waiver, or termination is sought.
WARRANT TO PURCHASE COMMON STOCK - PAGE 9
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(g) GOVERNING LAW. This Warrant Certificate shall be governed by and
construed and enforced in accordance with the laws of the State of Arizona.
Dated: January 13, 1997
ASSOCIATION:
ECKLER INDUSTRIES, INC.
By:______________________________
Gary Smith, President
HOLDER:
FINOVA CAPITAL CORPORATION
By:______________________________
David B. Fricke, Vice President
WARRANT TO PURCHASE COMMON STOCK - PAGE 10
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ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
Shares of Common Stock set forth below:
NAME AND ADDRESS OF ASSIGNEE NUMBER OF SHARES OF COMMON STOCK
- ---------------------------- --------------------------------
and does hereby irrevocably constitute and appoint _________________________
attorney to register such transfer on the books of Association maintained for
the purpose, with full power of substitution in the premises.
Dated: _______________________
--------------------------------
- ------------------------------
Witness
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatever.
The signature to this assignment must be guaranteed by a bank or trust company
having an office or correspondent in ___________________________,
______________________ or by a firm having membership on the New York Stock
Exchange.
WARRANT TO PURCHASE COMMON STOCK - PAGE 11
EXHIBIT 4.3
FINOVA/registered trademark/[LOGO]
FINANCIAL INNOVATORS
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Rediscount Finance
SIXTH AMENDED AND RESTATED
PROMISSORY NOTE
$35,000,000.00 PHOENIX, ARIZONA MAY 7, 1997
FOR VALUE RECEIVED, the undersigned ("MAKER"), hereby unconditionally
promises to pay to the order of FINOVA CAPITAL CORPORATION, a Delaware
corporation ("HOLDER"), at HOLDER's branch address at 13355 Noel Road, Suite
800, Dallas, Texas 75240, or at such other place as HOLDER may designate in
writing, the principal sum of Thirty Five Million Dollars ($35,000,000.00) or so
much thereof as shall be outstanding from time to time, with interest thereon at
the Stated Interest Rate calculated on the average daily balance outstanding, as
follows:
1. DEFINITIONS. When used herein, the following terms have the meanings
given in this paragraph:
A. LOAN AGREEMENT. The term "Loan Agreement" shall mean that
certain First Amended and Restated Loan and Security Agreement of even
date herewith, entered into by and between FINOVA CAPITAL CORPORATION,
as Lender, and MAKER, as Borrower, and all amendments, substitutions,
renewals and extensions thereof. All capitalized terms used herein
which are not expressly defined herein shall have the meanings ascribed
to them in the Loan Agreement.
B. MAXIMUM RATE. The term "Maximum Rate" shall mean the
highest lawful rate of interest applicable to this NOTE. In determining
the Maximum Rate, due regard shall be given to all payments, fees,
charges, deposits, balances and agreements which may constitute
interest or be deducted from principal when calculating interest.
2. PAYMENT. The principal and interest of this NOTE are payable as
follows:
A. Accrued but unpaid interest for each calendar month during
the term hereof shall be due and payable monthly, in arrears, on the
fifteenth (15th) day of the immediately succeeding calendar month
commencing May 15, 1997. All outstanding principal together with all
accrued and unpaid interest shall be due and payable, if not sooner
paid on December 31, 1999. All payments received hereunder shall be
applied as set forth in the Loan Agreement.
B. Notwithstanding the foregoing, principal shall be
immediately due and payable without written notice and demand from
Lender in such amounts so that the outstanding balance hereunder does
not, at anytime, exceed the permitted amount of the Loan as determined
pursuant to Section 2.1 of the Loan Agreement. The amount of such
payments shall be determined by HOLDER pursuant to the terms of the
Loan Agreement and based upon the principal balance of this NOTE then
outstanding as determined pursuant to the Loan Agreement and as shown
on the books and records of HOLDER, maintained in accordance with its
usual practice, the entries of which being prima facie evidence of the
existence and amounts as therein recorded.
C. All of the principal hereunder may be prepaid in full at
any time; however, such voluntary prepayments shall be subject to the
voluntary prepayment provisions set forth in Article 2.6 of the Loan
Agreement.
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3. PRINCIPAL BALANCE. The unpaid principal balance of this NOTE at any
time shall be the total amounts loaned or advanced hereunder by HOLDER, less the
amount of payments or prepayments of principal made hereon by or for the account
of MAKER. It is contemplated that by reason of payments or prepayments hereon
there may be times when no indebtedness is owing hereunder; but notwithstanding
such occurrences, this NOTE shall remain valid and shall be in force and effect
as to loans or advances made pursuant to and under the terms of this NOTE
subsequent to each such occurrence. All loans or advances and all payments or
prepayments made hereunder on account of principal or interest may be evidenced
by HOLDER, or any subsequent holder, maintaining in accordance with its usual
practice an account or accounts evidencing the indebtedness of MAKER resulting
from all loans or advances and all payments or prepayments hereunder from time
to time in the amounts of principal and interest payable and paid from time to
time hereunder, in which event, in any legal action or proceeding in respect of
this NOTE, subject to Section 2.9 of the Loan Agreement, the entries made in
such account or accounts shall be prima facie evidence of the existence and
amounts of the obligations of MAKER therein recorded. In the event that the
unpaid principal amount hereof, at any time and for any reason, exceeds the
maximum amount hereinabove specified, MAKER covenants and agrees to pay the
excess principal amount immediately without notice or demand; such excess
principal amount shall in all respects be deemed to be included among the loans
or advances made pursuant to the other terms of this NOTE and shall bear
interest at the rate hereinabove stated.
4. ADVANCES. This Promissory Note is the "Note" referred to in the Loan
Agreement and the Holder is entitled to all the rights, remedies and benefits of
the Lender thereunder. Reference is hereby made to the Loan Agreement for the
terms and conditions under which this Note is to be made and to be repaid.
5. DEFAULT, REMEDIES. Upon the occurrence and during the continuance of
any one or more of the Events of Default set forth in the Loan Agreement, at the
option of the holder of this NOTE, the entire unpaid principal balance and
accrued and unpaid interest hereon shall at once become due and payable without
notice or demand and the Holder may foreclose and enforce all liens and security
interests securing this NOTE.
If this NOTE is not paid when due, whether at maturity or by
acceleration, or if it is collected through a bankruptcy, probate, or other
judicial proceeding, whether before or after maturity, MAKER agrees to pay
attorney's fees, together with all actual expenses of collection and litigation
and costs of court incurred by the Holder, whether or not suit is actually filed
or not.
6. WAIVER. MAKER and all other makers, signers, sureties, guarantors
and endorsers of this NOTE waive demand, presentment, notice of dishonor, notice
of intent to demand or accelerate payment hereof, diligence in the collecting,
grace, notice and protest, and agree to one or more extensions for any period or
periods of time and partial payments, before or after maturity, without
prejudice to HOLDER.
7. SECURITY. This NOTE is secured by certain security interests as set
forth in the Loan Agreement.
8. CONTROLLING AGREEMENT. The contracted for rate of interest of the
Loan without limitation, shall consist of the following: (i) the Stated Interest
Rate, calculated and applied to the principal balance of the Note in accordance
with the provisions of this Note and the Loan Agreement; (ii) interest after
Event of Default or due date, calculated and applied to the amounts due under
this Note in accordance with the provisions thereof; and (iii) all Additional
Sums (as herein defined), if any. Borrower agrees to pay an effective contracted
for rate of interest which is the sum of the above-referenced elements.
All fees, charges, goods, things in action or any other sums or things
of value (other than amounts described in the immediately previous paragraph),
paid or payable by Borrower (collectively, the "Additional Sums"), whether
pursuant to this Note, the Loan Agreement or any other documents or instruments
in any way pertaining to this lending transaction, or otherwise with respect to
this lending transaction, that under any applicable law may be deemed to be
interest with respect to this lending transaction, for the purpose of any
applicable law that may limit the maximum amount of interest to be charged with
respect to this lending transaction, shall be payable by Borrower as, and shall
be deemed to be, additional interest and for such purposes only, the agreed upon
and "contracted for rate of interest" of this lending transaction shall be
deemed to be increased by the rate of interest resulting from the inclusion of
the Additional Sums.
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It is the intent of the parties to comply with the usury law
("Applicable Usury Law") applicable pursuant to the terms of the preceding
paragraph or such other usury law which is applicable if the law chosen by the
parties is not applicable. Accordingly, it is agreed that notwithstanding any
provisions to the contrary in this NOTE, or in any of the documents securing
payment hereof or otherwise relating hereto, in no event shall this NOTE or such
documents require the payment or permit the collection of interest in excess of
the maximum contract rate permitted by the Applicable Usury Law. In the event
(a) any such excess of interest otherwise would be contracted for, charged or
received from Maker or otherwise in connection with the loan evidenced hereby,
or (b) the maturity of the indebtedness evidenced by this NOTE is accelerated in
whole or in part, or (c) all or part of the principal or interest of this NOTE
shall be prepaid, so that under any of such circumstances the amount of interest
contracted for, charged or received in connection with the loan evidenced
hereby, would exceed the maximum contract rate permitted by the Applicable Usury
Law, then in any such event (1) the provisions of this paragraph shall govern
and control, (2) neither Maker nor any other person or entity now or hereafter
liable for the payment hereof will be obligated to pay the amount of such
interest to the extent that it is in excess of the maximum contract rate
permitted by the Applicable Usury Law, (3) any such excess which may have been
collected shall be either applied as a credit against the then unpaid principal
amount hereof or refunded to Maker, at Holder's option, and (4) the effective
rate of interest will be automatically reduced to the maximum amount of interest
permitted by the Applicable Usury Law. It is further agreed, without limiting
the generality of the foregoing, that to the extent permitted by the Applicable
Usury Law; (x) all calculations of interest which are made for the purpose of
determining whether such rate would exceed the maximum contract rate permitted
by the Applicable Usury Law shall be made by amortizing, prorating, allocating
and spreading during the period of the full stated term of the loan evidenced
hereby, all interest at any time contracted for, charged or received from Maker
or otherwise in connection with such loan; and (y) in the event that the
effective rate of interest on the loan should at any time exceed the maximum
contract rate allowed under the Applicable Usury Law, such excess interest that
would otherwise have been collected had there been no ceiling imposed by the
Applicable Usury Law shall be paid to Holder from time to time, if and when the
effective interest rate on the loan otherwise falls below the maximum amount
permitted by the Applicable Usury Law, to the extent that interest paid to the
date of calculation does not exceed the maximum contract rate permitted by the
Applicable Usury Law, until the entire amount of interest which would have
otherwise been collected had there been no ceiling imposed by the Applicable
Usury Law has been paid in full. Maker further agrees that should the maximum
contract rate permitted by the Applicable Usury Law be increased at any time
hereafter because of a change in the law, then to the extent not prohibited by
the Applicable Usury Law, such increases shall apply to all indebtedness
evidenced hereby regardless of when incurred; but, again to the extent not
prohibited by the Applicable Usury Law, should the maximum contract rate
permitted by the Applicable Usury Law be decreased because of a change in the
law, such decreases shall not apply to the indebtedness evidenced hereby
regardless of when incurred.
9. APPLICABLE LAW. This NOTE shall be construed in accordance with the
laws of the State of Arizona and the laws of the United States applicable to
transactions in the State of Arizona.
10. NO WAIVER. No delay on the part of the HOLDER in the exercise of
any power or right under this NOTE, or under the LOAN AGREEMENT or any other
instrument executed in connection herewith, shall operate as a waiver thereof,
nor shall a single or partial exercise of any power or right preclude other or
further exercise thereof or exercise of any other power or right. Enforcement by
HOLDER of any security for the payment hereof shall not constitute any election
by it of remedies so as to preclude the exercise of any other remedy available
to it.
11. SUCCESSORS, ASSIGNS. The term "HOLDER" shall include all of
HOLDER's successors and assigns to whom the benefits of this NOTE shall inure.
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12. RENEWAL AND EXTENSION. This Sixth Amended and Restated Promissory
Note is executed in conjunction with that certain Amended and Restated Loan and
Security Agreement of even date herewith, by and between HOLDER, MAKER and
Guarantors. This Sixth Amended and Restated Promissory Note is given in renewal,
extension and rearrangement of and not in payment, satisfaction or
extinguishment of that certain Promissory Note in the original principal amount
of Two Million Dollars ($2,000,000.00), dated February 24, 1994, (the "Prior
Note") executed by MAKER in favor of Greyhound Financial Corporation, the same
being amendments, renewals and extensions of prior instruments as referenced in
the Prior Note, that certain Amended and Restated Promissory Note in the
original principal amount of Four Million Dollars ($4,000,000.00), dated June 8,
1995, ("Amended Note") executed by Maker in favor of FINOVA Capital Corporation,
that certain Second Amended and Restated Promissory Note, dated May 13, 1996
("Second Amended Note") in the stated principal amount of Five Million Dollars
($5,000,000.00), executed by Maker in favor of FINOVA Capital Corporation, that
certain Third Amended and Restated Promissory Note, dated October 15, 1996
("Third Amended Note") in the stated principal amount of Five Million Dollars
($5,000,000.00), that certain Fourth Amended and Restated Promissory Note, dated
February 4, 1997 ("Fourth Amended Note") in the stated principal amount of
Twenty Million Dollars ($20,000,000.00) and that certain Fifth Amended and
Restated Promissory Note, dated April 22, 1997 ("Fifth Amended Note") in the
stated principal amount of Thirty Five Million Dollars ($35,000,000.00). This
Sixth Amended and Restated Promissory Note is secured by liens granted to HOLDER
on certain collateral and is a continuation of MAKER'S obligations to HOLDER and
such obligations and liens, mortgages, deeds of trust or security interests are
not extinguished by this Sixth Amended and Restated Promissory Note, but are
hereby renewed, extended, recognized and preserved in full to secure payment of
this Sixth Amended and Restated Promissory Note and all sums due or to become
due and payable under the Loan Documents.
MAKER:
FLORIDA FINANCE GROUP INC.
A FLORIDA CORPORATION
BY:
------------------------------------
CHARLES BONNANO, VICE PRESIDENT
LIBERTY FINANCE COMPANY
A FLORIDA CORPORATION
BY:
------------------------------------
CHARLES BONNANO, VICE PRESIDENT
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EXHIBIT 4.4
FINOVA/REGISTERED MARK/
FINANCIAL INNOVATORS
Rediscount Finance
FIRST AMENDED AND RESTATED SCHEDULE TO
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BORROWER: FLORIDA FINANCE GROUP INC.
ADDRESS: 5200 S. WASHINGTON
TITUSVILLE, FLORIDA 32780-7316
DATE: APRIL 22, 1997
This First Amended and Restated Schedule ("First Amended Schedule") is
executed in conjunction with a certain Amended and Restated Loan and Security
Agreement ("Agreement") of February 4, 1997, by and between FINOVA Capital
Corporation, as Lender, and the above Borrowers, as Borrower. This First Amended
Schedule is an amendment and restatement of the Schedule to Amended and Restated
Loan and Security Agreement, dated of even date with the Agreement. The terms
and provisions of this First Amended Schedule shall supersede all prior
schedules. All references to Section numbers herein refer to Sections in the
Agreement.
1.13.A. MAXIMUM AMOUNT OF AN ELIGIBLE RECEIVABLE (SECTION 1.13).
The term "Maximum Amount of an Eligible Receivable" shall mean
the sum of Twenty Thousand Dollars ($20,000.00) remaining due
thereon at any date of determination.
1.13.B. MAXIMUM TERM OF AN ELIGIBLE RECEIVABLE (SECTION 1.13).
The "Maximum Term of an Eligible Receivable" shall be
Forty-Eight (48) months remaining until the due date of such
Eligible Receivable at any date of determination.
1.13.C. AGING PROCEDURES AND ELIGIBILITY TEST (SECTION 1.13.)
AGING PROCEDURES FOR A CONTRACTUAL AGING:
1. No payment missed = Current.
2. 1 to 30 days past due = "30 day Account".
3. 31 to 60 days past due = "60 day Account".
4. 61 or more days past due = "60 + day Account"
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ELIGIBILITY TEST:
The term "Eligibility Test" shall mean the test to determine the eligibility of
a Receivable for the purposes of Section 1.13 hereof, that test, being as
follows: no payment due on said Receivable remains unpaid more than sixty (60)
days from the specific date on which such payment was due pursuant to the terms
of said Receivable.
1.15 GUARANTOR (WHETHER ONE OR MORE) (SECTION 1.15)
Smart Choice Holdings, Inc.
Smart Choice Automotive Group, Inc. (formerly known as Eckler
Industires, Inc.)
1.22 MODIFICATION TO THE DEFINITION OF "LEVERAGE RATIO" (SECTION 1.22)
Section 1.22 of the Agreement is hereby deleted in its entirety and the
following is substituted in lieu thereof:
"1.22 LEVERAGE RATIO. The term "Leverage Ratio" shall mean, at
any date of determination, total liabilities of Smart Choice
Automotive Group, Inc. ("SMAG"), including the outstanding
balance of the Indebtedness, less the outstanding balance due
pursuant to all subordinated debt which has been subordinated
to all the rights of Lender with respect to the Guaranty
Agreement of SMAG in favor of Lender, in a form and substance
acceptable to Lender ("SMAG Subordinated Debt"), divided by
the sum of the amount of SMAG's tangible net worth, as the
term "tangible net worth" is defined in the Agreement with
respect to Borrower, plus the outstanding balance due pursuant
to all SMAG Subordinated Debt."
2.1.A. AMOUNT OF REVOLVING CREDIT LINE (SECTION 2.1):
Thirty Five Million Dollars ($35,000,000.00)
2.1.B. AVAILABILITY ON ELIGIBLE RECEIVABLES (SECTION 2.1):
The "Availability on Eligible Receivables" shall be an amount
equal to, with respect to all Eligible Receivables, on the
date of determination as follows:
(i) if the date of determination is on or before the
earlier of (a) December 31, 1997, or (b) the
effective date of a public offering for the sale of
securities by Smart Choice Automotive Group, Inc. or
any subsidiary thereof, then with respect to each
Eligible Receivable sixty percent (60%) of the
aggregate unmatured and unpaid amount due to Borrower
from the Account Debtor named thereon, including all
unearned finance charges, time price differentials,
insurance fees, discounts, holdbacks and other fees
and charges pursuant to the Eligible Receivables; or
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(ii) if the date of determination is after the
earlier of (a) December 31, 1997, or (b) the
effective date of a public offering for the sale of
securities by Smart Choice Automotive Group, Inc. or
any subsidiary thereof, then with respect to each
Eligible Receivable fifty-five percent (55%) of the
aggregate unmatured and unpaid amount due to Borrower
from the Account Debtor named thereon, including all
unearned finance charges, time price differentials,
insurance fees, discounts, holdbacks and other fees
and charges pursuant to the Eligible Receivables
Notwithstanding any provision contained in the Loan Documents
to the contrary, if for the twelve (12) calendar month period
immediately prior to any date of determination, the Collateral
Recovery Rate is less than seventy percent (70%), or if on any
date of determination, the Collateral Performance Percentage
is greater than ten percent (10.0%), then in either event,
Lender, in its sole and absolute discretion, may modify the
Availability on Eligible advance percentage set forth above.
2.2. STATED INTEREST RATE (SECTION 2.2).
The lesser of (i) the Governing Rate plus three percent
(3.00%) per annum; or (ii) the Maximum Rate.
2.3. MATURITY DATE (SECTION 2.3.C).
The primary term of this Agreement shall expire on December
31, 1999. If Borrower desires to extend the primary term or
any term thereafter of this Agreement, Borrower shall give
Lender notice of its intent to extend the term no earlier than
one hundred and eighty (180) days and no later than one
hundred and fifty (150) days prior to any expiration date of
this Agreement. Upon the receipt by Lender of Borrower's
notice to extend the term of this Agreement, if Lender desires
to renew and extend the term of this Agreement, Lender shall
give Borrower notice of Lender's intent to extend the term of
this Agreement, within sixty (60) days of Lender's receipt of
Borrower's notice to extend. If Lender does not give Borrower
notice of Lender's intent to extend the term of this Agreement
within the sixty (60) days period, then it shall be deemed
that Lender does not intend to renew and extend the term of
this Agreement. Notwithstanding the foregoing, the Borrower's
obligation pursuant to this Agreement shall remain in full
force and effect until the Indebtedness due and owing to
Lender has been paid in full.
2.6. LIQUIDATED DAMAGES (SECTION 2.6).
The amount of "Liquidated Damages" shall be as follows:
(i) if on or prior to December 31, 1997, Borrower pays the
balance of the Indebtedness in full and Borrower requests
Lender to terminate Lender's security interest in the
Collateral, the amount of "Liquidated Damages" shall be an
amount equal to three percent (3%) of the Amount of Revolving
Credit Line;
(ii) if on or prior to December 31, 1998, but on or after
January 1, 1998, Borrower pays the balance of the Indebtedness
in full and Borrower requests Lender to terminate Lender's
security interest in the Collateral, the amount of "Liquidated
Damages" shall be an amount equal to two percent (2%) of the
Amount of Revolving Credit Line;
(iii) if prior to December 31, 1999, but on or after January
1, 1999, Borrower pays the balance of the Indebtedness in full
and Borrower requests Lender to terminate Lender's security
interest in the Collateral, the amount of "Liquidated Damages"
shall be an amount equal to one percent (1%) of the Amount of
Revolving Credit Line.
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2.13. FACILITY FEE (SECTION 2.13).
A Facility Fee shall not be due for any calender month ending
on or after April 30, 1997.
3.2. BUSINESS LOCATIONS OF BORROWER (SECTIONS 3.2, 3.6 AND 5.1.N.).
All locations are as set forth on the attach List of Locations
5.1.B. BORROWER'S TRADENAMES (WHETHER ONE OR MORE)(SECTION 5.1.B.)
As set forth in List of Tradenames attached hereto
6.2.A. LEVERAGE RATIO LIMIT (SECTION 6.2.J).
The term "Leverage Ratio Limit" shall mean 4.0 : 1.0
6.2.B. MINIMUM NET INCOME (SECTION 6.2.K).
The Minimum Net Income shall be One Dollar ($1.00) for each
fiscal year of Borrower, beginning with fiscal year ending
December 31, 1997.
6.2.C. DISTRIBUTIONS LIMITATION (SECTION 6.2.L).
The Maximum Distributions shall not exceed twenty-five percent
(25%) of Net Income of the fiscal year in which such
Distributions are made.
6.3.C. ANNUAL FINANCIAL STATEMENTS (SECTION 6.3).
Annual audited financial statements shall be prepared by
independent certified public accountants, reasonably
acceptable to Lender.
8.1. REIMBURSEMENT OF EXPENSES (SECTION 8.1).
None other then as set forth in the Loan Documents.
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9.1. NOTICES (SECTION 9.1).
Lender: FINOVA Capital Corporation
(copy each office below with all notices)
CORPORATE FINANCE OFFICE:
FINOVA Capital Corporation
355 South Grand Avenue, Suite 2400
Los Angeles, CA 90071
Attn: John J. Bonano, Senior Vice President
Telephone: (213) 253-1600
Telecopy No.: (213) 625-0268
CORPORATE OFFICE:
FINOVA Capital Corporation
1850 N. Central Avenue
Phoenix, AZ 85077
Attn: Joseph R. D'Amore, Senior Counsel
Telephone: (602) 207-4900
Telecopy No.: (602) 207-5543
REDISCOUNT FINANCE OFFICE:
FINOVA Capital Corporation
13355 Noel Road, Suite 800
Dallas, TX 75240
Attn: Douglas M. Fraser (Account Executive)
Telephone: (214) 458-5600
Telecopy No.: (214) 458-5650
Borrower: Florida Finance Group Inc.
5200 S. Washington
Titusville, Florida 32780-7316
Telephone: 407-269-9680
Telecopy No.:407-269-1880
Guarantors: Smart Choice Holdings, Inc.
Smart Choice Automotive Group, Inc.
5200 S. Washington
Titusville, Florida 32780-7316
Telephone: 407-269-9680
Telecopy No.:407-269-1880
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9.16. AGENT FOR SERVICE OF PROCESS (SECTION 9.16).
Gary Smith, whose address is 5200 S. Washington,Titusville, Florida
32780-7316 (Agent)
IN WITNESS WHEREOF, the parties have executed this Schedule on the day and
year first set forth above.
LENDER:
FINOVA CAPITAL CORPORATION,
a Delaware corporation
By:/s/ J. STEVEN CAMMACK 4-22-97
----------------------------------- ---------
J. Steven Cammack, Vice President (Date)
BORROWERS:
FLORIDA FINANCE GROUP INC.
By:/s/ GARY SMITH 4-22-97
----------------------------------- ---------
Gary Smith, President (Date)
GUARANTOR:
SMART CHOICE HOLDINGS, INC.
By:/s/ GARY SMITH 4-22-97
----------------------------------- ---------
Gary Smith, President (Date)
SMART CHOICE AUTOMOTIVE GROUP, INC.
By:/s/ GARY SMITH 4-22-97
----------------------------------- ---------
Gary Smith, President (Date)
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EXHIBIT 4.5
FINOVA/registered trademark/[LOGO]
FINANCIAL INNOVATORS
- -------------------------------------------------------------------------------
Rediscount Finance
GUARANTY
(Continuing/Unlimited)
TO: FINOVA CAPITAL CORPORATION
Ladies/Gentlemen:
1. THE GUARANTEED DEBT. In consideration of any and all loans, advances,
acceptances and extensions of credit made by FINOVA CAPITAL CORPORATION, a
Delaware corporation, ("FINOVA") to, for the account of, or on behalf of FLORIDA
FINANCE GROUP INC., a Florida corporation (referred to herein as "Borrower") and
as an inducement for FINOVA to make future loans, advances, acceptances and
extensions of credit to, for the account of, or on behalf of Borrower, the
undersigned (the "Guarantor"), absolutely and unconditionally guarantees to
FINOVA the punctual payment in full at maturity, whether due pursuant to
acceleration or otherwise, of the principal, interest and other sums due or to
become due from Borrower to FINOVA (collectively the "debt") at any time and
from time to time from the date of this Guaranty until termination under or
pursuant to that certain First Amended and Restated Loan and Security Agreement
of even date herewith by and among FINOVA, Borrower and Guarantor (the "Loan
Agreement"). Guarantor hereby acknowledges that it will receive a materially
financial and economic benefit from the extension of credit by FINOVA to
Borrower.
2. DURATION. This Guaranty shall operate as a continuing guaranty and shall
terminate as to the Guarantor only upon written notice signed by the Guarantor
and actually received by FINOVA, effective as of the opening of business on the
day following the date of receipt. Such termination shall be effective only as
to that portion of the debt incurred after such termination date, and this
Guaranty shall remain in full force and effect as to all debt incurred before
that time. Regardless of when a renewal or extension of pre-termination debt
occurs (with or without adjustment of interest rate or other terms), the debt is
deemed to have been incurred prior to termination to the extent of the renewal
or extension, and to be fully covered by this Guaranty. This Guaranty shall be
binding upon the undersigned Guarantor and its successors and assigns, jointly
and severally, and shall inure to the benefit of FINOVA and its successors and
assigns.
3. NO CONDITIONS. This is an unconditional Guaranty; it is unlimited as to
time, until termination. The Guarantor warrants that there are no conditions,
oral or otherwise, on the effectiveness of this Guaranty. This writing
constitutes the entire agreement of the parties regarding the Guaranty.
4. DISCLOSURE OF CONDITION OF BORROWER. The Guarantor warrants and
represents to FINOVA that: (a) this Guaranty is executed at the Borrower's
request; (b) the Guarantor has established adequate means of obtaining from the
Borrower on a continuing basis financial and other information pertaining to the
Borrower's affairs or business; and (c) the Guarantor is now and will be
familiar with the affairs, business, operation and condition of the Borrower and
its assets. The Guarantor hereby waives any duty on the part of FINOVA to
disclose to the Guarantor any matter relating to the affairs, business,
operation or condition of the Borrower and its assets now known or hereafter
known to FINOVA during the life of this continuing Guaranty. With respect to any
debt of the Borrower to FINOVA, FINOVA need not inquire into the powers of the
Borrower or the officers, directors or agents acting or purporting to act on its
behalf, and any debt created in reliance upon the professed exercise of such
powers shall be guaranteed hereunder.
<PAGE>
5. WAIVERS REGARDING THE GUARANTEED DEBT. The Guarantor expressly waives
the following: notice of the incurring of debt by the Borrower; notice of
default on the debt or intent to accelerate; notice of acceleration; notice of
intent to accelerate; the acceptance of this Guaranty by FINOVA; presentment and
demand for payment, protest, notice of protest and notice of dishonor or
nonpayment of any instrument evidencing debt of the Borrower; any right to
require the pursuit of any remedies against the Borrower or any other guarantor,
including commencement of suit, before enforcing this Guaranty (this is a
guaranty of payment, not a guaranty of collection); any right to have security
or the right of setoff applied before enforcing this Guaranty; and any and all
right of subrogation to FINOVA's rights against the Borrower, other guarantors
or any other person or entity; all diligence in collection and failure or delay
by FINOVA in protection or exercise of FINOVA's rights against Borrower; and any
other action or any other encumbrance whatsoever which might constitute a
defense to the enforcement of this Guaranty.
The Guarantor hereby consents and agrees that renewals and extensions of
time of payment (including interest rate adjustments), surrender, release,
exchange, substitution, dealing with or taking of additional collateral,
modifying any obligations of, taking or release of other guarantors, abstaining
from taking advantage of or realizing upon any collateral security or other
guaranty and any and all other forbearances or indulgences granted by FINOVA to
the Borrower or any other party may be made, granted or effected by FINOVA
without notice to the Guarantor and without affecting in any manner Guarantor's
liability hereunder. The Guarantor hereby expressly consents to any impairment
of collateral including, but not limited to, failure to perfect a security
interest and release of collateral.
Any adjustment or compromise may be made by FINOVA with the Borrower or any
other party to the debt, and a lesser sum than the face amount thereof may be
accepted in full payment and discharge. Any of the collateral or other security
granted by the Borrower or any other party which FINOVA may hold or which may
come to it or its possession may be released or otherwise dealt with by FINOVA
in all respects as if this Guaranty were not in existence and the obligation of
the Guarantor shall in no way be affected thereby. The Guarantor hereby waives
and foregoes any right in respect of any such action by FINOVA.
6. FINOVA'S COLLECTION RIGHTS AGAINST GUARANTOR. The Guarantor agrees to
pay to FINOVA any and all costs, expenses and reasonable attorney's fees paid or
incurred by FINOVA in collecting or endeavoring to collect the debt of the
Borrower or in enforcing or endeavoring to enforce this Guaranty, unless
recovery of attorney's fees is invalid under applicable state or federal law. In
addition to its other rights and remedies under this Guaranty, FINOVA may
require, at FINOVA's option, collateral security to support the Guarantor'
obligations upon Borrower's default of any loan agreement with FINOVA if
thereupon FINOVA reasonably deems itself insecure; if such a requirement is
imposed, now or in the future, FINOVA shall have any rights and remedies
contained in any mortgage, security agreement or other document executed by the
Guarantor. If the Guarantor refuses to execute such documents, the debt of the
Borrower shall, for the purposes of this Guaranty, be deemed to have matured.
7. BANKRUPTCY OF BORROWER. Guarantor agrees that this Guaranty shall not be
discharged except (subject to the limitations expressly contained herein) by
complete performance of Borrower's obligations to FINOVA and further agree that
the obligations of the Guarantor hereunder shall not be discharged, reduced or
affected in any way by any receivership, insolvency, bankruptcy or other
proceedings affecting the Borrower or any of its assets or the release or
discharge of the Borrower from the performance of any obligations to FINOVA,
whether by operation of law or otherwise or any other cause, whether similar or
dissimilar to the foregoing.
8. ASSIGNMENT. FINOVA may assign its rights hereunder in whole or in part
and upon any such assignment all the terms and provisions of this Guaranty shall
inure to the benefit of such assignee, to the extent so assigned.
9. MATURITY, PAYMENT. The Guarantor agrees that if the maturity of any of
the debt is accelerated by bankruptcy or otherwise, such maturity shall also be
deemed accelerated for the purpose of this Guaranty without demand or notice of
any kind to the Guarantor. Guarantor further agrees that, to the extent that the
Borrower or any other Person makes a payment to FINOVA on account of the
Indebtedness, or FINOVA receives any proceeds of collateral, which payment or
any part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside, or otherwise
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required to be repaid to the Borrower or any other party, including without
limitation, it's estate, trustee or receiver, under any bankruptcy, insolvency,
or other similar law, whether state or federal or under any common law or
equitable claim; then to the extent of such payment or repayment, the obligation
or part thereof which has been paid, reduced or satisfied by such amount shall
be reinstated and continued in full force and effect as of the date such initial
payment, reduction or satisfaction occurred. The Guarantor shall defend and
indemnify FINOVA of and from any claim or loss under this paragraph including
FINOVA's attorneys' fees and expenses in the defense of any such action or suit.
The Guarantor will, forthwith upon notice from FINOVA of the Borrower's failure
to pay any debt at maturity, pay to FINOVA at FINOVA's principal offices the
amount due and unpaid by the Borrower and guaranteed hereby. The failure of
FINOVA to give this or any notice shall not in any way release the Guarantor
hereunder.
10. NO ORAL MODIFICATIONS. This Guaranty shall not be suspended, amended,
released, terminated or modified in any manner except by an instrument in
writing signed by all parties to be bound.
11. WAIVER OF DEFAULT. No wavier by FINOVA of any default of any provision
of this Guaranty Agreement shall be deemed a waiver of any other pre-existing or
subsequently existing default, nor shall any such waiver by FINOVA be deemed a
continuing waiver. No delay or omission by FINOVA in exercising any right
hereunder, at any law or in equity, or otherwise, shall impair any such right or
be construed as a waiver thereof, acquiescence therein, nor shall any single or
partial exercise of any right preclude other or further exercise of any other
right that may exist or that may thereafter exist.
12. INDEMNIFICATION. In the event of the breach of this Guaranty, by
Guarantor, Guarantor hereby agrees to indemnify and hold FINOVA harmless from
any and all resulting claims and damages, including attorney's fees, and all
other costs.
13. GOVERNING LAW. This Guaranty is executed and delivered by Guarantor and
is performable in Maricopa County, Arizona, and shall be governed by and
construed in accordance with the laws of the State of Arizona.
14. JURISDICTION AND VENUE. Any suit, action or proceeding against
Guarantor with respect to this Guaranty, the Loan Documents, as such term is
defined in the Loan Agreement, or any judgment entered by any court in respect
thereof, may be brought in any local, state or federal court in the State of
Arizona located in Maricopa County and Guarantor hereby submits to the
nonexclusive jurisdiction of such courts for the purpose of any such suit,
action or proceeding. Guarantor hereby further irrevocably consents to the
service of process in any suit, action or proceeding in said court by the
mailing thereof by Lender by registered or certified mail, postage thereon
prepaid, to Guarantor at its address set forth in the Loan Agreement. Guarantor
hereby irrevocably waives any objections which it may now or hereafter have to
the laying of venue of any suit, action or proceeding arising out of or relating
to this Guaranty or the Loan Documents brought in any local, state or federal
court of the State of Arizona located in Maricopa County and hereby further
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in any inconvenient forum.
15. WAIVER OF RIGHT TO TRIAL BY JURY. GUARANTOR AND FINOVA HEREBY COVENANT
AND AGREE THAT IN ANY SUIT, ACTION OR PROCEEDING IN RESPECT OF ANY MATTER
ARISING OUT OF THIS GUARANTY, THE LOAN DOCUMENTS OR TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE, TRIAL SHALL
BE TO A COURT OF COMPETENT JURISDICTION AND NOT TO A JURY; GUARANTOR HEREBY
EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY. ANY PARTY MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS GUARANTY WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
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16. ADVICE OF COUNSEL. Guarantor acknowledges that it has been advised by
counsel with respect to the transaction governed by this Guaranty and
specifically with respect to the terms of Sections 13, 14 and 15.
IN WITNESS WHEREOF, this Guaranty has been executed and delivered to FINOVA
by the undersigned Guarantor on the day of January, 1997.
ECKLER INDUSTRIES, INC.
---------------------------------------------
Gary Smith, President
THE STATE OFARIZONA )
ss.)
COUNTY OF MARICOPA )
BE IT REMEMBERED, that on 4th day of February, 1997 before me, the
undersigned, a Notary Public within and for the County and State aforesaid, came
Gary Smith, President of Eckler Industries, Inc., who is personally known to me
to be the person and said officer whose name is subscribed to the foregoing
instrument of writing, and acknowledged to me that he executed the said
instrument for the purposes and consideration therein expressed and in the
capacity as therein stated for the act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year last above written.
________________________________________________
NOTARY PUBLIC, STATE OF_________________________
My commission expires:__________________________
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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), entered into this _______
day of November, 1996, by and among SMART CHOICE HOLDINGS, INC., a Delaware
corporation (the "Buyer") and GARY SMITH, an individual (the "Stockholder");
W I T N E S S E T H:
WHEREAS, Florida Finance Group, a Florida corporation (the "Company"),
is engaged in a business consisting primarily of finance and leasing activities
in connection with the sale of new and used automobiles and other consumer
vehicles (the "Business"); and
WHEREAS, the Stockholder is the record and beneficial owner of all of
the issued and outstanding capital stock of the Company (the "Stock"); and
WHEREAS, the Buyer desires to purchase from the Stockholder, and the
Stockholder desires to sell to the Buyer, all upon the terms and subject to the
conditions set forth in this Agreement, all (and not less than all) of the
Stock, and the business of the Company as a going concern;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereby agree as follows:
1. ACQUISITION OF THE STOCK.
1.1 EXCHANGE OF SHARES. Subject to the terms and conditions of this
Agreement, on the date hereof, the Buyer is purchasing and acquiring from the
Stockholder, and the Stockholder is selling and transferring to the Buyer, all
(and not less than all) of the Stock, solely in exchange for the shares of
common stock of the Buyer provided for in Section 2 below. In furtherance
thereof, the Stockholder is, simultaneously with the execution and delivery of
this Agreement, delivering to the Buyer the certificates representing all of the
Stock, duly endorsed for transfer or accompanied by stock powers executed in
blank for transfer.
1.2 BOOKS AND RECORDS. On the date hereof, in addition to the
delivery and transfer of the Stock to the Buyer, the Stockholder is delivering,
and causing the Company to deliver, to the Buyer all of the stock books, records
and minute books of the Company, all financial and accounting books and records
of the Company, and all referral, client, customer and sales records of the
Company.
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2. CONSIDERATION.
2.1 SHARES.
(a) As the sole consideration for the Stock, the Buyer is
issuing to the Stockholder an aggregate of 285,714 shares of common stock of the
Buyer (the "Shares"), which are being issued and delivered to the Stockholder
concurrently with the execution and delivery of this Agreement, and which the
Buyer and the Stockholders agree have an aggregate fair value on the date hereof
of $____________ (the "Company Valuation"). The Company Valuation represents an
amount calculated as the difference of (i) 85% of the aggregate outstanding
principal amount of all outstanding finance receivables, accounts receivable,
notes receivable and other rights to receive payment under outstanding credit
agreements, finance leases and other such agreements under which the Company is
the payee or obligee (the "Receivables"), minus (ii) the sum of (A) the
aggregate principal amount, and all unpaid accrued interest thereon, of all
borrowings owed by the Company to Finova Credit Corporation and/or any of its
affiliates ("Finova"), plus (B) the $1,000,000 (approximate) principal amount,
and all unpaid accrued interest thereon, owed by the Company to certain private
investors as listed in SCHEDULE 4.17 annexed hereto, plus (C) $250,000.
(b) In the event that NEITHER of the following events occurs:
(i) the Buyer consummates an initial public offering of its common stock on or
prior to June 30, 1997, or (ii) the Buyer consummates, on or prior to June 30,
1997, a merger, share exchange or other business combination (a "Combination")
with another entity (an "Exchange Entity") whereby the stockholders of the Buyer
receive shares of such Exchange Entity of a class which is listed or traded on
any national securities exchange or recognized automated quotation system (such
as NASDAQ); THEN the Buyer shall redeem all of the Shares for an aggregate price
equal to the Company Valuation, which shall be payable in immediately available
funds within sixty (60) days after written demand therefor made at any time
after July 1, 1997 and prior to the occurrence of either of the events described
in clauses (i) and (ii) of this Section 2.1(b) (without regard to the date of
the occurrence of such event).
3. REORGANIZATION.
3.1 TAX-FREE REORGANIZATION. The parties intend that the
transactions pursuant to this Agreement qualify as a tax-free reorganization
under the Internal Revenue Code of 1986, as amended, and the parties shall
report these transactions and take such actions and otherwise conduct their
affairs so as to give effect to such intention.
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4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER.
In connection with the sale and transfer of the Stock to the
Buyer, the Stockholder hereby represents and warrants to the Buyer as follows:
4.1 TITLE TO THE STOCK. The Stockholder is the valid and lawful
record and beneficial owner of all of the Stock. All of the Stock has been duly
authorized and validly issued and is fully paid and non-assessable, and is free
and clear of all pledges, liens, claims, charges, options, calls, encumbrances,
restrictions and assessments whatsoever (except any restrictions which may be
created by operation of state or federal securities laws). The Buyer is
receiving from the Stockholder good, valid and marketable title to all of the
Stock, free and clear of all pledges, liens, claims, charges, options, calls,
encumbrances, restrictions and assessments whatsoever (except any restrictions
which may be created by operation of state or federal securities laws).
4.2 VALID AND BINDING AGREEMENT; NO BREACH.
(a) The Stockholder has full legal right, power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement constitutes the legal, valid and binding
obligation of the Stockholder, enforceable against the Stockholder in accordance
with its terms, except to the extent that such enforceability may be limited by
bankruptcy, insolvency, reorganization and other laws affecting creditors'
rights generally, and except that the remedy of specific performance or similar
equitable relief is available only at the discretion of the court before which
enforcement is sought.
(b) Except as disclosed in SCHEDULE 4.2 annexed hereto,
neither the execution and delivery of this Agreement by the Stockholder, nor
compliance with the terms and provisions of this Agreement on the part of the
Stockholder, will: (i) violate any statute or regulation of any governmental
authority, domestic or foreign, affecting the Company or the Stockholder; (ii)
require the issuance of any authorization, license, consent or approval of any
federal or state governmental agency; or (iii) conflict with or result in a
breach of any of the terms, conditions or provisions of any judgment, order,
injunction, decree, note, indenture, loan agreement or other agreement or
instrument to which the Company or the Stockholder is a party, or by which the
Company or the Stockholder is bound, or constitute a default thereunder.
4.3 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Florida, with full corporate power and authority to own its
assets and conduct its business as owned and conducted on the date hereof. The
Company is not required to be qualified as a foreign corporation under the
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laws of any jurisdiction. True and complete copies of the Certificate of
Incorporation and By-Laws of the Company (including all amendments thereto), and
a correct and complete list of the officers and directors of the Company, are
annexed hereto as SCHEDULE 4.3.
4.4 CAPITAL STRUCTURE; EQUITY OWNERSHIP.
(a) The authorized capital stock of the Company is as set
forth in its Certificate of Incorporation as included in SCHEDULE 4.3, and the
Stock constitutes and represents all of the outstanding capital stock of the
Company.
(b) There are no outstanding subscriptions, options, rights,
warrants, convertible securities or other agreements or calls, demands or
commitments obligating the Company to issue, transfer or purchase any shares of
its capital stock, or obligating the Stockholder to transfer any shares of the
Stock. No shares of capital stock of the Company are reserved for issuance
pursuant to stock options, warrants, agreements or other rights to purchase
capital stock.
4.5 SUBSIDIARIES AND INVESTMENTS. The Company does not own,
directly or indirectly, any stock or other equity securities of any corporation
or entity, or have any direct or indirect equity or ownership interest in any
person, firm, partnership, corporation, venture or business other than the
business conducted by the Company.
4.6 FINANCIAL INFORMATION.
(a) Annexed hereto as SCHEDULE 4.6(A) are the unaudited
financial statements (including balance sheet, income statement and statement of
cash flows) for the Company as of December 31, 1993, December 31, 1994 and
December 31, 1995 and for each of the years then ended, and as of June 30, 1996
and for the six (6) months then ended (collectively, the "Financial
Statements"), all of which fairly reflect, in all material respects, the
financial condition and results of operations of the Company as of the dates
thereof and for the periods then ended; and, without limitation of the
foregoing, the Company does not have any material liabilities, fixed or
contingent, known or unknown, except to the extent reflected in the most recent
of such Financial Statements or thereafter incurred in the normal course of the
Company's business.
(b) Annexed hereto as SCHEDULE 4.6(B) are the payment
histories of each of the credit agreements, finance leases and other agreements
underlying the Receivables, all of which fairly present the dates and amounts of
all receipts and disbursements under or in respect of such credit agreements,
finance leases and other agreements. Except as and to the extent
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reflected in such payment histories, (i) all payments under such credit
agreements, finance leases and other agreements have been made in a full and
timely manner, and (ii) there have been no prepayments made in respect of any
such credit agreements, finance leases or other agreements.
4.7 NO MATERIAL CHANGES. Except as disclosed in SCHEDULE 4.7
annexed hereto, since the date of the most recent of the Financial Statements,
(a) the business of the Company has been operated solely in the normal course,
(b) there has been no material adverse change in the financial condition,
operations or business of the Company from that reflected in such Financial
Statements, (c) the Company has not incurred any material obligation or
liability except in the normal course of business, (d) the Company has not
effected or suffered any material modification in its collection practices, or
with respect to the timing and manner of payment of its accounts payable, and
(e) there has not been any (i) sale, assignment or transfer by the Company of
any assets or other part of its business, excluding the sale or disposition of
inventory, and/or the sale of loans, in the ordinary course of business, (ii)
acquisitions or commitments to acquire (whether by purchase, lease or otherwise)
any capital assets by the Company wherein the aggregate payments will exceed
$10,000, (iii) increase or commitment to increase the compensation or benefits
of any employees of the Company, (iv) implementation or institution of any
bonus, benefit, profit-sharing, pension, retirement or other plan or similar
arrangement which was not in existence on June 30, 1996, or (v) new employment
agreement, or modification of any existing employment agreement, by the Company.
4.8 TAX MATTERS.
(a) The Company has, to the date hereof, timely filed all tax
reports and tax returns required to be filed by the Company, and the Company has
paid all taxes, assessments and other impositions as and to the extent required
by applicable law. All federal, state and local income, franchise, sales, use,
property, excise and other taxes (including interest and penalties and including
estimated tax installments where required to be filed and paid) due from or with
respect to the Company as of the date hereof have been fully paid, and all taxes
and other assessments and levies which the Company is required by law to
withhold or to collect have been duly withheld and collected and have been paid
over to the proper governmental authorities to the extent due and payable. There
are no outstanding or pending claims, deficiencies or assessments for taxes,
interest or penalties with respect to any taxable period of the Company.
(b) Except as disclosed in SCHEDULE 4.8 annexed hereto, there
are no audits pending with respect to any federal, state or local tax reports or
tax returns of the Company, and no
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waiver of statutes of limitations have been given or requested with respect to
any tax years or tax filings of the Company.
4.9 TITLE AND CONDITION OF THE ASSETS. Except for liens securing
the Company's indebtedness to Finova as described in Section 2.1(a)(ii)(A) above
(which liens secure only such indebtedness), the Company has and owns good and
marketable title to all of its assets, free and clear of all liens, pledges,
claims, security interests and encumbrances of every kind and nature. All of the
Company's fixed assets are in good operating condition and repair (reasonable
wear and tear excepted), are adequate for their use in the Business as presently
conducted, and are sufficient for the continued conduct of such Business.
4.10 RECEIVABLES. All of the Receivables (whether reflected in
the Financial Statements or thereafter created or acquired by the Company prior
to the date hereof), (a) have arisen in the normal course of the Company's
business, (b) are not subject to any counterclaims, set-offs, allowances or
discounts of any kind, and (c) have been, are and will be valid and generally
collectible in the ordinary course of the Business; and the Stockholder has no
knowledge of any material or unusual risk of non-payment of any of the
Receivables.
4.11 INVENTORY. All of the Company's inventory (whether reflected
in the Financial Statements or thereafter acquired by the Company prior to the
date hereof) is of a quality, age and quantity consistent with the historical
practices of the Company, and is valued on the Company's books at cost.
4.12 LEGAL COMPLIANCE.
(a) The Company is, and for the past three (3) years has been,
in compliance in all material respects with all laws, statutes, regulations,
rules and ordinances applicable to the conduct of its business (including,
without limitation, all applicable environmental laws, statutes, regulations,
rules and ordinances), and has in full force and effect all licenses, permits
and other authorizations required for the conduct of its business as presently
constituted; and the Company is not in default or violation in respect of or
under any of the foregoing, and none of such licenses, permits or other
authorizations will be voided, revoked or terminated, or voidable, revocable or
terminable, upon and by reason of the change of ownership of the Company
pursuant to this Agreement. The Stockholders is not aware of any past or present
condition or circumstance in the Company's business (including, without
limitation, with respect to any real property now or previously occupied by the
Company) which could give rise to any material liability under any such law,
statute, regulation, rule or ordinance.
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(b) To the best of the Stockholder's knowledge, the Company
has not, at any time during the three (3) year period prior to the date hereof,
(i) handled, stored, generated, processed or disposed of any hazardous
substances in violation of any federal, state or local environmental laws or
regulations, (ii) otherwise committed any material violation of any federal,
state or local environmental laws or regulations or any material violation of
the Occupational Safety and Health Act, or (iii) been in material violation of
any requirements of its insurance carriers from time to time.
(c) Neither the Company nor the Stockholder has received any
written notice of default or violation, nor, to the best of the Stockholder's
knowledge, is the Company or any of its directors, officers or employees in
default or violation, with respect to any judgment, order, writ, injunction,
decree, demand or assessment issued by any court or any federal, state, local,
municipal or other governmental agency, board, commission, bureau,
instrumentality or department, domestic or foreign, relating to any aspect of
the Company's business, affairs, properties or assets. Neither the Company nor
the Stockholder has received written notice of, been charged with, or is, to the
best of the Stockholder's knowledge, under investigation with respect to, any
violation of any provision of any federal, state, local, municipal or other law
or administrative rule or regulation, domestic or foreign, relating to any
aspect of the Company's business, affairs, properties or assets, which violation
would have a material adverse effect on the Company, its business or any
material portion of its assets.
4.13 REAL PROPERTY. The Company does not own any real estate or
any interest therein, except to the extent of its interest as lessee under the
lease for its business premises (the "Lease", a true and complete copy of which
is annexed hereto as SCHEDULE 4.13). The Company (and, to the best of the
Stockholder's knowledge, the landlord thereunder) is presently in compliance
with all of its obligations under the Lease, and the premises leased thereunder
are in good condition (reasonable wear and tear excepted), and are adequate for
the operation of the Business as presently conducted. No consent of the landlord
under the Lease which has not previously been obtained is required in connection
with the transactions contemplated by this Agreement.
4.14 INSURANCE. The Company maintains, has in full force and
effect, and has paid all premiums in respect of insurance covering its business
and assets against such hazards and in such amounts as are normal and customary
for businesses of similar size, scope and nature.
4.15 EMPLOYEES. Except as disclosed in SCHEDULE 4.15 annexed
hereto, the Company is not a party to or bound by any collective bargaining
agreement, employment agreement, consulting agreement or other commitment for
the employment or retention of
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any person, and no union is now certified or has claimed the right to be
certified as a collective bargaining agent to represent any employees of the
Company. The Company has not had any material labor difficulty in the past two
(2) years, and neither the Company nor the Stockholder has received notice of
any unfair labor practice charges against the Company or any actual or alleged
violation by the Company of any law, regulation, or order affecting the
collective bargaining rights of employees, equal opportunity in employment, or
employee health, safety, welfare, or wages and hours.
4.16 EMPLOYEE BENEFITS. The Company does not maintain and is not
required to make any contributions to any pension, profit-sharing, retirement,
deferred compensation or other such plan or arrangement for the benefit of any
employee, former employee or other person, and the Company does not have any
obligations with respect to deferred compensation or future benefits to any past
or present employee. SCHEDULE 4.16 annexed hereto fairly summarizes the employee
benefits currently granted by the Company to its employees.
4.17 CONTRACTS AND COMMITMENTS. The Company has previously
provided reasonable access to the Buyer and its representatives to permit such
persons to inspect and copy all of the credit agreements, finance leases and
other agreements underlying the Receivables. Other than (a) such credit
agreements, finance leases and other agreements underlying the Receivables, (b)
the Lease, and (c) those contracts and commitments listed on SCHEDULE 4.17
annexed hereto, there is no contract, agreement, commitment or understanding
which is material to the ongoing operation of the Business. To the best of the
Stockholder's knowledge, all of such agreements and contracts are in full force
and effect, and there is no material default or non-performance outstanding
thereunder. None of such agreements or contracts will be voided, revoked or
terminated, or voidable, revocable or terminable, upon and by reason of the
change of ownership of the Company pursuant to this Agreement.
4.18 LITIGATION. There is no pending or, to the best knowledge of
the Stockholder, threatened litigation, arbitration, administrative proceeding
or other legal action or proceeding against the Company or relating to its
business. The Stockholder is not aware of any state of facts, events, conditions
or occurrences which the Stockholder should reasonably believe would properly
constitute grounds for or the basis of any suit, action, arbitration, proceeding
or investigation against or with respect to the Company.
4.19 INTELLECTUAL PROPERTY. The Company has the valid right to
utilize all trade names and other intellectual property utilized in its
business, and has not received notice of any
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claimed infringement of any of such intellectual property with the rights or
property of any other person.
4.20 BANK ACCOUNTS. Annexed hereto as SCHEDULE 4.20 is a correct
and complete list of all bank accounts and safe deposit boxes maintained by or
on behalf of the Company, with indication of all persons having signatory,
access or other authority with respect thereto.
4.21 GOING CONCERN. The Stockholder has no knowledge of any fact,
event, circumstance or condition (including but not limited to any announced or
anticipated changes in the policies of any material supplier, referral source,
client or customer) that would materially impair the ability of the Company to
continue the Business in substantially the manner heretofore conducted (other
than general, industry-wide conditions).
4.22 THE SHARES. The Stockholder hereby confirms that the Shares
constitute "restricted securities" under applicable federal and state securities
laws, and that the Shares may not be resold in the absence of an effective
registration thereof under federal and state securities laws or an available
exemption from such registration requirements. The Stockholder further confirms
that he has received no assurance whatsoever as to whether or when any of the
Shares will be registered under federal or state securities laws, and that,
accordingly, the Stockholder may be required to hold the Shares indefinitely.
4.23 DISCLOSURE AND DUTY OF INQUIRY. The Buyer is not and will
not be required to undertake any independent investigation to determine the
truth, accuracy and completeness of the representations and warranties made by
the Stockholder in this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
In connection with the Buyer's acquisition of the Stock, the
Buyer hereby represents and warrants to the Stockholder as follows:
5.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with all necessary power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
5.2 AUTHORIZATION OF AGREEMENT. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Buyer has been duly and validly authorized by the
Board of Directors of the Buyer. No further corporate authorization is required
on the part of the Buyer to consummate the transactions contemplated hereby.
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5.3 VALID AND BINDING AGREEMENT. This Agreement constitutes the
legal, valid and binding obligation of the Buyer, enforceable against the Buyer
in accordance with its terms, except to the extent limited by bankruptcy,
insolvency, reorganization and other laws affecting creditors' rights generally,
and except that the remedy of specific performance or similar equitable relief
is available only at the discretion of the court before which enforcement is
sought.
5.4 NO BREACH OF STATUTE OR CONTRACT. Neither the execution and
delivery of this Agreement by the Buyer, nor compliance with the terms and
provisions of this Agreement on the part of the Buyer, will: (a) violate any
statute or regulation of any governmental authority, domestic or foreign,
affecting the Buyer; (b) require the issuance of any authorization, license,
consent or approval of any federal or state governmental agency; (c) conflict
with or result in a breach of any of the terms, conditions or provisions of any
judgment, order, injunction, decree, note, indenture, loan agreement or other
agreement or instrument to which the Buyer is a party, or by which the Buyer is
bound, or constitute a default thereunder; or (d) require the consent of any
third party under any outstanding statute, regulation, judgment, order,
injunction, decree, agreement or instrument to which the Buyer is a party, or by
which the Buyer is bound.
5.5 ISSUANCE OF SHARES. The issuance of the Shares hereunder has
been duly authorized by all necessary corporate action on the part of the Buyer,
and the Shares are validly issued, fully paid and non-assessable. The Shares are
part of the only class of voting stock of the Buyer authorized on the date
hereof.
5.6 INVESTMENT. The Buyer is purchasing the Stock for its own
account for investment, and not with a view to the resale or distribution
thereof in violation of any applicable securities laws.
5.7 DISCLOSURE AND DUTY OF INQUIRY. The Stockholder is not and
will not be required to undertake any independent investigation to determine the
truth, accuracy and completeness of the representations and warranties made by
the Buyer in this Agreement.
6. ADDITIONAL AGREEMENTS.
6.1 RESIGNATIONS. In addition to the other deliveries being made
pursuant to this Agreement on the date hereof, the Stockholders are causing to
be executed and delivered to the Company the resignations of all officers and
directors of the Company (except to the extent that such resignations are not
being required by the Buyer).
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6.2 AUDIT OF FINANCIAL STATEMENTS. The Stockholder shall, from
time to time as and when requested by the Buyer from and after the date hereof,
cooperate with and assist the Buyer in all reasonable respects in dealing with
the accountants heretofore retained by the Company, in order that the Buyer and
its accountants may obtain copies of all work papers utilized or prepared by the
Company's accountants in connection with their review of the Financial
Statements, and consult with the Company's accountants as and to the extent
necessary or appropriate in connection with the preparation of audited financial
statements of the Company for all periods from and after January 1, 1993 in
accordance with Regulation S-X promulgated under the Securities Act of 1933, as
amended.
7. [INTENTIONALLY OMITTED].
8. INDEMNIFICATION.
8.1 GENERAL.
(a) The Stockholder shall defend, indemnify and hold harmless
the Buyer from, against and in respect of any and all claims, losses, costs,
expenses, obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties and reasonable attorneys' fees, that the Buyer may
incur, sustain or suffer ("Losses") as a result of any breach of, or failure by
the Stockholder to perform, any of the representations, warranties, covenants or
agreements of the Stockholder contained in this Agreement or in any Schedule(s)
furnished by or on behalf of the Company or the Stockholder under this
Agreement.
(b) The Buyer shall defend, indemnify and hold harmless the
Stockholder from, against and in respect of any and all claims, losses, costs,
expenses, obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties and reasonable attorneys' fees, that the
Stockholder may incur, sustain or suffer as a result of any breach of, or
failure by the Buyer to perform, any of the representations, warranties,
covenants or agreements of the Buyer contained in this Agreement.
8.2 LIMITATIONS ON CERTAIN INDEMNITY.
(a) Notwithstanding any other provision of this Agreement to
the contrary, (i) the Stockholder shall not be liable to the Buyer with respect
to Losses unless and until the aggregate amount of all Losses incurred by the
Buyer shall exceed the sum of $10,000 (the "Basket"), and (ii) the Stockholder
shall thereafter be liable for all Losses in excess of the Basket, provided that
the Stockholder's maximum aggregate liability in respect of all Losses shall
not, in the absence of proven fraud by the Stockholder in respect of any
particular Losses, in any event exceed the limitations set forth in Section
8.2(b) below; PROVIDED, HOWEVER,
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that the Basket and such limitation on liability shall not be available with
respect to, and there shall not be counted against the Basket or such limitation
of liability, any Losses arising by reason of any Losses involving proven fraud
by the Stockholder.
(b) Except with respect to any Losses involving proven fraud
by the Stockholder, the Stockholder shall not be required to pay indemnification
hereunder in an aggregate amount in excess of the Company Valuation. The
Stockholder shall have the option of satisfying all or any portion of any claim
in respect of Losses by tendering to the Buyer for cancellation a number of
Shares (which, for purposes of this Section 8.2(b), shall include any shares of
an Exchange Entity issued in exchange or substitution for the Shares by reason
of any Combination) having an aggregate value (determined in accordance with
Section 2.1 above, subject to appropriate arithmetic adjustment to account for
any stock split, stock dividend, combination of shares or other such event
(including any Combination) which may occur at any time or from time to time
subsequent to the date hereof in respect of the outstanding common stock of the
Buyer) equal to the amount of the subject claim which is to be satisfied in such
manner.
(c) The Buyer shall be entitled to indemnification by the
Stockholder for Losses only in respect of claims for which notice of claim shall
have been given to the Stockholder on or before December 31, 1997.
8.3 CLAIMS FOR INDEMNITY. Whenever a claim shall arise for which
any party shall be entitled to indemnification hereunder, the indemnified party
shall notify the indemnifying party or parties in writing within sixty (60) days
of the indemnified party's first receipt of notice of, or the indemnified
party's obtaining actual knowledge of, such claim, and in any event within such
shorter period as may be necessary for the indemnifying party or parties to take
appropriate action to resist such claim. Such notice shall specify all facts
known to the indemnified party giving rise to such indemnity rights and shall
estimate (to the extent reasonably possible) the amount of potential liability
arising therefrom. If an indemnifying party shall be duly notified of such
dispute, the parties shall attempt to settle and compromise the same or may
agree to submit the same to arbitration or, if unable or unwilling to do any of
the foregoing, such dispute shall be settled by appropriate litigation, and any
rights of indemnification established by reason of such settlement, compromise,
arbitration or litigation shall promptly thereafter be paid and satisfied by
those indemnifying parties obligated to make indemnification hereunder.
8.4 RIGHT TO DEFEND. If the facts giving rise to any claim for
indemnification shall involve any actual or threatened action or demand by any
third party against the indemnified party or any of its affiliates, the
indemnifying party or parties shall
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be entitled (without prejudice to the indemnified party's right to participate
at its own expense through counsel of its own choosing), at their expense and
through a single counsel of their own choosing, to defend or prosecute such
claim in the name of the indemnifying party or parties, or any of them, or if
necessary, in the name of the indemnified party. In any event, the indemnified
party shall give the indemnifying party advance written notice of any proposed
compromise or settlement of any such claim. If the remedy sought in any such
action or demand is solely money damages, the indemnifying party shall have
fifteen (15) days after receipt of such notice of settlement to object to the
proposed compromise or settlement, and if it does so object, the indemnifying
party shall be required to undertake, conduct and control, though counsel of its
own choosing and at its sole expense, the settlement or defense thereof, and the
indemnified party shall cooperate with the indemnifying party in connection
therewith.
9. POST-CLOSING EVENTS.
9.1 DEBT REFINANCING. Simultaneous with the consummation of the
transactions contemplated hereby, the Buyer is causing the Company to (a)
consummate the renegotiation and/or refinancing of the Company's indebtedness to
Finova (as described in Section 2.1(a)(ii)(A) above, and (b) utilize additional
cash proceeds generated by such renegotiation and/or refinancing to repay in
full those obligations of the Company described in Section 2.1(a)(ii)(B) above.
9.2 ANNOUNCEMENTS. No party hereto shall make any disclosure or
public announcement of the consummation of the transactions pursuant to this
Agreement, or of any of the terms thereof, without the prior review and approval
thereof by the Buyer (in the case of any proposed disclosure or public
announcement by the Stockholder) or the Stockholder (in the case of any proposed
disclosure or public announcement by the Buyer), such approval not to be
unreasonably withheld or delayed.
9.3 BANK ACCOUNTS. Upon the consummation of the transactions
pursuant to this Agreement, the Stockholder shall cooperate with the Buyer to
promptly modify to the Buyer's satisfaction the signatory and access
arrangements for all bank accounts and safe deposit boxes maintained by or in
the name of the Company.
9.4 FURTHER ASSURANCES. From time to time from and after the date
hereof, the parties will execute and deliver to one another any and all further
agreements, instruments, certificates and other documents as may reasonably be
requested by any other party in order more fully to consummate the transactions
contemplated hereby, and to effect an orderly transition of the ownership and
operations of the Business.
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10. COSTS.
10.1 FINDER'S OR BROKER'S FEES. Each of the Buyer and the
Stockholder represents and warrants that neither it nor he nor any of their
respective affiliates have dealt with any broker or finder in connection with
any of the transactions contemplated by this Agreement, and no broker or other
person is entitled to any commission or finder's fee in connection with any of
these transactions, except that the Buyer agrees to be solely responsible for
any compensation payable to Greyhouse Services Corporation in connection with
the transactions contemplated by this Agreement.
10.2 EXPENSES. The Buyer and the Stockholder shall each pay all
costs and expenses incurred or to be incurred by them, respectively, in
negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement.
11. FORM OF AGREEMENT.
11.1 EFFECT OF HEADINGS. The Section headings used in this
Agreement and the titles of the Schedules hereto are included for purposes of
convenience only, and shall not affect the construction or interpretation of any
of the provisions hereof or of the information set forth in such Schedules.
11.2 ENTIRE AGREEMENT; WAIVERS. This Agreement and the other
agreements and instruments referred to herein constitute the entire agreement
between the parties pertaining to the subject matter hereof, and supersede all
prior agreements or understandings as to such subject matter. No party hereto
has made any representation or warranty or given any covenant to the other
except as set forth in this Agreement, the Schedules hereto, and the other
agreements and instruments referred to herein. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
party making the waiver.
11.3 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12. PARTIES.
12.1 PARTIES IN INTEREST. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective heirs, executors, administrators, personal representatives,
successors and permitted
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assigns, nor is anything in this Agreement intended to relieve or discharge the
obligations or liability of any third persons to any party to this Agreement,
nor shall any provision give any third persons any right of subrogation or
action over or against any party to this Agreement.
12.2 NOTICES. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (a) on the date of service if served personally on the
party to whom notice is to be given, (b) on the day after the date sent by
recognized overnight courier service, properly addressed and with all charges
prepaid or billed to the account of the sender, or (c) on the third day after
mailing if mailed to the party to whom notice is to be given, by first class
mail, registered or certified, postage prepaid, and properly addressed as
follows:
(i) If to the Stockholder:
Gary Smith
c/o Florida Finance Group
4037 66th Street North
St. Petersburg, Florida 33709
(ii) If to the Buyer:
Smart Choice Holdings, Inc.
625 Main Street, Suite 25
Windermere, Florida 34786
Attn: Tom Conlan
or to such other address as any party shall have specified by notice in writing
given to the other party.
13. MISCELLANEOUS.
13.1 AMENDMENTS AND MODIFICATIONS. No amendment or modification
of this Agreement or any Schedule hereto shall be valid unless made in writing
and signed by the party to be charged therewith.
13.2 NON-ASSIGNABILITY; BINDING EFFECT. Neither this Agreement,
nor any of the rights or obligations of the parties hereunder, shall be
assignable by any party hereto without the prior written consent of all other
parties hereto. Otherwise, this Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns.
13.3 GOVERNING LAW; JURISDICTION. This Agreement shall be
construed and interpreted and the rights granted herein governed
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in accordance with the laws of the State of Florida applicable to contracts made
and to be performed wholly within such State. Except as otherwise provided in
Section 8.3 above, any claim, dispute or controversy arising under or in
connection with this Agreement or any actual or alleged breach hereof shall be
settled exclusively by arbitration to be held before a single arbitrator in
Orlando, Florida, or in any other locale or venue as legal jurisdiction may
otherwise be had over the party against whom the proceeding is commenced, in
accordance with the commercial arbitration rules of the American Arbitration
Association then obtaining. As part of his or her award, the arbitrator shall
make a fair allocation of the fee of the American Arbitration Association, the
cost of any transcript, and the parties' reasonable attorneys' fees, taking into
account the merits and good faith of the parties' claims and defenses. Judgment
may be entered on the award so rendered in any court having jurisdiction. Any
process or other papers hereunder may be served by registered or certified mail,
return receipt requested, or by personal service, provided that a reasonable
time for appearance or response is allowed.
IN WITNESS WHEREOF, the parties have executed this Agreement on and as
of the date first set forth above.
SMART CHOICE HOLDINGS, INC.
By:
------------------------
---------------------------
GARY SMITH
16
EXHIBIT 10.2
PROMISSORY NOTE
$1,031,008.36 January 28, 1997
FOR VALUE RECEIVED, the undersigned, FIRST CHOICE AUTO FINANCE, INC., a
Florida corporation (the "Maker"), hereby promises to pay to Suncoast Auto
Brokers, Inc. and Suncoast Auto Brokers Enterprises, Inc. as joint payees
hereunder(the "Payees"), the principal sum of One Million Thirty One Thousand
Eight and 36/100 ($1,031,008.36) Dollars, together with interest on the
outstanding principal balance hereunder accrued from the date hereof at the rate
of nine (9%) percent per annum. All payments of principal and/or interest shall
be paid as set forth below, and each such payment shall be made in lawful money
of the United States of America
1. PAYMENTS OF PRINCIPAL AND INTEREST.
(a) The principal of this Note (to the extent not converted into
Common Stock pursuant to paragraph 3 below) shall be due and payable on the
earlier of (i) fifteen (15) days after that date on which the Maker and/or any
of its corporate affiliates (including the Company named below) shall consummate
an underwritten public offering of its equity securities, or (ii) December 31,
1997. All accrued interest under this Note (to the extent not converted into
Common Stock pursuant to paragraph 3 below) shall be due and payable upon the
final maturity of the principal of this Note.
(b) In the event that any scheduled payment date hereunder is a day
on which banks in the State of Florida are required or authorized to be closed,
then the payment that would be due on such day shall instead be due and payable
on the next day which is not such a non-banking day, with additional interest
for such delay at the rate then in effect hereunder.
2. PREPAYMENT.
The Maker shall have the right, upon ten (10) days' prior written
notice to the Payees, to prepay, without premium or penalty, at any time or
times after the date hereof, all or any portion of the outstanding principal
balance of and/or accrued interest under this Note; PROVIDED, HOWEVER, that the
Payees shall have the right, at all times prior to the date fixed for prepayment
in the Maker's notice hereunder, to elect to convert all or any portion of the
amount to be prepaid into Common Stock pursuant to paragraph 3 below.
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3. CONVERSION.
(a) CONVERSION. The Payees shall have the right to elect to convert
all or any portion of the principal balance of and/or accrued interest under
this Note into common stock (the "Common Stock") of the Maker's corporate
parent, Smart Choice Holdings, Inc. or any successor ultimate corporate parent
including Eckler Industries, Inc. (collectively, the "Company") as set forth in
paragraph 3(b) below, at any time and from time to time on or prior to the date
(the "Conversion Date") on which the Company successfully completes an
underwritten public offering (the "Offering") of the Company's Common Stock. In
addition to the Payees' right at any time and from time to time to initiate any
conversion in a manner consistent herewith, the Company shall notify the Payees
in writing that the Company has completed the Offering within five (5) days
after such completion, and the Payees shall notify the Company in writing of the
Payees' election to convert this Note (or any portion thereof) within five (5)
days of the date on which the Company notifies the Payees that the Company has
completed the Offering. Absent affirmative election by the Payees to convert,
this Note shall be payable in accordance with paragraph 1 above.
(b) MECHANICS OF CONVERSION. Upon notice to the Company of the
Payees' election to convert as provided in paragraph 3(a) above, the Payees may
convert into Common Stock at the Conversion Price all or any portion of the
principal balance of and unpaid accrued interest under this Note as of the date
of any conversion initiated by the Payees or as of the Conversion Date, as the
case may be. Upon conversion, the amount to be converted (the "Conversion
Amount") shall be converted into Common Stock of the Company at the rate of one
share of Common Stock for each $8.75 of Conversion Amount (the "Conversion
Price"). No fractional shares of Common Stock shall be issued upon conversion.
In lieu of any fractional shares to which the Payees would otherwise be
entitled, the Company shall pay cash equal to such fraction multiplied by the
Conversion Price. To exercise the conversion rights, the Payees shall give
written notice to the Company at the Company's office as indicated below,
setting forth the Conversion Amount and the name or names of the Payees'
nominees, if any, in which the Payees wishes the certificate or certificates for
shares of Common Stock to be issued.
(c) ISSUANCE OF COMMON STOCK UPON CONVERSION. Within a reasonable
time, not exceeding twenty (20) days after the Conversion Date, the Company
shall deliver or cause to be delivered to or upon the written order of the
Payees certificates representing the number of fully paid and nonassessable
shares of Common Stock of the Company into which the Conversion Amount may be
converted in accordance with the provisions of this paragraph 3. Within a
reasonable time, not exceeding ten (10) days after receipt by the Payees or
their
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designee(s) of the certificates (and payment of any amounts hereunder not
included in the Conversion Amount), the Payees shall surrender this Note to the
Maker for cancellation. Subject to the following provisions of this paragraph 3,
such conversion shall be deemed to have occurred on the Conversion Date, so that
the Payees' or its designee(s) shall be treated for all purposes as having
become the record holder or holders of such shares of Common Stock at such time.
(d) TAXES ON CONVERSION. The issuance of certificates for shares of
Common Stock upon the conversion of the Conversion Amount shall be made without
charge by the Company to the Payees for any tax in respect of the issuance of
such certificates and such certificates shall be issued in the name of, or in
such names as may be directed by, the Payees; PROVIDED, HOWEVER, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance or delivery of any such certificate in a
name other than that of the Payees, and the Company shall not be required to
issue or deliver such certificates unless and until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
(e) ADJUSTMENT OF CONVERSION PRICE.
(i) STOCK DIVIDENDS, DISTRIBUTIONS OR SUBDIVISIONS. In the event
the Company shall, at any time and from time to time, issue additional shares of
Common Stock (or securities convertible into Common Stock) in a stock dividend,
stock distribution or subdivision paid with respect to Common Stock, or declare
any dividend or other distribution payable with additional shares of Common
Stock (or securities convertible into Common Stock) with respect to Common Stock
or effect a split or subdivision of the outstanding shares of Common Stock, the
Conversion Price shall, concurrently with the effectiveness of such stock
dividend, stock distribution or subdivision, or the earlier declaration thereof,
be proportionately decreased.
(ii) COMBINATIONS OR CONSOLIDATIONS. In the event the
outstanding shares of Common Stock shall, at any time and from time to time, be
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares of Common Stock, the Conversion Price shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.
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(f) NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or By-Laws or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary actin, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Company but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 3 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights hereunder against
impairment.
(g) COMMON STOCK RESERVED. The Company shall reserve and keep
available out of its authorized but unissued Common Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect the full
conversion of the principal balance of and unpaid accrued interest on this Note.
4. EVENTS OF DEFAULT.
The following are Events of Default hereunder:
(a) Any failure by the Maker to pay when due all or any
principal or interest hereunder or under any other promissory note issued by the
Maker to the Payees or any of its affiliates; or
(b) If the Maker (i) admits in writing its inability to pay
generally its debts as they mature, or (ii) makes a general assignment for the
benefit of creditors, or (iii) is adjudicated a bankrupt or insolvent, or (iv)
files a voluntary petition in bankruptcy, or (v) takes advantage, as against its
creditors, of any bankruptcy law or statute of the United States of America or
any state or subdivision thereof now or hereafter in effect, or (vi) has a
petition or proceeding filed against it under any provision of any bankruptcy or
insolvency law or statute of the United States of America or any state or
subdivision thereof, which petition or proceeding is not dismissed within thirty
(30) days after the date of the commencement thereof, (vii) has a receiver,
liquidator, trustee, custodian, conservator, sequestrator or other such person
appointed by any court to take charge of its affairs or assets or business and
such appointment is not vacated or discharged within thirty (30) days
thereafter, or (viii) takes any action in furtherance of any of the foregoing;
or
(c) Any termination of that certain Employment Agreement of even
date herewith by and between Smart Choice Holdings, Inc. and the Payees (other
than a voluntary termination by the Payees which is not permitted pursuant to
the provisions of such Employment Agreement), or any assignment of the Employee
to full-time work for the Maker in accordance with paragraph 1(c) of such
Employment Agreement; or
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(d) Any liquidation, dissolution or winding up of the Maker or
its business.
5. REMEDIES ON DEFAULT.
If any Event of Default shall occur and be continuing, the
holder hereof shall, in addition to any and all other available rights and
remedies, have the right, at its option (except for an Event of Default under
paragraph 4(b) above, the occurrence of which shall automatically effect
acceleration hereunder), (a) to declare the entire unpaid principal balance of
this Note, together with all accrued interest hereunder, to be immediately due
and payable, and (b) to pursue any and all available remedies for the collection
of such principal and interest.
6. CERTAIN WAIVERS.
Except as otherwise expressly provided in this Note, the Maker
hereby waives diligence, demand, presentment for payment, protest, dishonor,
nonpayment, default, and notice of any and all of the foregoing. All amounts
payable under this Note shall be payable without relief under any applicable
valuation and appraisement laws. The Maker hereby expressly agrees that this
Note, or any payment hereunder, may be extended, modified or subordinated (by
forbearance or otherwise) from time to time, without in any way affecting the
liability of the Maker. The Maker hereby further waives the benefit of any
exemption under the homestead exemption laws, if any, or any other exemption or
insolvency laws.
7. WAIVERS AND AMENDMENTS.
Neither any provision of this Note nor any performance hereunder
may be amended or waived orally, but only by an agreement in writing and signed
by the party against whom enforcement of any waiver, change, modification or
discharge is sought.
8. CUMULATIVE REMEDIES.
No right or remedy conferred upon the Payees under this Note is
intended to be exclusive of any other right or remedy contained herein or in any
instrument or document delivered in connection herewith, and every such right or
remedy shall be cumulative and shall be in addition to every other such right or
remedy contained herein and/or now or hereafter existing at law or in equity or
otherwise.
9. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
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This Note shall be deemed to be a contract made under the laws
of the State of Florida and shall be governed by, and construed in accordance
with, the laws of the State of Florida. The Maker hereby irrevocably consents to
the jurisdiction of all courts (state and federal) sitting in the State of
Florida in connection with any claim, action or proceeding relating to or for
the collection or enforcement of this Note, and hereby waives any defense of
FORUM NON CONVENIENS or other such claim or defense in respect of the lodging of
any such claim, action or proceeding in any such court.
10. COLLECTION COSTS.
In the event that the Payees shall, after the occurrence of an
Event of Default, turn this Note over to an attorney for collection, the Maker
shall further be liable for and shall pay to the Payees all collection costs and
expenses incurred by the Payees, including reasonable attorneys' fees and
expenses; and the Payees may take judgment for all such amounts in addition to
all other sums due hereunder.
FIRST CHOICE AUTO FINANCE, INC.
By: ___________________________
As its: _______________________
The undersigned, currently being the "Company" named in
paragraph 3 above, hereby confirms its agreement to perform and comply with the
obligations of the Company under such paragraph 3, and following the business
combination of the undersigned with Eckler Industries, Inc., to cause Eckler
Industries, Inc. to assume, perform and comply with the obligations of the
Company pursuant to such paragraph 3.
SMART CHOICE HOLDINGS, INC.
By: ___________________________
As its: _______________________
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EXHIBIT 10.3
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "Agreement"), entered into this _______
day of November, 1996, by and among FIRST CHOICE AUTO FINANCE, INC., a Florida
corporation (the "Buyer"), SUNCOAST AUTO AND BROKERS, INC., a Florida
corporation ("SABI"), SUNCOAST AUTO BROKERS ENTERPRISE, INC., a Florida
corporation ("SABEI"), and GARY SMITH (the "Stockholder");
W I T N E S S E T H:
WHEREAS, SABI and SABEI (each a "Seller" and collectively the
"Sellers") are engaged, among other things, in a business consisting of a retail
automobile dealership for both new and used automobiles and other consumer
vehicles (collectively, the "Business"); and
WHEREAS, the Stockholder is the record and beneficial owner of all of
the issued and outstanding capital stock of each of the Sellers, and as such
will derive substantial benefit from the transactions contemplated by this
Agreement; and
WHEREAS, in connection with and in furtherance of such
Business, the Sellers are the owners of certain assets and
properties; and
WHEREAS, the Sellers desire to sell substantially all of their assets
and properties to the Buyer, and the Buyer desires to purchase such assets and
properties, and the Business as a going concern, all upon the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereby agree as follows:
1. ACQUIRED ASSETS.
1.1 SABI ASSETS. Subject to the terms and conditions of this
Agreement, SABI hereby sells, transfers and delivers to the Buyer, and the Buyer
hereby purchases and receives from SABI, the following assets, properties and
business of SABI as same are constituted on the date hereof (the "SABI Assets"):
(a) All notes receivable and accounts receivable of SABI;
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(b) Subject to Section 3.1 below, all inventory of SABI,
consisting primarily of new and used vehicles, auto supplies and spare auto
parts (collectively, the "SABI Inventory");
(c) All tangible fixed assets, furniture, fixtures, machinery,
equipment, tools, vehicles and other fixed assets of SABI (the "SABI Fixed
Assets");
(d) Any and all prepaid expenses of SABI (to the extent usable
in the Business), and any and all security deposits relating to leases of real
property or personal property being assumed by the Buyer hereunder;
(e) All trade names, customer lists, supplier lists, trade
secrets, technical information, and other such knowledge and information
constituting the "know-how" of the Seller, and the good will of SABI;
(f) All contract rights, commitments and claims of the Seller,
including rights as lessee (including, without limitation, all rights in any
security deposit thereunder) under SABI's Lease (as such term is defined in
Section 4.13 below) any equipment leases and vehicle leases, and rights under
manufacturer's warranties and any licenses or license agreements relating to
patents, trademarks or other intangibles;
(g) All software, books, records, printouts, drawings, data,
files, notes, notebooks, accounts, invoices, correspondence and memoranda
relating to the Assets and/or the business of SABI; and
(h) All other rights and assets of any kind, tangible or
intangible, of SABI, whether or not reflected in SABI's financial statements or
on its books and records, including but not limited to such rights (if any) as
SABI may have with respect to its existing telephone numbers, fax numbers and
directory listings, but expressly EXCLUDING any and all cash and/or marketable
securities.
1.2 SABEI ASSETS. Subject to the terms and conditions of this
Agreement, SABEI hereby sells, transfers and delivers to the Buyer, and the
Buyer hereby purchases and receives from SABEI, the following assets, properties
and business of SABEI as same are constituted on the date hereof (the "SABEI
Assets"):
(a) All notes receivable and accounts receivable of SABEI;
(b) Subject to Section 3.2 below, all inventory of SABEI,
consisting primarily of new and used vehicles, auto supplies and spare auto
parts (collectively, the "SABEI Inventory", and collectively with the SABI
Inventory, the "Inventory");
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(c) All tangible fixed assets, furniture, fixtures, machinery,
equipment, tools, vehicles and other fixed assets of SABEI (the "SABEI Fixed
Assets", and collectively with the SABI Fixed Assets, the "Fixed Assets");
(d) Any and all prepaid expenses of SABEI (to the extent
usable in the Business), and any and all security deposits relating to leases of
real property or personal property being assumed by the Buyer hereunder;
(e) All trade names, customer lists, supplier lists, trade
secrets, technical information, and other such knowledge and information
constituting the "know-how" of the Seller, and the good will of SABEI;
(f) All contract rights, commitments and claims of the Seller,
including rights as lessee (including, without limitation, all rights in any
security deposit thereunder) under SABEI's Lease (as such term is defined in
Section 4.13 below) any equipment leases and vehicle leases, and rights under
manufacturer's warranties and any licenses or license agreements relating to
patents, trademarks or other intangibles;
(g) All software, books, records, printouts, drawings, data,
files, notes, notebooks, accounts, invoices, correspondence and memoranda
relating to the Assets and/or the business of SABEI; and
(h) All other rights and assets of any kind, tangible or
intangible, of SABEI, whether or not reflected in SABEI's financial statements
or on its books and records, including but not limited to such rights (if any)
as SABEI may have with respect to its existing telephone numbers, fax numbers
and directory listings, but expressly EXCLUDING any and all cash and/or
marketable securities.
1.3 THE ASSETS. The SABI Assets and the SABEI Assets are
collectively referred to in this Agreement as the "Assets".
2. ASSUMED LIABILITIES.
2.1 ASSUMED SABI LIABILITIES. Subject to the terms and conditions
of this Agreement, SABI hereby assigns to the Buyer, and the Buyer hereby
assumes and agrees to pay and perform when due, all liabilities and obligations
of SABI for periods from and after the date hereof under (a) SABI's Lease, (b)
any outstanding leases for office equipment, and (c) any outstanding leases for
emissions equipment, all of which are listed on SCHEDULE 2.1 annexed hereto
(collectively, the "Assumed SABI Liabilities"). In addition, the Assumed SABI
Liabilities shall include the outstanding obligations owed by SABI under any
floor planning agreement relating to the SABI Inventory (subject to Section 3.1
below).
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2.2 ASSUMED SABEI LIABILITIES. Subject to the terms and
conditions of this Agreement, SABEI hereby assigns to the Buyer, and the Buyer
hereby assumes and agrees to pay and perform when due, all liabilities and
obligations of SABEI for periods from and after the date hereof under (a)
SABEI's Lease, (b) any outstanding leases for office equipment, and (c) any
outstanding leases for emissions equipment, all of which are listed on SCHEDULE
2.2 annexed hereto (collectively, the "Assumed SABEI Liabilities"). In addition,
the Assumed SABEI Liabilities shall include the outstanding obligations owed by
SABEI under any floor planning agreement relating to the SABEI Inventory
(subject to Section 3.2 below).
2.3 THE ASSUMED LIABILITIES. The Assumed SABI Liabilities and the
Assumed SABEI Liabilities are collectively referred to in this Agreement as the
"Assumed Liabilities".
2.4 EXCLUDED LIABILITIES. Notwithstanding anything to the
contrary contained in Sections 2.1 or 2.2 above, the Buyer shall not assume, or
become in any way liable for, the payment or performance of any debts,
liabilities or obligations (absolute or contingent) of either of the Sellers (a)
arising out of or relating to any operations of either of the Sellers prior to
the date hereof, including but not limited to trade accounts payable, customer
claims, payroll or employee claims, or obligations under any leases relating to
periods prior to the date hereof, (b) relating to any lease obligations of any
kind other than for periods from and after the date hereof under the Leases, and
the Assumed SABI Liabilities and the Assumed SABEI Liabilities, (c) relating to
any federal, state or local income, franchise, sales, use, property, excise,
transfer or other taxes payable by or in respect of either of the Sellers,
including but not limited to any such taxes which may be assessable against
either Seller arising out of, in connection with or as a result of the
transactions contemplated by this Agreement and/or the consummation thereof, (d)
relating to or arising out of any pending claims, actions, arbitrations and/or
other proceedings against either Seller, (e) relating to recapture of any
depreciation deduction or investment tax credit of either Seller, or (f) not
specifically assumed by the Buyer in Sections 2.1 and 2.2 above.
3. PURCHASE PRICE.
3.1 SABI PURCHASE PRICE. The net purchase price for the SABI
Assets is $____________ (the "SABI Purchase Price"), representing the amount
calculated as (a) $375,000, plus (b) an amount equal to the difference of (i)
the fair market value of all Inventory of SABI (valued at its fair market value
as determined by Don Cook and Bob Creeger, or two other appraisers reasonably
satisfactory to the Buyer and SABI, reasonably prior to the date hereof), minus
(ii) the outstanding obligations owed by SABI under any floor planning agreement
for such Inventory; PROVIDED, HOWEVER,
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that to the extent that either the Buyer or SABI have not accepted the
appraisers' valuation of any particular vehicles in the Inventory of SABI, then
such disputed vehicles have been excluded from the Inventory hereunder and may
hereafter be disposed of by SABI at any time and from time to time in such
manner as SABI shall deem appropriate. Such SABI Purchase Price is being paid on
the date hereof by certified or bank cashier's check, or (at SABI's option) by
wire transfer of immediately available funds to SABI's designated account.
3.2 SABEI PURCHASE PRICE. The net purchase price for the SABEI
Assets is $____________ (the "SABEI Purchase Price"), representing the amount
calculated as (a) $375,000, plus (b) an amount equal to the difference of (i)
the fair market value of all Inventory of SABEI (valued at its fair market value
as determined by Don Cook and Bob Creeger, or two other appraisers reasonably
satisfactory to the Buyer and SABEI, reasonably prior to the date hereof), minus
(ii) the outstanding obligations owed by SABEI under any floor planning
agreement for such Inventory; PROVIDED, HOWEVER, that to the extent that either
the Buyer or SABEI have not accepted the appraisers' valuation of any particular
vehicles in the Inventory of SABEI, then such disputed vehicles have been
excluded from the Inventory hereunder and may hereafter be disposed of by SABEI
at any time and from time to time in such manner as SABEI shall deem
appropriate. Such SABEI Purchase Price is being paid on the date hereof by
certified or bank cashier's check, or (at SABEI's option) by wire transfer of
immediately available funds to SABEI's designated account.
3.3 NET PRICE. The foregoing purchase price for the Assets shall
be in addition to the assumption of the Assumed Liabilities set forth in
Sections 2.1 and 2.2 above.
3.4 ALLOCATION OF CONSIDERATION. The purchase price specified in
Sections 3.1 and 3.2 above shall be allocated, as among the Assets, in
accordance with SCHEDULE 3.4 annexed hereto.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE
STOCKHOLDER.
In connection with the sale of the Assets to the Buyer, (a) SABI
and the Stockholder hereby jointly and severally represent and warrant to the
Buyer solely with respect to SABI, the SABI Assets and SABI's Business, and (b)
SABEI and the Stockholder hereby jointly and severally represent and warrant to
the Buyer solely with respect to SABEI, the SABEI Assets and SABEI'S Business,
as follows:
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the
Sellers is a corporation duly organized, validly existing and in good standing
under the laws of the State of Florida, with full corporate power and authority
to execute and deliver this
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Agreement and to consummate the transactions contemplated hereby, and to own its
assets and conduct its business as owned and conducted on the date hereof.
Neither of the Sellers is required to be qualified as a foreign corporation
under the laws of any jurisdiction.
4.2 AUTHORIZATION OF AGREEMENT. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by such Seller has been duly and validly authorized by the
Board of Directors of such Seller and by the Stockholder (as sole stockholder of
such Seller). No further corporate authorization is required on the part of such
Seller to consummate the transactions contemplated hereby.
4.3 VALID AND BINDING AGREEMENT. This Agreement constitutes the
legal, valid and binding obligation of such Seller and the Stockholder,
enforceable against such Seller and the Stockholder in accordance with its
terms, except to the extent limited by bankruptcy, insolvency, reorganization
and other laws affecting creditors' rights generally, and except that the remedy
of specific performance or similar equitable relief is available only at the
discretion of the court before which enforcement is sought.
4.4 NO BREACH OF STATUTE OR CONTRACT. Except as disclosed in
SCHEDULE 4.4 annexed hereto, neither the execution and delivery of this
Agreement by such Seller and the Stockholder, nor compliance with the terms and
provisions of this Agreement on the part of such Seller and the Stockholder,
will: (a) violate any statute or regulation of any governmental authority,
domestic or foreign, affecting such Seller; (b) require the issuance to such
Seller of any authorization, license, consent or approval of any federal or
state governmental agency or any other person; (c) conflict with or result in a
breach of any of the terms, conditions or provisions of such Seller's
certificate of incorporation or by-laws or any judgment, order, injunction,
decree, agreement or instrument to which such Seller or the Stockholder is a
party, or by which such Seller or the Stockholder is bound, or constitute a
default thereunder; or (d) require the consent of any third party under any
outstanding statute, regulation, judgment, order, injunction, decree, agreement
or instrument to which such Seller or the Stockholder is a party or by which
such Seller or the Stockholder is bound.
4.5 SUBSIDIARIES AND INVESTMENTS. Such Seller does not own,
directly or indirectly, any stock or other equity securities of any corporation
or entity, or have any direct or indirect equity or ownership interest in any
person, firm, partnership, corporation, venture or business other than the
Business conducted by such Seller.
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4.6 FINANCIAL INFORMATION. Annexed hereto as SCHEDULE 4.6 are the
unaudited financial statements (including balance sheet, income statement and
statement of cash flows) for each Seller as of December 31, 1993, December 31,
1994 and December 31, 1995 and for each of the years then ended, and as of June
30, 1996 and for the six (6) months then ended (collectively, the "Financial
Statements"), all of which fairly reflect, in all material respects, the
financial condition and results of operations of the subject Seller as of the
dates thereof and for the periods then ended; and, without limitation of the
foregoing, neither of the Sellers has any material liabilities, fixed or
contingent, known or unknown, except to the extent reflected in the most recent
of such Financial Statements or thereafter incurred in the normal course of such
Seller's business.
4.7 NO MATERIAL CHANGES. Since the date of the most recent of the
Financial Statements, (a) the business of such Seller has been operated solely
in the normal course, (b) there has been no material adverse change in the
financial condition, operations or business of such Seller from that reflected
in such Financial Statements, (c) such Seller has not incurred any material
obligation or liability except in the normal course of business, (d) such Seller
has not effected or suffered any material change in its collection practices, or
with respect to the timing and manner of payment of accounts payable, and (e)
there has not been any (i) sale, assignment or transfer by such Seller of any
assets or other part of its business, excluding the sale or disposition of
inventory, and the sale of loans, in each instance in the ordinary course of
business, (ii) acquisitions or commitments to acquire (whether by purchase,
lease or otherwise) any capital assets by the Sellers (collectively) wherein the
aggregate payments will exceed $10,000, (iii) increase or commitment to increase
the compensation or benefits of any employees, (iv) implementation or
institution of any bonus, benefit, profit-sharing, pension, retirement or other
plan or similar arrangement which was not in existence on June 30, 1996, or (v)
new employment agreement, or modification of any existing employment agreement,
by such Seller.
4.8 TAX MATTERS.
(a) Such Seller has, to the date hereof, timely filed all tax
reports and tax returns required to be filed by such Seller, and such Seller has
paid all taxes, assessments and other impositions as and to the extent required
by applicable law. All federal, state and local income, franchise, sales, use,
property, excise and other taxes (including interest and penalties and including
estimated tax installments where required to be filed and paid) due from or with
respect to such Seller as of the date hereof have been fully paid, and all taxes
and other assessments and levies which such Seller is required by law to
withhold or to collect have been duly withheld and collected and have been paid
over to the proper governmental authorities to the extent due and
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payable. There are no outstanding or pending claims, deficiencies or assessments
for taxes, interest or penalties with respect to any taxable period of such
Seller.
(b) Except as disclosed in SCHEDULE 4.8 annexed hereto, there
are no audits pending with respect to any federal, state or local tax reports or
tax returns of such Seller, and no waiver of statutes of limitations have been
given or requested with respect to any tax years or tax filings of such Seller.
4.9 TITLE AND CONDITION OF THE ASSETS. SABI has and owns good and
marketable title to all of the SABI Assets, and SABEI has and owns good and
marketable title to all of the SABEI Assets, in each case free and clear of all
liens, pledges, claims, security interests and encumbrances of every kind and
nature. All of the Fixed Assets are in good operating condition and repair
(reasonable wear and tear excepted), are adequate for their use in the Business
as presently conducted, and are sufficient for the continued conduct of such
Business.
4.10 RECEIVABLES. All notes receivable and accounts receivable
included in the Assets (whether reflected in the Financial Statements or
thereafter created or acquired by such Seller prior to the date hereof), (a)
have arisen in the normal course of such Seller's business, (b) are not subject
to any counterclaims, set-offs, allowances or discounts of any kind, and (c)
have been, are and will be valid and generally collectible in the ordinary
course of the Business; and neither such Seller nor the Stockholder has any
knowledge of any material or unusual risk of non-payment of any of such
receivables.
4.11 INVENTORY. All of the Inventory (whether reflected in the
Financial Statements or thereafter acquired by the subject Seller prior to the
date hereof) is of a quality, age and quantity consistent with the historical
practices of the subject Seller, and is valued on such Seller's books at cost.
4.12 LEGAL COMPLIANCE. Such Seller is, and for the past three (3)
years has been, in compliance in all material respects with all laws, statutes,
regulations, rules and ordinances applicable to the conduct of its business
(including, without limitation, all applicable environmental laws, statutes,
regulations, rules and ordinances), and has in full force and effect all
licenses, permits and other authorizations required for the conduct of its
business as presently constituted; and such Seller is not in default or
violation in respect of or under any of the foregoing, and neither such Seller
nor the Stockholder is aware of any past or present condition or circumstance in
such Seller's business (including, without limitation, with respect to any real
property now or previously occupied by such Seller) which could give rise to any
material liability under any such law, statute, regulation, rule or ordinance.
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4.13 REAL PROPERTY. Such Seller does not own any real estate or
any interest therein, except to the extent of such Seller's interests as lessee
or sublessee under those leases or subleases annexed hereto as SCHEDULE 4.13
(collectively, the "Leases"). Such Seller (and, to the best of such Seller's and
the Stockholder's knowledge, the landlords thereunder) is presently in
compliance with all of its obligations under the Leases, and the premises leased
thereunder are in good condition (reasonable wear and tear excepted), and are
adequate for the operation of the Business as presently conducted. No consent of
any landlord under any of the Leases which has not previously been obtained is
required in order to effect the assignment of the Leases to the Buyer pursuant
to this Agreement.
4.14 INSURANCE. Such Seller maintains, has in full force and
effect, and has paid all premiums in respect of insurance covering its business
and assets against such hazards and in such amounts as are normal and customary
for businesses of similar size, scope and nature.
4.15 EMPLOYEES. Except as disclosed in SCHEDULE 4.15 annexed
hereto, such Seller is not a party to or bound by any collective bargaining
agreement, employment agreement, consulting agreement or other commitment for
the employment or retention of any person, and no union is now certified or has
claimed the right to be certified as a collective bargaining agent to represent
any employees of such Seller. Such Seller has not had any material labor
difficulty in the past two (2) years, and neither such Seller nor the
Stockholder has received notice of any unfair labor practice charges against
such Seller or any actual or alleged violation by such Seller of any law,
regulation, or order affecting the collective bargaining rights of employees,
equal opportunity in employment, or employee health, safety, welfare, or wages
and hours.
4.16 EMPLOYEE BENEFITS. Such Seller does not maintain and is not
required to make any contributions to any pension, profit-sharing, retirement,
deferred compensation or other such plan or arrangement for the benefit of any
employee, former employee or other person, and such Seller does not have any
obligations with respect to deferred compensation or future benefits to any past
or present employee. SCHEDULE 4.16 annexed hereto fairly summarizes the employee
benefits currently granted by such Seller to its employees, provided that
nothing herein contained shall be deemed to obligate the Buyer to assume or
continue any such employee benefit or provide any comparable benefit.
4.17 CONTRACTS AND COMMITMENTS. Other than the Leases and those
contracts and commitments listed on SCHEDULE 4.17 annexed hereto, there is no
contract, agreement, commitment or understanding which is material to the
ongoing operation of the Business.
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4.18 LITIGATION. There is no pending or, to the best knowledge of
such Seller and the Stockholder, threatened litigation, arbitration,
administrative proceeding or other legal action or proceeding against such
Seller or relating to its business.
4.19 INTELLECTUAL PROPERTY. Such Seller has the valid right to
utilize all trade names and other intellectual property utilized in its
business, and has not received notice of any claimed infringement of any of such
intellectual property with the rights or property of any other person.
4.20 GOING CONCERN. Neither such Seller nor the Stockholder has
any knowledge of any fact, event, circumstance or condition (including but not
limited to any announced or anticipated changes in the policies of any material
supplier, referral source, client or customer) that would materially impair the
ability of the Buyer to continue the Business heretofore conducted by such
Seller in substantially the manner heretofore conducted by such Seller (other
than general, industry-wide conditions).
4.21 DISCLOSURE AND DUTY OF INQUIRY. The Buyer is not and will
not be required to undertake any independent investigation to determine the
truth, accuracy and completeness of the representations and warranties made by
the Sellers and the Stockholder in this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
In connection with the Buyer's purchase of the Assets from the
Sellers, the Buyer hereby represents and warrants to the Sellers and the
Stockholder as follows:
5.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida, with all necessary power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
5.2 AUTHORIZATION OF AGREEMENT. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Buyer has been duly and validly authorized by the
Board of Directors of the Buyer. No further corporate authorization is required
on the part of the Buyer to consummate the transactions contemplated hereby.
5.3 VALID AND BINDING AGREEMENT. This Agreement constitutes the
legal, valid and binding obligation of the Buyer, enforceable against the Buyer
in accordance with its terms, except to the extent limited by bankruptcy,
insolvency, reorganization and other laws affecting creditors' rights generally,
and except that
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the remedy of specific performance or similar equitable relief is available only
at the discretion of the court before which enforcement is sought.
5.4 NO BREACH OF STATUTE OR CONTRACT. Neither the execution and
delivery of this Agreement by the Buyer, nor compliance with the terms and
provisions of this Agreement on the part of the Buyer, will: (a) violate any
statute or regulation of any governmental authority, domestic or foreign,
affecting the Buyer; (b) require the issuance of any authorization, license,
consent or approval of any federal or state governmental agency; (c) conflict
with or result in a breach of any of the terms, conditions or provisions of any
judgment, order, injunction, decree, note, indenture, loan agreement or other
agreement or instrument to which the Buyer is a party, or by which the Buyer is
bound, or constitute a default thereunder; or (d) require the consent of any
third party under any outstanding statute, regulation, judgment, order,
injunction, decree, agreement or instrument to which the Buyer is a party, or by
which the Buyer is bound.
5.5 DISCLOSURE AND DUTY OF INQUIRY. The Sellers and the
Stockholder are not and will not be required to undertake any independent
investigation to determine the truth, accuracy and completeness of the
representations and warranties made by the Buyer in this Agreement.
6. ADDITIONAL AGREEMENTS.
6.1 BILLS OF SALE; ASSUMPTION AGREEMENTS. The parties hereby
confirm that this Agreement shall be sufficient as a bill of sale in respect of
the Assets and as an assumption agreement in respect of the Assumed Liabilities;
PROVIDED, HOWEVER, that if, as and when required, or reasonably requested by any
party, the parties shall execute and deliver such supplemental agreements,
instruments, certificates of title and other documents as may be necessary or
appropriate in order to give effect to the transfer of the Assets to the Buyer
and the assignment to and assumption by the Buyer of the Assumed Liabilities.
6.2 CERTIFICATES OF TITLE. Concurrently with the execution and
delivery of this Agreement, the Sellers are delivering to the Buyer the properly
endorsed certificates of title and/or other evidences of ownership of all
vehicles in the Inventory, and any and all vehicles constituting part of the
Fixed Assets. The Buyer shall be responsible for effecting the recordation of
such certificates and the reissuance (as required) of new certificates of title
for such vehicles in the name of the Buyer; and the Sellers shall be responsible
for the payment of any applicable transfer taxes in connection therewith.
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6.3 AUDIT OF FINANCIAL STATEMENTS. Each of the Sellers shall,
from time to time as and when requested by the Buyer from and after the date
hereof, (a) permit the Buyer and its accountants to have access to all books and
records of the Sellers for the purpose of performing an audit of the Sellers
and/or the Financial Statements sufficient to enable such accountants to render
their unqualified opinion on the financial statements of the Business for all
periods from and after January 1, 1993 in accordance with Regulation S-X
promulgated under the Securities Act of 1933, as amended, and (b) permit the
Buyer and its accountants to obtain copies of all work papers utilized or
prepared by the Sellers' accountants in connection with their review of the
Financial Statements, and to consult with the Sellers' accountants as and to the
extent necessary or appropriate in connection with the preparation of the
audited financial statements contemplated by this Section 6.3.
6.4 YOUR CAR STORE, INC. Concurrently with the execution and
delivery of this Agreement, the Buyer is assuming the lease for the business
premises of Your Car Store, Inc. (an affiliate of the Sellers), pursuant to a
separate assignment and assumption agreement of even date herewith; and the
Buyer is paying to the Stockholder the sum of $_________________, representing
his documented expenses incurred with the start-up of the proposed Your Car
Store, Inc. dealership.
6.5 EMPLOYMENT AGREEMENT. Concurrently with the execution and
delivery of this Agreement, the Buyer and the Stockholder are entering into an
employment agreement of even date herewith, pursuant to which the Stockholder
shall be employed by the Buyer from and after the date hereof, subject to and in
accordance with the terms and conditions of such employment agreement.
7. [INTENTIONALLY OMITTED].
8. INDEMNIFICATION.
8.1 GENERAL.
(a) Without prejudice to any rights of contribution as among
each Seller and the Stockholder, (i) SABI and the Stockholder shall jointly and
severally defend, indemnify and hold harmless the Buyer from, against and in
respect of any and all claims, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies, including interest, penalties
and reasonable attorneys' fees, that the Buyer may incur, sustain or suffer
("SABI Losses") as a result of (A) any breach of, or failure by SABI or the
Stockholder to perform, any of the representations, warranties, covenants or
agreements of SABI or the Stockholder contained in this Agreement or in any
Schedule(s) furnished by or on behalf of SABI or the Stockholder under this
Agreement, or (B)
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any failure by SABI to pay or perform when due any of its retained liabilities,
and (ii) SABEI and the Stockholder shall jointly and severally defend, indemnify
and hold harmless the Buyer from, against and in respect of any and all claims,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorneys' fees, that
the Buyer may incur, sustain or suffer ("SABEI Losses") as a result of (A) any
breach of, or failure by SABEI or the Stockholder to perform, any of the
representations, warranties, covenants or agreements of SABEI or the Stockholder
contained in this Agreement or in any Schedule(s) furnished by or on behalf of
SABEI or the Stockholder under this Agreement, or (B) any failure by SABEI to
pay or perform when due any of its retained liabilities. The SABI Losses and the
SABEI Losses are collectively referred to in this Agreement as "Losses".
(b) The Buyer shall defend, indemnify and hold harmless the
Sellers and the Stockholder from, against and in respect of any and all claims,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorneys' fees, that
the Sellers or the Stockholder may incur, sustain or suffer as a result of (i)
any breach of, or failure by the Buyer to perform, any of the representations,
warranties, covenants or agreements of the Buyer contained in this Agreement, or
(ii) any failure by the Buyer to pay or perform when due any of the Assumed
Liabilities.
8.2 LIMITATIONS ON CERTAIN INDEMNITY.
(a) Notwithstanding any other provision of this Agreement to
the contrary, (i) neither SABI nor the Stockholder shall be liable to the Buyer
with respect to SABI Losses unless and until the aggregate amount of all SABI
Losses incurred by the Buyer shall exceed the sum of $5,000 (the "SABI Basket"),
and (ii) SABI and the Stockholder shall thereafter be jointly and severally
liable for all SABI Losses in excess of the SABI Basket, provided that SABI's
and the Stockholder's maximum aggregate liability in respect of all SABI Losses
shall not, in the absence of proven fraud by SABI or the Stockholder in respect
of any particular SABI Losses, in any event exceed the limitations set forth in
Section 8.2(c)(i) below; PROVIDED, HOWEVER, that the SABI Basket and such
limitation on liability shall not be available with respect to, and there shall
not be counted against the SABI Basket or such limitation of liability, any SABI
Losses arising by reason of (A) any failure by SABI to pay or perform when due
any of its retained liabilities, or (B) any SABI Losses involving proven fraud
by SABI or any of its Stockholders.
(b) Notwithstanding any other provision of this Agreement to
the contrary, (i) neither SABEI nor the Stockholder shall be liable to the Buyer
with respect to SABEI Losses unless and until the aggregate amount of all SABEI
Losses incurred by the
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Buyer shall exceed the sum of $5,000 (the "SABEI Basket"), and (ii) SABEI and
the Stockholder shall thereafter be jointly and severally liable for all SABEI
Losses in excess of the SABEI Basket, provided that SABEI's and the
Stockholder's maximum aggregate liability in respect of all SABEI Losses shall
not, in the absence of proven fraud by SABEI or the Stockholder in respect of
any particular SABEI Losses, in any event exceed the limitations set forth in
Section 8.2(c)(ii) below; PROVIDED, HOWEVER, that the SABEI Basket and such
limitation on liability shall not be available with respect to, and there shall
not be counted against the SABEI Basket or such limitation of liability, any
SABEI Losses arising by reason of (A) any failure by SABEI to pay or perform
when due any of its retained liabilities, or (B) any SABEI Losses involving
proven fraud by SABEI or the Stockholder.
(c) Except with respect to any Losses involving proven fraud
by the subject Seller or the Stockholder, or any failure by any Seller to pay or
perform when due any of its retained liabilities, (i) SABI and the Stockholder
shall not be required to pay indemnification hereunder in an aggregate amount in
excess of the SABI Purchase Price, and (ii) SABEI and the Stockholder shall not
be required to pay indemnification hereunder in an aggregate amount in excess of
the SABEI Purchase Price.
(d) The Buyer shall be entitled to indemnification by the
Sellers and the Stockholder for Losses only in respect of claims for which
notice of claim shall have been given to the subject Seller or the Stockholder
on or before December 31, 1997.
8.3 CLAIMS FOR INDEMNITY. Whenever a claim shall arise for which
any party shall be entitled to indemnification hereunder, the indemnified party
shall notify the indemnifying party or parties in writing within thirty (30)
days of the indemnified party's first receipt of notice of, or the indemnified
party's obtaining actual knowledge of, such claim, and in any event within such
shorter period as may be necessary for the indemnifying party or parties to take
appropriate action to resist such claim. Such notice shall specify all facts
known to the indemnified party giving rise to such indemnity rights and shall
estimate (to the extent reasonably possible) the amount of potential liability
arising therefrom. If an indemnifying party shall be duly notified of such
dispute, the parties shall attempt to settle and compromise the same or may
agree to submit the same to arbitration or, if unable or unwilling to do any of
the foregoing, such dispute shall be settled by appropriate litigation, and any
rights of indemnification established by reason of such settlement, compromise,
arbitration or litigation shall promptly thereafter be paid and satisfied by
those indemnifying parties obligated to make indemnification hereunder.
8.4 RIGHT TO DEFEND. If the facts giving rise to any claim for
indemnification shall involve any actual or threatened
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action or demand by any third party against the indemnified party or any of its
affiliates, the indemnifying party or parties shall be entitled (without
prejudice to the indemnified party's right to participate at its own expense
through counsel of its own choosing), at their expense and through a single
counsel of their own choosing, to defend or prosecute such claim in the name of
the indemnifying party or parties, or any of them, or if necessary, in the name
of the indemnified party. In any event, the indemnified party shall give the
indemnifying party advance written notice of any proposed compromise or
settlement of any such claim. If the remedy sought in any such action or demand
is solely money damages, the indemnifying party shall have fifteen (15) days
after receipt of such notice of settlement to object to the proposed compromise
or settlement, and if it does so object, the indemnifying party shall be
required to undertake, conduct and control, though counsel of its own choosing
and at its sole expense, the settlement or defense thereof, and the indemnified
party shall cooperate with the indemnifying party in connection therewith.
9. POST-CLOSING EVENTS.
9.1 ANNOUNCEMENTS. No party hereto shall make any disclosure or
public announcement of the consummation of the transactions pursuant to this
Agreement, or of any of the terms thereof, without the prior review and approval
thereof by the Buyer (in the case of any proposed disclosure or public
announcement by either Seller or the Stockholder) or the Stockholder (in the
case of any proposed disclosure or public announcement by the Buyer), such
approval not to be unreasonably withheld or delayed.
9.2 FURTHER ASSURANCES. From time to time from and after the date
hereof, the parties will execute and deliver to one another any and all further
agreements, instruments, certificates and other documents as may reasonably be
requested by any other party in order more fully to consummate the transactions
contemplated hereby, and to effect an orderly transition of the Business being
acquired by the Buyer hereunder. Without limitation of the foregoing, each
Seller shall cooperate with the Buyer in order to cause the local telephone
company to transfer to the Buyer's name and account all telephone numbers and
fax numbers currently held by the Sellers (provided that the Buyer acknowledges
that the transfer of such telephone numbers and fax numbers is in the discretion
of the local telephone companies).
10. COSTS.
10.1 FINDER'S OR BROKER'S FEES. Each of the Buyer, the Sellers
and the Stockholder represents and warrants that neither they nor any of their
respective affiliates have dealt with any broker or finder in connection with
any of the transactions contemplated by this Agreement, and no broker or other
person is entitled to any commission or finder's fee in connection with any
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of these transactions, except that the Buyer agrees to be solely responsible for
any compensation payable to Greyhouse Services Corporation in connection with
the transactions contemplated by this Agreement.
10.2 EXPENSES. The Buyer, the Sellers and the Stockholder shall
each pay all costs and expenses incurred or to be incurred by them,
respectively, in negotiating and preparing this Agreement and in closing and
carrying out the transactions contemplated by this Agreement.
11. FORM OF AGREEMENT.
11.1 EFFECT OF HEADINGS. The Section headings used in this
Agreement and the titles of the Schedules hereto are included for purposes of
convenience only, and shall not affect the construction or interpretation of any
of the provisions hereof or of the information set forth in such Schedules.
11.2 ENTIRE AGREEMENT; WAIVERS. This Agreement and the other
agreements and instruments referred to herein constitute the entire agreement
between the parties pertaining to the subject matter hereof, and supersede all
prior agreements or understandings as to such subject matter. No party hereto
has made any representation or warranty or given any covenant to the other
except as set forth in this Agreement, the Schedules hereto, and the other
agreements and instruments referred to herein. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
party making the waiver.
11.3 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12. PARTIES.
12.1 PARTIES IN INTEREST. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective heirs, executors, administrators, personal representatives,
successors and permitted assigns, nor is anything in this Agreement intended to
relieve or discharge the obligations or liability of any third persons to any
party to this Agreement, nor shall any provision give any third persons any
right of subrogation or action over or against any party to this Agreement.
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12.2 NOTICES. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (a) on the date of service if served personally on the
party to whom notice is to be given, (b) on the day after the date sent by
recognized overnight courier service, properly addressed and with all charges
prepaid or billed to the account of the sender, or (c) on the third day after
mailing if mailed to the party to whom notice is to be given, by first class
mail, registered or certified, postage prepaid, and properly addressed as
follows:
(i) If to SABI and/or the Stockholder:
c/o Suncoast Auto and Brokers, Inc.
8101 66th Street North
Pinellas Park, Florida 34665
(ii) If to SABEI and/or the Stockholder:
c/o Suncoast Auto Brokers Enterprise, Inc.
3445 34th Street North
St. Petersburg, Florida 33713
(iii) If to the Buyer:
c/o Smart Choice Holdings, Inc.
625 Main Street, Suite 25
Windermere, Florida 34786
Attn: Tom Conlan
or to such other address as any party shall have specified by notice in writing
given to the other party.
13. MISCELLANEOUS.
13.1 AMENDMENTS AND MODIFICATIONS. No amendment or modification
of this Agreement or any Schedule hereto shall be valid unless made in writing
and signed by the party to be charged therewith.
13.2 NON-ASSIGNABILITY; BINDING EFFECT. Neither this Agreement,
nor any of the rights or obligations of the parties hereunder, shall be
assignable by any party hereto without the prior written consent of all other
parties hereto. Otherwise, this Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns.
13.3 GOVERNING LAW; JURISDICTION. This Agreement shall be
construed and interpreted and the rights granted herein governed in accordance
with the laws of the State of Florida applicable to
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contracts made and to be performed wholly within such State. Except as otherwise
provided in Section 8.3 above, any claim, dispute or controversy arising under
or in connection with this Agreement or any actual or alleged breach hereof
shall be settled exclusively by arbitration to be held before a single
arbitrator in Orlando, Florida, or in any other locale or venue as legal
jurisdiction may otherwise be had over the party against whom the proceeding is
commenced, in accordance with the commercial arbitration rules of the American
Arbitration Association then obtaining. As part of his or her award, the
arbitrator shall make a fair allocation of the fee of the American Arbitration
Association, the cost of any transcript, and the parties' reasonable attorneys'
fees, taking into account the merits and good faith of the parties' claims and
defenses. Judgment may be entered on the award so rendered in any court having
jurisdiction. Any process or other papers hereunder may be served by registered
or certified mail, return receipt requested, or by personal service, provided
that a reasonable time for appearance or response is allowed.
IN WITNESS WHEREOF, the parties have executed this Agreement on and as
of the date first set forth above.
FIRST CHOICE AUTO FINANCE, INC.
By:_________________________________
SUNCOAST AUTO AND BROKERS, INC.
By:_________________________________
SUNCOAST AUTO BROKERS ENTERPRISE, INC.
By:_________________________________
___________________________________
GARY SMITH
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The undersigned, SMART CHOICE HOLDINGS, INC., being the corporate
parent of First Choice Auto Finance, Inc. (the Buyer under the foregoing
Agreement), hereby guarantees the payment and performance by the Buyer of all of
the Buyer's obligations under this Agreement.
SMART CHOICE HOLDINGS, INC.
By: _________________________________
19
EXHIBIT 10.4
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "Agreement"), entered into this 19th day
of December, 1996, by and among FIRST CHOICE AUTO FINANCE, INC., a Florida
corporation (the "Buyer"), JACK WINTERS ENTERPRISES, INC. (d/b/a Motorcars of
Stuart), an Illinois corporation (the "Seller"), JACK WINTERS, an individual
("JW"), and F. CRAIG CLEMENS, an individual ("CC"; and, collectively with JW,
(the "Stockholders");
W I T N E S S E T H:
WHEREAS, the Seller is engaged in a business consisting of a retail
automobile dealership for Volkswagen and Volvo automobiles and other consumer
vehicles (collectively, the "Business"); and
WHEREAS, the Stockholders are collectively the record and beneficial
owners of all of the issued and outstanding capital stock of the Seller, and as
such will derive substantial benefit from the transactions contemplated by this
Agreement; and
WHEREAS, in connection with and in furtherance of the
Business, the Seller is the owner of certain assets and properties;
and
WHEREAS, the Seller desires to sell substantially all of its assets and
properties to the Buyer, and the Buyer desires to purchase such assets and
properties, and the Business as a going concern, all upon the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereby agree as follows:
1. ACQUIRED ASSETS.
1.1 THE ASSETS. Subject to the terms and conditions of this
Agreement, on the Closing Date (as such term is hereinafter defined), the Seller
shall sell, transfer and deliver to the Buyer, and the Buyer shall purchase and
receive from the Seller, all of the following assets, properties, improvements
and business of the Seller as same are constituted on the Closing Date:
(a) All franchise rights of the Seller with respect to its
Volkswagen and Volvo dealerships;
(b) All new, unused, undamaged and never damaged 1996, 1997
and 1998 model-year Volkswagen and Volvo vehicles owned by the Seller (or on
consignment to the Seller) and held for
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purchase or lease at the Seller's business location at 4205 South Federal
Highway, Stuart, Florida 34997 (the "Premises");
(c) All of the Seller's 1996 and 1997 model-year Volvo service
loaners at the Premises;
(d) All used vehicle inventory of the Seller at the Premises;
(e) All inventories of the Seller consisting of parts and/or
accessories usable in the Volkswagen or Volvo dealerships (the "Inventory");
(f) All usable new tires, wheels, batteries, oil, grease and
gasoline, if any, which the Seller has on hand;
(g) All tangible fixed assets, furniture, fixtures, machinery,
equipment, tools, signage, vehicles (to the extent not held for purchase or
lease) and other fixed assets of the Seller (the "Fixed Assets");
(h) Any and all prepaid expenses of and security deposits
granted by the Seller;
(i) All trade names (including but not limited to the trade
name "Motorcars of Stuart"), customer lists, supplier lists, trade secrets,
technical information, and other such knowledge and information constituting the
"know-how" of the Seller, and the good will of the Seller;
(j) All contract rights, commitments and claims of the Seller,
including but not limited to customer deposits, orders and sales contracts held
by the Seller with respect to the sale of new vehicles which are not yet
delivered to the customer as of the Closing Date, service agreements,
advertising agreements, and rights under manufacturer's warranties and any
licenses or license agreements relating to patents, trademarks or other
intangibles; and
(k) All software, books, records, printouts, drawings, data,
files, notes, notebooks, accounts, invoices, correspondence and memoranda
relating to the Assets and/or the business of the Seller.
1.2 EXCLUDED ASSETS. Anything elsewhere contained in this
Agreement to the contrary notwithstanding, the Assets shall not include, and the
Buyer is not purchasing hereunder, (a) any cash, marketable securities, accounts
receivable, notes receivable or lease receivables of the Seller, or (b) any
assets of the Seller which do not relate to the Volkswagen and Volvo dealerships
and are not listed or described in Section 1.1 above.
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2. ASSUMED LIABILITIES.
2.1 ASSUMED LIABILITIES. Subject to the terms and conditions of
this Agreement, on the Closing Date, the Seller shall assign to the Buyer, and
the Buyer shall assume, and agree to pay and perform when due, the following
liabilities and obligations of the Seller, as same are constituted on the
Closing Date (collectively, the "Assumed Liabilities"):
(a) The Seller's obligations under its floor planning
agreements for new Volkswagen and Volvo vehicles, up to an aggregate amount
equal to the Seller's aggregate actual invoice cost for those vehicles included
in the Assets pursuant to Section 1.1(a) above;
(b) All obligations of the Seller from and after the Closing
Date under the Reynolds & Reynolds lease for the Seller's data processing
equipment;
(c) All obligations of the Seller from and after the Closing
Date under the Seller's short-term sales trailer lease and telephone system
contract financed with the Stuart Bank;
(d) All obligations of the Seller from and after the Closing
Date under the Seller's short-term lease on two (2) Lanier copying machines;
(e) All obligations of the Seller from and after the Closing
Date under the Volkswagen mandatory V-Crest rooftop dish lease; and
(f) All obligations of the Seller with respect to periods from
and after the Closing Date under those contracts acquired by the Buyer pursuant
to Section 1.1(j) above, and all obligations of the Seller to complete service
work in process as of the Closing Date.
2.2 EXCLUDED LIABILITIES. Notwithstanding anything to the
contrary contained in Section 2.1 above, the Buyer shall not assume, or become
in any way liable for, the payment or performance of any debts, liabilities or
obligations (absolute or contingent) of the Seller (a) in the nature of customer
claims, employee claims or other contingent liabilities arising out of or
relating to any operations of the Seller prior to the Closing Date, (b) relating
to any lease obligations of any kind other than as expressly set forth in
Section 2.1 above, (c) in respect of any indebtedness for money borrowed or any
consignment or contingent purchase agreement, other than as expressly set forth
in Section 2.1(a), (d) relating to any federal, state or local income,
franchise, sales, use, property, excise, transfer, payroll or other taxes
payable by or in respect of the Seller, including but not limited to any such
taxes which may be assessable against the Seller arising out of, in connection
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with or as a result of the transactions contemplated by this Agreement and/or
the consummation thereof, (e) relating to or arising out of any pending claims,
actions, arbitrations and/or other proceedings against the Seller, (f) relating
to recapture of any depreciation deduction or investment tax credit of the
Seller, (g) relating to, arising out of, under or in respect of any employment
agreement or consulting agreement (except to the extent expressly assumed by the
Buyer by separate written agreement as of the Closing Date) or any benefit plan
maintained by the Seller in respect of or for the benefit of any of its
employees, or (h) not specifically assumed by the Buyer in Section 2.1 above.
3. PURCHASE PRICE.
3.1 CALCULATION OF PURCHASE PRICE. The net purchase price for the
Assets (collectively, the "Purchase Price") shall be the amount calculated as
follows:
(a) An amount equal to the aggregate actual factory invoice
cost to the Seller for all new vehicles included in the Assets, provided that
(i) there shall be added or deducted, as the case may be, the cost of any
dealer-installed or dealer-removed accessories and equipment in or from such
vehicles, (ii) there shall be deducted any applicable rebate, refund or holdback
actually received by or credited to the Seller on or prior to the Closing Date,
and any premium loan or physical miscellaneous charges, (iii) the invoice cost
shall not include any amounts for advertising funds, and (iv) no deduction will
be taken against a vehicle's invoice cost by reason of such vehicle not having
been "prepped" for delivery, provided that the Seller delivers to the Buyer any
reimbursement cards applicable thereto; PLUS
(b) An amount equal to the aggregate actual factory invoice
cost to the Seller for all Volvo service loaners purchased pursuant to Section
1.1(c) above, minus (i) $1,200 per vehicle, and (ii) $.40 per mile for each mile
by which any of such vehicles exceeds 6,500 miles; PLUS
(c) An amount equal to (i) the designated "clean" wholesale
value of all used vehicles being purchased by the Buyer pursuant to Section
1.1(d) above, as reflected in the Florida edition of the current Black Book with
applicable additions and deductions for equipment and options, and an
appropriate credit to the Buyer in the event of any damage discovered upon
inspection of such used vehicles within five (5) days prior to the Closing Date,
or (ii) in the case of any used vehicles for which no listing is available in
the current Black Book, an amount equal to the Seller's actual inventory cost of
such used vehicles; PLUS
(d) An amount equal to the book value on the Seller's books,
on the Closing Date, of all gas, oil, grease, work
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in process (including, without limitation, customer service repair orders,
including warranty items) and shop supplies; PLUS
(e) The sum of $300,000, plus or minus (as the case may be)
any net change from June 30, 1996 to the Closing Date in the aggregate book
value on the Seller's books of all Inventory (other than Volkswagen parts)
included in the Assets; PLUS
(f) The sum of $1,342,500; MINUS
(e) The amount of the Assumed Liabilities pursuant to Section
2.1(a) above.
The parties shall consult with one another on the Closing Date with respect to
the components of the Purchase Price set forth in Sections 3.1(a), (b), (c),
(d), (e) and (g) above, and shall agree in good faith on the amounts thereof on
the Closing Date.
3.2 PAYMENT OF PURCHASE PRICE.
(a) As a good faith deposit against the Purchase Price, the
Buyer shall, on the earlier of January 5, 1997 or the date of the consummation
of the proposed business combination between Smart Choice Holdings, Inc. and
Eckler Industries, Inc., deposit with the Seller's counsel (as escrow agent) the
sum of $100,000, which (i) shall be applied to the cash portion of the Purchase
Price at the time of Closing, (ii) shall be paid to the Seller as liquidated
damages in the event that and at such time as the Seller shall terminate this
Agreement (provided that it then has the right to do so) in accordance with
Section 10 below, or (iii) shall be returned to the Buyer in the event that and
at such time as the Buyer shall terminate this Agreement (provided that it then
has the right to do so) in accordance with Section 10 below. In each case, all
interest earned on the escrow deposit shall be paid with the principal of the
escrow deposit. The parties hereby agree to execute and deliver any reasonable
escrow agreement required by either of the parties or by the Escrow Agent in
connection with the deposit pursuant to this Section 3.2(a).
(b) The Purchase Price, as determined in accordance with
Section 3.1 above, shall be paid to the Seller on the Closing Date (i) as to the
first $900,000 thereof, by means of the issuance to the Seller (or, if so
designated by written instruction of both Stockholders, to the Stockholders) of
convertible redeemable preferred stock (the "Preferred Stock") of the Buyer's
corporate parent, Smart Choice Holdings, Inc. (the "Parent"), having an
aggregate liquidation preference (in priority to the common stock of the Parent)
of $900,000, and otherwise having the relative rights, preferences and
limitations set forth in the form Certificate of Stock Designation annexed
hereto as EXHIBIT A (the "Certificate of Stock Designation"), (ii) as to the
next $100,000 thereof, by application of the good faith deposit pursuant to
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Section 3.2(a) above, and (iii) as to the balance of the Purchase Price, by
means of a certified or bank cashier's check payable to the Seller or (at the
Seller's option) by wire transfer of immediately available funds to the account
designated therefor by the Seller reasonably prior to the Closing Date.
(c) The Parent shall be committed, pursuant to the Certificate
of Stock Designation, to (i) permit the holder(s) of the Preferred Stock to
convert any or all of the Preferred Stock into common stock of the Parent at the
rate of one (1) share of common stock for each $8.75 of liquidation value of the
Preferred Stock (exclusive of interest earned on the Preferred Stock), (ii)
grant to the holder(s) of the Preferred Stock a "piggyback" registration right
in respect of the shares of common stock issuable upon conversion of the
Preferred Stock (subject to customary cutbacks and indemnifications, and any
lock-up or holdback agreements, to the extent required by the Parent's
underwriter), until such time as the shares issued upon conversion of the
Preferred Stock may be resold under Rule 144 or other comparable exemption from
registration requirements, and (iii) redeem all of the Preferred Stock, together
with all accrued interest thereon, on that date which is one hundred eighty
(180) days after the Closing Date, to the extent that such Preferred Stock has
not theretofore been converted into common stock of the Parent as aforesaid.
(d) To the extent that the Seller's aggregate floor planning
obligations on the Closing Date exceed the portion thereof to be assumed by the
Buyer pursuant to Section 2.1(a) above, then the Seller shall apply a portion of
the cash portion of the Purchase Price to the payment of the entire such excess
floor planning obligations.
3.3 NET PRICE. The foregoing Purchase Price for the Assets shall
be in addition to the assumption of the Assumed Liabilities set forth in Section
2.1 above.
3.4 ALLOCATION OF CONSIDERATION. The purchase price specified in
Section 3.1 above shall be allocated, as among the Assets and the Seller's
covenants pursuant to Section 11 below, in accordance with SCHEDULE 3.4 annexed
hereto.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE
STOCKHOLDERS.
In connection with the sale of the Assets to the Buyer, the
Seller and the Stockholders hereby jointly and severally represent and warrant
to the Buyer as follows:
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4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Seller is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Illinois, with full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and to own its assets and conduct its business as owned and
conducted on the date hereof. The Seller is duly qualified and in good standing
as a foreign corporation under the laws of the State of Florida, and is not
required to be qualified as a foreign corporation under the laws of any other
jurisdiction.
4.2 AUTHORIZATION OF AGREEMENT. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Seller has been duly and validly authorized by the
Board of Directors of the Seller and by the Stockholders (as the stockholders of
the Seller). No further corporate authorization is required on the part of the
Seller to consummate the transactions contemplated hereby.
4.3 VALID AND BINDING AGREEMENT. This Agreement constitutes the
legal, valid and binding obligation of the Seller and the Stockholders,
enforceable against the Seller and the Stockholders in accordance with its
terms, except to the extent limited by bankruptcy, insolvency, reorganization
and other laws affecting creditors' rights generally, and except that the remedy
of specific performance or similar equitable relief is available only at the
discretion of the court before which enforcement is sought.
4.4 NO BREACH OF STATUTE OR CONTRACT. Neither the execution and
delivery of this Agreement by the Seller and the Stockholders, nor compliance
with the terms and provisions of this Agreement on the part of the Seller and
the Stockholders, will: (a) violate any statute or regulation of any
governmental authority, domestic or foreign, affecting the Seller; (b) require
the issuance to the Seller of any authorization, license, consent or approval of
any federal or state governmental agency or any other person; (c) conflict with
or result in a breach of any of the terms, conditions or provisions of the
Seller's certificate of incorporation or by-laws or any judgment, order,
injunction, decree, agreement or instrument to which the Seller or either of the
Stockholders is a party, or by which the Seller or either of the Stockholders is
bound, or constitute a default thereunder; or (d) require the consent of any
third party under any outstanding statute, regulation, judgment, order,
injunction, decree, agreement or instrument to which the Seller or either of the
Stockholders is a party or by which the Seller or either of the Stockholders is
bound.
4.5 SUBSIDIARIES AND INVESTMENTS. The Business is conducted
entirely through, in the name and for the account of the Seller, and no portion
or element of the Businessis conducted
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through, in the name or for the account of any subsidiary or
affiliate of the Seller or either of the Stockholders.
4.6 FINANCIAL INFORMATION. Annexed hereto as SCHEDULE 4.6 are the
audited financial statements (including balance sheet, income statement and
statement of cash flows) for the Seller as of December 31, 1993, December 31,
1994 and December 31, 1995 and for each of the years then ended, and the
unaudited financial statements of the Seller as of June 30, 1996 and for the six
(6) months then ended (collectively, the "Financial Statements"), all of which
fairly reflect, in all material respects, the financial condition and results of
operations of the Seller as of the dates thereof and for the periods then ended,
in accordance with generally accepted accounting principles consistently applied
(subject, in the case of the unaudited financial statements, to the absence of
full footnote disclosures and to normal, non-material audit adjustments); and,
without limitation of the foregoing, the Seller does not have any material
liabilities, fixed or contingent, known or unknown, except to the extent
reflected in the most recent of such Financial Statements or thereafter incurred
in the normal course of the Seller's business.
4.7 NO MATERIAL CHANGES. Since June 30, 1996, except as disclosed
in SCHEDULE 4.7 annexed hereto, (a) the business of the Seller has been operated
solely in the normal course, (b) there has been no material adverse change in
the financial condition, operations or business of the Seller from that
reflected in such Financial Statements, (c) the Seller has not incurred any
material obligation or liability except in the normal course of business, (d)
the Seller has not effected or suffered any material modification in its
collection practices, or with respect to the timing and manner of payment of its
accounts payable, and (e) there has not been any (i) sale, assignment or
transfer by the Seller of any material assets or other part of its business,
excluding the sale or disposition of inventory in the ordinary course of
business, (ii) acquisition or commitment to acquire (whether by purchase, lease
or otherwise) any capital assets by the Seller wherein the aggregate payments
will exceed $10,000 (provided that this clause (ii) shall not be applicable with
respect of purchases of inventory), (iii) increase or commitment to increase the
compensation or benefits of any employees of the Seller, (iv) implementation or
institution of any bonus, benefit, profit-sharing, pension, retirement or other
plan or similar arrangement which was not in existence on June 30, 1996, or (v)
new employment, consulting or management agreement, or modification of any
existing employment, consulting or management agreement, by the Seller.
4.8 TAX MATTERS. The Seller has, to the date hereof, timely filed
all tax reports and tax returns required to be filed by the Seller, and the
Seller has paid all taxes, assessments and other impositions as and to the
extent required by applicable law. All federal, state and local income,
franchise, sales, use,
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property, excise, payroll and other taxes (including interest and penalties and
including estimated tax installments where required to be filed and paid) due
from or with respect to the Seller as of the date hereof have been fully paid,
and all taxes and other assessments and levies which the Seller is required by
law to withhold or to collect have been duly withheld and collected and have
been paid over to the proper governmental authorities to the extent due and
payable. There are no outstanding or pending claims, deficiencies or assessments
for taxes, interest or penalties with respect to any taxable period of the
Seller.
4.9 TITLE AND CONDITION OF THE ASSETS. The Seller has and owns
good and marketable title to all of the Assets, free and clear of all liens,
pledges, claims, security interests and encumbrances of every kind and nature
(other than any such encumbrances to the extent securing the floor planning
obligations to be assumed pursuant to Section 2.1(a) above). All of the Fixed
Assets are in good operating condition and repair (reasonable wear and tear
excepted), are adequate for their use in the Business as presently conducted,
and are sufficient for the continued conduct of such Business.
4.10 FRANCHISE RIGHTS. Except as disclosed in SCHEDULE 4.7
annexed hereto, the Seller is in compliance in all material respects with all of
its obligations under its franchise agreements for its Volkswagen and Volvo
dealerships, and neither the Seller nor either of the Stockholders has received
any notice of any pending default, event of default or termination or threatened
termination thereunder. To the best of the Seller's and the Stockholders'
knowledge, the franchisors under such agreements are in compliance in all
material respects with their respective obligations under such franchise
agreements. Neither the Seller nor either of the Stockholders has any reason to
believe that such franchisors will not consent (to the extent required under
such franchise agreements) to the assignment of such franchise agreements to the
Buyer hereunder, and the continued operation of the Business by the Buyer from
and after the Closing Date.
4.11 INVENTORY. All of the Seller's inventory of vehicles, and
all of the Inventory (whether reflected in the Financial Statements or
thereafter acquired by the Seller prior to the date hereof), is of a quality,
age and quantity consistent with the historical practices of the Seller since
January 1, 1993, and is valued on the Seller's books at the lower of cost or
market (on a ____ basis).
4.12 COMPLIANCE. To the best of the Seller's and the
Stockholders' knowledge, the Seller is, and for the past three (3) years has
been, in compliance in all material respects with all laws, statutes,
regulations, rules and ordinances applicable to the conduct of its business
(including, without limitation, all applicable environmental laws, statutes,
regulations, rules and
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ordinances), and has in full force and effect all licenses, permits and other
authorizations required for the conduct of its business as presently
constituted; and the Seller is not in default or violation in respect of or
under any of the foregoing, and neither the Seller nor either the Stockholders
is aware of any past or present condition or circumstance in the Seller's
business (including, without limitation, with respect to any real property now
or previously occupied by the Seller) which could give rise to any material
liability under any such law, statute, regulation, rule or ordinance. Without
limitation of the foregoing, all odometer readings of the vehicles included in
the Assets reflect, to the best of the Seller's and the Stockholders' knowledge,
the actual mileage of the subject vehicle, and all service work in process
included in the Assets will have been performed in a proper and professional
manner in accordance with applicable service standards recommended or required
by the subject vehicle manufacturers.
4.13 REAL PROPERTY. The Seller does not own any real estate or
any interest therein, except to the extent of its interest as lessee under the
lease for its business premises at 4295 South Federal Highway, Stuart, Florida
34997 (which lease will be expressly superseded by the lease contemplated by
Section 9.3 below). Such leased premises are in good condition (reasonable wear
and tear excepted), and are adequate for the operation of the Business as
presently conducted.
4.14 INSURANCE. The Seller maintains, has in full force and
effect, and has paid all premiums in respect of insurance covering its business
and assets against such hazards and in such amounts as are normal and customary
for businesses of similar size, scope and nature.
4.15 EMPLOYEES. The Seller is not a party to or bound by any
collective bargaining agreement, and no union is now certified or has claimed
the right to be certified as a collective bargaining agent to represent any
employees of the Seller. The Seller is not party to any employment agreement,
consulting agreement or management agreement which is not terminable without
cost or penalty upon less than thirty (30) days' prior written notice. The
Seller has not had any material labor difficulty in the past two (2) years, and
neither the Seller nor either of the Stockholders has received notice of any
unfair labor practice charges against the Seller or any actual or alleged
violation by the Seller of any law, regulation, or order affecting the
collective bargaining rights of employees, equal opportunity in employment, or
employee health, safety, welfare, or wages and hours.
4.16 EMPLOYEE BENEFITS. The Seller does not maintain and is not
required and has no obligation to make any contributions to any bonus, pension,
profit-sharing, retirement, deferred compensation, retirement, medical benefits
or other such plan or
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arrangement for the benefit of any employee, former employee or other person,
and the Seller does not have any obligations with respect to deferred
compensation or future benefits to any past or present employee.
4.17 CONTRACTS AND COMMITMENTS. Except for the franchise
agreements described in Section 1.1(a) above, and those leases for which ongoing
obligations are included in the Assumed Liabilities, there is no contract,
agreement, commitment or understanding which is material to the ongoing
operation of the Business. To the best of the Seller's and the Stockholders'
knowledge, (a) the Seller and all other parties to the material contracts
specified in this Section 4.17 have performed and complied in all material
respects with all of their respective obligations thereunder, and (b) there is
no outstanding material default or non-performance under any of such material
contracts.
4.18 LITIGATION. Except for one pending litigation brought by a
former employee of the Seller alleging sexual harassment (as to which the Seller
will retain responsibility and any liability thereunder), there is no pending
or, to the best knowledge of the Seller and the Stockholders, threatened
litigation, arbitration, administrative proceeding or other legal action or
proceeding against the Seller or relating to its business.
4.19 INTELLECTUAL PROPERTY. The Seller has the valid right to
utilize all trade names and other intellectual property utilized in its business
(including but not limited to the trade name "Motorcars of Stuart"), and has not
received notice of any claimed infringement of any of such intellectual property
with the rights or property of any other person.
4.20 GOING CONCERN. Neither the Seller nor either of the
Stockholders has any knowledge of any fact, event, circumstance or condition
(including but not limited to any announced or anticipated changes in the
policies of any material supplier, referral source, client or customer) that
would materially impair the ability of the Buyer to continue the Business
heretofore conducted by the Seller in substantially the manner heretofore
conducted by the Seller (other than general, industry-wide conditions).
4.21 THE SHARES. The Seller and the Stockholders hereby confirm
that the Preferred Stock constitutes "restricted securities" under applicable
federal and state securities laws, and that none of the Preferred Stock (and/or
any shares of common stock of the Parent into which any of the Preferred Stock
may be converted) may be resold in the absence of an effective registration
therefor under federal and state securities laws or an available exemption from
such registration requirements. The Seller further confirms that it has received
no assurance
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whatsoever as to whether or when any of the Preferred Stock (and/or any shares
of common stock of the Parent into which any of the Preferred Stock may be
converted) will be registered under federal or state securities laws, and that,
accordingly, subject to Section 3.2 above, the Seller may be required to hold
such securities indefinitely.
4.22 DISCLOSURE AND DUTY OF INQUIRY. The Buyer is not and will
not be required to undertake any independent investigation to determine the
truth, accuracy and completeness of the representations and warranties made by
the Seller and the Stockholders in this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
In connection with the Buyer's purchase of the Assets from the
Seller, the Buyer hereby represents and warrants to the Seller and the
Stockholders as follows:
5.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida, with all necessary power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
5.2 AUTHORIZATION OF AGREEMENT. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Buyer has been duly and validly authorized by the
Board of Directors of the Buyer. No further corporate authorization is required
on the part of the Buyer to consummate the transactions contemplated hereby.
5.3 VALID AND BINDING AGREEMENT. This Agreement constitutes the
legal, valid and binding obligation of the Buyer, enforceable against the Buyer
in accordance with its terms, except to the extent limited by bankruptcy,
insolvency, reorganization and other laws affecting creditors' rights generally,
and except that the remedy of specific performance or similar equitable relief
is available only at the discretion of the court before which enforcement is
sought.
5.4 NO BREACH OF STATUTE OR CONTRACT. Neither the execution and
delivery of this Agreement by the Buyer, nor compliance with the terms and
provisions of this Agreement on the part of the Buyer, will: (a) violate any
statute or regulation of any governmental authority, domestic or foreign,
affecting the Buyer; (b) require the issuance of any authorization, license,
consent or approval of any federal or state governmental agency; (c) conflict
with or result in a breach of any of the terms, conditions or provisions of any
judgment, order, injunction, decree, note, indenture, loan agreement or other
agreement or instrument to which the Buyer is a party, or by which the Buyer is
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bound, or constitute a default thereunder; or (d) require the consent of any
third party under any outstanding statute, regulation, judgment, order,
injunction, decree, agreement or instrument to which the Buyer is a party, or by
which the Buyer is bound.
5.5 SHARES. The issuance of the Preferred Stock hereunder has
been duly authorized by all necessary corporate action on the part of the
Parent, and, when issued hereunder, the Preferred Stock will be validly issued,
fully paid and non-assessable.
5.6 DISCLOSURE AND DUTY OF INQUIRY. The Seller and the
Stockholders are not and will not be required to undertake any independent
investigation to determine the truth, accuracy and completeness of the
representations and warranties made by the Buyer in this Agreement.
6. THE SELLER'S OBLIGATIONS BEFORE THE CLOSING DATE.
The Seller hereby covenants and agrees that, from the date hereof
until the Closing Date:
6.1 ACCESS TO INFORMATION. The Seller shall permit the Buyer and
its counsel, accountants and other representatives, upon reasonable advance
notice, during normal business hours and without undue disruption of the
business of the Seller, to have reasonable access to all assets, properties,
books, accounts, records, contracts, documents and information relating to the
Business. The Buyer and its representatives shall also be permitted to freely
consult with the Seller's counsel concerning the Business. Such information,
together with any information which may be provided by the Buyer to the Seller
or the Stockholders, shall be maintained by each party in confidence, and shall
not be disclosed to any persons other than such parties' professional advisors
assisting such party in connection with the transactions contemplated hereby;
PROVIDED, HOWEVER, that information shall not be considered confidential to the
extent that it (a) is a matter of common knowledge, (b) is generally known in
the industry, or (c) is otherwise available to the recipient thereof other than
by reason of a breach of this or any other binding confidentiality agreement.
6.2 CONDUCT OF BUSINESS IN NORMAL COURSE. The Seller shall carry
on its business activities in substantially the same manner as heretofore
conducted, and shall not make or institute any unusual or novel methods of
service, sale, purchase, lease, management, accounting or operation that will
vary materially from those methods used by the Seller as of the date hereof,
without in each instance obtaining the prior written consent of the Buyer.
6.3 PRESERVATION OF BUSINESS AND RELATIONSHIPS. The Seller shall
use its best efforts, without making any commitments
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on behalf of the Buyer or incurring any unusual expenditures, to preserve its
business organization intact, and to preserve its present relationships with
customers, referral sources, suppliers and others having business relationships
with the Seller.
6.4 CORPORATE MATTERS. The Seller will not, without the prior
written consent of the Buyer:
(a) pay, grant or authorize any salary increases or bonuses
except in the ordinary course of business and consistent with past practice, or
enter into or modify any employment, consulting or management agreements, or
institute any bonus, benefit, profit sharing, pension, retirement or other such
benefit plan or policy;
(b) modify in any material respect any material agreement to
which the Seller is a party or by which it may be bound, except in the ordinary
course of business;
(c) make any change in the Seller's management personnel;
(d) acquire any capital assets having an aggregate purchase
price in excess of $1,000 (excluding purchases of inventory), or sell, assign or
dispose of any capital asset(s) with a net book value in excess of $1,000 as to
any one item;
(e) materially change its method of collection of accounts or
notes receivable;
(f) incur any liability or indebtedness except, in each
instance, in the ordinary course of business;
(g) subject any of the assets or properties of the Seller to
any liens or encumbrances not in existence on the date hereof; or
(h) agree to do, or take any action in furtherance of, any of
the foregoing.
7. CONDITIONS PRECEDENT TO THE BUYER'S PERFORMANCE.
The obligations of the Buyer to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, at or before the
Closing Date, of all of the following conditions, any one or more of which may
be waived in writing by the Buyer:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by the Seller and/or the Stockholders in
this Agreement, in any Schedule(s) hereto, and/or in any written statement
delivered to the Buyer under this
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Agreement shall be true and correct in all material respects on and as of the
Closing Date as though such representations and warranties were made on and as
of that date.
7.2 PERFORMANCE. The Seller and the Stockholders shall have
performed, satisfied and complied with all covenants, agreements, and conditions
required by this Agreement to be performed, satisfied or complied with by the
Seller and/or the Stockholders on or before the Closing Date.
7.3 CERTIFICATION. The Buyer shall have received a certificate,
dated the Closing Date, signed by the Seller and the Stockholders, certifying,
in such detail as the Buyer and its counsel may reasonably request, that the
conditions specified in Sections 7.1 and 7.2 above have been fulfilled.
7.4 GOOD STANDING CERTIFICATES. The Seller shall have delivered
to the Buyer certificates or telegrams issued by the Secretary of State of
Illinois and the Secretary of State of Florida, evidencing the good standing of
the Seller in the States of Illinois and Florida as of a date not more than ten
(10) days prior to the Closing Date.
7.5 ABSENCE OF LITIGATION. No action, suit or proceeding by or
before any court or any governmental body or authority, against the Seller or
pertaining to the transactions contemplated by this Agreement or their
consummation, shall have been instituted on or before the Closing Date, which
action, suit or proceeding would, if determined adversely, have a material
adverse effect on the Business.
7.6 CONSENTS. All necessary filings with, disclosures to and
agreements and consents of governmental agencies and regulatory bodies (state,
federal or local), and the franchisors under the Seller's franchise agreements
for its Volkswagen and Volvo dealerships, all to the extent required in
connection with the transactions contemplated by this Agreement, shall have been
obtained and true and complete copies thereof delivered to the Buyer; and the
Seller and the Stockholders shall have provided such reasonable assistance as
may be requested by the Buyer in connection therewith.
7.7 NO MATERIAL ADVERSE CHANGE. To the Closing Date, there shall
have been no material adverse change (or event or condition likely to result in
a material adverse change) in the financial or other condition of the Seller's
assets, operations or business from that reflected in the June 30, 1996
Financial Statements included in SCHEDULE 4.6. Between the date of this
Agreement and the Closing Date, assets of the Seller having an aggregate fair
market value of $25,000 or more shall not have been lost, destroyed or
irreparably damaged by fire, flood, explosion, theft or any other cause, whether
or not covered by insurance.
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7.8 ACCOUNTANT'S CONSENT. The Seller shall have caused to be
delivered to the Buyer a written agreement executed by the Seller's independent
certified public accountants, pursuant to which such accountants will agree (a)
not to unreasonably withhold their consent to the use of such accountants' audit
opinions and financial statements, and the inclusion of such accountants' name,
in any registration statement and/or prospectus (including any amendments
thereto) which may be filed by the Buyer or any of its affiliates subsequent to
the Closing Date, and (b) not to unreasonably withhold, with respect to such
financial statements and use of name, specific written consents bearing a
then-current date in a form suitable for inclusion as an exhibit to any filing
of any registration statement (including amendments thereto) which may be filed
by the Buyer or any of its affiliates subsequent to the Closing Date.
8. CONDITIONS PRECEDENT TO THE SELLER'S PERFORMANCE.
The obligations of the Seller and the Stockholders to consummate
the transactions contemplated by this Agreement are further subject to the
satisfaction, at or before the Closing Date, of all of the following conditions,
any one or more of which may be waived in writing by the Seller and the
Stockholders:
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by the Buyer in this Agreement and/or in any
written statement delivered by the Buyer under this Agreement shall be true and
correct in all material respects on and as of the Closing Date as though such
representations and warranties were made on and as of that date.
8.2 PERFORMANCE. The Buyer shall have performed, satisfied and
complied with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Buyer on or before
the Closing Date.
8.3 CERTIFICATION. The Seller and the Stockholders shall have
received a certificate, dated the Closing Date, signed by the Buyer, certifying,
in such detail as the Seller and its counsel may reasonably request, that the
conditions specified in Sections 8.1 and 8.2 above have been fulfilled.
9. CLOSING.
9.1 PLACE AND DATE OF CLOSING. Unless this Agreement shall be
terminated pursuant to Section 10 below, the consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of ____________________________________________________________________________
________________________________________________________________________________
______________________________, or such other location as is agreed to between
the Buyer and the Seller, at 10:00 A.M. local time on the later of (a) that day
which is thirty (30)
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days after the consummation of the contemplated business combination between the
Parent and Eckler Industries, Inc., or (b) January 20, 1997, or such later date
(not later than January 27, 1997) as may be agreeable to the Buyer and the
Seller (the date of the Closing being referred to in this Agreement as the
"Closing Date").
9.2 ACTIONS AT CLOSING. At the Closing, the Buyer and the Seller
shall make all payments and deliveries stated in this Agreement to be made at
the Closing and/or on or prior to the Closing Date; and in addition, (a) the
Seller shall execute and deliver to the Buyer a bill of sale to effect the
transfer of the Assets to the Buyer, in form and substance reasonably
satisfactory to the Buyer and the Seller, (b) the Seller shall execute and
deliver to the Buyer properly endorsed certificates of title to effect the
transfer to the Buyer of all vehicles and other titled assets included in the
Assets, (c) the Buyer and the Seller shall execute and deliver to one another an
assignment and assumption agreement with respect to the Assumed Liabilities, in
form and substance reasonably satisfactory to the Buyer and the Seller, and (d)
the Seller shall have caused to be delivered to the Buyer the accountant's
agreement contemplated by Section 7.8 above.
9.3 NEW LEASE. At the Closing, as a condition precedent to the
obligations of all parties hereunder, the Buyer and the owner of the Premises
shall execute and deliver to one another a mutually acceptable "triple net"
lease for the Premises, such lease to contain terms consistent with ADDENDUM "A"
annexed hereto.
10. TERMINATION OF AGREEMENT.
10.1 GENERAL. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing: (a) by the mutual written consent of the Seller and the Buyer; (b) by
the Buyer, or by the Seller, if: (i) a material breach shall exist with respect
to the written representations and warranties made by the other party, (ii) the
other party shall take any action prohibited by this Agreement, if such action
shall or may have a material adverse effect on the Business and/or the
transactions contemplated hereby, (iii) the other party shall not have
furnished, upon reasonable notice therefor, such certificates and documents
required in connection with the transactions contemplated hereby and matters
incidental thereto as it shall have agreed to furnish, and it is reasonably
unlikely that the other party will be able to furnish such item(s) prior to the
Outside Closing Date specified below, or (iv) any consent of any third party to
the transactions contemplated hereby (whether or not the necessity of which is
disclosed herein or in any Schedule hereto) is reasonably necessary to prevent a
default under any outstanding material obligation of the Buyer or the Seller,
and such consent is not obtainable without material cost or penalty (unless the
party or parties not seeking to terminate this
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Agreement agrees or agree to pay such cost or penalty); or (c) by the Buyer, or
by the Seller, at any time on or after January 27, 1997 (the "Outside Closing
Date"), if the transactions contemplated hereby shall not have been consummated
prior thereto, and the party directing termination shall not then be in breach
or default of any obligations imposed upon such party by this Agreement.
10.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to this Section 10, no party to this Agreement shall have any
further liability to the other, except that the confidentiality provisions of
Section 6.1 shall remain in full force and effect. In the event of termination
by either party as above provided in this Section 10, prompt written notice
shall be given to the other party.
11. RESTRICTIVE COVENANTS.
11.1 ACKNOWLEDGEMENTS. The Seller and the Stockholders
acknowledge and agree that: (a) the business contacts, customers, suppliers,
know-how, trade secrets, marketing techniques and other aspects of the Business
have been of value to the Seller, and have provided the Seller (and will
hereafter provide the Buyer) with substantial competitive advantage in the
operation of the Business, and (b) by virtue of their previous relationships,
the Seller and the Stockholders have detailed knowledge and possess confidential
information concerning the Business.
11.2 LIMITATIONS. Neither the Seller nor either of the
Stockholders shall directly or indirectly, for itself or himself, or through or
on behalf of any other person or entity:
(a) at any time from and after the Closing Date, divulge,
transmit or otherwise disclose or cause to be divulged, transmitted or otherwise
disclosed, any business contacts, client or customer lists, know-how, trade
secrets, marketing techniques, contracts or other confidential or proprietary
information relating to the Business of whatever nature existing on or prior to
the date hereof (provided, however, that for purposes hereof, information shall
not be considered to be confidential or proprietary if (i) it is a matter of
common knowledge or public record, (ii) it is generally known in the industry,
or (iii) the Seller or the Stockholder can demonstrate that such information was
already known to the recipient thereof other than by reason of any breach of any
obligation under this Agreement or any other confidentiality or non-disclosure
agreement); and/or
(b) at any time from and after the Closing Date, utilize any
trade name or other good will heretofore associated with the Business
(including, without limitation, the trade name "Motorcars of Stuart"); and/or
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(c) at any time during the two (2) year period from and after
the date hereof (the "Restrictive Period"), invest, carry on, engage or become
involved, either as a principal, operator, an employee, agent, advisor, officer,
director, stockholder (excluding ownership of not more than 3% of the
outstanding shares of a publicly held corporation if such ownership does not
involve managerial or operational responsibility), manager, partner, joint
venturer, participant or consultant, in any business enterprise (other than the
Parent or any of its subsidiaries, affiliates, successors or assigns) which: (i)
is or shall be located or operating, or soliciting or servicing automobile
dealers, clients or customers located, anywhere within a twenty (20) mile radius
(or, in the case of any Volvo dealership, a fifty (50) mile radius) of the
Premises in Stuart, Florida, and (ii) is or becomes, at any time during the
Restrictive Period, engaged in any manner in any retail sale, leasing or
financing of automobiles or other consumer vehicles, or in any leasing or
financing activities related to or arising out of any retail sale of automobiles
or other consumer vehicles.
11.3 REMEDIES.
(a) The parties hereby further acknowledge and agree that any
breach, directly or indirectly, of Section 11.2 above will cause the Buyer
irreparable injury for which there is no adequate remedy at law. Accordingly,
the Seller and the Stockholders expressly agree that, in the event of any such
breach or any threatened breach hereunder, directly or indirectly, the Buyer
shall be entitled, in addition to any and all other remedies available
(including but not limited to the liquidated damages provided for in Section
11.3(a) above), to seek and obtain, without requirement of posting any bond or
other security, injunctive and/or other equitable relief to require specific
performance of or prevent, restrain and/or enjoin a breach under the provisions
of this Agreement.
(b) In the event of any dispute under or arising out of this
Section 11, the prevailing party or parties in such dispute shall be entitled to
recover from the non-prevailing party or parties, in addition to any damages
that may be awarded, its or their reasonable costs and expenses (including
reasonable attorneys' fees) incurred in connection with prosecuting or defending
the subject dispute.
11.4 SEVERABILITY. It is acknowledged, understood and agreed that
the restrictions contained in this Section 11 (a) are made for good, valuable
and adequate consideration received and to be received by the Seller and the
Stockholders, and (b) are reasonable and necessary, in terms of the time,
geographic scope and nature of the restrictions, for the protection of the Buyer
and the good will thereof. It is intended that said provisions be fully
severable, and in the event that any of the foregoing
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restrictions, or any portion of the foregoing restrictions, shall be deemed
contrary to law, invalid or unenforceable in any respect by any court or other
tribunal of competent jurisdiction, then such restrictions shall be deemed to be
amended, modified and reduced in scope and effect, as to duration, geographic
area or in any other relevant respect, only to that extent necessary to render
same valid and enforceable, and any other of the foregoing restrictions shall be
unaffected and shall remain in full force and effect.
12. INDEMNIFICATION.
12.1 GENERAL.
(a) Without prejudice to any rights of contribution as among
the Seller and the Stockholders, the Seller and the Stockholder shall jointly
and severally defend, indemnify and hold harmless the Buyer from, against and in
respect of any and all claims, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies, including interest, penalties
and reasonable attorneys' fees, that the Buyer may incur, sustain or suffer
("Losses") as a result of (i) any breach of, or failure by the Seller or the
Stockholders to perform, any of the representations, warranties, covenants or
agreements of the Seller or the Stockholders contained in this Agreement or in
any Schedule(s) furnished by or on behalf of the Seller or the Stockholders
under this Agreement, or (ii) any failure by the Seller to pay or perform when
due any of its retained liabilities.
(b) The Buyer shall defend, indemnify and hold harmless the
Seller and the Stockholders from, against and in respect of any and all claims,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorneys' fees, that
the Seller or either of the Stockholders may incur, sustain or suffer as a
result of (i) any breach of, or failure by the Buyer to perform, any of the
representations, warranties, covenants or agreements of the Buyer contained in
this Agreement, or (ii) any failure by the Buyer to pay or perform when due any
of the Assumed Liabilities.
12.2 LIMITATIONS ON CERTAIN INDEMNITY.
(a) Notwithstanding any other provision of this Agreement to
the contrary, (i) neither the Seller nor the Stockholders shall be liable to the
Buyer with respect to Losses unless and until the aggregate amount of all Losses
incurred by the Buyer shall exceed the sum of $15,000 (the "Basket"), and (ii)
the Seller and the Stockholders shall thereafter be jointly and severally liable
for all Losses in excess of the Basket, provided that the Seller's and the
Stockholders' maximum aggregate liability in respect of all Losses shall not, in
the absence of proven fraud by the Seller or either of the Stockholders in
respect of any
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particular Losses, in any event exceed the limitations set forth in Section
8.2(b) below; PROVIDED, HOWEVER, that the Basket and such limitation on
liability shall not be available with respect to, and there shall not be counted
against the Basket or such limitation of liability, any Losses arising by reason
of (A) any breach by the Seller or either of the Stockholders of Section 11.2
above, (B) any failure by the Seller to pay or perform when due any of its
retained liabilities, or (C) any Losses involving proven fraud by the Seller or
either of the Stockholders.
(b) Except with respect to any Losses involving proven fraud
by the Seller or either of the Stockholders, or any breach of Section 11.2
above, or any failure by the Seller to pay or perform when due any of its
retained liabilities, the Seller and the Stockholders shall not be required to
pay indemnification hereunder in an aggregate amount in excess of the Purchase
Price. To the extent that, at the time of payment, the Seller or the
Stockholders still hold any Preferred Stock, then the Seller and/or the
Stockholders shall have the option of satisfying any claim in respect of Losses
by tendering to the Parent for cancellation a number of shares of Preferred
Stock having an aggregate liquidation value equal to the amount of the subject
claim which is to be satisfied in such manner.
(c) The Buyer shall be entitled to indemnification by the
Seller and the Stockholders for Losses only in respect of claims for which
notice of claim shall have been given to the Seller or the Stockholders on or
before March 31, 1998.
12.3 CLAIMS FOR INDEMNITY. Whenever a claim shall arise for which
any party shall be entitled to indemnification hereunder, the indemnified party
shall notify the indemnifying party or parties in writing within sixty (60) days
of the indemnified party's first receipt of notice of, or the indemnified
party's obtaining actual knowledge of, such claim, and in any event within such
shorter period as may be necessary for the indemnifying party or parties to take
appropriate action to resist such claim. Such notice shall specify all facts
known to the indemnified party giving rise to such indemnity rights and shall
estimate (to the extent reasonably possible) the amount of potential liability
arising therefrom. If an indemnifying party shall be duly notified of such
dispute, the parties shall attempt to settle and compromise the same or may
agree to submit the same to arbitration or, if unable or unwilling to do any of
the foregoing, such dispute shall be settled by appropriate litigation, and any
rights of indemnification established by reason of such settlement, compromise,
arbitration or litigation shall promptly thereafter be paid and satisfied by
those indemnifying parties obligated to make indemnification hereunder.
12.4 RIGHT TO DEFEND. If the facts giving rise to any
claim for indemnification shall involve any actual or threatened
21
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action or demand by any third party against the indemnified party or any of its
affiliates, the indemnifying party or parties shall be entitled (without
prejudice to the indemnified party's right to participate at its own expense
through counsel of its own choosing), at their expense and through a single
counsel of their own choosing, to defend or prosecute such claim in the name of
the indemnifying party or parties, or any of them, or if necessary, in the name
of the indemnified party. In any event, the indemnified party shall give the
indemnifying party advance written notice of any proposed compromise or
settlement of any such claim. If the remedy sought in any such action or demand
is solely money damages, the indemnifying party shall have fifteen (15) days
after receipt of such notice of settlement to object to the proposed compromise
or settlement, and if it does so object, the indemnifying party shall be
required to undertake, conduct and control, though counsel of its own choosing
and at its sole expense, the settlement or defense thereof, and the indemnified
party shall cooperate with the indemnifying party in connection therewith.
13. POST-CLOSING EVENTS.
13.1 ANNOUNCEMENTS. No party hereto shall make any disclosure or
public announcement of the consummation of the transactions pursuant to this
Agreement, or of any of the terms thereof, without the prior review and approval
thereof by the Buyer (in the case of any proposed disclosure or public
announcement by the Seller or either of the Stockholders) or JW (in the case of
any proposed disclosure or public announcement by the Buyer), such approval not
to be unreasonably withheld or delayed.
13.2 EMPLOYEES. The Buyer shall be permitted to offer employment
to any or all employees of the Seller as of the Closing Date, on such terms as
shall be mutually agreeable to the Buyer and each subject employee. Nothing
contained in this Agreement shall be deemed to obligate the Buyer to offer or
provide employment to any employee of the Seller, or to assume any pre-Closing
Date obligations owed by the Seller to any of such employees.
13.3 SALES TAXES. All real estate taxes (to the extent imposed on
the Seller pursuant to the lease for the Premises) and all state, city and
county personal property taxes attributable to the Assets shall be prorated as
of the Closing Date. The Seller will prepare and file a final sales tax return
and payment within fifteen (15) days after the Closing Date, and shall indemnify
and hold harmless the Buyer in respect of any and all sales taxes payable in
respect of the Seller's operations for periods through and including the Closing
Date.
13.4 ACCOUNTS RECEIVABLE. In the event and to the extent that the
Buyer shall, following the Closing Date, receive any payments in respect of the
Seller's accounts receivable, the Buyer shall be deemed to have received such
payments in trust for the
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benefit of the Seller, and shall immediately turn over any and all such payments
in the form received. The Buyer shall be under no obligation to pursue
collection of any of the Seller's accounts receivable, or to send any bills or
statements in respect thereof; and the Buyer shall have no authority to make any
adjustments or compromises in respect of the Seller's accounts receivable (which
authority shall, as between the Buyer and the Seller, remain solely with the
Seller).
13.5 BOOKS AND RECORDS. From and after the Closing Date, the
Buyer shall permit the Seller and its representatives, from time to time upon
reasonable prior notice and during normal business hours so as not to unduly
interfere with the conduct of the Buyer's business, to have access at the
Buyer's business premises to those books and records conveyed as part of the
Assets, including but not limited to sales and service records of the Seller and
its predecessor, Blow's Exposition. In the event and to the extent that the
Buyer may determine to dispose of any of such books and records following the
Closing Date, the Buyer shall permit the Seller a reasonable opportunity to
remove such books and records from the Buyer's business premises at the Seller's
sole cost and expense.
13.6 FURTHER ASSURANCES. From time to time from and after the
date hereof, the parties will execute and deliver to one another any and all
further agreements, instruments, certificates and other documents as may
reasonably be requested by any other party in order more fully to consummate the
transactions contemplated hereby, and to effect an orderly transition of the
Business to the Buyer hereunder. Without limitation of the foregoing, the Seller
shall cooperate with the Buyer in order to cause the local telephone company to
transfer to the Buyer's name and account all telephone numbers and fax numbers
currently held by the Seller (provided that the Buyer acknowledges that the
transfer of such telephone numbers and fax numbers is in the discretion of the
local telephone companies).
14. COSTS.
14.1 FINDER'S OR BROKER'S FEES. Each of the Buyer, the Seller and
the Stockholders represents and warrants that neither they nor any of their
respective affiliates have dealt with any broker or finder in connection with
any of the transactions contemplated by this Agreement, and no broker or other
person is entitled to any commission or finder's fee in connection with any of
these transactions, except that the Buyer agrees to be solely responsible for
any compensation payable to Greyhouse Services Corporation in connection with
the transactions contemplated by this Agreement.
14.2 EXPENSES. The Buyer, the Seller and the Stockholders shall
each pay all costs and expenses incurred or to
23
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be incurred by them, respectively, in negotiating and preparing this Agreement
and in closing and carrying out the transactions contemplated by this Agreement.
15. FORM OF AGREEMENT.
15.1 EFFECT OF HEADINGS. The Section headings used in this
Agreement and the titles of the Schedules hereto are included for purposes of
convenience only, and shall not affect the construction or interpretation of any
of the provisions hereof or of the information set forth in such Schedules.
15.2 ENTIRE AGREEMENT; WAIVERS. This Agreement and the other
agreements and instruments referred to herein constitute the entire agreement
between the parties pertaining to the subject matter hereof, and supersede all
prior agreements or understandings as to such subject matter. No party hereto
has made any representation or warranty or given any covenant to the other
except as set forth in this Agreement, the Schedules hereto, and the other
agreements and instruments referred to herein. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
party making the waiver.
15.3 COUNTERPARTS. This Agreement may be executed simultaneously
in any number of counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
16. PARTIES.
16.1 PARTIES IN INTEREST. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective heirs, executors, administrators, personal representatives,
successors and permitted assigns, nor is anything in this Agreement intended to
relieve or discharge the obligations or liability of any third persons to any
party to this Agreement, nor shall any provision give any third persons any
right of subrogation or action over or against any party to this Agreement.
16.2 NOTICES. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (a) on the date of service if served personally on the
party to whom notice is to be given, (b) on the day after the date sent by
recognized overnight courier service, properly addressed and with all charges
prepaid or billed to the account of the sender, or (c) on the third day after
mailing if mailed to the party to whom notice is to be given, by first
24
<PAGE>
class mail, registered or certified, postage prepaid, and properly
addressed as follows:
(i) If to the Seller and/or the Stockholders:
Jack Winters Enterprises, Inc.
d/b/a Motorcars of Stuart
4205 South Federal Highway
Stuart, Florida 34997
Attn: Jack Winters
(ii) If to the Buyer:
c/o Smart Choice Holdings, Inc.
625 Main Street, Suite 25
Windermere, Florida 34786
Attn: Tom Conlan
or to such other address as any party shall have specified by notice in writing
given to the other party.
17. MISCELLANEOUS.
17.1 AMENDMENTS AND MODIFICATIONS. No amendment or modification
of this Agreement or any Schedule hereto shall be valid unless made in writing
and signed by the party to be charged therewith.
17.2 NON-ASSIGNABILITY; BINDING EFFECT. Neither this Agreement,
nor any of the rights or obligations of any of the parties hereunder, shall be
assignable by any party hereto without the prior written consent of all other
parties hereto; PROVIDED, HOWEVER, that the Buyer shall have the right, without
requirement of any consent of the Seller or the Stockholders, (a) at any time up
to and including the Closing Date, to assign all of its rights and obligations
hereunder to any other affiliate of the Parent, and (b) at any time and from
time to time on or after the Closing Date, to assign its rights and remedies for
indemnification hereunder to any financial institution or other lender providing
financing to the Buyer or any permitted assignee of the Buyer. Otherwise, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
17.3 GOVERNING LAW; JURISDICTION. This Agreement shall be
construed and interpreted and the rights granted herein governed in accordance
with the laws of the State of Florida applicable to contracts made and to be
performed wholly within such State. Except for any judicial proceeding seeking
equitable relief as contemplated by Section 11.3(b) above, or as otherwise
provided in Section 12.3 above, any claim, dispute or controversy arising under
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<PAGE>
or in connection with this Agreement or any actual or alleged breach hereof
shall be settled exclusively by arbitration to be held before a single
arbitrator in Orlando, Florida, or in any other locale or venue as legal
jurisdiction may otherwise be had over the party against whom the proceeding is
commenced, in accordance with the commercial arbitration rules of the American
Arbitration Association then obtaining. As part of his or her award, the
arbitrator shall make a fair allocation of the fee of the American Arbitration
Association, the cost of any transcript, and the parties' reasonable attorneys'
fees, taking into account the merits and good faith of the parties' claims and
defenses. Judgment may be entered on the award so rendered in any court having
jurisdiction. Any process or other papers hereunder may be served by registered
or certified mail, return receipt requested, or by personal service, provided
that a reasonable time for appearance or response is allowed.
IN WITNESS WHEREOF, the parties have executed this Agreement on and as
of the date first set forth above.
FIRST CHOICE AUTO FINANCE, INC.
By: ------------------------------
JACK WINTERS ENTERPRISES, INC.
By: ------------------------------
----------------------------------
JACK WINTERS
----------------------------------
F. CRAIG CLEMENS
The undersigned, SMART CHOICE HOLDINGS, INC., being the "Parent" named
in the foregoing Agreement, hereby (a) joins in the representations and
warranties of the Buyer made in Section 5.5 of the foregoing Agreement, (b)
agrees to issue to the Seller, as contemplated by Section 3 of the foregoing
Agreement, the shares of Preferred Stock which may hereafter become issuable
pursuant to such Section 3.1, and (c) agrees to effect the redemption of any
remaining Preferred Stock as contemplated by Section 3.2(c) of the foregoing
Agreement.
SMART CHOICE HOLDINGS, INC.
By: ------------------------------
26
EXHIBIT 10.5
ADDENDUM TO ASSET PURCHASE AGREEMENT
This addendum is entered into this of March 1997, by and among FIRST
CHOICE AUTO FINANCE, INC., a Florida Corporation (the "Buyer"), JACK WINTERS
ENTERPRISE, INC. d/b/a Motorcars of Stuart, an Illinois corporation (THE
"SELLER"), JACK WINTERS, an individual ("JW") and F. CRAIG CLEMENTS, an
individual ("CC") and, collectively WITH JW (THE "STOCKHOLDERS");
WITNESSETH
WHEREAS, Seller, Buyer and Stockholders entered into an Asset Purchase
Agreement (the "Asset Purchase Agreement") on or about December 19, 1996;
WHEREAS, the Buyer has provided a deposit of $100,000 pursuant
to Section 3.2 of the Asset Purchase Agreement;
WHEREAS, the parties wish to amend the Asset Purchase
Agreement by this Addendum;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereby agree as follows:
1. EFFECT OF THE ADDENDUM
1.1 This addendum affects those issues contained herein only.
The remainder of the Asset Purchase Agreement not Affected by this Addendum
remains in full force anD effect.
2. PAYMENT OF PURCHASE PRICE
2.1 Payment of the Purchase Price is contained within section
3.2 of the Asset Purchase Agreement between the parties.
2.2 The Purchase price as defined by Section 3.1 of the Asset
Purchase Agreement was to be paid as set forth in section 3.2 of the Asset
Purchase Agreement. Section 3.2(b)(iii) is deleted from the Asset Purchase
Agreement. The following language shall replace this section:
(iii) As to the next $300,000, Smart Choice Automotive Group, Inc.
("Smart Choice") shall issue to the Seller (or if so designated by written
instruction of both Stockholders, to the Stockholders) shares (the "Shares") of
Common Stock of Smart Choice ("Common Stock") determined by dividing $300,000 by
the average last sale price for the Common Stock on Nasdaq for the three
business days prior to the date of execution of this Addendum. Smart Choice
agrees to file a registration statement that includes the Shares within 120 days
from the date of this Addendum, and agrees to use its best efforts to cause such
registration statement
1
<PAGE>
to become effective. The Shares shall be issuable to the Seller on the closing
of the transactions contemplated hereby. In the event that the Shares have not
been registered under the Securities Act of 1933, as amended, by 60 days from
the date of filing of such registration statement, then at the written request
of the Seller at the Seller's option, Smart Choice shall purchase the Shares
from the Seller for a purchase price per share equal to the average last sale
price set forth above used to determine the number of Shares to be issued to the
Seller hereunder.
(iv) As to the next $342,500 the Buyer shall deliver at Seller's option
a certified or cashier's check or wire transfer of immediately available funds
to the Seller in the amount of $342,500 on the date of execution of this
Addendum.
(v) As to the balance of the Purchase Price, if any, by means of a
certified or bank cashier's check payable to the Seller (or at the Seller's
option) by wire transfer of immediately available funds to the account
designated therefor by the Seller prior to the Closing Date.
2.3 The Buyer has delivered a total of $442,500 to the Seller
on or before the execution of this Addendum. The $442,500 cash portion of this
Addendum will be tendered to Seller as a good faith deposit upon the execution
of the attached Management Agreement. This good faith deposit will not be paid
to Seller's counsel and no escrow agreement will be created. Instead the good
faith deposit will be paid directly to Seller and will be immediately available
for use of Seller. Upon receipt of the $442,500, Seller and the Stockholders
will tender to Buyer a Promissory Note on which the Seller and the Stockholders
are co-obligors, to evidence the Seller's and the Stockholders' obligation to
return the good faith deposit to the Buyer on the terms set forth herein. Such
note shall be secured by the assets of the Seller and will also evidence the
Seller's obligation under Section 9(d) of the Management Agreement attached
hereto to pay the Buyer in cash at closing any amount the Buyer pays under
Section 9(d) of the Management Agreement to First National Bank of Stuart (the
"Bank") with respect to the capital loan from the Bank to the Seller. At
closing, the good faith deposit will be applied to the purchase price giving
Buyer credit for the same. On closing and on payment to the Buyer of the amount,
if any, that the Buyer has paid to the Bank pursuant to Section 9(d) of the
Management Agreement, such note will be returned marked paid in full. On
termination of the Asset Purchase Agreement pursuant to Section 10(i) thereof,
the Buyer shall return such note to the Seller marked paid in full. On
termination of the Asset Purchase Agreement pursuant to Section 10(ii) or (iv)
thereof and on payment to the Buyer of the amount, if any, that the Buyer has
paid to the Bank pursuant to Section 9(d) of the Management Agreement and the
amount of the good faith deposit, the Buyer shall return such note to the Seller
marked paid in full. On termination of the Asset Purchase Agreement pursuant
2
<PAGE>
to Section 10(iii) thereof and on payment to the Buyer of the amount, if any,
that the Buyer has paid to the Bank pursuant to Section 9(d) of the Management
Agreement, the Buyer shall return such note to the Seller marked paid in full.
Nothing in this paragraph, Addendum or Asset Purchase Agreement affects the
rights of any party for damages due to breach of the Management Agreement.
3. FRANCHISE APPLICATION
3.1 Buyer will make a complete application, which will include the
documents specified in the January 16, 1997, correspondence to Robert Creger
from Volvo Cars of North America, Inc. attached hereto as Exhibit "A", not later
than 15 days after the date hereof to become a Dealer with Volvo. Failure to
make such application will be a material breach of the Asset Purchase Agreement
and this Addendum.
3.2 Section 7.6 of the Asset Purchase Agreement is hereby amended to
delete the consent of Volkswagen as a condition to closing hereunder. Buyer
acknowledges that Seller has advised that Volkswagen has terminated Seller's
franchise.
4. MANAGEMENT AGREEMENT
4.1 Buyer and Seller will enter into the Management Agreement
attached.
4.2 Buyer and Seller recognize that Buyer will be operating the store
pursuant to the Management Agreement attached hereto. However, Buyer
specifically recognizes Shareholders right to maintain an office at the
dealership until the time of closing.
5. CLOSING
5.1 The parties contemplate franchisor/factory approval within 30 days
of submittal. The parties seek franchisor/factory to act quickly and in good
faith to complete the approval period as set forth. Both parties realize that
should the franchisor/factory not act expeditiously the value of this
transaction to both parties is harmed. Closing will occur 5 business days after
factory approval at The First National Bank And Trust Company, Stuart, Florida,
or such other location the parties may agree.
The parties hereto agree that Section 10.1c of the Asset Purchase
Agreement is hereby amended to provide that the Outside Closing Date shall be 60
days after the date hereof.
6. TERMINATION
6.1 The parties hereto agree that Section 10.1 of the Asset Purchase
Agreement shall be amended to provide in its entirety as follows:
3
<PAGE>
This Agreement may be terminated at any time prior to the Closing: (i)
by the mutual written consent of the parties hereto; (ii) by the Buyer if the
Seller or the Stockholders shall have committed a material breach of the Asset
Purchase Agreement as amended by the Addendum and the Seller or the Stockholders
shall not have cured such breach within 10 days after the Buyer shall have given
written notice of such breach to the Seller and the Stockholders; (iii) by the
Seller if the Buyer shall have committed a material breach of the Asset Purchase
Agreement as amended by the Addendum and the Buyer shall not have cured such
breach within 10 days after the Seller shall have given written notice of such
breach to the Buyer; (iv) the Closing shall not have occurred by the Outside
Closing Date, provided however that if on the Outside Closing Date Volvo shall
not have rejected the Buyer's application to become a Volvo dealer, the Outside
Closing Date shall be automatically extended for an additional 15 days. In the
event that this Agreement is terminated pursuant to Section 10.1(i), (ii),
(or)(iv) hereof, then the Seller shall return to the Buyer the $442,500 good
faith deposit provided by the Buyer to the Seller pursuant to Section 2.4 of the
Addendum. In the event that this Agreement is terminated pursuant to Section
10.1(iii) hereof, then the Seller shall be entitled to retain the $442,500 good
faith deposit as liquidated damages.
7. ASSIGNMENT
The Buyer shall have the right to assign the Asset Purchase Agreement
to any affiliate of the Buyer.
8. MISCELLANEOUS
8.1 The representations and warranties of the Buyer, the Seller, and
the Stockholders set forth in the Asset Purchase Agreement are true and correct
on the date of execution of the Addendum.
8.2 References herein to the Asset Purchase Agreement shall refer to
the Asset Purchase Agreement as amended by the Addendum.
IN WITNESS WHEREOF, the parties have executed this Agreement on and as
of the date first set forth.
FIRST CHOICE AUTO FINANCE, INC.
By: /s/ Robert E. Creger
-------------------------------
JACK WINTERS ENTERPRISES, INC.
By: /s/ Jack Winters
-------------------------------
4
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/s/ Jack Winters
--------------------------------------
Jack Winters, individually
/s/ F. Craig Clements
---------------------------------------
F. Craig Clements, individually
The undersigned, Smart Choice Automotive Group, Inc. joins in
this Addendum for purposes of Section 2.2(iii) hereof.
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/ Roger E. Creger
---------------------------------
5
EXHIBIT 10.14
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Employment Agreement") is
effective as of March 24, 1997, by and between SMART CHOICE AUTOMOTIVE GROUP,
INC., a Florida corporation ("Company"), and FRED E. WHALEY, an individual
("Executive").
W I T N E S S E T H:
WHEREAS, the Company believes that the attraction and retention of key
employees such as the Executive is essential to the Company's growth and
success; and
WHEREAS, the Company desires to employ Executive as its Chief Financial
Officer and Executive Vice President, and Executive is willing and able to
render his services to the Company from and after the date hereof, on the terms
and conditions of this Employment Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby covenant and agree as follows:
SECTION 1. EMPLOYMENT.
a. Subject to the terms and conditions of this Employment
Agreement, the Company shall retain the Executive as its Chief Financial Officer
and Executive Vice President, and the Executive shall render services to the
Company in an executive capacity. Executive shall perform such duties ordinarily
and customarily performed by a similar executive of a corporation of like type
and size as the Company, and shall perform such other reasonable executive
duties as the Company's President may assign to him from time to time. The
Employee may also be given additional titles, and may be assigned
responsibilities on behalf of certain of the Company's affiliates commensurate
with his position with the Company, without requirement of additional
compensation hereunder.
b. Throughout the period of his employment hereunder, the
Executive shall: (i) devote his full business time, attention, knowledge and
skills, faithfully, diligently and to the best of his ability, to the active
performance of his duties and responsibilities hereunder on behalf of the
Company; (ii) observe and carry out such reasonable rules, regulations,
policies, directions and restrictions as may be established from time to time by
the Company's Board of Directors, including but not limited to the standard
policies and procedures of the Company as in effect from time to time; and (iii)
do such traveling as may reasonably be required in connection with the
performance of such duties and responsibilities. However, the Company shall not
have the right to
<PAGE>
transfer the Executive's primary location from which he is to perform services
to a location outside of Central Florida without Executive's prior consent.
SECTION 2. Intentionally omitted.
SECTION 3. TERM OF EMPLOYMENT. Subject to prior termination in
accordance with the terms and conditions of this Employment Agreement, the term
of employment of Executive by the Company pursuant to this Employment Agreement
shall be for an initial period of three (3) years (the "Employment Period")
commencing on March 25, 1997 (the "Commencement Date"). The Employment Period
shall automatically renew for additional terms of three years each on each
anniversary of March 25, 1997 thereafter (an "Anniversary Date"), unless either
party gives written notice of termination to the other party not less than one
hundred twenty (120) days prior to such Anniversary Date, in which case the
Employment Period shall not so renew on such Anniversary Date and shall
terminate two years from such Anniversary Date. The term "Employment Period"
shall include the initial Employment Period and any and all successive renewals
thereof.
SECTION 4. COMPANY'S PRINCIPAL PLACE OF BUSINESS. It is anticipated
that the Company's principal place of business will be located in the
Titusville, Florida area, or such other area in Florida as may be designated by
the Company's Board.
SECTION 5. COMPENSATION. During the Employment Period, subject to all
the terms and conditions of this Employment Agreement and as compensation for
all services to be rendered by Executive under this Employment Agreement, the
Company shall pay to Executive the following:
a. BASE SALARY. The Company shall pay to Executive a base
salary of $200,000 during each year of the initial three (3) year Employment
Period payable in equal periodic installments in accordance with the standard
payroll practices of the Company in effect from time to time, but in no case
less than once a month. During each year of the Employment Period, the Board
shall review the base salary amount to determine whether or not to grant
additional increases in the base salary amount.
b. PERFORMANCE BONUS. In addition to the annual base salary
provided hereunder, Executive may be entitled to receive an annual performance
bonus (the "Performance Bonus") as determined and in an amount set by the Board.
Executive shall have no right to receive partial payments of any such
Performance Bonus except as provided in Section 9 hereof and at the termination
of the Employment Period.
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c. COMPANY CAR/CAR ALLOWANCE. During the Employment Period,
the Company shall provide to Executive, at the option of Executive, either (i)
an automobile for Executive's use, or (ii) an automobile allowance of $600 per
month which the Executive shall apply to leasing an automobile(s) for use by
executive and his immediate family. The Company shall pay all necessary
maintenance fees, insurance payments, gasoline expenses and all other expenses
related to the maintenance, operation and upkeep of the automobile. Upon
termination of the obligation of the Company to provide Benefits pursuant to
Section 6 hereof, the Executive shall have the right and option to purchase the
automobile at its then book value for financial statement purposes (if the
automobile is owned by the Company) or, subject to the terms of the lease, to
assume the lease for said automobile (if the automobile is leased by the
Company).
d. STOCK OPTIONS. During the Employment Period, Executive will
be provided with stock options under the Company's stock option plan(s) as
determined by the Company's Board of Directors (other than those granted on the
date hereof) and/or a committee appointed by the Company's Board of Directors in
accordance with the Company's stock option plan(s). Such awards shall be made on
a basis commensurate with other executives of the Company giving due
consideration to gross compensation levels and overall job performance.
SECTION 6. FRINGE BENEFITS. Executive shall be entitled to vacations,
health care benefits, fringe benefits and reimbursement for reasonable
out-of-pocket expense, including but not limited to those hereinafter detailed
(the "Benefits"), in accordance with the Company's practices covering executive
personnel. Unless Executive consents to a different treatment, his eligibility,
participation and benefits under the Benefits will be, and will continue to be,
not less than the Benefits provided to any other employee of Vice President or
lower level. The Company shall use its best efforts to obtain waivers of waiting
periods, if any, applicable to particular benefits. The benefits shall, at a
minimum, include:
a. coverage for Executive and his family, under any major
medical and dental insurance programs and plans, and under any short-term,
long-term or permanent disability programs and plans, which are or may become
generally available to management employees of the Company. Notwithstanding the
foregoing, Executive shall be provided at minimum fully-paid health, major
medical, dental and life insurance (equal to $300,000);
b. retirement benefits at such time and on such amounts as are
paid to executives by the Company at such time as the Company institutes a
retirement or 401(k) plan;
c. reimbursement of all properly approved travel and business
related expenses normally paid by the Company for the benefit of its executives,
including, but not limited to, all
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expenses for the acquisition and use of a cellular telephone and cellular
service of Executive's choice. All expense reports must (i) be approved by the
President of the Company prior to reimbursement, which approval will not be
unreasonably withheld, or (ii) conform to the Company's expense reimbursement
policies at the time the expenses were incurred;
d. four (4) weeks paid vacation per calendar year at any time
or times selected by Executive taking into account the convenience of the
Company. Executive shall give the Board reasonable prior notice of selected
vacation times of one week or more. While unused vacation time shall not be
cumulative from year to year, Executive may carry forward not more than four (4)
weeks of unused vacation time into the following calendar year, PROVIDED,
HOWEVER, that under no circumstances shall Executive be entitled to more than
eight (8) weeks of vacation per calendar year;
e. days of annual sick leave as is usual and customary for a
vice president of a company similar to Company;
f. a holiday on the following days with full pay: New Year's
Day, Easter, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day, and such other holidays as the Company may declare;
g. paid leave and reimbursement of all travel, tuition and
related expenses in attending trade conferences and/or seminars and/or college
or other high level courses acceptable to the Board in its reasonable
discretion;
h. the Company shall purchase director and officer liability
insurance that shall include coverage for Executive, as is normal and customary
for a company of similar size to the Company and, in addition, the Company and
its subsidiaries shall indemnify Executive pursuant to a separate written
agreement for liabilities incurred as an officer to the fullest extent allowed
by Florida law.
i. Employee shall also be provided with a disability income
plan equal to one hundred percent (100%) of his base salary, at least 80% of
which is funded by insurance.
SECTION 7. TERMINATION.
a. MUTUAL TERMINATION. This Employment Agreement may be
terminated upon mutual written agreement of the Company and the Executive;
b. BY EXECUTIVE. This Employment Agreement may be terminated
at the option of the Executive, upon fourteen (14) days' prior written notice to
the Company, in the event that the Company shall (i) fail to make any payment to
the Executive required to be made under the terms of this Employment Agreement
after payment is
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due, or (ii) fail to perform any other material covenant or agreement to be
performed by it hereunder or take any action prohibited by this Employment
Agreement, and fail to cure or remedy same within thirty (30) days after written
notice thereof to the Company. In the event that this Employment Agreement is
terminated pursuant to this Section 7b, then at the option of the Executive on
notice to the Company, the full compensation payable to the Executive for the
Employment Period under Section 5a hereof (just as if Executive had not been so
terminated and was continuing to serve as an employee hereunder for the full
Employment Period in effect as of the date of termination) shall be immediately
due and payable by the Company.
c. BY THE COMPANY FOR CAUSE. This Employment Agreement may be
terminated at the option of the Company, upon written notice to the Executive,
"for cause" (as hereinafter defined), or in the event of the "permanent
disability" (as defined and provided for in Section 8) or death of the Executive
as provided for in Section 8. The Company may terminate Executive "without
cause" (as defined in Section 8).
(i) As used herein, the term "for cause" shall mean and be
limited to: (A) any material breach of this Employment Agreement by the
Executive which in any case is not fully corrected within thirty (30) days after
written notice of same from the Company to the Executive; (B) any fraud, theft,
conversion, criminal misconduct, breach of fiduciary duty, or gross and willful
misconduct by the Executive in connection with the performance of his duties and
responsibilities hereunder; (C) habitual breach by the Employee of any of the
material provisions of this Agreement (regardless of any prior cure thereof); or
(D) gross neglect by the Employee of his duties and responsibilities hereunder
which in any case is not fully corrected upon written notice of same from the
Company to the Employee.
d. EFFECT OF TERMINATION FOR CAUSE. In the event of
termination for any of the reasons set forth in this Section 7 (except as
otherwise provided for hereinafter with respect to "permanent disability", death
or "without cause") Executive shall be entitled to no further compensation, Base
Salary or other Benefits under this Employment Agreement, except as to that
portion of any unpaid Base Salary or other benefits accrued and earned by him
hereunder up to and including the effective date of termination.
SECTION 8. TERMINATION BY REASON OF DEATH; PERMANENT DISABILITY; OR
WITHOUT CAUSE.
a. If the Company terminates Executive "without cause" which
shall mean for any reason other than as set forth in Section 7c(i), the
Executive terminates this Agreement under Section 7b, or in the event of
Executive's death or "permanent disability" (as defined below), Executive shall
(i) be entitled
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to receive an amount equal to the full compensation including Benefits, to which
he would otherwise be entitled under this Employment Agreement for the remainder
of the Employment Period in effect as of the date of termination (the "Severance
Payment") (just as if Executive had not been so terminated and was continuing to
serve as an employee hereunder for the full Employment Period in effect as of
the date of termination) and (ii) be provided, for the remainder of the
Employment Period, with all the insurance and other benefits set forth in
Section 6a hereof (PROVIDED, HOWEVER, to the extent that the benefits in Section
6a cannot in fact be paid due to the fact that Executive is not in fact employed
by the Company, the Company promptly shall pay Executive the monetary, after-tax
equivalent thereof in U.S. Dollars, without any present value adjustment). Such
Severance Payment shall be payable in a single lump sum distribution (without
any present value adjustment) to Executive or his estate, as the case may be, no
later than ninety (90) days from the effective date of such termination.
b. PAYMENT IN THE EVENT OF PERMANENT DISABILITY. For purposes
of this Employment Agreement, Executive's "permanent disability" shall be deemed
to have occurred after one hundred twenty (120) days in the aggregate during any
consecutive twelve (12) month period, or after ninety (90) consecutive days,
during which one hundred twenty (120) or ninety (90) days, as the case may be,
Executive, by reason of his physical or mental disability or illness, shall have
been unable to discharge fully his duties under this Employment Agreement. The
date of permanent disability shall be the one hundred twentieth (120th) or
ninetieth (90th) day, as the case may be. In the event Executive shall dispute
that his permanent disability shall have occurred, he shall promptly submit to a
physical examination by a qualified practicing physician mutually selected by
the Company and the Executive and paid for by the Company (and reasonably
acceptable to the Executive). Unless such physician shall issue a written
statement to the effect that in his opinion, based on his diagnosis, Executive
is capable of resuming his employment and devoting his full time and energy to
discharging his duties within ten (10) days after the date of such statement,
such permanent disability shall be deemed to have occurred without further
dispute by Executive or Company. Notwithstanding the foregoing, the time periods
set forth in this Subsection b shall be modified as necessary so that they match
the time periods set forth in the appropriate disability insurance policy such
that there is no gap in payment of disability insurance benefits and Executive's
compensation hereunder.
SECTION 9. CHANGE OF CONTROL.
a. Notwithstanding anything herein to the contrary,
specifically including Section 7 hereof, in the event that within one (1) year
following a "Change of Control" of the Company (as defined below), Executive's
employment with the Company is either: (i) terminated by the Company, or (ii)
terminated by
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Executive because his regular duties hereunder are materially reduced or
diminished (the position and duties of Chief Financial Officer of the Company
being material to such employment), then (subject to Section 9c that provides
for a lump sum cash payment) the Company shall pay to Executive for a period of
thirty-six (36) full calendar months from the date of termination, (A) the Base
Salary in effect at the time of the termination of employment (in the same
installments as prior to termination), (B) the Benefits to which he is entitled
hereunder, and (C) when and as due, any other amounts to which the Executive is
entitled under any compensation plan of the Company, including any Performance
Bonuses (PROVIDED, HOWEVER, that to the extent that the Benefits cannot in fact
be provided or paid due to the fact that Executive is not in fact employed by
the Company, the Company shall pay to Executive the monetary, after tax
equivalent thereof, in U.S. dollars without any present value adjustment. During
the period that the Company is required to make payments to the Executive
pursuant to this Section 9a, or for a period of twelve (12) months after
termination of employment in the event the Executive elects a lump sum cash
payment hereunder, the Company shall maintain in full force and effect for the
continued benefit of the Executive, all employee benefit plans and programs in
which the Executive was entitled to participate immediately prior to the date of
termination, including without limitation, all Benefits provided pursuant to
Section 6 hereof; provided that the Executive's continued participation is
possible under the general terms and provisions of such plans and programs. In
the event that the Executive's participation and any such plan or program is
barred, the Company shall arrange to provide the Executive with benefits
substantially similar to those which the Executive would otherwise have been
entitled to receive under such plans and programs from which his continued
participation is barred.
b. "Change of Control" shall be deemed to have occurred when:
(i) securities of the Company representing 25% or more of
the combined voting power of the Company's then outstanding voting securities
are acquired by a person or entity which is not a wholly-owned subsidiary of the
Company or any of its affiliates;
(ii) a merger or consolidation is consummated in which the
Company is a constituent corporation and which results in less than 50% of the
outstanding voting securities of the surviving or resulting entity being owned
by the then existing stockholders of the Company;
(iii) a sale or other disposition or transaction is
consummated by the Company of more than 50% of the Company's assets to a person
or entity which is not a wholly-owned subsidiary of the Company or any of its
affiliates; or
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(iv) during any period of two consecutive years,
individuals who, at the beginning of such period, constituted the Board cease,
for any reason, to constitute at least a majority thereof.
c. In lieu of payments in installments hereunder, within
thirty (30) days of termination of employment, the Executive or Company may, at
his or its sole option, elect to have all amounts to which he is entitled
hereunder, be paid in a lump sum cash payment. The lump sum cash payment
provided herein shall be due within five (5) days of notice from the Executive
of the election to receive a lump sum cash payment pursuant to this subsection.
d. It is the intention of the Company and the Executive that
no portion of any payment or benefit paid or provided under this Section or any
other payment or benefit under this Agreement, or payments to or for the
Executive under any other agreement or plan shall be deemed to be an excess
parachute payment as defined in Section 280G of the Internal Revenue Code of
1986 as amended (the "Code") or any successor provision. However, it is
understood that, depending upon elections hereunder made by the Executive, the
present value of all payments made under this Section and any other payment to
or for the benefit of the Executive in the nature of compensation, the receipt
of which is contingent on a Change of Control of the Company and to which
Section 280G of the Code or any successor provision thereto may apply, might
exceed the maximum amounts which the Executive may receive without becoming
subject to the tax imposed by Section 4999 of the Code or any successor
provision. In the event that the Executive becomes subject to a tax imposed by
Section 4999 of the Code or any successor provision as a result of the election
of the Executive to receive a lump sum cash payment hereunder or otherwise, the
Company shall pay to the Executive an amount equal to any excise tax imposed
upon the Executive as a result of such payment (in addition to any other payment
or benefit hereunder).
SECTION 10. CONFIDENTIAL INFORMATION. Executive recognizes and
acknowledges that the Company has, through the expenditure of substantial time,
effort and money, developed and acquired certain confidential information and
trade secrets which have become of great value to the Company in its creation,
development and operations. Executive further acknowledges and understands that
in the course of performing his duties for the Company, Executive has had and
will have access to the trade secrets and confidential information of the
Company. Executive agrees that during the course of his employment and at any
time after the termination or expiration thereof he will not make any
independent use of, publish or disclose, or authorize anyone to publish or
disclose, to any other person or organization, any of the Company's trade
secrets and the Executive agrees that during the course of his employment and
for a period of one (1) year after the termination or expiration thereof, he
will not make any
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independent use of, publish or disclose, or authorize anyone to publish or
disclose to any other person or organization, any of the Company's confidential
information, except as required in the course of his employment with the Company
or by law. Upon request of the Company and, in any event upon the cessation of
Executive's employment with the Company, whether with or without cause,
Executive will promptly return all tangible expressions of trade secrets and
confidential information in his possession and control and all copies thereof.
As used herein, the term "trade secrets and confidential information" shall mean
client lists, and other related client and applicant data, computerized
compilation of such data, training materials and information, policy and
procedure manuals, video and audio recordings of training and operation methods,
sales, services, support and marketing practices and operations, advertising
themes, information concerning possible acquisition candidates, formats of
advertising and other business methods, and techniques, processes and financial
information of any subsidiary, affiliate or the Company, all of which are not
publicly available information and/or generally known to the trade or industry
and which will be of competitive use by them. "Trade secrets and confidential
information" shall not include (A) intangible information which is generally
known and used by persons with training and experience comparable to Executive
as of the date of this Employment Agreement; (B) any information that was
already known to the recipient thereof other than by reason of any breach of any
confidentiality or non-disclosure agreement; and (C) all intangible information
which is common knowledge in the industry or otherwise legally in the public
domain.
Executive further agrees that the restrictions set forth in
this Section 10 are in addition to, and not in lieu of, any other restrictions
or obligations placed upon him, and/or any rights or remedies available to the
Company, by any statute or at common law.
SECTION 11. COVENANT NOT TO COMPETE. If, and only if this Agreement is
terminated by the Company for cause, by the Executive when the Company is not in
breach of this Agreement, or by Executive in accordance with Section 3 herein,
Executive covenants and agrees that, in order to protect the Company's
legitimate business interest in its trade secrets and confidential information,
special training, goodwill, and substantial relationships with prospective or
existing customers or suppliers during the Employment Period and for a period of
six (6) consecutive months (the "Non-Compete Period") following the expiration
or termination of this Employment Agreement or any renewal of the Employment
Agreement, Executive will not, without the prior written consent of the Company,
directly or indirectly,
a. engage, whether by virtue of stock ownership, management
responsibilities or otherwise, in companies, businesses, organizations and/or
ventures that compete with the
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business of the Company or any of its subsidiaries, affiliates or its parent
company. For the purposes hereof, the Company shall be deemed to be in the
business of operating automobile dealerships locally in the United States of
America that engage in the retailing of new and used automobiles, light duty
trucks and businesses ancillary or related thereto, PROVIDED, HOWEVER, that with
regard to any post-termination employment during the Non-Compete Period, for any
business of Executive to be deemed competitive for the purposes hereof, it must
be located within a 50-mile radius of any location where the Company is: (i)
currently conducting business, (ii) has an ownership interest of 20% or more in
an enterprise that, at the time the competing activities commence, competes with
the Company's business, or (iii) within a 50 mile radius of any location where
the Company has conducted, or has definitive plans to conduct business twelve
(12) months before or after the termination or expiration of this Employment
Agreement; or
b. become interested, directly or indirectly, whether as
principal, owner, stockholder, partner, agent, officer, director, employee,
salesman, joint venturer, consultant, advisor, independent contractor or
otherwise, in any person, firm, partnership, association, venture, corporation
or entity engaging directly or indirectly in any of the activities described in
Subsection 11a above; or
c. knowingly solicit the employment of any of the Company's
Personnel (as hereinafter defined) customers, suppliers or distributors.
d. For purposes of this Employment Agreement:
(i) the term "Company" shall include any subsidiary, any
affiliates, any successor in interest whether by sale, merger, liquidation or
the like, and any of the Company's other subsidiaries and affiliates;
(ii) the term "Company Personnel" shall mean any person
employed by the Company, any subsidiary or any of its affiliates at any time
through the end of the term of this Employment Agreement, but excluding any
person who has left such employment for a continuous period exceeding one (1)
year;
e. None of the foregoing shall prevent Executive from holding,
or having the right to acquire, up to three percent (3%) in the aggregate of any
class of securities of any entity engaged in the prohibited activities described
above.
f. Notwithstanding anything herein to the contrary, this
Section 11 shall not be deemed to prohibit Executive from
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engaging in the business of an investment or corporate banker at any time
subsequent to the expiration or termination of this Agreement for any reason.
SECTION 12. REMEDIES IN EVENT OF BREACH.
a. INJUNCTIVE RELIEF. The parties acknowledge that each would
be irreparably harmed by any breach of the covenants contained in Sections 10
and 11 of this Employment Agreement, and that either party's remedy at law for
any breach by the other party of their obligations under Sections 10 and 11 of
this Employment Agreement would be inadequate, and would be impossible to
ascertain and therefore, in the event of the breach or threatened breach of any
obligations under Sections 10 and 11 of this Employment Agreement, either party,
in addition to any and all other remedies at law or in equity, shall have the
right to enjoin the other party from any threatened or actual activities in
violation thereof; and the parties hereby consent and agree that temporary and
permanent injunctive relief may be granted in any proceedings which might be
brought to enforce any such covenants without the necessity of proof of actual
damages and without the necessity of posting bond. In the event either party
does apply for such injunction, the other party shall not raise as a defense
thereto that such applying party has an adequate remedy at law.
b. DAMAGES; ACCOUNTING FOR PROFITS. In addition to any
injunctive relief that may be granted to the Company or Executive for breach of
this Employment Agreement, the Company and Executive shall be entitled to
recover all damages, including reasonable attorneys' fees and costs (including
paralegals' fees), sustained or incurred by the Company or Executive by reason
of a violation or threatened violation of the terms of this Employment
Agreement, and to receive such other remedy or remedies as the court determines
is appropriate. Executive covenants and agrees that, if he violates any of his
covenants or agreements under Sections 10 and 11 hereof, the Company shall be
entitled to an accounting and repayment of all profits, compensations,
commissions, remunerations or benefits which Executive directly has realized as
a result of, growing out of, in connection with, any such violation; such remedy
shall be in addition to and not in limitation of any injunctive relief or any
other rights or remedies to which the Company is or may be entitled at law or in
equity or under this Employment Agreement.
c. In the event that the Company terminates or seeks to
terminate this Agreement or the employment of the Executive hereunder and
disputes its obligation to pay or fails or refuses to pay or provide when due to
the Executive any portion of the amounts or benefits due to the Executive
hereunder and the Executive prevails in any amount, the Company shall pay or
reimburse to the Executive all costs incurred by him in such dispute or
collection effort, including reasonable attorneys'
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fees and expenses (whether or not suit is filed) and costs of litigation. The
Executive shall not be required to mitigate the amount of any payment or benefit
provided herein by seeking other employment or otherwise, nor shall the amount
of any payment or benefit provided herein be reduced by any compensation earned
by the Executive as a result of employment by another employer or by retirement
benefits after the date of termination of employment or otherwise. The payments
and benefits hereunder are in addition to any and all payments and benefits to
which the Executive is entitled under the terms of this Agreement or otherwise.
SECTION 13. REASONABLENESS. Executive has carefully read and considered
the provisions of Sections 10 and 11 hereof and, having done so, agrees that the
restrictions set forth in such sections, including, but not limited to, the time
period of restriction, the geographical areas of restriction, and the definition
of Company Products set forth therein, are fair and reasonable and are
reasonably required for the protection of the legitimate business interests of
the Company, and further that the geographical areas of restriction set forth
therein accurately reflect the area in which he will be actively engaged in the
performance of services.
SECTION 14. NO INCONSISTENT OBLIGATIONS. Executive represents and
warrants that no action required of his under this Employment Agreement or any
other agreements or understandings, written or oral, entered into with the
Company will conflict with, breach or otherwise impair any previously existing
agreements or understandings, whether written or oral, into which Executive has
entered with other persons or entities, including agreements with respect to
proprietary information or non-competition.
SECTION 15. NOTICES. Any notice to be given hereunder shall be deemed
to be given when delivered by hand or by overnight courier to the party for whom
the notice is intended, or three (3) days after notice is placed in the U.S.
mail properly addressed to the party for whom notice is intended, at the
following address:
If to the Company: Smart Choice AutomotiveGroup, Inc.
5200 S. Washington Avenue
Titusville, Florida 32780
Attention: Gary Smith
If to Executive: Fred E. Whaley
1227 80th Street South
St. Petersburg, Florida 33707
SECTION 16. BINDING EFFECT AND GOVERNING LAW. This Employment Agreement
supersedes all prior understandings and agreements between the parties with
respect to the subject matter
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hereof. This Employment Agreement shall be binding upon the legal
representatives, heirs, distributees, successors and assigns of the parties. The
Employment Agreement contains the entire agreement of the parties, and may not
be changed orally but only in writing signed by the party against whom
enforcement of any such change is sought. It is agreed that a waiver by either
party of a breach of any provision of this Employment Agreement shall not be
operated or be construed as a waiver of any subsequent breach by that same
party. This Employment Agreement shall be governed by the laws of the State of
Florida.
SECTION 17. SEVERABILITY. In the event that any terms or provisions of
this Employment Agreement shall be held to be invalid or unenforceable by a
court of competent jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remaining terms and provisions
hereof.
SECTION 18. ASSIGNABILITY. The rights or obligations contained in this
Employment Agreement shall not be assigned, transferred, or divided in any
manner by Executive or Company, without the prior written consent of the other;
PROVIDED, HOWEVER, that nothing in this Section 18 shall preclude: (i) Executive
from designating a beneficiary to receive any benefits hereunder upon his death,
or the executors, administrator or other legal representatives of Executive or
his estate from assigning any rights hereunder to the person(s) entitled
thereto; or (ii) the Company's right to assign this Employment Agreement to a
related entity subsequent to any merger, stock for stock exchange,
reorganization, or otherwise as set forth in Section 11f. Notwithstanding the
foregoing, this Employment Agreement shall be binding on any entity which by
purchase of assets, merger, or otherwise, becomes a successor to the business of
the Company.
SECTION 19. DIRECTOR & OFFICER LIABILITY INSURANCE. The Company shall
obtain Director & Officer Liability Insurance of a type that is usual and
customary for businesses similar to Company.
SECTION 20. HEADINGS. The headings of paragraph herein are included
solely for convenience of reference and shall not control the meaning or
interpretation and performance of any of the provisions of this Employment
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be executed the day and year first above written.
COMPANY:
SMART CHOICE AUTOMOTIVE GROUP, INC.
By:
-----------------------------------
EXECUTIVE:
-----------------------------------
Fred E. Whaley
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EXHIBIT 10.15
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Employment Agreement") is
effective as of January 28, 1997, by and between ECKLER INDUSTRIES, INC., a
Florida corporation ("Company"), and GARY R. SMITH, an individual ("Executive").
W I T N E S S E T H:
WHEREAS, the Company believes that the attraction and retention of key
employees such as the Executive is essential to the Company's growth and
success; and
WHEREAS, the Company desires to employ Executive as its President and
Chief Executive Officer, and Executive is willing and able to render his
services to the Company from and after the date hereof, on the terms and
conditions of this Employment Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby covenant and agree as follows:
SECTION 1. EMPLOYMENT.
a. Subject to the terms and conditions of this Employment
Agreement, the Company shall retain the Executive as its President and Chief
Executive Officer, and the Executive shall render services to the Company in an
executive capacity. In such capacity, the Executive shall have and exercise
responsibility for managing, supervising, overseeing, and actively participating
in all aspects of the Company's business together with such similar or related
duties as may be assigned to the Executive from time to time by the Board of
Directors of the Company (the "Board"). The Executive may also be given
additional titles, and may be assigned responsibilities on behalf of certain of
the Company's affiliates commensurate with his position with the Company,
without requirement of additional compensation hereunder.
b. Throughout the period of his employment hereunder, the
Executive shall: (i) devote his full business time, attention, knowledge and
skills, faithfully, diligently and to the best of his ability, to the active
performance of his duties and responsibilities hereunder on behalf of the
Company; (ii) observe and carry out such reasonable rules, regulations,
policies, directions and restrictions as may be established from time to time by
the Board, including but not limited to the standard policies and procedures of
the Company as in effect from time to time; and (iii) do such traveling as may
reasonably be required in connection with the performance of such duties and
responsibilities. However,
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the Company shall not have the right to transfer the Executive's primary
location from which he is to perform services to a location outside of Central
Florida without Executive's prior consent.
c. Anything contained herein to the contrary notwithstanding,
the Company shall have the right to replace the Executive as president of the
Company at any time, provided that (i) at the time of any such replacement
(unless same is in conjunction with the termination of this Agreement), the
Executive shall be assigned to comparable duties on behalf of First Choice Auto
Finance, Inc. ("First Choice") (which shall thereupon become the "Company" for
all purposes of this Agreement), and (ii) from and after any such replacement,
the Executive shall have the right to require the prepayment in full, on demand,
of all outstanding principal and unpaid accrued interest under any and all
promissory notes issued by the Company and/or First Choice to the Executive
and/or any of his affiliates (collectively, the "Notes").
SECTION 2. INTENTIONALLY OMITTED.
SECTION 3. TERM OF EMPLOYMENT. Subject to prior termination in
accordance with the terms and conditions of this Employment Agreement, the term
of employment of Executive by the Company pursuant to this Employment Agreement
shall be for an initial period of five (5) years (the "Employment Period")
commencing on the date hereof (the "Commencement Date"). The Employment Period
shall automatically renew for additional terms of three years each on the third
anniversary of the Commencement Date and on each anniversary of the Commencement
Date thereafter (an "Anniversary Date"), unless either party gives written
notice of termination to the other party not less than one hundred twenty (120)
days prior to such Anniversary Date, in which case the Employment Period shall
not so renew on such Anniversary Date and shall terminate two years from such
Anniversary Date. The term "Employment Period" shall include the initial
Employment Period and any and all successive renewals thereof.
SECTION 4. COMPANY'S PRINCIPAL PLACE OF BUSINESS. It is anticipated
that the Company's principal place of business will be located in the
Titusville, Florida area, or such other area in Florida as may be designated by
the Company's Board.
SECTION 5. COMPENSATION. During the Employment Period, subject to all
the terms and conditions of this Employment Agreement and as compensation for
all services to be rendered by Executive under this Employment Agreement, the
Company shall pay to Executive the following:
a. BASE SALARY. The Company shall pay to Executive a base
salary of $250,000 during each year of the initial five (5) year Employment
Period payable in equal periodic installments in accordance with the standard
payroll practices of the Company in effect from time to time, but in no case
less than once a month. During each year of the Employment Period (as
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renewed under Section 3 hereof) after the initial five years of the Employment
Period, the Board shall review the base salary amount to determine whether or
not to grant additional increases in the base salary amount.
b. PERFORMANCE BONUS. In addition to the annual base salary
provided hereunder, Executive may be entitled to receive an annual performance
bonus (the "Performance Bonus") as determined and in an amount set by the Board.
Executive shall have no right to receive partial payments of any such
Performance Bonus except as provided in Section 9 hereof and at the termination
of the Employment Period.
c. COMPANY CAR/CAR ALLOWANCE. During the Employment Period,
the Company shall provide to Executive, at the option of Executive, either (i)
an automobile for Executive's use, or (ii) an automobile allowance of $700 per
month which the Executive shall apply to leasing an automobile(s) for use by
executive and his immediate family. The Company shall pay all necessary
maintenance fees, insurance payments, gasoline expenses and all other expenses
related to the maintenance, operation and upkeep of the automobile. Upon
termination of the obligation of the Company to provide Benefits pursuant to
Section 6 hereof, the Executive shall have the right and option to purchase the
automobile at its then book value for financial statement purposes (if the
automobile is owned by the Company) or, subject to the terms of the lease, to
assume the lease for said automobile (if the automobile is leased by the
Company).
d. STOCK OPTIONS. During the Employment Period, Executive will
be provided with stock options under the Company's stock option plan(s) as
determined by the Company's Board of Directors (other than those granted on the
date hereof) and/or a committee appointed by the Company's Board of Directors in
accordance with the Company's stock option plan(s). Such awards shall be made on
a basis commensurate with other executives of the Company giving due
consideration to gross compensation levels and overall job performance.
SECTION 6. FRINGE BENEFITS. Executive shall be entitled to vacations,
health care benefits, fringe benefits and reimbursement for reasonable
out-of-pocket expense, including but not limited to those hereinafter detailed
(the "Benefits"), in accordance with the Company's practices covering executive
personnel. Unless Executive consents to a different treatment, his eligibility,
participation and benefits under the Benefits will be, and will continue to be,
not less than the Benefits provided to any other employee of the Company. The
Company shall use its best efforts to obtain waivers of waiting periods, if any,
applicable to particular benefits. The benefits shall, at a minimum, include:
a. coverage for Executive and his family, under any major
medical and dental insurance programs and plans, and under
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any short-term, long-term or permanent disability programs and plans, which are
or may become generally available to management employees of the Company.
Notwithstanding the foregoing, Executive shall be provided at minimum fully-paid
health, major medical, dental and life insurance (equal to $300,000);
b. retirement benefits at such time and on such amounts as are
paid to executives by the Company at such time as the Company institutes a
retirement or 401(k) plan;
c. reimbursement of all properly approved travel and business
related expenses normally paid by the Company for the benefit of its executives,
including, but not limited to, all expenses for the acquisition and use of a
cellular telephone and cellular service of Executive's choice. All expense
reports must conform to the Company's expense reimbursement policies at the time
the expenses were incurred;
d. four (4) weeks paid vacation per calendar year at any time
or times selected by Executive taking into account the convenience of the
Company. Executive shall give the Board reasonable prior notice of selected
vacation times of one week or more. While unused vacation time shall not be
cumulative from year to year, Executive may carry forward not more than four (4)
weeks of unused vacation time into the following calendar year, PROVIDED,
HOWEVER, that under no circumstances shall Executive be entitled to more than
eight (8) weeks of vacation per calendar year;
e. days of annual sick leave as is usual and customary for a
President and Chief Executive Officer of a company similar to Company;
f. a holiday on the following days with full pay: New Year's
Day, Easter, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day, and such other holidays as the Company may declare;
g. paid leave and reimbursement of all travel, tuition and
related expenses in attending trade conferences and/or seminars and/or college
or other high level courses acceptable to the Board in its reasonable
discretion;
h. the Company shall purchase director and officer liability
insurance that shall include coverage for Executive, as is normal and customary
for a company of similar size to the Company and, in addition, the Company and
its subsidiaries shall indemnify Executive pursuant to a separate written
agreement for liabilities incurred as an officer to the fullest extent allowed
by Florida law.
i. Executive shall also be provided with a disability income
plan equal to one hundred percent (100%) of his base salary, at least 80% of
which is funded by insurance.
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j. Throughout the period of the Executive's employment
hereunder, the Company shall maintain (or cause to be maintained) and pay (or
cause to be paid) all premiums in respect of the existing William Penn life
insurance policy heretofore maintained by the Executive on his life, and the
Executive shall at all times have the right to designate the beneficiary or
beneficiaries thereof.
k. Florida Finance Group ("FFG") has maintained a policy of
disability insurance and key man life insurance on the life of the Executive
with death benefits of approximately $1 million payable to FFG (the "Policies").
The Company agrees to maintain such Policies at least until the payment of
creditors of FFG and further agrees that in the event of the death of the
Executive prior to payment of creditors of FFG, the proceeds of such Policies
shall be applied to the payment of creditors of FFG.
SECTION 7. TERMINATION.
a. MUTUAL TERMINATION. This Employment Agreement may be
terminated upon mutual written agreement of the Company and the Executive;
b. BY EXECUTIVE. This Employment Agreement may be terminated
at the option of the Executive, upon fourteen (14) days' prior written notice to
the Company, in the event that the Company shall (i) fail to make any payment to
the Executive required to be made under the terms of this Employment Agreement
after payment is due, or (ii) fail to perform any other material covenant or
agreement to be performed by it hereunder or take any action prohibited by this
Employment Agreement, and fail to cure or remedy same within thirty (30) days
after written notice thereof to the Company. In the event that this Employment
Agreement is terminated pursuant to this Section 7b, then at the option of the
Executive on notice to the Company, the full compensation payable to the
Executive for the Employment Period under Section 5a hereof (just as if
Executive had not been so terminated and was continuing to serve as an employee
hereunder for the full Employment Period in effect as of the date of
termination) shall be immediately due and payable by the Company.
c. BY THE COMPANY FOR CAUSE. This Employment Agreement may be
terminated at the option of the Company, upon written notice to the Executive,
"for cause" (as hereinafter defined), or in the event of the "permanent
disability" (as defined and provided for in Section 8) or death of the Executive
as provided for in Section 8. The Company may terminate Executive "without
cause" (as defined in Section 8).
(i) As used herein, the term "for cause" shall mean and be
limited to: (A) any material breach of this Employment Agreement by the
Executive which in any case is not fully corrected
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within thirty (30) days after written notice of same from the Company to the
Executive; (B) any fraud, theft, conversion, criminal misconduct, breach of
fiduciary duty, or gross and willful misconduct by the Executive in connection
with the performance of his duties and responsibilities hereunder; (C) habitual
breach by the Executive of any of the material provisions of this Agreement
(regardless of any prior cure thereof); or (D) gross neglect by the Executive of
his duties and responsibilities hereunder which in any case is not fully
corrected upon written notice of same from the Company to the Executive.
d. EFFECT OF TERMINATION FOR CAUSE. In the event of
termination for any of the reasons set forth in this Section 7 (except as
otherwise provided for hereinafter with respect to "permanent disability", death
or "without cause") Executive shall be entitled to no further compensation, Base
Salary or other Benefits under this Employment Agreement, except as to that
portion of any unpaid Base Salary or other benefits accrued and earned by him
hereunder up to and including the effective date of termination.
e. Upon and after any termination of this Agreement, the
Executive shall have the right to require the prepayment, on demand, of all
outstanding principal and unpaid accrued interest under any or all outstanding
Notes.
SECTION 8. TERMINATION BY REASON OF DEATH; PERMANENT DISABILITY; OR
WITHOUT CAUSE.
a. If the Company terminates Executive "without cause" which
shall mean for any reason other than as set forth in Section 7c(i), the
Executive terminates this Agreement under Section 7b, or in the event of
Executive's death or "permanent disability" (as defined below), Executive shall
(i) be entitled to receive an amount equal to the full compensation including
Benefits, to which he would otherwise be entitled under this Employment
Agreement for the remainder of the Employment Period in effect as of the date of
termination (the "Severance Payment") (just as if Executive had not been so
terminated and was continuing to serve as an employee hereunder for the full
Employment Period in effect as of the date of termination) and (ii) be provided,
for the remainder of the Employment Period, with all the insurance and other
benefits set forth in Section 6a hereof (PROVIDED, HOWEVER, to the extent that
the benefits in Section 6a cannot in fact be paid due to the fact that Executive
is not in fact employed by the Company, the Company promptly shall pay Executive
the monetary, after-tax equivalent thereof in U.S. Dollars, without any present
value adjustment). Such Severance Payment shall be payable in a single lump sum
distribution (without any present value adjustment) to Executive or his estate,
as the case may be, no later than ninety (90) days from the effective date of
such termination.
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b. PAYMENT IN THE EVENT OF PERMANENT DISABILITY. For purposes
of this Employment Agreement, Executive's "permanent disability" shall be deemed
to have occurred after one hundred twenty (120) days in the aggregate during any
consecutive twelve (12) month period, or after ninety (90) consecutive days,
during which one hundred twenty (120) or ninety (90) days, as the case may be,
Executive, by reason of his physical or mental disability or illness, shall have
been unable to discharge fully his duties under this Employment Agreement. The
date of permanent disability shall be the one hundred twentieth (120th) or
ninetieth (90th) day, as the case may be. In the event Executive shall dispute
that his permanent disability shall have occurred, he shall promptly submit to a
physical examination by a qualified practicing physician mutually selected by
the Company and the Executive and paid for by the Company (and reasonably
acceptable to the Executive). Unless such physician shall issue a written
statement to the effect that in his opinion, based on his diagnosis, Executive
is capable of resuming his employment and devoting his full time and energy to
discharging his duties within ten (10) days after the date of such statement,
such permanent disability shall be deemed to have occurred without further
dispute by Executive or Company. Notwithstanding the foregoing, the time periods
set forth in this Subsection b shall be modified as necessary so that they match
the time periods set forth in the appropriate disability insurance policy such
that there is no gap in payment of disability insurance benefits and Executive's
compensation hereunder.
SECTION 9. CHANGE OF CONTROL.
a. Notwithstanding anything herein to the contrary,
specifically including Section 7 hereof, in the event that within one (1) year
following a "Change of Control" of the Company (as defined below), Executive's
employment with the Company is either: (i) terminated by the Company, or (ii)
terminated by Executive because his regular duties hereunder are materially
reduced or diminished (the position and duties of President and Chief Executive
Officer of the Company being material to such employment), then (subject to
Section 9c that provides for a lump sum cash payment) the Company shall pay to
Executive for a period of thirty-six (36) full calendar months from the date of
termination, (A) the Base Salary in effect at the time of the termination of
employment (in the same installments as prior to termination), (B) the Benefits
to which he is entitled hereunder, and (C) when and as due, any other amounts to
which the Executive is entitled under any compensation plan of the Company,
including any Performance Bonuses (PROVIDED, HOWEVER, that to the extent that
the Benefits cannot in fact be provided or paid due to the fact that Executive
is not in fact employed by the Company, the Company shall pay to Executive the
monetary, after tax equivalent thereof, in U.S. dollars without any present
value adjustment. During the period that the Company is required to make
payments to the Executive pursuant to this Section 9a, or for a period of twelve
(12) months after termination of employment in the event
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the Executive elects a lump sum cash payment hereunder, the Company shall
maintain in full force and effect for the continued benefit of the Executive,
all employee benefit plans and programs in which the Executive was entitled to
participate immediately prior to the date of termination, including without
limitation, all Benefits provided pursuant to Section 6 hereof; provided that
the Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that the Executive's
participation and any such plan or program is barred, the Company shall arrange
to provide the Executive with benefits substantially similar to those which the
Executive would otherwise have been entitled to receive under such plans and
programs from which his continued participation is barred.
b. "Change of Control" shall be deemed to have occurred when:
(i) securities of the Company representing 25% or more of
the combined voting power of the Company's then outstanding voting securities
are acquired by a person or entity which is not a wholly-owned subsidiary of the
Company or any of its affiliates;
(ii) a merger or consolidation is consummated in which the
Company is a constituent corporation and which results in less than 50% of the
outstanding voting securities of the surviving or resulting entity being owned
by the then existing stockholders of the Company;
(iii) a sale or other disposition or transaction is
consummated by the Company of more than 50% of the Company's assets to a person
or entity which is not a wholly-owned subsidiary of the Company or any of its
affiliates; or
(iv) during any period of two consecutive years,
individuals who, at the beginning of such period, constituted the Board cease,
for any reason, to constitute at least a majority thereof.
c. In lieu of payments in installments hereunder, within
thirty (30) days of termination of employment, the Executive or Company may, at
his or its sole option, elect to have all amounts to which he is entitled
hereunder, be paid in a lump sum cash payment. The lump sum cash payment
provided herein shall be due within five (5) days of notice from the Executive
of the election to receive a lump sum cash payment pursuant to this subsection.
d. It is the intention of the Company and the Executive that
no portion of any payment or benefit paid or provided under this Section or any
other payment or benefit under this Agreement, or payments to or for the
Executive under any other agreement or plan shall be deemed to be an excess
parachute
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payment as defined in Section 280G of the Internal Revenue Code of 1986 as
amended (the "Code") or any successor provision. However, it is understood that,
depending upon elections hereunder made by the Executive, the present value of
all payments made under this Section and any other payment to or for the benefit
of the Executive in the nature of compensation, the receipt of which is
contingent on a Change of Control of the Company and to which Section 280G of
the Code or any successor provision thereto may apply, might exceed the maximum
amounts which the Executive may receive without becoming subject to the tax
imposed by Section 4999 of the Code or any successor provision. In the event
that the Executive becomes subject to a tax imposed by Section 4999 of the Code
or any successor provision as a result of the election of the Executive to
receive a lump sum cash payment hereunder or otherwise, the Company shall pay to
the Executive an amount equal to any excise tax imposed upon the Executive as a
result of such payment (in addition to any other payment or benefit hereunder).
SECTION 10. CONFIDENTIAL INFORMATION. Executive recognizes and
acknowledges that the Company has, through the expenditure of substantial time,
effort and money, developed and acquired certain confidential information and
trade secrets which have become of great value to the Company in its creation,
development and operations. Executive further acknowledges and understands that
in the course of performing his duties for the Company, Executive has had and
will have access to the trade secrets and confidential information of the
Company. Executive agrees that during the course of his employment and at any
time after the termination or expiration thereof he will not make any
independent use of, publish or disclose, or authorize anyone to publish or
disclose, to any other person or organization, any of the Company's trade
secrets and the Executive agrees that during the course of his employment and
for a period of one (1) year after the termination or expiration thereof, he
will not make any independent use of, publish or disclose, or authorize anyone
to publish or disclose to any other person or organization, any of the Company's
confidential information, except as required in the course of his employment
with the Company or by law. Upon request of the Company and, in any event upon
the cessation of Executive's employment with the Company, whether with or
without cause, Executive will promptly return all tangible expressions of trade
secrets and confidential information in his possession and control and all
copies thereof. As used herein, the term "trade secrets and confidential
information" shall mean client lists, and other related client and applicant
data, computerized compilation of such data, training materials and information,
policy and procedure manuals, video and audio recordings of training and
operation methods, sales, services, support and marketing practices and
operations, advertising themes, information concerning possible acquisition
candidates, formats of advertising and other business methods, and techniques,
processes and financial information of any subsidiary, affiliate or the Company,
all of which are not publicly available
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information and/or generally known to the trade or industry and which will be of
competitive use by them. "Trade secrets and confidential information" shall not
include (A) intangible information which is generally known and used by persons
with training and experience comparable to Executive as of the date of this
Employment Agreement; (B) any information that was already known to the
recipient thereof other than by reason of any breach of any confidentiality or
non-disclosure agreement; and (C) all intangible information which is common
knowledge in the industry or otherwise legally in the public domain.
Executive further agrees that the restrictions set forth in
this Section 10 are in addition to, and not in lieu of, any other restrictions
or obligations placed upon him, and/or any rights or remedies available to the
Company, by any statute or at common law.
SECTION 11. COVENANT NOT TO COMPETE. If, and only if this Agreement is
terminated by the Company for cause, by the Executive when the Company is not in
breach of this Agreement, or by Executive in accordance with Section 7 herein,
Executive covenants and agrees that, in order to protect the Company's
legitimate business interest in its trade secrets and confidential information,
special training, goodwill, and substantial relationships with prospective or
existing customers or suppliers during the Employment Period and for a period of
six (6) consecutive months (the "Non-Compete Period") following the expiration
or termination of this Employment Agreement or any renewal of the Employment
Agreement, Executive will not, without the prior written consent of the Company,
directly or indirectly,
a. engage, whether by virtue of stock ownership, management
responsibilities or otherwise, in companies, businesses, organizations and/or
ventures that compete with the business of the Company or any of its
subsidiaries, affiliates or its parent company. For the purposes hereof, the
Company shall be deemed to be in the business of operating automobile
dealerships locally in the United States of America that engage in the retailing
of new and used automobiles, light duty trucks and businesses ancillary or
related thereto, PROVIDED, HOWEVER, that with regard to any post-termination
employment during the Non-Compete Period, for any business of Executive to be
deemed competitive for the purposes hereof, it must be located within a 50-mile
radius of any location where the Company is: (i) currently conducting business,
(ii) has an ownership interest of 20% or more in an enterprise that, at the time
the competing activities commence, competes with the Company's business, or
(iii) within a 50 mile radius of any location where the Company has conducted,
or has definitive plans to conduct business twelve (12) months before or after
the termination or expiration of this Employment Agreement; or
b. become interested, directly or indirectly, whether as
principal, owner, stockholder, partner, agent, officer,
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director, employee, salesman, joint venturer, consultant, advisor, independent
contractor or otherwise, in any person, firm, partnership, association, venture,
corporation or entity engaging directly or indirectly in any of the activities
described in Subsection 11a above; or
c. knowingly solicit the employment of any of the Company's
Personnel (as hereinafter defined) customers, suppliers or distributors.
d. For purposes of this Employment Agreement:
(i) the term "Company" shall include any subsidiary, any
affiliates, any successor in interest whether by sale, merger, liquidation or
the like, and any of the Company's other subsidiaries and affiliates;
(ii) the term "Company Personnel" shall mean any person
employed by the Company, any subsidiary or any of its affiliates at any time
through the end of the term of this Employment Agreement, but excluding any
person who has left such employment for a continuous period exceeding one (1)
year;
e. None of the foregoing shall prevent Executive from holding,
or having the right to acquire, up to three percent (3%) in the aggregate of any
class of securities of any entity engaged in the prohibited activities described
above.
SECTION 12. REMEDIES IN EVENT OF BREACH.
a. INJUNCTIVE RELIEF. The parties acknowledge that each would
be irreparably harmed by any breach of the covenants contained in Sections 10
and 11 of this Employment Agreement, and that either party's remedy at law for
any breach by the other party of their obligations under Sections 10 and 11 of
this Employment Agreement would be inadequate, and would be impossible to
ascertain and therefore, in the event of the breach or threatened breach of any
obligations under Sections 10 and 11 of this Employment Agreement, either party,
in addition to any and all other remedies at law or in equity, shall have the
right to enjoin the other party from any threatened or actual activities in
violation thereof; and the parties hereby consent and agree that temporary and
permanent injunctive relief may be granted in any proceedings which might be
brought to enforce any such covenants without the necessity of proof of actual
damages and without the necessity of posting bond. In the event either party
does apply for such injunction, the other party shall not raise as a defense
thereto that such applying party has an adequate remedy at law.
b. DAMAGES; ACCOUNTING FOR PROFITS. In addition to any
injunctive relief that may be granted to the Company or Executive for breach of
this Employment Agreement, the Company and Executive shall be entitled to
recover all damages, including
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reasonable attorneys' fees and costs (including paralegals' fees), sustained or
incurred by the Company or Executive by reason of a violation or threatened
violation of the terms of this Employment Agreement, and to receive such other
remedy or remedies as the court determines is appropriate. Executive covenants
and agrees that, if he violates any of his covenants or agreements under
Sections 10 and 11 hereof, the Company shall be entitled to an accounting and
repayment of all profits, compensations, commissions, remunerations or benefits
which Executive directly has realized as a result of, growing out of, in
connection with, any such violation; such remedy shall be in addition to and not
in limitation of any injunctive relief or any other rights or remedies to which
the Company is or may be entitled at law or in equity or under this Employment
Agreement.
c. In the event that the Company terminates or seeks to
terminate this Agreement or the employment of the Executive hereunder and
disputes its obligation to pay or fails or refuses to pay or provide when due to
the Executive any portion of the amounts or benefits due to the Executive
hereunder and the Executive prevails in any amount, the Company shall pay or
reimburse to the Executive all costs incurred by him in such dispute or
collection effort, including reasonable attorneys' fees and expenses (whether or
not suit is filed) and costs of litigation. The Executive shall not be required
to mitigate the amount of any payment or benefit provided herein by seeking
other employment or otherwise, nor shall the amount of any payment or benefit
provided herein be reduced by any compensation earned by the Executive as a
result of employment by another employer or by retirement benefits after the
date of termination of employment or otherwise. The payments and benefits
hereunder are in addition to any and all payments and benefits to which the
Executive is entitled under the terms of this Agreement or otherwise.
SECTION 13. RELOCATION REIMBURSEMENT.
a. The Company shall relocate Executive and his spouse from
his current residence at 8022 Bayhaven Drive, Seminole, Florida 33776 (the
"Residence") to the area of the Company's principal place of business, in
accordance with the following terms:
(i) The Company shall reimburse Executive for the
reasonable cost of travel and hotel accommodations for Executive and his spouse
during each relocation trip;
(ii) The Company shall, at its sole expense, have
Executive's personal property relocated from his Residence to either a new
residence in the central Florida area or to such storage area reasonably
designated by the Executive;
(iii) At such time as the Board of Directors determines
the location of the principal place of business of the
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Company, Executive shall cause his Residence to be placed for sale at a price
consistent and competitive with other comparable properties located nearby (the
"Sales Price"). Executive shall accept any offer to purchase the Residence for
any amount equal to or greater than the fair market value of the Residence as
determined by an independent appraiser (the "Acceptance Price"). If, after
ninety (90) consecutive days (the "Sale Period"), Executive has not identified a
ready, willing and able buyer for the Residence who has offered not less than
the Acceptance Price, then the Company shall execute an agreement requiring it
to purchase the Residence from Executive, provided such purchase is not
prohibited by any zoning, regulations, laws or restrictions applicable to such
Residence, for an amount equal to the Acceptance Price. Executive shall notify
the Company of any offers he receives during the Sale Period. The Company shall
have ninety (90) days following its execution of the agreement to close such
transaction. The Company may, at its option, instruct the Executive to accept an
offer for the purchase of the Residence that is below the Acceptance Price,
provided that the Company pays to Executive at the time of the closing of such
sale of the Residence, the difference between the amount actually paid by the
buyer and the Acceptance Price. Additionally, the Company shall pay, on behalf
of Executive, all closing costs, realtor commissions, escrow charges and home
warranty premiums;
(iv) If Executive has not secured a new residence in the
central Florida area within a reasonable proximity to the Company's principal
place of business, then the Company, for a period not to exceed six (6) months
from the Commencement Date hereof, shall provide housing for Executive and his
spouse, at no cost to Executive; PROVIDED, HOWEVER, that the Company shall not
be obligated to pay for such expenses as local and long distance telephone
service, utilities and such other expenses that Executive would be obligated to
pay himself if Executive and his spouse were still living in the Residence. The
Company shall also pay any storage costs for Executive's personal property
during the aforementioned six (6) month period; and
(v) the Company shall extend substantially the same
benefits as provided for in this Section 13 to Executive should it decide to
relocate those of its offices which reasonably require Executive's day to day
presence to a location more than 50 miles from the current intended offices in
central Florida.
SECTION 14. REASONABLENESS. Executive has carefully read and considered
the provisions of Sections 10 and 11 hereof and, having done so, agrees that the
restrictions set forth in such sections, including, but not limited to, the time
period of restriction, the geographical areas of restriction, and the definition
of Company Products set forth therein, are fair and reasonable and are
reasonably required for the protection of the legitimate business interests of
the Company, and further that the geographical areas of restriction set forth
therein
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accurately reflect the area in which he will be actively engaged in the
performance of services.
SECTION 15. NO INCONSISTENT OBLIGATIONS. Executive represents and
warrants that no action required of his under this Employment Agreement or any
other agreements or understandings, written or oral, entered into with the
Company will conflict with, breach or otherwise impair any previously existing
agreements or understandings, whether written or oral, into which Executive has
entered with other persons or entities, including agreements with respect to
proprietary information or non-competition.
SECTION 16. NOTICES. Any notice to be given hereunder shall be deemed
to be given when delivered by hand or by overnight courier to the party for whom
the notice is intended, or three (3) days after notice is placed in the U.S.
mail properly addressed to the party for whom notice is intended, at the
following address:
If to the Company: Eckler Industries, Inc.
5200 S. Washington Avenue
Titusville, Florida 32780
If to Executive: Gary R. Smith
5200 S. Washington Avenue
Titusville, Florida 32780
SECTION 17. BINDING EFFECT AND GOVERNING LAW. This Employment Agreement
supersedes all prior understandings and agreements between the parties with
respect to the subject matter hereof. This Employment Agreement shall be binding
upon the legal representatives, heirs, distributees, successors and assigns of
the parties. The Employment Agreement contains the entire agreement of the
parties, and may not be changed orally but only in writing signed by the party
against whom enforcement of any such change is sought. It is agreed that a
waiver by either party of a breach of any provision of this Employment Agreement
shall not be operated or be construed as a waiver of any subsequent breach by
that same party. This Employment Agreement shall be governed by the laws of the
State of Florida.
SECTION 18. SEVERABILITY. In the event that any terms or provisions of
this Employment Agreement shall be held to be invalid or unenforceable by a
court of competent jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remaining terms and provisions
hereof.
SECTION 19. ASSIGNABILITY. The rights or obligations contained in this
Employment Agreement shall not be assigned, transferred, or divided in any
manner by Executive or Company, without the prior written consent of the other;
PROVIDED, HOWEVER, that nothing in this Section 19 shall preclude: (i)
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Executive from designating a beneficiary to receive any benefits hereunder upon
his death, or the executors, administrator or other legal representatives of
Executive or his estate from assigning any rights hereunder to the person(s)
entitled thereto; or (ii) the Company's right to assign this Employment
Agreement to a related entity subsequent to any merger, stock for stock
exchange, reorganization, or otherwise. Notwithstanding the foregoing, this
Employment Agreement shall be binding on any entity which by purchase of assets,
merger, or otherwise, becomes a successor to the business of the Company.
SECTION 20. DIRECTOR & OFFICER LIABILITY INSURANCE. The Company shall
obtain Director & Officer Liability Insurance of a type that is usual and
customary for businesses similar to Company.
SECTION 21. HEADINGS. The headings of paragraph herein are included
solely for convenience of reference and shall not control the meaning or
interpretation and performance of any of the provisions of this Employment
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be executed the day and year first above written.
COMPANY:
ECKLER INDUSTRIES, INC.
By:
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EXECUTIVE:
-----------------------------------
Gary R. Smith
EXHIBIT 10.16
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Employment Agreement") is
effective as of December 1, 1996, by and between ECKLER INDUSTRIES, INC., a
Florida corporation ("Company"), and ROBERT J. ABRAHAMS, an individual
("Executive").
W I T N E S S E T H:
WHEREAS, the Company believes that the attraction and retention of key
employees such as the Executive is essential to the Company's growth and
success; and
WHEREAS, Executive has extensive experience relating to the automobile
industry; and
WHEREAS, the Company desires to employ Executive as Chairman of its
Board of Directors, and Executive is willing and able to render his services to
the Company from and after the date hereof, on the terms and conditions of this
Employment Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby covenant and agree as follows:
SECTION 1. EMPLOYMENT.
a. Subject to the terms and conditions of this Employment
Agreement, the Company shall retain the Executive as Chairman of its Board of
Directors with the Executive assuming such office as of the date of the
Company's merger with Smart Choice Holdings, Inc., and the Executive shall
render services to the Company in an executive capacity. Executive shall perform
such duties ordinarily and customarily performed by a similar executive of a
corporation of like type and size as the Company, and shall perform such other
reasonable duties as the Company's board of directors (the "Board") may assign
to him from time to time. The Employee may also be given additional titles, and
may be assigned responsibilities on behalf of certain of the Company's
affiliates, without requirement of additional compensation hereunder. The
Parties acknowledge that Executive shall not be required to devote his full time
and energies to this position.
b. Throughout the period of his employment hereunder, the
Executive shall: (i) devote sufficient time to perform his duties; (ii) observe
and carry out such reasonable rules, regulations, policies, directions and
restrictions as may be established from time to time by the Board, including but
not limited to the standard policies and procedures of the Company as in effect
from time to time; and (iii) do such traveling as may reasonably be required in
connection with the performance of such
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duties and responsibilities (it being understood that the Executive's regular
duties will require him to travel at least once a month to the central Florida
area).
SECTION 2. TERM OF EMPLOYMENT. Subject to prior termination in
accordance with the terms and conditions of this Employment Agreement, the term
of employment of Executive by the Company pursuant to this Employment Agreement
shall be for an initial period of three (3) years (the "Employment Period")
commencing on December 1, 1996 (the "Commencement Date"), and ending on November
30, 1999. The Employment Period shall automatically renew for additional terms
of one (1) year each unless either party gives written notice of termination to
the other party not less than one hundred twenty (120) days prior to the end of
any term (in which event this Agreement shall terminate effective as of the
close of such Employment Period). The term "Employment Period," shall include
the initial Employment Period and any and all successive renewals thereof.
SECTION 3. COMPANY'S PRINCIPLE PLACE OF BUSINESS. It is anticipated
that the Company's principal place of business will be located in the central
Florida area, or such other area as may be designated by the Company's Board.
Executive shall be provided with an office and appropriate secretarial support
when working out of the Company's principal office, and shall be reimbursed for
all approved reasonable office expenses incurred outside of the Company's
principal office when working on Company business.
SECTION 4. COMPENSATION. During the Employment Period, subject to all
the terms and conditions of this Employment Agreement and as compensation for
all services to be rendered by Executive under this Employment Agreement, the
Company shall pay to Executive the following:
a. BASE SALARY. The Company shall pay to Executive a base
salary of $110,000 during each year of the Employment Period payable in equal
periodic installments in accordance with the standard payroll practices of the
Company in effect from time to time. During each year of the Employment Period
and during each successive renewal year following the expiration of the initial
Employment Period, the Board shall review the base salary amount to determine
whether or not to grant increases in the base salary amount for each one (1)
year renewal of the Employment Period.
b. PERFORMANCE BONUS. In addition to the annual base salary
provided hereunder, Executive shall be entitled to receive an annual performance
bonus (the "Performance Bonus") in accordance with a plan to be established by
the Company to compensate senior management within 45 days of the execution of
this Employment Agreement.
c. STARTING BONUS. As an added incentive to accept the duties
of Chairman, Company shall pay to Executive a starting
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bonus (the "Starting Bonus") equal to $20,000 no later than March 10, 1997.
d. STOCK OPTIONS. During the Employment Period of his
employment, Executive may be provided with stock options under the Company's
stock option plan(s) as determined by the Company's Board of Directors and/or a
committee appointed by the Company's Board of Directors in accordance with the
Company's stock option plan(s).
SECTION 5. FRINGE BENEFITS. Executive shall be entitled to vacations,
health care benefits, fringe benefits and reimbursement for reasonable
out-of-pocket expense, including but not limited to those hereinafter detailed,
in accordance with the Company's practices covering executive personnel. The
Company shall use reasonable efforts to seek waivers of waiting periods, if any,
applicable to particular benefits. Such benefits shall include:
a. reimbursement of all properly approved travel and business
related expenses normally paid by the Company for the benefit of its executives
including, but not limited to, first class air travel and accommodations at the
Hyatt Westshore in Tampa, Florida (or similarly priced accommodations) for
Executive and his spouse. All expense reports must be approved by the Chief
Financial Officer or the President of the Company prior to reimbursement; and
b. the Company shall provide Executive with an automobile for
his use for the duration of all business related trips to the Company's
principal office;
SECTION 6. TERMINATION.
a. MUTUAL TERMINATION. This Employment Agreement may be
terminated upon mutual written agreement of the Company and the Executive;
b. BY EXECUTIVE. This Employment Agreement may be terminated
at the option of the Executive, upon fourteen (14) days' prior written notice to
the Company, in the event that the Company shall (i) fail to make any payment to
the Executive required to be made under the terms of this Employment Agreement
within thirty (30) days after payment is due, ii) fail to perform any other
material covenant or agreement to be performed by it hereunder or take any
action prohibited by this Employment Agreement, and fail to cure or remedy same
within thirty (30) days after written notice thereof to the Company, or (iii)
upon thirty (30) days advanced written notice to the Company. In the event
Executive terminates this Employment Agreement pursuant to Section 6(b)(iii),
then all of Executive's rights under this Agreement (other than those set forth
in Sections 14 and 19) and all of his obligations (other than those set forth in
Sections 9, 10, 11 and 12) hereunder shall terminate effective as of the last
day of Executive's employment.
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c. BY THE COMPANY FOR CAUSE. This Employment Agreement may be
terminated at the option of the Company, upon written notice to the Executive,
"for cause" (as hereinafter defined), or in the event of the "permanent
disability" (as defined and provided for in Section 7) or death of the Executive
as provided for in Section 7). The Company may terminate Executive "without
cause" (as defined in Section 7).
(i) As used herein, the term "for cause" shall mean and be
limited to: (A) any material breach of this Employment Agreement by the
Executive which in any case is not fully corrected within thirty (30) days after
written notice of same from the Company to the Executive; (B) neglect by the
Executive of his duties and responsibilities hereunder; (C) any fraud, theft,
conversion, insubordination, criminal misconduct, breach of fiduciary duty,
dishonesty, or gross and willful misconduct by the Executive in connection with
the performance of his duties and responsibilities hereunder; (D) the Executive
being legally intoxicated (alcohol or drugs) during business hours, or being
habitually drunk or addicted to drugs provided that this shall not restrict the
Executive from taking physician-prescribed medication in accordance with the
applicable prescription); (E) the commission by the Executive of any crime of
moral turpitude, or any other action by the Executive which may materially
impair or damage the reputation of the Company; or (F) habitual breach by the
Executive of any of the material provisions of this Employment Agreement
(regardless of any prior cure thereof).
d. EFFECT OF TERMINATION FOR CAUSE. In the event of
termination for any of the reasons set forth in this Section 6 (except as
otherwise provided for hereinafter with respect to "permanent disability", death
or "without cause") Executive shall be entitled to no further compensation, Base
Salary or other benefits under this Employment Agreement, except as to that
portion of any unpaid Base Salary or other benefits accrued and earned by him
hereunder up to and including the effective date of termination.
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SECTION 7. TERMINATION BY REASON OF DEATH; PERMANENT DISABILITY; OR
WITHOUT CAUSE.
a. If the Company terminates Executive "without cause" which
shall mean for any reason other than as set forth in Section 7(c)(i), or in the
event of Executive's death or "permanent disability" (as defined below),
Executive shall be entitled to receive an amount equal to the full compensation
to which he would otherwise be entitled under this Employment Agreement (just as
if Executive had not been so terminated and was continuing to serve as an
employee hereunder for the full term of this Employment Agreement, not including
any renewal or extension thereof) for the remainder of the Employment Period
(the "Severance Payment"). Such Severance Payment shall be payable in a single
lump sum distribution (without any present value adjustment) to Executive or his
estate, as the case may be, no later than ninety (90) days from the effective
date of such termination.
b. PAYMENT IN THE EVENT OF PERMANENT DISABILITY. For purposes
of this Employment Agreement, Executive's "permanent disability" shall be deemed
to have occurred after one hundred twenty (120) days in the aggregate during any
consecutive twelve (12) month period, or after ninety (90) consecutive days,
during which one hundred twenty (120) or ninety (90) days, as the case may be,
Executive, by reason of his physical or mental disability or illness, shall have
been unable to discharge fully his duties under this Employment Agreement. The
date of permanent disability shall be the one hundred twentieth (120th) or
ninetieth (90th) day, as the case may be. In the event Executive, after receipt
of notice from Company, shall dispute that his permanent disability shall have
occurred, he shall promptly submit to a physical examination by a qualified
practicing physician selected and paid for by the Company (and reasonably
acceptable to the Executive). Unless such physician shall issue his written
statement to the effect that in his opinion, based on his diagnosis, Executive
is capable of resuming his employment and devoting sufficient time and energy to
discharge his duties within ten (10) days after the date of such statement, such
permanent disability shall be deemed to have occurred without further dispute by
Executive or Company.
SECTION 8. CHANGE IN CONTROL. In the event Executive's employment
with the Company is terminated by the Company within six (6) months following a
"Change in Control" of the Company (as defined below), then the Company shall
pay to Executive on the date of such termination a single lump sum distribution
(without any present value adjustment) equal to his Base Salary (as determined
in accordance with Section 4), for the remainder of the initial Employment
Period. The payments provided by this Section shall not be in addition to any
benefits payable pursuant to any other section of this Employment Agreement.
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"Change of Control" shall be deemed to have occurred when:
(i) securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding voting securities are
acquired pursuant to a tender offer or an exchange offer by a person or entity
which is not a wholly-owned subsidiary of the Company or any of its affiliates;
(ii) a merger or consolidation is consummated in which the
Company is a constituent corporation and which results in less than 30% of the
outstanding voting securities of the surviving or resulting entity being owned
by the then existing stockholders of the Company;
(iii) a sale is consummated by the Company of substantially
all of the Company's assets to a person or entity which is not a wholly-owned
subsidiary of the Company or any of its affiliates; or
(iv) during any period of two consecutive years, individuals
who, at the beginning of such period, constituted the Board cease, for any
reason, to constitute at least a majority thereof, unless the election or
nomination for election for each new director was approved by the voting of at
least two-thirds of the directors then still in office who were directors at the
beginning of the period.
SECTION 9. CONFIDENTIAL INFORMATION. Executive recognizes and
acknowledges that the Company has, through the expenditure of substantial time,
effort and money, developed and acquired certain confidential information and
trade secrets which have become of great value to the Company in its creation,
development and operations. Executive further acknowledges and understands that
in the course of performing his duties for the Company, Executive has had and
will have access to the trade secrets and confidential information of the
Company. Executive agrees that during the course of his employment and at any
time after the termination or expiration thereof he will not make any
independent use of, publish or disclose, or authorize anyone to publish or
disclose, to any other person or organization, any of the Company's trade
secrets and confidential information, except as required in the course of his
employment with the Company or by law. Upon request of the Company and, in any
event upon the cessation of Executive's employment with the Company, whether
with or without cause, Executive will promptly return all tangible expressions
of trade secrets and confidential information, including, but not limited to,
all personal notes, in his possession or control and all copies thereof. As used
herein, the term "trade secrets and confidential information" shall mean client
lists, applicant lists, and other related client and applicant data,
computerized compilation of such data, training materials and information,
policy and procedure manuals, video and audio recordings of training and
operation methods, sales, services, support and marketing practices and
operations,
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advertising themes, information concerning possible acquisition candidates,
formats of advertising and other business methods, and techniques, processes and
financial information of any subsidiary, affiliate or the Company, all of which
are not generally known to the trade or industry and which will be of
competitive use by them. "Trade secrets and confidential information" shall not
include intangible information which is generally known and used by persons with
training and experience comparable to Executive as of the date of this
Employment Agreement and all intangible information which is common knowledge in
the industry or otherwise legally in the public domain at any time after the
date of this Agreement (other than through breach of this Agreement).
Executive further agrees that the restrictions set forth in
this Section 9 are in addition to, and not in lieu of, any other restrictions or
obligations placed upon him, and/or any rights or remedies available to the
Company, by any statute or at common law.
SECTION 10. COVENANT NOT TO COMPETE. Executive covenants and agrees
that, in order to protect the Company's legitimate business interest in its
trade secrets and confidential information, goodwill, and substantial
relationships with prospective or existing customers or suppliers during the
Employment Period and for a period of twelve (12) months following the
expiration or termination of this Employment Agreement or any renewal of the
Employment Agreement, however the same shall occur, whether voluntary or
involuntary, Executive will not, without the prior written consent of the
Company, directly or indirectly,
a. engage, whether by virtue of stock ownership, management
responsibilities or otherwise, in companies, businesses, organizations and/or
ventures which manufacture, market or distribute products which are competitive
with any of the "Company's Products" (as hereinafter defined) within a 50 mile
radius of any location where the Company is currently conducting business, or
within a 50 mile radius of any location where the Company has conducted or has
definite plans on the date of termination or expiration of this Employment
Agreement to conduct business twelve (12) months before or after the termination
or expiration of this Employment Agreement; or
b. become interested, directly or indirectly, whether as
principal, owner, stockholder, partner, agent, officer, director, employee,
salesman, joint venturer, consultant, advisor, independent contractor or
otherwise, in any person, firm, partnership, association, venture, corporation
or entity engaging directly or indirectly in any of the activities described in
Subsection 11a. above; or
c. knowingly solicit the employment of any of the Company's
Personnel (as hereinafter defined).
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d. For purposes of this Employment Agreement:
(i) the term "Company" shall include any subsidiary, any
affiliates, any successor in interest whether by sale, merger, liquidation or
the like, and any of the Company's other subsidiaries and affiliates;
(ii) the term "Company Personnel" shall mean any person
employed by the Company, any subsidiary or any of its affiliates at any time
through the end of the term of this Employment Agreement, but excluding any
person who has left such employment for a continuous period exceeding one (1)
year;
(iii) the term "Company's Products" shall mean any present
or future (future being limited to the term of this Employment Agreement and any
and all extensions thereof) product or service (i) being sold by the Company or
(ii) any product designed, engineered, manufactured, assembled, or enhanced
(whether or not sold) by the Company.
e. None of the foregoing shall prevent Executive from holding
up to two percent (2%) in the aggregate of any class of securities of any entity
engaged in the prohibited activities described above, PROVIDED THAT, such
securities are listed on a national securities exchange or registered under
Section 12(g) of the Securities and Exchange Act of 1934.
f. The parties acknowledge that the Company intends to undergo
a major restructuring by way of a merger, stock for stock exchange,
reorganization or otherwise, and may, thereafter, seek to assign and delegate
this Employment Agreement to such new or resulting entity. Executive expressly
consents and agrees to such an assignment and delegation, without the need for
any further writing, approval or consent by Executive.
g. No activities which Executive is engaged in as of the
Commencement Date hereof shall constitute a default under this Section 11.
SECTION 11. REMEDIES IN EVENT OF BREACH.
a. INJUNCTIVE RELIEF. The parties acknowledge that each would
be irreparably harmed by any breach of the covenants contained in Sections 9 and
10 of this Employment Agreement, and that either party's remedy at law for any
breach by the other party of their obligations under Sections 9 and 10 of this
Employment Agreement would be inadequate, and would be impossible to ascertain
and therefore, in the event of the breach or threatened breach of any
obligations under 9 and 10 of this Employment Agreement, either party, in
addition to any and all other remedies at law or in equity, shall have the right
to enjoin the other party from any threatened or actual activities in violation
thereof; and the parties hereby consent and agree
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that temporary and permanent injunctive relief may be granted in any proceedings
which might be brought to enforce any such covenants without the necessity of
proof of actual damages and without the necessity of posting bond. In the event
either party does apply for such injunction, the other party shall not raise as
a defense thereto that such applying party has an adequate remedy at law.
b. DAMAGES; ACCOUNTING FOR PROFITS. In addition to any
injunctive relief that may be granted to the Company or Executive for breach of
this Employment Agreement, the Company and Executive shall be entitled to
recover all damages, including reasonable attorneys' fees and costs (including
paralegals' fees), sustained or incurred by the Company or Executive by reason
of a violation or threatened violation of the terms of this Employment
Agreement, and to receive such other remedy or remedies as the court determines
is appropriate. Executive covenants and agrees that, if he violates any of his
covenants or agreements under Sections 9 and 10 hereof, the Company shall be
entitled to an accounting and repayment of all profits, compensations,
commissions, remunerations or benefits which Executive directly or indirectly
has realized or may realize as a result of, growing out of, or in connection
with, any such violation; such remedy shall be in addition to and not in
limitation of any injunctive relief or any other rights or remedies to which the
Company is or may be entitled at law or in equity or under this Employment
Agreement.
SECTION 12. REASONABLENESS. Executive has carefully read and
considered the provisions of Sections 9 and 10 hereof and, having done so,
agrees that the restrictions set forth in such sections, including, but not
limited to, the time period of restriction, the geographical areas of
restriction, and the definition of Company Products set forth therein, are fair
and reasonable and are reasonably required for the protection of the legitimate
business interests of the Company, and further that the geographical areas of
restriction set forth therein accurately reflect the area in which he will be
actively engaged in the performance of services.
SECTION 13. NO INCONSISTENT OBLIGATIONS. Executive represents and
warrants that no action required of him under this Employment Agreement or any
other agreements or understandings, written or oral, entered into with the
Company will conflict with, breach or otherwise impair any previously existing
agreements or understandings, whether written or oral, into which Executive has
entered with other persons or entities, including agreements with respect to
proprietary information or non-competition.
SECTION 14. INDEMNIFICATION. The parties shall enter into a separate
indemnification agreement, in form and substance mutually agreeable to the
parties, within ninety (90) days from the execution of this Employment
Agreement.
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SECTION 15 15. NOTICES. Any notice to be given hereunder shall be
deemed to be given when delivered by hand or by overnight courier to the party
for whom the notice is intended, or three (3) days after notice is placed in the
U.S. mail properly addressed to the party for whom notice is intended, at the
following address:
If to the Company: ECKLER INDUSTRIES, INC.
5200 South Washington Avenue
Titusville, Florida 32780
Attention: Gary Smith
If to Executive: ROBERT J. ABRAHAMS
2610 Crestwood Lane
Deerfield, IL 60015
Either party may notify the other of any change to the address to which
future notices should be sent by providing the other party with written notice
of such change in accordance with the terms of this Section.
SECTION 16. BINDING EFFECT AND GOVERNING LAW. This Employment
Agreement supersedes all prior understandings and agreements between the parties
with respect to the subject matter hereof. This Employment Agreement shall be
binding upon the legal representatives, heirs, distributees, successors and
assigns of the parties. The Employment Agreement contains the entire agreement
of the parties, and may not be changed orally but only in writing signed by the
party against whom enforcement of any such change is sought. It is agreed that a
waiver by either party of a breach of any provision of this Employment Agreement
shall not be operated or be construed as a waiver of any subsequent breach by
that same party. This Employment Agreement shall be governed by the laws of the
State of Florida.
SECTION 17. SEVERABILITY. In the event that any terms or provisions
of this Employment Agreement shall be held to be invalid or unenforceable by a
court of competent jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remaining terms and provisions
hereof.
SECTION 18. ASSIGNABILITY. The rights or obligations contained in
this Employment Agreement shall not be assigned, transferred, or divided in any
manner by Executive or Company, without the prior written consent of the other;
provided however, that nothing in this Section 19 shall preclude: (i) Executive
from designating a beneficiary to receive any benefits hereunder upon his death,
or the executors, administrator or other legal representatives of Executive or
his estate from assigning any rights hereunder to the person(s) entitled
thereto; or (ii) the Company's right to assign this Employment Agreement to a
related entity subsequent to any merger, stock for stock exchange,
reorganization, or otherwise as set forth in Section 11e.
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Notwithstanding the foregoing, this Employment Agreement shall be binding on any
entity which by purchase of assets, merger, or otherwise, becomes a successor to
the business of the Company.
SECTION 19. DIRECTOR & OFFICER LIABILITY INSURANCE. The Company shall
obtain Director & Officer Liability Insurance of a type that is usual and
customary for businesses similar to Company.
SECTION 20. HEADINGS. The headings of paragraph herein are included
solely for convenience of reference and shall not control the meaning or
interpretation and performance of any of the provisions of this Employment
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be executed the day and year first above written.
COMPANY:
ECKLER INDUSTRIES, INC.
By:
-----------------------------------
EXECUTIVE
-----------------------------------
Robert J. Abrahams
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EXHIBIT 10.18
THE SHARES OF COMMON STOCK ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNLESS (I)
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS, OR (II) IN THE OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY REGISTRATION UNDER THE SECURITIES ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
TRANSFER.
$3,500,000.00 Nashville, Tennessee
March 13, 1997
CONVERTIBLE SENIOR PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, ECKLER INDUSTRIES, INC., Florida
corporation ("Maker"), promises to pay to the order of SIRROM CAPITAL
CORPORATION, a Tennessee corporation ("Payee"; Payee and any subsequent
holder(s) hereof are hereinafter referred to collectively as "Holder"), at the
office of Payee at Suite 200, 500 Church Street, Nashville, TN 37219, or at such
other place as Holder may designate to Maker in writing from time to time, the
principal sum of THREE MILLION FIVE HUNDRED THOUSAND AND NO/100ths DOLLARS
($3,500,000.00) or the aggregate unpaid principal amount of all advances by
Payee to Maker, together with interest on the outstanding principal balance
hereof from the date of each advance at the rate of twelve percent (12%) per
annum (computed on the basis of a 360-day year); provided, however, that Holder
may charge and receive interest upon any renewal or extension hereof at the
greater of (i) the rate set out above, or (ii) any rate agreed to by the
undersigned that is not in excess of the maximum rate of interest allowed to be
charged under applicable law (the "Maximum Rate") at the time of such renewal or
extension.
Interest-only on the outstanding principal balance hereof shall be due
and payable quarterly, in arrears, with the first installment being payable on
the first (1st) day of May, 1997; subsequent installments being payable on the
first (1st) day of each succeeding August, November, February and May thereafter
until the Maturity Date (as hereafter defined); and the final installment being
payable on the twelfth (12th) day of March, 1999 (the "Maturity Date"), at which
time the entire outstanding principal balance, together with all accrued and
unpaid interest, shall be immediately due and payable in full.
The indebtedness evidenced hereby may be prepaid in whole or in part at
any time and from time to time, without penalty, PROVIDED, HOWEVER, that in case
of each prepayment of indebtedness hereunder, Borrower will give written notice
thereof to the Holder not less than forty-five (45) nor more than seventy-five
(75) days prior to the date fixed for such prepayment, in each case specifying
the date of such prepayment, the aggregate principal amount of such prepayment
and the principal amount of the Note outstanding immediately prior to such
prepayment. Any such prepayments shall be credited first to any accrued and
unpaid interest and then to the outstanding principal balance hereof.
<PAGE>
Time is of the essence of this Note. It is hereby expressly agreed that
in the event that the Target Secondary Offering (as such term is defined in the
Loan Agreement) shall have been consummated on or before December 31, 1997 and
the Maker shall have received the purchase price of the securities of the Maker
offered thereunder prior to such date; or in the event that any default be made
in the payment of principal or interest as stipulated above; or in the event
that any default or event of default shall occur under that certain Loan
Agreement, dated March 13, 1997, between Maker and Payee (the "Loan Agreement"),
which default or event of default is not cured within any applicable cure period
set forth in said Loan Agreement; or in the event that any default be made in
the performance or observance of any covenants or conditions contained in any
other instrument or document now or hereafter evidencing, securing or otherwise
relating to the indebtedness evidenced hereby (subject to any applicable notice
and cure period provisions that may be set forth therein); then, and in such
event, the entire outstanding principal balance of the indebtedness evidenced
hereby, together with any other sums advanced hereunder, under the Loan
Agreement and/or under any other instrument or document now or hereafter
evidencing, securing or in any way relating to the indebtedness evidenced
hereby, together with all unpaid interest accrued thereon, shall, at the option
of Holder and without notice to Maker, at once become due and payable and may be
collected forthwith, regardless of the stipulated date of maturity. Upon the
occurrence of any default as set forth herein, at the option of Holder and
without notice to Maker, all accrued and unpaid interest, if any, shall be added
to the outstanding principal balance hereof, and the entire outstanding
principal balance, as so adjusted, shall bear interest thereafter until paid at
an annual rate (the "Default Rate") equal to the lesser of (i) the rate that is
two percentage points (2.0%) in excess of the above-specified interest rate, or
(ii) the Maximum Rate in effect from time to time, regardless of whether or not
there has been an acceleration of the payment of principal as set forth herein.
All such interest shall be paid at the time of and as a condition precedent to
the curing of any such default.
In the event this Note is placed in the hands of an attorney for
collection or for enforcement or protection of the security, or if Holder incurs
any costs incident to the collection of the indebtedness evidenced hereby or the
enforcement or protection of the security, Maker and any endorsers hereof agree
to pay to Holders an amount equal to all such costs, including without
limitation all reasonable attorney's fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest
and nonpayment are hereby waived by Maker and all other parties hereto. No
failure to accelerate the indebtedness evidenced hereby by reason of default
hereunder, acceptance of a past-due installment or other indulgences granted
from time to time, shall be construed as a novation of this Note or as a waiver
of such right of acceleration or of the right of Holder thereafter to insist
upon strict compliance with the terms of this Note or to prevent the exercise of
such right of acceleration or any other right granted hereunder or by applicable
laws. No extension of the time for payment of the indebtedness evidenced hereby
or any installment due hereunder, made by agreement with any person now or
hereafter liable for payment of the indebtedness evidenced hereby, shall operate
to release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or hereafter liable for payment of the
indebtedness evidenced hereby, either in whole or in part, unless Holder agrees
otherwise in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
The indebtedness and other obligations evidenced by this Note are
further evidenced and/or secured by (i) the Loan Agreement, and (ii) certain
other instruments and documents, as may be
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required to protect and preserve the rights of Maker and Holder as more
specifically described in the Loan Agreement.
CONVERSION OF NOTE
CONVERSION PRIVILEGE. Subject to and upon compliance with the
provisions hereof, the holder of this Note shall have the right, at its option,
at any time and from time to time, to convert the principal amount of the Note,
or any portion thereof, into that number of fully paid and nonassessable shares
of Class A Common Stock of the Maker, par value $.01 per share (the "Common
Stock") (calculated as to each conversion to the nearest 1/100th of a share)
obtained by dividing the principal amount of this Note or portion thereof to be
converted by the Conversion Price. The Conversion Price shall be $6.00 per share
of Common Stock unless adjusted as set forth below.
MANNER OF EXERCISE. In order to exercise the conversion privilege, the
Holder shall surrender this Note to the Maker, accompanied by written notice to
the Maker (the "Conversion Notice") that the Holder elects to convert this Note
or the portion hereof specified in said notice. The Conversion Notice shall also
state the name or names, together with address or addresses, in which the
certificate or certificates for shares of Common Stock which shall be issuable
on such conversion shall be issued, as well as the information, if any, required
to be submitted to the Maker pursuant to that certain Registration Rights
Agreement of even date herewith, between Maker and Payee (the "Registration
Rights Agreement"). As promptly as practicable after the surrender of this Note,
as aforesaid, the Maker shall issue and shall deliver to the Holder a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of this Note or portion thereof in accordance with
the provisions hereof, and any fractional interest in respect of a share of
Common Stock arising upon such conversion shall be settled as provided below,
together with an amount equal to the interest accrued but unpaid on the Note (or
part thereof) so converted. In case the Note is surrendered for partial
conversion, the Maker shall deliver to Holder, at the expense of the Maker, a
new Note in an aggregate principal amount equal to the unconverted portion of
the surrendered Note. Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which this Note shall
have been surrendered and the Conversion Notice received by the Maker as
aforesaid, and the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder or holders of record of the shares
represented thereby at such time, and such conversion shall be at the Conversion
Price in effect at such time, unless the stock transfer books of the Maker shall
be closed on that date, in which event such person or persons shall be deemed to
have become such holder or holders of record at the close of business on the
next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
this Note shall have been surrendered to and the Conversion Notice shall have
been received by the Maker.
PAYMENT IN LIEU OF FRACTIONAL SHARES. No fractional shares of Common
Stock shall be issued upon conversion of this Note or any part hereof. Instead
of any fractional interest in a share of Common Stock which would otherwise be
deliverable upon the conversion of this Note, the Maker shall make an adjustment
to the nearest 1/100th of a share in cash at the current market price thereof at
the close of business on the Trading Day next preceding the day of conversion.
ADJUSTMENT OF CONVERSION PRICE. The Conversion Price shall be adjusted
from time to time
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as follows:
(a) In the event that a Target Secondary Offering has not been
consummated and the Maker shall not have received the purchase price of
the securities of Maker offered thereunder on or before December 31,
1997, the Conversion Price shall be adjusted to equal the lesser of (i)
90% of the current market price per share of Common Stock (determined
as provided in subparagraph (e) of this paragraph) or (ii) the
then-current Conversion Price; PROVIDED, HOWEVER, that no adjustment
shall occur pursuant to this subparagraph (a) if prior to December 31,
1997, both (A) the current market price per share of Common Stock
(determined as provided in subparagraph (e) of this paragraph) with
respect to any twenty (20) consecutive Trading Day (as such term is
herein defined) period commencing after the date of this Note and
ending before December 31, 1997, exceeds $8.75 and (B) the rights to
purchase shares of Common Stock of the Maker represented by those
certain publicly traded warrants issued by the Maker pursuant to the
Warrant Agreement between Maker and American Stock Transfer & Trust
Company dated November 15, 1995, at an exercise price of $8.75 per
share shall have been exercised at such price with respect to at least
seventy-five percent (75%) of the number of such shares underlying such
rights as of the date of this Note, and the proceeds therefrom shall
have been delivered to the Maker.
(b) In case the Maker shall hereafter (i) pay a dividend or
make a distribution on its Common Stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number
of shares, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares, or (iv) issue by reclassification of its
Common Stock any shares of capital stock of the Maker, the Conversion
Price in effect immediately prior to such action shall be adjusted so
that the holder of this Note, if such Note is surrendered for
conversion, shall thereafter be entitled to receive the number of
shares of Common Stock or other capital stock of the Maker which it
would have owned immediately following such action had this Note been
converted immediately prior thereto. An adjustment made pursuant to
this subparagraph (b) shall become effective immediately after the
record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an
adjustment made pursuant to this subparagraph (b), the Holder
thereafter surrendering this Note for conversion shall become entitled
to receive shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Maker, the Board of
Directors of the Maker shall determine, on the basis of the opinion of
an independent financial advisor, the allocation of the adjusted
Conversion Price between or among shares of such classes of capital
stock or shares of Common Stock and other capital stock.
(c) In case the Maker shall hereafter issue rights or warrants
to holders of its outstanding shares of Common Stock generally
entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the current market price per share (as
determined pursuant to subparagraph (e) of this paragraph) of the
Common Stock on the record date mentioned in this subparagraph (c)
below, the Conversion Price of the shares of Common Stock shall be
adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
date of issuance of such rights or warrants by a fraction the numerator
of which shall be the number of shares of Common Stock outstanding on
the date of issuance of such rights or warrants plus the
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number of shares which the aggregate offering price of the total number
of shares so offered would purchase at such current market price, and
the denominator of which shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase. Such adjustment shall become effective immediately after the
record date for the determination of stockholders entitled to receive
such rights or warrants.
(d) In case the Maker shall hereafter distribute to holders of
its outstanding Common Stock generally evidences of its indebtedness or
assets (excluding any cash dividend paid from retained earnings of the
Maker and dividends or distributions payable in stock from which
adjustment is made pursuant to subparagraph (b) of this paragraph) or
rights or warrants to subscribe to securities of the Maker (excluding
those referred to in subparagraph (c) of this paragraph), then in each
such case the Conversion Price of the shares of Common Stock shall be
adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
date of such distribution by a fraction the numerator of which shall be
the current market price per share (determined as provided in
subparagraph (e) of this paragraph) of the Common Stock on the record
date mentioned in this subparagraph (d) below less the then fair market
value (as determined by the Board of Directors, whose determination
shall be conclusive) of the portion of the evidences of indebtedness or
assets so distributed to the holder of one share of Common Stock or of
such subscription rights or warrants applicable to one share of Common
Stock, and the denominator of which shall be such current market price
per share of Common Stock. Such adjustment shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such distribution.
(e) For the purpose of any computation under subparagraphs
(b), (c) or (d) of this paragraph, the current market price per share
of Common Stock on any date shall be deemed to be the average of the
daily market prices for the twenty (20) consecutive days other than
Saturday, Sunday or other days on which national securities exchanges
are open for trading and trades in Common Stock occur (each, a "Trading
Day") before the day in question. The market price for each such
Trading Day shall be (i) in the case of a security listed or admitted
to trading on any securities exchange, the last reported sale price,
regular way (as determined in accordance with the practices of such
exchange), on such day, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day (and in the
case of a security traded on more than one national securities
exchange, at such price or such average, upon the exchange on which the
volume of trading during the last calendar year was the greatest), (ii)
in the case of a security not then listed or admitted to trading on any
securities exchange, the last reported sale price on such day, or if no
sale takes place on such day, the average of the closing bid and asked
prices on such day, as reported by a reputable quotation service
designated by the Maker, (iii) in the case of a security not then
listed or admitted to trading on any securities exchange and as to
which no such reported sale price or bid and asked prices are
available, the average of the reported high bid and low asked prices on
such day, as reported by a reputable quotation service, or the WALL
STREET JOURNAL, or if there are no bid and asked prices on such day,
the average of the high bid and low asked prices, as so reported, on
the most recent day (not more than 30 days prior to the date in
question) for which prices have been so reported, and (iv) in the case
of a security determined by the Maker's Board of Directors as not
having an active quoted market or in the case of other property, such
fair market value as shall be determined by the Board of
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Directors.
(f) In any case in which the provisions of subparagraphs (b)
through (d) of this paragraph shall require that an adjustment be made
immediately following a record date, the Maker may elect to defer (but
only until five business days following the filing by the Maker with
the Holder of the certificate of independent public accountants
described in subparagraph (h) below) issuing to the Holder of this Note
if converted after such record date the shares of Common Stock issuable
upon such conversion over and above the shares of Common Stock issuable
upon such conversion on the basis of the Conversion Price prior to
adjustment.
(g) Whenever the Conversion Price is adjusted as herein
provided, Maker shall promptly deliver to the Holder (i) a certificate
of a firm of independent public accountants setting forth the
Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment and the manner of
computing the same, which certificate shall be conclusive evidence of
the correctness of such adjustment and (ii) a notice stating that the
Conversion Price has been adjusted and setting forth the adjusted
Conversion Price.
(h) In the event that at any time as a result of an adjustment
made pursuant to subparagraph (b) of this paragraph, the Holder
thereafter surrendering this Note for conversion shall become entitled
to receive any shares of the Maker other than shares of Common Stock,
thereafter the Conversion Price of such other shares so receivable upon
conversion of this Note or any portion hereof shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Common
Stock contained in subparagraphs (b) through (i) hereof.
CERTAIN NOTICES. In case:
(a) the Maker shall take any action which would require an
adjustment in the Conversion Price pursuant to subparagraph (d) of the
preceding paragraph; or
(b) the Maker shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any
shares of stock of any class or of any other rights; or
(c) there shall be any capital reorganization or
reclassification of the Common Stock (other than a subdivision or
combination of the outstanding Common Stock and other than a change in
the par value of the Common Stock), or any consolidation or merger to
which the Maker is a part or any statutory exchange of securities with
another corporation and for which approval of any stockholders of the
Maker is required, or any sale or transfer of all or substantially all
of the assets of the Maker; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Maker;
then the Maker shall provide to the Holder, at least ten (10) days prior to the
applicable date hereinafter specified, a notice stating (i) the date on which a
record is to be taken for the purpose of such distribution or rights, or, if a
record is not to be taken, the date as of which the holders of
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Common Stock of record to be entitled to such distribution or rights are to be
determined, or (ii) the date on which such reorganization, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up. Failure to give such notice or any
defect therein shall not affect the legality or validity of the proceedings
described in subparagraphs (a), (b), (c) or (d) of this paragraph.
STATUS OF STOCK. The Maker covenants that it will at all times reserve
and keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock or its issued shares of Common
Stock held in its treasury, or both, for the purpose of effecting conversions of
this Note, the full number of shares of Common Stock deliverable upon the
conversion of this Note.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value (if any) of the shares of Common Stock
deliverable upon conversion of this Note, the Maker will take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Maker may validly and legally issue fully paid and non-assessable shares of
Common Stock at such adjusted Conversion Price.
Prior to the delivery of any securities which the Maker shall be
obligated to deliver upon conversion of this Note, the Maker shall comply with
all federal and state laws and regulations thereunder requiring the registration
of such securities with, or any approval of or consent to the delivery thereof
by, any governmental authority, unless an exemption from registration is
available.
TAXES ON CONVERSIONS. The Maker will pay any and all documentary stamp
or similar issue or transfer taxes payable in respect of the issue or delivery
of shares of Common Stock upon conversion of this Note pursuant hereto;
PROVIDED, HOWEVER, that the Maker shall not be required to pay any tax which may
be payable in respect of any transfer involved in the issue or delivery of
shares of Common Stock in a name other than that of the Holder or any affiliate
of the Holder, and no such issue or delivery shall be made unless and until the
Holder requesting such issue or delivery or the person in whose name such shares
shall be issued has paid to the Maker the amount of any such tax or has
established, to the satisfaction of the Maker, that such tax has been paid.
COVENANTS TO STOCK. The Maker covenants that all shares of Common Stock
which may be delivered upon conversion of this Note will upon delivery be duly
and validly issued and fully paid and nonassessable, free of all liens and
charges and not subject to any preemptive rights.
MERGER, ETC. Notwithstanding any other provision herein to the
contrary, in case of any consolidation or merger to which the Maker is a party
other than a merger or consolidation in which the Maker is the continuing
corporation, or in case of any sale or conveyance to another corporation of the
property of the Maker as an entirety or substantially as an entirety, or in the
case of any statutory exchange of securities with another corporation (including
any exchange effected in connection with a merger of a third corporation into
the Maker), there shall be no adjustments hereunder, but the Holder shall have
the right thereafter to convert this Note into the kind and amount of
securities, cash or other property which he would have owned or been entitled to
receive immediately after such consolidation, merger, statutory exchange, sale
or conveyance had this Note
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been converted immediately prior to the effective date of such consolidation,
merger, statutory exchange, sale or conveyance, and in any such case, if
necessary, appropriate adjustment shall be made in the application of the
conversion and adjustment provisions set forth herein with respect to the rights
and interests thereafter of the holders of this Note, to the end that the
provisions regarding conversion and adjustment set forth herein shall thereafter
correspondingly be made applicable, as nearly as may reasonably be, in relation
to any shares of stock or other securities or property thereafter deliverable on
the conversion of this Note. Any such adjustment shall be approved by a firm of
independent public accountants, evidenced by a certificate to that effect; and
any adjustment so approved shall for all purposes hereof conclusively be deemed
to be an appropriate adjustment. The above provisions of this paragraph shall
similarly apply to successive consolidations, mergers, statutory exchanges,
sales or conveyances.
MISCELLANEOUS
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then, ipso facto, the obligation to pay interest hereunder shall be
reduced to the Maximum Rate; and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at the Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control every
other provision in any and all other agreements and instruments existing or
hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby.
Notwithstanding the place of making of this Note, the parties agree
that this Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Tennessee, except to the
extent that federal law may be applicable to the determination of the Maximum
Rate.
[Remainder of page intentionally left blank.]
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As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law.
ECKLER INDUSTRIES, INC.
By: /s/ JAMES NEAL HUTCHINSON, JR.
--------------------------------
James Neal Hutchinson, Jr.
Assistant Vice President
9
EXHIBIT 10.19
THE SHARES OF COMMON STOCK ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNLESS (I)
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS, OR (II) IN THE OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY REGISTRATION UNDER THE SECURITIES ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
TRANSFER.
$4,000,000.00 Nashville, Tennessee
May 13, 1997
CONVERTIBLE SENIOR PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, SMART CHOICE AUTOMOTIVE GROUP,
INC., Florida corporation ("Maker"), promises to pay to the order of SIRROM
CAPITAL CORPORATION, a Tennessee corporation ("Payee"; Payee and any subsequent
holder(s) hereof are hereinafter referred to collectively as "Holder"), at the
office of Payee at Suite 200, 500 Church Street, Nashville, TN 37219, or at such
other place as Holder may designate to Maker in writing from time to time, the
principal sum of FOUR MILLION AND NO/100ths DOLLARS ($4,000,000.00) or the
aggregate unpaid principal amount of all advances by Payee to Maker, together
with interest on the outstanding principal balance hereof from the date of each
advance at the rate of twelve percent (12%) per annum (computed on the basis of
a 360-day year); provided, however, that Holder may charge and receive interest
upon any renewal or extension hereof at the greater of (i) the rate set out
above, or (ii) any rate agreed to by the undersigned that is not in excess of
the maximum rate of interest allowed to be charged under applicable law (the
"Maximum Rate") at the time of such renewal or extension.
Interest-only on the outstanding principal balance hereof shall be due
and payable quarterly, in arrears, with the first installment being payable on
the first (1st) day of August, 1997; subsequent installments being payable on
the first (1st) day of each succeeding November, February, May, and August
thereafter until the Maturity Date (as hereafter defined); and the final
installment being payable on the twelfth (12th) day of May, 2002 (the "Maturity
Date"), at which time the entire outstanding principal balance, together with
all accrued and unpaid interest, shall be immediately due and payable in full.
Maker may not repay, at the option of the Maker, the indebtedness
evidenced by this Note at any time prior to the second anniversary of the date
hereof. On and after the second anniversary of the date hereof, the indebtedness
evidenced hereby may be prepaid in whole or in part at any time and from time to
time, without penalty, PROVIDED, HOWEVER, that in case of each prepayment of
indebtedness hereunder, Maker will give written notice thereof to the Holder not
less than forty-five (45) nor more than seventy-five (75) days prior to the date
fixed for such prepayment, in each case specifying the date of such prepayment,
the aggregate principal amount of such prepayment and the principal amount of
the Note outstanding immediately prior to such prepayment and FURTHER PROVIDED
that the average of the closing bid price for shares of the Maker's Common Stock
for the twenty (20) trading days immediately preceding the date of such notice
(the "Notice Date") shall exceed $9.50 per share of Common Stock (the "Threshold
Price"), and that as of the date set for such prepayment, the average of the
closing bid price for shares of the Maker's Common Stock for all the trading
days since the Notice Date shall exceed the Threshold Price. Any such
prepayments shall be credited first to any accrued and unpaid interest and then
to the outstanding principal balance hereof.
<PAGE>
Time is of the essence of this Note. It is hereby expressly agreed that
in the event that any default or event of default shall occur under that certain
Loan Agreement, dated May 13, 1997, between Maker and Payee (the "Loan
Agreement"), which default or event of default is not cured within any
applicable cure period set forth in said Loan Agreement; or in the event that
any default be made in the performance or observance of any covenants or
conditions contained in any other instrument or document now or hereafter
evidencing, securing or otherwise relating to the indebtedness evidenced hereby
(subject to any applicable notice and cure period provisions that may be set
forth therein); then, and in such event, the entire outstanding principal
balance of the indebtedness evidenced hereby, together with any other sums
advanced hereunder, under the Loan Agreement and/or under any other instrument
or document now or hereafter evidencing, securing or in any way relating to the
indebtedness evidenced hereby, together with all unpaid interest accrued
thereon, shall, at the option of Holder and without notice to Maker, at once
become due and payable and may be collected forthwith, regardless of the
stipulated date of maturity. Upon the occurrence of any default as set forth
herein, at the option of Holder and without notice to Maker, all accrued and
unpaid interest, if any, shall be added to the outstanding principal balance
hereof, and the entire outstanding principal balance, as so adjusted, shall bear
interest thereafter until paid at an annual rate (the "Default Rate") equal to
the lesser of (i) the rate that is two percentage points (2.0%) in excess of the
above-specified interest rate, or (ii) the Maximum Rate in effect from time to
time, regardless of whether or not there has been an acceleration of the payment
of principal as set forth herein. All such interest shall be paid at the time of
and as a condition precedent to the curing of any such default.
In the event this Note is placed in the hands of an attorney for
collection or for enforcement or protection of the security, or if Holder incurs
any costs incident to the collection of the indebtedness evidenced hereby or the
enforcement or protection of the security, Maker and any endorsers hereof agree
to pay to Holders an amount equal to all such costs, including without
limitation all reasonable attorney's fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest
and nonpayment are hereby waived by Maker and all other parties hereto. No
failure to accelerate the indebtedness evidenced hereby by reason of default
hereunder, acceptance of a past-due installment or other indulgences granted
from time to time, shall be construed as a novation of this Note or as a waiver
of such right of acceleration or of the right of Holder thereafter to insist
upon strict compliance with the terms of this Note or to prevent the exercise of
such right of acceleration or any other right granted hereunder or by applicable
laws. No extension of the time for payment of the indebtedness evidenced hereby
or any installment due hereunder, made by agreement with any person now or
hereafter liable for payment of the indebtedness evidenced hereby, shall operate
to release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or hereafter liable for payment of the
indebtedness evidenced hereby, either in whole or in part, unless Holder agrees
otherwise in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
The indebtedness and other obligations evidenced by this Note are
further evidenced and/or secured by (i) the Loan Agreement, and (ii) certain
other instruments and documents, as may be required to protect and preserve the
rights of Maker and Holder as more specifically described in the Loan Agreement.
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CONVERSION OF NOTE
CONVERSION PRIVILEGE. Subject to and upon compliance with the
provisions hereof, the holder of this Note shall have the right, at its option,
at any time and from time to time, to convert the principal amount of the Note,
or any portion thereof, into that number of fully paid and nonassessable shares
of Common Stock of the Maker, par value $.01 per share (the "Common Stock")
(calculated as to each conversion to the nearest 1/100th of a share) obtained by
dividing the principal amount of this Note or portion thereof to be converted by
the Conversion Price. The Conversion Price shall be $7.50 per share of Common
Stock unless adjusted as set forth below.
MANNER OF EXERCISE. In order to exercise the conversion privilege, the
Holder shall surrender this Note to the Maker, accompanied by written notice to
the Maker (the "Conversion Notice") that the Holder elects to convert this Note
or the portion hereof specified in said notice. The Conversion Notice shall also
state the name or names, together with address or addresses, in which the
certificate or certificates for shares of Common Stock which shall be issuable
on such conversion shall be issued, as well as the information, if any, required
to be submitted to the Maker pursuant to that certain Registration Rights
Agreement of even date herewith, between Maker and Payee (the "Registration
Rights Agreement"). As promptly as practicable after the surrender of this Note,
as aforesaid, the Maker shall issue and shall deliver to the Holder a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of this Note or portion thereof in accordance with
the provisions hereof, and any fractional interest in respect of a share of
Common Stock arising upon such conversion shall be settled as provided below,
together with an amount equal to the interest accrued but unpaid on the Note (or
part thereof) so converted. In case the Note is surrendered for partial
conversion, the Maker shall deliver to Holder, at the expense of the Maker, a
new Note in an aggregate principal amount equal to the unconverted portion of
the surrendered Note. Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which this Note shall
have been surrendered and the Conversion Notice received by the Maker as
aforesaid, and the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder or holders of record of the shares
represented thereby at such time, and such conversion shall be at the Conversion
Price in effect at such time, unless the stock transfer books of the Maker shall
be closed on that date, in which event such person or persons shall be deemed to
have become such holder or holders of record at the close of business on the
next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
this Note shall have been surrendered to and the Conversion Notice shall have
been received by the Maker.
PAYMENT IN LIEU OF FRACTIONAL SHARES. No fractional shares of Common
Stock shall be issued upon conversion of this Note or any part hereof. Instead
of any fractional interest in a share of Common Stock which would otherwise be
deliverable upon the conversion of this Note, the Maker shall make an adjustment
to the nearest 1/100th of a share in cash at the current market price thereof at
the close of business on the Trading Day next preceding the day of conversion.
ADJUSTMENT OF CONVERSION PRICE. The Conversion Price shall be adjusted
from time to time as follows:
(a) In the event that the Target Equity shall not have been
received by Maker on or before June 30, 1998, the Conversion Price
shall be adjusted to equal $6.00 per share of Common Stock. The term
"Target Equity" shall mean the receipt by Maker on or before June 30,
1998 of net proceeds of at least $10,000,000 (after the payment of
expenses, including underwriting discounts and commissions but before
any proceeds from the exercise of any underwriter's over allotment
option, if applicable) from the sale of capital stock of the Maker at a
purchase price of at least $6.50 per share of Common Stock, or with
respect to preferred stock convertible into Common Stock, a conversion
price of at least $6.50 per
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share.
(b) In case the Maker shall hereafter (i) pay a dividend or
make a distribution on its Common Stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number
of shares, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares, or (iv) issue by reclassification of its
Common Stock any shares of capital stock of the Maker, the Conversion
Price in effect immediately prior to such action shall be adjusted so
that the holder of this Note, if such Note is surrendered for
conversion, shall thereafter be entitled to receive the number of
shares of Common Stock or other capital stock of the Maker which it
would have owned immediately following such action had this Note been
converted immediately prior thereto. An adjustment made pursuant to
this subparagraph (b) shall become effective immediately after the
record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an
adjustment made pursuant to this subparagraph (b), the Holder
thereafter surrendering this Note for conversion shall become entitled
to receive shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Maker, the Board of
Directors of the Maker shall determine, on the basis of the opinion of
an independent financial advisor, the allocation of the adjusted
Conversion Price between or among shares of such classes of capital
stock or shares of Common Stock and other capital stock.
(c) In case the Maker shall hereafter issue rights or warrants
to holders of its outstanding shares of Common Stock generally
entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the current market price per share (as
determined pursuant to subparagraph (e) of this paragraph) of the
Common Stock on the record date mentioned in this subparagraph (c)
below, the Conversion Price of the shares of Common Stock shall be
adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
date of issuance of such rights or warrants by a fraction the numerator
of which shall be the number of shares of Common Stock outstanding on
the date of issuance of such rights or warrants plus the number of
shares which the aggregate offering price of the total number of shares
so offered would purchase at such current market price, and the
denominator of which shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase. Such adjustment shall become effective immediately after the
record date for the determination of stockholders entitled to receive
such rights or warrants.
(d) In case the Maker shall hereafter distribute to holders of
its outstanding Common Stock generally evidences of its indebtedness or
assets (excluding any cash dividend paid from retained earnings of the
Maker and dividends or distributions payable in stock from which
adjustment is made pursuant to subparagraph (b) of this paragraph) or
rights or warrants to subscribe to securities of the Maker (excluding
those referred to in subparagraph (c) of this paragraph), then in each
such case the Conversion Price of the shares of Common Stock shall be
adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
date of such distribution by a fraction the numerator of which shall be
the current market price per share (determined as provided in
subparagraph (e) of this paragraph) of the Common Stock on the record
date mentioned in this subparagraph (d) below less the then fair market
value (as determined by the Board of Directors, whose determination
shall be conclusive) of the portion of the evidences of indebtedness or
assets so distributed to the holder of one share of Common Stock or of
such subscription rights or warrants applicable to one share of Common
Stock, and the denominator of which shall be such current market price
per share of Common Stock. Such adjustment shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such distribution.
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(e) For the purpose of any computation under subparagraphs
(b), (c) or (d) of this paragraph, the current market price per share
of Common Stock on any date shall be deemed to be the average of the
daily market prices for the twenty (20) consecutive days other than
Saturday, Sunday or other days on which national securities exchanges
are open for trading and trades in Common Stock occur (each, a "Trading
Day") before the day in question. The market price for each such
Trading Day shall be (i) in the case of a security listed or admitted
to trading on any securities exchange, the last reported sale price,
regular way (as determined in accordance with the practices of such
exchange), on such day, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day (and in the
case of a security traded on more than one national securities
exchange, at such price or such average, upon the exchange on which the
volume of trading during the last calendar year was the greatest), (ii)
in the case of a security not then listed or admitted to trading on any
securities exchange, the last reported sale price on such day, or if no
sale takes place on such day, the average of the closing bid and asked
prices on such day, as reported by a reputable quotation service
designated by the Maker, (iii) in the case of a security not then
listed or admitted to trading on any securities exchange and as to
which no such reported sale price or bid and asked prices are
available, the average of the reported high bid and low asked prices on
such day, as reported by a reputable quotation service, or the WALL
STREET JOURNAL, or if there are no bid and asked prices on such day,
the average of the high bid and low asked prices, as so reported, on
the most recent day (not more than 30 days prior to the date in
question) for which prices have been so reported, and (iv) in the case
of a security determined by the Maker's Board of Directors as not
having an active quoted market or in the case of other property, such
fair market value as shall be determined by the Board of Directors.
(f) In any case in which the provisions of subparagraphs (b)
through (d) of this paragraph shall require that an adjustment be made
immediately following a record date, the Maker may elect to defer (but
only until five business days following the filing by the Maker with
the Holder of the certificate of independent public accountants
described in subparagraph (h) below) issuing to the Holder of this Note
if converted after such record date the shares of Common Stock issuable
upon such conversion over and above the shares of Common Stock issuable
upon such conversion on the basis of the Conversion Price prior to
adjustment.
(g) Whenever the Conversion Price is adjusted as herein
provided, Maker shall promptly deliver to the Holder (i) a certificate
of a firm of independent public accountants setting forth the
Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment and the manner of
computing the same, which certificate shall be conclusive evidence of
the correctness of such adjustment and (ii) a notice stating that the
Conversion Price has been adjusted and setting forth the adjusted
Conversion Price.
(h) In the event that at any time as a result of an adjustment
made pursuant to subparagraph (b) of this paragraph, the Holder
thereafter surrendering this Note for conversion shall become entitled
to receive any shares of the Maker other than shares of Common Stock,
thereafter the Conversion Price of such other shares so receivable upon
conversion of this Note or any portion hereof shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Common
Stock contained in subparagraphs (b) through (i) hereof.
CERTAIN NOTICES. In case:
(a) the Maker shall take any action which would require an
adjustment in the Conversion Price pursuant to subparagraph (d) of the
preceding paragraph; or
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(b) the Maker shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any
shares of stock of any class or of any other rights; or
(c) there shall be any capital reorganization or
reclassification of the Common Stock (other than a subdivision or
combination of the outstanding Common Stock and other than a change in
the par value of the Common Stock), or any consolidation or merger to
which the Maker is a part or any statutory exchange of securities with
another corporation and for which approval of any stockholders of the
Maker is required, or any sale or transfer of all or substantially all
of the assets of the Maker; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Maker;
then the Maker shall provide to the Holder, at least ten (10) days prior to the
applicable date hereinafter specified, a notice stating (i) the date on which a
record is to be taken for the purpose of such distribution or rights, or, if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such distribution or rights are to be determined, or
(ii) the date on which such reorganization, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding-up is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up. Failure to give such notice or any defect therein
shall not affect the legality or validity of the proceedings described in
subparagraphs (a), (b), (c) or (d) of this paragraph.
STATUS OF STOCK. The Maker covenants that it will at all times reserve
and keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock or its issued shares of Common
Stock held in its treasury, or both, for the purpose of effecting conversions of
this Note, the full number of shares of Common Stock deliverable upon the
conversion of this Note.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value (if any) of the shares of Common Stock
deliverable upon conversion of this Note, the Maker will take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Maker may validly and legally issue fully paid and non-assessable shares of
Common Stock at such adjusted Conversion Price.
Prior to the delivery of any securities which the Maker shall be
obligated to deliver upon conversion of this Note, the Maker shall comply with
all federal and state laws and regulations thereunder requiring the registration
of such securities with, or any approval of or consent to the delivery thereof
by, any governmental authority, unless an exemption from registration is
available.
TAXES ON CONVERSIONS. The Maker will pay any and all documentary stamp
or similar issue or transfer taxes payable in respect of the issue or delivery
of shares of Common Stock upon conversion of this Note pursuant hereto;
PROVIDED, HOWEVER, that the Maker shall not be required to pay any tax which may
be payable in respect of any transfer involved in the issue or delivery of
shares of Common Stock in a name other than that of the Holder or any affiliate
of the Holder, and no such issue or delivery shall be made unless and until the
Holder requesting such issue or delivery or the person in whose name such shares
shall be issued has paid to the Maker the amount of any such tax or has
established, to the satisfaction of the Maker, that such tax has been paid.
COVENANTS TO STOCK. The Maker covenants that all shares of Common Stock
which may be
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delivered upon conversion of this Note will upon delivery be duly and validly
issued and fully paid and nonassessable, free of all liens and charges and not
subject to any preemptive rights.
MERGER, ETC. Notwithstanding any other provision herein to the
contrary, in case of any consolidation or merger to which the Maker is a party
(other than a merger or consolidation in which the Maker is the continuing
corporation), or in case of any sale or conveyance to another corporation of the
property of the Maker as an entirety or substantially as an entirety, or in the
case of any statutory exchange of securities with another corporation (including
any exchange effected in connection with a merger of a third corporation into
the Maker), there shall be no adjustments hereunder, but the Holder shall have
the right thereafter to convert this Note into the kind and amount of
securities, cash or other property which he would have owned or been entitled to
receive immediately after such consolidation, merger, statutory exchange, sale
or conveyance had this Note been converted immediately prior to the effective
date of such consolidation, merger, statutory exchange, sale or conveyance, and
in any such case, if necessary, appropriate adjustment shall be made in the
application of the conversion and adjustment provisions set forth herein with
respect to the rights and interests thereafter of the holders of this Note, to
the end that the provisions regarding conversion and adjustment set forth herein
shall thereafter correspondingly be made applicable, as nearly as may reasonably
be, in relation to any shares of stock or other securities or property
thereafter deliverable on the conversion of this Note. Any such adjustment shall
be approved by a firm of independent public accountants, evidenced by a
certificate to that effect; and any adjustment so approved shall for all
purposes hereof conclusively be deemed to be an appropriate adjustment. The
above provisions of this paragraph shall similarly apply to successive
consolidations, mergers, statutory exchanges, sales or conveyances. In the event
that any such consolidation, merger, statutory exchange, sale or conveyance is
consummated before July 1, 1998 (a "Transaction Closing") and the Maker shall
not have received the Target Equity as of the date of the Transaction Closing,
the initial Conversion Price under this Note shall be deemed to be $6.00 per
share for the purposes of this paragraph.
MISCELLANEOUS
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then, ipso facto, the obligation to pay interest hereunder shall be
reduced to the Maximum Rate; and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at the Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control every
other provision in any and all other agreements and instruments existing or
hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby.
Notwithstanding the place of making of this Note, the parties agree
that this Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Tennessee, except to the
extent that federal law may be applicable to the determination of the Maximum
Rate.
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As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law.
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/ JAMES NEAL HUTCHINSON, JR.
---------------------------------------
James Neal Hutchinson, Jr.
Assistant Vice President
EXHIBIT 10.20
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement (the
"Agreement") dated this 13th day of May, 1997, by and between SMART CHOICE
AUTOMOTIVE GROUP, INC., a Florida corporation (the "Company") and SIRROM CAPITAL
CORPORATION, a Tennessee corporation (together with any subsequent assignees or
transferees of capital stock of the Company or rights thereto subject to the
provisions hereof, the "Holder").
WITNESSETH:
WHEREAS, the Company and Holder entered into a Registration Rights
Agreement dated March 13, 1997 (the "Registration Rights Agreement"),
simultaneously with the delivery by the Company to the Holder of the Company's
Convertible Senior Promissory Note dated March 13, 1997 in the principal amount
of $3,500,000 (the "Initial Note"), pursuant to the provisions of that certain
Loan Agreement, dated as of March 13, 1997, between the Company, as borrower,
and Holder, as lender (the "Initial Loan Agreement"), and the terms of the
Initial Note provide that the outstanding principal balance thereof is
convertible into shares of common stock, par value $.01 per share, of the
Company (the "Common Stock") at the option of the holder of the Initial Note;
WHEREAS, simultaneously with the delivery of the Initial Note, each of
Conlon Smart Choice Finance Trust, a Florida trust, and Parker Smart Choice
Finance Trust, a Florida trust (hereinafter individually or collectively
referred to as the "Grantor"), granted Holder, pursuant to certain Stock Option
Agreements dated March 13, 1997 (collectively, the "Stock Option Agreement"), by
and among the Company, Holder and the respective Grantor, an option (the
"Option") to purchase 150,000 shares, for an aggregate of 300,000 shares, of
Common Stock owned by Grantor (the shares of Common Stock transferred or
transferable upon exercise of this Option hereinafter referred to as the "Option
Shares");
WHEREAS, the Company has requested that the Holder extend a further
loan to the Company in the amount of four million and no/100ths Dollars
($4,000,000.00), which loan is to be evidenced by a Convertible Senior
Promissory Note of even date herewith (the " May Note") and pursuant to the
terms of the Loan Agreement dated May 13, 1997 (the "May Loan Agreement"), and
the May Note provides that the outstanding principal balance thereof shall be
convertible into shares of Common Stock at the option of the holder of the May
Note; and
WHEREAS, as a further inducement to Holder to make the loan pursuant to
the May Loan Agreement, the Company has agreed to amend and modify the rights of
Holder under, and to amend and restate, the Registration Rights Agreement.
<PAGE>
NOW, THERFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree, amend and restate the Registration
Rights Agreement as follows:
Section 1. REQUESTED REGISTRATION.
(a) DEMAND RIGHT. If at any time on or after the first anniversary of
the date of this Agreement the Company shall receive from the Holder a written
request that the Company effect any registration with respect to Registrable
Securities (as defined in Section 11 hereof) in an offering to be firmly
underwritten by underwriters selected by the Holder (subject to the consent of
the Company, which consent will not be unreasonably withheld), the Company will
as soon as practicable, use its best efforts to effect such registration
(including, without limitation, filing post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws, and
appropriate compliance with the Securities Act) and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request. The Company shall only be required
to effect, pursuant to this Section 1, three (3) registrations of Registrable
Securities.
(b) PROVISO. The Company shall not be obligated to effect, or to take
any action to effect, any such registration pursuant to this Section 1:
(i) in any particular jurisdiction in which the Company would
be required to execute a general consent to service of process in
effecting such registration, qualification, or compliance, unless the
Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act;
(ii) during the period starting with the date fifteen (15)
days prior to the Company's good faith estimate of the date of filing
of, and ending on a date ninety (90) days after the effective date of,
a Company-initiated registration, provided that the Company is actively
employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) if the market value of the number of shares of Common
Stock requested to be included in each registration pursuant to this
Section 1 does not exceed $3,000,000 as of the date of Holder's request
pursuant to Subsection (a) hereof.
(c) DEFERRAL OF REGISTRATION. The Company shall file a registration
statement covering the Registrable Securities so requested to be registered as
soon as practicable after receipt of the request or requests of the Holder;
PROVIDED, HOWEVER, that if (i) in the good faith judgment of the Board of
Directors of the Company, such registration would be materially detrimental to
the Company because there exist bona fide financing, acquisition or other
activities of the Company and the Board of Directors of the Company concludes,
as a result, that it is essential to defer the filing of such registration
statement at such time, and (ii) the Company shall furnish to the Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be materially
detrimental to the Company for such
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registration statement to be filed in the near future and that it is,
therefore, essential to defer the filing of such registration statement, then
the Company shall have the right to defer such filing (except as provided in
subsection (b)(ii) above) for a period of not more than ninety (90) days after
receipt of the request of the Holder, and, provided further, that the Company
shall not defer its obligation in this manner more than once in any
twelve-month period.
The registration statement filed pursuant to the request of the Holder
may, subject to the provisions of Sections 1(b) and 8 hereof, include other
securities of the Company, with respect to which registration rights have been
granted, and may include securities of the Company being sold for the account of
the Company, provided that all the Registrable Shares for which the Holder has
requested registration shall be covered by such registration statement before
any other securities are included.
(d) PROCEDURES. In any registration pursuant to this Section 1, if the
Company shall request inclusion of securities to be sold for its own account, or
if other persons entitled to incidental registrations shall request inclusion in
such registration, the Holder shall offer to include such securities in the
underwriting and may condition such offer on the acceptance by the Company or
such other persons of the further applicable provisions of this Agreement. The
Company shall (together with all such other persons proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the representative of the underwriter or underwriters
selected for such underwriting by the Holder, which underwriters are reasonably
acceptable to the Company. Notwithstanding any other provision of this Section,
if the representative of the underwriters advises the Holder of the need for an
Underwriter's Cutback, the number of shares to be included in the underwriting
or registration shall be allocated as set forth in Section 8 hereof. If a person
who has requested inclusion in such registration as provided in this Section
1(e) does not agree to the terms of any such underwriting, such person shall be
excluded therefrom by written notice from the Company, the underwriter or the
Holder, and the securities owned by such person(s) shall be withdrawn from
registration (the "WITHDRAWN SECURITIES"). If there are any Withdrawn Securities
and if there was an Underwriter's Cutback, then the Company, if permitted by the
underwriter, shall offer to all holders who have retained rights to include
securities in the registration the right to include additional securities in the
registration in an aggregate amount equal to the number of Withdrawn Securities
that would have been included in the registration after giving effect to the
Underwriter's Cutback had such securities not been withdrawn, with such shares
to be allocated among such holders requesting additional inclusion in accordance
with Section 8.
Section 2. "PIGGYBACK" REGISTRATION.
(a) NOTICE AND PROCEDURES. If the Company at any time after the date of
this Agreement proposes to register any of its securities under the Securities
Act (other than in connection with a merger or pursuant to Form S-8 or other
comparable form not available for registering the Registrable Securities for
sale to the public), the Company shall request that the managing underwriter (if
any) of such stock offering include the Registrable Securities in the
registration statement for the public offering in such registration. If such
managing underwriter agrees to include the Registrable Securities in the
registration statement relating to such stock offering, the Company shall at
such time give prompt written notice to the Holder of its intention to effect
such registration and of the Holder's right under such proposed registration,
and upon the request of the Holder
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delivered to the Company within twenty (20) days after giving such notice
(which request shall specify the Registrable Securities intended to be disposed
of by the Holder), the Company shall include such Registrable Securities held
by the Holder requested to be included in such registration; PROVIDED, HOWEVER,
that:
(i) If, at any time after giving such written notice of the
Company's intention to register any of the Holder's Registrable
Securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to file the registration statement wherein
the Registrable Securities are being registered or to delay the
registration of such Registrable Securities, at its sole election, the
Company may give written notice of such determination to the Holder and
thereupon shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (but not
from its obligation to pay Registration Expenses in connection
therewith or to register the Registrable Securities in a subsequent
registration); and in the case of a determination to delay a
registration, the Company shall thereupon be permitted to delay
registering any Registrable Securities for the same period as the delay
in respect of securities being registered for the Company's own
account.
(ii) If the managing underwriter in such a stock offering
shall advise the Company that it declines to include a portion of all
of the Registrable Securities requested by the Holder to be included in
the registration statement, then distribution of all or a specified
portion of the Registrable Securities shall be excluded from such
registration statement. In such event the Company shall given the
Holder prompt notice of the number of shares of Registrable Securities
excluded from such registration at the request of the managing
underwriter. No such exclusion shall reduce the securities being
offered by the Company for its own account to be included in such
registration statement.
(b) OPTION TO INCLUDE REGISTRABLE SECURITIES IN OFFERING. The Holder,
subject to the provisions of Section 2(a) hereof shall have the option to
include his Registrable Securities in the registration statement, relating to
such stock offering. The Company shall not be required to include any of the
Holder's Registrable Securities in the registration statement relating to an
underwritten offering of the Company's securities unless the Holder accepts the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (provided such terms are usual and customary for
selling stockholders) and the Holder agrees to execute and/or deliver such
documents in connection with such registration as the Company or the managing
underwriter may reasonably request.
(c) The Company may, in its sole discretion and without the consent of
the Holder, withdraw such registration statement and abandon the proposed
offering in which the Holder had requested to participate, but such abandonment
shall not preclude subsequent request for registration pursuant to Section 2(a).
(d) LOCK UP AGREEMENTS. If requested in writing by the Company and an
underwriter of Common Stock for the Company, the Holder shall agree not to sell
or otherwise transfer or dispose of any shares of Common Stock of the Company
held by the Holder (other than those included in the registration statement) for
a period following the effective date of a registration statement of the
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Company filed under the Securities Act, PROVIDED that all officers and
directors of the Company and all other holders of rights to registration of any
other security of the Company enter into similar agreements identical in terms
to that of the Holder (except for the holders of Public Warrants, the holder of
the Underwriter's Unit Purchase Option and the non-officer and non-director
Selling Shareholders referenced in the Company's Post-Effective Amendment No.
2 to the Registration Statement No. 33-96520-A).
Section 3. REGISTRATION ON FORM S-3.
(a) If at any time on or after the second anniversary of the date of
this Agreement, after the Company has qualified for the use of Form S-3, in
addition to the rights contained in the foregoing provisions of this Agreement,
the holders of Registrable Securities shall have the right to request
registrations on Form S-3 or any comparable or successor form. Each such request
shall be in writing and shall state the number of shares of Registrable
Securities to be disposed of and the intended methods of disposition of such
shares by the Holder (including whether such resales are to be made on a
continuous basis pursuant to Rule 415), PROVIDED, HOWEVER, that the Company
shall not be obligated to effect any such registration if (i) the Holder
proposes to sell Registrable Securities on Form S-3 at an aggregate price to the
public of less than $500,000, or (ii) in the event that the Company shall
furnish the certification described in paragraph 1(b)(ii) or 1(c) (but subject
to the limitations set forth therein), or (iii) the Company will be required to
obtain an audit (other than for its normal year-end audit) for such registration
to become effective. The Company shall only be required to effect one (1)
registration of Registrable Securities pursuant to this Section 3 in each
calendar year.
(b) If a request complying with the requirements of Section 3 hereof is
delivered to the Company, the provisions of Section 1(b)(i) and (ii) hereof
shall apply to such registration. If the registration is for an underwritten
offering, the provisions of Section 1(d) hereof shall also apply to such
registration.
Section 4. EXPENSES OF REGISTRATION.
(a) COMPANY EXPENSE. All Registration Expenses incurred in connection
with any registration, qualification or compliance pursuant to Sections 1, 2,
and 3 hereof, shall be borne by the Company; PROVIDED, HOWEVER, that Holder
shall bear the Registration Expenses for any registration proceeding begun
pursuant to Section 1 and subsequently withdrawn by the Holder registering
shares therein, unless such withdrawal is based upon (A) material adverse
information relating to the Company that is different from the information known
or available (upon request from the Company or otherwise) to the Holder at the
time of its request for registration under Section 1, or (B) material adverse
changes in the financial markets which result in a significant decline in the
public market price for the Company's Common Stock of at least twenty percent
(20%) from the date such registration proceeding is begun to the date of such
withdrawal.
(b) SELLING EXPENSES. All Selling Expenses relating to securities so
registered shall be borne by the Holder pro rata on the basis of the number of
shares of securities so registered on its behalf.
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Section 5. REGISTRATION PROCEDURES. In the case of each registration
effected by the Company pursuant to this Agreement, the Company will use its
best efforts to:
(a) Prepare and file with the SEC a registration statement with respect
to the securities to be registered on such form as the Company deems appropriate
and is permitted or qualified to use, and shall use all reasonable efforts to
cause such registration statement to become and remain effective for a period of
ninety (90) days or until the Holder has completed the distribution described in
the registration statement relating thereto, whichever first occurs or, in the
case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, for such period as
shall be necessary to keep the registration statement effective until all such
Registrable Securities are sold;
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement;
(c) Furnish to the Holder, if any Registrable Securities are to be
included in a registration statement, at a reasonable time prior to the filing
thereof with the SEC, a copy of the registration statement (and each amendment
thereto) in the form the Company proposes to file same; and furnish such number
of prospectuses and other documents incident thereto, including any amendment of
or supplement to the prospectus, as the Holder from time to time may reasonably
request;
(d) Notify the Holder as a seller of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and prepare and furnish to such seller a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such shares,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant hereunder
to be listed on each securities exchange on which similar securities issued by
the Company are then listed; and provide a transfer agent and registrar for all
the securities registered pursuant to such registration statement and a CUSIP
number for all such Registrable Securities, in each case not later than the
effective date of such registration;
(f) Otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make available to its security holders, as soon
as reasonably practicable, an earnings statement covering the period of at least
twelve months, but not more than eighteen (18) months,
6
<PAGE>
beginning with the first month after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act; and
(g) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 1 or 3 hereof, the Company and
Holder will enter into an underwriting agreement containing customary
underwriting provisions so as to effect the offer and sale of the Common Stock.
Section 6. INDEMNIFICATION.
(a) The Company will indemnify the Holder, each of its officers,
directors and partners, and each person controlling the Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration
has been effected pursuant to this Agreement, and each underwriter, if any, and
each person who controls within the meaning of Section 15 of the Securities Act
any underwriter, against all expenses, claims, losses, damages, and liabilities
(or actions, proceedings, or settlements in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus (including any related registration statement,
notification, or the like) incident to any registration under this Agreement, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or any rule or
regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration, and
will reimburse the Holder, each of its officers, directors, partners, and each
person controlling the Holder, each such underwriter, and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending or settling any such
claim, loss, damage, liability, or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by the Holder
or underwriter and stated to be specifically for use therein. It is agreed that
the indemnity agreement contained in this Section shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld).
(b) In connection with the registration or sale by the Holder of shares
of Registrable Securities pursuant to this Agreement, the Holder will indemnify
the Company, each of its directors, officers, partners, and each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement or prospectus, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and such directors, officers, partners, underwriters, or control person
for any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability, or action,
in each case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made in such
registration statement or
7
<PAGE>
prospectus, in reliance upon and in conformity with written information
furnished to the Company by the Holder, and stated to be specifically for use
therein; PROVIDED, HOWEVER, that the obligations of the Holder hereunder shall
not apply to amounts paid in settlement of any such claims, losses, damages, or
liabilities (or actions in respect thereof (if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld); and PROVIDED that in no event shall any indemnity under this
Section exceed the gross proceeds from the offering received by the Holder.
(c) Each party entitled to indemnification under this Section (the
"Indemnified Party") shall give notice to the party or parties required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of such
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section,
to the extent such failure is not prejudicial. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall
control.
8
<PAGE>
Section 7. INFORMATION BY HOLDER. The Holder shall furnish to the
Company in writing and in a timely manner (which shall mean not sooner than two
(2) business days after the receipt by Holder of such request) such information
regarding the Holder and the distribution proposed by the Holder as the Company
or underwriters may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification, or compliance
referred to in this Agreement.
Section 8. ALLOCATION OF REGISTRATION OPPORTUNITIES. In any
circumstance in which all of the Registrable Securities and other shares Common
Stock of the Company with registration rights (the "OTHER Shares") requested to
be included in a registration on behalf of the Holder or other selling
stockholders cannot be so included as a result of limitations of the aggregate
number of shares of Registrable Securities and Other Shares that may be so
included, the number of shares of Registrable Securities and Other Shares that
may be so included shall be allocated among the Holder and the other selling
stockholders requesting inclusion of shares pro rata on the basis of the number
of shares of Registrable Securities and Other Shares that would be held by the
Holder and such other selling stockholders. If the Holder or any other selling
stockholder does not request inclusion of the maximum number of shares of
Registrable Securities and Other Shares allocated to it pursuant to this
procedure, the remaining portion of its allocation shall be reallocated among
those requesting holders of Registrable Securities and other selling
stockholders whose allocations did not satisfy their requests pro rata on the
basis of the number of shares of Registrable Securities and Other Shares which
would be held by such holders and other selling stockholders, and this procedure
shall be repeated until all of the shares of Registrable Securities and Other
Shares which may be included in the registration on behalf of the Holder and
other selling stockholders have been so allocated. The Company shall not limit
the number of Registrable Securities to be included in a registration pursuant
to this Agreement in order to include shares held by stockholders with no
registration rights or to include in that registration shares of stock issued to
employees, officers, directors, or consultants pursuant to the Company's stock
option plan.
Section 9. MOST FAVORED NATION STATUS. The Company covenants and agrees
with the Holder that if it hereafter grants to any person rights to registration
with respect to securities of the Company on terms which are more favorable than
the rights of Holder hereunder, then the Company shall automatically extend such
rights to Holder and such further rights to registration shall be deemed to have
been incorporated into this Agreement as if such fully set forth herein.
Section 10. SURVIVAL OF RIGHTS; TERMINATION OF REGISTRATION RIGHTS.
This Agreement shall be binding upon and inure to the benefit of any subsequent
holder of either of the Notes or the Option, and the provisions of this
Agreement shall survive the payment in full and/or the conversion of the Note or
the exercise of the Option. The right of any holder of either of the Notes, the
Option or any Registrable Securities to request registration or inclusion in any
registration pursuant to this Agreement shall terminate on such date as all
shares of Registrable Securities held or entitled to be held upon conversion by
such holder shall equal less than one-quarter of one percent (00.25%) of the
Company's outstanding Common Stock.
Section 11. DEFINITIONS. Unless the context otherwise requires, the
terms hereinafter set forth when sued herein shall have the following meanings
and the following definitions shall be equally applicable to both the singular
and plural forms of any of the terms herein defined:
9
<PAGE>
"AFFILIATE" shall mean any Person (a) which directly or indirectly
through one or more intermediaries controls, or is controlled by , or is under
common control with, the Company, (b) which beneficially owns or holder 5% or
more of any class of the Voting Stock of the Company or (c) 5% or more of the
Voting Stock (or in the case of a Person which is not a corporation, 5% or more
of the equity interest) of which is beneficially owned or held by the Company or
a Subsidiary. The term "control" means take possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of Voting Stock, by contract or
otherwise.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday, or
other day on which banks in Tennessee are authorized to close.
"CONVERSION SHARES" shall mean the shares of Common Stock issued or
issuable upon conversion of either of the Notes, in whole or in part.
"HOLDER" shall mean Sirrom Capital Corporation or any of its
wholly-owned subsidiaries, or any other holders of either of the Notes, the
Option or any other Registrable Securities, provided that, in order to exercise
rights to request registration under Section 1, any such person shall hold in
the aggregate not less than twenty five percent (25%) of the shares of Common
Stock received or receivable upon conversion of the initial aggregate principal
amount of the Initial Note or the May Note, as the case may be.
"NOTES" shall mean the Initial Note and the May Note.
"OPTION SHARES" shall mean the shares of Common Stock transferred or
transferable upon exercise of the Option, in whole or in part.
"PERSON" shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political subdivision
thereof.
"REGISTER," "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement and such other action as might be required with respect
to registration, qualification or compliance under applicable state securities
laws.
"REGISTRATION EXPENSES" shall mean all expenses incurred in effecting
any registration pursuant to this Agreement, including, without limitation, all
registration, qualification, and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses
(including counsel fees), expenses of any special audits incident to or required
by any such registration and the reasonable fees and reasonable disbursements of
counsel for the Holder, as a selling stockholder, but shall not include (a)
Selling Expenses, (b) fees and expenses of any regular audit, (c) listing fees
on a stock exchange or the NASDAQ national market, (d) fees of transfer agents
and registrars and (e) costs of insurance, it being understood that the Company
shall pay all of clauses (b) through (e) hereof.
10
<PAGE>
"REGISTRABLE SECURITIES" shall mean all (i) Conversion Shares, (ii)
Option Shares and (iii) other shares of Common Stock held by the Holder;
PROVIDED, HOWEVER, that Registrable Securities shall not include any shares of
Common Stock which have previously been registered under the Securities Act.
"RULE 144" shall mean Rule 144 as promulgated by the SEC under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that may be promulgated by the SEC.
"RULE 145" shall mean Rule 145 as promulgated by the Commission under
the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the SEC.
"SECURITY" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of Registrable
Securities.
"UNDERWRITER'S CUTBACK" shall mean a reduction in the number of shares
to be included in any underwritten offering as the result of receipt of written
notice from the representative of the underwriters to the effect that advise
marketing factors require a limitation on the number of shares to be
underwritten.
"VOTING STOCK" shall mean Securities of any class or classes the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
Section 11. ARTICLE AND SECTION HEADINGS. Numbered and titled article
and section headings are for convenience only and shall not be construed as
amplifying or limiting any of the provisions of this Agreement.
Section 12. NOTICE. Any and all notices, elections or demands permitted
or required to be made under this Agreement shall be in writing, signed by the
party giving such notice, election or demand and shall be delivered personally,
telecopied, telexed, or sent by certified mail or overnight via nationally
recognized courier service (such as Federal Express), to the other party at the
address set forth below, or at such other address as may be supplied in writing
and of which receipt has been acknowledged in writing. The date of personal
delivery or telecopy or two (2) business days after the date of mailing (or the
next business day after delivery to such courier service), as the case may be,
shall be the date of such notice, election or demand. For the purposes of this
Agreement:
11
<PAGE>
The Address of Holder is: Sirrom Capital Corporation
500 Church Street, Suite 200
Nashville, Tennessee 37219
Attention: Craig Macnab
Telecopy No. (615) 726-1208
with a copy to: Sherrard & Roe, PLC
424 Church Street, Suite 2000
Nashville, Tennessee 37219
Attention: Donald I. N. McKenzie, Esq.
Telecopy No. (615) 742-4539
The Address of Company is: Smart Choice Automation Group, Inc.
P. O. Box 5637
Titusville, Florida 32783
Attention: President
Telecopy No.: (407) 383-8822
with a copy to: Greenberg Traurig
111 North Orange Avenue, Suite 2050
Orlando, Florida 32801
Attention: Randolph H. Fields
Telecopy No.: (407) 420-5909
Section 13. SEVERABILITY. If any provisions(s) of this Agreement or the
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
Section 14. ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the parties hereto concerning the subject matter hereof, and
all oral discussions and prior agreement are merged herein.
Section 15. GOVERNING LAW AND AMENDMENTS. This Agreement shall be
construed and enforced under the laws of the State of Tennessee applicable to
contracts to be wholly performed in such State. No amendment or modification
hereof shall be effective except in a writing executed by each of the parties
hereto.
Section 16. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and be different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
Section 17. JURISDICTION AND VENUE. The Company and Grantor hereby
consent to the jurisdiction of the courts of the State of Tennessee and the
United States District Court for the
12
<PAGE>
Middle District of Tennessee, as well as to the jurisdiction of all courts
from which an appeal may be taken from such courts, for the purpose of any
suit, action or other proceeding arising out of any of its obligations arising
under this Agreement or with respect to the transactions contemplated hereby,
and expressly waives any and all objections it may have as to venue in any of
such courts.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first above written.
COMPANY:
SMART CHOICE AUTOMOTIVE GROUP, INC.
a Florida corporation
By: /s/ JAMES NEAL HUTCHINSON, JR.
--------------------------------
James Neal Hutchinson, Jr.
Assistant Vice President
HOLDER:
SIRROM CAPITAL CORPORATION,
a Tennessee corporation
By: /s/ CRAIG MACNAB
--------------------------------
Craig Macnab
Vice President
13
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